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A2Z Waste Management (Jaipur) Ltd. v/s Commissioner (Health), Jaipur Municipal Corporation & Another

    S.B. Civil Misc. Appeal No. 88 of 2014
    Decided On, 09 January 2014
    At, High Court of Rajasthan
    By, THE HONOURABLE MR. JUSTICE BELA M. TRIVEDI
    For the Appellant: Mahendra Singh, Advocate. For the Respondents: --------


Judgment Text
The present appeal filed under Section 37(1) of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as "the said Act") is directed against the order dated 20.12.2013 passed by the Additional District Judge No.14, Jaipur Metropolitan, Jaipur (hereinafter referred to as "the court below") in Arbitration Application No.280/2013, whereby the court below has refused to grant ad-interim injunction in favour of the appellant-applicant during the pendency of the application under Section 9 of the said Act.

2. Briefly stated the facts are that the appellant-applicant was awarded the contract for the development of Integrated Solid Waste Management System for Jaipur Nagar Nigam on PPP Model (Public Private Partnership) to ensure scientific disposal of solid waste, for which a Concession Agreement was entered into between the appellant and the respondents on 24.09.2012. As per the condition, contained in Article 6.1 of the agreement, the appellant had furnished the bank guarantee/performance guarantee for a sum of Rs.1,00,00,000/- (rupees one crore) for the due and punctual performance of its obligations relating to the project. Accordingly the IDBI Bank, Mumbai at the instance of the appellant had executed an unconditional and irrevocable guarantee in favour of the respondents, agreeing and undertaking to pay to the respondents-authority such sum upto an aggregate sum of the guarantee amount as the authority may claim, without any demur, reservation, recourse, contest or protest, and without any reference to the concessionaire i.e. the appellant. It was further stated in the said bank guarantee that the liability of the IDBI Bank under the said guarantee was restricted to Rs.1,00,00,000/- (rupees one crore), and the guarantee was to remain in force until 23.08.2013, unless a demand or claim under the said agreement was made in writing on or before 23.02.2014. It further appears that thereafter certain disputes between the appellant and the respondents had arisen, which were required to be referred to the Arbitrator as per the terms of the agreement. However, the appellant, filed an application before the court below, under Section 9 of the said Act seeking injunction against the respondents for restraining them from encashing the said bank guarantee. The said application was registered as the Arbitration Application No.183/2013 before the court below. The court below initially granted ad-interim injunction in favour of the appellant restraining the respondents from encashing the bank guarantee in question, vide the order dated 25.02.2013. As per the case of the appellant, during the pendency of the said application under Section 9, the respondents had issued NIT on 19.06.2013 inviting tenders for the Integrated Solid Waste Management, identical to the work required to be carried out by the appellant as per the agreement dated 24.09.2012, and therefore, the appellant had challenged the said action before the High Court by filing the writ petition. The appellant also filed an application under Section 11 of the said Act before the High Court for the appointment of an Arbitrator for the resolution of the disputes between the parties. It further transpires that on 27.09.2013, when the said application was being heard by the court below, both the counsels for the parties had remained present, and as transpiring from the order dated 27.09.2013, both the counsels for the parties had declared before the court below that the validity period of the bank guarantee had expired, and the proceedings under Section 11 (not legible) were pending before the High Court, and therefore, the relief sought for in the application had become infructuous. The court below, therefore, had dismissed the said application on the basis of such statements made by the learned counsels for the parties.

3. As per the case of the appellant, thereafter the appellant received a letter dated 11.12.2013 from the IDBI Bank informing the appellant to remit the amount of Rs.1,00,000,00/- (rupees one crore) in its CC Account to enable the Bank to make payment to the respondent Nagar Nigam as per its notice dated 26.11.2013, in respect of the bank guarantee in question. The appellant, therefore, again approached the court below by filing the application under Section 9 of the said Act for restraining the respondents from encashing the bank guarantee in question and from entrusting the work to any other agency which was entrusted to the appellant pursuant to the agreement. The appellant also filed an application seeking ad-interim injunction of the same nature in the said proceedings under Section 9 of the said Act. The court below vide the impugned order dated 20.12.2013 has refused to grant ad-interim injunction in favour of the appellant, and fixed the matter for enabling the respondents to file reply. Being aggrieved by the said order, the appellant has filed the present appeal.

4. It has been sought to be submitted by the learned counsel Mr. Mahendra Singh for the appellant that the respondents had lied and committed fraud with the appellant, by getting the earlier application of the appellant dismissed on one hand, and on the other hand calling upon the IDBI Bank to make payment in respect of the bank guarantee. According to Mr. Singh, the learned counsel for the respondents appearing in the court below had misled the court below, which resulted into the dismissal of the earlier application. According to him, the court below without appreciating the said conduct on the part of the respondents, had refused to grant the ad-interim injunction in favour of the appellant. Pressing into service, the provisions contained in Section 9 of the said Act, Mr. Singh submitted that the appellant was entitled to the interim measure as contained in Section 9, for securing the amount in dispute.

5. At the outset, it is required to be stated that the appellant has sought the relief before the court below in the application under Section 9, and in the present proceedings, for restraining the respondents from encashing the bank guarantee, without impleading the concerned Bank i.e. IDBI Bank, Mumbai as the party respondent in the proceedings. It is needless to say that unconditional and irrevocable bank guarantee was issued by the said Bank in favour of the respondents at the instance of the appellant, and if the appellant had filed the proceedings for interim measures seeking injunction against the respondents for restraining them from encashing the bank guarantee, the Bank would not only be the proper party but the necessary party, and therefore, the present appeal deserves to be dismissed on the ground of non-joining of the necessary party alone.

6. The submissions made by the learned counsel for the appellant that the earlier application under Section 9 of the said Act was dismissed by the court below on the statement made by the learned counsel for the respondents, also cannot be accepted, for the simple reason that from the order sheet dated 27.09.2013 itself, it clearly transpires that the learned counsels for the parties had remained present, and both of them had declared before the court below that the period of bank guarantee had already expired, and therefore, the application had become infructuous. The said order passed by the court below on the basis of the statements made by the learned counsels for the parties was not challenged or sought to be reviewed by the appellant, if according to the appellant, false statement was made by the learned counsel for the respondents. If the counsel for the respondents had made any misleading statement in the court, the counsel for the appellant should have pointed out the correct facts to the court. That having not been done by the learned counsel appearing for the appellant, when the court below was dismissing its earlier application, the submissions made by the learned counsel Mr. Singh for the appellant that the respondents had played the mischief could not be accepted.

7. Further, a very strange practice appears to have been followed by the IDBI Bank, New Delhi by writing letter dated 11.12.13 to the appellant. Though the IDBI Bank had issued unconditional and irrevocable bank guarantee in favour of the respondents, at the instance of the appellant, and though the liability under the said Bank guarantee was upto 23.02.2014, the said bank had written the letter to the appellant on 11.12.2013 to remit the amount of Rs.1,00,00,000/- (rupees one crore) in its CC Account to enable the Bank to make payment to the respondents pursuant to its notice dated 26.11.2013. It is needless to say that the Bank was obliged to make payment to the respondents-authority on the written demand made by it, without any demur, reservation, recourse, contest or protest and without any reference to the concessionaire i.e. the appellant, as per the condition No.1 of the bank guarantee in question. By writing such letter to the appellant, it clearly transpires that the Bank wanted to oblige the appellant and to delay the payment to the respondents.

8. Under the circumstances, and having regard to the facts of the case, the Court is of the opinion that the court below has rightly not granted the ad-interim injunction as prayed for by the appellant. The legal position as regards the bank guarantee has been reiterated by the Apex Court in case of Himadri Chemicals Industries Ltd. v. Coal Tar Refining Company, 2007(2) WLC (SC) Civil, page 361, in which it has been held has under:-

"14. From the discussion made herein-above, relating to the principles for grant or refusal to grant of injunction to restrain enforcement of bank guarantee or a letter of credit, we find that following principles should be noted in the matter of injunction to restrain the encashment of a Bank Guarantee or a Letter of Credit :-

(i) While dealing with an application for injunction in the course of commercial dealings, and when an unconditional Bank Guarantee or Letter of Credit is given or accepted, the beneficiary is entitled to realize such a Bank Guarantee or a Letter of Credit in terms thereof irrespective of any pending disputes relating to the terms of the contract.

(ii) The Bank giving such guarantee is bound to honour it as per its terms irres

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pective of any dispute raised by its customer. (iii) The Courts should be slow in granting an order of injunction to restrain the realization of a Bank Guarantee or a Letter of Credit (iv) Since a Bank Guarantee or a Letter of Credit is an independent and a separate contract and is absolute in nature, the existence of any dispute between the parties to the contract is not a ground for issuing an order of injunction to restrain enforcement of Bank Guarantee or Letters of Credit. (v) Fraud of an egregious nature which would vitiate the very foundation of such a Bank Guarantee or Letter of Credit and the beneficiary seeks to take advantage of the situation. (vi) Allowing encashment of an unconditional Bank Guarantee or a Letter of Credit would result in irretrievable harm or injustice to one of the parties concerned." 9. In view of the above, the Court does not find any merit in the present appeal, and therefore, the appeal is dismissed in limine. A copy of this order be sent to the IDBI Bank, at its branch office at New Delhi and head office at Mumbai. Appeal Dismissed.
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