M/s. Mcml Systems Pvt. Ltd. vs The General Manager and 6 Others

Pankaj Mithal, J.—Heard Sri Manu Khare along with Sri Pramood Kumar for the petitioner.

Petitioner has furnished two bank guaranties BG No. 09401000000373 dated 4.12.2008 for a sum of Rs. 47,00,000/- and BG No. 09401000000285 dated 10.10.2007 for a sum of Rs. 22,76,349/- to the Financial Adviser and Chief Accounting Officer Construction Northern Central Railway, Allahabad as security for the performance of contract awarded to the petitioner. The said bank guarantees are valid upto 31st May 2014 to 8th July 2014.

In connection with the contract certain disputes arose between the parties. The petitioner invoked the arbitration clause and filed petition u/s 11 of the Arbitration and Conciliation Act, 1996 before the Delhi High Court but the same was dismissed with the observation that the petition ought to have been presented before the Chief Justice of the Allahabad High Court. In the meantime before the petitioner could present a fresh petition u/s 11 of the Act before the Chief Justice or his designate of the Allahabad High Court, as the respondents have written to the Bank for encashment of the bank guarantees, petitioner applied u/s 9 of the Act for grant of interim protection.

The District Judge by the impugned order dated 14.5.2014 has directed for issuing notices to the respondents fixing a date for consideration of grant of interim measure. In other words, no ex-parte interim protection has been granted on the ground that there appears to be no manifest intention on part of the petitioner to take recourse to arbitral proceedings.

It is settled law that recourse to Section 9 of the Act can be taken by a party before, during or even after the arbitral proceedings.

In view of the fact that the petitioner had earlier initiated arbitral proceedings by way of petition u/s 11 of the Act in the Delhi High Court and has now given a fresh notice invoking an arbitration clause it can not prima-facie be said that it has no intention to raise arbitral proceedings.

The encashment of the bank guarantees at this stage without waiting for resolution of the dispute between the parties may cause irreparable loss and injury to the petitioner. On the other hand, the respondents would not suffer any loss, if the bank guarantees continues as their interest would stand protected.

In view of the aforesaid facts and circumstances, as the District Judge is seized of the petition u/s 9 of the Act and the matter is fixed for 28.5.2014, I consider it appropriate and in the interest of justice to direct the District Judge to proceed and decide the petition u/s 9 of the Act in accordance with law without being influenced by this order or any observation made herein as expeditiously as possible preferably on the next date fixed or within a period of three months thereafter and till the disposal of the above petition, the respondents shall not encash the above two bank guarantees provided petitioner keeps them alive and does not allow them to expire.

The petition is disposed of.