Urgent interim relief is a crucial element that must be present at the time of

filing suit: Madras High Court uplifts Section 12A of the Commercial Courts
Act.

COURT: The High Court of Judicature at Madras.

CITATION: C.S. (Comm. Div.) No. 216/2022.

CASE TITLE: Arvind Gupta v. Punjab National Bank.

DATE OF ORDER: 10th November 2022.

JUDGE(S): Mr. Justice M. Sundar.

PARTIES: Petitioner: Arvind Gupta.

       Respondent: Punjab National Bank and another.

SUBJECT:

In the present case, the Court is dealing with the matter of urgent interim relief that should be
provided at the time of filing a suit under Section 12 A of the Commercial Courts Act. This was
done to bypass mandatory pre-institution mediation that must exist at the time of institution of
the suit.
IMPORTANT PROVISIONS:

 The Commercial Courts Act, 2015

 Section 12A- Pre-Institution Mediation and Settlement.

BRIEF FACTS:

 In the second defendant company Bhadreshwar Vidyut Pvt. Ltd. [hereinafter to be

referred as ‘BVPL’], the plaintiff was a nominee shareholder.
 BVPL was earlier called by the name of OPGS Power Gujarat Pvt. Ltd. It was
incorporated during the financial year 2007-2008 for the purpose to act as a ‘SPV’
(Special Purpose Vehicle) qua Electricity Rules, 2005 under Electricity Act, 2003. Their
objective was to own, manage and operate captive Power Generating Plants and that SPV
shall not carry out any other activities.
 The plaintiff was appointed as Director on the Board of BVPL on 4 May 2007. The
BVPL envisioned on setting up a power plant in the State of Gujarat. The plaintiff
initially held 9800 equity shares. Thereafter, he divested his shareholding in 2008 and
ultimately resigned on 4 February 2012.
 BVPL intended to set up a coal based group captive thermal Power Station in the State of
Gujarat. This project was undertaken with the help of term loans by a consortium of
lenders.
 PNB sanctioned a loan which was in consultation with the Conditions of Sanction dated
20 January 2008.
 Initially consortium of 10 Banks sanctioned a term loan of Rs. 950 Crores and additional
term loan of Rs. 218 Crores which aggregated to Rs. 1168 Crores. PNB had sanctioned
Rs. 150 Crores.
 A new Consortium of leaders were formed in 2013 and the dues of 10 Banks were
subsumed by the loans advanced by the new consortium.
  Under the terms of the new consortium, the PNB sanctioned a further term loan by a
notice issued on 19 April 2013.
 Later on, the PNB issued some amendments to the terms of the above mentioned sanction
on 22 October 2013 whereby they modified the security for the term loans which were
provided to the Company. Therefore, it can be said that the epicenter of this lis is a
Personal Guarantee Agreement captioned ‘GUARANTEE AGREEMENT dated 21 June
2014. Here PNB stated that the plaintiff is the guarantor and now the exposure is Rs.
440.49 Crores.
 The above stated agreement along with the signature of the plaintiff has been filed under
Document No. 13 which is undisputed.
 It is contended that there can be no guarantee qua the consortium and the guarantee
cannot be enforced by giving amendments to the terms of the sanction. This transaction
does not provide for a personal guarantee.
 This captioned suit has been filed on 14 October 2022 with a prayer to declare the above
stated Deed of Guarantee as null and void and also for the permanent injunction
restraining PNB in any manner relying on this Deed of Guarantee for the transactions
between PNB and BVPL.

QUESTIONS RAISED

 Whether Section 12A is mandatory or directory owing to different views taken by

different Commercial Divisions of different High Courts?

ARGUMENTS ADVANCED BY THE PLAINTIFF

 The plaintiff demonstrated the ‘’urgent relief claim’ phenomenon by referring to Plaint
Document Nos. 42 and 43 dated 9 December 2021 and 22 December 2021. These
documents include the communications from PNB to plaintiff and plaintiff’s response to
the same.
 Plaint Document No. 42 clearly stated that PNB invoked the personal guarantee on 21
June 2014 qua an outstanding of little over Rs. 440.49 Crores. The plaintiff responded
 with an e-mail stating that the PNB did not discussed the matter with the him and
therefore, it is an impulsive unilateral step. The plaintiff even requested PNB to provide
all documents relating to the personal guarantee agreement.
 The Commercial Division in Plaint Document No. 43 has mentioned one articulation that
the plaintiff by his own volition has stated that PNB should have shown the courtesy of
‘discussing’ considering the long standing cordial association. In this present view, the
Commercial Division and the plaintiff has suggested mediation.
 Proceedings were initiated in ‘Debts Recovery Tribunal-I, Chennai’ (hereinafter to be
referred as ‘DRT’) by State Bank of India and Syndicate Bank. The Commercial Division
informed that the proceedings were done before ‘National Company Law Tribunal’
(hereinafter to be referred to as ‘NCLT’) but no documents were produced.
 Learned counsel referred to Chandra Kishore Chaurasia v. R.A. Perfumery Works
Private Limited to explain the compliance of Section 12A of CCA.
 The learned counsel claimed that the institution of mediation would create an irreversible
situation. There was also no explanation as to why was the plaintiff prevented from
invoking Section 12 A after the e-mail received on 22 December 2021.
 Henceforth, the petitioner’s council submitted that the invocation of personal guarantee
along with the exposure was certainly unfair ground in urgency at this distant point of
time.

ARGUMENTS ADVANCED BY THE DEFENDANT

 The plaintiff’s reply (dated 22 December 2021) to the communication from PNB (dated
9 December 2021) included all documents such as CBIL notification but those were only
consequences.
 The Commercial Division called for records and summoned the first defendant on 26
December 2022 along with the Manager of the first defendant Bank.
ANALYSIS BY THE COURT

 The Commercial Division deems it appropriate to preserve the rights of the plaintiff with a
similar or a same suit if the need arises after exhausting pre-institution mediation as per the
Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018 read with notification
authorizing the State and District Authorities under the Legal Services Authorities Act, 1987 as
the authorities under Section 12A of the Commercial Courts Act, 2015, both dated 3 July 2018.
 The plaintiff by his own volition in his reply to PNB vide Document No. 43 dated 22 December
2021 has said that basic courtesy of discussing such a serious matter considering the long cordial
association should have been extended.
 The Court observed that the observations in this judgment /order will neither serve as an impetus
nor be an impediment for either of the parties in collateral proceedings. Hence, it rejected the suit
filed by the plaintiff.

CONCLUSION

The Supreme Court has rightly observed the lack of elements in Section 12A that needed to be
addressed. The mediation attempt should not be diverted by promoting interim relief. According
to my opinion the Courts can use Section 89 of the Code of Civil Procedure, 1908 and refer such
cases to mediation after the urgent interim application is decided.