Pan Asia Bank Ltd. vs Kandy Multi Purpose Co-Operative Society and Others – sllr 2012 volume 1 page 078

In the case between PAN ASIA BANK LTD. and KANDY MULTI PURPOSE CO-OPERATIVE SOCIETY and others, the court addressed the issue of whether a bank that issues a performance guarantee is bound to honour the guarantee on demand according to its terms, except in cases where clear evidence of fraud is shown. It was held that the bank must pay as per the terms of the guarantee unless such fraud is established, reaffirming the principle that obligations under a bank guarantee arise solely from the document itself, without reference to disputes between the underlying parties. The decision relied on established authority concerning bank guarantees, emphasizing that injunctive relief restraining payment is only warranted where fraud is both pleaded and established. This outcome reinforces the autonomy