The courts confirmed that invocation of conditional bank guarantees depends on the fulfillment of specific contractual conditions and may not proceed without established failure of obligations by the contractor.

JUDGMENT

Vibhu Bakhru, J. Abir Infrastructure Private Limited (hereafter `AIPL') has filed the present petition under Section 9 of the Arbitration and Conciliation Act, 1996 (hereafter the `A&C Act'), inter alia, praying that respondent no.1, Teestavalley Power Transmission Limited (hereafter `TPTL'), be restrained from invoking the Bank Guarantees bearing no. 0910310BG0000163 and 0910310BG0000165 issued by respondent no.2, State Bank of India. In the alternative, AIPL further prays that respondent nos. 2 and 3 (collectively referred to as `SBI') be directed to not entertain any invocation of the aforementioned Bank Guarantees and to not encash the same.

2. The aforementioned Bank Guarantees are referred to as BG-163 and BG-165 and are collectively referred to as `the BGs in question'. The present value of BG-163 is Rs.7,11,04,475/- and that of BG-165 is Rs.61,71,284/-.

3. Mr Ray, learned counsel appearing for AIPL, contended that TPTL is not entitled to invoke the BGs in question as the same are not unconditional Bank Guarantees and the requisite conditions for invoking the same - that AIPL has failed to perform the contract in question; has been called upon to pay the sum advanced; and has failed to pay the same - have not been met. According to him, it is not established that AIPL has failed to perform the contract in question, and therefore, the conditions in the underlying Contract have not been fulfilled. He submitted that since there is no finding of any Court or Tribunal of competent jurisdiction that AIPL has failed to fulfil its obligations under the terms of the Contract with TPTL, the BGs in question cannot be invoked.

4. It is AIPL's case that the issues involved in the present petition are no longer res-integra in view of the decision of a Coordinate Bench of this Court in Abir Infrastructure Private Ltd. v. Teestavalley Power Transmission Ltd. & Ors : 214 (2014) DLT 235. AIPL contends that this Court had considered the wordings of the BGs in question and had rejected TPTL's contention that the BGs in question were unconditional. The Court found that the BGs in question were conditional and could be invoked only if the conditions were met.

5. The controversy in the present case arises in the following context :

5.1 The disputes between AIPL and TPTL arises in respect of an Agreement dated 22.02.2010 (hereafter `the Contract') that was entered into between TTPL and a consortium of AIPL and M/s Deepak Cable India Limited for "the construction of 400 KV D/C Transmission Line from the 1200 MW TEESTA III Hydro Electric Project in the State of Sikkim to the Kishanganj Pooling Station in the State of Bihar spanning a length of approximately 212 KM" (hereafter `the Project').

5.2 The Project was divided into two geographical sections. The first section stretched from TEESTA III Hydro Electric Project in the State of Sikkim to Panighata, West Bengal (termed as `Package A-1'). The second section stretched from Panighata, West Bengal to Kishanganj, Bihar (termed as `Package A-2'). The scope of work under the Project in respect of each section was covered under two Agreements - being the Supply Agreement and Service Agreement.

5.3 The consideration payable for the Supply and Service Agreements for the first section Package A-1 was agreed at Rs.1,08,39,99,596/- (Rupees One Hundred and Eight Crores, Thirty Nine Lakhs, Ninety Nine Thousand, Five Hundred and Ninety Six only) and Rs.117,41,06,487/-(Rupees One Hundred and Seventeen Crores, Forty One Lakhs, Six Thousand, Four Hundred and Eighty Seven only) respectively. The consideration for the Supply and Service Agreements for Package A-2 was agreed at Rs.54,97,41,986/-(Rupees Fifty Four Crores, Ninety Seven Lakhs, Forty One Thousand, Nine Hundred and Eighty Six only) and Rs.36,72,49,533/-(Rupees Thirty Six Crores, Seventy Two Lakhs, Forty Nine Thousand, Five Hundred and Thirty Three only) respectively. Thus, the aggregate consideration for the works under the Supply