The opinion of the court was delivered by: Cedarbaum, District Judge.
Plaintiffs sue for breach of the terms of bonds purchased from
defendant State Bank of India ("SBI"). SBI moves to dismiss the
complaint on the ground of forum non conveniens. For the reasons
that follow, the motion is denied.
Plaintiffs Shrikumar Poddar, Mayurika Poddar, Vaishnava Center
for Enlightenment, Inc. and India Foundation, Inc. seek damages
for breach of contract and unjust enrichment stemming from SBI's
alleged failure to deliver payment of the principal amount of
certain bonds on the due date.
The bonds at issue are Series II India Development Bonds
("IDBs"). SBI issued the IDBs in accordance with The Remittances
of Foreign Exchange and Investment in Foreign Exchange Bonds
(Immunities and Exemptions) Act, 1991 (the "Act"). The Act was
designed to attract foreign currency to the Indian economy. It
encouraged investment in foreign exchange bonds by providing
purchasers with certain tax benefits in India. Only individuals
of Indian origin not residing in India and certain overseas
corporations controlled by such persons could purchase IDBs. For
purposes of the IDBs, persons of Indian origin were persons who
at any time had held an Indian passport or who had a parent or
grandparent who was at any time a citizen of India.
Plaintiff Shrikumar Poddar purchased IDBs in the face amount of
$100,000 in his individual capacity, $100,000 in his capacity as
plan administrator of the ESS Employees Profit Sharing Trust, and
$75,000 in his capacity as trustee of the Mayurika Poddar family
trust. (Cmplt. ¶ 23.) Plaintiff Mayurika Poddar purchased IDBs in
the face amount of $100,000 in her individual capacity and
$75,000 in her capacity as trustee of the Shrikumar Poddar Family
Trust. (Cmplt. ¶ 24.) Plaintiff Vaishnava Center for
Enlightenment, Inc. purchased IDBs in the face amount of
$100,000. (Cmplt. ¶ 25.) Plaintiff India Foundation, Inc.
purchased IDBs in the face amount of $100,000. (Cmplt. ¶ 26.)
Each of the named plaintiffs purchased the IDBs by submitting an
application and remitting funds to the SBI branch in New York
City. Plaintiffs have characterized this action as a class action
on behalf of all bondholders similarly situated, but a class has
not yet been certified.
The IDBs matured on February 15, 1997. The Terms of Offer of
the IDBs provided that "[t]he principal amount of the IDBs and
the interest earned thereon . . . are payable in U.S. Dollars on
expiry of five years from the date of allotment." To redeem the
IDBs, holders were required to present the IDBs with
"instructions regarding disposal of the proceeds to the Issuing
Office, the State Bank of India, NRI Branch . . . Bombay."
Plaintiffs allege that they complied with all of the redemption
requirements but did not receive payment on February 15, 1997 as,
they contend, the terms of the IDBs required. The complaint does
not state when the named plaintiffs actually received payment,
and the named plaintiffs do not specify their damages.
The Terms of Offer of the IDBs state that "[t]he Courts in
India and the United States of America only shall have
jurisdiction in respect of all matters of disputes about the
IDBs."*fn1 The Terms of Offer were not negotiated by plaintiffs.
Plaintiffs accepted the Terms of Offer as presented by defendant
by purchasing IDBs.
Defendant must make the difficult showing that enforcement of
the forum selection clause would be "unreasonable or unjust" or
that the clause was the product of "fraud or overreaching" to
avoid the enforcement of the forum selection clause. M/S Bremen
v. Zapata Off-Shore Co., 407 U.S. 1, 15, 92 S.Ct. 1907, 1916, 32
L.Ed.2d 513, 523 (1972). The difficulty of making such a showing
is particularly great in this case because the defendant drafted
the language consenting to jurisdiction in the courts of the
United States. Plaintiffs are contractually bound to bring any
action relating to the IDBs in a United States or Indian court.
Plaintiffs have complied with that obligation. Since SBI has a
branch in New York, SBI drafted the clause at issue, and SBI
solicited the purchase of IDBs in this country, enforcing the
forum selection clause in this case is not so "unreasonable or
unjust" as to justify setting it aside.
Defendant argues that the forum selection clause is
"permissive" rather than "mandatory" and that, therefore, the
M/S Bremen standard does not apply. Blanco v. Banco Indus. de
Venezuela, S.A., 997 F.2d 974, 979 (2d Cir. 1993). But an
examination of Blanco shows that defendant's characterization
of the forum selection clause in this case is erroneous. In
Blanco, the forum selection clause stated that an action "may
be brought" in one of four listed jurisdictions. The Court of
Appeals read the word "may" as permissive language. Indeed, the
Second Circuit emphasized that a forum selection clause
identifying a number of permissible fora could be mandatory if
the words used were words of command. Blanco, 997 F.2d at 979
("We reach this conclusion solely because of the nonmandatory
words the parties chose to express their agreement, and not . . .
because the permissive clause contemplates more than one
This forum selection clause, in contrast, limits available fora
to courts in the United States and India only. This clause uses
the word "shall," thereby consenting to jurisdiction in the
courts of the United States and India, and uses the word "only,"
thereby making those courts the exclusive fora that may decide
disputes arising from the IDBs. The combination of these words
makes the clause mandatory. The plaintiffs have chosen a forum in
compliance with a contractual obligation that the defendant
drafted. The defendant will not now be heard to complain that the
United States is an inconvenient forum.
Even if normal forum non conveniens analysis applied in this
case, defendant has not shown that the balance of both public and
private interests weighs so strongly in its favor that
plaintiffs' selection of a forum ...