The Formation Of An Arbitral Tribunal Does Not Preclude A Party From Seeking Enforcement Of A Court Order Under Section 9: Calcutta High Court

CASE NAME:

RKD Niraj JV and Ors. vs Union of India and Ors.

CASE DATE:

23rd April, 2024

PARTIES:-

Petitioner: RKD Niraj JV

Respondent: The Union of India

BENCH/JUDGE:

Justice Sabyasachi Bhattacharya

IMPORTANT PROVISIONS:-

1. Section 9, Arbitration and Conciliation Act, 1996:-Provides for interim measures of protection by a court before or during arbitral proceedings.

2. Order XXXIX Rule 2A, Code of Civil Procedure:-Pertains to the enforcement of injunction orders.

SUBJECT:-

The case is about a disagreement over bank guarantees that were asserted following a contract termination. Despite a court injunction, one guarantee was invoked. The bank argued timely invocation before court order awareness. The lack of evidence led the court to dismiss the petition, rejecting claims of deliberate violation. Relief sought was denied, concluding the legal dispute.

OVERVIEW:-

The petitioners succeeded in a tender process and entered into a work agreement with respondent no. 2. Pursuant to the agreement, three bank guarantees were executed in favor of respondent no. 2 by the petitioners. A dispute arose, leading to the termination of the contract by respondent no. 2 on September 30, 2023. One of the bank guarantees was invoked and encashed by respondent no. 2, while two others remained to be encashed. The petitioners sought injunctions from the Commercial Court to prevent the invocation of the remaining bank guarantees, which was partially granted. Despite the court order, one of the remaining bank guarantees was invoked by respondent no. 4. The petitioners sought various reliefs, including remittance of the invoked amount and reversal of NPA classification, alleging a violation of the court order.

ISSUES RAISED BEFORE THE COURT:-

1. Whether the invocation of bank guarantees by respondent no. 4 constituted a deliberate violation of the Commercial Court’s order?
2. Whether the petitioners were entitled to any relief?
3. Whether the court had jurisdiction to enforce its order under Section 9 of the Arbitration and Conciliation Act, despite the constitution of the Arbitral Tribunal?
4.  Whether the petitioners had pursued all available legal remedies, such as seeking implementation of the Commercial Court’s order before the appropriate forum?

CONTENTIONS RAISED ON BEHALF OF THE PETITIONER:-

• The learned counsel for the petitioner, Mr. Soumya Majumdar, contended that respondent no. 4 had deliberately invoked the bank guarantee despite the Commercial Court’s injunction.
• They argued that the court retained jurisdiction to enforce its order under Section 9 of the Arbitration and Conciliation Act, even after the constitution of the Arbitral Tribunal.
• The petitioner asserted that they had pursued available legal remedies, such as seeking implementation of the Commercial Court’s order and thus, should have been entitled to relief.

CONTENTIONS RAISED ON BEHALF OF THE RESPONDENT:-

• The learned counsel for the Respondent, Mr. Dhiraj Tribedi, asserted that the bank guarantee had been invoked before they became aware of the Commercial Court’s injunction.
• They argued that the invocation was completed upon debiting the amount from the petitioner’s account, with subsequent actions being mere formalities.
• It was contended that there was insufficient evidence to conclude deliberate violation of the court order.
• The counsel disputed the court’s jurisdiction to enforce its order under Section 9 of the Arbitration and Conciliation Act, given the constitution of the Arbitral Tribunal.

ANALYSIS BY COURT:-

• The court noted that the Commercial Court’s order was communicated to respondent no. 4 after the bank guarantee had been invoked, as per the bank’s records.
• It recognized the respondent’s argument that invocation was completed upon debiting the amount, with subsequent actions being formalities.
• The court observed that there was insufficient evidence to conclusively establish deliberate violation of the court order by respondent no. 4.

JUDGMENT:-

After carefully evaluating the arguments presented by both parties, the court renders the following judgment. The petition brought forth by the petitioner is hereby dismissed. Insufficient evidence was presented to substantiate the petitioner’s claim of deliberate violation of the court order by respondent no. 4. Consequently, the relief sought by the petitioner, including remittance of the invoked amount and reversal of NPA classification, is denied. 

CONCLUSION:-

Addressing the jurisdictional issue under Section 9 of the Arbitration and Conciliation Act, the court finds no basis to reverse the invocation of the bank guarantee. Additionally, the respondent’s argument regarding the petitioner’s failure to exhaust all available legal remedies before seeking relief is noted and further supports the dismissal of the petition. 

In conclusion, the court finds in favor of the respondent, dismissing the petition and concluding the legal dispute.