Full Text
Date ofDecision;5.4.2019 O.M.P.m(COMM.)57/2019
ISI-IVAKOO(INDIA)PVT.LTD. Petitioner
Through; Mr. Arun Kumar Verma, Sr. Adv. with Mr. Vishal Nautiyal and Mr. Abhay Raj Verma,Advs.
Through: Mr. Sudhir Nandrajog, Sr. Adv. with Mr. Rajat Ai:p.ra;,and Ms. Vishaiakshi Singh,Ady. '
JUDGMENT
1. This is a petition filed uhderyg^cpon,'9; Arbitration and Conciliation Act,1996(hereafter referred to-as"1996 Act").
2. Notice in this petition was issued on 21.2.2019. Reply on behalf of the respondenthas been filed therein. -V;.
3. The substantive prayers made in the petition are asfollows: "(a) Allow the present application and further direct the Respondent to immediately refund the amount of Rs.3,50,00,000/- to the Petitioner (in terms of order dated 20.09.2018) being the amount appropriated by it by Vi^rongfully en-cashing the Bank Guarantees in question, along with interest at the rate of 18% per annumfrom 14.09.2017tillthe amountis refunded,and (b) Award costs ofthe proceedings in favour ofthe O.M.P.(I)(COMM.)57/2019 1of14 2019:DHC:7640 s Petitioner andagainstthe Respondents, and/or..."
4. This petition is resisted by the respondent on several grounds, but before I come to the grounds, the following facts with respect to the objectionstaken quathe reliefs soughtin the petition need to be noted. 4.[1] The petitioner had previously filed a petition under Section 9 ofthe 1996 Act at a stage prior to commencement ofthe arbitration proceedings. This petition was numbered as: OMP No.363/2003. The Section 9 petition came to be disposed ofvia order dated 15.12.2005. 4.[2] It may be relevant to note that when this-Court passed the order dated 15.12.2005 in OMP No.363/2003, it issued the following operative directions:. ',; • ""The Petition is accordinslv dist>dsed of recording undertakins of the petitioner to the effect that the hank guarantees shall be kept alive till the matter is adjudicated upon by the arbitrator and,even thereafter if petition under section 34 ofthe Arbitration Actis filed till the disposal ofthe 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 shhlTbje^entitled to encash the bank guarantees..lA alsdstandkdis^ of. 4.[3] The aforesaid extract ofthe order dated 15.12.2005 would show thatthe petitioner had given an undertakipgtothe effeckthatthe bank guarantees furnished by it will be kept-alive* till- the matter is adjudicated by the learned Arbitrator and post the adjudication as well,in case a petition under Section 34ofthe 1996 Actwasfiled by the respondent. In other words,the petitioner was directed to keep the bank guarantees alive till the disposal ofSection 34 petition. As is plainly evident,the Court also made it clear that ifan executable award was passed infavour oftherespondent,based on which it was O.M.P.(I)(COMM.)57/2019 Page2of14 ' \ entitled to recover the money from the petitioner, the respondent would have liberty to encash the bank guarantees furnished by the petitioner. 4.[4] It is not in dispute that for whatever reason,the petitioner was unable to keep the bank guarantees alive, which resulted in the respondent and,to my mind,rightly, approaching the concerned bank for encashment of the bank guarantees. I am informed that this situation obtained in and about September 2017. 4.[5] It may also be relevant to note that the petitioner, who was the claimant before the learned Arbitrator, had also raised issues with regard to discharge ofbank guarantees furnished by it and in respect thereof, claimed bank charges in the sum of Rs;.-77,27,225/-, which, supposedly, were incurred by the ■ petitioner to keep the bank guarantees alive. v.., 4.[6] Qua these issues, the learned Arbitrator passed certain directions after noting the operative directions;-contains in the order dated 15.12.2005 passed in Ofyff I have already made reference hereinaboyd.'' y y k yV AA, 4.[7] The learned Arbitrator's view qua the afpfementioned aspect is contained in paragraphs 229 to 232 ofthe award. For the sake of convenience,the same are setforth hereafter:- 'y;- r * "229. Issues No. 3 and 4 are whether the Claimant is entitled to discharge of the Bank Guarantee and also whether the Claimant is entitled to the sum of Rs.77,27,225/- towards the bank chargesfor keeping the Bank Guarantee alive.
230. Without adverting to the submissions made by the Parties, the Tribunalfinds that the High Court ofDelhi, vide Order dated 15.12.2005, passed in O.M.P. NO. 363/2003 had disposed ofthe Petition in thefollowing terms: O.M.P.(I)(COMM.)57/2019 3of14 "The Petition is accordin2lv disposed of with the (sic) undertakins ofthe petitioner to the effect that the bank suarantees shall be kept alive till the matter is adiudicated bv 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 becomins executable if under the said award the respondent has to recover the amount, the respondent shall be entitled to encash the bank guarantees.lA also stands disposed of." (emphasis is mine)
231. Therefore, it can be seen that bv its own undertaking, the Claimant was bound to keep the bank guarantees alive in terms,ofthe above order.
232. In any event, due to the fraudulent and collusive conduct ofthe Claimant, the Respondent cannot be fastened with any liability and as such, the Tribunal is not inclined to grant any relief in this regards The Respondent is accordingly, notliable to pay anv.bankcharges.",, N (emphasis is mine) 4.[8] It may be pertinentto point[6],ut, at"t&s^UriQ&p^ while the matter was still pending adjudication beforeJi|leab^d:M the petitioner had filed yet another petition under Section 9ofthe 1996 Act.This petition was numbered as OMP(I)(COMM.) 382/2017. I am informed that this petition was filed before the encashment,of the bank.-guarantees by the respondent. However,beforethis petition could be finally adjudicated upon, the respondent had already encashed the bank guarantees. Therefore,the Court, after noting this fact and having regard to the aspect that the petitioner had failed to keep the bank guarantees alive,found no fault with the conduct of the respondent in encashing the bank guarantees. Accordingly,the petition i.e. OMP(I)(Comm.)No.382/2017,was dismissed by a learned Single Judge ofthis Court. O.M.P.(I)(COMM.)57/2019 Me4of14 4.[9] It would be importantto note thatthe learned Arbitrator had reserved the matter for rendering the Award on 12.12.2016, which was, ultimately, pronounced on 5.12.2017. The observations made in paragraphs 229to 232 of the Award, which have been extracted in paragraph 4.[7] above, were obviously made by learned Arbitrator without knowledge ofthe factthat in the interregnum i.e. in September 2017, the bank guarantees had already been encashed.It appearsthat neither party made any effortofinforming the learned Arbitrator aboutthis development.
5. Be that as it may,the petitioner being aggrieved by the Award,has filed a Section 34 petition, in which,I had passed two orders. These are orders: dated 20.9.2018 and 30.102018. The Section 34 filed by the petitioner is numbered as:OMP(COMM.)No.17.1/2018. 5.[1] This petition came up forhearingbefore me,on20.9.2018,when,four weeks were granted to the respondent:to file a reply to the Section 34 petition. Since, brief arguments were,heard oh.the aspect concerning the encashment ofbank guarantees,[1] had,,after hearing the counsel for both the parties,madethefollowing observ^ionsTbh;2Q.9^i[8];,, "4. Mr. Bhambhani, who, c^ec^^^^^-J^prident, affirms thefactthattherespondentdid'nm^efmyf^ claim in the matter.
5. However,Mr. Vermasays thata bankguarantee which was furnished by thepetitioner to-the respondmtmdfdd been kept alive all this while has been encashed'by tKeyespohdent.
6. Thefactthatthepetitioner was directed to keep the bank guarantee alive is, according to the counselfor the parties, discernible from a perusal of the order dated 15.12.2005, passedin OMPNo.363/2003.
7. In these circumstances, the respondent is directed to return the amount, equivalent to the bank guarantee, to the petitioner within three weeksfrom today.
8. In case, there is any difficulty or impediment qua the same, the respondent will have liberty to move this Court in that behalf." O.M.P.(I)(COMM.)57/2019 5of14 --J 5.[2] In effect, for the reasons recorded in the order dated 20.9.2018,[1] had directed the respondent to return the amount equivalent to the bank guarantees to the petitioner within three weeks from that date, primarily, based on the fact that the respondent had not filed any counter claims. Since,the respondent had failed to comply with the directions,the petitioner proceeded to file an interlocutory application,thatis,LA.No.14903/2018. 5.[3] This application came up for hearing on 30.10.2018. The application was disposed of after noticing the observations made, by the learned Arbitrator in paragraphs 229 to 232 ofthe award. The directions issued on that date are contained in paragraphs 4to 8 which are extracted hereafter for the sake ofconvenience: / •:/' / T ■ "4. A careful perusal ofthe aforeiAentidped,paragraphs of the award would show that: the learhed Apbjtrator, having regard to the orderpassed by thmCourton M.12.2005 in OMP No.363/2003 rejected the petitidf^er'srcfptentions qua Issue No.3and 4. In sum, the Arbitral Tribunal was ofthe view that since, the petitioner itself had giypn an undertaking to this Court that the bank guarantees would/be keptdliye. Issue No.3 which related to discharge ofthesubjeit bdnlfgudrantees could not be ordered infavour bfthepetitidjier. -Cgnsequently,Issue No.4, which, dealt with bank.charges[1] for/ikeeping the bank guarantees alive was also rejected.
5. In my opinion, what this Court had in mind was that the subject bank guarantees]will be:kept alive,hyr the petitioner during the period of adjudication. andftheredfier if the respondent were to succeed before the Arbitral Tribunal. It is clear that at thatstage, the Court wasperhapsfactoring in the circumstance that the respondent may alsofile a counter claim, however, as it transpires, concededly, the respondent did not lodge any counter claims. Therefore, what the Arbitral Tribunal was required to deal with was only the claims, which, the petitioner had lodged before it. The claims lodged by the. petitioner were admittedly rejected by the Arbitral Tribunal.
5.1. Therefore, the directions issued by this Court that the bank guarantees would be kept alive in anticipation that the O.M.P.(I)(COMM.)57/2019 Page[6] of14 award may accord moneys infavour ofthe respondent worked itselfoutwith the conclusion ofthe arbitrationproceedings.
5.2. As indicated above, the respondent did not lodge any counter claim and therefore, the purposefor which directions were issued by this Court stood upon pronouncement of the award.
6. Mr. Rajat Arora, who, appearsfor the respondent says that the subject bank guarantees were furnished by the petitioner towards mobilization advance.
6.1. Furthermore, counselfor the respondent says that the unutilized mobilization advance is still outstanding in the books ofrespondent. 6.[2] On being queried, learned counselfor the respondent admittedthatthere was nosuchfindingrecorded in the award.
7. In these circumstances, iwmyMew, there is no tenable ground based on which the respondent can retain the money, which itobtainedafter encashingthesubject bankguarantees.
8. Accordingly, since, no other aspfcf-iiUs.been articulated before me, the respondent is'directedfto remit the amount equivalent to the subject bank guarantees to the petitioner within ten (10) daysfrom today,failing which the concerned officer ofthe respondentwillremainpresentin the Courton the nextdate ofhearing as alreadyfixed;i.el21:02.2019.'' 5.[4] Evidently, the respondent.wasf'aggriev^ the orders dated 20.9.2018 and 30.10.2018. The respondent.''s -appeal.'against these orders, which was numbered as FAO(OS)(COMM;No.271/2018, came up for hearing on 29.11.2018.The Division Bench,based on the agreement arrived at between the counsel for the parties, set,asidedhe p^ dated 20.9.2018 and 30.10.2018. While doing so, the Division Bench issued the following directions: "After some hearing in the matter, it is agreed that without prejudice to the rights and contentions of the parties which have been raised by them in petitionfiled under Section 34 of the Arbitration and Conciliation Act, 1996, the impugned orders may be set aside and the questions raised may be left open to be decided alons with objections filed under Section 34 of the Arbitration and Conciliation Act, 1996, by the O.M.P.(I)(COMM.)57/2019 Page7of14 respondent. Thi.<^ order will not tv, the wnv ofthe respondent, in case th^ respondent chnn.es to file a fresh petition under Section 9 ofthe Arbitration andConcUintion Act. 1996. Legalobjectionsofthe appellantherein are keptopen. The present appeal is accordingly disposed of, in the above terms.",... s
6. It is in this background thatthe petitioner has approached this Court for the third time, albeit, after the award has been rendered by way of petitionfiled under Section9ofthe 1996 Act..
7. Insupportofthepetition,argumentshavebeenadvancedbyMr.Arun Kumar Verma, Sr. Advocate, instructed by Mr. Abhay Raj Verma, Advocate, while submissions on behalf of,the respondent have been advanced by Mr.Sudhir Nandrajog,Sr. Advocate,instructed by Mr.Rajat Arora,Advocate. fv' v
8. Mr.Verma has briefly submitted:tha;amc|tiOj^^ claims were preferred by the respondent,the nioniesfth»%c^^ obtained via encashmentofthesubjectbankguaranteeswoultfhaveto bereturnedtothe petitionerorintheveryleast,themoniesreceivedshouldbedeposited with this Court.It is Mr.Verma's submission t^atthere.Is no good reason asto whytherespondentshouldbeallowedtoretainthemoneyastherespondent did notthink itfittolodgeanycounterclaim(s)tojustifytheencashmentof thesubjectbank guarantees. Insupportofhis plea,Mr.Vermarelied upon Order XXXIX Rule 10 of the Code of Civil Procedure, 1908 (in short "CPC")and thejudgmentdated 14.1.2011,passed by aDivisionBench of this Court,inFAO(OS)No.200/2010,titled;SimplexInfrastructuresLtd.vs. NationalHighwaysAuthorityofIndia. Furthermore,Mr.Vermaalsoplaced Page[8] of14 ■--J reliance on the provisions of Section 9(1)(e) to emphasize the fact that this Court has the requisite power to pass the kind of direction sought for by the petitioner.
9. On the other hand, Mr. Nandrajog has made the following submissions:
(i) That this Court ought not to hear and adjudicate upon the captioned petition at this stage. This petition should be heard and decided at the stage when Section 34 petition is adjudicated upon by the Court.
(ii) Section 9 petition is not.adjudicatory in nature but only an application, whereby, interim measureslare put in place by the Court,
(ill) This Court at this stage cannot come;fo'the conclusion, one way or another, as to whether or not invocatidn of encashment ofthe bank guarantees was valid.
(iv) The respondent being a public spctor. entity is good for the money obtained by it. upon encashment^6f tte guarantees. In other words, there is no need to direct, the^ respondent to deposit the money obtained through encashment ofAihe banl^ guarantees.
10. I have heard learned counsel forthe parties kt some length.
11. This matter falls in a narrow compass. The facts nap-ated above would demonstrate that the petitioner had moved;Sectiop;9..petitions at three stages. At the first stage, the Section 9 petition was filed prior to the commencement of arbitration proceedings. The second time around, the petitioner filed a Section 9 petition during the arbitration proceedings, albeit, prior to the award being rendered and the instant petition, which is the third Section 9 petition, has been filed after the award has been rendered. 11.[1] The facts set out above, qua which there is no dispute, this Court, disposed of the first Section 9 petition with a direction that the bank O.M.P.(I) (COMM.) 57/2019 9 of 14 // guarantees furnished by the petitioner would be kept alive during the subsistence of arbitration proceedings and thereafter, till the Section 34 petition is disposed of. As a matter offactthis Courtfurther directed,thatin case the award rendered by the Arbitral Tribunal was in favour of the respondent,the respondent would have the right to recover the amount via encashment ofthe bank guarantees. 11.[2] As indicated above,these directions are contained in the order dated 15.12.2005. These directions were not assailed by either party. Hence, to my mind,the entire,aspect concerning the bank guarantees is covered bythe directions which this Court issued on 15.12.2005, The only catch in the present case is that the petitioner was unable,,for whatever reasons,to keep the bank guarantees alive. As notedftereinaboye,;;a right was given to the respondent to seek encashment of the,- bank' -guarantees, in such circumstance,which it did in September:2017, *;; 11.[3] Before I proceed further, I mus^,ndte-te during the course ofthe arguments, Mr. Nandrajog submitted that the* bank,r,guarantees had been issued againstmobilization advance,which.w|s notutilised.Thissubmission was made before meon30.10.2oMs weihlMd,in thatproceeding,puta pointed question to the learned counsel for the respondent as to whether there wasanyfindinginthe awardthatthe petitionerhadfailedto utilizethe mobilization advance.Ihadreceivedacandid'ang\yef,:Oh&atdate,from Mr. RajatArora,the AdvocateinstructingMr.Nandrajog,thatthere wasnosuch finding. 11.[4] Upon a perusal ofthe award,I noticed that there is no such finding recorded bythe ArbitralTribunal.Therefore,thisquery again wasputby me atthehearingheldtoday,lestImissedsomething.While Mr.Nandrajog was not able to show anything which would answer this query,he did refer to paragraphs 158to 160ofthe Award. OMP.(I)(COMM.)57/2019 10of14 11.[5] I have examined the observations made by the learned Arbitrator in those paragraphs. None of the observations, however prejudicial they may be, indicate that the petitioner had contended that the bank guarantees furnished by the petitioner against mobilization advance was not utilized by the petitioner. The observations made in the paragraphs referred to by Mr. Nandrajog do not answer the query that I posed to the learned Senior Counsel.
12. Therefore,the question before me is: whether without a claim,can the respondent, by any stretch ofimagination, hope to keep the money with it. Mr. Nandrajog points out that Issue No.3 was related to discharge of bank guarantee while Issue No.4 was related to the petitioner's claim for bank charges. According to the learned Senior Counsel, both the issues were ':•. ■■ ■ ' '., f,,, ■ decided by the learned Arbitrator againstthe petitioner. 12.[1] I tend to disagree with Mr. Nandrajog that'Issue No. 3 was, at all, decided by the learned Arbitrator. A carefiil perusal of paragraphs 229 to 232ofthe award dated 5.12.2017 wpuidshowthatthqdearned Arbitrator did not decide Issue No.3 which pertained toMischhfgejofbank guarantees. The learned Arbitrator after quoting the order:da%d.f^;T[2],2005 passed by this Court,had only stated the following: '' "231. Therefore, it can be seen that by its own undertakins, the Claimant was bound to keepjhe hank guarantees alive in terms ofthe above order.. ' ' - ■
232. In any event, due to the fraudulent and collusive conduct ofthe Claimant, the Respondent cannot be fastened with any liability and as such, the Tribunal is not inclined to grant any reliefin this regard. The respondent is accordingly, not liable topay any bank charses." \2.[2] Whatis plainly evident,when onereadsthe award,isthat,thelearned Aibitrator was unaware ofthe factthatthe bank guarantees had already been O.M.P.(I)(COMM.)57/2019 Hof14 /3 encashed. As a result, the learned Arbitrator held the view that the bank guarantees continued to remain in operation on account ofan undertakingto that effect,given bythe petitioner,by which it was bound.In this regard,the obvious reference ofthe Arbitral Tribunal was to the order dated 15.12.2005 passed by this Court. More importantly, this observation was made in the context ofIssue No.4,which required the Arbitral Tribunal to determine as to who would bear the financial burden of keeping the bank guarantees alive. 12.[3] The Arbitral Tribunal, clearly, failed to deal with the direction contained in order dated 15.12.2015 ^yhich required the petitioner to keep the bank guarantees alive only to enable the respondentto encash the bank guarantees againstan executable awaM,ifany,pqssed in itsfavour. In view of the fact that there was no counterclaim lodged by the respondent, the Arbitral Tribunal,in my view,had to decide,in the changed circumstances, whether or not the condition put in place by'this Court via order dated 15.12.2015 would continue to operate.The Arbitral,.;Tribunal, clearly, did not decide this aspect of the matterVhrid;, No. 3 remain unaddressed. •' ^ 3'- 12.[4] The Arbitral Tribunal, though, for whatever it is worth, did decide Issue No.4 which related to "liability", purportedly borne by the petitioner on accountofbank chargesfor keepingthehankguarantees alive.
13. Therefore, I am confronted with two undeniable facts. First, no counterclaims were filed. Second,however irrelevant it may be,there is no findingthatthebankguarantees were encashed onaccountofnon-utilization ofmobilisation advance.
14. Given this position,in my view,ifI were to permitthe respondentto continue to hold on the money,it would not only result in the respondent unjustlyenrichingitselfbutwould alsobecontrarytothe purposeandobject OMP.(I)(COMM.)57/2019 Page12 of14 with which order dated 15.12.2015 was passed by this Court when arbitration had not commenced. Thus, the argument that the respondent is good for its money, given the facts obtaining in this case, is untenable and hence is rejected.
15. However,before I issue any direction,I must locate the power vested in the Court. To my mind,the power is contained in following provision of Section 9 of1996 Act:- "9. Interim measures etc. by Court.— (1) A party may, before or during arbitral proceedings or at any time after the making ofthe arbitral award but before it is enforced in accordance with section 36, apply to a Court—
(i) XXX
(ii)for an interim measure,ofprotection in respect ofany of thefollowing matters, namely:- (a)XXX (b)XXX ' (C)XXX. (d)XXX '■ ^; (e)such other interim measure ofprotection as may appear to the court to be just and convenient, and the Courtshall have the samepowerfor making orders as it has for the purpose of, and in relation to, any proceedings before it..." 15.[1] The operative words are "just" and "convenient" followed by the words(and ifI were to paraphrase it) - that the Court could exercise the same powers,ifit were aproceeding pending beforeit. 15.[2] Thus, in view ofthe fact that I have still not adjudicated upon the Section 34 petition, equities, to my mind, would be balanced if an appropriate direction is issued to the respondent to deposit the money m Court, which is also the alternative reliefthat Mr. Verma has prayed for. This direction appears to be wholesome as deposit ofmoney m Court will enable accrual of interest which will ultimately benefit the party which Page13 of14 /r succeeds in the main matter.
16. In this context, I must also indicate that the submission of Mr. Nandrajog that Section 9 petition should await the adjudication of the Section 34 petition, is a submission, which does not impress me. In my opinion, neither the Division Bench has made any such observation nor is the methodology expedient. Once a litigant, in this case the petitioner, has moved a Section 9 petition, it has the right to have the same adjudicated upon unless for good reasons the Court defers a decision on such a petition. I see no reason to defer adjudication in the petition.
17. Thus, for the foregoing reasons, I am.inclined, for the moment, insofar as this petition is concerned,to;direct the respondent to deposit the monies,which,I am told,is an amountequivalentto,a sum ofRs.3.[5] Crores with the registry ofthis Court. The said amoiint will be deposited within two weeks from today. Upon such-lamount being deposited with the Registryofthis Court,thesameshallbeinvested m.an interest-bearingfixed deposit,maintained with anationalised ba&.;.
18. The petition is disposed ofinthe qfPreipehti^^^^^ •
19. Needless to say,the observafibhs.made^ have been made for the purposes ofdisposal ofthe captibned petitibh and would notimpact the main petition.
RAJIV SHAKDHER,J.