Gujarat High Court
Oil And Natural Gas Commission vs Balaram Cements Limited on 28 March, 2001
Equivalent citations: AIR2001GUJ287, AIR 2001 GUJARAT 287
JUDGMENT H.H. Mehta, J.
1. At the request of learned advocates for both the parties, these two appeals from orders are disposed by this common judgment, as in both these appeals, a common order dated 19th September, 1992 passed below application Ex.5 and Ex.18 in Special Civil Suit No.2 of 1991 which is still pending on the file of learned III Joint Civil Judge (Senior Division), Palanpur (who will be referred o hereinafter as the learned Judge of the trial Court for the sake of convenience), has been challenged on the ground that said common order by which two applications Exs.5 and 18 have been disposed of, is not legal and valid and the same is not according to law.
2. In Appeal From Order No. 546 of 1992, appellant is the defendant no.1, while respondent nos. 1 and 2 are original plaintiff and defendant no.2 respectively in Special Civil Suit No.2 of 1991.
2.1. In Appeal From Order No. 566 of 1992, appellant is original plaintiff, while respondents are defendant nos.1 and 2 respectively in aforesaid suit. For the sake of convenience, parties will be referred to hereinafter as the plaintiff and respective defendants at appropriate places.
3. In Appeal From Order No. 546 of 1992, the appellant i.e. defendant no.1 has challenged an order below application Ex.5, while in Appeal From Order No. 566 of 1992, the original plaintiff has challenged the order below application Ex.18, in aforesaid suit.
4. Application Ex.5 was submitted by original plaintiff requesting the Court to grat an interim injunction restraining the defendant no.1 from invoking/encashing the Bank Guarantee given by defendant no.2 in favour of defendant no.1, till final disposal of the suit. As per order below application Ex.5, the learned Judge of the trial Court allowed that application Ex.5 in favour of the plaintiff and directed defendant no.1 restraining him from encashing the Bank Guarantee given by defendan no.2, of Rs.9 Lacs till the award is filed by the Arbitrator.
5. The defendant no.1 immediately after making appearance in the suit, filed application Exh. 18 dated 28/1/1991 under Sec.34 of the Indian Arbitration Act, 1940 for staying the proceedings of the suit. That application Ex.18 was also granted by the learned Judge of the trial Court by passing an order to the effect that suit is stayed till the award of the Arbitrator is filed. As against aforesaid common order below applications Exh.5 and 18, respective aggrieved parties have preferred these two appeals separately to this Court. Appeal From Order No. 546 of 1992 is filed under Sec. 104(1)(i) of the Code of Civil Procedure read with Order 43 Rule 1(r) of the C.P.C. While Appeal From Order No. 566 of 1992 is filed under Sec. 39(1)(v) of the Indian Artibration Act, 1940. (Same will be referred to hereinafter as the Act, for brevity).
6. The facts leading to these present two appeals in a nutshell are as follows:
6.1 On or about 5/1/1991, the original plaintiff Balaram Cements Limited which is a Compay incorporated under the Indian Companies Act, has filed Special Civil Suit No.2 of 1991 in the Court of the learned Civil Judge (Senior Division) at Palanpur against defendant no.1 -Oil Natural & Gas Commission, through Joint Director (MM) ONGC Technical Business Group, Baroda and defendant no.2 -The Branch Manager of the Dena Bank, Palanpur.
6.2 As per the plaint of that suit, the plaintiff's registered company is sitated at Karnavati Shopping Centre at Palanpur. Plaintiff Company is mainly engaged in manufacturing ordinary port-land cement.
6.3 The defendant no.1 had invited tenders publicly for the supply of ordinary port land cement vide tender dated 16/7/1990. That tenders were to be submitted as per notice inviting tenders, on or before 9th August, 1990. The defendant no.1 was urgently needed different quantity of the cement for their different destinations namely Ahmedabad, Baroda, Cambay and Mahesana. The plaintiff is one of the participants by submitting his tender under its covering letter dated 8/8/1990. The plaintiff had put his certain terms and conditions in its said covering letter and one of the main conditions of the plaintiff was pertaining to the validity period of the offer of the plaintiff and as per the relevant clause, the offer of the plaintiff was to remain open for a period of 90 days from the date of said letter i.e. 8/8/1990. There were other stipulations also made in the offer by way of submitting a tender in the office of defendant no.1. As per the case of the plaintiff, along with his tender, he sent an earnest money of Rs. 2 Lacs by two demand drafts each of Rs.1 Lac. Defendant no.1 has accepted earnest money. Thereafter, defendant no.1 sent a Telex message pertaining to work under tender and by that Telex message, some clarifications with respect to Excise Duty and Sales Tax applicable and also with regard to acceptance of particular clause relating to security deposit, arbitration and jurisdiction were sought for, from the plaintiff. On receipt of Telex message, plaintiff, by their letter dated 20/9/1990, gave clarifications and the Telex message was fully responded by the plaintiff. In Telex message, the defendant no.1 had stated that the plaintiff should send the remaining balance of earnest money deposit of Rs. 9 Lacs as per terms and conditions of the offer. The plaintiff, by their letter dated 20/9/1990, clarified the points. The plaintiff sent Bank Buarantee dated 25/9/1990 for the remaining earnest money of Rs. 9 Lacs given by defendant no.2 in favour of defendant no.1.
6.4 Thereafter, on 23/10/1990 in the Chamber of General Manager (Technical) of defendant no.1, some negotiations were carried out at the instance of the defendant no. 1 regarding rates of plaintiff's offer etc. In response to said negotiations which took place on 23/10/1990, plaintiff addressed a letter dated 27/10/1990 to defendant no.1.
6.5 After negotiations, plaintiff had further clarified that there was no possibility of reducing the rates. However some incentivies so as to seek early payment were offered as per plaintiff's letter dated 27/10/1990. It is a specific case of the plaintiff that till date of filing of the suit, the plaintiff's offer has not been accepted by defendant no.1 though validity period of offer vide plaintiff's tender had expired on 7/11/1990. That period was extended for the period upto 30/11/1990 by plaintiff's letter dated 27/10/1990. It is a specific case of the plaintiff that plaintiff made it clear to the defendant no.1 that if plaintiff's offer after the negotiations was being accepted by defendant no.1, the same must be accepted on or before 30/11/1990.
6.6 On or about 16/11/1990, there was steep rise in the prices of electrical duties and charges due to the policy/decision of the Government of Gujarat and there was also steep rise in the petroleum products due to the changed policy of the Government of India. This situation had changed due to the statutory rise in the prices of petroleum products as well as electrical duties and thereby the plaintiff's rates were being directly affected. Therefore, on 20/11/1990, the plaintiff, by their letter, modified their offer by stating that plaintiff was revising their rates and this fact was brought to the notice of concerned authorities of defendant no.1.
6.7 Immediately, on 21/11/1990, plaintiff addressed one another letter wherein the plaintiff pointed out that due to steep rise, plaintiff was revising its rates for the reasons elaborately mentioned in the said letter. It is the case of the plaintiff that the plaintiff handed over their two letters dated 20/11/1990 and 21/11/1990 to defendant no.1 in person and thereafter, detailed discussions were held with various authorities of defendant no.1. It is the case of the plaintiff that during discussion, the defendant no.1 pointed out that they would need atleast some quantity of cement immediately, and therefore, plaintiff in their letter dated 21/11/1990 made it clear that in order to meet with urgent requirement of the defendant no.1 and as a gesture of good will and mutual co-operation, the plaintiff would accept to supply the small quantity of 2500 M.T. cement at the old price, though due to this, the plaintiff was going to incur loss. After the aforesaid letter dated 21/11/1990, defendant no.1 had carried out negotiations with the plaintiff and plaintiff was told that if plaintiff is agreeable to supply part quantity at the old price, then the defendant no.1 would consider the revision of rates as per revised offer. Accordingly, after letter dated 20/11/1990 of the plaintiff, the plaintiff was given part supply order vide order dated 19/11/1990. As per this supply order, the defendants were in need of some quantity urgently, and therefore, the defendant no.1 placed order of total quantity of 3000 M.T. cement for Baroda and Mahesana and rates which were mentioned in the said supply order were old rates. However, as per the plaintiff's letter dated 27/10/1990, the defendant no.1 have also agreed for the price incentive in respect of payment. This supply order was not for the whole quantity, but for the limited quantity i.e. maximum to the tune of 3000 M.T. at the old rate. It is a specific case of the plaintiff that while on the date of filing the suit, the plaintiff's original offer dated 8/8/1990 was not accepted in toto and their offer was revised and validity period of revised offer was of course extended upto 30/11/1990. This adhoc arrangement for short supply was only agreed by the plaintiff due to the fact that certain negotiations were carried out by the plaintiff's representatives with that of the defendant no.1 at the defendant's office and since the assurance was given to the plaintiff that their demand for revised rates as per their revised offer will be considered by the O.N.G.C. The plaintiff, in order to develop the business relations with the defendant no.1 agreed for this short supply, though this was going to cost more to the plaintiff. Plaintiff's offer was going to get expired on 30/11/1990. As per the position of Indian Contract Act, if validity period of offer is not mutually extended by both the parties, then the offerer is within his legal rights to refuse to honour the acceptance subsequently. Thus, in a nutshell, it is clarified tat if the defendant no.1 were really desirous to place their firm order, that too on the basis of the revised offer, which have been made by the plaintiff from time to time as per the negotiations which were carried out at the instance of the O.N.G.C. the same ought to have been accepted on or before 30/11/1990. After 30/11/1990, the revised offer under the eye of law is nonest and therefore, there is no question of any acceptance of such offer.
7. In short, it is the case of the plaintiff that he first put an offer which was not accepted by the defendant no.1. Thereafter, plaintiff put a revised offer, meaning thereby his earlier offer was withdrawn by plaintiff and a new offer was made to the defendant no.1 That revised offer has not been accepted by defendant no.1 on or before validity period of offer, and thus, it is the case of the plaintiff that no lawful contract has been concluded by and between the plaintiff and defendant no.1. Still however, the defendant no.1 addressed one letter to plaintiff which was received by plaintiff on 29/12/1990 stating, inter alia, that the Bank Guarantee of Rs. 9 Lacs submitted by the plaintiff in favour of defendant no.1 has been invoked by the beneficiaries i.e. defendant no.1. Therefore, plaintiff filed aforesaid Special Civil Suit No.2 of 1991 against the defendants and prayed for a decree of Rs.2 Lacs in favour of the plaintiff and executable against the defendant no.1 O.N.G.C. The plaintiff also prayed for an interest at the rate of 24% on the decretal amount from the date of the suit till realisation. The plaintiff also prayed for a perpetual prohibitory injunction restraining the defendant no.1 from invoking/encashing the Bank Guarantee dated 25/9/1990 issued by defendant no.2 in favour of defendant no. 1.
8. On the date on which the plaintiff filed the suit, the plaintiff filed one application Ex.5 for an interim injunction restraining defendant no.1 from invoking/encashing Bank Guarantee given to defendant no.1. On that day, the learned Judge of the trial Court directed to issue show cause notices against defendants as to why an interim injunction should not be granted in terms of Para 21 of application Ex.5. He also passed an order to the effect that mean while the petitioners are directed to maintain status quo regarding amounts lying in the Dena Bank, Palanpur in the form of Bank guarantee dated 25th September, 1990 furnished by the plaintiff till next date.
9. On the given date, the defendants appeared, but instead of filing written statement in reply to plaint and written reply in reply to Ex.5, the defendants submitted application Ex.18 under Sec. 34 of the Arbitration Act, 1940 (for short "the Act") with a request to stay the proceedings of the suit. The plaintiff submitted his written reply Exh.22 on 20/2/1991 in reply to Ex.18. The defendant no.1 submitted his written arguments in support of his application Ex.18 on 25/8/1991. It appears from record that thereafter the learned advocates for both the parties jointly made a request and at the request of both the parties, the learned Judge of the trial Court heard applications Ex.5 and Ex.18 together and he disposed of said both applications by one common order dated 19/9/1992. As against that common order, the plaintiff and defendant no.1 have filed their respective appeals to challenge the order passed below Ex.5 as well as Ex.18. As the order passed below Ex.5 was in favour of plaintiff and against defendant no.1, the defendant no.1 has preferred Appeal From Order No. 546 of 1992, while order below Ex.18 was in favour of defendant no.1 and against plaintiff, the plaintiff has filed Appeal From Order No. 566 of 1992.
10. I have heard Ms. Kalpanaben Brahmbhatt, the learned advocate for the original defendant no.1 and Shri G.T.Dayani, the learned advocate for the original plaintiff. It appears from record that respondent no.2 has thought fit to remain absent though notice has been served upon him. I have perused an impugned common order which has been challenged in these both appeals.
11. Before commencement of arguments, original plaintiff has produced certain copies of documents in a bunch which are relevant for the purpose of arguments in favour of plaintiff. Likewise, defendant no.1 has also produced certain copies of documents in support of arguments advanced by Ms. Kalpanaben Brahmbhatt. Those documents are also perused and taken into consideration by me.
12. The brief facts of the case of the plaintiff in a nutshell are as follows :
12.1 The defendant no.1 invited tenders publicly to make an offer from the interested tenderers to fill in and file their tenders in the office of defendant no.1. That invitation for making offer was for supply of Portland Cement. Plaintiff being manufacturer of the Cement, in response to invitation of defendant no.1, filled in and submitted its tender along with two demand drafts each of Rs.1 Lac towards earnest money. Thereafter, plaintiff modified its offer by stating enhanced rates for supply of goods. That counter offer was not accepted by the defendant no.1 within a stipulated time of validity period of the bank guarantee. Thus case of the plaintiff is that his revised offer has never been accepted by defendant no.1, and therefore, a concluded contract has not come into existence in between plaintiff and defendant no.1, and therefore, he has filed a suit for decree to recover Rs. 2 Lacs which he had paid towards earnest money from defendant no.1, and in that very suit, he also prayed for a perpetual prohibitory injunction restraining defendant no1 from invoking/encashing the bank guarantee given by defendant no.2 at the instance of plaintiff, till final disposal of the suit.
12.2. As against this, it is a defence of the defendant no.1 that offer put by plaintiff vide tender submitted by plaintiff was accepted by defendant no.1 within time and contract was concluded, and therefore, now plaintiff cannot ask for a relief in form of injunction restraining defendant no.1 from encashing bank guarantee given to defendant no.1. It is also the case of defendant no.1 that in a concluded contract, there is a term and condition that if any dispute will arise in future, that dispute shall be referred to Arbitrator, and therefore, Civil Court has no jurisdiction to entertain the suit filed by the plaintiff. In spite of this specific pleading that Civil Court has no jurisdiction to entertain and try the suit, the defendant no.1 has advanced his case that an injunction cannot be granted in favour of plaintiff restraining the defendant no.1 from encashing bank guarantee. Looking to well-settled principles of law with regard to "bank guarantee" ennunciated by Hon'ble Supreme Court and this Court from time to time and it is a request of defendant no.1 that the learned Judge of the trial Court had no jurisdiction to grant an injunction in favour of plaintiff, and therefore, the order passed below Ex.5 is not legal one and the same is not according to law, and therefore, that order below Exh.5 is required to be set aside. As the defendant no.1 has advanced his case that when there is a concluded contract and when there is a term and condition with regard to dispute, if arises in between the parties, it must be referred to the Arbitrator, and the suit is required to be stayed till the final decision is given by the Arbitrator. The plaintiff has challenged that order granted in favour of defendant no.1. It is the say of the plaintiff that when there is no concluded contract, the term and condition with regard to arbitration cannot be pressed into service by defendant no.1, and therefore, in no case, suit can be stayed.
13. To understand the rival contentions of both the parties, it is absolutely necessary to know certain admitted facts upon which whether either party can take any dispute and that facts can be summarized as follows :
(1) 16/7/90 Defendant no.1 invited tenders by his public notice bearing No. BDA/TBG/SP/RC/ BN/08(02)/89-90 DATED 16/7/1990 of which a reference is made in subject of latter dt. 8/8/1990.
(2) 8/8/90 Plaintiff filled in his tender and submitted that tender to the defendant no.1 under his covering letter dated 8/8/90.
(3) 9/8/90 As per that invitation, last date for submitting tenders was fixed i.e. 9/8/90 (4) 8/8/90 In letter dated 8/8/90, plaintiff stated under caption " Validity " that offer would remain valid for a period of 90 days from the date thereof i.e. 8/8/90, and therefore, according to plaintiff, validity period was to expire on 7/11/90.
(5) 9/8/90 The tender was opened by defendant no.1 on 9/8/90. Along with tender, plaintiff sent two demand drafts each of Rs. 1 Lac towards earnest money. Defendant No. 1 has accepted that two demand drafts each of Rs.1 Lac which were sent by plaintiff towards earnest money.
(6) 15/9/90 In reply to covering letter dated 8/8/90, for the first time, defendant no.1 sent a telex message to plaintiff and requested plaintiff to submit his clarifications with respect to Excise Duties, Sales Tax applicable etc. etc. That telex message appears to have been issued on 15/9/90 and by this telex message, a reply was expected by defendant no.1 from plaintiff latest by 22/9/90.By that telex message, defendant no.1 also asked plaintif to send the remaining balance of earnest money of Rs. 9 Lacs.
(7) 20/9/90 Plaintiff wrote letter dated 20/9/90 in reply to telex message dated 15/9/90. In this letter dated 20/9/90, plaintiff confirmed their acceptance for the clauses relating to security deposit and arbitration and jurisdiction. Plaintiff informed defendant no.1 that they were arranging to submit earnest money deposit for the balance amount of Rs.9 Lacs by way of bank guarantee. At the end of this letter dated 20/9/90, it was expected by plaintiff from defendant no.1 that defendant no.1 should place a valuable order at the earliest day.
(8) 25/9/90 Plaintiff, under his covering letter dated 25/9/90 sent bank guarantee issued by defendant no.2 in favour of defendant no.1.
(9) 23/10/90 From correspondence in between both the parties, it appears that on 23/10/1990 in the Office of General Manager (Tech.) of defendant no.1, some negotiations, took place in between plaintiff and defendant no. 1. There is no documentary evidence to show that as to what negotiations were taken place and what was the final out-come of that meeting held on 23/10/90.
(10) 27/10/90 Plaintiff wrote a letter to defendant no.1 on 27/10/90 and refused to reduce the rates. At the same time, plaintiff offered some incentives to defendant no.1 so as to seek early payment from defendant no.1 and by this letter dt. 27/10/90, plaintiff extended validity period from 7/11/90 to 30/11/90. According to plaintiff, his offer was effective and operative for acceptance by defendant no.1 for the period upto 30/11/90.
(11)16/11/90 As per case of the plaintiff, there was a steep rise in the prices of electrical duties ad changes due to the policy/ decision of Government of Gujarat around 16/11/90.
(12) 20/11/90 And therefore, plaintiff wrote a letter to defendant No. 1 on 20/11/90 and modified his offer by making enhancement in the rates in his offer.
(13) 21/11/90 On the next day of 21/11/90, plaintiff wrote another letter to defendant no.1 and it appears from record that both letters were given in person and there was a detailed discussion held between plaintiff and defendant no.1 In this letter, plaintiff agreed as a gesture of good-will to supply small quantity of 2500 M.T. Cement at the old price, though plaintiff was going to incur loss. From correspondence, it appears that negotiations were carried by defendant no.1 with plaintiff and plaintiff was told by defendant no.1 that if plaintiff was agreeable to supply part quantity at the old price, then defendant no.1 would consider revision of rates.
(14) 24/11/90 After 20/11/90 and 21/11/90, defendant no.1 sent a telex message to plaintiff on 24/11/90 and accepted his offer made by plaintiff at the old rates.
(15) 3/12/90 Defendant no.1 gave a part supply order after receipt of letter dt. 22/11/90 of plaintiff and that order was placed for 3000 M.T. That order was placed on 19/11/90. By placing this order by defendant no.1, original offer of rates stated in covering letter dt. 8/8/90 of plaintiff was not accepted. Plaintiff sent one telex message dated 3/12/90.
(16) 3/12/90 In reply to plaintiff's telex message, plaintiff received one telex message from defendant no.1 stating that defendant no.1 were accepting the offer. It is the case of the defendant no.1 that by this telex message, contract has been concluded.
(17) 3/12/90 Plaintiff replied that there is no question of any acceptance of the plaintiff's offer much less original offer at the old rates.
(19) 7/12/90 Plaintiff wrote one letter to defendant no.1 on 7/12/90.
(20) 29/12/90 Plaintiff received letter dated 29/12/90 from defendant no.2 i.e. Bank stating, inter alia, that on 29/12/90, Bank had received a letter from defendant no.1 and by that letter, defendant no.1 have invoked the bank guarantee. On 29/12/90, the Bank did not invoke the bank guarantee but inquired from plaintiff as to what were the reasons for not meeting with the requirements of defendant no.1 as per contract with defendant no.1 and a reply for that reasons was requested to be sent within four days, and therefore, on 29/12/90, defendant no.2 did not allow defendant no.1 to encash the bank guarantee but the request of defendant no.1 was postponed for a period upto 2/1/1991.
(21) 2/1/91 In reply to aforesaid letter dt. 29/12/90 of defendant no.2/Bank, plaintiff addressed one letter dt. 2/1/91 to defendant no.2. Plaintiff requested Bank not to make any payment towards bank guarantee to the defendant no.1 so that matter could be discussed with O.N.G.C. (22) 5/1/91 On 5/1/91, plaintiff filed aforesaid suit and sought an ad-interim injunction restraining defendant no.1 from encashing bank guarantee given by defendant no.2.
14. It is a well-settled principles of law that to invite tenders is nothing but an invitation to make an offer. A specimen of terms and conditions of defendant no.1 stated in invitation to offer is at Page 52 of Paper Book supplied by Mr. Dayani. Subject of that invitation of offer itself speaks for invitation to tender. That subject is as follows :
"Invitation to tender", "instructions to tenderers and conditions of contract".
15. Looking to aforesaid invitation to tender, it can be said that defendant no.1 was expecting from tenderers that they should put their offers including conditions of contract as suggested by defendant no.1. It was not obligatory for tenderers to put their offers in consonance with suggested conditions of contract. They were at liberty to put their independent offers imposing certain terms and conditions of their own choice.
16. Here in this case, the plaintiff, by his covering letter dated 8/9/90 put his independent offer stating inter alia his own terms and conditions. If we read this letter dated 8/8/90, we find that the plaintiff had incorporated his independent terms and conditions in his offer and as per one of the terms, validity period for that offer was for the period of 90 days. It is an admitted fact that defendant no.1 received that letter dated 8/8/90 and that offer was placed for consideration on 9/8/90. Defendant no.1 sat silent for the period upto 14/9/90. For the first time, defendant no.1 sent a telex message on 15/9/90. As per that telex message, defendant no.1 asked plaintiff to accept the following clauses which plaintiff had not agreed upon to accept, in his offer dated 8/9/1990.
(1) Submission of security deposit;
(2) Arbitration and jurisdiction;
(3) Test facility for testing the cement as per ISI 269(1976).
(4) Asking plaintiff to submit earnest money deposit for balance amount of Rs. 9 Lacs. (5) By telex message, plaintiff was asked to reply latest by 22/9/90, failing which plaintiff's offer would be rejected.
17. Thus, till 15/9/90, offer of plaintiff was not at all accepted by defendant no.1, and therefore, there was no concluded contract in between plaintiff and defendant no.1 till 15/9/90.
18. Ms. Kalpanaben Brahmbhatt has produced a copy of tender filled in and submitted by the plaintiff. That tender appears to have been signed by plaintiff on 7/8/90. She has further argued that when that tender is filled in and submitted by plaintiff himself, then it can be said that whatever the terms and conditions were stated in that tender, were accepted by plaintiff along with his offer which he put on overleaf of Schedule Part II of that tender. Though there was a condition with regard to arbitration in Clause 41 of tender, the defendant no.1 had asked plaintiff to clarify about certain terms and conditions stated in Telex message dated 15/9/90, meaning thereby defendant no.1 was not treating that tender dated 7/8/90 as a complete offer made by the plaintiff and that is why defendant no.1 sent a Telex message dated 15/9/90 and asked plaintiff to clarify certain points which are narrated in Para 16 hereinabove. As stated hereinabove, when defendant no.1 has stated in his Telex message that if defendant no.1 would not receive reply from plaintiff on the points indicated in that Telex message latest by 27th September, 1990, offer of plaintiff by way of submitting a tender dated 7/8/90 would be rejected. The plaintiff clarified that points narrated in said Telex message dated 15/9/90, by addressing a letter dated 20/9/90. In this letter dated 20/9/90, plaintiff agreed to confirm their acceptance to the clauses with regard to submission of security deposit and also clauses with regard to arbitration and jurisdiction. In that letter dated 20/9/90, plaintiff clarified with regard to their rates offered stating that said rates were inclusive of all taxes and excise duties etc. etc. except octroi and unloading charges. Plaintiff also mentioned in his letter dated 20/9/90 with regard to Sales Tax and Excise Duties prevailing as on that date of letter i.e. 20/9/90.
19. Most material and important letter is dated 21/11/1990 addressed by plaintiff to defendant no.2. That letter is at Page 39 of the Paper Book supplied by Shri Dayani. By this letter dated 21/11/1990, plaintiff revised the rates offered earlier in his tender dated 7/8/1990. The plaintiff has specifically stated that defendant no.1 should review the rates and allow the plaintiff a justifiable revision in the rates, so that contract can be executed. Ms. Kalpanaben Brahmbhatt has heavily placed reliance on Telex message dated 24/11/1990 sent by plaintiff to defendant no.1. It is at Page 76 in the Paper Book supplied by Mr. Dayani. By this Telex message, defendant No.1 has acknowledged the receipt of letter dt. 21/11/1990 of the plaintiff addressed to defendant no.1. Thus on 24/11/1990, defendant no.1 had already received a letter dated 21/11/1990 of the plaintiff in which plaintiff had revised his earlier offer so far as it relates to rates. If we read that Telex message dated 24/11/1990 of the defendant no.1 addressed to plaintiff, we find that defendant no.1 has accepted the offer of plaintiff put in the tender which is for the old rates before plaintiff addressed a letter dated 21/11/1990. Shri Dayani has argued that when an offer is not accepted by the opposite party, plaintiff was at liberty to revise his offer before acceptance made by opposite party, and therefore, before defendant no.1 could accept an earlier offer of old rates, he had already revised his offer, and therefore, it cannot be said that there is a concluded contract.
20. Shri Dayani has argued that in view of Sec. 5 of the Indian Contract Act, 1872, a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer but not afterwards and an acceptance may be revoked at any time before communication of the acceptance is complete as against the acceptor but not afterwards. As per well-settled principles of law, the plaintiff was entitled to revise his offer before acceptance of the offer put with old rates. Ms. Kalpanaben Brahmbhatt has vehemently argued that in view of Para 32 of the Tender, plaintiff is not entitled to revise his offer. Para 32 of the Tender reads as under:
"No alteration in or addition to or ommission or abandonment of or variation in the Contract or any part of the Contract shall be deemed authorised, except under instructions from the officer placing the order on the Contractor. Otherwise the Contractor shall be liable for consequence that may ensure."
Ms. Kalpanaben Brahmbhatt has argued that looking to aforesaid one of the terms and conditions of the tender, now plaintiff cannot revise his earlier offer.
21. In view of Section 5 of the Indian Contract Act, no such condition can be made operative against the plaintiff. When the Indian Contract Act itself allows the offerer to revise by revoking his earlier offer, before that offer is accepted by the opposite party, aforesaid Para 32 of the tender, will not be helpful to the defendant no.1.
22. There is one condition No.14 in Tender filled in by the plaintiff that acceptance by the purchaser will be communicated by the telegram or by express Letter, in case where acceptance is communicated by telegram or by express Letter, the form of acceptance of tender will be forwarded to tenderer (a person who has offered) as soon as possible but instructions contained in the telegram or express Letter should be acted upon immediately. The defendant No.1 relies only on Telex message sent on 24/11/1990. For the satisfaction of this Court, defendant no.1 has not produced the form of acceptance of tender, and therefore, the contract has not been concluded unless and until the form of acceptance of tender is sent by the defendant no.1 to the plaintiff. As said earlier, defendant no.1 has accepted the offer of the plaintiff which he put in the tender dated 7/8/1990 stating old rates. Before that offer could be accepted by the defendant no.1 on 24/11/1990, the plaintiff had already modified his offer by revising the rates in his letter dated 21/11/1990 which is admittedly received by the defendant no.1 before 24/11/1990. Thus, in this case, defendant no.1 has advanced his case that contract has been concluded by the Telex message dated 24/11/1990. As against that, it is the case of the plaintiff that contract is not concluded because offer stating old rates was modified and revised by him in his letter dated 21/11/1990 which had already been received by defendant no.1 before 24/11/1990, and therefore, despite the fact that defendant no.1 has accepted the old rates stated in the tender, it cannot be said that contract is concluded because earlier offer was already revised and modified by the plaintiff on 21/11/1990, and therefore, prima facie, plaintiff has satisfied that in this case, there is no concluded contract. It may be noted that in this case, plaintiff and defendant no.1 have not entered into a formal agreement in writing. Both the parties rely on exchange of correspondence in between them.
23. In case of ADANI EXPORTS LTD. v. HINDUSTAN ORGANIC CHEMICALS LTD., reported in 2000(3) : 41(3) G.L.R. Page 2759, a reference is there with regard to "contract by correspondence". In Para 18 of that judgment, an extract from Halsbury's Law of England, Fourth Edition, Page 140, has been recited. Para 262 of Halsbury's Law of England reads as follows :
"Contracts by correspondence : "If a contract depends on a series of letters or other documents, and it appears from them that the drawing up of a formal instrument is contemplated, it is a question of construction whether the letters or other documents constitute a binding agreement or whether there is a no binding agreement until the instrument has been drawn up. The whole of the correspondence or documents must be considered; and a document which, taken alone, appears to be an absolute acceptance of a previous offer does not make the contract binding, if, in fact, it does not extend to all the terms under negotiation, including matters appearing from oral communication. Moreover, two letters which at first sight appear to be an offer and an acceptance will not constitute a contract, if it appears from subsequent negotiations that important terms forming part of the contract were omitted from those letters; and the mere fact that parties think there is a binding contract is not conclusive. But once there has been a definite acceptance of all the terms of an offer and the acceptance was without qualification, further negotiations between the parties cannot, without the consent of both, get rid of the contract which has been made."
24. Defendant no.1 cannot place reliance only on Telex message dt. 24/11/1990. The Court is required to take into consideration the entire correspondence made in between plaintiff and defendant No.1 when there is no formal agreement in writing executed for the contract in question.
24.1 In view of discussions made hereinabove, the plaintiff had already revised his earlier offer and that offer has not been accepted by defendant no.1. On the contrary, the defendant no.1, by his Telex message dated 24/11/1990, accepted the offer of old rates, and therefore, it cannot be said that in this case, the binding contract has been concluded.
25. A question of giving security for earnest money by way of Bank Guarantee is dependent on a concluded contract. When there is no concluded contract, the question does not arise for taking into consideration the Bank Guarantee. The defendant no.1 is entitled to invoke the Bank Guarantee, provided there is a concluded contract in between the plaintiff and defendant no.1. Here in this case, the defendant no.1 wants to take an advantage of invoking the Bank Guarantee by saying that the contract was concluded on 24/11/1990. In view of contents of different letters referred to in the discussions made hereinabove, the contract is not concluded, and therefore, when the contract is not concluded in between the plaintiff and defendant no.1, the defendant no.1 cannot exercise his right to invoke the Bank Guarantee. This Court is in agreement with Ms.Kalpanaben Brahmbhatt as to under what circumstances, injunction can be granted to person having the Bank Guarantee from encashing the Bank Guarantee. It is now well-settled principles of law that injunction can only be granted from encashing the Bank Guarantee, if the case falls in any of the following clauses :
(i) In case of a fraud by one of the parties to the underlying contract and which has an effect of vitiating entire underlying transaction.
(ii) Where irretrievable injustice would be done, if Bank Guarantee is allowed to encash.
On aforesaid proposition of law, Ms. Kalpanaben Brahmbhatt has cited so many authorities. This Court is in total agreement with the proposition of law as to under what circumstances, an injunction can be granted from invoking the Bank Guarantee. She has placed much reliance on case of U.P.CO-OPERATIVE FEDERATION LTD. vs. SINGH CONSULTANTS AND ENGINEERS (P) LTD. reported in (1988) 1 SCC 174. It has been held as under:
"Commitments of banks must be honoured free from interference by the courts. An irrevocable commitment either in the form of confirmed bank guarantee or irrevocable letter of credit cannot be interfered with. In order to restrain the operation either of irrevocable letter of credit or of confirmed letter of credit of bank guarantee, there should be serious dispute and there should be good prima facie case of fraud and special equities in the form of preventing irretrievable injustice between the parties.
Here in this case, when plaintiff has, prima facie, satisfied the court that plaintiff had revised his earlier offer and that offer has not been accepted by defendant no.1, then in no case it can be said that final binding contract has been concluded. When there is no contract in between the parties, question does not arise for defendant no.1 from encashing the Bank Guarantee.
26. It may be noted that here in this case, plaintiff has filed a suit to recover Rs. 2 Lacs which he has paid towards earnest money by two demand drafts each of Rs. 1 Lac. Simultaneously, he has prayed for a perpetual prohibitory injunction restraining the defendant no.1 from encashing the Bank Guarantee of Rs. 9 Lacs till final disposal of the suit. Defendant No.1 has appeared in the proceedings of the suit but the defendant no.1 has not filed any written statement controverting the pleadings of the plaintiff stated in the plaint. It may also be noted that defendant no.1 has not advanced his counter claim of Rs.9 Lacs by making payment of requisite court fees.
27. Mr. Dayani has placed reliance on case of M/S ANSAL PROPERTIES & INDUSTRIES (P) LTD. vs. ENGINEERING PROJECTS (India) LTD. reported in AIR 1998 DELHI 176. In this case in Para 31, it has been held that invocation has to be made as per terms of guarantee. If Bank guarantee is conditional one, then the person who wants to invoke the Bank guarantee has to satisfy that conditions stated in Bank guarantee are fully satisfied, and thereafter, he becomes legally entitled to invoke the Bank guarantee. If the Bank guarantee is unconditional, then straight way the person in whose favour Bank guarantee has been given, can invoke the Bank guarantee. In aforesaid cited case, in Para 32 description of Bank guarantee is given. In that case, it has been held as under :
"The Bank guarantee in absolute terms gives discretion to the respondent/ beneficiary to invoke the same by making a demand, without demur, for loss or damages caused to or suffered by the respondent by reason of their being unable to recover in full the said amount and the respondent is the sole judge of the extent payable and the decision of the respondent is final, conclusive and binding on them".
28. Here in this case, the plaintiff has prayed for an interim injunction restraining the defendant no.1 from encashing Bank guarantee issued by defendant no.2, and therefore, naturally Bank guarantee is with the defendant no.1. It cannot be said that the Bank guarantee is in possession of either plaintiff or defendant no.2. The office copy of Bank guarantee could be produced by defendant no.2 in case of need. It is not the case of defendant no.1 that Bank guarantee has been misplaced or lost or destroyed. Admittedly, Bank guarantee is in possession of defendant No.1. This Court wanted to know whether that Bank guarantee is conditional or unconditional one, and therefore, this Court directed Ms. Kalpanaben Brahmbhatt to produce the original Bank guarantee which is admittedly in possession of defendant no.1. Though sufficient time has been given to defendant no.1, the defendant no.1 for the reasons best known to him has not produced the original Bank guarantee for perusal of the same by this Court. The defendant no.1 is entitled to invoke the Bank guarantee straight way if Bank guarantee is unconditional one but when it is not produced before this Court, then certainly this Court can draw an adverse inference against defendant no. 1, as a result of which, this Court draws an adverse inference against defendant no.1 that defendant no.1 has not produced the Bank guarantee before this Court because the Bank guarantee is conditional one and there are such conditions in the Bank guarantee that the defendant no.1 is required to first fulfil the conditions before making his claim to encash the same. An order under Order 39 Rule 1(2), C.P.C. is a discretionary order and Court demands from both the parties to be fair enough with the Court, and parties are required to place all the Cards before the Court, so that the Court can study the subject properly and exercise judicial discretion in proper perspective. Here in this case, even in the trial Court, defendant no.1 had not produced the Bank guarantee. Even on repeated demands of this Court, defendant no.1 has failed to produce the Bank guarantee. This is not a game of "Hide and Seek". When plaintiff wants an equitable relief from the Civil Court, he is expected to place all the relevant documents before the Court. As against the request of plaintiff for equitable relief, if opposite party takes strong objection for equitable relief being granted to plaintiff, then the opposite party should also play fairly with the Court by placing all the relevant documents before the Court. Here in this case, subject matter is with regard to Bank guarantee and that Bank guarantee itself is not produced by defendant no.1 which is admittedly in possession of defendant no.1. Inspite of the fact that there is a legal valid settled position that Bank Guarantee can be prevented to be encashed in case of fraud or irretrievable injustice, the original Bank Guarantee is not produced by the defendant no.1. On this sole ground, the contention taken by Ms.Kalpanaben Brahmbhatt is negatived.
29. As discussed earlier, considering the materials produced by both the parties, prima facie, plaintiff has satisfied the Court that offer put by him under tender dated 7/8/1990 was revised and modified by him and revised offer was put by him under letter dated 21/11/1990, before defendant no.1 could accept the earlier offer made under the tender with old rates, and therefore, a binding concluded contract has not come into existence. When there is no concluded contract in between the parties and still the subject is under process of offer and acceptance, then the Bank guarantee which was to be given for the contract cannot be encashed by defendant no.1 only on the ground that a concluded contract has not come into existence. As observed in case of Adani Exports Ltd. (supra) in Para 32, " it is also well settled principle of law that in order to make out a prima facie case, necessary for granting an interlocutory injunction, the plaintiff need not establish his title. It is enough if he can show that he has a fair question to raise as to the existence of right which he alleged and can satisfy the Court that the property in dispute should be preserved in its present actual condition until such question is disposed of. The Court must also, before disturbing any man's legal right stripping him off any of the rights with which law has clothed him, be satisfied that the probability is in favour of his case ultimately failing in the final issue of the suit. It is also observed in this cited case that the Court has to determine in granting injunction is whether there is a bona fide contest between the parties and when there is a fair and substantial question to be decided as to the rights of the parties in the suit, it is not necessary for the purpose nor is it right that the Court should further examine the question in dispute or anticipate the decision of the question in the suit itself.
30. Here in this case, plaintiff has made out his case that as there is no concluded contract having come into existence in between plaintiff and defendant no.1, the defendant no.1 cannot encash the Bank guarantee, because at the time of furnishing the Bank guarantee, it was one of the terms of offer made by the plaintiff. There can be more than one conditions of the offer. To give a Bank guarantee is one of the conditions of offer and that is complied by the plaintiff and that part of the offer is accepted by defendant no.1 because the Bank guarantee is with defendant no.1. But the most material part of the offer with regard to rates of the article to be supplied was modified by plaintiff before defendant no.1 could accept the earlier offer stating old rates. In case of GENERAL ASSURANCE SOCIETY LTD. v. LIFE INSURANCE CORPORATION OF INDIA, reported in AIR 1964 SC 892, it has been held that "when one party makes a composite offer each part thereof being dependent on the other, the other party cannot by accepting a part of the offer, compel the other to confine its dispute only to that part not accepted, unless, the party offering the composite offer agrees to that course". Here in this case, the defendant has accepted offer of plaintiff in piecemeal.
31. During the course of arguments, Shri Dayani, the learned advocate for the respondent no.1 has submitted that he has no objection, if the suit is referred to Arbitrator. This type of concession can be taken into consideration, if arbitration clause is effective by way of concluded contract. When there is no concluded contract, concession cannot be taken into consideration for referring the suit to the Arbitrator.
32. In view of discussion made hereinabove, plaintiff has made out his case for interim injunction. The learned Judge of the trial Court has rightly exercised jurisdiction of granting interim injunction.
Taking into consideration the correspondence between the plaintiff and defendant no.1, it cannot be said that the impugned order of granting injunction is not in accordance with the law, and therefore, Appeal From Order No. 546 of 1992 preferred by defendant no.1 is devoid of merits and it deserves to be dismissed, and accordingly it is dismissed.
Undertaking given by the respondent no.1 (plaintiff) on 3rd January, 1994, will be effective and operative till final disposal of the suit.
So far as Appeal From Order No. 566 of 1992 is concerned which is filed by the original plaintiff challenging an order passed by the learned Judge of the trial Court by which the suit has been stayed till award of the Arbitrator is filed, meaning thereby, the learned Judge of the trial Court accepted the case of the defendant no.1 that clause relating to Arbitration is binding to the plaintiff. When this Court has come to a conclusion that there is no concluded contract in between the plaintiff and defendant no.1, then one of the conditions of offer relating to arbitration cannot be pressed into service by the defendant no.1. The learned Judge of the trial Court has wrongly stayed the suit till the award of the Arbitrator is filed. That order cannot be said to be legal one when there is no concluded contract. In view of this, Appeal From No. 566 of 1992 deserves to be allowed, and therefore, order below application Ex.18 only in the suit is set aside.
As the suit is of the January, 1991, the learned Judge of the trial Court is directed to expedite trial of the Special Civil Suit No.2 of 1991 and dispose of the same as early as possible, preferably within six months from the date of receipt of the writ of this Court by the trial Court.
Looking to the facts and circumstances of the case, there shall be no order as to costs.