The obligation to procure financial guarantees remains with the parties as per the contract terms, and failure to meet these obligations justifies claims in arbitration for costs incurred.

R.I. CHAGLA, J.

1. By this Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (“ ARBITRATION ACT ”), the Petitioner is impugning (i) Award dated 5^th February 2019, passed by the learned Sole Arbitrator (“impugned Award”), rejecting the Petitioner’s contention and partly allowing the claim of the Respondent; and (ii) Order dated 3^rd September 2016, passed by the learned Sole Arbitrator (“impugned Order”), rejecting the application filed by the Petitioner under Section 16 of the ARBITRATION ACT .

2. A brief background of facts is necessary as stated hereunder:

(i) A Purchase Order was issued by the Petitioner on 15^th March, 2012 in favour of the Respondent for manufacturing and supply of 480 Hydraulic Drives and 960 Hydraulic Cylinders for a total contract price of INR 6,81,60,000/-. These goods were to be custom made as per the specification of the Petitioner and it is contended by the Respondent that the goods were of specific use only to the Petitioner.

(ii) Thereafter, the Petitioner and the Respondent executed a Supply Agreement dated 26^th March, 2012. Under Clause 4.8 of the Supply Agreement, the Petitioner was the Consignee of the goods delivered by the Respondent, as per the Delivery Schedule agreed between the parties and was liable to make/ensure full payment to the Respondent for the goods. The Respondent was to deliver the goods in different quantities, which was categorized as lots. Under Clause 5.4 of the Supply Agreement, (i) the Petitioner was liable to pay a non- refundable advance payment of INR 68,16,000/- i.e. 10% of the total contract price; and (ii) The Petitioner, prior to the first delivery of the goods, was liable to procure a usance Letter of Credit payable at site from Corporate Ispat Alloys Limited (“CIAL”), in favour of the Respondent, which was to cover the remaining 90% of the contract price. It is pertinent to note that as per Clause 22.3.1 of the Supply Agreement, a failure to procure a Letter of Credit amounted to the Petitioner’s default under Clause 22.3 and such default entitled the Respondent to terminate the Supply Agreement under Clause 22.4 thereof. Additionally, as per Clause 26.4 of the Supply Agreement, any forbearance or delay on part of either of the party, in enforcing any of its rights under the Supply Agreement would not construe as a waiver of such right to enforce the same.

(iii) A Multi-Party Agreement (“MPA”) was executed on 2^nd August, 2012. The MPA was entered between CIAL, APL (“Abhijeet Projects Limited”), the Petitioner and the Respondent but the Agreement was signed only by the Petitioner and the Respondent. The MPA provides a mere clarification to the payment mechanism agreed between the Petitioner and the Respondent. Under Clause A(1) of the MPA, CIAL was to open an irrevocable inland letter of credit in favour of the Respondent, covering 90% of the total contract price. The balance amount was payable by the Petitioner directly. It is pertinent to note that under Clause C of the MPA, it was agreed that all the terms and conditions mentioned in the Supply Agreement shall continue to remain valid and enforceable amongst the parties. As per Clause D of the MPA, in the event of any conflict between the terms of the Supply Agreement and the MPA, the former will prevail i.e. the Supply Agreement. Further, as per the