Case Note & Summary
The appellant, Mercator Oil & Gas Limited, had entered into a contract with the first respondent, Oil & Natural Gas Corporation Limited (ONGC), for the charter of vessels. Disputes arose, and ONGC terminated the contract and sought to invoke bank guarantees furnished by the appellant. The appellant filed arbitration petitions under Section 9 of the Arbitration and Conciliation Act, 1996, seeking to restrain ONGC from terminating the contract and from invoking the bank guarantees. The learned Single Judge rejected both petitions on 3 June 2019. The present appeal under Section 37 of the Act challenged only the order regarding the invocation of bank guarantees. The core legal issue was whether the appellant had made out a case for injunction against the encashment of bank guarantees, which requires establishing either fraud or special equities leading to irretrievable injustice. The appellant argued that ONGC had breached the contract and that the bank guarantees were not unconditional, but the court found no evidence of fraud or special equities. The court noted that the bank guarantees were unconditional and that the appellant had not demonstrated any fraud by ONGC. The court also rejected the argument of irretrievable injustice, as the appellant could seek damages in arbitration. Consequently, the appeal was dismissed, and the order of the Single Judge was upheld.
Headnote
A) Arbitration - Interim Relief - Bank Guarantee - Injunction - Section 9, Section 37 Arbitration and Conciliation Act, 1996 - The appellant sought to restrain ONGC from encashing bank guarantees. The court held that the grounds for injunction, namely fraud and special equities, were not made out. The appellant failed to establish any fraud or irretrievable injustice. The appeal was dismissed. (Paras 1-3, 20-21)
Issue of Consideration
Whether the ingredients required to restrain invocation and payments under bank guarantees, namely fraud and special equities, are present in the facts of the case.
Final Decision
The appeal is dismissed. The order of the Single Judge refusing to restrain invocation of bank guarantees is upheld.
Law Points
- Bank guarantee
- injunction
- fraud
- special equities
- irretrievable injustice
- arbitration
- Section 9 Arbitration and Conciliation Act
- 1996
- Section 37 Arbitration and Conciliation Act
Case Details
APPEAL NO. 318 OF 2019 IN ARBITRATION PETITION (L) NO. 1085 OF 2018
PRADEEP NANDRAJOG, C.J., NITIN JAMDAR, J.
Mr. Janak Dwarkadas, Sr. Advocate a/w Mr. Sharan Jagtiani, Mr. Prateek Bagaria, Ms. Jimisha Dalal & Mr. Chiranjeev Saboo i/b Singularity Legal LLP for Appellant; Mr. D.J. Khambata, Sr. Adv. a/w Mr. Pheroze Mehta, Mr. Amir Arsiwala, Mr. Omprakash Jha, Ms. Shivani Kumbhojkar i/b The Law Point for Respondent No.1; Mr. K.A. Suryanarayanan a/w Mr. Rajkumar Gaikwad, Adv. For Respondent No.2
Mercator Oil & Gas Limited
Oil & Natural Gas Corporation Limited, Axis Bank Limited
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 against an order of the Single Judge refusing to restrain invocation of bank guarantees.
Remedy Sought
The appellant sought an injunction restraining ONGC from encashing the bank guarantees.
Filing Reason
The appellant alleged that ONGC wrongfully terminated the contract and sought to invoke bank guarantees, claiming fraud and special equities.
Previous Decisions
The learned Single Judge rejected the appellant's arbitration petitions on 3 June 2019.
Issues
Whether the appellant established fraud or special equities to restrain invocation of bank guarantees.
Submissions/Arguments
Appellant argued that ONGC breached the contract and that the bank guarantees were not unconditional, and that there was fraud and special equities.
Respondent ONGC argued that the bank guarantees were unconditional and that no fraud or special equities were made out.
Ratio Decidendi
The court held that for an injunction against encashment of bank guarantees, the party must establish either fraud or special equities leading to irretrievable injustice. The appellant failed to prove either ground. The bank guarantees were unconditional, and the appellant could seek damages in arbitration.
Judgment Excerpts
Whether the ingredients required to restrain invocation and payments under bank guarantees are present. These ingredients are by now well defined. They are the existence of fraud and special equities that may arise.
Procedural History
The appellant filed Arbitration Petition (L) No.1085/2018 and Arbitration Petition (L) No.1162/2018 under Section 9 of the Arbitration and Conciliation Act, 1996. The learned Single Judge rejected both petitions on 3 June 2019. The appellant filed the present appeal under Section 37 of the Act challenging the order in Arbitration Petition (L) No.1085/2018 regarding bank guarantees.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 9, Section 37
