Interim Order 1

Order Details: Notice of Motion
Pdf Text: N/M 2277/18 in Su 2037/18 1/8 Date : 26.9.2018
IN THE BOMBAY CITY CIVIL COURT, AT MUMBAI
CNR No.MHCC010073462018
NOTICE OF MOTION NO.2277/2018
IN
SUIT NO.2037/2018
Zee Entertainment Enterprises Ltd. ]... Plaintiff
V/s.
Mumbai Port Trust & Ors. ]… Defendants
Adv. Dalal for plaintiff.
Sr. Counsel Mr. Rahul Narchania with
counsel Mr. Vishal Talsamoa & Adv. Tulsi Dhani for D1.
CORAM : HHJ Shri G. R. Agrawal
C. R. No.03
DATE : 26.09.2018
ORDER
(Dictated in open court)
By this motion, the plaintiff company is seeking temporary
injunction to restrain the defendants from invoking or encashing Bank
Guarantee of Rs. 27 lakhs issued by defendant no2. The defendant no.1
has filed reply to the motion.
2. Heard Ld. Counsel for the parties at length. Perused the record.
3. The Ld. Counsel for plaintiff has urged that the defendant no.1
has committed fraud by terminating the contract granted to the plaintiff.
He submitted that the defendant no.1 had discretion to grant extension
of time as per clause 3.6 of the tendered document. However, defendant
no.1 granted merely 10 days time to organize the events. He invited
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my attention to the various emails exchanged between the parties and
submitted that plaintiff had informed the defendant no.1 about the
various difficulties it was facing in organizing events. He also pointed
out clause 3.6 of the tender document to show that it was the obligation
of defendant no.1 to obtain NOCs from various Government Agencies
and also to obtain clearance from Statutory Authorities. He urged that
plaintiff had organized it's first event on 20.5.2018 and the total period
of license is up to 31.5.2020. On the point of fraud, he submitted that
this Court can grant injunction from encashing Bank Guarantee since
the defendant no.1 has committed fraud by invoking bank guarantee.
4. Per contra, the Ld. Counsel for defendant no.1 submitted that the
law in respect of grant or refusal of injunction from encashing bank
guarantee is well settled. He cited following Judgments in support of
his case and submitted that none of the essential ingredients to grant
injunction against bank guarantee exists in the present case.
i) ONGC Ltd. V/s. State Bank of India, AIR 2002 Bom.32.
ii) V. M. Salgaocar V/s. Board of Trustees, AIR 2005 SC 4138.
iii) Simplex Infrastructure V/s. Siemens Ltd., 2015 (2) Bom.C.R. 72.
iv) Himadri Chemicals V/s. Coal Tar Refining Co., AIR 2007 SC 2798.
v) Sachin Khan V/s. Mohd. Yousufuddin, (2006) 4 SCC 476.
5. On merits, he submitted that it is undisputed that the bank
Guarantee given by the plaintiff is unconditional. He therefore,
submitted that this Court cannot grant any injunction in respect of such
Bank Guarantee. He invited my attention to the email correspondence
between the parties and submitted that all obligations were on the
plaintiff and not on the defendant no.1. He submitted that there is no
question of fraud in this case and therefore, the plaintiff cannot prevent
defendant no.1 from encashing Bank Guarantee. He also relied on
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Section 120 of Bombay Port Trust Act and submitted that statutory
notice required under the said provision is mandatory and plaintiff has
failed to give such notice before filing the suit.
6. In rebuttal, the Ld. Counsel for plaintiff submitted that
encashment of Bank Guarantee by defendant no.1 is itself fraudulent
and hence this is a fit case to grant injunction.
7. I have considered the submissions of Ld. Counsel for the parties
and perused the various rulings cited by the Ld. Counsel for the
defendant. Before considering the primafacie case of plaintiff on merits,
it will be proper to peruse the law laid down by Hon'ble Apex court and
Hon'ble Bombay High Court in the rulings cited by Ld. Counsel for
defendant no.1. In the case of Hemandri (Supra), the Hon'ble Apex
Court has considered the law relating to grant or refusal of injunction
in the matter of invocation of Bank Guarantee. It will be useful to
reproduce the relevant extract of the said ruling which reads as under.:
“14. From the discussions made hereinabove relating to the
principles for grant or refusal to grant of injunction to restrain
enforcement of a Bank Guarantee or a Letter of Credit, we find
that the following principles should be noted in the matter of
injunction to restrain the encashment of a Bank Guarantee or a
Letter of Credit. :
(i) While dealing with an application for injunction in the course
of commercial dealings, and when an unconditional Bank
Guarantee or a Letter of Credit is given or accepted, the
Beneficiary is entitled to realize such a Bank Guarantee or a
Letter of Credit in terms thereof irrespective of any pending
disputes relating to the terms of the contract.
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(ii) The Bank giving such guarantee is bound to honour it as per
its terms irrespective of any dispute raised by its customer.
(iii) The Courts should be slow in granting an order of
injunction to restrain the realization of a Bank Guarantee or a
Letter of Credit.
(iv) Since a Bank Guarantee or a Letter of Credit is an
independent and a separate contract and is absolute in
nature, the existence of any dispute between the parties to
the contract is not a ground for issuing an order of
injunction to restrain enforcement of Bank Guarantee or
Letters of Credit.
(v) Fraud of an egregious nature which would vitiate the very
foundation of such a Bank Guarantee or a Letter of Credit and
the beneficiary seeks to take advantage of the situation.
(vi) Allowing encashment of an unconditional Bank Guarantee or
a Letter of Credit would result in irretrievable harm or injustice
to one of the parties concerned.” (emphasis added).
8. In the case of Simplex (Supra), the Hon'ble Bombay High Court
has held as under.:
“7.7 That it is settled law that in order to injunct a Bank
Guarantee on the ground of fraud, it must be established fraud
in connection with the execution of the Bank Guarantee as
would vitiate the very foundation of such Bank Guarantee
(ITD Cementation Ltd. V/s. Reliance Infrastructure) 3, 2014(2)
Bom.C.R. 1(O.S.). The subject Bank Guarantee is admittedly
unconditional and irrecoverable. The petitioner is incorrect in
contending that the delay was purely attributable to respondent
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no.1. The extensive correspondence exchanged (which has been
suppressed in the petition) shows that respondent no.1 had
repeatedly emphasized the delays on the part of the
petitioner, who had time and again assured corrective
action.” (emphasis added).
9. In the instant case, there is no dispute that Bank Guarantee is
unconditional. In view of the principles laid down by the Hon'ble Apex
Court and Hon'ble Bombay High Court, it was necessary for the plaintiffs
to primafacie show that the fraud was of such nature which would
vitiate Bank Guarantee. The “fraud” referred in the Judgment is
explained in paragraph no.11 by the Hon'ble Apex Court in the case of
UP Cooperative Federation Ltd. V/s. Singh Consultants and
Engineers (P) Ltd., (1988) 1 SCC 174 and it is held as under.:
“The fraud must be of an egregious nature such as to vitiate the
entire underlying transactions. While coming to a conclusion
as to what constitutes fraud, this court in the above case “ed
with approval the observations of Sir John Donaldson, M.R. in
Bolivinter Oil SA v. Chase Manhattan Bank, (1984) 1 All ER
351 at p. 352 which is as follows. The wholly exceptional case
where an injunction may be granted is where it is proved
that the bank knows that any demand for payment already
made or which may thereafter be made will clearly be
fraudulent. But the evidence must be clear both as to the
fact of fraud and as to the bank's knowledge. It would
certainly not normally be sufficient that this rests on the
uncorroborated statement of the customer, for irreparable
damage can be done to a bank's Credit in the relatively brief time
which must elapse between the granting of such an injunction
and an application by the bank to have it charged.”
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10. It is apparent that dispute has arose between plaintiff and
defendant no.1 in respect of contract executed between them and
contract of plaintiff is terminated by defendant no.1. The entire
correspondence between the parties in the nature of emails shows that
the plaintiff started making grievance to the defendant no.1 from
March 2018. There is no grievance in any of the emails issued by
plaintiff that the defendant no.1 has failed to perform any
obligation under the contract. In the email dated 7.3.2018, it is stated
by the plaintiff that “due to unseen circumstances we would not be able to
do the March event as scheduled.” There is no grievance in this email
that defendant no.1 is responsible for the circumstances. On the
contrary, in email dated 8.3.2018 issued on behalf of defendant no.1 it
is stated as under.:
“We are very disappointed. Can you please elaborate causes so if
any thing/support we can extend for this program.”
11. In the email dated 5.4.2018 issued on behalf of defendant no.1
they have stated as under :
“Kindly note that vide email dated 12.2.2018, you had
informed to organise event on following dates :
Event 1 – 10th March and 11th March 2018
Event 2 – 28th April and 29th April 2018
Event 3 – 26th May and 27th May 2018
Recommendation letters to various authorities
were issued by this office to grant necessary permission.”
All the emails primafacie show that the defendant no.1 was
extending best possible help to the plaintiff company. However, for
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unknown reasons, plaintiff company was not able to hold the events
which were planned on 10th & 11th March 2018 and 28th & 29th April
2018. Only one event was held on 20.5.2018. There is no primafacie
material on record to show what necessary steps were taken by the
plaintiff company during the period from December 2017 to April 2018
and how defendant no.1 failed to cooperate with plaintiff.
12. During the course of hearing of this motion, the Ld. Counsel for
plaintiff has admitted that the bank guarantee is unconditional. Perusal
of plaint shows that it is the case of plaintiff that the invocation of bank
guarantee by defendant no.1 is contrary to and in breach of terms of
contract, terms of bank guarantee and also fraudulent. Though it is
pleaded in paragraph no.8 of the plaint that the action of defendant no.1
constitutes fraud of an egregious nature, primafacie I am not satisfied
how the defendant no.1 has committed fraud in this case. There is also no
primafacie material to show that the defendant no.1 has committed
breach of any term or condition of the contract or bank guarantee.
Clause no.3.6 of the tender document empowers the defendant no.1 to
terminate the license in whole or part in the contingencies
mentioned in said clause. The Ld. Counsel for plaintiff has placed
reliance on condition no. (i) of the said clause which states as under.:
“ If the Licensee fails to commission and commence festival
operation within the specified time period including extension, if
any.”
13. It is clear from the said condition that though defendant no.1 has
discretion to grant extension, it is not obligatory on the part of defendant
no.1 to grant extension of time. Hence, the plaintiff cannot take
advantage of said condition. As regards the case of plaintiff regarding
obligation of defendant no.1 to obtain NOCs from Government and
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clearance from Statutory Authorities, there is no communication from
the plaintiff complaining to the defendant no.1 that they have not
obtained statutory clearance or NOCs from a particular authority.
In the plaint, it is not the case of plaintiff that the defendant no.1 has
failed to cooperate in obtaining permission or statutory clearance from
a particular authority. Therefore, the submission of Ld. Counsel for
plaintiff that the defendant no.1 has failed to obtain the necessary
permissions and statutory clearances, cannot be accepted.
14. Considering the primafacie material on record and the settled
law, I find that the plaintiff has failed to make out primafacie case for
injunction to restrain the defendants from encashing or invoking the
bank guarantee. Hence, following order.
ORDER
Notice of motion no.2277/2018 is dismissed.
(G. R. Agrawal)
Judge
City Civil Court,
Date : 26.9.2018 Gr. Bombay.
Dictated on : 26.9.2018
Transcribed : 28.9.2018
Signed on : 29.9.2018
“CERTIFIED TOBE TRUE AND CORRECT COPY OF THE ORIGINAL SIGNED
JUDGMENT/ORDER”
29.09.2018 at 5.00 pm (Mrs. S. W. Tuscano)
UPLOAD DATE AND TIME NAME OF STENOGRAPHER
Name of the Judge (with Court
room no.)
HHJ Shri G. R. Agrawal, C.R.
No.3
Date of Pronouncement of
JUDGMENT/ORDER
26.09.2018
JUDGMENT/ORDER signed by 29.09.2018
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P.O. on
JUDGMENT/ORDER uploaded
on
29.09.2018
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