Back
SUPREME COURT OF INDIA
INDIRA BANERJEE, V. RAMASUBRAMANIAN, JJ.
SEPCO ELECTRIC POWER CONSTRUCTION CORPORATION - APPELLANT
VERSUS
POWER MECH PROJECTS LTD. – RESPONDENT
CIVIL APPEAL NOS.4936-4937 OF 2021 (ARISING OUT OF SLP (C) NOS. 11476-11477 OF 2021)
DECIDED ON : 24-08-2021
Arbitration and Conciliation Act, 1996 – Section 37 read with Section 13(1A) of Commercial Courts Act, 2015 – Direction to substitute an irrevocable Bank Guarantee by foreign Bank – Court has discretion to insist on a Bank Guarantee from any specific bank or class of banks to safeguard interests of beneficiary of Bank Guarantee – A party cannot be faulted for acting in terms of order as issued, particularly when there was no patent or obvious error in direction to furnish a Bank Guarantee of a Scheduled Bank, located in India – Direction to furnish a Bank Guarantee of a Scheduled Indian Bank located in India, is perfectly legal – It is not uncommon for Courts to give directions which might be at variance with an oral offer – Court may legitimately disapprove a Bank Guarantee of a bank with a history which raises doubts with regard to its credibility – Appeal allowed. (Paras 17, 21, 22 and 56)
Per V. Ramasubramanian, J.(Dissenting View)
Arbitration and Conciliation Act, 1996 – Section 37 – Direction to substitute an irrevocable Bank Guarantee by foreign Bank – If a party to a proceeding invites an order by making an offer, he is obliged to honour commitment made in form of offer – Petitioner, after making a clear offer to furnish a bank guarantee of a scheduled Indian bank, has chosen to take advantage of a mistake that crept in paragraph 6 of order – He is not entitled to take advantage of Latin maxim “actus curiae neminem Gravabit – If without any offer from petitioner, an adjudication had been made by Court directing petitioner to furnish bank guarantee of a particular type of bank and a dispute had been raised thereafter, it is only then that a question of law as to status of such a bank with reference to statutory provisions, would have arisen – Special Leave Petitions dismissed as not giving rise to any substantial question of law. (Paras 22, 24 and 25)
Result : Matter referred to Larger Bench in view of conflicting opinion.
ORDER :
Indira Banerjee, J.
Leave granted.
2. These appeals are against a judgment and order dated 27.11.2020, passed by the Division Bench of Delhi High Court, dismissing the Appeal being FAO(OS) (COMM) No.136 of 2019, filed by the Appellant under Section 37 of the Arbitration and Conciliation Act 1996, hereinafter referred to, in short, as the “A & C Act” read with Section 13(1A) of the Commercial Courts Act 2015, and affirming an order dated 16.05.2019 passed by the Commercial Division of the Delhi High Court in OMP(I) (COMM) No.523/2017 under Section 9 of the A & C Act, whereby the Court refused to recall its earlier order dated 09.04.2019, directing the Appellant to substitute an irrevocable Bank Guarantee, issued by the Industrial and Commercial Bank of China Limited (ICBC), Mumbai Branch for Rs.30 Crores furnished pursuant to an order dated 12.02.2019 of the Court, with a Bank Guarantee of a “Scheduled Indian Bank” of the same amount. The Appellant has also impugned a judgment and order dated 12.03.2021 passed by the Division Bench dismissing Review Petition No.5/2021 filed by the Appellant for review of the said judgment and order dated 27.11.2020 dismissing the Appeal.
3. The short question in these Appeals is, whether the High Court was right in refusing to accept a legally valid irrevocable Bank Guarantee of Rs.30 Crores, issued by the Industrial and Commercial Bank of China Limited, Mumbai, hereinafter referred to as ‘ICBC’ which is a Scheduled Bank included in the Second Schedule of the Reserve Bank of India Act, 1934, and insisting that the Appellant should furnish a fresh Bank Guarantee of the same amount, with identical terms, issued by a “Scheduled Indian Bank”, notwithstanding the expenditure incurred by the Appellant in obtaining the Bank Guarantee from ICBC.
4. These Appeals are restricted only to the question of legality of the direction of the High Court, requiring the Appellant to substitute a legally valid irrevocable Bank Guarantee, issued by ICBC, which is a Scheduled Bank, carrying on business in India, with a Bank Guarantee of equivalent amount issued by a “Scheduled Indian Bank”.
5. The Appellant, an entity incorporated in China was awarded contracts in relation to various coal based power projects in India and the Respondent, a company incorporated in India was engaged as a subcontractor of the Appellant. Disputes and differences between the Respondent and the Appellant were referred to Arbitration. The details of the contract between the Appellant and the Respondent, or the disputes and differences that arose therefrom, are irrelevant to the issues involved in these Appeals. Suffice it to mention that the Arbitration culminated in an Award dated 17.10.2017 of approximately Rs.1,42,00,00,000 (One hundred and forty two crores) in favour of the Respondent.
6. On 03.12.2017, the Appellant filed an application under Section 34 of the A & C Act being O.M.P. (COMM) No. 432 of 2017 challenging the Arbitral Award dated 17.10.2017 in the Commercial Division of the Delhi High Court, which is pending.
7. On the other hand, the Respondent filed an application being OMP (I) (COMM) No. 523/2017 in the Commercial Division of the High Court under Section 9 of the A & C Act seeking, interalia, directions on the Appellant to secure the amount of the Arbitral Award.
8. On 12.02.2019, a Single Bench of the Commercial Court of the High Court passed an order in O.M.P.(I) (COMM.) No. 523/2017 directing the Appellant to furnish to the Registry of the High Court, a Bank Guarantee for a sum of Rs.30 Crores, from a Scheduled Bank located in India. The operative part of the order dated 12.02.2019 is set out hereinbelow:-
4. The Judgment Debtor will file the affidavit within two (2) weeks; with a copy being furnished to the counsel for the Decree Holder.
5. Insofar as the bank guarantee is concerned, it will be furnished within 6 weeks as indicated by the counsel.
6. Further, the bank guarantee in the su
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
