Telefonaktiebolaget Lm ... vs Mercury Electronics & Anr
2017 Latest Caselaw 770 Del

$~23
*      IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                                    Decided on: 10.02.2017
+      CS(OS) 442/2013
       TELEFONAKTIEBOLAGET LM ERICSSON(PUBL) ... Plaintiff
                          Through:     Mr. C.S. Vaidyanathan, Sr. Advocate
                                       along with Ms. Prathiba M. Singh, Sr.
                                       Advocate.
                                       Ms.    Saya  Choudhary      Kapur,
                                       Advocate along with Ashutosh
                                       Kumar, Mr. Adithya Jayaraj, Mr.
                                       Nikhil Chawla, Ms. Sutapa, Mr.
                                       Abhimanyu Chauhan and Mr.
                                       Devanshu Khanna, Advocates.
                          versus
       MERCURY ELECTRONICS & ANR                       ..... Defendants
                          Through:     Mr. Jayant K. Mehta, Advocate along
                                       with Mr. Gaurav Vig, Mr. Shubham
                                       Agarwal and Mr. Shaurya Kuthiala,
                                       Advocates for D-2.
CORAM:
HON'BLE MS. JUSTICE DEEPA SHARMA
JUDGMENT (Oral)

O.A. 18/2017 (by defendant no. 2 against order dated 10.01.2017) & I.A. 1737/2017 (application seeking stay of order dated 10.01.2017) Issue notice. Notice is accepted on behalf of non-applicant. Learned counsel for the plaintiff has submitted that she does not want to file the reply to this OA of the defendant and the same may be disposed of.

CS(OS) No.442/2013                                                        Page 1
                Heard.

Vide this OA, defendant no. 2 has challenged the order dated 10.01.2017 passed by the Registrar General.

It is submitted that the Registrar General vide the impugned order rejected the objection of defendant no. 2 in respect of the validity of the bank guarantee which they raised along with their application with I.A. No. 11696/2016 and recorded the statement of the bank official and directed the defendant no. 2 to ensure the compliance of the order dated 12.11.2014. It is submitted that the Registrar General did not examine the deficiencies pointed out by defendant no. 2 in his objections and also did not verify the bank guarantee that plaintiff had furnished in compliance of the order passed by this Court but merely accepted the bank guarantee and therefore the passing of the impugned order is in violation of the discretion granted by this court to accept the bank guarantee to the satisfaction of the Registrar General and his approach is illegal and the impugned order is liable to be set aside.

It is also contended by defendant no. 2/applicant that this appeal has been preferred without prejudice to their rights in I.A. 11556/2016 and O.A. No 239/2016 and Registrar General had erred in passing the impugned order and so it is liable to be set aside.

Learned counsel for the plaintiff has submitted that this OA has no force in it because learned Registrar General had acted under the directions of the Division Bench and had accepted the bank guarantee submitted by the plaintiff and the application filed by the defendant

CS(OS) No.442/2013 Page 2 no.2 is mischievous and is moved with the sole intention to delay the disposal of the case and is liable to be dismissed.

I have heard the arguments and perused the record. From the perusal of the record, it is apparent that on 02.01.2017, the matter was taken up by Court for early hearing of O.A. 239/2016 and I.A. 11556/2016. The Court refused to post the matter for an early date and allowed the matter to be taken up on the date fixed i.e. 20.02.2017.

The defendant no. 2 against this order of the Court filed FAO(OS)(COMM) No.6/2017.

The Division Bench in FAO(OS)(COMM) No.6/2017 on 09.01.2017 had passed the following order:- "FAO (OS) (COMM.) 6/2017 & CM 822/2017

The major grievance of the appellant is that the IA 11556/2016 has not been taken up for hearing and despite an early hearing application having been filed and allowed, the matter was not heard on 02.01.2017. In the meanwhile the Registrar General of this court is going ahead with further steps towards acceptance of the bank guarantee furnished by the plaintiff in the suit and that there is every likelihood that a consequential order requiring the appellant to make an equivalent payment to the plaintiff may be passed by the Registrar General tomorrow itself.

We are of the view that this appeal can be disposed of by directing that the IA11556/2016 and OA 239/2016 be listed before the learned Single Judge for disposal on 11.01.2017 in the first instance. In the meanwhile the Registrar General shall proceed with the steps towards

CS(OS) No.442/2013 Page 3 accepting the bank guarantee but the same shall be without prejudice to the rights of the parties in the IA 11556/2016 and OA 239/2016. There was objection on the part of the respondent that the present appeal itself was not maintainable but we are in effect not entertaining the appeal as such because we feel that the learned Single Judge can deal with the matter by hearing the above application and the OA 239/2016. It is for this reason we are not going into the issue whether the appeal is maintainable or not. Neither do we need to examine the merits of the matter.

The appeal stands disposed of.

Dasti under the signature of the Court Master."

Pursuant to this direction of the Division Bench, matter was taken up by the Registrar General on 10.01.2017 on which date, he passed the following order:-

"Today, learned counsel for defendant No.2 placed before me a photocopy of order dated 09.01.2017 of the Hon'ble Division Bench, whereby while disposing of the appeal, the Hon'ble Division Bench directed the Registrar General to proceed with the steps towards accepting the bank guarantee without prejudice to the rights of the parties in lA No.11556/2016 and OA No.239/2016.

Although, bank officials are stated to be present for recording of statements relating to bank guarantees, which had to be accepted subject to satisfaction of the Registrar General, learned counsel for defendant No.2 contended that defendant No.2 also may be heard as regards validity of the bank guarantees. Both sides

CS(OS) No.442/2013 Page 4 addressed arguments for more than an hour. It is after completing the oral submissions that learned counsel for defendant No.2 also placed on record written submissions related to validity of the bank guarantees and learned senior counsel for the plaintiff filed a compilation of relevant orders.

It is lunch time. Re-call at 3.00 pm."

"At 3.00 pm

CM No.11696/2016

This order deals with objections submitted on behalf of defendant No.2, challenging the validity of bank guarantees submitted by plaintiff for the satisfaction of Registrar General. Arguments were advanced for more than one hour in pre-lunch session by learned senior counsel for plaintiff and by learned counsel for defendant No.2, where after written arguments also were submitted on behalf of defendant No.2 and a brief compilation of relevant orders was submitted on behalf of plaintiff, which have been examined by me.

Briefly stated, vide order dated 12.11.2014, the Hon'ble Single Judge while disposing of applications under Order 39 Rules 1 and 2 CPC and under Order 39 Rule 4 CPC, recorded consent of both sides, whereby defendant No.2 agreed to pay during pendency of the trial, royalty at different rates specified in the order itself, directly to plaintiff for sales made in India pertaining to different periods. In the said order dated 12.11.2014, the Hon'ble Single Judge also directed that the trial of suit be expedited and the same be concluded by 31.12.2015 where after final arguments were to be commenced and

CS(OS) No.442/2013 Page 5 both parties had no objection to the said arrangement. In compliance with order dated 12.11.2014, payment of royalty was made twice to the plaintiff. The payment of royalty was initially directed to be subject to the plaintiff furnishing surety bond of the exact amount to the satisfaction of the Registrar General but this condition was modified vide order dated 10.04.2015, whereby instead of surety bond, bank guarantee was directed to be filed. As regards the payments now to be made, admittedly defendant No.2 submitted the calculations of royalty amount, which was accepted by plaintiff, so the only issue now left is the payment of the same. In that regard, plaintiff filed IA No.11696/2016 seeking directions to defendant No.2 to transfer the admitted royalty amount of Rs.57,52,98,182/- by wire transfer. In order to secure the amount plaintiff also filed bank guarantees.

I.A No.11696/2016 came up for hearing before me, as defendant No.2 strongly opposed the same. After hearing both sides, vide order dated 06.12.2016, I found no force in the opposition to the application so matter was posted for recording the statement of bank officials as regard the acceptance of the bank guarantees. My order dated 06.12.2016 was challenged by way of Chamber Appeal filed on behalf of defendant No.2 but the proceedings as regards accepting the bank guarantees were not stayed by the Hon'ble Single Judge. Thereafter, defendant No.2 filed FAO (OS) (Comm.) No.6/2017 in which the Hon'ble Division Bench of this Court while disposing of the appeal directed Registrar General to proceed with the steps towards accepting the bank guarantee without prejudice to the rights of the parties in the Chamber Appeal.

CS(OS) No.442/2013 Page 6 Learned counsel for defendant No.2 argued that the surety bond initially ordered and bank guarantees subsequently ordered must be in favour of defendant No.2 and not in favour of Registrar General since it is the defendant No.2 who is releasing money and therefore, has to be protected. Learned counsel for defendant No.2 clarified that the earlier bank guarantee accepted were in favour of Registrar General of this Court, since the same was to secure the amount of Rs.118 crore which was lying under the control of the Registrar General, whereas now the money has to be released by defendant No.2 directly to the plaintiff. As regards the bank guarantee subsequently accepted in favour of the Registrar General of this court in terms with order dated 07.07.2015, the same was inadvertent error as per counsel for defendant No.2.

It was further argued by learned counsel for defendant No.2 that the remittance of the amount has to be by way of demand draft or cheque and not by way of wire transfer since earlier also the payments were made by way of demand draft.

As regards validity of the bank guarantees also, learned counsel for defendant No.2 contended that such bank guarantees being conditional and restricted shall not be enforceable. It was argued that bank guarantees should be continuing one so that there is no need of a renewal of the same. It was argued that since the bank guarantees contemplate a demand by the Hon'ble High Court during the currency of the bank guarantees and also contemplate passing of an adverse order, which in turn would be a matter of interpretation, uncertainty has crept in. It was further contended that since the bank

CS(OS) No.442/2013 Page 7 guarantees contemplate that the bank would pay only when plaintiff fails to pay, contingency is likely to create a dispute.

Per contra, learned senior counsel for plaintiff took me through the relevant orders as well as copies of bank guarantees filed by way of compilation. Learned senior counsel for plaintiff demonstrated at length that defendant No.2 is trying to wriggle out of their commitments and ever since 24.09.2015 defendant No.2 has been protracting the proceedings on one or the other pretext and not making payments which were to be made on quarterly basis.

Learned senior counsel for plaintiff pointed out that order dated 12.11.2014 of Hon'ble Single Judge nowhere contemplated that the payments would be released by defendant No.2 to the plaintiff by way of only demand draft or cheque. Rather, order dated 19.12.2014 as per learned senior counsel for plaintiff clearly showed that counsel for defendant No.2 himself submitted that defendant No.2 would release the sum of Rs. 113 crores by way of wire transfer and accordingly payment by way of wire transfer was directed. Even order dated 10.04.2015 of the Hon'ble Single Judge directed release of the payment by way of wire transfer.

As regards bank guarantees, learned senior counsel for the plaintiff argued that the same could not be in favour of defendant No.2 since that would create a risk of defendant No.2 invoking the same arbitrarily and illegally. If defendant No.2 does not trust the court, there is no reason for plaintiff to trust defendant No.2 and therefore, according to learned senior counsel for

CS(OS) No.442/2013 Page 8 plaintiff the bank guarantees have to be in favour of Registrar General of this Court.

Learned senior counsel for plaintiff also took me through order dated 07.05.2015 whereby defendant No.2 was explicitly protected by directing the plaintiff to keep the bank guarantees alive till disposal of the case and file renewed bank guarantees at least four weeks in advance before expiry of the bank guarantees, in failure whereof the matter would be placed before the Hon'ble Court.

Learned senior counsel for plaintiff also took me through the bank guarantees earlier filed on behalf of plaintiff which were verbatim similar to the bank guarantees presently submitted for consideration. Learned senior counsel for plaintiff also took me through order dated 29.01.2016 which specifically dealt with the contentions similar to the ones raised today by learned counsel for defendant No.2.

In light of above mentioned rival submissions 1 have examined the three bank guarantees filed on behalf of plaintiff along with I.A No.11696/2016. The said bank guarantees are verbatim same as the bank guarantees previously submitted on behalf of plaintiff and accepted by my predecessor Registrar General, rejecting the similar arguments of defendant No.2 in order dated 29.01.2016. The present bank guarantees bear explicit clause No. 6 whereby the bank has undertaken not to revoke the guarantees during the currency of the same except with the previous consent of the Delhi High Court in writing. In addition, as mentioned above, vide order dated 07.05.2015 defendant No.2 was granted further protection by directing the plaintiff to keep the bank

CS(OS) No.442/2013 Page 9 guarantees alive till disposal of the case and file renewed bank guarantees at least four weeks in advance before expiry of the bank guarantees, failing which the matter was to be placed before the Court. Vide order dated 24.09.2015 my predecessor Registrar General found the bank guarantees valid up to 09.09.2016 in order and accepted the same subject to the condition that plaintiff would keep the bank guarantees alive till disposal of the case.

Admittedly the bank guarantees earlier submitted by plaintiff and accepted by my predecessor Registrar General are being regularly renewed and are kept alive.

Even the contention of learned counsel for defendant No.2 that the bank guarantees should be in favour of defendant No.2 and not Registrar General of this court was examined vide order dated 29.01.2016 and was rejected placing reliance on order dated 07.07.2015 of the Hon'ble Court, which specifically contemplated bank guarantees to be in favour of Registrar General of this court. Argument of learned counsel for defendant No.2 that order dated 07.07.2015 of the Hon'ble Court was "erroneous" fails to hold water as admittedly no steps were taken by defendant No.2 to challenge the same or get the same modified. Besides, the Registrar General certainly cannot hold an order passed by the Hon'ble Court to be "erroneous".

Counsel for plaintiff has also filed copies of certain orders passed in CS(OS) No.2010/2013 in which also, similar bank guarantees were accepted.

In view of above discussion, I fail to find any merit in the objections of defendant No.2 to the acceptance of

CS(OS) No.442/2013 Page 10 the bank guarantees furnished by plaintiff with I.A No. 11696/2016.

Statement of Mr. Vishal Vedi, Manager, Credit Agricole Corporate & Investment Bank separately recorded.

The following bank guarantees submitted by plaintiff/Telefonaktiebolaget LMEricsson (PUBL) are found to be in order and the same are accepted:-

(i) Bank Guarantee No.INDB602066 DIS dated 26.08.2016 for INK 22,60,71,137/- valid upto 25.08.2017 issued by Credit Agricole CIB, Mark'D'.

(ii) Bank Guarantee No.INDB602071 DIS dated 26.08.2016 for INK 19,15,31,048/- valid upto 25.08.2017 issued by Credit Agricole CIB, Mark 'E'.

(iii) Bank Guarantee No.INDB602070 DIS dated 26.08.2016 for INR 15,76,95,997/- valid upto 25.08.2017 issued by Credit Agricole CIB, Mark 'F'.

The plaintiff shall keep the said bank guarantees alive till the disposal of the case and shall file renewed hank guarantees at least four weeks in advance before expiry of the above mentioned bank guarantees.

In case the matter remains pending and the bank guarantees are not renewed by plaintiff, the file shall be put up before this Court at least three weeks before expiry of the above mentioned bank guarantees.

IA No. 11696/2016 has already been allowed. Defendant No.2 is directed to ensure compliance accordingly.

CS(OS) No.442/2013 Page 11 In compliance of the directions of the Hon'ble Division Bench, matter be placed before the Hon'ble Single Judge on 11.01.2017.

As requested by both sides, copy of this order be given dasti (dictation concluded at 4.00 p.m.)"

The Division Bench vide its order dated 09.01.2017 had directed the Registrar General to proceed with the steps towards accepting the bank guarantee and observed that the same shall be without prejudice to the rights of the parties in the I.A 11556/2016 and O.A 239/2016". The Division Bench had also directed that I.A. 11556/2016 and O.A. 239/2016 be put up before this Court for disposal on 11.01.2017, however, on that date since this Court was on leave, the Court master had fixed this IA and OA for hearing for the date already fixed in the matter i.e. 20.02.2017.

The contentions raised by the defendant in this OA is that Registrar General did not consider the objections raised by him in IA 11556/2016, this argument is of no consequence and misplaced because while issuing the directions to the Registrar General for accepting the bank guarantee, the Division Bench had clearly held that "in the meanwhile the Registrar General shall proceed with the steps towards accepting the bank guarantee but the same shall be without prejudice to the rights of the parties in the I.A. 11556/2016 and OA 239/2016". The applicant was very well aware that the Registrar General had acted squarely as per the directions of the Division Bench and his challenge in I.A. 11556/2016 was open for argument before this Court which was fixed for hearing by Division

CS(OS) No.442/2013 Page 12 Bench for 11.01.2017 and knowing fully well that the Registrar General had no jurisdiction to consider his objections in the said I.A while acting under the directions of the Division Bench dated 09.01.2017 yet the present OA has been filed. The order of the Registrar General does not suffer with any infirmity or illegality.

The OA as well as application is misconceived and meritless and the same are dismissed with cost of Rs. 1 lakh.

I.A. 1738/2017 (application for early hearing of I.A. No. 11556/2016 and O.A. No. 239/2016)

As per the directions of the Division Bench, the matter was put up on 11.01.2017 for disposal of these IA's.

The Court was on leave on that day.

The matter was then listed for 20.02.2017 by Court Master. Since this date is only a week away and the Court has already heard the parties on O.A. 18/2017 and disposed it of, no ground for giving other short date is made out.

The application stands disposed of.

                                                         DEEPA SHARMA
                                                            (JUDGE)

FEBRUARY 10, 2017
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CS(OS) No.442/2013                                                     Page 13