Case Note & Summary
The appellant, Tata Projects Limited, was awarded a turnkey contract by respondent No.1, Hazel International FZE, for constructing a Chemical Storage Terminal in Sharjah, UAE. The contract was executed on 02/06/2014, and the appellant furnished a Performance Bank Guarantee issued by respondent Nos.2 and 3 (Bank of Baroda) on 11/08/2014. The work was to be completed within two years, but was not completed within that period, and an extension of two years was granted. The appellant claimed delays were due to reasons beyond its control and attributable to the respondent-employer. On 17/11/2018, respondent No.1 invoked the bank guarantee. The appellant filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking an injunction against the invocation. The learned Single Judge rejected the petition. The appellant appealed. The Division Bench held that the law regarding bank guarantees is well settled: courts should not interfere unless there is established fraud or irretrievable injustice. The appellant argued that Clause 4.2 of the contract required an amount due before invocation, but the court found that the bank guarantee is an independent contract and its invocation cannot be restrained based on contractual disputes. The appellant failed to establish fraud or irretrievable injustice. The appeal was dismissed.
Headnote
A) Arbitration - Interim Relief - Section 9 Arbitration and Conciliation Act, 1996 - Injunction against Bank Guarantee - The court considered whether an injunction could be granted against invocation of a performance bank guarantee. Held that unless there is established fraud or irretrievable injustice, the court should not interfere with the invocation of a bank guarantee. The appellant failed to establish either condition. (Paras 1-14) B) Contract Law - Interpretation of Clause 4.2 - Performance Bank Guarantee - The appellant argued that Clause 4.2 of the contract required an amount due before invocation. The court held that the bank guarantee is an independent contract and its invocation cannot be restrained based on contractual disputes unless fraud or irretrievable injustice is shown. (Paras 4-14)
Issue of Consideration
Whether the appellant is entitled to an injunction restraining the invocation of the Performance Bank Guarantee in the absence of established fraud or irretrievable injustice.
Final Decision
Appeal dismissed. The order of the learned Single Judge rejecting the Section 9 petition is upheld.
Law Points
- Bank Guarantee
- Injunction
- Fraud
- Irretrievable Injustice
- Section 9 Arbitration and Conciliation Act
- 1996
- Contract Interpretation
