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THE ARBITRATION AND CONCILIATION ACT, 1996
Section 9 in The Arbitration Act, 1940
Section 9 in THE ARBITRATION AND CONCILIATION ACT, 1996
U.P. State Sugar Corporation vs M/S. Sumac International Ltd on 4 December, 1996
Amarjeet Singh & Ors vs Devi Ratan & Ors on 18 November, 2009
Citedby 1 docs
The Indian Cultural Research ... vs Rm Palaniappan on 12 February, 2016

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Madras High Court
M/S.Sbec Projects Private ... vs Bgr Energy Systems Limited on 29 June, 2012
       

  

  

 
 
 IN THE HIGH COURT OF JUDICATURE AT MADRAS 

Dated : 29-06-2012
 
CORAM

THE HONOURABLE MR.JUSTICE R.S.RAMANATHAN

O.A.Nos.656 to 659 of 2011
and
A.Nos.3751 and 3752 of 2011

M/s.SBEC Projects Private Limited,
#55-14-1-3, APSEB Colony,
Sethammadhara,
Visakhapatnam-530 013.               : Applicant


vs.

BGR  Energy Systems Limited,
Represented by the Managing Director,
Power Project Division,
443, Anna Salai,
Teynampet,
Chennai-600 018.                      : Respondent

Prayer in O.A.No.656 of 2011: This application is filed under order XIV Rule 8 of Original Side Rules r/w section 9(ii)(d) of the Arbitration and Conciliation Act 1996, restraining the respondent from interfering with the removal of materials and machineries including the batching plant of the applicant from the side.

Prayer in O.A.No.657 of 2011: This application is filed under Order XIV Rule 8 of Original Side Rules r/w section 9 ii)(d) of the Arbitration and Conciliation Act 1996, restraining the respondent by an order of interim injunction from enforcing the Bank Guarantee No.402LG1395/10, dated 11.01.2011 for Rs.26,19,588/- issued by ING Vysya Bank Limited, Dwaraka Nagar Branch, Visakhapatnam valid upto 13.11.2011 until the issue of legality of termination is finally determined by the Arbitral Tribunal.

Prayer in O.A.No.658 of 2011: This application is filed under Order XIV Rule 8 of Original Side Rules r/w section 9 ii)(d) of the Arbitration and Conciliation Act 1996, restraining the respondent from interfering the removal of materials and machineries including the batching plant of the applicant from the site.

Prayer in O.A.No.659 of 2011: This application is filed under Order XIV Rule 8 of Original Side Rules r/w section 9 ii)(d) of the Arbitration and Conciliation Act 1996, restraining the respondent by an order of interim injunction from enforcing the Bank Guarantee No.402lg1396/10, DATED 11.01.2011 for Rs.47,53,308/- issued by ING Vysya Bank Ltd., Dwaraka Nagar Banch, Viskhapatnam valid upto 02.10.2011 until the issue of legality of termination is finally determined by the Arbitral Tribunal.

	For Applicant         : Mrs.Malini Ganesh


     For Respondent        : Mr.T.R.Rajagopalan
                             Senior counsel
                             for Mr.D.Ravichander 




COMMON ORDER
		

These four applications are filed under section 9 of the Arbitration and Conciliation Act 1996 seeking for the relief of interim injunction restraining the respondent from interfering with the removal of materials and machineries, including batching plaint of the applicant from the site and for interim injunction restraining the respondent from enforcing the bank guarantee.

2.The case of the applicant is that the applicant was awarded sub-contract by the respondent in respect of construction of Raw-water Pump House and River Water Intake Pump House and civil work of Switchyard in respect of contract No.3300004383 and 3300004354 respectively. The LOA in respect of the first sub-contract was issued on 14.05.2010 and the duration of the contract was 10 months from the date of LOA. In respect of the said contract, the applicant also executed a performance bank guarantee for a sum of Rs.26,19,588/-, which was valid till 13.11.2011.

3.O.A.Nos.656 and 657 of 2011 are in respect of the sub-contract, dated 14.05.2010 and the bank guarantee for a sum of 26,19,588/- and O.A.Nos.658 and 659 of 2011 are in respect of sub-contract, dated 03.06.2010 and the execution of performance bank guarantee for a sum of Rs.47,53,308/-.

4.As the facts of the case are not relevant for deciding the issue involved in these applications, the facts are not stated in detail in this common order. According to the applicant, the contract was illegally terminated by the respondent and according to the respondent, the contract work was not performed by the applicant as per the stipulation and they have not made any progress in the work and each parties blaming the other for delayed execution of the contract.

5.According to the applicant, the termination is illegal and as per the contract, the matter has to be referred to arbitration and as a matter of fact, the Arbitral Tribunal shall consist of three arbitrators and the Arbitral Tribunal has to decide whether the termination is illegal or not. Nevertheless, the applicant apprehends that the respondent may not permit them to remove the materials and machineries, including the batching plant of the applicant from the site and according to the applicant, the applicant has mobilized various resources, including setting up a batching plant machineries at a cost of Rs.1,40,00,000/- and the respondent may enter into the site and take over the possession of the batching plant set up by the applicant and also obstruct the removal of applicant's own machineries and materials, which would cause further financial loss and hardship to the applicant.

6.Further, the applicant had executed two performance bank guarantees for a total sum of Rs.73,72,896/- issued on behalf of the applicant by ING Vysya Bank Ltd., Dwarakanagar Branch, Visakhapatnam and the respondent may invoke the bank guarantees, which was valid till 13.11.2011 and 02.10.2011 respectively and therefore, filed the above applications for injunction as stated supra.

7.It is contended by Mrs.Malini Ganesh, the learned counsel for the applicant that the legality of the termination order, whether it is valid or not can be decided by the Arbitral Tribunal and the applicant is prepared to agitate the dispute in the arbitration and as per contract, if the respondent prevents the applicant from removing the machineries and materials from the site, that would cause serious loss and hardship to the applicant and therefore, filed the applications for injunction restraining the respondent from interfering with the applicant from removing the materials and machineries from the site.

8.She further submitted that though the bank guarantees were executed by the applicant for the due performance of the contract, according to the applicant, the applicant was not at fault and the contract could not be executed due to non-cooperation and lapse on the part of the respondent in supplying the materials etc. and according to the applicant, the applicant set up a batching plant at a cost of Rs.1,40,00,000/- and for the work done by the applicant, the respondent has to pay a sum of Rs.1,81,00,000/- in respect of the contract, dated 14.05.2011 and a sum of Rs.17,95,846/- towards retention, totaling Rs.1,98,95,846/- and the applicant demanded for idle resources to the tune of Rs.70,35,000/- and it is also pending with the respondent and therefore, the applicant has got a claim against the respondent and hence, the respondent should not invoke the bank guarantees executed by the applicant and if the bank guarantees are enforced, the applicant will be put to serious loss and hardship and the applicant also agreed to renew the bank guarantees till the final adjudication by the Arbitral Tribunal in respect of the claim made by both parties and therefore, no prejudice would be caused to the respondent and the object of section 9 of Arbitration and Conciliation Act is to provide interim measure of protection pending adjudication by the Arbitral Tribunal and therefore, if the respondent is allowed to invoke the bank guarantees, that would cause serious prejudice to the applicant and the applicant is also prepared to renew the bank guarantees for the said sum and therefore, no prejudice would be caused to the respondent.

9.The applicant also averred in the affidavit filed in support of the applications for injunction stating clearly that the applicant will renew the bank guarantees till the disposal of the proceedings before the Arbitral Tribunal. Therefore, the learned counsel appearing for the applicant submitted that in similar circumstances, the Delhi High Court in the judgment reported in 2006(2)R.A.J.132(Del) in the case of Satlujjal Vidyut Nigam Ltd., vs. Jai Prakash Hyundai Consortium, has restrained the party from invoking the bank guarantee and therefore, submitted that the bank guarantee should not be invoked and therefore, injunction has to be ordered.

10.The learned counsel appearing for the applicant also relied upon the judgment reported in AIR 2004 SUPREME COURT 1433 in the case of Firm Ashok Traders and another etc., vs. Gurumukh Das Saluja and others etc., for the proposition that the object of section 9 is to provide an interim measure of protection to the parties.

11.On the other hand, Mr.T.R.Rajagopalan, the learned Senior counsel appearing for the respondent submitted that so far as the removal of machineries and materials from the site is concerned, the respondent has no objection, provided the applicant gives the list of his machineries and materials in advance to the respondent and the respondent, after verifying the same, will permit the applicant to remove the machineries of the applicant. He further submitted that so far as the invocation of bank guarantee is concerned, the law is well settled that no injunction can be granted restraining the invocation of bank guarantee and only when there is a clear case of fraud on which the bank has notice and when there are any special equities in favour of granting injunction and in this case, it was not pleaded that any fraud was practiced by the respondent against the applicant and the bank has notice of fraud and no plea was taken regarding the irretrievable injury or irretrievable injustice that may be caused to the applicant by invoking of the bank guarantee by the respondent.

12.He further submitted that scope of section 9 of Arbitration and Conciliation Act has been discussed in the judgment reported in (2007)7 SCC 125, in the case of Adhunik Steels Ltd vs. Orissa Manganese and Minerals Pvt. Ltd., wherein it is held that the power under section 9 of the Arbitration and Conciliation Act 1996 is not totally independent of the well known principles governing the grant of an interim injunction and generally, the courts are governed by the general principles relating to the grant of injunction in the matter of enforcing bank guarantee. He, therefore, submitted that no injunction can be granted from invoking the bank guarantee and therefore, these applications are liable to be dismissed.

13.The learned Senior counsel appearing for the respondent further submitted that the contract was terminated on 04.08.2011 and the applications were moved on 12.08.2011 and injunction was granted by this court on the same day, restraining the respondent from invoking the bank guarantees and the case was adjourned and though the bank guarantees expired on 13.11.2011 and 02.10.2011 respectively, the respondent was prevented from invoking the bank guarantees by reason of the injunction granted by this court and therefore, this court has got power to direct the bank to pay the guaranteed amount to the respondent and relied upon the judgment reported in (2004)2 SCC 783 in the case of Karnataka Rare Earth and another vs. Senior Geologist, Department of Mines and Geology and another and (2010)1 SCC 417 in the case of Amarjeet Singh and others vs. Devi Ratan and others, in support of his contention.

14.He also relied the judgment reported in (1997)6 SCC 450 in the case of Dwarikesh Sugar Industries Ltd vs. Prem Heavy Engineering Works (P) Ltd., and another and (2008)1 SCC 544 in the case of Vinitec Electronics Private Limited and HCL Infosystems Ltd. in respect of the law relating to invocation of bank guarantee and circumstances under which, injunction can be granted by the court in respect of invocation of bank guarantee.

15.In respect of the relief prayed in O.A.Nos.656 and 658 of 2011, the applicant prayed for injunction restraining the respondent from interfering with the removal of the machineries, including the batching plant of the applicant from the site.

16.As the learned Senior counsel appearing for the respondent submitted that the respondent has no objection for the inventories to be taken, including the machineries and materials, an order was also passed directing the parties to complete the inventory. Nevertheless, the inventory could not be taken, as both parties are blaming other for not taking inventory as per the agreement, dated 13.01.2011.

17.Admittedly, the machineries and materials belonged to the applicant and after termination of the contract, the applicant cannot retain those machineries and materials in the site belonging to the respondent and as rightly contended by the learned counsel appearing for the appellant, if the machineries and materials were allowed to be kept in the site belonging to the respondent, they may get damaged and the machineries will be damaged and the materials will become useless and having regard to the scope of section 9 of the Arbitration and Conciliation Act and section 9 has been introduced as an interim measure of protection, in my opinion, no prejudice would be caused to the respondent, if the applicant is allowed to remove the machineries and materials belonging to them and available in the site belonging to the respondent. However, before removing the machineries and materials, the applicant has to submit the list of those machineries and materials to the respondent and after verifying the same by the respondent, the applicant is entitled to remove their machineries and materials from that site and if the respondent disputes any machineries and materials as given in the list by the applicant, those machineries and materials cannot be removed and they are subject to the adjudication by the Arbitral Tribunal. Hence, the O.A.Nos.656 and 658 of 2011 are ordered and the applicant is permitted to remove the machineries and materials from the site, after giving a list of those machineries and materials to the respondent and if the respondent questions any machineries and materials belonging to the applicant, those machineries and materials shall not be removed and the other machineries and materials can be removed by the applicant from the site and in respect of disputed machineries and materials, the same is subject to the adjudication by the Arbitral Tribunal.

18.In so far as the bank guarantee is concerned, as submitted by the learned Senior counsel appearing for the respondent, in the judgment reported in (2007)7 SCC 125, in the case of Adhunik Steels Ltd., vs. Orissa Manganese and Minerals Pvt. Ltd., the Hon'ble Supreme Court has elaborately discussed the scope of section 9 and held as follows:-

18. It is true that the intention behind Section 9 of the Act is the issuance of an order for preservation of the subject matter of an arbitration agreement. According to learned counsel for Adhunik Steels, the subject matter of the arbitration agreement in the case on hand, is the mining and lifting of ore by it from the mines leased to O.M.M. Private Limited for a period of 10 years and its attempted abrupt termination by O.M.M. Private Limited and the dispute before the arbitrator would be the effect of the agreement and the right of O.M.M. Private Limited to terminate it prematurely in the circumstances of the case. So viewed, it was open to the court to pass an order by way of an interim measure of protection that the existing arrangement under the contract should be continued pending the resolution of the dispute by the arbitrator. May be, there is some force in this submission made on behalf of the Adhunik Steels. But, at the same time, whether an interim measure permitting Adhunik Steels to carry on the mining operations, an extraordinary measure in itself in the face of the attempted termination of the contract by O.M.M. Private Limited or the termination of the contract by O.M.M. Private Limited, could be granted or not, would again lead the court to a consideration of the classical rules for the grant of such an interim measure. Whether an interim mandatory injunction could be granted directing the continuance of the working of the contract, had to be considered in the light of the well-settled principles in that behalf. Similarly, whether the attempted termination could be restrained leaving the consequences thereof vague would also be a question that might have to be considered in the context of well settled principles for the grant of an injunction. Therefore, on the whole, we feel that it would not be correct to say that the power under Section 9 of the Act is totally independent of the well known principles governing the grant of an interim injunction that generally govern the courts in this connection. So viewed, we have necessarily to see whether the High Court was justified in refusing the interim injunction on the facts and in the circumstances of the case. Therefore, it is clear from the above judgment that section 9 of the Arbitration and Conciliation Act is not totally independent and it is subject to well known principles governing the grant of any interim injunction and generally govern the courts in this case.

19.Therefore, we will have to consider, what is the law laid down by the Hon'ble Supreme Court in respect of the invocation of bank guarantee and in what circumstances, injunction can be granted from invoking the bank guarantee.

20.In the judgment reported in (1997)6 SCC 450 in the case of Dwarikesh Sugar Industries Ltd. vs. Preme Heavy Engineering Works (P) Ltd. and another, it has been held as follows:-

21.Numerous decisions of this Court rendered over a span of nearly two decades have laid down and reiterated the principles which the courts must apply while considering the question whether to grant an injunction which has the effect of restraining the encashment of a bank guarantee. We do not think it necessary to burden this judgment by referring to all of them. Some of the more recent pronouncements on this point where the earlier decisions have been considered and reiterated are Svenska Handelsbanken v. Indian Charge Chrome [(1994)1 SCC 502], Larsen & Toubro Ltd. v. Maharashtra SEB [(1995)6 SCC 68], Hindustan Steel Workers Construction Ltd. v. G.S. Atwal & Co. (Engineers) (P) Ltd.[(1995)6 SCC 76], and U.P. State Sugar Corpn. v. Sumac International Ltd.[(1997)1 SCC 568]. The general principle which has been laid down by this Court has been summarised in the case of U.P. State Sugar Corpn.[(1997)1 SCC 568 as follows: (SCC p. 574, para 12) The law relating to invocation of such bank guarantees is by now well settled. When in the course of commercial dealings an unconditional bank guarantee is given or accepted, the beneficiary is entitled to realize such a bank guarantee in terms thereof irrespective of any pending disputes. The bank giving such a guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer. The very purpose of giving such a bank guarantee would otherwise be defeated. The courts should, therefore, be slow in granting an injunction to restrain the realization of such a bank guarantee. The courts have carved out only two exceptions. A fraud in connection with such a bank guarantee would vitiate the very foundation of such a bank guarantee. Hence if there is such a fraud of which the beneficiary seeks to take the advantage, he can be restrained from doing so. The second exception relates to cases where allowing the encashment of an unconditional bank guarantee would result in irretrievable harm or injustice to one of the parties concerned. Since in most cases payment of money under such a bank guarantee would adversely affect the bank and its customer at whose instance the guarantee is given, the harm or injustice contemplated under this head must be of such an exceptional and irretrievable nature as would override the terms of the guarantee and the adverse effect of such an injunction on commercial dealings in the country. Dealing with the question of fraud it has been held that fraud has to be an established fraud. The following observations of Sir John Donaldson, M.R. in Bolivinter Oil SA v. Chase Manhattan Bank[(1984)1 All ER 351, CA] are apposite:

...The wholly exceptional case where an injunction may be granted is where it is proved that the bank knows that any demand for payment already made or which may thereafter be made will clearly be fraudulent. But the evidence must be clear, both as to the fact of fraud and as to the bank's knowledge. It would certainly not normally be sufficient that this rests on the uncorroborated statement of the customer, for irreparable damage can be done to a bank's credit in the relatively brief time which must elapse between the granting of such an injunction and an application by the bank to have it discharged. (emphasis supplied) The aforesaid passage was approved and followed by this Court in U.P. Coop. Federation Ltd. v. Singh Consultants and Engineers (P) Ltd.[(1988)1 SCC 174]

22.The second exception to the rule of granting injunction, i.e., the resulting of irretrievable injury, has to be such a circumstance which would make it impossible for the guarantor to reimburse himself, if he ultimately succeeds. This will have to be decisively established and it must be proved to the satisfaction of the court that there would be no possibility whatsoever of the recovery of the amount from the beneficiary, by way of restitution.

20.The entire law on that subject has been thoroughly discussed in the judgment reported in (2008)1 SCC 544 in the case of Vinitec Electronics Private Ltd., vs. HCL Infosystems Ltd. as follows:-

11.The law relating to invocation of bank guarantees is by now well settled by a catena of decisions of this Court. The bank guarantees which provided that they are payable by the guarantor on demand is considered to be an unconditional bank guarantee. When in the course of commercial dealings, unconditional guarantees have been given or accepted the beneficiary is entitled to realise such a bank guarantee in terms thereof irrespective of any pending disputes. In U.P. State Sugar Corpn. v. Sumac International Ltd.[(1997)1 SCC 568] this Court observed that: (SCC p. 574, para 12) 12. The law relating to invocation of such bank guarantees is by now well settled. When in the course of commercial dealings an unconditional bank guarantee is given or accepted, the beneficiary is entitled to realise such a bank guarantee in terms thereof irrespective of any pending disputes. The bank giving such a guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer. The very purpose of giving such a bank guarantee would otherwise be defeated. The courts should, therefore, be slow in granting an injunction to restrain the realisation of such a bank guarantee. The courts have carved out only two exceptions. A fraud in connection with such a bank guarantee would vitiate the very foundation of such a bank guarantee. Hence if there is such a fraud of which the beneficiary seeks to take advantage, he can be restrained from doing so. The second exception relates to cases where allowing the encashment of an unconditional bank guarantee would result in irretrievable harm or injustice to one of the parties concerned. Since in most cases payment of money under such a bank guarantee would adversely affect the bank and its customer at whose instance the guarantee is given, the harm or injustice contemplated under this head must be of such an exceptional and irretrievable nature as would override the terms of the guarantee and the adverse effect of such an injunction on commercial dealings in the country. The two grounds are not necessarily connected, though both may coexist in some cases.

12.It is equally well settled in law that bank guarantee is an independent contract between bank and the beneficiary thereof. The bank is always obliged to honour its guarantee as long as it is an unconditional and irrevocable one. The dispute between the beneficiary and the party at whose instance the bank has given the guarantee is immaterial and of no consequence. In BSES Ltd. v. Fenner India Ltd.2 this Court held: (SCC pp. 733-34, para 10) 10. There are, however, two exceptions to this rule. The first is when there is a clear fraud of which the bank has notice and a fraud of the beneficiary from which it seeks to benefit. The fraud must be of an egregious nature as to vitiate the entire underlying transaction. The second exception to the general rule of non-intervention is when there are special equities in favour of injunction, such as when irretrievable injury or irretrievable injustice would occur if such an injunction were not granted. The general rule and its exceptions has been reiterated in so many judgments of this Court [(1997)1 SCC 568, (1996)1 SCC 735, (1981)2 SCC 766 & (1986)4 SCC 136], that in U.P. State Sugar Corpn. v. Sumac International Ltd.[(1997)1 SCC 568 (hereinafterU.P. State Sugar Corpn.[(1997)1 SCC 568]) this Court, correctly declared that the law was settled.

13.In Himadri Chemicals Industries Ltd. v. Coal Tar Refining Co. [(2007)8 SCC 110 : (2007)9 Scale 631] this Court summarised the principles for grant of refusal to grant of injunction to restrain the enforcement of a bank guarantee or a letter of credit in the following manner: (SCC pp. 117-18, para 14) 14.  (i)While dealing with an application for injunction in the course of commercial dealings, and when an unconditional bank guarantee or letter of credit is given or accepted, the beneficiary is entitled to realise such a bank guarantee or a letter of credit in terms thereof irrespective of any pending disputes relating to the terms of the contract.

(ii)The bank giving such guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer.

(iii)The courts should be slow in granting an order of injunction to restrain the realisation of a bank guarantee or a letter of credit.

(iv)Since a bank guarantee or a letter of credit is an independent and a separate contract and is absolute in nature, the existence of any dispute between the parties to the contract is not a ground for issuing an order of injunction to restrain enforcement of bank guarantees or letters of credit.

(v)Fraud of an egregious nature which would vitiate the very foundation of such a bank guarantee or letter of credit and the beneficiary seeks to take advantage of the situation.

(vi)Allowing encashment of an unconditional bank guarantee or a letter of credit would result in irretrievable harm or injustice to one of the parties concerned.

14.In Mahatma Gandhi Sahakra Sakkare Karkhane v. National Heavy Engg. Coop. Ltd. [(2007)6 SCC 470] this Court observed: (SCC p. 471b-d) If the bank guarantee furnished is an unconditional and irrevocable one, it is not open to the bank to raise any objection whatsoever to pay the amounts under the guarantee. The person in whose favour the guarantee is furnished by the bank cannot be prevented by way of an injunction from enforcing the guarantee on the pretext that the condition for enforcing the bank guarantee in terms of the agreement entered into between the parties has not been fulfilled. Such a course is impermissible. The seller cannot raise the dispute of whatsoever nature and prevent the purchaser from enforcing the bank guarantee by way of injunction except on the ground of fraud and irretrievable injury.

What is relevant are the terms incorporated in the guarantee executed by the bank. On careful analysis of the terms and conditions of the guarantee in the present case, it is found that the guarantee is an unconditional one. The respondent, therefore, cannot be allowed to raise any dispute and prevent the appellant from encashing the bank guarantee. The mere fact that the bank guarantee refers to the principal agreement without referring to any specific clause in the preamble of the deed of guarantee does not make the guarantee furnished by the bank to be a conditional one.

21.Therefore, unless, a clear case of fraud on which the bank has notice and the fraud of the beneficiary from which he seeks the benefit has been established, no injunction can be granted from invoking the bank guarantee.

22.In other wards, it is not enough if the beneficiary has committed fraud, the fraud must be such that the bank which issues a bank guarantee has notice of the fraud and the other circumstances, in which injunction can be granted is where special equities are there in favour of grant of ad-interim injunction.

23.Admittedly, in this case, no allegation of fraud against the respondent has been made out and the applicant is also not able to bring his case under the second exception, namely there are special equities in favour of injunction.

24.In the judgment reported in (2008)1 SCC 544, in the case of Vinitech Electronics Private Limited vs. HCL Infosystems Limited, it has been held as follows:-

Whether encashment of the bank guarantee would cause any irretrievable injury or irretrievable injustice. There is no plea of any special equities by the appellant in its favour. So far as the plea of irretrievable injustice is concerned the appellant in its petition merely stated:

That should the respondent be successful in implementing its evil design, the same would not only amount to fraud, cause irretrievable injustice to the applicant, and render the arbitration nugatory and infructuous but would permit the respondent to take an unfair advantage of their own wrong at the cost and extreme prejudice of the applicant. Therefore, in order to bring the case within the 2nd exception that there are special equities in favour granting injunction, there must be a pleading and the applicant has to prove the irretrievable injury or irretrievable injustice and in this case, admittedly, no plea regarding special equity or irretrievable injury or irretrievable injustice have been made on by the applicant. When the applicant is not able to bring the case, under any of of both the exceptions stated above, there cannot be any injunction restraining the respondent from invoking the bank guarantee.

25.Further, it has been held in the judgment reported in (1997)6 SCC 450 in the case of Dwarikesh Sugar Industries Ltd vs. Prem Heavy Engieering Works(P) Ltd. and another, that resulting of irretrievable injury in a given circumstance, would make it impossible for the guarantor to reimburse himself, if he ultimately succeed and there would be no possibility of whatsoever for the recovery of the amount from the beneficiary by way of restitution.

26.In this case, it cannot be stated that in the event of invoking the bank guarantee and in the event of award being passed in favour of the applicant by the Arbitral Tribunal, the applicant cannot recover the amount from the respondent. As stated supra, the applicant has given two bank guarantees for a total sum of Rs.76,72,876/- and according to the applicant, the respondent has to pay a sum of Rs.1,98,95,846/- and the claim of Rs.17,35,000/- is also pending with the respondent. Therefore, when the respondent has to pay a sum of Rs.1,98,95,846/- and in the event of any award being passed in favour of the applicant, there would not be any difficulty for the applicant to recover the bank guarantee amount also and it is not the case of the applicant that the respondent is not financially sound and they cannot recover the amount from the respondent, in the event of award being passed in their favour. Therefore, considering the law laid down by the Hon'ble Supreme Court that section 9 of the Arbitration and Conciliation Act is subject to the general principles of law regarding grant of injunction and in the case of invocation of bank guarantee, unless fraud or irretrievable injury or injustice are established, it can be invoked and in this case, there is no allegation of fraud or irretrievable injury or injustice and it is not the case of the applicant that the respondent is not financially sound and he will not be in a position to recover the guarantee amount, in the event of award being passed in favour of the applicant, the injunction prayed for cannot be granted to the applicant and the application O.A.Nos.657 and 659 are dismissed.

27.As stated supra, though the bank guarantees were valid till 30.11.2011 and 02.10.2011 respectively, the applicant filed the applications and got interim orders on 12.08.2011 restraining the respondent from invoking the bank guarantees and the order of injunction is in force till now. Therefore, it cannot be contended by the applicant that the bank guarantees were expired and therefore, the respondent cannot invoke the bank guarantee.

28.As a matter of fact, on 30.11.2011, it was represented by the learned counsel appearing for ING Vysaya Bank that without getting further orders from this court, the bank will not release the amount to the applicant and that was also recorded by me on that date. Though subsequently, it was mentioned by the learned counsel appearing for the bank stating that the bank does not have the money available with them furnished by the applicant for paying the guaranteed amount, in my opinion, even assuming that though the bank has discharged the applicant from the bank guarantee, after the expiry of the period, having regard to the averments made in the affidavit filed by the applicant that they are willing to renew the bank guarantee and the bank guarantee could not be invoked by the respondent by reason of injunction, the applicant is bound to restore the benefit received by it by reason of interim injunction.

29.It has been held in the judgment reported in (2004)2 SCC 783 in the case of Karnataka Rare Earth and another vs. Senior Geologist, Department of Mines & Geology and another, as follows:-

10. In South Eastern Coalfields Ltd.4 this Court dealt with the effect on the rights of the parties who have acted bona fide, protected by interim orders of the court and incurred rights and obligations while the interim orders stood vacated or reversed at the end. The Court referred to the doctrine of actus curiae neminem gravabit and held that the doctrine was not confined in its application only to such acts of the court which were erroneous; the doctrine is applicable to all such acts as to which it can be held that the court would not have so acted had it been correctly apprised of the facts and the law. It is the principle of restitution which is attracted. When on account of an act of the party, persuading the court to pass an order, which at the end is held as not sustainable, has resulted in one party gaining advantage which it would not have otherwise earned, or the other party has suffered an impoverishment which it would not have suffered but for the order of the court and the act of such party, then the successful party finally held entitled to a relief, assessable in terms of money at the end of the litigation, is entitled to be compensated in the same manner in which the parties would have been if the interim order of the court would not have been passed. The successful party can demand: (a) the delivery of benefit earned by the opposite party under the interim order of the court, or (b) to make restitution for what it has lost.

30.In the judgment reported in (2010)1 SCC 417 in the case of Amarjeet Singh and others vs. Devi Ratan and others also the Honourable Supreme court has held as follows:-

17.No litigant can derive any benefit from mere pendency of case in a court of law, as the interim order always merges in the final order to be passed in the case and if the writ petition is ultimately dismissed, the interim order stands nullified automatically. A party cannot be allowed to take any benefit of its own wrongs by getting an interim order and thereafter blame the court. The fact that the writ is found, ultimately, devoid of any merit, shows that a frivolous writ petition had been filed. The maxim actus curiae neminem gravabit, which means that the act of the court shall prejudice no one, becomes applicable in such a case. In such a fact situation the court is under an obligation to undo the wrong done to a party by the act of the court. Thus, any undeserved or unfair advantage gained by a party invoking the jurisdiction of the court must be neutralised, as the institution of litigation cannot be permitted to confer any advantage on a suitor from delayed action by the act of the court. (Vide Shiv Shankar v. U.P. SRTC [1995 Supp (2) SCC 726: 1995 SCC (L & S) 1018: (1995)30 ATC 317], GTC Industries Ltd. v. Union of India [(1998)3 SCC 376: AIR 1998 SC 1566} and Jaipur Municipal Corpn. v. C.L. Mishra [(2005)8 SCC 423)

18.In Ram Krishna Verma v. State of U.P.[((1992)2 SCC 620: AIR 1992 SC 1888] this Court examined the similar issue while placing reliance upon its earlier judgment in Grindlays Bank Ltd. v. ITO [(1980)2 SCC 191: 1980 SCC (Tax)230: AIR 1980 SC 656 and held that no person can suffer from the act of the court and in case an interim order has been passed and the petitioner takes advantage thereof and ultimately the petition is found to be without any merit and is dismissed, the interest of justice requires that any undeserved or unfair advantage gained by a party invoking the jurisdiction of the court must be neutralised.

19.In Mahadeo Savlaram Shelke v. Pune Municipal Corpn. [((1995)3 SCC 33] this Court observed that while granting the interim relief, the court in exercise of its discretionary power should also adopt the procedure of calling upon the plaintiff to file a bond to the satisfaction of the court that in the event of his failing in the suit to obtain the relief asked for in the plaint, he would adequately compensate the defendant for the loss ensued due to the order of injunction granted in favour of the plaintiff. Even otherwise the court while exercising its equity jurisdiction in granting injunction is also competent to grant adequate compensation to mitigate the damages caused to the defendant by grant of injunction. The pecuniary award of damages is consequential to the adjudication of the dispute and the result therein is incidental to the determination of the case by the court. The court can do so in exercise of its inherent jurisdiction in doing ex debito justitiae mitigating the damage suffered by the defendant by the act of the court in granting injunction restraining the defendant from proceeding with the action complained of in the suit. Such a procedure is necessary as a check on abuse of the process of the court and adequately compensate the damages or injury suffered by the defendant by act of the court at the behest of the plaintiff.

20.In South Eastern Coalfields Ltd. v. State of M.P. [(2003)8 SCC 648: AIR 2003 SC 4482] this Court examined this issue in detail and held that no one shall suffer by an act of the court. The factor attracting applicability of restitution is not the act of the court being wrongful or a mistake or error committed by the court; the test is whether on account of an act of the party persuading the court to pass an order held at the end as not sustainable, has resulted in one party gaining an advantage it would not have otherwise earned, or the other party has suffered an impoverishment which it would not have suffered but for the order of the court and the act of such party. There is nothing wrong in the parties demanding being placed in the same position in which they would have been had the court not intervened by its interim order when at the end of the proceedings the court pronounces its judicial verdict which does not match with and countenance its own interim verdict. The injury, if any, caused by the act of the court shall be undone and the gain which the party would have earned unless it was interdicted by the order of the court would be restored to or conferred on the party by suitably commanding the party liable to do so. Any opinion to the contrary would lead to unjust if not disastrous consequences.

21.The Court further held: (South Eastern Coalfields case [(2003)8 SCC 648: AIR 2003 SC 4482], SCC pp. 664-65, para 28) 28.  Litigation may turn into a fruitful industry. Though litigation is not gambling yet there is an element of chance in every litigation. Unscrupulous litigants may feel encouraged to approach the courts, persuading the court to pass interlocutory orders favourable to them by making out a prima facie case when the issues are yet to be heard and determined on merits and if the concept of restitution is excluded from application to interim orders, then the litigant would stand to gain by swallowing the benefits yielding out of the interim order even though the battle has been lost at the end. This cannot be countenanced. We are, therefore, of the opinion that the successful party finally held entitled to a relief assessable in terms of money at the end of the litigation, is entitled to be compensated.

22. Similarly, in Karnataka Rare Earth v. Deptt. of Mines & Geology [(2004)2 SCC 783], a similar view has been reiterated by this Court observing that the party which succeeds ultimately is to be placed in the same position in which it would have been if the court would not have passed an interim order.

31.Therefore, as per the above judgment reported (2010)1 SCC 417 in the case of Amarjeet Singh and others vs. Devi Ratan and others, the applicant cannot take advantage of the interim order obtained by it and in the event of bank, namely ING Vysya Bank which issued the guarantee, returned the money paid by the applicant, the applicant is directed to pay the guaranteed amount to the respondent, namely a sum of Rs.73,72,896/- within a period of eight weeks from the date of receipt of a copy of this order. No costs.

32.A.Nos.3751 and 3752 of 2011 are for interim stay of the order of termination, dated 04.08.2011. As rightly submitted by the learned Senior counsel appearing for the respondent that the legality of the termination order, whether it is valid or not can be decided only by the Arbitral Tribunal and the court cannot stay the termination order and hence, these applications are dismissed.

33.In the result, O.A.No.656 and 658 of 2011 are allowed and O.A.No.657 and 659 of 2011 are dismissed.

29.06.2012 Index;Yes.

Internet:Yes.

er R.S.RAMANATHAN.J er Pre-delivery Orders made in O.A.Nos.656 to 659 of 2011 and A.Nos.3751 and 3752 of 2011 29.06.2012