Case Note & Summary
The appeal was filed by the original respondent (appellant) under Section 37 of the Arbitration and Conciliation Act, 1996, challenging an ex-parte ad-interim order dated 1st January 2016 passed by the learned District Judge-II, Pune, in Misc. Application No.1009 of 2015 in OMP No.101009 of 2015. The respondent (original petitioner) had filed an application under Section 9 of the Arbitration Act seeking an injunction against the appellant from invoking four performance bank guarantees furnished under a construction contract dated 15th April 2011 for strengthening and widening of a road on Pune-Satara section of NH 4. The contract was between appellant no.1 and respondent. Disputes arose, and on apprehension of invocation of bank guarantees, the respondent filed the Section 9 application. The District Judge passed an ex-parte ad-interim order restraining the appellant from invoking the bank guarantees without issuing notice to the appellant. The appellant contended that the order was passed without hearing them and without recording any satisfaction that the case fell within the exceptions to the rule that bank guarantees are independent contracts. The High Court held that ex-parte orders of injunction against invocation of bank guarantees should not be passed lightly and only in exceptional cases of fraud or irretrievable injustice. The court found that the District Judge did not record any reasons for dispensing with notice and did not consider the settled legal position. Accordingly, the High Court allowed the appeal, set aside the ex-parte order, and directed the District Judge to hear the matter afresh after giving notice to both parties.
Headnote
A) Arbitration - Interim Measures - Section 9 of the Arbitration and Conciliation Act, 1996 - Ex-parte Injunction - The court set aside an ex-parte ad-interim order restraining invocation of bank guarantees, holding that such orders should not be passed without hearing the opposite party unless there is a clear case of fraud or irretrievable injustice, and the court must record reasons for dispensing with notice. (Paras 1-10)
B) Bank Guarantees - Invocation - Injunction - The court reiterated that bank guarantees are independent contracts and courts should be slow in granting injunctions against their invocation, except in cases of fraud or irretrievable injustice. The appellant's apprehension of invocation was not sufficient to grant an ex-parte injunction. (Paras 2-10)
Issue of Consideration
Whether the learned District Judge was justified in passing an ex-parte ad-interim order restraining the appellant from invoking the bank guarantees without hearing the appellant and without recording satisfaction that the case falls within the exceptions to the rule that bank guarantees are independent contracts.
Final Decision
The High Court allowed the appeal, set aside the ex-parte ad-interim order dated 1st January 2016, and directed the learned District Judge to hear the matter afresh after giving notice to both parties and pass appropriate orders in accordance with law.
Law Points
- Section 9 of the Arbitration and Conciliation Act
- 1996
- Section 37 of the Arbitration and Conciliation Act
- Principles for grant of interim injunction against invocation of bank guarantees
- Ex-parte order principles
Case Details
Arbitration Appeal (L) No.154 of 2016 in Misc.Application No.1009 of 2015 in OMP No.101009 of 2015 along with Civil Application No.7 of 2016
Anoop V. Mohta, G.S. Kulkarni
Mr.Janak Dwarkadas Sr.Counsel a/r Mr.D.J.Kakalia a/w Mr.Paresh Patkar, Mr.Tushad Kakalia i/b Mulla & Mulla Craigie Blunt & Caroe for Appellants; Mr.Ravi Kadam Sr.Counsel a/w Mr.Samit Shukla, Mr.Sandeep Sharma, Mr.Nirav Shah, Mr.Nilesh Tated Ms.Nishal Mittal, Mr.Nausher Kohli, Mr.Pethe Mr.Munaf Virjee i/b Pethe & Co for Respondents
Reliance Infrastructure Ltd and P.S.Toll Road Pvt.Ltd
M/s Roadway Solution (I) Pvt.Ltd
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Nature of Litigation
Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 against an ex-parte ad-interim order passed under Section 9 of the Act restraining invocation of bank guarantees.
Remedy Sought
The appellant sought setting aside of the ex-parte ad-interim order dated 1st January 2016 passed by the District Judge-II, Pune, which restrained the appellant from invoking four performance bank guarantees.
Filing Reason
The respondent filed a Section 9 application on apprehension of invocation of bank guarantees by the appellant under a construction contract.
Previous Decisions
The learned District Judge-II, Pune, passed an ex-parte ad-interim order on 1st January 2016 in Misc.Application No.1009 of 2015 in OMP No.101009 of 2015, restraining the appellant from invoking the bank guarantees.
Issues
Whether the ex-parte ad-interim order restraining invocation of bank guarantees was justified without hearing the appellant and without recording reasons for dispensing with notice.
Whether the case fell within the exceptions to the rule that bank guarantees are independent contracts, such as fraud or irretrievable injustice.
Submissions/Arguments
The appellant argued that the ex-parte order was passed without hearing them and without recording any satisfaction that the case fell within the exceptions to the rule that bank guarantees are independent contracts.
The respondent contended that there was an apprehension of invocation of bank guarantees and sought interim protection.
Ratio Decidendi
Ex-parte orders of injunction against invocation of bank guarantees should not be passed lightly and only in exceptional cases of fraud or irretrievable injustice. The court must record reasons for dispensing with notice and hear the opposite party before granting such interim relief.
Judgment Excerpts
The Appellant (Original Respondent) has filed this Appeal under section 37 of the Arbitration and Conciliation Act, 1996 (Amendment Act, 2005) (The Arbitration Act) thereby challenging an ex-parte order dated 1st January 2016 passed by the learned District Judge-II Pune, in Misc.Application No.1009 of 2015 in OMP No.101009 of 2015, filed under section 9 of the Arbitration Act by the respondent herein, for reliefs of injunction on apprehension of invocation of the contractual Bank Guarantees.
Procedural History
The respondent filed a Section 9 application on 1st January 2016 before the District Judge, Pune, seeking injunction against invocation of bank guarantees. The District Judge passed an ex-parte ad-interim order on the same day. The appellant filed an appeal under Section 37 of the Arbitration Act before the Bombay High Court, which was heard and disposed of on 7th January 2016.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 9, Section 37
