IMPORTANT POINT
Interim measures – Direction to furnish security in form of Performance Bank Guarantees is contingent upon fulfilment of certain conditions.

JUDGMENT :

M.R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 11.02.2022 passed by the High Court of Gujarat at Ahmedabad in Regular First Appeal No. 3253 of 2021, by which, the High Court has dismissed the said appeal confirming the order passed by the Commercial Court in an application under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Arbitration Act, 1996), by which the Commercial Court directed the appellant herein – original opponent/respondent No. 1 to deposit the amount of performance bank guarantees pertaining to purchase order Nos. 01, 02 and 03 invoked by it, the original opponent/respondent No. 1 has preferred the present appeal.

2. We have heard Shri Vivek Chib, learned Senior Advocate appearing on behalf of the appellant and Shri K.V. Viswanathan, learned Senior Advocate appearing on behalf of respondent No. 1 herein – the main contesting party.

3. At the outset it is required to be noted that in the present case the dispute is with respect to three purchase orders, namely, purchase order Nos. 01, 02 and 03. It appears that the appellant served a notice upon respondent No. 1 vide notice dated 11.06.2021 claiming a loss of INR 29.31 crores (approximately) owing to the defective quality of the cables supplied. The said notice was replied by respondent No. 1 vide reply dated 19.06.2021. That thereafter, respondent No. 1 served a legal notice dated 13.07.2021 on the appellant claiming for outstanding payment of INR 1.30 crores (approximately). That the appellant vide communication/letter dated 21.07.2021 invoked the bank guarantees issued by respondent No. 1 herein, which according to respondent No. 1 were by way of performance bank guarantees. That thereafter, the appellant invoked the arbitration on 22.07.2021. Immediately on the next day i.e., 23.07.2021, respondent No. 1 herein filed two applications/petitions under Section 9 of the Arbitration Act, 1996, being application No. 438/2021 before the Commercial Court at Ahmedabad and another application No. 88/2021 before the Commercial Court at Bhuj. Application No. 88/2021 under Section 9 of the Arbitration Act, 1996 filed by respondent No. 1 herein was regarding three bank guarantees, which is the subject matter of present case. At this stage, it is required to be noted that by the time any further order could be passed the bank realized the payments under the bank guarantees invoked by the appellant. That the Commercial Court passed an order dated 13.10.2021 under Section 9(ii)(e) of the Arbitration Act, 1996 to secure the amount in dispute and directed the appellant herein to deposit the amount of respective performance bank guarantees, which as such has already been invoked and for which the payments were already made by the bank. The order passed by the Commercial Court under Section 9 of the Arbitration Act, 1996, directing the appellant to deposit in the court the amount of respective bank guarantees pertaining to purchase order Nos. 01, 02 and 03 was the subject matter of appeal before the High Court under Section 13 of the Commercial Courts Act, 2015. By the impugned judgment and order, the High Court has dismissed the said appeal which has given rise to the present appeal.

4. Having heard learned counsel appearing on behalf of the respective parties and in the facts and circumstances of the case, more particularly, when the bank guarantees were already invoked and the amounts under the respective bank guarantees were already paid by the bank much prior to the Commercial Court passed the order under Section 9 of the Arbitration Act, 1996 and looking to the tenor of the order passed by the Commercial Court, it appears that the Commercial Court had passed the order under Section 9(ii)(e) of the Arbitration Act, 1996 to secure the amount in dispute, we are of the opinion that unless and until the preconditions under Order XXXVIII Rule 5 of the CPC are satisfied and unless there