XYZ a Singapore Company entered into two contracts on two different dates with ABC an Indian Company for supply of some chemicals. XYZ furnished two bank guarantees towards those two contracts separately. XYZ fulfilled its obligations as per the 2nd contract. But XYZ could not supply the chemicals as agreed in the first contract due to price increase in the International market. Even though the compromise talks were going on between the Companies, to the surprise of XYZ Company, ABC wrote a letter to the Bank which issued both the Bank Guarantees demanding encashment of both the BGs even though the 2nd contract was fully completed by XYZ. Hence we filed an application under S.9 of the Arbitration and conciliation Act and Delhi High Court granted a stay against the encashment of the Bank guarantee in the 2nd Contract. The Court held that these are two different contracts between the same parties and hence for a failure in one contract the 2nd BG cannot be allowed to be encashed.
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