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TMI Blog2017 (9) TMI 1878X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Performance Bank Guarantee bearing No.0834INC15CG00075 for an amount of EUR EUR 3,831,589.69 i.e. INR 28,35,37,637.06 valid till 1 st July, 2024 by Defendant No.1 to Defendant No.2 and consequently of the Counter Guarantee of Defendant No.3 to Defendant No.2 bearing No. 2158FGPER000215 is fraudulent and hence void; and (b) pass a decree of permanent injunction restraining Defendant No.3 from making any payment whatsoever to Defendant No.2 in terms of the fraudulent invocation by Defendant No.1 of the Performance Bank Guarantee in turn invoking the Counter Guarantee baring number 2158FGPER000215 dated 20th April, 2015 for an amount of EUR 3,831,589.69 i.e. INR 28,35,37,637.06; and (c) pass a decree of permanent injunction restraining Defendant No.2 from making any payment whatsoever to Defendant No.1 in terms of the fraudulent invocation dated 21st April, 2015 by Defendant No.1 of the Performance Bank Guarantee baring No. 0834INC15CG00075 for an amount of EUR 3,831,589.69 i.e. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid amount shall be paid to your administration upon your first written demand, immediately and without delay in cash and in full, together with the legal interest to accrue for the days elapsing from the date of demand to that of payment, without it being necessary to apply for a notice of protest, obtaining a court order and the consent of the aforesaid contractor and regardless of any dispute that may arise between the aforesaid contractor and your administration and regardless the consequences and legal effects thereof this guarantee will remain valid until 01.07.2024 and will be null and void if no written claim is received by us until said date. In the event of indemnification under this performance bond, the sum of performance bond shall be paid to you in Euro. This guarantee has been issued on the basis of the counter guarantee No. 2158FGPER000215 dated 20 April 2015 given by Bank of Baroda CFS Branch 16, Parliament Street New Delhi in the amount of EUR 3,831,589.69." [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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termination of the contract and since the Performance Bank Guarantee had been fraudulently invoked, the plaintiff i.e. BHEL filed the present suit seeking declaration and permanent injunction from encashment of Performance Bank Guarantee and Counter Guarantee. 9. In the plaint BHEL has repeatedly stated that jurisdiction of the Counter Bank Guarantee being conferred on the Commercial Court at London, it is impossible for the plaintiff to approach the said jurisdiction at such short notice. It is also stated that the act of EGI was a clear case of fraud and mala fide exercise, hence BHEL was approaching this Court for the prayers as noted above. 10. The suit came up before this Court on 10th March, 2017 when this Court in I.A. No. 3842/2017 under Order XXXIX Rule 1 and 2 CPC passed an ex-parte ad-interim injunction restraining BoB from making any payment in terms of Performance Bank Guarantee bearing No. 0834INC15CG00075 for an amount of EUR 3,831,589.69 i.e. Rs.28,35,37,637.06 and Counter Guarantee bearing No. 2158FGPER000215 for an amount of EUR 3,831,589.69, i.e. Rs.28,35,37,637.06 till the next date, which interim order is continuing till date. 11. Defendants were served howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive jurisdiction vests in the Commercial Courts at London for adjudication of the Counter Bank Guarantee is repeatedly admitted by BHEL in its pleading in the plaint and the contention now raised before the Court that interpretation of a document is a question of law is contrary to the further admission in replies to I.A. Nos. 5090/2017 and 7263/2017 filed by BHEL stating that the same was a question of fact. Relying upon the decisions reported as 1974 (1) SCC 242 Nagindas Ramdas vs. Dalpatram Ichharam @ Brijram & Ors. and 1998 (2) SCC 70 ITC Limited vs. Debt Recovery Appellate Tribunal & Ors. it is contended that the admissions are the best proof of facts and BHEL cannot wriggle out of its admission made in the plaint and replies to I.A. No. 5090/2012 under Order VII Rule 10 and 11 CPC and 7263/2017 under Order XXXIX Rule 4 CPC read with Order VII Rule 10 and 11 CPC. 15. It is contended that besides the clause of exclusive place of jurisdiction/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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tee without fulfilling the conditions required for encashment of Performance Bank Guarantee. Hence equity demands and since part of cause of action has arisen in Delhi, the suit filed by BHEL be entertained and not rejected on the ground of territorial jurisdiction. Fifthly, it is submitted that the reliance of learned counsel for AKBank on the decision reported as 2003 (4) SCC 341 Modi Entertainment Network & Anr. vs. WSG Cricket PTE Ltd. is misconceived for the reason the present is not an anti suit injunction but a suit that seeks injunction from invocation of the Counter Bank Guarantee. It is further submitted that in Modi Entertainment (supra) the Hon'ble Supreme Court relied upon the decision reported as 1969 (2) Weekly Law Reports 1073 Owners of Cargo lately Laden on Board the Ship or Vessel Eleftheria vs. The Eleftheria (Owners) which described the strong and compelling reasons which though mentioned in Modi Entertainment (supra) 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OCUMENTS AND AGREEMENT THE AFORESAID AMOUNT SHALL BE PAID TO YOUR ADMINISTRATION UPON YOUR FIRST WRITTEN DEMAND, IMMEDIATELY AND WITHOUT DELAY IN CASH AND IN FULL, TOGETHER WITH THE LEGAL INTEREST TO ACCRUE FOR THE DAYS ELAPSING FROM THE DATE OF DEMAND TO THAT OF PAYMENT, WITHOUT IT BEING NECESSARY TO APPLY FOR A NOTICE OF PROTEST, OBTAINING A COURT ORDER AND THE CONSENT OF THE AFORESAID CONTRACTOR AND REGARDLESS OF ANY DISPUTE THAT MAY ARISE BETWEEN THE AFORESAID CONTRACTOR AND YOUR ADMINISTRATION AND REGARDLESS THE CONSEQUENCES AND LEGAL EFFECTS THEREOF. THIS GUARANTEE WILL REMAIN VALID UNTIL 01.07.2024 AND WILL BE NULL AND VOID IF NO WRITTEN CLAIM IS RECEIVED BY US UNTIL SAID DATE. IN THE EVENT OF INDEMNIFICATION UNDER THIS PERFORMANCE BOND, THE SUM OF PERFORMANCE BOND SHALL BE PAID TO YOU IN EURO. THIS GUARANTEE HAS BEEN ISSUED ON THE BASIS OF THE COUNTER GUARANTEE NO 2158FGPER000215 DATED 20 APR 2015 GIVEN BY BANK OF BARODA CFS BRANCH 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue or would arise. In view of the admitted position that contract was executed in Bombay, i.e., within the jurisdiction of the High Court of Bombay, performance of the contract was also to be done within the jurisdiction of the Bombay High Court; merely because bank guarantee was executed at Delhi and transmitted for performance to Bombay, it does not constitute a cause of action to give rise to the respondent to lay the suit on the original side of the Delhi High Court. The contention that the Division Bench was right in its finding and that since the bank guarantee was executed and liability was enforced from the bank at Delhi, the Court got jurisdiction, cannot be sustained. 20. Dealing with this issue of territorial jurisdiction in case of invocation of bank guarantee in Hellenic Electricity (supra) this Court held: "12. The principle of law that a bank guarantee is an independent contract between the issuing bank and the beneficiary 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial jurisdiction has to be determined with reference to a cause of action arising under a contract and if there is an exclusive jurisdiction clause vesting jurisdiction in one Court and ousting jurisdiction in others, the same has to be respected. 16. As we have noted hereinabove, apart from the exclusive jurisdiction clause vesting jurisdiction in the Courts of Athens, no part of cause of action concerning the contract arose in Delhi or for that matter in India. Entire cause of action was in Athens. As held above, issuance of the bank guarantee from Delhi is not a part of the cause of action and territorial jurisdiction cannot be determined with reference to the said fact. 17. We terminate by holding that the impugned order is contrary to the principles of law and our reasons for disagreement have been noted above. [Emphasis supplied] 21. First and second contentions of learned Senior Counsel for BHEL can be dealt together. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und as has been done by the High Court." 23. In respect of the third contention of learned counsel for BHEL that as the word 'only' is conspicuously missing from the jurisdictional clause in the Counter Bank Guarantee, Commercial Court at London is not vested with the exclusive jurisdiction. This contention of learned Senior Counsel deserves to be rejected in view of the decision reported as 1989 (2) SCC 163 A.B.C. Laminart Pvt. Ltd. & Anr. vs. A.P. Agencies, Salem wherein it was held: 21. From the foregoing decisions it can be reasonably deduced that where such an ouster clause occurs, it is pertinent to see whether there is ouster of jurisdiction of other Courts. When the clause is clear, unambiguous and specific accepted notions of contract would bind the parties and unless the absence of ad idem can be shown, the other Courts should avoid exercising jurisdiction, As regards construction of the ouster clause 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 ano ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Anr., (1995) 4 SCC 153, Shriram City Union Finance Corporation Limited v. Rama Mishra, (2002) 9 SCC 613, Hanil Era Textiles Ltd. v. Puromatic Filters (P) Ltd. MANU/SC/0348/2004 : (2004) 4 SCC 671 and Balaji Coke Industry Private Limited v. Maa Bhagwati Coke Gujarat Private Limited (2009) 9 SCC 403." 25. The fourth contention of learned Senior Counsel for BHEL that equity demands and that since part of cause of action has taken place at Delhi, the suit filed by BHEL be entertained and not rejected on the ground of territorial jurisdiction for the reason that EGI played a fraud and walked away with encashing the Performance Bank Guarantee without fulfilling the conditions required therein for encashment of Performance Bank Guarantee though not required to be considered by this Court at this stage for the reason it will be for the Court which has territorial jurisdiction to decide whether the encashment of the Bank 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 ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uarantee would result in irretrievable harm or injustice to one of the parties concerned. Since in most cases payment of money under such a bank guarantee would adversely affect the bank and its customer at whose instance the guarantee is given, the harm or injustice contemplated under this head must be of such an exceptional and irretrievable nature as would override the terms of the guarantee and the adverse effect of such an injunction on commercial dealings in the country. The two grounds are not necessarily connected, though both may co- exist in some cases. ...... 14. On the question of irretrievable injury which is the second exception to the rule against granting of injunctions when unconditional bank guarantees are sought to be realised the Court said in the above case that the irretrievable injury must be of the kind which was the subject-matter of the decision in the Itek Corporation case (566 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 cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erlying contract cannot settle the disputes with respect to allegations of breach by resorting to litigation or arbitration as stipulated in the contract. The remedy arising ex contractu is not burred and the cause of action for the same is independent of enforcement of the guarantee." 27. Relying upon the decision in Eleftheria (supra) learned Senior Counsel for BHEL advanced his fifth and sixth submissions that there are strong and compelling reasons for this Court to entertain the present suit, the essence of jurisdictional laws in Indian Courts being that the payments had already been made by AKBank to EGI under the Performance Bank Guarantee, the lis in the present suit is between BHEL and BoB which both parties are situated in the jurisdiction of this Court and even if a decree is granted in favour of BHEL and against BoB it will have to be executed in Delhi and the Commercial Court at London has 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial activities gave rise to the practice of the parties to a contract agreeing beforehand to approach for resolution of their disputes thereunder, to either any of the available courts of natural jurisdiction and thereby create an exclusive or non-exclusive jurisdiction in one of the available forums or to have the disputes resolved by a foreign court of their choice as a neutral forum according to the law applicable to that court. It is a well-settled principle that by agreement the parties cannot confer jurisdiction, where none exists, on a court to which CPC applies, but this principle does not apply when the parties agree to submit to the exclusive or non-exclusive jurisdiction of a foreign court; indeed in such cases the English Courts do permit invoking their jurisdiction. Thus, it is clear that the parties to a contract may agree to have their disputes resolved by a Foreign Court 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.
32. Consequently, the plaint is directed to be returned to be filed in the Court of competent jurisdiction however, since there is an ad-interim order in favour of BHEL since 10th March, 2017 and it would take some time for BHEL to approach the Court of competent jurisdiction the interim order dated 10th March, 2017 is extended for a further period of 45 days so that BHEL can approach the Court of competent jurisdiction. CS(COMM) 190/2017 is accordingly disposed of directing the plaint to be returned with liberty as noted above.
33. I.A. No. 3182/2017 is dismissed and I.A. Nos. 5090/2017 and 7263/2017 are disposed of.
34. I.A. No. 9057/2017 under Order VIII Rule 1 CPC by defendant No.2 seeking extension of time in filing written statement is disposed of as infructuous. The date of 2nd November, 2017 fixed before the learned Joint Registrar is cancelled. X X X X Extracts X X X X X X X X Extracts X X X X
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