Madras High Court
Vishnu Infra Pvt. Ltd vs Engineering Projects India Ltd on 6 October, 2025
Author: N.Anand Venkatesh
Bench: N.Anand Venkatesh
Original Application No.824 of 2025
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 06.10.2025
CORAM
THE HONOURABLE MR.JUSTICE N.ANAND VENKATESH
Original Application No.824 of 2025
Vishnu Infra Pvt. Ltd.,
represented by its Director,
Mr.MVS Krishnam Raju
Having registered office at:
H.No.6-3-1095 & 1096, Metro Palm,
Grove Apartment, Hyderabad,
Telengana - 50034. .... Applicant
Vs.
1.Engineering Projects India Ltd.
represented by its Director,
Ms.Akanksha Pare Kashiv
Having registered office at:
Core 3 Scope Complex 7
Institutional Area, Lodhi Road,
New Delhi - 110 003.
Also at:
Southern Regional Office,
3D, EC Chambers, 92, G.N.Chetty Road,
T.Nagar, Chennai - 600 017.
2.Union Bank of India
Besant Nagar Branch,
No.58, AV Church Road,
Chennai - 600 090. .... Respondents
PRAYER
1/14
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Original Application No.824 of 2025
Original Application filed under Order XIV Rule 8 of
O.S.Rules read with Section 9(1)(ii)(e) of the Arbitration and
Conciliation Act, 1996, praying to grant an order of interim injunction
restraining the first respondent, its men, agents and representatives from
encashing the Performance Bank Guarantee of Rs.2,89,50,000/- dated
31.01.2024 bearing No.52720IGL0002423 issued by the second
respondent as well as the Demand Draft for Rs.2,89,50,000/- furnished by
the applicant, until a competent Arbitral Tribunal is seized of the matter.
For Applicant : Mr.Rohan Rajasekaran
For Respondents : Mrs.Hema Srinivasan [R1]
*****
ORDER
This application has been filed under Section 9 of the
Arbitration and Conciliation Act, 1996 (for brevity 'the Act') for an order
of interim injunction restraining the first respondent from encashing the
Performance Bank Guarantee for a sum of Rs.2,89,50,000/- dated
31.01.2024 bearing No.52720IGL0002423 issued by the second
respondent as well as the demand draft for a sum of Rs.2,89,50,000/-
furnished by the applicant until the dispute is resolved by the Arbitral
Tribunal.
2. The facts of the case and the grounds raised by the applicant
was considered by this Court and an interim order was passed on
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Original Application No.824 of 2025
14.08.2025 and for proper appreciation, the same is extracted hereunder:
"This application has been filed under Section 9 of the
Arbitration and Conciliation Act, 1996, seeking for an order of
interim injunction to restrain the first respondent from encashing
the Performance Bank Guarantee for a sum of Rs.2,89,50,000/-
dated 31.01.2024 given by the applicant; and also for an order of
interim injunction to restrain the first respondent from encashing
the Demand Draft (DD) for a sum of Rs.2,89,50,000/- issued by
the second respondent bank.
2. The applicant was appointed as a sub-contractor by
the first respondent, who was awarded a contract by the
Railways. As per the terms and conditions of the sub-contract
awarded to the applicant, the applicant had executed a
Performance Bank Guarantee for a sum of Rs.2,89,50,000/- dated
31.01.2024 in favour of the first respondent. According to the
applicant, despite fulfilling their part of the contract as per the
terms and conditions of the contract agreement dated 05.02.2024,
the first respondent is now attempting to encash the Performance
Bank Guarantee in violation of the terms and conditions of the
contract. The applicant has also pleaded in the affidavit filed in
support of this application that if the Performance Bank
Guarantee is encashed, the applicant will be put to irreparable
loss/hardship and they have also pleaded that any attempt made
by the first respondent to encash the Performance Bank
Guarantee will amount to fraud.
3. Earlier, the very same applicant in respect of the
very same contract had approached this Court against the very
same respondents and this Court, vide its order dated 30.10.2024
passed in O.A.No.834 of 2024, restrained the first respondent
from engaging a third party. Thereafter, the applicant and the
first respondent reached an amicable settlement and the same was
recorded by the Arbitrator through the compromise arbitral award
dated 01.03.2025. However, according to the applicant, despite
the applicant's readiness and willingness to complete the contract
as per the terms and conditions of the contract agreement dated
05.02.2024, the first respondent is now once again attempting to
invoke the Performance Bank Guarantee. As per the terms and
conditions of the contract agreement dated 05.02.2024, the time
for completion of the contract by the applicant ends on
05.02.2027.
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Original Application No.824 of 2025
4. The applicant also claims that apart from the
Performance Bank Guarantee, which was given as security for
the due performance of the contract by the applicant, the first
respondent is also possessing a Demand Draft taken in their
favour for the same amount. Therefore, the applicant seeks for an
order of interim injunction not alone in respect of the
Performance Bank Guarantee but also in respect of the Demand
Draft taken for the very same amount. Insofar as the DD is
concerned, the question of granting interim injunction at the
exparte stage does not arise, as the same has been taken
voluntarily by the applicant in favour of the first respondent.
However, insofar as the prayer sought for in respect of
Performance Bank Guarantee is concerned, this Court is inclined
to grant an order of interim injunction as the applicant has made
adequate averments in the affidavit filed in support of this
application, which are supported by documents.
5. For the foregoing reasons, since the applicant has
made out a prima-facie case, and the balance of convenience and
irreparable loss/hardship have also been established by the
applicant, this Court is issuing the following directions:-
(a) There shall be an order of interim injunction
restraining the respondents from encashing the
Performance Bank Guarantee dated 31.01.2024 for a sum
of Rs.2,89,50,000/-.
(b) Insofar as the other relief in respect of the
DD for a sum of Rs.2,89,50,000/- is concerned, the said
relief cannot be granted by this Court at the exparte stage.
(c) Notice to the respondents through Court as
well as privately returnable by 18.09.2025."
3. Pursuant to the above order, notice was issued to the
respondents and the 1st respondent entered appearance and a counter
affidavit was also filed on behalf of the first respondent along with typed-
set of documents.
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Original Application No.824 of 2025
4. When the mater came up for hearing on 25.09.2025, this
Court after hearing both sides and after considering the counter affidavit
filed by the first respondent, passed the following order:
"Counter and typed set of papers have been filed on
the side of the 1st respondent. This Court also heard the learned
counsel for the applicant and the learned counsel appearing on
behalf of the 1st respondent.
2. It is seen that earlier there was a settlement
agreement between the applicant and the 1st respondent on
31.05.2024, whereby, the applicant was supposed to give an
additional bank guarantee of Rs.2crores, apart from the bank
guarantee of Rs.2.89cores which was available. The fresh bank
guarantee for a sum of Rs.2crores was supposed to replace the
existing bank guarantee of Rs.2.89crores. Insofar as the existing
bank guarantee of Rs.2.89crores, a demand draft has to be given
by the applicant and accordingly, the applicant has given the
demand draft.
3. The specific case of the 1st respondent is that even
after the settlement agreement, there has been absolutely no
progress on the side of the applicant and repeated letters have
been issued in this regard, starting from 11.04.2025 onwards.
Since there was no progress, ultimately, the termination notice
was issued by the 1st respondent on 13.08.2025.
4. The learned counsel for the 1st respondent submitted
that an unconditional bank guarantee has been issued by the
applicant and therefore, unless and otherwise the applicant is able
to bring this case within the parameters that are available for
injuncting the invocation of bank guarantee, the applicant cannot
sustain this application. That apart, the grounds that were raised
by the applicant, which were recorded in the earlier order by this
Court on 14.08.2025, are unsustainable.
5. Learned counsel for the applicant seeks for some
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Original Application No.824 of 2025
time to respond and to place the relevant documents in order to
establish before this Court that for those letters that were issued
on the side of the 1st respondent, the applicant had in fact
responded.
Post this case under the caption “part heard case” on
06.10.2025."
5. The application was taken up for hearing today and this
Court heard the learned counsel for applicant and the learned counsel
appearing on behalf of the first respondent.
6. The present application has been filed before this Court to
injunct the first respondent from invoking the Bank Guarantee. It is now
too well settled that Bank Guarantee is an independent contract between
the bank and the beneficiary, who is the first respondent in this case.
Therefore, irrespective of the dispute between the beneficiary at whose
instance the Bank has given the guarantee, the Bank is obliged to honour
the guarantee. There are only two exceptions available for this rule. The
first exception is where there is a clear fraud, for which the Bank has
notice. The second exception is where there are special equities in favour
of granting interim injunction such as irretrievable injury or injustice that
would be faced by a party, if such an order of injunction is not granted.
Thus, the Court has a very limited jurisdiction to injunct invocation of a
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Original Application No.824 of 2025
Bank Guarantee.
7. Keeping the above in mind, the facts of the present case has
to be dealt with.
8. When the ex parte interim order was granted by this Court on
14.08.2025, three facts loomed large in the mind of the Court. The first
fact is regarding earlier order passed in O.A.No.834 of 2024, which
ultimately resulted in a settlement between the parties. This order
pertained to a completely different contract and it has got nothing to do
with the present dispute between the parties. The present dispute has
arisen after the settlement agreement entered between the first respondent
and the applicant on 31.05.2024. Therefore, this fact will have no bearing
in the present application.
9. The second fact that was considered by this Court is the
agreement dated 05.02.2024 where the applicant is said to have expressed
the readiness and willingness to complete the contract and that the tenure
of the agreement itself ends only on 05.02.2027. There is a factual
mistake insofar the completion of the tenure. The tenure actually comes
to an end on 07.02.2026 and not on 05.02.2027. The issue is as to
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Original Application No.824 of 2025
whether the applicant was really showing the readiness and willingness as
was recorded by this Court in the interim order.
10. The third fact that was considered by this Court is regarding
the Bank Guarantee given as security and the demand draft given by the
applicant for the very same amount of Bank Guarantee, which was also
retained by the first respondent.
11. Insofar as the above fact is concerned, after the settlement
agreement, a fresh Bank Guarantee for a sum of Rs.2 crores was
supposed to replace the existing Bank Guarantee of Rs.2.89 crores.
Insofar as the existing Bank Guarantee of Rs.2.89 crores, the demand
draft was given by the applicant and this demand draft is available with
the first respondent. This clarity was not there when the interim order was
passed by this Court on 14.08.2025.
12. In the order dated 25.09.2025, this Court took into
consideration the various communications made by the first respondent
starting from 11.04.2025 complaining about the lack of progress in the
work undertaken by the applicant. In reply to the same, additional typed-
set of documents has been filed on the side of the applicant today. On
going through the same, it is seen that the applicant has issued various
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Original Application No.824 of 2025
letters during the period 2024-2025. Curiously, for all those
communications received from the first respondent highlighting lack of
progress for the work done and also the inadequate labour strength, there
is only one document available in the additional typed-set of documents
which is a letter dated 20.06.2025, which was purportedly given for the
letter of the first respondent dated 18.06.2025. For none of the other
communications, there was even a response on the side of the applicant.
13. Apart from the above, learned counsel for the applicant
submitted that the labour license itself was obtained by the first
respondent on 21.03.2025 and 25.03.2025 and only if this license is
obtained, the applicant will be able to engage the maximum labour force.
Therefore, the first respondent had failed to perform their obligation in
this case. Learned counsel further submitted that the first respondent, who
is the direct contractor with the Southern Railways, approached the Delhi
High Court and filed an application under Section 9 of the Act seeking
for an injunction against the Railways from invoking the Bank Guarantee
and the interim injunction was also granted in favour of the first
respondent. Therefore, when the first respondent has obtained an order of
interim injunction, there is no reason as to why the Bank Guarantee
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Original Application No.824 of 2025
issued by the applicant has to be invoked.
14. This Court has already taken into consideration the limited
grounds on which an order of interim injunction can be granted against
invocation of Bank Guarantee. On carefully reading the affidavit filed in
support of the applicant, this Court finds that it is bereft of details. None
of the documents produced before this Court can be looked into by this
Court without the same being supported by necessary averments made in
the affidavit. The affidavit does not speak about the delay in obtaining the
labour license. The affidavit does not speak about the various
communications sent by the first respondent and the letters written by the
applicant to the first respondent. All these documents are emerging as this
case was progressing before this Court. A Court while deciding an
application under Section 9 of the Act cannot decide the same based on
mere documents unless it is supported by necessary averments in the
affidavit filed in support of the application.
15. The sum and substance of the dispute between the applicant
and the first respondent pertains to a claim made by the applicant for the
work already done and that without making this payment, an attempt is
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Original Application No.824 of 2025
being made by the first respondent to invoke the Bank Guarantee.
16. Per contra, the first respondent is making a counter claim
against the applicant and specific allegations have been made in the
counter to the effect that the applicant failed to perform their obligations
and the repeated notices sent did not yield any response and therefore, it
ended in a termination notice dated 13.08.2025 issued by the first
respondent to the applicant.
17. The above dispute between the applicant and the first
respondent cannot be a ground for passing an order of interim injunction
restraining the invocation of the Bank Guarantee unless it is vitiated by
fraud. There is not even a single averment in the affidavit to the effect
that the agreement between the parties is vitiated by fraud. One ground
raised on the side of the applicant is that there is a special equity in favour
of the applicant since the first respondent has obtained an order of interim
injunction against the Southern Railways and therefore, the first
respondent should not, in turn, invoke the Bank Guarantee issued by the
applicant.
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Original Application No.824 of 2025
18. In the considered view of this Court, the above ground
raised on the side of the applicant is bereft of merits. The special equities
raised on the side of the applicant must be predicated with a case of fraud,
which has not been raised in this case. Therefore, the settled principles of
law insofar as restraining the invocation of Bank Guarantee has not been
satisfied in the case in hand. That apart, the very basis on which the
interim order was passed by this Court on 14.08.2025, is now found to be
unsustainable based on the documents that have now been presented
before this Court and the averments made in the counter affidavit filed by
the first respondent. Hence, the interim order cannot continue and this
application has to be necessarily dismissed.
19. Learned counsel for the applicant submitted that already
termination notice has been issued by the first respondent and therefore,
the dispute has to be resolved by referring the matter to the Arbitral
Tribunal.
20. Learned counsel for the first respondent submitted that the
first respondent will not have any objection if this Court appoints an
Arbitrator and refer the dispute.
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Original Application No.824 of 2025
21. The agreement between the parties is borne out by the
tender conditions and Clause 4.35 of the tender conditions deals with
referring the dispute to an Arbitrator. The agreement specifies the Sole
Arbitrator, who will be appointed for this purpose. Such unilateral
appointment is not sustainable as per the judgment of the Apex Court in
Central Organisation for Railway Electrification v. ECI SPIC SMO
MCML (JV) A Joint Venture Company [(2025) 4 SCC 641]. Therefore,
on the basis of consent given by both sides, this Court is inclined to
appoint a Sole Arbitrator to resolve the dispute between the parties. It is
also made clear that it is left open to the applicant and the first respondent
to move necessary interlocutory applications under Section 17 of the Act
before the Sole Arbitrator, if and when they seek for any interim
protection.
N.ANAND VENKATESH, J.
gm
In the result, this Original Application is dismissed. This Court
appoints Mrs.Chitra Sampath, Senior Advocate, No.14/1,
Kamatchipuram, 1st Street, West Mambalam, Chennai - 600 033 [Mobile
No.9962085956] as the sole Arbitrator and the Hon'ble sole Arbitrator is
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Original Application No.824 of 2025
requested to adjudicate the arbitral disputes that had arisen between the
parties and render arbitral award by holding sittings in the 'Madras High
Court Arbitration Centre under the aegis of this Court' (MHCAC) as per
Madras High Court Arbitration Proceedings Rules 2017 and fee of
Hon'ble sole Arbitrator shall be in accordance with the Madras High
Court Arbitration Centre (MHCAC) (Administrative Cost and Arbitrator's
Fees) Rules 2017.
06.10.2025
NCC:Yes/No
Index:Yes/No
Speaking Order/Non-speaking Order
gm
Original Application No.824 of 2025
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