Nautilus Shipping India Pvt. ... vs Dredging Corporation Of India ...
2021 Latest Caselaw 1056 AP

   IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
                                  ***
                   Writ Petition No.17813 of 2020


Between:


# Nautilus Shipping India Pvt. Ltd.,
  2nd Floor, Sai Building, New 79/1, Old 62/1,
  Lloyds Road, Royapettah, Chennai-600014.
  Rep. by its Authorized Signatory Ajay Kumar Krishnamani

                                                            ... Petitioner
                                  AND
$ 1. Dredging Corporation of India Ltd., Head Office: Dredge House, Port
     Area, Visakhapatnam- 530001. Rep. by its Joint General Manager
     (Operations)

  2. Kotak Mahindra Bank Ltd., CSM Chennai, Prestige Polygon, 12th Floor,
     471 Anna Salai, Nandanam, Chennai-600035. Rep. by its Manager.


                                                        ... Respondents



Date of Judgment pronounced on          :     23-02-2021


           HON'BLE SRI JUSTICE R. RAGHUNANDAN RAO


1. Whether Reporters of Local newspapers                    : Yes/No
   May be allowed to see the judgments?


2. Whether the copies of judgment may be marked             : Yes/No
   to Law Reporters/Journals:


3. Whether the Lordship wishes to see the fair copy         : Yes/No
   Of the Judgment?
                                     2                            RRR,J.

W.P.No.17813/2020

*IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI * HON'BLE SRI JUSTICE R. RAGHUNANDAN RAO + Writ Petition No.17813 of 2020

% Dated:23-02-2021

Between:

# Nautilus Shipping India Pvt. Ltd., 2nd Floor, Sai Building, New 79/1, Old 62/1, Lloyds Road, Royapettah, Chennai-600014. Rep. by its Authorized Signatory Ajay Kumar Krishnamani

... Petitioner AND $ 1. Dredging Corporation of India Ltd., Head Office: Dredge House, Port Area, Visakhapatnam- 530001. Rep. by its Joint General Manager (Operations)

2. Kotak Mahindra Bank Ltd., CSM Chennai, Prestige Polygon, 12th Floor, 471 Anna Salai, Nandanam, Chennai-600035. Rep. by its Manager.

... Respondents

! Counsel for petitioners : Sri P. Roy Reddy

^Counsel for Respondents : Sri A. Krishnam Raju Sri M. Balanaga Srinivas

<GIST :

>HEAD NOTE:

? Cases referred:

   1. 1979 SCR (2) 641
   2. (2004) 3 SCC 553
                               3                         RRR,J.
                                             W.P.No.17813/2020

THE HON'BLE SRI JUSTICE R.RAGHUNANDAN RAO

WRIT PETITION No.17813 OF 2020

ORDER:-

The petitioner which undertakes various shipping

activities, had entered in to an agreement dated 06.12.2018

with the 1st respondent Corporation for the purposes of

"manning and technical management of DCI dredge XIV at

various ports in India". This contract was for a period of one

year, which was extendable by another year on behalf of the

1st respondent for a value of Rs.3,99,90,991/-. According to

the terms of the agreement, the petitioner was required to

offer a performance guarantee in the form of a bank

guarantee. Accordingly, the petitioner had furnished a bank

guarantee bearing No.0462OBG18022589 dated 04.12.2018

through the 2nd respondent for a sum of Rs.39,99,099/-. The

Petitioner was put in possession of the said vessel and started

managing the same.

2. By a letter dated 07.08.2019, the 1st respondent

claimed default on the part of the petitioner and issued a

notice of unilateral termination and takeover of the vessel

belonging to the 1st respondent on 21.08.2019. The petitioner

replied to the said notice on 12.08.2019 and sought amicable

resolution of the issues. As there was no response, the

petitioner again sent an e-mail dated 19.08.2019, denying the

claims of the 1st respondent and sought clearance of pending 4 RRR,J.

W.P.No.17813/2020

dues before the vessel could be delivered to the 1st

respondent.

3. The 1st respondent by an e-mail dated 20.08.2019

accepted the offer of the petitioner for a mutual resolution of

the issues. However, the petitioner received another e-mail

dated 20.08.2019, where the 1st respondent reiterated its

intention to repossess the vessel on 21.08.2019 and that no

payment would be made to the petitioner. This was replied by

the petitioner on 20.08.2018 itself. However, there was a

meeting between the representatives of the petitioner and 1st

respondent on 22.08.2018 during which, certain issues were

discussed and minutes of the meeting were prepared. The

petitioner contends that in this meeting, the 1st respondent

had undertaken not to invoke the bank guarantee issued by

the petitioner, as performance guarantee, pending resolution

of the disputes. On that basis, the petitioner had handed

over the vessel of the 1st respondent on 23.08.2019. However,

on 26.08.2019, the 1st respondent sought a modification of

the minutes to the effect that the undertaking of the 1st

respondent was substituted to state that the same would be

dealt as per contractual terms and conditions.

4. The petitioner further contends that even though

the contract ended effectively on 23.08.2019 and the 1st

respondent was bound under the general conditions of the

contract to return the bank guarantee, the 1st respondent

went ahead and sought encashment of the bank guarantee.

                                5                         RRR,J.
                                              W.P.No.17813/2020

At that stage, the petitioner approached this Court by way of

Writ Petition No.8301 of 2020, challenging the action of the

1st respondent seeking to encash the bank guarantee. On

29.04.2020 this Court, by way of an interim order, had

directed the respondents not to encash the bank guarantee

for a period of one week after the lock down is lifted.

However, the bank guarantee was invoked and the proceeds

were paid out to the 1st respondent.

5. Aggrieved by the said action of the respondents

1 and 2, the petitioner has now approached this Court

contending that the invocation of the bank guarantee by the

1st respondent and the payment, arising out of such

invocation, by the 2nd respondent is bad, arbitrary and

required to be set-aside for the following grounds:

A. In the meeting on 22.08.2019, the 1st respondent

gave an undertaking, as reflected in the minutes, that it

would not invoke the bank guarantee until the issues

between the petitioner and the 1st respondent were resolved.

On the basis of this undertaking, the petitioner had given

back the vessel under its management and possession to the

1st respondent. By doing so, the petitioner had changed its

position to its detriment on the basis of the undertaking given

by the 1st respondent. In such a situation, the invocation of

the bank guarantee by the 1st respondent is hit by the

principle of promissory estoppel and is also amounts to 6 RRR,J.

W.P.No.17813/2020

egregious fraud, because of which, the invocation of the bank

guarantee by the 1st respondent has to be set aside.

B. Apart from the above, Sri P.Roy Reddy, learned

counsel for the petitioner, would point out that this Court by

an order dated 29.04.2020 had directed the respondents not

to encash the bank guarantee for a period of one week after

the lock down is lifted. The passing of this order was

intimated to the respondents 1 and 2 by an e-mail of the

counsel for the petitioner on 29.04.2020 itself. In such

circumstances, the respondents could not have encashed the

bank guarantee and such encashment requires to be

reversed.

6. In its counter affidavit, the 1st respondent denies

the allegation of the petitioner. It is the case of the 1st

respondent that there were discussions in the meeting on

22.08.2019. However, no undertaking was given by the 1st

respondent as claimed by the petitioner. It is the further

submission of the 1st respondent that the minutes were

initially drafted by the petitioner and sent to the 1st

respondent. After perusing minutes, the 1st respondent,

having realized the error in the minutes had requested the

petitioner on 26.08.2019 to rectify the said mistake by

amending the minutes. The 1st respondent contends that in

view of these facts, the claim of the petitioner that the 1st

respondent had given an undertaking and that such

undertaking was recorded in the minutes is in correct.

                                        7                              RRR,J.
                                                           W.P.No.17813/2020

7. As far as invocation of the bank guarantee, in

violation of the order of this court, is concerned, the 1st

respondent, initially denied the receipt of the email from the

learned Counsel. However, after further verification, the 1st

respondent admitted receipt of the email on 29.4.2020.

However, the 1st respondent submits that the bank guarantee

was invoked on 06.04.2020 itself and as such, there was no

violation of the orders of this Court dated 29.04.2020.

8. The 2nd respondent in its counter states that the

invocation of the bank guarantee by the 1st respondent was

on 06.04.2019. However, there were certain issues because

of which the invocation process was not initiated immediately.

The 2nd respondent submits that on 27.04.2020, the

invocation of bank guarantee was processed. It would be

instructive to extract the exact pleading in this connection,

which is as follows:

"In this regard it is submitted that the transfer of amounts falling under the BG transactions is facilitated through a software called "TIPlus" from the front end whereas the debit of individual accounts are done through another software namely 'Finacle'. In the instant case, the payment initiated on 27.04.2020 was shown as 'completed' in the 'TIPlus' whereas the said payment transaction was failed as the same did not pass Finacle as the individual account of petitioner was not having funds to debit. Hence the payment was re-initiated on 30.04.2020 by force debiting the account of the petitioner and transaction completed on 30.04.2020. The said process are 8 RRR,J.

W.P.No.17813/2020

purely technical and it is clear from the facts and circumstances that the payment initiated on 27.4.2020 and conclusion of the same on 30.04.2020 are the sequence of the same process. It is re-iterated that the Bank has not received any copy of interim order passed in WP.No.8301/2020 until 04.05.2020 except an e-mail from the Counsel of the petitioner on 29.04.2020 stating that a Writ Petition has been filed before this Hon'ble Court, however, the payment was initiated prior to the petitioner filing the said Writ Petition. It is also pertinent to note that the said mail attachment received from the advocate of the petitioner does not specifically state that any restraint/stay order had been passed in the said Writ Petition nor does the same mention any details of the order.

Consideration of the Court:

9. Sri P. Roy Reddy, learned counsel for the

petitioner would rely upon the Judgment of the Hon'ble

Supreme Court in M/S Motilal Padampat Sugar Mills vs

State Of Uttar Pradesh And Ors1 and also on Section 63 of

the Contract Act for the proposition that the invocation of the

bank guarantee is hit by the principle of promissory estoppel

and on the ground of egregious fraud.

10. Sri P. Roy Reddy, learned counsel for the

petitioner would also rely upon the Judgment of the Hon'ble

Supreme Court in ABL international Ltd vs. Export Credit

1979 SCR (2) 641 9 RRR,J.

W.P.No.17813/2020

Guarantee Corporation2 to the effect that findings of fact

can be given by this Court in proceedings under Article 226 of

the Constitution of India.

11. It is true that the Hon'ble Supreme Court had held

that in exceptional cases and circumstances, this Court can

go into questions of fact in proceedings under Article 226 of

the Constitution of India. However, these are the issues

raised in W.P. No. 8301 of 2020 and would need to be decided

in that Writ Petition.

12. The question of whether the invocation of the bank

guarantee is in violation of the orders of this Court is more

relevant for a decision in this case.

13. The counter affidavit of the 1st respondent shows

that the bank guarantee was invoked by the 1st respondent

on 06.04.2020 itself. This was quite some time before the

petitioner approached this Court and obtained an order on

29.04.2020.

14. According to the counter affidavit of the 2nd

respondent, the process of invocation and encashment of the

bank guarantee was initiated by 2nd respondent on

27.04.2020 and the same had failed. Subsequently, after

receipt of a notice of the order of this Court on 29.04.2020,

the 2nd respondent again went through the process of

encashment of the bank guarantee on 30.04.2020. The

statement of the 2nd respondent that the process of

(2004) SCC 553 10 RRR,J.

W.P.No.17813/2020

encashment which commenced on 27.04.2020 and ended on

30.04.2020 is a continuous process cannot be accepted. The

2nd respondent unequivocally states that after the first

attempt had failed, a second attempt was done and the

description of the second attempt clearly shows there was

manual intervention in this process. In these circumstances,

it has to be held that the payment on the basis of the

invocation of the bank guarantee was in violation of the

orders of this Court dated 29.4.2020.

15. The law relating to the consequences of such

violation is fairly settled. The review of law by the Hon'ble

Supreme Court in MANOHAR LAL Vs. UGRASEN (2010) 11

SCC 557, would suffice:

24. In Mulraj v. Murti Raghunathji Maharaj [AIR 1967 SC 1386] this Court considered the effect of action taken subsequent to passing of an interim order in its disobedience and held that any action taken in disobedience of the order passed by the Court would be illegal. Subsequent action would be a nullity.

25. In Surjit Singh v. Harbans Singh [(1995) 6 SCC 50 : AIR 1966 SC 135] , this Court while dealing with the similar issue held as under: (SCC p. 52, para 4)

"4. ... In defiance of the restraint order, the alienation/assignment was made. If we were to let it go as such, it would defeat the ends of justice and the prevalent public policy. When the court intends a particular state of affairs to exist while it is in seisin of a lis, that state of affairs is not only required to be maintained, but it is presumed to exist till the court orders otherwise. The court, in these circumstances has the duty, as also the right, to treat the 11 RRR,J.

W.P.No.17813/2020

alienation/assignment as having not taken place at all for its purposes."

26. In All Bengal Excise Licensees' Assn. v. Raghabendra Singh [(2007) 11 SCC 374 : AIR 2007 SC 1386] this Court held as under: (SCC p. 387, para 28)

"28. ... a party to the litigation cannot be allowed to take an unfair advantage by committing breach of an interim order and escape the consequences thereof. ... the wrong perpetrated by the respondent contemnors in utter disregard of the order of the High Court should not be permitted to hold good."

27. In DDA v. Skipper Construction Co. (P) Ltd. [(1996) 4 SCC 622 : AIR 1966 SC 2005] this Court after making reference to many of the earlier judgments held: (SCC p. 636, para 18)

"18. ... '... on principle that those who defy a prohibition ought not to be able to claim that the fruits of their defiance are good, and not tainted by the illegality that produced them.' [Ed.: As observed in Clarke v. Chadburn, (1985) 1 WLR 78, p. 81 C.] "

28. In Gurunath Manohar Pavaskar v. Nagesh Siddappa Navalgund [(2007) 13 SCC 565 : AIR 2008 SC 901] this Court while dealing with the similar issues held that even a court in exercise of its inherent jurisdiction under Section 151 of the Code of Civil Procedure, 1908, in the event of coming to the conclusion that a breach of an order of restraint had taken place, may bring back the parties to the same position as if the order of injunction has not been violated.

29. In view of the above, it is evident that any order passed by any authority in spite of the knowledge of the interim order of the court is of no consequence as it remains a nullity.

16. In the circumstances the Writ petition is allowed

with the following directions:

                               12                          RRR,J.
                                               W.P.No.17813/2020

1. The 1st respondent shall repay, to the 2nd respondent,

within two weeks of receipt of this order, the money

received from the 2nd respondent on account of the

invocation of Bank Guarantee bearing No.

04620BG18022589.

2. Upon such payment, the Bank Guarantee of the

Petitioner bearing No. 04620BG18022589 will stand

restored, without any charge to the Petitioner.

3. The invocation of the said Bank Guarantee will await

further orders/result of W.P. No. 8301 of 2020 pending

before this Court.

4. The said bank Guarantee will be kept alive and valid by

the Petitioner subject to the orders of this Court in

W.P.No. 8301 of 2020.

Miscellaneous Petitions, if any pending, in this Writ

petition, shall stand closed. There shall be no order as to

costs.

___________________________________ JUSTICE R. RAGHUNANDAN RAO

Date : 23-02-2021 RJS 13 RRR,J.

W.P.No.17813/2020

THE HON'BLE SRI JUSTICE R.RAGHUNANDAN RAO

WRIT PETITION No.17813 OF 2020

Date : 23-02-2021

RJS