LAW FOR ALL

Monday, August 30, 2021

whether there exists statutorily, a distinction between “a Scheduled Indian Bank” and “a Scheduled Bank located in India” does not arise for consideration in this case, as the dispute primarily revolves around what was offered in Court by one of the parties, what was accepted in Court, and what was recorded in the Order and clarified later. If without any offer from the petitioner, an adjudication had been made by the Court directing the petitioner to 13 furnish bank guarantee of a particular type of bank and a dispute had been raised thereafter, it is only then that a question of law as to the status of such a bank with reference to the statutory provisions, would have arisen.

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.4936-4937 OF 2021

(Arising out of SLP (C) NOS. 11476-11477 OF 2021)

SEPCO ELECTRIC POWER CONSTRUCTION CORPORATION … Appellant(s)

VERSUS

POWER MECH PROJECTS LTD. … Respondent(s)

O R D E R

Since we have not been able to agree, let the matter

forthwith be placed before Hon’ble the Chief Justice of India for

appropriate directions.

………………………………………………………,J.

[INDIRA BANERJEE]

………………………………………………………,J.

[V. RAMASUBRAMANIAN]

NEW DELHI;

AUGUST 24, 2021

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

Civil Appeal Nos. 4936-4937 of 2021

(Arising out of SLP(C) Nos. 11476-11477 OF 2021)

SEPCO ELECTRIC POWER

CONSTRUCTION CORPORATION …...Appellant(s)

Versus

POWER MECH PROJECTS LTD. ….Respondent(s)

J U D G M E N T

Indira Banerjee, J.

Leave granted.

2. These appeals are against a judgment and order dated 27.11.2020,

passed by the Division Bench of Delhi High Court, dismissing the Appeal

being FAO(OS) (COMM) No.136 of 2019, filed by the Appellant under

Section 37 of the Arbitration and Conciliation Act 1996, hereinafter

referred to, in short, as the “A & C Act” read with Section 13(1A) of the

Commercial Courts Act 2015, and affirming an order dated 16.05.2019

passed by the Commercial Division of the Delhi High Court in OMP(I)

(COMM) No.523/2017 under Section 9 of the A & C Act, whereby the Court

refused to recall its earlier order dated 09.04.2019, directing the Appellant

to substitute an irrevocable Bank Guarantee, issued by the Industrial and

Commercial Bank of China Limited (ICBC), Mumbai Branch for Rs.30 Crores

furnished pursuant to an order dated 12.02.2019 of the Court, with a Bank

Guarantee of a “Scheduled Indian Bank” of the same amount. The

Appellant has also impugned a judgment and order dated 12.03.2021

passed by the Division Bench dismissing Review Petition No.5/2021 filed

by the Appellant for review of the said judgment and order dated

27.11.2020 dismissing the Appeal.

3. The short question in these Appeals is, whether the High Court was

right in refusing to accept a legally valid irrevocable Bank Guarantee of

Rs.30 Crores, issued by the Industrial and Commercial Bank of China

Limited, Mumbai, hereinafter referred to as ‘ICBC’ which is a Scheduled

Bank included in the Second Schedule of the Reserve Bank of India Act,

1934, and insisting that the Appellant should furnish a fresh Bank

Guarantee of the same amount, with identical terms, issued by a

“Scheduled Indian Bank”, notwithstanding the expenditure incurred by the

Appellant in obtaining the Bank Guarantee from ICBC.

4. These Appeals are restricted only to the question of legality of the

direction of the High Court, requiring the Appellant to substitute a legally

valid irrevocable Bank Guarantee, issued by ICBC, which is a Scheduled

Bank, carrying on business in India, with a Bank Guarantee of equivalent

amount issued by a “Scheduled Indian Bank”.

5. The Appellant, an entity incorporated in China was awarded

contracts in relation to various coal based power projects in India and the

Respondent, a company incorporated in India was engaged as a subcontractor of the Appellant. Disputes and differences between the

Respondent and the Appellant were referred to Arbitration. The details of

the contract between the Appellant and the Respondent, or the disputes

and differences that arose therefrom, are irrelevant to the issues involved

in these Appeals. Suffice it to mention that the Arbitration culminated in

an Award dated 17.10.2017 of approximately Rs.1,42,00,00,000 (One

hundred and forty two crores) in favour of the Respondent.

6. On 03.12.2017, the Appellant filed an application under Section 34

of the A & C Act being O.M.P. (COMM) No. 432 of 2017 challenging the

Arbitral Award dated 17.10.2017 in the Commercial Division of the Delhi

High Court, which is pending.

7. On the other hand, the Respondent filed an application being OMP

(I) (COMM) No. 523/2017 in the Commercial Division of the High Court

under Section 9 of the A & C Act seeking, inter alia, directions on the

Appellant to secure the amount of the Arbitral Award.

8. On 12.02.2019, a Single Bench of the Commercial Court of the High

Court passed an order in O.M.P.(I) (COMM.) No. 523/2017 directing the

Appellant to furnish to the Registry of the High Court, a Bank Guarantee

for a sum of Rs.30 Crores, from a Scheduled Bank located in India. The

operative part of the order dated 12.02.2019 is set out hereinbelow:-

“3. ….. It is ordered accordingly.

4. The Judgment Debtor will file the affidavit within two (2)

weeks; with a copy being furnished to the counsel for the Decree

Holder.

5. Insofar as the bank guarantee is concerned, it will be

furnished within 6 weeks as indicated by the counsel.

6. Further, the bank guarantee in the sum of Rs.30 crores will be

that of a scheduled bank located in India.

7. Renotify the matter on 31.7.2019.

8. In the meanwhile, the Judgment Debtor will continue to make

deposit with the Registry of this Court in terms of the order

dated 24.7.2018.”

9. On 22.03.2019, the Appellant got ICBC to issue an unconditional,

irrevocable Bank Guarantee for a sum of Rs.30 Crores payable on demand

to the Registrar General of the Delhi High Court. An electronic copy of

the Bank Guarantee was filed in the Registry on 26.03.2019.

10. Mr. K.V. Vishwanathan, learned Senior Counsel appearing on behalf

of the Appellant submitted that the Appellant incurred expenditure of

Rs.30,00,000/- (Thirty Lakhs) approximately towards bank charges for

furnishing the Bank guarantee. Furthermore, an amount of

Rs.36,40,00,000/- was frozen in the Bank Account of the Appellant with

ICBC in China.

11. However, by an order dated 09.04.2019, the Single Bench directed

the Appellant to substitute the Bank Guarantee issued by ICBC, which had

been filed in the Registry of the High Court, by a Bank Guarantee of

equivalent amount from a Scheduled Indian Bank. The relevant

paragraphs of the said order are extracted hereinbelow:-

“5. Furthermore, Mr. Sethi says that in compliance of the order

dated 12.02.2019 which required the respondent to furnish a

bank guarantee of a Scheduled Bank, the respondent has

complied with the same and submitted a bank guarantee of

Industrial and Commercial Bank of China Limited (in short

“ICBC”).

6. However, a careful perusal of the order would show that Mr.

Sethi had offered to furnish a bank guarantee of a Scheduled

Indian bank and that while dictating the operative part of the

order, I had indicated that it would be a scheduled bank located

in India, therefore, the confusion, if any caused is now removed.

The respondent will substitute the bank guarantee filed with a

guarantee of a Scheduled Indian bank of an equivalent value.

7. Pending the substitution, the Registry will hold on to the bank

guarantee already submitted and the respondent will ensure

that the same is kept alive.

8. As to whether the bank guarantee already filed is valid, the

matter will be placed before Joint Registrar (Judicial) on

23.04.2019.

8.1 It is made clear that as and when the respondent is ready to

replace the bank guarantee furnished by ICBC with a bank

guarantee of a Scheduled Indian Bank, on a request being made

in that behalf via an appropriate application, the Joint Registrar

(Judicial) will release the bank guarantee furnished by ICBC

provided the request is backed by an undertaking of the duly

authorized representative of the respondent that it shall place

the bank guarantee of the Scheduled Indian Bank on record

within a defined time line not exceeding 10 days from the date

of the request.”

12. Pursuant to the direction of the Court, the Registrar (Judicial) of the

High Court scrutinized the Bank Guarantee furnished by the Appellant,

recorded the statement of Mr. Ayush Ganediwala, Vice President of ICBC,

who had appeared before him, and passed an order dated 03.05.2019,

recording that the said Bank Guarantee was valid with effect from

22.03.2019 till 19.03.2020.

13. Thereafter, the Appellant filed an application being IA No.7096 of

2019 for recall of the order dated 09.04.2019 of the Commercial Division

(Single Bench) of the High Court directing the Appellant to substitute the

Bank Guarantee issued by ICBC with a Bank Guarantee of equivalent

value of a Scheduled Indian Bank.

14. By an order dated 16.05.2019, the learned Single Bench dismissed

the said application, inter alia observing:-

“5. I may clarify, at the outset, that it is not this court’s

endeavour to doubt in any manner the credentials of ICBC. The

record, however, shows that the applicant/respondent had in

fact, on its own, offered to furnish a bank guarantee of a

Scheduled Indian Bank. The confusion, if any, in the mind of the

applicant/respondent, as rightly pointed out by Mr. Nigam, was

removed on 09.04.2019. The applicant/respondent has moved

this application after nearly four weeks of the clarification issued

in that behalf. Thus, having passed an order based, essentially,

on the offer made by the counsel for the applicant/respondent, I

do not see any good reason to recall the direction.”

15. From the orders dated 09.04.2019 and 16.05.2019, it appears that

the senior Counsel, representing the Respondent in the High Court had

vehemently objected to the Bank Guarantee of ICBC, arguing

emphatically, that the Appellant itself had, through Counsel, offered to

furnish a Bank Guarantee of a Scheduled Indian Bank, but had retracted

from its offer, taking advantage of an inadvertent typographical error in

Paragraph 6 of the order dated 12.02.2019, which read “Further the bank

guarantee in the sum of Rs.30 crores will be that of a scheduled bank

located in India”.

16. The direction in the operative part of the order dated 12.02.2019

was clear. It required the Appellants to furnish a Bank Guarantee of a

Scheduled Bank located in India. The Appellant complied with the

direction and furnished a Bank Guarantee of a sum of Rs.30,00,000,00/-

(Thirty Crores) from the Mumbai Branch of ICBC.

17. May be, there was a mistake in passing the order dated 12.02.2019,

in the sense that the Court had intended to pass an order in terms of the

offer of the Appellant, to furnish a Bank Guarantee of a Scheduled Indian

Bank. In the order dated 09.04.2019, the learned Judge very fairly stated

that while dictating the operative part of the order, the learned Judge had

said that the Bank Guarantee would be of a Scheduled Bank located in

India. That is what the order read. A party cannot be faulted for acting in

terms of the order as issued, particularly when there was no patent or

obvious error in the direction to furnish a Bank Guarantee of a Scheduled

Bank, located in India.

18. It is true, that the order dated 12.02.2019 records the oral offer

made on behalf of the Appellant, through Counsel, to submit a bank

guarantee of a Scheduled Indian Bank. However, the direction in the

operative part of the order dated 12.02.2019 gives the impression, that

the offer of the Appellant to furnish a Bank Guarantee may have

persuaded the Court to secure the Arbitral Award by directing the

Appellant to furnish a Bank Guarantee of a Scheduled Bank located in

India.

19. As recorded in the order dated 09.04.2019, there may have been

some confusion by reason of the direction to furnish a Bank Guarantee of

a Scheduled Bank located in India. The language and tenor of the order

dated 12.02.2019, as also the fact that the Respondent did not make any

attempt to have the direction to furnish a Bank Guarantee of a Scheduled

Bank located in India rectified and/or altered, shows that use of the

expression ‘Scheduled Indian Bank’ may have been understood by all

concerned parties to include an Indian branch of a Scheduled Bank.

20. Contrary to the contention of the Respondent, as recorded in the

order dated 16.05.2019 of the Court, there was no typographical error in

the order dated 12.02.2019. One can say that there is a typographical

error when there is an inadvertent mistake in a figure or the spelling of a

word by reason of pressing a wrong key of the keyboard or the omission or

duplication of a word or phrase or even a sentence/sentences. A

typographical error is obvious. That was not the case here.

21. The direction to furnish a Bank Guarantee of a Scheduled Indian

Bank located in India, is perfectly legal. There was no reason for the

Appellant to proceed on the basis that the direction had been issued by

mistake. The Respondent also did not take any steps to get the direction

rectified or altered. The direction was allowed to remain intact for almost

two months. In the meanwhile, the Appellant furnished a Bank Guarantee

of an Indian Branch of ICBC, a Scheduled Bank in India.

22. In this case, perhaps the intention of the Court was not expressed

in the order accurately. However, the order was otherwise correctly

worded and legally valid. It is not uncommon for Courts to give directions,

which might be at variance with an oral offer. The Appellant having acted

in accordance with the order dated 12.02.2019 and changed his position

to his detriment by incurring an expenditure of about Rs.30 lakhs to

comply with the said order, it was not appropriate for the Court to change

the order.

23. From the order dated 09.04.2019, it is clear that even the Single

Bench accepted that there was a confusion due to the language and tenor

of the direction in Paragraph 6 of the said order. Thus the Court, in effect,

accepted that there may not have been any deliberateness on the part of

the Appellant in furnishing a Bank Guarantee issued by ICBC.

24. Being aggrieved by the order dated 16.05.2019 refusing to recall

the earlier order of the Court dated 09.04.2019, directing the Appellant to

replace the Bank Guarantee of ICBC, with a Bank Guarantee of a

Scheduled Indian Bank, the Appellant filed an appeal under Section 37 of

the A & C Act, read with Section 13 (1A) of the Commercial Courts Act,

2015. The appeal was dismissed by the order of the Division Bench dated

27.11.2020 impugned before this Court. The prayer of the Appellant, for

review of the Order dated 27.11.2020 was rejected by an order dated

12.03.2021, which is also under challenge before this Court.

25. There may not be any infirmity in the order dated 12.03.2021,

rejecting the prayer of the Appellant for review, having regard to the

limited scope of an application for review. A matter cannot be re-argued

in the garb of an application for review. Nor does the Review Court

exercise appellate powers. All applications for review are governed by the

principles enshrined in Section 114 read with Order 47 Rule 1 of the Code

of Civil Procedure, 1908. A court is empowered to review its own order

only if the conditions precedent for a review, as laid down in Section 114

read with Order 47 Rule 1 of the Code of Civil Procedure exist. In this case

the prerequisites for a review did not exist. The appeal from the order

dated 12.03.2021, rejecting the application for review, is therefore,

dismissed.

26. Therefore, the question is whether the Division Bench, after having

held that the order impugned before it was appealable, should have

dismissed the appeal and allowed the direction on the Appellant to

substitute the Bank Guarantee of ICBC with a fresh bank guarantee of a

Scheduled Indian Bank, to stand.

27. Even in the proceedings before the Division Bench, the Respondent

only harped on the offer of the Appellant to furnish a Bank Guarantee of a

Scheduled Indian Bank and further contended that the Bank Guarantee of

ICBC being conditional, the Respondent feared that the purpose of the

Bank Guarantee might not be served.

28. Significantly, there is no finding of the Single Bench that the bank

guarantee is conditional. A copy of the Bank Guarantee is included in the

Paper Book. The Bank Guarantee reads:

“NOW THESE PRESENTS WITNESSETH THAT THE SAID BANK DOTH HEREBY

STAND SURETY IN PURSUANCE OF THE SAID ORDER DATED 12

FEBRUARY

2019 FOR THE SUM OF RS. 300,00,000/- (RUPEES THIRTY CRORES ONLY)

AND THE SAID BANK DOTH HEREBY GUARANTEE TO AND COVENANT WITH

THE REGISTRAR GENERAL, DELHI HIGH COURT THAT THE SAID BANK

SHALL FORTHWITH PAY THE SAID SUM OF RS. 300,00,000/-(RUPEES THIRTY

CRORES ONLY) TO THE REGISTRAR GENERAL, DELHI HIGH COURT IN

TERMS OF THE ORDER/JUDGEMENT OF THE HON’BLE HIGH COURT OF

DELHI ALLOWING THE ENFORCEMENT OF THE ARBITRAL AWARD DATED

17TH OCTOBER, 2017 AND AS PER ORDER/DIRECTION/JUDGMENT BY THE

HON’BLE HIGH COURT OF DELHI IN THE MATTER ARISING OUT OF ABOVE

MENTIONED LEGAL PROCEEDINGS.

AND THE SAID BANK DOTH HEREBY FURTHER COVENANT AND DECLARE

THAT THE BANK GUARANTEE HEREIN SHALL REMAIN IN FORCE UP TO AND

INCLUSIVE OF A PERIOD OF ONE YEAR AND THE SAID BANK SHALL IN

CIRCUMSTANCES AS ABOVE, WITHOUT ANY DEMUR OR DEMAND, ACTION,

NOTICE OR OBJECTION FORTHWITH PAY TO THE REGISTRAR GENERAL,

DELHI HIGH COURT THE SAID AMOUNT OF RS.300,00,000/-(RUPEES THIRTY

CRORES ONLY).

AND IT IS HEREBY FURTHER RECORDED THAT THE SAID BANK GUARANTEE

GIVEN HEREIN IS IRREVOCABLE AND SHALL NOT BE REVOKED BY NOTICE

OR OTHERWISE AND IT IS IN ACCORDANCE WITH THE ORDER DATED 12

FEBRUARY, 2019 PASSED BY THE HON’BLE HIGH COURT OF DELHI IN

PETITION NO. O.M.P.(I) (COMM) NO.523/2017 TITLED M/S. POWER MECH

PROJECTS LTD. VS. SEPCO ELECTRIC POWER CONSTRUCTION

CORPORATION AND O.M.P. (COMM) NO.432/2017 TITLED SEPCO ELECTRIC

POWER CONSTRUCTION CORPORATION VS M/S. POWER MECH PROJECTS

LTD. NOTHWITHSTANDING ANYTHING CONTAINED HEREINABOVE THE

LIABILITY OF THE SAID BANK IS RESTRICTED TO THE SUM OF

RS.300,00,000/- (RUPEES THIRTY CRORES ONLY).

IN WITNESS WHEREOF WE, INDUSTRIAL AND COMMERCIAL BANK OF

CHINA LIMITED, MUMBIA BRANCH

NAME OF THE SCHEDULED BANK, BRANCH AND ADDRESS)

HAVE EXECUTED THESE PRESENT AT NEW DELHI

THIS 22

DAY OF MARH 2019.

THE GUARANTEE IS SUBJECT TO THE UNIFORM RULES FOR DEMAND

GUARANTEES(URDG) 2010 REVISION, ICC PUBLICATION NO.758.”

29. The ICBC has unequivocally agreed to honour the Bank Guarantee

on an order and/or judgment of the High Court allowing enforcement of

the Arbitral Award, and as per Order/Direction/Judgment by the High Court

in the pending legal proceedings. The statement that the Bank Guarantee

is subject to the Uniform Rules for Demand Guarantees (URDG) 2010

Revision, does not dilute the terms of the Bank Guarantee. Nor does the

URDG render the Bank Guarantee any less effective. Furthermore, the

High Court did not direct the Appellant to furnish an unconditional

guarantee.

30. The Uniform Rules for Demand Guarantees (URDG) 758 is a set of

voluntary contractual rules, published by the International Chamber of

Commerce (ICC) with the aim of regularising and creating a set standard

of international banking practice on demand guarantees and counter

demand guarantees.

31. The URDG balances the legitimate and competing interests of the

applicant, the guarantor and the beneficiary and limits the risk of unfair

calls and demands on guarantors and counter-guarantors, just like the

ICC's Uniform Customs and Practice for Documentary Credits (UCP) 600

which applies to Letters of Credit (LCs) and other documentary credits.

32. The URDG, being a voluntary instrument, lacks the force of law, and

must thus be expressly incorporated by the parties in order for it to apply

to a demand guarantee or counter-guarantee. Guarantees issued by

guarantors and counter-guarantors, which incorporate the URDG, are

entirely subject to their own terms, while incorporating beneficial terms of

the URDG.

33. It is important to note that the URDG may apply without the parties

expressly including it in certain instances, where it is in the general usage

of a particular trade, where the applicable law provides for its application;

or where it has been in consistent use in the course of a transaction or

dealings between the parties.

34. The provisions of the URDG are limited to the scope of the matters

upon which the contracting parties are free to contract on, and is subject

to mandatory national laws of the governing jurisdiction, which is the law

and jurisdiction of the guarantor or counter-guarantor, unless otherwise

agreed by the parties.

35. Under the URDG, guarantees are completely independent of any

underlying relationship between the applicant and beneficiary, and

subject to only the terms contained in it, thereby limiting the liabilities and

rights of the guarantor bank to only matters to which it voluntarily

commits itself.

36. URDG 758 is a revised version of URDG 458. The revision was

conducted under the aegis of ICC Banking Commission and the ICC

Commission on Commercial Law and Practice.

37. The ICC Task Force on Guarantees, the standing expert body created

by ICC in 2003 to monitor international guarantee practice, acted as a

consultative body to the Drafting Group that produced five comprehensive

drafts during the two-and-a-half-year revision process.

38. The resulting URDG 758 were adopted unanimously by the ICC

Executive Board at its meeting in New Delhi on 3 December 2009,

following their endorsement by the members of the two sponsoring ICC

Commissions. They came into force on 1 July 2010, whereupon a

considerable number of demand guarantees and counter-guarantees

started being issued all over the world subject to the new URDG 758.

39. It appears that all the concerned parties proceeded on the

understanding that there was no difference between a ‘Scheduled Indian

Bank’ and ‘Scheduled Bank located in India’, in the absence of any

specific definition of the expression ‘Scheduled Indian Bank’ in the RBI or

the Banking Regulation Act.

40. Incorporated on 01.01.1984, ICBC is a Chinese State-owned multi

national banking company, with capital provided by the Ministry of

Finance of China. ICBC is a banking company within the meaning of

Section 5(c) of the Banking Regulation Act, 1949, read with Section 45A

(a) of the Reserve Bank of India Act, 1934, hereinafter referred to as the

RBI Act. Sections 5(c) of the Banking Regulation Act and Section 45A(a) of

the RBI Act are set out hereinbelow for convenience”-

“Section 5(c) of Banking Regulation Act, 1949

5(c) “banking company” means any company which transacts

the business of banking in India ;

Explanation.—Any company which is engaged in the

manufacture of goods or carries on any trade and which

accepts deposits of money from the public merely for the

purpose of financing its business as such manufacturer or

trader shall not be deemed to transact the business of

banking within the meaning of this clause;

xxx xxx xxx

Section 45A (a) of the Reserve Bank of India Act, 1934

45A(a) “banking company” means a banking company as

defined in Section 5 of the Banking Regulation Act, 1949, and

includes the State Bank of India, any subsidiary bank as defined

in the State Bank of India (Subsidiary Banks) Act, 1959, any

corresponding new bank constituted by Section 3 of the Banking

Companies (Acquisition and Transfer of Undertakings) Act, 1970,

and any other financial institution notified by the Central

Government in this behalf,...”

41. ICBC is also a Scheduled Bank within the meaning of Section 2 (e) of

the RBI Act, which defines a ‘Scheduled Bank’ to mean a bank included in

the Second Schedule to the RBI Act. ICBC has its branch office at the

Bandra Kurla Complex, Mumbai, India. The Mumbai branch of ICBC has

been granted license by RBI to carry on banking business in India

pursuant to a Memorandum of Understanding between the Governments

of India and China.

42. The Mumbai branch of ICBC commenced operations in September

2011 and was included in the Second Schedule to the RBI Act by

Notification DBOD IBD. No.8137/23.03.026/2011-12 dated 01.12.2011

published in the Gazette of India (Part III Section 4).

43. ICBC evidently continues to be in the Second Schedule to the RBI

Act till date. In this context, it may be pertinent to point out that some

banks have been excluded from the Second Schedule to the RBI Act by

Gazette Notifications.

44. Banks have been listed in the Second Schedule to the RBI Act, by

Gazette Notifications issued from time to time, under the following

categories:-

1. Scheduled Public Sector Banks

2. Scheduled Private Sector Banks.

3. Scheduled Small Finance Banks

4. Scheduled Payments Banks

5. Scheduled Regional Rural Banks

6. Scheduled Foreign Banks in India

45. In terms of Annexure-1 to the notification dated 13th April 2020,

mentioned in Paragraph 2(b) thereof the following Scheduled Commercial

Banks have been included in the Schedule to the RBI Act:-

“Annexure I

(Refer to para 2(b) of notification dated April 13, 2020)

List of Scheduled Commercial Banks

PUBLIC SECTOR BANKS PRIVATE BANKS

1 State Bank of India 1 Axis Bank Ltd.

2 Bank of Baroda

(Including Vijaya Bank and Dena Bank)

2 Catholic Syrian Bank Ltd.

3 Bank of India 3 City Union Bank Ltd.

4 Bank of Maharashtra 4 Development Credit Bank Ltd.

5 Canara Bank

(Including Syndicate Bank)

5 Dhanlaxmi Bank Ltd.

6 Central Bank of India 6 Federal Bank Ltd.

7 Indian Bank

(Including Allahabad Bank)

7 HDFC Bank Ltd.

8 Indian Overseas Bank 8 ICICI Bank Ltd.

9 Punjab National Bank (including

Oriental Bank of Commerce and United

Bank of India)

9 IndusInd Bank Ltd.

10 Punjab & Sind Bank 10 Jammu & Kashmir Bank Ltd.

11 Union Bank of India (including Andhra

Bank and Corporation Bank)

11 Karnataka Bank Ltd.

12 UCO Bank 12 Karur Vysya Bank Ltd.

13 Kotak Mahindra Bank Ltd.

14 Lakshmi Vilas Bank Ltd.

15 Nainital Bank Ltd.

16 Ratnakar Bank Ltd.

17 South Indian Bank Ltd.

18 Tamilnad Mercantile Bank Ltd.

19 Yes Bank Ltd.

20 Bandhan Bank

21 IDFC Bank Ltd.

22 IDBI Bank Ltd

FOREIGN BANKS

1 The Royal Bank of Scotland N.V. 23 Mizuho Corporate Bank Ltd.

2 Abu Dhabi Commercial Bank Ltd. 24 Oman International Bank

3 Antewerp Diamond Bank N.V. 25 Societe Generale

4 Arab Bangladesh Bank Ltd. (AB Bank) 26 Sonali Bank

5 Bank International Indonesia 27 Standard Chartered Bank

6 Bank of America 28 State Bank of Mauritius

7 Bank of Bahrain & Kuwait B.S.C. 29 JSC-VTB Bank

8 Bank of Ceylon 30 UBS-AG

9 Bank of Nova Scotia 31 American Express Banking Corporation

10 Bank of Tokyo-Mitsubishi Ltd. 32 First Rand Bank Ltd.

11 Barclays Bank 33 Commonwealth Bank of Australia

12 BNP Paribas 34 United Overseas Bank Ltd.

13 China Trust Bank 35 Credit Suisse A.G.

14 Shinhan Bank 36 Sberbank

15 Citibank N.A. 37 Australia and New Zealand Banking

Group Ltd.

16 Credit Agricole Corporate and

Investment Bank

38 Rabobank International

17 Deutsche Bank 39 National Australia Bank

18 DBS Bank Ltd. 40 Woori Bank

19 Hongkong and Shanghai Banking

Corpn. Ltd.

41 Industrial & Commercial Bank of China

20 J.P. Morgan Chase Bank N.A. 42 Sumitomo Mitsui Banking Corporation

21 Krung Thai Bank 43 Westpac Banking Corporation

22 Mashreqbank 44 Doha Bank

46. As a Scheduled Bank and a banking company within the meaning of

the Banking Regulation Act, ICBC is governed by the regulatory provisions

of the RBI Act and the Banking Regulation Act and the Rules, Regulations,

Orders, Notifications etc. issued thereunder. The circulars and directives

of the Reserve Bank of India with regard to Bank Guarantees/ Demand

Guarantees are binding on ICBC.

47. The RBI Act only defines ‘Scheduled Banks’ which includes

Scheduled Foreign Banks operating in India. The RBI Act or the Second

Schedule thereto does not segregate Scheduled Indian Banks. There is no

definition of Scheduled Indian Bank in the RBI Act. The regulatory

provisions of the RBI Act apply equally to all scheduled banks.

48. However, since there is a list of Scheduled Foreign Banks in India

categorized separately in the Second Schedule by Gazette Notifications, it

may be presumed that all other banks listed in the Second Schedule in the

various categories except the category of Scheduled Foreign Banks, that

is, Scheduled Public Sector Banks, Scheduled Private Sector Banks,

Scheduled Small Finance Banks, Scheduled Payments Banks, Scheduled

Regional Rural Banks are all Scheduled Indian Banks, even though

Scheduled Indian Banks do not constitute any distinct category in the

Second Schedule to the RBI Act. Since ICBC has its principal branch

registered in the People’s Republic of China and is listed in the category of

Scheduled Foreign Banks in India, the High Court made a distinction

between ICBC and a ‘Scheduled Indian Bank’.

49. The Annexures to the Special Leave Petition filed in this Court, which

form part of the Paper Book in these appeals show that ICBC is not only a

Scheduled Bank in India, but it also ranks very high in terms of asset value

in atleast three extremely authoritative lists being ‘The Banker’s Top 1000

World Banks 2018’, ‘The Forbes Global 2000 2019’ and ‘The Fortune

Global 500 Sub-list of Commercial Banks’.

50. It is stated by the Appellant that ICBC realized a net profit of RMB

298.7 Billion in the year 2018 with the total value of its assets assessed at

27,699,540 (in RMB Millions). Mr. Vishwanathan submits that ICBC

continues to hold the largest total net profit in the global banking industry.

51. It appears that the Mumbai branch of ICBC has set up a fund for an

amount of 200 million US Dollars for investment in Indian Micro, Small and

Medium Enterprises (MSMEs). It is contended on behalf of the Appellant

that this establishes the credibility of ICBC within the Indian Commercial

Market.

52. In the Second Schedule to the RBI Act, ICBC is listed in the same

category of Scheduled Foreign Banks in India as Standard Chartered Bank,

Citi Bank, American Express Banking Corporation, HSBC Limited etc.

which are household names in India in the arena of banking. On the

other hand, Scheduled Indian Bank, as stated above would include all

categories of banks in the Second Schedule except those in the category

of Scheduled Foreign Banks. Scheduled Banks would therefore, include

Scheduled Private Sector Banks such as Bandhan Bank Limited, City Union

Bank Limited, Ratnakar Bank Limited, Dhanalaxmi Bank Limited, Kotak

Mahindra Bank Limited, Lakshmi Vilas Bank Limited, Nainital Bank Limited,

Yes Bank Limited etc.

53. Mr. Abhishek Manu Singhvi, learned Senior Counsel opposing these

appeals on behalf of the respondents could not demonstrate any real

prejudice likely to be caused by reason of furnishing of a Bank Guarantee

of ICBC in preference to Scheduled Indian Banks nor could he show any

plausible reason for preference of Scheduled Private Sector Banks in India

to Scheduled Foreign Banks like ICBC.

54. As pleaded in the appeal being FAO (OS) (COMM) No.136 of 2019

the Respondents have not been able to advert to a single instance of

default, fraud or any other malpractice of ICBC which could cast any doubt

over ICBC’s ability or inclination to honour the Bank Guarantee issued by

it.

55. It is incomprehensible why Scheduled Private Banks in India should

be preferred to Scheduled Foreign Banks in India with high global rating,

even though, some Scheduled Private Sector Banks have not even been

running well. It would perhaps not be out of place to take judicial notice of

reports that in March, 2020, Yes Bank, a private Sector bank, which was on

the brink of complete financial collapse, had to be placed under a

moratorium by RBI. Yes Bank has been cited by this Court as an example

only to illustrate the fallacy of insistence upon the Bank Guarantee of a

Scheduled Indian Bank in preference to that of Scheduled Foreign Bank in

India, and not to cast any aspersion on the present functioning of Yes bank

or any other Scheduled Bank in the Private Sector in India.

56. There can be no doubt that the Court has the discretion to insist on

a Bank Guarantee from any specific bank or class of banks to safeguard

the interests of the beneficiary of the Bank Guarantee. The Court may

legitimately disapprove a Bank Guarantee of a bank with a history which

raises doubts with regard to its credibility. In this case, there is nothing

on record to give rise to any doubts with regard to the credibility of ICBC

or its financial ability or willingness to honour guarantees.

57. In the absence of any adverse material against ICBC and in the light

of a plethora of reports showing its financial soundness, I am of the view

that the High Court erred in directing the Appellant to replace the Bank

Guarantee of ICBC, already furnished pursuant to an order of Court passed

on 12.02.2019, with another Bank Guarantee, oblivious of the practical

realities in the arena of banking activities, specially the difficulties in

obtaining a Bank Guarantee from banks with which the applicant has no

transaction and ignoring the cost already incurred by the Appellant by way

of bank charges for obtaining the guarantee.

58. Mr. Singhvi, more as an argument in desperation, submitted that the

Petitioner would not have incurred so much expenditure if it had complied

with the order dated 09.04.2019 instead of taking recourse to different

proceedings before Court. Prompt compliance with the order of

09.04.2019 may have saved the Appellant the costs of renewal of the

Bank Guarantee. However, the initial amount of about Rs.30 lakhs had

already been spent long before the order dated 09.04.2019 was passed.

59. As discussed above, all that is required for invocation of the Bank

Guarantee is an order of the High Court in the proceedings relating to the

Arbitral Award. The statement that the guarantee is subject to the URDG

does not dilute the guarantee or make it conditional. Mr. Singhvi’s client

has not been able to demonstrate how the URDG can cause any prejudice

to the beneficiary of the Bank Guarantee. Having passed an order on

12.02.2019 which directed “..Further, the bank guarantee in the sum of

Rs.30 crores will be that of a scheduled bank located in India...” on the

basis of which the Appellant altered its position to its detriment by

extending Rs.30 lakhs in obtaining a Bank Guarantee of ICBC. The High

Court was not justified in altering and/or modifying the said direction after

almost two months and after its compliance.

60. For the reasons discussed above, the appeal from the impugned

judgment and order of the Division Bench dated 27.11.2020 in FAO(OS)

(COMM) No. 136 of 2019 is allowed. The impugned judgment and order

of the Division Bench dated 27.11.2020 in FAO(OS) (COMM) No. 136 of

2019 and orders dated 09.04.2019 and 16.05.2019 in OMP (I) (COMM)

523/2017 are set aside.

….……………………………………. J.

[INDIRA BANERJEE]

New Delhi;

August 24, 2021

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

SPECIAL LEAVE PETITION (CIVIL) NO. 1147677 OF 2021

SEPCO ELECTRIC POWER

CONSTRUCTION CORPORATION … PETITIONER(S)

VERSUS

POWER MECH PROJECTS LTD. … RESPONDENT(S)

O R D E R

1. Despite a fine analysis by my learned sister, of the relevant

provisions of the Reserve Bank of India Act, 1934 and the Banking

Regulation Act, 1949 and the fine distinction that the Hon’ble Judge

has brought out between a ‘scheduled Bank’ defined in the Act, in

contrast to a ‘scheduled Indian Bank’ not defined anywhere

statutorily, I regret my inability to persuade myself to agree to the view

taken by my learned sister. In my considered view, the special leave

petitions deserve to be dismissed. The reasons are provided herein

below.

2. As pointed out by my sister, the awarddebtor has come up with

these Special Leave Petitions challenging (i) the dismissal of an appeal

under Section 37 of the Arbitration and Conciliation Act, 1996

(hereinafter referred to as the ‘Act’); and (ii) the dismissal of a review

petition arising there from. The appeal under section 37 of the Act

arose out of the rejection of a petition for recalling an order passed in

an application for interim measure under Section 9 of the Act.

3. The petitioner suffered an arbitration award dated 17.10.2017 in

a sum of Rs.142,41,14,499/. The award is the subject matter of

challenge in a petition OMP(COMM.)No.432 of 2017 under Section 34

of the Act. It appears that the petition under Section 34 was

accompanied by an application for stay of execution of the award, but

the same has not yet been finally disposed of.

4. However the respondent filed an independent petition under

Section 9 of the Act, and sought a direction to the petitioner to secure

the award amount. In the said petition in I.A.No.11128 of 2018 in

OMP (I)(COMM.)No.523 of 2017, an order was passed on 12.02.2019.

Since the genesis of the dispute before us could be traced to the said

order, it is extracted as follows:

“1. Mr. Sethi, learned senior counsel for the

respondent, says that he will file an affidavit stating

therein the following:

(i) The list of assets which find mention in the

valuers’ report along with their location and

valuation given by the valuer.

(ii) The list of assets which, according to him,

the valuer has not valued. In respect of these

assets their location and approximate valuation will

also be given.

(iii) Furnish a bank guarantee in the sum of

Rs.30 crores of a scheduled Indian bank.

2. Learned senior counsel says that on account of the

spring festival in China, it could take at least six (6)

weeks to furnish the bank guarantee.

3. Mr. Sethi says, however, the affidavit can be

furnished within the next two (2) weeks. It is ordered

accordingly.

4. The Judgment Debtor will file the affidavit within

two (2) weeks; with a copy being furnished to the counsel

for the decree holder.

5. Insofar as the bank guarantee is concerned, it will

be furnished within 6 weeks as indicated by the counsel.

6. Further, the bank guarantee in the sum of

Rs.30 crores will be that of a scheduled bank

located in India.

7. Renotify the matter on 31.7.2019.

8. In the meanwhile, the Judgment Debtor will

continue to make deposit with the Registry of this Court

in terms of the order dated 24.7.2018.”

5. Pursuant to the aforesaid order, the petitioner furnished a bank

guarantee issued by the Industrial and Commercial Bank of China

Limited, Mumbai Branch dated 22.03.2019 (hereinafter referred to

ICBC).

6. It appears that thereafter the respondent moved another

application in I.A.No.5185 of 2019 in OMP(I)(COMM.) No.523 of 2017

seeking Garnishee Orders in respect of the amounts that the

petitioner was entitled to receive under a settlement agreement

entered into with one of their customers. While dealing with the said

application, the learned Judge found that instead of furnishing a bank

guarantee of a scheduled Indian bank, the petitioner had furnished

bank guarantee of ICBC, in view of the confusion created in paragraph

6 of the order dated 12.02.2019. Therefore, by an order passed on

09.04.2019, in I.A.No.5185 of 2019, the learned Judge directed the

petitioner to substitute the bank guarantee of ICBC, with a bank

guarantee of a scheduled Indian bank. The relevant portion of the

order passed by the learned judge in I.A.No.5185 of 2019 dated

09.04.2019 reads as follows:

“… … …

5. Furthermore, Mr. Sethi says that in compliance of

the order dated 12.02.2019 which required the

respondent to furnish a bank guarantee of a Scheduled

Bank, the respondent has complied with the same and

submitted a bank guarantee of Industrial and

Commercial Bank of china Limited (in short “ICBC”)

6. However, a careful perusal of the order would

show that Mr. Sethi had offered to furnish a bank

guarantee of a Scheduled Indian bank and that while

dictating the operative part of the order, I had

indicated that it would be a scheduled bank located in

India, therefore, the confusion, if any caused is now

removed. The respondent will substitute the bank

guarantee filed with a guarantee of a Scheduled Indian

bank of an equivalent value.

… … …”

7. It is relevant to point out here that the order dated 09.04.2019

was passed by the very same Judge who passed the order dated

12.02.2019. The learned Judge was thus aware of what transpired in

court on 12.02.2019 and hence recorded in the order dated

09.04.2019 as to what happened in court on 12.02.2019. It is

needless to emphasize that what is recorded in a judicial order about

what transpired during the hearing in court, is to be taken to be a

correct reflection of what transpired.

8. However, the petitioner filed an application in I.A.No.7096 of

2019 seeking to recall the directions contained in paragraph 6 of the

order dated 09.04.2019. The main grievance as projected by the

petitioner in the said petition was that the nonacceptance of the bank

guarantee furnished by ICBC may be taken as a reflection on the

reputation of the bank.

9. But by an order dated 16.05.2019, the learned Judge dismissed

I.A.No.7096 of 2019, clarifying that the credentials of ICBC are not at

all doubted and that what was sought to be done by the order dated

09.04.2019, was merely to correct an error that crept in the order

dated 12.02.2019. Paragraph 5 of the order dated 16.05.2019 reads

as follows:

“… … …

5. I may clarify, at the outset, that it is not this

court’s endeavour to doubt in any manner the credentials

of ICBC. The record, however, shows that the

applicant/respondent had in fact, on its own, offered

to furnish a bank guarantee of a Scheduled Indian

Bank. The confusion, if any, in the mind of the

applicant/respondent, as rightly pointed out by Mr.

Nigam, was removed on 09.04.2019. The

applicant/respondent has moved this application after

nearly four weeks of the clarification issued in that

behalf. Thus, having passed an order based, essentially,

on the offer made by the counsel for the

applicant/respondent, I do not see any good reason to

recall the direction. …”

10. Challenging the order dated 16.05.2019, passed in I.A.No. 7096

of 2019, the petitioner moved an intracourt appeal in FAO(OS)

(COMM.)No.136 of 2019 under Section 37 of the Act read with Section

13 of the Commercial Courts Act, 2015. This appeal was dismissed by

the Division Bench by an order dated 27.11.2020 primarily on the

ground that the order under appeal was an interim one which is

largely discretionary and that the scope and power of the appellate

court in appeals against interim orders is limited to certain factors.

11. The petitioner thereafter moved an application for review in

R.P.No.5 of 2021 seeking a review of the order dated 27.11.2020. The

review petition was dismissed by an order dated 12.03.2021.

Therefore, challenging the dismissal of the appeal and the dismissal of

the review petition, the petitioner has come up with these Special

Leave Petitions.

12. Thus we have 2 Special Leave Petitions, one challenging the

dismissal of the appeal under section 37 and another challenging the

dismissal of the review petition. The SLP arising out of the order

passed in the review petition deserves to be thrown out without much

ado, since the refusal of a court to review its order due to the absence

of the parameters prescribed in Order 47 Rule 1 CPC, cannot give rise

to a substantial question of law of public importance, warranting our

interference under Article 136.

13. In so far as the other SLP challenging the order passed in the

appeal under Section 37 of the Act is concerned, the same arises out

of an interim order passed under Section 9 of the Act. As rightly

observed by the Division Bench of the High Court, interim orders are

discretionary and there is no question of interference with the exercise

of the discretion, even in an intracourt appeal, much less in an SLP

under Article 136.

14. All that the learned Judge did on 09.04.2019, was to correct a

mistake that inadvertently crept in his order. The correction that the

learned Judge sought to make, was in tune with the very offer made

by the petitioner at the first instance on 12.02.2019. When an interim

order has been passed particularly in a fact situation arising out of an

offer made by one of the parties, especially by the very same learned

Judge, I fail to understand how the case can be elevated to the status

of one raising a substantial question of law warranting our

interference under Article 136.

15. I have extracted in full, the first order dated 12.02.2019 and the

relevant portions of the orders dated 09.04.2019 and 16.05.2019. The

order dated 12.02.2019 shows (i) that it was not an adjudicatory order

but passed entirely on the basis of an offer made by the petitioner

herein; and (ii) that paragraphs 4 and 5 of the order gave two weeks

time to the petitioner to file an affidavit and six weeks time to furnish

bank guarantee. The statement of the learned senior counsel for the

petitioner to file an affidavit is recorded in paragraph 1 of the order

dated 12.02.2019. Paragraph 1 of the order dated 12.2.2019 indicates

three items with respect to which the petitioner undertook to file an

affidavit. Item no. (iii) of paragraph 1 is very specific that one of the

contents of the affidavit should be to furnish a bank guarantee in a

sum of Rs.30 crores of a ‘scheduled Indian bank’. Paragraph 5

directs the petitioner to furnish bank guarantee within six weeks

‘as indicated by the counsel’.

16. To a pointed question whether an affidavit containing all the

three items mentioned in paragraph 1 was filed or not, as directed in

paragraph 4 of the order dated 12.02.2019, the reply of Mr. K.V.

Vishwanathan, learned senior counsel for the petitioner was that an

affidavit containing the matters indicated in Item Nos. (i) and (ii) of

paragraph 1 of the order was filed and that in view of the directions

contained in paragraph 6 to furnish a bank guarantee of a scheduled

bank located in India, there was no necessity to incorporate in the

affidavit, the matter covered by Item No.(iii) of paragraph 1.

17. But I do not agree. If a party to a proceeding invites an order by

making an offer, he is obliged to honour the commitment made in the

form of the offer. The contention of Mr. K.V. Vishwanathan that his

client’s offer in paragraph 1(iii) of the order dated 12.02.2019 to

furnish a bank guarantee of a scheduled Indian bank stood modified

by paragraph 6 of the order, is not acceptable. This is for the reason

that the very same learned Judge from whom the order dated

12.02.2019 was invited, clarified on 09.04.2019 that what he had in

mind was what was actually offered by the petitioner. Once the same

learned Judge has clarified that there was no intention to accept the

offer made by the petitioner with a modification, it is not open to the

appellate court to upset the discretion exercised by the learned Judge.

18. Both in the orders dated 09.04.2019 and 16.05.2019, the very

same learned Judge had clarified (i) as to what transpired in court; (ii)

as to what was offered; and (iii) as to what was the purport of the

order dated 12.02.2019. Therefore, the matter should be allowed to

rest there.

19. Even the contention that the credentials of ICBC will be taken to

have been doubted, was considered by the learned Judge in his order

dated 09.04.2019 and the matter was clarified. Therefore, the

question of any harm to the reputation of ICBC does not arise.

20. Lastly it is contended by Mr. K.V. Vishwanathan, learned senior

counsel for the petitioner that the bank guarantee was taken by the

petitioner from ICBC, upon payment of a nonrefundable charge of

Rs.30 lakhs and that therefore assuming that there was a mistake on

the part of the Court, it cannot be corrected by the Court resulting in

a financial loss of Rs.30 lakhs to the petitioner. The maxim “actus

curiae neminem gravabit” is sought to be invoked by the learned senior

counsel for the petitioner.

21. But in my considered view the petitioner has to blame itself, for

the loss if any. The order dated 12.02.2019 gave (i) two weeks time to

the petitioner to file an affidavit incorporating all the three items of

matters indicated in paragraph 1 of the order dated 12.02.2019; and

(ii) six weeks time to furnish bank guarantee as indicated by the

counsel. Therefore the petitioner ought to have filed an affidavit

containing all the three ingredients, before taking the bank guarantee

from ICBC. If they had done so, the affidavit would have contained a

statement, in tune either with what was undertaken by them or with

what was mentioned in the order. The filing of an affidavit in such a

manner, would have given a wake up call to the respondents and

shown the bonafides of the petitioner. But without doing so, the

petitioner filed an affidavit containing only those matters covered by

Items (i) and (ii) of paragraph 1 and thereafter furnished a bank

guarantee of ICBC. Since the petitioner did not adopt a course of action

as undertaken by them, it is not open to them to say that they were

misled by the direction in paragraph 6 of the order dated 12.02.2019

and that therefore they should not be prejudiced on account of a

mistake committed by the court.

22. This is a case where the petitioner, after making a clear offer to

furnish a bank guarantee of a scheduled Indian bank, has chosen to

take advantage of a mistake that crept in paragraph 6 of the order.

Therefore, he is not entitled to take advantage of the Latin maxim

“actus curiae neminem gravabit”.

23. In my humble considered view, these special leave petitions do not

deserve to be entertained under Article 136 of the Constitution of India

in view of the fact (i) that the very same Judge who passed the first

Order dated 12.02.2019, clarified the same by his subsequent Order

dated 09.04.2019; (ii) that the same learned Judge dismissed on

16.05.2019, the petition to recall the Order dated 09.04.2019; (iii) that

the Commercial Division Bench of the High Court dismissed the appeal

arising out of the Order dated 16.05.2019; and (iv) that the Commercial

Division Bench again reiterated its orders, by dismissing the review

petition. We must remember that all this arose out of an interim

measure under Section 9 of the Act and the petitioner is seeking to

upset all of this in a petition under Article 136 of the Constitution as

though there is a substantial question of law of great importance.

24. The question whether there exists statutorily, a distinction

between “a Scheduled Indian Bank” and “a Scheduled Bank located in

India” does not arise for consideration in this case, as the dispute

primarily revolves around what was offered in Court by one of the

parties, what was accepted in Court, and what was recorded in the

Order and clarified later. If without any offer from the petitioner, an

adjudication had been made by the Court directing the petitioner to

furnish bank guarantee of a particular type of bank and a dispute had

been raised thereafter, it is only then that a question of law as to the

status of such a bank with reference to the statutory provisions, would

have arisen.

25. Therefore, in my considered view and with the greatest of respect

for my learned Sister, I deem it fit to dismiss the Special Leave Petitions

as not giving rise to any substantial question of law warranting our

interference under Article 136 of the Constitution.

……………………………….J.

(V. Ramasubramanian)

New Delhi

August 24, 2021

an order of externment was unwarranted.=Even otherwise, threat to lodge a complaint cannot possibly be a ground for passing an order of externment under Section 56 of the Maharashtra Police Act, 1951, more so, when the responses of government authorities to queries raised by the Appellant under the Right to Information Act clearly indicate that the complaints are not frivolous ones, without substance.A person cannot be denied his fundamental right to reside anywhere in the country or to move freely throughout the country, on flimsy grounds.where on the basis of complaints lodged by the Appellants inquiry had been started by the concerned authorities against government officials and educational institutions including the complainants, who lodged the FIRs against the Appellant, the impugned externment order which followed, cannot be sustained. 42. The Appeal is accordingly allowed, and the impugned externment order is set aside.

Reportable

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 912 OF 2021

[@SPECIAL LEAVE PETITION (CRL.) No. 1676 of 2021]

Rahmat Khan @ Rammu Bismillah ...Appellant(s)

Versus

Deputy Commissioner of Police …Respondent(s)

J U D G M E N T

Indira Banerjee, J.

Leave granted.

2. This appeal is against a final judgment and order dated 29th

January, 2021 passed by the Nagpur Bench of the High Court of

Judicature at Bombay, dismissing the Criminal Writ Petition No. 490 of

2018 filed by the Appellant, challenging an order of Externment dated

07.05.2018 passed by the Deputy Commissioner of Police, Zone-1,

Amravati City, under Section 56(1)(a)(b) of the Maharashtra Police Act,

1951, whereby the Appellant has been directed not to enter or return to

Amravati City or Amravati Rural District for a period of one year from

the date on which he leaves, or is taken out of Amravati City and/or

Amravati Rural District.

3. Paragraphs 1 and 2 of the impugned Externment Order are

extracted hereinbelow for convenience:

“Whereas as per the Order under section 10(2) of the Bombay Police Act

(Mumbai 22 of 1951) the Govt. of Maharashtra by Order No.Maharashtra

Ordinance No.9/94 dt.24

June, 1994 has directed that, Deputy Commission of

Police (Zonal) Amravati will implement the power, work and duties conferred

upon him under section 56 of the said Act.

Whereas against Rahematakhan @ Rammu Bismillakhan, age 48 years, R/o

Chaman Chhaoni, University Road, Amravati the proof of following nature has

been submitted before me.

1. Since 2017 due to his act and movement fear has been created in the

locality under Police Station, Nagpurigate and Kotwali and to the property of

people residing in the nearby surroundings and un-safety has been created in

their mind. In future, also there is every possibility of creation of un-safety.

(a) The said person by accompanying with his companions is engaged in

serious offence like threatening to kill by abusing and demanding ransom to

the people residing in area specified above.

Offence registered against aforesaid person.

Sr.

No.

Police

Station

Crime No. Sections Date Settlement

1 Nagpurigate 344/2017 384, 452, 294,

506(B), 34 IPC

12/10/2017 Under Police

Investigation

2 Nagpurigate 352/2017 384,448,294,

504, 506(B), 34

IPC

23/10/2017 Under Police

Investigation

3 Kotwali 501/2017 384 IPC 13/10/2017 Under Police

Investigation

Prohibitory Action

Sr. No. P.S. Iste. No. & Section Date of

Registration

1 Nagpurigate 53/17 under section

110(e) (g) Cr.P.C.

04/12/2017

In this way he is liable to be punished as per Chapter 17 of the I.P.C.

(b)The aforesaid person accompanying with his companions is engaged in

serious offence like threatening to kill by abusing and demanding ransom to

the people residing in area specified above.

2. He has committed activities of the nature as mentioned in paragraph No.1

sub-para No.A and B, so also has committed several activities of the nature

mentioned in the show cause notice….”

4. On or about 11th October, 2013, the Government of Maharashtra

introduced a scheme called “Dr. Zakir Hussain Madrasa Adhunikikaran

Yojana” hereinafter referred to as ‘the Scheme’ for the upliftment of the

Muslim community by providing quality education to Muslim children.

5. As per the Scheme, the Madrasas registered with the office of

Charity Commissioner or Waqf Board which had completed three years

were to be given priority for allotment of funds for basic amenities,

remuneration of teachers, scholarship of students, etc.

6. Pursuant to a Government Resolution dated 20th March 2015, the

State of Maharashtra announced the disbursement of grants totaling a

sum of Rs.1,35,70,000/- to 33 Madrasas of Amravati District for the

Financial Year 2014-2015.

7. The Appellant claims to be a religious minded journalist and

social worker, who has been fighting against corruption and misuse of

public funds. The Appellant used to publish the newspaper “kalam Ki

Takat” till 2009.

8. According to the Appellant, his daughter was studying in a

Madrasa in Amravati District in Maharashtra. At that time, the Appellant

came to know of irregularities in the running of Madrasas, including

misappropriation of public money distributed to Madrasas in Amravati

District, by the State of Maharashtra.

9. The Appellant has alleged that complaints were received by the

Government of Maharashtra, of illegalities in distribution of grants under

the Scheme, during the Financial Years 2014-2015 and 2015-2016. The

appellant had also made such complaints.

10. In view of the complaints as aforesaid, all Collectors were

directed to initiate inquiry into the disbursement of grants to Madrasas

during the Financial Years 2014-2015 and 2015-2016.

11. On or about 9

th August, 2017 the Appellant made an application

under the Right to Information Act, 2005, seeking information from the

District Planning Committee, Amravati of the outcome of the inquiry and

details of distribution of grants in Amravati District in the Financial Years

2014-2015 and 2015-2016.

12. By a communication dated 18th September, 2017 the Appellant

was informed that a Government Order dated 24th May, 2017 had been

passed for enquiry, but no Enquiry Report had been received by the

office of the District Planning Committee. The Appellant was furnished

with a list of grantees to whom grants had been disbursed during the

years 2014-2015 and 2015-2016, with particulars of the amounts

granted to the respective granters.

13. The Appellant claims that he came to know that certain

government officers, including one C.R. Rathod, the then Deputy

Director of Education, Amravati, had disbursed grants under the

Scheme in contravention of the Government Resolution dated 11th

October, 2013.

14. On or about 14th September, 2017, the Appellant filed a

complaint with the Collector, Amravati seeking appropriate action

against the concerned officers including the said C.R. Rathod, allegedly

responsible for illegal distribution of grants. The Appellant also

requested the Collector to stop the distribution of Government grants

under the scheme, in contravention of Rules, to certain educational

institutions and Madrasas including the institutions run by Joha

Education and Charitable Welfare Trust and Madrasi Baba Education

Welfare Society.

15. On 13th October, 2017, the Appellant requested the Collector as

also the police to investigate misappropriation of Government grants by

Madrasas in collusion with Government officials. In retaliation, affected

persons filed complaints against the Appellant, particulars whereof have

been mentioned in paragraph 1 of the impugned Externment Order

extracted above. The Appellant applied for and was granted bail by the

Sessions Court, on condition that the Appellant would attend to the

Police Station concerned till the chargesheet was filed.

16. The Appellant appears to have filed applications under Section

482 of the Code of Criminal Procedure in the High Court, for quashing

the criminal cases referred to above, which are pending adjudication.

17. On or about 30.01.2018, the Appellant filed a Public Interest

Litigation in the Nagpur Bench, praying for the following orders:

“(i) issue a writ, order or direction in the nature of Mandamus commanding

the State Minority Development Department to take action and stop

distribution of grants to the respondent no. 11 to 29 and all concerned

Madarssa’s, into the matter of the selection of the Madarsa’s under the

said scheme, which are not registered with charity commissioner or Wakf

Board and regarding the same inquiry has been already done in the year

2017 as of the Annexure F and report of it already been prepared and

submitted by the residential collector Amravati to the respondent no.2

further be pleased to direct the respondent no.1 to 2 to submit the details

of the action taken against all the concerned Madarsas, before this Hon’ble

Court in stipulated time.

(ii) issue a writ, order or directions to take action against the respondent

no. 2-10 who are responsible for the selection of the Madarsas under the

scheme.

(iii) issue a writ, order or direction in the nature of Mandamus directing an

independent, impartial enquiry to be conducted regarding all the Madarsas

running in the state of Maharashtra and are receiving grants under the

scheme, by any retired High Court Judge for submitting its report before

this Court in a stipulated time.

(iv) issue a writ, order or direction in the nature of Mandamus commanding

the Respondent no. 2 to 6 to furnish the record of the funds distributed

under the schemes to the different Madarsas.

(v) issue a writ, order or direction in the nature of Mandamus commanding

the respondents 1 to initiate the departmental and disciplinary proceeding

against the Respondents no. 2-10 who are responsible for selection of the

36 Madarsas.

(vi) issue a writ, order or direction which this Hon’ble Court may deem fit

and proper under the facts and circumstances of the case.

(vii) award the cost of the petition to the petitioner.”

18. Some time thereafter, a Show Cause Notice dated 3rd April 2018

was issued to the Appellant from the office of the Assistant Police

Commissioner, Gadge Nagar Division, Amravati informing him of the

initiation of Externment proceeding against him under Section 56(1)(a)

(b) of the Maharashtra Police Act, 1951. According to the Appellant, he

received the show cause notice on 12th April, 2018.

19. By a letter dated 16th April, 2018 the Appellant replied to the

Show Cause Notice dated 3rd April, 2018, inter alia, contending-

“1. In the show cause notice the reference of three criminal offences

pending against me are reflecting which includes Crime No. 344/17, 352/17

registered with Police Station Nagpuri gate and Crime No. 501/17 registered

with Police Station Kotwali. It appears that in the show cause notice the

date of the said offences is deliberately not shown.

2. First offence i.e. Crime No. 344/17 registered against me is on the

complaint filed by one Shamim Azahar Khan Jafar Ali Khan dt. 12/10/2017 in

which it is alleged by him that I the undersigned had threatened him on

20/9/2017 at about 9.30 A.M. to 10 A.M. and demanded Rs.50,000/-. On the

basis of said complaint FIR was lodged against me for the offences

punishable u/s 294, 34, 384, 452, 506(B) of IPC. I have filed application u/s

482 CrPC before the Hon’ble High Court Bench at Nagpur challenging the

said FIR vide Criminal Application (APL) no. 921/2017. In which Hon’ble

High Court was pleased to issue notices and same is pending as on today. I

submit that the FIR in question is maliciously lodged as I have pursued the

matter of misappropriation by the various schools including the office

bearers of the Education Department while implementing the Scheme of

Government vide G.R. dt. 11/10/2013.

3. Second Offence i.e. Crime No. 352/17 registered against me is on the

complaint filed by one Irfan Ahmed Mohd. Sheikh dt. 23/10/2017 in which it

is alleged by him that I the undersigned along with three other had

threatened him and demanded Rs.5,00,000/-. On the basis of said

complaint FIR was lodged against me for the offences punishable u/s 448,

384, 294, 504, 506(B) and 34 of IPC. I have filed application u/s 482 CrPC

before the Hon’ble High Court Bench at Nagpur challenging the said FIR

vide Criminal Application (APL) no. 922/2017. In which the Hon’ble High

Court was pleased to issue notices and same is pending as on today. I

submit that the FIR in question is maliciously lodged as I have pursued the

matter of misappropriation by the various schools including the office

bearers of the Education Department while implementing the Scheme of

Government vide G.R. dt. 11/10/2013.

4. Third Offence i.e. Crime No. 501/17 registered against me is on the

complaint filed by one Chandansingh Ramsingh Rathod dt. 13/10/2017 in

which it is alleged by him that I the undersigned had demanded

Rs.25,000/- from him for not lodging complaint against him with collector.

On the basis of said complaint FIR was lodged against me for the offences

punishable u/s. 384 of IPC. I have filed application u/s 482 CrPC before the

Hon’ble High Court Bench at Nagpur challenging the said FIR vide Criminal

Application (APL) no. 924/2017. In which the Hon’ble High Court was

pleased to issue notices and same is pending as on today. I submit that

the FIR in question is maliciously lodged as I have pursued the matter of

misappropriation by the various schools including the office bearers of the

Education Department while implementing the Scheme of Government

vide G.R. dt. 11/10/2013.

5. That the impugned action is nothing but a pressurized tactics on me for

not pursuing the matter of misappropriation before the concerned

authorities as the impugned action is initiated against me only after I have

approached the Hon’ble High Court by filing application for quashing of the

three FIRs referred in the notice in question. As such the action is with

ulterior motive and malafide.

6. That all the three FIRs are output of personal allegations levelled against

me and no allegations which satisfies a requirement of Section 56(1)(a)(b)

of the Bombay Police Act. Thus the three FIRs cannot be a ground of

externing me from entire Amravati District.”

20. On 25th April, 2018 the Appellant received another notice dated

20th April, 2018 from the Office of the Deputy Commissioner of Police,

Zone 1, Amravati City, under Section 59 of the Maharashtra Police Act

1951. Thereafter externment proceedings were initiated against the

Appellant, which culminated in the impugned Externment order.

21. The impugned Externment Order refers to three Crime Cases,

being Crime Case Nos. 344/17, 352/17 and 501/17, which were initiated

pursuant to three First Information Reports (FIRs); (i) the first FIR dated

12.10.2017 lodged at the Nagpuri Gate Police Station, by Shamim

Azahar Khan Jafal Ali Khan, Headmaster of Priyadarshani Urdu Primary

and Pre Secondary School, run by Madrasi Baba Education Welfare

Society at Azad Colony, Amravati, (ii) the second FIR dated 23.10.2017

also lodged at the Nagpur Gate Police Station by Irfan Ahmed

Mohammad Sheikh, Headmaster of Al-Haram International English

School, run by Joha Educational and Charitable Trust at Jamiya Nagar,

Lal Khadi Ring Road, Amravati, and (iii) the third FIR dated 13th October,

2017 lodged at the Kotwali Police Station in Amravati City, by C. R.

Rathod , the then Deputy Director of Education, Amravati.

22. The Appellant had been filing applications under the Right to

Information Act, 2005, seeking information from concerned authorities,

in relation to illegalities in disbursement of funds to various Madrasas

including Al Haram International English School run by Joha Education

and Charitable Welfare Trust, and Priyadarshini Urdu Primary and

Pre-Secondary School run by Madrasi Baba Education Welfare Society.

Pursuant to such applications, the Office of the Education Officer had

sought information from the concerned Headmasters vide

communications dated 23.8.2017 and 25.9.2017 respectively.

23. It is the case of the Appellant that Crime Nos. 352/2017 and

344/2017 were initiated as a counterblast, in retaliation to the steps

taken by the Appellant to put an end to illegal misappropriation of

public funds and to initiate action against those involved in illegal

practices. The Criminal Case No.501/2017 filed by the said C.R. Rathod,

Deputy Director of Education, Amravati is also retaliatory, according to

the Appellant.

24. It is not in dispute that the three FIRs were filed soon after the

Appellant started making complaints and raising queries under the

Right to Information Act, 2005. Reference may be made to a response

dated 7.9.2018 of the Office of the District Collector in response to a

query of the Appellant vide an application dated 16.8.2018. The

response is extracted below for convenience.

“As per the terms and conditions of Government Resolution of 11

October,

2013 on the order of District Collector on the complaint dated 14.9.2017 of

Rahemat Khan Bismilla Khan in the year 2016-17 inquiry of total 36

Madarsas was done on 15.11.2017 and 26.11.2017 who have taken

Government Grant. After this inquiry with the signature of Resident Dy.

District Collector and District Collector in office note in the proposal of 36

Madarsa there is certificate of registration with the office of Charity

Commissioner. But there is no registration Certificate in the name of

Madarsa in the office of Waqf Board or Charity Commissioner. In the year

2016-17 the Directors of total 36 Madarsa have been found guilty hence

further proposal has been sent to the Govt for necessary action. After

getting directives from the Govt further action would be taken.”

25. After investigation of Crime No. 344/2017 (initiated pursuant to

the FIR lodged by Shamim Azahar Khan of Priyadarshani Urdu Primary

and Pre-Secondary School), charge sheet was submitted in the Court of

the Judicial Magistrate, First Class, Court No. 11, Amravati. Charges

were framed and the case was registered as Reg. Crl. Case No. 421.

The appellant has been acquitted by a judgment and order dated 26th

February, 2020 of the Judicial Magistrate.

26. The impugned Externment Order records that witnesses are not

ready to adduce evidence publicly against the Appellant for fear of

physical harm as also loss of their property. By a notice sent on 20th

April, 2018 the Appellant was called for a hearing to submit his reply.

The Appellant submitted his reply which as per the impugned

Externment Order “does not feel to be cogent”.

27. Allegedly on the basis of statement made by undisclosed

persons whose identity, it is claimed, cannot be disclosed, to protect

them from the danger of retribution, the Deputy Commissioner issued

an order recording the finding extracted hereinbelow :-

“… I am sure that, the said person named Rahematkhan alias Rammu

Bismillakhan age 48 years, R/o Chaman Chhaoni, University Road,

Amravati Alongwith his colleagues is engaed in illegal acts, serious offence

like threatening to kill by abusing and demanding tribute in the Police

Commissionerate to the people residing in the localities under Nagpurigate

and Kotwali. As he is having backing of Grundyism he alongwith his

companions he threatens the residents of aforesaid locality and part.

The said offences are punishable under Chapter XVII of the I.P.C.

Whereas as per my opinion as it is felt that the safety of property of

witnesses will be endangered, the witnesses are not ready adduce evidence

publicly by coming forward against the said person. The Police Inspector by

making utmost efforts took two witnesses in confidence and after assuring

them that, if they record their statement/evidence then their names and

identification will be kept secret. They will not call before any Court or open

Forum to adduce evidence. On such assurance their evidence has been

recorded in closed doors. Perused the said closed door statements and got

sure about its factual condition. On perusing all the documents, there is no

effect of cases filed in Court against the said person….”

28. The scope and ambit of Sections 56 to 59 of the Maharashtra

Police Act, 1954 was considered in Pandharinath Shridhar

Rangnekar v. Dy. Commr. Of Police, the State of Maharashtra

reported in (1973) 1 SCC 372 cited by Mr. Patil, appearing for the State,

where this Court held:

“8. Section 56 of the Act provides, to the extent material, that whenever it

shall appear in Greater Bombay to the Commissioner: (a) that the movements

of acts of any person are causing or are calculated to cause alarm, danger or

harm to person or property, or (b) that there are reasonable grounds for

believing that such person is engaged or is about to be engaged in the

commission of an offence involving force or violence or an offence punishable

under Chapter XII, XVI or XVII of the Penal Code, 1860, and when in the

opinion of such officer witnesses are not willing to come forward to give

evidence in public against such person by reason of apprehension on their

part as regards the safety of their person or property, the said officer may by

order in writing direct such person to remove himself outside the area within

the local limits of his jurisdiction or such area and any district or districts or

any part thereof contiguous thereto, within such time as the said officer may

prescribe and not to enter or return to the said area from which he was

directed the remove himself. Under Section 58, an order of externment

passed under Section 56 can in no case exceed a period of two years from the

date on which it was made. The relevant part of Section 59(1) provides that

before an order under Section 56 is passed against any person, the officer

shall inform that person in writing “of the general nature of the material

allegations against him” and give him a reasonable opportunity of tendering

an explanation regarding those allegations. The proposed externee is entitled

to lead evidence unless the authority takes the view that the application for

examination of witnesses is made for the purpose of vexation or delay.

Section 59 also confers on the person concerned a right to file a written

statement and to appear through an advocate or attorney.

9. These provisions show that the reasons which necessitate or justify the

passing of an externment order arise out of extraordinary circumstances. An

order of externment can be passed under clause (a) or (b) of Section 56, and

only if, the authority concerned is satisfied that witnesses are unwilling to

come forward to give evidence in public against the proposed externee by

reason of apprehension on their part as regards the safety of their person or

property. A full and complete disclosure of particulars such as is requisite in

an open prosecution will frustrate the very purpose of an externment

proceeding. If the show-cause notice were to furnish to the proposed externee

concrete data like specific dates of incidents or the names of persons involved

in those incidents, it would be easy enough to fix the identity of those who out

of fear of injury to their person or property are unwilling to depose in public.

There is a brand of lawless element in society which is impossible to bring to

book by established methods of judicial trial because in such trials there can

be no conviction without legal evidence. And legal evidence is impossible to

obtain, because out of fear of reprisals witnesses are unwilling to depose in

public. That explains why Section 59 of the Act imposes but a limited

obligation on the authorities to inform the proposed externee “of the general

nature of the material allegations against him”. That obligation fixes the limits

of the co-relative right of the proposed externee. He is entitled, before an

order of externment is passed under Section 56, to know the material

allegations against him and the general nature of those allegations. He is not

entitled to be informed of specific particulars relating to the material

allegations.

10. It is true that the provisions of Section 56 make a serious inroad

on personal liberty but such restraints have to be suffered in the

larger interests of society. This Court in Gurbachan Singh v. State of

Bombay[1952 SCR 737 : AIR 1952 SC 221 : 1952 SCJ 279] had upheld

the validity of Section 27(1) of the City of Bombay Police Act, 1902,

which corresponds to Section 56 of the Act. Following that decision,

the challenge to the constitutionality of Section 56 was repelled in

Bhagubhai v. Dulldbhabhai Bhandari v. District Magistrate, Thana.

We will only add that care must be taken to ensure that the terms of

Sections 56 and 59 are strictly complied with and that the slender

safeguards which those provisions offer are made available to the

proposed externee.

15. As regards the last point, it is primarily for the externing authority to

decide how best the externment order can be made effective, so as to

subserve its real purpose. How long, within the statutory limit of two years

fixed by Section 58, the order shall operate and to what territories, within the

statutory limitations of Section 56 it should extend, are matters which must

depend for their decision on the nature of the data which the authority is able

to collect in the externment proceedings. There are cases and cases and

therefore no general formulation can be made that the order of externment

must always be restricted to the area to which the illegal activities of the

externee extend. A larger area may conceivably have to be comprised within

the externment order so as to isolate the externee from his moorings.

16. An excessive order can undoubtedly be struck down because no

greater restraint on personal liberty can be permitted than is

reasonable in the circumstances of the case. The decision of the

Bombay High Court in Balu Shivling Dombe v. Divisional Magistrate,

Pandharpur, is an instance in point where an externment order was

set aside on the ground that it was far wider than was justified by

the exigencies of the case. The activities of the externee therein were

confined to the city of Pandharpur and yet the externment order covered an

area as extensive as districts of Sholapur, Satara and Poona. These areas are

far widely removed from the locality in which the externee had committed but

two supposedly illegal acts. The exercise of the power was therefore arbitrary

and excessive, the order having been passed without reference to the

purpose of the externment.”

29. In Gazi Saduddin v. State of Maharashtra reported in (2003)

7 SCC 330, also cited by Mr. Patil, this Court held that in passing an

order of externment, the authority passing the order must be satisfied

of the expediency of passing the order. If the satisfaction recorded by

the authority is objective and is based on material on record then the

Court would not interfere with the order passed by the authority, only

because another view can possibly be taken.

However, the satisfaction of the authority can be interfered

with if the satisfaction recorded is demonstrably perverse,

based on no evidence, misleading evidence or no reasonable

person could have, on the basis of the materials on record,

been satisfied of the expediency/necessity of passing an order

of externment.

30. In Gazi Saduddin (supra), the externment notice referred to

three criminal proceedings registered against the appellant. It was

alleged in the notice that movements and activities of the appellant had

caused alarm in the locality and created an atmosphere of terror. It

contained details of three incidents having occurred within the period of

a fortnight or a month prior to the date of notice, wherein the appellant

had threatened the people for seeking their cooperation in teaching a

lesson to a particular religious community. It was mentioned that the

appellant had established contacts with an organisation engaged in

activities against communal harmony and national security and had

participated in a programme of burning the effigies of leaders of that

religious community, thereby causing communal tension in the area.

31. The judgment of this Court in State of Maharashtra and Ors.

v. Salem Hasan Khan reported in (1989) 2 SCC 316 pertained to a

person found to be frequently engaged in illegal business of narcotics,

who was involved in several cases of riot and also criminal intimidation,

of the residents of the locality because of suspicion that they were

supplying information to the police about his illegal activities.

Witnesses were, therefore, not willing to come forward and depose

against him. Rejecting the argument that the allegations in the show

cause notice were too vague in the absence of details to afford the

externee reasonable opportunity to defend himself, this Court held that

a full a complete disclosure of particulars as was requisite in an open

prosecution, would frustrate the very purpose of an externment

proceeding. This Court observed :-

“4….There is band of lawless elements in society which it is impossible to

bring to book by established methods of judicial trial because in such trials

there can be no conviction without legal evidence. And legal evidence is

impossible to obtain, because out of fear of reprisal witnesses are unwilling

to depose in public. While dealing with the contention that the State

Government was under a duty to give reasons in support of its order

dismissing the appeal, the point was rejected in the following terms: (SCC

p. 378, para 14)

“Precisely for the reason for which the proposed externee is only

entitled to be informed of the general nature of the material

allegations, neither the externing authority nor the State Government

in appeal can be asked to write a reasoned order in the nature of a

judgment.”

As observed, if the authorities were to discuss the evidence in the case, it

would be easy to fix the identity of the witnesses who were unwilling to

depose in public against the proposed externee. A reasoned order

containing a discussion would probably spark off another round of

harassment...”

32. Significantly, even though this Court allowed the Appeal of the

State and set aside the order of the High Court quashing the

externment order, this Court made it clear that the externment order

should not be enforced against the externee any further.

33. From the judgments cited on behalf of the State, it is patently

clear that Sections 56 to 59 of the Act are intended to prevent

lawlessness and deal with a class of lawless elements in society who

cannot be brought to book by established methods of penal action,

upon judicial trial.

34. An externment order may sometimes be necessary for

maintenance of law and order. However the drastic action of

externment should only be taken in exceptional cases, to maintain law

and order in a locality and/or prevent breach of public tranquility and

peace. In this case, it is patently clear that the impugned externment

order was an outcome of the complaints lodged by the Appellant

against government officials, some Madrasas and persons connected

with such Madarasas who later lodged FIRs against the Appellant.

The FIRs are clearly vindictive, retaliatory and aimed to teach a lesson

to the Appellant and stifle his voice.

35. In the facts and circumstances of this case, the notices of

externment and the impugned externment order based on Crime Nos

344 of 2017, 352 of 2017 registered with Nagpuri Gate Police Station

and Crime No.501 of 2017 registered with the Kotwali Police Station in

Amravati City are patently arbitrary, mala fide, unsustainable in law

and liable to be set aside.

36. It would be pertinent to refer to communication No. KS8/ALP0S/K.L./KV/2018 dated 25.7.2018 from the office of District

Collector, Amravati in response to queries raised by the Appellant. It is

extracted hereinbelow for convenience:-

“In view of the above subject the Annexure-A of your application submitted

under Right to Information Act 2005 has been received by this Office.

Regarding Point No.1 and 4 as mentioned in your application you have

asked for the information. The information related to point No.1 and 3 is

available in this office; but the information related to point No.4 is not

available in record of this office. Hence available information is being

provided to you whereas the information that is not available is not being

provided.

Sr.

No.

Information demanded by the

applicant

Information provided to the

applicant

1 Information of point No. 1, 2 and 3

would be given as per the record.

Would be given as per the record.

2 Point No 4: To contemporary

Education Officer Secondary &

Present Director of Education

Chandansingh Ramsingh Rathod,

contemporary District Planning

Officer Ravindra Kale, Extension

Officer Sandip Bodkhe with

reference to the complaint dated

14/9/2017 in respect of Bogus

Madarse about the letter given for

submitting say in view of

explanation letter dated 13/10/2017,

26/9/2017 and 3/10/2017 returned

back to the Officer of District

Collector, if the concerned Office is

satisfied and trusting that letter then

in view of that letter the true copy

may be given duly attested.

In this matter in respect of the

Inquiry in view of the complaint

received after inquiry of Dy.

District Collector with the

explanation of said officers the

inquiry report has been sent to

Chamber Officer, Minority Dev

Department, Mantralaya, Mumbai

for further necessary action.

After receipt of further order any

action about the complaint can

be taken.

37. It is patently clear that pursuant to a complaint dated

14.9.2017 an inquiry was conducted by the Deputy District Collector

against the Director (previously Deputy Director) of Education,

C.R. Rathod, District Planning Officer Ravindra Kale, Extension Officer

Sandip Bodhke. The Inquiry Report along with explanation of the

officers has been sent to the Chamber Officer of the Minority

Development Department, Mantralaya, Mumbai for further action.

C.R. Rathod lodged FIR No.501/2017 dated 13th October 2017 against

the Appellant under Section 384 of the Indian Penal Code, exactly

within one month from the date of the Appellant’s complaint against

him, in respect of illegalities in relation to disbursal of funds to

Madarsas.

38. As observed above, the Appellant was acquitted in Crime

No.344 of 2017. FIR No.352/2017 dated 23.10.2017 which led to

initiation of Crime No.352/2017 was apparently filled soon after the

complainant of the said FIR/Crime case being the Head Master, AlHaram International School received a communication from the

Office of the Education Officer (Primary), Zila Parishad, Amravati

directing him to furnish information sought by the Appellant by filing

an application under the Right to Information Act, 2005.

39. From the tenor of the complaint lodged by Irfan Ahmed Mohd.

Sheikh, Headmaster of the Al Haram International English School with

the Nagpuri Gate Police Station, it is patently clear that there were

disputes with regard to the manner of operation of the school.

Accordingly, in the FIR it is stated:-

“This School is formed after obtaining requisite permission as per rule.

Their U-Dise Number is is 27071502112. On 8

August 2017 the nonapplicant Rehemat Khan filed an application for getting certain information

under Right to Information Act. On 4/10/2017 the non-applicant No 1 came

in the office of the applicant and demanded the information that was given

to him. The applicant verbally told him and given in writing that this is a

private school hence information cannot be given under Right to

Information.

xxx xxx xxx

The applicant tried to convince the non-applicant No 1 that in this school

no any malfunction takes place, hence there is no question arises to pay

him anything. On that he got delirious with anger and said the applicant

that TUM BHADKHAU HO, MAI TUMHARA HISAB KARTA HOON. Saying this

he aimed the pistol towards me and tried to come near to me. Hearing this

noise the Staff Members, School Bus Driver Shakil Ahmed, Teacher of the

school Hafiz Riyaz Huseni, Watchman of the School Abdul Sayeed all

entered in the office and seeing the situation they stopped the nonapplicant and attempted to control him.”

40. The deplorable allegation of demand for ransom by threat,

prima facie, appears to have been concocted to give the complaint a

colour of intense gravity. Mr. Patil argued that the Appellant had

been extorting money under threat of exposing the illegal activities

of certain officials and certain Madrasas or educational institutions.

Even assuming that there was substance in the allegation, which

appears to be doubtful, an order of externment was unwarranted.

There was no reason for the complainants who lodged the FIRs to get

terrorized by the alleged threats, allegedly meted out by the

Appellant, for if those complainants had not indulged in unlawful

acts, they had nothing to fear. Even otherwise, threat to lodge a

complaint cannot possibly be a ground for passing an order of

externment under Section 56 of the Maharashtra Police Act, 1951,

more so, when the responses of government authorities to queries

raised by the Appellant under the Right to Information Act clearly

indicate that the complaints are not frivolous ones, without

substance. A person cannot be denied his fundamental right to

reside anywhere in the country or to move freely throughout the

country, on flimsy grounds.

41. Having regard to the special facts and circumstances of this

case, where on the basis of complaints lodged by the Appellants

inquiry had been started by the concerned authorities against

government officials and educational institutions including the

complainants, who lodged the FIRs against the Appellant, the

impugned externment order which followed, cannot be sustained.

42. The Appeal is accordingly allowed, and the impugned

externment order is set aside.

……………………………………………J.

[INDIRA BANERJEE]

…………………………………………….J.

[V. RAMASUBRAMANIAN

NEW DELHI;

AUGUST 25, 2021

Friday, August 27, 2021

whether there would be a cut-off date under paragraph 11(3) of the Employees’ Pension Scheme and whether the decision in R.C. Gupta1 would be the governing principle on the basis of which all these matters must be disposed of.

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION/

INHERENT JURISDICTION

SPECIAL LEAVE PETITION (C) NOS.8658-8659 OF 2019

The Employees Provident Fund Organisation & Etc. …. Appellant(s)

Versus

Sunil Kumar B. & Etc. ….. Respondent(s)

WITH

W.P. (C) No.767/2021; SLP (C) No.3289/2021; CONMT. PET.(C) Nos.1917-

1918/2018 IN C.A. Nos.10013-10014/2016; W.P. (C) No.406/2018; W.P. (C)

No.368/2018; W.P. (C) No.393/2018; W.P. (C) No.395/2018; W.P. (C)

No.374/2018; W.P. (C) No.372/2018; W.P. (C) No.385/2018; W.P. (C)

No.360/2018; W.P. (C) No.1134/2018; W.P. (C) No.390/2019; W.P. (C)

No.875/2019; W.P. (C) No.349/2019; W.P. (C) No.466/2019; W.P. (C)

No.352/2019, SLP (C) Nos.16721-16722/2019, W.P. (C) NO.512/2019, W.P.

620/2019 IN C.A. NOs.10013-10014/2016, W.P.(C) NO.601/2019, W.P.(C)

No.1312/2019, W.P.(C) No.832/2019, SLP(C) NO.2465/2021,

SLP(C) NO.3290/2021, W.P.(C) No.86/2021, SLP(C) NO.1738/2021, SLP(C)

No.1701/2021, W.P.(C) No.414/2021, W.P.(C) No.477/2021, SLP(C)

NO.8547/2021, W.P.(C) No.233/2018, W.P.(C) No.69/2018, W.P.(C)

No.141/2018, W.P.(C) No.118/2018, W.P.(C) No.250/2018, W.P.(C)

No.380/2018, W.P.(C) No.371/2018, W.P.(C) No.367/2018, W.P.(C)

No.369/2018, W.P.(C) No.411/2018, W.P.(C) No.466/2018, W.P.(C)

No.804/2018, W.P.(C) No.594/2018, W.P.(C) No.884/2018, W.P.(C)

No.778/2018, W.P.(C) No.874/2018, W.P.(C) No.1149/2018, W.P.(C)

No.1167/2018, W.P.(C) No.1430/2018, W.P.(C) No.1433/2018, W.P.(C)

No.1428/2018, W.P.(C) No.269/2019 and W.P.(C) No.327/2019,

O R D E R

1. By Order dated 25.02.2021 these matters were broadly divided in

four categories with lead matters being:-

“(i) SLP (C) No(s). 8658-8659/2019, 16721-16722/2019

[arising from the judgment dated 12.10.2018 passed by the

High Court of Kerala];

(ii) SLP(C) Diary No(s). 46219/2019 [arising from the

judgment dated 22.5.2019 passed by the High Court of

Delhi] along with connected matter being SLP(C) No.

1366/2021 [arising from the judgment dated 16.12.2019

passed by the High Court of Delhi];

(iii) SLP(C) No. 2465/2021 [arising from judgment dated

28.08.2019 passed by the High Court of Rajasthan, Jaipur];

and

(iv) CONMT.PET.(C) No. 1917-1918/2018 in C.A. No.

10013- 10014/2016 [seeking implementation of the order

dated 04.10.2016 passed by this Court in

C.A.No.10013/201 :R.C. Gupta & Ors. Etc. etc. vs.

Regional Provident Fund Commissioner Employees

Provident Fund Organization & Ors. Etc.1

] …...”

2. SLP (C) Nos.8658 – 59 of 2019 challenging the Judgment and

order dated 12.10.2018 passed by the Division Bench of the High Court of

Kerala in Writ Petition (C) Nos.602/2015 and 13120/2015 were initially

dismissed by this Court on 01.04.2019.

Thereafter, SLP (C) Nos. 16721-22/2019 at the instance of Union of

India challenging the very same judgment dated 12.10.2018 came up

before this Court on 12.07.2019. While condoning the delay in preferring

said SLPs, this Court directed that said SLPs be listed along with Review

1 (2018) 4 SCC 809

Petition (C) Nos.1430-31/2019 (which had since then been preferred

against the order dated 01.04.2019 in SLP(C) Nos.8658-59/2019) in open

Court.

3. When both sets of matters were listed before this Court on

29.01.2021, the submissions on behalf of the petitioners were noted as

under:-

“Mr. C.A. Sundaram, learned Senior Advocate appearing

for the petitioners in said Review Petitions invited our

attention to the order dated 21.12.2020 passed by another

Division Bench of the High Court of Kerala by which the

correctness of the earlier decision dated 12.10.2018 was

doubted and the matter was referred to Full Bench of the

High Court.

Mr. Sundaram, also invited our attention to the decision of

this Court in M/s Pawan Hans Ltd. & Ors. vs. Aviation

Karmachari Sanghatana & Ors [2020(2)SCALE 1942

] and

specially paragraph 6.6 of the decision.

It was submitted that as a result of the directions issued by

the High Court in its order dated 12.10.2018, benefit would

get conferred upon employees retrospectively which, in

turn, would create great imbalance.”

4. Thereafter, this Court recalled the order dismissing SLP (C)

Nos.8658-8659 of 2019 and the entire bunch of matters was directed to be

listed for disposal.

5. It may be noted here that the Division Bench of the High Court of

Kerala in its order dated 12.10.2018 had relied upon the decision of two

Judges of this Court in R.C. Gupta1

. Said decision had set aside the

2 Also reported : (2020) 13 SCC 506

judgment and order passed by the Division Bench of the High Court of

Himachal Pradesh in LPA Nos.411-12 of 2012 which had inter alia

accepted the submission that under the proviso to Clause 11(3) of the

Employees’ Pension Scheme there was a cut-off date. Paragraphs 7, 9 and

10 of the decision in R.C. Gupta1

were as under:-

“7. Reading the proviso, we find that the reference to the

date of commencement of the Scheme or the date on which

the salary exceeds the ceiling limit are dates from which the

option exercised are to be reckoned with for calculation of

pensionable salary. The said dates are not cut-off dates to

determine the eligibility of the employer-employee to

indicate their option under the proviso to Clause 11(3) of

the Pension Scheme. A somewhat similar view that has

been taken by this Court in a matter coming from the

Kerala High Court3

, wherein Special Leave Petition (C)

No. 7074 of 2014 filed by the Regional Provident Fund

Commissioner was rejected by this Court by order dated

31-3-20164

. A beneficial scheme, in our considered view,

ought not to be allowed to be defeated by reference to a

cut-off date, particularly, in a situation where (as in the

present case) the employer had deposited 12% of the actual

salary and not 12% of the ceiling limit of Rs 5000 or Rs

6500 per month, as the case may be.

…. …. ….

9. We do not see how exercise of option under Para 26 of

the Provident Fund Scheme can be construed to estop the

employees from exercising a similar option under Para

11(3). If both the employer and the employee opt for

deposit against the actual salary and not the ceiling amount,

exercise of option under Para 26 of the Provident Scheme

3 Union of India v. A. Majeed Kunju, Writ Appeal No.1135 of 2012, order dated 5-3-

2013 (Ker)

4 Reg. Provident Fund Commr. v. A. Majeed Kunju, 2016 SCC OnLine SC 1744,

wherein it was directed:

“SLPs (C) Nos.7074-76, 7107-108, 7224 of 2014 and 697 of 2016.

Heard the learned counsel for the parties and perused the relevant material. We

do not find any legal and valid ground for interference. The special leave petitions are

dismissed. SLPs (C) Nos.19954 and 33032-33 of 2015.

List these special leave petitions on 26-4-2016. As prayed for, liberty is

granted to file additional documents.”

is inevitable. Exercise of the option under Para 26(6) is a

necessary precursor to the exercise of option under Clause

11(3). Exercise of such option, therefore, would not

foreclose the exercise of a further option under Clause

11(3) of the Pension Scheme unless the circumstances

warranting such foreclosure are clearly indicated.

10. The above apart in a situation where the deposit of the

employer’s share at 12% has been on the actual salary and

not the ceiling amount, we do not see how the Provident

Fund Commissioner could have been aggrieved to file the

LPA before the Division Bench of the High Court. All that

the Provident Fund Commissioner is required to do in the

case is an adjustment of accounts which in turn would have

benefited some of the employees. At best what the

Provident Commissioner could do and which we permit

him to do under the present order is to seek a return of all

such amounts that the employees concerned may have

taken or withdrawn from their provident fund account

before granting them the benefit of the proviso to Clause

11(3) of the Pension Scheme. Once such a return is made in

whichever cases such return is due, consequential benefits

in terms of this order will be granted to the said

employees.”

6. Relying on the decision in R.C. Gupta1, the Division Bench of the

High Court of Kerala made following observations in the judgment which

is under challenge in matters of the first category: -

“32. The Apex Court has thus found the insistence on a date

for exercise of the joint option to be without any

justification. In other words, the proviso to paragraph 11 of

the Pension Scheme does not stipulate a cut off date at all.

Any such stipulation of a cut-off date for conferring

benefits under the Pension Scheme would have the effect of

classifying the employees into persons who have retired

before or after the said date”

6.1 The Division Bench of the High Court then found that the effect of

the amendment to the Pension Scheme created following classes of

pensioners on the basis of the date namely 01.09.2014: -

“(i) employees who have exercised option under the

proviso to paragraph 11(3) of the 1995 Scheme and

continuing in service as on 01.09.2014;

(ii) employees who have not exercised their option under

the proviso to paragraph 11(3) of the 1995 Scheme, and

continuing in service as on 01.09.2014;

(iii) employees who have retired prior to 01.09.2014

without exercising an option under paragraph 11(3) of the

1995 Scheme.

(iv) employees who have retired prior to 01.09.2014 after

exercising the option under paragraph 1193) of 1995

Scheme.”

6.2 The amendments to the Pension Scheme were therefore found to be

arbitrary and the Writ Petitions were allowed with following directions: -

“(i) The Employee’s Pension (Amendment) Scheme, 2014

brought into force by Notification No.GSR. 609€ dated

22.08.2014 evidenced by Ext.P8 in W.P.(C) No.13120 of

2015 is set aside;

(ii) All consequential orders and proceedings issued by the

Provident Fund authorities/respondents on the basis of the

impugned amendments shall also stand set aside.

(iii) The various proceedings issued by the Employees

Provident Fund Organization declining to grant

opportunities to the petitioners to exercise a joint option

along with other employees to remit contributions to the

Employees Pension Scheme on the basis of the actual

salaries drawn by them are set aside.

(iv) The employees shall be entitled to exercise the option

stipulated by paragraph 26 of the EPF Scheme without

being restricted in doing so by the insistence on a date.”

7. Challenging the view taken by the High Court Mr. C.A. Sundaram,

learned Senior Advocate inter alia relied upon the decision of the

Constitution Bench of this Court in Krishena Kumar Vs. Union of India5

Paragraphs 1 and 2 of said decision disclose that the petitioners in SLP (C)

No.8461 of 1986 and in WP No.1165 of 1989 had retired with Provident

Fund benefits and their claims to switch to pension scheme after retirement

having been rejected, specific challenge was raised. In support of such

challenge, reliance was placed on the decision of this Court in D.S.

Nakara and Others vs. Union of India6

. The challenge was rejected by

the Constitution Bench with following observations: -

“32. In Nakara5

it was never held that both the pension

retirees and the PF retirees formed a homogeneous class

and that any further classification among them would be

violative of Article 14. On the other hand the court clearly

observed that it was not dealing with the problem of a

“fund”. The Railway Contributory Provident Fund is by

definition a fund. Besides, the government’s obligation

towards an employee under CPF Scheme to give the

matching contribution begins as soon as his account is

opened and ends with his retirement when his rights qua

the government in respect of the Provident Fund is finally

crystallized and thereafter no statutory obligation

continues. Whether there still remained a moral obligation

is a different matter. On the other hand under the Pension

Scheme the government’s obligation does not begin until

the employee retires when only it begins and it continues

till the death of the employee. Thus, on the retirement of an

employee government’s legal obligation under the

Provident Fund account ends while under the Pension

Scheme it begins. The rules governing the Provident Fund

and its contribution are entirely different from the rules

governing pension. It would not, therefore, be reasonable to

5 (1990) 4 SCC 207

6 (1983) 1 SCC 305

argue that what is applicable to the pension retirees must

also equally be applicable to PF retirees. This being the

legal position the rights of each individual PF retiree finally

crystallized on his retirement whereafter no continuing

obligation remained while, on the other hand, as regard

Pension retirees, the obligation continued till their death.

The continuing obligation of the State in respect of pension

retirees is adversely affected by fall in rupee value and

rising prices which, considering the corpus already received

by the PF retirees they would not be so adversely affected

ipso facto. It cannot, therefore, be said that it was the ratio

decidendi in Nakara5

that the State’s obligation towards its

PF retirees must be the same as that towards the pension

retirees. An imaginary definition of obligation to include all

the government retirees in a class was not decided and

could not form the basis for any classification for the

purpose of this case. Nakara5

cannot, therefore, be an

authority for this case.”

8. Mr. Sundaram relied upon the observations that Pension Retirees

and Provident Fund Retirees did not form a homogeneous class and that

the Rules governing the Provident Fund Scheme were entirely different

from the Rules governing Pension Scheme.

After inviting our attention to the various provisions of the

Employees’ Pension Scheme, it was submitted that the difference between

the Provident Fund Scheme on the one hand and the Pension Scheme on the

other was well recognised. Under the former scheme, the contributions

made by the employer and the employees during the employment of the

employee would be made over to the employee along with interest accrued

thereon at the time of his retirement. Thus, the obligation on the part of the

operators of the Provident Fund Scheme would come to an end, after the

retirement of the employee; whereas the obligation under the Pension

Scheme would begin when the employee retired. Under the former scheme,

the liability was only to pay interest on the amount deposited and to make

over the entire amount at the time of his retirement. On the contrary, in the

latter scheme, it would be for the operators of the Pension Scheme to invest

amount deposited in such a way that after the retirement of the concerned

employee the invested amount would keep on giving sufficient returns so

that the pension would be paid to the concerned employee not only during

his life time but even to his family members after his death. If the option

under paragraph 11(3) of the Scheme, was to be afforded well after the cutoff date, it would create great imbalance and would amount to crosssubsidization by those who were regularly contributing to the Pension

Scheme in favour of those who come at a later point in time and walk away

with all the advantages.

It was submitted that the emphasis on investment of the amount in

both the funds would qualitatively be of different dimension. The

difference between two schemes which was fulcrum of the decision in

Krishena Kumar5

was not so noted in the subsequent decision in R.C.

Gupta1

. In his submission it would not be a mere adjustment of amount to

transfer from one fund to another as stated in R.C. Gupta1 and that the

decision in R.C. Gupta1

was required to be re-visited.

9. These, and the other submissions touching upon the applicability

of the principle laid down in the decision in R.C. Gupta1

go to the very

root of the matter. Sitting in a Bench of two Judges it would not be

appropriate for us to deal with said submissions. The logical course would

be to refer all these matters to a Bench of at least three Judges so that

appropriate decision can be arrived at.

10. The principal questions that arise for consideration are whether

there would be a cut-off date under paragraph 11(3) of the Employees’

Pension Scheme and whether the decision in R.C. Gupta1

would be the

governing principle on the basis of which all these matters must be

disposed of.

11. The Registry is, therefore, directed to place these matters before

the Hon’ble the Chief Justice for requisite directions so that these matters

can be placed before a larger Bench.

….…………………………………..J.

(UDAY UMESH LALIT)

….…………………………………..J.

(AJAY RASTOGI)

New Delhi,

August 24, 2021

LAW FOR ALL

LawforAll

advocatemmmohan

Just for legal information but not form as legal opinion

Monday, August 30, 2021

Friday, August 27, 2021

whether there would be a cut-off date under paragraph 11(3) of the Employees’ Pension Scheme and whether the decision in R.C. Gupta1 would be the governing principle on the basis of which all these matters must be disposed of.