Section 17 relief and bank guarantees: force majeure failed, and encashment stood amid unresolved contractual disputes.

At the Section 17 stage, factual and contractual disputes cannot justify restraining or undoing encashment of unconditional bank guarantees unless fraud, special equities or irretrievable injustice is shown, so the encashment and refusal to revive the guarantees were not interfered with. The force majeure plea based on the COVID-19 lockdown also failed because performance was not shown to have been prevented; the operations continued during the lockdown and fell within exempted transport and cargo activities, making the claim a factual issue already examined and unsuitable for interlocutory relief. The underlying disputes on variable fee escalation and minimum guaranteed throughput were left for arbitration on merits.

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Issues: (i) Whether the appellant was entitled to invoke force majeure on account of the COVID-19 lockdown so as to suspend or defer its contractual payment obligations and restrain encashment of the bank guarantees. (ii) Whether the invocation and encashment of the bank guarantees, and the refusal to return the encashed amounts or revive the guarantees, could be interfered with at the Section 17 stage in view of the disputes regarding escalation on variable fee and computation of minimum guaranteed throughput.

Issue (i): Whether the appellant was entitled to invoke force majeure on account of the COVID-19 lockdown so as to suspend or defer its contractual payment obligations and restrain encashment of the bank guarantees.

Analysis: The contractual force majeure clause applied only where performance was prevented by an event beyond the reasonable control of the affected party. On the material before the learned arbitrator, the operations at ICD, Loni continued during the lockdown and fell within the exempted categories under the governmental guidelines governing transport and cargo movements. The additional material placed later did not persuade the learned arbitrator to revisit the earlier factual conclusion. The plea of force majeure was therefore a factual one, already examined, and no appellate interference was warranted at the interlocutory stage.

Conclusion: The force majeure plea was rejected, and the appellant was not entitled to interim protection on that basis.

Issue (ii): Whether the invocation and encashment of the bank guarantees, and the refusal to return the encashed amounts or revive the guarantees, could be interfered with at the Section 17 stage in view of the disputes regarding escalation on variable fee and computation of minimum guaranteed throughput.

Analysis: The bank guarantees were unconditional and irrevocable, so their invocation could be restrained only in cases of egregious fraud, special equities, or irretrievable injustice. The disputes whether escalation on variable fee was payable, whether the contractual exception for rail movement applied, and whether minimum guaranteed throughput was to be calculated monthly or annually were substantive contractual controversies requiring adjudication on merits. Those controversies could not justify interlocutory reversal of encashment or a direction to return the money to the bank for revival of the guarantees. The prayer for such return was also outside the proper scope of Section 17 relief.

Conclusion: The encashment of the bank guarantees was upheld, and no interim order for return of the encashed sums or revival of the guarantees was warranted.

Final Conclusion: The appeal failed because the interlocutory orders disclined to interfere with the bank guarantee encashment and refused force majeure relief on the facts, leaving the substantive contractual disputes to be determined in arbitration.

Ratio Decidendi: At the Section 17 stage, factual and contractual disputes that require merits adjudication cannot justify restraining or undoing encashment of unconditional bank guarantees, absent fraud, special equities, or irretrievable injustice, and a force majeure claim depends on proof of actual disruption preventing performance.

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