Delhi High Court
Denel Proprietary Ltd. vs Uoi on 23 March, 2012
Author: A.K.Sikri
*IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 23rd March, 2012
+ FAO (OS) 240/2010
% DENEL PROPRIETARY LTD. ..... Appellant
Through: Mr. Chetan Sharma, Sr. Adv. with
Mr. Ravi Singhania & Mr. Vikas
Goel, Advs.
Versus
UOI ..... Respondent
Through: Mr. Mohan Parasaran, ASG with
Mr. B.V. Niren and Ms. Aaarthi
Rajan, Advs.
AND
+ FAO (OS) 241/2010
% DENEL PROPRIETARY LTD. ..... Appellant
Through: Mr. N.K. Kaul, Sr. Adv. with Mr.
Ravi Singhania, Mr. Vikas Goel and
Mr. Abhishek Kumar, Advs.
Versus
UOI ..... Respondent
Through: Mr. Mohan Parasaran, ASG with
Mr. B.V. Niren and Ms. Aaarthi
Rajan, Advs.
FAO Nos.240,241,242,420 & 423.10 Page 1 of 9
AND
+ FAO (OS) 242/2010
% DENEL PROPRIETARY LTD. ..... Appellant
Through: Mr. Chetan Sharma, Sr. Adv. with
Mr. Ravi Singhania & Mr. Vikas
Goel, Advs.
Versus
UOI ..... Respondent
Through: Mr. Mohan Parasaran, ASG with
Mr. B.V. Niren and Ms. Aaarthi
Rajan, Advs.
AND
+ FAO (OS) 420/2010
% DENEL LTD. ..... Appellant
Through: Mr. N.K. Kaul, Sr. Adv. with Mr.
Ravi Singhania, Mr. Vikas Goel and
Mr. Abhishek Kumar, Advs.
Versus
UOI ..... Respondent
Through: Mr. Mohan Parasaran, ASG with
Mr. B.V. Niren and Ms. Aaarthi
Rajan, Advs.
FAO Nos.240,241,242,420 & 423.10 Page 2 of 9
AND
+ FAO (OS) 423/2010
% DENEL LTD. ..... Appellant
Through: Mr. N.K. Kaul, Sr. Adv. with Mr.
Ravi Singhania, Mr. Vikas Goel and
Mr. Abhishek Kumar, Advs.
Versus
UOI ..... Respondent
Through: Mr. Mohan Parasaran, ASG with
Mr. B.V. Niren and Ms. Aaarthi
Rajan, Advs.
CORAM :-
HON'BLE THE ACTING CHIEF JUSTICE
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
JUDGMENT
A.K. SIKRI, ACTING CHIEF JUSTICE (ORAL)
1. These appeals impugn the common order dated 22.03.2010 of
dismissal of OMPs No.703/2009, 710/2009 and 711/2009 and two separate
orders both dated 12.04.2010 of dismissal of OMPs No.682/2009 and
702/2009. All the said OMPs were preferred by the appellants under
Section 9 of the Arbitration and Conciliation Act, 1996 seeking to restrain
the respondent from invoking the Bank Guarantees furnished at the
instance of the appellant to the respondent. While the order dated
22.03.2010 is a detailed one, the orders dated 12.04.2010 merely follow
the earlier order dated 22.03.2010.
2. Notices of these appeals were issued. The amount in respect of
some of the Bank Guarantees was got deposited in this Court. Some of the
Bank Guarantees are stated to be still alive. Mr. Mohan Parasaran, learned
ASG informs that an amount of `15,89,87,349/- against the following
Bank Guarantees already stands deposited in this Court and there is thus no
need for keeping them alive.
FAO (OS) No. Warranty Bank Guarantee No.
423/2010 Warranty Bank Guarantee No.OND/FGN/BG/03/57 dated
11.09.2003 valid upto 31.10.2008. Counter Guarantee
No.821020009480G issued by ABSA Bank, South Africa.
240/2010 Warranty Bank Guarantee No.OND/FGN/BG/03/54 dated
11.09.2003 issued by Bank of Baroda valid upto
25.08.2008. Counter Guarantee No.821020009417G
issued by ABSA Bank, South Africa.
420/2010 Warranty Bank Guarantee No.SBI/GUAR/97 dated
26.04.2004 valid upto 30.06.2005. Counter Guarantee
No.821020010566G issued by ABSA Bank, South Africa.
Warranty Bank Guarantee No.SBI/GUAR/64 dated
28.03.2002 valid upto 12.12.2007. Counter Guarantee
No.303110155G108407 issued by Standard Bank, South
Africa.
241/2010 Warranty Bank Guarantee No.SBI/GAUR/1460 dated
28.03.2002 valid upto 12.12.2007. Counter Guarantee
No.821020002584 issued by ABSA Bank, South Africa.
3. Mr. Mohan Parasaran, learned ASG further informs that the
following Bank Guarantees are still being kept alive
a) Performance Bank Guarantee No.OND/FGN/BG/
2003/56 dated 11.09.2003 valid upto 25.08.2008.
Counter Guarantee No.821020009435G issued by ABSA
Bank Ltd., South Africa.
b) Warranty Bank Guarantee (ii) No.SBI/GUAR/83 dated
07.10.2003 valid upto 30.10.2008. Counter Guarantee
No.821020009756G issued by ABSA Bank, South
Africa.
c) Warranty Bank Guarantee (iii) No.SBI/GUAR/91 dated
27.11.2003 valid upto 22.12.2008. Counter Guarantee
No.821020009989G issued by ABSA Bank, South
Africa.
d) Warranty Bank Guarantee (v) No.SBI/GUAR/101 dated
04.06.2004 valid upto 14.06.2009. Counter Guarantee
No.821020010799 issued by ABSA Bank, South Africa.
e) Warranty Bank Guarantee (viii) No.SBI/GUAR/124
dated 01.03.2005 valid upto 15.12.2009. Counter
Guarantee No.821020011743G issued by ABSA Bank,
South Africa.
f) Performance Bank Guarantee No.SBI/GUAR/132 dated
05.04.2005 valid upto 30.06.2007. Counter Guarantee
No.821020012029G issued by ABSA Bank."
4. After hearing the senior counsels for the appellants and the learned
ASG for considerable time, what we find is that the cause of action for
filing of the aforesaid OMPs under Section 9 of the Arbitration Act was the
letters of the respondent calling upon the appellant to renew the Bank
Guarantees, term whereof was about to expire, and invoking the same if
the same were not so renewed. It was thus not as if the respondent was
seeking to appropriate unto itself the amount of the said Bank Guarantees.
The respondent only wanted the Bank Guarantees to be kept alive. Mr.
Mohan Parasaran, learned ASG in the hearing before us also confirms that
the respondent UOI even now does not want to pocket the money of the
Bank Guarantees and is only desirous of having the Bank Guarantees kept
alive for satisfaction of its claims. It is contended that the appellant is a
foreign entity and in the event of the claims of the appellant being
ultimately upheld, unless the Bank Guarantees are alive, it will be difficult
and inconvenient for the respondent UOI to realize its claim.
5. In view of the aforesaid stand of the respondent UOI, we have
enquired from the senior counsels for the appellant, the purpose of the
present appeals. We have put to them that even if we are to find in their
favour, the said finding considering the nature of the proceedings will only
be a prima facie finding. It is not for this Court in Section 9 proceedings to
adjudicate the respective claims and contentions. Rather, restraint, even if
were to be granted to the encashment of the Bank Guarantees, cannot be
unconditional resulting in an irreversible situation. If the respondent was
to be restrained from invoking the Bank Guarantees and the Bank
Guarantees were to lapse, in the event of it being ultimately held that the
respondent was entitled to have the Bank Guarantees kept alive and / or to
encash the same, if the Bank Guarantees are not alive, the respondent
would be deprived of the benefits of the arbitral award if ultimately in its
favour. Even otherwise, ordinarily, the orders of restraint of encashment
of Bank Guarantees are conditional i.e. subject to the Bank Guarantees
being kept alive.
6. However in the present case all that the respondent requires is to
keep the Bank Guarantees alive.
7. That being the position, we do not consider the need to delve into
the factual and the legal controversy or to burden our order with the same.
The time so saved can be utilized for other deserving cases.
8. However since some of the Bank Guarantees have already been
invoked and the money thereof has already been received in this Court, the
only order with respect thereto can be of retaining the said amount in this
Court subject to orders of the Arbitral Tribunal. Similarly, the only order
qua the Bank Guarantees which are still alive is for the same to be kept
alive subject to the orders of the Arbitral Tribunal.
9. We are also told that the respondent has so far not preferred any
claims before the Arbitral Tribunal. The learned ASG has explained that
the Bank Guarantees were invoked / enchashed on the ground of the
appellant having violated the clause, in the Agreement of sale and supply
of arms and ammunition, prohibiting offering of gift, bribe, inducement
etc. He further informs that the said matter is still under investigation
before the CBI and the making of the claims by the respondent is held up
for the said reason.
10. We are of the opinion that the respondent cannot insist upon the
Bank Guarantee and the deposits being kept alive / retained indefinitely.
We therefore dispose of these appeals with the following directions:
(i) The Bank Guarantees qua which the respondent has already
filed the claims before the Arbitral Tribunal, we implore the
Arbitral Tribunal to make attempt to decide the dispute
between the parties as early as possible. Even if the final
adjudication is likely to take time, the Arbitral Tribunal can
always pass interim award deciding whether the appellant is
under any obligation to keep these Bank Guarantees alive or
not;
(ii) The Bank Guarantees qua which the respondent has not so far
preferred any claims, we grant six months time to the
respondent to prefer the claims. If no claims are preferred
within six months, the liability of the respondent to keep the
Bank Guarantees alive shall cease; if the amount of the Bank
Guarantees has already been received in this Court, the
appellant shall become entitle to refund thereof;
(iii) Else we direct that the amount deposited in this Court and the
Bank Guarantees which are still alive shall be kept alive by
the appellant, and shall be subject to the orders of the Arbitral
Tribunal;
(iv) The findings and observations of the learned Single Judge
being on a prima facie view of the matter shall have no
bearing on the deicison of the Arbitral Tribunal;
(v) To balance the equity, we further direct that in the event of the
appellant succeeding in the arbitral proceedings, the costs
hereafter of keeping the Bank Guarantees alive shall have to
be borne by the respondent.
The appeals are disposed of. No order as to costs.
ACTING CHIEF JUSTICE
RAJIV SAHAI ENDLAW, J
MARCH 23, 2012
'gsr'
