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High Court Of Delhi
HFCL BEZEQ TELECOM LIMITED - Appellant
Versus
UNION OF INDIA - Respondent
Suit 1481 of 1996
Decided On : 09/19/1997
The plaintiff, a successful bidder for the provision of telephone services, filed suit against the defendant, the Department of Telecommunications (DOT), seeking a declaration that the invocation of the earnest money bank guarantees was invalid and an injunction restraining the DOT from invoking the guarantees. The plaintiff argued that the DOT had not issued the Letter of Intent (LOI) along with the draft Licence Agreement and Interconnect Agreement as agreed, and that the plaintiff was not prejudiced by the non-supply of the agreements. The DOT contended that the plaintiff had withdrawn its bid during the bid validity period, and that it was entitled to invoke the bank guarantees. The court held that the DOT had committed a serious breach of the terms of the tender document by not issuing the LOI along with the draft agreements, and that the plaintiff was not guilty of anticipatory breach. The court also held that the DOT was not entitled to invoke the bank guarantees because the plaintiff had not withdrawn its bid without any justifiable reason within the bid validity period. The court granted a permanent injunction restraining the DOT from invoking the bank guarantees and receiving payments from the banks.
Fact of the Case:
The plaintiff, a successful bidder for the provision of telephone services, filed suit against the defendant, the Department of Telecommunications (DOT), seeking a declaration that the invocation of the earnest money bank guarantees was invalid and an injunction restraining the DOT from invoking the guarantees. The plaintiff argued that the DOT had not issued the Letter of Intent (LOI) along with the draft Licence Agreement and Interconnect Agreement as agreed, and that the plaintiff was not prejudiced by the non-supply of the agreements. The DOT contended that the plaintiff had withdrawn its bid during the bid validity period, and that it was entitled to invoke the bank guarantees.
Finding of the Court:
The court held that the DOT had committed a serious breach of the terms of the tender document by not issuing the LOI along with the draft agreements, and that the plaintiff was not guilty of anticipatory breach. The court also held that the DOT was not entitled to invoke the bank guarantees because the plaintiff had not withdrawn its bid without any justifiable reason within the bid validity period.
Issues: 1. Whether the DOT had committed a breach of the tender document by not issuing the LOI along with the draft agreements? 2. Whether the plaintiff was guilty of anticipatory breach? 3. Whether the DOT was entitled to invoke the bank guarantees?
Ratio Decidendi: The court held that the DOT had committed a serious breach of the terms of the tender document by not issuing the LOI along with the draft agreements, and that the plaintiff was not guilty of anticipatory breach. The court also held that the DOT was not entitled to invoke the bank guarantees because the plaintiff had not withdrawn its bid without any justifiable reason within the bid validity period.
Final Decision: The court granted a permanent injunction restraining the DOT from invoking the bank guarantees and receiving payments from the banks.
( 1 ) THE plaintiff HFCL Bezeq Telecom Limited (HBTL who had submitted tender pursuant to the invitation of tender given by the first defendant, has instituted this suit for a declaration and injunction. The other defendants 2 to 8 are Banks, who had given Bank guarantees on behalf of the plaintiff. Therefore, the only contesting defendant is the first defendant. The learned Senior Counsel for the plaintiff and the learned Addl. Solicitor General for the first defendant submitted that the suit itself could be disposed of on the materials available on record and they submitted written arguments in the suit. The following issues were framed for trial on the 5th of November, 1996: -
"1. Whether the suit is liable to be dismissed for want of notice under Section 80, CPC? 2. Whether invocation of the earnest money Bank guarantee is illegal? 3. Whether the drafts of the license and inter connect Agreements finalised on 1. 7. 1996 and 9. 9. 1996 contained substantial deviations from the Tender Documents? If so, to what effect? 4. Relief.
( 2 ) BEFORE I consider the issues, it is better to notice the facts culminating in the filing of the suit.
( 3 ) ON 16. 1. 1995 notice inviting tender was issued by the first defendant. The due date fixed was 30. 3. 1995 by 11 a. m. Opening date was 30. 3. 1995 at 12 noon. On 31. 3. 1995 time was extended by the first defendant upto 23. 6. 1995. On 15. 11. 1995 the first defendant wrote to the plaintiff (Ex. P. I) that the plaintiff had been ranked as the highest bidder (H-l) in the 8 Service Areas, which are as under:the letter further states that the Government had desired to restrict the award of license for a maximum of three Service Areas in A and B categories and requested the plaintiff to indicate its choice of three Service Areas in A and B categories. On 21. 11. 1995 (P. 2) the plaintiff exercised its option and informed the categories to the first defendant. The plaintiff made it clear that the contractual covenants should remain the same. The plaintiff expressed his choice for Delhi, Haryana and U. P. (West ). By letter dated 21. 12. 1995 (P. 3) the first defendant requested the plaintiff to extend the Bank guarantees upto31. 3. 1996fornine Service Areas. The plaintiff gave the details of the Bank guarantees given by the plaintiff. On 29. 12. 1995 (P. 5) the plaintiff wrote to the first defendant stating that Bank guarantees had been extended upto 31. 3. 1996. In paragraph I of the letter it is stated :
"extension of the validity of the Bank Guarantees beyond 31 st December, 1995 would imply the extension of the bids validity beyond 180 day period as initially provided in the tender itself. "in paragraph 5 it is stated :
"in terms of the aforesaid clarification and in view of what is stated hereinabove, we give our concurrence for extension of the Bid validity only in respect of four circles viz. Delhi, Haryana, U. P. Westand 0rissaupto31. 3. 1996. Accordingly, we enclose herewith the extended Bank guarantees for the above four circles upto 31. 3. 1996. "on 4. 3. 1996 (P. 6) with reference to Delhi Service Area the first defendant sent, which according to first defendant is the Letter of Intent. In paragraph 2 of the letter, it is stated:
"the award of licence shall be governed by the terms and conditions stipulated / contained in the tender documents read with clarifications and amendments/ corrigenda issued for the above referred DOT tender enquiry. The detailed terms and conditions shall be enumerated in the Licence Agreement and Interconnect Agreement to be signed subsequently. A copy of these documents would be made available within a short span of time. "
( 4 ) THE plaintiff was asked to give unequivocal and unconditional acceptance of this Letter of Intent duly signed by the authorised signatory so as to reach the first defendant latest by 2. 4. 1996. In paragraph 4 the first defendant would state :
"in case the Letter of Acceptance, along with required documents as me
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