GUJARAT MARITIME BOARD versus L&T INFRASTRUCTURE DEVELOPMENT PROJECTS LTD.  AND ANOTHER
[2016] 8 S.C.R. 692, Supreme Court of India, 2016
Outcome: Appeal(s) allowed (Granted)
Segment: Facts
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B 
c 
[2016] 8 S.C.R. 692 
GUJARAT MARITIME BOARD 
v. 
L&T INFRASTRUCTURE DEVELOPMENT PROJECTS LTD. 
AND ANOTHER 
(Civil Appeal No. 9821 of2016) 
SEPTEMBER 28, 2016 
[KURIAN JOSEPH AND R. F. NARIMAN, JJ.] 
Writs: 
Constitution of India - Art.226 - Writ Jurisdiction in 
contractual matters -Unconditional performance 
bank 
guarantee - Invocation of - Discretionary jurisdiction of High 
Court - Scope of - High Court restrained the appellant-guarantee 
from invoking an unconditional bank guarantee executed by the 
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first respondent - Held: Bank guarantee is an independent and 
separate contract betv"een the guarantor-bank and the appellant-
guarantee - Existence of any dispute between the parties to the 
contract not a ground to issue order of injunction to restrain 
enforcement of bank guarantee - Between the guarantor-bank and 
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the appellant-guarantee, there was a written demand for invoking 
the bank guarantee in pursuant to any breach of covenants -
Decision of appellant as to breach was binding on bank to honour 
the payment under the guarantee - Justifiability of such decision 
is a different matter between the appellant and the first 
respondent - High Court not to go in that question u/Art. 226 as 
disputed question of facts are involved - Jurisdiction. 
Allowing the appeal, the Court 
HELD: 1. The High Court went wrong both in its analysis 
of facts and approach on law. A cursory reading of the Loi issued 
by the appellant to the first respondent would
clearly show that it 
G is not a case of forfeiture of security deposit " ... if the contract 
had frustrated on account of impossibility ... " but invocation of 
the performance bank guarantee. On law, the High Court ought 
to have noticed that the bank guarantee is an independent 
contract between the guarantor-bank and the guarantee-appellant. 
The guarantee is unconditional. No doubt, the performance 
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692
GUJARAT MARITIME BOARD v. L&T INFRASTRUCTURE 
693 
DEVELOPMENT PROJECTS LTD. 
guarantee is against the breach by the lead promoter, viz., the A 
first respondent. But between the bank and the appellant, the 
specific condition incorporated in the bank guarantee is that the 
decision of the appellant as to the breach is binding on the bank. 
The justifiability of the decision is a different matter between the 
appellant and the first respondent and it is not for the High Court B 
in a proceeding under Article 226 of the Constitution of India to 
go into that question since several disputed questions of fact are 
involved. [Para 10) [699-E-GJ 
2.1 The contention of the first respondent that the 
invocation of Bank Guarantee depends on the cancellation of the C 
contract and once the cancellation of the contract is not justified, 
the invocation of Bank guarantee also is not justified cannot be 
appreciated. The bank guarantee is a separate contract and is 
not qualified by the contract on performance of the obligations. 
No doubt, in terms of the bank guarantee also, the invocation is 
only against a breach of the conditions in the Loi. But between D 
the appellant and the bank, it has been stipulated that the decision 
of the appellant as to the breach shall be absolute and binding on 
the bank. [Para 11) [702-E-F] 
2.2 An injunction against the invocation of an absolute and 
an unconditional bank guarantee cannot be granted except in 
situations of egregious fraud or
irretrievable injury to one of the 
parties concerned. 
[Para 12) [702-G] 
Himadri Chemicals Industries Limited v. Coal Tar 
Refining Company (2007) 8 SCC 110: 2007 (8) 
SCR 869 - referred to. 
3. Guarantee given by the bank to the appellant contains 
only the condition that in case of breach by the lead promoter, 
viz., the first respondent of the conditions of Loi, the appellant is 
free to invoke the bank guarantee and the bank should honour it 
••• "witliout any demur, merely on a demand from GMB (appellant) 
stating tliat tlie said lead promoter failed to perform tlie 
covenants •.. ". It has also been undertaken by the bank that such 
written demand from the appellant on the bank shall be ... 
"conclusive, absolute and unequivocal as regards tlie amount due 
and payable by the bank under this l(Uarantee". Betwe~n the 
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SUPREME COURT REPORTS 
[2016] 8 S.C.R. 
A appellant and the first respondent, in the event of failure to 
perform the obligations under the Loi, the appellant was entitled 
to cancel the Loi and invoke the bank guarantee. On being 
satisfied that the first respondent has failed to perform its 
obligations as covenanted, the appellant cancelled the Loi and 
resultantly invoked the bank guarantee. Whether the cancellation 
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is legal and proper, and whether on such cancellation, the bank 
guarantee could have been invoked on the extreme situation of 
the first respondent justifying its inability to perform its obligations 
under the Loi, etc., are not within the purview of an inquiry under 
Article 226 of the Constitution of India. Between the bank and 
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the appellant, the moment there is a written demand for invoking 
the bank guarantee pursuant to breach of the covenants between 
the appellant and the first respondent, as satisfied by the 
appellant, the bank is bound to honour the payment under the 
guarantee. [Para 13] [703-G-H; 704-A-C] 
D 
Joshi Technologies International Inc. v. Union of India 
and others (2015) 7 SCC 728: 2015 (6) SCR 1042 -
referred to. 
2015 (6) SCR 1042 
Case Law Reference 
referred to 
Para 10 
E 
2()Q7 (8) SCR 869 
referred to 
Para 12 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9821 
of2016. 
From the Judgment and Order dated I 7.02.2016 and 18.02.2016 
of the High Court of Gujarat atAhmedabad in Special Civil Application 
F
No.4870of2015. 
Mukul Rohatgi, AG, Tushar Mehta, ASG, Gursharan H. Virk, Nakul 
Mohta, Ms. Misha Rohatgi Mohta, Shashibhushan P. Adgaonkar, Advs. 
for the Appellant. 
Gopal Jain, Sr. Adv., Devashish Bharuka, Chinmayee Chandra, 
G Ms. Arpita Bishnoi, Vaibhav Niti, Ravi Bharuka, Advs. for the 
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Respondents. 
The Judgment of the Court was delivered by 
KURIAN, J.: 1. Leave granted. 
2. Whether the High Court is justified in exercising its discretional)'
GUJARAT MARITIME BOARD v. L&T INFRASTRUCTURE 
695 
DEVELOPMENT PROJECTS LTD. [KURIAN, J.] 
jurisdiction under Article 226 of the Constitution oflndia for restraining A 
the appellant from invoking an unconditional bank guarantee executed 
by the first respondent, is the main issue arising for consideration in this 
case. 
3. The appellant invited bids for development ofSutrapada Port. 
In the process, a Letter oflntent (hereinafter referred to as 'Lol') was 
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issued to the first respondent on 06.02.2008. The relevant conditions of 
Lol are extracted below: 
1. 7 The Lead Promoter shall submit a detailed project report within 
12 months of issue of this Letter oflntent (LOI) and present it to 
Gujarat Maritime Board for their approval. 
c 
1.8 The Lead Promoter shall obtain all environment clearances 
and coastal regulation zone (CRZ) clearances and effective 
financial closure and all such other clearances and permissions 
within 18 months or issue of this Letter oflntent 
1.9 A Performance Guarantee/Bank Guarantee of Rs 5 Crores 
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(Rupees Five crores only) shall be submitted to Gujarat Maritime 
Board within 4 weeks of issue of this Letter of Intent in the 
Performa annexed herewith. (Annexure I). This perfonnance/bank 
guarantee is against the submission of Detailed Project Report 
within 12 months and obtaining environment clearance, coastal 
regulation zone clearance and effecting financial closure within 
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18 months as mentioned in para 1.7 and 1.8 above, failing
which 
Gujarat Maritime Board/Government shall cancel this Letter of 
Intent and bank guarantee shall be forfeited." 
4. On 07.05.2010, the first respondent requested for change of 
location from Sutrapada to Kachchigarh and the bank guarantee was 
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extended. At the instance of the first respondent, the Yes Bank Limited 
furnished a bank guarantee to the appellant on 26.11.2011 for an amount 
ofRs.5 crores. The relevant conditions read as follows: 
" 
(a) We, YES BANK Ltd. do hereby guarantee and undertake to G 
pay to GMB an amount not exceeding Rs 5,00,00,000/- (Rupees 
Five Crores only) as against breach by the Lead Promoter for the 
development of Kachchigarh Port. The decision of GMB as to 
any breach having been committed and loss/damages caused or 
suffered shall be absolute and binding on us. 
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[2016] 8 S.C.R. 
(b) We, YES BANK Ltd, do hereby undertake to without any 
reference to the Lead Promoter or any other person and 
irrespective of the fact whether any dispute is pending between 
GMB and the Lead Promoter or any court ofTribunal or arbitrator 
relating thereto, pay the amount due and payable under this 
guarantee without any demur, merely on demand from GMB stating 
that the said Lead Promoter's failure to perform the covenants of 
the same. Any such written demand made by GMB on the Bank 
shall be conclusive, absolute and unequivocal as regards the amount 
due and payable by the Bank under this guarantee. However, 
Bank's liability under this guarantee shall be restricted to an amount 
not exceeding Rs 5,00,00,0001-(Rupees Five Crores only)." 
5. It appears, the first respondent could not proceed with the 
work even at Kachchigarh, and on such intimation, the appellant by letter 
dated 10.03.2015, cancelled the Loi issued to the first respondent. The 
communication dated I 0.03.2015 cancelling the Loi to the extent relevant, 
reads as follows: 
"This is with reference to your above mentioned letter informing 
GMB about your inability to develop a port at Kachchigarh due to 
presence of corals not seeking any further extension of the LOI. 
In this regard, it is hereby informed that your admission on failure 
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in taking up the Project is in breach of the conditions set out in the 
Letter of Intent dated 6.2 .2008. At
your request, the proposal for 
cancellation of Letter of Intent issued to Mis. L&T Ltd. for 
development ofKachchigarh port was laid before the Board and 
was further submitted to GOG for its decision in the matter. After 
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much deliberations, the Government of Gujarat has vide its letter 
dated February 23, 2015 accorded its approval to (a) cancel the 
Letter ofintent to Mis L& T Ltd. for development of Kachchigarh 
port and (b) forfeit the Bank Guarantee worth Rs.5 crores 
submitted by the Company. 
In view of the above direction of the Government, the Letter of 
Intent dated 06.02.2008 issued to you for development of 
Kachchigarh port (earlier Sutrapada port) is hereby cancelled. 
Further, the issuing Bank of the Bank Guarantee has been 
informed about GMB's claim on the Bank Guarantee." 
xxx 
xxx 
xxx 
xxx"
GUJARAT MARITIME BOARD v. L&T INFRASTRUCTURE 
697 
DEVELOPMENT PROJECTS LTD. [KURIAN, J.] 
6. On the same day, the appellant also invoked the bank guarantee 
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furnished by the Yes Bank Limited at the instance of the first respondent. 
The communication reads as follows: 
"This is with reference to the above mentioned Performance Bank 
Guarantee issued by your bank on behalf of Mis L&T 
Infrastructure Development Projects Ltd.("the Company") 
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towards securing the fulfilment of conditions set out in the Letter 
oflntent ("LOI") dated 15.07.2010 and having its validity till March 
31, 2015 worth Rs.5,00,00,000/-(Rupees Five crore only) submitted 
to Gujarat Maritime Board (GMB). 
Whereas, in view of breach of the conditions set out in the LOI c 
by the Company, the Gujarat Maritime Board/Government intends 
to exercise its right in accordance with Clause 1.9 and has decided 
to cancel the Letter of Intent and forfeit the above Bank 
Guarantee. 
I, undersigned hereby put my claim to forfeit the Bank Guarantee 
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no. 005GM07113300001 dated November 26, 2011 worth Rs. Five 
crores issued by your bank and to reimburse the amount of the 
Bank Guarantee in the account of Gujarat Maritime Board, 
Gandhinagar. 
It is requested to issue Demand Draft in the name of Vice 
Chairman & Chief Executive Officer, Gujarat Maritime Board 
payable at Gandhinagar at the earliest." 
7. The first respondent filed a writ petition before the High Court 
challenging the cancellation of the Lo I
and the invocation of the bank 
guarantee. The following are the two main reliefs: 
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(a) That this Hon'ble Court be pleased to issue an appropriate 
writ, order or direction and be pleased to quash and set aside the 
decision dated 23.02.2015 of the respondent no. 2 and the 
consequential decision of the respondent no. I communicated vide 
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letter of 10.03.2015, to approve the request of the petitioner to 
cancel the Loi issued to the petitioner, with the condition of 
forfeiting the Bank Guarantee worth Rs 5 crores, and further 
command the respondent no. 1 to cancel the LoI dated 06.02.2008 
and return the Bank Guarantee to the petitioner; 
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[2016] 8 S.C.R. 
(b) That this Hon'ble Court may be pleased to issue appropriate 
writ, order or direction directing the respondent no. 1 not to encash 
the Bank Guarantee No. 005GM07113300001 dated 
26.11.2011 (extended from time to time) and command the 
respondent no. I to withdraw the letter dated 10.03.2015 addressed 
to Yes Bank invoking the aforesaid Bank Guarantee." 
8. By the impugned judgment, the writ petition was allowed. 
Paragraphs-24, 25 and 26 of the impugned judgment which deal with the 
contentions are extracted below: 
"24. Learned counsel for the GMB however, would place much 
reliance on the tender conditions in which the tenderer agreed 
that the bidder had made a complete and careful examination to 
determine the difficulties in matters incidental to the performance 
of its obligations under the Concession Agreement and to specify 
the nature and extent of all difficulties and hazards. Counsel would 
therefore, contend that any difficulty or even impossibility in 
obtaining environmental clearances cannot be a defence of the 
petitioner to avoid forfeiture of the security deposit. We are unable 
to read such condition in such a rigid manner. If the contract had 
frustrated on account of impossibility, we have serious doubt 
whether GMB could forfeit security deposit citing the reason that 
whatever be the reason, the petitioner failed to perform its 
obligations and, therefore, must be visited with
the penalty of 
forfeiture. However, there is an additional reason why we must 
reject such a contention. We may recall, the initial project was for 
construction of port at Sutrapada. On account of the respondents 
not being able to make the land available for such project, the 
same had to be shelved. Only as an alternative, the petitioner 
suggested Kachchigarh as a site where the port could be 
developed. Surely, the petitioner was not expected tn.carry out 
complete environmental assessment before coming up with such 
an alternative suggestion nor GMB understood the offer of the 
petitioner as to one which will irrespective of environment 
concerns, be accepted. When there was a fundamental shift in 
the initial project envisaged in the letter of intent, the contention 
that whatever be the difficulties in executing the contract, forfeiture 
must follow, need to be viewed in the background of such material 
changes.
GUJARAT MARITIME BOARD v. L&T INFRASTRUCTURE 
699 
DEVELOPMENT PROJECTS LTD. [KURIAN, J.) 
25. The contention that having given unconditional bank guarantee, 
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the petitioner cannot avoid encashment thereof, can also not be 
accepted. The parameters for avoiding the payment of a bank 
guarantee by the bank giving such guarantee cannot be applied in 
the present case. The question in the present case is not so much 
as to allowing the authorities to encash the bank guarantee as 
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much as the authority of the GMB to retain such amount even if 
it was so allowed to be encashed. If the decision of GMB to 
cancel the contract and to award the penalty of forfeiture ofRs 5 
crores on the petitioner itselfis found to be erroneous and therefore, 
set aside, the question of allowing GMB to encash the bank 
guarantee would simply not arise. 
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26. In the result, petition is allowed. Impugned communication 
dated l 0.3.2015 is set aside. The respondents shall not encash 
the bank guarantee in question." 
9. Heard Shri Mukul Rohatgi, learned Attorney General for India, 
and Shri Tushar Mehta, learned Additional Solicitor General, appearing 
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forthe appellant and Shri Gopal Jain, learned Senior Counsel appearing 
for the first respondent. 
I 0. Unfortunately, the High Court went wrong both in its analysis 
of facts and approach on law. A cursory reading of Loi would clearly 
show that it is not a case of forfeiture of security deposit '"... if the 
contract had frustrated on
account of impossibility ... " but invocation 
of the performance bank guarantee. On law, the High Court ought to 
have noticed that the bank guarantee is an independent contract between 
the guarantor-bank and the guarantee-appellant. The guarantee is 
unconditional. No doubt, the performance guarantee is against the breach 
by the lead promoter, viz., the first respondent. But between the bank 
and the appellant, the specific condition incorporated in the bank guarantee 
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is that the decision of the appellant as to the breach is binding on the 
bank. The justifiability of the decision is a different matter between the 
appellant and the first respondent and it is not for the High Court in a 
proceeding under Article 226 of the Constitution oflndia to go into that 
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question since several disputed questions of fact are involved. Recently, 
this Court in Joshi Technologies Internationallnc. v. Union oflndia 
and others1, where one of us (R.F. Nariman, J.) is a member, has 
surveyed the entire legal position on exercise of writ jurisdiction in 
1 (2015)1 sec ns 
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[2016] 8 S.C.R. 
A contractual matters. The paragraphs which deal with the situation relevant 
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to the case under appeal, read as follows: 
"68. The Court thereafter summarised the legal position in the 
following manner: (ABL International Ltd. Case (2004) 3 SCC 
553) 
"2 7. From the above discussion of ours, following legal principles 
emerge as to the maintainability of a writ petition: 
(a) In an appropriate case, a writ petition as against a State 
or an instrumentality of a State arising out of a contractual 
obligation is maintainable. 
(b) Merely because some disputed questions of facts arise 
for consideration, same cannot be a ground to refuse to 
entertain a writ petition in all cases as a matter of rule. 
(c) A writ petition involving a consequential relief of 
monetary claim is also maintainable. 
28. However, while entertaining an objection as to the 
maintainability of a writ petition under Article 226 of the Constitution 
of India, the court should bear in mind the fact that the power to 
issue prerogative writs under Article 226 of the Constitution is 
plenary in nature and is not limited by any other provisions of the 
Constitution. The High Court having regard to the facts of the 
case, has a discretion to entertain or not to entertain a writ petition. 
The Court has imposed upon itself certain restrictions in the 
exercise of this power. (See Whirlpool Corpn. v. Registrar of 
Trade Marks. [(1998) 8 SCC I]) And
this plenary right of the 
High Court to issue a prerogative writ will not normally be exercised 
by the Court to the exclusion of other available remedies unless 
such action of the State or its instrumentality is arbitrary and 
unreasonable so as to violate the constitutional mandate of Article 
14 or for other valid and legitimate reasons, for which the Court 
thinks it necessary to exercise the said jurisdiction." 
69. The position thus summarised in the aforesaid principles has 
to be understood in the context of discussion that preceded which 
we have pointed out above. As per this, no doubt, there is no 
absolute bar to the maintainability of the writ petition even in 
contractual matters or where there are disputed questions of fact
GUJARAT MARITIME BOARD v. L&T INFRASTRUCTURE 
701 
DEVELOPMENT PROJECTS LTD. [KURIAN, J.] 
or even when monetary claim is raised. At the same time, 
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discretion lies with the High Court which under certain 
circumstances, it can refuse to exercise. It also follows that under 
the following circumstances, "normally", the Court would not 
exercise such a discretion: 
69 .1. The Court may not examine the issue unless the action has 
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some public law character attached to it. 
69.2. Whenever a particular mode of settlement of dispute is 
provided in the contract, the High Court would refuse to exercise 
its discretion under Article 226 of the Constitution and relegate 
the party to the said mode of settlement, particularly when c 
settlement of disputes is to be resorted to through the means of 
arbitration. 
69.3. If there are very serious disputed questions of fact which 
are of complex nature and require oral evidence for their 
determination. 
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69.4. Money claims per se particularly arising out of contractual 
obligations are nonnally not to be entertained except in exceptional 
circumstances. 
70. Further, the legal position which emerges from various 
judgments of this Court dealing with different situations/aspects 
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relating to contracts entered into by the State/public authority with 
private parties, can be summarised as under~ 
70.1. At the stage of entering into a contract, the State acts purely 
in its executive capacity and is bound by the obligations of
fairness. 
70.2. State in its executive capacity, even in the contractual field, 
is under obligation to act fairly and cannot practise some 
discrimination. 
70.3. Even in cases where question is of choice or consideration 
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of competing claims before entering into the field of contract, 
facts have to be investigated and found before the question of a 
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violation of Article 14 of the Constitution could arise. If those 
, facts are disputed and require assessment of evidence the 
correctness of which can only be tested satisfactorily by taking 
detailed evidence, involving examination and cross-examination 
of witnesses, the case could not be conveniently or satisfactorily 
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SUPREME COURT REPORTS 
[2016] 8 S.C.R. 
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decided in proceedings under Article 226 of the Constitution. In 
such cases the Court can direct the aggrieved party to resort to 
alternate remedy of civil suit, etc. 
70.4. Writ jurisdiction of the High Court under Article 226 of the 
Constitution was not intended to facilitate avoidance of obligation 
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voluntarily incurred. 
70.5. Writ petition was not maintainable to avoid contractual 
obligation. Occurrence of commercial difficulty, inconvenience 
or hardship in performance of the conditions agreed to in the 
contract can provide no justification in not complying with the 
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terms of contract which the parties had accepted with open eyes. 
It cannot ever be that a licensee can work out the licence if he 
finds it profitable to do so: and he can challenge the conditions 
under which he agreed to take the licence, if he finds it 
commer~ially inexpedient to conduct his business. 
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70.6. Ordinarily, where a breach of contract is complained of, the 
party complaining of such breach may sue for specific 
performance of the contract, if contract is capable of being 
specifically performed. Otherwise, the party may sue for 
damages." 
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11. It is contended on behalf of the first respondent that the 
invocation of Bank Guarantee depends on the cancellation of the contract 
and once the cancellation of the contract is not justified, the invocation 
of Bank Guarantee also is not justified. Weare afraid that the contention
cannot be appreciated. The bank guarantee is a separate contact and is 
not qualified by the contract on performance of the obligations. No doubt, 
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in terms of the bank guarantee also, the invocation is only against a 
breach of the conditions in the Loi. But between the appellant and the 
bank, it has been stipulated that the decision of the appellant as to the 
breach shall be absolute and binding on the bank. 
12. An injunction against the invocation of an absolute and an 
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unconditianal bank guarantee cannot be granted except in situations of 
egregious fraud or irretrievable injury to one of the parties concerned. 
This position also is no more res integra. In Himadri Chemicals 
Industries Limited v. Coal Tar Refining Company2, at paragraph -14: 
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'(2007J s sec 110
GUJARAT MARITIME BOARD v. L&T INFRASTRUCTURE 
DEVELOPMENT PROJECTS LTD. [KURIAN, J.] 
"14. From the discussions made hereinabove relating to the 
principles for grant or refusal to grant of injunction to restrain 
enforcement of a bank guarantee or a letter of credit, we find that 
the following principles should be noted in the matter ofinjunction 
to restrain the encashment of a bank guarantee or a letter of 
credit: 
(i) While deaiing with an application for injunction in the course 
of commercial dealings, and when an unconditional bank 
guarantee or letter of credit is given or accepted, the beneficiary 
is entitled to realise such a bank guarantee or a letter of credit 
in terms thereof irrespective of any pending disputes relating 
to the terms of the contract. 
(ii) The bank giving such guarantee is bound to honour it as 
per its terms irrespective of any dispute raised by its customer. 
(iii) The courts should be slow in granting an order of injunction 
703 
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to restrain the realisation of a bank guarantee or a letter of o 
credit. 
(iv) Since a bank guarantee or a letter of credit is an 
independent and a separate contract and is absolute in nature, 
the existence of any dispute between the parties to the contract 
is not a ground for issuing an order of injunction to restrain 
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enforcement of bank guarantees or letters of credit. 
(v) Fraud of an egregious nature which would vitiate the very 
foundation of such a bank guarantee or letter of credit and
the 
beneficiary seeks to take advantage of the situation. 
(vi) Al lowing encashment of an unconditional bank guarantee 
or a letter of credit would result in irretrievable harn1 or injustice 
to one of the parties concerned." 
13. Guarantee given by the bank to the appellant contains only 
the condition that in case of breach by the lead promoter, viz., the first 
respondent of the conditions of Loi, the appellant is free to invoke the 
bank guarantee and the bank should honour it ... "ll'ithout any de11n11; 
merely on a demand from GMB (appellant) stating that the said 
lead promoter failed to pe1for111 the covenants ... ". It has also been 
undertaken by the bank that such written demand from the appellant on 
the bank shall be ... "conclusive, abs(l/ute and unequivocal as regards 
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[2016] 8 S.C.R. 
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the amount due and payable by the bank under this guarantee".· 
Between the appellant and the first respondent, in the event of failure to 
perform the obligations under the Loi dated 06.02.2008, the appellant 
was entitled to cancel the LoI and invoke the bank guarantee. On being 
satisfied that the first respondent has failed to perform its obligations as 
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covenanted, the appellant cancelled the Lo I and resultantly invoked the 
bank guarantee. Whether the cancellation is legal and proper, and whether 
on such cancellation, the ba.nk guarantee could have been invoked on 
the extreme situation of the first respondent justifying its inability to 
perform its obligations under the Loi, etc., are not within the purview of 
an inquiry under Article 226 of the Constitution of India. Between the 
bank and the appellant, the moment there is a written demand for invoking 
the bank guarantee pursuant to breach of the covenants between the 
appellant and the first respondent, as satisfied by the appellant, the bank 
is bound to honour the payment under the guarantee. 
14. Therefore, the appeal is allowed and the impugned judgment 
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is set aside. However, we make it clear that this judgment will not stand 
in the way of the first respondent working out its grievances in appropriate 
proceedings as permitted under law. 
Ankit Gyan 
Appeal allowed.