The Parties Dispute Over Money Can Resort To Arbitration – In The High Court At Calcutta

The two parties had resorted to the Arbitration and Conciliation Act, 1996, to find common ground for their dispute regarding constructing a 10 MW solar photovoltaic power plant at Mejia, Bankura District, West Bengal. Section 9 of the Arbitration and Conciliation Act, 1996 refers to Court-ordered interim measures. A party may apply to the Court before or during arbitral proceedings or at any time after the arbitral award is made but before it is enforced in line with section 36. RAVI KRISHAN KAPUR. J pronounced this Judgement on 20.01.2022 in BHARAT HEAVY ELECTRICALS LIMITED V. THE WEST BENGAL STATE ELECTRICITY DISTRIBUTION CO. LTD. & ANR.

Facts of the case – The parties’ disagreements stem from a notice soliciting an E-Tender to construct a 10 MW solar photovoltaic power plant at Mejia, Bankura District, West Bengal. The petitioner received a Letter of Award dated September 6, 2016, responding to the notification mentioned above (LOA). The LOA outlines all of the terms and conditions of the parties’ agreement. The petitioner was required to produce a performance bank guarantee in the amount of 10% of the contract’s total value, according to clause 13 of the LOA. An arbitration clause is also included in clause 32 of the LOA. As a result, there have been disagreements and arguments between the parties. Respondent no.1 invoked the assurance in a letter dated May 24, 2021. Before invoking the guarantee, respondent no.1 had given a show-cause notice on November 25, 2020, and eventually terminated the contract with a letter dated April 5, 2021. The petitioner is seeking an injunction preventing respondent no. 1 from claiming or receiving any money under guarantee.

The petitioner’s central point is that the demand for invocation of payment under guarantee must explicitly indicate the actual sums payable by the petitioner. As a result, it is subject to restraint because the request is not assurance. On behalf of the petitioner, it is further said that the petitioner owes and owes no money to respondent no.1. The petitioner further claims that while no monetary liability for an alleged breach has arisen in the facts of this case, the Court must assess whether the party complaining of breach is entitled to damages. On behalf of the petitioner, it is further claimed that no reference of any risk purchase or any losses or damages suffered by respondent no.1 is mentioned in the termination letter issued by respondent no.1. A guarantee, by its very name, is for contract performance. It is also argued on behalf of the petitioner. There are no grounds for invoking the security because the contract has been fulfilled, as evidenced by the Certificate of Commissioning.

The argument on behalf of the respondent is that there are no reasons for restricting the invocation of the guarantee. The petitioner is also accused of failing to fulfill its contractual obligations. It is further argued that there is no other basis for restraining the security other than a blatant allegation of fraud in the main application. It is further argued that numerous Courts, including the Hon’ble Supreme Court, have frequently said that the Court should typically refrain from meddling with bank guarantees.

Based on other precedent cases, the Learned Judge said that on the facts, the claimed decision is distinct. The legal propositions mentioned in the said rulings deal with violations of the parties’ primary, underlying, or matrix contract. For the reasons stated above, these difficulties are irrelevant at this point in the process. According to these procedures, the Judge deems the application without merit. In the case of the guarantee, there are no grounds for passing any order of restriction. As a result of the preceding, AP 242/2021 is dismissed. As a result, the temporary order of June 21, 2021, is immediately revoked.

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Reviewed by Rangasree

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