Case Note & Summary
The petitioner, Felguera Gruas India Pvt. Ltd. (FGIPL), filed six arbitration petitions under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim injunction against the encashment of advance/down payment bank guarantees and performance bank guarantees furnished to the respondent, Tuticorin Coal Terminal Pvt. Ltd. (TCTPL), under six purchase orders. FGIPL is a company engaged in turnkey projects, and TCTPL is a concessionaire for developing a cargo berth at Tuticorin Port. The purchase orders were placed pursuant to letters of intent dated 10 July 2012 and 1 November 2012. FGIPL furnished bank guarantees as security for advance payments and performance. Disputes arose regarding the execution of the project, and TCTPL invoked the bank guarantees. FGIPL sought injunction on grounds of alleged fraud and irretrievable injustice. The court examined the principles governing injunctions against bank guarantees, noting that bank guarantees are independent contracts and courts should not interfere except in cases of clear fraud or special equity. The court found that FGIPL failed to establish any fraud or special equity that would cause irretrievable injustice. The balance of convenience was in favor of TCTPL, and no prima facie case was made out. Consequently, the court dismissed all six arbitration petitions.
Headnote
A) Arbitration - Interim Relief - Bank Guarantee - Injunction against encashment - Petitioner sought to restrain encashment of advance and performance bank guarantees furnished under purchase orders - Court held that bank guarantees are independent contracts and injunction can only be granted in cases of established fraud or special equity causing irretrievable injustice - No such case made out - Petition dismissed (Paras 1-20).
Issue of Consideration
Whether the petitioner is entitled to an interim injunction restraining the respondent from encashing the bank guarantees furnished under the purchase orders, pending arbitration.
Final Decision
All six arbitration petitions are dismissed.
Law Points
- Bank guarantees are independent contracts
- injunction against encashment only in fraud or special equity
- no irretrievable injustice
- balance of convenience
- prima facie case
Case Details
Arbitration Petition (L) No. 366 of 2016 with Arbitration Petition (L) No. 367 of 2016, Arbitration Petition (L) No. 368 of 2016, Arbitration Petition (L) No. 369 of 2016, Arbitration Petition (L) No. 370 of 2016, Arbitration Petition (L) No. 371 of 2016
Mr. Darius Khambatta, Senior Advocate, along with Mr. Zal Andhyarujina instructed by M/s. Res Legal for the Petitioner. Mr. S.U. Kamdar, Senior Advocate, along with Mr. Chirag Kamdar, Mr. Dharam Juman instructed by M/s. Argus Partners, for Respondent No.1.
Felguera Gruas India Pvt. Ltd.
Tuticorin Coal Terminal Pvt. Ltd., Barclays Bank PLC, Hong Kong & Shanghai Banking Corporation Limited
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Nature of Litigation
Arbitration petition seeking interim injunction against encashment of bank guarantees.
Remedy Sought
Petitioner sought interim injunction restraining Respondent No.1 from encashing the bank guarantees and restraining the bank respondents from making payment under the bank guarantees.
Filing Reason
Disputes arose between the parties regarding the execution of the project, and Respondent No.1 invoked the bank guarantees.
Issues
Whether the petitioner is entitled to an interim injunction restraining the respondent from encashing the bank guarantees furnished under the purchase orders, pending arbitration.
Submissions/Arguments
Petitioner argued that there was fraud and special equity warranting injunction.
Respondent argued that bank guarantees are independent contracts and no case for injunction was made out.
Ratio Decidendi
Bank guarantees are independent contracts; injunction against encashment can only be granted in cases of established fraud or special equity causing irretrievable injustice. The petitioner failed to establish such grounds.
Judgment Excerpts
The above Arbitration Petitions are filed by the Petitioner Felguera Gruas India Pvt. Ltd. under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim injunction against the encashment of the Advance/Down Payment Bank Guarantees and Performance Bank Guarantees.
Procedural History
Petitions filed under Section 9 of the Arbitration and Conciliation Act, 1996. Judgment reserved on 12th September 2017 and pronounced on 11th January 2018.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 9
