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2010 Supreme(Bom) 258
In the High Court of Bombay at Aurangabad
THE HONOURABLE MR. JUSTICE V.R. KINGAONKAR
M/s Great Eastern Energy Corporation Ltd.
Versus
M/s Jain Irrigation Systems Ltd. & Others
WRIT PETITION NO. 502 OF 2009
Decided on : 17-02-2010
For the Petitioner:P.M. Shah, Senior Counsel instructed by S.P. Shah, Advocates.
For the Respondents:R1, P.V. Mandlik, Senior Counsel instructed by K.C. Sant, R3, S.S. Gangakhedkar, Advocates.
Headnote:Civil Procedure Code, 1908 - Section 151 - Order XXXIX, Rules 1 and 2 - Grant of interim injunction - Encashment of Bank guarantee - Challenged by petitioner - Petitioner invited tenders for MDPE - Tender submitted by respondent-1 alongwith Bank guarantee - Specific arbitration clause in tender document - Held - Bank guarantee cannot be invoked after validity period - Respondent-1 not declared as successful bidder by petitioner within parameters of tender document - Petitioner suffered no financial loss - Courts below committed grave error in entertaining suit without payment of ad volarem court-fees - Impugned order not suffers from any perversity or illegality - Confirmed subject to condition that respondent-1 shall pay deficit courtfees in trial Court and shall furnish letter addressed to bank to extend period of Bank guarantee by one year more - Petition dismissed. - The present case does not come within ambit of first exception which permits non invocation of Bank Guarantee, namely, the existence of alleged fraud in connection with the Bank Guarantee which could vitiate the very foundation thereof. The respondent No. 1 agreed to give the Bank Guarantee. The respondent No. 2 Bank executed the Bank Guarantee without any false representation made by either of the party. The second exception relates to the cases where allowing the encashment of an unconditional Bank Guarantee would result in irretrievable harm or injustice to one of the parties concerned or that it would be a case of "special equities" in favour of granting injunction. No purchase Order was issued by the petitioner. The petitioner did not suffer any financial loss. It prima facie appears that there was no concluded contract within bid validity period under the terms of the Tender Document. In such a case it will have to be said that "Special equities" are with the respondent No. 1 because the amount shown under the Bank Guarantee would be taken away by the petitioner and that the respondent No. 1 will be dragged to further litigation for recovery thereof. There will be multiplicity of litigation in such a case. The balance of convenience lies in favour of the respondent No. 1. There appears likelihood of legal injury caused to the respondent No. 1 if the relief of prohibitory injunction is refused. The civil dispute involves seriously debatable issues and questions of facts and law. The first appellate Court has issued direction to decide the suit within a particular frame of time. It appears however that the schedule of final hearing is not adhered to by the trial Court. It would be appropriate to direct the expeditious disposal of the suit within a particular time frame by emphasising significance of such early disposal in the peculiar fact situation of the present case. The trial Court and the first Appellate Court, however committed patent error while entertaining the suit without payment of ad volaram Court fees. The suit merely seeking declaration from immunity to pay the amount under the Bank Guarantee cannot be treated as a mere suit for declaration. The suit is susceptible to monetary evaluation. Obviously, the respondent No. 1 (plaintiff) was required to pay the entire Court fees on ad volaram basis and the valuation of the suit is defective. So also it would be in the interest of justice to secure payment of interest amount/compensation in case the suit fails because the dispute arose out of commercial transaction. In such a case, blanket order of injunction is uncalled for.
To conclude, it may be stated that the respondent No. 1 did make out a prima facie case containing some substance and the lis is shown to contain potential material for full fledged trial. It also appears that the Civil Court’s jurisdiction is not ousted though the Tender Document consists the arbitration clause in as much as the acceptance of such offer in the Tender Document was not communicated within the bid validity period as required under other terms of the Tender Document. It will have to be said further that the impugned order does not suffer from vice of perversity, arbitrationess or absolute lack of legal foundation.
Considering the foregoing reasons and the fact situation of the present case, Court inclined to hold that the impugned order does not call for interference though minor modifications are necessary. Hence, the petition is dismissed. The impugned order is confirmed, subject to condition that the respondent No. 1 shall pay the deficit Court fees in the trial Court within period of two (2) weeks and shall also furnish letter addressed to the Bank to extend the period of Bank Guarantee by one more year alongwith execution of the Bank Guarantee to the tune of rupees two lacs more in order to ensure payment of interest amount, if ultimately the case of the petitioner will be found acceptable and the respondent No. 1 will fail in the suit. The extention of the Bank Guarantee and the further Bank guarantee of rupees two lacs shall be done by the respondent No. 1 within period of four (4) weeks and it will be condition precedent for continuation of the interim prohibitory relief granted by the first appellate Court. The petition is accordingly disposed of Rule discharged. No costs.
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1. Rule. By consent of learned counsel for the parties, the petition is heard finally.
2. Challenge in this petition is to judgment and order rendered by learned District Judge, Jalgaon in Misc. Civil Appeal No. 31/2008 whereby and whereunder interim injunction is clamped on petitioner from encashment of Bank Guarantee until disposal of suit (R.C.S. No. 138/2007), reversing dismissal order of application (Exh6) for interim injunction passed by learned Civil Judge (S.D.).
Facts:
3. The petitioner is a Corporation. The petitioner needed MDPE pipes worth Rs. 4,15,00,000/. For procurement of the MDPE pipes, the petitioner invited competitive bidding through tenders. The tenders were called from domestic as well as intracountry suppliers. The domestic bidder was required to furnish bid security of Rs. 13,00,000/ (rupees thirteen lacs) vide a Bank Guarantee or demand draft in favour of the petitioner. The respondent No. 1 is manufacturer of MDPE and other pipes. The respondent No. 1 participated in the bidding process. The respondent No. 1 submitted tender document alongwith the Bank Guarantee through its banker i.e. the respondent No. 3. The Bank Guarantee was enforceable till 15th May, 2007. The petitioner sent Letter of Intent (LoI) by fax dated 14th March, 2007. The petitioner informed that the offer expressed in the Tender Document was accepted on the conditions shown in the Letter of Intent. The Bank Guarantee was irrevocable and encashable without providing any reason to the Bank. The respondent No. 1, in response to the Letter of Intent, communicated to the petitioner that the terms of the original bid floated by the petitioner were not in conformity with the Letter of Intent and it was not possible to supply the goods due to deviation of the original terms of the proposed contract. The respondent No.1, however, informed that the supply of the MDPE pipes will be undertaken by it, in case the subsequent variations are rectified and original terms are restored. The petitioner informed the respondent No. 2 Bank on 9May, 2007 to allow encashment of the Bank Guarantee. On the very next day, the respondent No. 1 informed the Bank that the petitioner had not placed the order as per the terms of the notice inviting the tenders and there were variations in the terms and as such, the Bank Guarantee may not be encashed. The respondent No.1, on the day the validity of the Bank Guarantee was to come to an end, filed suit (R.C.S. No. 138/2007) for perpetual injunction. The learned Civil Judge initially passed status quo order on interim application (Exh6) filed by the respondent No.1 for interim injunction sought under Order XXXIX Rules 1 and 2 of the Civil Procedure Code. The application was dismissed after hearing the parties. The respondent No.1 preferred appeal (Misc. Civil Appeal No. 31/2008) against the order of dismissal of the application (Exh6). The learned District Judge allowed the appeal and clamped interim injunction restraining the petitioner from encashing the Bank Guarantee till disposal of the suit. The learned District Judge also directed the trial Court to dispose of the suit within period of six (6)months. This order of the learned District Judge is impugned by the petitioner.
Issues:
4.The questions involved in this petition are as follows :
(i)Whether the parties entered into a concluded contract, prima facie, and as such, there was privity of the contract between them soon after the petitioner issued Letter of Intent or that it was unconcluded contract as such?
(ii)Whether in the teeth of arbitration clause in the Tender Document, the exercise of jurisdiction by the Civil Court was barred and, therefore, the civil Court was required to refer the dispute between the parties to the Arbitrator as contemplated under section 8 of the Arbitration and Conciliation Act, 1996 ?( 6 )
(iii)Whether interim injunction against encashment of the Bank Guarantee could be validly clamped in the fact situation of th
