Anil Dev Singh, J. ( 1 ) THE petitioner by means of the instant petition under Section 11 (6) of the Arbitration and Reconciliation Act, 1996, seeks appointment of an Arbitrator and an order restraining the respondents from encashing the bank guarantees. The petitioner-company is a manufacturer of Jelly filled telephone cables at Rohtak. On 23rd February, 1994, the Department of Telecommunication floated a tender for the purpose of purchase of various quantities of Polythene Insulated Jelly Filled cables (for short pijf ) on cash basis. In response to the invitation the petitioner submitted its tender. The tender was accepted and the parties thereafter entered into an agreement on 20th September, 1994 (for short the "initial contract"), a copy whereof has been presented in Court today. Subsequently, by letter dated 2nd February, 1995, the Assistant Director General (LF), Government of India, Dot wrote to the petitioner as follows : "subject : Supply of PIJF/ug Cable on Deferred Terms. Reference : Tender No. 203-60/93-MMS-1, opened on 22-4-1994. It has been decided by Telecom. Commission to obtain PIJF U/g Cable of various sizes (as per standard specifications issued vide tender No. 203-60/ 93-MMS-I, opened on 22. 4. 1994) on deferred payment terms. 2. You are requested to give your unconditional acceptance to the enclosed offer by 9th February, 1995 (5. 00 p. m.) following which formal contract shall be entered into. " ( 2 ) PURSUANT to above the letter of the Assistant Director General, the petitioner signified its consent to the offer vide communication dated 9th February, 1995, (page 65 of the paper book, vol. III ). Thereupon, after the receipt of the abovesaid letter of the petitioner, the respondents by their letter dated 6th March, 1995 requested the petitioner to enter into deferred payment agreements for procurement of the undermentioned quantities of PIJF/ug cables (page 66 of the paper book. Vol. III ). ( 3 ) THE letter was accompanied by the terms and conditions for deferred payment agreement. Since the supplies related to three circles, therefore, the parties entered into three separate contracts on 7th April, 1995, 22nd May, 1995 and 24th April,1995. It may be pointed out that at the time of entering into the initial contract on 20th September, 1994, the petitioner had furnished a Bank Guarantee dated 28th September, 1994 to the tune of Rs. 85 lacs for due performance of the contract. It may be pointed out that at the time of entering into the initial contract on 20th September, 1994, the petitioner had furnished a Bank Guarantee dated 28th September, 1994 to the tune of Rs. 85 lacs for due performance of the contract. Subsequently, when the respondents placed order for PIJF cables on deferred payment, the petitioner in terms of the subsequent agreements furnished asecond Bank Guarantee on 5th April, 1995 (page 24, part III of the Court record) for a sum of Rs. 15 lacs. It appears that the parties differed on certain matters and disputes arose between them. On 14th March, 1997, the respondents by means of two separate letters invoked the abovesaid Bank Guarantees. The petitioner feeling aggrieved by the said invocations filed the instant petition for the following reliefs: (I) to direct the Agreement No. SP-2/34/ipo/ugc/dp/95-96/ HTL dated 7. 4. 1995, No. Engg/agreement with HTL/cp/2 dated 7. 4. 1995 and No. Engg/haryana/n84/dp (har)/htl/95/96/l dated 22. 5. 1995 be filed and be further pleased to appoint Arbitrator to arbitrate upon the disputes/differences arising between the parties. (ii) the respondents be restrained from encashing the Bank Guarantees No. PER/57/94-95 dated 28. 9. 1994 for Rs. 85 lakhs issued on behalf of the petitioner by the State Bank of Patiala, Rajpura (Pb.) and Bank Guarantee No. 34/95 dated 5. 4. 1995 for Rs. 15 lakhs issued on behalf of the petitioner by the Canara Bank, Barakhamba Lane, New Delhi, till the passing of the Award. Insofar as the first prayer relating to the question of appointment of an Arbitrator is concerned, learned Counsel for the respondent states that a Committee has been constituted by the Chairman, Telecommunication for this purpose and an Arbitrator will be appointed. In view of this statement of the learned Counsel for the respondent, the only direction which need to be given in regard to the first prayer is that the respondent will appoint an Arbitrator with four weeks. ( 4 ) AS regards the second prayer of the petitioner pertaining to the question of the validity or otherwise of the invocation of Bank Guarantees is concerned, the learned Counsel for the petitioner contended that the respondent was not justified in invoking the Bank Guarantees as they pertain to the initial contract in regard to which there is no demand by the respondents. Learned Counsel invited my attention to the following recitals in the Bank Guarantee dated 28th September, 1994: Bank Guarantee No. PER/57/94-95 dated 28th September, 1994: "in consideration of the President of India (hereinafter called "the Government") having agreed to exempt Haryana Telecom Limited, Rohtak (hereinafter called "the said Contractor") from the demand, under the terms and conditions of an agreement No. 203-60/93-MMS-I dated 20. 9. 1994 made between President of India, Through Director (MMSI, Department of Telecommunication, New Delhi and Haryana Telecom Limited, Rohtak for the supply of Jelly Filled Telephone Cables (hereinafter called "the said Agreement ) of the security deposit for the due fulfilment by the said Contractor of the terms and conditions contained in the said Agreement, on the production of a Bank Guarantee for Rs. 85,00,000. 00 (Rupees eighly five lacs only) we. State Bank of Patiala, Rajpura (hereinafter referred to as "the Bank ) at the request of Haryana TelecomLimited, Rohtak (Contractor) do hereby undertake to pay to the Government an amount not exceeding Rs. 85,00,000. 00 (Rupees eighty five lacs only) against any loss or damage caused to or suffered or would be caused to or suffered by the Government by reason of any breach by the said contractor s of any of the terms or conditions contained in the said Agreement. "bank Guarantee No. 34/94-95 dated 28th September, 1994: "in consideration of the President of India (hereinafter called "the Government") having agreed to exempt Haryana Telecom Limited, Rohtak (hereinafter called "the said Contractor") from the demand, under the terms and conditions of an agreement No. 203-60/93-MMS-1 dated 23. 2. 1994 made between President of India, through Director (MMSI, Department of Telecommunication, New Delhi and Haryana Telecom Limited, Rohtak for the supply of Jelly Filled Telephone Cables (hereinafter called the said Agreement ) of the security deposit for the due fulfilment by the said Contractor of the terms and conditions contained in the said Agreement, on the production of a Bank Guarantee for Rs. 15,00,000. 00 (Rupees fifteen lacs only) we, Canara Bank, Industrial Finance Branch, New Delhi, (hereinafter referred to as the Bank ) at the request of Haryana Telecom Limited, Rohtak (Contractor) do hereby undertake to pay to the Government an amount not exceeding Rs. 15,00,000. 15,00,000. 00 (Rupees fifteen lacs only) we, Canara Bank, Industrial Finance Branch, New Delhi, (hereinafter referred to as the Bank ) at the request of Haryana Telecom Limited, Rohtak (Contractor) do hereby undertake to pay to the Government an amount not exceeding Rs. 15,00,000. 00 (Rupees fifteen lacs only) against any loss or damage caused to or suffered or would be caused to or suffered by the Government by reason of any breach by the said Contractor s of any of the terms or conditions contained in the said Agreement. " ( 5 ) HE submitted that the Bank Guarantees clearly refer to the initial contract dated 20th September, 1994, which has its genesis in the Tender No. 203-60/93 MMI-S dated 23rd February, 1994, and not to the contracts entered by the partics on 7th April, 1995, 22nd May, 1885 and 24th April, 1995. Learned Counsel also submitted that the Bank Guarantees have not been invoked as per the terms and conditions laid down therein. He canvassed that the respondent while invoking the Bank Guarantees was required to state that the respondents had suffered loss due to failure of the petitioner to perform the agreement. Learned Counsel also invited my attention to the following decisions : ( 6 ) HINDUSTAN Steel Works Construction Ltd. v. Tarapore and Co. and Another, AIR 1996 SC 2268 , M/s. Saraya Distillery, Sardarbaggar v. Union of India and Another, AIR 1984 Delhi 360, M/s. Harprashad and Co. Ltd. v. Sudarshan Steel Mills and Others, AIR 1980 Delhi 174. Ansal Properties and Industries Ltd. v. Union of India and Ors. , 54 (1994) DLT 307. ( 7 ) ON the other hand, learned Counsel for the respondents submitted that the respondents have invoked the Bank Guarantees because of the failure of the petitioner to perform the contracts dated 7th April, 1995,22nd May, 1995 and 24th April, 1995 and for the loss suffered as a consequence thereof. He further contended that the invocations are in terms of the Bank Guarantees. He also canvassed that there are no special equities in favour of the petitioner nor is it going to suffer any irretrievable loss in the event of encashment of the Bank Guarantees. ( 8 ) I have considered the respective submissions of the learned Counsel for the parties. He also canvassed that there are no special equities in favour of the petitioner nor is it going to suffer any irretrievable loss in the event of encashment of the Bank Guarantees. ( 8 ) I have considered the respective submissions of the learned Counsel for the parties. While it is correct that the plaintiff furnished the first Bank Guarantee No. 57/94-95 dated 28th September, 1994, in fufilment of the conditions of the tender document No. 203-60/93 dated23rd February, 1994,subsequently,however,when the respondents by their communication dated 2nd February, 1995, asked the plaintiff to give its acceptance to a further supply of PIJF G/c cables of various sizes it not only consented to furnish a fresh Bank Guarantee for a sum of Rs. 15 lacs but also agreed that the Bank Guarantees already given at its instance by State Bank of Patiala for a sum of Rs. 85 lacs will also serve as a guarantee for the subsequent contracts. This is apparent from a reading of the agreements dated 7th April, 1995, 22nd May, 1995 and 24th April, 1995. At this stage it will be convenient to extract the relevant clauses of one of the agreements dated viz. , 7th April, 1995 as the recital in all the agreements are to the same effect. "whereas, in response to supplier s offer (hereinafter referred to as "initial Tender") against Tender Enquiry No. 203-60/93-MMS-1 dated 23. 2. 1994, the Dot placed some purchase order on the suppliers. xxxx xxxx xxxx xxxx It is hereby agreed that the terms and conditions fixed under the initial tender with regard to specifications - Rates, Excise Duty, Sales Tax, Bank Guarantee, etc.- would apply to supplies as per Annexure-I of this Agreement except for the changes incorporated hereinafter in this agreement. In case of contradiction between the terms of initial tender and the Agreement, the latter will prevail. xxxx xxxx xxxx xxxx 1. 0. Scope of the Agreement : The Dot hereby places an order on the supplier to supply PIJF U/g Cable as per specifications attached to Tender No. 203-60/93-MMS-1 dated 23. 2. 1994 in accordance with details of quantity ordered, rates applicable, consignor and delivery schedule indicated in Annexure-I and Annexure-II, on the basis of supplier s credit subject to the terms of this Agreement No. E-19/ Agreement with HTL/cf/2 (hereinafter referred to as "agreement" ). 2. 1994 in accordance with details of quantity ordered, rates applicable, consignor and delivery schedule indicated in Annexure-I and Annexure-II, on the basis of supplier s credit subject to the terms of this Agreement No. E-19/ Agreement with HTL/cf/2 (hereinafter referred to as "agreement" ). Any supplementary schedule shall be deemed to form an integral part of this Agreement as if the same were annexed hereto. 2. 0. Concerned References 1. Tender Enquiry No. 203-60/93-MMS-1 dated 23. 2. 1994. 2. Offer No. 80-24/pijf-2/94-VLF dated 2. 2. 1995. 3. Acceptance Letter No. HTL/sales/640 dated 9. 2. 1995. 4. 0. Performance Bank Guarantee : 4. 1. Performance Bank Guarantee 95% of the order value (exclusive of Excise, Sales Tax etc.) upto Rs. 4 crores and 2% for every extra crore order value subject to a total ceiling of Rs. 1 crore is to be submitted by the supplier to the purchaser in the prescribed proforma enclosed herewith, from any Nationalised Scheduled Bank before signing of the Agreement. The supplier has already submitted a Performance Bank Guarantee No. Per/57/94-95 issued by State Bank of Patiala, Rajpura. for Rs. 85,00,000. 00 (Rs. eighty five lacs only) i. e. valid for three years upto 27. 9. 1997 and Bank Guarantee No. 34/95 issued by Canara Bank, New Delhi, for Rs. 15,00,000. 00 (Rs. fifteen lacs only) is valid for three years upto 4. 4. 1993. The extension of the Performance Bank Guarantee shall be arranged by supplier/bank as and when requested by the Dot till it is allowed to be lapsed by Dot. 4. 2. The Performance Guarantee shall be encashed by the Dot on the supplier s failure to meet its obligations under the agreement. ( 9 ) THUS it is obvious that the petitioner agreed that the respondents will be entitled to encash the Performance Guarantees mentioned in para 4. 1 in case of its failure to meet its obligation under the agreement. Thus the underlying contracts clearly permitted the respondents to invoke not only the Bank Guarantee No. 34/ 95 for Rs. 15 lacs but also Bank Guarantee No. 57/94-95 for a sum of Rs. 85 lacs in the event of the failure of the petitioner to comply with the terms and conditions thereof. Thus the underlying contracts clearly permitted the respondents to invoke not only the Bank Guarantee No. 34/ 95 for Rs. 15 lacs but also Bank Guarantee No. 57/94-95 for a sum of Rs. 85 lacs in the event of the failure of the petitioner to comply with the terms and conditions thereof. Therefore, the petitioner, cannot at this stage, turn back and raise a challenge to the invocation of the Bank Guarantees including Bank Guarantee No. 57/94-95 on the ground that the same were furnished, at its instance, by the above said Banks only in fulfilment of the initial contract and not for the purpose of ensuring due performance of the underlying contracts dated 7th April, 1995 or agreements dated 22nd May, 1995 and 24th April, 1995. Besides, it seems to me that the petitioner cannottake up the plea that the Bank Guarantees No. 34/95 and 57/ 94-95 furnished by the abovesaid banks are not continuing guarantees as the petitioner is not a surety. ( 10 ) THE next question to be considered is whether the invocation of the Bank Guarantees are as per their terms. In order to appreciate the question it is necessary to refer to Clause 4. 0 of the Bank Guarantee already quoted above. Under the said clause the respondents being the beneficiaries of the Bank Guarantees can invoke the same in the event of loss suffered or likely to be suffered by them due to the breach of the abovesaid contracts by the petitioner. The respondents in their reply to the petition have stated that the Bank Guarantees have been invoked for the reason of the failure of the petitioner to comply with the terms and conditions contained in the underlying contracts. The respondents by their letters dated 9th May, 1995 and 14th May, 1995 to the abovesaid Banks have stated that the claim is being made for the loss/damages suffered in terms of the Bank Guarantees. One of such letter reads as follows (Annexure-A) to respondent s reply: "to 9. 5. 1997. The Chief Manager, canara Bank IFB, world Trade Tower, barakhamba Lane, new Delhi-110001. Subject: Encashment of Bank Guarantee No. 34/95 dated 5. 4. 1995 for Rs. 15,00,000. 00 issued on behalf of M/s. HTL Ltd. Rohtak against Dot Agreement Nos. (i) No. SP-2/34/po/ugc/dp/95-96/htl/5 dated 24. 4. 1995; (ii) No. Engg. /agreement with HTL/cp/2 dated 7. 4. 1995 (iii) No. Engg. The Chief Manager, canara Bank IFB, world Trade Tower, barakhamba Lane, new Delhi-110001. Subject: Encashment of Bank Guarantee No. 34/95 dated 5. 4. 1995 for Rs. 15,00,000. 00 issued on behalf of M/s. HTL Ltd. Rohtak against Dot Agreement Nos. (i) No. SP-2/34/po/ugc/dp/95-96/htl/5 dated 24. 4. 1995; (ii) No. Engg. /agreement with HTL/cp/2 dated 7. 4. 1995 (iii) No. Engg. /haryana/ N84/dp (Haryana) HTL/95-96/1 dated 22. 5. 1995. Dear Sir, This has reference to your letter No. 49cr: 711:ggrk;97 dated 4. 4. 1997 and No. 49cr: 807: SS : 97 dated 2. 5. 1997 on the subject captioned above. It is hereby confirmed that the claim is by way of loss / damage suffered in terms of Para 4 of the above mentioned Bank Guarantee. 2. You are, therefore, requested to send a Demand Draft (crossed payee A/c only) payable at Delhi, for Rs. 15,00,000. 00 i. e. , equivalent to the amount of Bank Guarantee drawn in favour of "pay and Accounts Officer Dot (Hqrs), New Delhi" immediately on receipt of this letter. The Demand Draft may be sent under registered cover to : Accounts Officer (VLF), Dot, VLF BRANCH, Room No. 315, Sanchar Bhawan, 20, Ashoka Road, New Dehi-11ooo1. 3. The matter is pending with you for last two months as such requisite Demand Draft may please be sent by return of post latest by 15. 5. 1997. In case of any failure in this regard department will be constrained to refer the matter to Reserve Bank of India for getting compliance. 4. The receipt of the letter may please be acknowledged. sd/- (R. S. Thiyagarajan) asstt. Director General (VLF) ( 11 ) THEREFORE, a reading of the above letter clearly shows that the requirement laid down in Para 4 of the Bank Guarantee stands satisfied. ( 12 ) IT may be recalled that the plaintiff had submitted that the respondents without suffering any loss have invoked by the Bank Guarantees. sd/- (R. S. Thiyagarajan) asstt. Director General (VLF) ( 11 ) THEREFORE, a reading of the above letter clearly shows that the requirement laid down in Para 4 of the Bank Guarantee stands satisfied. ( 12 ) IT may be recalled that the plaintiff had submitted that the respondents without suffering any loss have invoked by the Bank Guarantees. I am afraid cannot go into this question as the Bank Guarantees specifically state that the Bank will pay the amount under the guarantee without any demur merely on a demand from the Government stating that the amount claimed is due by way of loss or damage caused to or would be caused to or suffered by the Government by reason of breach of any of the terms and conditions contained in the said agreements or by any reason of the contractor s failure to perform the said agreements. They further stipulate that any such demand made on the Bank shall be conclusive as regards the amount due and payable by the Bank under the Bank Guarantees and the decision of the Government shall be final and binding on the Banks. Therefore, as per the Bank Guarantees the beneficiary has been made the sole Judge as to the question whether the amount under the Bank Guarantees is due or not. Once the beneficiary takes that decision the Bank is under an obligation to remit the amount claimed under the Bank Guarantee to the Government. ( 13 ) LEARNED Counsel for the petitioner invited my attention to Para 20 of the petition where it is alleged that the Dot, in fact, has purchased the ordered material from other suppliers without incurring any loss. Learned Counsel also invited my attention to the reply filed by the respondents to Para 20 of the petition and submitted that the respondents have not traversed the abovesaid fact. Since it is not open to go into the question as to whether the Government has suffered any loss as it has been made the sole Judge under the agreement, I refrain from going into that question. I also find that the decision of the Supreme Court in Hindustan Steel Works (supra), cited by the learned Counsel, is of no avail to the plaintiff as neither a case of special equity nor a case of irretrievable injustice has been made out. I also find that the decision of the Supreme Court in Hindustan Steel Works (supra), cited by the learned Counsel, is of no avail to the plaintiff as neither a case of special equity nor a case of irretrievable injustice has been made out. Further the demand made by the respondents under the Bank Guarantee cannot be said to be fraudulent because on the own showing of the petitioner, the PIJF cables were not suplied to the respondent by it under the underlying contracts. While it is true that a demand by the beneficiary under the Bank Guarantee may become fraudulent not because of any fraud committed by the beneficiary at the time of executing the underlying contract, but it may become so because of subsequent events or circumstances. However, the instant case does not fall in that category as there are no subsequent events or circumstances which render the demand of the respondents fraudulent. The decision of this Court in Harprasad and Co. (supra) also does not come to the rescue of the petitioner inasmuch as the invocation of the Bank Guarantees have been made in terms of the Bank Guarantees. All that the above said decision lays down is that the duty of the beneficiary in making the demand is like the duty of the petitioner to disclose the cause of action in the plaint. It seems to me that the respondents have disclosed the cause of action in their favour while invoking the Bank Guarantees. Even the decision of a Division Bench of this Court in M/s. Saraya Distilleries (supra) is not helpful to the case of the petitioner as this was not a matter arising under the Bank Guarantee. In view of the abovesaid discussion, I seem no ground to interfere with the invocation of the Bank Guarantees made by the respondents. The abovesaid second prayer made in the petition, therefore, merits rejection and is accordingly rejected. As regards the first prayer, the Chairman, Dot is directed to appoint an Arbitrator within four weeks for resolution of disputes between the parties. The arbitration application and the I. A. disposed of. Copies of this order may be given Dasti to the learned Counsel for the parties. .