Full Judgment Text
$~30
* IN THE HIGH COURT OF DELHI AT NEW DELHI
rd
% Date of Decision: 03 December, 2021
+ LPA 461/2021
NCUBATE INDIA SERVICES PRIVATE LIMITED
FORMERLY NCUBATE LOGISTICS AND
WAREHOUSING PVT LTD & ANR. ..... Appellants
Through: Mr. Ritin Rai, Senior Advocate with
Mr. R. Jawahar Lal, Mr. Siddharth Bawa, Mr.Anuj
Garg, Mr. Mohit Sharma and Mr. Aman Shukla,
Advocates.
versus
UNION OF INDIA THROUGH: ITS
SECRETARY & ORS. ..... Respondents
Through: Mr. P.S. Singh, Senior Panel Counsel
for UOI.
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MS. JUSTICE JYOTI SINGH
JUDGMENT
D.N. PATEL, CHIEF JUSTICE (ORAL)
CM APPL. 43220/2021 (Exemption )
Allowed, subject to all just exceptions.
Application stands disposed of.
LPA 461/2021
1. Being aggrieved and feeling dissatisfied by the judgment dated
08.02.2021, passed by the learned Single Judge in W.P.(C) 7302/2013,
Original Petitioners have preferred the present Letters Patent Appeal.
LPA 461/2021 Page 1 of 9
2. Writ petition was filed by the Appellants before the learned Single
Judge seeking the following reliefs :-
“A. Issue a Writ of Certiorari or any other
appropriate Writ, Order or Direction, thereby
quashing and setting aside the impugned letters,
including the letter dated 03.06.2013 issued by
Respondent No. 5, and also the letter issued by the
General Manager on behalf of the Respondent No. 3 to
5 dated 29.06.2013 and the letter dated 26.07.2013
issued by the Respondent No. 2 being unreasonable,
unfair and arbitrary; and,
B. Issue a Writ of Mandamus or any other
appropriate Writ, Order or Direction, thereby
directing the Respondents to honor all the four bank
Guarantees as such a total of Rs. 7,00,00,000/-
(Rupees Seven Crores only) in favour of the petitioner
which includes First Bank Guarantee for an amount of
Rs. 2,00,00,000/- issued on 14.02.2013 bearing No.
1436/ILG/12/2013, Second and Third Bank
Guarantees for an amount of Rs. 2,00,00,000/- and Rs.
1,00,00,000/- issued on 06.03.2013 bearing No.
1436/LG/18/13 & No. 1436/LG/19/13, and fourth Bank
Guarantee for an amount of Rs. 2,00,00,000/- dated
26.03.2013 bearing No. 1436/LG/26/13, each issued
by the Respondent No. 5 in favour of the Petitioner
Company; and,
C. Issue an appropriate Writ, Order or Direction,
including the writ of mandamus thereby directing the
respondents to pay of suitable compensation and
damages as well as interest @-18% on the amount of
Rs.7,00,00,000/- (Rupees Seven Crores only), being the
amount of all four Bank Guarantees issued by the
Respondent No. 5 in favour of the Petitioner Company
for the period from the date of invocation i.e.
01.06.2013 until the Bank Guarantee is honoured;
LPA 461/2021 Page 2 of 9
and,
Pass any other or further order (s), which this Hon’ble
court may deem fit and proper, in the facts and
circumstances of the present case, in the interest of
justice.”
3. From the pleadings set out in the writ petition and the present appeal,
it emerges that the Appellants had filed the aforementioned writ petition
seeking directions to the Respondents to honour 2 Bank Guarantees dated
14.02.2013 and 26.03.2013 and 2 Bank Guarantees both dated 06.03.2013,
for a total sum of Rs.7 Crores, issued by Indian Overseas Bank (IOB) in
favour of Appellant No.1.
4. It was the case of the Appellants in the writ petition that Ncubate, part
of the SAR Group of Companies is engaged in import sourcing,
warehousing, distribution, etc. of various goods, such as, electronics, water
purifiers. Global Brands Enterprise Solutions Pvt. Ltd. (GBESPL) had the
marketing and distribution rights for India of electronic consumer goods
under the name „AKAI‟. On 05.05.2012, GBESPL and Ncubate entered into
Import and Sourcing Agreement, whereby Ncubate was engaged as
GBESPL supplier and was to source, import and warehouse the products to
GBESPL, based on Purchase Orders placed and/or instructions given by
GBESPL, by issuance of Letter of Credit to Ncubate‟s vendors. Ncubate
incurred substantial financial expenditure on account of the inventory
procured pursuant to Purchase Orders and monies recoverable from
GBESPL against the goods sold. To safeguard Ncubate, GBESPL was
required to provide security deposit of Rs.5 Crores to Ncubate along with
furnishing an unconditional and irrevocable Bank Guarantee (“BG”) for an
amount of Rs.20 Crores in favour of Ncubate.
LPA 461/2021 Page 3 of 9
5. On 07.05.2012, an addendum to the Agreement dated 05.05.2012 was
executed and subsequent thereto, 4 BGs in a sum of Rs.7 Crores were issued
by IOB at the instance of GBESPL, in favour of Ncubate. GBESPL also
entered into a National Distribution Agreement dated 05.05.2012 with
Savoir Faire Services Pvt. Ltd., a Group Company of Ncubate, whose name
was subsequently changed to Global Brands Enterprise Solutions and
Distributions Pvt. Ltd. (GBESDPL). According to the Appellants, for more
than a year, in performance of its contractual obligations, Ncubate took
significant exposure on account of GBESPL‟s business activity and as on
the date of filing of the writ petition, the financial liability of Ncubate and
Group Companies for transacting business on behalf of GBESPL was to the
tune of Rs.21 Crores and as of May, 2013, a total of Rs.26,74,58,000/- was
payable by GBESPL to Ncubate.
6. According to the Appellants, when GBESPL failed to clear the dues,
despite opportunities, Ncubate invoked the 4 BGs vide letter dated
01.06.2013. Vide letter dated 03.06.2013, IOB, however, took a stand that
the BGs were fraudulently issued and, therefore, the amounts could not be
remitted in favour of Ncubate. This compelled the Appellants to file a
writ petition seeking quashing of the letter dated 03.06.2013 and a
direction to the Respondents to honour the 4 BGs. It needs a mention that
during the pendency of the writ petition, IOB also filed a suit being
CS(COMM) 829/2016 seeking a declaration that the 4 BGs were
unenforceable, and also permanent injunction restraining Ncubate and
GBESDPL from encashing the BGs. GBESPL was also impleaded as a
Defendant.
LPA 461/2021 Page 4 of 9
7. Learned Single Judge decided the writ petition and the suit by a
common judgment. Writ petition was dismissed on the ground that disputed
questions of facts were not capable of decision while exercising jurisdiction
under Article 226 of the Constitution of India, while the suit was disposed
of, observing that Ncubate, as a beneficiary of the BGs, having not sued for
recovery of monies under the BGs, was not entitled to recovery thereof and
that on the basis of documents, there was sufficient material before the Court
to hold that IOB stood discharged from its obligations under the BGs, owing
to concealment and misrepresentation and the evident collusion and fraud
practice in issuance of the BGs. Relevant would it be to note that the
challenge in the present appeal is to the extent of dismissal of the writ
petition being WP(C) 7302/2013.
8. Contention of the learned Senior Counsel for the Appellants is that
Respondent No.5 herein/IOB had issued 4 BGs to the tune of Rs.7 Crores at
the instance of GBESPL and the beneficiary was Appellant No.1, a body
corporate, who was engaged in a contractual business transaction, under
duly executed Agreements for import and supply of electronic goods by the
Appellants. The BGs were unequivocal, irrevocable and unconditional and
the amounts under the BGs were payable on a mere demand by the
beneficiary without any further proof/requirement. Since GBESPL defaulted
in the payment obligations, Appellants were constrained to invoke the BGs,
as an amount of nearly Rs.27 Crores was payable to Appellant No.1.
Instead of honouring the BGs, IOB strangely refused to remit the amounts
on the ground that GBESPL had played fraud on IOB in collusion with
Appellant No.1.
LPA 461/2021 Page 5 of 9
9. It is further submitted that the learned Single Judge has erred in
dismissing the writ petition, on the ground that it involved disputed
questions of facts as also observing that Appellant No.1 is not entitled to
enforcement of the BGs on account of concealment, collusion and fraud in
issuance of the BGs. Once the Agreements between the parties were legal
and enforceable and monies were outstanding to the Appellants, IOB was
not legally entitled to question the mode and performance of the Agreements
and to refuse payment under the BGs, particularly, when the BGs were
unconditional and irrevocable. The Contract of Guarantee is an independent
contract. Appellant No.1 has no role to play in issuance of BGs and was
only a beneficiary.
10. During the course of hearing, a pointed query was put by the Court to
the learned Senior Counsel appearing on behalf of the Appellants as to the
period of validity of the BGs and whether the BGs were kept alive during
the pendency of the writ petition as also the current status of the validity of
the 4 BGs. In response, learned Senior Counsel categorically submitted that
the 3 BGs out of four were valid for a period of one year while 1 BG was
valid for three years, from the date of issuance, and that none of the BGs are
presently valid. It is also fairly submitted that during the pendency of the
litigation before the learned Single Judge, there was no interim order
directing the IOB or the Guarantor to keep the BGs alive.
11. We have heard learned Senior Counsel appearing on behalf of the
Appellants and looked into the facts and circumstances of the case.
12. There is no dispute that the 4 BGs in question were executed on
different dates in the year 2013. BG dated 14.02.2013 was valid upto
13.02.2016, 2 BGs both dated 06.03.2013 were valid upto 05.03.2014 and
LPA 461/2021 Page 6 of 9
BG dated 26.03.2013 was valid upto 25.03.2014. There was no interim order
directing IOB/Guarantor Bank by the learned Single Judge to keep the BGs
alive during the pendency of the litigation. Resultantly, none of the 4 BGs
are currently valid and hence, no orders can be passed directing their
encashment. It is a settled law that a Bank Guarantee, which is no longer
valid and whose life has expired, cannot be encashed at the instance of a
beneficiary and, therefore, no such directions can be given by this Court to
the Respondents.
13. We are also in agreement with the view taken by the learned Single
Judge that the relief sought in the writ petition entailed adjudication of
disputed questions of fact, which cannot be done while exercising
jurisdiction under Article 226 of the Constitution of India. Learned Single
Judge has observed that on the basis of documents on record, it cannot be
conclusively established, whether monies under the BGs are due to Ncubate
or whether the BGs were obtained by misrepresentation/concealment.
According to the learned Single Judge, IOB had placed sufficient material
on record raising suspicion on the aforesaid counts and the questions that
thus arose could not be answered without examination and cross-
examination of witnesses. Learned Single Judge has also noted that the
remedy available to Ncubate, on failure of IOB to honour the BGs, is to file
a suit, which they failed to do. Reliance was placed by the learned Single
Judge on the judgment of the Hon‟ble Supreme Court in Thansingh
Nathmal vs. Superintendent of Taxes, Dhubri, AIR 1964 SC 1419 and
Suganmal vs. State of Madhya Pradesh, AIR 1965 SC 1740 holding that
jurisdiction under Article 226 of the Constitution is not intended as an
alternate remedy for relief which is to be sought through a civil suit and
LPA 461/2021 Page 7 of 9
ordinarily a writ petition should not be entertained in cases where money is
sought to be recovered requiring elaborate evidence and examination of
witnesses.
14. We find no infirmity with the said view. It is a settled law that
disputed questions of facts ought not to be decided in a writ petition and
particularly, in matters relating to recovery of monies when the appropriate
remedy is to file a suit for recovery, a writ jurisdiction cannot and should not
be exercised as an alternate remedy. IOB had seriously disputed the
enforcement of the BGs on the ground of fraud and collusion. IOB also filed
a civil suit being CS (COMM) 829/2016 seeking a declaration that the BGs
were unenforceable. In view of the serious contest by IOB and in the light of
the documents placed on record, as noted by the learned Single Judge, it was
known to the Appellants that there was a serious suspicion being raised on
the genuineness of the BGs, which could only be resolved by leading
evidence, yet the Appellants chose to continue with the writ remedy instead
of filing a suit where evidence could be led to prove their claim and/or
to disprove the stand of the Bank. In view of the aforementioned judgments
of the Hon‟ble Supreme Court, we see no reason to interfere with the
impugned judgment insofar as the learned Single Judge has dismissed the
writ petition.
15. As far as the suit filed by the IOB, being CS(COMM) 829/2016, is
concerned, we are informed that the Appellants had already preferred the
Regular First Appeal and the same will be decided in accordance with law
by the concerned Court.
16. In view of the aforesaid facts and reasons, no error has been
committed by the learned Single Judge while deciding W.P.(C) 7302/2013
LPA 461/2021 Page 8 of 9
vide judgment and order dated 08.02.2021, with respect to encashment of
the BGs.
17. Liberty is granted to the Appellants to resort to appropriate remedy
available in law, with respect to recovery of the alleged amounts, if any
and/or enforcement of the BGs. The learned Single Judge has in para 49 of
the impugned judgment, noted that the limitation for filing a suit has
expired. However, if the Appellants are advised to take recourse to the
remedy of filing a suit, the same shall be decided by the Competent Court, in
accordance with law, keeping in mind the provisions of the Limitation Act,
1963.
18. There is no merit in the appeal and the same is accordingly dismissed,
with liberty as aforementioned.
CHIEF JUSTICE
JYOTI SINGH, J
DECEMBER 03, 2021/ sn
LPA 461/2021 Page 9 of 9