Supreme Court: No court interference in bank guarantees unless fraud or irretrievable harm

On May 7, 2025, the Supreme Court reaffirmed that courts should not interfere with the invocation of bank guarantees unless there is gross fraud or the risk of irreversible injustice. This arose from a civil appeal by M/s Jindal Steel and Power Ltd against an Orissa High Court order dated August 20, 2024, which had temporarily restrained the encashment of a bank guarantee issued to M/s Bansal Infra Projects Pvt Ltd.

The dispute stemmed from a terminated work order worth over 43 crore due to alleged poor performance by the respondent. Jindal sought to encash the bank guarantee after seeking reimbursement of 4.12 crore in unadjusted advances. Bansal Infra, in turn, filed for interim protection under Section 9 of the Arbitration and Conciliation Act, which the Commercial Court denied, leading to the writ petition and the High Court’s interim status quo order.

The Supreme Court upheld this temporary protection, noting it balanced both parties' interests and was contingent on the respondent extending the bank guarantee’s validity. It directed the Commercial Court to decide the matter within eight weeks and left legal questions open for final determination.

Case Title: M/s Jindal Steel And Power Ltd & Anr Vs M/s Bansal Infra Projects Pvt Ltd & Others.