Bank Guarantee

Dated: ……..

Mr. X

Managing Director

Bank Asia Limited

Corporate Office

Rangs Bhaban (8th floor)

113-116 Old Airport Road

Dhaka-1215

Dear Sir

RE:     ENCASHMENT OF BANK GUARANTEE

A/C COMPANY 1 LIMITED.

We refer to your letters dated 14.09.2002, our earlier letter dated 14.09.2002 and the copies of the papers/documents subsequently sent to us on 16.09.2002 on the above subject and. We have perused the papers/documents referred to us.

It appears that at the request of COMPANY 1 Limited (the “Seller”) a Performance Guarantee was issued by Bank of Nova Scotia (predecessor of Bank Asia Limited) (the “Bank”) in favour of Summit Daqing Joint Venture (the “Purchaser”) against Counter Guarantee No. 0179 FOG 04 2000 dated 23.12.2000 issued by Canara Bank, New Delhi in favour of the Bank.

We understand that the Purchaser invoked the Performance Guarantee and lodged their claim to the Bank. Subsequently, the Seller filed Suit No. 862 of 2002 in the High Court of Delhi along with an application for injunction being I. A. No. 4062 of 2002 whereupon the High Court of Delhi passed an ad-interim order of injunction. The said order has been served upon the Canara Bank and Summit Daqing Joint Venture in the following term:

“This Court doth order that you, in the meanwhile you, your servants, employees or agents be and the same are hereby restrained from encashing the bank guarantee No. BG-53405 dated 3rd January, 2001 for US$ 7,05,698 and Defendant No. 1 (Conara Bank) is restrained from making the payment.”

In such circumstances our opinion was sought whereupon we gave our opinion vide our earlier letter dated 08.05.2002 that Bank Asia is legally bound to honour the notice of encashment.

Now the matter has referred to us once again to consider following aspects:

a)      Section 44A of the Code of Civil Procedure and the reciprocal arrangement between India and Bangladesh.

b)      In the order the Delhi High Court has mentioned the guarantee number as BG-53405 which is the particulars of the guarantee issued by Nova Scotia Bank (predecessor of Bank Asia Limited) in favour of Summit Daqing Joint Venture.

We have perused the copies of the papers/documents referred to us. The provision of Order XXXIX, Rule 1 and 2 of the Code of Civil Procedure (which is same as in India). Order XXXIX, Rule 1 and 2 of the Code of Civil Procedure empowers a Court to restrain any party to the suit.

Section 44A of the Code of Civil Procedure reads as follows:

44A.    (1)        Where a certified copy of a decree of any of the superior Courts of the United Kingdom or any reciprocating territory has been filed in a District Court, the decree may be executed in Bangladesh as if it had been passed by the District Court.

(2)               Together with the certified copy of the decree shall be filed a certificate from such superior Court stating the extend, if any, to which the decree has been satisfied or adjusted and such certificate shall, for the purpose of proceedings under this section, be conclusive proof of the extent of such satisfaction or adjustment.

(3)               The provisions of section 47 (now omitted) shall as from the filing of the certified copy of the decree apply to the proceedings of a District Court executing a decree under this section, and the District Court shall refuse execution of any such decree, if it is shown to the satisfaction of the Court that the decree falls within any of the exceptions specified in clauses (a) to (f) of section 13.

In view of the aforesaid provisions there cannot be any shred of doubt that the provisions of section 44A have been meant for the purpose of facilitating the execution of foreign judgement and the said provisions have no manner of application in enforcing any order of a foreign Court upon

Further, from the copies of the papers/documents referred to us it appears that –

a)                  Bank Asia Limited (or its predecessor Nova Scotia Bank) has not been impleaded in Suit No. 862 of 2002.

b)                  The ex-parte ad-interim order of injunction has been passed restraining the Conara Bank and Summit Daqing, but no order of injunction has been passed restraining Bank Asia Limited.

With regard to the said factual position we would like to refer to the provision of Order XXXIX, Rule 1 and 2 of the Code of Civil Procedure (which is same as in India). Order XXXIX, Rule 1 and 2 of the Code of Civil Procedure empowers a Court to restrain any party to the suit.

From the copies of the papers/documents referred to us it further appears that –

a)                  In the order of the Court particular/description of the Bank Guarantee has been given incompletely. The name of the issuer has not been mentioned.

b)                  In the order of the Court the Conara Bank has been restrained from making payment (under Bank Guarantee No. BG-53405 dated 03.01.2001) whereas the Conara Bank is not under any obligation to make payment under the said guarantee because the Conara Bank has not issued the said Bank Guarantee. The Conara Bank is under obligation to make payment under the Counter Guarantee No. 0179 FOG 04 2000 dated 23.12.2000 which was issued by it in favour of the Nova Scotia Bank.

With regard to the said factual position we would like to refer to case reported in 1993 CLC 489 where the Indian Court held as follows:

“Where effect of the Court’s order did not involve any doubt, ambiguity or want of precision, penalties, incidental upon contempt proceedings were attracted but not so, when orders of Court were uncertain, wanting in essential details, capable of bona fide misinterpretation or open to debate and argument one way or the other.”

The said decision of Indian Court expressly indicates that where there is uncertainty, want of essential details, etc, the Court’s order is not effective. In the instant Court’s order of Delhi High Court there is sufficient uncertainty, want of essential details, capability of bona fide misinterpretation, openness to debate and argument one way or the other. In such situation that order cannot, in our opinion, be binding upon Bank Asia Limited.

We, therefore, reiterate our earlier opinion that since the order is passed by the competent Court of India under whose jurisdiction Canara Bank is, the restraining order is binding on Canara Bank. But Bank Asia is not within the jurisdiction of the Court in Delhi. So, the order is not binding on Bank Asia. Therefore, Bank Asia is legally bound to honour the notice of encashment.

If you have any query, please do not hesitate to contact the undersigned.

Thanking you

Yours faithfully

For: The Lawyers & Jurists

M.L.Hotel Tower Ltd,

208,Shahid Syed Nazrul Islam Sarani,

Bijoy Nagar, Dhaka-1000.

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