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2007 Supreme(Ori) 48
High Court Of Orissa
S. B. ROY, C. J. And M. M. DAS, J.
VISHWA INDUSTRIAL COMPANY PVT.LTD - Appellant
Versus
MAHANADI COALFIELDS LTD - Respondent
W. P. (C) 12899 Of 2004
Decided On : 01/18/2007
A.Panja, B.ROUT, D.MOHANTY, N.C.SAHU, P.K.Panda, S.K.MISHRA, S.K.NANDA, S.Mishra, S.N.MOHAPATRA, S.P.Mishra, SANJIT MOHANTY
The main legal point established in the judgment is the requirement for an unqualified acceptance to form a completed contract, as per the principles outlined in the Indian Contract Act, 1872.
Headnote:
Bank Guarantee - Contract Law - Indian Contract Act, 1872, Section 4, Section 7 - The court examined the communication of proposal and acceptance, and the requirement for an unqualified acceptance. It found that there was no completed contract between the parties as the petitioner did not accept, sign, stamp, and return the supply order within the stipulated time or remain silent. The court quashed the letters issued by the MCL and directed it not to take any step against the petitioner.
Fact of the Case:
The petitioner submitted a tender with an offer to supply materials to MCL. MCL placed a formal order on the petitioner, requiring a Performance Bank Guarantee, which the petitioner claimed was covered by an OMNIBUS Bank Guarantee given to Coal India Limited. The petitioner refused to provide a separate Performance Bank Guarantee, leading to a dispute and subsequent actions by MCL.
Finding of the Court:
The court found that there was no completed contract between the parties, as the petitioner did not fulfill the pre-condition for acceptance of the supply order. It concluded that MCL's actions were illegal and without jurisdiction.
Issues: The main issue was whether there was a completed contract between the parties and the legality of MCL's actions based on the disputed Performance Bank Guarantee requirement.
Ratio Decidendi: The court applied the principles of communication of proposal and acceptance under the Indian Contract Act, 1872, and determined that there was no completed contract due to the petitioner's failure to accept, sign, stamp, and return the supply order within the stipulated time or remain silent.
Final Decision: The court quashed the letters issued by MCL and directed it not to take any step against the petitioner. The writ petition was allowed without any cost.
M. M. DAS, J.
( 1 ) A tender notice was floated by the Mahanadi Coalfields Limited (for short, 'the MCL') on 20-1-2003 inviting quotations in sealed covers for supply of materials indicated in the schedule of requirement as per technical specification, which was attached as Annexure A to the tender documents. Clause 21 of the Notice inviting Tender was with regard to submission of Performance Bank Guarantee by the successful tenderer which reads as follows:
"21. PERFORMANCE BANK GUARANTEE : the performance guarantee shall be submitted by succesful tenderer for 10% value of the destination price of the order including all taxes and duties to cover both satisfactory performance and warranty. The performance guarantee for 10% value will be taken in the form of a Bank Guarantee. The bank Guarantee shall be valid for 18 months from the date of receipt and acceptance of the equipment/materials at site and the same shall be either released or extended thereafter, as deemed fit. "
( 2 ) PURSUANT to the said Notice Inviting tender, the petitioner submitted its tender on 8-3-2003. With regard to Performance bank Guarantee, the petitioner in its offer document (tender) mentioned as follows :
"performance BANK GUARANTEE : agreed. We have submitted OMNIBUS Bank guarantee No. LG/14/12/90 dated 14-7-90 for Rs. 50,00,000/- (Rupees Fifty Lakhs) only to Coal India Limited; In terms of the clause of the said OMNIBUS Bank Guarantee performance Bank Guarantee against various orders to CIL and its subsidiaries will be covered by it and no separate Bank. Guarantee is required to be submitted to coal India Limited and its subsidiaries. Authenticated xerox copy of the valid Bank guarantee is enclosed".
( 3 ) IT is to be noted that as per conditions stipulated in the Notice Inviting Tender, the validity period of the proposal/offer was initially fixed as six months. After considering the tender offered by the petitioner, the MCL by its letter dated 30-12-2003 placed a formal order on the petitioner to supply the materials mentioned therein. However, though in the tender submitted by the petitioner, with regard to Performance Bank guarantee, the petitioner claimed that the omnibus Bank Guarantee given by it for an amount of Rs. 50,00,000/- on 14-7-1990 to Coal India Limited and in terms of the said Bank Guarantee, Performance Bank guarantee against various orders to Coal india Limited and its subsidiaries will be covered by it and no separate Bank Guarantee is required to be submitted, but the mcl in its formal order dated 30-12-2003 placed on the petitioner, required the petitioner to submit a Bank Guarantee as per clause 21 of the tender document which has been quoted above.
( 4 ) THE petitioner's case is that it received the said letter dated 30-12-2003 of the MCL on 12-1-2004,. e. much after the expiry of the validity period of its offer and by its letter dated 12-1-2004, the petitioner sent a reply o the Deputy Chief Materials Manager of the MCL, acknowledging receipt of the letter under which formal order was placed on the petitioner and reiterating that as they have offered OMNIBUS Bank Guarantee to the Coal India Limited, they were not required to submit separate Performance Bank guarantee and accordingly, made a request to the MCL to make necessary amendment of the order so that the petitioner can supply the materials. The petitioner again by its letter dated 12-1-2004 addressed to the mcl reiterated that Coal India Limited introduced the OMNIBUS Bank Guarantee to those suppliers whose past performance were considered satisfactory and suppliers were given facility to submit the OMNIBUS bank Guarantee in place of individual Bank guarantees to cover contractual obligation as well as equipment performance including warranty obligation and such facility of omnibus Bank Guarantee was extended by the Coal India Limited to very few firms whose credentials have continued to be satisfactory. The petitioner stated further that in view of the above, it w
