Messes MACDONALD LAYTON & COSTAIN LTD. vs MESSRS AVARI HOTELS LTD.
The petitioner was awarded a contract by the respondent for the construction of the Lahore Hilton hotel, which included a provision for a mobilisation fund secured by a bank guarantee issued through National & Grindlays Bank Ltd. Upon stoppage of construction work by the petitioner, the respondent sought encashment of the bank guarantee, leading to a dispute. The petitioner filed an application under sections 20 and 41 of the Arbitration Act, 1940 before the High Court of Sind & Baluchistan seeking an interim injunction to restrain the respondent from encashing the bank guarantee. The High Court dismissed the application and refused the injunction. The petitioner filed an intra-court appeal which was admitted for hearing. The Supreme Court of Pakistan held that the matter ought to be decided first by the High Court in the pending appeal and accordingly dismissed the petition.
- Can an application under sections 20 and 41 of the Arbitration Act, 1940 be maintained to restrain the encashment of a bank guarantee?
- Whether the Supreme Court will interfere with interlocutory matters pending adjudication before the High Court?
- Section 20, Arbitration Act 1940
- Section 41, Arbitration Act 1940
ORDER
1. SALAHUDDIN AHMED, J.-The petitioner had been given a contract by the respondent for the construction of a hotel at Lahore to be styled as "Lahore Hilton". The contract, Inter alia provided for furnishing the petitioner with a mobilisation fund for executing the work at Lahore. For this mobilisation fund the petitioner through Messrs National & Grindlays Bank Ltd., Karachi furnished to the respondent a bank guarantee to cover the amount of the mobilisation fund. For some reasons the petitioner stopped the construction work and the respondent pressed the Bank for encashment of the aforesaid Bank guarantee. The petitioner, however, disputed the encashment of the Bank guarantee and this is the dispute before us.
2. The petitioner made an application under sections 20 and 41 of the Arbitration Act, 1940, before the High Court of Sind & Baluchistan and prayed for an order restraining the respondent from realising or encashing the said bank guarantee furnished by the National & Grindlays Bank. The High Court dismissed the petitioner's application under sections 20 and 41 of the Arbitration Act, 1940, and refused to give the interim injunction asked for.
3. It appears that the petitioner has already filed an appeal before the High Court and it has been admitted for hearing.
4. We, accordingly, think that the matter should first be decided by the High Court. The petition is dismissed.