M/s TBEA Shenyang Transformers Group Co. Ltd. v. M/s Alstom Projects India Ltd.
Background
TBEA, a Chinese transformer manufacturer, had supplied transformers and equipment to Alstom Projects India for a hydro project in Sikkim under a 2007 contract. A dispute arose over alleged defects in the supplied material, and Alstom invoked a bank guarantee furnished by TBEA without, TBEA claimed, adequate notice or justification. TBEA's earlier attempt to get interim relief (stopping encashment of the guarantee) had already failed before the trial court, the High Court, and even the Supreme Court itself. TBEA then asked the Supreme Court to appoint an arbitrator to resolve the underlying contractual dispute, as the contract contained an arbitration clause.
Decision Breakdown
The Court held that a genuine dispute did exist between the parties over the quality of goods supplied and the propriety of invoking the bank guarantee, rejecting Alstom's argument that the dispute had become moot simply because the guarantee had already been encashed. Since the contract contained a valid arbitration clause, the Court exercised its power under Section 11(6) of the Arbitration Act and appointed Mr. Justice A.P. Shah, former Chief Justice of the Delhi High Court, as the sole arbitrator, with the seat of arbitration at Delhi (differing from the contract's designated seat of Paris, apparently by consent of the parties). The petition was allowed in these terms with no order as to costs.
Lesson Learnt
Even if a party's attempt to get interim relief (such as blocking a bank guarantee) has already failed in court, that does not by itself close the door on the underlying commercial dispute: a party can still invoke a contract's arbitration clause to have the actual dispute decided by an arbitrator.