The main legal point established in the judgment is that the encashment of a bank guarantee during the pendency of arbitration proceedings may be permissible based on subsequent developments and the need to invoke specific legal provisions for interim measures.

JUDGMENT

Kesang Doma Bhutia, J. - This appeal is directed against the order passed by Hon'ble Single Bench in I.a. No. G.a. 7 of 2021 in a.P. No.1989 of 2014 on 15th September, 2021 whereby the Hon'ble Single Bench has been pleased to permit Shristi Infrastructure Development Corporation/the award Holder to encash bank guarantee of Rupees 6 Crore deposited by the petitioner/award debtor while obtaining order of stay of operation of the arbitration award dated September 3rd, 2014 in a petition under section 36(2) of the arbitration and Conciliation act and further directed the award-holder to furnish a bank guarantee for the same amount by a Public Financial Institution of the petitioner's choice within 10 days from the date of passing of the order.

2. In order to appreciate the appeal and determine the issues in question the facts of the case in gist are that the West Bengal Transport Infrastructure Development Corporation/ the petitioner had invited tender for construction of Vivekananda Road Fly Over project sometime in the year 2000. The respondent was successful and the contract was awarded in its favour. The petitioner failed to discharge its reciprocal obligation in the nature of condition precedent for commencing of work by the Respondent, inter alia, by failure to hand over possession of the site, while the Respondent after the contract was awarded in its favour had incurred huge expenses in connection with preparatory and other work related to the aforesaid agreement.

3. The Respondent was directed to submit performance security for the construction period by the petitioner vide letter dated 2nd July, 2002, when the petitioner has failed to handover the vacant possession of the construction site to the respondent. Challenging the letter dated 2nd July, 2002, the respondent filed a Writ Petition No. 2043 of 2002 and an interim order was passed restraining the petitioner from giving effect to such letter and Writ was finally disposed of on 02.03. 2009 directing parties to resolve their dispute through arbitration mechanism as provided in Clause 31 of the Concession agreement.

4. During the pendency of the Writ Petition the Government of West Bengal handed over the entire project to KMDa and agreement between petitioner and respondent suffered a natural death.

5. The matter was referred to the arbitral Tribunal which passed an award on 3rd of September, 2014 in favour of the respondent awarding Rupees 4 Crore 32 Lakh towards principal amount along with interest at the rate of 18 per cent per annum.

6. Challenging the said award dated 3rd September, 2014, the petitioner filed petition under Section 34 of the arbitration and Conciliation act, 1996 before the Hon'ble High Court and also filed an application under Section 36 (2) of the arbitration act for stay of the operation of the arbitration award. While granting the stay, the Hon'ble Single Bench directed the petitioner to furnish bank guarantee of Rupees 6 Crore issued by a Nationalised Bank to the Learned Registrar, Original Side. From time to time such bank guarantee was extended.

7. That in a.P. No.1989 of 2014 under Section 34 of the arbitration act, the respondent/award holder filed the impugned application being no. Ga 7 of 2021 and prayed for encashment of bank guarantee furnished by the petitioner/appellant to the tune of Rupees 6 Crore while obtaining stay of operation of the arbitration award, with a consequential order of permitting the respondent to furnish another Bank Guarantee of the same amount to be furnished by a Nationalised Bank with the condition the bank guarantee shall be kept alive till disposal of the application u/s 34 of the arbitration act/ a.P. No.1989 of 2014.

8. after hearing learned Counsel for both sides Hon'ble Single Bench has been pleased to allow application filed by the award Holder permitting it to encash the bank guarantee furnished by the petitioner but on furnishing a bank guarantee for the same amount issued by a Public Financial Inst