HM Journal

Are ‘Scheduled Indian Bank’ and ‘Scheduled Bank located in India’ any different?

COURT NAME: Supreme Court

JUDGMENT NAME: SEPCO Electric Power Construction Corporation Vs. Power Mesh Projects Ltd.

CITATION: CIVIL APPEAL NOS.4936-4937 OF 2021

JUDGMENT DATE: 24th Aug, 2021

BENCH: Justice Indira Banerjee; Justice V. Ramasubramanian

INTRODUCTION:

In this case, these appeals are contrary to the judgment and decision of 27.11.2020, passed by the Division Bench of Delhi High Court, rejecting the Appeal Appeal under Section 37 of the Arbitration and Conciliation Act 1996.The judges are of contradicting views so the matter will be put before the Hon’ble Chief Justice.

FACTS OF THE CASE:

  • The Appellant is a China based entity awarded coal-based power projects in India and the Respondent is an Indian company engaged as a subcontractor of the Appellant. Disputes between the parties were referred to Arbitration which culminated in an Award of Rs.1,42,00,00,000 in favor of the Respondent.
  • 2 months later, the petitioner filed an appeal against the arbitral award while the respondent applied for directions to the Passenger to obtain the amount of the Arbitral Award in response there, the Delhi High Court ordered the appellant to provide the High Court Registry, Bank Organized in India a Bank Guarantee for a sum of Rs.30 Crores, from a Scheduled Bank located in India.
  • The Appellant obtained from the ICBC to issue an unconditional, non-refundable Bank Guarantee amount of R30 paid on demand to the Registrar General of the Delhi High Court. Mr. K.V. Vishwanathan, an Advocate who appeared on behalf of the Appellant, requested that the Appellant incur the costs of Thirty Lakhs on bank charges by providing a Bank guarantee. In addition, an amount of Rs.36,40,00,000 / – was deposited in the Transfer Bank Account with ICBC in China. However, One Bench instructed the applicant to file a Bank certificate issued by ICBC, which was filed in the Registry of the High Court, by the Bank Guarantee of Equal Funding from the Indian Banked Schedule.
  • Following the Court’s direction, the Registrar (Justice) of the High Court reviewed the Bank’s Certificate issued to the Appellant, recording the ICBC Deputy President’s statement that the Bank Guarantee was operational from 22.03.2019 to 19.03.2020. Subsequently, the Appellant filed a motion to recall the Commercial Division (Single Bench) of the High Court directing the Applicant to submit a Bank Certificate issued by ICBC with a Bank Guarantee of the equivalent amount of the scheduled Indian Bank.
  • The Court affirmed that there could not be any intention from the appellant’s side to furnish a Bank Guarantee issued by ICBC. Aggrieved by the order he refused to recall the previous Court order dated 09.04.2019, which ordered the Applicant to replace ICBC’s Bank Guarantee, with Indian Bank certification, the Applicant filed an appeal under Section 37 of the A&C Act, read out. and Section 13 (1A) of the Commercial Courts Act, 2015 repealed. The Appellant’s prayer, for review of the order dated 27.11.2020 was rejected by an order dated 12.03.2021, which faces a challenge before this Court.

FACTS IN ISSUE

Whether the High Court was right in refusing to accept a legally valid irrevocable Bank Guarantee of Rs.30 Crores, issued by the ICBC? Whether the High Court was correct in refusing to accept the irrevocable bank guarantee of Rs.30 Crores which was legally valid, released by ICBC?

CONTENTIONS:

On behalf of the appellant

The Appellant stated that ICBC received a total profit of RMB 298.7 Billion in 2018 with the total value of its assets tested at 27,699,540 (RMB Millions). Mr Vishwanathan pointed out that ICBC continues to be a major boon in the banking industry. This establishes ICBC’s credibility within the Indian Commercial Market.

 In the Second Schedule to the RBI Act, ICBC is listed in the same category of Foreign schedule Banks in India as Citi Bank, American Express Banking Corporation, etc. On the other hand, the scheduled indian bank, as mentioned above will include all banking categories in the Second Schedule except those in the Organized Mining Banking category. Organized Banks will therefore include Organized Private Banks such as Bandhan Bank Limited.

On behalf of the respondent-

Mr. Singhvi submitted that the Petitioner would not have incurred so much expenditure if it had complied with the order dated 09.04.2019 instead of taking recourse to different proceedings before Court. Immediate compliance with the order dated 09.04.2019 could have the Appellant’s costs of renewing the Bank Assurance. However, the initial amount of Rs.30 lakhs had been used long before the order dated 09.04.2019 was approved.

PRINCIPLES AND OBSERVATIONS:  

The court observed that it has 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 since the refusal of a court to review its order due to the unavailability of the criteria 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. Another SLP that challenges an order referred to an appeal under Section 37 of the Act is affected, the same as from an interim order issued under Section 9 of the Act. As appropriately considered by the Division Bench of the High Court, interim orders are optional and there is no question of interference in the exercise of discretion, even if an application to enter the court, is not to mention in the SLP under Article 136. All that the Judge learned was done on 09.04 In 2019, it would have corrected an error that went unintentionally into his order.

The question of whether there is a legal basis, the distinction between the “a Scheduled Indian Bank” and “a Scheduled Bank located in India” does not arise for consideration in this case, as the issue centered mainly on what was presented to the Court by one of the parties, what was accepted in the Court, and what was recorded in the Order was clarified later.

JUDGMENT:

Justice Subramanian stated Special Leave Petitions are not giving rise to any substantial question of law warranting our interference under Article 136 of the Constitution and should be dismissed. However, Justice Indira deems the allowance of appeal as more appropriated. So, it was ordered that since the bench has not been able to decide, the matter will be placed before Chief Justice of India.

MY OPINION:

In my view, Justice Subramanian are correct to state that the special leave petitions do not deserve to be entertained under Article 136 of the Constitution of India in view of the fact 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 and that the same learned Judge dismissed on 16.05.2019, the petition to recall the Order dated 09.04.2019. Furthermore, the High Court also dismissed the appeal and also the review petition.

Written By: Himani Thareja, Christ University, 3rd Year.

REFERENCES:

  1. Article 136, The Constitution of India, 1950 ; available at: https://www.refworld.org/docid/3ae6b5e20.html
  2. Section 37, The Arbitration And Conciliation Act, 1996 ; available at: https://www.indiacode.nic.in/bitstream/123456789/1978/1/AAA1996__26.pdf
  3. https://main.sci.gov.in/supremecourt/2021/10376/10376_2021_38_1501_29510_Judgement_24-Aug-2021.pdf

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