Case Note & Summary
The petitioner, M/s. ANCL & Co. (India) Pvt. Ltd., filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking an injunction to restrain respondent nos. 2 to 4 (Reliance Industries Ltd., Reliance Eminent Trading and Commercial Pvt. Ltd., and Fine Tech Commercial Pvt. Ltd.) from invoking nine bank guarantees issued by respondent no. 1 (Corporation Bank) on 3rd September 2012. The petitioner was engaged as a contractor by respondent no. 2 through respondent no. 4 for civil/structural work and interior work for a project, pursuant to a Letter of Intent dated 5th September 2011 and a work order dated 23rd September 2011. Disputes arose regarding the performance of the contract, and the respondents sought to invoke the bank guarantees. The petitioner alleged fraud and irretrievable injustice, contending that the invocation was not in accordance with the terms of the contract and that the respondents had no legitimate claim. The court examined the principles governing the grant of interim injunctions, particularly the exceptions to the rule that bank guarantees must be honoured. The court found that the petitioner had made out a strong prima facie case of fraud and that invocation would cause irretrievable injustice, as the petitioner would be unable to recover the amounts if the arbitration ultimately found in its favour. The balance of convenience was in favour of the petitioner. Consequently, the court granted an injunction restraining the respondents from invoking the bank guarantees until the disposal of the arbitration proceedings. The court also directed the petitioner to furnish an undertaking to indemnify the respondents if the arbitration award went against it.
Headnote
A) Arbitration - Interim Relief - Section 9 Arbitration and Conciliation Act, 1996 - Injunction against invocation of bank guarantees - Court considered principles for grant of interim injunction, including existence of prima facie case, balance of convenience, and irreparable loss - Held that petitioner made out a strong prima facie case of fraud and irretrievable injustice, warranting restraint on invocation of bank guarantees (Paras 1-45). B) Bank Guarantee - Fraud Exception - Invocation of unconditional bank guarantees - Court examined the exception to the rule that bank guarantees must be honoured, namely fraud of which the bank has notice or irretrievable injustice - Held that the petitioner established a prima facie case of fraud and that invocation would lead to irretrievable injustice, thus injunction granted (Paras 2-45).
Issue of Consideration
Whether the petitioner is entitled to an injunction restraining the respondents from invoking the bank guarantees pending arbitration, on grounds of fraud and irretrievable injustice.
Final Decision
The court allowed the petition and granted an injunction restraining respondent nos. 2 to 4 from invoking the bank guarantees until the disposal of the arbitration proceedings. The petitioner was directed to furnish an undertaking to indemnify the respondents if the arbitration award went against it.
Law Points
- Bank Guarantee
- Fraud Exception
- Irretrievable Injustice
- Prima Facie Case
- Balance of Convenience
- Section 9 Arbitration and Conciliation Act
- 1996
