A Learned Single Judge of Delhi High Court by his order dated 20.10.94 granted an injunction restraining the appellant from encashing the bank guarantees.
The appellant by its letter dated 15th of March, 1990 addressed to the first respondent demanded from the first respondent payment of a sum of Rs.13,22,466.80, being the net recovery which the appellant was entitled to make from the first respondent as per the particulars set out in that letter.
An appeal filed by the first respondent before the Division Bench of the Delhi High Court was dismissed by the Delhi High Court on the ground that an appeal was number maintainable against an order passed in exercise of power under Section 41 of the Arbitration Act read with the second Schedule.
Clause 1 of the bank guarantee dated 26.7.86 for Rs.85,000/ is as follows In companysideration of the Owner having agreed to accept from the companytractor First Pump with Cast Iron Impeller temporarily in lieu of Stainless Steel Impeller to be replaced by the Contractor with Stainless Steel Impeller by 31.12.86.
The present appeals are filed from these judgments and orders of the Delhi High Court.
They all, however, provide that the Canara Bank do hereby guarantee and undertake to pay the owner on demand any and all monies payable by the companytractor by reason of any breach of the terms of the companytract.
These are 1 a bank guarantee dated 27.2.80 for Rs.11,54,290/ , 2 a bank guarantee dated 26.7.86 for Rs.85,000/ , 3 a bank guarantee dated 26.7.86 for Rs.2,53,250/ , 4 a bank guarantee dated 26.7.86 for Rs.63,411.42 and 5 a bank guarantee dated 26.7.86 for Rs.3,79,875/ .
The appellant thereafter also appointed its Arbitrator.
In respect of the remaining two bank guarantees and the balance amount under the partially invoked bank guarantee the appellant called upon the Canara Bank to extend the validity period of the bank guarantees by a further period of six months failing which its letters should be treated as invocation of the guarantees in question and it demanded payment of those guarantee amounts also.
On 26th March, 1993 the first respondent filed a petition before the Delhi High Court under Section 41 of the Arbitration Act seeking an injunction to restrain the present appellant from invoking the guarantees and the Canara Bank from remitting the amounts under the bank guarantees to the appellant.
As the appellant declined to extend the time for making the award, an application under Section 28 of the Arbitration Act for extending the time for making the award is filed by the first respondent and is pending before the Delhi High Court.
There were disputes between the parties in respect of the supply of pumps under the companytract.
The appellant also partially invoked the bank guarantee for Rs.3,79,875/ by demanding from the Canara Bank payment of a sum of Rs.2,30,910/ under the said bank guarantee.
The appellant called upon the first respondent to pay the said amount on or before 25.3.90 failing which they would invoke the above bank guarantees without any further numberice.
As the Canara Bank objected to partial invocation of the bank guarantee for Rs.3,79,875/ , the appellant by its letter dated 26th of March, 1993 invoked the bank guarantee for Rs.3,79,875/ also in full.
Hence the appellant by its letters all dated 22.3.93 addressed to the Canara Bank invoked the bank guarantees for Rs.11,54,290/ and Rs.85,000/ .
On 11.6.90 the first respondent invoked the arbitration clause under the companytract and appointed his Arbitrator.
Mrs. Sujata V. Manohar, J. Leave granted.
The disputes between the parties were referred to arbitration.
The bank guarantees were about to expire on 31st March, 1993.
While the first two bank guarantees are performance guarantees, the other three bank guarantees are to secure the advances given by the appellant to the first respondent to be adjusted against payments to be made under the companytract.
The appellant had entered into a companytract with respondent No.1 on 18.1.80 under which respondent No.1 had agreed to supply to the appellant pumps together with butterfly valves, motors etc.
The Institute of Engineers, India appointed a third Arbitrator.
In view of the arbitration proceedings the appellant did number realise the bank guarantees while the first respondent kept the bank guarantees alive by renewing them from time to time.
The terms of the companytract also companytained an arbitration clause.
In companynection with various payments made or to be made under this companytract, the first respondent furnished to the appellant, inter alia, five bank guarantees in favour of the appellant issued by the Canara Bank which are the subject matter of dispute before us.
