Final Order 1

Order Details: Notice of Motion
Pdf Text: 1
IN THE BOMBAY CITY CIVIL COURT AT BOMBAY
LOCKDOWN COURT NO.8
NOTICE OF MOTION NO. 1224 OF 2020
IN
COMMERCIAL SUIT (STAMP) NO. 3765 OF 2020
UD Trading Group Holding Pte Ltd. )…Plaintiff
Versus
ICICI Bank Limited & Ors. )…Defendants
CORAM : HIS HONOUR JUDGE SHRI R.V. KOKARE
LOCKDOWN COURT NO.8
DATE : 08/06/2020.
APPEARANCE:
Adv. Mr. Karan Bhosle a/w Adv. Priyanka Dubey for Plaintiff
Adv. Mr.Bhadang a/w Adv. Vividh Tandon i/b. Trilegal for Defendant
No.1
ORDER
This is a notice of motion taken out by the plaintiff for
temprorarily restraining to the defendant no.1 from invoking the
corporate guarantee dated 9th October,2015 issued by the plaintiff
company and given to the defendant no.1 bank, pursuant to the
facilities extended by the defendant no.1 bank to UIL Hongkong Limited
pursuant to the bank facility agreement dated 30th september 2010.
This notice of motion resisted by the defendant no.1 Bank by filing its
reply. Read the present notice of motion, Reply of the defendant no.1.
Heard both the learned counsels on behalf of both the sides at length.
Perused record.
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2. Brief facts of the plaintiffs case are that plaintiff is a company
duly incorporated in the republic of Singapore. The plaintiff is one of
the companies of UD group of companies. UIL Hongkong limited
(UILHK), a company incorporated in Hongkong on 12th Nov. 2009 is the
wholly owned subsidiary of plaintiff. Initially 'UILHK' was the wholly
owned subsidiary of Ushdev International Limited (UIL INDIA), Mumbai
till 2013-2014. The defendant no.2 is the chairman and non executive
director (suspended) of UIL, whereas defendant no.3 is the promoter of
UD group and also a non executive Director (suspended) of UIL. The
Defendant no.1 is the lender of the plaintiff and is a bank constituted
under the provisions of the Banking Regulation Act, 1949, having its
corporate office in Mumbai.
3. The Plaintiff states that, UIL has been incorporated on 18th May ,
1994 and duly registered under the provisions of the Companies
Act.1956. Having its registered office at Mumbai. UIL is engaged in
business of trading in metals. UIL is one of the India's largest companies
in the metal trading sector with its core businesses in metals and power
generation. UIL's revenues are over Rs.8884 crores having 100
employees, with offices strategically located in 5 countries. The
Defendant No.1 Bank is the lender of the UD group since past 20 years.
On 30th september 2010, UILHK entered into facility agreement with
Defendant No.1. By way of said facility agreement, the Defendant no.1
agreed to give credit facility amounting to USD 40 million to UILHK.
Pursuant to the credit facilities to UILHK, the Defendant no. 1 requested
Defendant no.3, the then Managing Director of UIL to provide his
personal gurantee and corporate gurantee of UIL to ensure the
repayment obligations of UILHK. The Plaintiff issued and provided said
corporate guarantee dated 9th October 2015 in favour of the Defendant
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no.1 against the credit facilities provided by the defendant no.1 to
UILHK as per the facility agreement dated 30th sepember 2010 as
amended from time to time. All discussion in respect of providing said
credit facility to UILHK took place at UIL INDIA head office at Fort,
Mumbai or the corporate office of defendant No.1 at BKC Mumbai as in
2009-10 UILHK was wholly owned subsidiory of UIL. The Defendant
no.1 being the consortium member of UIL, also issued their no
objections for providing such corporate gurantees by UIL. The
Defendant no.1 issued credit arrangement letter dated 8th July 2010
with respect of working capital facilities in favour of UILHK upto USD
40 million.
4. The plaintiff further states that prior to the execution of this
corporate Guarantee, somewhere in the month of september 2012 , the
Defendant no.1 approached Defendant no.2, the then Managing
Director of UIL and asked his assistance through his entities for the
purpose of bailing out two companies initially namely Glodyne
Technoserve Limited and Smarftech Technologies Private limited who
appear to be facing financial difficulties. In the event of non co-
operations by UIL , the bank threatened to reduce / withdraw the credit
facility of UIL and UILHK. The Defendant no.1 pressurized UIL to lend
money to these third party customers of which the UIL or UD group did
not have any previous course of dealing. The defendant no.1 officials
were fully aware that the facility agreement of UILHK was due to be
renewed during the said quarter ending due to which Defendant no.2
would not be in a position to refuse the bank suggestion. The plaintiff
group provided the financial assistance and consequently, UIL entered a
number of Inter corporate debt (ICD) agreements with these entities.
5. The Plaintiff further state that on or around 20th September,
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2012 towards the quarter ending of September 2012, Defendant no.1
officials again approached UIL INDIA with a proposal to fund another
financially stressed customer, Kemrock Industries ( "kemrock"), who
then required financial assistance, and would default in repayment of
its loans taken from the Defendant no.1, otherwise if not assisted. The
amount requested was USD 10 million. The entire UIL group were
reluctant to comply with the requests of the defendant no.1 and were
unhappy with these requests of bank that were wrought undue
influence and coercion. As such, UIL INDIA and UILHK expressed their
unwillingness about the same and requested Defendant no.1 not to
involve them or any of the company of the UIL Group in the said
scheme of bank. However, the Defendant no.1 assured that Kemrock is a
financially sound and mega giant company with healthy business in the
market. The Defendant no.1 promised and assured UIL Group that if the
financial assistance is provided to their client, then bank will inrease
credit facility of the UILHK from USD 40 millions to USD 72 million.
Further, the bank also misrepresented to UILHK that upon UILHK
providing such financial assistance to kemrock, then kemrock would
provide certain land parcels as security which can be invoked at any
time in the event of non-payment of loan by UILHK. Ultimately, albeit
very reluctantly and for want of any other option, based on
representations of financial soundness of kemrock, undertakings,
assurances and threats from the Bank, UILHK agreed to assist Bank's
distressed customer.
6. It is submitted that on 24th september 2012, Hiren Vora, the
relationship manager of ICICI Bank for Kemrock Industries, alongwith
Mr.Kalpesh Patel, the promoter of Kemrock Industires, visited UIL INDIA
Mumbai office and informed the modus operandi of this transaction.
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UIL Group expressed thier concern that the said loan amount of USD 10
million would have substantial negative effect on its cash flow and
working capital which might jeoparadise companies own commercial
operations and ability to access and deploy financing. However, bank
represented that like the glodyne and smarftech, the said funding to
Kemrock India would also be immediately repaid to UILHK. It was
further represented by the Bank that, as soon as the kemrock loan was
paid, new funds would be disbursed to the kemrock group by Defendant
no.1, which would enable it to comply with the immediate repayment
of the Kemrock loan to UILHK. Thereafter, the entire modus operandi of
the transaction was planned out by the officials of Defendant no.1.
Subsequently, Defendant No.1 also increased credit facility of UILHK
from USD 40 million to USD 72 million in order to fund this
transaction.
7. The Plaintiff states that the Defendant no.1's Hongkong issued LC
for USD 9.7 million in favour of one of regular vendor of UIL Group i.e.
Newzone Intertrade FZE (Newzone ) against UILHK's regular purchase
agreement with New Zone under an arrangement to pay the discounted
proceeds to kemrock directly under UILHK's guarantee to repay them
within 10 days for the material purchased. UILHK provided an
undertaking to indemnify the said vendor from potential losses of the
aforesaid transaction. Thereafter, as per the arrangement, Defendant
no.1, Hongkong branch issued the letter of credit to the vendor to the
counters of Defendant no.1 Dubai branch for discounting the usance
period of 90 days. However, Defendant no.1 Dubai Branch discounted a
L/C worth 9.70 millions USD to a client walked into their office for the
first time with direct remittance of money to Kemrock India bank
account with Defendant no.1, India on behalf of Kemrock FZE and
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debited discounting interest of UILHK account.
8. However, to the absolute shock of UD Group after the receipt of
the money from Kemrock for reasons best known to them, the Bank
refused to grant additional funding to Kemrock and therefore
Kemrocks's account became non-performing asset (NPA) in subsequent
quarters. It is pertinent to note that since Bank refused to disburse the
further funding to Kemrock, Kemrock also defaulted in repayment, as
UILHK stood as a gurantor to the transaction between New Zone
(vendor) and Kemrock, thus the entire burden of this liabilty fell on
UILHK. Due to UILHK constant follow up on Kemrock loan seeking
return of the funds and subsequent denial on supporting bank in other
evergreening transactions, the bank refused UILHK to utilize its full
sanctioned limit of USD 72 million and reduced the credit d to exposure
USD 50 million and thereafter to USD 40 million abruptly and
arbitrarily despite the sanction was for one year.
9. The plaintiff states that due to constant pressure on its cash flows
due to misdoing of Defendant no.1 in books of UILHK, the account of
UILHK turned NPA with its bank. Subsequently banks have taken UILHK
into liquidation due to non payment of dues which has wiped out full
equity value of the plaintiff in UILHK in excess of USD 100 million. The
Defendant No.1 has threatened the plaintiff that they would be invoking
the said corporate Guarantee outside India , which was provided by the
plaintiff against the credit facility provided to UILHK. The Plaintiff
states that the Plaintiff has the serious apprehension that the Defendant
No.1 would act against interest of the Plaintiff and would deprive the
legal and legible rights, of the Plaintiff. Hence this Notice of Motion.
10. The Defendant No.1 resisted the Notice of motion taken out by
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the plaintiff company. The Defendant no.1 states that the corporate
Guarantee ( governed by laws of singapore ) was issued by the Plaintiff
( a Singapore based company) in favour of Hongkong Branch of
Defendant no.1 (which is governed by the regulator of Hongkong) in
respect of facilities advanced to UIL Hongkong limited,(UILHK)
principal borrower. Further, as per clause 22 of the Corporate
Guarantee, the plaintiff has agreed that the corproate guarantee would
be governed by laws of Singapore and the courts of Singapore shall, at
Defendant no. 1’s instance, have jurisdiction to adjudicated any dispute
thereunder. Therefore, any legal action ought to be initiated in respect
of the Corporate Guarantee, the same would lie in singapore as per
applicable law.
11. The Defendant no.1 further states that the Plaintiff and its various
group companies have defaulted on several loans, and many such
companies are already undergoing winding up/insolvency proceedings
in respective jurisdictions. Moreover, the promoters of the plaintiff and
its affiliates have also defaulted on personal guarantee issued in favour
of Defendant no.1 and the lenders, including Defendant no.1 have
initiated recovery proceedings before the Hon’ble Debt Recovery
Tribunal, Mumbai Bench. It is amply clear from the aforesaid that the
Plaintiff and its affiliates/ Promotors are facing immense financial crises
and as a result, they are unable to service the debts owed to Defendant
no.1. The Plaintiff has filed the present proceedings in its desperate
attempt to delay initiation of potential legal action, including winding
up proceedings against the Plaintiff in Singapore.
12. The Defendant no.1 has states that the plaintiff has suppressed
certain material facts that in view of persisting default by UILHK,
Defendant no.1 acted in accordance with Singapore law, general
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banking practices in Singapore and in terms of the Corporate Guarantee
to invoke the Corporate Guarantee and consequently, issued a statutory
demand notice dated 23rd March 2020 {(expiring on 13 April 2020
(statutory demand notice)}. The statutory Demand notice was served
upon the Plaintiff on the same day i.e. 23rd March 2020 by way of hand
delivery. The Plaintiff suppressed this material facts with the malafide
intent to maintain the present suit. The present suit and notice of
motion are nothing but a counter blast to the statutory Demand Notice.
It is the duty of the plaintiff to disclose all the material facts while
approaching the court and not withhold or misrepresent facts to gain an
undue advantage over opposite party.
13. The Plaintiff has failed to pay the defaulted amount as demanded
under the statutory Demand Notice. The Plaintiff, in its desperate
attempt, tried to bring itself under the pool of companies that are
specifically impacted by non operation of business activities during the
lockdown implemented in various countries across the globe. However,
it is pertinent to note that the Plaintiff and its group companies have
been defaulting on several loans advanced by defendant no. 1 much
before the coronavirus outbreak. Therefore, it would be nothing but an
unjust enrichment on part of the defendant to take shelter of the
coronavirus outbreak.
14. The Defendant no. 1 states that in furtherance of initiation of the
present proceedings, the plaintiff itself initiated legal proceedings
against Defendant no.1 before the High Court of Republic of Singapore,
bearing case no. HC/OS/400/2020 and sub-case no. HC/sum/1676 on
9th April 2020. The Plaintiff themselves have ascribed to the jurisdiction
of Courts of Singapore. Therefore, initiation of multiple legal
proceedings on same cause of action is not only abuse of Court process
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but also impermissible under law. The plaintiff by initiating several legal
proceedings is depriving to the Defendant no.1 from claiming its
legitimate and rightful dues, which is the public money held in trust.
15. The Defendant no.1 states that the present suit and Notice of
Motion have been filed with the sole intention of initiating unnecessary
and frivolous litigation in order to harass and pressurise one of the
leading and reputed banks of India to succumb to the illegal demands of
the Plaintiff. The present proceedings have been initiated with the aim
to delay the recovery of legitimate claims of Defendant no.1. On these
grounds the Defendants no.1 submitted that the present Notice of
Motion of the plaintiff may kindly be dismissed with costs.
16. Considering pleadings, notes of argument and documents are on
record and the terms of corporate guarantee dated 09-10-2015, there
are two main objections raised for entertaining the matter for grant of
relief by the Hon’ble court viz. that this Court does not have jurisdiction
to try and entertain the present proceedings filed by Plaintiff and the
present proceedings are not maintainable in view of the fact that the
Defendant No.1-Bank has already issued notice dated 23.03.2020 and
Plaintiff ascribed to jurisdiction of the Singapore Court by filing
proceeding there. Thus, the present proceedings has become
infructuous.
17. Before expressing my opinion, some further developments have
taken place in the matter after 02.04.2020 and during the hearing of
the present notice of motion which are required to be kept in mind and
cannot be overlooked. These developments are: filing of Chamber
Summons by Plaintiff on 15.05.2020 for amending the plaint and
Notice of Motion by the Defendant No.1-Bank on 22.05.2020 for
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rejection of plaint under Order VII Rule 11 r/w section 151 of Civil
Procedure Code,1908 on the ground that cause of action as disclosed in
the plaint has become infructuous.
18. The material question relating to the jurisdiction of the Court is
concerned, it is noted that plaint (pleadings) and the terms of the
Corporate Guarantee are required to be considered. Plaintiff has averred
that it’s Head Office and Corporate Office is at Mumbai and the
meetings between the Plaintiff and the Defendant No.1-Bank has taken
place in Mumbai. The cause of action has arisen in Mumbai. Therefore,
this Hon'ble Court will have jurisdiction to try and entertain the present
proceedings in view of provision contained in Section 20 of the Code of
the Civil Procedure, 1908. The Defendant No.1-Bank has also office in
Mumbai and the officers of the Defendant No.1-Bank which are named
in the pleadings negotiated with the Plaintiff in Mumbai in regard to the
transactions mentioned in the plaint and the terms of the Corporate
Guarantee. Therefore, in view of the settled position in law that the
cause of action has to be decided based on the pleadings, this Hon'ble
Court will have jurisdiction on the basis of facts which transpired in
Mumbai in relation to facilities and Corporate Guarantee as pleaded in
the plaint.
19. The contention of the Defendant No.1-Bank opposing the
jurisdiction of this Hon'ble Court is based on Clause 22 of the Corporate
Guarantee dated 09.10.2015 which deals with the Governing law and
Jurisdiction and also on the basis that the Plaintiff has subscribed to
jurisdiction of Singapore court as it filed proceedings in Singapore. So
far as ascribing to jurisdiction of Singapore is concerned, in my view,
Plaintiff first filed the present suit and then filed the proceeding in
Singapore. It is not clear from the record under which Act the said
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proceedings have been filed there. The Defendant No.1-Bank can raise
objection. It cannot therefore, be said that Plaintiff has ascribed to
jurisdiction of Singapore Court as the nature of the present matter is
totally different.
20. Now, if we proceed on the basis that the said guarantee is valid
ignoring the allegation in plaint, then this court would be required to
see the terms of the Corporate Guarantee in relation to laws applicable
about jurisdiction. Clause 22 says that the Corporate Guarantee shall be
governed by and construed in accordance with Singapore law. It also
says that the parties which Corporate Guarantee irrevocably agrees to
submit to lead non exclusive jurisdiction of the Court at Singapore or of
any other Court as the lender may elect. The other factor which is
required to be considered for the purposes of jurisdiction are
averments/pleading in the plaint.
21. Before we go to consider this based on terms of Corporate
Guarantee, Plaintiff, in the plaint filed before the Court, has pleaded
fraud and misrepresentation against Defendant No.1-Bank in regard to
financing transaction with UILHK in relation to which the Corporate
Guarantee was given. Plaintiff has given sufficient particulars in respect
of transactions and annexed documents which indicate involvement of
Defendant No.1-Bank officials playing significant role. On that basis, the
Plaintiff has disputed the Bank’s to invoke the Corporate Guarantee.
22. A careful perusal of this clause 22 makes it clear that the issues in
respect of the Corporate Guarantee will have to be adjudicated based on
law applicable in Singapore. The other important thing in this clause
relates to the jurisdiction of the Court. It says that the Singapore Court
may have jurisdiction but the clause also says that the other Courts may
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also have jurisdiction as the lender may elect. What is required to be
noted is that the jurisdiction of the Court at Singapore is not at all
exclusive. This clause, on the face of it, cannot be construed as a clause
excluding jurisdiction of other Courts and conferring exclusive
jurisdiction on Singapore Court as clear from the words "of any other
Court as the lender may elect". This clearly means that apart from Court
at Singapore, other Courts will also have jurisdiction but at the option
of lender.
23. The issue in the light of these facts would be whether the clause
of the Corporate Guarantee could be relied upon at this stage when
there are serious allegation against Bank’s involvement supported by
documents. It would have been different case if allegation of fraud
coercion/undue influence and misrepresentation were not supported by
documents.
24. If we go by the case as sought to be advanced by the bank, in
view of settled legal position in India, cases which are required to be
decided as per foreign law applicable in a particular country, the same is
required to be placed before the court in an Affidavit pleading foreign
law on oath which could not be done due to paucity of time and
extraordinary situation caused by Covid-19 all over the world bringing
everything to halt. Therefore, in absence of proper affidavit putting law
applicable in regard to jurisdiction and Corporate Guarantee applicable
in Singapore, it is necessary in the facts and circumstances of the
present case and also in the interest of justice that the order dated
02.04.2020 passed by this Hon’ble Court should not be disturbed.
Further, based on the facts as they stand today, in view of the pleadings
in the plaint showing material and important facts transpired within the
jurisdiction of this Hon’ble court and which are not disputed by the
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Bank, this Hon’ble court necessarily have jurisdiction over the matter
and it would be in the interest of justice to try and entertain the present
suit. Therefore, the interim reliefs based on principles of equity and
balance of convenience on issues raised are required to be adjudicated
based on the proper law prevailing in Singapore, if found applicable, by
this Hon’ble Court India having jurisdiction and in regard to grant of
interim relief which is in the nature of injunction. The law in India in
regard to jurisdiction is dealt with the Code of Civil Procedure, 1908
and the provisions of the Code of Civil Procedure are taken into
consideration, the jurisdiction has to be decided on the basis of
pleadings which clearly states that the cause of action has arisen in
Mumbai on the basis of facts mentioned in the plaint. This Hon'ble court
will therefore, have jurisdiction to try and entertain the present
proceedings.
25. Considering documents produced on behalf on the plaintiff
annexed with the plaint and pleadings with regard to jurisdiction, it is
clear that negotiations have taken place in Mumbai, therefore, it cannot
be said that cause of action has not arisen in Mumbai; the Bank’s
officers who participated in negotiation are also in Mumbai, therefore,
in the light of non exclusive jurisdiction of court at Singapore and in
absence of appropriate law applicable in Singapore with regard to
jurisdiction and also in the light of specific pleadings by Plaintiff that
negotiations took place in Mumbai, this Court will have jurisdiction.
26. As regards the issue of maintainability of the proceedings is
concerned, this should also be seen on the basis of terms of Corporate
Guarantee and facts of the case. The proceedings are filed by Plaintiff
for permanent injunction restraining the Defendant No.1-Bank from
invoking the Corporate Guarantee by the Defendant No.1-Bank and
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during the pendency of the proceedings interim relief with regard to
invocation of Corporate Guarantee by Defendant No.1-Bank and also
restraining the Defendant No.1-Bank from taking any coercive action
against U D Trading by invoking Corporate Guarantee.
27. There are two admitted facts viz. the Defendant No.1-Bank has
extended financial facilities to UIL-HK, a group company of the Plaintiff
in 2010 with certain modifications which took place till 2015 as averred
in the Plaint. In 2015, Corporate Guarantee was given by Plaintiff
favouring the Defendant No.1-Bank in regard to the facilities extended
by the Defendant No.1-Bank to UIL-HK as stated in the plaint r/w with
para-1 of the Corporate Guarantee. Admittedly, the Corporate
Guarantee was given in relation to the facility given by the Defendant
No.1-Bank to UIL-HK. Though the Guarantee is an independent
agreement, yet the fact that the Corporate Guarantee was given for
facility by the Defendant No.1-Bank to UIL-HK has to be kept in mind.
The contention of the Defendant No.1-Bank that the Corporate
Guarantee has no nexus and whether the Corporate Guarantee can be
treated to be an independent agreement as contended by Bank, has to
be seen from the terms of the Corporate Guarantee. Further, in case of
sureties, if we go by the stand of the Bank, the law applicable would be
law applicable to sureties in England and the Defendant No.1-Bank
being creditor would
prima facie be estopped from taking benefit of the
Corporate Guarantee on the basis of allegation in plaint indicating
involvement of Defendant No.1-Bank official which are surprisingly not
denied by Defendant No.1-Bank despite two submissions. Principal of
Estoppel, in the facts of the present case as brought on record by
Plaintiff and Bank, would come and assist Plaintiff and not the
Defendant No.1-Bank which relied on the case of
Hewlett-Packard
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Singapore Sales Pte. Ltd. v/s Chin Su Hwa Corrina, [2016] SGCA 19.
28. Further, if the terms of the Corporate Guarantee are read as a
whole, it will reveal and throw light on the clear nature of the
Corporate Guarantee. Para 1 itself refers UIL-HK as a borrower and
defines the Guaranteed Obligations which are in fact related to the
demand of monies or liabilities arising out of different facilities
mentioned in the said para. The second para also again refers to
continuation of the Corporate Guarantee in full force till the amounts
due are paid in full either from Guarantor or from the Borrower under
the Guaranteed obligation. In para 4, of the Corporate Guarantee, the
Guarantor undertakes the Defendant No.1-Bank to exercise no right
mentioned therein "so long as the borrower has any actual or contingent
liability to the lender". Para 5 refers to the borrower. Further clauses of
the Corporate Guarantee at various places refers borrower in various
situations / contexts. Therefore, the objection / contention raised by the
Defendant No.1-Bank that the Corporate Guarantee has no nexus has
no substance at all.
29. It is pertinent to mention here that the Guarantee can be invoked
only in circumstances, where the obligation/ liability is not discharged
by the borrower i.e. UIL-HK. Plaintiff has undertaken to the Bank, as
clear from the terms of the Corporate Guarantee, that they as guarantor
shall not exercise any right, which the guarantor may at any time have
by reason or performance or its obligation under this Guarantee till or
so long as the borrower i.e. UIL-HK has any actual or contingent liability
to the Bank. This shows that the Corporate Guarantee can be invoked or
Defendant No.1-Bank can exercise its right in case of existence of actual
liability under the financing agreement. Now if this is the case, then the
question is whether the Defendant No.1-Bank can invoke the Corporate
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Guarantee or the Defendant No.1-Bank can claim any right or benefit
under the Corporate Guarantee when UIL-HK which was the borrower,
had filed claim in the Court at Hong-Kong against the Defendant No.1-
Bank based on serious allegations of fraud and misrepresentation
causing erosion of the share capital of the borrower is required to be
considered. It is pertinent to mention here that the Plaintiff made all
efforts to resolve the issue with the Defendant No.1-Bank amicably till
2018-19. They submitted proposal in April 2019 to resolve the issue
once for all and made representation to the Defendant No.1-Bank in
June 2019. It is further pertinent to mention here that the Defendant
No.1-Bank having found substance in the representation of the group
took action against its officer Mr. Niranjan Limaye and terminated him
from the services.
30. It is therefore, submitted that the contention of the Defendant
No.1-Bank is required to be rejected as Plaintiff has filed this matter in
this Hon'ble Court on 23.03.2020 before the notice dated 23.03.2020
was served upon the Plaintiff. The Notice dated 23.03.2020 of the
Defendant No.1-Bank is issued u/s. 254 (2)(a) of the Companies Act. In
para 5 of the notice, it refers the liability of USD 30145835.22 of the
borrower - UIL-HK, as on 31.01.2020 and states that UIL-HK have
refused and neglected and failed to make any payment of the
outstanding sum. The notice demands full payment of the sum
mentioned hereinabove pursuant to Corporate Guarantee. It is
respectfully submitted that the notice shows the fraudulent conduct of
the Bank. It is further submitted that the Defendant No.1-Bank sought
to initiate legal proceedings against UIL-HK at Hongkong by raising
statutory demand dated 25.2.2019 but when the UIL-HK disputed the
liability vide its reply dated 10.7.2019, they did not proceed with their
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demand for the reason that the claim made by them in their statutory
demand would fall flat in the Court at Hong Kong. Therefore, the
Defendant No.1-Bank has chosen to realise money which they are
otherwise not entitled to under the main financing agreement from the
borrower. In view of clause 4 of the Corporate Guarantee, it is clear that
the Guarantee can be invoked only in case of existence of actual liability
or contingent liability. It uses the words
"so long as" the borrower has
any actual or contingent liability and since the Defendant No.1-Bank by
withdrawing the statutory demand after reply of UIL-HK lawyer, the
claim of the Defendant No.1-Bank yet to be examined in the light of the
proceedings taken up by UIL-HK against the Defendant No.1-Bank in
the Court at Hongkong.
31. Furthermore, the Corporate Guarantee stipulates that the issues
related to the Corporate Guarantee will be decided based on law
applicable in Singapore. Plaintiff submitted that the present proceedings
was filed before this Hon'ble Court on 23.03.2020 based on facts and
apprehension that the Defendant No.1-Bank will take undue and unfair
advantage by invoking the Corporate Guarantee obtained by fraud, mis-
representation and under coercion. It is pertinent to mention here that
the suit was filed when covid-19 panic gripped the people and there
was tremendous uncertainty which caused tremendous disruption in
every activity in Mumbai resulting into complete lockdown of the city,
which is continuing even till date with number of restrictions increasing
day by day due to pandemic.
32. Therefore, the claims and contention of the party cannot be
decided in regard to issues in relation to invocation of the Corporate
Guarantee or liability at this stage till it is decided whether corporate
guarantee is vitiated for reason stated in plaint and if the Plaintiff fails
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to make out a case of fraud, misrepresentation etc. the law applicable
on the issues raised i.e. Jurisdiction and guarantee are placed before the
Court by way of Affidavit. In view of the facts and circumstances of the
case, the ad-interim order is required to be confirmed till the issues are
properly adjudicated by this Hon'ble Court on the basis of proper law
applicable to the facts and circumstances of the present case.
33. The contention of the Defendant No.1-Bank that there was
suppression of facts by Plaintiff including the fact of Statutory Demand
Notice is totally incorrect and misleading. The said Notice was served by
mail after Plaintiff filed the present proceedings in this Hon'ble Court on
23.3.2020. Therefore, neither Plaintiff officials in Singapore nor in
Mumbai were aware of the said Demand Notice. Plaintiff further
submits that since the proceedings was filed on 23.03.2020, prior to
receiving the Statutory Notice dated 23.03.2020, and soon after,
complete lockdown was imposed in the entire nation, therefore, certain
legal and factual requirement like for eg. Singapore Law etc. and
subsequent developments for eg. Statutory Demand Notice dated
23.03.2020 of Defendant No.1-Bank etc. and certain other material
facts having bearing upon the subject matter were/could not be
mentioned which Plaintiff would bring on record shortly with the
permission of this Hon'ble Court. The Court after going through the
records filed, more specifically the Plaintiff’s praecipe dated
02/03/2020 noted that the Plaintiff craved liberty to amend Suit in near
future with the permission of the court, as due to the paucity of time
and the current Covid-19 situation the Plaintiffs could not amend the
main suit and bring certain new developments in the court’s record. The
court allowed the precipe bearing in might that it ought to give a fair
chance to both the parties, in this case, the Plaintiff.
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34. The Ld. Advocate for Defendant No.1-Bank’s contention that it
cannot be prevented from exercising its legal or statutory right is also
incorrect and misleading for the reason that Plaintiff has not got any
reliefs in regard to the right available to Defendant No.1-Bank under
law relating to winding up in Singapore. The winding up proceedings
are the proceedings under the Special Act applicable to working and
functioning of companies. If the reliefs of the present proceedings are
seen carefully, Plaintiff has prayed for injunction in relation to
invocation of Corporate Guarantee dated 09.10.2015. Therefore, Bank's
right to invoke the Corporate Guarantee is founded on or emanates
from a contract which is Corporate Guarantee referred herein.
Invocation of Corporate Guarantee is a matter of contract and not a
matter of Company or Corporate Law as sought to be contended by the
Bank.
35. The Ld. Advocate for the Plaintiff submitted that the law relating
to Guarantees is governed by the law relating to Contracts and
therefore, all aspect of contractual relation between the parties be it
Defendant No.1-Bank Guarantee, Corporate Guarantee, Indemnity or
Executory Contract etc. are governed by law applicable to contract.
Fraud, Misrepresentation, coercion/undue influence nowhere in the
world validates a contract or other legal proceedings. Therefore, the
principles which have emerged from the plethora of cases from Court
involving fraud, misrepresentation, coercion/influence are applicable to
every case including the present case. It is settled principles in law that
fraud etc., vitiate the contract and no law justifies or supports or
validates the transactions made under fraud or misrepresentations etc.
The Corporate Guarantee though admittedly different from Defendant
No.1-Bank Guarantee is no exception to these principles.
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36. Further, the Ld. Advocate for the Defendant No.1-Bank submitted
that Plaintiff must set out an establish case of fraud and not mere
assumption. It is submitted that Plaintiff has given particulars in detail
and has not made bald allegations as alleged. Documents are annexed
to plaint showing involvement of Bank’s official. This Court is curious to
note that there are no denial by the Defendant No.1-Bank in respect of
allegations. Documents annexed to plaint belies the stand of the
Defendant No.1-Bank that the Defendant No.1-Bank was not a party to
any of those transactions alleged in the plaint.
37. The Plaintiff stated that the contention of the Defendant No.1-
Bank that conditions for grant of injunction are not satisfied is also
totally incorrect and misleading, which is clear from the para which the
Defendant No.1-Bank has quoted from the case of
Billimoria Jehan Bux
Tehmuraf and ors. vs. Indian Institute of Architecture and Ors (2005 (2)
MhLJ 2006). The reading of the para is clear that Plaintiff has made out
a
prima facie case in the light of facts stated in the plaint and
submissions made. Plaintiff submitted that the law governing injunction
whether in India or in Singapore are almost on the same principles. The
Singapore Court derives their general powers to grant interim measures
from Section 4 (10) of the Civil Law Act which states that mandatory
order or injunction may be granted by an interlocutory order of the
Court, either unconditionally or upon such terms and conditions as the
Court is just, in all cases in which it appears to the Court to be just or
convenient that such Orders should be made. The Singapore Court can
also pass ex-parte Order in case the Court seeks invitation or notice to
the Respondent defeats the purpose of obtaining the interim measures.
If the matter is urgent and applicant may attend the Duty Registrar to
obtain an urgent hearing date before either a Registrar or the Judge of
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the High Court. While granting interim measures, the Court satisfies
itself that there is a serious question to be tried, and it does this without
investigating the merits of the case and focuses instead on the evidence
to determine if there are issues that demonstrate the potential purposes.
The Court also considers whether the damages will be an adequate
remedy for either party and if the answer is 'No', the Court will then
have to take into account all the relevant consideration in deciding the
appropriate balance of convenience to be struck. In this regard, the
Court has a wide discretion as in India.
38. Considering the above facts and circumstances, I come to the
conclusion that the plaintiff has made out prima facie case. Further, the
balance of convenience is also lies in favour of the plaintiff. If this notice
of motion is not granted in favour of the plaintiff, then certainly the
plaintiff will suffer irreparable loss. Hence, I have proceed to pass
following order.
ORDER
1) The Notice of Motion No.1224/2020 is hereby allowed as per prayer
clause (B).
2) The Defendant No.1- ICICI Bank is hereby temporarily restrained
from taking coercive action against the plaintiff on the basis of the
corporate Guarantee dated 9/10/2015 through its agents, servants,
officers, or any person claiming through the defendant No.1 Bank till
final disposal of this suit.
3) Defendant No.1-Bank may submit written statement in details to
expedite the hearing.
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4) Costs in cause.
5) Notice of Motion No.1224/2020 is hereby disposed off accordingly.
(R.V.Kokare)
Judge,
Date : 08/06/2020. City Civil Court, Gr. Bombay.
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CERTIFIED TO BE TRUE AND CORRECT COPY OF THE ORIGINAL
SIGNED JUDGMENT/ORDER”
UPLOAD DATE TIME NAME OF STENOGRAPHER
16/06/2020 2.45p.m. Mrs. V. V. Malgaonkar
Name of the Judge HHJ Shri R.V. Kokare
(Lockdown Court No.8)
Date of Pronouncement of Judgment/
Order
08/06/2020
Judgment/order signed by P.O on 16/06/2020
Judgment/order uploaded on 16/06/2020
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