Bank Guarantees: a new art of payment by the Art of Living Foundation

Reading between the lines

What exactly does "We have no objection to pay the penalty if at all any damage has been done to the floodplains" mean?

A simple reading of the sentence would indicate that the client of Akshama Nath, the Art of Living Foundation, has "no objection" in paying "the penalty" "IF" and "AT ALL" "ANY" damage has been done to the floodplains. The learned lawyer creates ample scope to claim in future hearings that there actually has been no damage at all. This is quite audacious of the lawyer, particularly in light of para 7 of the order that the NGT pronounced on 9 March 2016. Part of the paragraph reads inter alia as below:

"It is the consistent view of the Experts and is sufficiently evident from the documents placed on record that the flood plains have been drastically tampered with while destroying the natural flow of the river, reeds, grasses, natural vegetation on the river bed.  It has further disturbed the aquatic life of the river and destroyed water bodies and wet lands on the flood plains, which were in existence, as noticed in our judgment in the case of Manoj Misra vs. Union of India and Ors., OA No.6 of 2012 decided on 13th January, 2015.  Furthermore, they have constructed ramps, roads, compaction of earth, pontoon bridges and other semi-permanent or temporary structures etc. even without the permission of the concerned authorities including Ministry of Water Resources."

"For the damage caused to the environment, ecology, biodiversity and aquatic life of the river, the Foundation should be held liable for its restoration in all respects. In that regard and in exercise of our powers under Sections 15 and 17 of the NGT Act, 2010 we impose an Environmental compensation, initially of Rs. 5 crores. This amount would be paid by the Foundation prior to the commencement of the event.  This amount would be adjusted towards the final compensation determined to be paid by the Foundation for restoration work."

"The Foundation shall, by tomorrow, file an undertaking before the Tribunal that it would, within two weeks from date of demand by DDA, pay the balance amount for restoration, as directed by the Tribunal."

It should be clear from a plain reading of the above that the question of AoLF having "no objection" to paying is completely irrelevant as the NGT has unambiguously asked it to pay up. The other phrase "if at all any damage has been done" is equally frivolous in view of the NGT's finding that "It is the consistent view of the Experts and is sufficiently evident from the documents placed on record that the flood plains have been drastically tampered with while destroying the natural flow of the river, reeds, grasses, natural vegetation on the river bed.  It has further disturbed the aquatic life of the river and destroyed water bodies and wet lands on the flood plains, which were in existence."

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Under normal circumstances, one would have wondered why a 'learned' counsel would make such obviously incorrect statements in the Tribunal but the current circumstances, particularly in this case, are far from normal, so the reason is not hard to guess. It seems that the lawyer is preparing the ground to say at a later stage that there has been no damage at all and therefore there will be objections to paying anything at all.

An amazing commercial innovation

The other sentence of interest is "We have just informed the NGT that we may like to pay in the form of a bank guarantee than cash in this case." And the key phrase is the one that has been italicised. This must qualify as one of the greatest innovations in the history of the commercial world. And the innovation is the invention of a new, hitherto unknown form of payment.

So far, naïve folks have been under the impression that payment can only be made in cash, by cheque, or in kind. "Payment in kind" has so far meant giving a material object or a benefit or a service in place of money. The new form of payment, invented by the AoLF and announced through its counsel, is a "bank guarantee".

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A "bank guarantee" is a guarantee given by a bank. And a guarantee, the dictionary tells us, is

"1. a promise or assurance, especially one in writing,that something is of specified quality, content, benefit, etc., or that it will perform satisfactorily for a given length of time;

2. an assurance that another's obligation will be fulfilled, or something presented as such security, guarantee;

3. something that assures a particular outcome or condition."

Here is the crux of the invention: so far, a bank guarantee used to be a guarantee or a promise that payment would be made, but now the guarantee becomes the payment itself.

Since the "environmental compensation" of Rs 5 crores was supposed to be "initial" and was to "be adjusted towards the final compensation determined to be paid by the Foundation for restoration work," it is assumed that now the cost of restoration will be "taken out" of the bank guarantee.

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Whether the amount guaranteed in the bank guarantee will progressively come down as the restoration moves forward, and a part of the bank guarantee will be transferred to the agencies actually doing the physical work of restoration, and they will, in turn, transfer part of it to their workers and suppliers, remains to be seen.

Maybe the AoL will keep us informed of further operationalisation of this new form of payment through their lawyer as it evolves!

***

Addendum on 4 May, 2016

According to AoLF:

The National Green Tribunal had made it amply clear in its order of March 11, 2016 that the sum of Rs 5 crores being imposed is not a penalty but an environmental compensation. Please ​note the difference between the two as both are governed by different acts.

The Art of Living had put in an application seeking to assist the court in determining whether and to what extent there has been any environmental impact of our event, particularly since the directions issued by the Tribunal on March 9 and 11, 2016 were strictly complied with prior to, during and after the event.

The Art of Living asked for a just and reasonable opportunity to arrive at a fair conclusion that was based on detailed scientific assessment. We also sought perusal of the Principal committee's reports on which the NGTs order was based. The Principal Committee's report was merely based on a visual examination of the site. We are asking for a fair trial by giving all concerned parties an opportunity to respond with credible scientific and legal evidence.

Therefore considering that the environmental compensation has to be paid based on the impact which is YET to be assessed by proper scientific methodology and parameters laid by the Tribunal itself, The Art of Living has requested for a modification to the modality of the payment by allowing submission of security through a Bank Guarantee. As the impact and the compensation are still to be decided.

Just for the writers reference a bank guarantee is an "undertaking given by the bank on behalf of an applicant (in this case The Art of Living) or its customer" to make a payment in case the applicant defaults. So hope you can see that in fact we are offering a very secure option for payment.

No where has it been suggested or said by the foundation lawyers that "We have no objection to pay penalty if at all any damage has been done to the floodplains. We have just informed the NGT that we may like to pay in the form of a bank guarantee than cash in this case"

This is irresponsibly misquoted and twisted, the article seeks to malign the foundation and create media pressure on the Tribunal.

The March 9 order has to be read fully which says that it's an 'interim order' based on the NGT's Principal Committee reports which was done merely on a visual observation of the ground (with no sampling, or scientific assessment).

Kindly note that the Tribunal wrote in its March 9 order that it's the consistent "VIEW" of the experts (the Principal Committee) and not a "final finding or decision" of the experts. The final finding has to be based on credible scientific and legal evidence.

Please understand that the assessment of the alleged impact is YET to be determined and only then will the restoration and cost thereof be defined and not vice versa.

The views expressed by the writer are in absolute poor taste distorting the facts with no understanding of the essence of the Tribunal's order or the basis of the request made by the foundation.

We would suggest that the writer first do his homework right, understand the subject he wants to write about before being reckless with words and misuse the power of the pen.

The author adds:

The quote which is said to be "irresponsibly misquoted and twisted" has been taken verbatim from a report in a national daily, reference to which is also given the article. The rest of the "response" is full of legalese and verbosity, and needs no comment.

(The views expressed here are personal and do not necessarily reflect those of the organisation.)

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