Gujarat High Court
Gujarat State Petroleum vs Idbi Bank on 16 February, 2013
Author: K.M.Thaker
Bench: K.M.Thaker
GUJARAT STATE PETROLEUM CORPORATION LIMITEDV/SIDBI BANK LIMITED....Respondent(s) C/SCA/1879/2013 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 1879 of 2013 ================================================================ GUJARAT STATE PETROLEUM CORPORATION LTD. & 2....Petitioner(s) Versus IDBI BANK LIMITED....Respondent(s) ================================================================ Appearance: MR MIHIR THAKORE, SR. COUNSEL, WITH MR. UMESH SHUKLA WITH MR MANAV MEHTA for the Petitioner(s) No. 1-4. NONE for the Respondent(s) No. 1 =========================================================== CORAM: HONOURABLE MR.JUSTICE K.M.THAKER Date : 16/02/2013 ORAL ORDER
The subject matter of present petition is not assigned to this Court. As per the present roster, this Court is assigned roster of criminal matters. However, for the reasons recorded in the Office Note dated 16.2.2013 (i.e. Saturday) and in view of the order dated 16.2.2013 (i.e. Saturday) passed by the Honourable the Chief Justice, present matter is placed before this Court by virtue of the said order passed by the Hon'ble the Chief Justice.
1.1 The papers of present petition came to be placed before this Court today (i.e. Saturday) at around 3.45 p.m. and the order passed by the Hon'ble the Chief was also placed before this Court and brought to the notice of this Court at that time.
2. In present petition, the petitioners have prayed, inter alia, that :-
4(A) The Hon'ble Court be pleased to call for the record and proceedings of Civil Suit No.349/2013 pending before the City Civil Court, Ahmedabad and be further pleased to quash and set aside the order dated 15th February, 2013 passed below Exh.6 and 7 in Civil Suit No.349/2013 and be further pleased to grant interim injunction, during the pendency and final disposal of the notice of motion and the application for interim reliefs (Exh.6 and 7) restraining the respondent from making any payments under the SBLCs (Standby Letters of Credit) issued by the respondent for an amount aggregating to USD 42 million and from seeking or demanding any payment under the Omnibus Counter Guarantee issued by petitioner No.1 on 3.7.2008 and the counter bank guarantee issued by Axis Bank Limited (BG No.0220100001300) in favour of the respondent dated 07.06.2008 and counter bank guarantee issued by ICICI Bank Limited (BG No.0008BG00045308) in favour of respondent dated 14.05.2008.
(B) Pending admission, hearing and final disposal of the petition, the Hon'ble Court be pleased to grant interim injunction restraining the respondent from making any payments under the SBLCs (Standby Letters of Credit) issued by the respondent for an amount aggregating to USD 42 million and from seeking or demanding any payment under the Omnibus Counter Guarantee issued by petitioner No.1 on 3.7.2008 and the counter bank guarantee issued by Axis Bank Limited (BG No.0220100001300) in favour of the respondent dated 07.06.2008 and counter bank guarantee issued by ICICI Bank Limited (BG No.0008BG00045308) in favour of respondent dated 14.05.2008.
2.1 Thus, the order dated 15.2.2013 passed by the learned City Civil Court below Exhs. 6 and 7 in Civil Suit No.349 of 2013 is brought under challenge in present petition.
2.2 By the said order, the learned trial Court has, before granting any ad-interim relief, directed to issue notice to the respondent (opponent in the suit) viz. IDBI Bank. Thus, the learned trial Court has not granted ex-parte ad-interim relief and instead, issued urgent notice to show-cause as to why the relief, as prayed for, should not be granted.
2.3 The said order has been passed below notice of motion, which was preferred under O-39, R-1 & 2 of the Code of Civil Procedure.
3. In response to the query put by this Court, at the outset, in view of the provisions under O-43 of the Code of Civil Procedure that as to why Appeal from Order is not preferred against the impugned order dated 15.1.2013, Mr. Mihir Thakore, learned Senior Counsel, relied on the decision rendered by this Court (Coram: Hon'ble Mr. Justice B.J.Shethna, as his Lordship then was) in the case between Gujarat Small Industries Corporation v. Rajkot Engineering Association [1991(2) GLH 399]. He, in particular, relied on para-7 of the said decision, which reads thus:-
7. In view of the above discussion when show-cause notice was only issued by the learned Civil Judge on application Exh.5, order of issuing notice was not appealable under Order 43 Rule 1 C.P.C. The appeal would lie only against the orders mentioned in Order-43(1) C.P.C. The order of issuing notice does not fall under Order 43(1) C.P.C.
Therefore, the learned Judge was not at all justified in entertaining the appeal and passing the impugned order on Exh.5 filed in the said appeal. Therefore, the impugned orders passed on 20-8-91 and 23-8-91 are liable to be set aside which are hereby set aside.
3.1 As mentioned above, present petition is placed before this Court under order passed by the Hon'ble the Chief Justice. In present petition, the order passed by the learned trial Court directing urgent notice to the defendant but not granting ad-interim relief is challenged.
4. So far as the relevant facts involved in and giving rise to present petition are concerned, it has emerged from the material on record of present petition and submissions by learned Senior Counsel that the petitioner herein is a State Government Corporation, which appears to have entered into a Production Sharing Agreement [hereinafter referred to as Agreement/Contract for short] with Government of Yemen. It appears that one of the conditions in the Agreement is that the petitioner was required to submit a Standby Letters of Credit [hereinafter referred to as SBLC for short] in the sum of Rs.200 Crores. For the said purpose, the petitioner Corporation entered into Agreement with the respondent Bank, who issued SBLC in favour of Dresdner Bank AG FrankFurt AM Main De. The said Bank - Dresdner Bank AG FrankFurt AM Main De issued SBLC in favour of International Bank of Yemen and the said International Bank of Yemen in turn issued SBLC in favour of Government of Yemen. The petitioner has claimed that during execution of the said Agreement with the Government of Yemen, force majeure situation arose as a result of which, the petitioner is not in position to execute the Agreement in accordance with the terms of the said Agreement. It is claimed that in view of such situation, the petitioner invoked the force majeure provision under the Agreement and issued notice to the Government of Yemen as contemplated under the terms of the Agreement. It is also claimed that upon completion of the period of notice, as contemplated under the Agreement, the petitioner issued intimation of termination of the said Agreement on 13.2.2013 and thereby the said Agreement has been terminated by the petitioner. It is claimed by the petitioner that after the initial notice was issued by the petitioner, a meeting between the petitioner and Ministry of Oil, Government of Yemen was held during which, the petitioner was informed that if the petitioner fails to execute the Agreement in accordance with the terms of the said Agreement, then, Government of Yemen will take appropriate action in accordance with the Agreement, including the action of invoking SBLC. The petitioner has claimed that in this view of the matter, the petitioner apprehended that upon termination of the Agreement, the Government of Yemen may invoke the SBLC, which was not permissible and contemplated as per the terms of the Agreement and that therefore, the petitioner approached the learned City Civil Court and filed the above mentioned Civil Suit, which came to be registered as Civil Suit No.349 of 2013. Alongwith the said Civil Suit, the petitioner also preferred notice of motion and asked for interim relief in the nature of stay against invocation of SBLC issued by IDBI Bank, i.e. the defendant in the Suit.
5. At this stage, it is pertinent to note that this Court has noticed that neither in the petition nor in the suit, the petitioner has impleded the above referred two Banks, more particularly, Government of Yeman, who, actually can invoke the SBLC and who is effected party. When this aspect was pointed out, Mr. Thakore, learned Senior Counsel for the petitioner, submitted that the petitioner undertakes before the Court to implead the Government of Yemen as party respondent in the present petition and as opponent in the said suit. Leave to amend so as to add necessary and effected party is granted. The petitioner shall implead the Government of Yemen also as a party respondent.
6. It appears that the said suit was presented before the learned City Civil Court on 15.2.2013 and after hearing the suit, the learned City Civil Court passed below mentioned order:-
Read notice of motion and injunction application Exh.7 and perused the documents produced along with plaint vide Mark 4/1 to 4/38 and heard the learned advocate for the plaintiffs Mr. Mihir Thakor.
Learned Advocate for the plaintiffs has submitted that suit in respect of the letter of credit issued by the defendant on behalf of the plaintiffs of Rs.200 Crores (USD 42 Million) Bank guarantee in view of the Production Sharing Agreement between plaintiffs and Ministry of Oil and Minerals, Republic Yemen for Block No.19, 28 and 57 produced at Mark 4/2 to 4/4 due to violet condition and existence of force majeure situation, it is impossible for the plaintiffs to continue exploration work as per PSA. In such situation, the plaintiffs have terminated the contract on 13.02.2013 by giving 90 days notice and in such circumstances, the suit letter of guarantee is conditional letter of guarantee as per force majeure condition in Yemen Bank Guarantee stands suspended automatically. In such situation, it is necessary to restrain defendant from releasing the Bank guarantee in special equity circumstances otherwise, plaintiffs would suffer irreparable loss and cause of suit would remain no more. Also learned advocate for the plaintiffs has cited before me the case of hindustan Constructions Company Ltd. Vs. State of Bihar AIR 1999 SC 3710 and Svenska Handlsbanken Vs. M/s. Indian Charge Chrome & Others reported in (1994) 1 SCC 502 in support to grant ex-parte relief against the defendant.
Looking to the facts and circumstances of the case and prayer sought for, it is desirable to hear other side before granting any ad interim relier. Hence, I pass following order:
ORDER Issue urgent Show Cause Notice to the defendant returnable on 25.02.2013 on payment of P.F. And production of copies.
6.1 Aggrieved by the said order, the petitioner has preferred present petition with above quoted reliefs.
7. Mr. Mihir Thakore, learned Senior Counsel, has appeared with Mr. Umesh Shukla and Mr. Manav Mehta, for the petitioners. Mr. Thakore, learned Senior Counsel, submitted that the learned trial Court has failed to appreciate special equity, compelling circumstances and fact that if ad-interim relief is not granted, then, irreparable and irretrievable situation will arise and will result into huge loss to the petitioner Corporation. It is also submitted that the impugned order amounts to error in not exercising the jurisdiction or exercising the jurisdiction with irregularity.
7.1 So as to support and justify his submission that ad-interim relief, as prayed for, deserves to be granted, Mr. Thakore, learned Senior Counsel, has relied and taken this Court thorough the documents at page Nos. 526, 527, 544, 545, 559, 560, 33, 108, 646, 593, 594, 599, 600, 630, 631, 647, 648, 666, 700, 704, 710 and 861. Mr. Thakore, learned Senior Counsel, also relied on documents at page Nos.565, 582, 597 and 142. I have considered the said documents.
7.2 Besides the said documents, Mr. Thakore, learned Senior Counsel, relied upon clause 22.2 and 22.4 (page-108) which contain the provision regarding force majeure. He, in particular, heavily relied on the expression/s insurrection , riot , war and strike used in clause 22.2. Mr. Thakore, learned Senior Counsel, also submitted that the petitioner has issued in 90 days the notice as contemplated under clause 22.4 and thereafter, the Agreement has been terminated under letter dated 13.2.2013. Relying on the above referred provisions, i.e. clause 22.2 and 22.4, Mr. Thakore, learned Senior Counsel submitted that during period of force majeure, the SBLC stands suspended and upon termination of the Agreement, the said SBLC cannot be invoked. So as to further justify the said submission, Mr. Thakore, learned Senior Counsel, relied upon clause 5 in the SBLC issued by the defendant IDBI Bank Ltd. He submitted that the subsequent and connected SBLC issued by Dresdner Bank AG FrankFurt AM Main De and International Bank of Yemen also contain identical clause. The said clause 5 pertains to suspension of Standby Letters of Credit. It is provided, inter alia, under the said clause that:-
5. Suspension During the force majeure the standby letter of credit shall be suspended and continue in force thereafter during such period of force majeure. If the force majeure event continues for a period of six (06) months and the contractor terminates its obligation in accordance with the production sharing agreement this standby letter of credit shall automatically be cancelled according to its terms. We hereby guarantee the payment of all amounts not having been reduced in accordance with the above within ten (10) days of receipt by us of your written notice, without further juridical procedures.
7.3 It is submitted that in view of the said clause 5 read with clause 22.2 and 22.4 of the Agreement, the SBLC cannot be invoked and released and the respondent Bank should restrain from making the payment. It is also contended that the said clause 5 of the SBLC makes it clear that the said SBLC is conditional SBLC and in view of the fact that force majeure situation has occurred in Yemem, there exists special equity in favour of the petitioner. In light of the said provision and the force majeure situation, which exists in Yemen, the relief as prayed for ought to have been granted. Mr. Thakore, learned Senior Counsel, submitted that by not granting ad-interim relief, the learned trial Court has failed to exercise jurisdiction and/or has exercised jurisdiction with material irregularity.
7.4 Mr. Thakore, learned Senior Counsel, submitted that the SBLC in question is valid until September-2013 and that therefore, if the relief as prayed for until returnable date is granted, then, the interest of respondent would not be adversely effected.
7.5 To support and justify his submission, Mr. Thakore, learned Senior Counsel, relied on the decisions in the case between U.P.State Sugar Corporation v. Sumac International Ltd. [(1997) 1 SCC 568] (particularly para 13 and 14 of the said decision), Svenska Handelsbanken v. M/s. Indian Charge Chrome & Ors. [(1994) 1 SCC 502] (particularly para 73 of the said decision) and Hindustan Construction Co.Ltd. v. State of Bihar & Ors. [AIR 1999 SC 3710] (particularly para 8 of the said decision).
8. I have heard Mr. Thakore, learned Senior Counsel at length and have also perused and considered the documents on which reliance has been placed by the petitioner as well as clause 22.2, 22.4 in the Agreement and clause 5 of the SBLC. I have also seen the documents placed on record to demonstrate that position of insurrection or riot or war or strike exists in Yemen, as a result of which, according to the petitioner, it has become impossible to execute the Agreement.
8.1 At this stage, it is pertinent to note that the Ministry of Oil, Government of Yemen has at several occasion, including in the meeting held with the petitioner, not accepted the petitioner's plea of force majeure. However, Mr.Thakore, learned Senior Counsel, submitted that the petitioner, upon terminating the contract by invoking force majeure clause, is not dependent upon the Government of Yemen accepting and admitting existence of force majeure.
8.2 It is claimed that because of the situation in Yemen, the personnel and staff of the petitioner had to leave Yemen and had to return to India which render the execution of the Contract impossible. In such situation, the petitioner has, according to the submission by learned Senior Counsel for the petitioner, terminated the Agreement. It is contended that in such situation, if the SBLC are invoked and payments are made, then, the petitioner will suffer huge loss and it will not be possible to receive the money back. The Agreement contains arbitration clause/agreement. In view of the said provision, it is contended that whether the petitioner's action of terminating the Agreement and/or of invoking force majeur clause and/or action of claiming existence of force majeure situation is justified or not will be examined in the suit proceedings and/or arbitration proceedings. However, until then, the ad-interim relief as prayed for ought to have been granted and deserves to be granted. As mentioned above, if the relief as prayed for is granted, the real affected party would be Government of Yemen. However, the said party is not impleaded as party respondent opponent. The petitioner has undertaken to implead the said party as party respondent and that therefore, leave to amend is granted.
8.3 From the material on record and particularly the relevant provisions in the stand-by letter of credit as well as production sharing agreement, it prima facie appears that the issue as to whether provision under Clause 5 of the stand-by letter of credit is attracted and applicable in the facts of the case is yet to be examined and it can be considered only after the respondent, i.e. the affected party with whom the agreement in question is executed by the petitioner corporation, is heard.
8.4 It has emerged that the petitioner corporation had made request for grant for force majeure on 6.3.2012 and Ministry of Oil and Mineral, Government of Yemen had issued letter dated 13.1.2013 calling the petitioner corporation for meeting and had alleged therein that the contract was not performed.
8.5 It has also emerged that pursuant to the said communication, meeting was held on 4.2.2013 and minutes were drawn on 12.2.2013. During the said meeting also, Ministry of Oil and Mineral, Government of Yemen had asked the petitioner corporation to continue the work without claiming force majeure.
8.6 It has also emerged that on the very next day, i.e. on 13.2.2013, the petitioner corporation appears to have terminated the contract.
8.7 In such facts, it is possible that the Ministry of Oil and Mineral, Government of Yemen might have already invoked the stand-by letter of credit and intimation in the intervening period, i.e. from 13.2.2013 to today might have been issued.
8.8 Learned senior counsel for the petitioner corporation has repeatedly and specifically asserted that until today (i.e. until closing of the banking hours), the respondent IDBI Bank has not received any intimation and payment has not been made according to the information of the petitioner corporation.
8.9 From the documents placed on record, the petitioner corporation has prima facie shown that force majeure situation exists in Yemen. In this context, reliance is placed on the documents showing that three different companies have invoked provision/clause of force majeure in their respective contracts, in view of the situation existing in Yemen and Government of India, UNO and United States of America have also instructed/advised their respective citizens about the situation in Yemen and in view of such situation, the personnel and staff of petitioner corporation have left Yemen.
9. So far as present petition is concerned, it challenges the order dated 15.2.2013 passed by the learned City Civil Court. In the said order, the learned City Civil Court has recorded that before granting ad-interim relief, it appears appropriate to hear the respondent. Therefore, the issue before this Court is with reference to the said order. From the record of the petition and submissions by the learned senior counsel for the petitioner, it prima facie appears that the above-referred provisions deserve consideration in light of the decisions relied on by the learned senior counsel for the petitioner and it would also be necessary to consider whether the stand-by letter of credit can be treated as conditional, in the facts of the case or not.
9.1 At the same time, it prima facie appears that the petitioner corporation is justified in its contention to some extent, i.e. until the respondent is heard and any order granting or refusing interim relief on merits is passed, if the stand-by letter of credit is invoked and payment is made, then irretrievable situation would arise and that in light of the provisions contained under Clause 22.2 and Clause 22.4 of the agreement and Clause 5 of the stand-by letter of credit, it is necessary to ascertain as to whether on overall consideration of production sharing agreement and the contract between the petitioner and the bank, i.e. stand-by letter of credit, the latter contract and particularly stipulation to make payment, can be said to be unconditional or not. The said aspects would require detailed hearing in presence of concerned parties.
9.2 The said aspect can be examined after hearing the respondent and in light of the provisions of the agreement. Ordinarily, invocation or realization of contract of bank guarantee or letter of credit should not be stayed or restrained except in case of fraud. In present case, even the petitioner has not raised contention on ground of fraud. What is claimed is that the contract between the petitioner and the bank, i.e. stand-by letter of credit does not use the expression agreed unconditionally and irrevocable and that, therefore, it is not unconditional stand-by letter of credit but, actually in view of Clause 5, the said contract gets suspended in the event of force majeure situation. It prima facie appears at this stage that the said contention deserves to be considered in light of the decision by the Hon ble Apex Court in case of Hindustan Construction Co. Ltd. (supra) and Svenska Handlesbanken (supra). It is also claimed by the petitioner that until the said aspect is considered by the Court, it has no adequate remedy at law and it would suffer irreparable harm. In this view of the matter, it prima facie appears that equities are required to be balanced in the facts of the case.
10. Having regard to the above discussed aspects and having regard to the fact that the relevant provisions require consideration by the Court, it would be appropriate to balance equity until the parties are heard.
10.1 By the time, learned senior counsel for the petitioner corporation completed his submission, it is already 10 minutes past 5.00 p.m. and the respondent bank must have closed by now and tomorrow being Sunday, it would re-open only on Monday at its regular working hours. In this context, learned senior counsel for the petitioner corporation express apprehension that the banks in Yemen would be working today as well as tomorrow, i.e. on Sunday and that, therefore, in the facts of the case, the7.3 It is submitted that in view of the said clause 5 read with clause 22.2 and 22.4 of the Agreement, the SBLC cannot be invoked and released and the respondent Bank should restrain from making the payment. It is also contended that the said clause 5 of the SBLC makes it clear that the said SBLC is conditional SBLC and in view of the fact that force majeure situation has occurred in Yemem, there exists special equity in favour of the petitioner. In light of the said provision and the force majeure situation, which exists in Yemen, the relief as prayed for ought to have been granted. Mr. Thakore, learned Senior Counsel, submitted that by not granting ad-interim relief, the learned trial Court has failed to exercise jurisdiction and/or has exercised jurisdiction with material irregularity.
10.2 The learned trial Court has already directed issuance of notice but notice is made returnable on 25.2.2013.
10.3 At this stage, any material is not available before this Court from which it can be ascertain that the stand-by letter of credit is already invoked or not. This aspect may become clear only after the respondent bank appears before the Court and clarifies the situation on that count. Under the circumstances, it would not be proper to ex parte grant ad-interim relief as prayed for. Under the circumstances, it appears necessary and appropriate to balance the equity and for that purpose, it would be appropriate to direct that the parties to the petition and the suit maintained status quo operating as at 5.15 p.m. today, i.e. on 16.2.2013 until the returnable date when the matter may be heard at length by the Court where the subject matter of petition is assigned as per present roster and in presence of the respondent. Therefore, below mentioned order is passed.
10.4 Let URGENT NOTICE be issued and considering the urgency it may be made returnable at 3.30 p.m. on 18.2.2013. Direct Service of the Notice by the petitioner is permitted until then the status quo obtaining as at 5.15 p.m. on 16.2.2013 will be maintained by the parties.
10.5 It is reiterated and clarified that the Court has merely directed the party to the petition to maintain status quo operating as at 5.15 p.m. today, i.e. on 16.2.2013 until the returnable date and time of the Notice and that the said order is passed only with a view to balancing equities so that interest of either parties is not affected until the parties are heard in regular course by the Court and further order will be passed by the Court after ascertaining the factual position by the Court from the respondent bank.
The petitioner will also amend the petition and join the relevant and likely to be affected party, i.e. Ministry of Oil and Mineral, Government of Yemen.
[K.M.Thaker, J.] kdc/bharat Page 14