Calcutta High Court
M/S. Kse Electricals Private Limited vs The Project Director on 18 May, 2021
Author: Arindam Sinha
Bench: Arindam Sinha
AP No.230 of 2021
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
[Via Video Conference]
M/S. KSE ELECTRICALS PRIVATE LIMITED
-Versus-
THE PROJECT DIRECTOR, BANGLADESH RURAL
ELECTRIFICATION BOARD AND ANR.
BEFORE:
The Hon'ble JUSTICE ARINDAM SINHA
Date : 18th May, 2021.
Appearance:
Mr. Sabyasachi Chowdhury, Adv.
...for petitioner.
Mr. K.R.Thaker, Adv.
...for respondent no.2.
The Court : Mr. Chowdhury, learned advocate appears on behalf of petitioner in this arbitration petition for interim measure. He submits, performance guarantee issued at instance of his client was sought to be invoked by letter dated 5th May, 2021. Relevant text of the letter is reproduced below:
"With reference to the above, please be informed that the supplier has already submitted the invoice regarding 10% retention money of this contract, but the payment of 10% retention money is still unsettled. On the other hand, a large portion of materials have been found as damage & shortage and packing deviation is occurred against the above mentioned contract. Under this circumstance, we have requested them to extend the validity 2 of their submitted Performance Security mentioned in the above subject. But they failed to extend the said Performance Security till to date which will be expired on 23-05-2021. Now it is necessary to encash the said Performance Security against this contract. The original bank guarantee along with amendments is attached herewith.
Hence, you are requested to encash the said Performance Security (BG No.5633601283, Date: 05-11-2015, Amount:USD 83,505.00) in favour of Project Director, UREDS;DCSD project, Bangladesh Rural Electrification Board, Nikunja-2, Khilkhet, Dhaka-1229 against this contract within the validity period as on 23-05-2021."
He submits, this invocation came as consequence of his client's claim for 10% of retention money under the contract. So far as respondent no.1 is concerned, its position is that issue of retention money is unsettled. There was no claim on performance.
He refers to payment clause in the contract. He demonstrates advance payment constitutes 10%, delivery 80% and on acceptance, remaining 10%. He reiterates position taken by respondent no.1 is regarding settlement of retention amount of 10%. Thus the facts are, there has been delivery and acceptance. As such, invoking the bank guarantee in the circumstances is practice of fraud upon his client. He refers to the bank guarantee and submits, it is a performance guarantee. The invocation is not in terms. He prays for interim measure in terms of prayers (a) and (b) at this time.
Mr. Thaker, learned advocate appears on behalf of Citibank NA in conducting its operations at Kolkata. He draws attention to the bank guarantee 3 and demonstrates therefrom that the issuing bank is Citibank NA of Gulshan Avenue, Bangladesh. The guarantee states, it shall be governed and construed by the laws of People's Republic of Bangladesh. Without prejudice he submits further, neither the Kolkata operations nor Bangladesh operations of Citibank NA is party to the arbitration agreement. He relies on judgment of a Division Bench of this Court in Arch Hi-Rise(P)Ltd. versus Yatin Bhimani reported in (2006)4 CHN 204, paragraphs 4, 11 and 12. He emphasizes view taken was, a person not a party to the arbitration agreement cannot be subjected to the proceeding by petition made under section 9 of Arbitration and Conciliation Act, 1996. His last submission, the bank guarantee is a separate contract and not within four corners of the contract containing the arbitration agreement. No order can be made against either of the entities impleaded as respondent no.2.
Mr. Chowdhury responds to submit, the arbitration agreement in the contract renders the reference therefrom to be an international commercial arbitration. However, seat of arbitration has not been defined in the agreement. As such, this Court can receive, try and determine the arbitration petition. That has been view taken by a coordinate Bench (Arindam Mukherjee, J.) on order dated 7th May, 2021 in AP 229 of 2021 (same parties to the arbitration agreement). He submits further, amended section 9 confers wide power on Court to pass such other interim measure or protection as may appear to be just and convenient. He reiterates orders be made in terms of prayers (a) and
(b).
4
Respondent no.1 goes unrepresented. It is the other party in the contract bearing the arbitration agreement. Though submissions have been made regarding service effected, Court proceeds with this petition ex parte.
It is clear from the invocation letter read with aforesaid payment terms that the contract stands worked out across the stages of advance payment, delivery and acceptance, since demand for remaining 10% is said by respondent no.1 in its letter of invocation, to be unsettled. There stands disclosed in the petition, letter dated 28th April, 2021 addressed to respondent no.1, from which last two paragraphs are reproduced below:-
"We have been requesting since 2019 and expressed our concern about compliance from the Indian Bank. Indian Bank is pressurizing for the closure of this contract including release of bank guarantee. This is again we want to highlight during this period in last 18 months we have spent reasonable amount of money for the extension of bank guarantee.
Now, this is our sincere request please let us have a confirmation about balance 10% payment and guarantee release."
On query from Court Mr. Chowdhury submits, no reply was received but it is clear from the invocation letter that it was issued on admission of fact of his client having had already submitted invoice regarding 10% retention money of the contract.
Court is persuaded by the view taken by coordinate Bench in AP 229 of 2021 on order dated 7th May 2021, regarding maintainability of the arbitration petition. The facts and circumstances stated above convince this Court that it is just and convenient that interim measure of injunction 5 restraining respondent no.1 from encashing the bank guarantee, be issued. Said respondent is accordingly injuncted and the invocation letter dated 5th May, 2021, stayed. Petitioner may produce copy of this order before respondent no.2 in their seats at Kolkata and Dhaka.
Respondents will be at liberty to file affidavit-in-opposition within three weeks herefrom. Reply if any, a week thereafter. List after four weeks.
Petitioner will serve copies of this order and the application on respondent no.1 and file affidavit on adjourned date. Respondent no.1 is at liberty to apply for vacating the interim order before returnable date, if so advised.
(ARINDAM SINHA, J.) D.Ghosh / A/s.