J U D G M E N T

SUBRAMONIUM PRASAD, J

1. The present appeal under Section 37 of the Arbitration and Conciliation Act, 1966 (hereinafter referred to as the „Arbitration Act‟) has been preferred by Canara Bank against the Order and Judgment dated 21.12.2021 passed by the Ld. Single Judge in OMP (COMM) 376/2016 dismissing the application filed by Canara Bank under Section 34(4) of the Arbitration Act (hereinafter referred to as the „Impugned Order‟), and also setting aside the majority award of the Arbitral Tribunal dated 29.04.2016 to the extent that nil amount was awarded as interest to Canara Bank (hereinafter referred to as the „Impugned Judgment‟).

2. The facts of the case indicate that back in 2008, Helm Dungemittel GMBH („Helm’) entered into a contract to supply 3 lakh tonnes of urea @ 685.50 per metric tonne (“Contract”) to the State Trading Corporation of India (“STC”). Clause 13 of the Contract called for Helm to furnish an irrevocable performance bank guarantee in favour of STC, for 3% of the total contract value, through any first-class international bank having its branch office in New Delhi (hereinafter referred to as „PBG’). Since Helm‟s banker (hereinafter referred to as the „German Bank’) did not have any branch office in New Delhi, Canara Bank issued a PBG of USD 67,86,450/- in favour of STC. This PBG was duly secured by a back-to-back counter-guarantee issued by German Bank in favour of Canara Bank for an identical amount (hereinafter referred to as „counter-guarantee‟).

3. However, certain disputes arose between Helm and STC regarding the price of the goods to be supplied. Helm insisted on the contract price, whereas STC sought for reduction. Helm contended that as the contract stood discharged by performance, the PBG also stood discharged.

4. On 10.02.2009, STC invoked the PBG issued by Canara Bank. On the same date, Canara Bank also sought to invoke the counter-guarantee. However, the German Bank declined payment, contending that the demand was not in terms of its guarantee. The very next day, Canara Bank released the PBG, although German Bank did not release monies under the counter-

guarantee.

5. On 12.02.2009, Helm filed a suit being CS(OS) 313/2009 titled „Helm Dungemittel Gmbh v. The State Trading Corporation & Ors.‟ before a bench of this Court impleading STC, Canara Bank, and German Bank seeking a permanent injunction against Canara Bank restraining it from invoking the counter-guarantee. An application seeking ad-interim injunction was also filed in the suit.

6. On 13.02.2009, vide an Order passed in CS(OS) 313/2009, an ad- interim ex-parte injunction was granted in favour of Helm, thereby restraining Canara Bank and German Bank from releasing the performance guarantee pursuant to its invocation by STC and also restraining STC from encashing the performance guarantee.

7. Thereafter, Canara Bank filed an IA in CS(OS) 313/2009 seeking vacation of stay granted vide Order dated 13.02.2009. This IA was decided in favour of Canara Bank in the following terms:

“32. For the reasons mentioned above, I am of the considered opinion that there is absolutely no fraud and no merit in the application under Order XXXIX Rule 1 & 2, CPC filed by the plaintiff which will warrant staying of the invocation of the counter guarantee by defendant no. 2 namely the Canara Bank against defendant no. 3 which was granted in favour of the plaintiff on 13.02.2009 much less the continuance of the same.

33. I, accordingly vacate the stay order and permit defendant no.2 to realize the amount of counter guarantee from German Bank. The IA No. 2206/2009 is dismissed. So far as the IA No. 6701/2009 wherein the plaintiff had prayed for a direction to the STC to produce certain records has also become infructuous on account of the fact that an affidavit of Mr. S.K. Jain, a senior employee of the STC has been filed indicating that the amount of performance guarantee was credited to the international account of the STC on

10.02.2009 itself.”

8. Helm as