ARBPLOD11-11 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION LOD.NO.1416 OF 2010 M/s.P.K.Aluinfra Pvt.Ltd. .. Petitioner Versus M/s.Pallazzio Hotels & Leisure Ltd. & Anr. .. Respondents Mr.Tejas Donde for petitioner Mr.Madhur Baya for respondents. CORAM : S.C.DHARMADHIKARI, J. DATE : 6th January 2011. P.C.: 1] Mentioned not on board. Mr.Dande submits that if the ad- interim order is not extended, the arbitration petition will become infructuous. The ad-interim order dated 29th December 2010 notes that the bank guarantee has been invoked by the beneficiary – first respondent but the bank has not paid the monies thereunder. Therefore, till today, the monies are not disbursed and paid. 2] An affidavit has been filed on behalf of the first respondent ARBPLOD11-11 2 beneficiary and considering the nature of the relief I have proceeded to hear the parties on admission of petition itself. 3] The petition is filed under section 9 of the Arbitration and Conciliation Act, 1996, principally seeking injunction to restrain encashment of bank guarantee dated 29th December 2009, details of which are set out in prayer clause (a) of this petition. The petitioner has entered into certain contract with first respondent pursuant to tender floated by first respondent. The petitioner states that the purchase order placed was for work of Rs.5,25,29,961/-. Reliance is placed upon clause 6 of the terms and conditions which provided that advance payment of 10% of the purchase order value will be made against the bank guarantee of a nationalised bank as per approved proforma. 4] The argument of the petitioner is that this is not a guarantee against performance but to secure the sum of the mobilisation advance. Once, the amount of bank guarntee was to be recovered ARBPLOD11-11 3 against the running bill raised by the petitioner on the first respondent and that sum having been already adjusted by the first respondent, there was no question of invocation of the bank guarantee. The invocation thereof is, therefore, fraudulent and in such circumstances, a prima facie case is made out for restraining encashment of the bank guarantee. More so, when the disputes and differences under the main contract are being referred to arbitration. 5] Mr.Dande, learned Counsel for petitioner submitted that the purchase order, copy of which is at page 30 makes it clear that the advance payment shall be 10% of the purchase order value and it shall be recovered from each R.A. Bill. Inviting my attention to a statement at page 62 of the paperbook, Mr.Dande submits that the advance amount has been recovered from the running bill and in such circumstances, this Court should restrain encashment of bank guarantee. 6] On the other hand, the first respondent has filed an affidavit and ARBPLOD11-11 4 has pointed out that the dispute under the parent contract apart, this is an unconditional and irrevocable bank guarantee. Its invocation is on demand by the first respondent and the bank is not empowered to adjudicate upon any of the issues but the demand raised on it is conclusive. In this connection a reference can usefully be made to a judgement of the Division Bench of this Court in the case of Maytas Infra Limited Vs. Utility Energytech & Engineers Pvt.Ltd. & Anr. (Appeal Lod.No.350 of 2009 in Arbitrattion Petition Lod.No.366 of 2009 decided on 20th August 2009). In the above decision the Division Bench has held that when the bank guarantee is unconditional, irrevocable, conclusive and binding notwithstanding any difference between the contractor and the beneficiary and pendency of any dispute not affecting the invocation, then, the settled principles laid down by Supreme Court in the case of Mahatma Gandhi Sahakari Sakhar Karkhana Vs. National Heavy Engineering Coop. Ltd. (2007) 6 S.C.C. 470 would apply. 7] In such circumstances, the disputes under the parent contract are ARBPLOD11-11 5 of no consequence. The invocation is only to be restrained in the case of clear fraud, giving rise to irritrievable injustice and special equities. Such is not the case here and, therefore, it is submitted that ad-interim order be vacated. 8] After having heard learned Counsel for parties at some length and perusing with their assistance the subject bank guarantee, I am of the opinion that the petition deserves to be dismissed. 9] The guarantee for mobilisation advance, a copy of which is at page 39 of the paperbook, makes it clear that the first respondent owner was approached with a request for grant of mobilisation advance by the contractor petitioner before me. The bank has unconditionally and irrevocably guaranteed to the owner that the amount under the bank guarantee would be paid on immediate demand by the owner and without demur or protest and without recourse to the contractor or anybody. Thus, it is not in dispute that this is an unconditional, irrevocable and on demand bank guarantee. ARBPLOD11-11 6 The satisfaction of the owner is made final and the bank cannot question the demand. The bank guarantee is an independent contract and invocation thereof is not dependent upon the disputes or differences arising out of parent contract or the terms of the parent contract, unless, the same are part and parcel thereof and invocation is conditional. In the instant case, if the guarantee is unconditional and irrevocable so also on demand and when the argument is not that it is not being invoked in terms thereof but its invocation is fraudulent, then, a very strong prima facie case of fraud to the knowledge of banker must be made out. Merely because there are some disputes and differences between the parties, under the main contract, the bank cannot be restrained from honouring its independent obligation. In these circumstances, there is no merit in the petition. Accordingly the same is dismissed. Ad-interim order stands vacated. (S.C.DHARMADHIKARI, J)