IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P.(C) No. 5167 of 2010
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CISC-SRSC Joint Venture, Kolkata ... Petitioner
Versus
Central Coalfields Limited & ors. ... Respondents
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CORAM: HON'BLE MR. JUSTICE D.N.PATEL
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For the petitioner : Mr. Prashant Vidyarthy, Advocate
For the C.C.L. : Mr. Anoop Kr. Mehta, Advocate
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Order No. 03: Dated 5th May, 2011
Per D.N.Patel, J.
1. The present writ petition has been preferred mainly for the reasons that for
no justifiable reason, the petitioner has to continue and keep alive the bank
guarantee, worth Rs.55 Lacs.
2. Learned counsel for the petitioner submitted that initially contract was
given to the petitioner for a period running from 1st February, 2003 to 31st January,
2004 for transportation of the coal and the contract is now over and the work has
been done. As per the learned counsel for the petitioner, at the relevant time the
bank guarantee was to be given and, therefore, during the pendency of the
contract, the aforesaid bank guarantee worth Rs.55 Lacs was given towards the
satisfactory performance of the contract. Learned counsel for the petitioner further
submitted that after completion of the contract, some dispute arose for payment of
money and ultimately, an arbitrator was appointed and the petitioner made a claim
for Rs.4 Crores before the arbitrator and the respondents also filed a counter claim
for Rs.42 Crores. The petitioner was compelled to keep the bank guarantee alive
for years together, without any justifiable reasons. Learned counsel for the
petitioner also submitted that the arbitrator passed an award and decided that the
petitioner is entitled for a sum of Rs.262 Lacs and the counter claim, made by
respondent no.1 was totally rejected. It is further submitted by the learned counsel
for the petitioner that respondent no.1 preferred an application under Section 34 of
the Arbitration Act, 1996 before the Sub Judge-V, Ranchi. The same is also
pending since years. This application was preferred in the year, 2008. For no
reasons, again petitioner was compelled to keep the bank guarantee worth Rs.55
Lacs alive. Learned counsel for the petitioner submitted that basically the bank
guarantee was given for satisfactory performance of the contract for the period,
running from 1st February, 2003 to 31st January, 2004. The work is over but the
dispute is going on and there is no clause that during the period of dispute also,
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the bank guarantee will be kept alive. However, the petitioner being a bonafide
company has continued the bank guarantee, but, enough is enough and now the
respondents are not proceeding with their application under Section 34 of the
Arbitration Act, 1996 before the Sub Judge-V, Ranchi (now pending before the
Sub Judge-IV, Ranchi). It is further submitted by the learned counsel for the
petitioner that the respondents have no claim at all as per the arbitration award
and, therefore, the present petition has been preferred. Further prayer has been
made by the learned counsel for the petitioner that renewal of the bank guarantee
may not be insisted upon and the petitioner is ready and willing to give an
undertaking that in case any amount is found payable by the petitioner, the same
will be paid forthwith and such undertaking will be filed separately before this
Court within a period of one week from the date of the order of this Court by the
Managing Director/Partners of the petitioner-company.
3. Learned counsel for the respondents submitted that the contract for
transportation of coal was given to the petitioner for the period, running from 1 st
February, 2003 to 31st January, 2004 i.e. for one year and the aforesaid bank
guarantee was taken for satisfactory performance of contract. Now the contract is
already over, but, the dispute for the amount payable is going on, initially before
the arbitrator and now before the Sub Judge-IV, Ranchi under Section 34 of the
Arbitration Act, 1966 and, therefore, the bank guarantee must be kept alive, so
that the amount can be realized from the petitioner, without any loss of time.
4. Having heard learned counsel for both the sides and looking to the facts
and circumstances of the case, it appears that there is no reason for the petitioner
to continue with the bank guarantee, worth Rs.55 Lacs, or to keep alive the bank
guarantee, worth Rs.55 Lacs, mainly for the reason that the contract given to the
petitioner for transportation of the coal was for a period of one year i.e. from 1st
February, 2003 to 31st January, 2004. The bank guarantee was to be given for
satisfactory performance of contract. Once the contract is over, the liability to
keep alive the bank guarantee comes to an end. Moreover, the arbitration award
has also been decided in favour of the petitioner. Thus, on the contrary, the bank
guarantee for Rs.262 Lacs ought to have been given by the respondents for the
awarded amount, which is yet to be paid by the respondents to the petitioner, as
per the arbitration award. High and tall claim was made as a counter claim by
respondent no.1 for Rs.42 Crores, but, nothing was proved before the arbitrator
and hence the whole claim of the respondents was rejected/dismissed. Therefore,
under Section 34 of the Arbitration Act, 1996, an application has been preferred
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for quashing and setting aside the award, passed by the arbitrator. This application
has been preferred by respondent no.1 and is still pending.
5. Be that as it may, the fact remains that the purpose, for which the bank
guarantee was given i.e. the contract must be performed satisfactorily, is already
over in the year, 2004. Merely because the dispute is going on, that cannot be a
reason for keeping the bank guarantee alive by the petitioner and, as stated herein
above, the award has been decided in favour of the petitioner and the amount
payable by respondent no.1 to the petitioner, worth Rs.262 Lacs, has not yet been
paid and, therefore, there is, on the contrary, a reason to give a bank guarantee by
the respondents, but, as the respondent is a Government company, this is also not
required. But the fact remains that receiver of the money has not to give a bank
guarantee. Petitioner has to receive a sizable amount from respondents.
6. In view of the aforesaid facts, the bank guarantee is not required to be
continued by the petitioner. Nonetheless, as the application under Section 34 of
the Arbitration Act, 1996 is pending, an undertaking will be given by all the
partners of the petitioner-company within 15 days from today, to this Court as
well as to respondent no.1 and also before the Sub Judge-IV, Ranchi, to the effect
that if the case is decided against the petitioner by the Sub Judge-IV, Ranchi, the
amount, legally payable by the petitioner to the respondents, will be paid
forthwith.
7. This writ petition is, accordingly, allowed and disposed of, with the
aforesaid observations.
( D.N. Patel, J. )
A.K.Verma/