1995 (12) TMI 423 - HC - Indian Laws

Summary

Issues Involved:
1. Allegation of discriminatory conduct by Defendant No. 1.
2. Allegation of fraudulent conduct by Defendant No. 1.
3. Request for an ad interim injunction to restrain encashment of the performance bank guarantee.
4. Application for appointment of an arbitrator under Section 20 of the Arbitration Act.

Issue-wise Detailed Analysis:

1. Allegation of Discriminatory Conduct by Defendant No. 1:
The plaintiff alleged that Defendant No. 1 had discriminated against it by granting extensions of time to other contractors until June 15, 1995, while refusing to grant a similar extension to the plaintiff. The court noted that the plaintiff's initial contract was to supply 25,000 metric tonnes of urea by March 31, 1995. The plaintiff had sought and was granted two extensions, first until April 30, 1995, and then until May 31, 1995. The court found no evidence of discrimination, stating that it was unclear when other contractors were initially supposed to fulfill their contracts and whether the extensions granted to them were the first or second extensions. The court concluded that the plaintiff's need for an extension until the end of July 1995 did not demonstrate discriminatory conduct by Defendant No. 1.

2. Allegation of Fraudulent Conduct by Defendant No. 1:
The plaintiff claimed that Defendant No. 1's actions in accepting tenders at higher rates from other contractors led to an increase in international urea prices, which in turn caused the plaintiff's supplier to refuse to supply urea at the agreed rate. The court found that the plaintiff's claim lacked evidence and that the increase in international prices could not be attributed to any fraudulent conduct by Defendant No. 1. The court also noted that the plaintiff did not have a concluded transaction with its supplier, McDaniel Co., at the time of entering the contract with Defendant No. 1. The court held that the failure of the plaintiff to secure urea at the expected rate was not due to any fraudulent activity by Defendant No. 1.

3. Request for an Ad Interim Injunction to Restrain Encashment of the Performance Bank Guarantee:
The plaintiff sought an ad interim injunction to prevent Defendant No. 1 from encashing the performance bank guarantee. The court referred to established principles laid down by the apex court, emphasizing that bank guarantees must be honored free from interference by courts unless there is a prima facie case of fraud or irretrievable injustice. The court found no evidence of fraud or irretrievable injustice in the plaintiff's case. The terms of the bank guarantee allowed Defendant No. 1 to encash it if the plaintiff failed to perform its contractual obligations. Given the plaintiff's own admission of its inability to supply the urea by May 31, 1995, the court held that Defendant No. 1 was justified in mobilizing the bank guarantee.

4. Application for Appointment of an Arbitrator under Section 20 of the Arbitration Act:
The plaintiff filed a suit under Section 20 of the Arbitration Act for the appointment of an arbitrator to resolve the disputes between the parties. However, the court's primary focus in the judgment was on the request for an ad interim injunction and the allegations of discrimination and fraud. The court did not provide a detailed analysis of the application for the appointment of an arbitrator in the judgment.

Conclusion:
The court dismissed the plaintiff's application (I.A. No. 7356 of 1995) for an ad interim injunction, holding that the plaintiff had failed to establish a prima facie case of fraud or irretrievable injustice. The court also rejected the plaintiff's claims of discriminatory and fraudulent conduct by Defendant No. 1. The interim injunction passed on July 17, 1995, was vacated, and the plaintiff was ordered to pay costs of Rs. 2,000.