Calcutta High Court
Indra Sistemas Sa vs Kolkata Metro Rail Corporation Ltd on 12 August, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
OCD 15
ORDER SHEET
AP-COM/621/2025
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL DIVISION
INDRA SISTEMAS SA
VS
KOLKATA METRO RAIL CORPORATION LTD.
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 12th August, 2025.
Appearance:
Mr. Anirban Ray, Sr. Adv.
Mr. Dwaipayan Basu Mallick, Adv.
Mr. Prashant Pakkidey, Adv.
Mr. Manav Gill, Adv.
Mr. Subhankar Das, Adv.
...for the petitioner
Mr. Jishnu Chowdhury, Sr. Adv.
Ms. Sreya Basu Mallick, Adv.
Mr. Aritra Basu, Adv.
Mr. Ankit Dey,Adv.
Mr. A. Mandal, Adv.
...for the KMRCL
1. This is an application under Section 9 of the Arbitration and Conciliation
Act, 1996 (hereinafter referred to as the 'said Act'). The petitioner prays for
interim protection and injunction. The prayers are quoted below:
"(a) That pending the hearing and final disposal of the arbitration
proceedings, the Respondent be restrained from making any
recoveries towards the cost of the alleged BCC procured by it from
third parties from the payments due to the Petitioner under the
Contract or otherwise, in furtherance to its letter dated 28th
March, 2025 or otherwise;
(b) That pending the hearing and final disposal of the arbitration
proceedings, the Respondent be restrained from the invocation
and/or encashment of the 2(two) bank guarantees bearing no's
0999614FG0001387 (new no. 1731314FG1001387) and
1731321FG0000837 issued by the State Bank of India;
(c) That pending the hearing and final disposal of the arbitration
proceedings, the Respondent be directed to deposit with the
registry of this Hon'ble Court the sum of Rs.29,15,742/- deducted
by it from the payments due to Indra towards the cost of the BCC
alleged to be procured by it from third parties;
(d) Ex-parte ad-interim and interim orders in terms of the prayers
above;
(e) Costs to be paid by the respondent;
(f) Such further orders or directions be passed as this Hon'ble Court
may deem fit and proper."
2. The petitioner apprehends that the respondent will invoke the bank
guarantee which was furnished by the petitioner in the course of business
arising out of contract for work of design, manufacture, supply,
installation, testing and commissioning of Automatic Fare Collection
system (in short the AFC system project). The letter of acceptance was
issued to the petitioner by the respondent on January 8, 2014 and a
contract was entered into on September 10, 2014. The contract was also
amended by the parties in respect of the deliverables of the software by a
supplementary agreement dated February 13, 2019. The work was divided
into two phases, Phase-I and Phase-II. Phase-I comprised of the design for
depot, six elevated stations and two underground stations. The original
date of completion of Phase-I was August 30, 2016. Phase-II comprised of
four underground stations with BCC (Backup Control Centre). The original
completion date for the work of Phase-II was August 9, 2017. A General
Consultant (GC) being a consortium of five companies was engaged by the
respondent to manage the project. The petitioner furnished a Performance
Bank Guarantee (PBG) for a sum of Rs.2,25,02,742/-. Multiple extensions
were granted by the respondent and the petitioner contends to have
completed the work within the extended period. In the course of execution
of the Phase-II, disputes and differences cropped up.
3. According to the petitioner, the dispute arose out of the BCC which was to
be provided for Phase-II. Reliance has been placed on Appendix-2.1 of the
contract which contains the particulars and specifications of the
deliverables under BCC. The BCC was the backup operating system to
support the Operations Control Centre (OCC). After multiple rounds of
discussions, the petitioner made the final proposal for the BCC. Several
queries were raised by the GC, which the petitioner claims to have been
sufficiently clarified and explained. On October 13, 2023, the proposal for
the BCC was approved by the respondent as well as by the. Accordingly,
the petitioner proceeded to finalize the detailed design and requirement as
per the approved BCC. Thereafter, the Centre for Railway Information
Systems (CRIS) made certain observations. The petitioner informed the
CRIS that the approved BCC complied with the contractual requirements
and if any additional design or backup equipments were to be provided, the
same would require a variation order. Accordingly, the petitioner put on
hold the procurement of BCC equipments, until a final confirmation was
received from the respondent with regard to the petitioner's claim for a
variation order.
4. The petitioner submitted the variation proposal. The GC, by a letter dated
October 30, 2024, informed the petitioner that due to failure on the part of
the petitioner to supply the approved BCC in accordance with the
requirements of Appendix 2.1 of the contract, the respondent had decided
to procure the same from an outside agency at the risk and cost of the
petitioner. The letter stated that the work of procurement of the BCC
equipment along with related software were de-scoped from the petitioner's
contract. That was the starting point of the dispute.
5. Mr. Anirban Ray, learned senior advocate for the petitioner submits that a
contract of 2014, under no circumstances, could have required the same
nature of design and the BCC equipment that was being demanded by the
respondent. With the change in technology, the requirement had enhanced
and the respondent was actually asking the petitioner to provide design and
drawing as also BCC equipments of a superior quality. This was not in
conformity with the contract of 2014. Under such circumstances, the
petitioner was justified in asking for the variation order as the bid of the
petitioner did not factor in the expenses that would be incurred, to provide
the BCC, having regard to the nature and specifications specified by the
respondent at a later stage.
6. Moreover, the proposal of the BCC was approved by the respondent and the
respondent could not turn around from the said approval by contending
that, the approval was on a preliminary basis and was subject to
procurement of the equipments by the petitioner. The requirement to
provide design and equipments with improved and modern technology, was
in breach of the contract.
7. Mr. Ray submits that the respondent unilaterally started deducting the
costs of the equipments procured from a third party, form the R/A bills of
the petitioner. That was the second violation and breach of the contract.
Mr. Ray submits that the petitioner has a strong, prima facie, case for
protection against any further coercive action that the respondent might
take, to cover their alleged expenses. Appendix-2.1 has been placed in
great detail to show that the number of equipments required were limited
and the petitioner had undertaken to provide those. The petitioner was
obliged only to provide the design and BCC equipments, strictly in
conformity with Appendix 2.1.
8. Mr. Ray alleges that although several meetings were held between the
parties, the matter remained unresolved and the respondent continued to
deduct the amount from the R/A Bills. According to the calculation
provided by the respondent, a sum of Rs.2,11,64,590.84 was still due and
payable, out of the expenses incurred by the respondent for procurement of
equipments in relation to the AFC System Contract. It is apprehended that
at any moment the bank guarantee may be invoked. The only other route
for recovery of the alleged amount due, would be by invoking the PBG. The
retention money was also withheld.
9. Reliance has been placed on an order of this Court in Gallant Equipment
Private Limited Versus Rashmi Metaliks Ltd, passed in AP-
COM/277/2025, in support of the contention that this Court had held that
if a strong, prima facie case was made out, the party invoking the bank
guarantee could be directed to deposit the amount with the Court or secure
the amount in some form or another. Reliance has also been placed in the
matter of Essar House Private Limited versus Arcellor Mittal Nippon
Steel India Limited reported in (2022) 20 SCC 178, in support of the
prayer for interim injunction.
10. Reference was made to various letters exchanged between the parties in
support of the contention that the petitioner had fulfilled its obligation
under the contract, but the respondent had not only changed the terms
and conditions of the contract by rewriting the same, but has extracted
money from the petitioner from its legitimate dues. By a letter dated July 6,
2023, the petitioner was asked to clarify the proposals. By letter dated July
20, 2023, the petitioner gave the clarifications and pointed out
discrepancies. The issues were all sorted out and on 13th October, 2023,
the design was approved. The approval, as it stood, was full and final
acceptance of the design provided by the petitioner in respect of the BCC
under Phase-II. According to Mr. Ray, the facts that the approval had been
accorded and all the clarifications had been accepted without any further
query, would indicate that the subsequent claim of the respondent and the
act of deduction were nothing, but a pressure tactic to recover money
unjustly from the petitioner. This caused unjust enrichment to the
respondent. The final approval came from the respondent on October 13,
2023, but the respondent changed its demands thereafter.
11. Under such circumstances, Mr. Ray submits that a strong, prima facie
case, has been made out. The approval of October 13, 2023 was an
unconditional acceptance of the design of the petitioner. Although, the
estimated value of the contract for the BCC was approximately Rs.1.5
crores, the equipments were procured for more than Rs.3.90 crores from
outside, and illegally deducted from the petitioner's bills.
12. Mr. Jishnu Chowdhury, learned Senior Advocate for the respondent
submits that the contract was a Design Build Contract. It was not an item
rate contract or a BOQ Contract. The nature of the contract was such that,
the petitioner was to provide the entire drawing and design of the AFC
system project and the petitioner failed to do so. When the petitioner failed
to provide the equipments necessary for the BCC as per the requirement
under the contract read with the supplementary agreement, the respondent
had to procure the same from outside. Page 1127 of the application has
been relied upon in support of the contention that the proposal of the BCC
which was submitted by the petitioner, was approved with conditions. The
approval was subject to compliances. The conditions which were put
forward to the petitioner by the said letter were as follows:
" i ) The functionalities of BCC should be same as OCC as confirmed
by M/s. Indra's letter under reference (15)i.e.;
KMRC/AFC/1248-23_124 Dated 05.10.2023.
ii) There should not be any interruption of service at BCC in case
of failure at OCC.
iii) Web server and other items as indicated at Appendix 2.1
(revised) of the Contract, are to be delivered for BCC.
iv) Functional requirements of Central Computer (CC) as
specified in Clause 4.2 of Volume 4 are to be complied for
BCC.
v) All required licences for AFC systems are to be provided as
per Clause 2.3.2(o) of Volume 4.
vi) Data Storage capacity at BCC should be complied as per the
requirements of Clause 4.2.8 of Volume 4.
vii) Functional requirements as defined in the contract are to be
complied."
13. By letters dated December 26, 2023, June 12, 2024 and September 3,
2024, the petitioner contended that the meetings were held with the
technical team of CRIS, for review of various technical aspects. Some
additional works were required and the same should be channelized
through a variation order. Accordingly, the petitioner put on hold the
procurement of the BCC equipments until the respondent agreed to issue a
variation order. Similar contentions were raised in the subsequent letters
and according to the petitioner's estimate, Rs.5,73,91,000/- would be the
additional cost. Accordingly, by the letter dated September 3, 2024, the
petitioner requested the respondent to either approve the financial variation
proposal that was submitted earlier or allow the petitioner to deliver the
BCC as approved earlier without the additional equipments and systems.
By a letter dated October 30, 2024, the respondent informed the petitioner
that the respondent had decided to procure the BCC equipment from an
outside agency, by de-scoping the BCC equipment and the related software,
from the AFC contract. Thereafter, the parties negotiated and had several
meetings, but the dispute remained unresolved.
14. Heard the parties. It appears that there is a live dispute with regard to the
execution of the Phase-2 of the contract. Requirement of further BCC
equipments by the respondent, denial of the petitioner to provide such BCC
equipment without a variation order, allegation of such requirement being
beyond the scope of the contract and the claim for a variation order, are
some of the major disputes. The disputes aggravated with the deduction of
the costs incurred by the respondent in procuring the BCC equipments
from a third party, from the RA Bills of the petitioner. The disputes are
factual. The allegations of the petitioner and the action of the respondent in
deducting the bills of the petitioner, are to be decided by weighing evidence
and by interpreting the contract. The question, therefore, before this Court
is whether an order of interim injunction should be passed at this stage, on
the prayers made by the petitioner.
15. By the letter dated October 30, 2024, the respondent informed the
petitioner that the requirement for the BCC equipment and the related
software, were being de-scoped from the contract. Thus, the respondent
always understood that the said requirements were a part of the original
contract. The respondent also informed the petitioner that the equipments
would be procured from a third party agency and the payment to the said
third party would be recovered from the petitioner. On and from October
30, 2024, the petitioner was well aware of the stand of the respondent.
Even thereafter, the parties negotiated and the petitioner raised queries and
tried to clarify its position. Although the petitioner contradicted the
allegation of the respondent that, the petitioner failed to comply with the
terms of the contract, it does not appear to this Court that the petitioner
had taken any other step, by seeking any order against such deduction.
The act of de-scoping, indicates that, the respondent always treated the
procurement of the BCC equipments and the related software, as a
contractual obligation of the petitioner. RA Bills were raised and sums
were deducted from the RA Bills, on a regular basis even after October 30,
2024. The petitioner did not seek recourse to law, but continued to
negotiate. The deductions continued up to June, 2025. It is at this
juncture, when all the RA Bills had been paid after deduction that, the
petitioner feels threatened that the PBG will be invoked. The law is well-
settled that, there cannot be an injunction against invocation of a bank
guarantee unless equity demands, or the bank guarantee is a product of
fraud. Relevant decisions relied on are North Eastern Electric Power
Corporation Ltd. v. Patel Unity Joint Venture and Ors. reported in AIR
2022 Meghalaya 30 and Standard Chartered Bank v. Heavy
Engineering Corporation Ltd. and Anr. reported in (2020) 13 SCC 574.
16. In the matter of Standard Chartered Bank (supra), the relevant portion is
quoted below:-
"19. The law relating to invocation of bank guarantees with the
consistent line of precedents of this Court is well settled and a three-
Judge Bench of this Court in Ansal Engg. Projects Ltd. v. Tehri Hydro
Development Corpn. Ltd. [Ansal Engg. Projects Ltd. v. Tehri Hydro
Development Corpn. Ltd., (1996) 5 SCC 450] held thus: (SCC p. 454,
paras 4-5)
"4. It is settled law that bank guarantee is an independent and distinct
contract between the bank and the beneficiary and is not qualified by the
underlying transaction and the validity of the primary contract between
the person at whose instance the bank guarantee was given and the
beneficiary. Unless fraud or special equity exists, is pleaded and prima
facie established by strong evidence as a triable issue, the beneficiary
cannot be restrained from encashing the bank guarantee even if dispute
between the beneficiary and the person at whose instance the bank
guarantee was given by the bank, had arisen in performance of the
contract or execution of the works undertaken in furtherance thereof.
The bank unconditionally and irrevocably promised to pay, on demand,
the amount of liability undertaken in the guarantee without any demur
or dispute in terms of the bank guarantee. The object behind is to
inculcate respect for free flow of commerce and trade and faith in the
commercial banking transactions unhedged by pending disputes between
the beneficiary and the contractor.
5. ... The court exercising its power cannot interfere with enforcement of
bank guarantee/letters of credit except only in cases where fraud or
special equity is prima facie made out in the case as triable issue by
strong evidence so as to prevent irretrievable injustice to the parties."
(emphasis supplied)
20. A bank guarantee constitutes an independent contract.
In Hindustan Construction Co. Ltd. v. State of Bihar [Hindustan
Construction Co. Ltd. v. State of Bihar, (1999) 8 SCC 436] , a two-Judge
Bench of this Court formulated the condition upon which the invocation
of the bank guarantee depends in the following terms: (SCC p. 442, para
9)
"9. What is important, therefore, is that the bank guarantee should be
in unequivocal terms, unconditional and recite that the amount would be
paid without demur or objection and irrespective of any dispute that
might have cropped up or might have been pending between the
beneficiary under the bank guarantee or the person on whose behalf the
guarantee was furnished. The terms of the bank guarantee are, therefore,
extremely material. Since the bank guarantee represents an independent
contract between the bank and the beneficiary, both the parties would be
bound by the terms thereof. The invocation, therefore, will have to be in
accordance with the terms of the bank guarantee, or else, the invocation
itself would be bad."
21. The same principle was followed in SBI v. Mula Sahakari Sakhar
Karkhana Ltd. [SBI v. Mula Sahakari Sakhar Karkhana Ltd., (2006) 6
SCC 293] wherein a two-Judge Bench held thus: (SCC p. 301, paras 33-
34)
"33. It is beyond any cavil that a bank guarantee must be construed on
its own terms. It is considered to be a separate transaction.
34. If a construction, as was suggested by Mr Naphade, is to be
accepted, it would also be open to a banker to put forward a case that
absolute and unequivocal bank guarantee should be read as a
conditional one having regard to circumstances attending thereto. It is,
to our mind, impermissible in law."
22. Taking note of the exposition of law on the subject in Himadri
Chemicals Industries Ltd. v. Coal Tar Refining Co. [Himadri Chemicals
Industries Ltd. v. Coal Tar Refining Co., (2007) 8 SCC 110] , a two-Judge
Bench of this Court in Gujarat Maritime Board v. Larsen & Toubro
Infrastructure Development Projects Ltd. [Gujarat Maritime
Board v. Larsen & Toubro Infrastructure Development Projects Ltd.,
(2016) 10 SCC 46 : (2017) 1 SCC (Civ) 458] has laid down the principles
for grant or refusal for invocation of bank guarantee or a letter of credit.
The relevant paragraph is as under: (Himadri Chemicals Industries Ltd.
case [Himadri Chemicals Industries Ltd. v. Coal Tar Refining Co., (2007)
8 SCC 110] , SCC pp. 117-18, para 14)
"14. From the discussions made hereinabove relating to the principles
for grant or refusal to grant of injunction to restrain enforcement of a
bank guarantee or a letter of credit, we find that the following principles
should be noted in the matter of injunction to restrain the encashment of
a bank guarantee or a letter of credit:
(i) While dealing with an application for injunction in the course of
commercial dealings, and when an unconditional bank guarantee or
letter of credit is given or accepted, the beneficiary is entitled to realise
such a bank guarantee or a letter of credit in terms thereof irrespective of
any pending disputes relating to the terms of the contract.
(ii) The bank giving such guarantee is bound to honour it as per its
terms irrespective of any dispute raised by its customer.
(iii) The courts should be slow in granting an order of injunction to
restrain the realisation of a bank guarantee or a letter of credit.
(iv) Since a bank guarantee or a letter of credit is an independent and a
separate contract and is absolute in nature, the existence of any dispute
between the parties to the contract is not a ground for issuing an order of
injunction to restrain enforcement of bank guarantees or letters of credit.
(v) Fraud of an egregious nature which would vitiate the very foundation
of such a bank guarantee or letter of credit and the beneficiary seeks to
take advantage of the situation.
(vi) Allowing encashment of an unconditional bank guarantee or a letter
of credit would result in irretrievable harm or injustice to one of the
parties concerned."
23. The settled position in law that emerges from the precedents of this
Court is that the bank guarantee is an independent contract between
bank and the beneficiary and the bank is always obliged to honour its
guarantee as long as it is an unconditional and irrevocable one. The
dispute between the beneficiary and the party at whose instance the
bank has given the guarantee is immaterial and is of no consequence.
There are, however, exceptions to this rule when there is a clear case of
fraud, irretrievable injustice or special equities. The Court ordinarily
should not interfere with the invocation or encashment of the bank
guarantee so long as the invocation is in terms of the bank guarantee."
17. In the decision of North Eastern Electric Power (supra), the Mehgalaya
High Court held as follows:-
"20. There is no doubt that the case carried by the respondent to the
Commercial Court may not have been appropriately assessed. However,
the respondent has not proffered any appeal from the impugned orders.
Further, the grounds urged by the respondent here and the grounds
indicated in the petition under Section 9 of the said Act, even if accepted
at face value, would not constitute grounds for interfering with an
unconditional bank guarantee. In short, the best arguable case of the
respondent does not entitle the respondent to an injunction or any form
of interdiction in respect of the subject unconditional bank guarantees.
21. The orders impugned amount to the Commercial Court rewriting the
conditions of the bank guarantees or the contract between the parties,
which the Court had no jurisdiction to do. If an unconditional bank
guarantee permits the beneficiary to receive the payment thereunder on
its first demand and without any reference to or concurrence of the
person at whose behest the guarantee had been furnished, the Court
cannot introduce clauses to make the invocation conditional. Indeed, the
directions issued amount to the conversion of an unconditional bank
guarantee into a conditional one, which the Court plainly lacks the
authority to do.
22. The arguments of fait accompli that the appellate court has been
presented with by the respondent are of no relevance. Merely because no
claim has been made or there is no attempt at invocation of the bank
guarantees since the making of the impugned orders, it does not follow
that the orders have to be continued. The contention in such regard is
akin to an injunction being issued in respect of a residential property in
favour of a stranger merely because the owner of the house does not
intend to sell the house. When an injunction is sought against a bank
guarantee or a letter of credit or the like, serious considerations should
go into the adjudication; and only in the rare case may an injunction
issue. There is no doubt that there is an element of prejudice that the
respondent has suffered or is likely to suffer; but that is not a ground for
an unconditional bank guarantee to be interdicted or interfered with.
There is no case of fraud at the inception that has been made out. The
only case run by the respondent is that large sums of money due to it
from the appellant remain unpaid and, as such, it would be inequitable
for the appellant to be left free to invoke the bank guarantees. Even if it
is so, it is a completely irrelevant consideration in the matter of assessing
whether the nature of order sought in respect of the bank guarantees
ought to be passed.
23. For the aforesaid reasons, the judgments and orders dated June 21,
2019 are found to be without basis and completely flawed. No reason is
indicated therein to interfere with the invocation or encashment or
payment under any of the unconditional bank guarantees. The
Commercial Court, clearly, failed to take relevant considerations into
account and apply the law in such regard that it was obliged to."
18. In the decision of this Court in AP-COM/277/2025 (Gallant Equipment
Pvt. Ltd. v. Rashmi Metaliks Ltd.) (decided on 16th April 2025), the
factual background was discussed in detail and the Court had come to a
specific finding that it would be equitable to pass an order directing the
respondent therein to secure the amount, in the event the bank guarantee
was invoked. Such finding was based on the fact that, the respondent had
failed to take delivery of the goods which were approved by them. The bank
guarantee was kept alive by this process. The clauses of the contract
provided that the bank guarantee would be kept alive till the goods were
manufactured and ready for delivery. Under such circumstances, it was
directed that in the event the bank guarantee was invoked the money
should be deposited with the learned Registrar, Original Side. The
important point in the said decision was that, the respondent did not
inform the petitioner that there was either any defect in the goods or there
was any reason for not taking delivery thereof. Deliberately, the respondent
neglected to receive the goods and kept the bank guarantee alive.
19. The decision in Essar House Private Limited v. Arcellor Mittal Nippon
Steel India Limited reported in (2022) 20 SCC 178 was on the
proposition that the rigors of the Code of Civil Procedure would not be
applicable when the Court decides a prayer for injunction under Section 9
of the Arbitration and Conciliation Act, 1996. The Hon'ble Apex Court held
that while technicalities of the Code of Civil Procedure, should not prevent
the Court from securing the ends of justice if a strong, prima facie, case
was made out and the balance of convenience was in favour of granting an
interim relief. The Court should exercise such power and should not
withhold the relief on the mere technicality of absence of averments
incorporating grounds for attachment or security. The Hon'ble Apex Court
held that there should be a strong, prima facie, case and the balance of
convenience and inconvenience should be in favour of granting such
injunction. This Court finds that the proposal for de-scoping the work from
the contract of the petitioner was taken on October 30, 2024, when the
petitioner was adequately put on notice. The petitioner kept silent.
Thereafter, parties negotiated. Minutes of the meetings, which form part of
the petitioner's correspondence, clearly indicate that talks were going on
over the issue, but the respondent maintained its stand and continued with
the silence. The petitioner allowed the deductions from its RA Bills over a
period of 6-7 months.
20. Under such circumstances, this Court does not find that a strong case has
been made out for an interim injunction by which the Court should restrain
the respondent from invoking the bank guarantee, or deducting any money.
As has already been discussed above, the bank guarantee is a contract
between the respondent and the bank and the moment a Court exercises
jurisdiction by restraining enforcement of the same, the Court interferes
with the contract between the respondent and the bank. Under such
circumstances, this Court refuses injunction. Moreover, there is not a
single document on record which would show that the respondent has
threatened to invoke the PBG.
21. The petitioner shall proceed for constitution of an arbitral tribunal and
interim reliefs may be claimed before the learned arbitral Tribunal. At this
stage, if this Court probes deeper, it would amount to holding a mini trial,
which is not the true objective behind exercise of power under Section 9 of
the said Act of 1996. All observations are, prima facie, and the learned
arbitral Tribunal shall proceed in accordance with law.
22. AP-COM/621/2025 is, accordingly, disposed of.
(SHAMPA SARKAR, J.)
B.Pal/SP/SKumar
