FACTS OF THE CASE

The involved parties had established a contract for the provision of a Gainwell High Wall Mining System. According to the agreement, the petitioner was responsible for delivering the High Wall Mining System to the respondent, which included a cutter module. The payment for the HWM System was to be made in installments, as specified in the terms of the agreement, resulting in a total consideration of Rs. 60,12,93,000/- (plus taxes). Of this amount, the petitioner had already received a payment of Rs. 24,00,00,000.

In its order dated December 22, 2021, the Tribunal issued three directives:

1. a) The outstanding balance for the HWM (High Wall Mining System) system was instructed to be deposited into an Escrow Account, which would be managed by the advocates of the parties acting as escrow agents.
2. b) The pre-despatch testing of the HWM system would occur under a special officer’s supervision.
3. c) The escrow agents would release the funds to the petitioner if the HWM System demonstrated satisfactory performance for a continuous period of 96 hours.

The tribunal amended its earlier December 22, 2021 order on March 7, 2022, instructing the respondent to open an interest-bearing account. In favour of the petitioner’s counsel, this account would hold 50% of the fundamental contract value and 100% of the taxes and duties owed on the HWM. The money would be released after the HWM system was deployed, and the remaining sum would be paid once the system had performed satisfactorily. The petitioner submitted a request to encash the fixed deposit after the dispatch was finished. The defendants submitted a request to prevent the petitioners from withdrawing any money from the fixed deposit. The tribunal instructed the petitioner’s attorney to only release the fixed deposit if the petitioner provided a bank guarantee for the specified sum. This requirement of furnishing a bank guarantee by the petitioner was subsequently challenged.

ISSUES

1. Whether the Tribunal exceeds the scope of the contract when awarding interim reliefs?
2. Whether the Tribunal go beyond the terms of the Agreement when issuing the Order dated July 22, 2022?
3. Should the disputed order be invalidated?

RULE

• Section 9 of the Arbitration and Reconciliation Act, 1996:

“9. Interim measures, etc. by Court.—A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court—

(i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or

(ii) for an interim measure of protection in respect of any of the following matters, namely:—

(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;

(b) securing the amount in dispute…”

• Section 17 of the Arbitration and Reconciliation Act, 1996:

“17. Interim measures ordered by arbitral tribunal.—

(1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute.

(2) The arbitral tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1).”

 CONTENTIONS OF THE PETITIONER

The primary argument presented by the petitioner’s counsel centered on the Tribunal’s inability to impose an additional requirement, such as furnishing a Bank Guarantee, as was done in the current case. The counsel contended that there were insufficient reasons provided for imposing such requirements, and that the agreement stipulated payment upon dispatch without any additional conditions or security. Consequently, the counsel argued that this condition would deviate from the terms of the contract, and the Tribunal does not possess the authority to alter the contract. Moreover, the counsel asserted that the order was issued without granting the petitioner a reasonable opportunity to be heard, thereby violating the principles of fair play and natural justice. Additionally, the counsel argued that since the respondent has already received the machine, the amount owed has become due and payable.

CONTENTIONS OF THE RESPONDENT

According to the respondent’s counsel, the machine delivery was delayed, and they suspect that the contractual specifications are not being met. They also claim that certain parts are cheap, inferior, and duplicates. The respondent had to make the payment even before the stipulated timelines, and both parties had agreed to the Tribunal’s order of December 22, 2021, and March 7, 2022, directing the same. Therefore, the petitioners cannot object to the requirement of providing a bank guarantee. The counsel believes that this condition was imposed by the Tribunal to balance the equities and ensure the fulfillment of contractual obligations while the dispute is in abeyance. The petitioners have also failed to deliver the Low Seam Cutter Module despite receiving reminders and 90% of the payment for the same.

Therefore, they argue that there are reasonable apprehensions of the same being done with the HWS System and the Bank Guarantee is a necessary condition.

JUDGMENT

The court expressed the view that the Tribunal, when exercising its powers under Section 17, is not bound to strictly adhere to the technicalities of the Civil Procedure Code (CPC). The court highlighted that the authority granted to the tribunal under Section 17 is parallel to the powers vested in a court under Section 9 of the Arbitration and Conciliation Act. Referring to the case of Essar House Private Limited v. Arcellor Mittal Nippon Steel India Limited (2022 SCC OnLine SC 1219), the court emphasized that while it is important for the court to respect the basic principles of procedural law when exercising its power under Section 9, the technicalities of the CPC should not impede the court from achieving justice. The Tribunal is not permitted to exceed the scope of the dispute referred to it, but there are no limitations requiring the Tribunal to restrict itself solely to the terms of the contract when granting interim reliefs. The purpose of the power conferred under Section 17 is to prevent the arbitral proceedings from becoming futile.

The Tribunal has the authority to grant relief as long as it does not directly contradict the terms of the contract. In the present case, the Tribunal deemed it necessary to provide certain protections to the respondent due to concerns regarding the performance of the HWM System. The Tribunal made efforts to address the complexities and fulfill the contractual obligations. Both the orders issued on December 22, 2021, and March 7, 2022, were intended to facilitate the fulfillment of contractual obligations in alignment with the underlying spirit of the contract. Despite not strictly adhering to the agreement, these orders were accepted by both parties.  Therefore, this exercise did not go against the agreement but instead facilitated an equitable resolution for both parties.

The Court concluded that the Tribunal did not act beyond the scope of the agreement, and thus, there is no basis for interference with the order.

CONCLUSION

This is a case between Gainwell Commosales Private Limited and Minsol Limited under Section 37 of the Arbitration and Conciliation Act, 1996. The petitioner is a major supplier of Caterpillar construction, mining, and power solutions, while the respondent carries out mining activities. The petitioner has challenged the Order dated July 22, 2022, passed by the arbitral tribunal, and an application for stay of the Impugned Order has also been filed. Both the applications are being conjointly decided. The case was heard in the Calcutta High Court and the judgment was delivered on December 15th, 2022.

ENDNOTES

Gainwell Commosales Private Limited vs. Minsol Limited (15.12.2022 – CALHC): MANU/WB/1784/2022.

Essar House Private Limited v. Arcellor Mittal Nippon Steel India Limited (2022 SCC OnLine SC 1219).

Arbitration and Reconciliation Act, 1996.