Kerala High Court
Airports Authority Of India vs M/S.Lite Bite Foods Private Limted on 24 January, 2024
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE C. JAYACHANDRAN
WEDNESDAY, THE 24TH DAY OF JANUARY 2024 / 4TH MAGHA, 1945
OP(C) NO. 2612 OF 2023
AGAINST THE ORDER IN MCA 5/2021 OF COMMERCIAL COURT(SUB COURT),
MANJERI
PETITIONER/RESPONDENT:
AIRPORTS AUTHORITY OF INDIA,CALICUT INTERNATIONAL
AIRPORT KARIPPUR AMSOM & DESOM, KONDOTTY TALUK,
MALAPPURAM DISTRICT REPRESENTED BY THE AIRPORT
DIRECTOR, SHESHADRIVASAM SURESH, S/O.LAKSHMI NARAYANA
RAO, RESIDING AT AIRPORTS AUTHORITY OF INDIA,
RESIDENTIAL COLONY, CALICUT AIRPORT P.O, MALAPPURAM,
PIN - 676646
BY ADVS.
S.SUJIN
NITA.N.S.
KEERTHI M.
B.BILWIN
N.BHARAT
RESPONDENT/APPELLANT:
M/S.LITE BITE FOODS PRIVATE LIMTED
A-2/3, 4TH FLOOR, PUNJABI BHAVAN, 10, ROUSE AVENUE,
NEW DELHI - 110 002 ALSO AT: 317, UDYOG VIHAR PHASE
IV, GURUGRAM, HARYANA REPRESENTED BY ITS AUTHORIZED
REPRESENTATIVE NEERAV BHATNAGAR, PIN - 122016
ADV.SRI. P.MARTIN JOSE
THIS OP (CIVIL) HAVING COME UP FOR ADMISSION ON 24.01.2024,
ALONG WITH OP(C).2650/2023, THE COURT ON THE SAME DAY DELIVERED
THE FOLLOWING:
O.P.(C).Nos. 2612 & 2650 of 2023
2
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE C. JAYACHANDRAN
WEDNESDAY, THE 24TH DAY OF JANUARY 2024 / 4TH MAGHA, 1945
OP(C) NO. 2650 OF 2023
AGAINST THE ORDER IN I.A NO.2/2023 IN O.P(ARB) 1/2023 OF
COMMERCIAL COURT, MANJERI
PETITIONER/PETITIONER :
AIRPORTS AUTHORITY OF INDIA
CALICUT INTERNATIONAL AIRPORT KARIPPUR AMSOM &
DESOM, KONDOTTY TALUK, MALAPPURAM DISTRICT
REPRESENTED BY THE AIRPORT DIRECTOR
SHESHADRIVASAM SURESH, S/O.LAKSHMI NARAYANA RAO,
RESIDING AT AIRPORTS AUTHORITY OF INDIA,
RESIDENTIAL COLONY, CALICUT AIRPORT P.O,
MALAPPURAM, PIN - 676646
BY ADVS.
S.SUJIN
NITA.N.S.
T.N.GIRIJA
KEERTHI M.
RESPONDENT/RESPONDENT :
M/S.LITE BITE FOODS PRIVATE LIMTED
A-2/3, 4TH FLOOR, PUNJABI BHAVAN, 10, ROUSE
AVENUE, NEW DELHI - 110 002 ALSO AT: 317, UDYOG
VIHAR PHASE IV, GURUGRAM, HARYANA REPRESENTED BY
ITS AUTHORIZED REPRESENTATIIVE, NEERAV
BHARTNAGAR, PIN - 122016
ADV.SRI. P.MARTIN JOSE
THIS OP (CIVIL) HAVING COME UP FOR ADMISSION ON
24.01.2024, ALONG WITH OP(C).2612/2023, THE COURT ON THE
SAME DAY DELIVERED THE FOLLOWING:
O.P.(C).Nos. 2612 & 2650 of 2023
3
'C.R'
COMMON JUDGMENT
Dated this the 24th day of January, 2024 These two Original Petitions under Article 227 of the Constitution are intertwined and hence disposed of by this common judgment. The following questions surface for consideration in these Original Petitions:
1. Whether a party to a contract can invoke bank guarantee, after passing the Award, which found no default on the part of the party against whom bank guarantee is sought to be enforced, especially when the Award is not stayed under Section 36(3) of the Arbitration and Conciliation Act, 1996?
2. When an interim relief under Section 9 is refused by the Court considering a O.P.(C).Nos. 2612 & 2650 of 2023 4 petition under Section 34 of the Act, whether the High Court can interfere under Article 227 of the Constitution, especially in the absence of the four parameters culled out in Whirpool Corporation v. Registrar of Trademarks, Mumbai[(1998) 8 SCC 1]?
When the order impugned is not one which patently lacks inherent jurisdiction, whether the High Court can justifiably exercise its power of superintendence under Article 227? By the discussion to follow, this Court answers both the questions in the negative.
2. The petitioner herein is the Airports Authority of India ('the petitioner authority', for short) and the respondent is a private limited company ('the respondent company', for short). The Original Petition first above O.P.(C).Nos. 2612 & 2650 of 2023 5 referred to, stems from the order dated 09.11.2023 of the Commercial Court, Manjery, which declined the petitioner authority's application seeking to encash the bank guarantee in terms of the agreement embodying the business arrangement between the petitioner authority and respondent company. The Original Petition second above referred to, arise from an order dated 22.11.2023 of the same court, which declined the petitioner authority's interlocutory application, preferred in a petition under Section 34 of the Arbitration and Conciliation Act (the Act, for short), seeking to keep the bank guarantee alive, for a further period of six months.
3. Essential Facts:
The following list of events in the chronological order will unfurl the facts leading to the impugned orders.
O.P.(C).Nos. 2612 & 2650 of 2023 6 Sl. Date Event Remarks No.
1. 07.12.2017 Letter of Intent to Award the contract issued by the petitioner authority to the respondent company, accepting the bid of the ---
latter, to set up and operate food and beverages outlets at the Calicut International Airport.
2. 14.02.2018 The respondent company Ext.P8 in furnished bank guarantee O.P. No. for Rs.4,94,64,000/- 2612/2023.
3. 22.03.2018 An agreement was executed between the petitioner authority and the Ext.P1 in both the respondent company to set O.Ps.
up and operate food and
beverages outlets at
Calicut International
Airport.
4. 26.08.2019 The petitioner authority sought to invoke the bank guarantee alleging ---
violation of the contract by the respondent company.
5. 05.09.2019 The respondent company ---
filed O.P. (Arbitration) No.293/2019 in the Sub Court, Manjeri and obtained an ad-interim order of injunction restraining encashment of the bank guarantee by the O.P.(C).Nos. 2612 & 2650 of 2023 7 Sl. Date Event Remarks No. petitioner authority.
6. 06.01.2020 The above O.P. --- (Arbitration) No.293/2019
was dismissed.
7. 28.10.2020 Allowing Arbitration Request No.103/2019 preferred by the
---
respondent Company, the High Court appointed the Arbitrator.
8. 24.11.2020 Arbitration Appeal No. 1/2020 preferred by the respondent Company before the High Court,
---
challenging dismissal of
O.P.(Arbitration)
No.293/2019, was also
dismissed.
9. 15.01.2021 A Review Petition
preferred against
dismissal of Arbitration
---
Appeal No.1/2020 was also
dismissed by the High
Court.
10. 13.04.2021 S.L.P.(C) No.4355 - Ann.B
4356/2021, preferred by (erroneou- the respondent company, sly was disposed of, directing indexed as Ann.A) in the respondent company to argument avail the remedy under notes Sec.17 of the Act before submitted O.P.(C).Nos. 2612 & 2650 of 2023 8 Sl. Date Event Remarks No. the Arbitrator; and to by counsel enable the same, the for the petitioner authority was respondent directed not to encash the bank guarantee for a period of six weeks.
11. 30.07.2021 High Court permitted the Ann.A respondent company to (erroneou-
withdraw Arbitration sly Appeal No.1/2020 in the indexed as Ann.B) in light of the judgment of argument the Hon'ble Supreme Court notes in the S.L.P. afore submitted referred. by counsel for the respondent
12. 20.09.2021 I.A. No.1/2021 preferred Ann.C in by the respondent company argument under Sec.17 of the Act notes for an injunction submitted by counsel restraining encashment of for the bank guarantee was respondent dismissed by the Arbitrator.
13. 13.10.2021 The respondent company preferred M.C.A No.5/2021 before the Commercial Court, Manjeri, under Sec. ---
37 of the Act, challenging dismissal of I.A No.1/2021 by the Arbitrator and obtained an interim order restraining encashment of bank guarantee.
O.P.(C).Nos. 2612 & 2650 of 2023 9 Sl. Date Event Remarks No.
14. 28.08.2023 The Arbitrator passed Award allowing the claim of the respondent company Ext.P7 in O.P.(C)No. and dismissing the counter 2612/2023 claim of the petitioner authority.
15. 12.09.2023 The respondent company preferred I.A. No.15/2023 before the Commercial Ext. P2 in Court, seeking to dispose O.P.(C)No. of M.C.A. No.5/2021 in 2612/2023 terms of the Award and to return the bank guarantee.
16. 2023 The petitioner authority filed I.A. No.17/2023 claiming that the ---
petitioner be permitted to encash the bank guarantee.
17. 08.11.2023 The petitioner authority O.P.(Arb) filed O.P.(Arb) No.1/2023 No.1/2023:
under Sec.34 of the Act, Ext.P4 in challenging the Award. O.P.(C)No. 2612/2023 Along with the same, I.A. & Ext.P2 No.2/2023 was also in O.P. preferred to renew/keep (C)No. alive the bank guarantee. 2650/2023 I.A. No.2/2023:
Ext.P5 in O.P.(C)No. 2612/2023 & Ext.P3 O.P.(C).Nos. 2612 & 2650 of 2023 10 Sl. Date Event Remarks No. in O.P.(C) No. 2650/2023
18. 09.11.2023 M.C.A. No.5/2021, along with the cross objection of the petitioner authority, was dismissed as infructuous. The Commercial Court also found that the petitioner Ext.P6 in authority is not entitled O.P.(C)No. to encash the bank 2612/2023 guarantee and directed the & Ext.P5 same to be released to the in O.P. respondent company. (C)No. 2650/2023 Note: The instant O.P.(C) No.2612/2023 is preferred by the petitioner authority challenging the said order of the Sub Court, Manjeri.
19. 22.11.2023 The Sub Court, Manjeri, dismissed I.A. No.2/2023 in O.P. (Arbitration) Ext.P6 in O.P.(C)No. No.1/2023 finding that the 2650/2023 Award is not stayed as per Sec.36 (3) of the Act;
that no application under Sec.36 (3) is made by the petitioner authority and the respondent company cannot be directed to keep alive the bank guarantee against the findings rendered in the Arbitral O.P.(C).Nos. 2612 & 2650 of 2023 11 Sl. Date Event Remarks No. Award.
Note: The second Original Petition, O.P.(C) No. 2650 of 2023, is preferred by the petitioner authority challenging the above order of the Sub Court, Manjeri.
4. Heard Sri.N.Sugunapalan, learned Senior Counsel, instructed by Adv.S.Sujin, on behalf of the petitioner; and Sri.S.Sreekumar, learned Senior Counsel, instructed by Adv.P.Martin Jose, on behalf of the respondent.
5. Petitioner's contentions:
Arguments advanced in O.P.(C) No.2612/2023:
The main plank of contention of the learned Senior Counsel for the petitioner authority is with respect to the legal nature and character of a bank guarantee. It was contended that bank O.P.(C).Nos. 2612 & 2650 of 2023 12 guarantee is an independent contract between the Bank and the beneficiary and that the same is separate, distinct and independent of the main contract between the parties. Learned Senior counsel pointed out that the question of invocation of bank guarantee was not decided by the Arbitrator; and the same was left open to be decided in M.C.A. No.5/2021 by the Commercial Court. That being so, the Commercial Court committed a grave error in directing release of bank guarantee to the respondent company, simultaneous with dismissal of the M.C.A., without there being any discussion on the merits of the matter. The Commercial Court should not have placed sole reliance upon the findings in the Arbitral Award, which is the subject matter of challenge in O.P. (Arbitration) No.1/2023 under Sec.34 of the Act. The learned Senior counsel then contended that the rights and entitlement of the parties should have been O.P.(C).Nos. 2612 & 2650 of 2023 13 decided based on the state of affairs prevailing as on the date of application and therefore, dismissal of the interlocutory application to encash the bank guarantee, based on the findings in the subsequent Award, is flawed in law. As regards the challenge to the maintainability of the Original Petition under Article 227 of the Constitution of India, in view of the alternate remedy under Sec.37(3) of the Act, learned Senior counsel relied upon a judgment of the Hon'ble Supreme Court in I.T.I v. Seimens Public Communications Network Ltd. [(2002) 5 SCC 510], which, in turn, relied upon the land mark judgment of the Hon'ble Supreme Court in L. Chandrakumar v. Union of India [(1997) 3 SCC 261].
Arguments advanced in O.P.(C) No.2650/2023: Here again, learned Senior Counsel would challenge the approach of the learned Sub Judge in dismissing I.A.No.2/2023 by placing sole O.P.(C).Nos. 2612 & 2650 of 2023 14 reliance upon the findings in the Award. It was emphasised that the scope of the interlocutory application was only to renew/keep alive the bank guarantee, so that the subject matter can be preserved pending consideration of application under Section 34 of the Act. Dismissal of I.A.No.2/2023 is all the more bad in law, since the issue as to invocation of the bank guarantee was not adjudicated by the Arbitrator; instead, it was left open. As regards the respondent's contention that the remedy under Section 9 is an independent proceeding, wherefore, the same cannot be invoked by way of an interlocutory application in a petition under Section 34, learned Senior Counsel would contend that the same whittles down the scope of Section 9 of the Act, in which regard learned Senior Counsel relied upon the judgment of the Honourable Supreme Court in Essar House Private Limited v. Arcellor Mittal Nippon Steel India Limited [AIR O.P.(C).Nos. 2612 & 2650 of 2023 15 2022 SC 4294].
6. Respondent's contentions:
Refuting the above submissions, learned Senior Counsel for the respondent put forward the following arguments:
O.P.No.2612/2023:-
In respect of both the Original Petitions, the first point canvassed is with respect to the maintainability of the Original Petition. Learned Senior Counsel relied upon the judgment of the Hon'ble Supreme Court in (1). Deep Industries Limited v. Oil and Natural Gas Corporation [(2020) (15) SCC 706] (2). Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Others [1998 (8) SCC 1] and (3). Madhya Pradesh High Court Advocates Bar Association and Another v. Union of India and another [AIR 2022 SC 2713], to contend that, in the absence of infringement of a fundamental right; violation of O.P.(C).Nos. 2612 & 2650 of 2023 16 principles of natural justice; or when the order impugned is wholly without jurisdiction, or the vires of the statute is under challenge, an Original Petition under Article 227 of the Constitution, is not maintainable. The specific contentions raised with respect to O.P.No. 2612/2023 is that, the order impugned passed in M.C.A.No.5/2021 is an order under Section 37(2)
(b) of the Act, which refused an interim measure under Section 17 and the same can be challenged only by way of an appeal to the Hon'ble Supreme Court, as provided under Section 37(3) of the Act. The third point canvassed by the learned Senior Counsel is with respect to the scope of Section 17 of the Act. It was contended that, Section 17 contemplates only an interim measure and once the arbitral proceedings comes to an end, all interlocutory orders merge with the Award and orders passed under Section 17 will become infructuous. In other words, M.C.A. O.P.(C).Nos. 2612 & 2650 of 2023 17 No.5/2021 preferred under Section 37 of the Act has become infructuous, since the arbitral proceedings culminated in an Award in favour of the respondent. The next point canvassed by the learned Senior Counsel is that, the bank guarantee has become unenforceable, since the contingency upon which the bank guarantee could be invoked does not and cannot exist, the Award passed being wholly in favour of the respondent herein, dismissing the claim of the petitioner.
Simultaneous with this point, learned Senior Counsel emphasised the fact that, the Award in question has not been stayed by the Court in the proceedings initiated under Section 34 of the Act. As a matter of fact, even an application for stay has not been preferred, wherefore, the question of encashment of bank guarantee after the Award does not arise at all. That being so, M.C.A.No.5/2021 could only have been dismissed, is the submission.
O.P.(C).Nos. 2612 & 2650 of 2023 18
7. O.P.No.2650/2023:-
Apart from the issue on maintainability, which is common to both the Original petitions, it was urged that, the relief sought for by way of an application under Section 9, in a petition under Section 34, to keep the bank guarantee alive, itself was misconceived. The only power available under Section 34 of the Act is to set aside an arbitral Award and there is no power for grant of any interim relief, except a stay of the impugned Award, as provided under Section 36(3) of the Act. It was pointed out in this context that, the remedy contemplated under Section 9 is an independent proceeding, which remedy can be invoked even after the arbitral Award has been passed. However, the same would not justify the instant facts, where an application, purportedly under Section 9, is filed as an interim one, in a petition under Section 34. Such interim O.P.(C).Nos. 2612 & 2650 of 2023 19 application in an application to set aside an arbitral Award under Section 34, is not maintainable. Learned Senior counsel further canvassed, based on Section 36 (2) of the Act, that an application under Section 34 will not make the Award inoperative or unenforceable, unless the operation of the Award is stayed by the Court under Section 36(3) of the Act. In the instant facts, there is not even an application preferred by the petitioner seeking stay of the arbitral Award, wherefore, the Award binds the parties as per Section 35 of the Act. Therefore, the question of keeping the bank guarantee alive does not surface, so long as the Award is not stayed. In answer to the contentions of the learned counsel for the petitioner - that an arbitral Award becomes enforceable only when the time prescribed for setting aside the arbitral Award expires, wherefore, the petitioner was not obligated to seek a stay of the Award, which was O.P.(C).Nos. 2612 & 2650 of 2023 20 otherwise not enforceable - learned Senior Counsel submits that the petitioner cannot claim the benefit of 90 days' time to seek stay of operation of the Award, once an application to set aside the Award under Section 34 had infact been filed. It was further contended that even the said period of 90 days expired on 28.11.2023, wherefore, the subject interim application to keep the bank guarantee alive, in the absence of a stay of arbitral Award cannot be granted at all. Relying upon the Canara Nidhi Limited (M/s) v. M Shashikala and others [2019 (9) SCC 462], learned Senior Counsel submitted that, proceedings under Section 34 of Act is summary in nature and the same is not in the nature of a regular suit. There cannot be any judicial intervention as prohibited by Section 5 of the Act, except where it is so provided in the Act. Finally, it was submitted that the High Court, in exercise of jurisdiction of Article 227 of the O.P.(C).Nos. 2612 & 2650 of 2023 21 Constitution, cannot delve into the merits of the case or the propriety of the Award.
8. ANALYSIS:-
Having heard the learned Senior Counsel appearing for the respective parties elaborately, this Court will first address the challenge in O.P.(C) No.2612/2023. Ext.P6 order of the Commercial Court, Manjeri rendered in M.C.A. No.5/2021 is under challenge in the said Original Petition. As already indicated, the subject matter of challenge in this Miscellaneous Civil Application was the refusal of an injunction sought for by the respondent company, seeking to restrain the petitioner authority from encashing the bank guarantee. Injunction was sought for as an interim measure before the Arbitral Tribunal under Section 17 of the Act. The petitioner authority preferred a cross objection to enable encashment of the bank guarantee. During the O.P.(C).Nos. 2612 & 2650 of 2023 22 pendency of the M.C.A, the Arbitral Award was passed on 28.08.2023. An interim order was holding sway pending the M.C.A. restraining the petitioner authority from encashing the bank guarantee. Pursuant to the Award, the respondent Company preferred an application to dispose of M.C.A. in accord with the Award, whereas the petitioner authority preferred I.A.No.17/2023 seeking a permission to encash the bank guarantee. The learned Sub Judge noticed that the Award found breach of agreement on the part of the petitioner authority, on which premise, the claim of the respondent Company was allowed and the counter claim of the petitioner authority was dismissed. It was also noticed that the award left open the issue with respect to invocation of bank guarantee, due to the pendency of M.C.A. No.5/2021. When no amount is due to the petitioner authority as per the Award, the learned Sub Judge found that there is no O.P.(C).Nos. 2612 & 2650 of 2023 23 justification in the petitioner's request to encash the bank guarantee. Accordingly, the appeal, as also, the cross objection were dismissed as infructuous and the Sub Court directed release of the bank guarantee in favour of the respondent Company herein.
9. A copy of the agreement between the petitioner authority and the respondent Company is produced as Ext.P1 in both the O.Ps. Article 7 of the agreement deals with the Security Deposit, as per which, the selected bidder has to deposit a bank guarantee equivalent to the amounts specified therein with the petitioner authority in the first phase. Clause 7.3 speaks of a further deposit to be made in the second phase. Clause 7.7 deals with appropriation of Security Deposit, wherein it is contemplated that the petitioner authority shall without prejudice to its other rights and remedies under O.P.(C).Nos. 2612 & 2650 of 2023 24 the agreement or as per law, be entitled to appropriate the relevant amounts from Security Deposit as damages on the event of the respondent Company committing default, which default is seen expressed in clause 7.7 as "Concessionaire Event of Default".
10. It could thus be seen that the essential event which enables the petitioner authority to invoke the bank guarantee is a default on the part of the respondent Company. It is true that to invoke a bank guarantee, the pendency of a dispute/litigation is not necessary. It is also settled that the bank guarantee is essentially a contract between the Bank and the beneficiary, which is independent and distinct from the main contract between the parties. To invoke the bank guarantee, it requires no adjudication or arrival of a finding that the respondent Company had committed breach of the agreement and, therefore, O.P.(C).Nos. 2612 & 2650 of 2023 25 in default. It is only a matter of satisfaction of the petitioner authority that there is a default on the part of the respondent Company, which entails loss to the petitioner authority. Nor does the Bank has a say in the matter to refuse encashment of bank guarantee, except in the two situations namely, a fraud in obtaining the bank guarantee and in a case, where very serious and irreparable prejudice/injury will be caused to the contracting party, who offered the bank guarantee. [See in this regard (1). Vinitec Electronics Private Limited v. HCL Infosystems Limited. [(2008) 1 SCC 544]; (2). U.P.State Sugar Corporation v. M/s.Surnac International Ltd. [(1997) 1 SCC 568]; and (3). Hindustan Construction Co. Ltd. v. State of Bihar & Ors. [(1999) 8 SCC 436]]. In view of the above settled position, the petitioner authority could have invoked the bank guarantee and got encashed the amount, even before the dispute precipitated and O.P.(C).Nos. 2612 & 2650 of 2023 26 culminated in litigation. Even during the course of litigation, the petitioner authority could have impressed upon the courts concerned to vacate the interim orders, preventing invocation of the bank guarantee.
11. However, there will be a paradigm shift to the situation, once an Award is passed, finding that there is absolutely no default on the part of the respondent Company and that it was the petitioner authority, who committed default and breached the agreement, thereby nullifying the very essential pre-requisite to invoke the bank guarantee. When we say that the contract of bank guarantee is independent and distinct from the main contract between the parties and that it is not essential to establish default/breach on the part of the party, who offered the bank guarantee, it cannot be understood in law that bank guarantee can be invoked at the whims and O.P.(C).Nos. 2612 & 2650 of 2023 27 fancy of the party to whom it was offered, in an arbitrary manner. Rather, it is not a matter of pure and absolute discretion, even in the absence of factual and circumstantial support as regards default on the part of the other party. It may be true that the Bank, which offered the guarantee on behalf of its customer, cannot have any power or authority in stock to oppose the bank guarantee being invoked. However, when the matter is before the court, in the form of an injunction sought for by one party to restrain the other from invoking the bank guarantee, the situation is different. The considerations of prima facie case, balance of convenience, irreparable injury etc., may have to be gone into, based on the facts and circumstances, consistent with the legal position as regards invocation of the bank guarantee. In the instant case, we have crossed that stage; and the litigation has culminated in an Arbitral Award, which categorically arrived at O.P.(C).Nos. 2612 & 2650 of 2023 28 a finding that breach is committed by the petitioner authority, thus implying that there is no default, whatsoever, on the part of the respondent Company.
12. It is in the above referred state of affairs that M.C.A.No.5/2021 was brought up for consideration before the learned Sub Judge. As rightly found by the learned Sub Judge, the Award was in force as on the date of consideration of the above said Miscellaneous Civil Case and hence, that court could have only disposed of the M.C.A. in terms of the Award, for reasons more than one. Firstly, there exists no material suggesting default on the part of the respondent Company, so as to permit invocation of the bank guarantee. The Award in fact indicates vice versa. Secondly, the order under challenge before the learned Sub Judge in the M.C.A was in respect of an interim measure contemplated under O.P.(C).Nos. 2612 & 2650 of 2023 29 Section 17 of the Act, which cannot have any life or survival, once the arbitration proceedings culminates in an Award.
13. This Court also does not find merit in the contention made by the learned senior counsel for the petitioner, based on the principle that the act of the court shall not prejudice anybody. This principle is sought to be pressed into service on the premise that the petitioner was prevented from invoking the bank guarantee only because of the interim order of injunction restraining the petitioner from doing so. The right of the parties are liable to be decided as on the date of application of M.C.A No.5 /2021 and not based on a subsequent award passed in the arbitration proceedings, is the submission made by the learned senior counsel. This court cannot entertain the said submission. Primarily, this court is of the opinion that, if the petitioner O.P.(C).Nos. 2612 & 2650 of 2023 30 had a right to invoke the bank guarantee even before the commencement of the arbitration proceedings, or after the commencement of the arbitration proceedings, effective steps ought to have been taken by the petitioner to get the injunction restraining the same vacated. The same having not been done, the petitioner authority cannot now blame the court, for its inability to invoke the bank guarantee. This court also cannot find fault with the Sub Court, Manjeri in taking note of the subsequent event of passing of award, which declined the entire claim of the petitioner and accepted the respondent's claim. Again, it is important to notice that the M.C.A arose from a petition under Section 17 of the Act, which has relevance only during the pendency of the arbitration proceedings and once the proceedings had culminated in an award, the significance of the order under challenge in M.C.A No.5/2021 pale into insignificance.
O.P.(C).Nos. 2612 & 2650 of 2023 31
14. Ratiocinating as above, this Court finds no reason to interfere with the well considered order of the learned Sub Judge in M.C.A.No.5/2021, with the result, the challenge in O.P.(C) No.2612/2023 fails and the same will stand dismissed.
15. O.P.No.2650/2023:-
Coming to the above captioned Original Petition, the first and foremost issue to be addressed is with respect to the maintainability of I.A.No.2/2023 in the O.P.(Arb)No.1/2023 seeking to renew/keep alive the bank guarantee. Learned Senior Counsel for the respondent contended that such an interlocutory application is not contemplated by the relief under Section 34 of the Arbitration Act, whereas the said proposition is disputed by the learned Senior Counsel for the petitioner. According to the petitioner, the O.P.(C).Nos. 2612 & 2650 of 2023 32 petitioner has 90 days time to seek a stay of the impugned award and therefore, to pursue an independent remedy under Section 9 of the Act, the petitioner has 90 days time. It is during the interregnum period that the relief is sought for by virtue of the subject interim application to keep alive the bank guarantee, as otherwise, the amount offered as bank guarantee is liable to be withdrawn by the respondent company, especially when there is an enabling order in M.C.A.No.5/2021. Such an event may frustrate the very purpose of O.P.(Arb)No.1/2023, in case the same is ultimately decided in favour of the petitioner, is the submission made by the learned Senior counsel.
16. Having considered the rival contentions, this Court is of the opinion that the subject interlocutory application preferred in O.P.(Arb)No.1/2023 is not maintainable. O.P.(C).Nos. 2612 & 2650 of 2023 33 A salutary aspect which requires to be taken note of is that the Arbitration and Conciliation Act, 1996, contemplates a special remedy which is different, independent and distinct from the ordinary civil remedy, the purpose being expeditious settlement of disputes, especially of a commercial nature. The second important aspect to be noted is that the remedy under Section 34 is neither that of an appeal, nor of a review. It is a provision where the aggrieved person can seek to set aside an arbitral award on certain specified grounds. Coupled with said aspect, it is worthwhile to notice that remedy under Section 9 is available before, during and after the arbitral proceedings. There is no dispute that the remedy under Section 9 is of an interim nature. Therefore, when a specific provision caters to needs of an interim character, invocation of the remedy of filing an interlocutory application in a petition under O.P.(C).Nos. 2612 & 2650 of 2023 34 Section 34 is not envisaged. It may not be proper to import the ordinary principles of civil procedure into a challenge under Section 34, to find that an interim application is always maintainable in a main petition.
17. In this regard, this Court also takes stock of Section 5 of the Act, which defines the extent of judicial intervention in respect of matters provided for under the Act. Section 5 starts with a non-obstante clause and interdicts the intervention by a judicial authority, except where it is so provided by the Act. The interdiction contained in Section 5 is also a pointer which leads to the proposition that judicial intervention by virtue of an interim application filed in a proceeding under Section 34 of the Act cannot have legal sanction, inasmuch as the same is not so provided in Section 34. Even a stay of the impugned arbitral O.P.(C).Nos. 2612 & 2650 of 2023 35 award, pending consideration of an application under Section 34, is not contemplated in Section 34 of the Act; instead it is provided under Section 36(3), which is all the more a reason for this Court not to read into Section 34, a power for grant of an interim relief. In this regard, this Court may profitably refer to the dictum of the Honourable Supreme Court in Canara Nidhi Limited (supra), which frowned upon an application under Section 151 of C.P.C to adduce evidence in support of the grounds canvassed under Section 34 of the Act, holding that the proceeding under Section 34 is not an appeal, but summary in nature.
18. This Court also finds that the scope of interference under Article 227 of the Constitution of India, in the factual scenario as obtaining in this case, is also very limited. The legal position has been succinctly stated by a O.P.(C).Nos. 2612 & 2650 of 2023 36 three Judges Bench of the Hon'ble Supreme Court in Deep Industries Limited v. Oil and Natural Gas Corporation Limited and another [(2020) 15 SCC 706]. In that decision, the Hon'ble Supreme Court, of course, held that the constitutional provision of Article 227 remains untouched by the non-obstante clause in Section 5 of the Act. However, the Hon'ble Supreme Court cautioned that, while interfering under Article 227, the High Court should be extremely circumspect, taking into account the statutory policy of the Act and that interference shall be restricted to orders which patently lacks inherent jurisdiction. There cannot be any quarrel on the proposition canvassed by the learned Senior Counsel for the petitioner, based on the Constitution Bench decision of the Honourable Supreme Court in L.Chandra Kumar v. Union of India and Others [(1997) 3 SCC 261], as regards the High Court's power of superintendence over O.P.(C).Nos. 2612 & 2650 of 2023 37 the Tribunals. The question is one of propriety in exercise of the discretion, especially in the absence of the four parameters culled out in paragraph no.15 of Whirlpool Corporation v. Registrar of Trade Marks, Mumbai [(1998) 8 SCC 1] This Court is therefore of the opinion that an interference under Article 227 is not warranted as against the order of the Sub Court, Manjeri, dated 22.11.2023, dismissing I.A. No.2/2023.
19. This Court is also impelled to consider the issue, on facts as well. As emphatically contended for by the learned Senior counsel for the respondent and as taken stock of and relied upon by the learned Sub Judge, a stay of the impugned award has neither been sought for, nor obtained under Section 36(3) of the Act, by the petitioner herein. By virtue of the provision under Section 36(2), mere filing of an application to set aside the arbitral award under O.P.(C).Nos. 2612 & 2650 of 2023 38 Section 34 will not render the award unenforceable, unless its operation has been stayed in terms of Section 36(3). It could, thus, be seen that the award remained enforceable, when the matter was considered by the learned Sub Judge and it continues to be so, even now. This Court cannot endorse the submission made by the learned Senior counsel for the petitioner that the petitioner had three months' time to challenge an arbitral award as per Section 34(3) of the Act, until which time the award cannot be enforced, going by Section 36(1) of the Act. According to the learned Senior counsel, the petitioner had time till 28.11.2023, which is the date of expiry of three months' period afore referred; and since the award cannot be enforced until such time, the petitioner was under no legal obligation to obtain a stay of operation of the award. In other words, at the time when the learned Sub Judge considered the interlocutory O.P.(C).Nos. 2612 & 2650 of 2023 39 application to keep alive the bank guarantee, the award remained unenforceable, since the period of three months had not expired, wherefore, absence of a stay of the award should not have been taken stock of and relied upon by the learned Sub Judge to refuse the relief, is the submission made by the learned Senior counsel. As already indicated, this Court cannot countenance the said argument. It is true, that Section 34(3) stipulates a period of three moths from the date of receipt of the arbitral award to prefer an application under Section 34. It is equally correct that the enforcement of the award is permissible only on the expiry of the said period of three months, as per Section 36(1), which would necessarily imply that the award is unenforceable till the expiry of such period. However, one cannot loose sight of the fact that the enforcement of the award is dealt with under Section 36 of the Act, wherein Sub-Section 2 of Section 36 specifically provides O.P.(C).Nos. 2612 & 2650 of 2023 40 that mere filing of an application to set aside the arbitral award, by itself, will not render the award unenforceable, unless the operation of the arbitral award is stayed by the court under Section 36(3). Thus, when the entire provisions of Section 36 is considered as a whole, harmoniously, the inescapable conclusion is that, once an application under Section 34 is filed, the applicant cannot take recourse to Section 36(1), to contend that the award cannot be enforced until the expiry of the period of three months stipulated in Section 34(3). The winner of the award is only under an obligation to wait till the expiry of the period prescribed for filing an application under Section 34 to seek enforcement of the award; and he cannot be under any fetters in law, in so far as enforcement of the award is concerned, once a petition is filed under Section 34 and a stay has not been obtained. An interpretation, to the contrary, O.P.(C).Nos. 2612 & 2650 of 2023 41 would affront the provisions of Section 36(2) and this Court is of the opinion that the Section 36(1) cannot be read independent of and divorced from the remaining provisions under Section 36.
20. In the light of the above discussion, this Court finds that it was the fundamental obligation of the petitioner to obtain a stay of operation of the award, before seeking any interim relief, even if the same was to preserve the subject matter of the proceeding under Section 34; and a failure in this regard would only keep the award alive, in which case, the finding that the respondent company was not at default would stand in the way, even in respect of a prayer to keep the bank guarantee alive. In other words, so long as the findings as regards default on the part of the petitioner authority, coupled with absence of any such default on the part of the respondent company, stare at the O.P.(C).Nos. 2612 & 2650 of 2023 42 petitioner authority, the relief contemplated in I.A. No.2/2023 could not have been granted. That being so, this Court cannot find fault with the impugned order of the learned Sub Judge.
In the light of the above discussion, O.P. No.2650/2023 will also stand dismissed.
Sd/-
C.JAYACHANDRAN, JUDGE TR/Skk/ww/vdv O.P.(C).Nos. 2612 & 2650 of 2023 43 APPENDIX OF OP(C) 2650/2023 PETITIONER EXHIBITS Exhibit P1 TRUE COPY OF THE AGREEMENT DATED 22/03/2018 EXECUTED BETWEEN THE PETITIONER AND RESPONDENT Exhibit P2 TRUE COPY OF THE ARBITRATION OP NO.1/2023 FILED UNDER SECTION 34 OF THE ARBITRATION CONCILIATION ACT Exhibit P3 TRUE COPY OF THE I.A 2/2023 IN ARBITRATION O.P NO.1/2023 ON THE FILES OF THE COMMERCIAL COURT, MANJERI Exhibit P4 TRUE COPY OF THE PRELIMINARY OBJECTION DATED 13/11/2023 IN I.A NO.2/2023 IN ARBITRATION O.P NO.1/2023 BEFORE THE COMMERCIAL COURT MANJERI Exhibit P5 TRUE COPY OF THE ORDER DATED 09/11/2023 IN MCA NO.5/2021 ON THE FILES OF COMMERCIAL COURT MANJERI Exhibit P6 TRUE COPY OF ORDER DATED 22/11/2023 IN I.A NO.2/2023 IN O.P.(ARB) NO.1/2023 O.P.(C).Nos. 2612 & 2650 of 2023 44 APPENDIX OF OP(C) 2612/2023 PETITIONER EXHIBITS Exhibit P1 TRUE COPY OF THE AGREEMENT DATED 22/03/2018 EXECUTED BETWEEN THE PETITIONER AND RESPONDENT Exhibit P2 TRUE COPY OF THE APPEAL MEMORANDUM IN MCA 5/2021 ON THE FILES OF COMMERCIAL COURT, MANJERI Exhibit P3 TRUE COPY OF THE COUNTER STATEMENT FILED BY THE PETITIONER HEREIN IN MCA 5/2021 ON THE FILES OF COMMERCIAL COURT, MANJERI Exhibit P4 TRUE COPY OF THE ARBITRATION OP NO.1/2023 FILED UNDER SECTION 34 OF THE ARBITRATION CONCILIATION ACT Exhibit P5 TRUE COPY OF THE I.A 2/2023 IN ARBITRATION O.P NO.1/2023 ON THE FILES OF THE COMMERCIAL COURT, MANJERI Exhibit P6 TRUE COPY OF THE ORDER DATED 09/11/2023 IN MCA NO.5/2021 ON THE FILES OF COMMERCIAL COURT MANJERI Exhibit P7 TRUE COPY OF THE ARBITRAL AWARD DATED 28/08/2023 IN A.R NO.103 OF 2019 OF THE ARBITRAL TRIBUNAL Exhibit P8 TRUE COPY OF THE BANK GUARANTEE NO.OGT0005180018525 DATED 14/02/2018 ISSUED BY INDUS IND BANK LTD TO THE AIRPORT DIRECTOR, AIRPORTS AUTHORITY OF INDIA Exhibit P9 TRUE COPY OF THE LETTER DATED 05/12/2023 ISSUED BY AUTHORIZED SIGNATORY INDUS IND BANK