Arbitration; Abb Vs. Isolux Corsan [Delhi High Court, 30-05-2016]



Judgment pronounced on: 30th May, 2016

O.M.P.(I) (COMM.) 192/2016

ABB INDIA LIMITED ….. Petitioner Through Mr.A.S.Chandhiok, Sr.Adv. with Mr.Ananya Kumar, Mr.Kunal Mimani & Ms.Vandana Anand, Advs. versus ISOLUX CORSAN INDIA ENGINEERING & CONSTRUCTION & ORS ….. Respondents Through Mr.Akhil Sibal, Adv. with Mr.Jatin Mongia, Mr.Nikhil Chawla & Mr.Utkarsh, Advs. for R-1. Mr.Sanjay Jain, ASG with Mr.Deepak, Mr.Shreshth Jain, Ms.Aastha Jain, Mr.Sumit Misra & Ms.Aditi Sharma, Advs. for R-2.


1. M/s. ABB India Limited, the petitioner, having its registered office at Bengaluru has filed the present petition under

Section 9 of the Arbitration and Conciliation Act, 1996

(hereinafter referred to as the ‘Act’) against the three respondents, namely, (i) Isolux Corsan India Engineering & Construction Private Limited, 2nd Floor, Block Two, Vatika Business Park, Sector 49, Sohna Road, Gurgaon- 122101; (ii) Power Finance Corporation Limited, Urjanidhi, 1, Barakhamba Lane, Connaught Place, New Delhi 110001; and (iii) Hongkong and Shanghai Banking Corporation Limited, 25, Barakhamba Road, New Delhi 110001.

2. The respondent No.1 is a company incorporated under the provisions of the Companies Act, 1956 having its registered office at 2nd Floor, Block Two, Vatika Business Park, Sector 49, Sohna Road, Gurgaon-122101.

The respondent No.2 is a Government of India undertaking engaged in the business of financing projects. The respondent No.2 is a purported creditor to the respondent No.1 and is re-assignee of a bank guarantee issued by the petitioner to respondent No.1 under the agreements entered into between the petitioner and the respondent No.1.

The respondent No.3 is a banking company which has issued the bank guarantees referred to above.

3. The present dispute arise out of the supply, service and civil works agreements, executed between the petitioner and the respondent No.1 in relation to the Project of the respondent No.1 at Uttar Pradesh, where under the parties have agreed to resolve all disputes arising thereunder though arbitration with the venue at New Delhi.

4. The petition was listed before Court first time on 17th May, 2016. While issuing the notice for 20th May, 2016, the interim order was passed, in the meanwhile, directing the respondents to maintain the status quo in respect of the bank guarantees as per details mentioned in Annexure P-11 filed along with the petition.

5. When the matter was taken up on 20th May, 2016, Mr.Sanjay Jain, ASG appeared on behalf of respondent No.2, Government of India and Mr.Akhil Sibal, Advocate appeared on behalf of respondent No.1. Both counsel raised the preliminary objections that the present petition is not maintainable thus no reply is required. They addressed their submissions without reply. The respondent No.3 is a formal party. The learned Senior counsel for the petitioner has also made his submissions replying the objection of the respondent No.1 and 2 and the order was reserved.

6. The main submissions of Mr.Sanjay Jain, learned ASG are outlined as under:

(i) The bank guarantees are unconditional. Every bank guarantee is an independent contract. The respondent No.2 has nothing to do with the disputes between the petitioner and the respondent No.1. The respondent No.2 is assignee of the bank guarantees in question. The respondent No.1, in written documents has acknowledged the same. Being an assignee, the respondent No.2 (Government of India) is entitled to invoke the bank guarantees. The present petition is otherwise not maintainable.

(ii) Mr.Jain also submits that the petitioner before filing of the petition was supposed to serve the advance copy of the petition to the respondent No.2 who is the statutory authority, which is required as per the practice direction dated 16th January, 2015 of this Court vide No.31/Rules/DHC but the same was not served, for the reasons best known to the petitioner. The clause referred by Mr. Jain, learned ASG in this regard is as under:

“1. In a Petition filed under Section 9 of the Arbitration and Conciliation Act, 1996, where the arbitration proceedings have commenced, an advance copy of petition shall be supplied to private parties and in all the petitions under Section 9 of the Act whether before, during or after passing of the award in cases where the opposite party is Union of India, State Government, Statutory Authority, Public Sector Undertaking or Govt. Department, advance copy shall be served through the respective standing/ nominate/ empanelled counsel.”

Mr.Jain submits that had the copy of the petition was served in advance, the respondent No.2 (Government of India) would have made their submission at the interim stage itself and the interim order may not have been passed. He submits that despite of admission made by the petitioner in para 3 of the petition that the respondent No.2 is Government of India, yet it was mentioned to the Registry in the letter at the time of listing of the petition that the service is not necessary as the respondents are private parties. Mr.Jain says that it should not have been done.

7. Mr.A.S. Chandhiok, learned Senior counsel appearing on behalf of the petitioner has referred the para 96 of the decision of

Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc. reported in (2012) 9 SCC 552

as well as the judgement of the Division Bench in Rohit Bhasin & Anr. v. Nandini Hotels in Arb.P. No. 70/2012 decided on 1st July, 2013. Mr. Chandhiok has also referred Section 126 of the Contract Act, 1872, and stated that in view of the settlement agreement between the petitioner and the respondent No.1, it was agreed by respondent No.1 that the respondent No.2 would not take any steps to invoke the bank guarantees, although it was an admitted position that respondent No.2 was not a party to the said agreement.

8. Mr.Akhil Sibal, learned counsel appearing on behalf of respondent No.1, in addition has made his submissions as under:

(i) In his first submission, Mr.Sibal says that it is admitted by the petitioner that out of Rs.745 crores the only outstanding i.e. the default as per petitioner is for a sum of Rs.69.12 crores. The rest of the amount has already been received by the petitioner from the respondent No.1. His clients disputes the said amount claimed by the petitioner. The assignment of bank guarantees in favour of the respondent No.2 is not denied. The petitioner is a party to the assignment deed and was fully aware about the consequences. He referred to the Clause 6 of the bank guarantee dated 20th June, 2014 which reads as under: