Galle Multipurpose Co-operative Society Limited vs Morawakkoralage Gajeru Waluwe Anton Buddhika Abayakoon – C A L A NO. 455/2005-2016

In the case between Galle Multipurpose Co-operative Society Limited and Pan Asia Banking Corporation Limited (among others), the court addressed the lawfulness of an interim injunction restraining Pan Asia Banking Corporation Limited from making, and Seylan Bank Limited from honoring, payment under a disputed bank guarantee issued pursuant to a distributorship agreement. It was held that the District Judge of Colombo acted within the law in granting the injunction, specifically due to serious questions regarding the validity and purpose of the guarantee and the absence of clear indebtedness by the Plaintiff to the primary beneficiaries. The principle reaffirmed is that courts will intervene to restrain encashment of bank guarantees only when a real challenge exists as to validity or where