BINNY LIMITED Vs. NIZAM SUGARS LIMITED

JUDGEMENT

(1.) All these civil miscellaneous appeals are directed against a common order dated 23/09/1996, passed by the Fifth Additional Judge, City Civil Court, Hyderabad, dismissing the applications filed by the appellant herein under Order 39, rules 1 and 2 of the Civil Procedure Code, 1908, read with section 9 of the Arbitration and Conciliation Ordinance, 1996, seeking temporary injunctions restraining the first respondent herein from enforcing certain bank guarantee furnished by the appellant and also restraining respondents Nos. 2 and 3 banks from making payment to the first respondent under the said bank guarantees pending disposal of the three suits filed by the appellant against the respondents in that behalf.

(2.) The facts leading to the appeals can be stated briefly : The appellant entered into three separate contracts dated 30/11/1990, with the first respondent for supply, erection and commissioning of three plants for the manufacture of sugar at Metpalli, Zaheerabad and Bobbili, respectively. For the due performance of the terms and conditions of the said agreements, the appellant furnished certain bank guarantees in favour of the first respondent through the banks, respondents Nos. 2 and 3 herein. As disputes arose between the appellant and the first respondent, each blaming the other of committing default, the first respondent invoked the bank guarantees and sought to enforce the same. Asserting that it has a right to get the disputes settled through arbitration and that the first respondent has no right to enforce the bank guarantees in the meantime, the appellant initially filed writ petitions under article 226 in this court to restrain the first respondent from enforcing the bank guarantees and obtained interim orders of status quo but ultimately the said writ petitions were disposed of directing the appellant to approach the civil court. Accordingly, the appellant filed the three suits in the lower court and applied for the grant of orders of temporary injunction in all the suits. The lower court initially granted ad-interim orders of status quo on 27/06/1996. But after hearing the parties, the lower court by the impugned order dated 23/09/1996, dismissed the petitions for the grant of temporary injunction and vacated the status quo orders granted earlier. Aggrieved thereby the appellant has filed the present appeals.

(3.) The appellant sought to restrain the first respondent from enforcing the bank guarantees mainly on the ground that it (appellant) was declared as a sick industrial company and the Board for Industrial and Financial Reconstruction (BIFR) has formulated a scheme for its rehabilitation and as such the first respondent has no right to invoke the bank guarantees in view of the provisions of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. The lower court, however, found from the very documents filed by the appellant that the appellant was subsequently declared to have ceased to be a sick unit within the meaning of section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985, by an order dated 12/01/1995, by the BIFR in Case No. 48 of 1993, and consequently, the protection of section 22 of the Act is not available to it. Further, the lower court, following an unreported decision of this court in W.A. No. 128 of 1995 and W.P. No. 11632 of 1994, dated 4/04/1995, (since reported as Haryana Telecom Ltd. v. Aluminium Industries Ltd. [1997] 88 Comp Cas 735 (AP)) held that the provisions of section 22 cannot be invoked to restrain the encashment of bank guarantees. The lower court also held that the appellant did not place on record any evidence to show that there was fraud on the part of the first respondent and that the appellant had also failed to make out a prima facie case and the balance of convenience is also not in its favour and there is no question of irreparable injury to the appellant as in the event of ultimate success in the suit, the appellant can easily recover the entire amount covered by the bank guarantees from the first respondent which is a Government company. Accordingly the lower court dismissed the applications for the grant of temporary injunction.