ZIAUDDIN AHMED & CO. (PVT.) LIMITED vs KARACHI SHIPYARD AND ENGINEERING WORKS LTD

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ZIAUDDIN AHMED & CO. (PVT.) LIMITED VS KARACHI SHIPYARD AND ENGINEERING WORKS LTD. S. 126---Civil Procedure Code (V of 1908), O.XXXIX, Rr. 1 & 2---Specific Relief act (I of 1877), Ss. 42 & 54---Suit for declaration and injunction---Interim injunction, refusal of---Bank guarantees, types of---Object, purpose and scope---Principle of strict liability---applicability---Plaintiff/company sought stay against encashing of bank guarantees issued to defendant for Performance of Contract and to secure Mobilization advance---Validity---Bank guarantee is an autonomous contract, and as such it has to be construed on its own terms, independent of underlying contract between principal and beneficiary, irrespective of claims pending between them---accordingly nature and text of bank guarantee assumes great importance---Of the two well-known types of bank guarantees, Mobilization Guarantee is given to secure advance payment received by principal from beneficiary for contracted works---Usually beneficiary deducts that advance payment from bills raised by principal from time to time and Mobilization Guarantee is then renewed for unadjusted amount---Performance Guarantee, generally speaking, is to guarantee fulfilling of obligations by principal under underlying contract---Mobilization Guarantee is essentially beneficiary's money with principal---Courts ordinarily invoke 'the rule of non-interference' with a banker's obligation to construe such guarantee as not being subject to a restraining order even if there is a dispute between the parties to the underlying contract---In cases involving guarantees such as Performance Guarantees, Courts grant or refuse injunction depending upon the text of the guarantee construing it on 'the rule of strict compliance'---Plaintiff did not bring forth any exception to unsettle general rule of non-interference with bank guarantees, and the demand raised on bank guarantees too met the test of strict compliance---Plaintiff did not have a prima facie case for the grant of temporary injunction to stay payment under the bank guarantees, nor was it a case of irreparable harm---High Court declined to grant interim injunction restraining encashing of bank guarantees as balance of convenience was also in favour of defendant---application was dismissed, in circumstances.

ZIAUDDIN AHMED & CO. (PVT.) LIMITED vs KARACHI SHIPYARD AND ENGINEERING WORKS LTD — 2024 CLD 1170 KARACHI-HIGH-COURT-SINDH

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