A bank guarantee invocation need not quantify recoveries if the notice states they are due or likely due.

The petitioner was engaged by the Union of India to construct a Regional Centre Building in Rohini, New Delhi, and furnished an unconditional and irrevocable performance bank guarantee (PBG) for ₹1.37 crore, valid until 19 October 2026.

After the respondent determined the contract, it invoked the PBG by letter dated 1 October 2026, stating that encashment was required to meet recoveries due or likely to be due from the petitioner.

The petitioner sought an injunction restraining encashment, contending that the invocation did not identify the amount recoverable.

Its application for appointment of an arbitrator was also pending.

1. Whether the invocation notice complied with the PBG’s requirement that a demand state that the amount was required to meet recoveries due or likely to be due from the contractor.

2. Whether the petitioner established grounds for an injunction restraining encashment of the PBG under Section 9 of the Arbitration and Conciliation Act, 1996.

Under Section 9 of the Arbitration and Conciliation Act, 1996, courts may grant interim relief but should be slow to restrain encashment of an unconditional bank guarantee.

U.P. State Sugar Corpn. v. Sumac International Ltd., (1997) 1 SCC 568, and Himadri Chemicals Industries Ltd. v. Coal Tar Refining Co., (2007) 8 SCC 110, establish that the guarantee must ordinarily be honoured according to its terms, notwithstanding disputes under the underlying contract; recognised exceptions include egregious fraud and irretrievable injustice.

The judgment also referred to M/s Garg Builders v. Hindustan Prefab Ltd., 2022 SCC OnLine Del 1264, on the independent nature of a bank guarantee and the limited grounds for interference.

Black Gold Resources Pvt. Ltd. v. International Coal Ventures Pvt. Ltd., 2025 SCC OnLine Del 9231, on the requirement that recovery of the encashed amount would be practically impossible to establish irretrievable injustice.

The PBG required a demand stating that the amount claimed was needed to meet recoveries due or likely to be due from the contractor.

The invocation letter stated that the guarantee was liable to be encashed “so as to meet the recoveries due or likely to be due” from the petitioner; the Court held that the notice therefore met the essential contractual requirement, even though it did not quantify or crystallise the recoverable amount.

The Court distinguished Marshal Infradevelopers India Pvt. Ltd. v. Union of India, 2022 SCC OnLine Del 936, because the invocation there was cryptic and did not meet the stipulated requirement.

The petitioner neither pleaded nor argued fraud, and did not demonstrate that it would be impossible to recover the amount if it ultimately succeeded in arbitration; financial loss or hardship alone was insufficient.

The pending contractual dispute did not, by itself, justify restraining an unconditional and irrevocable guarantee.

It dismissed the petition and disposed of the pending application, while clarifying that its observations were tentative and would not affect the merits of any dispute before the arbitral tribunal.