TMI Blog2017 (9) TMI 1878X X X X Extracts X X X X X X X X Extracts X X X X ..... e or procedure or the law of England being different or that conditions are such that BHEL cannot proceed against the parties at London but is paucity of time which is not one of the grounds recognized. Even if this Court accepts that paucity of time is one of the grounds, time can be granted to BHEL to approach the Court of competent jurisdiction. Even though learned counsel for AKBank harps on the admissions made by BHEL in the plaint that the Commercial Court at London has the exclusive jurisdiction to try the suit and the present suit was filed only because of paucity of time for BHEL to approach the Court of competent jurisdiction, dehors the admission of BHEL this Court finds that it has no territorial jurisdiction to entertain the present suit, for it is well settled that contract of Bank Guarantee is an independent contract and merely because the same was issued at the place within the territorial jurisdiction of this Court and that the word 'only' is missing from the Counter Bank Guarantee clause, the same would not vest this Court with the territorial jurisdiction to entertain the plaint. The plaint is directed to be returned to be filed in the Court of com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... INR 28,35,37,637.06 valid till 1st July, 2024 2. Claim of BHEL is that it is a public sector undertaking of the Government of India and EGI is a State owned company duly incorporated under the laws of Turkey engaged in the business of power generation and transmission having its office at Ankara, Turkey. AKBank is a privately owned commercial bank in Adana and is a banking company carrying on banking activities at Istanbul, Turkey. BoB is yet another International State Banking and financial service company with its headquarter at Vadodara, Gujarat and its branch office at Sansad Marg, New Delhi. 3. EGI issued a contract for rehabilitation of eight units of Keban Hydroelectric Power Plant for which BHEL was engaged as a contractor. On 21st April, 2015 a contract to this effect was entered into between BHEL and EGI valued at Euro 63,859,828.24 (Eur Sixty Three Million Eight Fifty Nine Thousand Eight and Twenty Four Cents only) approximately INR 472,56,27,289.76 (Rupees four hundred seventy two crores fifty six lakhs twenty seven thousand two hundred eighty nine and seventy six paise only). 4. As per Article 11 of the contract between BHEL and EGI a Performance Bank Guarant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . [Emphasis supplied] 6. BHEL was informed by BoB that EGI has terminated the contract of BHEL for renovation and modernisation of Keban Hydroelectric Power Plant, Turkey citing the following contractual condition: Clause: 26.1. The Contracting Entity shall terminate the Contract in the following cases: If the Contractor does not perform the Contract in accordance with the provisions of the tender document and the Contract or complete the work in time, and if the same situation continues in spite of the written notice of the Contracting Entity for a period specified in this Contract with regard to the application of the delay penalty at the rate stipulated in the Article of the Contract concerning delay penalties 7. BHEL claims that the contract termination letter dated 7 th March, 2017 is in complete contravention to Article 20 of Law 4735 applicable to the contract between BHEL and EGI which described the circumstances under which contract can be terminated as under: In case the contractor fails to perform its obligations in compliance with provisions of the contract and tender documents or fails to complete works within the period as prescribed, and such st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377;28,35,37,637.06 and Counter Guarantee bearing No. 2158FGPER000215 for an amount of EUR 3,831,589.69, i.e. ₹28,35,37,637.06 till the next date, which interim order is continuing till date. 11. Defendants were served however, only defendant Nos. 2 and 3, that is, AKBank and BoB entered appearance and written statement has been filed by BoB. Further two applications, that is, I.A. No. 5090/2017 under Order VII Rule 10 and 11 CPC and I.A. No. 7263/2017 under Order XXXIX Rule 4 read with Order VII Rule 10 and 11 CPC have been filed by defendant No. 2/AKBank and defendant No.3/BoB respectively. Thus the three applications, that is, I.A. Nos. 3182/2017 (under Order XXXIX Rule 1 and 2 CPC), 5090/2017 (under Order VII Rule 10 and 11 by Defendant No. 2) and 7263/2017 (under Order XXXIX Rule 4 CPC r/w Order VII Rule 10 and 11 by Defendant No.3) were heard together. After arguments were addressed by learned counsel for AKBank and BoB on their applications, BHEL filed an application under Order VI Rule 17 CPC being I.A. No. 10152/2017 seeking to amend partly paragraph-25 and whole of paragraph- 31 of the plaint seeking to withdraw certain averments in relation to the jurisdiction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /territorial jurisdiction with Commercial Courts at London, the Counter Guarantee is a contract between AKBank and BoB and AKBank neither resides at Delhi nor carries on business or profession within the jurisdiction of this Court thus no part of cause of action having arisen in Delhi, mere issuance of Counter Bank Guarantee by BoB is not sufficient to confer jurisdiction to this Court. Further in the main contract BHEL and EGI agreed to submit to the jurisdiction of Courts at Ankara, Turkey. Furthermore the amount in terms of the Counter Guarantee issued by BoB to AKBank is to be paid outside the jurisdiction of this Court. Reliance is placed on the decision reported as 1996 (3) SCC 443 South East Asia Shipping Co. Ltd. vs. Nav Bharat Enterprises Pvt. Ltd. Ors. and the decision of the Division Bench of this Court reported as 2016 SCC OnLine Del 2485 : (2016) 157 DRJ 71 Hellenic Electricity Distribution Network Operator vs. Bharat Heavy Electricals Limited which judgment has attained finality as SLP (Civil) No. 13913/2016 has been dismissed by the Hon'ble Supreme Court vide order dated 5th August, 2017. 16. It is further contended that even assuming, though not admitting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but were not explained and the present case being one of strong and compelling reasons this suit be not returned or rejected at the threshold. Sixthly, since the present suit is against EGI, AKBank and BoB together as defendants and the three defendants are not governed by a single contract but different contracts, further plaintiff cannot sue BoB either at Ankara or in London nor enforce a decree against BoB either at Ankara or London, the same being a meaningless exercise when both BHEL and BoB are situated at Delhi, this Court has territorial jurisdiction to entertain the present suit. 18. Before referring to the rival contentions of the parties it would be appropriate to note terms of Counter Bank Guarantee, the invocation whereof is sought to be injuncted by the present suit as the Performance Bank Guarantee has already been invoked: TN MR. SERDAR KESKIN MANAGER INTL DIVISION AND GUARANTEES DEPT. ORDER AND COUNTER GUARANTEE NO. 2158FGPER000215 FOR PERFORMANCE BOND. WE BANK OF BARODA CFS BRANCH 16 PARLIAMENT STREET NEW DELHI INDIA HEREBY INSTRUCT YOU TO ISSUE UNDER OUR FULL RESPONSIBILITY AND ACCOUNT AND COUNTER GUARANTEE A PERFORMANCE BOND IN THE STANDART FORMAT IN TURK ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 PARLIAMENT STREET NEW DELHI INDIA IN THE AMOUNT OF EUR 3,831,589.69 UNQUOTE IN CONSIDERATION OF YOUR ISSUING YOUR ABOVE MENTIONED GUARANTEE WE BANK OF BARODA CFS BRANCH 16 PARLIAMENT STREET NEW DELHI INDIA HOLD YOU INDEMNIFIED AND IRREVOCABLY AND UNCONDITIONALLY UNDERTAKE TO PAY TO YOU OR YOUR ORDER WITHOUT OBJECTION AND DEFENSE UPON YOUR FIRST WRITTEN OR AUTHENTICATED SWIFT DEMAND INFORMING OUR BANK THAT YOUR BANK HAS BEEN CALLED UPON TO MAKE PAYMENT TO THE BENEFICIARY AN AMOUNT UNDER THE GUARANTEE AGAINST ITS DEMAND PRESENTED TO YOUR BANK IRRESPECTIVE OF THE VALIDITY OF THE ABOVE MENTIONED CONTRACT AND ANY CONTESTATION BY ACCOUNT PARTY OR ANY OTHER PARTY WHATSOEVER ANY AMOUNT UP TO EURO 3,831,589.69 PLUS LEGAL INTEREST IN TURKEY IF OCCURS FOR THE DAYS ELAPSED FROM THE DATE OF YOUR DEMAND TO THAT OF OUR ACTUAL DISBURSEMENT. YOUR LIABILITY WITH REGARD TO THE EXAMINATION OF BENEFICIARIES WRITTEN DEMAND STIPULATED IN YOUR GUARANTEE IS LIMITED TO ITS APPEARANCE ON ITS FACE ONLY. OUR COUNTER GUARANTEE WILL REMAIN VALID UNTIL 16.07.2024 (15 DAYS ADDED FOR MAILING PURPOSES) AND WILL BE NULL AND VOID IF NO WRITTEN CLAIM IS RECEIVED BY US UNTIL SAID DATE. THIS COUNTER GUARANTEE IS GOVE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eficiary and has no concern with the main contract between the beneficiary and the party at whose instance the bank guarantee has been issued, with reference to territorial jurisdiction of a Court, has to be understood in the context of jurisdiction with reference to the mother contract. The independence of a contract for guarantee simply means that the dispute concerning the bank guarantee has to be resolved in terms of the bank guarantee i.e. the bank guarantee is the complete contract between the bank issuing the guarantee and the beneficiary. But since the bank guarantee flows out of the mother contract the jurisdictional issue has to be resolved in the context of the cause of action arising under the contract for the reason a guarantee is invocable, though in terms of the guarantee, but in relation to the main contract. To wit. Instant guarantee is a performance guarantee. The performance of the contract by the plaintiff has to be in terms of the contract. The bank guarantee simply states that a demand by the beneficiary, alleging non-performance, would require the bank to pay under the bank guarantee. 13. In the decision reported as (1996) 3 SCC 443 South East Asia Shippin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogether. Contention that the relationship between BHEL and BoB was governed by an omnibus agreement, the said contract having been entered into at Delhi as the Counter Bank Guarantee was issued in Delhi, therefore, since part of cause of action arose in Delhi this Court has jurisdiction to entertain the suit is bereft of any pleadings in the plaint on this count or any documents filed by BHEL. Even otherwise as noted in the South East Asia and Hellenic Electricity (Supra) issuance of Bank Guarantee at Delhi, or that BHEL and BoB were bound by an omnibus agreement would not be sufficient to vest territorial jurisdiction on this Court to entertain the suit. Further the prayers in the suit are declaration and permanent injunction qua the Performance Bank Guarantee and the Counter Guarantee, both guarantees specify Courts where jurisdiction is vested. BHEL does not claim any relief in the suit based on the omnibus agreement between BHEL and BoB. The plea regarding the jurisdiction of this Court based on the omnibus agreement is required to be rejected also on the ground that a Bank Guarantee is an independent contract and the existence or non-existence of the underlined contract is irr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use when words like 'alone', 'only, 'exclusive' and the like have been used there may be no difficulty. Even without such words in appropriate cases the maxim 'expressio unius est exclusio alterius' expression of one is the exclusion of another may be applied. What is an appropriate case shall depend on the facts of the case. In such a case mention of one thing may imply exclusion of another. When certain jurisdiction is specified in a contract an intention to exclude all others from its operation may in such cases be inferred. It has therefore to be properly construed. 24. Further the Supreme Court in the decision reported as 2013 (9) SCC 32 Swastik Gases Pvt. Ltd. vs. Indian Oil Corporation Ltd. held: 32. For answer to the above question, we have to see the effect of the jurisdiction clause in the agreement which provides that the agreement shall be subject to jurisdiction of the courts at Kolkata. It is a fact that whilst providing for jurisdiction clause in the agreement the words like 'alone', 'only', 'exclusive' or 'exclusive jurisdiction' have not been used but this, in our view, is not decisive and does not m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk Guarantee was vitiated with fraud or not however, it would be apposite to note the following decisions of the Supreme Court. In the decision reported as AIR 1996 SC 2268: 1996 (5) SCC 34 Hindustan Steel Works Construction Ltd. vs. Tarapore Co. it was observed: We are, therefore, of the opinion that the correct position of law is that commitment of banks must be honoured free from interference by the courts and it is only in exceptional cases, that is to say, in case of fraud or in a case where irretrievable injustice would be done if bank guarantee is allowed to be encashed, the court should interfere. In this case fraud has not been pleaded and the relief for injunction was sought by the contractor/Respondent No. 1 on the ground that special equities or the special circumstances of the case required it. The special circumstances and/or special equities which have been pleaded in this case are that there is a serious dispute on the question as to who has committed breach of the contract, that the contractor has a counter claim against the appellant, that the disputes between the parties have been referred to the arbitrators and that no amount can be said to be due and paya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 Fed Supp. 1210) (supra). In that case an exporter in the U.S.A. entered into an agreement with the Imperial Government of Iran and sought an order terminating its liability on stand by letters of credit issued by an American Bank in favour of an Iranian Bank as part of the contract. The relief was sought on account of the situation created after the Iranian revolution when the American Government cancelled the export licences in relation to Iran and the Iranian Government had forcibly taken 52 American citizens as hostages. The U.S. Government had blocked all Iranian assets under the jurisdiction of United States and had cancelled the export contract. The Court upheld the contention of the exporter that any claim for damages against the purchaser if decreed by the American Courts would not be executable in Iran under these circumstances and realisation of the bank guarantee/letters of credit would cause irreparable harm to the Plaintiff. This contention was upheld. To avail of this exception, therefore, exceptional circumstances which make it impossible for the guarantor to reimburse himself if he ultimately succeeds, will have to be decisively established. Clearly, a mere appreh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no connect with any of the parties before the Court. 28. In Eleftheria (supra) the Court summarized the principles in relation to the territorial jurisdiction as under: The principles established by the authorities can, I think, be summarized as follows: (1) Where plaintiffs sue in England in breach of an agreement to refer disputes to a foreign court, and defendants apply for a stay, the English court, assuming the claim to be otherwise within its jurisdiction, is not bound to grant a stay but has a discretion whether to do so or not. (2) The discretion should be exercised by granting a stay unless strong cause for not doing so is shown. (3) The burden of proving such strong cause is on plaintiffs. (4)In exercising its discretion the court should take into account all the circumstances of the particular case. (5) In particular, but without prejudice to (4) the following matters, where they arise, may properly be regarded: - (A) In what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the English and foreign courts. (b) Whether the law of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termed as a 'neutral court' or 'court of choice' creating exclusive or non-exclusive jurisdiction in it. 30. From the decisions noted above, it is settled that if the cause of action has taken place in India and the Indian law applies, the parties cannot choose to vest territorial jurisdiction to try the suit in a Court which does not have the jurisdiction though they may agree to vest exclusive jurisdiction in one of such Court having jurisdiction, however, where one party is not subject to the law of India, the parties may vest jurisdiction outside the country in a neutral forum as has been done in the present case. The cause of action in the present case does not arise by virtue of the omnibus agreement between BHEL and BoB as there is no prayer in respect of the omnibus agreement to be enforced or violation thereof alleged but of the Counter Guarantee and the Performance Bank Guarantee which both vest jurisdiction in Courts outside India. It is in this light that the circumstances noted in Eleftheria (supra) have to be looked into i.e. the evidence on issues of fact situated in or more readily available, the effect of relative convenience and expense of tria ..... X X X X Extracts X X X X X X X X Extracts X X X X
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