Delhi High Court
Union Of India (Uoi) vs Dabhol Power Company on 5 May, 2004
Author: R.C. Chopra
Bench: R.C. Chopra
JUDGMENT R.C. Chopra, J.
1. The plaintiff has filed a suit for permanent injunction with the prayer to restrain the defendant from proceeding with the arbitral proceedings initiated in pursuance of the notices for arbitration dated 4th September, 2001 and 13th May, 2003 till the co. clusion and final outcome of the proceedings pending before the Bombay High Court and the Supreme Court of India. The present application under Order 39 Rules 1 and 2 read with Section 151 of the CPC, however, is for interim stay of the arbitral proceedigs before the Arbitral Tribunal at London, till the appeal filed by defendant before Supreme Court of India is disposed of.
2. The facts relevant for the disposal of this application, briefly stated, are that the defendant and Maharashtra State Electricity Board (MSEB) had entered into a Power Purchase Agreement (PPA) dated 8.12.1993. The Government of Maharashtra (GOM) execute a guarantee in favor of the defendant on 10th February, 1994 guaranteeing payments due to the defendant from MSEB. On 15.9.1994, a counter guarantee was executed by the Government of India (GOI), Plaintiff, also in favor of defendant. Clause (1) of the said counter guarantee stipulated that if and whenever MSEB fails to pay to the defendant company ''sum of money validly due'' under the agreement and the Government of Maharashtra also upon demand thereof by the defendant company fails to pay such amount to the defendant company, the plaintiff shall, within 30 days following the date of receiving from the defendant-company a demand for payment pay the sum to the company together with interest thereon.
3. Certain demands were raised by the defendant company which MSEB did not clear and as such, the defendant invoked guarantee of the Government of Maharashtra. MSEB raised counter claims in regard to its entitlement to rebate. The defendant company referred the disputes to an expert panel in terms of the PPA and thereafter invoked the counter guarantee furnished by the plaintiff claiming Rs.102 crores in view of non-receipt of payment from MSEB as well as the Government of Maharashtra. Since MSEB and Government of Maharashtra had failed to make payments, the defendant invoked arbitration clause also but MSEB raised a plea of misrepresentation and made counter claim. On 23.5.2001, it rescinded the PPA on grounds of fraud, misrepresentation etc. MSEB approached Maharashtra Electricity Regulatory Commission (MERC) pleading that MERC alone had jurisdiction in regard to disputes between the MSEB and the defendant and submitted that the arbitration agreement contained in Clause 20.3 of PPA was illegal.
4. In 29.5.2001, MERC held that it alone had jurisdiction to adjudicate the disputes between MSEB and the defendant-Company. This order was challenged by defendant company by way of filing a Writ petition in the Bombay High Court. On 26.6.2001, Bombay Hig Court dismissed defendant's petition holding that it was for MERC only to pronounce upon its jurisdiction and also ordered that pending final determination of disputes by MERC interim injunction dated 29.5.2001 passed by it shall remain in force. The defendant filed a Special Leave Petition in the Supreme Court of India challenging the High court's order. On 6.8.2001, the Supreme Court allowed SLP filed by the defendant holding that it was for the High Court to pronounce upon MERC's jurisdiction and sayed arbitral proceedings between MSEB and defendant-Company till the matter was decided by the High Court. On 5.3.2002, the High Court of Bombay dismissed defendant's petition holding that MERC alone had jurisdiction to determine the disputes between the MSEB and the defendant company. The appeal filed by the defendant company against the said order is pending in the Supreme Court. Interim orders have been issued by the Apex Court that till the time the appeal is decided the arbitral proceedings whit were commenced by the defendant company against MSEB shall not be proceeded with.
5. The prayer made in this application is to stay the Arbitral proceedings between plaintiff and defendant pending at London till the aforesaid appeal is disposed of by Supreme Court of India. In the course of final hearing, even an undertaking has been field on behalf of plaintiff that in case the appeal pending before the Supreme Court of India is dismissed, the plaintiff would submit to Arbitral Tribunal. It is also pointed out by learned Attorney General that the appeal before the Supreme Court of India is likely to be disposed of very soon.
6. The plaintiff invokes the inherent jurisdiction of this court to claim the injunction and asserts that the defendant has no right to raise any claim under the counter guarantee furnished by the plaintiff till the disputes between the MSEB and defendant are adjudicated upon and ''money validly due'' is determined in terms of Clause (1) of the guarantee and it can be said that the MSEB and Government of Maharashtra have failed to pay to the defendant company ''money validly due'' under the agreement. Additionally, it is also pleaded that in terms of the duration Clause 3(a) of the guarantee furnished by the plaintiff, the guarantee furnished by the plaintiff has already expired on account of the termination of the Power Purchase Agreement by MSEB. It is commended that the issues involved in this suit cannot be equated with questions ordinarily raised in regard to invocation of Bank Guarantees for the reason that in the case of Bank Guarantees issued by Banks, the controversies are between the party at whose instance the Bank Guarantee is issued and the party in whose favor the Bank Guarantee is issued but the Banker executing the Bank Guarantee is not at all concerned with disputes between them. However, in the present case facts are somewhat different a the dispute is being raised by the executor of the Guarantee itself in regard to its liability to pay. It is pleaded that the guarantee furnished by the plaintiff is not an unconditional guarantee under which a guarantor is obliged to pay the guarantee amount on demand, without any demur and without raising any question. It is pointed out that these very issues were raised before the Arbitral Tribunal also right from the beginning when the plaintiff filed its statement of defense but still the Arbitr l Tribunal is proceedings further without waiting for the adjudication of the disputes between the MSEB and the defendant company and without awaiting the outcome of the matters pending before the Division Bench of the Bombay High Court and the Supreme Court of India which approach is unfair, oppressive and unjust. The conduct of defendant in proceeding further with the arbitral proceedings is alleged to be malafide and an abuse of the process of law. It is submitted that the defendant, in spite of being unable to settle its disputes with MSEB and during the pendency of the judicial proceedings, is trying to rush through arbitral proceedings against plaintiff to obtain an award against the plaintiff which has no liability to pay unless the conditios in Clause (1) of the guarantee are squarely satisfied.
7. Learned Attorney General of India relies upon Halsbury on the law of injunction, Russel on arbitration, Queen's Bench decision in ''Kitts and Moore'' reported in 1891(1) QBD P-253 and the judgments of the Supreme Court of India in M/s. V.O. Tractoroexport, oscow Vs. M/s. Tarapore and Co. and Anr Oil and Natural Gas Commission Vs Western Company of North America to contend that this Court has inherent powers to restrain the defendant from proceeding further with arbitral proceedings if it is shown that the proceedings are oppressive and vexatious in nature and continuance of thereof would be an abuse of the process of law. Interference by this Court is prayed on equitable grounds to ensure fair play and complete justice between the parties.
8. Shri Kapil Sibal, Sr.Advocate, however, arguing on behalf of the defendant submits that the instant suit filed by the plaintiff is an abuse of the process of law to circumvent and scuttle the arbitral proceedings pending in United Kingdom. According to aim this suit is not maintainable even. It is pointed out that the Arbitration and Conciliation Act, 1996 is not applicable to the arbitral proceedings pending in United Kingdom for the reason that in the agreement, the parties had agreed that the procedral laws of the place where the arbitral proceedings are held would be applicable. It is submitted that even if the suit filed by the plaintiff is held maintainable the plaintiff has no prima facie case in its favor to show that the arbitral proceeding are oppressive or vexatious as the defendant is only trying to raise a dispute before the agreed Arbitral Tribunal in respect of the amount validly due to it from Maharashtra State Electricity Board which has not been paid either by MSEB or Government of Maharashtra in spite of demands. According to him in terms of Clause (1) of the counter guarantee furnished by the plaintiff (GOI), the defendant is entitled to claim the said amount from the plaintiff. It is submitted that the ''amount validly due'' a mentioned in Clause(1) does not mean that the amount has to be adjudicated upon by a Court or Award of the Arbitrator. He refers to para (7) of the counter guarantee which specifically says so. Learned counsel for the defendant submits that the defe dant, who has already supplied power to MSEB in terms of the Power Purchase Agreement, is entitled to the payments thereof and as such, the said amount is validly due from the plaintiff in terms of the counter guarantee.
9. He submits that the rescission of the PPA on 23rd May, 2001 may be good or bad but the defendant is entitled to invoke arbitration clause in terms of the counter guarantee furnished by the plaintiff which is an independent contract between the parties and not at all controlled or governed by the terms and conditions of P.P.A. Learned counsel argues that not only that the plaintiff has no prima facie case in its favor the balance of convenience also is not in its favor as the defendant, after the sale of the power to MSEB, is entitled to recover the amount due to it on the basis of the bills raised by it. Regarding irreparable loss/injury, it is submitted that the plaintiff is not going to suffer any irreparable loss/injury if the arbitral proceedings are continued and the plaintiff makes payments under the Award, for the reason that the defendant is already having a Receiver appointed by the Financial Institutions in India from whom the defendant had raised loans and as such, the payment made by plaintiff would not go into the pocket of the defendant company but to the Receiver only. It is contended that this Court has no good grounds to stay the arbitral proceedings between the parties in U.K. because the plaintiff can raise all these pleas b fore the Arbitral Tribunal also. It is submitted that the defendant has invoked the arbitration Clause in terms of the agreement between the parties and has done nothing to oppress the plaintiff whereas the plaintiff and its associates viz. MSEB and Government of Maharashtra are leaving no stone unturned to forestall the recovery of the amount due to the defendant regarding sale of power to MSEB.
10. Learned counsel for the defendant submits that a comparative reading of Clause (1) of the counter guarantee furnished by the plaintiff and Clause (1) of the guarantee furnished by Government of Maharashtra shows that the counter guarantee furnished by the plaintiff is absolutely unconditional, irrevocable and independent of any dispute or difference between the defendant and MSEB in regard to the payments guaranteed by the plaintiff. He submits that the guarantee furnished by Government of Maharashtra add not contain any stipulation that the amount due to the defendant company should be validly or legally recoverable or found due after adjudication and as such, the counter guarantee furnished by the plaintiff, which was guaranteeing the payment by Government of Maharashtra, could not be conditional or subject to any adjudication by Court, Arbitral Tribunal or any other authority. He refers to the conditions mentioned in Clause (1) of the counter guarantee furnished by the plaintiff and argues that ther was no condition that before invoking the guarantee in question, the amount claimed by the defendant was liable to be adjudicated upon and by referring to Clause (7) thereof points out that it was specifically agreed that for claiming the amount under this guarantee the amount was not liable to be adjudicated upon by any judgment or Award. It is submitted that in case the amount of each and every bill claimed by the DPC-defendant company was to be adjudicated upon, there was hardly any purpose in obtaining the Bank Guarantees from the Government of Maharashtra or the Government of India, i.e., plaintiff because after adjudication of claims, the amounts could be recovered otherwise also in execution proceedings. According to him, the whole purpose of the guarantees furnished by the Government of Maharashtra as well as Government of India was to ensure that defendant was not denied or kept waiting for the payments becoming due and leave it to enforce its claims by way of filing suits or legal proceedings. It is submitted that had the intention of the parties been to pay the amounts due to the defendant subject to the adjudication thereof by Courts or Arbitrators, it would have been so mentioned in guarantees and in that case, all the three parties would have entered into only one agreement with the defendant and would have been covered by only one umbrella Arbitration Clause. In that event, it would have been mentioned in the PPA also that the payments to the defendant on account of capacity paymen and energy payment were to be made only after adjudication thereof and the defendant could not enforce recovery thereof otherwise.
11. Learned Counsel has drawn the attention of this Court to various clauses of the counter guarantee to show that the payments under the guarantee could not be refused even on the plea of set off or counter claim and even recission of contract by MSEB could not result in frustration of the counter guarantee. He submits that Clauses (10 (b)), ((c) and (d)) of the counter guarantee reveal that this counter guarantee was in addition to the guarantee furnished by the Government of Maharashtra and it was uncondit onal and irrevocable to ensure that the payments to DPC by MSEB were within the time frame and expeditious so that DPC could function and run its power project under the PPA smoothly.
12. Learned counsel has further argued that the plaintiff has no right to question the jurisdiction of the Arbitral Tribunal inasmuch as it has conceded before the Arbitral Tribunal itself that Tribunal would decide the issues relating to its jurisdiction and 23.6.2003 was actually fixed for hearing the parties on the question of jurisdiction. He also points out that the payments regarding which defendant company has raised its claims before the Arbitral Tribunal are admitted by the plaintiff and for that reason only it is getting scary and trying to circumvent the arbitral proceedings and the Award that may be passed against it. Learned counsel expresses serious reservations in regard to the conduct of the plaintiff and its allies MSEB and Government of Maharashtra and submits that the defendant company is deeply aggrieved by their conduct in not making payments under PPA as well as guarantees and their attempts to thwart the defendant's efforts to proceed with arbitration proceedings against them under different and independent agreements. According to him, the plaintiff can raise its objections before the Arbitral Tribunal and even if Award is passed against it, it may challenge it in terms of Section 48 of the Arbitration and Conciliation Act, 1996
13. In support of his submissions, learned counsel for the defendant relies upon the judgments in ''Sumitomo Heavy Industries Vs. ONGC Ltd.'' , ''Bhatia International Vs. Bulk Trading'' , ''State Bank of India Vs. M/s Indexport Registered'' , ''Bank of Bihar Vs. Damodar Prasad'' , ''M.S.E.B., Bombay Vs. Official Liquidator'' , ''Ansal Engineering Projects Vs. Tehri Hydro'' , ''Dressar Rand S.A. Vs. Bindal Agro Chem'' reported in 1994 (1) Arb.L.R. P-507, ''Brawn Laboratories Vs. Fiftydent International'' , ''Hyundai Heavy Industries Co.Ltd. Vs. Papadopoulos and Others'' reported in [1980] 2 All ER P-29 and ''Union of India Vs. Popular Construction'' .
14. In Sumitomo Heavy Industries (supra) the Apex Court held that the curial law operates during the continuance of the arbitral proceedings and the Courts administering the curial law have the authority to entertain applications for the purpose of ensuring that the procedure adopted in the arbitral proceedings conforms to the requirements of the curial law. This judgment is relied upon by learned counsel for the defendant in support of his submission that since the arbitral proceedings have already commend in terms of the agreement between the parties all applications in relation to conduct of the arbitral proceedings have to be made before the Courts in England and in terms of Section 44 of the English Arbitration Agreement Act 1996 and Article 26 of Unnatural Arbitration Rules contained in Appendix III the arbitral tribunal may pass necessary orders in regard to the stay or adjournment of arbitral proceedings if the circumstances so warrant. Learned Counsel for the defendant points out that in Bhatia International case (supra) the question of curial law was not before the Court and adds that in para 29 of the judgment thereof the Supreme Court categorically held that there could be no application under Section 9 of the Arbitration and Conciliation Act 1996 for stay of the arbitral proceedings or to challenge the existence or the validity of the agreement or the jurisdiction of the arbitral Tribunal. It was held that all such challenges would have to be made before the arbitral Tribunal. Learned counsel for the defendant heavily relies upon the judgments in State Bank of India, Bank of Bihar Limited, Ansal Engineering Product and Maharashtra State Electricity Board (supra) to repel the plaintiff's arguments that without establishing its claim against Maharashtra State Electricity Board, the Principle debtor, the defendant company has no right to proceed against the guarantor i.e. the plaintiff. In these judgments the Courts have categorically held that a surety may be proceeded against without first proceeding against the principle debtor and it is not at all necessary for the creditor to sue the principle debtor before proceeding against the surety unless it is expressly stipulated in the Contract of Guarantee itself. In these judgments Section 128 of the Indian Contract Act has been discussed to hold that the liability of the surety is always co-extensive with that of the principle debtor unless it is otherwise provided in the contract and the obligation of the guarantor cannot be deferred until the creditor exhausts his remedies against the principle debtor. It has been held that a guarantee is an independent and separate contract between the parties and it does not depend upon the adjudication of disputes between the creditor and the principle debtor on whose behalf the guarantee is given to the beneficiary. In Union of India Vs. Popular Construction as well as Brawn Laboratories case (supra) it was held that the new arbitration Act 1996 has introduced a sea change in the law of arbitrat on and Section 5 thereof specifically prohibits Court intervention in arbitral proceedings.
15. Coming to the question as to whether a prima facie case is made out or not in favor of the plaintiff for ad-interim injunction as prayed this Court finds that prima facie neither Section 5 nor Section 45 of the Arbitration and Conciliation Act, 199 6 oust the jurisdiction of this Court from issuing an injunction if it finds that the arbitral proceedings against the plaintiff in a foreign country are oppressive and call for interference. The plaintiff is not asking this Court to stay the arbitral proceedings indefinitely but is merely praying that the defendant be restrained from prosecuting the arbitral proceedings till the time the Supreme Court of India returns its findings in regard to the jurisdiction of Maharashtra Electricity Regulation Commission. This submission is based on the ground that the counter guarantee furnished by the plaintiff is not a usual unconditional guarantee under which the guarantor is under an obligation to pay the demanded amount without any demur. Clause (1) of the guarantee in question specifically says that only the ''amount validly due'' can be demanded by defendant. A perusal of Clause (1) of the Counter Guarantee executed by the plaintiff prima facie shows that it is not an unconditional guarantee. It does not say that the guarantor will pay the amount demanded by the beneficiary without any demur or that the beneficiary/defendant would be the sole judge to determine the amount due from the plaintiff-guarantor. The Supreme Court in the case of Hindustan Construction Company Limited Vs. State of Bihar and others , while considering the question of grant of injunction against invocation of a Bank Guarantee, clearly held that in case a Bank Guarantee is found to be conditional, the beneficiary cannot have unfettered right to invoke such guarantee and Court can issue injunction against invocation of such a guarantee having regard to the terms thereof. In para 9 of the judgment, it was held that the terms of a Bank Guarantee are extremely material and since it is an independent contract between the guarantor and the beneficiary, both the parties are bound by the terms thereof. The invocation has to be in accordance with the terms or else the invocation itself would be bad. I
16. paras 13 and 14 of the same judgment, in spite of the use of expression ''agree unconditionally and irrevocably''to make payment on demand, the circumstances enumerated in the Bank Guarantee which qualified the liability of the Banker to pay the amount covered by the guarantee were taken note of and it was held that the Bank Guarantee could not be said to be unconditional or unequivocal in terms under which the defendant could have unfettered right to invoke the same and receive immediate payment there of from the Bank.
17. The contention of learned counsel for the defendant that Clauses (7) and (10(b)) of the Counter Guarantee clearly convey that payment was not subject to adjudication by any Court or Tribunal and any sum expressed to be payable under the guarantee had to be paid by the plaintiff-guarantor is not prima facie sustainable on account of the fact that Clause (1) of the Counter Guarantee is the soul of the Counter Guarantee and neither Clause (7) nor Clause (10(b)) can render Clause (1) otiose or meaningle is. No fixed sum was stipulated to be payable to the beneficiary under the Counter Guarantee and since Clause (1) says ''sum of money validly due'', the determination of the amount validly due to the defendant assumes great significance. Had the intention of the parties been to obtain or furnish an unconditional guarantee, under which any sum demanded by the defendant was payable by the guarantor without demur, it would have been specifically so stated instead of using words ''sum of money validly due''.
18. lause (7) of the Counter Guarantee which says that the defendant Company was not obliged to obtain any judgment or arbitral Award against MSEB or State of Maharashtra or to invoke any legal remedies which may be available to it under or in respect of the agreement or guarantee furnished by Government of Maharashtra before taking steps to enforce the Counter Guarantee itself stipulated that this Clause was subject to clause (1) of the Counter Guarantee which says ''sum of money validly due''. Therefore, this Court is prima facie unable to hold that the Counter Guarantee furnished by the plaintiff is unconditional and the plaintiff is under an obligation to make payment to the defendant without determination of the sum that is validly due to the defendant rom MSEB.
19. The contention of the plaintiff is that since the ''amount validly due'' cannot be determined without adjudication of the question of rescission of PPA by an appropriate forum, which is pending before the Supreme Court of India, it would be highly unjust, unfair and oppressive if the plaintiff is made to face the arbitral proceedings during the pendency of matter before the Supreme Court of India the decision of which would be binding not only upon the parties but upon arbitral tribunal also. This Court , therefore, prima facie is of the view that in case the arbitral proceedings between the parties at London continue during the pendency of matter before Supreme Court of India, there would be multiplicity of proceedings and there is a possibility of con licting findings also resulting in confusion. A situation may arise under which the principle obligor MSEB may not be held liable to pay any amount to defendant but the plaintiff, a guarantor, may be held liable to pay to the defendant the demanded amount on the basis of the Counter Guarantee which was not the intention of the parties. The use of words ''sum of money validly due'' in Clause (1) of the Counter Guarantee was quite meaningful. The law is well settled that in case of a valid recission, the contract between the parties becomes void ab initio and the avoidance relates back to the date of the making of the contract. Hence, the recission of PPA is an extremely crucial question the determination of which would affect the liability of not only the principle obligor MSEB but the guarantor-plaintiff also.
20. The plea of the defendant that counter guarantee was unconditional and the amount validly due as mentioned in Clause (1) thereof is the amount demanded by the defendant is not prima facie sustainable for the reason that had it been so the words uncondit opal, without demur as well as the amount as demanded by the defendant could have been used in the counter guarantee furnished by the plaintiff. The use of the words ''validly due'' was not without any purpose. A copy of the ''draft counter guarantee'' placed on record by the plaintiff shows that the defendant in fact was interested in getting an unconditional guarantee from the plaintiff but upon the insistence of the plaintiff the words ''validly due'' were introduced therein and as such the parties agreed and intended to burden the plaintiff under the counter guarantee only in respect of the amount which was validly due to the defendant from Maharashtra Electricity Board but was not being paid either by Maharashtra State Electricity Board, the principle obligor or Government of Maharashtra which was the first guarantor. Clauses (7) and (10B) cannot be read to make the words ''validly due'' used in Clause (I) of the counter guarantee superfluous and meaningless in as much as Clause (I) is the foundation of the counter guarantee. The words ''validly due'' were introduced in this clause after parties had fully deliberated upon the nature of this counter guarantee. Learned counsel for the defendant has also submitted that since the guarantee furnished by government of Maharashtra was unconditional and did not contain the words as used in Clause (1) of the Counter Guarantee furnished by the plaintiff it cannot be said that the Counter Guarantee was conditional but the primary guarantee furnished by the Government of Maharashtra was unconditional as the liability of the plaintiff was to arise on failure of the Government of Maharashtra to discharge its liability under its guarantee. This contention also is not prima facie tenable for the reason that this Court has to go by the terms and conditions of the Counter Guarantee furnished by the plaintiff and nothing else. For examining the liability of plaintiff under counter guarantee the Court cannot look into the terms of guarantee furnished by Government of Maharashtra.
21. The contention of learned Attorney General of India is that the plaintiff is facing a peculiar situation inasmuch as the principle obligor may or may not be held liable to pay anything to defendant but during the pendency of the litigation between the principle obligor and the defendant and without determination of ''the amount validly due'' to the defendant, the defendant is trying to hustle through the arbitral proceedings against the plaintiff and get an Award in its favor and thereafter proceed to recover the amount from it. It is argued that under these circumstances special equities demand that this Court of equity should temporarily defer the arbitral proceedings pending in London by way of injuncting the defendant to proceed further with it till the Supreme Court gives its decision on the question of the jurisdiction of MERC to decide the issue of rescission of PPA. Towards the end of concluding his arguments learned Attorney General has placed on record an undertaking of the plaintiff to a that in case the Supreme court holds that MERC has no power to go into the question of the recission of the PPA the plaintiff would submit to the jurisdiction of the arbitral tribunal at London.
22. He relies upon a decision of the Apex Court in V.O Tractor Moscow Vs.Tarapore and Co. in which the Apex Court had declared that an arbitral tribunal should not proceed with the arbitration side by side in rivalry or in competition with Court. In the said case the Supreme Court restrained a Russian firm, which had moved Arbitral Tribunal in Moscow, from getting the matter decided so long as the suit was pending in India and was not disposed of. The Courts in India like the courts in England are Courts of Law and Equity and as such whenever a Court finds that a party is indulging in some vexatious or oppressive proceedings and that too in a foreign country the Court can come to the rescue of the harassed party and pass appropriate orders to ensure fair play. There is substantial force in the contention of learned Attorney General of India that the defendant is trying to hustle through arbitral proceedings against the plaintiff who is not party to Power Purchase Agreement and the counter guarantee furnished by it is not unconditional nor the payment there under is to be made without any demur. The counter guarantee uses the words ''amount validly due'' and as such the question of the jurisdiction of MERC to decide the v lidity of the recission of the PPA assumes great significance.
23. Learned counsel for the defendant has argued that the pleas that are being raised by the plaintiff before this Court could be and have been raised before the arbitral Tribunal also. This submission has no force considering the fact that the highest Court of the land is likely to pronounce its decision shortly on a crucial question and as such, there is no justification for the arbitral Tribunal to hold a parallel inquiry into the same question and give a finding thereon which may be contrary to the view of the Supreme Court. This Court being a Court of equity has inherent powers to injunct a party from proceeding further with oppressive proceedings in a foreign country especially when temporary deferment thereof is not going to make much difference Rather all the parties would be benefitted by the pronouncement of the Supreme Court on a crucial question and the Arbitrators also would be guided on further course of action. In Hellsbury's Laws of England Volume 21 P-407 with regard to foreign proceedings, it is stated that the Court may restrain a person within its jurisdiction from instituting or prosecuting proceedings in a foreign Court whenever the circumstances of the case make such an interposition necessary or expedient. It is stated that this jurisdiction can be exercised whenever there is vexation or oppression. In ONGC Vs. Western Company of North America , the Apex Court passed an injunction restraining the respondent from proceeding further with an act on in the American Court on the ground that the proceedings were oppressive. The plea that the High Court had no jurisdiction to grant such a restraint order even if the proceedings in the foreign Court were oppressive was rejected and it was held that an a case where the action in the foreign Court is found to be oppressive, the Courts have inherent jurisdiction to grant a restraint order.
24. Sections 5 as well as 45 of the Arbitration and Conciliation Act, 1996, do not stand in the way of this Court while invoking inherent powers as this Court is not only a Court of law but a Court of equity also. Clause (13) of the Counter Guarantee which provides that the curial law applicable to the arbitral proceedings would be of U.K. only does not oust the jurisdiction of this court to exercise its inherent powers to prevent injustice, oppression and multiplicity of proceedings.
25. At this stage, this Court does not find it necessary to undertake an in-depth examination of various issues raised before this Court. These issues relate to the implications of rescission of PPA by MSEB; the liability of the guarantor if the principle obligors is not held liable to pay any amount etc. Suffice would it be to say that a guarantee in which the words ''validly due''are deliberately introduced cannot be called an unconditional guarantee under which the guarantor is obliged to pay the demanded amount without raising any objection, without any demur and without any reference to the disputes between the main parties.
26. Under the circumstances, this Court is of the considered view that a prima facie case is made out for restraining the defendant from proceedings further with the Arbitral proceedings in London till the decision of the Supreme Court on the question of the jurisdiction of MERC is pronounced. The proceedings in London in which the plaintiff is already raising this question appear to be oppressive for the reason that in spite of the pendency of the matter before the Apex Court, the arbitrators are trying to proceed further without Realizing that decision of the Apex Court would go to the root of the matter pending before them. In case no ad interim injunction is granted the plaintiff would suffer irreparable loss/injury inasmuch as not only that it will have to participate in the arbitral proceedings at London but may also suffer an Award in spite of the pendency of a crucial issue before Supreme Court. Balance of convenience also is more in favor of the temporary deferment of the arbitral proceedings rather than permitting these to go ahead which may ultimately turn out to be an exercise in futility at an exorbitant cost for the plaintiff. The mere fact that at the instance of Indian Financial Institutions, a Receiver has been appointed and the mone , if paid by the plaintiff would go to them only, is not sufficient to hold that the balance of convenience is more in favor of the defendant. As discussed hereinbefore, the plaintiff prima facie does not appear to be liable to pay any amount to the dependant under the counter guarantee unless the said amount is found validly due to the defendant from the principle obligor. Had the counter guarantee furnished by the plaintiff been unconditional and unequivocal, the pleas raised by the plaintiff would have fallen flat on the ground but in view of the conditions laid down in Clause (1) of the counter guarantee, balance of convenience is more in favor of the plaintiff to stay the arbitral proceedings at least till the question of the jurisdiction of MER to look into the recission of PPA is decided by the Supreme Court of India. Temporary deferment of the arbitral proceedings are not going to cause any irreparable loss/injury to the defendant or put it to undue inconvenience. Law must not countenance amassment of one party by another. Technicalities cannot stand in the way of justice and obstruct its flow to the needy. Courts are always under a duty to ensure fair play and equal justice between the parties and for this purpose, Section 151 of the Code of Civil Procedure can be safely invoked.
27. Accordingly, the plaintiff's application is allowed and till the pronouncement of the Supreme Court upon the judgment of Bombay High Court in regard to the jurisdiction of MERC the defendant is restrained from proceeding further with arbitral proceedins pending before Arbitral Tribunal at London.
28. I.A stands disposed of.
29. Nothing stated herein shall be taken as an expression of opinion on the merits of the suit pending before this Court.