Delhi District Court
Steeworks And Power Engineers P Ltd vs Standard Chartered Bank And Anr on 29 October, 2024
IN THE COURT OF MR. SATYABRATA PANDA, DJ-04,
PATIALA HOUSE COURTS, NEW DELHI
CS No. 59226/2016
Date of Institution: 17.12.2014
Date of Arguments: 11.07.2024
Date of Judgment: 29.10.2024
Steelworks & Power Engineers (P) Ltd.,
C-3550, Green Fields Colony,
1st Floor, Sector 40-41, Faridabad (Haryana)
Through its Director and Authorised Representative,
Namely Shri Chetan Goyal
.....Plaintiff
Vs.
1. Standard Chartered Bank,
10, Sansad Marg, Mezzanine Floor,
New Delhi-110001.
2. Standard Chartered Bank,
10, Sansad Marg,
New Delhi-110001
Through its SME Banking Head .....Defendants
JUDGMENT
1. The plaintiff has filed the present suit for declaration that the demand of the defendant bank for Rs. 30,23,627 for pre-payment penalty charges was illegal and mandatory injunction directing the defendant to return certain documents/deeds to the plaintiff.
2. The present suit was earlier pending before the Hon'ble High Court of Delhi as CS(OS) No. 3936/2014, however, CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 1 of 48the suit was later transferred to the District Court upon revision in the pecuniary jurisdiction.
3. The case of the plaintiff as pleaded in the plaint is summarised as follows:
3.1. The plaintiff company is engaged in the design, fabrication, erection and commissioning of various types of steel structures as per requirements of its clients.
3.2. The defendant is a banking company.
3.3. The plaintiff was having Cash Credit Account no.
33905006862 and Term Loan Accounts having no. 48015237 and 48039195 with the defendant bank. The details of the facilities and the facility limits provided by the defendant to the plaintiff were as under:
Type of facility Facility limit(s) Limits description 1 Over draft facility-1 Rs. 10,000,000 To meet the working capital requirements 2 Term loan facility- 1 Rs. 62,27,000 Term loan facility (initial disburse amount INR 8,548,000.-) 3 Bank Guarantees INR 132,200,000 Bank Guarantee Facility Facility 4 Over draft facility-2 Rs. 20,000,000 To meet the working capital requirements CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 2 of 48
5 Term loan facility Rs. 27,54,340 Term loan facility
(initial disburse
amount Rs.
3,780,000.-)
Total facility limits Rs. 15,11,81,340
3.4. The plaintiff had been working with the defendant since long. The facilities/limits were opened at the Siliguri branch of the defendant bank in the year 2010 and later on after closure of the Siliguri branch in FY 2012-13, the same were transferred to the Delhi branch of the bank and renewals were carried out up to August 2013.
3.5. The limits were enhanced and renewed for two consecutive times in the past since 2011. However, problems were being faced by the plaintiff after the facilities were transferred to Delhi branch because of the closure of the SME unit of the defendant bank in Siliguri.
3.6. During FY 2012-13, the plaintiff's SME banking account was transferred to Delhi from Siliguri. Post the transfer of the plaintiff's account to Delhi, the plaintiff had to face various acts of omission/commission on the part of the defendant.
On various occasions, the contact persons or the relationship manager of the defendant was changed without prior information because of which the new person so appointed could not meet the plaintiff's CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 3 of 48requirements which caused disturbance and loss both in terms of money and reputation to the plaintiff company.
3.7. The plaintiff also faced harassment, defaults and negligence from the defendant in the services including but not limited to delay/abnormality in issuance of bank guarantees, seeking information, creation of FDRs etc. Apart from this, the defendant also pressurized the plaintiff to provide the details of losses incurred and status of its purchases even when the plaintiff, during the Uttarakhand flood disaster, was busy saving lives of over hundreds of staff/workmen on the site and was arranging for their safe evacuation. The bank officials of the defendant were also non-cooperative and made false and misleading statements to veil their mistakes. Regular complaints were made from time to time by the plaintiff.
3.8. Since the renewal of the facility was due in the month of August 2013, the defendant, on the request of the plaintiff, vide its email dated 09.06.2013 sought various documents from the plaintiff so that the facility could be renewed in time. The plaintiff provided the documents to the defendant through various emails in the month of July 2013. The defendant sent confirmation of receipt of the documents with the mail dated 30.07.2013 by CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 4 of 48demanding the processing fees of 0.25% as renewal charges. The said amount was also debited from the plaintiff's account in 2 instalments on 31.07.2013 and 31.08.2013. There were certain meetings scheduled between the parties for discussions on the limited renewal, but the same could not be take place due to the failure on the part of the defendant.
3.9. To the utter surprise and shock of the plaintiff, on 19.11.2013, the plaintiff received an email from the defendant stating that there was delay in processing the limit renewals and the limit was dropped on the very same day i.e. 19.11.2013. The dropping of the plaintiff's cash credit limits on 19.11.2013 by the defendant was without prior intimation. This resulted in the cheques of the plaintiff company suppliers been dishonoured. This was an unprofessional conduct on the part of the defendant. The plaintiff immediately vide its email dated 19.11.2013, objected to the limits being dropped without prior intimation.
3.10. On 26.11.2013, the defendant in order to cover its failure made fresh offers and requested the plaintiff to enter into a fresh agreement for the renewal of the limits. The plaintiff in order to restore its relationship with the defendant bank, once again provided all the necessary documents for scrutiny as CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 5 of 48demanded by the defendant bank during December 2013.
3.11. In the last week of December 2014, the defendant handed over a limit sanction agreement with covering letter dated 13.12.2013 to Mr. Chetan Goyal, director of the plaintiff company, and offered the plaintiff company to enter into the agreement and to remain with the defendant bank with the assurance that the services of the defendant bank would improve in quality.
3.12. However, the plaintiff once again suffered a setback as it received an email dated 02.01.2014 from the defendant alleging that due to non-submission of the limit loading papers, the limit on account of the plaintiff company would be zeroised and the cheques would be dishonoured. Being aggrieved by this, the plaintiff vide its letter dated 02.01.2014 served on the defendant bank its intimation to exit from the defendant's banking. Immediately, the officials of the defendant contacted the plaintiff company and tendered their apologies and requested the plaintiff to remain with the defendant bank and assured and promised that the services of the defendant would improve.
3.13. The plaintiff company, considering the assurances and promise of the defendant, on 03.01.2014, signed CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 6 of 48and sent to the defendant, the limit sanction documents along with a covering letter dated 03.01.2014 wherein the plaintiff categorically asked the defendant to process the limit only if the condition of pre-payment penalty charges of 2% was waved off completely from the terms of the agreement. This letter was duly received by the defendant.
3.14. The limit sanction agreement was processed thereafter, i.e. after the receipt of the letter dated 03.01.2014, without any objections from the defendant. The defendant sent email dated 07.01.2014, 08.01.2014 and 04.03.2014 to the plaintiff seeking documents to process the limit. The documents as required were provided by the plaintiff to the defendant.
3.15. However, the negligent approach of the defendant in handling the plaintiff's accounts was repeated and resultantly, the plaintiff had to face embarrassments before its suppliers and clients. Several cheques were dishonoured because of failure on the part of the defendant.
3.16. Ultimately, the plaintiff was compelled to arrive at a decision to close their accounts and to sever its relationship from the defendant bank. Accordingly, the plaintiff sent communication dated 27.03.2014 CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 7 of 48requesting the defendant to disburse the funds in order to enable it to close the existing limits with the defendant bank.
3.17. However, an absurd, illegal and arbitrary standard was taken by the defendant vide its email dated 28.03.2014 claiming 2% pre-payment penalty charges on the total cash credit limit including the limit towards bank guarantee. The plaintiff immediately vide its letter dated 29.03.2014 objected to such illegal demand, wherein reference was also made to the letter dated 03.01.2014. The defendant sent an email dated 29.03.2014 to the plaintiff falsely stating that a reply to the letter dated 03.01.2014 was provided, whereas no reply had been received from the defendant in response to the letter dated 03.01.2014, and on the contrary, the defendant had acted on the letter dated 03.01.2014.
3.18. The defendant had processed the limit/agreement after accepting the conditions stipulated in the letter dated 03.01.2014, however, now in order to make a wrongful gain as a pressure tactic the defendant was not returning the plaintiff company's original documents/instruments and was demanding 2% pre- payment penalty charges.
3.19. In paragraph 39 of the plaint, the plaintiff has mentioned the valuable security/documents which CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 8 of 48the defendant bank had retained illegally and was not releasing to the plaintiff.
3.20. The defendant was not entitled for any pre-payment penalty charges of 2% of the facility limit granted. The defendant was also not entitled to retain the valuable security/instruments of the plaintiff.
4. On this basis, the plaintiff has sought the following reliefs in the suit:
"a. Pass a decree of declaration that the demand of the defendant bank of Rs. 30,23,627/- towards pre- payment penalty charges is illegal, dehors the contract and is not payable, b. Pass mandatory injunction directing the defendants to immediately return the plaintiff all the documents/deeds as detailed at para 37 above"
5. The defendant has filed its written statement seeking dismissal of the suit. The case of the defendant as pleaded in the written statement is summarised as follows:
5.1. The plaintiff had filed the suit to gain unjust enrichment and to come out of the contractual agreements.
5.2. It is denied that there were any deficiencies in the services as alleged by the plaintiff in the plaint.
CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 9 of 485.3. The plaintiff had approached the defendant to avail certain financial facilities and accordingly, acceding to the request of the plaintiff, Overdraft A.c No. 33905006862 and Term Loan A.cs having Nos. 48015237 and 48039195 with the defendant were sanctioned. At the time when the facilities were granted, it was specifically agreed between the parties that in case of prepayment, the plaintiff shall be liable to pay an additional amount towards the prepayment charges @ 2% along with applicable service tax. These charges were duly intimated to the Plaintiff at the time of sanctioning the facilities and were duly countersigned by the director of the plaintiff company as a token of acceptance. Not only that the aforesaid charges were accepted by the plaintiff company, these facilities were actually availed by the Plaintiff thereafter. However, later on, the Plaintiff desired to close the facilities before the scheduled closure time which attracted the prepayment penalty in terms of the agreement. After having agreed to the terms and conditions of the facilities and also after having availed the facilities on the terms and conditions, it did not lie in the mouth of the plaintiff to object the conditions on any ground, whatsoever.
5.4. The credit facilities and limits assigned to the accounts are reviewed and renewed every year CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 10 of 48after taking necessary documents from the customer. Accordingly, a fresh facility letter is issued to the customer at the time of renewal of the facilities.
5.5. In the present case, the credit limit was due for renewal on 13.08.2013. The defendant requested the plaintiff to submit the necessary documents in this regard. The plaintiff submitted the documents through emails in July 2013. However, since the documents were not sufficient to complete the renewal process, the plaintiff was informed accordingly. As a goodwill gesture, during the renewal process, the plaintiff was provided with pre-approved credit limit for a period of 90 days from August 2013 so that the plaintiff could utilise and carry on transactions in the account.
5.6. The extension of 90 days was granted to the plaintiff since there was a delay in the renewal process and so as to enable the plaintiff to submit the satisfactory/required information to the defendant. The documents would have been required by the defendant to review the facilities and address the credit concerns or the risks involved in the proposals. In case the limits were not renewed in the extended period of 90 days, then the defendant was well within its rights to suspend the facilities. The defendant had duly CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 11 of 48intimated the plaintiff regarding its decision to suspend the facilities. The credit limits were dropped on 19.11.2013 as the renewal process was not completed. it is denied that the dropping of the credit limits on 19.11.2013 was a failure and breach on the part of the defendant.
5.7. Since the renewal process could not be completed due to credit concerns and inherent reason is involved in the account, the defendant offered to revise the facility structure. The basic purpose of the annual renewal is to update the current financial position of the company and to record other business updates of the borrower company and after evaluation of the aforesaid, to extend the existing facilities to realign the facility structure as per the prevailing financial and other business factors.
5.8. In the present case, the renewal of the facilities was done on 04.12.2013 and thereafter, the account was made operational and the facilities were made available at the plaintiff's disposal. The benefits of the facilities were duly availed by the plaintiff from 05.12.2013 onwards.
5.9. As a matter of practice, a sanction letter dated 13.12.2013 was issued to the plaintiff. The renewal documents were executed by the plaintiff CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 12 of 48on 26.12.2013 by executing the facility letter dated 13.12.2013.
5.10. The plaintiff is guilty of misleading the court. It is sought to be stated by the plaintiff that the signed sanction letter was submitted by the plaintiff to the defendant along with letter dated 03.1.2014. However, the fact was that the sanction letter was executed by the plaintiff on 26.12.2013, and that for the purpose of execution, the authorized signatory of plaintiff visited the defendant's branch. At the time of execution, a board resolution passed by the board of the plaintiff company was also provided to the defendant being Board Resolution dated 14.12.2013. The story of the covering letter dated 03.1.2014 was concocted only to create a false case.
5.11. After the agreement was already executed by execution of the facility letter dated 13.12.2013 on 26.12.2013, as an afterthought, the plaintiff issued the letter dated 03.01.2014. By 03.01.2014, the plaintiff had actually availed the extended facilities. It is denied that the request of the plaintiff for waiver of the pre-payment penalty was ever accepted by the defendant. The relationship of the parties was governed by the agreement which was executed and acted upon prior to the letter dated 03.01.2014. There was no CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 13 of 48other agreement between the parties other than the agreement executed on 26.12.2013.
5.12. The defendant was entitled to claim 2% pre-
payment charges in terms of the agreement between the parties. Whenever any facilities are granted, necessary provisioning is done with respect to the circulation of money. This exercise is carried out by the financial institutions so as to augment their resources properly. In case of any change in the schedule of payment, this disturbs the schedule of the financial institutions, and the financial institutions are well within their rights to impose such prepayment charges. These charges are also in accordance with the provisions of Section 74 of the Indian Contract Act, which provides that in case of termination of the agreement, the party, who is not in breach, would be entitled to seek damages from the party in breach. On the same analogy, the agreement between the parties has provided for the levy of prepayment penalty.
5.13. It is denied that the original title documents were retained by the defendant bank due to the 2% pre- payment penalty charges. The title documents were retained to secure the exposure of the defendant bank towards their bank guarantees CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 14 of 48issued by the defendant bank on behalf of the plaintiff to third parties.
5.14. During the course of proceedings before the banking ombudsman, as per the advice of the banking of batsmen to offer some sort of reduction to the plaintiff to amicably resolve the issue, the defendant had made an offer to the plaintiff for waiver of Rs. 2 lacs in respect of the 2% pre-payment penalty charges.
5.15. On this basis, it is the defendant's case that the plaintiff was not entitled to any relief and the suit to be dismissed.
6. The plaintiff has filed replication in which the plaintiff has reiterated the averments made in the plaint and has denied the contentions raised in the written statement.
7. The Hon'ble High Court of Delhi (Division Bench) vide order dated 24.12.2014 passed in FAO (OS) No. 548/2014, arising from the present suit, in respect of the title documents which were retained by the defendant bank for the bank guarantees issued by the defendant at the asking of the plaintiff, directed as follows:
"5. Suffice it so state, if the plaintiff wants return of the title documents either the bank guarantee need to be substituted or counter securities offered for the bank guarantee issued by the defendants at the CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.Page 15 of 48
asking of the plaintiff before the title documents can be returned.
6. Learned counsel for the defendants states that as long as the plaintiff secures the defendants, the defendants would not insist upon retention of the title documents. If the plaintiff is willing to deposit the sums, as are being claimed by the defendants or in respect whereof the defendants have issued bank guarantees or if the plaintiff were to substitute full amounts due as also the amount covered by the bank guarantees with counter guarantees, the matter can be looked at accordingly.
7. In that view of the matter, it is agreed between the parties that the plaintiff would send to the defendants a proposal to secure all interests of the bank. The letter containing the proposal would be sent within three days from today. The same would be responded to by the bank within two weeks thereafter.
8. If the parties are able to resolve the dispute, an application would be filed in the suit. If the resolution evades the parties, the plaintiff would be entitled to move an application before the learned Single Jude praying that the date of January 27, 2015 be pre-poned.
9. The appeal stands disposed of."
CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 16 of 488. Subsequently, vide order dated 11.03.2015 in the suit, the Hon'ble High Court directed the release of the title deeds by the defendant bank on the plaintiff furnishing bank guarantee for sum of Rs. 30,23,627. The relevant portion of the order dated 11.03.2015 in this regard is extracted hereunder:
"IA No. 25728.2014 (u.O 39 R 1 & 2 CPC) Learned senior counsel appearing for the plaintiff relying upon para 6 of the order of the Division Bench dated 24.12.2014 states that his clients are willing to offer a security for the alleged dues of the defendants by way of a bank guarantee of a nationalised bank.
As per the parties the disputed amount is Rs.30,23,627.- and not Rs.33,23,627.- as recorded in the order dated 19.02.2015. Hence, I order that on the plaintiff furnishing a bank guarantee of a nationalised bank for the said sum of Rs.30,23,627.- to the defendants, the defendants shall release all the title deeds of the properties which were charged with the bank. If for some reason, the plaintiff is unable to get the bank guarantee from a nationalised bank, then they are free to deposit the said sum before the Registrar General of this court who may in such an eventuality put the same in a fixed deposit.
CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.Page 17 of 48
Needless to add the plaintiff shall keep the bank guarantee alive till the pendency of the suit.
The application stands disposed of."
9. Vide order dated 11.03.2015, the following issues were framed in the suit:
"i) Whether the plaintiff is not liable to pay the pre-
closure charges being demanded by the defendant bank? OPP
ii) Whether the defendant waived the pre-closure charges by the act and conduct? OPP
iii) Relief."
10. Both the parties have led their respective evidence.
11. In support of its case, the plaintiff has examined as PW-1, Sh. Chetan Goyal, who is the director in the plaintiff company. He has tendered his affidavit in evidence as Ex. PW1.A in which he has deposed along the lines of the plaint. He was cross-examined by the defendant. The plaintiff has also relied upon the documentary evidence which has been exhibited on the record.
12. In support of its case, the defendant has examined Sh.
Vinod Bhakuni who was Associate Director with the defendant. He has tendered his affidavit in evidence as Ex.
CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 18 of 48DW1/A in which he has deposed along the lines of the written statement. He was cross-examined by the plaintiff.
13. The learned counsels for both the parties have made their respective submissions.
14. Ld. counsel for the plaintiff has referred to the relevant pleadings and evidence in support of the plaintiff and has submitted that the plaintiff would be entitled to decree. It is submitted that the plaintiff has been able to prove that the signed facility letter was submitted by the plaintiff to the defendant only along with the letter dated 03.01.2014 Ex.PW-1/88 and not prior thereto. It is submitted that the defendant has been unable to prove that the signed facility letter was submitted by the plaintiff to the defendant any time prior to 03.01.2014. It is submitted that the undisputed position was that the credit limits and facilities had already expired and that the parties were in the process of renewal of the facilities. It is submitted that there was a lapse on the part of the defendant in concluding the renewal process and delay was caused due to the defendant. It is submitted that the facility letter dated 13.12.2013 issued by the defendant to the plaintiff was the offer from the defendant to the plaintiff for renewal of the facilities. It is submitted that the duly signed facility letter was given by the plaintiff to the defendant only with the letter dated 03.01.2014 in which the plaintiff had categorically asked the defendant to process the limits only if the condition of pre-payment penalty charges of 2% was CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 19 of 48waved off completely from the terms of the agreement. It is submitted that hence, there was no absolute and unqualified acceptance of the facility letter dated 13.12.2013, and rather this was a case of a counter-offer by the plaintiff to the defendant. It is submitted when the counter-offer made by the plaintiff was subject to the condition that the clause for pre-payment penalty be removed, then the defendant could not have accepted the rest of the terms and conditions without also accepting the condition of removal of the pre-payment penalty clause. In this regard, learned counsel for the plaintiff has referred to the decision in Food Corporation of India v. Ram Kesh Yadav (2007) 9 SCC 531. It is further submitted that pursuant to the conditional offer or counter-offer of the plaintiff through its letter dated 03.01.2014, the defendant remained silent and did not object to this. It is submitted that hence, the counter-offer made by the plaintiff was accepted by the defendant sub silentio. It is submitted that hence, the plaintiff's condition in the counter-offer that the pre-penalty clause be removed was accepted by the defendant sub silentio. The learned counsel for the plaintiff has referred to the decisions in Ramji Dayawala v. Invest Import (1981) 1 SCC 80 and Bharat Petroleum Corp. Ltd. v. Great Eastern Shipping Co. Lt. (2008) 1 SCC 503, with regard to the principle of acceptance sub silentio. On this basis, learned counsel for the plaintiff has submitted that since there remained no pre-payment penalty clause under the agreement between the parties, the defendant could not claim to charge any such penalty.
CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 20 of 4815. Learned counsel for the plaintiff has further submitted that even otherwise, the defendant could not claim any payment under the pre-payment penalty clause since the defendant had failed to prove as to what was the actual loss suffered by the defendant. It is further submitted that even in order to claim any damages for pre-payment, the defendant was supposed to file a suit for damages against the plaintiff. It is submitted that no pecuniary liability could arise till the court had determined that the party complaining of the breach was entitled to the damages. In this regard, learned counsel for the plaintiff has relied upon the decision in Tower Vision India v. Procall Pvt. Ltd. 2012 SCC OnLine Del 4396.
16. Learned counsel for the plaintiff has further submitted that in any case, the plaintiff has been able to show that there were gross deficiencies in the services of the defendant, and, hence, the plaintiff was fully justified in closing the accounts and facilities. It is submitted that since the plaintiff was constrained to close their accounts and facilities due to the deficiencies in the services of the defendant, in any case, the defendant could not claim to levy any pre-payment penalty.
17. On the other hand, the learned counsel for the defendant has referred to the pleadings and evidence in support of the defendant and has submitted that the suit is liable to be dismissed. It is submitted that the facility letter dated 13.12.2013 Ex.PW-1/89 was already accepted by the CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 21 of 48plaintiff on 26.12.2013 by putting signature and company stamp on it. It is submitted that this facility letter was executed by the plaintiff company through its director who was duly authorised by the board of directors in the meeting on 14.12.2013. It is submitted that hence, on 26.12.2013, the contract stood concluded between the parties. It is submitted that the acceptance of the facility letter by the plaintiff on 26.12.2013 was without any condition attached to it and the pre-payment clause which was part of the facility letter was unconditionally accepted by the plaintiff on 26.12.2013.
18. It is further submitted that although the receipt of the letter dated 03.01.2014 was not disputed, however, the said letter dated 03.01.2014 was never accepted by the defendant. It is submitted that the letter dated 03.01.2014 was a unilateral act by the plaintiff and could not alter the contract which already stood concluded on 26.12.2013.
19. It is further submitted that it was doubtful that the facility letter was forwarded by the plaintiff with the letter dated 03.01.2014 since the letter did not reveal that it had any enclosures.
20. Learned counsel for the defendant has further submitted that the letter dated 03.01.2014 was issued by the director of the plaintiff company without any authorisation and the plaintiff has been unable to show that its director was authorised to make any variation or modification in the CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 22 of 48facility letter which was already accepted by the plaintiff on 26.12.2013. It is submitted that, without prejudice to the contention that the letter dated 03.01.2014 was subsequent to the conclusion of the contract on 26.12.2013 and could not alter the contract, even otherwise, the letter dated 03.01.2014 which was issued by the plaintiff's director was without any authority and hence, to no effect.
21. It is further submitted that the plaintiff has been unable to prove that the defendant had ever communicated to the plaintiff regarding acceptance of the condition imposed in the letter dated 03.01.2014.
22. It is further submitted that the last date for renewal of the facilities had come to an end in August 2013, and accordingly, the defendant requested the plaintiff to provide the necessary documents. It is submitted that the plaintiff did not submit the completed documents and the defendant as a goodwill gesture provided pre-approved credit limit so that the plaintiff's business may not be hampered. It is submitted that the condition of pre- payment charges was existing even in the earlier facility letter and under no circumstances would the defendant have agreed to waive of the condition of pre-payment penalty charges.
23. It is submitted that hence, the only agreement between the parties was the agreement executed on 26.12.2013 by way of execution of the facility letter dated 13.12.2013. It is CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 23 of 48submitted that the facility letter dated 13.12.2013 contains the pre-payment charges which were agreed to between the parties. It is submitted that hence, the defendant was entitled to payment of the pre-payment charges under the agreement between the parties.
24. It is further submitted that the undisputed position was that the plaintiff was enjoying the credit facility in December 2013 in itself, and hence, the plaintiff could not even rely upon the letter dated 03.01.2014.
25. On this basis, it is submitted that the suit is liable to be dismissed.
26. Both parties have also filed their respective written submissions.
27. I have considered the submissions of the learned counsels for the parties and I have perused the record including the pleadings, evidence (both oral and documentary) and the written submissions.
28. My issue-wise findings are as follows.
Issue No.1- Whether the plaintiff is not liable to pay the pre-closure charges being demanded by the defendant bank? OPP Issue No.2- Whether the defendant waived the pre-closure charges by the act and conduct? OPP CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 24 of 4829. The defendant is claiming the right to levy the pre-
payment/foreclosure charges on the basis of the facility letter dated 13.12.2013. It is the case of the defendant that there was a concluded contract between the parties by way of execution on 26.12.2013 of the facility letter dated 13.12.2013 which contained the clause for pre-closure charges. The relevant clause of the facility letter is extracted hereunder:
"Pre-payment Charges The Facility shall attract prepayment charge at 2% plus applicable service tax (as may be revised by the Bank from time to time) on the Facility limits granted to the Borrower in the event of
(a) repayment by the Borrower to the Bank of any amount ahead of previously agreed repayment schedule or lenor or terms or dates of repayment or renewal as contained in the Facility Latter, or
(b) The Borrower's not availing of the Facility or any part thereof within 80 (sixty) days from the date of its grant."
30. The undisputed position is that that term of the previous facility letter had already expired. Hence, the controversy in the present suit revolves only around the facility letter dated 13.12.2013 and not to any previous facility letter since the term of the previous facility letter already stood expired.
CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 25 of 4831. It is the case of the defendant that the defendant had issued the facility letter dated 13.12.2013 to the plaintiff and that the plaintiff had through its duly authorised director signed and stamped the facility letter on 26.12.2013. On this basis, it is the case of the defendant that the contract between the parties already stood concluded on 26.12.2013 with the execution of the facility letter by the plaintiff on 26.12.2013 through its signing and stamping by the plaintiff's director.
32. On the other hand, it is the case of the plaintiff that it had signed and sent the facility letter to the defendant along with covering letter dated 03.01.2014 in which the defendant was asked to process the facility only if the condition of pre-payment penalty charges of 2% was waived off completely from the terms of the agreement.
33. The defendant has not denied the receipt of the letter dated 03.01.2014. However, it is the case of the defendant that the letter dated 03.01.2014 was issued by the plaintiff as an afterthought after the agreement between the parties through the facility letter was already executed between the parties on 26.12.2013. It is the case of the defendant that after the agreement through the facility letter was already executed on 26.12.2013, then the letter dated 03.01.2014 by the plaintiff for waiver of the condition of pre-payment penalty charges could not unilaterally alter the already concluded contract, especially when the defendant did not agree to the request for waiver.
CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 26 of 4834. The plaintiff, on the other hand, has claimed that there was no concluded contract on 26.12.2013 as alleged by the defendant. It is the plaintiff's case that it had sent the signed facility letter along with the covering letter dated 03.01.2014 to the defendant imposing the condition for waiver of the pre-payment penalty charges. As such, it is the plaintiff's case that the plaintiff had not accepted the offer of the defendant made through the facility letter, but that the plaintiff had made a counter-offer for execution of the facility letter without the clause for pre-payment penalty charges.
35. Thus, the principal question which arises is whether the contract already stood concluded on 26.12.2013 with the signing and stamping of the facility letter by the plaintiff as per the case of the defendant, or whether there was no concluded contract since there was a counter-offer made through the letter dated 03.01.2014 as per the case of the plaintiff.
36. This controversy requires going to the basic principles of law as to the formation of a contract under the Indian Contract Act, 1872. Under Section 2(b) of the Contract Act, when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted, and a proposal, when accepted, becomes a promise. Thus, an offer/proposal is accepted by a person by signifying his/her assent thereto. Under Section 2(e) of the Contract Act, every promise and every set of promises, CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 27 of 48forming the consideration for each other, is an agreement. Under Section 2(h) of the Contract Act, an agreement enforceable by law is a contract.
37. Section 4 of the Indian Contract Act provides as to when communication of an acceptance is complete. Section 4 of the Contract Act is extracted hereunder:
"4. Communication when complete.-- The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.
The communication of an acceptance is complete,-- as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor;
as against the acceptor, when it comes to the knowledge of the proposer.
The communication of a revocation is complete,-- as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it;
as against the person to whom it is made, when it comes to his knowledge."
(Emphasis supplied by me)
38. Thus, as per section 4 of the Contract Act, although the communication of an acceptance is complete as against the proposer when it is put in a course of transmission to him CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 28 of 48so as to be out of the power of the acceptor, however, on the other hand, the communication of an acceptance is complete as against the acceptor when it comes to the knowledge of the proposer. Hence, for the communication of an acceptance to be complete as against the acceptor, it has to come to the knowledge of the proposer.
39. Section 5 of the Indian Contract Act provides as to when an acceptance may be revoked. Section 5 of the Contract Act is extracted hereunder:
"5. Revocation of proposals and acceptances.-- A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards."
(Emphasis supplied by me)
40. Thus, as per section 5 of the Contract Act, an acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, i.e. before the acceptance comes to the knowledge of the proposer, but not afterwards.
41. Thus, in the present case, the communication of the acceptance by the plaintiff of the offer made by the defendant through the facility letter would have been complete as against the plaintiff only when the acceptance CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 29 of 48had come to the knowledge of the defendant, and prior thereto the acceptance could have been revoked at any time by the plaintiff.
42. It is the case of the defendant that the contract stood concluded on 26.12.2013 since the facility letter was signed and stamped on behalf of the plaintiff company on 26.12.2013. However, I am unable to agree with this contention in light of sections 4 and 5 of the Contract Act. Mere signing and stamping of the facility letter by the plaintiff would not mean that the acceptance was complete as against the plaintiff. The acceptance would have been complete as against the plaintiff only when the signed and stamped facility letter had been transmitted to the defendant and after the same had subsequently come to the knowledge of the defendant. Prior thereto, the plaintiff would have been free to revoke the acceptance at any time.
43. It is the case of the plaintiff that the signed and stamped facility letter was enclosed by the plaintiff along with its letter dated 03.01.2014 in which the plaintiff had sought waiver of the pre-payment penalty clause. The defendant has not denied that it had not received the letter dated 03.01.2014 although it is denied that the duly signed and stamped facility letter was given along with the letter dated 03.01.2014. A perusal of the letter dated 03.01.2014 Ex.PW-1/88 shows that it was received by the defendant on 06.01.2014 since there is a signed acknowledgment of receipt dated 06.01.2014 on this document.
CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 30 of 4844. The letter dated 03.01.2014 Ex.PW-1/88 is extracted hereunder:
"Ref: 0114.C.SCB.002 Date: 03.01.2014 To The Standard Chartered Bank SME Banking 10, Sansad Marg, New Delhi Sub: Conditional Acceptance and Signing of the Limit Sanction Documents Dear Sir, We refer to the Limit Sanction Documents received by the Bank for signing and further discussions thereafter.
We hereby submit the documents duly signed with a conditional clause that these documents shall be processed further only if the condition of foreclosure charges of 2% shall be waived off . removed. We were unaware of the foreclosure charges while signing the sanction letters earlier and we shall not accept the same for this sanction.
This is for your information and necessary action further.
Thanking You Yours Sincerely.
For Steelworks & Power Engineers (P) Ltd.
CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.Page 31 of 48
Chetan Director"
(Emphasis supplied by me)
45. As can be seen from the letter dated 03.01.2014 Ex.PW-
1/88, it was written by Mr. Chetan Goyal, director, on behalf of the plaintiff. The contention of the defendant that the letter dated 03.01.2014 was of no effect on the basis that the author thereof i.e. the director of the plaintiff was not specifically authorised to write such a letter imposing condition of removal of the foreclosure charges is wholly without merit. The undisputed position is that Mr. Chetan Goyal was the director of the plaintiff company and had addressed the letter dated 03.01.2014 to the defendant in that capacity. As the director of the plaintiff company, he could act on behalf of the plaintiff company and the letter dated 03.01.2014 was such an act by the director on behalf of the plaintiff company. The defendant has been unable to show that there was any requirement in law for the director to have any express authorisation from the board of directors to write the letter dated 03.01.2014. In any case, it would be deemed that the letter dated 03.01.2014 was duly authorised since it was being written by a director and the same was never disputed by the plaintiff or its board of directors at any point of time.
CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 32 of 4846. Mr. Chetan Goyal was examined as PW-1 by the plaintiff.
In his affidavit in evidence Ex.PW-1/A, PW-1 has stated in respect of the facility letter dated 13.12.2013 as follows:
"27. I say that the defendant bank in the last week of December, 2013 handed over a limit sanction agreement with covering letter dated 13.12.2013 to Mr. Chetan Goyal, (Director of the plaintiff company) and offered the plaintiff company to enter into agreement and to remain with Defendant bank with an assurance that the services of Defendant bank would improve both in quality and otherwise.
28. I say that the sincere efforts to the plaintiff company, once again suffered a setback, as despite providing to the defendant all the documents so sought, Plaintiff company received an email dated 02.01.2014 from the defendants alleging that due to non- submission of limit loading papers, the limit in account of Plaintiff company will be zeorised and cheques would dishonor. Printout of email dated 02.01.2014 is exhibited hereto and marked as EXHIBIT-PW-1/87.
29. I say that being constrained by continuous failure and illegal acts on the part of the defendant bank, Plaintiff company vide its letter dated 02.01.2014 served on Defendant bank its intimation to exit from Defendant banking through bank takeover. The reason in brief such as dissatisfactory services, CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.Page 33 of 48
dropping and reduction in sanction limit etc for the said decision were also communicated to the defendants.
30. I say that immediately, the officials of the defendant bank contacted the plaintiff company and tendered their apologies and requested to remain with the defendant bank and assured. promised the plaintiff that the services of the defendants would improve.
31. I say that the Plaintiff company considering the assurances and promises of the defendant, accepted to enter into agreement with the Defendant bank, and accordingly, on 03.01.2014 signed and send to the defendants, the limit sanction documents along with a covering letter dated 03.01.2014, wherein, the plaintiff company categorically asked the defendants to process the said limit only if the condition of pre-
payment penalty charges of 2% is waived
off.removed completely from the said
terms.agreement. It was also informed that
foreclosure charges shall not be acceptable for the said sanction. This letter was duly received by the Defendant bank and has been admitted to have been received. It is pertinent to state that the same was also accepted by the bank. Letter dated 03.01.2014 is exhibited hereto and marked as EXHIBIT-PW- 1/88.
CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.Page 34 of 48
32. 1 say that the limit Sanction Agreement was processed thereafter, ie. after the receipt of the said letter dated 03.01.2014, without any whisper and or objection from Defendant bank. Limit sanction agreement with covering letter is exhibited hereto and marked as EXHIBIT-PW1/89."
(Emphasis supplied by me)
47. Thus, PW-1 has deposed that the facility letter dated 13.12.2013 was handed over to him by the defendant bank in the last week of December 2013. He has further deposed that, on 03.01.2014, the facility letter was signed and sent to the defendant along with the letter dated 03.01.2014.
48. In his cross-examination, PW-1 has stuck to this stand. The relevant portion of the cross-examination dated 24.09.2019 of the PW-1 is extracted hereunder:
"Q.14 Is it correct that the credit facility after renewal in August 2013 was signed and accepted by the Plaintiff Company on 26.12.2013?
Ans: It is incorrect.
Q.15 Kindly see Ex.PW1.89[Colly] [Page 97] of the documents filed by the Plaintiff. Is it correct that the date of execution of this document is 26.12.2013?
Ans: It was not executed on 26.12.2013. [Vol.] After 26.12.2013 more documents were asked by the Bank and Plaintiff Company finally submitted the facility CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.Page 35 of 48
letter along with the Conditional Acceptance vide letter dated 03.01.2014 [Ex.PW1.88], which was accepted by the bank also.
It is incorrect to suggest that the Bank never agreed and accepted the contents of the letter dated 03.01.2014 [Ex.PW1.88].
Q.16 Kindly see portion 'A' to 'A' at page 107 of Ex.PW1.89[Colly] filed by the Plaintiff. Is it correct that there is no striking off of the pre-payment charges in this facility letter?
Ans: It is correct. [Vol.] It was handed over along with the letter dated 03.01.2014 specifying the conditional acceptance of the facility letter with respect to this clause.
It is incorrect to suggest that the facility letter was executed on 26.12.2013."
(Emphasis supplied by me)
49. On the other hand, as per the case of the defendant as pleaded in the written statement, the sanction letter was executed by the plaintiff on 26.12.2013, and that for the purpose of execution, the authorized signatory of plaintiff visited the defendant's branch. It is also denied by the defendant that the duly signed and stamped facility letter was given along with the letter dated 03.01.2014. However, there is no evidence placed on record by the defendant to show that the facility letter was executed by CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 36 of 48the authorised signatory of the plaintiff at the defendant's branch on 26.12.2013 or that the duly signed facility letter was already received by the defendant prior to receipt of the letter dated 03.01.2014.
50. In his cross-examination on 20.01.2020, the defendant's witness DW-1 Mr. Vinod Bhakuni has admitted that his knowledge of the facts of the case was not based on his personal knowledge but was based on the records maintained by the defendant bank. Although in his cross- examination on 19.02.2020, the defendant's witness DW-1 has denied the suggestion that the facility letter dated 13.12.2013 was for the first time shared with the defendant bank with the covering letter dated 03.01.2014, however, DW-1 has not deposed as to when the signed facility letter was shared by the plaintiff with the defendant if not with the covering letter dated 03.01.2014. DW-1 has also not pointed to any part of the record which would show as to when the facility letter dated 13.12.2013 was received by the defendant or that it was received prior to the letter dated 03.01.2014. The relevant portion of the cross- examination dated 19.02.2020 is extracted hereunder:
"Q.19. I put it to you that the said facility letter dated 13.12.2013 was for the first time shared with the Defendant Bank with covering letter dated 3.1.2014. What you have to say?
Ans. It incorrect.
CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.Page 37 of 48
Q.20. I put it to you that letter dated 3.1.2014 (Ex. PW 1.88) though received was not responded back by the Defendant Bank as it was accepted.
Ans. The facility letter was signed by the Plaintiff on 26.12.2013, hence there was no reason to respond to this letter.
Q.21. I put it to you that the Defendants have not filed any document to support your allegations as made in answer to question 19 and 20 above.
(Question is objected to by Ld. Counsel for the Defendant on the ground that it is argumentative in nature).
(Ld. Counsel for the Plaintiff states that the question is factual in nature and seeks to find out facts.) (Observation of the Local Commissioner: To be decided by the Hon'ble Court. However, the witness is directed to answer the question.) Ans. As already mentioned earlier, there was no reason to respond to the letter when the facility sanction letter which had all the terms and conditions mentioned therein was signed on 26.12.2013.
Q.22. I put it to you that the Defendants have not filed any document because there exist no such CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.Page 38 of 48
document (s) and the facility letter was sent along with Ex PW 1.88.What do you have to say?
Ans. It is incorrect to state that the facility letter was shared along with Ex PW 1.88.
Q.23. Can you show any document from the record to show that the facility letter was shared, apart from with letter dated 3rd Jan, 2014?
Ans. On the record there is no such document."
(Emphasis supplied by me)
51. Thus, there is no evidence from the defendant's side that the signed facility letter dated 13.12.2013 was received by the defendant at any time prior to 03.01.2014.
52. It is also pertinent that although the defendant has pleaded in its written statement that the sanction letter was executed by the plaintiff on 26.12.2013 and that for the purpose of execution, the authorized signatory of the plaintiff i.e. Mr. Chetan Goyal, director of the plaintiff, visited the defendant's branch, however, neither was any suggestion to this effect was put to the PW-1 Mr. Chetan Goyal, nor was PW-1 cross-examined on this aspect. Further, even the defendant's witness DW-1 has not deposed in his affidavit in evidence Ex.DW-1/A to the fact that the authorised signatory of the plaintiff had visited the defendant's branch on 26.12.2013 to sign and execute the facility letter. Thus, it is clear that the defendant has CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 39 of 48abandoned the stand taken by it in its written statement to the effect that the plaintiff's authorised signatory had visited the defendant's branch on 26.12.2013 to sign and execute the facility letter.
53. On the other hand, the plaintiff's witness PW-1 has categorically deposed that the signed facility letter dated 13.12.2013 was shared with the defendant with the letter dated 03.01.2014. The defendant has been unable to shake his evidence in this regard in cross-examination. The receipt of the letter dated 03.01.2014 is admitted.
54. A perusal of the letter dated 03.01.2014 shows that it is captioned as "Sub: Conditional Acceptance and Signing of Limit Sanction Documents". The letter states that the plaintiff was "hereby" submitting the documents duly signed with the condition that the documents shall be processed further only if the condition of foreclosure charges of 2% shall be waived off/removed. It is further stated in the letter that the plaintiff would not accept the condition of foreclosure charges for the present sanction. The fact that the plaintiff wrote in the letter dated 03.01.2014 that it was "hereby" submitting the duly signed documents also supports the contention of the plaintiff that the signed facility letter was given to the defendant along with the letter dated 03.01.2014 Ex.PW-1/88.
55. On a balance of probabilities, in light of there being no evidence led by the defendant to show that the signed CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 40 of 48facility letter was received by the defendant at any time prior to 03.01.2014, and in light of the evidence led by the plaintiff in the form of deposition of PW-1 Mr. Chetan Goyal and the letter dated 03.01.2014 Ex.PW-1/88, it is held that the signed facility letter, although signed and stamped by the plaintiff on 26.12.2013, was given by the plaintiff to the defendant for the first time along with the letter dated 03.01.2014 Ex.PW-1/88 only.
56. This being the position, the letter dated 03.01.2014 would have to be read as part and parcel of the signed facility letter which was given by the plaintiff to the defendant, and the date of communication of the signed facility letter would be 03.01.2014 only. Thus, the acceptance of the terms and conditions of the facility letter by the plaintiff was not unqualified and absolute but was conditional on the removal of the condition of foreclosure charges of 2%.
57. Section 7 of the Contract Act provides that in order to convert a proposal into a promise, the acceptance must be absolute and unqualified. As already mentioned, the acceptance in the present case was not absolute and unqualified but was only a conditional acceptance. This means that in the present case there was no acceptance in the which would convert the proposal to a promise and result in an agreement/contract. Rather, this was the case of a counter-offer by the plaintiff to the defendant proposing the terms and conditions in the facility letter CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 41 of 48subject to the condition of removal of the clause for foreclosure charges.
58. It is the own case of the defendant that it never agreed to the condition mentioned in the letter dated 03.01.2014. This stand of the defendant means that the counter-offer made by the plaintiff by virtue of the letter dated 03.01.2014 was never agreed to by the defendant. Resultantly, there was no renewal of contract between the parties in respect of the facilities.
59. The defendant has clearly stated in its written statement (see paragraphs 17-21 of the para-wise reply portion of the written statement) that the credit limits were due for renewal on 13.08.2013, meaning thereby that the defendant has admitted that the previous agreement for the facilities would have expired on 13.08.2013 unless renewed.
60. The defendant has also stated in its written statement (see paragraphs 17-21 of the para-wise reply portion of the written statement) that since there was delay in completion of the renewal process on or before the due dates, an extension of 90 days was granted to the plaintiff so as to enable it to submit the satisfactory/required information to the defendant, and that the documents would have been required to review the facilities and address the credit concerns or the risks involved in the proposals. It is further stated in the written statement that in case the limits were CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 42 of 48not renewed in the extended period of 90 days, then the defendant was well within its rights to suspend the facilities. The defendant has further stated that it had duly intimated the plaintiff regarding its decision to suspend the facilities. On this basis, the defendant has sought to justify the dropping of the credit limits on 19.11.2013.
61. Thus, as can be seen from the written statement, it is the own case of the defendant that the previous facilities arrangement was due to expire on 13.08.2013 unless renewed and that there was delay in the renewal process and that, as such, the defendant had granted extension of 90 days to the plaintiff for submission of the required information and documents for renewal. It is also the own case of the defendant that the facilities were suspended and the credit limits were dropped on 19.11.2013 since the renewal did not take place even in the extended period of 90 days.
62. It is further the case of the defendant in its written statement (see paragraph 9 of the para-wise reply portion of the written statement) that the renewal of the facilities was done on 04.12.2013 and, thereafter, the account was made operational and facilities were made available at the plaintiff's disposal. It is further stated that the benefits of the facilities were duly availed by the plaintiff from 05.12.2013 onwards and, as a matter of practice, the renewal documents were executed by the plaintiff on 26.12.2013.
CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 43 of 4863. However, even if the defendant had made the facilities operational on 04.12.2013, this was not a renewal of the facilities upon a concluded contract between the parties, but would have been only on a stop-gap or ad hoc basis pending the completion of the renewal process. As per the defendant's own case, the facilities arrangement was set to expire on 13.08.2013 unless renewed and that since the renewal process had been delayed, an extension of 90 days was granted to the plaintiff for the credit limits, which means the extension would have been till around 13.11.2013 only. As per the defendant's own case, the renewal process was not completed within the 90 days extension period and consequentially the credit limits were dropped on 19.11.2013. As per the defendant's own case in the written statement (see paragraph 22 of the para-wise reply portion of the written statement), the defendant had subsequently offered to revise the facility structure. As per the defendant's own case, the defendant had issued the facility letter dated 13.12.2013 to the plaintiff for execution of the fresh/renewed agreement. As per the defendant's own case, on 26.12.2013, the facility letter was executed between the parties which constituted the agreement between the parties. The defendant has categorically stated in its written statement (see paragraph 28 of the para-wise reply portion of the written statement) that there was "no other agreement between the parties other than the one executed on 26.12.2013." Thus, the contention of the defendant that the facilities were renewed on 04.12.2013 is not acceptable. When it is the CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 44 of 48own case of the defendant that the agreement for renewal of the credit facilities was executed on 26.12.2013, then even if the defendant had made the facilities operational on 04.12.2013 this would have been merely on a stop-gap or ad hoc basis pending the negotiation of the final terms of the renewal of the facilities and would not bind the plaintiff with respect to any term for pre-payment penalty charges.
64. I have already held above that there was no agreement which was executed by the parties on 26.12.2013 as alleged by the defendant. The plaintiff had only made a counter-offer through its letter dated 03.01.2014, which was never accepted by the defendant. Thus, there was no concluded contract between the parties.
65. From the evidence on the record, it appears that both the parties were proceeding with the matter after 03.01.2014 on their respective misconceived notions.
66. The defendant was under the misconceived notion that the contract was already concluded on 26.12.2013 merely due to the fact that the facility letter dated 13.12.2013 was signed and stamped by the plaintiff on 26.12.2013, and on the erroneous view that the letter dated 03.01.2014 was of no consequence. However, the signed facility letter had been given to the defendant only along with the letter dated 03.01.2014 which contained the condition of waiver of the pre-payment penalty clause, and as such the CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 45 of 48acceptance of the facility letter was conditional on this condition. Thus, there was really no acceptance of the facility letter but only a counter-offer was made through the letter dated 03.01.2014. However, the defendant did not realise this and continued to act on the erroneous belief that the agreement had been concluded on 26.12.2013. This is most likely the reason why the defendant chose not to reply to the letter dated 03.01.2014.
67. The plaintiff was also under a misconceived impression that the condition mentioned in the letter dated 03.01.2014 had been accepted by the defendant since the defendant did not give any reply to the letter dated 03.01.2014 raising any objection thereto. However, the defendant was considering that the contract already stood concluded on 26.12.2013 and that the letter dated 03.01.2014 was of no consequence, and most likely this is why the defendant did not even respond to the letter dated 03.01.2014.
68. Thus, the parties had continued with the renewal process based on their own misconceived notions as mentioned above. The defendant mistakenly believed that the terms of the facility letter dated 13.12.2013 including the pre- payment charges clause stood finally executed on 26.12.2013, whereas the plaintiff believed that the defendant had accepted the condition of the counter-offer for removal of the pre-payment charges clause.
CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 46 of 4869. Be that as it may, the fact of the matter is that there was no concluded contract in the form of the facility agreement between the parties on 26.12.2013 as alleged by the defendant. The plaintiff had made a very categorical counter-offer through its letter dated 03.01.2014 that the 2% pre-payment penalty charges be waived. This counter- offer was never agreed to by the defendant. Thus, the process of renewal of the limits was not finalised and concluded, although the parties had their respective misconceived notions, as elaborated above, that the contract had been concluded as per their own respective interpretations. As on 27.03.2014, when the plaintiff had asked the defendant to close the existing limits, this position persisted.
70. Although the parties had in principle agreed to all the terms of the facility letter dated 13.12.2013 except the clause for pre-payment charges, since there was no agreement on the clause for pre-payment charges, it would be taken that there was no concluded contract under the facility letter dated 13.12.2013 between the parties with respect to the renewal of the facilities. The defendant was only providing the facilities to the plaintiff during the period of negotiation of the renewal of the facilities only on a stop-gap or ad hoc basis. This position persisted when the plaintiff asked the defendant to close the accounts and facilities. Hence, the defendant would not be entitled to levy any pre-payment penalty based on the clause for pre- payment charges in the facility letter dated 13.12.2013.
CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 47 of 4871. Accordingly, the plaintiff would be entitled to declaration that the demand of the defendant bank of sum of Rs. 30,23,627/- towards pre-payment penalty charges was illegal and not payable. It is decreed accordingly.
72. In view of the aforesaid result, the bank guarantee furnished by the plaintiff in respect of the aforesaid amount would stand discharged.
73. In the facts and circumstances of the case, parties to bear own costs.
74. Let the decree sheet be drawn up accordingly.
75. File be consigned to record room after due compliance.
Digitally signed by Satyabrata Panda Satyabrata Date:
Panda 2024.10.29
17:08:41
+0530
(SATYABRATA PANDA)
District Judge-04
Judge Code- DL01057
PHC.New Delhi.29.10.2024
CS No. 59226/16 Steelworks & Power Engineers (P) Ltd., Vs. Standard Chartered Bank & Anr.
Page 48 of 48