CONSUL CONSOLIDATED PRIVATE LIMITED Vs. RADHAKRISHNAN RAGHAVAN NAIR

JUDGEMENT

(1.) The appeal arises out of the impugned order dated 27.04.2015 where the learned Single Judge has passed the order on the application (O.A.No.48 of 2015) filed by the first respondent under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to the said ''Act'') restraining the invocation and encashment of the Bank Guarantee of Rs.1,00,00,000/- bearing B.G.No.007GT0113074005 dated 05.03.2013 (the petitioner, in Section 9 petition and the learned Single Judge in the impugned order mention the date as 15.03.2013) established in favour of the first appellant by the second appellant. At the initial stage, an interim order was granted on 18.01.2015 directing the first respondent to keep the Bank Guarantee alive, which direction was complied with in terms of the impugned order. The learned Single Judge has opined that the Bank Guarantee should not be encashed, but to be kept alive by the first respondent during the pendency of the arbitration proceedings.

(2.) We may also note that as often happens, the concentration of the appellants seems to be only on the issue of interim relief as it is stated not to have sent the response as yet to the notices issued by the first respondent to the appellants invoking the arbitration Clause and seeking appointment of an Arbitrator, though the learned Senior Counsel for the appellants states that appointment of an Arbitrator would not pose any problem.

(3.) The facts giving rise to the present application of the said Act are that the first respondent is the former Director and Promoter of the second appellant and engaged in the construction business. The shareholding of the second appellant was sought to be transferred to the first appellant by the first respondent as well the other shareholders of the second appellant. Such shares were transferred in two tranches. 51% of the equity share capital and 100% preference share capital held by the first respondent and his wife was transferred to the first appellant for Rs.15,52,50,000/- in terms of the First Share Purchase Agreement (SPA) executed on 21.12.2012. A certificate of completion and the CP Satisfaction Certificate dated 08.01.2013 were also issued, however, an Indemnity was furnished by the first respondent and the other sellers in respect of the liabilities relating to the period prior to the completion date. On completion, the first appellant is stated to have caused full-fledged audit to be conducted and the financial statements were signed both by the first respondent and the Managing Director of the first appellant and thereafter, no claims were made against the first respondent. The first respondent had provided the Bank Guarantee referred to aforesaid in favour of the first appellant towards security for any legitimate indemnity claim, which was to remain valid for a period of two years from the completion date. In this behalf, it is stated in the petition that as per Clause 6.7 of the First SPA, the Bank Guarantee had been furnished and as per Clause 15.2 of the First SPA, the Indemnity was to be valid for a period of two years from the completion date.