By S&S Co. Advocates & Solicitors · Published 4 September 2026 · Informational content, not legal advice
About this article: A general explainer prepared by S&S Co. Advocates & Solicitors on a recurring type of dispute. It does not report a specific judgment or order, names no parties and gives no case citation, so it should not be cited as authority. Law and practice change; please verify against the current statute and primary sources before relying on it.
A performance bank guarantee is a separate contract between the bank and the beneficiary. It is payable according to its own terms, usually on a demand that complies with the guarantee. The Supreme Court has said in a long line of cases, including U.P. State Sugar Corporation v. Sumac International Ltd. (1997) and Standard Chartered Bank v. Heavy Engineering Corporation Ltd. (2020), that courts should interfere with the invocation only in exceptional cases.
The recognised exceptions are fraud of an egregious nature, which must be established, affecting the invocation itself, and special equities, such as irretrievable injury, which would make encashment unjust. The existence of a dispute on the merits, whether it is before a Dispute Resolution Board, an arbitral tribunal or a court, is not by itself a ground to restrain encashment.
A contractor who believes the invocation is wrongful is generally left to recover the amount as damages if it succeeds on the merits. Courts also look at the wording of the guarantee, including whether it is conditional or unconditional, since it decides what the beneficiary must show before demanding payment.