Interim measures under Section 9 of the Arbitration and Conciliation Act require establishing a prima facie case, balance of convenience, and irreparable loss; court granted interim protection by retaining a bank guarantee pending arbitration.

JUDGMENT

Sanjeev Narula, J. (Oral)--The present petition under Section 9 of the Arbitration and Conciliation Act, 1996 [hereinafter, "the Act"] has been filed seeking interim measures for securing the amount in dispute of 38 crores, pending appointment of the arbitral tribunal. Canara Bank - the Petitioner - also seeks continuation of orders of restrain against withdrawal of bank guarantee of Rs.15 Crores, furnished by Respondent No. 1 in O.M.P. (I.) (COMM.) 318/2018.

2. Briefly stated, the background of the case is as follows:

2.1. Canara Bank issued a performance bank guarantee [hereinafter, "PBG"] of USD 67,86,450/- for securing transaction between Respondent No. 1 [hereinafter, "Helm"] and Respondent No. 2 [hereinafter, "STC"]. The exposure was safeguarded by way of a counter guarantee of/by HypoVereins Bank [hereinafter, "German Bank"].

2.2. Upon invocation of the PBG, Canara Bank paid the amount to STC [the beneficiary], and parallelly invoked the counter-guarantee issued by the German Bank. However, German Bank failed to make good its obligation to pay Canara Bank. Later on, in proceedings before this court, the amount of counter guarantee was deposited in court by Helm - which by then had taken over the liabilities and responsibilities of the German Bank. The said amount was subsequently released in favour of Canara Bank, pursuant to court directions. The dispute relating to invocation of the PBG by STC, rights and obligations of German Bank & Helm, including Canara Bank's entitlement to the amount of counter guarantee - were referred to arbitration between Canara Bank, Helm (which also represented German Bank) and STC.

2.3. The arbitration proceedings culminated in a majority Award dated 29th April, 2016 wherein Canara Bank's claim was adjudicated, and it was held to be entitled to retain the amount already released to it. Several other claims inter-se the parties were also adjudicated. Challenge to the said Award, at the instance of STC, was rejected right up to the Supreme Court vide its order dated 27th July, 2018 in an SLP.

2.4. Canara Bank also assailed the majority award before this Court under Section 34 of the Act [being O.M.P.(COMM.) 373/2016], limited to the extent of denial of interest on the PBG amount, for the period Canara Bank was out of pocket for the said amount. On this aspect, the Arbitral Tribunal made certain observations which favoured Canara Bank, yet, no relief was granted.

2.5. While considering the challenge to the award, the court found that the Nil Award in respect of interest claim was not supported with reasons and accordingly, set-aside the same vide Judgment dated 21st December 2021, and observed that Canara Bank could initiate fresh arbitration proceedings qua both Helm and STC on this limited aspect.

2.6. Along with the aforenoted petition, the Court also adjudicated a petition filed by Canara Bank under Section 9 of the Act on the same date, [being O.M.P.(I.)(COMM.) 318/2018] wherein Canara Bank sought to secure its claim for interest. In the said proceedings, Canara Bank was protected by way of a bank guarantee for an amount of Rs.15 crores. Since the Nil Award was set aside by this Court, the interim protection which was continuing in O.M.P.(I.)(COMM.) 318/2018, was directed to be maintained for a brief period, to enable Canara Bank to take recourse to protect its interest, in accordance with law.

2.7. Subsequently, Canara Bank filed appeals - FAO(OS)(COMM.) 17/2022 impugning the judgment i