State Trading Corporation Of India Ltd. vs State Bank Of India And Ors.

J.M. Malik, J

The State Trading Corporation of India Ltd. (to be referred as STC henceforth), the appellant in this appeal has picked up a conflict with the judgment and recovery certificate issued by the learned DRT in the sum of Rs. 6,30,85,220/- together with pendente lite and future interest at the rate of 21.57% p.a. with monthly rests w.e.f. the date of filing of O.A. No. 507/ 2000 till the realisation of whole amount along with costs against STC/defendant No. 3 and in favour of State Bank of India. The learned Trial Court also came to the conclusion that United Bank, Switzerland (in short UBS), Zurich, Switzerland, defendant No. 1 and Tradigrain SA (in short Tradigrain), defendant No. 2 who have been arrayed as respondent Nos. 2 and 3 respectively in this appeal were absolved of the above said liability. Adumbrated in brief, the facts of this appeal are these. STC invited tenders for purchase of Argentine wheat on 20.1.1997. The offer made by Tradigrain was accepted by STC for supply of one lac metric tons of wheat at US $ 173 per ton. Tradigrain entered into a contract with STC on 4.2.1997. In terms of the said contract, Tradigrain was to give performance guarantee to appellant STC to ensure due performance of its obligation under the contract in the sum of US $ 908250/-. It was also agreed that the goods were to be inspected at the time of loading by STC appointed surveyor at Tradigrain's cost and would be considered acceptable if Indian Health and Plant Inspection Authorities authorised their unloading. It was also agreed that in case of dispute, the matter would be decided by the Grain and Food Trade Association (in short GAFTA). Therefore, at the request of Tradigrain, the UBS, being its Banker, approached State Bank of India (in short SBI) and requested it to issue a performance guarantee on behalf of Tradigrain in favour of the appellant. In turn, SBI asked for a counter guarantee in its favour from UBS against the aforesaid request. Accordingly, UBS issued a counter guarantee on 13.2.1997 and amended the counter guarantee on 14.2.1997 in favour of SBI. The counter guarantee so issued by UBS in favour of SBI, inter alia, stated as follows:

Our counter guarantee is irrevocable and unconditional and fully indemnifies you against all claims presented hereunder upto the maximum amount and allows payment in full and or in part upto the sum of US $ 908250 plus interest (if any) on first demand by tested telex or cable until August 19, 1997 and notwithstanding any contestation from ourselves, our principals or any other party whatsoever and despite any dispute that arises between the contracting parties.

The counter guarantee was amended on 14.2.1997 and as per law, the said amendment the counter guarantee issued by UBS in favour of SBI was to be governed in accordance with Indian law. The said portion is reproduced as follows:

Furthermore referring to Y/MSGE of this day, we conform that our Counter Guarantee No. DOC-CO-IS: 06002 is governed and constitute in accordance with Indian Laws and Indian jurisdiction (New Delhi Courts and not by Swiss law).

On 14.2.1997, amended counter guarantee for US $ 908,250/- was issued by UBS. Based on the above counter guarantee, SBI issued a performance guarantee/Bank guarantee of US $ 908,250/- in favour of STC which was valid up to 4.8.1997 and which was further extended to 4.11.1997 and further extended validity of its counter guarantee up to 19.11.1997. The said performance guarantee issued by SBI in favour of the appellant, inter alia, stated as under:

Against contract No. STC/WHEAT/IMP/4/97 dated 4.2.1997 (hereinafter called the LOI/Contract) entered into between M/s. STC (hereinafter called the buyer) and M/s. Tradigrain S.A., Geneva (hereinafter called the sellers), this is to certify that at the request of the sellers; we State Bank of India, Overseas Branch, Vijaya Building, 17, Barakhamba Road, New Delhi having its local head office at 11, Parliament Street, New Delhi-110001 unconditionally and irrevocably guarantee to pay to the buyers immediately on first demand, the amount of US $ 908,250 (US Dollars nine hundred eight thousand two hundred fifty only) without any protest or demur or reference to the sellers if the sellers fail to perform all or any of their obligations under the said contract. The decision of the buyers duly communicated in writing to the Bank that the sellers have failed to perform all or any of the obligations under the contract shall be not questioned and be final and conclusive. The said amount of US $ 908,250 (US Dollars nine hundred eight thousand two hundred fifty only) will accordingly forthwith be paid without any conditions or requirement of our proof whatsoever failing with interest of 21.75% P.A. on monthly rest basis shall be due by the Bank to the buyer.

On 20.2.1997, wheat was shipped to India on board. Agreed price of goods were paid to Tradigrain on 26 and 27 March, 1997. On 1 and 13 April, 1997 the goods were unloaded at destination from two ships. Inspection at the time of unloading, by inspecting company chosen by STC, confirmed that goods corresponded to the specifications of the contract dated 4.2.1997, except in relation to the second shipment, which contained a higher percentage of damaged grains being 3.86% instead of 3%. Consequently, Tradigrain reduced the price of the goods of second consignment to US $ 170.02 per ton. On 28.7.1997, STC claimed despatch money in the sum of US $ 175,372.75. On 1.9.1997, STC revised despatch money calculation to US $ 115,384.71. Consequently, dispute arose on account of despatch money. The Tradigrain had calculated the despatch money to US $ 100,669.55. The dispute amount remained to the amount of US $ 14,715.16. On 11.9.1997, STC made claim of US $ 680,920/- on account of damaged grain. Tradigrain sent reply on 16.9.1997 wherein it was mentioned that qualities were checked long ago.

On 25.9.1997, the appellant invoked performance guarantee stating that UBS had failed to perform its obligation under the contract and called upon it to immediately remit the amount of US $ 908,250/- and credit the proceedings to their cash credit account. Thereafter, SBI vide telex dated 25.9.1997 called upon the UBS to pay the said sum of US $ 908,250/- against the counter guarantee issued by it in favour of SBI. Subsequent to the invocation, SBI paid Rs. 3,27,87,825/- equivalent to US $ 908,250/- at the prevailing exchange rate as on the date of invocation of the performance guarantee vide cheque dated 21.1.1998 to STC.

UBS failed to make the payment to SBI against such demand in violation and against the fate of an undertaking in the counter guarantee issued by it in favour of SBI. It also came to the notice that Swiss Court which had no jurisdiction to deal with the matter had issued a Court injunction dated 26th September, 1997 prohibiting UBS to pay any amount due as part of the counter guarantee. UBS had issued the counter guarantee at the instance of Tradigrain S.A. There was no business activity between the appellant and SBI. Again, Tradigrain S.A. in invoking the jurisdiction of the Swiss Court when contract between the parties including the counter guarantee provided by the UBS to SBI provided for the jurisdiction of Indian Courts. UBS and Tradigrain S.A. did not fulfil their obligation under the counter guarantee issued by them in favour of SBI. It is contended that Swiss Court had no jurisdiction as Indian Law was to apply and Indian Court had jurisdiction. Appeals filed against that order were dismissed.

However, Tradigrain S.A. preferred arbitration proceedings against the appellant in GAFTA. On 29.12.1997, Tradigrain appointed its Arbitrator and STC appointed its Arbitrator on 6.1.1998. SBI filed an intervention application before the Swiss Court on 9.2.1998 which was permitted on 31.3.1998. In the meantime, GAFTA appointed its Chairman of the Arbitral Tribunal on 13.3.1998. GAFTA pronounced the award on 6.11.2000. The extract of award germane to instant controversy reads:

5.5 We find that seller fulfilled their contract by shipping the goods and providing contractual certificates in accordance with the contractual terms which were accepted and paid for by buyers. Furthermore, buyers took delivery of the goods and removed them from the port at which the vessels discharged. In these circumstances, we find no justification/or the calling down by buyers of the performance bond put up by sellers as a means of providing security for any damages suffered by buyers, as there was no breach of the contract by sellers, leading to a claim for damages by buyers. (Emphasis supplied)

Award--

I We do hereby award that buyers have no claim against sellers in respect of quality of the wheat.

6.2 We further award that sellers shall pay to buyers forthwith the sum of US$ 100,669.95 (one hundred thousand, six hundred and sixty-nine United States Dollars and ninety-five Cents), in settlement of despatch monies earned at discharge, together with interest thereon at the rate of 7% (seven per cent) per annum from 22nd December, 1997 to the date of this Award.

An appeal was preferred against the GAFTA award which was decided in November, 2004. Tradigrain S.A. preferred the appeal against the GAFTA award before the GAFTA Appellate Tribunal. Tradigrain S.A. raised the question that it should be paid the amount of the performance guarantee which was invoked by the appellant to Tradigrain S.A. Award of the Appellate Tribunal was pronounced on 19.11.2004 wherein it was held that since Tradigrain had not suffered any loss on account of invocation of the performance guarantee and, therefore, it is not entitled to receive any amount from the appellant.

Tradigrain preferred further appeal in the High Court of Justice Queens Bench Division, Commercial Court England. High Court of London pronounced the judgment on 18.10.2005 wherein it was held that the appellant is liable to pay US $ 807,580.45 to the Tradigrain S.A. It was also held that the appellant is entitled to receive US $100,669.55 on account of dispatch money. It was urged that such award and judgment is of no relevance as being foreign award which is against the public policy of India.

Under these circumstances, the present appeal was filed to set aside and quash the impugned order dated 3.3.2006 as passed by the learned Presiding Officer with costs.

I have heard the Counsel for the parties. The main plank of appellant's Counsel assailing the judgment passed by the lower Court is that the learned DRT has wrongly placed reliance on the GAFTA award, GAFTA Appellate Tribunal Award and the order of the High Court of Justice Queens Bench Division, Commercial Court England. It was argued that the order passed by the Swiss Court is nullity. Again Indian law was to apply. The foreign judgment cannot be taken into consideration unless and until the procedure envisaged in Sections 44 to 49 and 60 of the Arbitration and Conciliation Act, 1996 is followed.

Learned Counsel for the appellants vehemently argued that the above said foreign award is hit by Section 48(2)(b) of the Arbitration and Conciliation Act, 1996. The said provision of law runs as follows:

Conditions for enforcement of foreign awards--

(1) xxx xxx xxx

(2) Enforcement of an Arbitral Award may also be refused if the Court finds that--

(a) xxx xxx xxx

(b) The forcement of the award would be contrary to the public policy of India.

Explanation--Without prejudice to the generality of Clause (b) of this section, it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption.

In order to buttress his arguments, learned Counsel for the appellant cited an authority reported in Oil and Natural Gas Corporation Ltd. v. SAW Pipes Ltd., : III (2003) SLT 324 : II (2003) CLT 242 (SC) : AIR 2003 SC 2629 wherein it was held:

15 It has been repeatedly stated by various authorities that the expression 'public policy' does not admit of precise definition and may vary from generation to generation and from time-to-time. Hence, the concept 'public policy' is considered to be vague, susceptible to narrow or wider meaning depending upon the context in which it is used. Lacking precedent, the Court has to give its meaning in the light and principles underlying the Arbitration Act, Contract Act and Constitutional provisions.

22....The aforesaid submission of the learned Senior Counsel requires to be accepted. From the judgments discussed above, it can be held that the term 'public policy of India' is required to be interpreted in the context of the jurisdiction of the Court where the validity of award is challenged before it becomes final and executable. The concept of enforcement of the award after it becomes final is different and the jurisdiction of the Court at that stage could be limited....

Therefore, in our view, the phrase 'Public Policy of India' used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time-to-time. However, the award which is, on the face of it. patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/ decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term 'public policy' in Renusagar's case (supra), it is required to be held that the award could be set aside if it is patently illegal. Result would be --- award could be set aside if it is contrary to:

(a) fundamental policy of Indian law; or

(b) the interest of India; or

(c) justice or morality, or

(d) in addition, if it is patently illegal.

Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the Court. Such award is opposed to public policy and is required to be adjudged void.

It was also pointed that the present case does not come within the purview of the Foreign Awards (Recognition and Enforcement) Act, 1961. The attention of the Court was invited to Section 7 which also mentions that the award should not be enforced when it is found that the award will be contrary to the public policy.

The attention of the Court was also invited toward another authority of Hon'ble Delhi High Court reported in Marina World Shipping Corpn. v. Jindal Exports, 2004 (2) CLJ 50 (Del) Para 15 which is reproduced as hereunder:

Section 49 of the Arbitration Act makes it clear that only after objections are adjudicated and decided, and the Court is satisfied that the foreign award is enforceable, then and then only, the award is deemed to be a decree of the Civil Court and, thereafter, effective steps for execution of the said award could be taken. The foreign award becomes binding on the parties only when it is enforceable. In the decision of the Supreme Court in Fuerst Day Lawson Limited v. Jindal Export, : (2001) 3 Comp LJ (SC): AIR 2001 SC 2293 --the Supreme Court has held that an award could be enforced and also executed in the same proceeding. It was held that there is no need to take out separate proceeding--one for deciding the enforceability of the award, and the order to make execution thereof. Therefore, although the adjudication process for enforcement and execution could be done in one single process, but, before order for execution, the Court has to examine whether or not the foreign award is enforceable.

The learned Counsel also cited another authority reported in Smt. Satya v. Teja Singh, AIR 1979 SC 105. In this case it was observed;

Turning to proof of fraud as a vitiating factor, if the foreign decree was obtained by the fraud of the petition, then fraud as to the merits of the petition was ignored in England, but fraud as to the jurisdiction of the Foreign Court, i.e. whether the petitioner had successfully invoked the jurisdiction by misleading the Foreign Court as to the jurisdictional facts, used to provide grounds for not recognizing the decree...

Under Section 13(e), Civil Procedure Code, the foreign judgment is open to challenge where it has been obtained by fraud. Fraud as to the merits of the respondent's case may be ignored and his allegation that he and his wife have lived separate and apart for more than three (3) consecutive years without cohabitation and that there is no possibility of a reconciliation may be assumed to be true...

Learned Counsel for the appellant also referred to another authority reported in Sheo Tahal Ram v. Binaek Shukul, : AIR 1931 All 689 wherein it was held that the judgment debtor can object to the validity of the decree on the ground of want of jurisdiction. Learned Counsel for the appellant vehemently argued that the jurisdiction was always with the Indian Courts as agreed in the agreement.

All these arguments have left no impression upon the Court for the following reasons. It must be borne in mind that the appellant has never challenged the award. All the parties were given opportunity to lead evidence. The award held that STC alone is liable to pay the amount. No counter appeal was filed by STC. The appellant itself had accepted and acted upon the GAFTA award and as such it is stopped from challenging the same. This is an unsavoury volte face on its part.

The appellant had written a number of letters which clearly go to show that they had accepted the above said award. Its letter dated 9.7.2001 addressed to M/s. Tradigrain S.A. contains the following request:

Please refer to your letter dated February 22, 2001 seeking payment instructions from us for remitting US $ 114,086.47 as per GAFTA Award letter dated 6th November, 2000.

You are requested to please remit the Award amount of US $ 114,086.47 to State Bank of India, CAG Branch, Barakhamba Road, New Delhi-110001 (India) Cash Credit Account No. 016000001010. The Bank has also SWIFT No. SBININBBA 172.

Further, it may kindly be noted that the interest @ 7% per annum from 22.12.1997 till Award date i.e. 16.11.2000 comes to US $ 20,275.03 instead of US $ 20,240.26. Hence, you are requested to pay a difference of US $ 34.77 also. Kindly remit the amount mentioned above as per instructions given in this letter under intimation to us.

Again another letter dated 27.7.2001 sent by Mr. Vijay Kumar, Deputy Marketing Manager mentions:

Your attention is invited to our letter dated July 9,2001 (enclosed), which was faxed to you regarding remittance of US $ 114,086.47 plus interest difference of US $ 34.77 to our Bankers, State Bank of India, CAG Branch, Barakhamba Road, New Delhi-110001 (India). On checking up with our Bankers this was brought to our notice that till date the amount due to us has still not been received. Kindly instruct your Bankers to remit the Award amount along with interest differential.

An expeditious action in this regard will be highly appreciated.

Yet another letter written by Mr. O.P. Mishra, Marketing Manager dated 31.8.2001 mentions:

Please refer to your letter dated February 22nd, 2001 for remittance of US $ 114,086 to STC in connection with the above award.

In this connection your attention is invited to our communication dated 9th July, 2001 and 27th July, 2001 wherein we had requested you to remit the award amount of US $ 114,086.47 to State Bank of India, CAG Branch, Barakhamba Road, New Delhi-110001 (India), Cash Credit Account No. 01600081010. The Bank has SWIFT No. SBININBBA 172. In this letter we had also requested you to remit US $ 34.77 on account of interest differential.

We regret to inform you that till date the amount has not been remitted in our Bank and we have not received any communication from you in this regard. Hence, you are finally requested to remit the above mentioned award amount without any further delay failing which we would have no alternative but to inform GAFTA regarding non settlement of the award amount and also initiate appropriate action for realisation of the award. This matter may please be treated as most urgent.

It may be also mentioned here that Tradigrain S.A. was willing to comply with award as is apparent from their letter dated 14.12.2001 sent to the appellant. The relevant portion of the said letter reads as under:

My clients have already clarified their stand in their affidavit dated 16.11.2001 filed in the Debts Recovery Tribunal, New Delhi in O.A. No. 507 of 2000. We repeat and reaffirm that our clients are ready and willing to comply with the Award.

However, in light of the proceeding brought by the State Bank of India before the Debts Recovery Tribunal of New Delhi against UBS AG, my client and your company, you will understand that my client cannot take the risk to pay twice the amount which was awarded by you.

It will only do so provided the proceedings brought by the State Bank of India before the Debt Recovery Tribunal of New Delhi are brought to an end upon such payment.

The Apex Court in the case reported in Brace Transport Corporation of Monrovia, Bermuda v. Orient Middle East Lines Ltd., Saudia Arabia and Others, : 52 (1993) DLT 243 (SC) : AIR 1994 SC 1715 was pleased to hold:

Before we deal with the facts of the case before us, a statement of some broad principles is necessary. The New York Convention speaks of 'recognition and enforcement' of an award. An award may be recognised, without being enforced; but if enforced, then it is necessarily recognised. Recognition alone may be asked for as a shield against re-agitation of issues with which the award deals. Where a Court is asked to enforce an award, it must recognise not only the legal effect of the award but must use legal sanctions to ensure that it is carried out. In the Law and Practice of International Commercial Arbitration by Redfern and Hunter (1986 edition) it is said (at pages 337 and 338).

In another authority reported in M/s. Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., : IV (2001) SLT 67=AIR 2001 SC 2293 in paras 29 and 30 it was held:

29....Since the object of the Act is to provide speedy and alternative solution of the dispute, the same procedure cannot be insisted under the new Act when it is advisedly eliminated. If separate proceedings are to be taken, one for deciding the enforceability of a foreign award and the other thereafter for execution, it would only contribute to protracting the litigation and adding to the sufferings of a litigant in terms of money, time and energy. Avoiding such difficulties is one of the objects of the Act as can be gathered from the scheme of the Act and particularly looking to the provisions contained in Sections 46 to 49 in relation to enforcement of foreign award.... The only difference as found is that while under the Foreign Award Act, a decree follows, under the new Act foreign award is already stamped as the decree. Thus, in our view, a party holding foreign award can apply for enforcement of it but the Court before taking further effective steps for the execution of the award has to proceed in accordance with Sections 47 to 49.

30....As per Section 49, if the Court is satisfied that a foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that Court and that Court has to proceed further to execute the foreign award as a decree of that Court.

In another authority reported in Goel Associates v. Din. Coop. Group Housing Society Ltd., I.A. No. 4225/96 in Suit No. 57-A/96 decided on 23.10.1997 () it was held:

4.... The principle on which the learned Judge acted is to be found in Russel on Arbitration, 14th Edition, page 19; and what the learned author says is that it will be good answer to a motion to set aside an award if the opposing party can show that the party moving has acquiesced in the award by knowingly accepting a benefit under it. The emphasis on 'knowingly" is in order to point out that the acceptance of the benefit under the award should not be in ignorance of the fact that the award has been made. If the party accepting the benefit wishes to challenge the award, as in this case there cannot be the slightest doubt that the benefit was accepted knowingly by the party....

Sum and substance of the remaining four decisions referred to above is also that where a party to an award has taken benefit under it, it cannot turn round, and say that the award is invalid.

In Zumaklal Motiram v. Fulchand Tarachand and Others, : AIR 1941 Bom 20 it was held that a party admitting an award is estopped subsequently at a late stage from challenging the validity even if the arbitration proceedings were invalid.

In Vishram Manji v. Gangaram Ladha and Others, AIR 1935 Sind 235 it was held:

... The award having been acted upon for all these years, in my opinion, he is estopped from contesting the validity of the reference and of the award at this late stage...

Under these circumstances it does not lie in the mouth of the appellant to challenge the award at this late stage. A right about turn on its previous stand is unfathomable. You cannot ride both the horses at the same time.

It is also not understood as to how this award is against the public policy. No reasons for the same were spelt out. There is not even an iota of evidence to reveal that there is a difference between Indian law and law of Switzerland. Learned Counsel for the appellant failed to show any difference between two types of law. The appellant has made a vain attempt to make bricks without straw.

I also find considerable force in the arguments urged by the Tradigrain SA to the effect that it had not agreed to submit to the jurisdiction of Courts/Tribunals in India. It appears that the contention raised by it that no cause of action arose against it appears to have force in view of the Hon'ble Supreme Court authority reported in World Tanker Carrier Corporation v. SNP Shipping Services Pvt. Ltd. and Ors., : IV (1998) SLT 708 : 11 (1998) CLT 139 (SC) : AIR 1998 SC 2330.

The appellant cannot re-agitate the above said award in view of the Hon'ble Supreme Court authority reported in State of Karnataka and Anr. v. All India Manufacturers Organization and Ors., : VI (2006) SLT 179 : AIR 2006 SC 1846 and Hon'ble Delhi High Court authority reported in Sea Transport Contractors Ltd. v. Indian Farmers Fertiliser Cooperative Ltd., . The present case appears to be barred by principle of constructive res judicata.

Last but not the least, the fact is further accentuated by the absence of evidence to show that the award is contrary to (i) fundamental policy of Indian law or (ii) the interest of India or (iii) justice or morality in the said award or (iv) that the said award is obtained illegally.

The present award comes within the four corners of Sections 44 to 49. I see no reasons to discard the same. The arguments urged by the learned Counsel for the appellant have to be eschewed out of consideration. The appellant also participated in the appointment of its own Arbitrator. When once a party submits to the jurisdiction of the Court, that party cannot challenge the same at a subsequent stage.

The second contention raised by the Counsel for the appellant was that the present amount does not come within the purview of debt as defined in Section 2(g) of the RDDBFI Act. It was argued that it was a contingent liability. The attention of the Court was invited toward Section 126 of the Indian Contract Act. Counsel for the appellant explained that the appellant came within the definition of creditor and not a debtor. In order to bring his point home the learned Counsel for the appellant cited an authority reported in Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works (P) Ltd. and Another, : II (1997) CLT 468 (SC) : AIR 1997 SC 2477 wherein the following observations were made:

The second exception to the rule of granting injunction, i.e., the resulting of irretrievable injury has to be such a circumstance which would make it impossible for the guarantor to reimburse himself, if he ultimately succeeds. This will have to be decisively established and it must be proved to the satisfaction of the Court that there would be no possibility whatsoever of the recovery of the amount from the beneficiary by way of restitution.

28.... The law relating to invocation of such Bank guarantees is by now well settled. When in the course of commercial dealings an unconditional Bank guarantee is given or accepted, the beneficiary is entitled to realise such a Bank guarantee in terms thereof irrespective of any pending disputes. The Bank giving such a guarantee is bound to honour, it as per its terms irrespective of any dispute raised by its customer. The very purpose of giving such a Bank guarantee would otherwise be defeated. The Courts should, therefore, be slow in granting an injunction to restrain the realisation of such a Bank guarantee.

... Dealing with the question of fraud it has been held that fraud has to be an established fraud. The following observations of Sir John Donaldson, M.R. in Bolivinter Oil S.A. v. Chase Manhattan Bank, (1984) 1 All ER 351, are apposite--

The wholly exceptional case where an injunction may be granted is where it is proved that the Bank knows that any demand for payment already made or which may thereafter be made will clearly be fraudulent. But the evidence must be clear both as to the fact of fraud and as to the Bank's knowledge.

It was also argued that there was no privity of contract between them. It was also argued that the invocation of the Bank guarantee was right.

This is indeed a side show not the heart of the problem. It must be borne in mind that the encashment of the Bank guarantee by the appellant was held to be wrongful and fraudulent by all the foreign Courts as well as GAFTA award. It was held that invocation of the performance bond/Bank guarantee by the appellant was wrong and without any justification. Consequently, the liability of the appellant to refund the Bank guarantee amount to the SBI had already arisen at the time of filing of the OA before the DRT in the year 2001.

The Court of DRT could not consider all these questions which are barred by the principles of res judicata. The appellant cannot be permitted to re-agitate the issues including the jurisdiction issue which already stands adjudicated upon in Switzerland as well as in London. It is also noteworthy that the appellant has unjustly enriched itself at the expense of the respondent, firstly by taking and keeping possession of the shipment of wheat from Tradigrain SA, respondent No. 3, secondly, retaining the amount of US $ 908,250 obtained by unlawfully invoking the performance Bank guarantee, and thirdly, by seeking an amount of US $ 100,699.55 from Tradigrain SA, respondent No. 3, toward dispatch money pursuant to the original award.

The appellant stood to gain wrongfully by its unlawful invocation of the performance Bank guarantee since it was clear and evident that by receiving and retaining the amount of US $ 908,250 obtained by unlawful invoking the performance Bank guarantee and simultaneously seeking US $ 100,699.55 from Tradigrain SA towards dispatch monies, the appellant would have purchased wheat from Tradigrain SA without paying the agreed contractual price in full which appears to be glaring example of fraud. The Supreme Court of India has held in cases reported in Hamza Haji v. Stale of Kerala & Anr., : III (2011) SLT 157 : AIR 2006 SC 3028 and Stale of Andhra Pradesh & Anr. v. T. Suryachandra Rao, : V (2005) SLT 531 : AIR 2005 SC 3110 that "fraud as is well known vitiates every solemn proceedings of Courts of justice".

It must be borne in mind that the expression debt has to be given widest amplitude. The Apex Court in an authority reported in Eureka Forbes Limited v. Allahabad Bank and Others, : III (2010) BC 1 (SC): IV (2010) SLT 280 :(2010) 6 SCC 193 was pleased to hold:

We some of the general expressions used by the framers of law in this provision--

(a) any liability;

(b) claim as due from any person;

(c) during the course of any business activity undertaken by the Bank;

(d) where secured or unsecured;

(e) and lastly legally recoverable.

All the above expressions used in the definition clause clearly suggest that, expression 'debt' has to be given general and wider meaning, just to illustrate, the words 'any liability' as opposed to the words 'determined liability' or 'definite liability' or 'any person' in contrast to 'from the debtor'. The expression 'any person' shows that the framers do not wish to restrict the same in its ambit or application. The Legislature has not intended to restrict to the relationship of a creditor or debtor alone. General terms, therefore, have been used by the Legislature to give the provision a wider and liberal meaning. These are generic or general terms. Therefore, it will be difficult for the Court, even on cumulative reading of the provision, to hold that the expression should be given a narrower or restricted meaning. What will be more in consonance with the purpose and object of the Act is to give this expression a general meaning on its plain language rather than apply unnecessary emphasis or narrow the scope and interpretation of these provisions, as they are likely to frustrate the very object of the Act.

Thus, in our opinion, the provisions of Section 2(g) have to be construed, so as to give it liberal meaning. The general expressions used in this provision will have to be understood generally. Neither there is scope to hold, nor is the legislative intent that these provisions should be given a narrower or a restricted meaning. In our considered view, the claim of the Bank relatable to the hypothecated goods was well within the jurisdiction of the Tribunal exercising its power under Section 17 of the Recovery Act.

In State Bank of Bikaner & Jaipur v. Ballabh Das & Co. and Others, : VII (1999) SLT 460 : AIR 1999 SC 3408 it was held:

According to the definition, the term 'debt' means liability which is alleged as due from any by a Bank or a financial institution or by a consortium of Banks or financial institutions. It should have arisen during the course of any business activity undertaken by the Bank or the financial institution or the consortium under any law for the time being in force. The liability to be discharged may be in cash or otherwise. It would be immaterial whether the liability is secured or unsecured or whether it is payable under a decree or an order of any civil Court or otherwise. However, it should be subsisting and legally recoverable on the date on which proceedings are initiated for recovering the same.

The High Court should have appreciated that the Bank has alleged in the suits -- plaints that the respondents had borrower money for the goods exported under the bills referred to in the suits and that the amounts payable under the bills have not been paid by the foreign buyer to the Bank under the agreement between the parties and, therefore, they have remained outstanding. This is the cause of action disclosed in the plaints....

In another authority reported in United Bank of India v. Debts Recovery Tribunal and Others, : III (1999) SLT 482 :III (1999) CLT 47 (SC) : AIR 1999 SC 1381 it was held:

13....In the aforesaid case, the Court noticed as how the word 'debt' was interpreted in Wabb v. Stenton (1883) 11 QBD 518, 527, wherein it was held a 'debt' is a sum of money which is now payable or will become payable in the future by reason of a present obligation, debitum in praesenti, solvendum in futuro...

In the case in hand, there cannot be any dispute that the expression 'debt' has to be given the widest amplitude to mean any liability which is alleged as due from any person by a Bank during the course of any business activity undertaken by the Bank ether in cash or otherwise, whether secured or unsecured, whether payable under a decree or order of any Court or otherwise and legally recoverable on the date of the application. In asserting the question whether any particular claim of any Bank or financial institution would come within the purview of the Tribunal created under the Act, it is imperative that the entire averments made by the plaintiff in the plaint have to be looked into and then find out whether notwithstanding the specially created Tribunal having been constituted, the averments are such that it is possible to hold that the jurisdiction of such tribunal is ousted.

Now, I turn to the aspect of unjust enrichment. It is well settled that the doctrine of unjust enrichment can be invoked to deny benefit to a person who is not otherwise entitled. In case reported in Mahabir Kishore and Others v. State of Madhya Pradesh, : AIR 1990 SC 313 it was held:

The principle of unjust enrichment requires--first, that the defendant has been 'enriched' by the receipt of a 'benefit'; secondly, that his enrichment is 'at the expense of the plaintiff; and thirdly, that the retention the enrichment be unjust. This justifies restitution. Enrichment may take the form of direct advantage to the recipient's wealth such as by the receipt of money or indirect one for instance where inevitable expense has been saved.

Another analysis of the obligation is of quasi-contract. It was said, 'if the defendant be under an obligation from the ties of natural justice to refund, the law implies a debt, and gives this action founded in the equity of the plaintiff's case, as it were, upon a contract (quasi ex contractu) as the Roman law expresses it. As Lord Wright in Fibrosa Spolka v. Fairbairn Lawson, (1943) AC 32 (1942) 2 All ER 122 pointed out 'the obligation is as efficacious as it if were upon a contract. Such remedies are quasi contract or restitution and theory of unjust enrichment has not been closed in English law'.

See the law laid down in M/s Sahakari Khand Udyog Mandal Ltd. v. Commissioner of Central Excise and Customs, : III (2005) SLT 5=AIR 2005 SC 1897.

The pendente lite and future interest granted by the learned DRT @ 21.75% p.a. with monthly rests w.e.f. the date of filing of O.A. No. 507/2000 till the realisation of the whole amount is on the higher side.

In the cases reported in State Bank of India v. Sarathi Textiles & Ors., II (2009) BC 696 (SC) =2008 (3) SCALE 409, C.K. Sasankan v. Dhanalakshmi Bank Ltd., : I (2009) CLT 368 (SC) : I (2011) BC 122 (SC) : II (2009) SLT 449 : 2009 (2) D.R.T.C. 320 (SC) and Sardar Associates and Others v. Punjab & Sind Bank and Others, : VI (2009) SLT 473 : III (2009) BC 705 (SC) : III (2009) CLT 186 (SC) : AIR 2010 SC 218 it was held that it is the discretion of the Court to award the pendente lite and future interest which has to be exercised fairly. Section 19(20) of the DRT Act runs as follows:

19(20). The Tribunal may, after giving the applicant and the defendant an opportunity of being heard, pass such interim or final order, including the order for payment of interest from the date on or before which payment of the amount is found due up to the date of realization or actual payment, on the application as it thinks fit to meet the ends of justice.

No rate of interest under the circumstances can be made a rule of thumb.

I, therefore, reduce the interest from 21.75% p.a. to 15% p.a. simple from the date of filing of the OA till its realisation.

Subject to this modification the appeal stands dismissed. There shall be no order as to costs. It may also be mentioned that the award has been challenged before the Hon'ble High Court. The matter is still pending before the Hon'ble High Court but the Hon'ble High Court has desired that this Court should decide the matter expeditiously. This order shall be subject to the order passed by the Hon'ble High Court.

Copies of this order be furnished to the parties as per law and one copy be sent to the learned DRT forthwith.