J.K. Tyre And Industries Ltd vs Maharashtra State Road Transport ... on 30 April, 2021

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Delhi High Court - Orders

J.K. Tyre And Industries Ltd vs Maharashtra State Road Transport ... on 30 April, 2021

1. The present suit has been preferred by M/s. J.K. Tyre and Industries Ltd. (hereinafter referred to as the 'Plaintiff') against M/s. Maharashtra State Road Transport Corporation (hereinafter referred to as the 'Defendant'); the General Manager, Store and Purchase Department; M/s. IDBI Bank Ltd. and M/s. Bank of India (hereinafter referred to as the 'Banks') seeking declaration with consequential reliefs of permanent injunction.

2. The Plaintiff claims to be a company engaged in the business of manufacture of tyres and other products including tubes, flaps, pre-cured tread etc. It is claimed that the Defendant is a Government of Maharashtra CS(COMM) 212/2021 Page 1 of 11 undertaking which runs bus service of Maharashtra, India. It is averred that on 19.06.2017, the Defendant released an e-tender No. 01/2017-2018 in respect of the tender number ST/S&P/OT/BT/TOB/2017_MSRTC_217929/ for purchase of "Tyre Re-trading Material (Pre-cured Process) - Pre-cured Tread Rubber, Bonding Gum and Black Vulcanising Solution" (hereinafter referred to as the 'tender').

3. The Plaintiff participated in the tender process and the tender was allotted to the Plaintiff. In terms of the tender documents, the Plaintiff provided earnest money deposit of Rs. 61,79,000/- by way of a Bank Guarantee dated 28.11.2017 drawn on IDBI Bank Ltd., Jhandewalan Extension, New Delhi in favour of the Defendant, which guarantee was extended time and again and finally extended up to 30.04.2021.

4. The Plaintiff also claims to have provided a Performance Bank Guarantee dated 28.11.2017 for an amount of Rs.1,74,00,000/- drawn on IDBI Bank Ltd., Jhandewalan Extension, New Delhi to the Defendant which was also extended time and again and finally extended up to 30.04.2021.

5. Pursuant to acceptance of Plaintiff's tender, the Defendant issued a contract dated 15.12.2017 bearing No. 54 of 2017-2018 under Reference No.ST/S&P/TOB/ET-217929/4185 (hereinafter referred to as the 'Contract'). The Contract duly recorded the receipt of the Bank Guarantee towards the security deposit as well as the Performance Bank Guarantee.

6. It is the Plaintiff's case that subsequent to the award of Contract, the Defendant, from time to time, procured Pre-Cured Tread Rubber, Bonding Gum and Black Vulcanizing Solution material from the Plaintiff for producing tyres using the said materials.

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7. It is averred that the Plaintiff had raised various invoices from time to time for supply of materials to the Defendant to which payments were either refused or made belatedly. The Plaintiff claims to have raised invoice dated 26.03.2019 for an amount of Rs. 2,43,097/- on which the Defendant proceeded to arbitrarily deduct an amount of Rs.2,21,216/- allegedly towards Line Rejection of 1,506 kgs. of 195 M.M. Bonding Gum.

8. It is averred that thereafter, the Defendant vide letter dated 14.07.2019 intimated the Plaintiff about Line Rejection of Pre-cured Cushion Gum 125ºC. The Plaintiff claims that the material supplied by the Plaintiff was as per ASRTU specification no. AS:163:74:AUG:2009.

9. It is claimed that on the Plaintiff raising an objection, even internal inquiry was held by the Defendant with respect to Line Rejection claimed under letter dated 14.07.2019.

10. It is the grievance of the Plaintiff that notwithstanding the aforementioned, the Defendant vide letter dated 03.11.2020 claimed an amount of Rs.3,29,24,105/- consisting of Rs.3,21,87,311/- against the Performance Bank Guarantee, Rs. 7,10,974/- against the Line Rejection and Rs.25,820/- towards 'lab tests fail' penalty.

11. It is averred that despite repeated reminders including letters dated 06.11.2020, 10.11.2020 and lastly, 09.04.2021, the detailed calculations were not provided by the Defendant. However, the Defendant vide letter dated 17.04.2021 reduced the claim amount to Rs.2,68,87,459/- and called upon the Plaintiff to settle the claim on or before 25.04.2021 failing which, the Bank Guarantee provided by the Plaintiff would be encashed. The Plaintiff vide letter dated 19.04.2021 sought some time for procuring the data.

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12. It is averred that the Defendant vide letters dated 27.04.2021 bearing No. ST/S&P/TOB/Encashment Letter/1017, No. ST/S&P/TOB/Encashment Letter/1018 and No. ST/S&P/TOB/Encashment Letter/1019, instructed the Banks to encash the Bank Guarantee bearing No. 170127IBGB00281 dated 28.11.2017, Bank Guarantee bearing No. 170127IBGB00928 dated 28.11.2017, Bank Guarantee bearing No.6059IPEBG190074 dated 09.04.2019 and No. 6059IPEBG190149 (dated 10.10.2019, as mentioned in the plaint).

13. Mr. Sandeep Agarwal, learned Senior Counsel while appearing for the Plaintiff, has challenged the action of the Defendant in issuing the letter of invocation of Bank Guarantee on the ground that the same is not only contrary to the terms of the Contract but also in defiance of the Plaintiff's repeated requests seeking detailed calculations of the claim.

14. It is also submitted that the aforesaid claim was raised without awaiting the final report of the internal inquiry conducted by the Defendant. It is also urged that the invocation of the fourth Bank Guarantee is not related to the Contract in issue. It is thus urged that by seeking to invoke the Bank Guarantees, the Defendant has acted without any cause and with malafide and fraudulent intent. In support, the Plaintiff has also placed reliance on the decision of a Coordinate Bench of this Court in Halliburton Offshore Services Inc. v. Vedanta Limited and Another reported as 2020 SCC OnLine Del 542.

15. During the course of hearing, this Court invited the attention of learned Senior Counsel appearing for the Plaintiff to the following clause in the Contract dated 15.12.2017 which provided for jurisdiction in case of disputes arising between the parties:-

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"26) JURISDICTION:

Any dispute or litigation arising out of it or in connection with the terms & conditions of the rate contract and / or supply or supplies made there under, including any suit to enforce the rights of either party under or in the respect of this contract shall be instituted and exclusively triable by the courts of competent ordinary jurisdiction within Greater Mumbai. Notwithstanding the part of the clause of action may have arisen outside the jurisdiction of such courts and the supplier expressly agrees to submit to the jurisdiction of such courts."

16. Learned Senior Counsel, rather, submitted that the Bank Guarantees sought to be invoked were issued by the Banks within the territorial jurisdiction of this Court and in this regard, he referred to the following extract from the Bank Guarantee:-

"Jurisdiction: Any dispute or litigation arising out of or in connection with the terms of this contract and / or supply or supplies made there -under, including any suit to enforce the rights of either party under or in respect of this contract shall be instituted and exclusively triable by the Courts of Competent Ordinary Jurisdiction within New Delhi. Notwithstanding that part of the cause of action may have arisen outside the jurisdiction of such courts and the supplier expressly agrees to submit to the jurisdiction of such courts."

17. It was thus urged that the Banks issuing the Bank Guarantee are located in Delhi and the aforesaid clause in the Bank Guarantee also provided for jurisdiction of the Courts in Delhi.

18. Further, the grievance of the Plaintiff with respect to the invocation of the Bank Guarantee, in fact, arises from the claims raised by the Defendant under the Contract entered into between the parties. It is averred and urged that by raising the impugned claim vide letter dated 03.11.2020, CS(COMM) 212/2021 Page 5 of 11 subsequently modified vide letter dated 17.04.2021, the Defendant has not provided justification by giving detailed calculations.

19. The law with respect to invocation of Bank Guarantee is well settled in U.P. State Sugar Corporation v. Sumac International Ltd. reported as (1997) 1 SCC 568 and several other authorities of the Supreme Court. However, without going into the merits of the case made out by the Plaintiff for injunction in the light of the law settled by the Supreme Court, I find that this Court lacks territorial jurisdiction to entertain the suit.

20. The issue raised in the present case is whether the mere fact of the Bank Guarantee having been issued by the Banks in Delhi would give rise to cause of action to entertain the suit by this Court and further, the effect of jurisdiction clause contained in the Bank Guarantee.

21. It is not disputed by the Plaintiff that the underlying Contract between the parties was executed in Mumbai and was to be performed in Mumbai. In terms of Clause 26 of the Contract, the parties, in unequivocal and absolute terms, have agreed to confine jurisdiction to Courts at Mumbai.

22. It is a settled law that a Bank Guarantee is an independent contract. The contract of Bank Guarantee is independent of the underlying contract between the beneficiary of the Bank Guarantee and the party at whose instance the guarantee has been made by the bank. Even though the clause in the Bank Guarantee in question in the present case does mention that the Courts at Delhi shall have jurisdiction however, the present dispute is not the one between the Banks and the Plaintiff. The stay on invocation has been sought in view of the dispute between the Plaintiff and Defendant under the underlying Contract between them dated 15.12.2017. Therefore, the clause in the Bank Guarantees providing for jurisdiction of Courts at Delhi is of no CS(COMM) 212/2021 Page 6 of 11 avail to the Plaintiff to attract the territorial jurisdiction of this Court. The jurisdictional clause in the Bank Guarantee has to be read and resolved in light of the underlying Contract executed between the Plaintiff and the Defendant.

23. The Supreme Court in South East Asia Shipping Co. Ltd. v. Nav Bharat Enterprises Pvt. Ltd. And Ors. reported as (1996) 3 SCC 443, in almost similar facts, while setting aside the decision of the Division Bench of this Court, held as follows:-

"3. It is settled law that cause of action consists of bundle of facts which give cause to enforce the legal injury for redress in a court of law. The cause of action means, therefore, every fact, which if traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the court. In other words, it is a bundle of facts, which taken with the law applicable to them, gives the plaintiff a right to claim relief against the defendant. It must include some act done by the defendant since in the absence of such an act no cause of action would possibly accrue or would arise. In view of the admitted position that contract was executed in Bombay, i.e., within the jurisdiction of the High Court of Bombay, performance of the contract was also to be done within the jurisdiction of the Bombay High Court; merely because bank guarantee was executed at Delhi and transmitted for performance to Bombay, it does not constitute a cause of action to give rise to the respondent to lay the suit on the original side of the Delhi High Court. The contention that the Division Bench was right in its finding and that since the bank guarantee was executed and liability was enforced from the bank at Delhi, the Court got jurisdiction, cannot be sustained."

24. Subsequently, a similar issue arose before the Division Bench of this Court in Hellenic Electricity Distribution Network Operator S.A. v. Bharat Heavy Electricals Ltd. and Ors. reported as 2016 SCC OnLine Del 2485 CS(COMM) 212/2021 Page 7 of 11 wherein, while holding that the issuance of the Bank Guarantee from Delhi would not be a part of the cause of action and that the territorial jurisdiction of a Court cannot be determined with reference to issuance of Bank Guarantee, it was observed as under:-

"12. The principle of law that a bank guarantee is an independent contract between the issuing bank and the beneficiary and has no concern with the main contract between the beneficiary and the party at whose instance the bank guarantee has been issued, with reference to territorial jurisdiction of a Court, has to be understood in the context of jurisdiction with reference to the mother contract. The independence of a contract for guarantee simply means that the dispute concerning the bank guarantee has to be resolved in terms of the bank guarantee i.e. the bank guarantee is the complete contract between the bank issuing the guarantee and the beneficiary. But since the bank guarantee flows out of the mother contract the jurisdictional issue has to be resolved in the context of the cause of action arising under the contract for the reason a guarantee is invocable, though in terms of the guarantee, but in relation to the main contract. To wit. Instant guarantee is a performance guarantee. The performance of the contract by the plaintiff has to be in terms of the contract. The bank guarantee simply states that a demand by the beneficiary, alleging non-performance, would require the bank to pay under the bank guarantee.

13. In the decision reported as (1996) 3 SCC 443 South East Asia Shipping Co. Ltd. v. Nav Bharat Enterprises Pvt. Ltd. noting that the contract between the parties was executed at Bombay and had to be performed at Bombay, it was held that merely because the bank guarantee was executed by a bank at Delhi in terms of the mother contract would not constitute a cause of action at Delhi to a lay a suit to injunct the bank from paying under the guarantee and to restrain the beneficiary from enforcing the right under the guarantee. Concerning jurisdiction under the Consumer Protection Act, in the decision reported as (1999) 8 CS(COMM) 212/2021 Page 8 of 11 SCC 357 Union Bank of India v. Seppo Rally OY the Supreme Court held that the consumer fora at the place where the office of the party at whose instance the bank guarantee was furnished would have no jurisdiction to entertain a complaint concerning the bank guarantee furnished by the branch of the bank from the place where the office of the party concerned was situated.

14. Concerning the assignment of the right under the contract, on hiving off the business of defendant No. 1 and the hived off business vested in defendant No. 2, having noted that the same was under a notification issued by the Government of Greece, the learned Single Judge was obliged to consider the effect of a legislative hiving off the business of defendant No. 1 to defendant No. 2 and the contract between plaintiff and defendant No. 1 relating to the business vested in defendant No. 2 on the issue of territorial jurisdiction. The learned Single Judge was also obliged to consider the effect of the plaintiff filing a suit in a Court in Athens against defendant No. 1 and defendant No. 2 concerning the contract.

15. Whether the contract was validly assigned or not and whether defendant No. 2 could enforce the bank guarantee in its favour notwithstanding beneficiary being defendant No. 1 is a matter of substance and has no concern with the issue of territorial jurisdiction. It is a dispute concerning the contract and suffice would it state that whether it is a dispute concerning the contract or relating to a contract or arising out of a contract would make no difference on the issue of territorial jurisdiction. Territorial jurisdiction has to be determined with reference to a cause of action arising under a contract and if there is an exclusive jurisdiction clause vesting jurisdiction in one Court and ousting jurisdiction in others, the same has to be respected.

16. As we have noted hereinabove, apart from the exclusive jurisdiction clause vesting jurisdiction in the Courts of Athens, no part of cause of action concerning the contract arose in Delhi or for that matter in India. Entire cause of action was in Athens. As held above, issuance of the bank guarantee from Delhi is not CS(COMM) 212/2021 Page 9 of 11 a part of the cause of action and territorial jurisdiction cannot be determined with reference to the said fact."

25. To the similar extent are the decisions of the Coordinate Benches of this Court in Affinity Beauty Salon Pvt. Ltd. and Anr. v. Kotak Mahindra Bank Limited and Ors. reported as 2018 SCC OnLine Del 12627 and the decision dated 19.09.2017 passed in CS(COMM) 190/2017 titled Bharat Heavy Electricals Limited v. Electricity Generation Incorporation & Ors.

26. Thus, without going into the merits of the disputes and the decision cited by the learned Senior Counsel appearing for the Plaintiff relating to the merits of invocation; and in view of the fact that the underlying Contract dated 15.12.2017 between the parties was made in Mumbai, the Contract was to be performed at Mumbai, the contracting party namely the Defendant works for gain at Mumbai, the parties (in Clause 26 of the Contract) have agreed to confine the jurisdiction to the Courts at Mumbai, this Court is of the view that mere presence of the Banks issuing the Bank Guarantees within the territorial limits of this Court or the jurisdictional clause contained in the Bank Guarantee would not confer jurisdiction on this Court to entertain this suit.

27. For the aforesaid reasons I hold that this Court does not have territorial jurisdiction to entertain the present plaint and the plaint should be returned to be presented to the appropriate Court having jurisdiction.

28. After the conclusion of the V.C. proceedings, a written note has been submitted by the learned counsel for the Plaintiff wherein he has sought withdrawal of the present plaint in order to file the same in the appropriate Court having jurisdiction over the subject matter. Learned Senior Counsel prayed that in view of the pandemic situation, protection be granted for 45 CS(COMM) 212/2021 Page 10 of 11 days for the Plaintiff to approach the appropriate Court in Mumbai. I am not inclined to entertain this request having already held that this Court lacks jurisdiction to entertain the suit in the first place.

29. With the above directions, the present plaint along with the pending applications is disposed of. The plaint is hereby ordered to be returned with no order as to costs.

MANOJ KUMAR OHRI, J APRIL 30, 2021 na Click here to check corrigendum, if any CS(COMM) 212/2021 Page 11 of 11

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Delhi High Court - Orders