Yograj Infras.Ltd vs Ssamg Yong Eng.& Constrn.Co.Ltd.& Anr

filed on behalf of the Respondents for early hearing

and disposal of the Special Leave Petition were taken

up together for consideration. The facts on which the

Special Leave Petition is based, are set out

hereinbelow.

2. By its letter of acceptance No.NHAI/PH

11/NHDP/ADB/GM-11/NS1/746 dated 30th December, 2005, the

National Highways Authority of India, hereinafter

referred to as `NHAI', awarded a contract to the

Respondent, SSANG YONG Engineering & Construction Co.

Ltd., for the National Highways Sector II Project,

Package-ADB-II/C-8, which involved the four laning of

Jhansi-Lakhadon sector KM 297 to KM 351 of National

Highway 26 in the State of Madhya Pradesh. The total

contract amount for the aforesaid project was more than

` 750 crores. An agreement was entered into by the NHAI

with the Petitioner on 13th August, 2006. Clause 27 of

the Agreement incorporated an arbitration clause

stipulating that all disputes and differences arising

out of or in connection with the Agreement dated 13th

August, 2006, would be referred to arbitration to be

conducted in English in Singapore in accordance with

the Singapore International Arbitration Centre (SIAC)

Rules. For the purpose of reference, Clause 27 of the

Agreement relating to arbitration is extracted

hereinbelow :

"27. Arbitration

27.1 All disputes, differences arising out of

or in connection with the Agreement shall be

referred to arbitration. The arbitration

proceedings shall be conducted in English in

Singapore in accordance with the Ssangyong

International Arbitration Centre (SIAC) Rules

as in force at the time of signing of this

Agreement. The arbitration shall be final and

binding.

27.2 The arbitration shall take place in

Singapore and be conducted in English language.

27.3 None of the Party shall be entitled to

suspend the performance of the Agreement merely

by reason of a dispute and/or a dispute

referred to arbitration."

3. According to Clause 1 of the Agreement read with

the Appendix thereof, the Petitioner was to provide all

adequate manpower, material, plant, machinery,

construction equipment and all other resources,

including finance, which would be required to perform

the work Bank Guarantee was furnished by the Petitioner

on 31st October, 2006, whereby the Bank undertook to pay

to the Respondent on its first written demand and

without cavil or argument any sum or sums within the

limits of ` 6,05,00,000/-, without there being need to

prove or give any reasons for the demand for the said

sum. The guarantor also waived the necessity of the

Respondent Company making a demand for the debt to the

contractor/petitioner before presenting the demand. The

guarantor also agreed that no change or addition or

other modification of the terms of the contract or of

the work to be performed thereunder or any of the

contract documents, which may be made between the

Respondent and the Petitioner, would release the Bank

from its liability under the Agreement. Similarly,

three Bank Guarantees of ` 1 crore each and one Bank

Guarantee for ` 3 crores were also furnished to secure

mobilization advance.

4. Disputes and differences arose between the parties

relating to the performance of the Petitioner in

completing the work contracted as per the Agreement

dated 13th August, 2006. Consequently, since the

Petitioner failed to carry out the works entrusted and

had allegedly been over-paid to the tune of ` 78 crores,

the Respondent Company on 22nd September, 2009,

terminated the contract under Clause 23.2 of the

Agreement dated 13th August, 2006 and invoked the Bank

Guarantees referred to hereinbefore vide its letters

dated 25th January, 2010, 27th January, 2010 and 5th

March, 2010. The Respondent No.1 also made a

subsequent demand for encashment of the Bank Guarantees

by its letter dated 6th May, 2010.

5. In the Special Leave Petition, the Petitioner has

sought for an order of injunction against the

Respondent No.1 on the basis of alleged fraud on the

part of the said Respondent. The Petitioner also filed

a criminal complaint against the Respondent No.1

alleging fraud and making the same allegations which

have been made by it in the present Special Leave

Petition. The learned Magistrate took cognizance on the

said complaint and issued process on 5th February, 2010.

6. Aggrieved thereby, the Respondent No.1 challenged

the said order of the Magistrate dated 5th February,

2010, taking cognizance of the criminal complaint

alleging fraud, by filing a petition under Section 482

of the Code of Criminal Procedure in the Jabalpur Bench

of the Madhya Pradesh High Court, for quashing of the

cognizance taken by the learned Magistrate. The High

Court by its order dated 13th October, 2010, quashed the

criminal proceedings commenced against the Respondent

No.1. Challenging the said order of the High Court,

the Petitioner filed Special Leave Petition (Crl) No.

Crl. M.P. 2872 of 2011, which was dismissed by this

Court on 18th February, 2011. On account of the above,

an application for early hearing and disposal of the

Special Leave Petition was filed on behalf of the

Respondent No.1 urging that since the allegation of

fraud had already been decided by this Court, the

present Special Leave Petition could be finally

disposed of in view of order passed by this Court in

Special Leave Petition (Crl) No. Crl. M.P. 2872 of

2011. It is in this background that the present I.A.

has been filed for early hearing and disposal of the

Special Leave Petition.

7. Appearing for the Special Leave Petitioner, who is

the opposite party in the Interlocutory Application

filed on behalf of the Respondent No.1, Mr. Jaideep

Gupta, learned Senior Advocate, contended that the stay

order passed in these proceedings was liable to be

continued in view of the special equities in this case.

He submitted that the Petitioner Company had

invested large sums of money in the project and upon

termination of the contract, the dues of either party

were yet to be decided and the same could only be done

at the time of the final Award. Mr. Gupta submitted

that his main emphasis in the Special Leave Petition

was with regard to the special equities which existed

and the order of stay granted by this Court restraining

the Respondent No.1 Company from invoking the Bank

Guarantees was liable to be continued till the passing

of the final Award by the learned Arbitrator.

8. Ms. Meenakshi Arora, learned Advocate, who appeared

for the Respondent Company, submitted that the prayer

made on behalf of the Petitioner in the Section 9

application before the District Court, Narsinghpur,

seeking injunction against the Respondent No.1 from

invoking the Bank Guarantees, was dismissed by the

District Judge on 4th March, 2010, and the Appeal

therefrom was dismissed by the Jabalpur Bench of the

Madhya Pradesh High Court on 20th August, 2010.

However, this Court had stayed the invocation of the

Bank Guarantees by the Respondent No.1 Company by an

interim order dated 31st August, 2010. Ms. Arora

submitted that once the cognizance taken by the

magistrate on the petitioner's criminal complaint

alleging fraud on the part of the Respondent No.1 was

quashed by the Jabalpur Bench of the Madhya Pradesh

High Court by its order dated 13th October, 2010, and

even the Special Leave Petition preferred therefrom was

dismissed by this Court on 18th February, 2011, the very

basis for seeking injunction in the proceedings under

Section 9 of the Arbitration and Conciliation Act,

1996, stood removed. Ms. Arora submitted that in

addition to the above, a partial Award had been made by

the Arbitral Tribunal in Singapore on 30th June, 2011,

in favour of the Respondent No.1. Ms. Arora submitted

that in terms of the agreement between the parties, the

Respondent No.1 Company had made huge cash advances to

the Petitioner for completion of the project, but the

same had not been fully repaid by the Petitioner and

that as a result, the Respondent No.1 should be

permitted to invoke the Bank Guarantees to realize the

outstanding amounts. According to Ms. Arora, the dues

of the Respondent No.1 Company were far beyond those

claimed by the Petitioner. Ms. Arora submitted that

since the partial Award had not been challenged by the

Petitioner, the execution thereof could not be stayed

and the Respondent No.1 was, therefore, entitled to

recover the amount under the partial Award. According

to Ms. Arora, the plea taken by the Petitioner in the

criminal complaint and the present Special Leave

Petition was the same and since the allegation of fraud

against the Respondent No.1 by the Petitioner has been

negated, the interim order restraining the Respondent

No.1 from invoking the Bank Guarantees was liable to be

vacated.

9. Ms. Arora submitted that since payment under a Bank

Guarantee can normally be stopped only on two grounds

and on no other, viz., on grounds of fraud and special

equity, and the ground of fraud having been rejected

upto this Court, the only other ground available to the

Petitioner to stop the invocation of the Bank

Guarantees was on account of special equities and in

the instant case the Petitioner had failed to indicate

any such special equity which entitled the Petitioner

to an order of restraint against the Respondent No.1

from invoking the Bank Guarantees in question.

10. Having heard learned counsel for the parties, we

are inclined to accept Ms. Meenakshi Arora's

submissions that since the Petitioner's application

under Section 9 of the Arbitration and Conciliation

Act, 1996, was based mainly on allegations of fraud,

which have been rejected, there was no foundation for

the stay order passed in these proceedings to continue.

We cannot lose sight of the fact that both in the

criminal proceedings as also in the proceedings under

Section 9 of the aforesaid Act, the Petitioner proved

to be unsuccessful, at least upto the High Court stage.

In the criminal proceedings, the Petitioner was

unsuccessful right upto this Court. In the aforesaid

circumstances, we are unable to accept the submissions

relating to special equities urged by Mr. Jaideep

Gupta, particularly in view of the fact that such a

point had not been raised earlier.

11. In addition to the above, we also have to keep in

mind the fact that a partial Award has been made by the

Arbitral Tribunal which has not been questioned or

challenged by the Petitioner and the Respondent No.1 is

entitled to the amount awarded in the partial Award.

12. Accordingly, we are not inclined to disturb the

order of the High Court and the Special Leave Petition

is, therefore, dismissed with cost of ` 1 lakh to be

paid by the Petitioner Company to the Supreme Court

Legal Services Committee. The Interlocutory Application

is also disposed of by this order.

............................................................J.

(ALTAMAS KABIR)

............................................................J.

(JASTI CHELAMESWAR)

New Delhi

Dated: 31.01.2012.