Soumen Sen, C.J.

1. Heard Mr. Deepu Thankan, learned counsel for the appellant, Sr. Adv. Raju Joseph instructed by Mr. C. Joseph Antony, learned counsel for respondent Nos. 2 to 6 and Ms. O.A. Nuriya, learned Senior Government Pleader.

2. We have considered the minutes of the meeting dated 1st August, 2026 and also the letter dated 1st August, 2026, from which it appears that there is a dispute between the Indian partner and the Chinese partner with regard to the implementation of the contract awarded by the Kerala State Electricity Board Limited (KSEB). Hence, it is not possible for the Indian partner alone to execute the work. The Indian partner has sought a period of one year to fulfill the obligations under the said agreement. The KSEB, however, is of the view that, despite repeated opportunities extended to the appellant, including facilitative measures, the project has remained incomplete even after a period of ten years, owing to the alleged failure to fulfill the contractual obligations, thereby causing substantial financial loss to the KSEB. It is further stated that approximately ₹169 Crores of public funds invested in the project remain dead without serving the intended purpose, apart from the continuing loss of generation on account of the delay in commissioning the project. On that basis, the KSEB has reiterated the decision to proceed with termination of the contract for the Electro-Mechanical Works of the Bhoothathankettu SHEP at the risk and cost of the Consortium, in accordance with the contractual provisions and the termination proceedings already issued. The KSEB has already rejected the request for release of the Civil and Electro-Mechanical Bank Guarantees, as the conditions governing their release have not been fulfilled and the KSEB is entitled to retain the same in accordance with the Agreement and the Conditions of the Contract.

3. In the present proceedings, we are concerned only with the Bank Guarantee, which is unconditional in nature. A bank guarantee, unconditional in nature, does not admit of any requirement to be fulfilled except a simple demand for the money covered under the guarantee. We are, therefore, examining whether any ground exists for interfering with the exercise of power by the KSEB in invoking an unconditional Bank Guarantee. It appears that the project has remained pending for almost ten years.

4. Lord Denning once has said that bank guarantee is as good as cash. It is life blood of commerce. The law relating to invocation of bank guarantee is now well-settled. When in the course of commercial dealings and unconditional bank guarantee is given the beneficiary is entitled to realize the amounts covered under the bank guarantee in terms thereof irrespective of any pending dispute. The bank giving such guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer. The very purpose of giving such a bank guarantee would otherwise be defeated. The only two exceptions when the bank may refuse encashment of the said bank guarantee are fraud and irretrievable injury. The fraud must be of an egregious nature such has to vitiate the entire underlying transactions. The exceptional circumstances would include a case where it is proved to the satisfaction of the court that the bank knows that any demand for payment already made or which thereafter be made would be clearly fraudulent. However, in such an event, the evidence must be clear both as to the fact of fraud and as to the bank's knowledge. (See Adani Agri Fresh Limited v. Mahaboob Sharif) reported at (2016) 14 SCC 517). The third exception which is of recent origin is special circumstances or special equity which may at times overlap with the irretrievable harm or injustice on which encashment may be refused. The limited categories on which the Court may refuse encashment of a bank guarantee or a performance guarantee are summarized below:-

                  (i) If there is a fraud in connection with the bank guarantee which would vitiate the very foundation of such guarantee and the beneficiary seeks to take advantage of such fraud.

                  (ii) The applicant, in the facts and circumstances of the case, clearly establishes a case of irretrievable injustice or irreparable damage.

                  (iii) The applicant is able to establish exceptional or special equities of the kind which would prick the judicial conscience of the Court.

                  (iv) When the bank guarantee is not invoked strictly in its terms and by the person empowered to invoke under the terms of the guarantee. In other words, the letter of invocation is in apparent violation to the specific terms of the bank guarantee.

5. The exceptional cases would be few but it could never be stated as an absolute proposition of law that under no circumstances the Court would injunct encashment / invocation of a bank guarantee which might have been furnished by a party as an independent contract. A beneficiary is not vested with an unquestionable or unequivocal legal right to encash the bank guarantee on demand. The obligation of the bank furnishing the bank guarantee to pay would be subject to a limited exceptional circumstance aforenoticed. As a matter of rule, the bank would be under obligation to encash the bank guarantee, once it is invoked in its terms. The exceptions aforenoticed are merely indicative of the kind of cases where the Court may injunct encashment of a bank guarantee. It is neither possible nor permissible to exhaustively classify the cases where the Court would not interfere and where the Court would judicially intervene in such matters. The bank guarantee is an independent and separate contract and is absolute in nature and the existence of any dispute between the parties to the contract is of no consequence. (See Himadri Chemicals Industries Ltd. v. Coal Tar Refining Co.) reported at (2007) 8 SCC 110, Mahatma Gandhi Sahakra Sakkare Karkhane v. National Heavy Engg. Coop. Ltd. reported at (2007) 6 SCC 470), BSES Ltd. (Now Reliance Energy Ltd.) v. Fenner India Ltd. reported at (2006) 2 SCC 728 and Gangotri Enterprises Limited v. Union of India reported at (2016) 11 SCC 720. [See per Sen, J., in Heavy Engineering Corporation Limited v. Standard Chartered Bank and Another (2019 SCC OnLine Cal 617; (2019) 3 Cal LT 133; (2019) 4 CHN 119) , affirmed in Standard Chartered Bank v. Heavy Engg. Corpn. Ltd.2]

6. In Standard Chartered Bank (supra), the Hon’ble Supreme Court in affirming the decision of the Calcutta High Court in Heavy Engineering Corporation Limited (supra) has reiterated as follows:

                  “23. The settled position in law that emerges from the precedents of this Court is that the bank guarantee is an independent contract between bank and the beneficiary and the bank is always obliged to honour its guarantee as long as it is an unconditional and irrevocable one. The dispute between the beneficiary and the party at whose instance the bank has given the guarantee is immaterial and is of no consequence. There are, however, exceptions to this rule when there is a clear case of fraud, irretrievable injustice or special equities. The Court ordinarily should not interfere with the invocation or encashment of the bank guarantee so long as the invocation is in terms of the bank guarantee.

                  26. In our considered view, once the demand was made in due compliance with bank guarantees, it was not open for the appellant Bank to determine as to whether the invocation of the bank guarantee was justified so long as the invocation was in terms of the bank guarantee. The demand once made would oblige the bank to pay under the terms of the bank guarantee and it is not the case of the appellant Bank that its defence falls in any of the exception to the rule of case of fraud, irretrievable injustice and special equities. In absence thereof, it is not even open for the Court to interfere with the invocation and encashment of the bank guarantee so long as the invocation was in terms of the bank guarantee and this is what has been observed by the Division Bench of the High Court in the impugned judgment [Heavy Engg. Corpn. Ltd. v. Standard Chartered Bank, 2019 SCC OnLine Cal 617 : (2019) 3 Cal LT 133] and that reflected the correct legal position.”

7. In the absence of the writ appellant establishing the existence of any of the aforesaid exceptional circumstances, we do not find any reason to interfere with the order passed by the learned Single Judge. Moreover, during the pendency of the appeal, we have afforded sufficient opportunities to the writ appellant to fulfill its obligation. Taking into consideration the dispute between the partners of the joint venture, there appears to be no immediate possibility of the contract being executed by the joint venture.

8. This order shall, however, not prevent the appellant from pursuing such legal remedies as may be available in law to recover the amounts covered by the Bank Guarantee and the retention of any amount in respect of the works already completed. Our decision is primarily founded on the scope of the invocation of the unconditional Bank Guarantee. We do not find any infirmity in the invocation as it is in accordance with the terms of the Guarantee. In the aforesaid circumstances, we do not find any reason to interfere with the order passed by the learned Single Judge.

9. The writ appeal fails accordingly and is dismissed.

However, there shall be no orders as to costs.