CCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 1 of 21
IN THE HIGH COURT OF DELHI AT NEW DELHI
(Reportable)
CCP (O) No.16 of 2009 in O.M.P. 495 of 2008
Reserved on: 7
th
September, 2012
Decision on: 12
th
October, 2012
TECON PROJECTS PVT. LTD. ..... Petitioner
Through: Mr. Harish Malhotra, Senior
Advocate with Mr. Vikas Sharma,
Advocate.
Versus
SANJAY MEHTA & ORS. ..... Respondents
Through: Mr. Y.P. Narula, Senior Advocate
with Mr. Aniruddha Choudhury,
Advocate for Canara Bank.
CORAM: JUSTICE S. MURALIDHAR
JUDGMENT
12.10.2012
1. Contempt Petition C.C.P. No. 16 of 2009 has been filed by Tecon Projects
Private Limited (‘Tecon’), the Petitioner in O.M.P. No. 495 of 2008, under
Sections 11 and 12 of the Contempt of Courts Act, 1971 complaining of
wilful breach, disobedience and violation by the Respondents of the order
dated 18
th
September 2008 passed by the Court in O.M.P. No. 495 of 2008.
Background facts
2. The background to the contempt petition is that Tecon specializes in
design, engineering, manufacture, supply, erection and commissioning of
bulk material handling systems. M/s Kolsons International (‘Kolsons’) hadCCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 2 of 21
been awarded the work of design, engineering, manufacture, supply erection
and commissioning of material handling system for the Respondent in
O.M.P. No. 495 of 2008 Gulf Sponge Iron Company Limited (‘Gulf’) at
ICAD-1 Mussfah Abu Dhabi, UAE. For this purpose, Kolsons entered into
an agreement dated 29
th
May 2007 with Gulf. The stipulated date of
completion was 30
th
April 2008. Tecon stated that it was approached by
Kolsons immediately thereafter for execution of the said work on its behalf.
In terms of the agreement, the contract could be assigned by Kolsons in
favour of Tecon subject to the approval by Gulf. This was formalized by a
letter dated 30
th
May 2007 awarded to Tecon which was accepted by it on 1
st
June 2007.
3. It is not necessary to set out in detail the dispute that arose between the
parties in relation to the execution of the said work by Tecon. What is
relevant is that Gulf opened a Letter of Credit (‘LC’) dated 22
nd
October
2007 in favour of Tecon for US Dollar (‘USD’) 1,646,800 after 100 days.
Under Clause 4.4 of the agreement entered into between the parties, the LC
was to be received by Tecon within 40 days of the agreement. Since there
was delay in approval of the designs and drawings, meetings were held
between the parties. As a result the time schedules got revised.
4. On 23
rd
February 2008, Tecon furnished a Bank Guarantee (‘BG’) in the
sum of USD 411,700 in favour of Gulf through Tecon’s bankers i.e. Canara
Bank, Barakhamba Road, New Delhi. This was to secure the advance that
was released by Gulf to Tecon which was to be adjusted as and when
payment was made of the bills raised by Tecon for the work done under the
contract. One of the conditions in the BG was that “this guarantee shall standCCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 3 of 21
reduced to the extent of advance adjusted against the bill raised on the
buyer.” The disputes between the parties remained unresolved and the
contract could not proceed as scheduled.
Tecon’s case in the Section 9 petition
5. In O.M.P. No. 495 of 2008, filed in this Court under Section 9 of the
Arbitration and Conciliation Act, 1996 (‘Act’), Tecon stated that even while
it was executing the work “suddenly for no justification” they were informed
by their bankers that by letter dated 30
th
July 2008 Gulf informed HSBC
bank that it had cancelled the contract. However, no formal intimation was
sent to Tecon. According to Tecon, till that date it had raised bills of the
value of USD 460,023.38 on Gulf against which it had received a sum of
USD 50,683.39. Consequently, there was a balance of USD 409,339.99.
Gulf was accordingly informed on 3
rd
September 2008. In addition Tecon
also claimed that it was entitled to USD 500,000 towards its claim against
Gulf. However, Tecon apprehended that Gulf would encash the BG and use
the drawings and designs prepared by Tecon for executing and completing
the contract in violation of the agreement.
6. According to Tecon, Gulf was trying to take undue advantage of its
dominant position by arm twisting Tecon to agree to a mutual cancellation.
Further, Tecon alleged that in view of the fluctuating dollar price Gulf had
become dishonest and it had, therefore, cancelled the contract with Tecon.
In para 31 of O.M.P. No. 495 of 2008 Tecon stated that the advance for
which the BG was furnished was liable to be adjusted against the bill dated
1
st
August 2008 for USD 205,850 raised by it. No payment had been
received from Gulf. Consequently, if USD 409,339.99 due from Gulf wasCCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 4 of 21
adjusted against the advance BG then the amount payable thereunder would
stand reduced to USD 2,360. In the circumstances, it was stated that action
of Gulf threatening to invoke the BG was illegal and fraudulent. In paras 34
to 36 of O.M.P. No. 495 of 2008 Tecon repeatedly pleaded that it had
suffered on account of fraud and misrepresentations of Gulf. Tecon’s prayer
in O.M.P. No. 495 of 2008 inter alia read as under:
“restrain the respondent their agents assigns, successors,
executors, employees from encashing the advance bank
guarantee bearing No. 0179FOG0082008 dated 23/2/08
for USD 411700 issued by Canara Bank, Barakhamba
Road, New Delhi and send the intimation to Manager,
Canara Bank, Barakhamba Road, New Delhi to not to
remit any amount to the respondent.”
The order dated 18
th
September 2008
7. On 18
th
September 2008 this Court passed the following order:
“Issue notice to the respondent, upon the petitioner taking
requisite steps through all modes, including electronic
media, returnable on 28
th
November, 2008.
The senior counsel for the petitioner has, at this stage,
prayed for interim relief with respect to the encashment of
the bank guarantee. The bank guarantee has been given in
pursuance to the agreement, as per Clause 5.1 whereof the
bank guarantee was against the advance of 20% paid by
the respondent to the petitioner and to secure the said
advance. It is further provided that the advance bank
guarantee shall stand reduced to the extent of advance
adjusted against the bill raised by the petitioner on the
respondent. It is contended that the petitioner has already
raised bills of USD 460023.38 against the bank guarantee
for a sum of USD 411700 and it is argued that the said
bills have not been disputed or controverted by the
respondent and the respondent has not denied the liability
to pay the said bills. The bank guarantee also,
though providing for payment by the bank without anyCCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 5 of 21
demur and merely on the first demand from the
respondent, also provides that the guarantee shall stand
reduced to the extent of advance adjusted against the bills
raised on the respondent. It is, therefore, argued that the
threatened action of the respondent of invoking the bank
guarantee for the entire amount is contrary to the terms
of the bank guarantee itself, since as per its terms the
guarantee was to stand reduced to the extent of the bills
raised and which are stated to have been raised.
Considering that the respondent is a foreign party and in
the event of the petitioner succeeding, irretrievable injury
may be caused to the petitioner and further since the
rights of the respondent can be protected by imposing
the conditions on the petitioner to renew and keep the
bank guarantee alive and to also pay interest to the
respondent for the delay, if any, in release of the amount
under the bank guarantee to the respondent, I deem it
appropriate to grant ad interim ex parte order. The
respondent, till the next date of hearing, is restrained from
encashing the advance bank guarantee
No.0179FOG0082008 dated 23.02.2008 for USD 411700
issued by Canara Bank, Barakhamba Road, New
Delhi. This shall, however, be subject to the petitioner
immediately taking steps for renewal of the extension of
bank guarantee and having the same
so renewed/extended, at least, for a period of three
months from today and to pay interest for delay, if the
stay is vacated and to which the counsel for the petitioner
has agreed.
A copy of this order be given dasti to the petitioner under
signature of court master for communication to the bank.”
The counter Bank Guarantee issued by Canara Bank
8. In the documents enclosed with the petition of Tecon was a copy of the
(counter) BG dated 23
rd
February 2008 issued by Canara Bank. The said
BG was sent to the HSBC Bank, Middle East Limited, Dubai. The relevantCCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 6 of 21
portion of the said BG read as under:
“At the request of our customer M/s. Tecon Projects
Private Limited, B159 Sector 63, Noida, District Gautam
Budh Nagar – 201307, UP, India, we request you to issue
your advance payment guarantee for USD 411,700.00
(USD four hundred eleven thousand seven hundred only)
against our counter guarantee No. 0179FOG0082008
dated 23-Feb-2008.
Quote
To Gulf Sponge Iron Co. Ltd.,
P O Box No. 8795
Mussafah
Abu Dhabi, U.A.E.
In Consideration of Gulf Sponge Iron Co. Ltd., P.O. Box
No. 8795, Mussaffah, Abu Dhabi, U.A.E. (hereinafter
called the ‘Overseas Buyer’) and Tecon Projects Private
Limited, having its registered office at C-516, Sarita
Vihar, New Delhi 110 044, India (hereinafter called ‘the
Said Supplier’) entered into a contract for design,
engineering, manufacturing, supply, erection and
commissioning of material handling system for
USD20,58,500 (USD two million fifty eight thousand
five hundred only) as per contract No. GSPI/MH/1 dated
29-May-2007. The supplier has agreed to furnish a bank
guarantee for USD411,700.00 (USD four hundred eleven
thousand seven hundred only) being 20 per cent of the
contract price to cover the advance. We ……………
(Bank’s name and address) do hereby undertake to pay
the damage caused to or suffered by the overseas buyer
by reason of any breach by the said supplier.”
9. The above counter BG also stated that “this guarantee shall stand reduced
to the extent of advance adjusted against the bill raised on the buyer” and
that “this letter of guarantee is subject to Uniform Rules for Demand
Guarantee 1992 revision International Chamber of Commerce Publication
No. 458.” The said counter guarantee was valid up to 7
th
June 2008 and
thereafter up to 22
nd
September 2008.CCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 7 of 21
Events leading to the contempt petition
10. The contempt petition came to be filed in the following circumstances.
HSBC by an affidavit filed on 6
th
April 2010 in O.M.P. No. 495 of 2008
informed the Court that pursuant to the assignment of the supply contract by
Kolsons in favour of Tecon, Gulf had given Tecon an advance on the sum of
USD 411,700 being 20% of the contract price against the supply of
equipment. Tecon had to furnish Gulf a BG for the aforementioned sum.
HSBC received a request from Canara Bank through a swift message dated
24
th
February 2008 to issue an advance payment guarantee (‘APG’) and in
lieu thereof Canara Bank would execute a counter BG in the same sum in
favour of HSBC. Accordingly, Canara Bank executed the counter BG No.
0179FOG0082008 dated 23
rd
February 2008 in favour of HSBC.
11. In response to the swift message, HSBC wrote to Canara Bank asking it
to carry out certain amendments as suggested by HSBC. The amended terms
were confirmed by Canara Bank by its swift message dated 22
nd
March
2008. Pursuant to the above communication, HSBC issued an APG being
Guarantee No. APG/GTY/081813/C dated 25
th
March 2008 for a sum of
USD 411,700 in favour of Gulf. This APG was extended from time to time
up to 22
nd
September 2008.
12. By letter dated 8
th
September 2008 Gulf lodged a valid claim with HSBC
on 15
th
September 2008 asking it to encash the APG and credit the proceeds
to its account. Pursuant thereto HSBC sent an intimation to Canara Bank by
swift message dated 18
th
September 2008 invoking the counter BG and
asking Canara Bank to make arrangements to pay HSBC a sum of USD
411,700.CCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 8 of 21
13. In response to HSBC’s said swift message, Canara Bank sent its first
swift message on 20
th
September 2008 informing HSBC that the Court had
restrained the beneficiary from encashing the APG dated 23
rd
February 2008
issued by Canara Bank till the next date of hearing. HSBC understood the
number of the BG in the Canara Bank’s swift message as actually referring
to Canara Bank’s counter BG and not the APG. Therefore, HSBC was not
clear whether in fact the Court had stayed payment of the APG. By a second
swift message on the same date i.e. 20
th
September 2008 Canara Bank
informed HSBC that there was a Court order restraining Canara Bank from
making payment of the BG without specifying which BG was being
referred.
14. On 22
nd
September 2008 HSBC advised Canara Bank that it had made
payment of USD 411,700 to Gulf “towards a valid claim received from them
as the beneficiary under the Advance Bank Guarantee.” HSBC therefore
called upon Canara Bank to reimburse USD 411,700 to HSBC’s account in
New York. On 23
rd
September 2008 HSBC received another swift message
from Canara Bank which stated that Canara Bank had couriered a copy of
the order passed by the Court to HSBC. On 24
th
September 2008 for the first
time Canara Bank informed HSBC that since Tecon had raised certain bills
on Gulf the amount under the APG stood reduced by USD 409,340. Canara
Bank requested HSBC to recall the amount paid to Gulf to the above extent.
Since by then the payment under the APG had already been made by it,
HSBC sent a swift message to Canara Bank on 24
th
September 2008
pointing out that the alleged bill raised by Tecon upon Gulf had not been
notified in time to HSBC and was therefore not binding on HSBC. Canara
Bank pressed Tecon to make payment. On 31
st
October 2008, Canara BankCCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 9 of 21
informed Tecon that it had made payment to HSBC. When Tecon failed to
deposit the amount in its account, Canara Bank froze Tecon’s account. In the
above circumstances, Tecon filed the present contempt petition.
Proceedings in the contempt petition
15. In the contempt petition Tecon arrayed the Chief Executive Officer
(‘CEO’) and Deputy General Manager of Gulf as Respondent Nos.1 and 2.
Canara Bank was arrayed as Respondent No.3 and HSBC Bank as
Respondent No.4. Tecon’s main grievance was that despite the order passed
by this Court on 18
th
September 2008, the Respondents had proceeded to
encash “the bank guarantee” and therefore they should be held to be in
contempt and asked to refund/return USD 411,700 to Tecon.
16. In its reply to the contempt petition, Canara Bank narrated the entire
sequence of events. In particular, it highlighted Clause No.4 of the
clarifications/confirmations that was incorporated in the counter BG which
read: “our counter guarantee and your guarantee is governed by and
construed in all respects in accordance with the laws of UAE”. It was Tecon
which conveyed to Canara Bank by its letter dated 3
rd
March 2008 that
HSBC required the above confirmation. Therefore, Tecon was fully aware of
the requirement of HSBC as regards furnishing of a counter BG by Canara
Bank. In its affidavit dated 16
th
April 2010, Canara Bank pointed out that
HSBC had forwarded to Canara Bank a copy of APG issued by it in favour
of Gulf on 25
th
March 2008 which, apart from stating that the APG would be
governed and construed in accordance with the laws of UAE provided as
under:
“We undertake to pay the Overseas Buyer any money soCCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 10 of 21
demanded notwithstanding any disputes raised by the
Supplier in any suit or proceeding pending before any
court or tribunal relating thereto our liability under the
present being absolute and unequivocal. The payment so
made by us under this Bond shall be valid discharge to
our liability for payment thereunder and the Supplier shall
have no claim against us for making such payments.”
17. Canara Bank contended that despite being aware of the above facts,
Tecon failed to implead either Canara Bank or HSBC as parties to O.M.P.
No.495 of 2008; Tecon did not inform the Court that an APG favouring Gulf
was issued by HSBC and that Canara Bank had only issued a counter BG
and that too in favour of HSBC and not Gulf. In particular, Canara Bank
pointed out that Tecon could not have sought any restraint order against Gulf
from encashing the counter BG issued by Canara Bank in favour of HSBC.
Further such remedy if at all was available only before the Courts in the
UAE.
18. Referring to the correspondence following the orders passed by the
Court, Canara Bank stated that by its swift message dated 29
th
September
2008 HSBC took the stand that the order passed by the Court was in respect
of Canara Bank’s counter BG in favour of HSBC and not the BG issued by
HSBC in favour of Gulf. It was in these circumstances that Canara Bank
paid the amount under the counter BG to HSBC on 31
st
October 2008 in
order to safeguard its interest and to avoid its other liabilities to HSBC.
The order dated 19
th
January 2011
19. This Court has passed a detailed order in the contempt petition on 19
th
January 2011. After noticing some of the above facts the Court held thatCCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 11 of 21
there was no case for proceeding in contempt against Gulf inasmuch as they
had invoked the APG on 8
th
September 2008 prior to the order dated 18
th
September 2008. It had not been shown by Tecon that “Gulf had been served
either with the stay order passed by this Court, or even informed of the
details of the said OMP”. It was held that the mere acceptance of the funds
by Gulf from HSBC Bank, Dubai in respect of the APG which had already
been invoked on 8
th
September 2008 could not be said to be wilful
disobedience of the order passed by this Court.
20. As far as HSBC was concerned, the Court observed that “its action in
making payment under its guarantee to Gulf appears to be questionable”. It
could not strictly be held that HSBC was in wilful disobedience of the order
“inasmuch as there was no restraint in relation to the bank guarantee issued
by HSBC Bank, Dubai and they had not been served with the copy of the
order by 22
nd
September 2008, when they made the payment under their own
guarantee.”
21. As regards Canara Bank, the Court observed as under:
“21. So far as the Canara Bank is concerned, I find
absolutely no justification for its conduct of making
payment under its own guarantee which had been
squarely stayed by this court and the Canara Bank had
been duly served with the order passed by this court.
Merely because HSBC Bank, Dubai was pressing
for payment under the said guarantee was no ground for
Canara Bank to disregard the order passed by this Court.
If it were so minded, it should have approached this court
for clarification or vacation of the injunction order. The
stand taken by the Canara Bank in its letter dated
31.10.2008 that its higher authorities had advised the
bank to pay the invoked amount is in the teeth of theCCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 12 of 21
interim order of injunction granted by this court. No
authority is above the law, and once there was an order
passed by this court - whether right, wrong or indifferent,
that order was bound to be obeyed by all authorities
including those of the Canara Bank.
22. It is clear that the second communication dated
10.12.2008, whereby the petitioner is claimed to have
absolved the Canara Bank of its liability in making
payment under its guarantee, was extracted from the
petitioner. This is evident from the first communication
dated 10.12.2008 issued by the petitioner to the Canara
Bank wherein the petitioner stated as follows:
“Gulf Sponge Iron Co. Bank Guarantee
Encashment: We have time and again informed
Canara Bank that the encashment of the Bank
Guarantee done by our clients is wrong and
illegal and the payment against the same should
not be sent to them. However, as per your
performa we are enclosing the letter required by
the bank to op0erate our bank normally.”
23. As the Canara Bank has made payment despite the
injunction being granted by this court, it is not entitled to
recover the said amount from the petitioner. It is,
therefore, accordingly, directed that the amount of US
$411700/- debited to the petitioner’s account by
conversion of US $411700/- should be credited to the
petitioner’s account and status quo ante should be
restored in all respects. This is, however, without
prejudice to the rights and obligations of the parties.
24. The contempt petition is dismissed so far as
respondents No. 1, 2 and 4 are concerned.
25. Issue notice to the Manager, Canara Bank,
Barakhamba Road Branch, New Delhi requiring him to
be present in person in court on the next date to show
cause as to why he should not be punished for contemptCCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 13 of 21
of court.”
Order of the Division Bench
22. Aggrieved by the above order, Canara Bank filed Contempt Appeal (C)
Nos.8-9 of 2011, in which, the Division Bench while issuing notice on 10
th
May 2011 stayed the order and directed status quo to be maintained “in
respect of the amounts deposited by the Bank in the accounts of the
Respondent”.
23. Thereafter, on 5
th
March 2012, the Division Bench passed the following
order:
“Learned counsel for R-3 states that R-4 has received the
services of Gulf Sponge Iron Co. Ltd and thus she will
not be able to represent R-4 and the service of R-4 has
been effected on her as she was the counsel earlier. The
lis in the present appeal is, however, really between the
appellant and R-4.
The occasion for the appellant to file the appeal arose on
account of the directions contained in para 23 of the
impugned order dated 19.01.2011 passed on CCP(O)
No.16/2009 as it has civil consequences. To that extent,
the interim order dated 10.05.2011 directing status quo to
be maintained in respect of the amount deposited by the
Bank in the account of R-1, takes care of the position.
However, there cannot be stay of the contempt
proceedings itself as it is for the appellant to persuade the
learned Single Judge that no case of contempt is made out
and it is naturally open to the appellant to urge whatever
pleas are permissible in this behalf before the learned
Single Judge.
It is, thus, agreed that the present appeal be disposed of
with the direction that the CCP(O) No.16/2009 be heard
on merits and insofar as the directions contained in theCCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 14 of 21
order dated 19.01.2011, which have civil consequences,
are concerned till the decision of the CCP(O) No.16/009,
the interim arrangement envisaged by the order dated
10.05.2011 would continue to enure for the benefit of the
appellant.
The appeal and the applications stand disposed of.
The parties to appear before the learned Single Judge in
CCP (O) No.16/2009 on 30.03.2012.”
Was Canara Bank in contempt of the Court’s order?
24. At the outset it must be pointed out that in the light of the order passed
by the Division Bench on 5
th
March 2012, it is clear that the observations
made by this Court in its order dated 19
th
January 2011 were tentative and at
a stage prior to Canara Bank showing cause. Canara Bank has on 10
th
March
2011 filed a reply to the show cause notice issued by this Court on 19
th
January 2011. Tecon has filed a response thereto.
25. This Court has heard the submissions of Mr. Harish Malhotra, learned
Senior counsel appearing for Tecon and Mr. Y.P. Narula, learned Senior
counsel appearing for Canara Bank.
26. An examination of the submissions made should begin with reiterating
the settled legal position that the question whether a party is in contempt of
the Court’s order is essentially one between the Court and the contemnor.
The Court has to be satisfied that the disobedience, if at all, by the party of
the Court’s order was wilful and intended to obstruct the administration of
justice. In exercising its power under the Contempt of Courts Act, 1971 the
Court has to be cautious in ensuring that the order originally passed by theCCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 15 of 21
Court the breach of which is complained is not interpreted in the manner
inconsistent with what the order actually states. It is not open to the Court to
expand the scope of the order of which disobedience by the contemnor is
alleged.
27. In R.N. Dey v. Bhagyabati Pramanik (2000) 4 SCC 400, the Supreme
Court held as under (SCC, p.404):
“We may reiterate that the weapon of contempt is not to
be used in abundance or misused. Normally, it cannot be
used for execution of the decree or implementation of an
order for which alternative remedy in law is provided for.
Discretion given to the Court is to be exercised for
maintenance of the Court’s dignity and majesty of law.
Further, an aggrieved party has no right to insist that the
Court should exercise such jurisdiction as contempt is
between a contemner and the Court.”
28. There are some disconcerting aspects of the present case which were
perhaps not noticed in their entirety by the Court when it issued notice to
Canara Bank on 19
th
January 2011. The foremost is that Tecon failed to
place the complete facts before the Court which first heard O.M.P. No. 495
of 2008 on 18
th
September 2008. Tecon knew there were two BGs involved.
One was an APG issued by HSBC in favour Gulf. The second was the
corresponding counter-BG issued by Canara Bank in favour of HSBC. This
basic fact was kept back from the Court for reasons best known to Tecon.
29. A perusal of O.M.P. No.495 of 2008 as was presented before the Court
when it passed the order dated 18
th
September 2008 shows that therein
reference was made only to the counter BG issued by Canara Bank (without
referring to it as a counter BG) and stay was also sought of encashment ofCCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 16 of 21
the said counter BG. While the copy of the BG enclosed with the petition did
refer to it being a counter BG, in the absence of Tecon drawing the Court’s
attention specifically to that fact and explaining the context in which such
counter BG was issued it could not be expected that the Court would on its
own discern it. On the basis of the petition in O.M.P. No. 495 of 2008, it was
not possible for the Court to have on its own realised that there was an APG
issued by HSBC in favour of Gulf and a corresponding counter BG issued
by Canara Bank in favour of HSBC. Tecon made it appear as if Gulf was
threatening to encash a BG issued in its favour by Canara Bank and which
therefore was required to be stayed. This was contrary to the correct factual
position and led to further unnecessary litigation arising out of the order
dated 18
th
September 2008 passed by this Court. This deliberate, incorrect
and incomplete presentation of facts by Tecon has serious consequences.
30. In S.P. Chengalvaraya Naidu v. Jagannath (1994) 1 SCC 1, the
Supreme Court emphasized as under (SCC, p.5):
“A litigant, who approaches the Court, is bound to
produce all the documents executed by him which are
relevant to the litigation. If he withholds a vital document
in order to gain advantage on the other side then he would
be guilty of playing fraud on the Court as well as on the
opposite party.”
31. A second aspect was that the entire correspondence between the parties
which was material to the case was not produced before the Court or
adverted to by Tecon. In particular, it did not bring to the notice of the Court
the letter written by it to Canara Bank on 3
rd
March 2008 which drew Canara
Bank’s attention to HSBC requiring the incorporation in the counter BGCCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 17 of 21
certain specific clauses. The relevant portions of the said letter read as under:
“Sub: FBG of USD 411,700/- in favour of GULF
SPONGE IRON CO. LTD. UAE
Dear Sir,
As our request and the advise of your branch, foreign
deptt. Main New Delhi Of Canara Bank advise to HSBC
Bank middle East Ltd. Dubai to issue advance guarantee
USD 411,700/- in favour of GLF SPONGE IRON CO.
LTD. UAE against their counter Guarantee
No.0179FOGOO82008 dated 23.02.2008 on dated
23.02.2008 itself.
Against the above mentioned counter guarantee, HSBC
Bank middle East Ltd., Dubai requires the confirmation
of the following:
1. Your Guarantee will be issued against our
irrevocable an unconditional counter guarantee in
your favour, under our full risk and responsibility.
2. ........
3. Our counter guarantee will be valid until 22 June
2008 (one month from expiry date of your
guarantee).
4. Our counter guarantee and your guarantee is
governed by and construed in all respects in
accordance with the laws of UAE.
....
10. We hereby confirm the above mentioned clauses
and request you to kindly advise to your Foreign
Department, Main, New Delhi.”
32. There was no justifiable reason for Tecon to have kept back the above
information from the Court. A party which suppresses material facts and
obtains an order considerably weakens its case for persuading the Court toCCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 18 of 21
proceed against another party for disobedience of such an order. The Court
will be reluctant to exercise its power under the contempt jurisdiction at the
instance of a litigant who acts irresponsibly.
33. Mr. Malhotra, learned Senior counsel for Tecon sought to point out that
during the course of arguments Tecon had pointed out to the Court about it
having raised bills in the sum of USD 460,023.38 and to that extent the BG
would stand reduced. This however does not still explain why reference was
being made in the Court to an “advance bank guarantee” issued by Canara
Bank when in fact what had been issued was a counter BG. The Court was
not told that such counter BG was in fact issued by Canara Bank in favour of
HSBC and not Gulf. No mention was made of the APG issued by HSBC in
favour of Gulf. In respect of the said APG there was in fact no interim order
sought by Tecon or passed by this Court. It is impossible to read into the
order dated 18
th
September 2008 something that even Tecon had not prayed
for. Without making HSBC or Canara Bank parties to the petition no interim
order restraining either of them from making payment under the counter BG
or the APG could have been sought. If Tecon wanted to restrain Gulf from
encashing the APG issued by HSBC in its favour, Tecon should have in the
first place pleaded that as a fact giving such details of APG, made HSBC a
party, and then sought a specific order restraining HSBC from making
payment under the APG, by giving the precise number of the APG. There
was no such pleading and there was no such prayer.
34. While examining if Canara Bank acted in wilful disobedience of the
Court’s order dated 18
th
September 2008 it is important to note in the first
place that Canara Bank was not a party to that order. Further Canara BankCCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 19 of 21
was in any event not going to make any payment to Gulf under the counter
BG issued by it. Therefore the direction in the order dated 18
th
September
2008 was not capable of being complied with by Canara Bank. The Court
while exercising jurisdiction under the Contempt of Courts Act, 1971 when
an allegation is made of civil contempt, i.e. wilful disobedience of an order
passed by the Court, has to be cautious in first ascertaining what precisely
was the scope of the order of which the disobedience is alleged and whether
the party against whom the allegation is made, was obliged to obey such
order.
35. In this context the following observations of the Supreme Court in Bihar
Finance Service H.C. Coop. Soc. Ltd. v. Gautam Goswami AIR 2008 SC
1975 regarding the exercise of power by the Court in the contempt
jurisdiction are relevant (AIR, p.1980):
“22. While exercising the said jurisdiction this Court does
not intend to reopen the issues which could have been
raised in the original proceeding nor shall it embark upon
other questions including the plea of equities which could
fall for consideration only in the original proceedings.
The Court is not concerned with as to whether the
original order was right or wrong. The Court must not
take a different view or traverse beyond the same. It
cannot ordinarily give an additional direction or delete a
direction issued. In short, it will not do anything which
would amount to exercise of its review jurisdiction.”
36. It is plain to the Court that there was no disobedience of the order passed
by this Court on 18
th
September 2008 as a result of HSBC making payment
to Gulf under the APG issued by it in favour of Gulf. That was not the
subject matter of O.M.P. No.495 of 2008 or the interim order passed by this
Court on 18
th
September 2008. As far as payment under the counter BG isCCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 20 of 21
concerned, it had to follow the payment made under the APG. The order
passed by this Court was not a mandamus issued to Canara Bank. It only
restrained Gulf from encashing the BG but the number given was of the
counter BG to which Gulf was not a party and therefore it was incapable of
being complied with by Gulf. Since the direction was to Gulf, Canara Bank
could also not have complied with it. In any event there was no order
restraining Canara Bank from making payment to HSBC although the
number in the order of the Court refers to the counter BG. In other words, it
was an order incapable of being complied with either by Gulf, which alone
was party to it, or by Canara Bank which was not a party to the order.
Significantly, at no point in time did Tecon seek modification of the order
dated 18
th
September 2008.
37. As already noted in the order dated 19
th
January 2011, the Court’s order
dated 18
th
September 2008 was not communicated to Gulf prior to its
invoking the APG. Even HSBC stood absolved because there was no
reference to the APG issued by it in favour of Gulf in the order dated 18
th
September 2008. With Tecon not seeking any amendment of the order
passed by the Court, Canara Bank could not have on its own restrained
HSBC from proceeding to pay Gulf the amount under the APG. All that
Canara Bank could do within its means, and which it did, was to
communicate the order of this Court to Gulf. Even when Canara Bank made
payment to HSBC on 31
st
October 2008 it was not acting in disobedience of
any order of the Court.
38. This Court is, therefore, satisfied that there was no disobedience of the
order dated 18
th
September 2008 by Canara Bank. The contempt noticeCCP (O) No.16 of 2009 in O.M.P. 495 of 2008 Page 21 of 21
issued to Canara Bank is discharged and the contempt petition is dismissed.
Consequently, the order passed by this Court on 19
th
January 2011 requiring
Canara Bank to credit the account of Tecon with a sum of USD 411,700
does not survive and is hereby vacated.
S. MURALIDHAR, J.
OCTOBER 12, 2012
AK/bs
