9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (8) TMI 1129 - SC - Indian LawsAs per J. INDIRA BANERJI Substitution of a legally valid irrevocable Bank Guarantee - Scheduled Bank - whether the Division Bench, after having held that the order impugned before it was appealable, should have dismissed the appeal and allowed the direction on the Appellant to substitute the Bank Guarantee of ICBC with a fresh bank guarantee of a Scheduled Indian Bank, to stand? HELD THAT - As a Scheduled Bank and a banking company within the meaning of the Banking Regulation Act, ICBC is governed by the regulatory provisions of the RBI Act and the Banking Regulation Act and the Rules, Regulations, Orders, Notifications etc. issued thereunder. The circulars and directives of the Reserve Bank of India with regard to Bank Guarantees/ Demand Guarantees are binding on ICBC - The RBI Act only defines Scheduled Banks which includes Scheduled Foreign Banks operating in India. The RBI Act or the Second Schedule thereto does not segregate Scheduled Indian Banks. There is no definition of Scheduled Indian Bank in the RBI Act. The regulatory provisions of the RBI Act apply equally to all scheduled banks. However, since there is a list of Scheduled Foreign Banks in India categorized separately in the Second Schedule by Gazette Notifications, it may be presumed that all other banks listed in the Second Schedule in the various categories except the category of Scheduled Foreign Banks, that is, Scheduled Public Sector Banks, Scheduled Private Sector Banks, Scheduled Small Finance Banks, Scheduled Payments Banks, Scheduled Regional Rural Banks are all Scheduled Indian Banks, even though Scheduled Indian Banks do not constitute any distinct category in the Second Schedule to the RBI Act. Since ICBC has its principal branch registered in the People s Republic of China and is listed in the category of Scheduled Foreign Banks in India, the High Court made a distinction between ICBC and a Scheduled Indian Bank . In the absence of any adverse material against ICBC and in the light of a plethora of reports showing its financial soundness, the High Court erred in directing the Appellant to replace the Bank Guarantee of ICBC, already furnished pursuant to an order of Court passed on 12.02.2019, with another Bank Guarantee, oblivious of the practical realities in the arena of banking activities, specially the difficulties in obtaining a Bank Guarantee from banks with which the applicant has no transaction and ignoring the cost already incurred by the Appellant by way of bank charges for obtaining the guarantee. All that is required for invocation of the Bank Guarantee is an order of the High Court in the proceedings relating to the Arbitral Award. The statement that the guarantee is subject to the URDG does not dilute the guarantee or make it conditional - Appeal allowed. As per V. Ramasubramanian, J. These special leave petitions do not deserve to be entertained under Article 136 of the Constitution of India in view of the fact (i) that the very same Judge who passed the first Order dated 12.02.2019, clarified the same by his subsequent Order dated 09.04.2019; (ii) that the same learned Judge dismissed on 16.05.2019, the petition to recall the Order dated 09.04.2019; (iii) that the Commercial Division Bench of the High Court dismissed the appeal arising out of the Order dated 16.05.2019; and (iv) that the Commercial Division Bench again reiterated its orders, by dismissing the review petition. The question whether there exists statutorily, a distinction between a Scheduled Indian Bank and a Scheduled Bank located in India does not arise for consideration in this case, as the dispute primarily revolves around what was offered in Court by one of the parties, what was accepted in Court, and what was recorded in the Order and clarified later. If without any offer from the petitioner, an adjudication had been made by the Court directing the 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 the status of such a bank with reference to the statutory provisions, would have arisen - SLP dismissed.
Issues Involved:
1. Legality of the High Court's direction to substitute a Bank Guarantee issued by ICBC with one from a "Scheduled Indian Bank." 2. Interpretation of the terms "Scheduled Bank" and "Scheduled Indian Bank." 3. Applicability and implications of the Uniform Rules for Demand Guarantees (URDG) 2010. 4. Evaluation of the credibility and financial soundness of ICBC. 5. Discretionary powers of the Court in interim orders under Section 9 of the Arbitration and Conciliation Act, 1996. 6. Review of judicial orders and the scope of appellate intervention. Detailed Analysis: 1. Legality of the High Court's Direction: The Supreme Court examined whether the High Court was correct in requiring the Appellant to replace a legally valid irrevocable Bank Guarantee issued by ICBC with one from a "Scheduled Indian Bank." The High Court's direction was based on an earlier offer by the Appellant to furnish such a guarantee. The Court noted that the Appellant had complied with the direction by providing a Bank Guarantee from ICBC, which is a Scheduled Bank included in the Second Schedule of the RBI Act, 1934. The Supreme Court found that the High Court's insistence on a "Scheduled Indian Bank" was not justified, especially given the Appellant's incurred costs and the absence of any adverse material against ICBC. 2. Interpretation of "Scheduled Bank" and "Scheduled Indian Bank": The Supreme Court clarified that ICBC, being a Scheduled Bank under the RBI Act, is regulated by the same rules and regulations as other Scheduled Banks in India. The Court observed that the RBI Act does not define "Scheduled Indian Bank," and the term "Scheduled Bank located in India" used in the High Court's order was legally valid. The Court noted that the distinction made by the High Court between "Scheduled Indian Bank" and "Scheduled Bank located in India" was not supported by statutory definitions. 3. Applicability and Implications of URDG 2010: The Court discussed the Uniform Rules for Demand Guarantees (URDG) 2010, noting that these rules are voluntary contractual guidelines published by the International Chamber of Commerce (ICC). The Bank Guarantee issued by ICBC was subject to URDG 2010, which balances the interests of the applicant, guarantor, and beneficiary. The Court found that the inclusion of URDG 2010 did not render the Bank Guarantee conditional or less effective. 4. Evaluation of ICBC's Credibility and Financial Soundness: The Supreme Court highlighted ICBC's high global ranking and financial soundness, as evidenced by its inclusion in authoritative lists such as 'The Banker’s Top 1000 World Banks 2018' and 'The Forbes Global 2000 2019.' The Court found no reason to doubt ICBC's credibility or its ability to honor the Bank Guarantee. The Court noted that the Respondent failed to demonstrate any real prejudice or provide instances of default or malpractice by ICBC. 5. Discretionary Powers of the Court in Interim Orders: The Supreme Court emphasized that interim orders under Section 9 of the Arbitration and Conciliation Act, 1996, are discretionary. The Court found that the High Court's direction to substitute the Bank Guarantee was an exercise of discretion that was not warranted in this case. The Court noted that the Appellant had acted in compliance with the initial order and incurred significant costs, making it inappropriate for the High Court to alter its direction after compliance. 6. Review of Judicial Orders and Scope of Appellate Intervention: The Supreme Court discussed the limited scope of review under Section 114 read with Order 47 Rule 1 of the Code of Civil Procedure, 1908. The Court found no grounds for review in this case, as the prerequisites for a review did not exist. The Court also noted that the Division Bench of the High Court had dismissed the appeal primarily on the ground that interim orders are largely discretionary and that the scope of appellate intervention is limited. Conclusion: The Supreme Court allowed the appeal, setting aside the impugned judgments and orders of the Division Bench and the Single Bench of the High Court. The Court held that the direction to substitute the Bank Guarantee issued by ICBC with one from a "Scheduled Indian Bank" was not justified, given the legality of the ICBC guarantee and the absence of any adverse material against ICBC. The Court emphasized the importance of adhering to legally valid directions and the practical realities in banking activities.
|
