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TMI Blog2021 (8) TMI 1129X X X X Extracts X X X X X X X X Extracts X X X X ..... cting 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erms of the order dated 24.7.2018." 9. On 22.03.2019, the Appellant got ICBC to issue an unconditional, irrevocable Bank Guarantee for a sum of Rs. 30 Crores payable on demand to the Registrar General of the Delhi High Court. An electronic copy of the Bank Guarantee was filed in the Registry on 26.03.2019. 10. Mr. K.V. Vishwanathan, learned Senior Counsel appearing on behalf of the Appellant submitted that the Appellant incurred expenditure of Rs. 30,00,000/- (Thirty Lakhs) approximately towards bank charges for furnishing the Bank guarantee. Furthermore, an amount of Rs. 36,40,00,000/- was frozen in the Bank Account of the Appellant with ICBC in China. 11. However, by an order dated 09.04.2019, the Single Bench directed the Appellant to substitute the Bank Guarantee issued by ICBC, which had been filed in the Registry of the High Court, by a Bank Guarantee of equivalent amount from a Scheduled Indian Bank. The relevant paragraphs of the said order are extracted hereinbelow:- "5. Furthermore, Mr. Sethi says that in compliance of the order dated 12.02.2019 which required the respondent to furnish a bank guarantee of a Scheduled Bank, the respondent has complied with the same a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt/respondent had in fact, on its own, offered to furnish a bank guarantee of a Scheduled Indian Bank. The confusion, if any, in the mind of the applicant/respondent, as rightly pointed out by Mr. Nigam, was removed on 09.04.2019. The applicant/respondent has moved this application after nearly four weeks of the clarification issued in that behalf. Thus, having passed an order based, essentially, on the offer made by the counsel for the applicant/respondent, I do not see any good reason to recall the direction." 15. From the orders dated 09.04.2019 and 16.05.2019, it appears that the senior Counsel, representing the Respondent in the High Court had vehemently objected to the Bank Guarantee of ICBC, arguing emphatically, that the Appellant itself had, through Counsel, offered to furnish a Bank Guarantee of a Scheduled Indian Bank, but had retracted from its offer, taking advantage of an inadvertent typographical error in Paragraph 6 of the order dated 12.02.2019, which read "Further the bank guarantee in the sum of Rs. 30 crores will be that of a scheduled bank located in India". 16. The direction in the operative part of the order dated 12.02.2019 was clear. It required the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is obvious. That was not the case here. 21. The direction to furnish a Bank Guarantee of a Scheduled Indian Bank located in India, is perfectly legal. There was no reason for the Appellant to proceed on the basis that the direction had been issued by mistake. The Respondent also did not take any steps to get the direction rectified or altered. The direction was allowed to remain intact for almost two months. In the meanwhile, the Appellant furnished a Bank Guarantee of an Indian Branch of ICBC, a Scheduled Bank in India. 22. In this case, perhaps the intention of the Court was not expressed in the order accurately. However, the order was otherwise correctly worded and legally valid. It is not uncommon for Courts to give directions, which might be at variance with an oral offer. The Appellant having acted in accordance with the order dated 12.02.2019 and changed his position to his detriment by incurring an expenditure of about Rs. 30 lakhs to comply with the said order, it was not appropriate for the Court to change the order. 23. From the order dated 09.04.2019, it is clear that even the Single Bench accepted that there was a confusion due to the language and tenor of the dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded in the Paper Book. The Bank Guarantee reads: "NOW THESE PRESENTS WITNESSETH THAT THE SAID BANK DOTH HEREBY STAND SURETY IN PURSUANCE OF THE SAID ORDER DATED 12TH FEBRUARY 2019 FOR THE SUM OF RS. 300,00,000/- (RUPEES THIRTY CRORES ONLY) AND THE SAID BANK DOTH HEREBY GUARANTEE TO AND COVENANT WITH THE REGISTRAR GENERAL, DELHI HIGH COURT THAT THE SAID BANK SHALL FORTHWITH PAY THE SAID SUM OF RS. 300,00,000/-(RUPEES THIRTY CRORES ONLY) TO THE REGISTRAR GENERAL, DELHI HIGH COURT IN TERMS OF THE ORDER/JUDGEMENT OF THE HON'BLE HIGH COURT OF DELHI ALLOWING THE ENFORCEMENT OF THE ARBITRAL AWARD DATED 17TH OCTOBER, 2017 AND AS PER ORDER/DIRECTION/JUDGMENT BY THE HON'BLE HIGH COURT OF DELHI IN THE MATTER ARISING OUT OF ABOVE MENTIONED LEGAL PROCEEDINGS. AND THE SAID BANK DOTH HEREBY FURTHER COVENANT AND DECLARE THAT THE BANK GUARANTEE HEREIN SHALL REMAIN IN FORCE UP TO AND INCLUSIVE OF A PERIOD OF ONE YEAR AND THE SAID BANK SHALL IN CIRCUMSTANCES AS ABOVE, WITHOUT ANY DEMUR OR DEMAND, ACTION, NOTICE OR OBJECTION FORTHWITH PAY TO THE REGISTRAR GENERAL, DELHI HIGH COURT THE SAID AMOUNT OF Rs. 300,00,000/-(RUPEES THIRTY CRORES ONLY). AND IT IS HEREBY FURTHER RECORDED THAT THE SAID ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch incorporate the URDG, are entirely subject to their own terms, while incorporating beneficial terms of the URDG. 33. It is important to note that the URDG may apply without the parties expressly including it in certain instances, where it is in the general usage of a particular trade, where the applicable law provides for its application; or where it has been in consistent use in the course of a transaction or dealings between the parties. 34. The provisions of the URDG are limited to the scope of the matters upon which the contracting parties are free to contract on, and is subject to mandatory national laws of the governing jurisdiction, which is the law and jurisdiction of the guarantor or counter-guarantor, unless otherwise agreed by the parties. 35. Under the URDG, guarantees are completely independent of any underlying relationship between the applicant and beneficiary, and subject to only the terms contained in it, thereby limiting the liabilities and rights of the guarantor bank to only matters to which it voluntarily commits itself. 36. URDG 758 is a revised version of URDG 458. The revision was conducted under the aegis of ICC Banking Commission and the ICC Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial institution notified by the Central Government in this behalf,..." 41. ICBC is also a Scheduled Bank within the meaning of Section 2 (e) of the RBI Act, which defines a 'Scheduled Bank' to mean a bank included in the Second Schedule to the RBI Act. ICBC has its branch office at the Bandra Kurla Complex, Mumbai, India. The Mumbai branch of ICBC has been granted license by RBI to carry on banking business in India pursuant to a Memorandum of Understanding between the Governments of India and China. 42. The Mumbai branch of ICBC commenced operations in September 2011 and was included in the Second Schedule to the RBI Act by Notification DBOD IBD. No.8137/23.03.026/2011-12 dated 01.12.2011 published in the Gazette of India (Part III Section 4). 43. ICBC evidently continues to be in the Second Schedule to the RBI Act till date. In this context, it may be pertinent to point out that some banks have been excluded from the Second Schedule to the RBI Act by Gazette Notifications. 44. Banks have been listed in the Second Schedule to the RBI Act, by Gazette Notifications issued from time to time, under the following categories:- 1. Scheduled Public Sector Banks 2. Schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Banking Group Ltd. 16 Credit Agricole Corporate and Investment Bank 38 Rabobank International 17 Deutsche Bank 39 National Australia Bank 18 DBS Bank Ltd. 40 Woori Bank 19 Hongkong and Shanghai Banking Corpn. Ltd. 41 Industrial & Commercial Bank of China 20 J.P. Morgan Chase Bank N.A. 42 Sumitomo Mitsui Banking Corporation 21 Krung Thai Bank 43 Westpac Banking Corporation 22 Mashreqbank 44 Doha Bank 46. 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. 47. 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. 48. However, since there is a list of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk Limited, Kotak Mahindra Bank Limited, Lakshmi Vilas Bank Limited, Nainital Bank Limited, Yes Bank Limited etc. 53. Mr. Abhishek Manu Singhvi, learned Senior Counsel opposing these appeals on behalf of the respondents could not demonstrate any real prejudice likely to be caused by reason of furnishing of a Bank Guarantee of ICBC in preference to Scheduled Indian Banks nor could he show any plausible reason for preference of Scheduled Private Sector Banks in India to Scheduled Foreign Banks like ICBC. 54. As pleaded in the appeal being FAO (OS) (COMM) No.136 of 2019 the Respondents have not been able to advert to a single instance of default, fraud or any other malpractice of ICBC which could cast any doubt over ICBC's ability or inclination to honour the Bank Guarantee issued by it. 55. It is incomprehensible why Scheduled Private Banks in India should be preferred to Scheduled Foreign Banks in India with high global rating, even though, some Scheduled Private Sector Banks have not even been running well. It would perhaps not be out of place to take judicial notice of reports that in March, 2020, Yes Bank, a private Sector bank, which was on the brink of complete financial col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank Guarantee. Having passed an order on 12.02.2019 which directed "..Further, the bank guarantee in the sum of Rs. 30 crores will be that of a scheduled bank located in India..." on the basis of which the Appellant altered its position to its detriment by extending Rs. 30 lakhs in obtaining a Bank Guarantee of ICBC. The High Court was not justified in altering and/or modifying the said direction after almost two months and after its compliance. 60. For the reasons discussed above, the appeal from the impugned judgment and order of the Division Bench dated 27.11.2020 in FAO(OS) (COMM) No. 136 of 2019 is allowed. The impugned judgment and order of the Division Bench dated 27.11.2020 in FAO(OS) (COMM) No. 136 of 2019 and orders dated 09.04.2019 and 16.05.2019 in OMP (I) (COMM) 523/2017 are set aside. August 24, 2021 ORDER V. Ramasubramanian, J. 1. Despite a fine analysis by my learned sister, of the relevant provisions of the Reserve Bank of India Act, 1934 and the Banking Regulation Act, 1949 and the fine distinction that the Hon'ble Judge has brought out between a 'scheduled Bank' defined in the Act, in contrast to a 'scheduled Indian Bank' not defined anywhere statutorily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is concerned, it will be furnished within 6 weeks as indicated by the counsel. 6. Further, the bank guarantee in the sum of Rs. 30 crores will be that of a scheduled bank located in India. 7. Renotify the matter on 31.7.2019. 8. In the meanwhile, the Judgment Debtor will continue to make deposit with the Registry of this Court in terms of the order dated 24.7.2018." 5. Pursuant to the aforesaid order, the petitioner furnished a bank guarantee issued by the Industrial and Commercial Bank of China Limited, Mumbai Branch dated 22.03.2019 (hereinafter referred to ICBC). 6. It appears that thereafter the respondent moved another application in I.A.No.5185 of 2019 in OMP(I)(COMM.) No.523 of 2017 seeking Garnishee Orders in respect of the amounts that the petitioner was entitled to receive under a settlement agreement entered into with one of their customers. While dealing with the said application, the learned Judge found that instead of furnishing a bank guarantee of a scheduled Indian bank, the petitioner had furnished bank guarantee of ICBC, in view of the confusion created in paragraph 6 of the order dated 12.02.2019. Therefore, by an order passed on 09.04.2019, in I.A.No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd, however, shows that the applicant/respondent had in fact, on its own, offered to furnish a bank guarantee of a Scheduled Indian Bank. The confusion, if any, in the mind of the applicant/respondent, as rightly pointed out by Mr. Nigam, was removed on 09.04.2019. The applicant/respondent has moved this application after nearly four weeks of the clarification issued in that behalf. Thus, having passed an order based, essentially, on the offer made by the counsel for the applicant/respondent, I do not see any good reason to recall the direction. ..." 10. Challenging the order dated 16.05.2019, passed in I.A.No. 7096 of 2019, the petitioner moved an intracourt appeal in FAO(OS) (COMM.)No.136 of 2019 under Section 37 of the Act read with Section 13 of the Commercial Courts Act, 2015. This appeal was dismissed by the Division Bench by an order dated 27.11.2020 primarily on the ground that the order under appeal was an interim one which is largely discretionary and that the scope and power of the appellate court in appeals against interim orders is limited to certain factors. 11. The petitioner thereafter moved an application for review in R.P.No.5 of 2021 seeking a review of the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates three items with respect to which the petitioner undertook to file an affidavit. Item no. (iii) of paragraph 1 is very specific that one of the contents of the affidavit should be to furnish a bank guarantee in a sum of Rs. 30 crores of a 'scheduled Indian bank'. Paragraph 5 directs the petitioner to furnish bank guarantee within six weeks 'as indicated by the counsel'. 16. To a pointed question whether an affidavit containing all the three items mentioned in paragraph 1 was filed or not, as directed in paragraph 4 of the order dated 12.02.2019, the reply of Mr. K.V. Vishwanathan, learned senior counsel for the petitioner was that an affidavit containing the matters indicated in Item Nos. (i) and (ii) of paragraph 1 of the order was filed and that in view of the directions contained in paragraph 6 to furnish a bank guarantee of a scheduled bank located in India, there was no necessity to incorporate in the affidavit, the matter covered by Item No.(iii) of paragraph 1. 17. But I do not agree. If a party to a proceeding invites an order by making an offer, he is obliged to honour the commitment made in the form of the offer. The contention of Mr. K.V. Vishwanathan that his cli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... call to the respondents and shown the bonafides of the petitioner. But without doing so, the petitioner filed an affidavit containing only those matters covered by Items (i) and (ii) of paragraph 1 and thereafter furnished a bank guarantee of ICBC. Since the petitioner did not adopt a course of action as undertaken by them, it is not open to them to say that they were misled by the direction in paragraph 6 of the order dated 12.02.2019 and that therefore they should not be prejudiced on account of a mistake committed by the court. 22. This is a case where the 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 the order. Therefore, he is not entitled to take advantage of the Latin maxim "actus curiae neminem gravabit". 23. In my humble considered view, 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 16.05.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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