SEPCO ELECTRIC POWER CONSTRUCTION CORPORATION versus POWER MECH PROJECTS LTD.

Citation: [2021] 12 S.C.R. 259 · Decided: 24-08-2021 · Supreme Court of India · Bench: INDIRA BANERJEE
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Judgment (excerpt)

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[2021] 12 S.C.R. 259
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SEPCO ELECTRIC POWER CONSTRUCTION CORPORATION
v.
POWER MECH PROJECTS LTD.
(Civil Appeal Nos. 4936-4937 of 2021)
AUGUST 24, 2021
[INDIRA BANERJEE AND V. RAMASUBRAMANIAN, JJ.]
Arbitration and Conciliation Act, 1996 – ss. 9, 37 –
Commercial Courts Act, 2015 – s.13(1A) – Reserve Bank of India
Act, 1934 – Bank Guarantee from a ‘schedule Bank’ and a ‘schedule
Indian Bank’ – The appellant, an entity in corporate in China was
awarded contracts in relation to coal based power projects in India
and the respondent, a company incorporated in India was engaged
as a sub-contractor of the appellant –Dispute arose between the
parties – Arbitration clause invoked – Arbitration Award was passed
of approximately Rs.1,42,00,00,000 (One hundred and forty two
crores) in favour of the respondent – Appellant filed an application
u/s.34of the Act challenging the Arbitral Award before the
Commercial Division of the High Court – Respondent also filed an
application u/s. 9 of the Arbitration Act seeking, inter alia, directions
to secure the amount of the Arbitral Award – On 12.02.2019, Single
Judge of the High Court directed the Appellant to furnish to the
Registry, a Bank Guarantee for a sum of Rs.30 Crores, from a
Scheduled Bank located in India – On 22.03.2019, appellant got
Industrial and Commercial Bank of China Limited (ICBC) to issue
an unconditional, irrevocable Bank Guarantee for a sum of Rs.30
Crores – However, on 09.04.2019 the Single Bench directed the
appellant to substitute the Bank Guarantee issued by ICBC, by a
Bank Guarantee of equivalent amount from a “Scheduled Indian
Bank” – Appellant filed an application for recall of the order of the
Commercial Division (Single Bench) of the High Court directing
the Appellant to substitute the Bank Guarantee – Application
dismissed by the High Court – On appeal, held: Per Indira Banerjee,
J: ICBC is also a Scheduled Bank within the meaning of s.2 (e) of
the RBI Act – The RBI Act only defines ‘Scheduled Banks’ which
includes Scheduled Foreign Banks operating in India – There is no
definition of Scheduled Indian Bank in the RBI Act – The Court
may legitimately disapprove a Bank Guarantee of a bank with a
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SUPREME COURT REPORTS
[2021] 12 S.C.R.
history which raises doubts with regard to its credibility – In the
instant 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 – Therefore, the High Court erred
in directing the Appellant to replace the Bank Guarantee of ICBC –
Per V. Ramasubramanian, J.: 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 the order passes by Single Bench which was rectified
later on –The order dated 09.04.2019 was to correct a mistake that
had inadvertently crept in – 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 –
Therefore, the Special Leave Petitions are dismissed – No
interference u/Art.136 of the Constitution required – Since, both
the Judges have not been able to agree, the matter to be placed
before the Chief Justice of India for appropriate directions.
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.4936-
4937 of 2021.
From the Judgment and Order dated 12.03.2021 of the High Court
of Delhi at New Delhi in Review Petition No.5 of 2021 in FAO (OS)
(COMM) 136 of 2019.
K. V. Vishwanathan, Sr. Adv., Satvik Varma, Ranjit Prakash,
Apoorv Singhal, Gaurav Lavania, Harsh Gokhale, Pai Amit, Adv. for the
appellant.
Dr. Abhishek Manu Singhvi, Sr. Adv., Dharmesh Misra, Prateek
Gupta, Krishna Dev Jagarlamudi, Sahil Garg, Vishal Singh, Advs. for the
respondent.
The following Judgment and Order of the Court were delivered :
JUDGMENT
INDIRA BANERJEE, J.
1. 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
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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, a
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