JUDGMENT :

N.V. Anjaria, J.

This appeal is preferred under Section 37 of the Arbitration and Conciliation Act, 1996 against order dated 17.2.2021 passed by Commercial Court, City Civil Court, Ahmedabad, dismissing Application Exhibit 23 filed by the appellant herein. It was an application under Section 8 of the Arbitration and Conciliation Act praying to dismiss the suit and refer the parties to the arbitration in view of the Arbitration Clause in the contract.

1.1 It was stated by learned advocate for respective parties that pleadings were complete and no further pleadings were to be added or to be supplemented. They stated that they argued the appeal finally. Accordingly, the appeal was taken up for final consideration.

1.2 The parties submitted the compilation of copies of pleadings and documents which were on record of the Commercial Court. The parties were ad idem in respect of contents of same. They were accordingly permitted to rely on the same in course of hearing of the appeal.

2. Respondent M/S. Transformers and Rectifiers India Limited- original plaintiff, institute Commercial Suit No.192 of 2020 against the appellant herein- defendant No.3. The suit was for declaration that letter dated 18.1.2020 issued by appellant in which conditional claim for the bank guarantees was lodged, was illegal. By the said letter dated 18.1.2020, the appellant instructed the bank to permit the proceeds of the bank guarantees to it treating as claim unless the period of bank guarantees were extended.

2.1 The said letter reads as under,

Dear Sir,

Sub:- Conditional Claim against the Bank Guarantee issued by you in favor of M/s. Vijai Electricals Limited vide Bank Guarantee No.0403816BG0000189 dt.12.04.2016

The validity period of the following Bank Guarantee executed by you in our favour bearing Bank Guarantee Number 04038168G0000189, dt.12.04.2016 expiring on 28 January, 2020. We request for same to be extended for two year i.e. from 28.01.2020 to 28.01.2022 before expiry of the validity. In case the extension is not provided to us before expiry date, this may be treated as claim against this Bank Guarantee and the proceeds of the same shall be remitted to us by way of RTGS to the account details given in this letter.

2.2 The bank guarantees in question, in invocation for which was sought were No.0403816BG0000189 dated 5.3.2019 and another No.2538IGPER003416 dated 6.3.2019.Both the bank guarantees were for the amount of Rs.11,00,77,500/- each and they were to expire on 28.1.2020.

3. The aforementioned suit had the reference to and the context of the supply agreement entered into between the parties. The dispute in the suit was relatable to the contract obligations between the parties. The said contract dated 28.3.2015 was executed between the appellant Vijai Electricals Limited and respondent M/s. Transformers and Rectifiers (India) Limited who were the purchasers and the suppliers respectively. The purchaser had entered into a contract dated 28.11.2013 with Compatoir Algerien Du Materiel et Electrique et Gazier (CAMEG). Under the agreement the supplier had agreed to provide equipments for the purpose of exporting to the CAMEG which was the ultimate buyer customer to be benefitted under the Algerien Contract and also to provide the transformer related services. In other words the agreement was in respect of power supply, power transformers and transformer related allied services.

3.1 Under Clause 1 of the contract, certain terms were defined. ‘Guarantee period’ was ascribed the same meaning as stated in Clause 8 of the contract. The word ‘performance guarantee’ was also defined under Clause 6 of the contract and in the format of the performance guarantee