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TMI Blog2025 (5) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... injunction could be passed without affording an opportunity of hearing to the opposite parties, and accordingly, it directed issuance of notice to the opposite parties and fixed 25.06.2024 as the date for their appearance. Challenging the said order of the Commercial Court, Respondent No.1 (herein) filed the writ petition before the High Court, in which, the High Court as an interim measure, granted an order of status quo till the next date of hearing with regard to encashment of bank guarantee. Thereafter, the High Court by the order impugned herein, disposed of the writ petition in the following terms: "40. Hence, the parties are directed to appear before the Senior Civil Judge, Commercial Court, Cuttack in ARBP No. 14 of 2024 on 27.08.2024. If so required, the Commercial Court shall prepone the date to the said date, if the said case stands posted to any date beyond the said date. The Opposite Parties shall file their Objection with all relevant documents, if any, to the application filed under section 9 of the Act, 1996, within ten days from the said date. 41. On filing of Objection, the Senior Civil Judge, Commercial Court, Cuttack shall proceed further in accordance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticularly in relation to quality deficiencies, missed deadlines, and non-compliance with contractual obligations - the appellants were constrained to terminate the work order in accordance with clauses 11, 32, 33, 34, 45 and 57 of the work order. 3.4. In the meanwhile, the project completion timeline was extended upto 30.09.2023, with the express condition that if the handover schedule extended beyond this date, the retention money would be forfeited. Accordingly, an amended work order was issued. 3.5. Even thereafter, time limit was extended subject to the condition already agreed upon regarding the forfeiture of the retention money. Meanwhile, several issues arose at the project site, and relevant correspondence pertaining to the same was duly exchanged. 3.6. Consequently, the appellants sent a letter dated 21.02.2024 to Respondent No. 1 highlighting the disregard for construction norms which resulted in a compromise of standards and posed a serious risk to the integrity and safety of the project. They directed Respondent No. 1 to take appropriate corrective actions. Since no compliance was made, by letter dated 25.03.2024, the appellants requested Respondent No. 1 to refund t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout any judicial interference that could prejudice the rights of the parties. 4.1. Elaborating further, the learned counsel submitted that it is settled law that the High Court may exercise its power under Article 227 of the Constitution of India in cases involving grave injustice or failure of justice, such as when: (i) the court or tribunal has assumed a jurisdiction which it does not possess, (ii) it has failed to exercise a jurisdiction which it does possess, and such failure has resulted in a failure of justice; or (iii)the jurisdiction, though available, is being exercised in a manner that amounts to overstepping the limits of jurisdiction. In the present case, the High Court in utter disregard of settled principles, entertained a writ petition under Article 227 of the Constitution of India on an incorrect premise that the non-grant of exemption under Order XXXIX Rule 3 CPC is not appealable either under CPC or under the Commercial Courts Act, 2015. Proceeding on this erroneous understanding, the High Court held that since no appeal was provided for, Respondent No.1 had rightly invoked its supervisory jurisdiction. 4.2. Adding further, it is submitted that the court should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the spirit of the Arbitration and Conciliation Act, 1996, which mandates minimal judicial intervention and prioritizes the expeditious resolution of disputes through arbitration. 4.5. In support of these submissions, the learned counsel placed reliance on a plethora of decisions of this Court. 4.6. Stating so, the learned counsel sought to allow this appeal and set aside the order passed by the High Court. 5. Per contra, the learned counsel for Respondent No.1 submitted that the challenge pertains solely to the grant of interim relief staying the invocation of the bank guarantee during the pendency of the proceedings under Section 9 of the Arbitration and Conciliation Act, 1996. The said Arbitration Petition bearing No. 14 of 2024 has already been partly heard; the arguments on behalf of Respondent No. 1 and Respondent No. 2 have been concluded on 10.12.2024, and the matter is now pending for final arguments of the appellants, who have sought an adjournment citing the pendency of the present appeal. Therefore, no prejudice is caused to the appellants, and it remains open to them to raise all their contentions before the Commercial Court. To demonstrate its bonafides, Respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 8 of the Commercial Courts Act, 2015, there is an express bar against filing a revision application or petition against an interlocutory order passed by a commercial court. In the present case, since the order dated 30.04.2024 passed by the Commercial Court is an interim order, Respondent No.1 could not have filed a revision application or petition under the Commercial Courts Act. That apart, no appeal could have been filed under Section 13 of the Commercial Courts Act, as that provision applies only to appeals against decrees of Commercial Courts and Commercial Divisions, and not against interlocutory orders. Since the order dated 30.04.2024 passed by the Commercial Court is neither a decree nor a final order, it is not subject to appeal under Section 13 of the Commercial Courts Act, 2015. Further, there is no provision under the CPC permitting an appeal against an order passed under Order XXXIX Rule 3 CPC. In these circumstances, Respondent No. 1 was constrained to approach the High Court under Article 227 of the Constitution of India, in order to safeguard its interests as the invocation of the bank guarantee would have resulted in a significant financial burden and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoking arbitration, thereby causing delay in the arbitral process? (g) Whether an interlocutory order arising out of the rejection of ex parte interim stay under Order XXXIX Rule 3 CPC accompanying a Section 9 Petition under the Arbitration Act, is appealable under Section 37 of the Arbitration and Conciliation Act, and hence, whether the aggrieved party is barred from approaching the High Court under Article 227 of the Constitution? (h) Whether an interlocutory order passed on an Order XXXIX Rule 3 application by the Commercial Court, in a Section 9 arbitration petition is barred from challenge by virtue of the specific bar under Order XLIII Rule l(r) read with Section 104 CPC, and is not appealable under Section 37 of the Arbitration Act thereby permitting recourse only under Article 227 of the Constitution? 8. According to the appellants, they made an advance payment of Rs. 3,73,95,490/- in respect of the work order dated 24.01.2022 issued to Respondent No. 1, and the Respondent No. 1 furnished an irrevocable and unconditional bank guarantee dated 08.03.2022 for the said amount as security. The original project completion period was fixed at eight months, but the timelin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. Ltd v. State of Bihar and others (1999) 8 SCC 436, emphasized that bank guarantees serve as the backbone of commercial transactions and must be honoured in accordance with their terms. The following paragraphs are pertinent in this regard: "8. Now, a bank guarantee is the common mode of securing payment of money in commercial dealings as the beneficiary, under the guarantee, is entitled to realise the whole of the amount under that guarantee in terms thereof irrespective of any pending dispute between the person on whose behalf the guarantee was given and the beneficiary. In contracts awarded to private individuals by the Government, which involve huge expenditure, as, for example, construction contracts, bank guarantees are usually required to be furnished in favour of the Government to secure payments made to the contractor as "advance" from time to time during the course of the contract as also to secure performance of the work entrusted under the contract. Such guarantees are encashable in terms thereof on the lapse of the contractor either in the performance of the work or in paying back to the Government "advance", the guarantee is invoked and the amount is recovered fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 9 arbitration petition would likely become infructuous. Furthermore, the High Court clearly observed that the Commercial Court shall proceed in accordance with law and adjudicate upon the prayers made in the arbitration petition on its own merits, considering the pleadings and documents placed on record, without being influenced by any of the observations made therein. Ultimately, it was directed that the interim order restraining the appellants from encashing the bank guarantee shall remain in force until the disposal of the arbitration petition pending before the Commercial Court, subject to Respondent No. 1 extending the validity of the bank guarantee. Thus, we are of the view that the order passed by the High Court is merely an interim measure intended to protect the interests of both parties. 13. Admittedly, Respondent No. 1 initiated arbitration proceedings to resolve the disputes with the appellants. In the Section 9 arbitration petition filed by them, the arguments on behalf of Respondent No. 1 and Respondent No. 2 have already been concluded, and the matter stands partly heard, pending further arguments on behalf of the appellants. Furthermore, pursuant to the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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