SEPCO ELECTRIC POWER CONSTRUCTION CORPORATION versus POWER MECH PROJECTS LTD. on 24 August 2021

1. Leave granted.

2. These appeals are against a judgment and order dated27.11.2020, passed by the Division Bench of Delhi High Court, dismissingH

the Appeal being FAO(OS) (COMM) No.136 of 2019, filed by theAppellant under Section 37 of the Arbitration and Conciliation Act 1996,hereinafter referred to, in short, as the “A & C Act” read with Section13(1A) of the Commercial Courts Act 2015, and affirming an orderdated 16.05.2019 passed by the Commercial Division of the Delhi HighCourt in OMP(I)(COMM) No.523/2017 under Section 9 of the A & CAct, whereby the Court refused to recall its earlier order dated09.04.2019, directing the Appellant to substitute an irrevocable BankGuarantee, issued by the Industrial and Commercial Bank of ChinaLimited (ICBC), Mumbai Branch for Rs.30 Crores furnished pursuantto 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 alsoimpugned a judgment and order dated 12.03.2021 passed by the DivisionBench dismissing Review Petition No.5/2021 filed by the Appellant forreview of the said judgment and order dated 27.11.2020 dismissing theAppeal.

3. The short question in these Appeals is, whether the High Courtwas right in refusing to accept a legally valid irrevocable Bank Guaranteeof Rs.30 Crores, issued by the Industrial and Commercial Bank of ChinaLimited, Mumbai, hereinafter referred to as ‘ICBC’ which is a ScheduledBank included in the Second Schedule of the Reserve Bank of IndiaAct, 1934, and insisting that the Appellant should furnish a fresh BankGuarantee of the same amount, with identical terms, issued by a“Scheduled Indian Bank”, notwithstanding the expenditure incurred bythe Appellant in obtaining the Bank Guarantee from ICBC.

4. These Appeals are restricted only to the question of legality ofthe direction of the High Court, requiring the Appellant to substitute alegally valid irrevocable Bank Guarantee, issued by ICBC, which is aScheduled Bank, carrying on business in India, with a Bank Guaranteeof equivalent amount issued by a “Scheduled Indian Bank”.

5. The Appellant, an entity incorporated in China was awardedcontracts in relation to various coal based power projects in India andthe Respondent, a company incorporated in India was engaged as asub- contractor of the Appellant. Disputes and differences between theRespondent and the Appellant were referred to Arbitration. The detailsof the contract between the Appellant and the Respondent, or the disputesand differences that arose there from, are irrelevant to the issues involvedin these Appeals. Suffice it to mention that the Arbitration culminated in AB

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Aan Award dated 17.10.2017 of approximately Rs.1,42,00,00,000 (Onehundred and forty two crores) in favour of the Respondent.

6. On 03.12.2017, the Appellant filed an application under Section34 of the A & C Act being O.M.P. (COMM) No. 432 of 2017 challengingthe Arbitral Award dated 17.10.2017 in the Commercial Division of theBDelhi High Court, which is pending.

7. On the other hand, the Respondent filed an application beingOMP (I) (COMM) No. 523/2017 in the Commercial Division of theHigh Court under Section 9 of the A & C Act seeking, inter alia,directions on the Appellant to secure the amount of the Arbitral Award.

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8. On 12.02.2019, a Single Bench of the Commercial Court of theHigh Court passed an order in O.M.P.(I) (COMM.) No. 523/2017directing the Appellant to furnish to the Registry of the High Court, aBank Guarantee for a sum of Rs.30 Crores, from a Scheduled Banklocated in India. The operative part of the order dated 12.02.2019 is setout hereinbelow:-D

“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 theDecree Holder.

E5. Insofar as the bank guarantee is concerned, it will befurnished within 6 weeks as indicated by the counsel.

6. Further, the bank guarantee in the sum of Rs.30 crores willbe that of a scheduled bank located in India.

7. Renotify the matter on 31.7.2019.

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8. In the meanwhile, the Judgment Debtor will continue tomake deposit with the Registry of this Court in terms of theorder dated 24.7.2018.”

9. On 22.03.2019, the Appellant got ICBC to issue an unconditional,Girrevocable Bank Guarantee for a sum of Rs.30 Crores payable ondemand to the Registrar General of the Delhi High Court. An electroniccopy of the Bank Guarantee was filed in the Registry on 26.03.2019.

10. Mr. K.V. Vishwanathan, learned Senior Counsel appearingon behalf of the Appellant submitted that the Appellant incurredHexpenditure of Rs.30,00,000/- (Thirty Lakhs) approximately towards bank

charges for furnishing the Bank guarantee. Furthermore, an amount ofRs.36,40,00,000/- was frozen in the Bank Account of the Appellant withICBC in China.

11. However, by an order dated 09.04.2019, the Single Benchdirected the Appellant to substitute the Bank Guarantee issued by ICBC,which had been filed in the Registry of the High Court, by a BankGuarantee of equivalent amount from a Scheduled Indian Bank. Therelevant paragraphs of the said order are extracted hereinbelow:- “5. Furthermore, Mr. Sethi says that in compliance of the orderdated 12.02.2019 which required the respondent to furnish abank guarantee of a Scheduled Bank, the respondent hascomplied with the same and submitted a bank guarantee ofIndustrial and Commercial Bank of China Limited (in short“ICBC”).

6. However, a careful perusal of the order would show thatMr. Sethi had offered to furnish a bank guarantee of aScheduled Indian bank and that while dictating the operativepart of the order, I had indicated that it would be a scheduledbank located in India, therefore, the confusion, if any causedis now removed. The respondent will substitute the bankguarantee filed with a guarantee of a Scheduled Indian bankof an equivalent value.

7. Pending the substitution, the Registry will hold on to thebank guarantee already submitted and the respondent willensure that the same is kept alive.

8. As to whether the bank guarantee already filed is valid,the matter will be placed before Joint Registrar (Judicial) on23.04.2019.

8.1 It is made clear that as and when the respondent is readyto replace the bank guarantee furnished by ICBC with a bankguarantee of a Scheduled Indian Bank, on a request beingmade in that behalf via an appropriate application, the JointRegistrar (Judicial) will release the bank guarantee furnishedby ICBC provided the request is backed by an undertakingof the duly authorized representative of the respondent that itshall place the bank guarantee of the Scheduled Indian Bankon record within a defined time line not exceeding 10 daysfrom the date of the request.”

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A12. Pursuant to the direction of the Court, the Registrar (Judicial)of the High Court scrutinized the Bank Guarantee furnished by theAppellant, recorded the statement of Mr. Ayush Ganediwala, VicePresident of ICBC, who had appeared before him, and passed an orderdated 03.05.2019, recording that the said Bank Guarantee was validwith effect from 22.03.2019 till 19.03.2020.B

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13. Thereafter, the Appellant filed an application being IA No.7096of 2019 for recall of the order dated 09.04.2019 of the CommercialDivision (Single Bench) of the High Court directing the Appellant tosubstitute the Bank Guarantee issued by ICBC with a Bank Guaranteeof equivalent value of a Scheduled Indian Bank.C

14. By an order dated 16.05.2019, the learned Single Benchdismissed the said application, inter alia observing:- “5. I may clarify, at the outset, that it is not this court’sendeavour to doubt in any manner the credentials of ICBC.DThe record, however, shows that the applicant/respondent hadin fact, on its own, offered to furnish a bank guarantee of aScheduled Indian Bank. The confusion, if any, in the mind ofthe applicant/respondent, as rightly pointed out by Mr. Nigam,was removed on 09.04.2019. The applicant/respondent hasmoved this application after nearly four weeks of theEclarification issued in that behalf. Thus, having passed anorder based, essentially, on the offer made by the counsel forthe applicant/respondent, I do not see any good reason torecall the direction.”

15. From the orders dated 09.04.2019 and 16.05.2019, it appearsFthat the senior Counsel, representing the Respondent in the High Courthad vehemently objected to the Bank Guarantee of ICBC, arguingemphatically, that the Appellant itself had, through Counsel, offered tofurnish a Bank Guarantee of a Scheduled Indian Bank, but had retractedfrom its offer, taking advantage of an inadvertent typographical error inGParagraph 6 of the order dated 12.02.2019, which read “Further thebank guarantee in the sum of Rs.30 crores will be that of a scheduledbank located in India”.

16. The direction in the operative part of the order dated 12.02.2019was clear. It required the Appellants to furnish a Bank Guarantee of aScheduled Bank located in India. The Appellant complied with theH

direction and furnished a Bank Guarantee of a sum of Rs.30,00,000,00/- (Thirty Crores) from the Mumbai Branch of ICBC.

17. May be, there was a mistake in passing the order dated12.02.2019, in the sense that the Court had intended to pass an order interms of the offer of the Appellant, to furnish a Bank Guarantee of aScheduled Indian Bank. In the order dated 09.04.2019, the learned Judgevery fairly stated that while dictating the operative part of the order, thelearned Judge had said that the Bank Guarantee would be of a ScheduledBank located in India. That is what the order read. A party cannot befaulted for acting in terms of the order as issued, particularly when therewas no patent or obvious error in the direction to furnish a Bank Guaranteeof a Scheduled Bank, located in India.

18. It is true, that the order dated 12.02.2019 records the oraloffer made on behalf of the Appellant, through Counsel, to submit abank guarantee of a Scheduled Indian Bank. However, the direction inthe operative part of the order dated 12.02.2019 gives the impression,that the offer of the Appellant to furnish a Bank Guarantee may havepersuaded the Court to secure the Arbitral Award by directing theAppellant to furnish a Bank Guarantee of a Scheduled Bank located inIndia.

19. As recorded in the order dated 09.04.2019, there may havebeen some confusion by reason of the direction to furnish a BankGuarantee of a Scheduled Bank located in India. The language and tenorof the order dated 12.02.2019, as also the fact that the Respondent didnot make any attempt to have the direction to furnish a Bank Guaranteeof a Scheduled Bank located in India rectified and/or altered, shows thatuse of the expression ‘Scheduled Indian Bank’ may have been understoodby all concerned parties to include an Indian branch of a ScheduledBank.

20. Contrary to the contention of the Respondent, as recorded inthe order dated 16.05.2019 of the Court, there was no typographicalerror in the order dated 12.02.2019. One can say that there is atypographical error when there is an inadvertent mistake in a figure orthe spelling of a word by reason of pressing a wrong key of the keyboardor 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 ScheduledIndian Bank located in India, is perfectly legal. There was no reason for ABC

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Athe Appellant to proceed on the basis that the direction had been issuedby mistake. The Respondent also did not take any steps to get the directionrectified or altered. The direction was allowed to remain intact for almosttwo months. In the meanwhile, the Appellant furnished a Bank Guaranteeof an Indian Branch of ICBC, a Scheduled Bank in India.

B22. In this case, perhaps the intention of the Court was notexpressed in the order accurately. However, the order was otherwisecorrectly worded and legally valid. It is not uncommon for Courts to givedirections, which might be at variance with an oral offer. The Appellanthaving acted in accordance with the order dated 12.02.2019 and changedhis position to his detriment by incurring an expenditure of about Rs.30Clakhs to comply with the said order, it was not appropriate for the Court to change the order.

23. From the order dated 09.04.2019, it is clear that even theSingle Bench accepted that there was a confusion due to the languageand tenor of the direction in Paragraph 6 of the said order. Thus theDCourt, in effect, accepted that there may not have been any deliberatenesson the part of the Appellant in furnishing a Bank Guarantee issued byICBC.

24. Being aggrieved by the order dated 16.05.2019 refusing torecall the earlier order of the Court dated 09.04.2019, directing theEAppellant to replace the Bank Guarantee of ICBC, with a BankGuarantee of a Scheduled Indian Bank, the Appellant filed an appealunder Section 37 of the A & C Act, read with Section 13 (1A) of theCommercial Courts Act, 2015. The appeal was dismissed by the orderof the Division Bench dated 27.11.2020 impugned before this Court.FThe prayer of the Appellant, for review of the Order dated 27.11.2020was rejected by an order dated 12.03.2021, which is also under challengebefore this Court.

25. There may not be any infirmity in the order dated 12.03.2021,rejecting the prayer of the Appellant for review, having regard to theGlimited scope of an application for review. A matter cannot be re-arguedin the garb of an application for review. Nor does the Review Courtexercise appellate powers. All applications for review are governed bythe principles enshrined in Section 114 read with Order 47 Rule 1 of theCode of Civil Procedure, 1908. A court is empowered to review its ownorder only if the conditions precedent for a review, as laid down in SectionH114 read with Order 47 Rule 1 of the Code of Civil Procedure exist. In

this case the prerequisites for a review did not exist. The appeal fromthe order dated 12.03.2021, rejecting the application for review, istherefore, dismissed.

26. Therefore, the question is whether the Division Bench, afterhaving held that the order impugned before it was appealable, shouldhave dismissed the appeal and allowed the direction on the Appellant tosubstitute the Bank Guarantee of ICBC with a fresh bank guarantee ofa Scheduled Indian Bank, to stand.

27. Even in the proceedings before the Division Bench, theRespondent only harped on the offer of the Appellant to furnish a BankGuarantee of a Scheduled Indian Bank and further contended that theBank Guarantee of ICBC being conditional, the Respondent feared thatthe purpose of the Bank Guarantee might not be served.

28. Significantly, there is no finding of the Single Bench that thebank guarantee is conditional. A copy of the Bank Guarantee is includedin the Paper Book. The Bank Guarantee reads:

“NOW THESE PRESENTS WITNESSETH THAT THE SAIDBANK DOTH HEREBY STAND SURETY IN PURSUANCE OFTHE SAID ORDER DATED 12[TH] FEBRUARY 2019 FOR THESUM OF RS. 300,00,000/- (RUPEES THIRTY CRORES ONLY)AND THE SAID BANK DOTH HEREBY GUARANTEE TOAND COVENANT WITH THE REGISTRAR GENERAL, DELHIHIGH COURT THAT THE SAID BANK SHALL FORTHWITHPAY THE SAID SUM OF RS. 300,00,000/-(RUPEES THIRTYCRORES ONLY) TO THE REGISTRAR GENERAL, DELHIHIGH COURT IN TERMS OF THE ORDER/JUDGEMENT OFTHE HON’BLE HIGH COURT OF DELHI ALLOWING THEENFORCEMENT OF THE ARBITRAL AWARD DATED 17THOCTOBER, 2017 AND AS PER ORDER/DIRECTION/JUDGMENT BY THE HON’BLE HIGH COURT OF DELHIIN THE MATTER ARISING OUT OF ABOVE MENTIONEDLEGAL PROCEEDINGS.

AND THE SAID BANK DOTH HEREBY FURTHERCOVENANT AND DECLARE THAT THE BANK GUARANTEEHEREIN SHALL REMAIN IN FORCE UP TO AND INCLUSIVEOF A PERIOD OF ONE YEAR AND THE SAID BANK SHALLIN CIRCUMSTANCES AS ABOVE, WITHOUT ANY DEMUR

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AOR DEMAND, ACTION, NOTICE OR OBJECTIONFORTHWITH PAY TO THE REGISTRAR GENERAL, DELHIHIGH COURT THE SAID AMOUNT OF RS.300,00,000/-(RUPEES THIRTY CRORES ONLY).

AND IT IS HEREBY FURTHER RECORDED THAT THE SAIDBBANK GUARANTEE GIVEN HEREIN IS IRREVOCABLE ANDSHALL NOT BE REVOKED BY NOTICE OR OTHERWISE ANDIT IS IN ACCORDANCE WITH THE ORDER DATED 12[TH]FEBRUARY, 2019 PASSED BY THE HON’BLE HIGH COURTOF DELHI IN PETITION NO. O.M.P.(I) (COMM) NO.523/2017 TITLED M/S. POWER MECH PROJECTS LTD. VS.CSEPCO ELECTRIC POWER CONSTRUCTIONCORPORATION AND O.M.P. (COMM) NO.432/2017 TITLEDSEPCO ELECTRIC POWER CONSTRUCTIONCORPORATION VS M/S. POWER MECH PROJECTS LTD.NOTHWITHSTANDING ANYTHING CONTAINEDDHEREINABOVE THE LIABILITY OF THE SAID BANK ISRESTRICTED TO THE SUM OF RS.300,00,000/- (RUPEESTHIRTY CRORES ONLY).

IN WITNESS WHEREOF WE, INDUSTRIAL ANDCOMMERCIAL BANK OF CHINA LIMITED, MUMBIAEBRANCHNAME OF THE SCHEDULED BANK, BRANCH ANDADDRESS)

HAVE EXECUTED THESE PRESENT AT NEW DELHI

THIS 22[ND] DAY OF MARH 2019.FTHE GUARANTEE IS SUBJECT TO THE UNIFORM RULESFOR DEMAND GUARANTEES(URDG) 2010 REVISION, ICCPUBLICATION NO.758.”

29. The ICBC has unequivocally agreed to honour the BankGGuarantee on an order and/or judgment of the High Court allowingenforcement of the Arbitral Award, and as per Order/Direction/Judgmentby the High Court in the pending legal proceedings. The statement thatthe Bank Guarantee is subject to the Uniform Rules for DemandGuarantees (URDG) 2010 Revision, does not dilute the terms of theBank Guarantee. Nor does the URDG render the Bank Guarantee anyH

less effective. Furthermore, the High Court did not direct the Appellantto furnish an unconditional guarantee.

30. The Uniform Rules for Demand Guarantees (URDG) 758 isa set of voluntary contractual rules, published by the InternationalChamber of Commerce (ICC) with the aim of regularising and creatinga set standard of international banking practice on demand guaranteesand counter demand guarantees.

31. The URDG balances the legitimate and competing interestsof the applicant, the guarantor and the beneficiary and limits the risk ofunfair calls and demands on guarantors and counter-guarantors, just likethe ICC’s Uniform Customs and Practice for Documentary Credits(UCP) 600 which applies to Letters of Credit (LCs) and otherdocumentary credits.

32. The URDG, being a voluntary instrument, lacks the force oflaw, and must thus be expressly incorporated by the parties in order forit to apply to a demand guarantee or counter-guarantee. Guaranteesissued by guarantors and counter-guarantors, which incorporate theURDG, are entirely subject to their own terms, while incorporatingbeneficial terms of the URDG.

33. It is important to note that the URDG may apply without theparties expressly including it in certain instances, where it is in the generalusage of a particular trade, where the applicable law provides for itsapplication; or where it has been in consistent use in the course of atransaction or dealings between the parties.

34. The provisions of the URDG are limited to the scope of thematters upon which the contracting parties are free to contract on, andis subject to mandatory national laws of the governing jurisdiction, whichis the law and jurisdiction of the guarantor or counter-guarantor, unlessotherwise agreed by the parties.

35. Under the URDG, guarantees are completely independent ofany underlying relationship between the applicant and beneficiary, andsubject to only the terms contained in it, thereby limiting the liabilitiesand rights of the guarantor bank to only matters to which it voluntarilycommits itself.

36. URDG 758 is a revised version of URDG 458. The revisionwas conducted under the aegis of ICC Banking Commission and theICC Commission on Commercial Law and Practice.

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A37. The ICC Task Force on Guarantees, the standing expert bodycreated by ICC in 2003 to monitor international guarantee practice, actedas a consultative body to the Drafting Group that produced fivecomprehensive drafts during the two-and-a-half-year revision process.

38. The resulting URDG 758 were adopted unanimously by theBICC Executive Board at its meeting in New Delhi on 3 December 2009,following their endorsement by the members of the two sponsoring ICCCommissions. They came into force on 1 July 2010, whereupon aconsiderable number of demand guarantees and counter-guaranteesstarted being issued all over the world subject to the new URDG 758.

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39. It appears that all the concerned parties proceeded on theunderstanding that there was no difference between a ‘Scheduled IndianBank’ and ‘Scheduled Bank located in India’, in the absence of anyspecific definition of the expression ‘Scheduled Indian Bank’ in the RBIor the Banking Regulation Act.

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D40. Incorporated on 01.01.1984, ICBC is a Chinese State-ownedmulti national banking company, with capital provided by the Ministry ofFinance of China. ICBC is a banking company within the meaning ofSection 5(c) of the Banking Regulation Act, 1949, read with Section45A (a) of the Reserve Bank of India Act, 1934, hereinafter referred toas the RBI Act. Sections 5(c) of the Banking Regulation Act and SectionE45A(a) of the RBI Act are set out hereinbelow for convenience”- “Section 5(c) of Banking Regulation Act, 1949

5(c) “banking company” means any company which transactsthe business of banking in India ; F

Explanation.—Any company which is engaged in themanufacture of goods or carries on any trade and whichaccepts deposits of money from the public merely for thepurpose of financing its business as such manufacturer ortrader shall not be deemed to transact the business of bankingGwithin 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 asHdefined in Section 5 of the Banking Regulation Act, 1949, and includes the State Bank of India, any subsidiary bank asdefined in the State Bank of India (Subsidiary Banks) Act,1959, any corresponding new bank constituted by Section 3of the Banking Companies (Acquisition and Transfer ofUndertakings) Act, 1970, and any other financial institutionnotified by the Central Government in this behalf,...”

41. ICBC is also a Scheduled Bank within the meaning of Section2 (e) of the RBI Act, which defines a ‘Scheduled Bank’ to mean a bankincluded in the Second Schedule to the RBI Act. ICBC has its branchoffice at the Bandra Kurla Complex, Mumbai, India. The Mumbai branchof ICBC has been granted license by RBI to carry on banking businessin India pursuant to a Memorandum of Understanding between theGovernments of India and China.

42. The Mumbai branch of ICBC commenced operations inSeptember 2011 and was included in the Second Schedule to the RBIAct by Notification DBOD IBD. No.8137/23.03.026/2011-12 dated01.12.2011 published in the Gazette of India (Part III Section 4).

43. ICBC evidently continues to be in the Second Schedule to theRBI Act till date. In this context, it may be pertinent to point out thatsome banks have been excluded from the Second Schedule to the RBIAct by Gazette Notifications.

44. Banks have been listed in the Second Schedule to the RBIAct, by Gazette Notifications issued from time to time, under the followingcategories:-

1. Scheduled Public Sector Banks

2. Scheduled Private Sector Banks.

3. Scheduled Small Finance Banks

4. Scheduled Payments Banks

5. Scheduled Regional Rural Banks

6. Scheduled Foreign Banks in India

45. In terms of Annexure-1 to the notification dated 13[th] April2020, mentioned in Paragraph 2(b) thereof the following ScheduledCommercial Banks have been included in the Schedule to the RBI Act:- A

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272SUPREME COURT REPORTS

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SEPCO ELECTRIC POWER CONSTRUCTION CORPORATION273v. POWER MECH PROJECTS LTD. [INDIRA BANERJEE, J.]

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46. As a Scheduled Bank and a banking company within theFmeaning of the Banking Regulation Act, ICBC is governed by theregulatory provisions of the RBI Act and the Banking Regulation Actand the Rules, Regulations, Orders, Notifications etc. issued thereunder.The circulars and directives of the Reserve Bank of India with regard toBank Guarantees/ Demand Guarantees are binding on ICBC.

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47. The RBI Act only defines ‘Scheduled Banks’ which includesScheduled Foreign Banks operating in India. The RBI Act or the SecondSchedule thereto does not segregate Scheduled Indian Banks. There isno definition of Scheduled Indian Bank in the RBI Act. The regulatoryprovisions of the RBI Act apply equally to all scheduled banks.

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A48. However, since there is a list of Scheduled Foreign Banks inIndia categorized separately in the Second Schedule by GazetteNotifications, it may be presumed that all other banks listed in the SecondSchedule in the various categories except the category of ScheduledForeign Banks, that is, Scheduled Public Sector Banks, Scheduled PrivateSector Banks, Scheduled Small Finance Banks, Scheduled PaymentsBBanks, Scheduled Regional Rural Banks are all Scheduled Indian Banks,even though Scheduled Indian Banks do not constitute any distinctcategory in the Second Schedule to the RBI Act. Since ICBC has itsprincipal branch registered in the People’s Republic of China and is listedin the category of Scheduled Foreign Banks in India, the High CourtCmade a distinction between ICBC and a ‘Scheduled Indian Bank’.

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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 isnot only a Scheduled Bank in India, but it also ranks very high in terms ofasset value in atleast three extremely authoritative lists being ‘TheDBanker’s Top 1000 World Banks 2018’, ‘The Forbes Global 2000 2019’and ‘The Fortune Global 500 Sub-list of Commercial Banks’.

50. It is stated by the Appellant that ICBC realized a net profit ofRMB 298.7 Billion in the year 2018 with the total value of its assetsassessed at 27,699,540 (in RMB Millions). Mr. Vishwanathan submitsEthat ICBC continues to hold the largest total net profit in the global bankingindustry.

51. It appears that the Mumbai branch of ICBC has set up a fundfor an amount of 200 million US Dollars for investment in Indian Micro,Small and Medium Enterprises (MSMEs). It is contended on behalf ofFthe Appellant that this establishes the credibility of ICBC within the IndianCommercial Market.

52. In the Second Schedule to the RBI Act, ICBC is listed in thesame category of Scheduled Foreign Banks in India as StandardChartered Bank, Citi Bank, American Express Banking Corporation,GHSBC Limited etc. which are household names in India in the arena ofbanking. On the other hand, Scheduled Indian Bank, as stated abovewould include all categories of banks in the Second Schedule exceptthose in the category of Scheduled Foreign Banks. Scheduled Bankswould therefore, include Scheduled Private Sector Banks such asBandhan Bank Limited, City Union Bank Limited, Ratnakar BankH

Limited, Dhanalaxmi Bank Limited, Kotak Mahindra Bank Limited,Lakshmi Vilas Bank Limited, Nainital Bank Limited, Yes Bank Limitedetc.

53. Mr. Abhishek Manu Singhvi, learned Senior Counsel opposingthese appeals on behalf of the respondents could not demonstrate anyreal prejudice likely to be caused by reason of furnishing of a BankGuarantee of ICBC in preference to Scheduled Indian Banks nor couldhe show any plausible reason for preference of Scheduled Private SectorBanks in India to Scheduled Foreign Banks like ICBC.

54. As pleaded in the appeal being FAO (OS) (COMM) No.136of 2019 the Respondents have not been able to advert to a single instanceof default, fraud or any other malpractice of ICBC which could cast anydoubt over ICBC’s ability or inclination to honour the Bank Guaranteeissued by it.

55. It is incomprehensible why Scheduled Private Banks in Indiashould be preferred to Scheduled Foreign Banks in India with high globalrating, even though, some Scheduled Private Sector Banks have noteven been running well. It would perhaps not be out of place to takejudicial notice of reports that in March, 2020, Yes Bank, a private Sectorbank, which was on the brink of complete financial collapse, had to beplaced under a moratorium by RBI. Yes Bank has been cited by thisCourt as an example only to illustrate the fallacy of insistence upon theBank Guarantee of a Scheduled Indian Bank in preference to that ofScheduled Foreign Bank in India, and not to cast any aspersion on thepresent functioning of Yes bank or any other Scheduled Bank in thePrivate Sector in India.

56. There can be no doubt that the Court has the discretion toinsist on a Bank Guarantee from any specific bank or class of banks tosafeguard the interests of the beneficiary of the Bank Guarantee. TheCourt may legitimately disapprove a Bank Guarantee of a bank with ahistory 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 thecredibility of ICBC or its financial ability or willingness to honourguarantees.

57. In the absence of any adverse material against ICBC and inthe light of a plethora of reports showing its financial soundness, I am ofthe view that the High Court erred in directing the Appellant to replace A

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Athe Bank Guarantee of ICBC, already furnished pursuant to an order ofCourt passed on 12.02.2019, with another Bank Guarantee, oblivious ofthe practical realities in the arena of banking activities, specially thedifficulties in obtaining a Bank Guarantee from banks with which theapplicant has no transaction and ignoring the cost already incurred bythe Appellant by way of bank charges for obtaining the guarantee.B58. Mr. Singhvi, more as an argument in desperation, submittedthat the Petitioner would not have incurred so much expenditure if it hadcomplied with the order dated 09.04.2019 instead of taking recourse todifferent proceedings before Court. Prompt compliance with the orderof 09.04.2019 may have saved the Appellant the costs of renewal of theCBank Guarantee. However, the initial amount of about Rs.30 lakhs hadalready been spent long before the order dated 09.04.2019 was passed.59. As discussed above, all that is required for invocation of theBank Guarantee is an order of the High Court in the proceedings relatingto the Arbitral Award. The statement that the guarantee is subject to theDURDG does not dilute the guarantee or make it conditional. Mr. Singhvi’sclient has not been able to demonstrate how the URDG can cause anyprejudice to the beneficiary of the Bank Guarantee. Having passed anorder on 12.02.2019 which directed “..Further, the bank guarantee inthe sum of Rs.30 crores will be that of a scheduled bank located inIndia...” on the basis of which the Appellant altered its position to itsEdetriment by extending Rs.30 lakhs in obtaining a Bank Guarantee ofICBC. The High Court was not justified in altering and/or modifying thesaid direction after almost two months and after its compliance.

60. For the reasons discussed above, the appeal from the impugnedjudgment and order of the Division Bench dated 27.11.2020 in FAO(OS)F(COMM) No. 136 of 2019 is allowed. The impugned judgment and orderof the Division Bench dated 27.11.2020 in FAO(OS) (COMM) No. 136of 2019 and orders dated 09.04.2019 and 16.05.2019 in OMP (I)(COMM) 523/2017 are set aside.

O R D E R*

G1. Despite a fine analysis by my learned sister, of the relevantprovisions of the Reserve Bank of India Act, 1934 and the BankingRegulation Act, 1949 and the fine distinction that the Hon’ble Judge hasbrought out between a ‘scheduled Bank’ defined in the Act, in contrastto a ‘scheduled Indian Bank’ not defined anywhere statutorily, I regretH*Ed. Note : Order passed by Hon’ble Mr. Justice V. Ramasubramanian my inability to persuade myself to agree to the view taken by my learnedsister. In my considered view, the special leave petitions deserve to bedismissed. The reasons are provided herein below.

2. As pointed out by my sister, the award-debtor has come upwith these Special Leave Petitions challenging (i) the dismissal of anappeal under Section 37 of the Arbitration and Conciliation Act, 1996(hereinafter referred to as the ‘Act’); and (ii) the dismissal of a reviewpetition arising there from. The appeal under section 37 of the Act aroseout of the rejection of a petition for recalling an order passed in anapplication for interim measure under Section 9 of the Act.

3. The petitioner suffered an arbitration award dated 17.10.2017in a sum of Rs.142,41,14,499/-. The award is the subject matter ofchallenge in a petition OMP(COMM.)No.432 of 2017 under Section 34of the Act. It appears that the petition under Section 34 was accompaniedby an application for stay of execution of the award, but the same hasnot yet been finally disposed of.

4. However the respondent filed an independent petition underSection 9 of the Act, and sought a direction to the petitioner to securethe award amount. In the said petition in I.A.No.11128 of 2018 in OMP(I)(COMM.)No.523 of 2017, an order was passed on 12.02.2019. Sincethe genesis of the dispute before us could be traced to the said order, itis extracted as follows:- “1. Mr. Sethi, learned senior counsel for the respondent, says thathe will file an affidavit stating therein the following:

(i) The list of assets which find mention in the valuers’ reportalong with their location and valuation given by the valuer.

(ii) The list of assets which, according to him, the valuerhas not valued. In respect of these assets their location andapproximate valuation will also be given.

(iii) Furnish a bank guarantee in the sum of Rs.30 croresof a scheduled Indian bank.

2. Learned senior counsel says that on account of the spring festivalin China, it could take at least six (6) weeks to furnish the bankguarantee.

3. Mr. Sethi says, however, the affidavit can be furnished withinthe next two (2) weeks. It is ordered accordingly.

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A4. 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 furnishedwithin 6 weeks as indicated by the counsel.

6. Further, the bank guarantee in the sum of Rs.30 crores willBbe 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 makedeposit with the Registry of this Court in terms of the order dated24.7.2018.”C5. Pursuant to the aforesaid order, the petitioner furnished a bankguarantee issued by the Industrial and Commercial Bank of China Limited,Mumbai Branch dated 22.03.2019 (hereinafter referred to ICBC).

6. It appears that thereafter the respondent moved anotherDapplication in I.A.No.5185 of 2019 in OMP(I)(COMM.) No.523 of 2017seeking Garnishee Orders in respect of the amounts that the petitionerwas entitled to receive under a settlement agreement entered into withone of their customers. While dealing with the said application, the learnedJudge found that instead of furnishing a bank guarantee of a scheduledIndian bank, the petitioner had furnished bank guarantee of ICBC, inEview of the confusion created in paragraph 6 of the order dated12.02.2019. Therefore, by an order passed on 09.04.2019, in I.A.No.5185of 2019, the learned Judge directed the petitioner to substitute the bankguarantee of ICBC, with a bank guarantee of a scheduled Indian bank.The relevant portion of the order passed by the learned judge inFI.A.No.5185 of 2019 dated 09.04.2019 reads as follows:- “… … …

5. Furthermore, Mr. Sethi says that in compliance of the orderdated 12.02.2019 which required the respondent to furnish a bankguarantee of a Scheduled Bank, the respondent has complied withGthe same and submitted a bank guarantee of Industrial andCommercial Bank of china Limited (in short “ICBC”)

6. However, a careful perusal of the order would show thatMr. Sethi had offered to furnish a bank guarantee of aScheduled Indian bank and that while dictating the operativeHpart of the order, I had indicated that it would be a scheduled bank located in India, therefore, the confusion, if any causedis now removed. The respondent will substitute the bankguarantee filed with a guarantee of a Scheduled Indian bank ofan equivalent value.

… … …”

7. It is relevant to point out here that the order dated 09.04.2019was passed by the very same Judge who passed the order dated12.02.2019. The learned Judge was thus aware of what transpired incourt on 12.02.2019 and hence recorded in the order dated 09.04.2019as to what happened in court on 12.02.2019. It is needless to emphasizethat what is recorded in a judicial order about what transpired during thehearing in court, is to be taken to be a correct reflection of whattranspired.

8. However, the petitioner filed an application in I.A.No.7096 of2019 seeking to recall the directions contained in paragraph 6 of theorder dated 09.04.2019. The main grievance as projected by the petitionerin the said petition was that the non-acceptance of the bank guaranteefurnished by ICBC may be taken as a reflection on the reputation of thebank.

9. But by an order dated 16.05.2019, the learned Judge dismissedI.A.No.7096 of 2019, clarifying that the credentials of ICBC are not atall doubted and that what was sought to be done by the order dated09.04.2019, was merely to correct an error that crept in the order dated12.02.2019. Paragraph 5 of the order dated 16.05.2019 reads as follows:- “… … …

5. I may clarify, at the outset, that it is not this court’s endeavourto 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 aScheduled Indian Bank. The confusion, if any, in the mind ofthe applicant/respondent, as rightly pointed out by Mr. Nigam,was removed on 09.04.2019. The applicant/respondent has movedthis application after nearly four weeks of the clarification issuedin that behalf. Thus, having passed an order based, essentially, onthe offer made by the counsel for the applicant/respondent, I donot see any good reason to recall the direction. …”

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A10. Challenging the order dated 16.05.2019, passed in I.A.No.7096 of 2019, the petitioner moved an intra-court appeal inFAO(OS)(COMM.)No.136 of 2019 under Section 37 of the Act readwith Section 13 of the Commercial Courts Act, 2015. This appeal wasdismissed by the Division Bench by an order dated 27.11.2020 primarilyon the ground that the order under appeal was an interim one which isBlargely discretionary and that the scope and power of the appellate courtin appeals against interim orders is limited to certain factors.

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11. The petitioner thereafter moved an application for review inR.P.No.5 of 2021 seeking a review of the order dated 27.11.2020. Thereview petition was dismissed by an order dated 12.03.2021. Therefore,Cchallenging the dismissal of the appeal and the dismissal of the reviewpetition, the petitioner has come up with these Special Leave Petitions.

12. Thus we have 2 Special Leave Petitions, one challenging thedismissal of the appeal under section 37 and another challenging thedismissal of the review petition. The SLP arising out of the order passedDin the review petition deserves to be thrown out without much ado, sincethe refusal of a court to review its order due to the absence of theparameters prescribed in Order 47 Rule 1 CPC, cannot give rise to asubstantial question of law of public importance, warranting ourinterference under Article 136.

E13. In so far as the other SLP challenging the order passed in theappeal under Section 37 of the Act is concerned, the same arises out ofan interim order passed under Section 9 of the Act. As rightly observedby the Division Bench of the High Court, interim orders are discretionaryand there is no question of interference with the exercise of the discretion,even in an intra-court appeal, much less in an SLP under Article 136.F

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14. All that the learned Judge did on 09.04.2019, was to correct amistake that inadvertently crept in his order. The correction that thelearned Judge sought to make, was in tune with the very offer made bythe petitioner at the first instance on 12.02.2019. When an interim orderhas been passed particularly in a fact situation arising out of an offerGmade by one of the parties, especially by the very same learned Judge,I fail to understand how the case can be elevated to the status of oneraising a substantial question of law warranting our interference underArticle 136.

15. I have extracted in full, the first order dated 12.02.2019 andHthe relevant portions of the orders dated 09.04.2019 and 16.05.2019.

The order dated 12.02.2019 shows (i) that it was not an adjudicatoryorder but passed entirely on the basis of an offer made by the petitionerherein; and (ii) that paragraphs 4 and 5 of the order gave two weekstime to the petitioner to file an affidavit and six weeks time to furnishbank guarantee. The statement of the learned senior counsel for thepetitioner to file an affidavit is recorded in paragraph 1 of the orderdated 12.02.2019. Paragraph 1 of the order dated 12.2.2019 indicatesthree items with respect to which the petitioner undertook to file anaffidavit. Item no. (iii) of paragraph 1 is very specific that one of thecontents of the affidavit should be to furnish a bank guarantee in a sumof Rs.30 crores of a ‘scheduled Indian bank’. Paragraph 5 directsthe petitioner to furnish bank guarantee within six weeks ‘asindicated by the counsel’.

16. To a pointed question whether an affidavit containing all thethree items mentioned in paragraph 1 was filed or not, as directed inparagraph 4 of the order dated 12.02.2019, the reply of Mr. K.V.Vishwanathan, learned senior counsel for the petitioner was that anaffidavit containing the matters indicated in Item Nos. (i) and (ii) ofparagraph 1 of the order was filed and that in view of the directionscontained in paragraph 6 to furnish a bank guarantee of a scheduledbank located in India, there was no necessity to incorporate in the 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 orderby making an offer, he is obliged to honour the commitment made in theform of the offer. The contention of Mr. K.V. Vishwanathan that hisclient’s offer in paragraph 1(iii) of the order dated 12.02.2019 to furnisha bank guarantee of a scheduled Indian bank stood modified by paragraph6 of the order, is not acceptable. This is for the reason that the verysame 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 actuallyoffered by the petitioner. Once the same learned Judge has clarified thatthere was no intention to accept the offer made by the petitioner with amodification, it is not open to the appellate court to upset the discretionexercised by the learned Judge.

18. Both in the orders dated 09.04.2019 and 16.05.2019, the verysame 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 orderdated 12.02.2019. Therefore, the matter should be allowed to rest there.

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A19. Even the contention that the credentials of ICBC will be takento have been doubted, was considered by the learned Judge in his orderdated 09.04.2019 and the matter was clarified. Therefore, the questionof any harm to the reputation of ICBC does not arise.

20. Lastly it is contended by Mr. K.V. Vishwanathan, learnedBsenior counsel for the petitioner that the bank guarantee was taken bythe petitioner from ICBC, upon payment of a non-refundable charge ofRs.30 lakhs and that therefore assuming that there was a mistake on thepart of the Court, it cannot be corrected by the Court resulting in afinancial loss of Rs.30 lakhs to the petitioner. The maxim “actus curiaeneminem gravabit” is sought to be invoked by the learned senior counselCfor the petitioner.

21. But in my considered view the petitioner has to blame itself,for the loss if any. The order dated 12.02.2019 gave (i) two weeks timeto the petitioner to file an affidavit incorporating all the three items ofmatters indicated in paragraph 1 of the order dated 12.02.2019; and (ii)Dsix weeks time to furnish bank guarantee as indicated by the counsel.Therefore the petitioner ought to have filed an affidavit containing all thethree ingredients, before taking the bank guarantee from ICBC. If theyhad done so, the affidavit would have contained a statement, in tuneeither with what was undertaken by them or with what was mentionedEin the order. The filing of an affidavit in such a manner, would havegiven a wake up call to the respondents and shown the bonafides of thepetitioner. But without doing so, the petitioner filed an affidavit containingonly those matters covered by Items (i) and (ii) of paragraph 1 andthereafter furnished a bank guarantee of ICBC. Since the petitioner didnot adopt a course of action as undertaken by them, it is not open toFthem to say that they were misled by the direction in paragraph 6 of theorder dated 12.02.2019 and that therefore they should not be prejudicedon account of a mistake committed by the court.

22. This is a case where the petitioner, after making a clear offerto furnish a bank guarantee of a scheduled Indian bank, has chosen toGtake advantage of a mistake that crept in paragraph 6 of the order.Therefore, he is not entitled to take advantage of the Latin maxim “actuscuriae neminem gravabit”.

23. In my humble considered view, these special leave petitionsdo not deserve to be entertained under Article 136 of the Constitution ofH

India in view of the fact (i) that the very same Judge who passed thefirst Order dated 12.02.2019, clarified the same by his subsequent Orderdated 09.04.2019; (ii) that the same learned Judge dismissed on16.05.2019, the petition to recall the Order dated 09.04.2019; (iii) thatthe Commercial Division Bench of the High Court dismissed the appealarising out of the Order dated 16.05.2019; and (iv) that the CommercialDivision Bench again reiterated its orders, by dismissing the reviewpetition. We must remember that all this arose out of an interim measureunder Section 9 of the Act and the petitioner is seeking to upset all of thisin a petition under Article 136 of the Constitution as though there is asubstantial question of law of great importance.

24. The question whether there exists statutorily, a distinctionbetween “a Scheduled Indian Bank” and “a Scheduled Bank located inIndia” does not arise for consideration in this case, as the dispute primarilyrevolves around what was offered in Court by one of the parties, whatwas accepted in Court, and what was recorded in the Order and clarifiedlater. If without any offer from the petitioner, an adjudication had beenmade by the Court directing the petitioner to furnish bank guarantee of aparticular type of bank and a dispute had been raised thereafter, it is onlythen that a question of law as to the status of such a bank with referenceto the statutory provisions, would have arisen.

25. Therefore, in my considered view and with the greatest ofrespect for my learned Sister, I deem it fit to dismiss the Special LeavePetitions as not giving rise to any substantial question of law warrantingour interference under Article 136 of the Constitution.

O R D E R*

Since we have not been able to agree, let the matter forthwith beplaced before the Hon’ble the Chief Justice of India for appropriatedirections.

Ankit Gyan

Matter to be placed before Hon’ble CJI.

*Ed. Note : Common order passed by Hon’ble Ms. Justice Indira Banerjee andHon’ble Mr. Justice V. Ramasubramanian.

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