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2011 Supreme(Mad) 3107
2011 (3) LW 865
High Court of Judicature at Madras
R. BANUMATHI & V. PERIYA KARUPPIAH
M/s.Omni Agate Systems Private Limited, Chennai
Versus
Southern Railway & Another
O.S.A.NOS.9 and 10 of 2011 & M.P.Nos.1 of 2011
Decided on : 01-07-2011
For the Appellant:Mr. S.R. Rajagopal, Advocate.
For the Respondents:R1, Mr. Vellaisamy Mr. Suresh, R2, M/s. Sivakumar Suresh, Advocates.
Headnote:
Bank Guarantee - Contract Dispute - Arbitration and Conciliation Act - [LED Screens Installation] - [Arbitration and Conciliation Act] - [Section 9] - [Clause 11, Clause 16] - The court discussed the terms of the bank guarantee, the conditions for granting injunction against encashment of unconditional bank guarantee, and the exceptions for granting injunction. The court found that the liability of the bank is absolute and unequivocal, and declined to grant injunction as the exceptional instances for granting injunction were not made out by the appellant.
Fact of the Case:
The appellant was awarded a contract for the installation of LED screens at railway stations. Disputes arose regarding the start date of the contract, delay in installation, and termination of the contract by the respondent. The appellant sought injunction restraining the respondent from invoking bank guarantees issued by the bank.
Finding of the Court:
The court found that the appellant had a genuine dispute regarding the start date and validity of termination, and the matter was fit for arbitration. The court declined to grant injunction against the bank guarantee as the liability of the bank was absolute and unequivocal.
Issues: Dispute over start date and termination of contract, invocation of bank guarantees, and the grant of injunction.
Ratio Decidendi: The court held that the liability of the bank guarantee was absolute and declined to grant injunction as the exceptional instances for granting injunction were not made out by the appellant.
Final Decision: The court disposed of the appeals with the observation that the realization of the amount by invoking the bank guarantee is subject to the outcome of the arbitration proceedings. The respondent was directed to refer the matter to arbitration if a request was already made by the appellant, and the appellant was given the liberty to make a demand for referring the matter to arbitration within a specified period.
R. Banumalthi, J.
These appeals are filed challenging the order dated 15.11.2010 dismissing the applications - O.A.Nos.653 and 657 of 2010 filed under Section 9 of the Arbitration and Conciliation Act and declining to grant injunction restraining the 1st respondent - Southern Railway from invoking the Bank guarantee given by the appellant for Rs.6,00,000/- and Rs.2,77,200/- respectively.
2. Brief facts are as follows:-
The 1st respondent -Southern Railways had invited tenders for erection of 3 LED screens in Chennai Central Railway Station and 2 LED screens in Egmore Railway Station for a period of three years and the place of installation was notified. Appellant was declared as a successful tenderer and awarded the contract for three years - 2008-2011 on payment of licence fee. The licence fee, security deposit and performance guarantee required to be furnished for the works at Chennai Central and Egmore are as follows:
Name of the Place Licence fee Security Deposit Performance
Guarantee
Chennai Central Railway Rs.40,00,000/- per annum
Rs.6,00,000/- Rs.6,00,000/-
Station payable in 3 Instalments
Rs.18,48,000/- per annum
Name of the Place Licence fee Security Deposit Performance
Guarantee
Egmore Railway station payable in 3 Instalments Rs.2,77,200/- Rs.2,77,200/-
(ii) The tender notification was on 4.12.2007, technical bid was opened on 4.1.2008, financial bid was opened on 3.2.2008, contract was awarded to the appellant on 11.4.2008 and the Southern Railway issued a letter of acceptance to the appellant on 15.5.2008. By communication dated 17.6.2008, the first respondent informed the appellant about the sudden developments arising out the proceedings in W.P.No.7143 of 2006 and the Divisional Office is constrained to temporarily suspend the acceptance of the offer made in respect of the advertisement location on the facade of the Station Buildings, both at the Chennai Central as well as Egmore Railway Stations. In so far as Chennai Central Railway Station, for two other locations, the appellant was called upon to pay proportionate licence fee of Rs.32,72,227/-. The appellant sought to re-work the contract and requested the Southern Railway to facilitate speedy permissions to instal LEDs at suitable locations. After correspondences and discussions, the locations were re-fixed and for the Central, for 3 locations, the original licence fee of Rs.40,00,000/-was restored and the re-locations are as under:
Sr.No.
1
2
3
LOCATION
At the entrance to PF.Nos.12 & 11 facing MMC car park area Chennai Central
At New concourse Facing booking counters near Luggage office Chennai Central
At the entrance to PF No.6(Instead of facade of the Station Building)
QTY
1 No.
1 No.
1 No.
In Egmore:-
1
2
Sr.No. LOCATION
On platform No.3 near SSE/AC coach office facing SMR room
Near the exit of the car parking Area(Instead of facade of the
Station Building)
QTY
1 No.
1 No.
(iii) The appellant remitted first year licence fee of Rs.40,00,000/- for Chennai Central Railway Station and Rs.18,48,000/- for Egmore Railway Station. For Chennai Central Railway station, the appellant furnished Bank guarantee for Rs.6,00,000/- (dated 22.9.2008) by the covering letter dated 24.9.2008. In so far as Egmore Railway Station, the appellant furnished Bank guarantee dated 7.2.2008. By the letter dated 24.9.2008, the appellant sought for permission to proceed with the work approved. By the letter dated 29.9.2008, the 1st Respondent - Southern Railway permitted the appellant to execute the work and informed the 1st respondent about the date of completion of work.
(iv) The case of appellant is that the installation work has been delayed and that they have been sending communications to the Railways to extend the time for installation. By their letter dated 1.9.2008, the appellant informed the 1st respondent about the delay in execution of the work in Egmore and requested the first respondent to permit the appellant to carry out the work for erection of the structure for installatio
