Full Judgment Text
2012:BHC-OS:9461-DB
VBC 1/3 wp1557.12-26.7
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
O. O. C. J.
WRIT PETITION (L) NO.1557 OF 2012
Mohit Minerals Pvt. Ltd. ...Petitioner.
Vs.
Maharashtra Small Scale Industries
Development Corporation Ltd. & Anr. ...Respondents.
....
Ms.Pooja Thorat i/b. Mr.V.M.Thorat for the Petitioner.
Mr.M.P.Kulkarni, Law Superintendent of Respondent No.1 present.
Ms.I.K.Culcuttawala, AGP for Respondent No.2 and 3.
.....
CORAM : DR.D.Y.CHANDRACHUD AND
R.D.DHANUKA, JJ.
July 26, 2012 .
ORAL JUDGMENT (PER DR.D.Y.CHANDRACHUD) :
The Petitioner was appointed as a handling agent by the
Maharashtra Small Scale Industries Development Corporation Ltd., the First
Respondent, under an agreement dated 16 September 2008. The agreement
contains a provision for the resolution of disputes by arbitration. The First
Respondent invoked a Bank Guarantee executed by the Petitioner pursuant
to the contract by a letter dated 29 June 2011 addressed to the Bank of India.
The Petitioner filed an “appeal” before the Minister for Industries in the State
of Maharashtra. At a meeting held on 14 November 2011, the Minister
(Industries) was of the view that the invocation of the Bank Guarantee was
without any prior intimation and there was no compliance of the principles of
natural justice and on this ground purported to instruct the First Respondent to
revoke the invocation after hearing the parties and take a decision. The
Petitioner invoked the jurisdiction of this Court under Article 226 of the
Constitution avowedly on the ground that the First Respondent, despite the
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order of the Minister for Industries, has not implemented the order.
2. The law on the subject is clear. A bank guarantee constitutes an
agreement between the Bank and the beneficiary in favour of whom the
guarantee is issued. Absent a case of fraud and irretrievable injustice, even
Courts do not grant injunctions on the invocation of an unconditional bank
guarantee in view of the principles of law established by judgments of the
Supreme Court. The First Respondent having invoked the bank guarantee, it
was for the Petitioner to take recourse to such remedies as were available in
law. The agreement between the parties as noted earlier contains a provision
for resolution of disputes by arbitration. Instead of seeking recourse to the
remedy available in law, the Petitioner moved the Minister for Industries. At a
meeting which was held on 14 November 2011, a direction was given to the
First Respondent to hear the parties and thereafter to take action. A bank
guarantee emanates purely from contract. There is no requirement of the
beneficiary furnishing a hearing to the party at whose behest the bank
guarantee is issued before proceeding to invoke the bank guarantee.
Indeed, if such a requirement were to be introduced, that would defeat the
purpose of bank guarantees. A bank guarantee, as the Supreme Court has
repeatedly noted, constitutes a vital element in the channel of investment and
trade and even judicial interference against the invocation and encashment of
bank guarantees is circumscribed by strict parameters. We are of the view
that the jurisdiction of this Court under Article 226 of the Constitution cannot
be pressed in aid to enforce a clearly unlawful direction of the Minister of
Industries. The order of the Minister of Industries is void. The direction which
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he issued is a direction which is unsustainable with reference to any provision
of law. In the circumstances, we decline to exercise our jurisdiction at the
behest of the Petitioner. It must be noted that the First Respondent had
raised a specific objection before the Minister that the Petitioner was at liberty
to invoke arbitration and that there was no provision in the agreement for an
appeal to be filed to the Minister for Industries.
3. The Law Superintendent of the First Respondent, who is present
before the Court, has in any event informed the Court that the bank guarantee
has been encashed by the First Respondent and the monies were realised on
5 July 2012.
4. The Petition shall accordingly stand dismissed. There shall be no
order as to costs.
( Dr.D.Y.Chandrachud, J.)
( R.D. Dhanuka, J. )
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