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High Court Of Delhi
NATIONAL BUILDINGS CONSTRUCTIONCORPORATION LIMITED - Appellant
Versus
IRCON INTERNATIONAL LIMITED - Respondent
ORIGINAL MISCELLANEOUS PETITION 147 of 1997
Decided On : 08/01/1997
{'KEYWORD': 'Arbitration and Conciliation Act, 1996', 'SUBJECT': 'Maintainability of Petition for Interim Injunction', 'ACT SECTION LIST': ['Section 9', 'Section 21', 'Section 7', 'Section 11']}
Fact of the Case:
NBCC, a public sector undertaking, entered into sub-contracts with IRCON, another public sector undertaking, for construction of railway stations. Disputes arose between the parties, leading to termination of the contract by IRCON and invocation of bank guarantees furnished by NBCC. NBCC challenged the invocation of bank guarantees before the Committee on Disputes, which directed the parties to seek appropriate legal remedies.
Finding of the Court:
The petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim injunction to restrain the encashment of bank guarantees, was held to be not maintainable.
Issues: 1. Whether the petition under Section 9 of the Arbitration and Conciliation Act, 1996, was maintainable? 2. Whether the arbitration clause in the agreement between the parties was illegal and unenforceable?
Ratio Decidendi: 1. Section 9 of the Arbitration and Conciliation Act, 1996, allows a party to apply for an interim injunction before or during arbitral proceedings or after the arbitral award is made but before its enforcement. 2. The word "before" in Section 9 refers to the interregnum period between the demand for arbitration and the actual reference of the dispute to arbitration. 3. An interim order under Section 9 can be sought only after a ground for settlement of disputes through arbitration has been laid by invoking the arbitration agreement. 4. The petitioner, by repudiating the arbitration clause, could not invoke Section 9 of the Act for interim relief. 5. The arbitration clause in the agreement was not illegal or unenforceable merely because it did not conform to the office memorandum and presidential directives.
Final Decision: The petition was dismissed as not maintainable.
( 1 ) IT is indeed unfortunate that despite the judgment of the Supreme Court in Oil and Natural Gas Commission and Anr v. Collector of Central Excise, JT 1991 (4) SC 158, expressing the hope that disputes between government departments and public sector undertakings of the Union of India may be resolved at the government level itself, the Committee (of Secretaries) on Disputes has expressed its helplessness to resolve the disputes and the two public sector undertakings are fighting like two private litigants.
( 2 ) BY this petition under Section 9 of The Arbitration and Conciliation Act, 1996 the petitiioner seeks ad interim ex parte injunction against the respondents, restraining them, or their agents and servants, from invoking and/or encashing the bank guarantees amounting to Rs. 6. 09 crores, the details whereof have been given in Annexures F and G (collectively) to the petition.
( 3 ) I have heard Mr. Mukul Rohatgi,learned Senior counsel appearing for the petitioner and Mr. Ashok Desai, learned Attorney General of India for respondent No. 1.
( 4 ) BRIEFLY stated, the material facts emanating from the petition are that on 13 March 1989 City and Industrial Development Corporation (hereinafter REFERRED TO to as the CIDCO) awarded a contract to Indian Railway Construction Company Ltd (for short the IRCON) for commercial construction of railway station-cum-commercial complexes at various railway stations in New Bombay. Pursuant to the contract dated 5 April 1990 between CIDCO and IRCON and as per clause 51 of the agreement, IRCON sub-contracted the said works to National Building COnstruction Corporation Ltd (for short the NBCC), the petitioner herein, for construction of railway station-cum-commercial complexes at Vashi and Belapur, amounting to Rs. 30. 42 crores.
( 5 ) CONSEQUENTLY, on 16 July 1990 two separate agreements were executed between IRCON and NBCC in respect of Vashi and Belapur works. In terms of the agreements, NBCC furnished bank guarantees amounting to Rs. 6. 09 crores with the State Bank of Patiala, Kasturba Gandhi Marg, New Delhi, State Bank of India, Connaught Place, New Delhi and Syndicate Bank, Nehru Place, New Delhi, respondents No. 2, 3 and 4 respectively for securing mobilisation advance, security deposit, security and material advance.
( 6 ) IT appears that some disputes arose between IRCON and NBCC with regard to the said contracts and as a result thereof the IRCON terminated the contract with NBCC and invoked the bank guarantees given by NBCC amounting to Rs. 6. 09 crores. Thereafter the matter was REFERRED TO to Committee on Disputes, constituted in terms of judgment of the Supreme Court in ONGC s case (supra ). The Committee met on various dates, deliberated on the disputes between IRCON and NBCC and it is claimed by the petitioner that during all this period the bank guarantees in question were directed to be kept alive and were not to be invoked.
( 7 ) FROM letter dated 11 August 1995 (page 140), it appears that there was some correspondence between the IRCON and NBCC with regard to encashment of bank guarantees in question. In the said letter from IRCON to NBCC, the NBCC had been informed that the bank guarantees having been invoked prior to the directive of the Cabinet Secretariat it could not be withdrawn at that stage as the issue was still not settled. It is said that the issue of encashment of bank guarantees again came up for consideration and resolution before the Committee on Disputes but no decision was taken on the issue.
( 8 ) IT appears that when the matter was still under consideration of the Committee on Disputes the NBCC filed a writ petition in this Court challenging some decisions taken by the Committee. Taking note of this fact in its meeting held on 24 July 1997 the Committee washed its hands of the matter, discussed its earlier decision taken in its meeting held on 10 April 1997 regarding encashment of bank guarantees, and permitted the parties to seek appropri
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