The court clarified that injunction against unconditional bank guarantees requires proof of egregious fraud, irretrievable injustice, or special equities, none of which were sufficiently substantiated in this case.

JUDGMENT :

C. HARI SHANKAR, J.

1. Consequent on completion of hearing, this Court, on 12 September 2024, allowed the present appeal and set aside the impugned Order dated 10 January 2024 passed by the learned Arbitral Tribunal, presently in seisin of the disputes between the parties, for reasons to follow. 

2. This judgment sets out the reasons for the decision. 

3. In order to avoid prejudice to the parties, the order dated 12 September 2024 and the present judgment are being released together, on 17 September 2024.

The Dispute 

4. Arbitral proceedings are presently ongoing between the respondent Navayuga-Van OORD JV as the claimant and the appellant Director General Project Varsha, of the Indian Navy, as the respondent. An application under Section 17 [Interim measures ordered by arbitral tribunal: (1) A party may, during the arbitral proceedings, apply to the arbitral tribunal: (i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or (ii) for an interim measure of protection in respect of any of the following matters, namely: (a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement; (b) securing the amount in dispute in the arbitration; (c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken, or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence; (d) interim injunction or the appointment of a receiver; (e) such other interim measure of protection as may appear to the arbitral tribunal to be just and convenient, and the arbitral tribunal shall have the same power for making orders, as the court has for the purpose of, and in relation to, any proceedings before it. (2) Subject to any orders passed in an appeal under Section 37, any order issued by the arbitral tribunal under this section shall be deemed to be an order of the court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were an order of the court] of the Arbitration and Conciliation Act, 1996 ["the 1996 Act" hereinafter] stands decided by the learned Arbitral Tribunal, comprising three learned arbitrators, by order dated 10 January 2024. This appeal, under Section 37(2)(b) [(2) An appeal shall also lie to a court from an order of the arbitral tribunal: (a) accepting the plea referred to in sub-section (2) or sub-section (3) of Section 16; or (b) granting or refusing to grant an interim measure under Section 17] of the 1996 Act, assails the said order.

5. I have heard Mr. K.K. Venugopal, learned Senior Counsel for the appellant and Mr. Saurav Agrawal, learned counsel for the respondent, at length.

Facts 

6. The appellant floated a tender, in November 2016, for construction of the outer Harbour Package at Project Varsha, SouthWest of Visakhapatnam, Andhra Pradesh. The respondent Joint Venture emerged as the successful bidder, and Letter of Acceptance was issued to the respondent by the appellant on 24 October 2017. This culminated in a contract dated 19 December 2017. 

7. As required by the contract, the respondent issued, in favour of the appellant, two Performance Bank Guarantees ["PBGs" hereinafter] dated 18 November 2017 and 29 November 2017 for Rs. 292.54 crores and Rs. 74,16,97,410/- respectively, an Advance Bank Guarantee ["ABG" hereinafter] dated 9 December 2017 for Rs. 188,82,87,026/- and four Retention Money Bank Guarantees ["RBGs" hereinafter] for Rs. 32 crores, 3.7 crores, 22.5 crores and 20 crores. The impugned order restrains the appellant from invoking these Bank Guarantees [“BGs” hereinafter