Arbitration and Conciliation Act, 1996 – ss. 9, 37 – Commercial Courts Act, 2015 – s.13(1A) – Reserve Bank of India Act, 1934 – Bank Guarantee from a ‘schedule Bank’ and a ‘schedule Indian Bank’ – The appellant, an entity in corporate in China was awarded contracts in relation to coal based power projects in India and the respondent, a company incorporated in India was engaged as a sub-contractor of the appellant –Dispute arose between the parties – Arbitration clause invoked – Arbitration Award was passed of approximately Rs.1,42,00,00,000 (One hundred and forty two crores) in favour of the respondent – Appellant filed an application u/s.34of the Act challenging the Arbitral Award before the Commercial Division of the High Court – Respondent also filed an application u/s. 9 of the Arbitration Act seeking, inter alia, directions to secure the amount of the Arbitral Award – On 12.02.2019, Single Judge of the High Court directed the Appellant to furnish to the Registry, a Bank Guarantee for a sum of Rs.30 Crores, from a Scheduled Bank located in India – On 22.03.2019, appellant got Industrial and Commercial Bank of China Limited (ICBC) to issue an unconditional, irrevocable Bank Guarantee for a sum of Rs.30 Crores – However, on 09.04.2019 the Single Bench directed the appellant to substitute the Bank Guarantee issued by ICBC, by a Bank Guarantee of equivalent amount from a “Scheduled Indian Bank” – Appellant filed an application for recall of the order of the Commercial Division (Single Bench) of the High Court directing the Appellant to substitute the Bank Guarantee – Application dismissed by the High Court – On appeal, held: Per Indira Banerjee, J: ICBC is also a Scheduled Bank within the meaning of s.2 (e) of the RBI Act – The RBI Act only defines ‘Scheduled Banks’ which includes Scheduled Foreign Banks operating in India – There is no definition of Scheduled Indian Bank in the RBI Act – The Court may legitimately disapprove a Bank Guarantee of a bank with a history which raises doubts with regard to its credibility – In the instant 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 – Therefore, the High Court erred in directing the Appellant to replace the Bank Guarantee of ICBC – Per V. Ramasubramanian, J.: 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 the order passes by Single Bench which was rectified later on –The order dated 09.04.2019 was to correct a mistake that had inadvertently crept in – 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 later – Therefore, the Special Leave Petitions are dismissed – No interference u/Art.136 of the Constitution required – Since, both the Judges have not been able to agree, the matter to be placed before the Chief Justice of India for appropriate directions.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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