TMI Blog2021 (8) TMI 1129X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and order dated 27.11.2020, passed by the Division Bench of Delhi High Court, dismissing the Appeal being FAO(OS) (COMM) No.136 of 2019, filed by the Appellant under Section 37 of the Arbitration and Conciliation Act 1996, hereinafter referred to, in short, as the A C Act read with Section 13(1A) of the Commercial Courts Act 2015, and affirming an order dated 16.05.2019 passed by the Commercial Division of the Delhi High Court in OMP(I) (COMM) No.523/2017 under Section 9 of the A C Act, whereby the Court refused to recall its earlier order dated 09.04.2019, directing the Appellant to substitute an irrevocable Bank Guarantee, issued by the Industrial and Commercial Bank of China Limited (ICBC), Mumbai Branch for ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder dated 12.02.2019 is set out hereinbelow:- 3. .. It is ordered accordingly. 4. The Judgment Debtor will file the affidavit within two (2) weeks; with a copy being furnished to the counsel for the Decree Holder. 5. Insofar as the bank guarantee is concerned, it will be furnished within 6 weeks as indicated by the counsel. 6. Further, the bank guarantee in the sum of ₹ 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. 9. On 22.03.2019, the Appellant got ICBC to issue an unconditional, irrevocable Bank Guarantee for a sum of ₹ 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 ₹ 30,00,000/- (Thirty Lakhs) approximately towards bank charges for furnishing the Bank guarantee. Furthermore, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was valid with effect from 22.03.2019 till 19.03.2020. 13. Thereafter, the Appellant filed an application being IA No.7096 of 2019 for recall of the order dated 09.04.2019 of the Commercial Division (Single Bench) of the High Court directing the Appellant to substitute the Bank Guarantee issued by ICBC with a Bank Guarantee of equivalent value of a Scheduled Indian Bank. 14. By an order dated 16.05.2019, the learned Single Bench dismissed the said application, inter alia observing:- 5. I may clarify, at the outset, that it is not this court s endeavour to doubt in any manner the credentials of ICBC. The record, 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. 15. From the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Bank Guarantee of a Scheduled Bank located in India rectified and/or altered, shows that use of the expression Scheduled Indian Bank may have been understood by all concerned parties to include an Indian branch of a Scheduled Bank. 20. Contrary to the contention of the Respondent, as recorded in the order dated 16.05.2019 of the Court, there was no typographical error in the order dated 12.02.2019. One can say that there is a typographical error when there is an inadvertent mistake in a figure or the spelling of a word by reason of pressing a wrong key of the keyboard or the omission or duplication of a word or phrase or even a sentence/sentences. A typographical error 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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. 27. Even in the proceedings before the Division Bench, the Respondent only harped on the offer of the Appellant to furnish a Bank Guarantee of a Scheduled Indian Bank and further contended that the Bank Guarantee of ICBC being conditional, the Respondent feared that the purpose of the Bank Guarantee might not be served. 28. Significantly, there is no finding of the Single Bench that the bank guarantee is conditional. A copy of the Bank Guarantee is included 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 TERM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ising and creating a set standard of international banking practice on demand guarantees and counter demand guarantees. 31. The URDG balances the legitimate and competing interests of the applicant, the guarantor and the beneficiary and limits the risk of unfair calls and demands on guarantors and counter-guarantors, just like the ICC's Uniform Customs and Practice for Documentary Credits (UCP) 600 which applies to Letters of Credit (LCs) and other documentary credits. 32. The URDG, being a voluntary instrument, lacks the force of law, and must thus be expressly incorporated by the parties in order for it to apply to a demand guarantee or counter-guarantee. Guarantees issued by guarantors and counter-guarantors, which 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 prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .-Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause; xxx xxx xxx Section 45A (a) of the Reserve Bank of India Act, 1934 45A(a) banking company means a banking company as defined in Section 5 of the Banking Regulation Act, 1949, and includes the State Bank of India, any subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959, any corresponding new bank constituted by Section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, and any other 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 pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank of India (including Andhra Bank and Corporation Bank) 11 Karnataka Bank Ltd. 12 UCO Bank 12 Karur Vysya Bank Ltd. 13 Kotak Mahindra Bank Ltd. 14 Lakshmi Vilas Bank Ltd. 15 Nainital Bank Ltd. 16 Ratnakar Bank Ltd. 17 South Indian Bank Ltd. 18 Tamilnad Mercantile Bank Ltd. 19 Yes Bank Ltd. 20 Bandhan Bank 21 IDFC Bank Ltd. 22 IDBI Bank Ltd FOREIGN BANKS 1 The Royal Bank of Scotland N.V. 23 Mizuho Corporate Bank Ltd. 2 Abu Dhabi Commercial Bank Ltd. 24 Oman International Bank 3 Antewerp Diamond Bank N.V. 25 Societe Generale 4 Arab Bangladesh Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ian 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 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 . 49. The Annexures to the Special Leave Petition filed in this Court, which form part of the Paper Book in these appeals show that ICBC is not only a Scheduled Bank in India, but it also ranks very high in terms of asset value in atleast three extremely authoritative list ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 collapse, had to be placed under a moratorium by RBI. Yes Bank has been cited by this Court as an example only to illustrate the fallacy of insistence upon the Bank Guarantee of a Scheduled Indian Bank in preference to that of Scheduled Foreign Bank in India, and not to cast any aspersion on the present functioning of Yes bank or any other Scheduled Bank in the Private Sector in India. 56. There can be no doubt that the Court has the discretion to insist on a Bank Guarantee from any specific bank or class of banks to safeguard the interests of the beneficiary of the Bank Guarantee. The Court may legitimately disapprove a Bank Guarantee of a bank with a history which raises doubts with regard to its credibility. In this case, there is nothing on record to give rise to any doubts with regard to the credibility of ICBC or its financial ability or willingness to honour guarantees. 57. In the absence of any adverse material against ICBC and in the light of a plethora of reports showing its financial soundness, I am of the view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, I regret my inability to persuade myself to agree to the view taken by my learned sister. In my considered view, the special leave petitions deserve to be dismissed. The reasons are provided herein below. 2. As pointed out by my sister, the award debtor has come up with these Special Leave Petitions challenging (i) the dismissal of an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act ); and (ii) the dismissal of a review petition arising there from. The appeal under section 37 of the Act arose out of the rejection of a petition for recalling an order passed in an application for interim measure under Section 9 of the Act. 3. The petitioner suffered an arbitration award dated 17.10.2017 in a sum of ₹ 142,41,14,499/. The award is the subject matter of challenge in a petition OMP(COMM.)No.432 of 2017 under Section 34 of the Act. It appears that the petition under Section 34 was accompanied by an application for stay of execu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead 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.5185 of 2019, the learned Judge directed the petitioner to substitute the bank guarantee of ICBC, with a bank guarantee of a scheduled Indian bank. The relevant portion of the order passed by the learned judge in I.A.No.5185 of 2019 dated 09.04.2019 reads as follows: 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 and submitted a bank guarantee of Industrial and Commercial Bank of china Limited (in short ICBC ) 6. However, a careful perusal of the order would show that Mr. Sethi had offered to furnish a bank guarantee of a Scheduled Indian bank and that while dictating the operative part of the order, I had indicated that it would be a scheduled bank located in India, therefore, the confusion, if any caused is now removed. The respondent will substitute the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 order dated 27.11.2020. The review petition was dismissed by an order dated 12.03.2021. Therefore, challenging the dismissal of the appeal and the dismissal of the review petition, the petitioner has come up with these Special Leave Petitions. 12. Thus we have 2 Special Leave Petitions, one challenging the dismissal of the appeal under section 37 and another challenging the dismissal of the review petition. The SLP arising out of the order passed in the review petition deserves to be thrown out without much ado, since the refusal of a court to review its order due to the absence of the parameters prescribed in Order 47 Rule 1 CPC, cannot give rise to a substantial question of law of public importance, warranting our interference under Article 136. 13. In so far as the other SLP challenging the order passed in the appeal under Section 37 of the Act is concerned, the same arises out of an interim order passed under Section 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 client s offer in paragraph 1(iii) of the order dated 12.02.2019 to furnish a bank guarantee of a scheduled Indian bank stood modified by paragraph 6 of the order, is not acceptable. This is for the reason that the very same learned Judge from whom the order dated 12.02.2019 was invited, clarified on 09.04.2019 that what he had in mind was what was actually offered by the petitioner. Once the same learned Judge has clarified that there was no intention to accept the offer made by the petitioner with a modification, it is not open to the appellate court to upset the discretion exercised by the learned Judge. 18. Both in the orders dated 09.04.2019 and 16.05.2019, the very same learned Judge had clarified (i) as to what transpired in court; (ii) as to what was offered; and (iii) as to what was the purport of the order dated 12.02.2019. Therefore, the matter should be allowed to rest there. 19. Even the content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions 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. We must remember that all this arose out of an interim measure under Section 9 of the Act and the petitioner is seeking to upset all of this in a petition under Article 136 of the Constitution as though there is a substantial question of law of great importance. 24. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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