Frigo Mekanik Insaat Tesisat Ve Taahhut Sanayi Ve Ticarest A.S. vs. Respondent: Bangladesh Milk Producers' Co-Operative Union Limited (BMPCUL) and Ors.

Jul 21, 2022

IN THE SUPREME COURT OF BANGLADESH (HIGH COURT DIVISION)

arbitration Application No. 36 of 2016

Decided On: 29.10.2019

Appellants: Frigo Mekanik Insaat Tesisat Ve Taahhut Sanayi Ve Ticarest A.S.
Vs.
Respondent: Bangladesh Milk Producers' Co-operative Union Limited (BMPCUL) and Ors.

**Hon’ble Judges:**Muhammad Khurshid Alam Sarkar, J.

Counsels:
For Appellant/Petitioner/Plaintiff: Mohammad Imtiaz Farooq and Md. Faisal Islam, Advocates

For Respondents/Defendant: Momtaz Uddin Fakir and Molla Kismot Habib, Advocates

Subject: arbitration

Catch Words

Mentioned IN

**Acts/Rules/Orders:**Code of Civil Procedure, 1908 (CPC) - Order VI Rule 15; Evidence Act, 1872 - Section 115, Evidence Act, 1872 - Section 85

Industry: Banks

JUDGMENT

Muhammad Khurshid Alam Sarkar, J.

  1. Since the factual matrix as well as the parties of both the cases are the same and, furthermore, the laws required to be examined by this Court in both these cases are related to the laws of arbitration, they were heard simultaneously and, now, are being disposed of by this single Judgment.

  2. In the arbitration Application No. 36 of 2016, on 12.12.2016 Rule was issued calling upon Bangladesh Milk Producers Co-operative Union Limited (hereinafter referred to either as the BMPCUL or as the respondent no. 1) & the Standard Chartered Bank (hereinafter referred to either as the SC Bank or as the respondent no. 2) to show cause within 4 (four) weeks from date as to why the purported notice of termination dated 30.11.2016 issued by the respondent no. 1 should not be stayed, why the respondents should not be restrained by an Order of ad-interim injunction from encashment of the Bank Guarantees/ Performance Securities dated 03.08.2015 issued by the respondent no. 2 bearing Nos. 411020278783 and 411020278774, so as to preserve the subject matter of the arbitration, and also why the BMPCUL shall not be directed to extend the terms of the LCs, being LC nos. 033015010605 and 033015010606, both issued by Sonali Bank Ltd on 01.09.2015 so as to preserve the subject matter of the arbitration. Further, pending disposal of this application, the respondents were restrained from encashment of the Performance Securities issued by the SC Bank bearing Bank Guarantee Nos. 411020278783 and 411020278774, both dated 03.08.2015, for an amount of €62,500 (equivalent to BDT 52,90,559/-) each. This Court also directed at the time of issuance of the above-mentioned Rule that pending disposal of this application, all operation of and consequential effects stemming from the purported termination of the Contracts by the BMPCUL on 30.11.2016 shall be held in abeyance.

  3. In the arbitration Application No. 17 of 2018, when the petitioner, by invoking Section 12(3)(a)(ii) of the arbitration Act, 2001 (hereinafter referred to as the arbitration Act), prayed to this Court for appointment of an arbitrator from the BMPCUL’s side, towards formation of the arbitral tribunal for resolution of the dispute that has arisen between the petitioner and the BMPCUL in connection with the (i) Contract No. PD/CWP(D)LC-10/2013/01 dated 08.07.2015 and (ii) Contract No. PD/CWP(D)LC-10/2011/02 dated 08.07.2015, a Rule has been issued on 14.10.2018 calling upon the BMPCUL to show cause as to why an arbitrator shall not be appointed from the side of the BMPCUL for resolution of the dispute between the parties.

  4. The facts of both the cases, briefly, are that on 10.02.2014, the Bangladesh Milk Producers' Co-operative Union Limited (the BMPCUL) floated an international tender bearing Tender No. PD/MP(D)/LC-14/2013/441 consisting of Tender Package No. (i) PD/CWP(B)/LC-10/2011/12 dated 10/02/2014 and (ii) PD/CWP(D)/LC-10/2013/11 dated 10/02/2014 for procurement of one custom-made Chilled Water Plant for Baghabari Dairy Plant (“BDP”) and one custom-made Chilled Water Plant for Dhaka Dairy Plant (“DDP”) respectively, and the petitioner submitted its bid against the aforesaid Tenders, which was accepted by the BMPCUL and issued two Notifications of Awards, namely, (i) PD/CWP(D)/LC-10/2013/01 dated 08.07.2015 and (ii) Contract No. PD/CWP(D)LC-10/2011/02 dated 08.07.2015, for the supply of goods and related services for Chilled Water Plant for BDP and DDP respectively for the contract price of €625,000.00 (Euro Six Hundred and Twenty Five Thousand) each. Pursuant to the conditions of the Notifications of Awards, the petitioner furnished Bank Guarantee/Performance Security issued by the Standard Chartered Bank bearing Bank Guarantee Nos. 411020278783 dated 03.08.2015 and 411020278774 dated 03.08.2015 for an amount of €62,500.00 (Euro Sixty Two Thousand Five Hundred) each in the format proposed by the BMPCUL. Upon furnishing the Performance Securities, the petitioner entered into two contracts dated 04.08.2015 with the BMPCUL for the supply of goods and related services for Chilled Water Plant for BDP and DDP respectively valued at €1,250,000/-(Euro One Million Two Hundred and Fifty Thousand) collectively (hereinafter referred to as the “Contracts”). The BMPCUL, then, issued Purchase Orders, bearing nos. (i) PD/CWP(B)/LC-10/2011/07 dated 24.08.2015 and (ii) PD/CWP(D)LC-10/2013/06 dated 24.08.2015 (collectively referred to as the “Purchase Orders” or the POs). In accordance with the Contracts and the Purchase Orders, the Letters of Credit (L/C), being No. 033015010605 dated 01.09.2015 and 033015010606 dated 01.09.2015 were issued on the basis of Pro-forma Invoice No. 15/0169/CT dated 20.08.2015 and 15/0170/CT dated 20.08.2015 respectively. Pursuant to the Contracts, the Purchase Orders and the L/Cs, the petitioner procured all the required components and equipments from several different sources, including internationally reputed manufacturers, for the supply of goods and related services for Chilled Water Plant for BDP and DDP. Subsequently, there were various correspondences between the petitioner and the BMPCUL regarding the pre-shipment inspection (PSI) of the said goods and, eventually, on 14.04.2016, the petitioner sent a letter to the BMPCUL notifying that the said goods were ready for inspection with a request to perform the PSI tests through the BMPCUL’s appointed PSI company, Continental Inspection Co. (BD) Ltd.

  5. The PSI Company carried out its inspection of the plants on 25.04.2016 and 26.04.2016. Upon inspection, the PSI company did not issue PSI certificate, nor did it issue any communication pertaining to any technical or other discrepancies. Thereafter, it came to the knowledge of the petitioner that the PSI company by sending a letter on 27.04.2016 to the BMPCUL pointed out some discrepancies about the Item No. 1.1 (Ice Thermal Storage Unit), Item No. 1.6 (Evaporative Condenser) and about the Motor. Notwithstanding the discrepancy raised by the PSI company, the BMPCUL’s PSI team, which includes a specialist from the Bangladesh University of Engineering and Technology (BUET), issued a clean pre-shipment inspection certificate on 29.04.2016 (“BMPCUL’s certificate”). Immediately after obtaining the BMPCUL’s certificate, the petitioner shipped the said goods to Bangladesh, which arrived at the Chittagong Port in June-2016 but the BMPCUL denied to accept the said goods due to non-conformity to the terms of the L/Cs with respect to the country of origin. It is stated that although the L/Cs stipulate at sight payment, subject to furnishing of a PSI certificate together with other documents, the BMPCUL’s bank, i.e. the Sonali Bank Ltd refused to clear the payment due under the L/Cs as per the BMPCUL’s instructions despite furnishing all the documents. The BMPCUL has been made aware of the petitioner’s ordeal as to incurring huge demurrage at the Chattogram Port at numerous times vide e-Mails, letters, phone-calls and face-to-face meetings in Dhaka. The petitioner has made numerous requests to the BMPCUL, both in writing and during meetings, to amend and extend the terms of the L/Cs and thereby amicably resolve the matter, but the BMPCUL has continuously and unreasonably rejected such requests although the shipped equipments met all material technical specifications as required under the Contracts, POs and the L/Cs, which have been certified in the BMPCUL’s Certificate. Subsequently, the BMPCUL sent a letter dated 18.06.2016 stating that the BMPCUL would extend the L/Cs only if the following conditions were met: (a) the petitioner would have to release shipped machineries from the Chattogram Sea Port at its own cost and liabilities and (b) payments due under the L/Cs will be made after a full year following successful installation of the plants. In response to the above conditions, the petitioner vide letter dated 29.06.2016 proposed some favorable payment terms for the BMPCUL. Since then, the BMPCUL did not attempt to resolve the issues regarding the country of origin in good faith, nor is the BMPCUL concerned about the rising cost of demurrages. More so, the BMPCUL has unreasonably refused to extend the term of the L/Cs and amend the appropriate clauses thereof, all of which have raised a ‘dispute’ between the petitioner and the BMPCUL. The petitioner has attempted and failed, at numerous times, to resolve the dispute through an amicable settlement.

  6. It is stated that in view of dispute as to the extension of the terms of the L/Cs and the amendment of the appropriate clauses, the petitioner had invoked the arbitration clause. It is further stated that the relevant clause of the Particular Conditions of Contract (PCC) empowers the BMPCUL to choose the law from among (i) the United Nations Commission on International Trade Law (UNCITRAL) arbitration Rules 1976, (ii) the Rules of Conciliation and arbitration of the International Chamber of Commerce (ICC), (iii) the Rules of arbitration of the Institute of the Stockholm Chamber of Commerce (ISCC) and (iv) the Rules of the London Court of International arbitration (LCIA). The petitioner had invoked the multi-option arbitration provision contained in GCC Clause 47.3 read with the relevant PCC clauses and intended to commence the arbitration proceedings by sending two notices of arbitration to the BMPCUL on 24.11.2016 and 05.12.2016 respectively. The BMPCUL, disregarding the petitioner’s request for arbitration, sent a letter under Memo No. PD/CWP(D)/LC-10/2013/46 dated 30.11.2016 informing the petitioner that the BMPCUL shall not allow the extension of the L/C validity and has decided to cancel the said contracts and the L/Cs. Under the circumstances, the petitioner by invoking Section 7A of the arbitration Act filed the arbitration Application No. 36 of 2016 before this Court and obtained the Rule in the terms mentioned hereinbefore.

  7. The BMPCUL eventually responded to the notice of arbitration on 06.12.2016 stating that the matter has apparently been settled and there exists no dispute in respect of the matter and, therefore, no arbitration tribunal requires to be constituted. Thereafter, by a letter dated 21.05.2018, the petitioner reiterated its intention to commence arbitration to resolve the dispute at the BMPCUL’s earliest convenience having appointed Mr. AM Amin Uddin, a Senior Advocate of the Supreme Court of Bangladesh, as one of the arbitrators, with a request to the BMPCUL to appoint its arbitrator within 30 (thirty) days of receipt of the letter, so that the two appointed-arbitrators may choose the third arbitrator who shall be Chairman of the arbitral tribunal. Then, the BMPCUL, vide its letter dated 25.06.2018, refused to appoint an arbitrator claiming that there is no dispute between the petitioner and the BMPCUL. Hence, is the arbitration Application No. 17 of 2018.

  8. By filing two separate affidavits-in-opposition for the two arbitration Applications being arbitration Application No. 36 of 2016 & arbitration Application No. 17 of 2018, the BMPCUL contends, amongst others, that comprehensive inspection for the stores regarding quality, quantity and description of the Chilled Water Plant for BDP and related accessories marking and supervising of the loading were agreed by the parties to be carried out prior to shipment by the BMPCUL’s appointed PSI company or their accredited representative who will issue an inspection certificate the cost of which will be borne by the buyer (BMPCUL) and the PSI certificate will form part and parcel of the shipping documents required for submission to the bank for drawing payment by the beneficiary. In addition to the PSI company’s inspection, a three-member team of the BMPCUL will inspect the Chilled Water Plant for BDP prior to shipment in the manufacturer’s workshop. All the related costs i.e. both-way air tickets, food, lodging, local transport and pocket money of at least USD 100.00 per day for each representative for 07 (seven) days will be borne by the supplier. The same representative will issue PSI certificate which will form part and parcel of the shipping documents for drawing payment. Advance copies of the shipping documents must be sent to the cited addresses at least 07 (seven) days before the expected date of arrival of the consignment at the destination of the Chattogram Sea Port, Bangladesh and the invoice should contain full information such as item, weight, measurement value etc. Bill of lading should indicate freight prepaid. L/C Nos. 033015010605 (“L/C 1”) and 033015010606 (“L/C 2”), both dated 01.09.2015, were issued against the Purchase Order (PO) 1 and the Purchase Order (PO) 2 respectively (collectively referred to as the “L/Cs”). However, the PSI company of the BMPCUL vide their report dated 27.04.2016 informed that the supplier did not provide any testing facility to its inspector at the time of inspection in Belgium. The supplier arranged only visual inspection to its inspector and its inspector conducted only visual inspection of the subject consignment in Belgium on 25.04.2016 for Item No. 1.1 (Ice Thermal Storage Unit) and Item No. 1.6 (Evaporative Condenser) and found the following discrepancies: (i) For Item No. 1.1 (Ice Thermal Storage Unit), its inspector found the country of origin to be Belgium; instead of Italy, (ii) For Item No. 1.6 (Evaporative Condenser), its inspector found its Model No. VSC-250; instead of VXC-C250 and the country of origin to be Belgium; instead of Italy and (iii) Motor was found by Siemens, Germany; instead of Baltimore Air Coil (BAC), Italy. And, as per the report of the PSI company dated 30.04.2016, it was also detected that (iv) For Item No: 1.2, Volume of the Refrigerant Receiver was found 2610 Ltr; instead of 3000 Ltr, (v) For Item No: 1.3 (Single Stage Reciprocating Compressor) running speed, capacity control, power consumption of motor and insulation protection (whether it is IP 23 or not) are not mentioned on the name-plate of the motor. It is alleged that the petitioner with ill-motive shipped discrepant machineries on 30.04.2016 without informing the BMPCUL and without obtaining PSI certificate from the PSI agent of the BMPCUL which is evidenced by the Bill of Lading provided by the carrier. Thereafter, the petitioner sent letter to the BMPCUL requesting for extension of L/C dated 24.05.2016. The petitioner managed to obtain a letter dated 26.05.2016 from the Baltimore Air Coils Company clarifying the so-called situation about the country of origin.

  9. After getting information from the PSI company about the above-mentioned discrepancies, the BMPCUL sent the letter No. PD/CWP(D)/LC-10/2013/127 dated 29.05.2016 to the supplier company stating about the deviation of purchase orders, contract agreements as well as L/Cs' terms and conditions and requested them to follow the offer and subsequent purchase order and to mitigate/recover the problem. The supplier company, thereafter, without resolving the discrepancies wrote letters on 01.06.2016 and 07.06.2016 having tried to explain the situation as to why the discrepancies arose, in an attempt to persuade the BMPCUL that the equipments shipped are of superior model and would be of the expected performance and earnestly requested the BMPCUL to accept the goods. The petitioner, without any legal authority, wrote a letter to the PSI company (Continental Inspection Company) on 08.06.2016 to issue PSI certificate. The PSI company also vide their letter Nos: CIC/BMPCUL/Denmark/Turkey/Belgium/LC-10/2016 dated 09.06.2016 and CIC/ BMPCUL/ Denmark/ Turkey/ Belgium/ L/C-10/2016 dated 11.06.2016 informed the supplier company about the above mentioned discrepancies. After getting such explanation and earnest request from the petitioner, the BMPCUL considered the matter sympathetically by giving option with conditions, failing which, the petitioner shall take back the cargo at its own cost. It was, then, agreed that the supplier (the petitioner) shall take back the goods.

  10. Thereafter, the supplier, by avoiding the earlier amicable settlement, wrote a letter on 29.06.2016 to the BMPCUL for L/C payment under some new terms. Again, the supplier wrote a letter on 09.07.2016 for extension of L/Cs. Subsequently, several meetings were held for amicable settlement of the dispute with an aim to arrive at a conclusive decision between the BMPCUL and the supplier. Finally, the supplier by its letter dated 27.07.2016 confirmed the BMPCUL to take back the goods. It is claimed by the BMPCUL that as per the terms of the settlement, it provided all sorts of support as required for example; the BMPCUL, as per the request of the petitioner, wrote a letter to the Sonali Bank dated 27.07.2016 and the Sonali Bank accorded NOC on 28.07.2016; the petitioner wrote a letter to the BMPCUL for appointment of C&F Agent for re-shipping purpose dated 31.07.2016 and, accordingly, the BMPCUL wrote a letter to the Chief Controller of Imports and Exports who accorded NOC on 01.08.2016, the BMPCUL wrote a letter to the Commissioner of Customs, Chattogram on 01.08.2016 and accorded their permission for re-shipment on 31.08.2018; Pursuant to the petitioner’s request, the BMPCUL wrote a letter to the customs authority for permission for taking back the goods by the petitioner on 01.08.2016. Thereafter, the BMPCUL wrote a letter to the petitioner’s C&F Agent ‘Transmire’ on 01.08.2018, but the petitioner when requested for appointing ‘Oshin Enterprise’ as its C&F Agent on 03.08.2016, the BMPCUL, as per the request of the petitioner, issued a letter of authorization to the new C&F Agent (Oshin Enterprise) on 03.08.2016. In the meantime, an auction letter was issued by the customs authority on 31.07.2016 which was received on 08.08.2016 by the BMPCUL and the BMPCUL then sent a request letter to the customs authority to stop auction process on 08.08.2016. A request letter from the petitioner was received by the BMPCUL on 09.08.2016 for endorsement of shipping documents for taking back the entire consignments, the BMPCUL then sent a letter on 10.08.2016 to the Sonali Bank to endorse the documents for re-shipping. As per the request of the BMPCUL, the Sonali Bank endorsed the documents for re-shipping of the concerned goods vide letter dated 11.08.2016. When the customs authority again sent the letter dated 10.08.2016 for auction sale of the goods, the BMPCUL requested the customs authority to stop the auction sale vide the letter dated 23.08.2016. The petitioner further requested the BMPCUL to send a letter to the Bangladesh Bank for issuing NOC for re-shipping of the consignment on 31.08.2016 and the BMPCUL sent a request letter to the Sonali Bank to obtain the NOC from the Bangladesh Bank on 03.09.2016; the Sonali Bank requested the Bangladesh Bank for NOC for re-shipping vide letter dated 04.09.2016 and it accorded permission vide letters dated 19.09.2016 and 21.09.2016. Thereafter, the petitioner surprisingly, by taking a U-turn, sent a letter to the BMPCUL for amendment of the L/Cs on 29.09.2016, to which the BMPCUL replied on 26.10.2018. The petitioner sent a letter requesting the BMPCUL for extension of the L/Cs on 27.10.2016 and the petitioner also sent a letter to the BMPCUL to take steps to stop the auction sale on 31.10.2016 and the BMPCUL sent a letter for that purpose to the customs authority on 08.11.2016. When the petitioner sent a letter again requesting the BMPCUL for extension of the L/Cs on 10.11.2016, the BMPCUL vide their letter dated 30.11.2016 cancelled the L/Cs due to their expiry and informed the petitioner as well as the Sonali Bank Ltd accordingly. Thereafter, to protect the interest and loss, the BMPCUL wrote a letter to the Standard Chartered Bank for forfeiture and encashment of the Bank Guarantees and Performance Security on 30.11.2016. Thus, the matter amicably came to a conclusion.

  11. Thereafter, turning back from the amicably settled matter, the petitioner sent Demand Notice to the BMPCUL on 24.11.2016 for arbitration under the Rules of the London Court of International arbitration (LCIA) within 7 days. The BMPCUL vide letter dated 06.12.2016 replied to the notices denying the arbitration on the ground that the matter has amicably been settled. The petitioner on 05.12.2016 served another Demand Notice for arbitration under the Rules of International Chamber of Commerce (ICC) and, thereafter, the petitioner filed an application under Section 7A of the arbitration Act, being Application No. 36 of 2016, before this Court and on 12.12.2016 obtained an Order of stay. The petitioner, after a long gap, sent another legal notice on 21.05.2018 to the BMPCUL for appointment of an arbitrator from the BMPCUL’s side and the BMPCUL replied to the said notice on 25.06.2018 denying the arbitration. Thereafter, at the instance of the BMPCUL, the arbitration Application No. 36 of 2016 has been fixed and posted in the Cause List for hearing before this Court, but the petitioner took time on several occasions. After obtaining No Objection Certificate from the petitioner’s filing lawyer, who had filed the arbitration Application No. 36 of 2016, the petitioner’s present Advocate, after a long lapse of time i.e. 1 year 9 months and 28 days, filed arbitration Application No. 17 of 2018 under Section 12 of the arbitration Act with malafide intention.

  12. Mr. Mohammad Imtiaz Farooq, the learned Advocate appearing for the petitioner, takes me through sub-clauses 47.1 to 47.3 of the General Conditions of Contract (GCC) and submits that according to sub-clause 47.3(a) of the GCC, if the parties are unable to reach an amicable settlement within 28 days of first written correspondence on the matter of disagreements, then, either party may give notice to the other party of its intention to commence arbitration in accordance with the GCC sub-clause 47.3(b). In an endeavour to explain as to when the first written correspondence on the matter of disagreement was made, he contends that according to paragraph 10(ii) of the Purchase Order dated 24.08.2015, a three-member team of the BMPCUL was supposed to inspect the Chilled Water Plant for BDP and had the authority to issue PSI certificate and the said team, upon carrying out required inspection, issued the PSI on 29.04.2016 in the form of furnishing a report, but since the BMPCUL raised its dispute by its letter dated 29.05.2016 and the petitioner replied thereto on 07.06.2016 and after expiry of 28 days there was no amicable settlement, as such the GCC sub-clause 47.3(a) became operative.

  13. He, then, takes this Court through the GCC sub-clause 47.3(b) and submits that though the “agreement to arbitrate” is present but as per the choices of the Rules of Procedures as mentioned in the PCC, the BMPCUL is to identify and prefer any one Rules of Procedures from among the UNCITRAL Rules, Rules of the ICC, Rules of LCIA and Rules of the arbitration of the ISCC, but no choice of the Rules of Procedures has been made yet. He argues that since the place of arbitration has not been selected to be outside of Bangladesh, the laws of Bangladesh can be resorted to by the petitioner. By referring to the case of STX Corporation Ltd Vs Meghna Group 64 DLR (2012) 550, he submits that until the place of arbitration is decided to be outside of Bangladesh, Section 3(1) of arbitration Act does not seek to oust the jurisdiction of Bangladeshi Court. Furthermore, as he continues to submit, even if the BMPCUL selects any of the agreed foreign Rules of Procedures, the place of arbitration may be chosen by the BMPCUL as Bangladesh, and if no choice of Rules of Procedures is made by the BMPCUL, then the GCC sub-clause 47.3(a) will be in place which refers to mere agreement to arbitrate, and since as per the GCC sub-clause, 8.1 the governing law of the Contract is the laws applicable in Bangladesh, the arbitration Act will be applicable.

  14. Mr. Imtiaz Farooq submits that, as per the proposed amicable settlement, since the BMPCUL did not take the necessary steps to stop the auction operation and failed to provide the necessary documents for taking back the goods to its origin, and since the BMPCUL refused to extend the duration of the L/Cs which were required for the petitioner to take back the goods to its origin and resupply the goods into Bangladesh and, instead, terminated the Contract and, more importantly, the BMPCUL issued letters to the concerned bank to encash the performance securities, as such, it is clear that no final settlement was agreed and the dispute between the petitioner and the BMPCUL still exists, which being an arbitrable matter should be adjudicated upon by arbitration. By referring to the Preamble of the arbitration Act, he submits that the object and scheme of enactment of the arbitration Act of 2001, upon repealing the arbitration Act of 1940, is to facilitate holding of arbitration of international commercial disputes in Bangladesh and, also, to execute the foreign arbitration award in Bangladesh, and since in this case the dispute between the parties is an international commercial dispute, this Court should form an arbitration tribunal in the backdrop of the BMPCUL’s refusal to constitute an arbitration tribunal for resolving the dispute between the parties by arbitral tribunal. He proposes to this Court that the arbitrator of the BMPCUL’s side and the Chairman of the arbitral tribunal may be appointed at the expenses of the petitioner, and let the arbitral tribunal decide all the issues, including the issue as to whether there is existence of a dispute or not.

  15. Lastly, in a bid to rebut submissions of the learned Advocate for the BMPCUL on the issue of swearing in the affidavits by the affidavit-makers, Mr. Mohammad Imtiaz Farooq, the learned Advocate appearing for the petitioner, takes me through Rule 8 of Chapter IV of the Supreme Court of Bangladesh (High Court Division) Rules, 1973 (hereinafter referred to as ‘the High Court Rules’) and submits that as per the said law, the affidavit may be sworn in by any person having knowledge of the facts stated and, accordingly, the arbitration Application No. 36 of 2016 was sworn in by one Mr. Nayon Mia as he is well acquainted with the facts. He argues that the law requires his knowledge of facts, and not on the power of attorney. He then takes me through Order VI, Rule 15 of the Code of Civil Procedure, 1908 (CPC) and argues that Order VI, Rule 15 of the CPC has similar language as the above-mentioned Rule. In an effort to buttress up his above count of submissions, he refers to the case of Messers Anath Bandhu Guha and Sons Ltd vs Babu Sudangshu Shekhar Halder (1991) 11 BLD (AD) 66, and submits that in the aforecited case it was observed that “it is not a necessary condition of verification that it should be done by the holder of a power of attorney”, and argues that Nayon Mia, even on the basis of a Letter of Authority, is competent to swear the affidavit in the arbitration Application No. 36 of 2016 under Rule 8 of the High Court Rules read with Order VI, Rule 15 of the CPC. He then refers to the Power of Attorney Rules, 2015 and Section 85 of the Evidence Act, 1872 and argues that the arbitration Application No. 17 of 2018 is sworn in by Mr. Nure Alam and the Power of Attorney in favour of Mr. Nure Alam has been duly executed and authenticated under the Power of Attorney Act, 2012, the Power of Attorney Rules, 2015 and Section 85 of the Evidence Act 1872. Therefore, Mr. Nure Alam has full authority to swear in the affidavit in the arbitration Application No. 17 of 2018. Then, he submits that as per the ratio laid down in the case of Messers Anath Bandhu Guha and Sons Ltd vs Babu Sudangshu Shekhar Halder (1991) 11 BLD (AD) 66, the power of attorney-holder does not need to show his personal cause of action for the suit and it is the original plaintiff who requires to show a cause of action against the defendant, not the attorney. As such, subsequent Power of Attorney can cure any defect, he argues.

  16. By making the above submissions, the learned Advocate for the petitioner prays for appointment of an arbitrator on behalf of the BMPCUL and a neutral Chairman towards formation of an arbitral tribunal and, further, to restrain the BMPCUL and the Standard Chartered Bank from encashing the Bank Guarantee till disposal of the arbitration.

  17. Mr. Momtaz Uddin Fakir, the learned Advocate appearing for the BMPCUL, at the very outset seeks to draw attention of this Court to the affidavit-part of these two petitions and raises question as to the standing of the persons who have sworn in the affidavits. By taking this Court through the initial and subsequent documents as to Power of Attorney, he contends that the said documents have not been executed as per the provisions of the Power of Attorney Act, 2012, the Power of Attorney Rules, 2015 and the Evidence Act, 1842. Thereafter, Mr. Momtaz Uddin Fakir takes me through all the correspondences made by the petitioner to the BMPCUL after arrival of the goods in the Chattogram Port and submits that since the dispute has amicably been settled vide letters dated 23.06.2016, 27.07.2016, 28.07.2016, 31.07.2016, 01.08.2016, 31.08.2018 and 03.08.2016, there is no need of going for arbitration. In an endeavour to elaborate his above count of submissions, he takes this Court through sub-clause 47.1(a) of the GCC and contends that pursuant to the petitioner’s letter dated 23.06.2016 for amicable settlement through supplying original goods as per the Contract and, also, pursuant to the petitioner’s letter dated 27.07.2016 to supply original goods as per the Purchase Order and the L/Cs, the BMPCUL helped the petitioner to obtain (1) NOC on 28.07.2016 from the Sonali Bank for reshipping purpose, (2) NOC and permission on 31.08.2016 from the Chief Controller of Exports and Imports, (3) endorsement of shipping documents for taking back the entire consignment dated 10.08.2016, (4) endorsement by the Sonali Bank on 31.08.2016, (5) NOC issued by the Bangladesh Bank for reshipping on 19.09.2016 and 21.09.2016 and (6) also helped the petitioner in appointing and changing the C&F Agent for the petitioner, that is to say, after arranging everything for the purpose of reshipping the goods, subsequent demands are barred by estoppels and waiver under Section 115 of the Evidence Act and, thus, there is no dispute at all. He submits that the arbitration Application No. 36 of 2016 under Section 7A of the arbitration Act and arbitration Application No. 17 of 2018 under Section 12 of the arbitration Act for appointing an arbitrator have been filed with malafide intention to harass the BMPCUL and, hence, they are not tenable in law and the same are liable to be rejected.

  18. By referring to the GCC sub-clause 47.3(b), the learned Advocate for the BMPCUL submits that the arbitration shall be conducted in accordance with the Rules of Procedures specified in the Particular Condition of Contract (PCC) which stipulates that in the case of a dispute between the purchaser and a Bangladeshi supplier, the dispute shall be referred to adjudication for arbitration in accordance with the laws for the Bangladesh i.e. arbitration Act of Bangladesh as in force at present. He argues that the provisions of the arbitration Act of Bangladesh for conducting the arbitration for foreign supplier is not applicable and the petitioner is not entitled to get any relief under this Act.

  19. By putting forward the above submissions, the learned Advocate for the BMPCUL prays for discharging both the Rules with exemplary costs.

  20. Upon hearing the learned Advocates for the petitioner and the BMPCUL, on perusal of the petitioner’s application and the BMPCUL’s affidavits-in-opposition together with their annexures and having read the relevant laws and citations, I find that the following issues are required to be adjudicated upon by this Court; (1) whether the petitioner and the BMPCUL are legally bound to resolve the dispute through arbitration or the petitioner should approach the civil Court seeking the aspired remedy, (2) whether the petitioner and the BMPCUL have amicably settled the dispute, or the dispute exists between them, (3) whether this Court has jurisdiction, and whether this Court is otherwise competent, to deal with the petitioner’s grievance, (4) whether the affidavit-makers of the instant petitions were competent to swear in the affidavits for these two applications and (5) whether payment/encashment of the Bank Guarantee can be stopped by an Order of injunction in an application under Section 7A of the arbitration Act.

  21. With regard to the issue no. 1, this Court’s unequivocal view is that since, admittedly, there is an agreement between the petitioner and the BMPCUL, the petitioner and the BMPCUL are legally bound to settle their dispute, if any, either by amicable settlement or through arbitration. When two or more parties voluntarily enter into an agreement to resolve any dispute among them through arbitration, usually, no civil Court of our jurisdiction or of foreign jurisdiction entertains an application from any aggrieved party for adjudication upon the dispute unless there exists an exceptional circumstance warranting interference of the civil Court for ends of justice. Therefore, in this case, the parties of the agreement are obliged to take recourse of, at first, amicable settlement and, failing to settle the dispute amicably, the petitioner and the BMPCUL have no other option but to resort to the arbitration. Now, the issue as to whether the petitioner and the BMPCUL have been able to arrive at an amicable settlement or not, being a factual issue, deserves a thorough examination by this Court.

  22. From the averments made by the parties of these two cases, it transpires that when the goods arrived at the Chattogram Port in the month of June, 2016, the BMPCUL declined to accept the said goods on the plea of non-conformity to the terms and conditions of L/C’s with respect to the country of origin and halted the payment against the L/Cs. Under the circumstances, the petitioner made several correspondences to the BMPCUL with a request to amend and extend the terms and conditions of the L/Cs so that the matter may be solved amicably. It is evident that by the letter dated 18.06.2016, the BMPCUL eventually agreed to extension of the L/Cs subject to the condition that (i) the petitioner must release the shipped machineries from the Chattogram Port and take the same to the project site of the BMPCUL at the petitioner’s own costs and liabilities and (ii) the payment due under the L/Cs shall be paid after a full calendar year following installation or commissioning of the plant. To this end, I find it pertinent to quote the contents of the BMPCUL’s aforesaid letter dated 18.06.2016;

“(i) You have to release shipped machineries from the Chittagong Sea Port at your own cost and liabilities, and deliver it to our project site BDP & DDP. After delivery of the machineries, our nominated BMPCUL engineers & user section will inspect and evaluate the supplied machineries. You will carry out installation and commissioning of the plant at the respective site upon satisfactory report given by nominated BMPCUL engineers and user section. (ii) After successful installation and commissioning and trial operation for one year, we shall make L/C payment to you. (iii) Please confirm us in writing that you agree with the proposals and then extension of L/C will be done accordingly. If you do not agree with the above-mentioned terms and conditions, then please take back the cargo at your own cost and liabilities from the Chittagong Port.”

  1. It appears from the BMPCUL’s above-quoted letter that the BMPCUL voluntarily has deviated from the original terms and conditions stipulated in their original agreement and the L/Cs. For avoiding the future legal complexities over this international purchase by the BMPCUL, while the BMPCUL at that point of time could have straight-a-way rejected the proposal of the petitioner on the plea of nonconformity to the terms of the L/Cs, this Court takes judicial notice of the conduct of the concerned officials of the BMPCUL that they agreed to accept the goods. Had the BMPCUL right-away cancelled the contract on the ground of admitted infraction of the terms of the contract, purchase orders and the L/Cs, the supplier (the petitioner) would not have insisted upon the BMPCUL for taking the matter to the arbitration. Another unusual fact also has caught sight of this Court that despite finding inconsistencies in the goods at the time of pre-shipment inspection by the appointed PSI company, on 29.04.2016 how did the specialist team issue the pre-shipment inspection certificate (PSI) in the following terms ‘The discrete components, which form part of the Chilled Water Plant, have been physically verified and are as mentioned in the purchase order. At the time of inspection it was found that the goods were ready for shipment, which will be assembled at the BMPCUL site.’ (emphasis added) This Court also has taken judicial notice of the conduct of the supplier (petitioner) that when evidently there was a non-compliance to the terms of the L/Cs, how did the petitioner dare to take the risk of shipping the goods to the Chattogram Port. These are apparently some mysterious eventual facts, which require to be investigated by the high officials of the concerned regulatory/ controlling ministry of the country and, if any illegalities surface, disciplinary action against the delinquent should be taken as per the recommendation of the investigating authority. However, in reply to the proposal made by the BMPCUL vide letter dated 18.06.2016, when the petitioner made a counter offer with regard to the mode of payment and, ultimately, they failed to reach an agreement with regard to mode of payment, eventually, the petitioner requested the BMPCUL to assist the petitioner in taking back the goods to its country, so that it can re-ship the goods as per the terms and conditions of the L/C. In other words, in order to re-ship the goods upon assembling those from the country of origin being Italy to the BMPCUL, the petitioner agreed to take back the goods lying at the Chattogram Port, as evident from the petitioner’s letter dated 23.06.2016, which is quoted below;

“In order to provide an amicable settlement, it is hereby agreed that the shipped Ice Bank Tank and Condenser, as the purchaser do not accept the origin Belgium, although ice bank tanks were inspected and verified by the BMPCUL inspection team in Belgium, will be taken back to the manufacturer Baltimore Company and we will supply the Ice Bank Tank and Condenser from Italy”. (underlined by me)

  1. The petitioner, thereafter, again wrote to the BMPCUL on 27.07.2016 in the following language;

“I am writing to request that you permit us to reship the above-mentioned consignment back to Turkey. In our participation of the tender, due to some goods being discrepant with the contracts, where we supplied equipment from Belgium instead of Italy. We are required to take back this equipment back and then resupply them according to the contract and purchase order. As such, you are kindly requested to permit and aid by issuing and giving us some necessary required documents, such as, letters to the Sonali Bank Limited, Chief Controller of Export and Import Department, Commissioner of Customs, Chittagong Port, Bangladesh Bank etc. from your end to take back all of the equipment from the Chittagong Sea Port to Turkey.” (underlined by me)

  1. From a plain reading of the petitioner’s above letters, it reveals that while the supplier (petitioner) has made its position crystal clear in black and white in the following wordings “we are required to take back the equipment and, then, resupply those according to the contract and purchase order”, no materials before this Court has been placed by the BMPCUL to rebut the claim of the petitioner as to “resupplying of the goods”.

  2. It is evident from the papers that while the petitioner was in the process of taking back the goods by collecting necessary papers from the various Government authorities, the BMPCUL eventually declined to extend the tenure of the L/Cs. It is the case of the petitioner that if the tenure of the L/Cs is not extended, there is no question of taking back the goods inasmuch as, in that case, the petitioner shall not be able to resupply the goods to the BMPCUL. This Court, thus, finds that since the BMPCUL has not rebutted the petitioner’s claim of reshipping the goods and since the BMPCUL had agreed with the petitioner to assist the petitioner in obtaining all the required papers and documents from the concerned State-Functionaries and statutory authorities, the issue as to whether refusal by the BMPCUL to extend the validity of the L/Cs in order to enable the petitioner to re-supply the goods was justified or not, should be adjudicated upon by the arbitration tribunal. In the light of the fact that the BMPCUL has unilaterally cancelled the contract having declined to extend the tenure of the L/Cs for enabling the petitioner to re-supply the goods, this Court is of the view that prima facie there is existence of a dispute and there is no scope on the part of the BMPCUL to claim that the dispute has amicably been settled. Given the fact that it is the BMPCUL who had agreed with the petitioner to send back the goods and the petitioner had agreed thereto with a condition to resupply the goods to the petitioner as per the specification/terms and conditions of the original L/Cs, now, if the BMPCUL intends to claim that it had never agreed to take the goods afresh from the petitioner, that position itself amounts to a dispute, resolution of which can be done through adducing evidence before the arbitration.

  3. To put the above rescript in a shorter and simpler version, all that this Court wishes to record here that the issue as to whether the BMPCUL had agreed with the petitioner only to send back the shipped-goods lying at Chattogram Port, or it had also agreed with the petitioner to take the goods from the petitioner afresh as per the specification of the original L/Cs, apparently remains unsettled between the petitioner and the BMPCUL. More importantly, since the contract has been cancelled by the BMPCUL without arriving at any consensus thereto, there should be an adjudication by the arbitration tribunal as to whether the BMPCUL has properly and lawfully cancelled the contract. While that is the scenario, this Court finds it difficult to concede to the argument advanced by the learned Advocate for the BMPCUL that the parties have amicably settled the dispute. Accordingly, this Court holds that the dispute between the parties is still subsisting and the same is to be adjudicated upon by the arbitration tribunal.

  4. Since, it has been surfaced that the dispute still exists, now, this Court is required to examine the next issue, namely, whether this Court is competent to entertain the petitioner’s present application. In other words, whether this Court has the jurisdiction to deal with the present petition. For adjudication upon this issue, the following sub-issues are required to be considered by this Court; (i) whether the provisions of the arbitration Act are applicable in the backdrop of the provisions contained in the PCC that the arbitration Act would be applicable if both the parties are Bangladeshi nationals, (ii) given the dilemma this foreign petitioner is facing due to non-selection of a Rules of Procedures by the BMPCUL, whether this Court is competent to make a declaration regarding applicability of the arbitration Act or the petitioner should seek a declaration from the Civil Court as to whether or not this foreign petitioner is entitled to have adjudication of his grievance in Bangladesh through invocation of the arbitration Act, (iii) Given the scenario that despite this Court’s findings that there is existence of dispute between the parties, the BMPCUL is not willing to name a foreign Rules of Procedures, out of UNCITRAL, ICC, LCIA and ISCC which were agreed by the parties, as mentioned in the Particular Condition of Contract (PCC), under the circumstances, whether this Court is empowered to compel the BMPCUL to opt for any one of the above-mentioned Rules of Procedures as well as to determine the place of arbitration and (iv) whether the petitioner’s proposal to form the arbitration tribunal at the petitioner’s expense can be accepted and implemented.

  5. Let me commence with the first sub-issue, (i) whether the provisions of the arbitration Act are applicable in the backdrop of the provisions contained in the PCC that the arbitration Act would be applicable if both the parties are Bangladeshi nationals. BMPCUL’s case before this Court is that since the Particular Conditions of Contract (PCC) stipulates that the arbitration Act would be applicable if both the parties are Bangladeshi parties, but if one party is a foreign entity, in that case, at first, one foreign Rules of Procedures, out of UNCITRAL Rules, ICC arbitration Rules, LCIA Rules and ISCC arbitration Rules, would be chosen by the BMPCUL and, only then, the arbitration shall be commenced under the aforesaid Rules of Procedures chosen by the BMPCUL. On the other hand, the petitioner’s case is that it does not disagree with the BMPCUL’s above position, but since the place of arbitration has not been mentioned either in the GCC or anywhere in the PCC, the arbitration Act shall be applicable either in tandem with one of the above foreign Rules, if chosen by the BMPCUL in course of disposal of this cases, and if the BMPCUL remains adamant not to select a foreign Rules of Procedures, in that scenario, this Court may direct the parties to proceed with the arbitration under the arbitration Act.

  6. At this juncture, I consider it pertinent to look at the general provisions regarding Amicable Settlement, Adjudication, arbitration contained in the Contract, and the special provisions of the GCC, which have been placed in Section (Part) 4 of the Contract and have been regarded in the Contract as the PCC.

General Conditions of Contract (GCC)

47.1- Amicable Settlement:

The purchaser and the supplier shall use their best efforts to settle amicably all disputes arising out of or in connection with this Contract or its interpretation.

47.2-Adjudication :

If the supplier/purchaser believe that amicable settlement of dispute is not possible between the two parties, the dispute shall be referred to the Adjudicator within 14 (fourteen) days of first written correspondence on the matter of disagreement;

The Adjudicator named in the PCC is jointly appointed by the parties. In case of disagreement between the parties, the Appointing Authority designated in the PCC shall appoint the Adjudicator within 14 (fourteen) days of receipt of a request from other party;

The Adjudicator shall give its decision in writing to both the parties within 28 (twenty eight) days of a dispute being referred to it;

47.3-Arbitration:

(a) If the parties are unable to reach a settlement under GCC clause 47.1(a) within twenty eight (28) days of the first written correspondence on the matter of disagreement, then either party may give notice to the other party of its intention to commence arbitration in accordance with GCC sub-clause 47.3(b);

(b) The arbitration shall be conducted in accordance with the Rules of Procedures specified in the PCC.

Particular Conditions of Contract (PCC):

47.3(b)

The Rules of Procedures for arbitration proceedings shall be as follows:

(a) Contract with foreign Supplier:

For contracts entered into with foreign suppliers, International commercial arbitration may have practical advantages over other dispute settlement methods. The World Bank should not be named as arbitrator, nor should it be asked to name an arbitrator. Among the Rules to govern the arbitration proceedings, the Purchaser may wish to consider the United Nations Commission on International Trade Law (UNCITRAL) arbitration Rules of 1976, the Rules of Conciliation and arbitration of the International Chamber of Commerce (ICC), the Rules of the London Court of International arbitration or the Rules of arbitration Institute of the Stockholm Chamber of Commerce.

(b) Contract with Supplier national of the Purchaser’s country:

In the case of a dispute between the Purchaser and a Supplier who is a national of the Bangladesh, the dispute shall be referred to adjudication or arbitration in accordance with the laws of the Bangladesh i.e arbitration Act (Act No 1 of 2001) of Bangladesh as at present in force.

  1. From a minute reading of the provisions of the GCC clauses 47.1, 47.2 and 47.3 concurrently with the provisions of the PCC attached to the aforementioned clause 47.3(b), it appears to me that while the GCC clause 47.3 provides for the provisions of arbitration of a dispute, the PCC attached to the clause 47.3(b) stipulates the provisions regarding the Rules of Procedures of the arbitration. But, this Court could not trace out any provisions as to the place or venue of arbitration anywhere in the four-corners of the GCC or PCC. As per the PCC sub-clause (a) of the GCC clause 47.3(b), the BMPCUL has been given the liberty to choose one Rules of Procedures out of the four foreign Rules of Procedures, but it does necessarily mean that if the BMPCUL names the UNCITRAL arbitration Rules, the venue of arbitration has to be at the office of the United Nations Office or if the BMPCUL opts for the International Chamber of Commerce (ICC) Rules, the place of arbitration needs to be in London and so on for the other Rules of procedures. Because all the foreign Rules of Procedures stipulate that the place of arbitration would be fixed either by the parties themselves or by the arbitrators once a party to arbitration agreement notifies the Secretariat of any of the foreign forum about kicking off the arbitration.

  2. It follows that the BMPCUL can select Bangladesh as the place of arbitration, even after choosing any foreign Rules of Procedures. In other words, if the BMPCUL wishes to have its arbitration held in Bangladesh, upon applying one of the Rules of Procedures from amongst the UNCITRAL, ICC Rules, LCIA Rules and ISCC Rules, it can be done without any sort of impediment. At this juncture, I find it profitable to look at the relevant provisions of the arbitration Act, namely, Section 3 which is about the scope of the arbitration Act. This Court’s endeavour is to see whether there is any prohibition to apply the provisions of the arbitration Act, where one/both parties of arbitration is/are foreign/s.

Scope-(1) This Act shall apply where the place of arbitration is in Bangladesh.

(2) Notwithstanding anything contained in sub-section (1) of this section, the provisions of sections 45, 46, and 47 shall also apply to the arbitration if the place of that arbitration is outside Bangladesh.

(3) This Act shall not affect any other law for the time being in force by virtue of which certain disputes may not be submitted to arbitration.

  1. From a plain reading of the above law, anyone with ordinary prudence would understand that if the venue of the international commercial dispute is in Bangladesh, the arbitration Act shall be applicable. Since the literal meaning of Section 3 of the arbitration Act can easily be gathered without taking resort to any case laws, thus, no further detailed discussion is needed to know the scheme of Section 3 of the arbitration. In the case of Southern Solar Power Ltd Vs BPDB and other 2019(2) 16 ALR (HCD) 91, this Court had the occasion to dwell on this provision at length.

  2. Given the fact that the parties of this case have not mentioned the place of arbitration anywhere in the Contract, they are free to prefer Bangladesh as the venue of their arbitration and, thereby, apply the arbitration Act. Also had both the parties agreed in the Contract (i.e. in the GCC & PCC) that the venue of arbitration shall be Bangladesh and Rules of Procedures of arbitration will be one from amongst the foreign arbitration Rules of Procedures, in that event as well, a number of provisions of arbitration Act, such as Section 7A and Section 10, would have been applicable in conjunction with the foreign Rules of Procedures, once the BMPCUL would have chosen one Rules of Procedures out of the four foreign Rules of Procedures. In the Bangladesh International arbitration Centre (BIAC), which is situated in Dhaka, now-a-days, each year quite a few foreign parties, who have chosen for foreign arbitration Rules of Procedures, are conducting the hearing of their arbitration cases. However, if the BMPCUL would have chosen one foreign Rules of Procedures, application under Section 12 for appointment of arbitrators would not have been applicable in view of availability of the said provisions for appointment of the arbitrators in most of the foreign Rules of Procedures for arbitration.

  3. It leads me to arrive at the conclusion that while the PCC sub-clause (b) attached to the GCC clause 47.3(b) stipulates about the applicability of the arbitration Act specifically, the PCC sub-clause (a) attached to the same GCC clause keeps provisions for applicability of the arbitration Act impliedly. Therefore, this Court holds that in the absence of any provisions regarding the venue/place of arbitration in the Contract, the provisions of the arbitration Act squarely be applied in this case.

  4. The second sub-issue is whether this Court is competent to make a declaration regarding applicability of the arbitration Act or the petitioner should seek a declaration from the Civil Court as to whether or not this foreign petitioner is entitled to have adjudication of his grievance in Bangladesh through invocation of the arbitration Act, in the backdrop of non-selection of a Rules of Procedures by the BMPCUL. The Civil Courts of our country are well-competent to make a declaration in favour of/against this petitioner by examining the issue as to whether the arbitration Act is applicable in the present scenario. Because, our Civil Courts are bestowed with ample power to adjudicate upon any civil dispute, including making a declaration as to whether a particular law is applicable for adjudication upon a dispute by any Court, or tribunal or quasi-judicial body. However, since in this case, this Court has already adjudicated upon the issue upon examining the relevant facts in connection with or arising out of the GCC & PCC clauses and the relevant law, namely Sections 3 of the arbitration Act, there is no need to approach the Civil Court for the said purpose. In the backdrop that the BMPCUL is purposefully refraining from choosing one foreign Rules of Procedures as well as selecting the venue of the arbitration leaving this foreign petitioner in limbo, therefore, ends of justice would be best served if a forum of adjudication for the petitioner’s grievance is declared by this Court, instead of pushing the petitioner to the Civil Court.

  5. The third sub-issue is whether this Court is competent to compel the BMPCUL to opt for one of the Rules of Procedures for arbitration, out of the agreed four foreign Rules of Procedures and determine the venue of the arbitration. Before answering this question, it should be borne in mind that since this Court has already arrived at the findings that the arbitration Act is applicable in the present case, this Court should search for the relevant provision in the arbitration Act. And upon skimming through the arbitration Act, it appears to this Court that Section 12(7) provides the necessary law in overcoming the situation. Section 12(7) runs as follows:

12(7): Where, under an appointment procedure agreed upon by the parties-

A party fails to act as required under such procedure; or

The parties, or the arbitrators, fail to reach an agreement under the same procedure; or

A person or any third party fails to perform any function assigned to him under that procedure, unless the agreement on the appointment procedure provides other means to take the necessary measure for securing the appointment, a party may apply to-

the District Judge except in case of international commercial arbitration and the District Judge shall appoint the chairman of tribunal along with the other arbitrators;

the Chief Justice or any Judge of the Supreme Court designated by the Chief Justice in case of international commercial arbitration and the Chief Justice or the Judge of the Supreme Court as designated by the Chief Justice shall appoint the Chairman of the tribunal along with other arbitrators.

(emphasis supplied)

  1. From a plain reading of the above law, it appears to this Court that when any party to the arbitration agreement fails to observe the procedures regarding appointment of the arbitrator/s, this Court may appoint the arbitrator/s upon receiving application from any party to the arbitration agreement.

  2. In the light of the fact that since the BMPCUL has failed to act as required under the GCC and PCC, such failure falls under Section 12(7) of the arbitration Act and, accordingly, this Court, in case of an international commercial arbitration, appears to have the jurisdiction to compel the BMPCUL to opt for any of the foreign Rules of Procedures of arbitration or, in the alternative, to select arbitration Act towards commencing the arbitration based on the application by the petitioner under Section 12 of the arbitration Act. Since (i) there is an “agreement to arbitrate” in the GCC Clause 47.3(a), (ii) the parties have not agreed to a seat of arbitration, (iii) the BMPCUL has failed to make any choice of Rules of Procedures and (iv) the governing law of the Contract is Bangladesh, this Court holds that it has jurisdiction under Section 12 of the arbitration Act to impose upon the parties to fix/determine the place of arbitration to be Bangladesh and, accordingly, this Court is well competent to appoint an arbitrator from the respondent’s side. Since the petitioner has volunteered to pay the fees of all the three Arbitrators, therefore, this Court is of the view that a Chairman of the tribunal may also be appointed towards formation of the arbitral tribunal with an aim to expeditiously resolve this international commercial dispute.

  3. Now, let me pick up the main issue no. 4 namely, whether the affidavit-makers of these two applications were competent to swear in the affidavits for these two applications. It is the contention of the learned Advocate for the BMPCUL that since the affidavit-makers of these two applications are Bangladeshi nationals and the petitioner company is a foreign company, the affidavit-makers, being not acquainted with the facts of these cases, are not eligible to swear in the affidavits of these two applications. In order to adjudicate upon this issue, it would be useful if the relevant provisions of law, namely, Rule 8 of Chapter IV of the Supreme Court (High Court Division) Rules, 1973, which is popularly known as the High Court Rules and Order VI, Rule 15 of the CPC are examined. At first, Rule 8 of Chapter IV of the High Court Rules is quoted below:

  1. Affidavit/Affirmation about contents.-The facts stated in such application shall be verified by the solemn affirmation of the applicant or by an affidavit to be annexed to the application.

Note.- The affidavit may be sworn in by any person having knowledge of the facts stated. Several persons may join in an affidavit each deposing separately to those facts which are within his own knowledge.

(underlined by me)

  1. Chapter IV of the High Court Rules contains the general Rules for Applications and Affidavits. Rule 8 of the aforesaid Chapter IV of the High Court Rules provides that the facts stated in an application shall be verified by an affidavit, and the ‘Note’ tagged with Rule 8 of the High Court Rules seeks to remove all sorts of ambiguity as to who may swear in an affidavit, clarifying that any person having knowledge of the stated-facts is competent to swear in the affidavit.

  2. Let me, now, look at the provisions of Order VI, Rule 15 of the CPC, which runs as follows:

Order VI, Rule 15 of the CPC

15.(1) Save as otherwise provided by any law for the time being in force, every pleading shall be verified at the foot by the party or by one of the parties pleading or by some other person proved to the satisfaction of the Court to be acquainted with the facts of the case.

(2) The person verifying shall specify, by reference to the numbered paragraphs of the pleading, what he verifies of his own knowledge and what he verifies upon information received and believed to be true.

(3) The verification shall be signed by the person making it and shall state the date on which and the place at which it was signed.

  1. From a plain reading of Order VI, Rule 15 of the CPC, the literal meaning that I get is that, when a person would satisfy the Court that s/he has her/his own knowledge of the facts of the case or s/he has been acquainted with the facts through receiving information from others, the said person is competent to verify the pleading. In the light of the fact that the affidavit-makers of these two applications, one being under Section 7A and another being under Section 12 of the arbitration Act, have affirmed by swearing affidavit that they are acquainted with the facts of the cases, this Court finds them to be well-competent to swear in the affidavits of these two cases.

  2. The learned Advocate for the BMPCUL has also raised question about the power of attorney of the affidavit-makers on the ground of non-compliance with the provisions of the Power of Attorney Act, Power of Attorney Rules and the Evidence Act.

  3. From a minute reading of the relevant provision of the Power of Attorney Act, 2012 and the Power of Attorney Rules, 2015, it appears to me that Power of Attorney is a legal instrument which authorizes another person to act on behalf of the person granting it. When a foreigner or Non-Resident Bangladeshi (NRB) grants such power to a native Bangladeshi, the Power of Attorney Act, 2012 and the Power of Attorney Rules, 2015 require that photographs of the person granting the Power of Attorney and the person who is going to hold the Power of Attorney must be attached on the front page of the document having been attached the same by the person granting the Power of Attorney and the document (the Power of Attorney) has to be executed and signed by a Notary Public or Court, Judge, Magistrate of the concerned foreign country or Consul/Vice Consul of the Bangladesh diplomatic mission in the concerned foreign country and, thereafter, it is to be submitted to the ministry of foreign affairs for its attestation within 2 (two) months of its reaching Bangladesh and must be, then, stamped within three months. If the Power of Attorney is required to be registered, it must be submitted to the concerned sub-registry office within four months from the date of receiving it in Bangladesh. Upon examination of both the Power of Attorney granted by the petitioner-company in the name of these two affidavit-makers, I find that their Power of Attorney have been annexed to these applications upon exhausting all the required legal formalities.

  4. To this end, I find it pertinent to consider the provision of Section 85 of the Evidence Act, 1872, which is quoted below:

“The Court shall presume that every document purporting to be a power-of-attorney, and to have been executed before, and authenticated by, a notary public, or any Court, Judge, Magistrate, Bangladesh Consul or Vice-Consul, or representative of the Government, was so executed and authenticated.”

  1. From a minute reading of the above quoted law, it appears to this Court that the law only presumes the Power of Attorney being executed before and authenticated by the Notary Public or any other persons/bodies prescribed in Section 85 of the Evidence Act, 1872. In the light of the fact that both the Power of Attorney appended to these two applications appear to this Court to have been executed before and authenticated by the Notary Public, this Court holds that the same are valid. Since, there is no restriction in the Evidence Act for a foreign Notary Public to execute and authenticate a Power of Attorney, thus, a due execution and authentication has to be presumed under Section 85 of the Evidence Act. Therefore, this Court finds that the affidavit-makers of these two applications have been appointed as the agent of the petitioner-company upon observing all the legal formalities in granting the power to these two affidavit-makers and, accordingly, this Court holds that the affidavit-makers of these two applications are well-competent to swear in the affidavits of these two applications.

  2. Finally, I need to take up the issue No. 5, namely, whether payment/encashment of the Bank Guarantee can be stopped by an Order of injunction in an application under Section 7A of the arbitration Act.

  3. To adjudicate upon this issue, it would be useful if I, at first, look at the provisions of Section 7A of the arbitration Act, which are quoted below:

7A.Powers of Court and High Court Division to make interim orders:-(1) Notwithstanding anything contained in section 7 unless the parties agree other-wise, upon prayer of either parties, before or during continuance of the proceedings or until enforcement of the award under section 44 or 45 in the case of international commercial arbitration the High Court Division and in the case of other arbitration the Court may pass order in the following matters:-

(a) To appoint guardian for minor or insane to conduct on his/her behalf arbitral proceedings.

(b) To take into interim custody of or sale of or other protective measures in respect of goods or property included in the arbitration agreement.

(c) To restrain any party to transfer certain property or pass injunction on transfer of such property which is intended to create impediment on the way of enforcement of award.

(d) To empower any person to seize, preserve, inspect, to take photograph, collect specimen, examine, to take evidence of any goods or property included in arbitration agreement and for that purpose to enter into the land or building in possession of any party.

(e) To issue ad-interim injunction.

(f) To appoint receiver; and

(g) To take any other interim protective measures which may appear reasonable or appropriate to the court or the High Court Division.

(2) The similar powers of the Court or the High Court Division as are available in relation to any other legal proceedings shall be available to the Court or the High Court Division as the case may be, while passing orders under subsection (1).

(3) …………….

(4) If the Court or the High Court Division is satisfied that arbitration Tribunal has no power to initiate proceedings in any matter under sub-Section (1) or the arbitration Tribunal has failed to pass order in such matter, the Court or the High Court Division as the case may be, shall be competent to pass order under this Section.

(5) The Court or the High Court Division if considers appropriate shall be competent to cancel, alter or amend the order passed under this Section.

(6) …………………

  1. From a plain reading of the provisions of Section 7A of the arbitration Act, it appears to this Court that the High Court Division is amply empowered to make almost all types of interim Order/s and, for the aforesaid purpose, this Court has been equipped with all necessary arms and ammunitions, as are available in any proceedings, be it a civil suit or a criminal case inasmuch as the Legislature has employed the expressions “…..any other legal proceedings……” in sub-Section (2) of Section 7A of the arbitration Act. While sub-Section 1(e) of Section 7A of the arbitration Act empowers this Court to issue ad-interim injunction, sub-Section 1(g) of Section 7A of the arbitration Act grants this Court the power of taking protective measures and, in issuing the Orders under the clauses (e) & (g) of sub-Section (1) of Section 7A of the arbitration Act, this Court is endowed with ample power to pass necessary Order/s, Direction/s or to take any other appropriate initiative under sub-Section (2) of Section 7A of the arbitration Act.

  2. As per the ratio laid down in the case of Southern Solar Power Vs. BPDB 2019(2) 16 ALR (HCD) 91, this Court is under an obligation to embark on the scrutiny as to whether the facts and circumstances stated in an application under Section 7A of the arbitration Act fulfills the legal criteria for passing ad-interim Order/s or Directions. When any of the circumstances set out in sub-Section (1) of Section 7A of the arbitration Act would be found to have existed in an application under Section 7A of the arbitration Act, this Court shall unhesitatingly pass the necessary Order/s or Direction/s, but if this Court finds that the stated-facts do not attract the circumstances enumerated in sub-Section (1) of Section 7A of the arbitration Act, in that event, this Court has to be satisfied that whether the stated-circumstances fulfill the cardinal principles of granting interim Orders, namely, whether (i) there exists a prima-facie case, (ii) whether the balance of inconvenience is in favour of the applicant and (iii) whether, if the other party is not restrained, the applicant shall suffer irreparable loss and injury not commensurable in monetary terms. In the instant Section-7A application, being arbitration Application No. 36 of 2016, two interim Orders and one direction upon the BMPCUL had been prayed for by the petitioner. One interim Order is sought for preservation of two contracts dated 04.08.2015 executed between the petitioner-company and the BMPCUL for supply of goods and related services for Chilled Water Plant for BDP and DDP valued at €1,250,000 (Euro One Million two Hundred and Fifty Thousand) collectively and the second interim Order is prayed for restraining the BMPCUL and the Standard Chartered Bank from encashment of the Bank Guarantee Nos. 411020278783 and 411020278774 both dated 03.08.2015 issued by the Standard Chartered Bank as the Performance Securities of the contracts. And the only direction which is sought for by the petitioner-company upon the BMPCUL is for compelling the BMPCUL to extend the tenure of the L/C in order to enable the petitioner-company to take back the goods from the Chattogram Port and, then, reship the goods as per the specifications of the original L/C.

  3. With regard to the petitioner’s prayer for the interim Order for preservation of the contracts, this Court’s view is that there exists a prima-facie case of the petitioner-company to agitate before the arbitration tribunal as to whether the petitioner-company is entitled to complete the Contracts by re-shipping the goods after taking back the goods from the Chottagram Port. Because if the Contracts are not preserved, there is no point of formation of the arbitration tribunal. If the BMPCUL is allowed to terminate the Contracts towards floating new tender, undoubtedly the petitioner-company shall suffer loss which cannot be repaired in monetary terms. It follows that the petitioner’s prayer for preservation of the two Contracts, namely, (i) Contract No. PD/CWP(D)LC-10/2013/01 dated 08.07.2015 and (ii) Contract No. PD/CWP(D)LC-10/2011/02 dated 08.07.2015, deserves positive consideration by this Court.

  4. However, with regard to the prayer for second interim Order by the petitioner-company for restraining the respondents, this Court does not find any prima-facie case in favour of the petitioner-company in the light of the fact that the two Bank Guarantees issued by the Standard Chartered Bank in the name of the BMPCUL are completely independent contracts between the parties, which is evident from the terms of the contracts expressly and lucidly stated in the contracts. The relevant clauses of the contracts are reproduced below:

Guarantee No. 411020278783

Issue Date: 03, August, 2015

Amount: Eur 62,500.00

Expiry Date: 14 July, 2016

At the request of the supplier, we, Standard Chartered Bank, Dhaka, Bangladesh legally domiciled in 67 Gulshan Avenue, Gulshan, Dhaka-1212, Bangladesh hereby irrevocably undertake to pay you without cavil or argument any sum or sums not exceeding in total an amount of EUR 62,500.00 (sixty two thousand five hundred euros only) upon receipt by us of your first written demand accompanied by a written statement that the supplier is in breach of its obligation(s) under the contract conditions, without you needing to prove or show grounds or reasons for your demand of the sum specified therein.

This guarantee is subject to the uniform rules for demand guarantees, ICC publication No. 758.

Guarantee No. 411020278774

Issue Date: 03, August, 2015

Amount: Eur 62,500.00

Expiry Date: 14 July, 2016

At the request of the supplier, we, Standard Chartered Bank, Dhaka, Bangladesh legally domiciled in 67 Gulshan Avenue, Gulshan, Dhaka-1212, Bangladesh hereby irrevocably undertake to pay you without cavil or argument any sum or sums not exceeding in total an amount of EUR 62,500.00 (sixty two thousand five hundred euros only) upon receipt by us of your first written demand accompanied by a written statement that the supplier is in breach of its obligation(s) under the contract conditions, without you needing to prove or show grounds or reasons for your demand of the sum specified therein.

This guarantee is subject to the uniform rules for demand guarantees, ICC publication No. 758.

  1. From a plain perusal of the terms and conditions of the above two Bank Guarantees, it is crystal clear that the Standard Chartered Bank has guaranteed the BMPCUL in unambiguous terms that whenever the BMPCUL will ask for encashment of the Bank Guarantees, it shall pay the agreed amount of €62,500 to the BMPCUL without raising any question. So, there is no scope for the petitioner-company to make out a case seeking a declaration from this Court or from the civil Court or from the arbitration tribunal that BMPCUL’s request to the Standard Chartered Bank for encashment of the Bank Guarantee is illegal. When this Court is getting a clear picture about the nature of relationship between the BMPCUL and the Standard Chartered Bank, there remains hardly any chance for the Standard Chartered Bank or the petitioner-company to make an endeavour for making out a prima-facie case. In any event, the petitioner-company is not going to suffer a loss by encashment of the Bank Guarantee, which can not be compensated. Because if the petitioner-company succeeds in the arbitration tribunal, the BMPCUL would no longer ask for the new Bank Guarantees against these Contracts. More importantly, the Bank Guarantees have been issued under the ICC Uniform Rules for Demand Guarantees, ICC Publication No. 758, which is the Biblical Rules for the Banks of all the member (signatory) countries. Since the said URDG 758 mandatorily requires the Banks to make instantaneous payment of the Bank Guarantees whenever is asked by the beneficiary of a Bank Guarantee, Bangladesh being a member country of the ICC, the Banks which are conducting banking business in Bangladesh are legally obliged to observe and obey the said laws and, accordingly, the Standard Chartered Bank is legally bound to encash the Bank Guarantees without getting involved in any dispute of the petitioner-company with the BMPCUL. It leads me to hold that there is no scope for this Court to stop encashment of the two Bank Guarantees by issuing any interim Order.

  2. Now, remains prayer for issuance of Direction upon the BMPCUL for extension of L/C. Since this Court is going to form the arbitration tribunal for adjudication upon the substantive issue as to whether the petitioner-company is entitled to complete the Contracts by re-shipping the goods, it would be for the arbitration tribunal to extend the L/C if the petitioner succeeds in the arbitration.

  3. After examining all the issues of these two applications, now, this Court is passing the following Orders and Directions;

a. The petitioner’s prayer made in the application under Section 7A of the arbitration Act (Arbitration Application No. 36 of 2016) for conservation of the two Contracts, namely (i) Contract No. PD/CWP(D) LC-10/2013/01 dated 08.07.2015 and (ii) Contract No. PD/CWP(D)LC-10/2011/02 dated 08.07.2015 is allowed.

b. The prayer made in the application under Section 7A of the arbitration Act (Arbitration Application No. 36 of 2016) for restraining the BMPCUL and the Standard Chartered Bank from encashing the Performance Securities issued by the SC Bank bearing Bank Guarantee Nos. 411020278783 and 411020278774, both dated 03.08.2015, for an amount of €62,500 (equivalent to BDT 52,90,559/-) each is rejected.

Mojibul Huq (Md.) vs. Respondent: Md. Yakub Ali and Ors.
: R. Sim & Co. vs. Respondent: Pak. Industries (Jute Mills) Ltd.

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