Case: Tuticorin Coal Terminal Private Limited Vs. Gelguera Gruas India Private Limited

A few facts are necessary to be set out :2. The respondent herein is the claimant in arbitration proceedings which are underway before the Arbitral Tribunal. The petitioner is a private company established under the Companies Act, 1956 which entered into a Concession Agreement with the Board of Trustees for Tuticorin Port on or about 11th September 2010, the intention being to develop North Cargo) to handle bulk cargo at Tuticorin Port on a Design, Build, Finance, Operate and transfer basis. The Concession Agreement is valid for 30 years and upon project completion vessels would come alongside to discharge cargo. Theis stated to be partially operational. The respondent offered services for supply, design, erection and commissioning ofand a conveyor system. Three purchase orders dated 23rd August, 2012 came to be placed for design, erection supply and commissioning ofA further set of three purchase orders dated 28th November, 2012 were placed for design, supply, erection and commissioning of the conveyor system. As required under the contract, the respondent issued down payment bank guarantees and performance bank guarantees (the guarantees) in favour of the petitioner in respect of each of the purchase orders.3. Disputes arose between parties and at some stage the petitioner invoked these guarantees. The respondent then filed six Arbitration Petitions under Section 9 of the Act seeking injunctions restraining the petitioner from invoking any of the guarantees, the contention of the respondent being that the guarantees were conditional and therefore could not be invoked at will. All the guarantees were identically worded. Vide an order dated 11th January, 2018 the arbitration petitions under Section 9 came to be dismissed, thereby rejecting the submission of the respondent that it will suffer immensely if the bank guarantees are permitted to be encashed.4. Being aggrieved by this order six Commercial Appeals were filed. On 23rd February, 2018 these appeals were heard, by consent of parties, finally at the admission stage. By a common order and judgment dated 10th April, 2018 the appeals came to be dismissed. Theprotection granted by the single Judge initially had, by then, been continued for a substantially long period of time. This protection was therefore continued at the request of the respondent for a further period of three weeks.5. Being aggrieved by the rejection of the appeals the respondent filed a Special Leave Petition in the Supreme Court on or about 20th April, 2018. Vide order dated 27th April, 2018 the SLP came to be dismissed. On the same day i.e. 27th April, 2018 the respondent filed an application under Section 17 of the Act seeking the following prayers :(a) Allow the present application and pass necessary directions directing that the amounts under the bank guarantees, which aggregate to Rs.43,98,13,832, be not appropriated / utilized by the Respondent, by keeping it in a separate account / Fixed Deposit, subject to the arbitral award; and(b) Pass such further or other orders as the Honble Tribunal may deem fit and proper.The Application was sent by the respondents Advocates to the Tribunal accompanied by an Amendment Application. The forwarding email dated 27th April, 2018 set out as follows :Keeping in view the urgency involved and the likely appropriation of the monies that will be released under the Bank guarantees (aggregating to Rs.44 crore approximately) by TCTPL, with no chance of recovery and also keeping in view their precarious financial condition, we request the Honble Tribunal to pass urgent orders in terms of the prayer(s) made in the Section 17 application, if possible, by circulation.6. Thus two applications were made. One for amendment which is still pending and the second for urgent relief under Section 17. This sought to prevent appropriation / utilisation of the amount of Rs. 43,98,13,832/being the proceeds realised by encashing the bank guarantee. After receipt of the application, an order dated 27th April, 2018 came to be passed by the Tribunal which reads as follows :(i) Respondent is hereby directed to file its replies to both the applications, within 15 days hereof after serving copies thereof to all.(ii) Until the Application under Section 17 of the ArbitrationConciliation Act is heard and disposed off, the Parties are hereby directed to maintain status quo as is obtained today.(iii) Tribunal will endeavour to meet at an early date, if convenient to all to consider the said Applications. The order was modified the following day. The operative part of the modified order reads as follows :In case, Respondent encashes the Bank Guarantee for a sum ofthen the aforesaid amount shall be kept in Fixed Deposit, bearing maximum interest on it in a Scheduled Bank. Respondent shall not be permitted to utilise the aforesaid amount for any other purpose until further orders to be passed by the Tribunal.Thus effectively the petitioner was restrained from utilisation of the amount recovered by it by directing that the same be placed in a fixed deposit. Meanwhile the bank guarantees were encashed and the appellants received the monies thereunder.7. This petition was filed on 11th May, 2018 challenging the aforesaid impugned orders dated 27th April, 2018 and 28th April, 2018. On 4th June, 2018 this petition came to be mentioned. Circulation was granted and the matter was listed for 5th June, 2018. On 5th June, 2018 the matter came to be adjourned to 11th June, 2018. On 11th June, 2018 the respondent sought time to put in a reply. Time was granted and it was agreed between counsel for the parties that on the next date the petition may be disposed of finally. It was on this basis that the petition was heard on 18th June, 2018. The respondent has filed affidavit of one Mr. Nandan Kumar, Senior Manager (Legal) and Company Secretary of the respondent to oppose this appeal under Section 37 of the Act. An affidavit in rejoinder dated 16th June, 2018 has also been filed.

Court's reasoning:
15. The case of the respondents and as canvassed by Mr. Andhyarujina is that the application under Section 17 is the result of a fresh cause of action namely rejection of the SLP. In my view rejection of the SLP has resulted in confirmation of the order of the appeal Court in which the order passed under Section 9 has merged. The order of the Supreme Court does not give rise to fresh cause of action to seek relief qua the very subject matter of the application under Section 9. The order under Section 9 makes reference to the Order passed by me as Company Judge in Company Petition No. 780 of 2015 seeking winding up of the petitioner company.Thus, the so called admission was not really an unqualified admission which could entail an order for payment in the manner in which it is projected. sought. Mr. Andhyarujina was guarded in his submission that the relief sought is in Section 17 application is not based on the bank guarantee or merely an attempt to secure the amount collected by the petitioner pursuant to invocation of the bank guarantees and therefore not subject matter of the first application under Sectionview of this amendment what we have here is rather a unique situation whereby despite an order of this Court under Section 9 being confirmed in appeal and in the SLP by virtue of its dismissal, a fresh order affecting rights of the petitioner has been passed. By virtue of the deeming provision of Section 17(2) this order is to be treated as order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure in the same manner as if it were order of the Court. This results in a rather incongruous situation which certainly could not have been permitted since the highest Court has already confirmed the order passed by the division Bench of this Court approving the order passed under Section 9. An order under Section 17 which shall be deemed to be an order of court cannot result in setting the clock back to prevent the petitioners from utilising the funds received under the guarantees encashment of which has been permitted. The funds are now at the disposal of the petitioners. In the light of the order under Section 9 attaining finality the impugned orders certainly cannot be expressed as order of the Court. For this reason also the order impugned cannot be enforced in law and hence cannot be sustained.18. Apropos the contention that the application seeks to secure an admitted sum of money, I enquired of Mr. Andhyarujina whether in the light of such alleged admission, the respondent had sought any interim award to which Mr. Andhyarujina fairly stated that no such application for interim award had been made. It transpires that the so called admission was not in any pleading in the arbitration proceedings but refers to the very same amount which formed the subject matter of the Statutory notice under Section 434 of the Companies Act and a Company petition based on that notice to which reference was made in the Section 9 order. As stated above the Company Court had observed that admission of liability was in anticipation of the work under the contract and not as the result of termination of the contract. Different sets of circumstances arose on termination of the contract and this aspect has been dealt with by the Court while disposing of the Section 9 Applications.19. It is also not possible to accept Mr. Andhyarujinas contention that the application under Section 17 is by way of an application to furnish security as contemplated under Order 38 Rule 5. In my view none of the elements of the said Order or Rule have been satisfied and on that ground alone this contention of the respondent is liable to be rejected. The Arbitral Tribunal has not passed the order after having come to any satisfaction that the petitioner was about to dispose of the property or remove property from the jurisdiction with intention to delay or execution of any award that has to be passed. Paragraph 30 of the order passed under Section 9 deals with the submission on behalf of the respondents in support of the plea of irretrievable injustice and special equities in their favour.This submission was dealt with by the Court in its order under Section 9. The contention on behalf of the respondent that the petitioner does not have any assets and the respondent is left high and dry and thus it will be unable to execute an award has been rejected. The Court found that the promoters of the petitioner had already invested about 170 crores in the project and the Concession Agreement between the parties was for a period of 30 years during which users of the facilities would be required to pay appropriate handling charges. The estimated revenue during the balance of the Concession period was Rs.10,067.14 crores to be appropriated in the manner set out in the contract. The petitioner also had a counter claim of Rs.600 crores and the Court held that the adjudication of the proceeding on the basis that the claim of the respondent would be upheld by the Arbitral Tribunal and the counter claim could be dismissed, cannot be accepted. In this view of the matter the so called admission of liability is not significant.