Q: Elaborate the citation of Hindustan Construction Co. Ltd. vs State of Bihar and othrs ?

Ans: 

Hindustan Construction Co. Ltd vs State Of Bihar And Ors on 8 October, 1999

In this case, the honourable Supreme Court held that the bank only pays the amount after certain conditions which might be enumerated in the guarantee contract, are fulfilled by the debtor. Conditions can be like- Proof of default, approval of a third party etc. To invoke the encashment of the bank guarantee, the conditions put forth in the contract have to be fulfilled. Injunction against encashment of conditional Bank guarantees can be granted by the courts in view of the facts of the case present and the beneficiary can’t have an unrestrained right to invoke the bank guarantees. Therefore, the invocation of the bank guarantee should be in strict conformity with the conditions on which the guarantee is issued.

In the case of Hindustan Construction Co. Ltd. vs State of Bihar and othrs, the honourable supreme court held that  under conditional bank guarantees, the beneficiary does not have an unfettered right to invoke the guarantee and demand immediate payment. The court further held that the conditions stated in the bank guarantee contracts have to be fulfilled in order to invoke the encashment of the bank guarantee.

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