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2024 Supreme(Online)(GUJ) 22598
HIGH COURT OF GUJARAT
MRS. JUSTICE SUNITA AGARWAL, CJ, MR. JUSTICE PRANAV TRIVEDI, J
DATANG TECHNOLOGIES AND ENGINEERING INDIA PVT LTD – Appellant
Versus
BRIDGE AND ROOF COMPANY INDIA LTD – Respondent
FIRST APPEAL NO. 257 of 2023
MR. JAIMIN R DAVE(7022) for the Appellant(s) No. 1 SHIVAM D PARIKH(9477) for the Appellant(s) No. 1 MR KAMAL TRIVEDI, SR. ADV. with G H VIRK(7392), SIMRANJIT H VIRK, PRASHANTH S UNDURTI for the Defendant(s) No. 1
The court upheld the interim injunction against encashment of a bank guarantee due to established fraud by the appellant and refusal to arbitrate, emphasizing the need for protecting the respondent's interests.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 9 - Interim order to stay encashment of bank guarantee - The appeal challenges an interim order regarding the encashment of a bank guarantee under a contract containing an arbitration clause - The appellant's refusal to arbitrate and allegations of fraud were central to the court's decision. (Paras 2, 8, 12)
(B) Interim Injunction - The court found that the respondent established a prima facie case for an interim injunction based on the appellant's alleged fraud and the impossibility of executing an award. (Paras 12, 13)
Facts of the case:
The appellant challenged an interim order that restrained it from encashing a bank guarantee related to a contract for chimney work, citing fraud and non-cooperation from the appellant.
Findings of Court:
The Commercial Court found that the respondent had made a prima facie case for an interim injunction, given the appellant's fraudulent conduct and refusal to arbitrate.
Issues: The main issues included the validity of the interim order and the appellant's readiness to arbitrate.
Ratio Decidendi: The court ruled that the respondent proved a prima facie case for an injunction due to the appellant's egregious fraud and lack of assets in India, justifying the restraint on the bank guarantee encashment.
Result: Appeal dismissed.
| Table of Content |
|---|
| 1. interim order regarding bank guarantee (Para 2 , 3) |
| 2. execution of contract and arbitration clause (Para 4 , 5) |
| 3. appellant's refusal for arbitration (Para 6 , 7 , 8) |
| 4. allegations of fraud by appellant (Para 9 , 10) |
| 5. appellant's conduct and assets (Para 11) |
| 6. prima facie case for injunction (Para 12 , 13) |
| 7. appeal dismissed (Para 14) |
ORAL ORDER
(PER : HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA AGARWAL)
1. Heard learned counsel for the parties and perused the record.
2. This is a wholly misconceived appeal filed on behalf of the appellant, who seeks to challenge the interim order passed under Section 9 of the Arbitration and Conciliation Act, 1996 (in short as ‘ the Act’1996’), on an interim application filed by the respondent, namely Bridge and Roof Company (India) Limited, a Government of India undertaking, which had sought relief to stay the encashment of bank guarantee tendered by the respondent under the contract agreement dated 30.10.2020, for execution of Chimney Work on EPC basis for fuel Gas Desulphurisation System at Gujarat State Electricity Corporation Limited (in short as ‘GSECL’), Wanakbori 1 X 180 MV Plant.
3. There is no dispute about the execution of contract/ agreement dated 30.10.2020 between the parties and that the said agreement contains an arbitration clause, which reads as under:-
“10. ARBITRATION
10.1 The parties hereto shall endeavor to settle amicably all disputes and difference relating to and/or arising out of the Contract amicably.
10.2 In the event of the Parties fail to resolve any dispute amicably the same shall be referred to arbitration in accordance with the Arbitration and Conciliation Act, 1996 and as amended by the Arbitration and Conciliation Act, 2015 and any other amendment thereto and as per the Dispute Resolution mechanism stipulated in the GCC. Each Party shall be entitled to nominate an Arbitrator and the two arbitrators so nominated shall jointly nominate the third presiding Arbitrator. The Arbitrators shall give a reasoned award. The language of the arbitration shall be English.
10.3 The Parties agree that any arbitration award shall be final and binding upon the Parties.
10.4 The Parties hereto agree that the Sub- Contractor shall be obliged to carry out its obligations under the Contract even in the event a dispute is referred to Arbitration. It is further clarified that the Contractor shall be entitled to retain any sum or portion of Contract Price which has become due and payable for any unfinished Works or any subject matter under arbitration.
10.5 This Clause 10 shall survive the termination or expiry of this Contract.
xxx xxx xxx
13. GOVERNING LAW
13.1 This Contract shall be construed in accordance with and governed by the laws of India”
4. A perusal of the agreement dated 30.10.2020 indicates that in clause 13.1 it was set out that the contract shall be construed in accordance with and governed by the laws of India. When the matter was taken up on 05.08.2024, taking note of the fact that the dispute between the parties arise out of the contract, which contains the arbitration clause, we propose to the counsel appearing for the parties to invoke arbitration. So as to settle their dispute in accordance with the terms and conditions of the contract.
5. On the said proposal, Mr. Kamal Trivedi, learned Senior Advocate assisted Mr. G.H. Virk, learned advocate for the respondent had agreed to go in for arbitration. However, Mr. Jaimin Dave, learned advocate for the appellant sought adjournment to obtain instructions from the appellant.
6. Today, when the matter was taken up, Mr. Jaimin Dave, learned advocate for the appellant would submit that the appellants are not ready for arbitration. The result is that the dispute cannot be brought to its logical end, inasmuch as, one of the parties to the arbitration agreement is not ready to arbitrate the dispute.
7. The appellant has relied on the following decisions of the Apex Court:-
(i) Himadri Chemicals Industries Ltd. v
