Madras High Court: Urgent Interim Relief Must Exist At Time Of Filing Suit, Cannot Be Ex-Post Facto Jurisdictional Fact, S.12A Commercial Courts Act

The Madras High Court in the case Arvind Gupta v Punjab National Bank and another observed and has held that circumstances to seek “urgent interim relief” under Section 12A of the Commercial Courts Act, 2015 and to bypass mandatory pre-institution mediation must exist at the time of institution of the suit.

The bench headed by Justice M Sundar observed while dismissing an application while dismissing an application, wherein seeking an injunction against the invocation of a bank guarantee.

In the present case, as Hon’ble Supreme Court has made it clear that Section 12A is mandatory, it is being in the nature of a jurisdictional fact. Therefore, the jurisdictional fact should precede the suit and there can be no ex post facto jurisdictional fact and the plaintiff in the plea cannot be heard to contend that this Commercial Division should be looking at the matter as it stands. The test being as it stood on the date of institution of suit i.e., 17.10.2022 in this case.

The plea was heard by the court of one Arvind Gupta, who used to being the director of Bhadreshwar Vidyut Pvt Ltd. and during this term had been entered into a Personal Guarantee Agreement with Punjab National Bank to the tune of 440.49 crores.

It has been contended by the Gupta that the guarantee could not be enforced as there were amendments to the terms of the sanction. Further, he claimed that the transaction did not provide a personal guarantee and thus sought to declare the Personal Guarantee Agreement as null and void. It has also been sought by him for a permanent injunction restraining the bank from relying upon the guarantee agreement.

It was observed that the court heard the parties in light of Section 12A of the Commercial Courts Act, 2015. However, the court looked into whether the case of the plaintiff fulfilled the parameters laid down by the court in its earlier decision of K Varathan. It was noted by the court while looking into the communications between the parties that there being a possibility of mediation and nothing had stopped the plaintiff from calling the bank to participate in mediation.

It has also been noted by the court that there was nothing to show that exhausting the remedy of pre-institution mediation would create an irreversible situation that would require any prompt action.

The court observed that one other parameter is that a high standard being required to establish requirement of prompt action urgency and the plaintiff being in the light of narrative thus far, certainly does not meeting this high standard. 

Further, the court observed that the plaintiff drew attention to the proceedings before NCLT to buttress his point of imminent apprehended wrong or injury, it has been noted by the court that the same was of no relevance as the order of NCLT was made after the institution of the suit. 

It was also noted that the plaintiff had failed to fulfil the parameters for avoiding pre-institution mediation.

Accordingly, the court rejected the application for interim relief made by the plaintiff, the court also preserved the right of the plaintiff to approach the court with a similar suit after exhausting the pre-institution mediation.

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