IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 11.03.2011 CORAM THE HON'BLE MR. JUSTICE VINOD K.SHARMA A.No.1293 of 2011 ORDER This petition under Section 9 of the Arbitration and Conciliation Act, 1992, has been moved by the applicant, praying for stay of order, bearing Proc.No.BS6/1235/2011 dated 14.02.2011, imposing the following penalities: i.The rate confirmation given to them vide reference 1st read above for the supply of 1500 M.Ts. of Toor dhall (Fatka) be cancelled for the violation of tender Clause No.16(a) of the tender conditions. ii.The Earnest Money Deposit amount of Rs.32,70,000/- remitted by them in the form of demand draft along with the tender which has been taken to the credit of the Corporation account under this office C.R.No.RO-1508 dated 31.01.2011 be forfeited for failure to execute agreement with in the time limit as per the provisions contained in Clause No.12(1) of the tender conditions. M/s.Rajiv Impex, Chennai are also ordered to be blacklisted for the period of 5 (five) years from participating in the future tenders floated by TNCST from the date of issue of this order as per the provisions contained in Clause No.19(g) of the tender conditions." 2. The case of the applicant is that the respondent called for tender for supply of 6000 MT of Toor dhall (fatka quality) as per Agmark specification. The applicant participated in the tender and deposited a sum of Rs.32,70,000/- (Rupees Thirty Two Lakhs Seventy Thousand only) towards Earnest Money Deposit (EMD), to participate in the tender. Tender of the applicant was accepted and a letter was issued, directing the applicant to deposit security deposit of Rs.47,22,000/- and also execute agreement for supply of Toor dhall. Last date of supply was fixed as 18.03.2011. 3. The case of the application is that in pursuance to the letter, demand draft of Rs.14,52,000/- (Rupees Fourteen Lakhs Fifty Two Thousand only) was sent to the responent in addition to EMD amount already deposited towards security amount, but the demand draft was wrongly sent by M/s. Rajni Exports & Imports, as the applicant is closely associated with M/s. Rajni Exports & Imports. Letter enclosing demand draft for Rs.14,52,000/- reads as under: RAJNI EXPORTS & IMPORTS No.86, (Old 68) Acharappan Street, First Floor, George Town, Chennai  600 001. Tamil Nadu, India. Phone: 25262515 / 25262516 Fax:25261425 E-Mail:rajniexports@vsnl.net 01.02.2011. To, The Managing Director Tamilnadu Civil Supplies Corporation, 12,Thambu Samy Rd., Kilpauk, Chennai-600 010. Sir, Sub: Supply of Yellow Lentil-remittance of Security deposit-reg. Ref: Tender reference number BS6/1235/2011 dt. 14.01.2011 ----- With reference to the above, we enclose TMB Demand Draft bearing no:876022 dt. 01.02.2011 for Rs.14,52,000/- being the balance amount payable towards security deposit after adjusting the EMD already remitted. Thanking you sir, Yours faithfully, For RAJNI EXPORTS & IMPORTS Partner/Authorised Signatory" 4. The applicant immediately on realizing mistake, addressed a letter to the respondent for crediting the amount of Rs.14,52,000/- (Rupees Fourteen Lakhs Fifty Two Thousand only) towards security amount payable by the applicant. Letter sent to the respondent by the applicant reads as under: RAJIV IMPEX No.86, (Old 68) Acharappan Street, Chennai  600 001. Tamil Nadu, India. Tel:91-44-25261418 / 91-44-25262515 Fax:91-44-25261425 E-Mail:rathnambrothers@eth.net 09.02.2011. To, The Managing Director Tamilnadu Civil Supplies Corporation, 12,Thambu Samy Rd., Kilpauk, Chennai-600 010. Sir, Sub: Supply of toor dall-remittance of security deposit-reg. Ref: Tender reference number BS6/1235/2011 dt. 14.01.2011 ----- With reference to the above, we would like to state that we have already sent TMB Demand Draft bearing no:876022 dt. 01.02.2011 for Rs.14,52,000/- being the balance amount payable towards security deposit after adjusting the EMD already remitted. We request you to credit the same in our account. We shall execute the agreement in a couple of day. We request your kind co-operation in this matter. Thanking you sir, Yours faithfully, For RAJIV IMPEX, Partner/Authorised Signatory" 5. The case of the applicant is that even in the demand draft, it was clearly mentioned that the draft was purchased by M/s. Rajiv Impex, therefore, it could not have been credited to the account of M/s. Rajni Exports & Imports. 6. It is also the contention of the learned counsel for the applicant that the amount of Rs.14,52,000/- (Rupees Fourteen Lakhs Fifty Two Thousand only) was not the amount due from M/s. Rajni Exports & Imports, therefore, it was patent error, which was liable to be ignored. 7. The case of the applicant, therefore, is that merely because of error, the respondent has passed the impugned order, imposing three penalities referred to above, which, on the face of it, are arbitrary. 8. It is further case of the applicant that the applicant has prima facie case, inasmuch as the penalities, on the face of it, are disproportionate to the error committed and that the EMD could not be forfeited. 9. Learned Senior Counsel for the application contends that prima facie case is in favour of the applicant, the balance of convenience is also in favour of the applicant and that the applicant is likely to suffer irreparable loss, in case operation of impugned is not stayed. 10. Learned Senior counsel for the applicant also contends that steps have already been taken by the applicant for initiation of arbitration proceedings to claim damages, suffered by the applicant, on account of action of the respondent and also to challenge the impugned order before arbitrator. 11. The prayer, made is that the operation of impugned order should be stayed during pendency of arbitration proceedings. 12. The application is opposed by the learned Additional Advocate General, on the contention, that the applicant failed to deposit the security amount within the stipulated period as directed. The contention of the learned Additional Advocate General was that the amount was deposited by M/s. Rajni Exports & Imports in a contract for supply of Yellow Lentil under Tender Ref. No.BS6/1235/2011 dated 14.01.2011. It is also the contention of the learned Additional Advocate General that even in the clarificatory letter issued subsequently, there was no authorisation by M/s.Rajni Exports & Imports, therefore, keeping in view the urgency of the matter, the Government decided to cancel the contract and forfeit the security deposited by way of EMD. The amount of Rs.14,52,000/- (Rupees Fourteen Lakhs Fifty Two Thousand only) was credited to the account of M/s.Rajni Exports and Imports, as per the letter issued. 13. The contention of learned Additional Advocate General further is that this application is not competent as the applicant has not taken any steps to initiate arbitration proceedings till date. 14. This contention is controverted by the learned counsel for the applicant by stating that notice is ready and immediate steps are being taken to get an arbitrator appointed to proceed with the arbitration proceedings. 15. In view of the stand taken by the learned counsel for the applicant, learned Additional Advocate General handed over a panel of Arbitrators, so as to enable the applicant to select the Arbitrator for adjudication of the dispute between the parties. 16. On consideration of the matter, I find that this application deserves to be partly succeed. The order blacklisting the applicant, on the face of it, is not warranted, being arbitrary. The facts pleaded by the applicant and the stand of the respondent shows that the error committed by the applicant was not of such nature, which can entitle the respondent to blacklist the applicant that too without issuing showcause notice. 17. Consequently, impugned part of order, vide which, applicant was ordered to be blacklisted, is ordered to be stayed pending arbitration proeedings. 18. With regard to payment of EMD, the prayer cannot be allowed for the present, as in order to succeed in application under Section 9, it is not only prima facie and balance of convenience, but it is also required to be shown that the applicant is likely to suffer irreparable loss and injury, if necessary protection is not granted. 19. Mere refund of money is not such claim, which can be result in irreparable loss, as in the event of success in claim, arbitrator can grant of interest on the amount wrongly withheld, and the interest of the applicant can be easily protected. On the other hand, the right of the respondent to forfeit the security amount for failure to comply would stand defeated even without trial. 20. There is certainly a dispute, which needs to be adjudicated by the the Arbitrator on appreciation of evidence. As admittedly, demand draft was not sent by the applicant within the period prescribed, and it was sent by another party, specifically mentioning therein that the amount was being deposited against a different contract. 21. Mere printing of name of the purchasing party on the draft cannot be a bar to acceptance of draft, once presented. The very purpose of taking out draft is, that the amount depicted in draft becomes trust money with the bank on behalf of the persons in whose favour draft is drawn. 22. Prima facie, there can be nothing wrong in crediting the amount in favour of the party, depositing the draft against particular contract. However, this be not taken as the final decision of the controversy, as it will be for the arbitrator to decide the claim of the respective parties after parties are allowed to lead evidence. 23. On instruction from the applicant, learned Senior Counsel for the applicant selected Thiru K.Kannayiram, Retired District Revenue Officer / Formerly Vigilance Officer, Head Office, as Arbitrator to adjudicate the claim. 24. In view of the fact that the Arbitrator stands appointed by the parties, the applicant would be at liberty to file claim with the arbitrator, on receipt of notice. Keeping in view the controversy involved in this case, it would be appreciated if the Arbitrator expedites arbitration proceedings and concludes the same, within a period of two months from the date of entering reference. 25. This application is accordingly disposed off by staying blacklisting of applicant, while rejecting the relief against other two penalties, as no irreparable loss can be said to be caused to applicant. 26. At the sake of repetition, it is made clear that anything observed above, on the merit of controversy, is only for the purpose of disposal of this application, and be not taken as the opinion by this Court, on the merit of controversy. No costs. ar