Jharkhand State Electricity Board vs Corporation Bank, ICICI Bank Limited and IVRCL Limited

Dhirubhai Naranbhai Patel, J.—The present appeals have been preferred against the order passed by the Sole Arbitrator dated 11th March, 2013, which is at Annexure-17 to the memo of the appeals, whereby, the major objection raised by the appellant is that the stay against encashment of the bank guarantees by the Arbitrator. The details of the bank guarantee are as under:

BG against Security Deposit amount Released:-

BG against Performance Bank Guarantee:-

BG against Mobilisation Advance:-

In pursuance of the aforesaid stay, the appellant and respondent nos. 1 and 2 are unable to encash the bank guarantees and the bank guarantees are going to be expired on 31st March, 2013. The total amount of the bank guarantees comes to Rs. 132,24,67,496/-.

It is submitted by learned counsel for the appellant that respondent no. 3 had entered into the contract with the appellant for execution of the contract and as per Clause 47 of the General Condition of Contract, whenever any dispute is raised the matter will go for conciliation before the Engineer-in-Chief and within 30 days the dispute will be appeared to be resolved by the Engineer-in-Chief. The 30 days'' period was not over and immediately a letter was written for appointment of an Arbitrator under Clause 48 thereof on 25th June, 2012 and 29th June, 2012, which are at Annexures 7 and 8 respectively to the memo of the appeals and an application u/s 9 of the Arbitration and Conciliation Act, 1996 was moved by respondent no. 3 on 31st August, 2012 before the Hon''ble Delhi High Court, thereafter, initially stay was granted by the Hon''ble Delhi High Court on 31st August, 2012 in Original Miscellaneous Petitions 791 of 2012, 792 of 2012 and 793 of 2012, thereafter, the appellant appeared before the Hon''ble Delhi High Court and filed their reply and raised several objections and after hearing both the parties, at length, the Hon''ble Delhi High Court has vacated the stay order vide order dated 8th March, 2013 and Original Miscellaneous Petitions 791 of 2012, 792 of 2012 and 793 of 2012 were withdrawn. This order is annexed at Annexure-9 series. Thus, it appears that opposite party no. 3 had unnecessarily preferred Original Miscellaneous Petitions 791 of 2012, 792 of 2012 and 793 of 2012 and they have avoided the encashment of the bank guarantees. The Court process has been misused by respondent no. 3. Ultimately, they have to withdraw their own Original Miscellaneous Petitions and it appears that respondent no. 3 is avoiding encashment of bank guarantees. Now, they are moving an application before the Sole Arbitrator. There is dispute raised by the appellant about the appointment of the Sole Arbitrator because in fact an Arbitrator should be nominated by each party to the dispute and these two Arbitrators will appoint as an umpire. Before these three Arbitrators, the dispute could have been proceeded. These objections have also been raised by the appellant before the so called Sole Arbitrator about his jurisdiction and authority to decide the dispute. This dispute was raised in the month of December 2012 and that application was dismissed without assigning any reason in the month of March 2013. One thing should be kept in mind that on 31st March, 2013, the bank guarantees are going to expire, which are worth Rs. 132,24,67,496/-. Too much time has been taken from 3rd December, 2012 to 10th March, 2013, as stated in paragraph 7 of the impugned order at Annexure-17.

So far as interim relief is concerned, it appears that there is prima facie case in favour of the appellant. Moreover, the appellant is the Jharkhand State Electricity Board, which is the "State" within the meaning of Article 12 of the Constitution of India, is being capable of returning this amount. Once the bank guarantees expire on 31st March, 2013, it will not be possible to recover the amount, which is at Rs. 132,24,67,496/- from respondent no. 3.

Learned counsel for the appellant has raised several objections against the conduct of the ICICI Bank, Begumpet (Commercial) Branch, Hyderabad. Looking at Annexure-18, it appears that on 9th March, 2013, this appellant had moved an application before the ICICI Bank, Begumpet (Commercial) Branch, Hyderabad for encashment of the bank guarantees, on the other hand the ICICI Bank has waited enough and on 11th March, 2013 they waited up to 04:28 p.m. It is submitted by learned counsel for the appellant that they have waited for the stay to be granted by the Arbitrator on 11th March, 2013 and in fact, the ICICI Bank was also anticipating the stay, though it was not granted. Ultimately, the stay was granted on 11th March, 2013. This behaviour of ICICI Bank, Begumpet (Commercial) Branch, Hyderabad is noticeable.

Similar is the behaviour of the Corporation Bank. This bank is also waited to favour respondent no. 3 and they had also not allowed encashment of the bank guarantees. With this bank, there are six bank guarantees worth Rs. 4394 Lakhs. This amount has also not been allowed for encashment by the Corporation Bank, Hyderguda Branch, Hyderabad.

In view of the aforesaid facts and also keeping in mind the decision rendered by the Hon''ble Supreme Court in the case of Hindustan Steel Works Construction Ltd. Vs. Tarapore and Co. and another, especially in paragraphs 14, 23 and 49, I hereby stay the operation, implementation and execution of an order passed by the Sole Arbitrator dated 11th March, 2013, which is at Annexure-17 and allow the appellant to encash the following bank guarantees:

BG against Security Deposit amount Released:-

BG against Performance Bank Guarantee:-

BG against Mobilisation Advance:-

The amount will be deposited in separate bank account with the nationalized bank and the amount shall not be withdrawn without permission of this Court and to this effect, the affidavit shall be filed by the Chairman of the Jharkhand State Electricity Board. The amount involved is sizeable. It is a public money and it is necessary to secure this public money.

Learned counsel for respondent no. 3 submitted that he is watching the proceeding, but, he has not filed any vakalatnama in this matter, but, he shall appear in the matter and shall file his vakalatnama, at the earliest. It is also submitted by learned counsel for respondent no. 3 that his clients will renew the bank guarantees and he shall also file reply, on or before the next date of hearing.

As the counsel Sri Alok Kumar has appeared for respondent no. 3 and he shall file his vakalatnama on or before the next date of hearing, he is waiving notice on behalf of respondent no. 3. Notice upon respondent nos. 1 and 2 to be served through ordinary process, for which, requisites etc. must be filed within 1st week of April 2013. Notice is made returnable on 12th April, 2013.