AHMEDABAD: The last-minute intervention by
Gujarat high court has saved
IDBI Bank’s Dubai branch from being attached at the behest of the
Dubai International Financial Centre (DIFC) Court for not being able to pay Rs 60 crore bank guarantee to Riyadh Bank. The HC lifted the stay order by a lower court that had prevented IDBI from making a payment in Dubai, and carry out its obligations both according to agreement and by order of a Dubai court.
IDBI Bank was caught in between conflicting orders upon it. A Dubai court had ordered it to pay money due to Riyadh Bank, and in case of default had threatened attachment, but an Indian court had stayed it from making the payment. The commercial court in Ahmedabad had refused to remove its stay granted in 2014, and in a bid to prevent the attachment of its Dubai branch and protect its reputation in the international market, IDBI came before the high court, said IDBI’s advocate Akshat Khare. According to case details, Jaihind Projects Ltd (JPL) had entered into a joint venture in 2009 with Saudi Arabia’s Arabian Pipeline Project Company (APPC) for the Al Taif AL Baha Water Transmission System Project of Saline Water Conversion Corporation of Riyadh in Saudi Arabia.
IDBI had granted financial assistance of Rs 187.55 crore to JPL consortium before this. At the request of JPL, IDBI issued performance bank guarantee of US $71,49,00170 as a counter guarantee in favour of Riyadh Bank, valid up to September 2014. Riyadh Bank later issued a bank guarantee to APCC.
Following a dispute between two companies, APCC invoked the bank guarantee of Riyadh Bank and withdrew Rs 60 crore. This led Riyadh Bank to invoke the counter bank guarantee of IDBI.
Meanwhile, JPL approached a civil court in Ahmedabad and filed a suit saying IDBI should not pay Rs 60 crore to Riyadh Bank. The court stayed IDBI from paying Riyadh Bank. Riyadh Bank approached Saudi Arabian Monitoring Agency (SAMA), which permits foreign banks to furnish bank guarantee in Saudi Arabia. IDBI expressed helplessness in making payment due to a stay by the Indian court. SAMA wrote to the Reserve Bank of India, which further directed IDBI to honour the counter bank guarantee. The pressure from monitoring agencies made IDBI approach the local court requesting it to lift the stay on payment.
Meanwhile, Riyadh Bank sought enforcement of SAMA orders by approaching the DIFC Court, which gave a 14-day deadline to IDBI for the payment, and in case of default ordered attachment of IDBI’s Dubai branch. IDBI once again unsuccessfully requested the lower court to remove the stay. Hence the issue came to the HC.
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