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2025 Supreme(Telangana) 127
IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
N.V. SHRAVAN KUMAR, J.
PCL Intertech Lenhydro Consortium Joint Venture - Appellant
Versus
Punjab National Bank - Respondent
Arbitration Application No.49 of 2024
Decided On : 09-06-2025
Advocate Appeared:
For the Appellant : NAFISA
For the Respondent: KALPANA EKBOTE
Disputes under an Escrow Agreement cannot warrant arbitration if the agreement has fulfilled its purpose and there is no joint request for closure.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 11(6) - Application seeking appointment of an arbitrator dismissed - The Escrow Agreement dated 20.03.2020 fulfilled its purpose, and no ongoing disputes warranted arbitration appointments - The Escrow account was debit frozen; thus, no parties could operate it and no joint request for closure had been submitted. (Paragraphs 10, 23, 28)
Findings of Court:
The court determined that there were no disputes between the parties regarding the Escrow Agreement, leading to the dismissal of the application for the appointment of an arbitrator.
Issues: The main issue was whether there were existing disputes under the Escrow Agreement justifying the appointment of an arbitrator.
Ratio Decidendi: The court reasoned that the Escrow Agreement had served its purpose, no joint agreement for closure was made, and the Escrow account's status precluded the operation of ongoing disputes.
Result: Application dismissed.
| Table of Content |
|---|
| 1. factual background of the arbitration application and agreements. (Para 1) |
| 2. background of the arbitration agreement and escrow account (Para 2 , 3 , 4 , 5) |
| 3. allegations of forgery and legal responses filed (Para 6 , 7) |
| 4. court's observations on the arbitration process and account status. (Para 8 , 9 , 20 , 21 , 22 , 25 , 26) |
| 5. nomination of arbitrators and dispute process initiation (Para 10 , 11) |
| 6. arguments presented by the parties regarding the arbitration. (Para 12 , 16 , 17 , 18 , 19) |
| 7. conduct and responses of the parties in arbitration (Para 13 , 14 , 15) |
| 8. court's analysis on validity of disputes and account closure (Para 23 , 24 , 27) |
| 9. final ruling on the arbitration application (Para 28) |
ORDER :
N.V. SHRAVAN KUMAR, J.
This Application is filed under Section 11 (6) of Arbitration and Conciliation Act, 1996 (for short ‘the 1996 Act’ hereinafter) seeking appointment of arbitrator for adjudicating the disputes between the Applicant and Respondent No.1.
2. The brief facts as stated in the present Arbitration Application and in Agreement dated 20.03.2020 are that the Applicant was a successful bidder and was awarded with work pertaining to spill way and powerhouse of Koteswar Hydro Electric Project at Tehri Dam, Uttarakhand. The Applicant entered into an agreement dated 14.11.2002 with Tehri Hydro Electric Development Corporation Limited (hereinafter referred as ‘THDC’). Later respondent No.3 approached the applicant and participated in the work. When the work was in progress, certain disputes arose between the Applicant and THDC and legal proceedings were initiated and an award dated 17.12.2010 was passed. The said award was challenged before the Hon’ble High Court of Delhi and in the said background, the High Court of Delhi passed orders on 13.12.2019 in O.M.P.No.100 of 2011 and I.A.No.15200 of 2019 in OMP No.100 of 2011 directing THDC to deposit an amount of Rs.4,50,00,000/- within a period of six (6) weeks and further permitted the Applicant to withdraw such amounts by submitting Bank Guarantees as securities.
3. Thereafter, respondent No.3 approached the Applicant and agreed for opening the Escrow account for depositing the above amounts, accordingly respondent No.1 was appointed as Escrow Agent and an agreement dated 20.03.2020 was entered between the parties. The terms of the Escrow Agreement are that:
(i) Respondent No.3 will provide 100% Bank Guarantees needed as per the agreement.
(ii) Applicant will open a designated bank account with respondent No.2 with an Escrow Agreement to deposit the money withdrawn from the Registrar, High Court of Delhi to the extent of the Bank Guarantee amount issued by respondent No.2 on behalf of the Applicant and such BG is acceptable by the Registrar, High Court of Delhi.
(iii) (a) 5.5% of the above such deposit will be transferred to the Applicant or to any nominee of the Applicant’s choice and
(b) the balance will be transferred to respondent No.3.
4. Consequent to the furnishing of the Bank Guarantee, an amount of Rs.150,00,00,000/- was deposited to the above Escrow Account No.4437002900000827 and thereafter the said amounts were transferred as per the Escrow Agreement to the Applicant and respondent No.3. In view of the same, the Escrow account has outlived its purpose as the actions/transactions contemplated under the Escrow Agreement was satisfied and completed and stood fulfilled and it is not permissible for either of the parties to operate Escrow account in any manner. In terms of clause 13 of Escrow Agreement, the agreement shall be terminated based on the written communications of Applicant and respondent No.3. Further, as per clause 13.3 and 13.5 of Escrow Agreement, the Escrow Account shall stand closed by both the parties seeking termination of Escrow Account and thereupon respondent No.1 will automatically cease to be an Escrow Agent.
5. The Applicant issued letter on 19.06.2020 requesting respondent No.1 marking a copy to respondent No.3 to formally clos
