Writ Jurisdiction Cannot Be Invoked for Adjudicating Disputes Arising From Invalidation or Invocation of Bank Guarantees

The Appellant (CTUIL) and Respondent No. 2 (Lanco Vidarbha Thermal Power Ltd.) entered into a Transmission Agreement on 31.03.2016.

Pursuant to this, Respondent No. 2 furnished bank guarantees, including one for ₹8.7 crores (the "Bank Guarantee").

The Appellant invoked the Bank Guarantee via letter dated 17.12.2020; however, Respondent No. 1 (IDBI Bank) refused to remit the sum, asserting the invocation was not within stipulated timelines.

The Appellant filed a Writ Petition seeking a direction for the bank to release the funds, which the learned Single Judge dismissed on 19.03.2026, granting liberty to file a civil suit instead.

The Appellant challenged this via the present intra-court appeal.

1. Whether the learned Single Judge erred in declining to exercise writ jurisdiction under Article 226 of the Constitution of India on the ground that the dispute involved contractual interpretation and disputed questions of fact.

Article 226 of the Constitution of India regarding the scope of writ jurisdiction.

The precedent IDBI Bank Ltd. v. Power Finance Corpn. Ltd. (2023), which established that disputes concerning the construction of bank guarantee terms, the validity of invocation, and the entitlement to claimed amounts fall within the domain of civil proceedings and not writ jurisdiction.

The principle of "alternative and efficacious remedy," holding that extraordinary jurisdiction should not be invoked for private contractual disputes requiring detailed factual inquiry or evidence.

The Court reasoned that while Respondent No. 1 is a regulated banking institution, the dispute remains essentially private and contractual in nature rather than a public law dispute.

The Court observed that determining whether the Bank Guarantee was validly invoked requires a detailed examination of the correspondence between the parties and the specific terms of the guarantee contract, which are "inextricably intertwined with disputed questions of fact".

Following the settled position in IDBI Bank Ltd. (supra), the Court found that such inquiries require the appreciation of evidence, making a civil court the appropriate forum.

The Court rejected the Appellant’s contention that regulatory oversight of banks converts a contractual breach into a matter for judicial review.

The Court affirmed that the Appellant’s appropriate remedy lies in instituting civil proceedings before a court of competent jurisdiction.

The Appeal and all pending applications were dismissed, and the Impugned Order granting liberty to file a suit was upheld.