ASSOCIATION OF CORPORATION AND APEX SOCIETIES OF HANDLOOMS Vs. ASSAM APEX WEAVERS AND ARTISANS CO OPERATIVE FEDERATION LIMITED

JUDGEMENT

(1.) This appeal is directed against the order dated 7.3.2003 passed by the learned Adhoc Additional District Judge No. 2, Guwahati in Miscellaneous Arbitration Case No. 143/ 1998. By the impugned order, the learned Judge restrained the appellant from encashing the bank guarantee till disposal of the ongoing arbitration proceedings between the appellant and the respondent.

(2.) The appellant and the State of Bihar executed an agreement dated 5.3.1997 for supply of handloom dhoties and sarees worth Rs. 200 crores. The appellant had by the agreement dated 1.4.1997 asked the Respondent No. 1 for supply of 1,16,400 pieces of handloom dhoties and an equal number of handloom sarees to the State of Bihar. In terms of Clause-2 of the agreement, the respondent No. 1 was given a sum of Rs. 32 lakhs as advance against the bank guarantee dated 8.4.1997 furnished by the Respondent No. 1.

(3.) The dispute arose between the parties and the matter was referred to the Arbitral Tribunal for adjudication in terms of the arbitration clause. The proceeding is still pending before the Tribunal. During pendency of the proceedings, the appellant wrote the letter dated 8.4.1997 expressing their desire to invoke the bank guarantee indicating that there are sufficient reasons for such invocation. The respondent raised objection on the plea that there was no reason for such invocation. The Respondent Society then approached the learned Court below seeking prohibitory orders. The respondent while seeking prohibitory orders pleaded that there is no allegation from the State of Bihar about the quantity and quality of the sarees and dhoties supplied, breach of any of the terms and conditions and that the letter of invocation was not in terms otf the conditions embodied in the bank guarantee. Their specific plea before the learned Court below was that the bank guarantee in question should not be invoked till disposal of the arbitral proceeding pending between the parties.