TaxTMI 
TaxTMI 
2013 (1) TMI 504
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....tion for an order that pending the hearing and final disposal of the suit, direct and restrain by way of a temporary injunction the respondent no.3 from acting by themselves or through their servants, agents, representatives and/or all other persons claiming by, through or under them paying to the respondent no.1 or to anyone else any amount purportedly under the Counter Guarantee. Similar temporary injunction is sought against the respondent no.1 from receiving from the respondent no.3 any amount purportedly under the Counter Guarantee. The appellant has also claimed a temporary injunction restraining the respondent nos.1 & 3 from invoking and/or encashing the Counter Guarantee. The learned single Judge vide judgement dated 5.10.2012 dismissed the Notice of Motion. Being aggrieved by the said judgement of the learned single Judge, the appellant has filed the present appeal challenging the impugned judgement. 2. The learned counsel for the appellant has submitted that the brief facts of the case are as follows:- (a) The appellant is a company incorporated in India. The respondent no.1 is a company incorporated in Singapore, wholly owned and controlled by Tamsek Holdings, an i....
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....der:- "4. In consideration of PSA International Pte Ltd. Counter indemnifying Standard Chartered Bank for issue of the Bid Bond of Rs.67,00,00,000/- (Rupees Sixty Seven Crore Only) on behalf of the consortium of PSA Mumbai Investments Pte Ltd and ABG Ports Pvt. Ltd. ("Consortium"), we Bank of Baroda ("Guarantor"), hereby irrevocably and unconditionally undertake to pay to PSA International Pte Ltd. "(Beneficiary"), on its first demand, an amount up to Rs.17,42,00,000/- (Rupees Seventeen Crores and Forty Two Lakhs Only), as payment obligation to the Beneficiary pursuant to the Bid Bond, without any demur, reservation, recourse, contest or protest, without notice or reference to ABG Ports Pvt. Ltd., irrespective of whether the Beneficiary's demand is disputed by ABG Ports Pvt. Ltd. or any other person or not, within 3 business days of a written request from the Beneficiary for payment within the Effective Period (as defined hereinafter), supported by the following documents: (emphasis supplied) It is submitted that from the above, it is clear that the purpose of the Counter Guarantee was to indemnity the respondent no.1. The words "as payment obligation to the Benefic....
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....erroneous and proceeds on an erroneous premise that the Counter Guarantee was given to the respondent no.2 towards the Bid Bond. The learned single Judge failed to appreciate that the liability of the appellant, as aforesaid, if any, was towards the respondent no.2 and not the respondent no.1. The parties had carefully worded the terms of the Bank Guarantee to include the term "payment obligation" in the guarantee. The impugned judgement completely ignores the specific term used by the parties. In order to enable the respondent no.1 to invoke the Counter Guarantee, it was imperative that the respondent no.1 ought to have suffered a loss on account of the conduct of the appellant. It is, therefore, contended that under the JBA, all obligations were to be performed by the respondent no.2 which in turn is a subsidiary of the respondent no.1. The respondent no.2 having failed to comply with the same, cannot ask and seek contribution to indemnify any loss of the respondent no.1 arising out of its own inaction. 5. It is contended that if the encashment of the Counter Guarantee is not injuncted, the same would tantamount to a party profiteering from its own wrongs/inaction. It is submi....
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....espite these facts, the learned single Judge has erroneously held as under:- "In my view, in the present case, the Plaintiff has failed to make out any case of fraud. On a reading of the averments made in paragraph 8 of the Suit it is clear that the said averments by no stretch of imagination can be said to have made out a case of fraud. The allegations of fraud made by the Plaintiff are merely bald assertions and do not establish a case of fraud much less a fraud of a egregious nature. .............." 8. The counsel for the appellant has further contended that the learned single Judge has also negatived the appellant's contentions on fraud on the ground that the appellant had till date not rescinded the JBA, which according to the learned single Judge "speaks volumes about the seriousness of the allegation of fraud made by them against Defendant Nos.1 and 2." The conclusion of the learned single Judge is clearly erroneous. The appellant specifically pleaded discharge of the contract which fact has been completely ignored by the learned single Judge. 9. It is further submitted that the learned single Judge completely overlooked the fact that the respondent no.2 has allowed....
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....und that the respondent no.1 is backed by the Government of Singapore. It is contended that in view of the joint obligation under the JBA, being between the appellant and the respondent no.2, the financial soundness of the respondent no.1 cannot be a ground to deny injunctive reliefs to the appellant. 12. The learned counsel for the appellant has specifically pleaded that the facts and circumstances of the case clearly give rise to special equities being invoked by the appellant to protect the rights of the appellant. The sole ground taken by JNPT for invoking the Bid Bond is the failure on the part of the respondent no.2 to sign the concession agreement for the said project. This has clearly been on account of PSA and the appellant has had no role to play in this. The default, if any, is therefore of PSA alone. If the default and the consequent invocation of the Bid Bond is solely due to PSA's failure to execute the concession agreement, the respondent no.1 is not entitled to pass that burden or any part thereof upon the appellant and claim benefit under the Counter Guarantee. Allowing the respondent no.1 to do so would tantamount to rewarding the respondent no.1 for its own in....
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....no.1 is one of the largest container terminal operators in the world." It is contended that a reading of the above pleading in the plaint shows that the respondent no.1 is one of the largest container terminal operators in the world and, therefore, irretrievable injury/special equities for injuncting the encashment of Bank Guarantee has not been established as required in law by the appellant. 14. The learned counsel has further contended that the plaintiff has pleaded special equities in paragraph 12 of the plaint which reads thus:- "12. The Plaintiff states and submits that irretrievable injustice will be caused to it in case appropriate orders are not passed restraining encashment of the Counter Guarantee. It is submitted that Defendant No.2 is a shell company and has no assets in either India or Singapore and thereby any order that the Plaintiff may obtain against Defendant No.1 will be a mere paper decree." It is submitted that this pleading is irrelevant as the respondent no.2 is not the beneficiary under the Bank Guarantee and as such, pleading in regard to the respondent no.2 being a shell company for establishing irretrievable injury is immaterial and ought to ....
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....s, therefore, submitted by the counsel for the respondent nos.1 & 2 that the contention of the appellant regarding fraudulent intention on the part of the respondent no.1, in the facts and circumstances of the present case, is absurd. 17. It is further contended that the appellant who has alleged fraud has not terminated the Joint Bid Agreement (JBA). It is important to note that the appellant has not avoided the transaction nor has it avoided the same in the plaint. The appellant, therefore, is estopped from raising the plea of fraud. 18. The learned counsel for the respondent nos.1 & 2 has contended that the Supreme Court in the case of Svenska Handelsbanken v. M/s.Indian Charge Chrome & Ors. (1994) 1 SCC 502) has held in paragraph 71 thus:- "71. Shetty, J. speaking for the Bench noticed the earlier observations of Mukharji, J. in the case of U.P. Cooperative Federation Ltd. and stated that the nature of the fraud that the courts talk about is fraud of an "egregious nature as to vitiate the entire underlying transaction". It is fraud of the beneficiary, not the fraud of somebody else." 19. The learned counsel for the respondent nos.1 & 2 has placed reliance on the obs....
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....ting to the Project and in accordance with the terms of the RFQ, RFP and the Concession Agreement, till such time as the Financial Close for the Project is achieved under and in accordance with the Concession Agreement." It is submitted that the appellant has itself admitted its joint and several liability under Clause 5 of the JBA for any/all obligations and liabilities relating to the project. This is evident from the appellant's letter to the respondent no.1 dated 31.3.2012. 22. The counsel for the respondent nos.1 & 2 further submitted that under the Request for Proposal issued by the respondent no.4 (RFP), a Bid Bond of Rs.67 crores was required to be furnished by the consortium of which the appellant is a 26% member/partner. The sum of Rs.17.42 crores (Counter Guarantee) thus represents the appellant's share (26%) of the total amount of Rs.67 crores covered by the Bid Bond. It is submitted that the respondent nos.1 & 2 could have submitted their share of 74% of the Bid Bond amount the appellant would have required to submit its share of the Bid Bond directly to the respondent no.4 and the effect would have been that the respondent no.4 would have invoked two Bank Guaran....
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....ere is a letter of invocation of the Bid Bond by the respondent no.4. That letter of invocation by the respondent no.4, therefore, establishes the right to invoke the Counter Guarantee. The counsel for the respondent nos.1 & 2 further submitted that even otherwise, the Counter Guarantee was given as consideration of the respondent no.1 indemnifying Standard Chartered Bank for issuing the Bid Bond in favour of the respondent no.4 and was not an indemnity given by the appellant to the respondent no.1. Thus, the reliance placed by the appellant on section 124 of the Indian Contract Act, 1872 is entirely misplaced as the said section does not apply. It is, therefore, contended that the order of the learned single Judge is a well-reasoned order and does not warrant any interference. The appeal, therefore, deserves to be dismissed with costs. 25. We have given anxious thought to the various contentions canvassed by the respective learned counsel for the appellant as well as the respondents, considered the decisions cited as well as the impugned judgment passed by the learned single Judge. We feel it appropriate to express the well-settled legal position relating to encashment of Bank ....
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....the appellant. The learned single Judge, after taking into consideration all these aspects in paragraph 27 of the impugned judgement has observed thus:- "27. It is trite law that a Court can restrain encashment of Bank Guarantee in cases of established fraud in issuance of the Bank Guarantee. The fraud has to be absolute and egregious vitiating the very foundation of the Bank Guarantee. In my view, in the present case, the Plaintiff has failed to make out any case of fraud. On a reading of the averments made in paragraph 8 of the Suit it is clear that the said averments by no stretch of imagination can be said to have made out a case of fraud. The allegations of fraud made by the Plaintiff are merely bald assertions and do not establish a case of fraud much less a fraud of a egregious nature. In view thereof, the decisions cited by the Learned Senior Counsel for the Plaintiff in the cases of U.P. Cooperative Federation Ltd. vs. Singh Consultants and Engineers (P) Ltd. (supra) and Yog Systems India Ltd. Vs. SU-KAM Power Systems Ltd. (supra) are of no assistance to the Plaintiff. As held hereinafter, the said Counter Guarantee is an unconditional and irrevocable Guarantee. It is s....
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....the disputes/claim thereunder. Even a perusal of the allegations made in paragraphs 9 and 10 are also not specific to establish absolute fraud as required in law and, therefore, mere allegation/bald assertions of fraud made by the appellant, in our view, does not prima facie establish that fraud has been practised by the respondent nos.1 & 2 to vitiate the very foundation of Bank Guarantee in order to injunct the respondent no.1 from invoking the Counter Guarantee. 29. As regards the contention canvassed by the learned counsel for the appellant that irretrievable injustice would be caused if the Counter Guarantees permitted to be encashed by the respondent no.1 is concerned, the law is well-settled on this subject and when applied to the facts of the present case, it must show that if the respondent no.1 is permitted to encash the Counter Guarantee, it would be impossible for the guarantor to reimburse himself if he ultimately succeeds. In the instant case, it is not disputed that the consortium is in the nature of partnership and the consortium member in law bears liabilities of consortium to the extent of their share in consortium. Clause 5 of the Joint Bid Agreement (JBA) aff....
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....ied the said Bid Bond of Rs. 67 crores, the Plaintiff furnished a Counter Guarantee dated 13th October 2010 issued by Defendant No.3 in favour of Defendant No.1 for a sum of Rs. 17.42 crores. The terms of the Counter Guarantee make it clear that the Counter Guarantee is for issue of Bid Bond of Rs. 67 crores by PSA on behalf of the Consortium. The payment under the Counter Guarantee is described as the payment obligation of the Plaintiff to the beneficiary pursuant to the Bid Bond. The payment under the Counter Guarantee is without demur, reservation, recourse, contest or protest. The only condition for such payment is that the demand or the payment must be supported by the documents listed in Clause 4 and must be in accordance with Clauses 5 and 6. Admittedly the demand complies with this requirement. Upon such demand being made, the Defendant No.3 Bank, within 3 days upon receipt of a written request from Defendant No.1, is bound to pay an amount upto Rs. 17.42 crores as payment obligation to Defendant No.1 pursuant to the Bid Bond, without any demur, reservation, recourse, contest or protest, without notice or reference to the Plaintiff, irrespective of whether the Defendant ....