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

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

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

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

The court heard the parties in light of Section 12A of the Commercial Courts Act. 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. Looking into the communications between the parties, the court noted that there was a possibility of mediation and nothing had stopped the plaintiff from calling the bank to participate in mediation.

The court also noted 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.

One other parameters is that a high standard is required to establish requirement of prompt action urgency and the plaintiff, in the light of narrative thus far, certainly does not meet this high standard. 

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

Thus, noting that the plaintiff had failed to fulfill the parameters for avoiding pre-institution mediation, the court deemed it fit to reject the application for interim relief made by the plaintiff. 

At the same time, the court preserved the right of the plaintiff to approach the court with a similar suit after exhausting the pre-institution mediation

 Case Title: Arvind Gupta v Punjab National Bank and another

Citation: 2022 LiveLaw (Mad) 511

Case No: C.S. (Comm.Div.) No. 216 of 2022 & O.A.No.666 of 2022