Altamas Kabir, J.— The special leave petition and the application filed on behalf of the respondents for early hearing and disposal of the special leave petition were taken up together for consideration. The facts on which the special leave petition is based, are set out hereinbelow.
2. By its Letter of Acceptance No. NHAI/PH11.NHDP/ADB/GM-11.NS1/746 dated 30-12-2005, the National Highways Authority of India (hereinafter referred to as “NHAI”) awarded a contract to the respondent, Ssang Yong Engineering & Construction Co. Ltd., for the National Highways Sector II Project, Package-ADB-II/C-8, which involved the four-laning of Jhansi-Lakhadon Sector Km 297 to Km 351 of National Highway 26 in the State of Madhya Pradesh. The total contract amount for the aforesaid project was more than Rs 750 crores.
3. An agreement was entered into by NHAI with the petitioner on 13-8-2006. Clause 27 of the agreement incorporated an arbitration clause stipulating that all the disputes and differences arising out of or in connection with the agreement dated 13-8-2006, would be referred to arbitration to be conducted in English in Singapore in accordance with the Singapore International Arbitration Centre (SIAC) Rules.
4. For the purpose of reference, Clause 27 of the agreement relating to arbitration is extracted hereinbelow:
“27. Arbitration
27.1 All disputes, differences arising out of or in connection with the agreement shall be referred to arbitration. The arbitration proceedings shall be conducted in English in Singapore in accordance with the Ssang Yong (sic Singapore) International Arbitration Centre (SIAC) Rules as in force at the time of signing of this agreement. The arbitration shall be final and binding.
27.2 The arbitration shall take place in Singapore and be conducted in English language.
27.3 None of the party shall be entitled to suspend the performance of the agreement merely by reason of a dispute and/or a dispute referred to arbitration.”
5. According to Clause 1 of the agreement read with the Appendix thereof, the petitioner was to provide all adequate manpower, material, plant, machinery, construction equipment and all other resources, including finance, which would be required to perform the work. Bank guarantee was furnished by the petitioner on 31-10-2006, whereby the bank undertook to pay to the respondent on its first written demand and without cavil or argument any sum or sums within the limits of Rs 6,05,00,000, without there being need to prove or give any reasons for the demand for the said sum. The guarantor also waived the necessity of the respondent Company making a demand for the debt to the petitioner contractor before presenting the demand. The guarantor also agreed that no change or addition or other modification of the terms of the contract or of the work to be performed thereunder or any of the contract documents, which may be made between the respondent and the petitioner, would release the bank from its liability under the agreement. Similarly, three bank guarantees of Rs 1 crore each and one bank guarantee for Rs 3 crores were also furnished to secure mobilisation advance.
6. Disputes and differences arose between the parties relating to the performance of the petitioner in completing the work contracted as per the agreement dated 13-8-2006. Consequently, since the petitioner failed to carry out the works entrusted and had allegedly been overpaid to the tune of Rs 78 crores, the respondent Company on 22-9-2009, terminated the contract under Clause 23.2 of the agreement dated 13-8-2006 and invoked the bank guarantees referred to hereinbefore vide its letters dated 25-1-2010, 27-1-2010 and 5-3-2010. Respondent 1 also made a subsequent demand for encashment of the bank guarantees by its letter dated 6-5-2010.
7. In the special leave petition, the petitioner has sought for an order of injunction against Respondent 1 on the basis of alleged fraud on the part of the said respondent. The petitioner also filed a criminal complaint against Respondent 1 alleging fraud and making the same allegations which have been made by it in the present special leave petition. The learned Magistrate took cognizance of the said complaint and issued process on 5-2-2010.
8. Aggrieved thereby, Respondent 1 challenged the said order of the Magistrate dated 5-2-2010, taking cognizance of the criminal complaint alleging fraud, by filing a petition under Section 482 of the Code of Criminal Procedure in the Jabalpur Bench of the Madhya Pradesh High Court, for quashing of the cognizance taken by the learned Magistrate. The High Court by its order dated 13-10-2010 MCRC No. 1969 of 2010 quashed the criminal proceedings commenced against Respondent 1. Challenging the said order of the High Court, the petitioner filed Special Leave Petition (Cri.) Crl. M.P No. 2872 of 2011, which was dismissed by this Court on 18-2-2011 SLP (Cri) Crl. M.P No. 2872 of 2011.
9. On account of the above, an application for early hearing and disposal of the special leave petition was filed on behalf of Respondent 1 urging that since the allegation of fraud had already been decided by this Court, the present special leave petition could be finally disposed of in view of the order passed by this Court in Yograj Infrastructure Ltd. v. Jiang Sang Lee SLP (Cri) Crl. M.P No. 2872 of 2011. It is in this background that the present IA has been filed for early hearing and disposal of the special leave petition.
10. Appearing for the special leave petitioner, who is the opposite party in the interlocutory application filed on behalf of Respondent 1, Mr Jaideep Gupta, learned Senior Advocate, contended that the stay order passed in these proceedings was liable to be continued in view of the special equities in this case. He submitted that the petitioner Company had invested large sums of money in the project and upon termination of the contract, the dues of either party were yet to be decided and the same could only be done at the time of the final award. Mr Gupta submitted that his main emphasis in the special leave petition was with regard to the special equities which existed and the order of stay granted by this Court restraining Respondent 1 Company from invoking the bank guarantees was liable to be continued till the passing of the final award by the learned arbitrator.
11. Ms Meenakshi Arora, learned advocate, who appeared for the respondent Company, submitted that the prayer made on behalf of the petitioner in the Section 9 application before the District Court, Narsinghpur, seeking injunction against Respondent 1 from invoking the bank guarantees, was dismissed by the District Judge on 4-3-2010, and the appeal therefrom was dismissed by the Jabalpur Bench of the Madhya Pradesh High Court on 20-8-2010. However, this Court had stayed the invocation of the bank guarantees by Respondent 1 Company by an interim order dated 31-8-2010 SLP (C) No. 24746 of 2010.
12. Ms Arora submitted that once the cognizance taken by the Magistrate on the petitioner's criminal complaint alleging fraud on the part of Respondent 1 was quashed by the Jabalpur Bench of the Madhya Pradesh High Court by its order dated 13-10-2010 MCRC No. 1969 of 2010, and even the special leave petition preferred therefrom was dismissed by this Court on 18-2-2011 SLP (Cri) Crl. M.P No. 2872 of 2011, the very basis for seeking injunction in the proceedings under Section 9 of the Arbitration and Conciliation Act, 1996, stood removed. Ms Arora submitted that in addition to the above, a partial award had been made by the Arbitral Tribunal in Singapore on 30-6-2011, in favour of Respondent 1.
13. Ms Arora submitted that in terms of the agreement between the parties, Respondent 1 Company had made huge cash advances to the petitioner for completion of the project, but the same had not been fully repaid by the petitioner and that as a result, Respondent 1 should be permitted to invoke the bank guarantees to realise the outstanding amounts. According to Ms Arora, the dues of Respondent 1 Company were far beyond those claimed by the petitioner. Ms Arora submitted that since the partial award had not been challenged by the petitioner, the execution thereof could not be stayed and Respondent 1 was, therefore, entitled to recover the amount under the partial award.
14. According to Ms Arora, the plea taken by the petitioner in the criminal complaint and the present special leave petition was the same and since the allegation of fraud against Respondent 1 by the petitioner has been negated, the interim order restraining Respondent 1 from invoking the bank guarantees was liable to be vacated.
15. Ms Arora submitted that since payment under a bank guarantee can normally be stopped only on two grounds and on no other viz. on grounds of fraud and special equity, and the ground of fraud having been rejected up to this Court, the only other ground available to the petitioner to stop the invocation of the bank guarantees was on account of special equities and in the instant case the petitioner had failed to indicate any such special equity which entitled the petitioner to an order of restraint against Respondent 1 from invoking the bank guarantees in question.
16. Having heard the learned counsel for the parties, we are inclined to accept Ms Meenakshi Arora's submissions that since the petitioner's application under Section 9 of the Arbitration and Conciliation Act, 1996, was based mainly on allegations of fraud, which have been rejected, there was no foundation for the stay order passed in these proceedings to continue. We cannot lose sight of the fact that both in the criminal proceedings as also in the proceedings under Section 9 of the aforesaid Act, the petitioner proved to be unsuccessful, at least up to the High Court stage. In the criminal proceedings, the petitioner was unsuccessful right up to this Court. In the aforesaid circumstances, we are unable to accept the submissions relating to special equities urged by Mr Jaideep Gupta, particularly in view of the fact that such a point had not been raised earlier.
17. In addition to the above, we also have to keep in mind the fact that a partial award has been made by the Arbitral Tribunal which has not been questioned or challenged by the petitioner and Respondent 1 is entitled to the amount awarded in the partial award.
18. Accordingly, we are not inclined to disturb the order of the High Court and the special leave petition is, therefore, dismissed with costs of Rs 1 lakh to be paid by the petitioner Company to the Supreme Court Legal Services Committee. The interlocutory application is also disposed of by this order.