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TMI Blog2021 (12) TMI 1105X X X X Extracts X X X X X X X X Extracts X X X X ..... n their seats at Kolkata and Dhaka. The petitioner and the respondent No. 2 have filed their respective affidavits thereafter. The respondent No. 1 has however not contested in the proceedings and has not challenged or responded to the orders of injunction by way of affidavit or otherwise. These orders were passed in the present application filed by the petitioner under Section 9 of The Arbitration and Conciliation Act, 1996. 3. A brief background of the facts is necessary for a better understanding of what brought the petitioner to this court by way of the present Arbitration Petition. A brief factual background: 4. The petitioner was awarded a contract for supply of conductor and related accessories to the respondent No. 1 pursuant to a global tender floated by the latter. The contract dated 15th November, 2015 was a Carriage and Insurance Paid (CIP) contract for a price of USD 830,290 + BDT 371,000. The petitioner was required to furnish a performance security for an amount of USD 83,505 for a period of 24 months under the relevant clause of the General Conditions of Contract (GCC). The contract was governed by the GCC and the Special Conditions of Contract (SCC) which also p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction since the Citibank NA, Kolkata and Citibank NA, Dhaka are separate entities governed by different banking regulations. Counsel submit that neither of the two parties are parties to the arbitration agreement between the petitioner and the respondent No. 1 which forms the basis of the application and hence no relief can be sought against them. The other contention is that the bank guarantee is an independent contract between the bank and the beneficiary, invocation whereof is to be tested on the terms of the bank guarantee. It is also submitted that the petitioner has not been able to make out an established case of fraud or irrevocable injury or special equities which would vitiate the entire underlying transaction. Counsel urge that the petition has become infructuous upon Citibank NA, Dhaka making payments to the respondent No. 1 on the advice of the Bangladesh Bank - the banking regulatory authority of Bangladesh. Response of the petitioner to the above contentions: 9. According to Mr. Sabyasachi Chowdhury, and Mr. Rajarshi Dutta, learned Counsel, Citibank NA, Kolkata and Citibank NA Bangladesh are one and the same entity in respect of the bank guarantee and the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UNCITRAL Arbitration Rules, 2010. Clause 9.1 of the GCC which provides that the contract shall be governed by the laws of the Purchaser's Country, which is Bangladesh in this case, would not stand in the way of this court assuming jurisdiction of the matter since the governing law of the contract only decides the substantive provisions of law which would govern the arbitration between the parties; Reference : Bharat Aluminium Co. vs Kaiser Aluminium Technical Services Inc.: (2012) 9 SCC 552 , where the Supreme Court made a distinction between the place/seat of the arbitration and the location of the subject matter of the suit. 13. The question with regard to territorial jurisdiction may also be answered with reference to Section 2(1)(e)(ii) of The Arbitration and Conciliation Act, 1996, which defines "Court" to mean in the case of International Commercial Arbitration, the High Court in exercise of its Ordinary Original Civil Jurisdiction, having jurisdiction to decide the questions affirming the subject-matter of the arbitration if the same had been the subject-matter of a suit. Second, it is also undisputed that the transaction is an International Commercial Arbitration as defin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this court would have jurisdiction to try and decide the present application filed under Section 9 of the Act. The wide and unfettered powers of a court under Section 9 has been reiterated in countless decisions of the Supreme Court and the High Courts. Section 2(2) as amended by the amendment of 2016, closes the loops for a party to object to interim measures under Section 9 unless the parties have specifically and unequivocally agreed to exclude the operation of Part-I of the Act. The issue of maintainability of the arbitration petition was also considered by the learned Single Judge on 18th May, 2021 and the order of injunction was confirmed and extended to the respondent no.1 despite such objection. Whether the respondent no.2 Citibank NA should be treated as consisting of two different entities? 16. It would be evident from the transaction that the petitioner, the respondent no.1 and Citibank NA, Kolkata (respondent no.2) treated Citibank NA Bangladesh at Dhaka as an overseas office of Citibank NA, Kolkata. Citibank NA carries on business from different offices in India including the one at Kolkata. Since the petitioner was required to submit a Performance Security in the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecial equities. The Supreme Court was of the opinion that special equities existed in favour of the appellants since the defendants did not have sufficient funds to complete the work. The other set of decisions namely Girish Mulchand Mehta vs Mahesh S. Mehta; 2010 (1) Bom CR 31 (Division Bench of the Bombay High Court), Bluecoast Infrastructure Development Pvt.Ltd. vs Blue Coast Hotels Ltd (Single Bench of the Delhi High Court), Geodesic Techniques vs L&T (Single Bench of the Madras High Court) and Valentine Maritime Ltd vs Kreuz Subsea Pte. Limited (Division Bench of the Bombay High Court) are for the proposition that while the jurisdiction of the Court under section 9 of the Act can only be invoked by a party to the arbitration agreement, Section 9 does not limit such jurisdiction to pass interim measures only against a party to an arbitration agreement. In Valentine Maritime, the Bombay High Court specifically pointed out that orders are regularly passed restraining banks from releasing payment under bank guarantees though the bank may not be a party to the arbitration agreement. 20. In Arch Hi-Rise (P) Ltd. vs. Yatin Bhimani: (2006) 4 CHN 204, a Division Bench of this court wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntions made on behalf of the petitioner on the merits of the dispute. 21. With regard to the objection taken on behalf of the respondent no. 2 that a non-party to an arbitration agreement cannot be impleaded in the present proceeding, this court is of the view that Section 9 read with Section 2(1)(a) of the 1996 Act provides for a right to apply for interim measures only to a "party" to an arbitration agreement. There is no embargo however in the provision against implementing a non-party to an arbitration proceeding where the presence of such non-party is necessary to give effect to the order that may be passed in the application against a party to the arbitration agreement. The petition contains an averment that the respondent no. 2 has been impleaded for proper and effective adjudication of the issues involved in the present proceeding. This pleading finds factual support from the petitioner applying for a bank guarantee to be issued in favour of the respondent no. 1 which was impleaded by Citibank NA, Kolkata issuing a stand-by letter of credit in favour of Citibank NA, Bangladesh at Dhaka who in turn issued a performance security in the form of a bank guarantee. Hence in orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udice to the petitioner's rights and contentions. It is therefore clear, that the invocation was not concerned with the performance obligations of the petitioner and was only confined to the 10% retention money. The performance security issued by the Citibank NA, Dhaka in the form of bank guarantee and the stand-by letter of credit issued by Citibank NA, Kolkata relate to the obligation of the petitioner to supply the materials to the respondent no. 1. This would appear from the application made by the petitioner to Citibank NA, Kolkata with the respondent no. 1 indicated as the beneficiary. 24. The performance security also makes it clear that the undertaking on the part of the respondent no. 2 to pay the beneficiary (respondent no. 1) was confined to the beneficiary's demand and statement in relation to breach of the obligations of the petitioner under the contract. Since the petitioner performed its obligations under the contract by executing the entire supplies by February, 2018 and received 90% of the contract price for the same, there can be no further basis for any outstanding claim by the respondent no. 1 against the petitioner under the contract. No claim on account of li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edients, namely special equity and the invocation not being in terms of the guarantee. The clauses in the contract and more particularly the GCC clearly demonstrate that the bank guarantee was furnished towards performance security. There can be no issue with regard to performance since the petitioner has already received 90% of the contract price as discussed above. The invocation letter also demonstrates that there cannot be any performance issue with regard to the supplies effected by the petitioner. The invocation letter does not contain any allegation of a breach of performance obligations by the petitioner. The special equity also stands satisfied by reason of the petitioner facing an immediate and irreversible financial loss if the payment is made by Citibank NA, Dhaka to the respondent No. 1 in terms of the Letter of Invocation. The submission made on behalf of the respondent no. 2 that Citibank NA, Dhaka may already have made payment to the respondent no. 1 thereby rendering the present application infructuous, is not a factor which would deter this court to permit the order of injunction to be subverted by errant parties. If Citibank NA, Dhaka has the temerity to frustrat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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