Law:

Section:

(a) Bank guarantee-------Contents of bank guarantee---Scope---Bank guarantee, generally contains in its contents whereby guarantor undertakes to agree irrevocably and unconditionally to payment to beneficiary---Amount mentioned in bank guarantee and demand of beneficiary is deemed to be conclusive evidence and beneficiary is considered as sole judge to do so regarding failure of principal to have not complied with or fulfilled requirements of brief/agreement---There are certain guarantees, which in their contents without mentioning the demand as conclusive evidence or beneficiary to be the sole judge, prescribe certain eventualities on happening whereof beneficiary is entitled to demand encashment of guarantee. (b) Arbitration Act (X of 1940)--- ----Ss. 20 & 41---Arbitration---Referring dispute to arbitrator---Stay of encashing of bank guarantees---Dispute between the parties was with regard to encashing of three bank guarantees provided by appellant to respondent authorities---High Court while referring matter to arbitrator, had gone deep and discussed minutely various clauses, terms and conditions of agreement and other relevant documents and their effect for arriving at its conclusion---Appellant sought stay against encashing of three bank guarantees---Validity---After referring dispute to arbitrator it was not appropriate and was uncalled for High Court to discuss the agreement as such findings of High Court would influence proceedings before Arbitrator---Supreme Court, while disproving such observations of High Court, declined to either affirm or not affirm findings of High Court with comments on merits of the case---Without interpreting terms of agreement, definite conclusion would not be possible as to whether conditions as required for encashing of bank guarantees had been fulfilled or not and by not doing so Supreme Court left it to arbitrator to deal with question of encashment of two guarantees relating to Toll collection according to law while making an award---Supreme Court partly allowed the appeal by holding that authorities were entitled to encashment of pre-bid bank guarantee and restrained them from encashment of other two bank guarantees…

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