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2025 Supreme(Online)(Kar) 38495
THE HIGH COURT OF KARNATAKA
Vibhu Bakhru, CJ, C M Joshi, J
Union Bank Of India – Appellant
Versus
NHDPL South Private Limited – Respondent
WA No. 237 of 2025|CCC No. 185 of 2025
For the Appellants/Petitioners: Dhyan Chinnappa, Divya Purandar
For the Respondents: Udaya Holla, Siddharth Suman
Electronic communications constitute a valid "written demand" for the invocation of a bank guarantee. The legal definition of "writing" focuses on the visibility of words rather than the medium used. Interest on withheld payments in commercial transactions is required for equity, but must be set at reasonable rates.
Headnote:(A) General Clauses Act, 1897 - Section 3(65) - IT Act, 2000 - Section 4 - Arbitration and Conciliation Act, 1996 - Section 7(3) and (4) - Bank guarantee invocation - Requirement of "in writing" - Electronic communication - Interpretation.
(B) The expression "in writing" is not confined to physical paper; it encompasses electronic records and digital communications. The medium of expression, provided it is visible and records words, does not detract from the character of a written document. (Paras 28, 30, 46)
(C) In commercial transactions, interest for the delayed payment of money is a standard entitlement to compensate for the time value of money, though the court maintains discretion to set a rate that is equitable and reasonable rather than punitive. (Paras 54, 57-58)
Facts of the case:
The appellant issued unconditional bank guarantees in favor of the respondent. When the respondent sought to invoke these guarantees, it sent an invocation demand via electronic mail followed by hard copies. The appellant challenged the invocation, arguing that electronic communication did not satisfy the contractual requirement of being a "written demand" and was not physically served as per the terms. The lower court rejected this contention and directed payment with 18% interest.
Findings of Court:
The appellate court determined that a demand sent via electronic mail constitutes a valid "written demand," as the medium (digital or physical) does not change the nature of the communication as long as the words are visible. However, the court found the original award of 18% interest excessive and modified the order to reflect a more reasonable rate of 9% per annum.
Issues: The main issues addressed were whether invoking a bank guarantee via email satisfies the contractual "in writing" and service requirements, and whether the award of 18% interest for the withheld amount was legally justifiable.
Ratio Decidendi: The court held that "writing" is defined by the visibility of letters and words, not the material or medium used. Following statutory interpretation and modern commercial practices, electronic records are functional equivalents of traditional writing. Commercial equity requires that the withholding party compensate the beneficiary with interest for the delay, but the rate must align with current judicial standards of fairness.
Result: Appeal allowed in part; the lower court's judgment was modified to reduce the interest rate from 18% to 9% per annum.
| Table of Content |
|---|
| 1. factual basis of the bank guarantee dispute involving the invocation process. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12) |
| 2. summary of rival contentions regarding interpretation of 'written demand'. (Para 13 , 14) |
| 3. electronic communication satisfies the legal requirement of a 'written demand' in contracts. (Para 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48) |
| 4. courts may award interest in commercial disputes based on equity and compensation for time value of money. (Para 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56 , 57 , 58) |
| 5. final appellate order and disposal of associated contempt proceedings. (Para 59 , 60) |
IN WRIT APPEAL NO. 237 OF 2025
BETWEEN:
1. UNION BANK OF INDIA
VILE PARLE (W) BRANCH
SHIV SHAKTI, 11
VITHAL NAGAR COOP. HOUSING SOCIETY
10TH ROAD, J.V.P.D SCHEME
VILE PARLE (W), MUMBAI - 400 049
NOW SHIFTED TO
UNION BANK OF INDIA
STRESSED ASSET MANAGEMENT BRANCH
MUMBAI, 104, GROUND FLOOR
BAHART HOUSE, M S MARG
FORT, MUMBAI - 400 001
REPRESENTED BY ITS
CHIEF MANAGER
MRSIDHARTHA S. MHADE
…APPELLANT
(BY SRI DHYAN CHINNAPPA, SENIOR ADVOCATE FOR
SMT. DIVYA PURANDAR, ADVOCATE)
AND:
1. M/S NHDPL SOUTH PRIVATE LIMITED
(FORMERLY KNOWN AS
NHDPL PROPERTIES PVT. LTD.
AND PREVIOUSLY KNOWN AS
NITESH HOUSING
DEVELOPERS PRIVATE LIMITED
HAVING ITS OFFICE AT NO. 110, LEVEL 1
ANREWS BUILDING, M.G. ROAD
BENGALURU - 560 001
ALSO HAVING OFFICE AT NO. 7
7TH FLOOR, NITESH TIMES SQAURE
M.G. ROAD
BENGALURU - 560 001
REPRESENTED BY ITS
AUTHORISED OFFICER
2. THE RESERVE BANK OF INDIA
NEW CENTRAL OFFICE BUILDING
SHAHID BHAGAT SINGH ROAD
FORT MUMBAI
MAHARASHTRA - 400 001
REPRESENTED BY DIRECTOR
3. THE BANKING OMBUDSMEN MUMBAI
C/O RESERVE BANK OF INDIA
4TH FLOOR, RBI BYCULLA
OFFICE BUILDING
OPPOSITE MUMBAI
CENTRAL RAILWAY STATION
BYCULLA-MUMBAI - 400 008
…RESPONDENTS
(SRI UDAYA HOLLA, SENIOR ADVOCATE FOR
SRI SIDDHARTH SUMAN, ADVOCATE FOR C/R-1)
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE IMPUGNED ORDER DATED 27.01.2025 PASSED BY THE LEARNED SINGLE JUDGE IN W.P. No. 2193/2021 (GM-RES) BY ALLOWING THIS APPEAL AND TO PASS SUCH OTHER AND FURTHER ORDERS AS MAY BE DEEMED JUST AND PROPER IN THE FACTS AND CIRCUMSTANCES OF THE CASE.
IN CCC NO. 185 OF 2025 (CIVIL)
BETWEEN:
1. NHDPL SOUTH PRIVATE LIMITED
(NOW KNOWN AS NORTHROOF
VENTURES PVT LTD.,
FORMERLY KNOWN AS NHDPL
PROPERTIES PRIVATE LIMITED EARLIER
NITESH HOUSING DEVELOPERS PVT LTD.,)
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT AND HAVING
REGISTERED OFFICE AT
NO.110, LEVEL 1, ANDREWS BUILDING
M.G. ROAD, BENGALURU - 560 001
REPRESENTED BY ITS
AUTHORIZED REPRESENTATIVE
VASUMATI H.K.
…COMPLAINANT
(BY SRI UDAYA HOLLA, SENIOR ADVOCATE FOR
SRI SIDDHARTH SUMAN, ADVOCATE)
AND:
1. SRI. GOYAL PRANAY HARIVANSH
CHIEF MANAGER / BRANCH MANAGER
UNION BANK OF INDIA
VILE PARLE (W) BRANCH, SHIV SHAKTI
II VITHAL NAGAR, CO-OP. HOUSING SOCIETY
10TH ROAD, J.V.P.D. SCHEME
VILE PARLE (W), MUMBAI - 400 049
…ACCUSED
THIS CCC IS FILED UNDER SECTION 11 AND 12 OF THE CONTEMPT OF COURTS ACT, 1971 R/W ARTICLE 215 OF THE CONSTITUTION OF INDIA, PRAYING TO INITIATE CONTEMPT PROCEEDINGS UNDER THE PROVISIONS OF THE CONTEMPT OF COURTS ACT AGAINST THE ACCUSED FOR HAVING WILLFULLY DISOBEYED THE ORDERS ORDER DATED 27.01.2025 IN W.P. NO.2193/2021 PASSED BY THE HON'BLE HIGH COURT OF KARNATAKA, BENGALURU I.E. ANNEXURE-A AND TO PUNISH THE ACCUSED FOR WILLFULLY AND DELIBERATELY DISOBEYING THE SAID ORDERS PASSED BY THE HON'BLE HIGH COURT OF KARNATAKA AND FURTHER ENFORCE THE ORDER PASSED BY THE HON'BLE HIGH COURT OF KARNATAKA IN ACCORDANCE WITH LAW; AND ALSO AWARD COSTS OF THESE PROCEEDINGS.
THIS WRIT APPEAL AND CCC, HAVING BEEN HEARD AND RESERVED FOR JUDGMENT, COMING ON FOR PRONOUNCEMENT THIS DAY, JUDGMENT WAS PRONOUNCED AS UNDER:
CORAM: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
and
HON'BLE MR. JUSTICE C M JOSHI
CAV JUDGMENT
(PER: HON'BLE MR. VIBHU BAKH
