Introduction

Unconditional Bank Guarantees, serve as an integral financial instrument in commercial transactions, offering an assurance of payment to the beneficiary, regardless of the contract’s underlying disputes. However, the enforcement of this instrument is not absolute, and Indian courts have acknowledged certain instances where stays on the execution of unconditional Bank Guarantees may be granted. This article explores the doctrine of Bank Guarantees (BGs) in India, focusing on the circumstances where an injunction to stay the execution can be warranted. ‘Contract of guarantee’ , ‘surety’, ‘principal debtor’ and ‘creditor’—A ‘contract of guarantee’ is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the ‘surety’; the person in respect of whose default the guarantee is given is called the ‘principal debtor’, and the person to whom the guarantee is given is called the ‘creditor’. 

A guarantee may be either oral or written. —A ‘contract of guarantee’ is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the ‘surety’; the person in respect of whose default the guarantee is given is called the ‘principal debtor’, and the person to whom the guarantee is given is called the ‘creditor’. A guarantee may be either oral or written.”

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