Bombay High Court

Qatar National Bank Alahli vs Man Industries India Limited on 23 January, 2025

Author: G. S. Kulkarni

Bench: G. S. Kulkarni

2025:BHC-OS:1068 902-COMAP-18-2024.DOC
Digitally
signed by
PRASHANT
PRASHANT VILAS
VILAS RANE
RANE Date:
2025.01.23
23:49:51
+0530

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

COMMERCIAL APPEAL NO. 18 OF 2024
IN
INTERIM APPLICATION (L) NO. 31678 OF 2023
IN
COMMERCIAL SUIT (L) NO 31639 OF 2023

Qatar National Bank Alahli ...Appellant
Versus
Man Industries (India) Limited & Ors. ...Respondents
_______
Mr. Nikhil Sakhardande, Sr. Adv. a/w Ms. Vatsala Rai, Ms. Nafisa
Khandeparkar, Ms. Sushrut Garg, Ms. Devanshi Jhaveri i/by AZB & Partners
for Appellant.
Mr. Ashish Kamat, Sr. Adv. a/w Mr. Kunal Mehta, Mr. Jay Zaveri, Ms.
Tavleen Saini, i/by Crawford Bayley Co. for Respondent No.1.
Mr. Ankit Tiwari i/b V. B. Tiwari & Co. for Respondent No.2 - State Bank
of India.
_______

CORAM: G. S. KULKARNI &
ADVAIT M. SETHNA, JJ.

DATE: 23 JANUARY 2025

Oral Judgment: (Per G. S. Kulkarni, J.)

1. This appeal is directed against an ex parte order dated 9 February 2023

passed by the learned Single Judge on interim application (L) No.31678 of

2023 filed in the Commercial Suit in question. By the impugned order, the

learned Single Judge has granted an ex parte injunction in terms of prayer

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clause (a) and (b) of this application. The relief as granted by the impugned

order in terms of prayer clause (a) and (b) is required to be noted which reads

thus:

"(a) That this Hon'ble Court be pleased to pass appropriate
orders granting ex-parte stay on the invocation by respondent no. 1
dated 7 November, 2023 of the Bid Bond/Performance Guarantee
(Exhibit X).

b) That the Hon'ble Court be pleased to pass an ex-parte order of
temporary injunction restraining the respondent no. 2 by themselves
and/or through their branches or howsoever otherwise in any manner
whatsoever from making payment on the Bid Bond/Performance
Guarantee and/or cause further costs and expenses to be incurred by
the applicant."

2. At the outset, we may observe that a coordinate Bench of this Court

considering the fact that the impugned order was an ex parte order by its

order dated 9 February 2024 disposed of this appeal, considering that it

would be appropriate for the appellant to move the learned Single Judge for

vacating of the ex parte order as permissible in law, on the premise that the

suit was yet to be transferred to the City Civil Court. The said order passed

by this Court read thus:

"1. The impugned Order dated 9 th November, 2023 passed by the
learned Single Judge is admittedly an ex-parte Order passed in the Suit
in question. The proper course of action for the Appellant would be to
move an application for vacating of such order, on the contentions
which are sought to be raised by the Appellant in the present Appeal.

2. We accordingly dispose of this Appeal, with liberty to the Appellant
to move the learned Single Judge, if the proceedings of the Suit are yet
to be transferred to the City Civil Court.

3. All contentions of the parties on such Application are expressly kept
open.

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4. In view of the disposal of the Appeal, Interim Application (L) No.
2705 of 2024 does not survive, it would stand dispose of."

3. However the appellant assailed the aforesaid order before the Supreme

Court in the proceedings of petition for Special Leave to Appeal No. 9747 of

2024, on which the Supreme Court passed an order on 17 May, 2024.

Considering the fact that the commercial suit has stood transferred to the

City Civil Court, it was observed that it would be appropriate for this Court

to decide the present appeal on merits. Accordingly this Commercial Appeal

was restored to the file of the Court for expeditious disposal, as it pertained to

an injunction on the invocation of bank guarantee. We, accordingly,

adjudicate the present appeal, as ordered by the Supreme Court.

4. The Commercial Suit in question was filed by respondent No.1-

Plaintiff against four defendants, Fayum Gas Company - defendant No.1 (for

short 'Fayum Gas'), State Bank of India, Overseas Branch, defendant No.2

(for short 'SBI'), Quatar National Bank Alahli - defendant No.3 (Appellant)

and Central Bank of Egypt - defendant No.4.

5. The reliefs which are prayed in the suit are primarily against defendant

No.1 - Fayum Gas Company and defendant No.2 - State Bank of India,

Overseas Branch. The prayers as made in the Suit reads thus:

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"(a) That this Hon'ble Court be pleased to declare that
Defendant No.1's termination of the Purchase Order dated 18 th April
2023 is null and void and not binding on the Plaintiff;

(b) That the Hon'ble Court be pleased to declare that the
invoation by Defendant No.1 dated 7 th November 2023 of the Bid
Bond (Exhibit X) is null and void and has no effect in law;

(c) That the Hon'ble Court be pleased to declare that Defendant
No.1 is not entitled to invoke the Bid Bond at this stage;

(d) That the Hon'ble Court be pleased to pass an order of
permanent injunction restraining the Defendant No.2 by themselves
and/or through their branches or howsoever otherwise in any manner
whatsoever from making payment on the Bid Bond/ and/or cause
further costs and expenses to be incurred by the Plaintiff;

(e) That this Hon'ble Court pass an order or decree directing
Defendant No.1 to pay to the Plaintiff a sum of Rs.1,24,89,300/- or
such additional sums as this Hon'ble Court may deem fit and proper as
and by way of damages.

(f) That pending the hearing and final disposal of the suit, the
Defendant No.2 be restrained by themselves and/or through their
branches or howsoever otherwise in any manner whatsoever from
making payment on the Bid Bond and/or cause further costs and
expenses to be incurred by the Plaintiff;

(g) Ad-interim and interim reliefs in terms of prayer clause (f)
above be granted to the Plaintiff.

(h) For costs of the Suit;

(i) For such further and other reliefs as the nature and
circumstances of the case may require;"

6. On a plain reading of the aforesaid prayers, it is clear that no substantive

prayer against the appellant - defendant No.3. Even in the prayers as made in

the interim application, as noted by us hereinabove, relief is sought against

only defendant Nos.1 (Fayum Gas) and defendant No.2 (SBI).

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7. The nature of the relief being granted by the ex parte impugned order,

admittedly pertains to a Counter Bank Guarantee (CBG) which was issued in

favour of the appellant by SBI- defendant No.2.

8. For convenience, the parties are referred as they stand in the suit.

Considering the settled position in law, the Counter Bank Guarantee (CBG)

in question, issued by the SBI in favour of the appellant, would be an

independent contract between the bank (SBI) and the beneficiary of the said

bank guarantee namely the appellant. On such preface we proceed to note

the relevant facts.

9. The case of the plaintiff in the suit is that in January 2023 Fayum Gas

issued tenders, inviting offers for supplying steel pipes, under which

document fees of USD 1,500 and bid bond of USD 1,50,000 being the

conditions.

10. On 30 January 2023, the plaintiff (Man Industries) submitted its offer

/ bid with the tender document fees of USD 1,500. For the bid bond of USD

1,50,000 the plaintiff approached the SBI- Defendant No.2. On 10 February

2023 the SBI approached the appellant to issue the Bid Bond on the

condition of a Counter Bank Guarantee (CBG) to be issued for an amount

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of USD 1,50,000 in favour of the appellant. The CBG dated 10 February

2023 was accordingly issued which was valid up to 30 June 2023.

11. In view of the CBG being issued by the SBI in favour of the

appellant, on 19 February 2023, the appellant issued a bid bond (BG) dated

19 February 2023 in favour of Fayum Gas which was valid up to 31 May

2023. It is on such backdrop, on 19 April 2023 Fayum Gas issued a purchase

order, in favour of the plaintiff.

12. In the context of the present dispute, it is necessary to consider the

nature of the Counter Bank Guarantee (CBG) issued by the SBI in favour of

the appellant. On a reading of the Counter Bank Guarantee (CBG), it is

clear that "the applicant" for issuance of the CBG is the plaintiff. It is issued

by SBI (defendant No.2) and the beneficiary is the appellant (defendant

No.3). The Counter Bank Guarantee (CBG) is for USD 1,50,000. The

contents and the wordings of the Counter Bank Guarantee in the context of

the dispute, become significant, which are required to be noted. The relevant

extract of the CBG reads thus:

"At our risk and responsibility and our Counter Guarantee No.
0479123FG0000036 for USD 150,000.00 (USD One Hundred Fifty
thousand only) and at the request of M/s. Man Industries (India) Ltd.
101 Man House, S.V. Road, Vile Parle (West), Mumbai- 400 056, India.
Please issue your bid guarantee favouring of Fayum Gas Company
(FCG), Address Head Office, Procurement Department, 15, Gamal
Abdel Naser St. Mesalla Square, Fayum, Egypt.

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In consideration of your doing so, we hereby issue our irrecoverable and
unconditional Counter Guarantee in your favour and we undertake to
pay to you without reservation and notwithstanding any contestation
from ourselves, our principal or any third party any sum or sums not
exceeding in total the amount of USD 150,000.00 (USD One Hundred
Fifty Thousand only) upon receipt by us your first demand in writing or
by any authenticated swift message wherein you notify us that you have
been called upon to effect payment under your guarantee in accordance
with its terms and in the amount you are demanding from us on or before
30.06.2023."

THE ISSUER BANK OF THE COUNTER GUARANTEE IS
OBLIGATED TO PAY QNBAEGCX REGARDLESS WHETHER
THE APPLICANT OR ANY THIRD PARTY RAISES OR SUBMITS
AN OBJECTION TO LIQUIDATION OR SUSPENSION OF
LIQUIDATION BEFORE COURTS
.......
II. THIS COUNTER GUARANTEE SHALL BE VALID UP TO
30.06.2023.
.... ... ..
44H. Governing Law and/or Place of Jurisdiction. IN.
....."

(emphasis supplied)

13. Thus from the reading of the aforesaid clauses of the CBG it is clear

that CBG is an irrevocable and unconditional counter guarantee issued in

favour of the appellant, under which the SBI undertook to pay to the

appellant without reservation and notwithstanding any contestation by the

SBI or principal or any third party, a sum not exceeding USD 1,50,000, on

receipt by the SBI from the appellants first demand in writing or by any

authenticated telex massage, wherein the appellant would notify the SBI that

the appellant have been called upon to effect payment under the bank

guarantee issued by the appellant in favour of Fayum Gas, in accordance with

its terms and the amount thereunder being demanded by the appellant from

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the SBI. It was also guaranteed that the SBI was obligated to pay the

appellant regardless, whether the plaintiff (applicant of bank guarantee) or

any third party raises or submits an objection to its liquidation before courts.

14. Clause 44H of Counter Bank Guarantee (CBG) provides for the

"Governing law and / or for Place of Jurisdiction" as agreed between parties,

in which originally it was indicated to be 'IN' i.e. India. Later on clause 44H

was amended in terms of the communication as exchanged between the SBI

and the appellant, for Clause 44H to be read to the effect that the

"Governing law and / or Place of Jurisdiction" to be the "Egyptian law"

instead of existing "IN" (India). The said communication is required to be

noted which reads thus:

"With reference to our Counter Guarantee No. 0479123FG0000036
dated 10.02.2023 for USD 150,000.00 please read the 44H as the
Bank Guarantee is governed by Egyptian Law instead of existing.

Please hand over the copy of this Bank Guarantee Haidy Momtaz
Mofid Contact No. 20001007402282, ID No. 29101152405421 or
Ahmed Hamdy Abdelaal, Contact No. 91210202047, ID No.
29107011407895.

Regards
Bank Guarantee"
(emphasis supplied)

15. It so happened that some time between April and June 2023 disputes

and differences had arisen between the plaintiff and Fayum Gas as the

plaintiff was unable to issue the net itemized proforma invoice, as per the

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conditions of the purchase order, issued to it by Fayum Gas. The proforma

invoice, as per the agreement was to be issued in Egyptian pound and/or

issued in US Dollars. There was correspondence between 28 May 2023 to 21

September 2023 inter alia between the SBI, and the appellant and Fayum

Gas, under which the validity of the CBG in question was extended till 31

December 2023, by the SBI in favour of the appellant while the validity of

the Original bank guarantee (issued by appellant in favour of Fayum Gas)

was extended till 30 November 2023.

16. On 5 November 2023 Faiyum Gas terminated the purchase orders

issued in favour of the plaintiff and immediately on the next day i.e. on 6

November 2023 Faiyum Gas invoked the bank guarantee issued by the

appellant, and furnished at the behest of the plaintiff. Further as the

arrangement under the CBG was a back-to-back arrangement, as agreed

under the terms and conditions of the CBG entered between the appellant

and the SBI, on Faiyum Gas invoking the bank guarantee as issued by the

appellant, the appellant in turn invoked the CBG issued in its favour by the

State Bank of India. However, before the proceeds of the CBG could be

received by the appellant, on 9 November 2023 the Commercial Suit in

question was filed by the plaintiff, in which the interim application in

question was filed, on which the impugned ex party order was passed

injuncting the SBI from honouring the CBG in appellant's favour.

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17. Mr. Sakhardande, learned senior counsel for the appellant has drawn

our attention to the various documents on record of the commercial suit. He

contends that the impugned order has seriously prejudiced the rights of the

appellant to the benefits of the CBG as issued by SBI when the same was

invoked lawfully, and that too passed by the learned Single Judge at the

behest of the plaintiff, who could never, have a quarrel on the terms of the

bank guarantee as issued by the SBI in favour of the appellant. It is

submitted that once the CBG issued by the SBI in the appellant's favour was

itself an independent contract, between the appellant and the SBI, conferring

unconditional entitlement on the appellant to invoke the CBG, the nature of

it being irrevocable and unconditional, there was no question of an

injunction being passed on its invocation.

18. It is submitted that the learned Single Judge could not have issued an

ex parte injunction oblivious of the clear terms of the bank guarantee, as also,

overlooking the settled principles of law that the CBG was part of the back-

to-back arrangement and being independent contract between the SBI and

the appellant, it was totally unconnected with any dispute, the plaintiff would

have against the contracting party namely Fiyum Gas. It is therefore his

submission that the impugned order adversely affects the legal rights of the

appellant, under the CBG, hence, the same could not have been passed,

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without the appellant being heard and secondly contrary to the terms and

conditions of the CBG.

19. The next contention as urged by Mr. Sakhardande is insofar as the

jurisdiction of the Court to grant the relief qua the CBG is concerned, when

he submits that learned Single Judge ought to have taken into consideration

that qua CBG the "Governing Law and / or Place of Jurisdiction" was Egypt

and hence this Court lacked jurisdiction to entertain any issue qua the CBG

and that too in a money suit principally between the plaintiff and a

defendant No.1 - Fayum Gas.

20. Mr. Sakhardande would next submit that the principles of law on the

Court granting injunction on the invocation of bank guarantee are well

settled namely of an egregious fraud to the knowledge of the bank in issuance

of bank guarantee and / or any irretrievable injury or injustice or special

equities being the only grounds which would weigh with the Court when an

injunction on the bank guarantee is prayed for. It is his submission that the

interim application in the commercial suit does not make out any such

ground nor any such ground is addressed by the plaintiff. It is submitted that

the impugned order does not whisper of any such ground being made out,

nonetheless it injuncts the invocation of the CBG.

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21. On the other hand Mr. Kamat, learned counsel for respondent no.1-

plaintiff has opposed this appeal. The opposition is primarily on the ground

that it cannot be said that the appellant has suffered any legal injury and or is

a person aggrieved to maintain the appeal, in terms of Section 13 of the

Commercial Courts Act, 2015, which provides an appeal to be maintainable

only at the behest of the person aggrieved. In short, it is Mr.Kamath's

contention that in the context of the invocation of the CBG issued by the

SBI, in favour of the appellant, although is an independent contract, as to

what has happened between the plaintiff and the contracting party, namely

Fayum Gas , would be relevant. It is hence, his contention that the appellant

oblivious of the actions of the contracting parties, would not be correct in

contending that the appellant would nonetheless consider the CBG as

unconditional and irrevocable, as necessarily the actions of Fayum Gas in

invoking the bank guarantee issued by the appellant in favour Fayum Gas

which was at the behest of plaintiff were legal, valid and relevant

considerations. For such reason it is submitted that it cannot be accepted and

qua the contract between the plaintiff and Fayum Gas, the appellant, could at

all be an aggrieved party. In support of such contention that the appellant is

not a aggrieved party/person. Mr. Kamat has placed reliance on the decision

of the Supreme Court in ADI Pherozshah Gandhi Vs. H. M. Seervai,

Advocate General of Maharashtra, Bombay1.

1 1970(2) SCC 484
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22. The next contention of Mr. Kamat is that when under the terms and

conditions of the Counter Bank Guarantee (CBG), even the appellant and

the SBI agreed that the CBG would be governed by the laws of Egypt, it is

not a clause conferring "exclusive jurisdiction" under the Egypt laws, hence, it

was certainly open for the learned Single Judge to exercise jurisdiction, on

issues in relation to the CBG. In this context, Mr. Kamat would further

submit that although under the modified clause 44H, the parties agreed that

the laws of Egypt to be applicable, however, insofar as jurisdiction is

concerned the modification is silent and therefore, the Court's in India would

continue to have jurisdiction. In contending that the Indian Court would

apply the Egyptian Law, Mr. Kamat has placed reliance on the provisions of

Section 45 of the Evidence Act that it would be permissible for the Court to

consider any plea on the CBG as raised by the plaintiff, assuming that the law

applicable is the Egyptian law.

23. The last contention of Mr. Kamat is that the Leave Petition filed by the

plaintiff under Clause XII of the Letters Patent being allowed, the impugned

order is a composite order, namely that it recognizes that the Bombay High

Court on the Original Side had the jurisdiction to entertain the Commercial

Suit, and that, such order cannot be assailed, and on the other hand the ex

parte injunction as granted to the plaintiff by such order, is legal and valid.

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24. It is Mr. Kamat's submission that although the Clause XII Leave

Petition was premised on the ground that the SBI had issued the CBG at

Mumbai and the same was sought to be invoked at Mumbai, and merely

because defendant No.1 its office was outside Mumbai i.e. in Egypt, part of

the cause of action had accrued within the territorial limits of the Courts at

Mumbai being the observations as made by the learned Single Judge in

allowing the leave petition under Clause XII of the Letters Patent cannot be

faulted. Mr. Kamat would thus submit that in this view of the matter the

appellants cannot have a quarrel on the jurisdiction of the learned Single

Judge to consider the Suit and the Interim Application in passing of the

impugned order.

25. Mr. Kamat in support of the his contention on the merits of the

invocation of the bank guarantee issued by the appellant, in favour of Fayum

Gas, and whether the actions of Fayum Gas in that regard were legal and

valid, and as to how, the same would have a bearing, on the invocation of the

CBG are sought to be supported by drawing our attention to the documents

relevant to the invocation of the principal bank guarantee by Fayum Gas. In

such context, it is also his submission that the learned Single Judge has

appropriately taken into consideration that both the guarantees in question

were furnished as bid guarantees and not performance guarantees, hence, it

was appropriate for the plaintiff's to approach the learned Single Judge in the

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Suit in question, to seek the reliefs as prayed for, and which are appropriately

granted in favour of the plaintiffs. Mr. Kamat hence would submit that no

interference is called for in the appeal which deserves to be rejected.

26. Mr. Sakhardande in responding to Mr. Kamat's contention on whether

the appellant could be called to be a person aggrieved in terms of Section 13

and more particularly as jurisprudentially as observed by the Supreme Court

in Adi Pherozshah Gandhi (supra), would submit that the person aggrieved

in the context of the present case would be required to be broadly construed

as observed in the decision of the Constitution Bench of Seven Judges, in the

case of Bar Council of Maharashtra Vs. M. V. Dabholkar & Ors. 2 more

particularly in paragraph 28 thereof. He therefore submits that Mr. Kamat's

contention that the appellant is not a person aggrieved, cannot be accepted.

Reasons and Conclusion

27. It is on the aforesaid backdrop, we have heard learned counsel for the

parties. With their assistance we have perused the record and more

particularly the terms and conditions of the CBG which is the primary

concern of the parties in the present proceedings.

2 (1975) 2 SCC 702
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28. Some of the admitted facts are required to be noted. It is not in dispute

that the plaintiff had participated in the tender issued by Fayum Gas, which

required a bid guarantee to be issued. It also appears to be clear from the

record that the plaintiff had approached the SBI for issuance of the bid

guarantee and as the SBI could not issue the same directly as desired by

Fayum Gas, the SBI approached the appellant, for issuance of the CBG.

Accordingly the CBG in question was issued by SBI in favour of the

appellant, which was to be valid up to 30 June 2023 and later on extended

up to 30 November 2023.

29. It also appears to be not in dispute that the contract under the

purchase orders issued by Fayum Gas in favour of the plaintiff, could not go

through as disputes had arisen between these parties, as noted by us

hereinabove, which ultimately culminated in Fayum Gas, terminating the

purchase orders on 5 November 2023. As a consequence thereof Fayum Gas

invoked the principal Bank Guarantee issued by the appellant, in favour of

Fayum Gas which was at the behest of the SBI, but ultimately as applied by

and for the benefit of the plaintiff. As the CBG was a back to back

arrangement the appellant on the very same day invoked the CBG as issued

by the SBI.

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30. On the aforesaid conspectus, the questions which arise for our

consideration are firstly as to whether the appellant had lawfully invoked the

CBG as per the terms and conditions of the CBG and whether the appellant

was entitled for proceeds of the CBG to be remitted to it by the SBI;

secondly, whether any case for an injunction was made out by the plaintiff to

restrain the SBI from honouring the proceeds of the CBG in favour of the

appellant; thirdly, whether qua the CBG, this Court had jurisdiction to

entertain the Commercial Suit, when the parties agreed to be governed by the

Egyptian law qua the CBG.

31. Having considered the contents of the CBG, admittedly it is an

"unconditional and irrevocable" bank guarantee, and notwithstanding any

contestation of either the SBI or any third party, it was to be honoured.

32. Thus, when under the settled principles of law a Bank Guarantee is an

independent contract between the bank and the person in whose favour the

bank guarantee is issued, the terms and conditions of the bank guarantee play

a pivotal role, in determination of the rights of the parties under the contract

of a bank guarantee. On a bare reading of the clauses of the CBG, we do not

find that the plaintiff would be correct in its contention that something

which is alien or is not recognized by the terms and conditions of the CBG

would be required to be read and taken into account, in considering whether

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the appellant would be entitled to the benefit under the CBG. The

contention of the plaintiff in this regard is that due regard needs to be given,

to the fact that the invocation of the principal guarantee issued by the

appellant in favour of Fayum Gas, whether was legal and valid considering

the contract between the said parties namely under the purchage order,

would have relevance qua the invocation of the CBG. We do not find that

there is any scope for accepting such contention being urged on behalf of the

plaintiff, more particularly considering the terms of the CBG as agreed

between the parties.

33. It cannot be countenanced that the Court would interpret the terms

and conditions of the bank guarantee, so as to recognize anything extraneous

or alien to what has been explicitly agreed between the parties, and / or which

would amount to adding or substituting any term of the bank guarantee,

dehors the position the parties have clearly taken, under the indisputed

clauses of the bank guarantee. To accept such approach would be destructive

of the contract of the bank guarantee bringing uncertainty or a clog on the

application which is certainly not permissible. We are thus not inclined to

accept Mr. Kamat's contention that the invocation of the CBG is required to

be read in the context of the invocation of the principal guarantee, as issued

by the appellant in favour of Fayum Gas and / or any dispute between Fayum

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Gas and the plaintiff can at all be considered to be relevant, qua the

invocation of the CBG.

34. Mr. Kamat's submission that it ought to be held that the learned Single

Judge (Commercial Court) would have jurisdiction in passing the impugned

order qua the CBG, in our opinion is also not acceptable. The reason being

that under the CBG, the parties in Clause 44H thereof clearly agreed on "the

Governing Law and / or Place of Jurisdiction" which was initially agreed to be

'IN' i.e. India, which was later on substituted to be the Egyptian law. Mr.

Kamat's contention that the substitution of Clause 44H is relevant only

insofar as the applicability of the Egyptian law is concerned and not qua the

jurisdiction of the Indian Court is also untenable. This for the reason that

Clause 44H of the CBG is required to be read holistically, under which the

parties agree on both the counts namely the "Governing Law and / or to the

Place of Jurisdiction". It would be anomalous to accept that the parties

intended Egyptian law to be applicable however, subject themselves to the

jurisdiction of the Courts in India. Thus, when the parties clearly agreed in

the amended clause 44H to be governed by Egyptian law by substituting IN

(India) as applicable to the clause as titled, certainly the Indian Court would

lack jurisdiction to entertain any plea qua the CGB. Mr. Kamat's contention,

in such context if accepted, it would render Clause 44H wholly unworkable

and not as desired by the parties. It would also be difficult to accept that the

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jurisdiction to entertain a plea qua CBG, on one hand, would be with the

Indian Courts, however, in the context in hand the Indian Court would apply

the Egyptian law, in adjudication of the Commercial Suit. In our opinion

this would be too far fetched a proposition being canvassed by Mr. Kamat

amounting to an untenable reading of Clause 44H, which the parties

themselves have avoided to incorporate. Mr. Kamat's contention is also that

although under Clause 44H the parties have agreed, that the bank guarantee

would be governed by Egyptian law, it is not a situation that the Egyptian

Law would be exclusively applicable, hence, there is scope for applicability of

the Indian law. We do not agree as such interpretation of Clause 44H would

be contrary to the express agreement between the parties and contrary to the

Clause itself. We also find that the reliance of Mr. Kamat on Section 45 of

the Evidecne Act is wholly untenable, out of the context and not relevant in

the facts in hand. We accordingly reject Mr. Kamat's contention in this

regard.

35. Mr. Kamat's contention on the appellant being not a "party aggrieved"

to maintain the appeal, is relying on the decision in Adi Pherozshah Gandhi

(supra). In this regard, we may observe that although the said decision is in

the context whether the Advocate General in the said case was a person

aggrieved, the observations as made by the Supreme Court clearly accept the

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settled principle of English Law that for a person to fall under the category of

an aggrieved person, he must be a person who himself had grievance or must

be aggrieved by the order which affects him. Applying such principles in the

present context, we do not find that there is any scope for an argument that

the appellant is not aggrieved by the impugned order passed by the learned

Judge, more importantly when by the injunction as granted, it has taken away

the benefit entitled to the appellant, under the CBG issued by the State Bank

of India.

36. In our opinion, also the manner in which the plaintiff has prayed for

the interim relief and possibly with an intention to maintain the suit under a

garb of a relief being sought against the State Bank of India, which in reality

was against the appellant who was innocuously impleaded as defendant No.

3, without a specific relief being prayed against the appellant, either in the

plaint or in the interim application, nonetheless has taken away the

entitlement of the appellant under the CBG. In our opinion, the plaintiff in

this regard has indulged in clever drafting qua the reliefs as pleaded not only

in the plaint but also in the interim application. It is as clear as the sunlight,

that the whose intention of the plaintiff, was to deprive the appellant of the

benefit of the CBG, however in a circuitous method of the relief being

portrayed to be against the State Bank of India and/or against defendant

No.1.

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37. In our opinion these were crucial aspects which have been completely

overlooked by the learned Single Judge, in passing the impugned order. Also

the basic premise that the CBG was an independent contract between the

SBI and the Appellant, which had nothing to do with any dispute which had

arisen between the plaintiff and Fayum Gas who were contracting parties.

Also the most vital aspect that the CBG stood on it own legs, was wholly

missed by the learned Single Judge, in passing the impugned order. Thus, in

the facts in hand, what was relevant for the learned Single Judge was to

consider the basic terms and conditions of the CBG and nothing else.

38. This apart the settled principles of law on which an injunction on

invocation of bank guarantee could be granted to deprive the beneficiary of

the bank guarantee ought to have been considered and applied by the

learned Single Judge in passing the impugned order, which proceeds to

consider the plaintiff's case on merits of its contentions qua defendant No.1-

Fayum Gas. The principles of law in such context are laid down in catena of

decisions.

39. In S. Satyanarayana v. West Quay Multiport (P) Ltd. 3, the Division

Bench of this Court considering the principles in this regard, referring to the

3 2015 SCC OnLine Bom 3352
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decisions in U.P. Cooperative Sugar Ltd.v.Singh Engineers Pvt. Ltd4. and

BSES Ltd. v. Fenner Ltd.5 observed thus:

13. It is well-settled that a bank guarantee is an independent contract
between the bank and the beneficiary and thus the bank guarantee is
required to be honoured in accordance with its terms. If the bank
guarantee is unconditional and irrevocable the exceptions in the bank
not honouring its obligations under the bank guarantee are firstly a
fraud of which the bank has a clear notice. Such a fraud must be of an
egregious nature so as to vitiate in its entirety the underlying
transaction. The nature of the fraud should be such that the beneficiary
of the bank guarantee is seeking to be benefited from such fraud. The
second exception are the 'special equities' such as an irretrievable injury
or irretrievable injustice which would be caused to the party at whose
instance the bank guarantee is issued and if an injunction at the
relevant time is not granted the party can never be compensated for
such an injury. (U.P. Cooperative Sugar Ltd. v. Singh Engineers Pvt.
Ltd., (1988) 1 SCC 174 and BSES Ltd. v. Fenner Ltd.(supra)).

(emphasis supplied)

40. In Andhra Pradesh Pollution Control Board Vs. CCL Products (India)

Ltd.6 the Supreme Court summarised the following principles:

"15. .......A bank guarantee constitutes an independent contract
between the issuing bank and the beneficiary to whom the guarantee is
issued. Such a contract is independent of the underlying contract
between the beneficiary and the third party at whose behest the bank
guarantee is issued.

16. The principle which we have adopted accords with a
consistent line of precedent of this Court. In Ansal Engg. Projects Ltd.
v. Tehri Hydro Development Corpn. Ltd. [Ansal Engg. Projects Ltd. v.
Tehri Hydro Development Corpn. Ltd. , (1996) 5 SCC 450] a three-
Judge Bench of this Court held thus : (SCC p. 454, paras 4-5)
"4. It is settled law that bank guarantee is an independent and
distinct contract between the bank and the beneficiary and is
not qualified by the underlying transaction and the validity of
the primary contract between the person at whose instance the
bank guarantee was given and the beneficiary. Unless fraud or
special equity exists, is pleaded and prima facie established by

4 (1988) 1 SCC 174
5 (2006) 2 SCC 728
6 (2019)20 SCC 669
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strong evidence as a triable issue, the beneficiary cannot be
restrained from encashing the bank guarantee even if dispute
between the beneficiary and the person at whose instance the
bank guarantee was given by the bank, had arisen in
performance of the contract or execution of the works
undertaken in furtherance thereof. The bank unconditionally
and irrevocably promised to pay, on demand, the amount of
liability undertaken in the guarantee without any demur or
dispute in terms of the bank guarantee. ...
5. ... The court exercising its power cannot interfere with
enforcement of bank guarantee/letters of credit except only in
cases where fraud or special equity is prima facie made out in
the case as triable issue by strong evidence so as to prevent
irretrievable injustice to the parties."

17. The same principle was followed in SBI v. Mula Sahakari
Sakhar Karkhana Ltd. [SBI v. Mula Sahakari Sakhar Karkhana Ltd. ,
(2006) 6 SCC 293] where a two-Judge Bench of this Court held thus :
(SCC p. 301, paras 33-34)
"33. It is beyond any cavil that a bank guarantee must be
construed on its own terms. It is considered to be a separate
transaction.
34. If a construction, as was suggested by Mr Naphade, is to
be accepted, it would also be open to a banker to put forward
a case that absolute and unequivocal bank guarantee should
be read as a conditional one having regard to circumstances
attending thereto. It is, to our mind, impermissible in law."

41. In Standard Chartered Bank Vs. Heavy Engineering Corporation

Ltd. & Anr.7 the Court reiterated the following principles in the context on

injunction on invocation of the bank guarantee:

"23. The settled position in law that emerges from the
precedents of this Court is that the bank guarantee is an independent
contract between bank and the beneficiary and the bank is always
obliged to honour its guarantee as long as it is an unconditional and
irrevocable one. The dispute between the beneficiary and the party at
whose instance the bank has given the guarantee is immaterial and is of
no consequence. There are, however, exceptions to this rule when there
is a clear case of fraud, irretrievable injustice or special equities. The
Court ordinarily should not interfere with the invocation or encashment
of the bank guarantee so long as the invocation is in terms of the bank
guarantee."

7 (2020)13 SCC 574
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42. In Atlanta Infrastructure Ltd. v. Delta Marine Co. 8 in similar

context the Supreme Court made the following observations:

"7........It is trite to say that as a bank guarantee is an independent
contract, there is a limited scope for interference in case of encashment
of bank guarantee as enunciated by various courts including this Court
from time-to-time. One of the reasons for interference could be
egregious fraud. The fraud must be relatable to the bank
guarantee. ..........

43. The aforesaid position of law as laid down in these decision certainly

cannot be disputed on behalf of the plaintiffs in its applicability in the

present facts.

44. Insofar Mr. Kamat's contention that as leave was granted under Clause

XII of the Letters Patent, on such petition being filed by the plaintiff, this

Court had jurisdiction to entertain a prayer qua the CBG, also cannot be

accepted. We may observe that in granting of such leave, the learned Single

Judge has neither examined whether such leave could be granted qua the

appellant (defendant No. 3) and more particularly, in terms of the

independent contract of the CBG which was not between the plaintiff and

the appellant but SBI and the appellant. This perhaps for the reason that as

earlier observed by us, by clever drafting no relief whatsoever was directly

sought against defendant No. 3 / Appellant. The learned Single Judge in

granting leave under Clause XII of the Letters Patent, proceeded merely on

the basis that relief is primarily sought against the State Bank of India, which

8 (2021) 20 SCC 593
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was to honor the invocation of the CBG as issued in favour of the appellant.

This is clear from the reading of the order passed on the Leave Petition which

reads thus:

"2.The Suit is for declaring termination vide e-mail letter dated 5 th
November, 2023 about purchase order dated 18 th April, 2023 by
Defendant No.1 - Purchaser as null and void. Further declaration and
injunctions are sought.

3. There are two Defendants, one is Purchaser of pipes and second is
Bank who has issued a Bank guarantee on behalf of the Plaintiff. The
Bank guarantee is issued from Mumbai. It is to be encashed at Mumbai.
They are having Office at Mumbai. Only Defendant No.1 is having
Office outside Bombay at Egypt. Part of cause of action has occurred
within the territorial limits of this Court. Read Para No.5 of the
Petition and the averments in the Plaint. Leave under Clause XII of
Letters Patent is granted."

45. This apart in so far as the the injunction as granted by learned Single

Judge is concerned, there is hardly any reasoning on the first principles

which required due consideration in injuncting the invocation of the CBG by

the appellant. This is clear from the following observations as made by the

Court in granting the interim reliefs in terms of prayer clause (a) and (b) of

the interim application filed by the plaintiffs: Para 5 to 9

"5.Defendant No.1 has called tenders globally for the purpose of
supplying of pipes. Tender of Defendant No.1 was approved.
Defendant No.1 is liable to pay the Plaintiff. Whereas, one of the
conditions of Tender is furnishing of Bank guarantee issued by their
Banker - Defendant No.2. It was issued in US Dollar.

6. However, when the question of payment of the goods to be supplied
by the Plaintiff arose, a dispute cropped up in between them.
Defendant No.1 intends to pay in Egyptian Pound. Plaintiff was
finding some difficulty to convert Egyptian Pound to American
Dollar. Though Plaintiff raised this issue with their Banker, it
could not resolve. No goods were dispatched. There are
correspondence from month of April 2023 till 5 November, 2023.

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The assistance of Defendant No.l is sought for getting the approval
from the Central Bank of Egypt to transfer Egypt Pound into US
Dollars in Bank's Nostro Account. Somehow, the issue could not be
resolved. Finally, the Defendant No.l terminated the contract as per
the letter dated 5 November, 2023.

7. Contention is, when the Bank guarantee was furnished,
Defendant No.l insisted US Dollar. However, when the question of
payment from their side had come, they have not cooperated for
resolving the issue with Central Bank of Egypt. Further contention
is, the issue of nature of exchange was not covered as per the Tender
Document. Plaintiff's contention is, on one hand, Defendant No.l
has terminated the agreement. Whereas, on the other hand, they
want to encash the Bank guarantee. The period of original Bank
guarantee has also expired. Plaintiff got it extended. It is valid upto 30
November, 2023.

8. It is true that Bank guarantee can be encashed at any time once there
is termination from the side of Defendant No.l. So, the Plaintiff
apprehends that they will lose money particularly when they are not
faulted with this issue. Hence, an ex parte injunction in terms of
prayer clauses (a) and (b) is sought. It reads thus:

"(a) That this Hon'ble Court be pleased to pass appropriate
orders granting ex parte stay on the invocation by Respondent
No.l dated 7 November 2023 of the Bid Bond / Performance
Guarantee (Exhibit X) ;

(b) That the Hon'ble Court be pleased to pass an ex parte
order of temporary injunction restraining the Respondent No.2
by themselves and / or through their branches or howsoever
otherwise in any manner whatsoever from making payment
on the Bid Bond / Performance Guarantee and / or cause
further costs and expenses to be incurred by the Applicant.

9. There is a request to keep this matter during vacation so that both
these Defendants can get an opportunity to put forth their case.
Because, otherwise also the validity of the Bank guarantee is upt
30th November 2023. Hence, Order:-

ORDER

(i) An ex parte injunction is granted in terms of prayer clause (a) and (b).

(ii) Matter be kept before vacation Judge in view of the urgency on 17th November, 2023.

(iii) Let copy of this order be served on both the Defendants by e-

mail.

23 January 2025 Kiran Kawre

902-COMAP-18-2024.DOC

(iv) Parties to act on an authenticated copy of this order.

46. In the light of the above discussion, we answer the questions as noted

by us in paragraph 30 of this judgment to hold that the appellant had

lawfully invoked the CBG and as per its terms and conditions and

accordingly, had become entitled to the proceeds of the CBG to be remitted