Madras High Court
Getit Informdiary Ltd. vs Principal Gen. Man. ... on 17 May, 2004
Equivalent citations: AIR2004MAD413, AIR 2004 MADRAS 413, (2004) 3 ARBILR 389
Author: V. Kanagaraj
Bench: V. Kanagaraj
ORDER V. Kanagaraj, J.
1. The above application has been filed praying to grant an injunction restraining the respondent from invoking the (1) Bank Guarantee No. 27/2000 dated 26-12-2000. (2) Bank Guarantee No. 15/1998-99, dated 4-12-1998, (3) Bank Guarantee No. 64/2000, dated 24-1-2000 and (4) Bank Guarantee No. 64/2001, dated 7-1-2002, pending adjudication of the dispute by arbitration.
2. In the affidavit filed in support of the above application, the applicant would submit that the respondent issued an advertisement inviting bids for printing and publication of Telephone Directories with yellow pages for the Coimbatore Telecom District and pursuant to the tenders submitted by various parties, the contract was awarded to the applicant herein: that accordingly, an agreement was entered into on 3-8-1998 between the applicant (which was then known as M&N Publications Limited) and . the respondent: that the contract was for compiling, printing, binding and supplying copies of Coimbatore Telecom District Main Telephone Directory, Numerical Supplementary Directory and Billing information for a total 5 consecutive annual issues commencing with the 1998 issue; that as per Clause 4 of the agreement, the number of copies was as follows :
Year Requirement 1998 2.4 Plus 20% lakhs 1999 2.8 Plus 20% lakhs 2000 3.3 Plus 20% lakhs 2001 3.8 Plus 20% lakhs 2002 4.5 Plus 20% lakhs
3. The applicant would further submit that Clause 9 of the agreement stated that normally a supplementary Issue will be released six months after the release of the Main Annual Issue and will include additions, deletions and changes which took place after the release of the Annual Issue and other matters of public interest as required by the Principal General Manager, Telecom; that the first and second issues of the Directories were brought out after the contract was signed and in accordance with the terms of the agreement; that thereafter, it was found that the price of raw material namely paper and printing charges, has increased by over 60% and therefore there was no option but to request the respondent to modify the terms and conditions of the con-tract so that the contract could be successfully executed; that subsequent representations were also made on 15-2-2001 and on various other dates; that finally, a meeting was held between the representatives of the respondent and the applicant on 8-3-2001 and in so far as it is relevant to this petition, it was decided as follows :
"The 2001 Issue will be a Supplementary Issue in 2 volumes with the I Volume containing new connections and change in numbers list, Complete Business Listings and Information pages and the II Volume will be containing the yellow pages.
But for the new phone connections, the Complete Directory in Volume-I should be supplied with complete date.
In the year 2002, the complete directory as per the format 2000 Issue and in the year 2003 as per the format 2001 Issue has to be printed and supplied".
Thus, it was decided that for every alternate year, it is enough if the Applicant prints a supplementary Directory; that the Minutes were drawn up in respect of this meeting and signed by 6 officers of the respondent; that these decisions were also confirmed by a supplementary letter dated 2-4-2001: that thereafter the respondents went back on their decision and refused to accept the supplementary directory.
4. The applicant would further submit that on 17-6-2003, the applicant made a request that the various disputes between the applicant and the respondent should be resolved by arbitration: that though over 7 months have passed, no Arbitrator has been appointed; that in the circumstances, the applicant has come forward to file O. P. No. .145 of 2003 under Section 11(4) of the Arbitration and Conciliation Act. 1996; that in the meanwhile, on the basis of the contract, the petitioner has furnished Bank Guarantees for Rs. 63 lakhs through Indian Bank M. G. Road, Bangalore; that 4 Bank Guarantees have been furnished and the details are given below :--
-----------------------------------------------------------------------------------
B. G. No. Amount Validity upto In favour of
-----------------------------------------------------------------------------------
27/2000 3,00,000 22-01-2004 Coimbatore Telecoms 15/1998-99 20,00,00 30-06-2003 Coimbatore Telecoms 06/2000 37,00,000 22-01-2004 Coimbatore Telecoms 64/2001 3,00,000 22-01-2004 Coimbatore Telecoms
-----------------------------------------------------------------------------------
5. The applicant would further submit that the respondent has already issued a letter on 10-3-2003 calling upon the applicant to explain why action cannot be taken against him for non supply of Directory for the year 2001-2002 as per the tender conditions, further directing to give reply to the notice within 30 days of receipt of the said communication.
6. The applicant would further submit that pursuant to the said letter, the respondent is contemplating action against the applicant and will take steps to encash the Bank Guarantees; that if the Bank Guarantees are invoked, the applicant will be put to extreme hardship and prejudice, since an amount of Rs, 63,00 lakhs will immediately be paid to the Bank for the purpose of the guarantees.
7. The applicant would further submit that in fact he sought for the appointment of an Arbitrator and it is only because of the respondent that no arbitrator has been appointed till date. On such arverments, the applicant would pray for the relief extracted supra.
8. During arguments, learned senior Counsel appearing on behalf of the applicant citing various passages from the typed set of papers, right from page 1 to 83, would state that on 18-3-2003, an Arbitrator has been appointed; that under Section 9 an interim relief has been sought for; that the prayer is only to the effect of interim injunction that Section 20 CPC, suits to be instituted where defendants resist or cause of action arises are enumerated, that in Section 42, the powers of Court in executing the decrees are mentioned; under Section 11 of the Arbitration and Conciliation Act, no code has been sought for; that person of any nationality may be an Arbitrator unless otherwise agreed by the parties; learned counsel would also cite the decision reported in 2001-(AR4)-GJX-298-DEL (The National Thermal Power Corporation v. V. R. S. Avtar Singh & Co.) wherein the application under Section 34 of the Arbitration and Conciliation Act could be filed; pertaining to the facts and circumstances of the case, it has been held.
"The Arbitrator has since submitted the award and the applicant National Thermal Power Corporation has submitted the application under Section 34 of the Act against, the award passed by the Arbitrator dated 7th April, 2000. To this, the objection raised on behalf of the respondent has been that since the Arbitrator had been appointed by the Supreme Court of India, the present application under Section 34 of the Act could only be filed in that Court and not in this Court."
On such arguments, learned Senior Counsel would pray to allow the above application.
9. In reply, learned counsel appearing on behalf of the respondent would argue to the effect that the entire cause of action arose outside Chennai; that application has been filed Section 11(6) IPC by virtue of Section 42 CPC; that it is open to the other side to demonstrate that application of this sort could be filed as it has been Section 4(e) of the Arbitration and conciliation Act defines "Court" that Section 42 of the Arbitration and Conciliation Act also defines "jurisdiction of the Court". Learned counsel would then submit a number of judgments respectively reported in :
(1) (The State Trading Corporation of India Ltd. v. Jainsons Clothing Corporation);
(2) (Larsen and Toubro Limited v. Maharashtra State Electricity Board):
(3) (Ador Samila Pvt. Ltd. v. Peekay Holdings Ltd.:
(4) (M/s Famous Construction v. National Projects Construction Corporation Ltd.);
(5) (Konkan Railway Corporation Ltd. and Ors. v. M/s Mehul Construction Co.):
(6) (Association of Corporation and Apex Societies of Handlooms v. State of Bihar);
(7) (Konkan Railway Corporation Ltd, v. Rani Construction Pvt. Ltd.); and (8) 2003 (2) Arbitration Law Reporter 598 : (2003 All LJ 1395) (Allahabad Payal Enterprises v. Union of India)
(i) In the Judgment first cited above, it is held as to when the order of injunction from invoking the bank guarantee could be granted particularly if, it is a cancellation of contract between the Corporation and the foreign buyer.
(ii) In the Judgment second cited above, regarding the same point, it has been held that invocation of bank guarantee in a case of dispute about the money wrongly recovered pending before Arbitrator refusal by Court to injunct bank from encashing Bank guarantee is proper;
(iii) In the Judgment third cited above, it has been held that for the appointment of Arbitrator by Chief Justice of High Court under Section 11(6) Special leave petition against such appointment is not maintainable since the order impugned being purely an administrative order;
(iv) In the Judgment fourth cited above, the dispute which have arisen between the parties were referred to the Sole Arbitrator who entered upon the Reference and thereafter published his award and Objections have been filed against the Award on behalf of respondents. A preliminary objection to the effect that the Courts at Delhi had no territorial jurisdiction has been raised, in reply to which the petitioner has submitted that "by virtue of Section 20(A) of the Code of Civil Procedure the respondents corporation shall be deemed to carry on business at its principal office at New Delhi; that the respondent Corporation has a subordinate office at different place which would confer concurrent jurisdiction to the competent Court and it does not mean that the jurisdiction vested in the Courts at Delhi by virtue of the fact that the principal office of the respondent Corporation is at New Delhi and by virtue of the provisions of Section 20(a) read with the Explanation thereto the Code of Civil Procedure, 1908, is in any way ousted;
(v) In the Judgment fifth cited above, also it is held that under Section 11(6) in the matter of appointment of the Arbitrator, the Chief Justice or his nominee discharging functions act in administrative capacity and refusal to appoint Arbitrator would not be amenable to Jurisdiction of Supreme Court under Article 136. However, it being an act of non performance of duty, mandamus would lie;
(vi) In the Judgment sixth cited above, the learned Single Judge of the Delhi High Court, regarding encashment of bank guarantee, in an application for encashment of bank guarantee has held that the alleged conditions for invocation of the Bank guarantee indicating the conditions of the bank guarantee but not incorporated in the object of the bank guarantee and some of the conditions for invocation of bank guarantee has been mentioned only in the main contract and not in bank guarantee itself and the terms of the bank guarantee indicating that bank issued irrevocable guarantee and that amount was to be paid by bank without any demur and protect-held, it was unconditional bank guarantee, more so, when alleged conditions were in fact fulfilled, cannot be as a ground. However, in an application for Arbitration proceedings for resolving conflict between parties which had arisen subsequent to furnishing of bank guarantee there cannot be a ground for issuing ad interim injunction;
(vii) in the Judgment seventh cited above, it has been held that there is nothing under Section 11 of the Arbitration and Conciliation Act, 1996 that requires the party other than the party making the request to be noticed. It does not contemplate a response from the other party. It does not contemplate a decision by the Chief Justice or his designate on any controversy that other party may raise, even in regard to its failure to appoint an Arbitrator within the period of 30 days. That the Chief Justice or his designate has to make the nomination of an Arbitrator only if the period of 30 days is over does not lead to the conclusion that the decision to nominate his adjudicator and in conclusion, it has been held that the order of the Chief Justice or his designate under Section 11 nominating the Arbitrator is not an adjudicatory order and the chief Justice or his designate is not a tribunal. Such an order cannot properly be made the subject of a petition for special leave to appeal under Article 136. The decision of the three Full Bench in Konkan Railway Corporation Limited v. Mehul Construction Co., is affirmed,
(viii) In the Judgment eight cited above, it has been held that the Chief Justice exercising power under Section 11 of the Act does not act judicially and, therefore, is not a Court as defined in Section 2(e) of the Act. In this way the contention of the learned counsel for the respondents, that since the application under Section 11 of the Act is pending before the Chief Justice, therefore, the subsequent application under Section 9 should also be filed there, because Section 42 requires so has no force, as the Chief Justice exercising jurisdiction under Section 11 of the Act is not acting as a Court as envisaged by Section 42 of the Act. Therefore, the application under Section 9 of the Act lies before the Court as defined in Section 2(e) of the Act i.e., the Principal civil Court of original jurisdiction i.e., the District Judge.
10. On such argument, the learned counsel appearing on behalf of the respondent would pray to dismiss the above application.
11. In consideration of the facts pleaded, having regard to the materials placed on record, and upon hearing the learned counsel for both, this Court is given to understand that it is an application filed by the applicant praying for the relief extracted supra particularly to grant an injunction restraining the respondent from invoking the Bank guarantee mentioned supra Numbering four and the only point for consideration is whether the order of injunction restraining the respondent from invoking the bank guarantees as extracted in paragraph 11 of the affidavit could be passed in the facts and circumstances of the case.
12. It is an admitted case that an agreement dated 3-8-1998 was entered into between the applicant and the respondent for the directory of compiling, printing, binding and supplying copies of the Coimbatore Telecom District Main Telephone directory, Numerical supplementary Directory and Billing Information for a total five consecutive annual issues commencing with 1998 issue for the number of copies denoted in the paragraph above on such terms and conditions as agreed; that the first and second issues of the Directories have also been brought out after the directory had been signed and in accordance with the terms and conditions of the agreement. But thereafter, since the price of raw materials such as papers and printing charges have been increased by over 60%, the applicant requested the respondent to modify the terms and conditions of the contract so that the contract could be successfully executed as it comes to be argued on the part of the applicant. The applicant would further go to say that the subsequent representations have been made on 15-2-2001; that finally in the meeting held between the representatives of the respondent and the applicant on 8-3-2001, it was decided that for every alternate year, it is enough if the applicant prints a Supplementary Directory: that the Minutes were drawn up in respect of the meeting and singed by six officers of the respondent and these decisions were also confirmed by a supplementary letter dated 2-4-2001. The applicant has come forward to submit that they have agreed in the above manner and thereafter the respondent went back on its decisions and refused to accept the supplementary Directory.
13. In the above circumstances, the applicant has come forward to file the above original application seeking the relief extracted supra on ground that the said disputes would be resolved only by Arbitration and though seven months have lapsed no Arbitrator has been appointed, that even the applicant has filed Original Petition in O.P.No. 145 of 2003 under Section 11(4). of the Arbitration and Conciliation Act, 1996; that in the mean while, on the basis of the contract, the applicant furnished the bank guarantees for a sum of Rs. 63 lakhs through Indian Bank, M, G. Road Branch, Bangalore and that the respondent has already issued a letter dated 10-3-2003 calling upon the applicant to explain why the action cannot be taken against the applicant for non supply of directory for the year 2001-2002 as per the terms and conditions, further, directing to give reply to the notice within 30 days. Since the applicant started entertaining the fear and apprehension, the respondent is attempting action against the applicant particularly pertaining to encash the bank guarantees in such event, the applicant submitting that he would be put to extreme hardship and prejudice has come forward to seek the relief prayed for.
14. In these facts and circumstances, in consideration of the materials made available on record, having heard the learned counsel for both, particularly focusing attention on the legality, argued on the part of the learned counsel for both, if any decision has to be arrived at by this Court, this Court is not able to see any inconsistency or irregularity in the filing of the application before this court. But, it has not been made clear whether they agreed to refer, in case of any dispute arising out of the contractual liability to refer the dispute to an Arbitrator. However, simply, the applicant has come forward to say that on 17-6-2003, the applicant made a request that the various disputes between the applicant and the respondent should be resolved by Arbitrator but no such Arbitrator has been appointed in spite of the agreement providing for an Arbitrator as per Clause 38 of the agreement dated 3-8-1998 and therefore it is a case falling under Arbitration and Conciliation Act and in anticipation of an Arbitrator to be appointed, the applicant has come forward to file the above application seeking to protect his interests without complying with the terms and conditions of the agreement as per the contract entered into and therefore this Court is not at all convinced with the reasons assigned in the application to go back the terms of agreement stating that the prices of the raw materials such as paper and printing charges have been increased which should have been contemplated by the applicant prior to entering into the agreement and provisions should have been made in order to protect his interest on such contingencies and therefore, in law the applicant's case does not have a basis and as on the date of filing of the above application since no Arbitration is pending and in such event since the provisions of Arbitration and Conciliation Act have no bearing on the subject, filing of the above application, cannot have any impact on the Arbitration Act and therefore consequently, the applicant cannot become entitled to get the relief as sought for in the above application and hence the following order;
15. In result,
(i) the above application does not merit acceptance but only becomes liable to be dismissed and is dismissed accordingly:
(ii) The order dated 8-4-2003 made in O.A. No. 331 of 2003 to the effect of granting ad interim injunction till 25-4-2003 which came to be extended till 17-6-2003 is vacated.