CHENNAI METRO RAIL LIMITED Vs. TRANSTONNELSTROY

JUDGEMENT

(1.) This appeal under Sec. 37 of the Arbitration and Conciliation Act, 1996 raises the issue under what circumstances an injunction can be granted against the invocation of a Bank Guarantee. This Court in this appeal will have to decide whether the respondents have satisfied the legal requirements for grant of injunction against the invocation of the Bank Guarantee by the Appellant. Under the impugned order dtd. 9/6/2021 passed under Sec. 17 of the Arbitration and Conciliation Act, the Arbitral Tribunal has granted an order in favour of the respondents restraining the Appellant from encashing the Bank Guarantee of Rs. 117.5 Crores given by the respondents in favour of the Appellant, who is the beneficiary under the said Bank Guarantee.

(2.) The case of the respondents before the Arbitral Tribunal as seen from the affidavit filed in support of its application under Sec. 17 of the Arbitration and Conciliation Act is that the Appellant through a speculative claim is attempting to invoke the Bank Guarantee given by the respondents for a sum of Rs. 117.5 crores, which will amount to egregious fraud and it is their case that in case of encashment of the Bank Guarantee by the Appellant, the respondents will suffer irretrievable injustice. It is also the case of the respondents that though the Bank Guarantee is an independent contract between the Banker and the Beneficiary viz., the Appellant herein, the subject Bank Guarantee given by the respondents is not an unconditional Bank Guarantee and is subject to the fulfilment of the terms and conditions contained therein which has to be strictly adhered to by the Appellant. According to the respondents even without proper estimate and crystallization of the losses alleged to have been suffered by the Appellant, they have attempted to fraudulently invoke the Bank Guarantee. It is also their case that the deficiencies pointed out by the Appellant on the execution of the work by the respondents are too trivial in nature and have been made only to fraudulently and illegally encash the Bank Guarantee given by the respondents for a sum of Rs. 117.5 Crores. According to the respondents having satisfied the legal requirements for obtaining an order of injunction against the Appellant from encashment of the Bank Guarantee, the Arbitral Tribunal exercising its discretionary power under Sec. 17 of the Arbitration and Conciliation Act has rightly granted the relief sought for by the respondents.

(3.) However, it is the contention of the Appellant that the respondents have committed breach of contract by not completing the work in accordance with the terms and conditions of the contract entered into between the Appellant and the Respondents. According to the Appellant, there was an enormous delay in the completion of the project by the respondents and there were several deficiencies in service committed by the respondents which have been intimated to the respondents prior to the invocation of the Bank Guarantee. It is their case that the Bank Guarantee given by the respondents is an unconditional Bank Guarantee as seen from the terms and conditions of the Bank Guarantee. According to them as seen from the Bank Guarantee, without demur, the Bank will have to permit the Appellant to encash the Bank Guarantee. It is their case that they have suffered losses to the extent of Rs. 900.00 Crores on account of the delay in completion of the project by the respondents and on account of the deficiencies in service and sub standard work on the part of the respondents and therefore, only in accordance with the terms and conditions of the contract, the Appellant has invoked the Bank Guarantee. It is also their contention that the Bank Guarantee being an independent contract between the Banker and the Beneficiary and the said Bank Guarantee also being an unconditional and an irrevocable one, the respondents have got no locus-standi to obtain an order of injunction restraining the Appellant from invoking the Bank Guarantee.