Ishvakoo (India) Pvt. Ltd vs National Projects Construction Corparation Ltd

Yogesh Khanna, J

On 14.11.2002 the letter of intent was issued by the respondent in favour of the petitioner for the project TTZ Heritage Corridor. The total sum of

Rs. 3.50 Crore was released by the respondent to the petitioner against bank guarantees Nos.109-124/2002.

On 11.09.2003, the petitioner approached this Court vide OMP No.363/2003 under Section 9 of the Arbitration and Conciliation Act 1996 to restrain

the respondent from encashing the bank guarantees.

On 12.08.2004, the petitioner invoked the arbitration proceedings and on 15.12.2005 this Court disposed of the petition OMP No. 363/2003 directing

the petitioner to keep the bank guarantees alive till the award becomes executable.

On 12.12.2016, the learned Arbitrator concluded the proceedings and reserved the matter for pronouncement. On 10.03.2017 the Canara Bank

issued a notice under Section 13(2) of the SARFAESI Act to the petitioner. The respondent issued a letter dated 14.09.2017 to the Canara Bank for

renewal of the bank guarantees, but it was not done. Thereafter, the respondent encashed the bank guarantees, hence this petition is filed for issuance

of directions to the respondent to deposit in this court a sum of Rs. 3.50 Crore received by the respondent on encashment of bank guarantees till the

award becomes executable or be kept in an interest bearing security and hence the amount be protected.

There is no dispute the petitioner had violated the order dated 15.12.2005 passed by this Court. The order notes:-

“Present petition is filed under Section 9 of the Arbitration and Conciliation Act, 1996 (in short 'the Act') seeking restraint against the

respondent from invoking bank guarantees No.109 to 124/2002 for a total sum of Rs.3 crores 50 lacs issued by Canara Bank, H-Block,

Connaught Circus, New Delhi in favour of the respondent. The arbitration proceedings are underway. On 16th September 2003 order was

passed recording the undertaking of the petitioner to renew these bank guarantees and directing the respondent not to press for

encashment of these bank guarantees during the extended period of the bank guarantees. This order was extended from time to time and on

19th August 2004 it was directed that the bank guarantees shall be kept alive by the petitioner till the disposal of this petition. Since the

counsel for the petitioner thereafter on 7th July 2005 gave an undertaking that the bank guarantees shall be kept alive till the arbitrator

gives the award, the learned counsel for the respondent sought time to have the instructions in the matter.

Mr. Taneja, learned senior counsel appearing for the respondent, states on instructions that the respondent shall not invoke these bank

guarantees provided the bank guarantees are kept alive till the arbitrator gives the award and further till the award becomes enforceable

as a decree under Section 36 of the Act. However, it is subject to the condition that if after adjudication by the arbitrator it is found that the

respondent has to recover the amount from the petitioner, the respondent will be entitled to recover such amount by invoking the bank

guarantees. This suggestion is acceptable to learned counsel for the petitioner. The Managing Director of the petitioner is present and

statement by the learned counsel for the petitioner is made on instructions from his client.

The petition is accordingly disposed of recording undertaking of the petitioner to the effect that the bank guarantees shall be kept alive till

the matter is adjudicated upon by the arbitrator and even thereafter if petition under Section 34 of the Arbitration Act is filed till the

disposal of the said petition. It is also made clear that on the award becoming executable if under the said award the respondent has to

recover the amount, the respondent shall be entitled to encash the bank guarantees. IA also stands disposed of.â€​

Though this Court restrained the respondent from encashing the bank guarantees but it was only on a condition the bank guarantees be kept alive by

the petitioner. Admittedly, the petitioner failed to keep the bank guarantees alive after September, 2017, hence, were encashed by the respondent.

Thus no fault can be seen in the conduct of the respondent and no further orders qua protection of such amount are required.

The petition being devoice of merit is dismissed. No order as to costs.