Full Text
HIGH COURT OF DELHI
Date of Decision: April 09, 2015
DENEL PROPRIETARY LTD. ..... Appellant Represented by: Mr.Vikas Goel, Advocate with
Mr.Abhishek Kumar, Advocate
Ms.Manjula Gandhi and Mr.Sarfaraz Ahmad, Advocates for the respondent
(UOI)
Mr.Sanjiv Kakra, Advocate with Mr.Bheem Sain Jain, Advocate for the applicant of CM No.3515/2015
(SBI)
HON'BLE MS. JUSTICE PRATIBHA RANI PRADEEP NANDRAJOG, J. (Oral)
CM No.3515/2015
JUDGMENT
1. The appellant had preferred a petition under Section 9 of the Arbitration and Conciliation Act 1996 seeking to restrain the respondent from invoking a bank guarantee furnished at the instance of the appellant beneficiary whereof was the respondent. The guarantee was a Warrantee Bank Guarantee No.SBI/GAUR/1460 dated March 28, 2002. The guarantee was issued by the applicant (State Bank of India) at the instance of the appellant and was secured by a counter guarantee No.821020002584 issued 2015:DHC:3215-DB by ABSA Bank South Africa.
2. Since the applicant bank had honoured its obligation under the bank guarantee issued by it to the respondent, when the bank guarantee was invoked, it issued a demand draft in the name of the respondent in sum of US $11,97,930. The learned Single Judge did not grant the relief prayed for by the appellant. FAO (OS) No.241/2010 was filed laying a challenge to the order dated March 22, 2010.
3. Initially recording a statement made by the learned Additional Solicitor General on behalf of the respondent that the respondent would not present for collection the demand draft issued by the applicant-bank, an order was passed on May 24, 2011 in the appeal directing that after encashing the demand draft issued in its favour by the applicant the respondent would deposit the proceeds thereof with the Registrar General of this Court.
4. The respondent complied with the said order.
5. The appeal was disposed of on March 23, 2012 noting that the dispute(s) between the appellant and the respondent has been referred to an Arbitral Tribunal before which the respondent had already filed its claims. The final direction issued in the appeal read as under:- “(i) The Bank Guarantees qua which the respondent has already filed the claims before the Arbitral Tribunal, we implore the Arbitral Tribunal to make attempt to decide the dispute between the parties as early as possible. Even if the final adjudication is likely to take time, the Arbitral Tribunal can always pass interim award deciding whether the appellant is under any obligation to keep these Bank Guarantees alive or not;
(ii) The Bank Guarantees qua which the respondent has not so far preferred any claims, we grant six months time to the respondent to prefer the claims. If no claims are preferred within six months, the liability of the respondent to keep the Bank Guarantees alive shall cease; if the amount of the Bank Guarantees has already been received in this Court, the appellant shall become entitled to refund thereof;
(iii) Else we direct that the amount deposited in this Court and the Bank Guarantees which are still alive shall be kept alive by the appellant, and shall be subject to the orders of the Arbitral Tribunal.
(iv) The findings and observations of the learned Single
(v) To balance the equity, we further direct that in the event of the appellant succeeding in the arbitral proceedings, the costs hereafter or keeping the Bank Guarantees alive shall have to be borne by the respondent.”
6. Thus, the money deposited by the respondent in the name of the
7. Vide CM No.3375/2015 the State Bank of India informs this Court that notwithstanding the counter bank guarantee issued by ABSA Bank South Africa is an irrevocable and unconditional counter guarantee the said bank has refused to make payment to the applicant notwithstanding applicant having honoured the bank guarantee issued by it at the instance of the appellant in favour of the respondent. The stand taken by ABSA Bank was that in view of the pending litigation it was not obliged to honour a bank guarantee issued by it in favour of the applicant, which bank guarantee ABSA Bank issued in favour of the applicant at the asking of the appellant.
8. Under the circumstances the applicant filed a claim before the Debt Recovery Tribunal against ABSA Bank for recovery of rupee equivalent of the amount, in US Dollars, secured by the bank guarantee.
9. The arbitration proceedings between the appellant and the respondent have resulted in an award dated December 12, 2014 holding that the invocation of the bank guarantee by the respondent issued by the applicant in its favour at the instance of the appellant was bad in law.
10. Pleading that the original application filed by the applicant has been dismissed by the Debt Recovery Tribunal, prayer made is that the sum deposited by the applicant in this Court pursuant to the interim order passed in the appeal which was confirmed when the final order was passed be returned to the applicant.
11. Notice was issued of CM No.3515/2005 to the applicant and the respondent, both of which were served and have filed their respective reply.
12. The appellant pleads that the amount lying in deposit in this Court should be directed to be released in its favour together with interest which has accrued thereon for the reason the applicant issued the bank draft in favour of the respondent under a bank guarantee which was issued by the applicant in favour of the respondent at the asking of the appellant, a plea which we note and reject for the reason it is preposterous.
13. The applicant has not debited the account of the appellant when it issued the bank draft in favour of the respondent upon invocation of the bank guarantee issued by it, at the asking of the appellant, in favour of the respondent. Further, the consideration for the bank guarantee issued by the applicant was the securing of the amount covered by the bank guarantee by the appellant through a counter guarantee issued by the appellant’s bank (ABSA Bank South Africa), which bank has refused to honour its commitment under the counter bank guarantee issued.
14. Union of India prays that the amount should be either retained in this Court or paid over to it because it has filed objections to the award.
15. No interim order has been obtained by the Union of India in the objections filed by it to the award against it, as per which the invocation of the bank guarantee has been held to be illegal.
16. In view of the decision reported as 2014(145) DRJ 399 Nussli Switzerland Ltd. Vs. Organizing Committee Commonwealth Games, 2010 it is doubtful whether Union of India can claim any interim measure concerning the bank guarantee, for the reason the view taken by the Division Bench of this Court that post award an interim measure can be sought and hence can be granted in favour of the party who has the award in its favour. In paras 15 to 33 of the decision it has been held as under:- “15. We thus proceed to answer the basic question: Whether a party which has lost before an Arbitral Tribunal and has no enforceable claim under an award is entitled to seek an interim measure against the winning party?
16. Section 9 of the Arbitration and Conciliation Act, 1996 reads as under:-
17. We highlight the catchwords of Section 9: A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to a court.
18. A plain textual reading of the above indicates that at any stage of the proceedings, before, during or after the making of the arbitral award (but before it is executed) a party to an arbitration agreement may approach the Court seeking interim measures. The word ‘but’ can either be a conjunction or a proposition or a noun or an adverb. In the textual setting in which the word ‘but’ finds itself in the section, it is obviously not used as a noun or an adverb. Whether the word „but’ is read as a conjunction or proposition would make no difference because if read as a conjunction, the section would read: „A party may, before or during arbitral proceedings or at any time after the making of the arbitral award and not before it is enforced‟ and if read as a proposition, the section would read: A party may, before or during arbitral proceedings or at any time after the making of the arbitral award except before it is enforced‟.
19. As noted by the Division Bench of the Bombay High Court Section 2(h) of the Arbitration and Conciliation Act, 1996 defines „party‟ to mean „a party to an arbitration agreement‟. And thus literally read the section could mean that any party, irrespective of whether or not it has or can have an enforceable claim in its favour, can avail the remedy under Section 9 of the Arbitration and Conciliation Act, 1996.
20. In paragraph 12 and 13 of its opinion, the Division Bench of the Bombay High Court has opined as under:-
21. No doubt, literally read, as observed by us in paragraph 19 above, Section 9 of the Arbitration and Conciliation Act, 1996 can be availed of even by the loosing party having no enforceable claim.
22. It may be true that there are a large number of decisions and notably the decisions reported as (1832) 2 D. & Cl. (H.L.) 480 Warburton v. Loveland; (1864) 2 H. & C. 431 Att.- Gen. v. Sillem; (1881) 8 Q.B.D. 125 Att.- Gen. V. Noyes; (1889) 24 Q.B.D. 1 Hornsey L.B. v. Monarch Investment Building Society; [1891] A.C. 401 M'Cowan v. Baine; [1897] A.C. 22 Salomon v. Salomon; [1922] 1 A.C. 1 Sutters v. Briggs; [1959] 1 W.L.R. 995 I.R.C. v. Collco Dealings, Same v. Lucbor Dealings; [1954] 1 Q.B. 439 (D.C.), Cf. Gluchowska v. Tottenham Borough Council wherein it has been held that where the language of an Act is clear and explicit, effect must be given to it, whatever may be the consequences, for in that case the words of the statute speak the intention of the legislature.
23. But, that is not the end of the matter because those who are in the know of the affairs of the law, would accept that law is not a logical code and this explains a series of judgments that the ratio of a decision is the law declared in the context of the facts of a particular case and not what logically flows there from.
24. It has been pertinently observed in the decision reported as (1914) 1KB 641 Camden (Marquis) v. IRC:- “It is for the court to interpret the statute as best it can. In so doing the court may no doubt assist itself in the discharge of its duty by any literary help which it can find, including of course the consultation of standard authors and references to well known and authoritative dictionaries.”
25. In the decision reported as AIR 1963 SC 1241 State of W.B. v. Union of India, the Supreme Court held that a Court must ascertain the intention of the legislature by directing its attention not merely to the clauses to be construed but to the entire statute; it must compare the clause with the other parts of the law, and the setting in which the clause to be interpreted occurs.
26. In the decision reported as (1871) L.R. 6 C.P. 365 Abel v. Lee it was observed by Willes J. that „no doubt the general rule is that the language of an Act is to be read according to its ordinary grammatical construction unless so reading it would entail some absurdity, repugnancy, or injustice.‟
27. Thus, we would find that there are two underlying principles while interpreting a statute and the same would be that one fundamental rule: „verbis legis non est recedendum‟ which means that the words of a statute must not be varied has to be harmoniously applied with the second rule that the intention of the legislature has also to be given effect to because „Index animi sermo est - Speech after all is the index of the mind‟.
28. As was held in the decisions reported as AIR 1961 SC 1491 Jivabhai v. Chhagan, and (2008) 9 SCC 527 Union of India v. Prabhakaran Vijaya Kumar if a provision is capable of more than one construction, that construction should be preferred which furthers the policy of the Act and is more beneficial to those in whose interest the Act may have been passed and the doubt, if any, should be resolved in their favour.
29. In the decision reported as (1982) 1 SCC 159 Chinnamarkathian alias Muthu Gounder v. Ayyavoo alias Periana Counder, the Supreme Court observed that it is a well settled canon of construction that in construing the provisions of such enactments, the Court should adopt that construction with advances, fulfils and furthers the object the Act rather than the one which would defeat the same and render the protection illusory.
30. In the decision reported as (1986) 2 SCC 237 Girdhari Lal & Sons Vs. Balbir Nath Mathur & Ors. the Supreme Court observed:- “The primary and foremost task of a court in interpreting a statute is to ascertain the intention of the legislature, actual or imputed. Having ascertained the intention, the Court must then strive to so interpret the statute as to promote and advance the object and purpose of the enactment. For this purpose, where necessary the court may even depart from the rule that plain words should be interpreted according to their plan meaning. There need be no meek and mute submission to the plainness of the language. To avoid patent injustice, anomaly or absurdity or to avoid invalidation of a law, the court would be well justified in departing from the so called golden rule of construction so as to give effect to the object and purpose of the enactment by supplementing, the written word if necessary.”
31. Words must be interpreted in a manner and given meaning to render the provision workable in a fair manner. There is a presumption that the legislature would not enact a section which produces unjust or inconvenient results. Rule of law presumes and enforces minimum standard of fairness both substantive and procedural. In the decision reported as (2003) 3 SCC 485 Chanchal Goel (Dr.) Vs. State of Rajasthan, the Supreme Court referred to D.Smith's Administrative Law and approved observations in the decision reported as (1997) 3 All ER 577 Pierson v. Secretary of State for Home Department, while discussing the plea of legitimate expectation. In Pierson’s case (supra), Lord Steyn referred to Cross on Statutory Interpretation (Third Edition, 1995), and observed:- “Statutes often go into considerable detail, but even so allowance must be made for the fact that they are not enacted in a vacuum. A great deal inevitably remains unsaid. Legislators and drafters assume that the courts will continue to act in accordance with well-recognised rules… Longstanding principles of constitutional and administrative law are likewise taken for granted, or assumed by the courts to have been taken for granted, by Parliament. Examples are the principles that discretionary powers conferred in apparently absolute terms must be exercised reasonably, and that administrative tribunals and other such bodies must act in accordance with the principles of natural justice. One function of the word 'presumption' in the context of statutory interpretation is to state the result of this legislative reliance (real or assumed) on firmly established legal principles. There is a 'presumption' that mens rea is required in the case of statutory crimes, and a 'presumption' that statutory powers must be exercised reasonably. These presumptions apply although there is no question of linguistic ambiguity in the statutory wording under construction, and they may be described as 'presumptions of general application'.... These presumptions of general application not only supplement the text, they also operate at a higher level as expressions of fundamental principles governing both civil liberties and the relations between Parliament, the executive and the courts. They operate here as constitutional principles which are not easily displaced by a statutory text....”
32. Guided as aforesaid, we agree that the reasoning by the Division Bench of the Bombay High Court is correct and thus we adopt the same as our reasoning.
33. The criticism of the view taken in Dirk‟s case (supra) by the learned counsel for the respondent, premised on Article 9 of the UNCITRAL Model Law which reads: ‘Arbitral agreement an interim measures by Court. It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a Court an interim measure or protection and for a Court to grant such measure.‟ is noted by us and rejected for the reason the legislative intent in India to confer power on a Court post award by way of an interim measure does not mean that the legislative intent was to vest an all embracing, all pervading power in favour of any party, irrespective of it being the loosing party.”
17. Under the circumstances we dispose of the application directing the respondent, together with interest which has accrued thereon, to the applicant State Bank of India.
18. No costs.
(PRADEEP NANDRAJOG) JUDGE (PRATIBHA RANI)
JUDGE APRIL 09, 2015 mamta