16 November 2021 | Zee Entertainment Enterprises Ltd. v. Railtel Corporation of India Ltd. | OMP (I) (Comm) 366 of 2021 | Vibhu Bakhru J | Delhi High Court | 2021 SCC OnLine Del 5004

An injunction was prayed in a Section 9 ACA application against the invocation of bank guarantee in view of the force majeure event due to the outbreak of Covid-19.

There was no dispute the guarantee was unconditional.

Bakhru J noted the law on the point in detail. Some of the key observations are:

1. Undeniably a bank guarantee cannot be interdicted unless the court is persuaded to accept that not granting an injunction would cause irretrievable injustice. However, as explained by the Supreme Court in Svenska Handelsbanken v. M/s. Indian Charge Chrome (1994) 1 SCC 502, mere irretrievable injustice without a prima facie case of established fraud would be of no consequence in restraining the encashment of the bank guarantees.
2. Special equities do not create a separate exception for granting of an injunction of a bank guarantee. If there exists any third exception of a special equity, it must be akin to irretrievable injustice or putting a party in an irretrievable situation [citing Teestavalley 2014 SCC OnLine Del 4741].
3. In a sense, special equities are a special circumstance that would justify granting the exceptional relief for interdicting a bank guarantee as not granting the said relief would cause irretrievable harm or injury to the party who has otherwise established a compelling case.
4. Commercial disputes arising in relation to the transactions do not present any special equities.
5. Hindustan Construction Co. Ltd. v. National Hydro Electric Power Corporation Ltd. [Delhi HC DB] must be read in context and cannot be read to say the scope of what constitutes special equities has been expanded.
6. A dispute between the parties relating to the performance of obligations under the contract does not give rise to any special equities warranting interdiction of a bank guarantee.

As to force majeure, a clause in the contract was noted that said that that would not excuse the performance of the payment obligations, and an undertaking to pay had also been given after the outbreak.

Read the judgment here.