M/s. INDO UNIQUE FLAME LTD. & OTHERS … Respondents JUDGMENT INDU MALHOTRA, J. 1 This case raises interesting issues with respect to the application of the doctrine of separability of an arbitration agreement from the underlying substantive contract in which it is embedded; whether an arbitration agreement would be nonexistent in law, invalid or unenforceable, if the underlying contract was not stamped as per the relevant Stamp Act; and, whether allegations of fraudulent invocation of the bank guarantee furnished under the substantive contract, would be an arbitrable dispute. 1 1.1 The Respondent No.1Indo Unique Flame Ltd. (“Indo Unique”) applied for grant of work of beneficiation/washing of coal to the Karnataka Power Corporation Ltd. (“KPCL”) in an open tender. KPCL awarded the Work Order vide letter of Award No.A1M1B3/Washed Coal/1052 dated 18.09.2015 to Indo Unique. In pursuance of the Work Order dated 18.09.2015, the Respondent No.1 Company furnished Bank Guarantees for Rs.29.29 crores in favour of KPCL through its bankers, State Bank of India (“SBI”), the Respondent No.2 herein. 1.2 Indo Unique, the Respondent No.1 herein, subsequently entered into a subcontract termed as a Work Order dated 28.09.2015 with the Appellant Company – M/s. N.N. Global Mercantile Pvt. Ltd. (“Global Mercantile”), for the transportation of coal from its washery at Village Punwat, District Yavatmal to the stockyard, siding, coal handling and loading into the wagons at Pandharpaoni siding, District Chanderpur, Maharashtra. Clause 9 of the Work Order provided for furnishing a security deposit which reads as : “9. Security Deposit : You will submit the Bank Guarantee for Rs.5.00 crores for the average stock of washed coal lying at your stockyard. This Bank Guarantee can be issued from any nationalised Bank/first class bank, initially valid for a period of 18 (eighteen) months.” Clause 10 of the Work Order incorporates an arbitration clause, which reads as: 2 “10. Arbitration : In case of any dispute due to difference of opinion in interpretation of any clause or terms and conditions or meaning of the work or language the decision of the arbitrator appointed with mutual consent shall be treated as final and binding on both the parties.” 1.3 As per Clause 9 of the Work Order, Global Mercantile furnished a Bank Guarantee for Rs.3,36,00,000/ on 30.09.2015, in favour of SBIthe banker of Indo Unique. The Bank Guarantee was extended from time to time, and was last extended on 10.11.2017. 1.4 Under the principal contract with KPCL dated 18.09.2015, certain disputes and differences arose with Indo Unique, which led to the invocation of the Bank Guarantee by KPCL on 06.12.2017. 1.5 Indo Unique, on 07.12.2017, invoked the Bank Guarantee furnished by Global Mercantile under the Work Order. It is the invocation of this Guarantee which has led to the present proceedings. 1.6 Global Mercantile filed a Civil (Commercial) Suit No.62 of 2017 against Indo Unique, and its banker SBI, as also the banker of the Appellant i.e. the Union Bank of India (Respondent No.3 herein), before the Commercial Court, Nagpur praying inter alia for a declaration that Indo Unique was not entitled to encash the bank guarantee as the Work Order had not been acted upon. It was expressly stated that Indo Unique had not allotted any work under the Work Order, nor were any invoices raised, or payments made by it. Consequently, there was no loss suffered which would justify the invocation of the Bank Guarantee. It was alleged that the invocation of the Bank Guarantee was fraudulent, since it was not in terms 3 of the Work Order, being a conditional guarantee linke