P L D 2003 Supreme Court 191 (PLP)

(i) The guarantee is unconditional which means that no condition or embargo whatsoever has been imposed for its encashment. (ii) The buyer shall be the Sole Judge to determine as to whether the seller has performed the purchase contract and fulfilled all the conditions as enumerated in the purchase contract. (iii) On the question of satisfaction of the buyer the only mechanism which has been evolved resolved around the buyer himself and no role whatsoever has been assigned to arty other person/entity.

6. Now here at this juncture we would like to dilate upon the pivotal question as mentioned hereinabove i.e. as to whether the performance guarantees can be encashed by the buyer being a Sole Judge to determine and decide whether seller has performed the purchase contract and fulfilled the terms and conditions of the purchase contract. We have examined the plethora of law from different jurisdiction on the subject before answering the said question detail whereof is as under:‑‑ Province of West Pakistan v. Mistry Patel & Co. PLD 1969 Supreme Court 80, W.J. Younie and others v. Tulsi Ram Jankiram and others AIR 1942 Cal: 382, Farr Smith & Company Ltd. v. Messers Limited (1928) 1 K B 397, Printpac (Pvt.) Ltd. v. Rice Export Corporation of Pakistan Ltd. 1992 MLD 1161, M/s. Jamia Industries v. M/s. Pakistan Refineries Limited, Karachi PLD 1976 Kar. 644, Sirafi Trading Establishment v. Trading Corporation of Pakistan Limited (1984 CLC 381), Law Relating to Bonds and Guarantees by S.N. Gupta, Vol. II, 2nd Edition, page 288, United Commercial Bank v. Bank of India AIR 1981 SC 1426, National Construction Company Limited v. Aiwan‑e‑Iqbal PLD 1994 Supreme Court 311, MacDonald Layton & Co. Ltd. v. Pakistan Service Limited and others 1983 CLC 2252, Pakistan Engineering Consultants v. Pakistan International Airlines Corporation and BCCI and others 1993 CLC 882, Lord Denning, Edward Owen Engineering Ltd. v. Barclays Bank International Ltd. (1978) I AER 976 at p. 983, Punjab National Bank Ltd. v. Vikram Cotton Mills Ltd.(1970) 50 Comp. Cas. 927 (SC), United Commercial Banks v. Bank of India and others AIR 1981 SC 1526, The Interacts Advertising (P) Ltd. v. Palmex Enterprises (1983) 58 Comp. Cas. 550, Interads Advertising (P.) Ltd. v. Bentrex & Co. and others (1983) 53 Comp. Cas. 646, United Commercial Bank v. Hanuman Synthetics Ltd. And others (1987) 61 Comp. Cas. 245, Tarapore & Co. v. V/O Tractoroexport (1970) 40 Comp. Cas. 447 (SC), Hamzeh Malas & Sons v. British Imex Industries Ltd. (1958) 2 QB 127 (CA) (at page 129), B.S. Aujla Co. (P.) Ltd. v. Kaluram Mahadev Prasad AIR 1983 Cal. 106, United Commercial Bank v. flank of India (1982) 52 Comp. Cas. 186 (SC), Sztejn v. Henry Schroder Banking Corporation (1941) 31 NYS 2d 631, United Commercial Bank v. State Bank of India (1982) 52 Comp. Cas. 198 (SC), Hamzeh Malas & Sons v. British Imex Industries Ltd. (1958) 2 QB 127 (CA), U.P. Cooperative Federation Ltd. v. Singh Consultants & Engineers (P) Ltd. (JT 1987‑(4) SC 406), Nangia Construction (India) (Pvt.) Ltd. v. National Buildings Construction Corporation Ltd. and others. (II (1990) 51 BC); 41 (1990) DLT 359, G.S. Atwal & Co. (Engineers) (Pvt.) Ltd. v. National Projects Construction Corporation Ltd. (1990) 69 SC 601, S.C.I.L. (India) Ltd. v. Indian Bank (1994) 79 Comp. Cas. 693, Suresh Arjundas Bekhtiani v. Union of India (1992) 74 Comp. Cas. 192 (Bon.), Hindustan Paper Corporation Ltd. v. Keneilhouse Angami (1990) 68 C6mp. Cas. 361 (Cal.), Jaipur Udyog Ltd. v. Punjab University (1980) 82 Punj., LR 597, State Bank of India v. Jaipur Udyog AIR 1986 Delhi 357, Taj Trade and Transport Co. Ltd. v. Oil and Natural Gas Commission (1994) 80 Comp. Cas. 740, Syndicate Bank v. Vijay Kumar (1992) 74 Comp. Cas. 597, The Law Relating to Bank Guarantees in India by Dr. Mohammad Akram Mir, The Banking Law in Theory and Practice, Third Edition, Vol.2 by S.N. Gupta, John F. Dolan, Letters of Credit, Article 5, Warranties, Fraud and the Beneficiary's Certificate, The Business Lawyer, Vol. 41, No.2 pp.186, 347, Michhal Stern, The Independence Rule in Stand by Letters of Credit. The University of Chicago LR Vol. 52, 185, Nussbaum, Temporary Restraining Orders and Preliminary Injunctions. The Federal Practice, 26 S.W.L.J. 265, 273 (1972) cited by Edward L. Symons, JR. Letters of C. Fraud, Good Faith and the' Basis or Injunctive Relief. Tulance Law R., Vol.54. 1979. p.380 (1980).

7. After having gone through the precedented law as mentioned hereinabove the judicial consensus seems to be as follows:‑‑ (i) 'The performance of guarantee stands on the footing similar to am irrevocable letter of credit of Bank, which gives performance guarantee must honour that guarantee according to its terms. It is not concerned in the least with the relations between the supplier has performed his contracted obligation or not, nor with the question whether the supplier is in default or not. The Bank must pay according to its guarantee all demand if so stipulated without proof or conditions. Only exception is when there is a clear fraud of which Bank has notice. (ii) There is an absolute obligation upon the banker to comply with the terms and conditions as enumerated in the guarantee and to pay the amount stipulated therein irrespective of any disputes there may be between buyer and seller as to whether goods are up to contract or not. (iii) The bank guarantee should be enforced on its own terms and realization against the bank guarantee would not affect or prejudice the case of contractor, if ultimately the dispute is referred to arbitration for the reason, once the terms and conditions of the guarantee were fulfilled, the bank's liability under the guarantee was absolute and it was wholly independent of the dispute proposed to be raised. (iv) The contract of bank guarantee is an independent contract between the bank and the party concerned and is to be worked out independently of the dispute arising out of the work agreement between the parties concerned to such work agreement and, therefore, the extent of the dispute and claims or counter‑claims were matters extraneous to the consideration of the question of enforcement of the bank and were to be investigated by the arbitrator. (v) Where the bank had undertaken to pay the stipulated sum to respondent, at any time, without demur, reservation, recourse, contest or protest, and without any reference to the contractor, no interim injunction restraining payment under the guarantee could be granted. (vi) The Bank guarantee is an autonomous contract and imposes an absolute obligation on the bank to fulfil the terms and the payment on the bank guarantee becomes due on the happening of a contingency on the occurrence of which the guarantee becomes enforceable. (vii) When once bank guarantee is discharged, the obligation of the bank ends and there is no question of going behind such discharge bank C guarantee. Courts should refrain from probing into the nature of the transactions between the bank and customer, which led to the furnishing of the bank guarantee. (viii) In the absence of any special equities and the absence of any clear fraud, the bank must pay on demand, if so stipulated and whether the terms are such must be have to found out from the performance l guarantee as such. (ix) The unqualified terms of guarantee could not be interfered with by Courts irrespective of the existence of dispute.

8. We have also examined various other important cases on the subject, instance, U.P. Cooperative Federation Ltd. v. Singh Consultants and Engineers (P) Ltd. (IT 1987 (4) SC 406) wherein while dilating upon identical issue it was held as under: "The provisions of section 41 of the Arbitration Act, 1940 and Order XLI, rules 1 and 2 of the Code of Civil Procedure, 1908 were duly examined by the. Court. The nature of the performance guarantee and the obligations arising out of the same in the light of the claim for irretrievable injustice or damage was also examined. After giving a detailed and micro analysis of the entire English and Indian Law governing the grant of injunctions against the enforcement of the Bank Guarantees, the Supreme Court: Held that the net effect of injunction is to restrain the bank from performing the bank guarantee. That cannot be done. One cannot do indirectly what one is not free to do directly'. But a maltreated man in such circumstances is not remediless. The respondent was not to suffer any injustice which was irretrievable. The respondent can sue the appellant for damages. In this case, there cannot be any basis for apprehension that irretrievable damages would be caused if any. I am of the opinion that this is not a case in which injunction should be granted: Held further that an irrevocable commitment either in the form of confirmed Bank‑guarantee or irrevocable letter of credit cannot be interfered with except in case of fraud or in case of question of apprehension of irretrievable injustice has been made out. Also held that (1) The Court should not, in transaction between a banker and banker, grant an injunction at the instance of the beneficiary of an irrevocable letter of credit, restraining the issuing bank from recalling the amount paid under reserve from the negotiating bank, acting on behalf of the beneficiary against the document of guarantee, or indemnity at the instance of the beneficiary. (2) The commitments of banks must be honoured free from interference by Courts Otherwise trust in commerce internal and international would be irreparably damaged. It is only in exceptional cases that is to say in case of fraud or in case of irretrievable injustice be done, the Court should interfere. (Emphasis provided) (3) This is not a case where irretrievable injustice would he done by enforcement of bank guarantee. This is also not a case where there was strong prima facie case of fraud in entering into a transaction was made out. If that is the position, then the High Court should not have interfered with the bank guarantee."

9. Similarly in case titled National Thermal Power Corporation Limited v. Flowmore Private Ltd. and another (1995) 84 Comp. Cas. 97). it was held while allowing the appeal and vacating the injunction "that looking to the obligation assumed by batiks under performance guarantees and guarantees to secure advances, bank cannot be prevented by the party at whose instance the guarantee or letter of credit was issued, from honouring the credit guaranteed. The Court should not lightly interfere with a performance bond or guarantee, unless there is fraud of the beneficiary (Sevenska Handelbanken v. Indian Charge Chrome (1994) 79 Comp. Cas. 589 (SC) and U.P. Cooperative Foundation Ltd. v. Singh Consultants and Engineers (Pvt.) Ltd. (1989) 65 Comp. Cas. 283 (SC).

10. Another important case on the, subject is Hindustan Steel Works Construction Ltd. v. G.S. Atwal & Co. (Engineers) (Pvt.) Ltd. (decided on September 13, 1995), wherein it was held as follows:‑‑ "On appeal to the Supreme Court alongwith the appeal it was held by Honourable Mr. Justice Paripooman, J.; that in case of confirmed bank guarantees/irrevocable letters of credit the Court will not interfere unless there is fraud and irretrievable damages are involved in he ease and the fraud has to be an established fraud The sums claimed by the appellant were covered by the guarantees. The guarantees furnished by the bank to the appellant were unconditional and the appellant was the sole Judge regarding the question as to whether any breach of contract had occurred and if so, the amount of loss to be recovered by the appellant from the respondent. The entire dispute was pending before the arbitrator. Whether and if so, what was the amount due to the appellant had to be adjudicated in the arbitration proceedings. The fact that the bank had issued a guarantee in a standard form, covering a wider spectrum than agreed between the respondent and the bank and the fact that the appellant had not quantified the loss and mentioned its were got grounds to restrain the appellant from invoking the unconditional batik guarantees. The order of injunction was liable to be set aside." (Emphasis provided).

11. In case Larsen & Toubro Ltd. v. Maharashta State Electricity Board and others (1996) 85 Comp. Cas. 214) the entire law on the subject way examined by the Indian Supreme Court and it was held that "after a survey of the earlier decisions of this Court in United Commercial Bank v. Bank of India (1982) 52 Comp. Cas. 186: (1981) 2 SC 766, U. P. Cooperative Federation Ltd. v. Singh Consultants and Engineers (P) Ltd. (1989) 65 Comp. Cas. 283; (1988) 1 SCC 174, General Electric Technical Services Company Inc. v. Punj. Sons (P) Ltd. (1992) 74 Comp. Cas. 624; (1991) 4 SC 230 and the decision of the Court of Appeal in England in Elian & Rabbath v. Matsas & Matsas, (1966) 2L Lloyd's List Law Reports 495 and a few American decisions, this Court in Svenska Handelbarrken v. Indian Charge Chrome, (1994) 1 SC 502, 423‑524, 526‑27; (1994) 79 Comp. Cas. 589, 616‑617, 620 laid down the law thus: "

in the case of confirmed Bank‑guarantees/irrevocable letters of credit, they cannot be interfered with unless there is fraud and irretrievable injustice involved in the case and fraud has to be an established fraud." "

irretrievable injustice which was made the basis for grant of injunction really was on the ground that the guarantee was not encashable on its terms " "

there should be prima facie a case of fraud and special equities in the firm of preventing irretrievable injustice between the parties. Mere irretrievable injustice without a prima facie case of established fraud is of no consequence in restraining the encashment of bank guarantee. "

12. In case State of Maharashtra and another v. M/s. National Construction Company, Bombay and another (decided on July 9, 1969) it was observed as follows:‑‑ "A bank issuing a guarantee is not concerned with the underlying contract between the parties to the contract. Unless there is an allegation of fraud, the Courts will not interfere a bank guarantee is ordinarily it contract quite distinct from the underlying contract and gives rise to a separate cause of action. At this juncture it seems necessary to analyse the laws relating to bank guarantees. The rule is well‑established that a Bank issuing a guarantee is not concerned with the underlying contract between the parties to the contract. The duty of Bank under a performance guarantee is created by the document itself. Once the documents are in order, the bank giving the guarantees must honour the same the make payment. Ordinarily, unless there is an allegation of fraud or the like, the Courts will not interfere directly or indirectly to withhold payment, otherwise trust in commerce, internal and international, would be irreparably damaged. But that does not mean that the parties to the underlying contract cannot settle their dispute with respect to allegations of breach by resorting to litigation or arbitration as stipulated in the contract. The remedy arising ex contract is not barred and the cause of action for the same is independent of enforcement of the guarantee. (Emphasis provided). See UCO Bank v. Bank of India 1901 (3) SCR 300 at 325; Centax (India) Ltd. v. Vinmar Impex Inc. JT 1986 SC 174; 1986 (4) SC 136 and U.P. Cooperative Federation Ltd. v. Singh Consultants and Engineers (P) Ltd., JT 1987 (4) SC 405; 1988 (1) SC 174."

13. Another important case on the subject is Hindustan Steel Works Construction Ltd. v. Tarapore & Co. and another (decided on January 6, 1996), wherein it was concluded as follows:‑‑ "

on the facts, that the special circumstances and/or special equities which had been pleaded were that there was a serious dispute on the question who had committed breach of the contract, that the contractor had a counter‑claim against the appellant, that the disputes between the parties had been referred to the arbitrators and that no amount could be said to be due and payable by the contractor to the appellant till the arbitrators declared their award. These factors were not sufficient to make this an exceptional case justifying interference by restraining the appellant from enforcing the bank guarantees. The High Court was, therefore, not right in restraining the appellant from enforcing the bank guarantees." 14. "The guarantee has been defined in Halsbury's Laws of England, Volume 20, Fourth Edition, page 49, page 101 as 'a guarantee is an accessory contract whereby the promisor undertakes to be answerable to the promisee for the debt, default or miscarriage of another person whose primary liability to the promise must exist or be contemplated'. "The contract. of guarantee is of very ancient date perhaps to be "Coeval with the first contracts recorded in history". It seems that the words warranty and guaranty were the same, the letter 'g' of the Norman French being convertible with 'w' of the German and English, as in the names William or Guillaume. They are sometimes used indiscriminately, but in general, warranty is applied to a contract ac to title, quality or quantity of a thing sold and guarantee is held to be the contract by which one person is bound to other for the due fulfilment of a promise or engagement of a third party. Guarantee is the Low Latin guarantia or garantia, which is merely a variant spelling of warrantia. Ultimately the word is Teutonic, and means "protect" 'defend" and the like (Germweliren) a meaning which remained its exclusive sense for a long while. The legal use, however, is Later. The Statute of Frauds, which describes, what we call a guaranty, calls it, 'a special promise to answer for the debt, etc. of another'. (De Colyar, The Law of Guarantees, 3rd Edn., 1897; Butterwirth & Co. 7 Fleet Street Law Publishers by Black Law Dictionary, 4th Edn., 833; Oxford Bank v. Haynes (1825) 25 Mass (8 Pick) 423, 428) it is said:‑‑ "A guarantee differs in character from a surety, cannot be questioned, for he cannot be sued as a promisor, as the surety may, his contract must be specifically set‑forth. That he differs from an indorser is equally clear and for the same and also because he warrants the solvency of the promisor which the indorser does not." "A guarantee often demanded by a banker as an additional security to reinforce a clean advance, or buttress a tangible security, which for one reason for the other is not considered adequate. The term guarantee or guaranty as it is called by some authorities is a collateral promise or undertaking by one person to another to answer for the payment of some debt or the performance of some contract or duty in case of the default of another person who in the first instance is liable for such payment or performance." (Ansons Law of Contract. The definition of guarantee is always reducible to this form: "Deal with X, and if lie does not pay you, I will").

15. The "guarantee" as defined and discussed hereinabove would indicate that it contains the ingredients of "dedicated commitment", "absolute undertaking", "an unambiguous assurance", "unconditional willingness", "'definite certainty", "compliance without objections", "sacred obligation" and "defined responsibility". In view of the ingredients as mentioned hereinabove which constitute a guarantee on the basis whereof its binding effect and nature can be well‑adjudged, a guarantee once given cannot be avoided, except on the ground of fraud or misrepresentation which were never alleged by the petitioner.

16. In the banking system, it is understood that a bank guarantee has a dual aspect. In the case of a bank guarantee, the banker is the promisor. It is a contract between the bank and the beneficiary by a third party. Now it is a well‑known business transaction in the world of commerce and it has become the backbone of the banking system. Now, coming to its enforceability the same depends upon the terms under which the guarantor has bound himself. He cannot be made liable for more than what he has undertaken. Therefore the bank guarantee as already noticed is in the nature of a special contact depending upon the happening of a specific event and when once it is discharged, the guarantee comes to an end It has to be borne in mind that the obligations arising under the bank guarantee are independent of the obligations arising out of specific contract between the parties. (Emphasis provided).

17. In this context, it is also necessary to consider the extent to which the Court can go into the nature of the securities offered for the bank g uarantee in the light of the banker's lien. In United Commercial Bank v. Bank of India AIR 1981 SC 1426; (1982) 52 Comp. Cas. 1986, this Court referred to a passage from R.D. Narbottle (Mercantile) Ltd. v. Natiomil Westminster Bank (1977) 2 All ER 862 with approval which runs as undo al page 207 of 52 Comp. Cas.): "It was only in exceptional cases that the Courts would interfere with the machinery of irrevocable obligations assumed by banks. They are the life blood of international commerce . " The machinery and commitments of banks are on a different level. They must be allowed to be honoured free from interference by the Courts. Otherwise, trust in international commerce could be irreparably damaged."

18. Recently "Sabyasachi Mukharji and Jagannatha Shetty, JJ. of Supreme Court have considered the various Supreme Court and High Courts cases in U.P. Cooperative Federation Ltd. v. Singh Consultants and Engineering (P) Ltd. (1987) 8 Reports (SC 567) the Court held:‑‑ "The principles upon which bank guarantees could be invoked of restrained are well‑settled, only in exceptional circumstances would the Courts interfere with the machinery of irrevocable obligation assured by the banks. In the case of a confirmed performance guarantee, just as in the case of a confined performance guarantee just as in the case of a confirmed letter of credit, the bank is only concerned to ensure that the terms of its mandate and confirmation had been complied with and is in no way concerned with an contractual disputes which might have arisen between the partier. Therefore, the commitments of banks must be honoured free frog interference by the Courts, otherwise trust in commerce, intern, and international, would be irreparably damaged. It is only exceptional cases of fraud or in cases of irretrievable injustice to be done, the Courts should interfere."

19. We have also thrashed out the prevalent law as laid down by the higher judicial forums in our jurisdiction. The law as laid down in case titled National Construction Ltd. v. Aiwan‑e‑Iqbal (PLD 1994 SC 311) is as under: "We have considered the contentions raised by the learned counsel for the parties and have also perused the record. The content para. 3 of mobilization advance guarantee, clearly visuanzed that the respondent can get encashed guarantee without any question or without any reference of any nature, whatsoever to the contractor appellants) and irrespective of any dispute between the parties or before any arbitrator or any Court of law. The precedents cited by learned counsel for the appellants are distinguishable. The case reported as M/s. Jamia Industries Limited v. M/s. Pakistan Refinery Limited PLD 1976 Kar. 644 does not deal with bank guarantee given against the mobilization advance. Similarly in MacDonald Layton & Co. Ltd. v. Pakistan Service Limited and others 1983 CLC 2252, the employer terminated the contract in contravention of the clauses of the agreement, when the plaintiffs did not abandon the work, consequently injunction was issued. The contention of the learned counsel for the appellants that in the event, the appellants succeeded in the arbitration proceedings they will not be able to recover the amount is beyond the point in issue. In the instant case, therefore, the Bank‑guarantees furnished by the appellants contain categorical undertaking and impose absolute obligations on the banks to pay the amount, irrespective of any dispute which may arise between the parties regarding the breach of contract. In our view the Courts must give effect to the covenants of the bank guarantees, the performance guarantees, for the smooth performance of the contracts. Those guarantees are independent contracts and the flank Authorities must construe them, independent of the primary contracts. They should encash them notwithstanding any dispute arising out of the original contract between the parties. In the instant case, therefore, the encashment of the bank guarantees cannot be postponed pending decision of the arbitration proceedings, which may take years to conclude. "

20. The latest verdict pronounced by this Court in Civil Petition No‑292‑K of 2001 (M/s. Huffaz Seamlen Pipe Industries Ltd., Karachi v. M/s. Security Leasing Corporation Ltd., Karachi) on the identical issue is reproduced herein-below for ready reference:‑‑ "

17. As regards contract of guarantee, rights and liabilities of parties are to be determined with reference to terms and conditions of the guarantees. The guarantor cannot take advantage of any condition incorporated in the principal agreement, unless same is reflected in a contract of guarantee executed by the guarantor, as liabilities of the principal and of guarantor, though arising from same transaction are distinct. In an action by a 'creditor against a guarantor, the former is only required to establish the liability of the principal debtor and occurrence of default or breach of the terms leading to the liability. The guarantor cannot resort to technicalities to defeat the claim of the creditor. Even where the contract becomes unenforceable against the principal debtor, yet the guarantor would still be liable for the surety he had executed, unless there was any covenant to the contrary."

21. We have applied the following test while examining the case of petitioners:‑‑ "(1) Whether demand for enforcing the bank guarantees has been made strictly in accordance with the terms of the document concerned? or (2) Whether there is any allegation of fraud against the beneficiary of which the bank has notice? or (3) Whether there is any special equity arising out of the particular situation of the case giving rise to a strong prima facie arguable case against enforcement of the bank guarantee or not?" (This test was applied in M/s. Banerjee & Banerjee v. Hindustan Steel Works Construction Ltd.) AIR 1986 Cal. 374; M/s. Brul Murgan Traders v. R.C. & F. Ltd., Bombay AIR 1986 Mad. 161).

22. After having a careful scrutiny of the entire record the answers to the above‑formulated questions are found in negative except Question No. 1 and the demand for enforcing the bank guarantees has been made by the respondent strictly in accordance with the terms as stipulated in the guarantees itself.

23. The law is thus settled that extraneous claims and counter‑claims do not bar the enforcement of the bank guarantee. The enforcement depends upon its terms and conditions. If bank guarantees are unconditional, there is no other option for the bank and moreso, the bank would have no defence, when its guarantee is sought to be enforced. The guarantee as provided could be scanned to ascertain, whether it is conditional, unconditional or an autonomous contract by itself or otherwise? If it is found unconditional, except in cases where a fraud has been alleged and notice by the bank, the commitment is to be honoured. By enunciating the general principle of non interference by the Courts in respect of the bank guarantee and letter of credit, the Courts only intended that the international trade and commerce should function smoothly without interference from Court. At the same time, the Courts expected that the merchants and traders in international trade and commerce will honour their respective commitments and the business honesty would be maintained. By the theory of non‑interference, in cases of letters of credit and bank guarantees, certainly the Courts did not intend that international trade and commerce should flourish by adopting dishonest unscrupulous practice. These trade practices and the commitments by the Banks are treated on a different level by the Courts and are allowed to unction without interference from Courts only with the view that the trust in international commerce is not damaged in any way and not for encouraging mala fide activities of unscrupulous traders. If so, fraud or the special equity arising out of the peculiar situation of the case could not have been made exception to the general principles of note‑interference by Courts". (See 'The Law Relating to Bank Guarantees in India' by Dr. Mohammad Akram Mir).

24. In the light of what has been discussed hereinabove it can be inferred safely that encashment of bank guarantee has no nexus with the spirit of the contract executed between the parties being an independent contract containing its own terms and conditions to be performed by the concerned parties. The encashment of the bank guarantee had nothing to do with the alleged dispute between the petitioners and the respondent, which must be decided independently on the basis of terms of that contract without involving the contract of bank guarantee. It must be noted that bank guarantee is an autonomous contract and imposes an absolute obligation on the bank to fulfil the terms and the payment on the bank guarantee becomes due on the happening of a contingency on the occurrence of which the guarantee becomes enforceable. If any authority is needed reference can be made to case titled National Construction Company Limited v. Aiwan‑e Iqbal (PLD 1994 Supreme Court 311). 2.5. We are not persuaded to agree with Mr. M.S. Baqir, learned advocate Supreme Court that leave granting order in case C.P. No.383‑K of 2002, decided on 17‑4‑2002 has modified the law as laid down in National Construction Company Limited v. Aiwan‑e‑Iqbal (PLD 1994 Supreme Court 311) because a leave granting order passed by Supreme Court does not lay down law to be followed, hence this aspect of the matter hardly needs any further elaboration. The dictum as laid down in case titled M/s. Jamia Industries Limited v. M/s. Pakistan Refinery Limited (PLD 1976 Kar. 644) being distinguishable cannot be made applicable to this case where it was found in view of the chequered history and peculiar circumstances of the case that the defendant may not be entitled to the entire guarantee amount as it was in the shape of earnest money and accordingly injunction was granted. (Printpac (Pvt.) Ltd. v. Rice Export Corporation of Pakistan Ltd. 1992 MLD 1161). In view of what has been discussed hereinabove the judgment impugned which is strictly in accordance with settled law hardly calls for any interference. The petitions being devoid of merits are dismissed. S.A.K./S‑235/S Petitions dismissed.