OFB TECH PRIVATE LIMITED v. REAN WATERTECH PRIVATE LIMITED & OTHERS
Case at a glance
- Bench
- NARAYAN RAI
Provisions considered
- Constitution of India arts. 226, 227
- Arbitration and Conciliation Act, 1996 s. 9
- Code of Civil Procedure, 1908 O. XXXIX r. 4; s. 115
- Companies Act, 2013
- Indian Contract Act, 1872
Judgment
i. Feeling aggrieved by the said order dated October 30, 2025, the opposite party has preferred Misc. Appeal (Com.) No. 02 of 2025 under Section 37(2) of the 1996 Act.
In the said appeal the opposite party took out an application praying for stay of operation of the order dated October 30, 2025 passed by the learned Arbitrator. The learned Appellate Court has agreed with the submissions made by the opposite party and stayed the operation of order of the learned Arbitral Tribunal until further orders.
Feeling aggrieved by the aforesaid order of stay, the petitioner has approached this Court by way of the present revisional application. PETITIONER’S ARGUMENTS:
Mr. Banerjee, learned Senior Advocate appearing for the petitioner has made the following submissions (both orally as well as by way of written notes):- a. The language of the subject bank guarantees is the only significant thing that is required to be seen while construction thereof and that upon a perusal of the same it would be clear that the bank guarantees are unconditional in nature. b. The different bank guarantees annexed to the revisional application would reveal that the issuing banks have undertaken to make payment unconditionally and irrevocably without any contestation, protest or delay and without any demur, set-off or counterclaim. c. The invocation clause of the bank guarantees would show that the obligation of the bank is independent of the disputes arising between the parties. d. Courts should not interfere with invocation or encashment of unconditional bank guarantees except in cases of - (i) egregious fraud vitiating the foundation of the bank guarantee, (ii) irretrievable injustice or irreparable injury of an exceptional nature.
Judgments of the Hon’ble Supreme Court in the cases of U.P. State Sugar Corporation vs. Sumac International Limited1, Himadri 1 (1997) 1 SCC 568 Chemicals Industries Limited vs. Coal Tar Refining Company2 and Standard Chartered Bank vs. Heavy Engineering Corporation Limited & Another3 were relied on in support of such contention. e. None of the conditions required for interference with invocation or encashment of bank guarantees has been satisfied in the present case. No case of fraud that went to the root of the bank guarantees has been made out. The disputes between the parties pertain to performance of the underlying contractual obligations and alleged breaches thereunder which are in no way concern the issuing bank. f. No case of irretrievable injustice has either been pleaded or established. The opposite party has failed to demonstrate that any special equity or irreversible prejudice would arise if the bank guarantees are invoked.
Mere financial hardship or apprehension of financial loss would not qualify for irretrievable injustice inasmuch as, if the opposite party ultimately succeeds, its remedy would sound in damages. g. Scope of an appeal under Section 37 of the 1996 Act is very limited inasmuch as the Section 37 Court does not sit as Court of first appeal. Judgements of the Hon’ble Bombay High Court in the case of Ashok Himmatbhai Patel vs. Meera Himmatbhai Patel & Others4 and the Hon’ble Delhi High Court in the case of Suresh Shah vs. M/s. Tata Consultancy Services Limited5 were relied on to buttress such contention. h. The order passed by the learned Appellate Court is contrary to several judgements of the Hon’ble Supreme Court and the well settled proposition that interpretation of contractual terms primarily falls within the domain of the learned Arbitral Tribunal which ought not to be interfered with, if the view of the learned Arbitral Tribunal is a plausible view. i.
The learned sole Arbitrator has not permitted invocation of the bank guarantees absolutely inasmuch as the invocation is conditioned upon deposit of an equivalent sum in an interest bearing short term fixed deposit. j. An order interfering with invocation of bank guarantees would amount to unnecessary interference with unconditional bank guarantees and undermine the sanctity of commercial transactions.
Precedent status how later indexed judgments have treated this case
No known negative treatment found in the Courts & Cases corpus.
This is a result about the indexed corpus, not a finding that the judgment remains good law. Coverage may be incomplete.