Court Can Take Penal Provisions For Violation Of Order U/S 9 Of A&C Act Even After Constitution Of Arbitral Tribunal: Calcutta HC

The Court was hearing a Writ Petition for the implementation of a Commercial Court order which granted an injunction on the invocation of Bank Guarantees.

The bench of Justice Sabyasachi Bhattacharyya observed, “Penal measures can be taken by the Commercial Court at Rajarhat for violation, if any, of its order under Section 9 of the 1996 Act even after constitution of the Arbitral Tribunal.”

Brief Facts-

The petitioner, RKD Niraj JV won a tender and signed a contract with the respondent, providing three bank guarantees. A dispute led to the contract's termination, with one guarantee already cashed. RKD Niraj JV sought an injunction against the respondent from invoking the remaining guarantees and requested setting aside the encashed amount. The Commercial Court granted an injunction on invoking the remaining guarantees but didn't address the encashed amount.

The Court stated that the petitioner's request to reverse the encashed amount of approximately ₹5.5Cr from a bank guarantee lacked legal basis. It emphasised that bank managers have discretion in such matters and there's no legal obligation to reverse the transaction without a Court order.

The Court further stated that what the petitioners seek is not an interim measure of protection under Section 9 but an implementation of an order already passed by the Court at a relevant point of time when the Arbitral Tribunal had not yet been constituted. Thus, for enforcement of its order, the court has not lost jurisdiction even after the constitution of the Arbitral Tribunal, even under the contemplation of sub-section (3) of Section 9.

The Court stated that Petitioners should have challenged the order which dropped their application under Order XXXIX Rule 2A of the Civil Procedure Code due to the constitution of the Arbitral Tribunal, as according to the Court such order was erroneous.

The Court stated that as the Petitioners failed to approach the Court against the above-mentioned order they cannot seek implementation of the impugned order before the High Court.

The Court further stated that it is well-settled that Order XXXIXRule 2A is not the only remedy for violation of an injunction order. According to the Court, implementation of an injunction order can be sought from the same court that granted the injunction in the first place.

According to the Court, another option would be to approach the Arbitral Tribunal and seek interim orders under Section 17(1)(ii)(e) seeking a reversal of the invocation of bank guarantee, if the petitioners are otherwise entitled to do so in law, as a fresh measure of protection in its own right.

Accordingly, the Court dismissed the Writ Petition.

Cause Title: RKD Niraj JV v. The Union of India 

Appearance:

Appellant: Adv. Soumya Majumder, Adv. Pratip Mukherjee, Adv. Tarun Chatterjee, Adv. Surajit Basu and Adv. Raju Mondal

Respondent: Adv. Dhiraj Tribedi, Adv. Atarup Banerjee, Adv. Ranjana Chatterjee, Adv. Sakya Sen and Adv. Anirban Ghosh

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