( 1 ) AGGRIEVED by invocation of bank guarantee by respondents 1 and 2, the petitioner has filed instant petition under Section 9 of the Arbitration and Conciliation Act 1996 seeking a restraint order against respondents 1 and 2 from encashing or realising any amount under the bank guarantee in question and injuncting the respondent No. 3 from making any payment to the respondents 1 and 2 thereunder.

( 2 ) FACTS relevant in the context of present controversy may be noticed briefly. On 30/06/1992 the respondent No. 1 placed a purchase order on the petitioner for supply of 1500 kms of "acsr Bersimis Conductor" of a total value of Rs. 13,92,84,000. 00. The delivery was to commence six months from the date of the award letter and was to be completed within 12 months i. e. on or before 30/06/1993. For each calender week of delay or part thereof, liquidated damages @1/2% of the contract value, subject to ceiling of 5% of the total contract value, was leviable under the contract. In the event of delay or default on the part of the respondent No. 1, the petitioner was entitled to reasonable extension of time, apart from being compensated therefor. The petitioner was required to furnish a performance bank guarantee for 10% of the value of the contract and accordingly a performance guarantee No. 3398 dated 3. 9. 1992 for Rs. 91,06,852. 00, issued by respondent No. 3, as amended vide amendment letter dated 31. 12. 2001 and validated up to 31st March, 2002, was submitted.

( 3 ) THE said bank guarantee, according to the petitioner, was a conditional one as upon discharge of the contract the same was to stand automatically determined/cancelled.

( 4 ) THERE was a delay in establishing the letter of credit favouring the petitioner by the respondent No. 1 to secure 85% payment to the petitioner against submission of documents evidencing despatch. In the circumstances, by a letter dated 28/02/1994, addressed to the petitioner the respondent No. 1 unilaterally re-scheduled the delivery period to commence from February 1994 till the entire order was executed. It is added that delays occurred in payments against the documents negotiated under the letter of credit, on the part of the respondents No. 1 and 2, due to which reinstatement of the letter of credit for payments against subsequent supplies also got delayed.

( 5 ) DURING the re-scheduled delivery period the petitioner supplied a total quantity of 299. 480 kms. of the conductors between 25/02/1994 and 28/07/1994. No further supplies could be made thereafter as the letter of credit got expired in view of non extension thereof by the respondents No. 1 and 2.

( 6 ) ON the request of the respondent No. 1, further supplies, under the same very contract, were resumed by the petitioner sometime in the year 1996 and during the period from 13/04/1996 to 15/02/1997 the conductors to the extent of 537. 082 kms were supplied and payments for the same were made to the petitioner. Between 6/07/2000 and 18/08/2000, 230. 378 kms of the said conductors were further supplied to the respondent No. 1 and the petitioner received payment against the same. Thus in all, 1066. 940 kms of the conductors out of the total quantity of 1500 kms. were supplied to the respondents and the petitioner received payments therefor.

( 7 ) BY a letter dated 26th February, 2002 from the respondent No. 2, the petitioner was informed that the supplies of the balance quantity of 433. 060 kms stood foreclosed/cancelled and the petitioner was required to refund the balance advance payment of Rs. 40,09,270. 48. Simultaneously, the respondent No. 1 made a claim of Rs. 23,92,462. 00 against the petitioner on account of liquidated damages for non supply of 300 kms. (approx) of the conductors in the first phase of supply. The petitioner was required to deposit the said amount of liquidated damages within 10 days failing which, it was told that the amount would be recovered by encashing the bank guarantee.

( 8 ) BY a letter da