In a dissenting judgement, Supreme Court Justice Indira Banerjee stated that it is incomprehensible why bank guarantees from Scheduled Private Banks in India should be preferred over Scheduled Foreign Banks in India with high global ratings, despite the fact that some Scheduled Private Sector Banks have not been performing well.
The Division Bench of Justices Indira Banerjee and V. Ramasubramanian was hearing appeals against a High Court order refusing to accept a legally valid irrevocable Bank Guarantee of Rs.30 crores issued by the Industrial and Commercial Bank of China Limited, Mumbai, which is a Scheduled Bank included in the Second Schedule of the Reserve Bank of India Act, 1934, and ordering the Appellant to pay the Appellant's legal costs. This order was issued by the Delhi High Court in an arbitration appeal brought under Section 66 of the Indian Constitution. In an arbitration appeal filed under Section 37 of the Arbitration and Conciliation Act, the Delhi High Court issued this judgement.
While Justice Banerjee upheld the appeal, Justice Ramasubramanian stated that the Special Leave Petitions should be dismissed since there is no serious question of law that warrants interference under Article 136 of the Constitution. As a result, the appeal has been forwarded to the Chief Justice of India for further instructions.
Justice Banerjee observed, referring to the Reserve Bank of India Act, 1934, and the Banking Regulation Act, 1949; as per paragraph 55 it is unclear why Scheduled Private Banks in India should be chosen over Scheduled Foreign Banks in India with good global ratings, notwithstanding the fact that certain Scheduled Private Sector Banks have failed miserably. It might not be out of place to take judicial note of reports that in March 2020, RBI had to apply a moratorium on Yes Bank, a private sector bank on the verge of full financial collapse. This Court has used Yes Bank as an example simply to demonstrate the absurdity of insisting on a Scheduled Indian Bank's Bank Guarantee above that of a Scheduled Foreign Bank in India, and not to throw any doubt on the current case. This Court has used Yes Bank as an example simply to show the absurdity of insisting on a Scheduled Indian Bank's Bank Guarantee above that of a Scheduled Foreign Bank in India, and not to put any doubt on Yes Bank's or any other Scheduled Bank in India's current operations.
The judge stated that a court has the authority to require a Bank Guarantee from any specific bank or class of banks in order to protect the interests of the Bank Guarantee beneficiary. She added saying that a Bank Guarantee of a bank with a history that raises issues about its legitimacy may be rightfully rejected by the Court. In this situation, there is nothing in the public record to cast doubt on ICBC's integrity, financial capabilities, or willingness to honour assurances.
The bench noted that ICBC is not only a Scheduled Bank in India, but it also appears in at least three authoritative lists, including 'The Banker's Top 1000 World Banks 2018,' 'The Forbes Global 2000 2019', and 'The Fortune Global 500 Sub-list of Commercial Banks.'
The question of whether a distinction between "a Scheduled Indian Bank" and "a Scheduled Bank located in India" exists statutorily does not arise for discussion in this instance, according to Justice Ramasubramanian.
"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.", the judge said.
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