Bombay High Court
Kec International Ltd vs Axis Bank Ltd. And 5 Others on 8 September, 2022
Bench: R. I. Chagla
Digitally signed
by JITENDRA
JITENDRA SHANKAR
SHANKAR NIJASURE
Date:
NIJASURE 2022.09.12
18:09:25 +0530
939-ial-28609-2022.doc
jsn
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
INTERIM APPLICATION (L) NO.28609 OF 2022
IN
COM SUIT (L) NO.28603 OF 2022
KEC International Ltd. ...Applicant/
Plaintiff
Versus
Axis Bank Ltd. & Ors. ...Defendants
----------
Mr. Venketesh Dhond, Senior Counsel with Rohan Kelkar, Anuj
Athalye and Noel Thomas i/b. Legasis Partners for the Applicant /
Plaintiff.
----------
CORAM : R.I. CHAGLA J
DATE : 08TH SEPTEMBER, 2022
ORDER :
1. Mr. Dhond, learned Senior Counsel for the Applicant /
Plaintiff states that notice of today's date with the Interim Application
have been served on the Defendants. These are by way of emails
which have been sent to the Defendants. He undertakes to file
Affidavit of Service by 12th September, 2022 showing service on the
Defendants.
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2. By this Interim Application, the Applicant is seeking an
injunction restraining the Defendant Nos.1 to 6 from invoking or
making or receiving payment under Counter ABG 1 and / or Counter
PBG 1 and / or Counter PBG 2 and / or Counter RBG 1 and / or ABG
1 and / or ABG 2 and / or PBG 1 and / or PBG 2 and / or RBG 1
which guarantees are annexed at Exhibits B, F, H, J, C, G, I and K of
the Plaint.
3. Urgency in moving this Court is that a SWIFT message
has been addressed by Defendant No.4 - Azizi Bank situated in
Afghanistan to Defendant No.1 - Axis Bank, wherein they have stated
that an official letter has been received from the beneficiary i.e.
Defendant No.6 requesting Azizi Bank for extension of the validity
period of Bank Guarantee till 31st December, 2022 or pay.
Accordingly, Axis Bank was requested to extend the Bank Guarantee
in its Counter Guarantees till 31st December, 2022 and extend the
validity period of Counter Guarantees till 31st January, 2023 or pay
under the Counter Guarantees by remitting the amount to Defendant
No.6. These SWIFT Messages are annexed at Exhibits 'Q' and 'R'
which are dated 24th August, 2022 to the Plaint. These SWIFT
messages have been responded to by Axis Bank by its SWIFT Message
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dated 29th August, 2022, wherein it states that Azizi Bank has not
confirmed that complying demand has been received by it under its
Bank Guarantee and that Axis Bank rejects the captioned claim as the
transaction is not in conformity with sanction and compliance policy
of the bank on account of applicability of global sanction on related
parties of the transaction i.e. Beneficiary / Promoter / Director /
MD / CEO etc. Hence Axis Bank cannot act on its request against the
Counter Guarantees. This has been further responded to by Azizi
Bank in Afghanistan vide SWIFT messages dated 5th September,
2022 wherein it is stated that the rejection of the claim of Axis Bank
is totally based on baseless justification which is totally against
international practice and terms of the said Counter Guarantee. They
have reiterated that complying demand has been received from the
beneficiary by Defendant No.6. Its claim is unconditional and merely
on demand within the claim validity period of the Counter
Guarantee. Axis Bank has accordingly been requested to either
extend or in case extension is not agreed to pay guarantee amount as
per the norms of the Counter Guarantee to the beneficiaries account.
4. Mr. Dhond has submitted that apart from Axis Bank who
has received the aforementioned communication the other Indian
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Banks being Export-Import Bank of India - Defendant No.2 and Yes
Bank Ltd. - Defendant No.3 are similarly placed as Axis Bank having
given the Counter Guarantees and that unless appropriate ad-interim
relief is granted restraining both the Indian Banks and Banks in
Afghanistan from encashing the Counter Guarantees and / or Bank
Guarantees upon their invocation, grave prejudice will be caused to
the Applicant / Plaintiff.
5. Mr. Dhond has then taken this Court through the
Agreement dated 11th December, 2017 executed by Defendant No.6
with the Applicant / Plaintiff which contemplated three different
types of Bank Guarantees being Advance Guarantee, Performance
Guarantee and Retention Guarantee. The Agreement contained a
"Force Majeure" provision under Clause 37 that should the
Guarantees be invoked, declared that "no delay or non performance
by either party by the occurrence of any event of Force Majeure
shall.... constitute a default or breach of the contract...if and to the
extent that such delay or non performance is caused by the
occurrence of an event of Force Majeure". He has then referred to the
relevant clauses of each type of Counter Guarantees given by the
Indian Banks which clearly provide that, in the event of default on
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the part of the Contractor, namely the Applicant / Plaintiff under the
terms of the Agreement, the Banks Guarantee / undertake
irrevocably to make payment of the amounts upon receipt of the first
written demand without cavil or agreement.
6. Mr. Dhond has submitted that the relevant clauses in the
Counter Guarantee envisages a default on the part of the Contractor
and only in that eventuality the Banks have irrecoverably
guaranteed / undertaken payment.
7. Mr. Dhond has referred to certain events subsequent to
the execution of the Agreement dated 11th December, 2017. He has
submitted that on 13th August, 2021, the Plaintiff had declared the
first Force Majaeure in view of the events of early August, 2021,
when the USA began a process of withdrawing from Afghanistan and
simultaneously, the Taliban started taking over large parts of
Afghanistan. On 12th September, 2021, Defendant No.6 - beneficiary
under the Bank Guarantees and State undertaking of the Afghanistan
Government declared Force Majeure with retrospective from 16th
August, 2021. Further Mr. Dhond has relied upon the aforementioned
SWIFT Messages exchanged between Azizi Bank and Axis Bank
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pursuant to Azizi Bank claiming that Defendant No.6 called upon
Azizi Bank to extend the Bank Guarantees and failing that to make
payment and upon which Azizi Bank in turn called Axis Bank to
extend the corresponding Counter Guarantees and failing which to
make payment. He has submitted that invocation of the Bank
Guarantees and Counter Guarantees were not justified as there had
been a wrongful invocation by the Defendant No.6. He has submitted
that by such wrongful invocation, the Indian Bank may be obliged to
make payment under the corresponding Counter Guarantees to
Defendant No.6. He has accordingly submitted that necessary ad-
interim orders be passed restraining Defendant Nos.1 to 6 from either
invoking or making or receiving payment under the said Bank
Guarantees and Counter Guarantees.
8. Mr. Dhond has relied upon the judgment in the case of
Sevenska Handelsbanken Vs. M/s. Indian Charge Chrome & Ors. 1 and
in particular paragraphs 73 to 75 thereof, in support of his
submission that invocation of Bank Guarantee can be restrained in
the event of irreparable harm being caused to the party by
encashment of the Bank Guarantee against whom it has been
1 (1994) 1 Supreme Court Cases 502.
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invoked. In that case the situation had been created after the Iranian
Revolution when the American government cancelled the export
licence in relation to Iran as it related to high technology. As the
American Government had cancelled the export licence in view of the
revolution in Iran and factors connected therewith, the Court was of
the view that even of the claim for damages is decreed by the
American Courts, the situation in Iran was such that the decree
cannot be executable in Iran. It was on these facts that the Court felt
that it was a case where the Plaintiff had demonstrated that it has no
adequate remedy at law and the allegations of irreparable harm are
not speculative but genuine and immediate and the Plaintiff would
suffer irreparable harm if the requested relief is not granted. He has
submitted that in the present case the invocation and / or
encashment of the Bank Guarantees and Counter Guarantees are
required to be restrained or otherwise irreparable harm would be
caused as the Applicant / Plaintiff would not be in a position to
pursue their claim in Afghanistan against Defendant No.6 - the State
Undertaking of the Afghanistan Government which is now governed
by the Taliban after withdrawal of the USA.
9. Having considered the submissions, a reading of Clause
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37 of the Agreement dated 11th December, 2017 which is the ''Force
Majaeure'' clause with relevant clauses in the Counter Guarantees, it
is clear that in an event of "Force Majaeure" being declared, no delay
or non-performance by either party shall constitute a default or
breach of the contract. Thus, prima facie no delay or non
performance by either party caused by occurrence of any event of
Force Majeure shall constitute a default or breach of the contract as
envisaged in the relevant clauses of the Counter Guarantees issued by
the Defendant Nos.1 to 3 - Indian Banks. It is clear from the factual
position that there was occurrence of an event of Force Majeure and
which was declared by the Plaintiff on 13th August, 2021 and
thereafter declared by Defendant No.6 on 12th September, 2021 with
retrospective effect from 16th August, 2021. Thus Defendant No.6
could not have called upon Defendant No.4 which is the Afghan bank
on 24th August, 2022 to extend the validity of the Bank Guarantees
or failing which to make payment. This prima facie appears to be a
wrongful invocation of the Bank Guarantees by Defendant No.6.
Further, the Defendant No.4 - Azizi Bank has called upon Defendant
No.1 - Axis Bank to either extend the validity of the Counter
Guarantees or failing which to make payment.
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10. I find much substance in the argument of
Mr. Dhond with regard to his submission on irreparable harm caused
in the event that the Bank Guarantees and Counter Guarantees are
not restrained from invocation and / or encashment. The decision of
the Supreme Court in Svenska Handelsbanken (Supra) relied upon
by Mr. Dhond is apposite. Irreparable harm would be caused as the
Applicant / Plaintiff would not be in a position to pursue its claim
against Defendant No.6 in Afghanistan in the event the Bank
Guarantee is encashed, particularly considering that the Taliban has
taken over Afghanistan upon the withdrawal of USA.
11. Considering that the Defendant Nos.1 to 5,
the concerned Afghan and Indian Banks may act upon the invocation
or the impeding invocation by Defendant No.6 of the Bank
Guarantees and Counter Guarantees, it would be necessary to grant
the ad-interim relief sought for. Further, the Defendants have been
served with the circulation of this matter and inspite of service, they
have remained absent. Thus, ad-interim relief is granted in terms of
prayer clause 16(ii) of the Interim Application which reads thus:-
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16(ii) An order and temporary injunction restraining
Defendants No.1, 2, 3, 4, 5 and 6, whether by
themselves or through their servants, employees,
officials, agents or any person acting through or under
them, or on their behalf, from invoking or making or
receiving payment under Counter ABG 1 and / or
Counter PBG 1 and / or Counter PBG 2 and / or
Counter RBG 1 and / or ABG 1 and / or ABG2 and /
or PBG 1 and / or PBG 2 and / or RBG 1 (Exhibits B, F,
H, J, C, G, I and K);
12. This order shall be served by the Advocates for the
Applicant / Plaintiff on the Defendants and an Affidavit of Service to
that effect shall be filed on or before the next date.
13. Interim Application shall be placed on 20th
September, 2022, high on board.
14. Parties to act on an authenticated copy of this
Order.
[ R.I. CHAGLA J. ]
