The Supreme Court has stayed the proceedings against Indian Overseas Bank in the Supreme Court of New York for recovery of 1,238,288 dollars.
The Bench of Justice M.R. Shah and Justice C.T. Ravi Kumar issued notice to the respondents on a Special Leave Petition (SLP) filed by Advocate-on-Record (AOR) Mayuri Raghuvanshi and argued by Additional Solicitor General (ASG) Aishwarya Bhati.
The SLP sought to impugn the final judgment and order dated September 13, 2021 passed by the High Court of Gujarat at Ahmedabad allowing the First Appeal No 319/2021 filed by Mashreq Bank, New York Branch and rejecting the Cross Objections No. 24 of 2021 filed by the petitioner.
Taking into consideration the observations made by the High Court in para 76 of the order that the application under Section 9 being Commercial Arbitration Petition No. 9 of 2020 be placed before the concerned court at the earliest, the Apex Court directed the High Court to decide and dispose of the Commercial Arbitration Petition No 9 of 2020 within six weeks.
It further issued notice to Respondent No 3, returnable on the next date of hearing, which was fixed at May 8, 2023.
The Division Bench of the High Court had permitted Respondent No. 1 to proceed against the petitioner before the Supreme Court of New York in a complaint filed for recovery of USD 1,238,288 together with interest, attorney’s fees and other cost of collection on the ground that the petitioner had refused reimbursement of the Letter of Credit of December 26, 2019 without appreciating that the petitioner was restrained by an ex-parte ad interim order dated January 27, 2020 passed by the Single-Judge Bench in a petition filed under Section 9 of the Arbitration and Conciliation Act by the Respondent no. 2 from making payment under the said Letter of Credit.
The SLP contended that the purpose of initiating proceedings against the petitioner in the Supreme Court of New York was to frustrate the proceedings pending before the High Court as the relief claimed in the complaint filed before the Supreme Court of New York was diametrically opposite to the relief claimed by the Respondent No. 2 in the proceedings pending before the High Court of Gujarat.
The petitioner said that if it satisfied the claims raised in the complaint before the Supreme Court of New York, he would be in contempt of the Gujarat High Court.
The petitioner further said that it was a public sector Scheduled Bank and if it was faced with such vexatious litigations abroad, it would ultimately lead to loss of public funds to satisfy the haste of a foreign bank, the Respondent No. 1.
The plea said that on one hand, the Respondent no. 1 has been permitted to proceed against the petitioner before the Supreme Court of New York, on the other hand, the Cross objections filed by the petitioner seeking vacation of the interim stay restraining it from releasing the payment has been dismissed.
The petitioner, therefore, has been put in a precarious situation where it has to defend the complaint in the Supreme Court of New York and at the same time, also has to comply with the order passed by the Gujarat High Court restraining him from making any payment under the Letter of Credit.
The petitioner said that the Single-Judge Bench in a proceeding under Section 9 could not have granted any relief affecting the independent right of a third party. The Division Bench erred in leaving the petitioner to face proceedings before the Supreme Court of New York for having complied with the order of the Single-Judge Bench, he added.
Advocate-on-Record (AOR) Rashi Bansal and Senior Advocate Nakul Dewan appeared for the respondents.
(Case title: Indian Overseas Bank vs Mashreq Bank PSC and Ors)