P. 1
Memorial of a moot court

Memorial of a moot court

|Views: 1,060|Likes:
Published by Prakhar Deep

More info:

Published by: Prakhar Deep on Aug 29, 2010
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as DOCX, PDF, TXT or read online from Scribd
See more
See less

05/22/2013

pdf

text

original

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE ŵ

IN THE HONOURABLE SUPREME COURT OF INDIA

NEW DELHI

C CI IV VI IL L A AÞ ÞÞ ÞL LA ALL N NC CŦ Ŧ Ŧ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ Ŧ/ /2 20 01 10 0

I IN N 1 1n nL L M MA A1 11 1L Lk k C CI I


M/S BRIGHT ENERGY LTDŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ (AÞÞLLLAN1)



M/5 5nAN1I VIG¥AN L1DŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ ŦŦ Ŧ ( (k kL L5 5Þ ÞC CNND DL LN N1 1) )

JkI11LN 5U8MI55ICN CN 8LnALI CI 1nL APPELLANT

COUNSEL FOR THE APPELLANT

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE Ŷ

TABLE OF CONTENTS
LIST OF ABBREVIATIONS..................3
INDEX OF AUTHORITIES.................4

STATEMENT OF 1URISDICTION..............................................8
STATEMENT OF FACTS.................9
ISSUES RAISED...................................................................................10
SUMMARY OF ARGUMENTS..............................................................11
ARGUMENTS ADVANCED..................................................................13
PRAYER.............................................................................................23

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE ŷ

LIST OF ABBREVIATIONS
1. & - And
2. § - Section
3. AIR - All India Reporter
4. Anr.- Another
5. Arb. LR- Arbitration Law Reporter
6. Art. - Article
7. Co.- Company
8. Edn. - Edition
9. GOI - Government oI India
10.Govt.- Government
11.Hon`ble - Honourable
12.Ltd. - Limited
13.Ors. Others
14.p .- Page
15.Para - Paragraph
16.SC - Supreme Court
17.SCC - Supreme Court Cases
18.SCR - Supreme Court Reporter
19.Supp - Supplement
20.UOI - Union oI India
21.v. - Versus
22.Vol. Volume

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE Ÿ

INDEX OF AUTHORITIES

LI51 CI CA5L5
1. ACC Babcock v Straw Productiond Ltd., AIR Del 237, (1985)
2. Ambala Bus Syndicate (P) Ltd. v. Bala Financiers Ltd., 2 SCC 322, (1983)
3. Banwari Lal Radhe Mohan v. Puniab State Co-op Supply and Marketing Federation
AIR (Delhi) 357 (1982)
4. Baraii Trading Co v. Veeraswami,1 AN. WR 28, (1980)
5. Basic Tele Services Ltd v. Union oI India, AIR (Delhi) 1, (2000)
6. Board oI Secondary Education, Manipur v. C.W. Leiyachan, 10 SCC 42, ( 2001)
7. BSES Ltd v. Fenner India Ltd (2006) 1 Arb. LR 388 (SC)
8. Centax (India) Ltd v. Vinmar Impex Inc., AIR SC 1924, (1986)
9. Centax India Ltd v Vinmar impex Inc, AIR SC 1924, (1986)
10.Chola Turbo Machinary International Pvt. Ltd. v. Development credit Bank and
Another, 1 Arb. LR (Delhi) 540, (2008 )
11.Collector oI Customs v. Madras Rubber Factory, 5 SCC 439, (1995)
12.Commercial Bank v. Bank oI India 2 SCC 766, (1981): AIR SC 1426, (1981)
13.Damodar Paints Pvt Ltd v Indian oil Corporation Ltd, AIR (Delhi) 57, (1982)
14.Deytsche Ruckversicherung AG v. Walbrook Insurance Co Ltd., 4 All ER 181, (1994)
15.DTH Constn Pvt Ltd v Steel Authority oI India Ltd., AIR Cal 31, (1986 )
16.Dwarikesh Sugar Inds Ltd v Prem Heavy Engg Works, AIR SC 2477, (1997)
17.Edward Owen Engg Ltd v. Barclayes Bank Ltd, 3 WLR 764, (1973);
18.Edward Owen Engg Ltd v. Barclays Bank Intl Ltd., 1 ALL ER 976, 986 (1978)
19.Engineering Mazdoor Sabha v.Hind Cycles Ltd., AIR SC 874, (1963)
20.Essar Oil Ltd v Oil India Ltd and Another, 1 Arb LR (Del) 2000, (1998)
21.General Electric Technical Services Company Inc. v Puni Sons (P) Ltd and another, 2
Arb. LR SC 173, (1991)
22.Harburg India Rubber Comb Co v. Martin, 1 K.B. 778, 784 (1902)
23.Himadri Chemicals Industries Ltd v. Coal Tar ReIining Corporation, 3 Arb. LR (SC)
139, (2007)
24.Hindustan copper Ltd v Rana Builders Ltd, AIR Cal 229, (1999)
25.Hindustan Steel Works Const Ltd v. Tarapore & Co., AIR SC 2268, (1996)
26.Hindustan steelworks corpn Ltd v. Tarapore and Co 5 SCC 341, (1966)

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE Ź

27.Hindustan steelworks corpn Ltd v. Tarapore and Co., 5 SCC 341, (1966)
28.Jaswant Sugar Mills Ltd. v. Lakshmi Chand, AIR SC 677, (1963)
29.Joginder Nath Gupta v. Satish Chander Gupta, 2 SCC 325, (1983)
30.Kalyanpur Limeworks v. State oI Bihar, AIR Pat 226, (1951)
31. Kirloskar Pneumonic Co Ltd v. National Thermal Power Corp. Ltd., AIR Bom. 308,
(1987)
32.Kisan Sahakari Chini Mills Ltd v. Richardson and Cruddas, AIR Bom 35, (1997)
33.Lakeman v. Mountstephen , 7 L.R H.L 17, 24 (1874)
34.Larsen & Toubro Ltd v Maharashtra State Electricity Board, 6 SCC 68, (1995)
35.Mahatma Gandhi Sahakra Sakkare Karkhane v. National Heavy Engg. Coop Ltd. And
Anr., 3 Arb. LR SC 78 (2007) ;
36.Mukharia Bros v State oI Nagaland, 10 SCC 503, (2000)
37.National Thermal Power corporation Ltd v. Hind Galvanizing and Engg Co Ltd, AIR
Cal 421, (1990)
38.NHAI v. ELSAMEX-TWS-SNC Joint Venture, 1 Arb. LR (Delhi) 559, (2008)
39.Pandnav v. Dhableshwar, 40 CLT 1337, (1974)
40.Pishora Singh v. Smt Laiobai, Rev LR 644, (1974)
41.Ram Chandra Panda v. Lok Nath Panda, 1 CWR 138, (1978)
42.Satwan Singh v. State OI Raiasthan, AIR SC 715, (1961)
43.Shankar Motiram Nale v. Shiolasing Gannusing Raiput, 2 SCC 753, (1994)
44.Shankarlal Devi Prasad v. State oI M.P, MPLJ 419, (1978)
45.State oI Maharashtra v. National Const. Co., AIR SC 2367, (1996)
46.State Trading Corpn oI India ltd v. Golodetz Ltd, 2 Loyd`s Rep 277, (1989)
47.Sundaram Finance Ltd v NEPC India LTD (1999) 2 SCC 479,487
48.Syndicate Bank v. Viiay Kumar, AIR SC 1066, (1992)
49.Tarapore and Co. v. V.O. Export AIR SC 1168, (1970) ; Union oI India v. Swadeshi
Cotton Mills Co. Ltd., 4 SCC 295, (1978)
50.Trinath Harichandan v. Chairman, Paradeep Port Trust, 3 SCC 113, 7(1998)
51.U.P Cooperative Iederation Ltd. v Singh Consultants and Engineers (P) Ltd., 1 SCC
174, (1988)
52.U.P. Co-operative Federation Ltd v. Singh Consultants and Engineers (P) Ltd., 2 Arb.
LR SC 279, (1987)
53.U.P. State Sugar Corporation v. M/s. Sumac International Ltd., AIR SC 1644, (1997)
54. Union oI India v. Era Educational Trust 5 SCC 57, (2000)

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE ź

55.Union oI India v. M.C. Desai, (1996) 11 SCC 400
56.Unique Allaince Industries, Goa v. Anupama Agencies, Trichur, AIR Ker 52, 54
(1995)
57.United City Merchants (Investments) Ltd v. Royal Bank oI Canada, 2 ALL ER 720,
728 (1982) Federal Bank Ltd v. VM Jon Engg Ltd, AIR SC 3166, ( 2000)
58.Upadhyay & Co. v. State oI U.P.,1 SCC 81,11, (1999)
59.Uttar Pradesh Co-op Federation Ltd v. Singh Consultants and Engrs Pvt Ltd, 1 SCC
174, (1988)
60.Videocon Properties Ltd. v. Dr. Bhalchandra Laboratories, 3 SCC 711, (2004)
61.Vinay Engineering v. Neyveli Lignite Corporation Ltd., AIR Mad 213, 219 (1985)


LIST OF BOOKS
1. AVTAR SINGH, LAW OF ARBITRATION AND CONCILIATION (EASTERN BOOK COMPANY
LUCKNOW 2005).
2. AVTAR SINGH, CODE OF CIVIL PROCEDURE (CENTRAL LAW AGENCY ALLAHABAD
2009).
3. DURGADAS BASU, CONSTITUTIONAL LAW OF INDIA (WADHWA AND COMPANY NEW
DELHI, 2004).
4. G.S GUPTA, LAW OF INJUNCTIONS (ORIENT PUBLISHER NEW DELHI, 2005).
5. H.C JOHARI, COMMENTARY ON ARBITRATION AND CONCILIATION ACT, 1996 (KAMAL
BOOK HOUSE KOLKATA 2002).
6. H.K SAHARAY, LAW OF ARBITRATION AND CONCILIATION (EASTERN LAW HOUE
KOLKATA 2001).
7. JUSTICE R.S BACHAWAT, LAW OF ARBITRATION AND CONCILIATION (WADHWA AND
COMPANY NAGPUR 2005).
8. M.P JAIN, INDIAN CONSTITUTIONAL LAW (WADHWA AND COMPANY NAGPUR 2003).
9. N.D BASU, LAW OF ARBITRATION AND CONCILIATION (ORIENT PUBLICATIONS NEW
DELHI 2006).
10.N.K ACHARYA, LAW RELATING TO ARBITRATION & A.D.R (ASIA LAW HOUSE
HYDERABAD 2006)
11.O.P MALHOTRA, LAW AND PRACTICE OF ARBITRATION AND CONCILIATION (LEXIS
NEXIS BUTTERWORTHS NEW DELHI 2006).

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE Ż

12.REGA SURYA RAO, LECTURES ON ARBITRATION CONCILIATION AND ALTERNATIVE
DISPUTE RESOLUTION SYSTEMS (ASIA LAW HOUSE HYDERABAD 2006).
13.SURENDRA MALIK, SUPPLEMENT TO SUPREME COURT ON ARBITRATION ( EASTERN
BOOK COMPANY LUCKNOW 2001).
14.V.N SHUKLA, CONSTITUTION OF INDIA (EASTERN BOOK COMPANY NEW DELHI 2008).
LI51 CI CNLINL 5CUkCL5

www.manupatra.com
www.kanoon.com
www.scconline.com
LI51 CI 51A1U1L5 kLILkkLD

The Code of Civil Procedure, 1908
The Indian Contract Act, 1872
The Arbitration and Conciliation Act, 1996
The Constitution of India








WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE 8

STATEMENT OF 1URISDICTION
With reIerence to the circumstances that have been presented in the instant case,
Appellant has approached this Hon`ble Court under Article 136 oI the Constitution oI
India.

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE 9

STATEMENT OF FACTS

1. A contract was entered into by M/s. Mohanwires Ltd. with M/s. Bright Energy Ltd Ior the
construction oI a captive power plant. M/s. Bright Energy Ltd. in their part awarded a part
oI the contract to M/s. Shanti Vigyan Ltd. and issued Iour work/purchase orders in this
connection

2. M/s. Shanti Vigyan issued Iour unconditional irrevocable bank guarantees Irom the State
Bank oI Baroda dated 20.08.1998. The bank guarantees were oI such nature that the bank
was under the liability to pay M/s. Bright Energy Ltd without protest or demur or prooI oI
satisIaction and without reIerence to M/s. Shanti Vigyan Ltd.

3. M/s Bright Energy and M/s. Shanti Vigyan enetered into a wrap around agreement in
which it was stated under a that in case oI any material breach oI the contract, Bright
Energy shall have the right to encash the bank guarantee oI all the contracts. At the time
oI entering into the contract it was agreed by both the parties and an arbitration clause was
added whereby they agreed that all the disputes arising out oI the contract and its
perIormance shall be reIered to an arbitrator, the decision oI whom shall be binding upon
both the parties.

4. On 23.04.2000 Bright Energy invoked the Iour bank guarantees as a result oI which Shanti
Vigyan invoked the Arbitration clause on 26.04.2000. The Iollowing day, i.e on 27.04.2000,
Shanti Vigyan moved a petition under Section 9 oI the Arbitration and Conciliation Act
claiming that Bright Energy are not entitled to the encashment oI the Bank Guarantee beIore
the district court oI Nagpur. On 12.06.2001 the learned District Judge dismissed the petition
oI Shanti Vigyan.

5. An appeal was made under Section 17 oI the Arbitration Act, however Shanti Vigyan
preIerred an appeal beIore the High Court. On 10.10.2001, even while the arbitration
proceedings were pending the Hon`ble High Court made an interim order and on
24.10.2001 allowed the appeal and set aside the iudgment oI the District Court.

6. In 2002, the appellant, Bright Energy Iiled a petition against the order oI the Hon`ble High
Court.

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE ŵŴ

ISSUES RAISED

1. WHETHER THE APPEAL IN MAINTAINABLE UNDER ARTICLE 136 OF CONSTITUTION
OF INDIA ?
1.1. Intervention of Hon`ble Supreme Court in Interim orders.
1.2. The case does not come under the exceptions of appeals to be filed under
Article 136 of Constitution of India.

2. WHETHER THE INTERIM IN1UNCTION BY HIGH COURT OVER THE ENCASHMENT
OF BANK GUARANTEE HAS SUBSTANTIAL VALIDITY ?
2.2. The essentials of invoking bank guarantee are fulfilled.
2.2.1. Bank is obliged to make pavment of all guarantees on demand, without
proof or condition.
2.2.2. A bank guarantee is an independent and distinct contract between
thebeneficiarv and the bank and the rights and obligations therein are to
be determined on its own terms.
2.3. The case does not cover the essentials of interim injunction on invocation
of Bank Guarantee.
2.3.1. Where the bank knows that the documents presented bv the beneficiarv for
seeking enforcement are forged or fraudulent
2.3.2. Where the case of prima facie fraud is established.
2.3.3. Where invocation of bank guarantee would lead to irreparable injurv.
2.3.4. Where the guarantee is conditional and the condition has not been complied
with or period stipulation for invocation for guarantee has expired.
3. WHETHER THE CASE HIGHLIGHTS THE APPARENT LACUNA IN ARBITRATION AND
CONCILIATION ACT. 1996

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE ŵŵ

SUMMARY OF ARGUMENTS

1. WHETHER THE APPEAL IN MAINTAINABLE UNDER ARTICLE 136 OF CONSTITUTION
OF INDIA ?
It is humbly submitted beIore the Hon,ble Court that appeal is maintainable under Article 136
oI Constitution oI India. The Supreme Court can intervene in matters concerning Interim
orders. The rights oI appellant have been inIringed. The case involves grave and substantial
iniustice done to the appellant. The case does not Iall within any oI the exception oI cases
where Special Leave Petition under Article 136 is not allowed. Hence the appellant appealed
beIore Hon,ble Supreme Court.

2. WHETHER THE INTERIM IN1UNCTION BY HIGH COURT OVER THE ENCASHMENT
OF BANK GUARANTEE HAS SUBSTANTIAL VALIDITY ?
It is humbly submitted beIore the Hon`ble Court that interim Iniunction against encashment
oI Bank Guarantee is not iustiIied. Firstly the bank guarantee is present case the bank
guarantee Iurnished is an unconditional and irrevocable one, the person in whose Iavour
guarantee is Iurnished by the bank cannot be prevented by way oI iniunction in enIorcing the
guarantee. Bank. Secondly it is humbly submitted beIore the Hon`ble court that it is well
settled that a bank guarantee is an autonomous contract and imposes an absolute obligation
on the bank to IulIil the terms and the payment in the Bank guarantee becomes due on the
happaning oI the contingency on the occurance oI which the guarantee becomes enIorceable.
Thirdly the present case is not a 5rima facie case oI Iraud as per the Iacts and also there is no
scope oI "irretrievable iniustice" being done, Ior iustice can always be rendered to the
respondents, iI they are to succeed in the tribunal where case is already pending. Moreover
the Iacts remain silent vis a vis the perIormace oI the conractual responsibilities on the part oI
the respondents, upon which the situation oI encashment oI bank guarantees have been
arrived at, thereby eradicating all chances oI "special equity" being done in Iavour oI the
appellants upon the encashment oI the bank guarantees.

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE ŵŶ

3. WHETHER THE CASE HIGHLIGHTS THE APPARENT LACUNA IN ARBITRATION AND
CONCILIATION ACT. 1996
It is humbly submitted beIore the Hon`ble Court that the present case highlights the apparent
lacuna in arbitration and conciliation act, 1996. Since parties have equal right to appeal in
either section 9 to court or section 17 to tribunal the scope oI section 17 appears to be less.
The abolition oI the dual mechanism oI interim relieI also needs to be given a serious
thought, iI reduction oI Court Intervention, which is one oI the primary obiectives oI the
Arbitration and Conciliation Act, 1996 is to be attained .





















WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE ŵŷ

ARGUMENTS ADVANCED

1. WHETHER THE APPEAL IS MAINTAINABLE UNDER ARTICLE 136 OF THE
CONSTITUTION OF INDIA?
It is humbly submitted to the Hon`ble Court that an appeal is being made under Article 136
1

oI the Constitution oI India. The appeal under Article 136 must satisIy certain conditions.
Firstly the determination or order sought to be appealed Irom must have character oI iudicial
adiudication.
2
Secondly, the authority whose act is complained must be a court or a tribunal.
Unless both the conditions are satisIied, Article 136, clause 1 cannot be invoked.
3
The
Supreme Court will grant special leave to appeal in exceptional - cases where grave and
substantial iniustice has been done by disregard to the Iorms oI legal process or violation oI
the principles oI natural iustice or otherwise.
4
In the present case the right oI the appellant has
been inIringed oI invoking a unconditional bank guarantee
5
hence appellant has approached
to the Hon`ble Supreme Court Ior iustice.
1.1. Intervention of Hon`ble Supreme Court in Interim orders.
It is humbly submitted to the Hon`ble court that it is necessary Ior the Supreme Court to deal
with legal issues at interim stage itselI, leaving the parties to work out their ultimate rights
respectively Iinally in the pending suite.
6
In Tara5ore and Co. v. J.O. Ex5ort.
7
the interim
order oI the trial iudge was not held iustiIied on account oI the important legal principles oI
international trade being involved in that case. In United Commercial Bank v. Bank of India
8

it was Iound that there is no iustiIication Ior the High Court to grant a temporary iniunction
restraining a bank Irom claiming reIund oI its due amount Irom another bank, and Supreme
Court intervention was called Ior. II the interim order oI High Court was on Iacts being
perverse in nature, interIerence was called Ior.
9
In several other cases also the Hon`ble

1
Article 136: Notwithstanding anything in this Chapter, the Supreme Court may, in its discretion, grant special
leave to appeal Irom any iudgement, decree, determination, sentence or order in any cause or matter passed or
made by any court or tribunal in the territory oI India.
2
Jaswant Sugar Mills Ltd. v. Lakshmi Chand, AIR SC 677, (1963)
3
Engineering Mazdoor Sabha v.Hind Cycles Ltd., AIR SC 874, (1963)
4
Satwan Singh v. State OI Raiasthan, AIR SC 715, (1961)
5
ReIer to Iacts oI the cases point no. 4
6
Videocon Properties Ltd. v. Dr. Bhalchandra Laboratories, 3 SCC 711, (2004)
7
1 SCC 223, (1969) :AIR SC 1168, (1970) ; Union oI India v. Swadeshi Cotton Mills Co. Ltd., 4 SCC 295,
(1978)
88
2 SCC 766, (1981): AIR SC 1426, (1981)
9
Board oI Secondary Education, Manipur v. C.W. Leiyachan, 10 SCC 42, ( 2001)

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE ŵŸ

Supreme Court had to interIere with the interim orders in the interest oI iustice.
10
In the
present case appellant has Iiled a case against the decision oI High Court granting a Interim
Iniunction over encashment oI bank guarantee. Since the decision violates the terms and
condition oI invoking bank guarantee hence intervention oI the Hon`ble Supreme Court is
necessary.
1.2.The case does not come under the exceptions of appeals to be filed under
Article 136 of Constitution of India
The in the Iollowing cases Special Leave Petition is not maintainable:
1. Against a deceased person.
11

2. Meager amount involved in the matter.
12

3. Where the intervention application oI the applicants Iiled in a writ petition beIore the High
Court was dismissed and an SLP was also dismissed, an intervention application by such
applicants in another SLP involving similar questions.
13

4. The SLP withdrawn without obtaining Irom the court liberty to Iile the same again, Iresh
SLP against the same impugned order.
14

5. Against the High Court`s reiecting review petition.
15

The present case does not come under any oI these exceptions hence intervention oI Hon`ble
Supreme Court in necessary to get iustice.

2. WHETHER THE INTERIM IN1UNCTION BY HIGH COURT OVER THE ENCASHMENT OF
BANK GUARANTEE HAS SUBSTANTIAL VALIDITY ?
2.1. The essentials of invoking bank guarantee are fulfilled.
It is most humbly submitted to the Hon`ble court that a contract oI guarantee is a contract to
perIorm the promise, or discharge the liability, oI a third person in case oI his deIault
16
. A

10
Joginder Nath Gupta v. Satish Chander Gupta, 2 SCC 325, (1983) ; Ambala Bus Syndicate (P) Ltd. v. Bala
Financiers Ltd., 2 SCC 322, (1983) ; Union oI India v. Era Educational Trust 5 SCC 57, (2000)
11
Union oI India v. M.C. Desai, (1996) 11 SCC 400 (para I).
12
Collector oI Customs v. Madras Rubber Factory, 5 SCC 439, (1995)
13
Trinath Harichandan v. Chairman, Paradeep Port Trust, 3 SCC 113, 7(1998)
14
Upadhyay & Co. v. State oI U.P.,1 SCC 81,11, (1999)
15
Shankar Motiram Nale v. Shiolasing Gannusing Raiput, 2 SCC 753, (1994)

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE ŵŹ

contract oI guarantee is predicated upon the existence oI a valid principal debtor.
17
II there is
no such principal obligation, generally the guarantee Iails. Consequently, a valid guarantee
depends upon the existence oI a promise made to a person to whom a debtor is already
answerable or is to become answerable.
18
A bank guarantee is a sort oI an absolute
undertaking to pay the amount whenever demanded by guarantee holder.
19
Further Bank
Guarantee is a well known business transaction in the world oI commerce and it has become
the backbone oI banking system.
20
The essentials oI invoking bank guarantee were laid down
in industan steelworks cor5n Ltd v. Tara5ore and Co.
21

2.1.1. Bank is obliged to make pavment of all guarantees on demand, without proof or
condition.
It is most humbly submitted to the Hon`ble court that in the present case the bank guarantees
are unconditional irrevocable bank guarantees in which the bank agreed to pay to Bright
Energy the amount demanded or claimed by them. II the bank guarantee Iurnished is an
unconditional and irrevocable one, the person in whose Iavour guarantee is Iurnished by the
bank cannot be prevented by way oI iniunction in enIorcing the guarantee.
22
Further each
every bank guarantee is an unconditional bank guarantee.
23
The Iundamental principle to be
kept in mind that bank cannot rely on the term underlying contract between the parties. The
bank Iurnishing such a guarantee is bound to honour it irrespective oI any disputes raised by

16
Indian Contract Act §126 A 'contract oI guarantee¨ is a contract to perIorm the promise, or discharge the
liability, oI a third person in case oI his deIault. The person who gives the guarantee is called the 'surety¨ ; the
person in respect oI whose deIault the guarantee is given is called the 'principal debtor¨ and the person to whom
the guarantee is given is called the 'creditor¨. A guarantee may be oral or written.
17
Lakeman v. Mountstephen , 7 L.R H.L 17, 24 (1874)
18
Harburg India Rubber Comb Co v. Martin, 1 K.B. 778, 784 (1902)
19
State Trading Corpn oI India ltd v. Golodetz Ltd, 2 Loyd`s Rep 277, (1989) large transactions involve both
documentary credit ( bank Guarantee and Letters oI Credit ) and guarantees.
20
Unique Allaince Industries, Goa v. Anupama Agencies, Trichur, AIR Ker 52, 54 (1995)
21
Hindustan steelworks corpn Ltd v. Tarapore and Co., 5 SCC 341, (1966) Firstly a bank guarantee is an
independent and distinct contract between the bank and the beneIiciary and is not qualiIied by the underlying
transaction and the primary contract between the person at whose instance the bank guarantee is given and the
beneIiciary,
Secondly in case oI an unconditional bank guarantee the nature oI the obligation is absolute and not dependent
upon any dispute or proceeding between the party at whose instance the bank guarantee is given and the
beneIiciary,
Thirdly the commitment by the banks must be honoured Iree Irom interIerence by the court and it is only in
exceptional cases, that is to say, in case oI Iraud, or in a case where irretrievable iniustice would be done iI bank
guarantee is allowed to be encashed, the court would interIere.
22
Mahatma Gandhi Sahakra Sakkare Karkhane v. National Heavy Engg. Coop Ltd. And Anr., 3 Arb. LR SC
78 (2007) ; State oI Maharashtra v. National Const. Co., AIR SC 2367, (1996)
23
NHAI v. ELSAMEX-TWS-SNC Joint Venture, 1 Arb. LR (Delhi) 559, (2008)

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE ŵź

its customer, since it`s an independent contract, absolute in nature.
24
Secondly the amount
guaranteed in present case is payable with or without reason in writing Irom Respondent
without protest or demour or prooI oI satisIaction and without reIerence to the Respondent,
upon being called by the appellant, irrespective oI any dispute between the parties with regard
or any contractual terms between them.
25
The authorities have completely ruled that
beneIiciary is entitled to realize a bank guarantee in its irrespective oI any pending disputes
upon the construction or perIormance oI contract.
26
It is not concerned in the least with the
relations between the supplier and the customer
27
; nor with the question whether the supplier
has perIormed his contracted obligation or not; nor with the question whether the supplier is
in deIault or not.
28
The bank must pay irrespective oI any dispute raised by the person at
whose instance has been given
29
thereIore with reIerence to above cases the bank is obliged
to make payment oI all guarantees on demand, without prooI or condition.

2.1.2. A bank guarantee is an independent and distinct contract between the beneficiarv
and the bank and the rights and obligations therein are to be determined on its own
terms.
It is humbly submitted to the Hon`ble court that it is well settled that a bank guarantee is an
autonomous contract and imposes an absolute obligation on the bank to IulIil the terms and
the payment in the bank guarantee becomes due on the happening oI the contingency on the
occurrence oI which the guarantee becomes enIorceable.
30
In the present case appellant and
respondent entered into a 'wrap around¨ agreement under which the respondent would
perIorm its duty on a turnkey basis. The contract Ior the sake oI convenience, was split up
into Iour sub-contracts (viz the Iour work purchase orders), was a composite contract
executable on turnkey basis. In case oI any material breach appellant shall have right to
embark upon the retentions and encashment oI all bank guarantees
31
. In case oI with similar

24
Himadri Chemicals Industries Ltd v. Coal Tar ReIining Corporation, 3 Arb. LR (SC) 139, (2007)
25
ReIer to Iacts the cases point no 3
26
Chola Turbo Machinary International Pvt. Ltd. v. Development credit Bank and Another, 1 Arb. LR (Delhi)
540, (2008 )
27
U.P. Co-operative Federation Ltd v. Singh Consultants and Engineers (P) Ltd., 2 Arb. LR SC 279, (1987)
28
Edward Owen Engg Ltd v. Barclayes Bank Ltd, 3 WLR 764, (1973); National Thermal Power corporation
Ltd v. Hind Galvanizing and Engg Co Ltd, AIR Cal 421, (1990); Kisan Sahakari Chini Mills Ltd v. Richardson
and Cruddas, AIR Bom 35, (1997)
29
Dwarikesh Sugar Inds Ltd v Prem Heavy Engg Works, AIR SC 2477, (1997)
30
Syndicate Bank v. Viiay Kumar, AIR SC 1066, (1992)
31
ReIer to Iacts oI the cases point no. 3

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE ŵŻ

Iactual situations BSES Ltd v. Fenner India Ltd
32
court held that under the 'wrap-around
agreement¨, the appellant had right to encash all or any oI the bank guarantees Ior the breach
oI Iirst respondent`s obligation under anyone oI the contracts.
33
Further, it is no Iunction oI
the bank, nor the court to enquire as to whether due perIormance had actually happened.
34

The beneIiciary could invoke the bank guarantees without giving the details oI the loss
caused.
35
Further an irrevocable perIormance bank guarantee being a distinct separate
transaction, the payment under it being invoked, it cannot be stayed or stopped, pending any
settlement oI disputes between the beneIiciary and the person at whose instance the guarantee
has been given.
36
A bank guarantee is a commercial document and is neither a statutory
notice nor a pleading in a legal proceeding, and it may be invoked in a commercial
manner.
37
A Bank Guarantee is an independent contract whereby the bank undertakes to
unconditionally and unequivocally abide by its terms.
38
Further iI bank undertakes a
guarantee to make unconditional payments on demand without reIerence the respondent.
Then the guarantee also provides that appellant would be the sole iudge Ior deciding whether
the respondent had IulIilled the terms oI contract or not.
39
II documentary credits are
irrevocable and independent, the bank must pay when demand is made.
40


2.2. The case does not cover the essentials of interim injunction on invocation of Bank
Guarantee.
It is humbly submitted to the Hon`ble Court that the iniunction order oI the High Court to the
appellant against the encashment oI the Bank Guarantee is uniustiIied. As Iar as interim
iniunctions are concerned they lay stress oI the prima Iacie case, balance oI convenience and
irreparable iniury.
41
Usually courts should reIrain Irom granting temporary iniunction to
restrain the perIormance oI the contractual obligations arising out oI a letter oI credit or a

32
(2006) 1 Arb. LR 388 (SC)
33
id
34
id
35
Hindustan copper Ltd v Rana Builders Ltd, AIR Cal 229, (1999)
36
Damodar Paints Pvt Ltd v Indian oil Corporation Ltd, AIR (Delhi) 57, (1982) ; Centax India Ltd v Vinmar
impex Inc, AIR SC 1924, (1986)
37
DTH Constn Pvt Ltd v Steel Authority oI India Ltd., AIR Cal 31, (1986 ) ( no statement in demand notice that
the beneIiciary had suIIered a loss and /or damages on account oI deIault by the person on whose behalI bank
guarantee was given).
38
Essar Oil Ltd v Oil India Ltd and Another, 1 Arb LR (Del) 2000, (1998)
39
U.P Cooperative Iederation Ltd. v Singh Consultants and Engineers (P) Ltd., 1 SCC 174, (1988)
40
General Electric Technical Services Company Inc. v Puni Sons (P) Ltd and another, 2 Arb. LR SC 173,
(1991)
41
Baraii Trading Co v. Veeraswami,1 AN. WR 28, (1980)

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE ŵ8

bank guarantee.
42
Commitments oI the bank must be allowed to be honoured Iree Irom
interIerence by courts; otherwise trust in international commerce would be irreparably
damaged.
43
In other words there is no absolute Ietter on Court to grant Iniunction.
44
A party
applying temporary iniunction has to establish a prima Iacie case to get a temporary
iniunction but to establish such a case it is not necessary to establish his title.
45
Prima Iacie
case really means that there is a serious question to be tried and that the claim oI the plaintiII
is not Irivolous or vexatious.
46
Even establishment oI prima Iacie case may not be suIIicient
to grant a temporary iniunction. Even irreparable iniury and balance oI convenience must be
taken into consideration.
47
The word iniury in Order XXXIX, Rule 2 means an invasion or
inIraction oI legal right giving rise to a right oI action to the party claiming a right.
48

Irreparable iniury is one that cannot be compensated by money. While considering to grant
temporary iniunction it is necessary to see whether interIerence is necessary to protect the
party applying Ior it.
49

Further to reIuse the payment oI a bank guarantee, IulIilment oI the Iollowing conditions is
essential:
2.2.1. Where the bank knows that the documents presented bv the beneficiarv for seeking
enforcement are forged or fraudulent
Where the bank knows that the documents presented by the beneIiciary Ior seeking
enIorcement are Iorged or Iraudulent.
50
In the present case it is not mentioned in the Iacts oI
the cases that Iorged or Iraudulent documents were submitted hence this condition should be
ruled out.
2.2.2 Where the case of prima facie fraud is established.
It is most humbly submitted to the Hon`ble court that the respondent cannot claim the
iniunction on the bank guarantees on the grounds oI Iraud. The nature oI the Iraud that the
courts talk about is Iraud oI an 'egregious nature as to vitiate the entire underlying

42
ACC Babcock v Straw Productiond Ltd., AIR Del 237, (1985)
43
Centax (India) Ltd v. Vinmar Impex Inc., AIR SC 1924, (1986)
44
Vinay Engineering v. Neyveli Lignite Corporation Ltd., AIR Mad 213, 219 (1985)
45
Ram Chandra Panda v. Lok Nath Panda, 1 CWR 138, (1978)
46
Shankarlal Devi Prasad v. State oI M.P, MPLJ 419, (1978)
47
Kalyanpur Limeworks v. State oI Bihar, AIR Pat 226, (1951)
48
Pandnav v. Dhableshwar, 40 CLT 1337, (1974)
49
Pishora Singh v. Smt Laiobai, Rev LR 644, (1974)
50
United City Merchants (Investments) Ltd v. Royal Bank oI Canada, 2 ALL ER 720, 728 (1982) ; Federal
Bank Ltd v. VM Jon Engg Ltd, AIR SC 3166, ( 2000)

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE ŵ9

transaction.¨ It is the Iraud oI the beneIiciary and the Iraud oI somebody else.
51
A Iraud is
that in which the beneIiciary would be claiming payment to which he knew he had no
entitlement.
52
In the present case the contract oI bank guarantee was entered upon by the
petitioner knowing Iully that he will be entitled to payment determined by the terms and
conditions oI the bank guarantee itselI. Mere suspicion or possibility oI Iraud is not enough.
53

Where a Iraud by one oI the parties to the underlying contract has been established and the
bank has notice oI the Iraud.
54
Another view is that a demand under the guarantee may
become Iraudulent not because oI a Iraud committed by the beneIiciary while executing the
underlying transaction, but it may become so because oI subsequent events and
circumstances.
55
In the present case the Iacts remain silent about the existence oI any such
misdeeds on the part oI the petitioner and a mere assumption oI the happenings oI any such
event would be beyond the scope oI prudence.
56

2.2.3. Where invocation of bank guarantee would lead to irreparable injurv.
It is most humbly submitted to the Hon`ble Court that the encashment oI the bank guarantees
by the appellant won`t lead to any special equity towards them or would result in an
irretrievable iniury being done towards the Respondents. The harm or iniustice contemplated
Ior reIusing enIorcement oI a bank guarantee must be oI such an exceptional and irretrievable
nature as would override the terms oI the guarantee and the adverse eIIect oI such an
iniunction on commercial dealings in the country.
57
Assuming the happenings oI events oI
such extraordinary nature would be incongruous as the Iacts oI the case remain silent on the
issue. There is no scope oI "irretrievable iniustice" being done, Ior iustice can always be
rendered to the respondents, iI they are to succeed in the tribunal where case is already
pending. Moreover the Iacts remain silent vis a vis the perIormance oI the contractual
responsibilities on the part oI the respondents, upon which the situation oI encashment oI
bank guarantees have been arrived at, thereby eradicating all chances oI "special equity"
being done in Iavour oI the appellants upon the encashment oI the bank guarantees.


51
Uttar Pradesh Co-op Federation Ltd v. Singh Consultants and Engrs Pvt Ltd, 1 SCC 174, (1988)
52
Deytsche Ruckversicherung AG v. Walbrook Insurance Co Ltd., 4 All ER 181, (1994)
53
Edward Owen Engg Ltd v. Barclays Bank Intl Ltd., 1 ALL ER 976, 986 (1978)
54

55
Hindustan Steel Works Const Ltd v. Tarapore & Co., AIR SC 2268, (1996)
56
ReIer to the Iacts oI the cases
57
U.P. State Sugar Corporation v. M/s. Sumac International Ltd., AIR SC 1644, (1997)

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE ŶŴ

2.2.4. Where the guarantee is conditional and the condition has not been complied with
or period stipulation for invocation for guarantee has expired.
It is humbly submitted to Hon`ble Court that where the guarantee is conditional and the
condition has not been complied with then an interim iniunction could be granted.
58
Secondly
where the conditions necessary Ior invoking a conditional bank guarantee have not arisen.
59

Thirdly where the purpose Ior which a conditional guarantee was given has been
accomplished iniunction could be granted.
60
Further where the period stipulated Ior
invocation Ior guarantee has expired.
61
The present case does not satisIy any oI the above
conditions so interim iniunction cannot be put on the invocation oI bank guarantee.

3. WHETHER THE CASE HIGHLIGHTS THE APPARENT LACUNA IN ARBITRATION AND
CONCILIATION ACT. 1996
It is humbly submitted to Hon`ble Court that the scope oI § 9 is wider than that oI § 17. § 9
and 17 both deal with the interim measures oI protection. The court and arbitral tribunal
appear to have concurrent iurisdiction which, though not identical, is somewhere overlapping.
The salient points oI diIIerence between these two are many. First oI all the party autonomy
is diIIerent. One such situation is to grant interim measures oI protection as contemplated by
§ 9. This is similar to the power available to the court under the Arbitration Act oI 1940. But
what is clearly revolutionary is § 17 oI the Act, which also uses the phrase Interim measures
oI protection` and thus gives co-terminus power to the Arbitral Tribunal as well. The phrase`
unless otherwise agreed by the parties` ushers in party autonomy and indicates that this
provision is oI non-mandatory nature. The non-mandatory provisions are primarily oI
importance where a set oI arbitral rules is agreed on as are used in institutional arbitration.
62

In some iurisdictions, the relevant law speciIically provides that in the Iirst instance, an
application should be made to the tribunal and then only to the court. For instance, § 38(3) to
(6) oI English Arbitration Act 1996, in the absence oI an agreement by the parties to the

58
Banwari Lal Radhe Mohan v. Puniab State Co-op Supply and Marketing Federation Ltd., AIR (Delhi) 357
(1982)
59
Basic Tele Services Ltd v. Union oI India, AIR (Delhi) 1, (2000) (bank guarantee given to cover withdrawal
oI bid by a bidder during the validity oI bid could not be invoked where the bidder never withdrew the bid) ;
Kirloskar Pneumonic Co Ltd v. National Thermal Power Corp. Ltd., AIR Bom. 308, (1987)
60
Larsen & Toubro Ltd v Maharashtra State Electricity Board, 6 SCC 68, (1995)
61
Mukharia Bros v State oI Nagaland, 10 SCC 503, (2000)

In this connection such institutional rules on this question are the LVIA Rules particularly Rule-25`Interim
and Conservatory Measure` is remarkably explicit

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE Ŷŵ

contrary, the delineate the deIault parameters oI tribunal iurisdiction to make interim orders
oI protection. § 44(3) vests the court with powers in support oI arbitral proceedings and
prescribes the procedure Ior exercise oI power. But there is no similar provision in model law
or is § 9 oI this Act. This section is not identical to Article 9 oI the Modal Law, though
codiIies its spirit, It appears rather to have been inIluenced by the language oI § 41(b) and
Second Schedule oI the Act oI 1940, albeit both the provisions, as observed by the Supreme
Court in Sundaram Finance Ltd v NEPC India LTD
63
are very diIIerent Irom the provisions
oI § 9 and 17 oI this Act. The parties thereIore, have the choice whether to approach the
arbitral tribunal under § 17 or court under § 9, Ior seeking an interim measure oI protection.
As the modern trend oI arbitration law is to marginalize court intervention, the balance
normally should tilt in Iavour oI the tribunal because it will be more expeditious and less
expensive. Legendary legal personality Nani Palkiwala mentioned that arbitration has to be
made compulsory in commercial matters. It has beneIits like speedy iustice, its economical,
Iinality as arbitrators award is unchallengeable except on narrow grounds and Iinally iustice
as the Iinal outcome oI arbitration is as likely -to be marked by iustice as is a case in a court
oI law. The law should provide Ior compulsory adiudication or arbitration to settle all
industrial disputes
64
. The court has the coercive power to enIorce its orders. But the arbitral
tribunal is not competent to exercise any such power. The lack oI power to enIorce an interim
measure Ior protection, leaves the tribunal with no eIIective way oI Iorcing the party to obey
the order, that is to say, it has no teeth.

§ 38 oI the English Arbitration Act 1996,
65
unless otherwise agreed by the parties, conIer the
powers to order interim measure oI protection on the arbitral tribunal. This power particularly

63
2 SCC 479, 487 (1999)
64
M.V Kamath, Convocation Address , Xavier labour relations instituts at Jamshedpur, 29 Ieb 1980, Obedience
to UnenIorceable,nani Palkiwala A liIe.
65
The English Arbitration Act, 1996: section 38 General Powers exercisable by the Tribunal.
(1) The parties are Iree to agree on the powers exercisable by the Tribunal Ior the purposes oI and in
relation to the proceedings.
(2) Unless otherwise agreed by the parties the tribunal has the Iollowing powers.
This power shall not be exercised on the ground that the claimant is-
(a) An individual ordinarily resident outside the United Kingdom, or
(b) A corporate oI association incorporated or Iormed under the law oI the country outside the United
Kingdom, or whose central management and control is exercised outside the United Kingdom
(c) The tribunal may order a claimant to provide security Ior the costs oI the arbitration.
This power shall not be exercised on the ground that the claimant is-
(i) An individual ordinarily resident outside the United Kingdom, or
(ii)A corporation or association incorporated or Iormed under the law oI a country outside the
United Kingdom, or whose central management and control is exercised outside the United
Kingdom.

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE ŶŶ

includes express power to order a party to Iurnish security Ior the costs oI arbitration, a power
previously preserve oI the court only. The 1996 act does not otherwise speciIy the basis on
which security Ior costs should or should not be granted and the tribunal thereIore has a broad
discretion. It seems likely though that in practice the tribunal will have regard to similar
consideration as those applied by court in dealing with applications under RSC O 23.
66

The abolition oI the dual mechanism oI interim relieI also needs to be given a serious
thought, iI reduction oI Court Intervention, which is one oI the primary obiectives oI the
Arbitration and Conciliation Act, 1996 is to be attained. In the present case, iustice could
have been delivered to Bright Energy with minimised hazards had such overlapping arbitral
Iramework not been present within the Arbitration and Conciliation Act, 1996 in the Iorm oI
Sections 9 & 17. Despite the Iact that the Arbitral Proceedings were pending beIore the
Arbitration Tribunal, the respondents could Iile a suit beIore the Hon`ble High Court, only by
exploiting this apparent lacuna and could successIully delay the iustiIied encashment oI the
bank guarantees.









(d) The tribunal may give directions in relation to any property which is the subiect oI the proceedings
or as to which any question arises in the proceedings, and which is owned by or is in the
possession oI a party to the proceedings-
(i) For the inspection, photographing, preservation, custody or detention oI the property by the
tribunal, an expert or a party, or
(ii)Ordering the examples be taken Irom, pr any observation be made oI or experiment conducted
upon the property.
(e) The tribunal may direct that a party or witness shall be examined on oath or aIIirmation, amd may
Ior that purpose administer any necessary oath or taken any necessary aIIirmation.
(I) The tribunal may give directions to a party Ior the preservation Ior the purposes oI any evidence in
his custody or control.

66
Russell on Arbitration, twenty-Iirst edition, 1997, p 206 para 5-098

WRITTEN S0BNISSI0N 0N BEBALF 0F APPELLANT PAuE Ŷŷ

PRAYER
WhereIore in the light oI the abovementioned Authorities Cited, Issues Raised and
Arguments advanced, it is humbly requested beIore this Hon`ble Court to adiudge the matter
and declare that:

O The Iniunction order passed by the Hon`ble High Court be set aside.
O The Appellant be allowed to encash the Bank Guarantees.

And to pass any such order as deemed Iit in the light oI iustice, equity and good
concise. The counsel shall Iorever beseech this Hon`ble Court Ior its humble
consideration.

Counsel For Appellant

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->