REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

SPECIAL LEAVE PETITION (C) NO.24746 OF 2010

YOGRAJ INFRAS. LTD. … PETITIONER    Vs.

SSANG YONG ENG. & CONSTRN. … RESPONDENTS CO. LTD. & ANR.   

J U D G M E N T

ALTAMAS KABIR, J.

1. 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/PH  

11/NHDP/ADB/GM-11/NS1/746 dated 30th December, 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  

`  750 crores. An agreement was entered into by the NHAI  

with the Petitioner on 13th August, 2006. Clause 27 of  

the  Agreement  incorporated  an  arbitration  clause  

stipulating that all disputes and differences arising  

out of or in connection with the Agreement dated 13th  

August, 2006, would be referred to arbitration to be  

conducted in English in Singapore in accordance with  

the Singapore International Arbitration Centre (SIAC)

Rules. 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  Ssangyong  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.”

3. 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 31st October, 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  `  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  

contractor/petitioner 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  `  1 crore each and one Bank  

Guarantee for  `  3 crores were also furnished to secure  

mobilization advance.   

4. Disputes and differences arose between the parties  

relating  to  the  performance  of  the  Petitioner  in  

completing  the  work  contracted  as  per  the  Agreement

dated  13th August,  2006.   Consequently,  since  the  

Petitioner failed to carry out the works entrusted and  

had allegedly been over-paid to the tune of ` 78 crores,  

the  Respondent  Company  on  22nd September,  2009,  

terminated  the  contract  under  Clause  23.2  of  the  

Agreement dated 13th August, 2006 and invoked the Bank  

Guarantees  referred  to  hereinbefore  vide  its  letters  

dated  25th January,  2010,  27th January,  2010  and  5th  

March,  2010.   The  Respondent  No.1  also  made  a  

subsequent demand for encashment of the Bank Guarantees  

by its letter dated 6th May, 2010.      

5. In the Special Leave Petition, the Petitioner has  

sought  for  an  order  of  injunction  against  the  

Respondent No.1 on the basis of alleged fraud on the  

part of the said Respondent.  The Petitioner also filed  

a  criminal  complaint  against  the  Respondent  No.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 on the  

said complaint and issued process on 5th February, 2010.

6. Aggrieved thereby, the Respondent No.1 challenged  

the said order of the Magistrate dated 5th February,  

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 13th October, 2010, quashed the  

criminal proceedings commenced against the Respondent  

No.1.  Challenging the said order of the High Court,  

the Petitioner filed Special Leave Petition (Crl) No.  

Crl. M.P. 2872 of 2011, which was dismissed by this  

Court on 18th February, 2011.  On account of the above,  

an application for early hearing and disposal of the  

Special  Leave  Petition  was  filed  on  behalf  of  the  

Respondent  No.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 order passed by this Court in  

Special  Leave  Petition  (Crl)  No.  Crl.  M.P.  2872  of

2011.  It is in this background that the present I.A.  

has been filed for early hearing and disposal of the  

Special Leave Petition.

7. Appearing for the Special Leave Petitioner, who is  

the  opposite  party  in  the  Interlocutory  Application  

filed on behalf of the Respondent No.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  

the  Respondent  No.1  Company  from  invoking  the  Bank  

Guarantees was liable to be continued till the passing  

of the final Award by the learned Arbitrator.  

8. 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  the  Respondent  No.1  from  

invoking  the  Bank  Guarantees,  was  dismissed  by  the  

District  Judge  on  4th March,  2010,  and  the  Appeal  

therefrom was dismissed by the Jabalpur Bench of the  

Madhya  Pradesh  High  Court  on  20th August,  2010.  

However, this Court had stayed the invocation of the  

Bank Guarantees by the Respondent No.1 Company by an  

interim  order  dated  31st August,  2010.  Ms.  Arora  

submitted  that  once  the  cognizance  taken  by  the  

magistrate  on  the  petitioner’s  criminal   complaint  

alleging fraud on the part of the Respondent No.1 was  

quashed by the Jabalpur Bench of the Madhya Pradesh  

High Court by its order dated 13th October, 2010, and  

even the Special Leave Petition preferred therefrom was  

dismissed by this Court on 18th February, 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 30th June, 2011,  

in favour of the Respondent No.1. Ms. Arora submitted  

that in terms of the agreement between the parties, the  

Respondent No.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,  the  Respondent  No.1  should  be  

permitted to invoke the Bank Guarantees to realize the  

outstanding amounts.  According to Ms. Arora, the dues  

of the Respondent No.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  the  Respondent  No.1  was,  therefore,  entitled  to  

recover the amount under the partial Award.  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 the Respondent No.1 by the Petitioner has been  

negated,  the interim order restraining the Respondent  

No.1 from invoking the Bank Guarantees was liable to be  

vacated.  

9. 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  

upto 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 the Respondent No.1  

from invoking the Bank Guarantees in question.  

10. Having heard 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 upto the High Court stage.  

In  the  criminal  proceedings,  the  Petitioner  was  

unsuccessful right upto 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.  

11. 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 the Respondent No.1 is  

entitled to the amount awarded in the partial Award.

12.  Accordingly, we are not inclined to disturb the  

order of the High Court and the Special Leave Petition  

is, therefore, dismissed with cost of  `  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.   

……………………………………………………J. (ALTAMAS KABIR)

……………………………………………………J. (JASTI CHELAMESWAR)

New Delhi Dated: 31.01.2012.