Dresser Rand S.A vs Bindal Agro Chem Ltd And K. G. Khosla ...

2. For convenience, Dresser Rand S.A. [Appellant in both the appeals], BINDAL Agro Chem. Ltd., [Respondent No. 1 in both appeals] and K. G. Khosla Compressors Ltd. [Respondent No. 2 in both appeals] will also be hereinafter referred to as DR, BINDAL and KGK respectively.

4. BINDAL and KGK have filed IA Nos. 5795/93 and 5819/1993 respectively in their respective suits, under Order 39 Rules 1 and 2 CPC seeking a temporary injunction to restrain DR from proceeding with the arbitration.

6. A learned single Judge of the High Court heard the four applications in the two suits and passed a common order dated 14.2.2002. He held that the plaintiffs in the two suits (BINDAL and KGK) had made out a prima facie case for grant of a temporary injunction restraining DR from proceeding with the arbitration. He also held that DR had failed to prove that any provisional concluded arbitration agreement had come into existence between either DR and BINDAL or DR and KGK. He also held that in the absence of any tripartite arbitration agreement, it may not be possible to decide the obligations between BINDAL and KGK. He, therefore, allowed the applications for temporary injunction filed by BINDAL and KGK and restrained DR from proceeding with the arbitration, subject however to BINDAL and KGK furnishing a bank guarantee to an extent of 5% [3% by BINDAL and 2% by KGK] of French Francs 4,93,00,000 and 5,26,25,000. The learned single Judge dismissed the applications filed by DR under section 3 of the Foreign Awards Act by holding that no valid or operative agreement capable of being performed had come into existence by issue of Letters of Intent signed by KGK and counter-signed by DR. The said order dated 14.2.2002 in so far as it grants temporary injunction is an interim order and in so far as it rejects DR's applications for stay under section 3 of the Foreign Awards Act is a final order. The said common order granting temporary injunction restraining it from proceeding with the arbitration was challenged by DR in FAO (OS) No.136/2002. The said common order rejecting the two applications for stay under Section 3 of the Foreign Awards Act was challenged by DR in FOA (OS) No.137 of 2002. BINDAL and KGK challenged the said common order in so far as it imposed a condition (relating to furnishing of Bank Guarantee) for temporary injunction, in FAO (OS) No.94/2002 and FAO (OS) No.113/2002 respectively.

7. A Division Bench of the Delhi High Court by common order dated 4.3.2003 dismissed the appeals filed by DR and allowed the appeals filed by BINDAL and KGK. The Division Bench affirmed the finding of the learned single Judge of the High Court that there was no arbitration agreement and consequently, upheld the rejection of the applications under section 3 of the Foreign Awards Act. The Division Bench while affirming the temporary injunction granted by the learned Single Judge restraining DR from proceeding with the Arbitration, deleted the requirement imposed by the learned Single Judge relating to furnishing of bank guarantee by BINDAL and KGK.

10. BINDAL sent a telex dated 12.1.1990 to DR informing that it was implementing a Gas-based Fertilizer Plant at Shahjahanpur and it was in the process of exploring possibilities for securing various equipments including Synthesis Gas Compressors, Process Air Compressors, Refrigeration Compressors and CO2 Compressors and enquired whether DR would be interested in supplying the equipments. DR sent a reply dated 18.5.1990 offering to supply Syn-Gas Compressor and indicating the total price of the compressor and spare parts. The matter was dormant for some times. By letter dated 16.3.1991, BINDAL informed DR that the necessary Government approval for fertilizer project has been received and, therefore, it wished to revive the discussions for supply of Syn. Gas compressors and CO2 compressors. By fax dated 5.4.1991, BINDAL requested DR for a quotation to be followed by a formal Bid for Syn-Gas and CO2 compressors and informed DR that having regard to the tight foreign exchange situation, the Government of India had allocated only 50% of its total foreign exchange requirement and, therefore, it had decided to limit its imports only to moving machinery, cutting out static equipment. DR sent a reply dated 16.5.1991, quoting its price for Syn. Gas compressor and proposed to discuss the modalities of DR having overall responsibility for various compressor turbines/auxiliaries not included in the scope of supplies, as also commercial points. This was followed by a meeting between the representatives of DR and BINDAL wherein the technical details in regard to performance of the syn. gas compressor discussed.

14. BINDAL neither placed any purchase order nor issued any confirmation that the Letters of Intent dated 12.6.1991 were placed by KGK on its behalf. However, the Chairman of BINDAL sent a communication dated 26.8.1991 to DR stating that in spite of its efforts, procedural matters at Government level did not move as fast as it expected, and that it was fully conscious of the position in which DR had to receive the Letters of Credit before making major financial commitments for castings etc. and requested DR to wait till 31.10.1991. BINDAL also stated that it was confident to open the Letters of Credit before 31.10.1991 and will accept a corresponding delay in the delivery schedule.

33. Clause 'C' of Letters of Intent provides that the Purchase Order shall be subject to the "General Conditions of Purchase"

Re: Point No. (iii) :

Conclusion

45. We, therefore, do not find any reason to interfere with the decision of the Division Bench of the High Court. The appeals are, therefore, dismissed. Parties to bear their respective costs.