Point of Law: Tender/Contract – Breach of – Invocation of bank guarantees - Existence of disputes between the parties to the Contract is not a ground for issuing an order of injunction to restrain enforcement of bank guarantees

JUDGMENT

Sanjeev Narula, J.

[Via Video Conferencing]

1. The present appeal under Section 37(1)(b) of the Arbitration and Conciliation Act, 1996 [hereinafter referred to as the ‘Act’] is directed against the final judgment/order dated 27th January, 2021 [hereinafter referred to as 'Impugned Order’] passed by the learned Single Judge in OMP (I) (COMM) 31/2021, wherein the petition filed by the Appellant herein under Section 9 of the Act, seeking orders restraining the Respondent from encashing bank guarantees, has been decided by directing the Respondents No. 2 to 5 [hereinafter referred to as the 'Banks'] to encash the four bank guarantees and transfer the encashed amount into the account of the learned Registrar General of this Court, to be put in a fixed deposit subject to the outcome of the arbitration proceedings.

Facts

2. The bare essential facts leading to the establishment of the bank guarantees in question are that a Notice Inviting Tender [hereinafter referred to as 'NIT] along with Geological Reports furnished therein [hereinafter referred to as 'GRs'], was issued by Respondent No. 1 [Bharat Coking Coal Ltd., hereinafter referred to as 'BCCL'] for, inter alia, ''Development of Kapuria Block and extraction of coal by mass production technology package for a minimum guaranteed production of 2.0 million ton per year on turnkey basis" [hereinafter referred to as the 'Project']. Pursuant thereto, on 10th September, 2011, a letter of acceptance was issued by BCCL to the Appellant/Consortium contractor. This was followed by the execution of a Contract Agreement between the Appellant and BCCL on 18th April, 2012 [hereinafter referred to as the 'Contract’]. On 8th November, 2012, the Appellant after undertaking exploration works, submitted a comprehensive Detailed Project Report to BCCL, for approval [hereinafter referred to as ‘.DPR’]. On 11th July, 2013, BCCL communicated its approval to the Appellant and gave directions to start work as per the approved DPR, after obtaining the required environmental clearance and statutory approvals. Based on the approval of the aforesaid DPR, on 29th July, 2013, the Appellant in line with Clause 4.1.4 of the Contract, furnished a performance bank guarantee in favour of BCCL for an amount of Rs.12,78,49,970/-. The Appellant also prepared a mining plan for extraction of coal reserves and submitted the same to BCCL, which was approved on 30th December, 2014. In line with the same, the Appellant conducted Environmental Impact Assessment and Environmental Management Plan, and submitted these reports to BCCL, based whereupon, environmental clearance for the Project was accorded on 19th December, 2014 by the Ministry of Environment and Forest, Government of India.

3. Based on the approved DPR, the Appellant tied up the supply of indigenous and imported plant and machinery/equipment for the Project and in terms of Clause 4.1.49.3 of the Contract furnished three bank guarantees for release of 5% part payment of deliverable plant and machinery to BCCL, for Rs.6,40,75,203/-, 20,00,00,000/- and 14,79,00,000/- respectively.

4. On 15th January, 2018, BCCL informed the Appellant that the Internal Rate of Return (IRR) of the total investment in the Project was unfavourable, as, upon a re-examination of the layout of the proposed panels, it was found that the amount of coal extraction is likely to be greatly reduced. Resultantly, subsidence studies were done afresh through the Central Institute of Mining and Fuel Research and its report was submitted in June, 2018. On 26th November, 2018, BCCL informed the Appellant that the reports furnished by the Appellant have been provided to the Design Consultant (Central Mine Planning and Design Institute Limited) to re-work the integrated economics of this Project. Thereafter, on 20th May, 2019, BCCL furnished a fresh GR to prepare revised DPR.

5. According to the Appellant, the fresh GRs were at great variance to the earlier GRs and called for entire fresh planning of wo