Goa Shipyard Limited vs. Short Shipyard Private Limited

Facts

The case involves multiple Interim Applications (IA) filed by both M/s. Shoft Shipyard Pvt. Ltd. (SHOFT) and Goa Shipyard Ltd. (GSL) in cross-appeals filed under Section 37 of the Arbitration and Conciliation Act, 1996. These appeals arose from ten Section 34 proceedings disposed of by the District Judge at Margao, Goa, concerning five arbitral proceedings. SHOFT sought the return of counter-security (Bank Guarantee and Corporate Undertaking) furnished for withdrawal of deposited sums, release of interest earned on deposited sums, and encashment of a Bank Guarantee to the extent the award remained unsatisfied, including GST. GSL sought withdrawal of bank guarantees furnished pursuant to interim orders in the appeals.

Held

The Court addressed the reliefs sought by SHOFT. Regarding relief (i) (return of counter-security), it was stated that this relief would not survive in view of previous orders. Regarding relief (ii) (release of interest), the Court directed the Registry of the High Court of Bombay at Goa to pay the amount of interest (Rs. 1,39,373/- as on 28 October, 2023) along with accrued interest to SHOFT within one week. Regarding relief (iii) (encashment of bank guarantee), the Court rejected SHOFT's contention that the bank guarantees should have been kept alive until the disposal of execution proceedings. The Court found this contention contrary to the observations in paragraph 60 of the Division Bench's judgment disposing of the Section 37 appeals. The Court held that the bank guarantee was to be kept alive until the disposal of the appeal, which had already occurred. However, the Court kept open all assertions/contentions of SHOFT in the execution proceedings concerning amounts due. For GSL's Interim Applications, the Court noted that the bank guarantees had lapsed and directed their return to GSL within two weeks, as no useful purpose would be served by keeping them on record. All contentions of GSL in execution proceedings were expressly kept open.

Key Issues

1. Whether SHOFT is entitled to the return of its counter-security (Bank Guarantee and Corporate Undertaking) furnished for the withdrawal of INR 3,55,32,326, to be deemed adjusted in part satisfaction of the Arbitral Award dated 17.04.2018? (Question of law and fact, concerning the terms of security and award satisfaction). 2. Whether SHOFT is entitled to the release of interest earned on sums deposited by GSL, prior to receiving a Demand Draft, to be adjusted in part satisfaction of the Arbitral Award? (Question of law and fact, concerning accrued interest and award satisfaction). 3. Whether SHOFT is entitled to the encashment of the Bank Guarantee submitted by GSL to the extent the award (including GST) remains unsatisfied? (Question of law and fact, concerning the validity and extent of the bank guarantee). Contentions: SHOFT argued that the bank guarantee ought to have been kept renewed until the disposal of execution proceedings, as per its terms, even after the disposal of the appeal. GSL argued that the bank guarantees had lapsed and no useful purpose would be served by keeping them on record as the principal proceedings were disposed of. Revenue/State did not appear to have made specific arguments on these issues as the dispute was primarily between the parties to the arbitration.