A division Bench of Justice MR Shah and CT Ravikumar of the Supreme Court recently stayed the proceedings against Indian Overseas Bank in the Court of  New York for recovery of an amount of USD 1,238,288/-.

Background of the Case:-

The Indian Overseas Bank has filed one Special Leave Petition against the order of the High Court of Gujarat 13/09/2021 which allowed the First Appeal filed by one Mashreq Bank, New York Branch, 17 state st. New York United States of America and rejected Cross Objections filed by IOB.

The High Court permitted Mashreq Bank to proceed against the Petitioner before the Supreme Court of New York in a complaint filed for recovery of an amount of USD 1,238,288 together with interest, attorney’s fees and other cost of collection on the ground that IOB refused reimbursement of the Letter of Credit bearing no. 016960119000032 dated 26/12/2019 without appreciating that the IOB was restrained by an ex-parte ad interim Order dated 27/01/2020 passed by Single Judge in a petition filed u/s Section 9 of the Arbitration and Conciliation Act by the Respondent no. 2 from making payment under the said Letter of Credit.

Mashreq Bank had filed an application seeking impleadment as party respondent in the said Arbitration Petition No. 9 of 2020 pending before the High Court of Gujarat which came to be allowed and had thereafter also filed an application for the vacation and modification/clarification of the interim order dated 27/01/2020. However, the said application for vacation of stay was rejected by the ld. Single Judge vide order dated 25/09/2020. Despite this, the Respondent No. 1 initiated the proceedings before the Supreme Court of New York misrepresenting that it has obtained an order from the Hon’ble High Court allowing the Respondent No. 1 to proceed with litigation against the Petitioner.

It was submitted by ASG Aishwarya Bhai appearing for the IOB that the purpose of initiating proceedings against IOB in the Supreme Court of New York was to frustrate the proceedings pending before the Hon’ble 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 Hon’ble High Court of Gujarat. If the Petitioner satisfies the claims raised in the complaint before the Supreme Court of New York, the Petitioner would be in contempt of the Hon’ble High Court of Gujarat.

It was stated in the petition that the IOB is a public sector Scheduled Bank and if it is faced with such vexatious litigations abroad, it would ultimately lead to loss of public funds to satisfy the haste of a foreign bank i.e., the Respondent No. 1. On one hand Mashreq Bank 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 the Petitioner from releasing the payment has been dismissed.

Resultantly, the Petitioner herein has been put in a precarious situation where it has to defend the complaint in Supreme Court of New York and at the same time also has to comply with the order passed by the Gujarat High Court restraining the Petitioner from making any payment under the Letter of Credit.

It is most respectfully submitted that the settled principle of law is that the actus curiae neminem gravabit—‘act of the court shall not harm anybody’. Having formed the view that the ld. Single Judge 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 Ld. Single Judge.

The SLP was filed by Mayuri Raghuvanshi, AOR and argued by Ms. Aishwarya Bhati, ASG.

Case Details:-

SLP (C) No. 1965-1966/2022
INDIAN OVERSEAS BANK Petitioner(s)
 VERSUS
MASHREQ BANK PSC & ORS. Respondent(s)

click here to read the complete order

Appearance of the Advocates:-

For Petitioner(s) 
Ms. Aishwarya Bhati, Sr. Adv.
Ms. Mayuri Raghuvanshi, AOR
Mr. Vyom Raghuvanshi, Adv.
Ms. Akanksha Rathore, Adv.

For Respondent(s) 
Mr. P. S. Sudheer, AOR

Mr. Nakul Dewan, Sr. Adv.
Mr. Keith Varghese, Adv.
Mr. Rohan Naik, Adv.
Ms. Rashi Bansal, AOR
Mrs. Vanita Bhargava, Adv.
Mr. Ajay Bhargava, Adv.
Mr. Arvind Ray, Adv.
Mr. Karan Gupta, Adv.
Ms. Bhawna Sharma, Adv.
M/s. Khaitan & Co., AOR