FIRST APPEAL No. 594 of 1993 WITH FIRST APPEAL No. 662 of 1993 Against the Judgment and Decree dated 23.6.1993 passed by Sri Narendra Mishra, Sub Judge I, Patna in Title Suit No.603 of 1992. STATE OF HARYANA & ORS. ………… Defendants/Appellants (In First Appeal No. 594 of 1993) Versus M/S DEEP MAYANK & ASSOCIATES & ORS. ……… Plaintiffs/Respondents DENA BANK ………… Defendant/Appellant (In First Appeal No. 662 of 1993) Versus M/S DEEP MAYANK & ASSOCIATES & ORS. ……… Plaintiffs/Respondents ---------- In First Appeal No. 594 of 1993 For the Defendants- Appellants : Mr. Kali Das Chatterji, Advocate Mr. Amlesh Kumar Varma, Advocate For the Plaintiff-Respondent : Mr. Sukumar Sinha, Sr. Advocate Mr. Mukesh Kumar Modi, Advocate Mr. Avinash Kumar, Advocate For the Dena Bank : Mrs. Sheela Sharma, Advocate Mr. Shivendra Kumar Roy, Advocate In First Appeal No. 662 of 1993 For the Appellant-Dena Bank : Mrs. Sheela Sharma, Advocate Mr. Shivendra Kumar Roy, Advocate For the Plaintiff-Respondent : Mr. Sukumar Sinha, Sr. Advocate Mr. Mukesh Kumar Modi, Advocate Mr. Avinash Kumar, Advocate For the Defendant Respondent : Mr. Kali Das Chatterji, Advocate Mr. Amlesh Kumar Varma, Advocate Dated : 2nd day of August, 2010 -2- P R E S E N T HON'BLE MR. JUSTICE MUNGESHWAR SAHOO J U D G M E N T Mungeshwar Sahoo, J. 1. Both these first appeals have been filed against the judgment dated 23.6.1993 and the decree following thereupon signed on 15.7.1995 by Sri Narendra Mishra, the learned Sub Judge 1st Patna in Title Suit No. 603 of 1992. Since both these first appeals arise out of the same judgment and decree, these are heard together and are being disposed of by this common judgment. 2. The defendant No.1 i.e. State of Harayana and defendant No.2 i.e. the Director of Lottery, have filed First Appeal No. 594 of 1993. The defendant No.3 Dena Bank has filed other First Appeal No. 662 of 1993. 3. The plaintiff-respondent i.e. M/s. Deep Mayank and Associates filed the aforesaid title suit No. 603 of 1992 for a declaration that the agreement dated 29.6.1992 entered into between the plaintiffs and defendant Nos. 1 and 2 is illegal, void, arbitrary and not enforceable in law and the bank guarantee dated 28.7.1992 furnished by defendant No.3 in favour of defendant No.1 is void and not enforceable in law. The plaintiffs further prayed that the defendant No.3 Dena Bank be directed to forthwith release the margin money and collateral securities to the plaintiffs. The plaintiffs also prayed for declaration that the plaintiffs did not commit any default and are not liable for damages and the defendants are not entitled to encash the bank guarantee G.T./100/92 dated 28.7.1992 given in favour of defendant No.1. The plaintiffs further prayed to restrain the defendants by an order of injunction from encashing the aforesaid bank guarantee and also -3- prayed for cost of the suit. 4. The plaintiffs prayed the aforesaid reliefs on the facts which may be stated in brief that, the plaintiff No.1 M/s. Deep Mayank and Associates is a registered partnership firm and the plaintiffs are engaged in the business of marketing of lottery tickets in different States and have acquired sufficient experience in the said trade. They have their registered office at Calcutta, a branch office at New Delhi and the principal office at Patna. The defendant No.1 i.e State of Harayana was doing lottery business and invited tenders for appointing stockist of lottery tickets of Rs.2/- for the entire country. The plaintiffs’ tender was accepted and were made main stockist and an agreement was executed between the parties on 29.6.1992. 5. The plaintiffs’ further case is that because of the agreement the plaintiffs became the sole stockist for a period of one year from 1st July 1992. The plaintiffs in good faith signed the agreement. At least 10 days’ time was needed to organize effecting sales in the country but the plaintiffs were not given any time. The plaintiffs were required to pay the royalty money of Rs.1,97,280/- per draw and the draw was to be held everyday. The further case is that the defendants had to pay a sum of Rs.81,00,000/- to the price winners out of the tickets sold by them prior to 1.7.1992 but the entire liability was put on to the plaintiffs just after the agreement. The defendants promised to adjust the amount but still 10% of that amount has not been adjusted. 6. The further case of the plaintiffs is that the plaintiffs had to give bank guarantee for Rs.3,71,00,000/- in favour of defendant Nos. 1 and 2 and on the request of Patna office of the plaintiffs, the defendant No.3 Dena Bank offered bank guarantee No. G.T./100/92 dated 23.6.1992. It was stipulated in the bank guarantee that on default by -4- the said main stockist the bank shall on demand pay the said sum to the Government of Harayana as per the agreement. According to the agreement, the plaintiffs were required to pay to the price winning tickets provided that it was claimed within 30 days from the date of draw which the plaintiffs complied. The further case is that recently the defendant No.1 issued public notice to the effect that all such claims would be paid by them directly. The defendants’ action is mala fide and the defendants started violating the terms of the agreement. Therefore, the plaintiffs are not guilty of any default. The plaintiffs were the only stockist of tickets valued at Rs.2/- but with mala fide intention the defendants in the bake of ticket printed that the plaintiffs were stockist of lottery ticket of value of Rs. 5/- and 10/- and because of that the plaintiffs’ market became confused and the selling of tickets decreased. 7. The further case is that according to the agreement, the draw was to be conducted at Chandigarh or at such other place as may be decided by the defendant Nos. 1 and 2 in consultation with the plaintiffs but the plaintiffs were never consulted. The result of the draw had to be published in news papers, which are popular with the public but it was not published in spite of plaintiffs’ letters. The defendants were required to deposit 0.81 lakh daily as printing costs of tickets and other miscellaneous charges without there being explanation as to why they were required to deposit the same. The numbers of the price winning tickets were leaked out on 18.7.1992, 19.7.1992 and 20.7.1992. Prior to draw the plaintiffs informed the authorities but the defendants took no steps. As a result of which the plaintiffs were put to huge loss. The plaintiffs became helpless. On 21st July 1992, the plaintiffs informed the defendants that they could not continue with the work. However, the plaintiffs continued to work till 14.9.1992 on the impression that the things will improve, but the defendants did not take -5- any step and, therefore, the default was committed by the defendants in not complying the terms of the agreement as such they are not entitled to enforce the bank guarantee. Subsequently, the defendants advertised in the newspaper that they would be directly selling the tickets of Rs. 2/- and started the business themselves. 8. The further case of the plaintiffs is that the plaintiffs requested the bank from Patna office (Dena Bank for Patna) to furnish the bank guarantee. The defendants delivered a letter at Patna branch of the defendant No.3 invoking bank guarantee on 3.12.1992 and, therefore, no part of cause of action relating to this bank guarantee arose at Chandigarh or any other place. Thus, the Patna Civil Court has jurisdiction in this matter. The plaintiffs learnt that the defendants are trying to encash the bank guarantee illegally and arbitrarily as per public notice issued by the State Government of Harayana. The said public notice was issued unauthorisedly with consulting the main stockist and for payment of the price winners were sought to be made by encashing the bank guarantee. 9. The further case of the plaintiff is that various terms and conditions of the agreement are arbitrary and impossible to perform and are beyond the imagination. The defendants with mala fide intention incorporated clause 5 of the agreement. Likewise clause 16 of the agreement is absolutely one sided which gives option to the plaintiffs to terminate the agreement by giving 4 months royalty, whereas the defendants can terminate without any liability. The agreement is void ab initio and no clause of the same can be acted upon. On these grounds the plaintiffs prayed for the aforesaid relief. 10. The defendant Nos. 1 and 2 on being noticed appeared and filed a contesting written statement mainly contending that the Court has -6- got no territorial jurisdiction to try the suit. According to them, the agreement in question dated 29.6.1992 was executed by the plaintiffs’ firm at Chandigarh. The payment regarding the lottery tickets were also to be made at Chandigarh. The breach of terms and conditions of the agreement has also been committed by the plaintiffs at Chandigarh and, therefore, no part of cause of action arose at Patna. There is also a clause in the agreement that the jurisdiction lies at Chandigarh and not at Patna. In the bank guarantee also it is specifically mentioned in clause (c) that in case of any dispute the jurisdiction will be at Chandigarh. The contract came into the existence at Chandigarh hence, Courts at Patna have no jurisdiction to try or entertain the suit. In dispute or difficulties or clarification of any clause of the contract was to be referred to the secretary to the Government of Harayana, Finance Department as arbitrator as provided in the agreement and his decision will be final. The plaintiffs instead of availing the said remedy wrongly filed the suit. 11. The further defence is that the plaintiffs have not approached the Court with clean hand. They themselves have violated the terms and conditions of the contract and stopped the sale of lottery from 15.9.1992 without serving any notice. The plaintiffs also committed various other breaches as such they are not entitled to discretionary relief of injunction. The notice inviting tenders was published on 12.3.1992, which contains the detailed terms and conditions and the plaintiffs’ tender was accepted and, thereafter the terms and conditions were reduced into agreement between the parties on 29.6.1992 for one year starting from 1st July 1992. The plaintiffs entered into the said contract with conscious mind and without any misconception after going through the terms and conditions and after fully understanding the contents thereof. The plaintiffs were required to furnish irrevocable -7- bank guarantee from a nationalized bank in favour of defendant No.2 for a sum of Rs. 3,71,00,000/-. The plaintiff executed the agreement and in terms of the same furnished bank guarantee dated 27.6.1992 with certain modification, it was given on 28.7.1992 which was delivered by the defendant No.3 Dena Bank at Chandigarh to the defendant No.2. According to the terms of the bank guarantee, in case of default by the stockist, the bank shall on demand pay the said sum to the defendant No.1. The plaintiffs abruptly left business from 15.9.1992 and refused to honour the price winning tickets presented in the office by the general public and thereafter with a view to provide relief to the price winners the State Government of Harayana published notice in the news paper informing the price winners to submit the price winning tickets in the lottery department of Harayana Government. The plaintiffs violated the clause Nos. 11 and 12 of the agreement and committed breach of the terms. The printing of tickets was the exclusive job of the defendants and the plaintiffs were to pay Rs. 2700/- per lakh tickets as printing charges according to the terms of the agreement. The defendants denied to have printed that the plaintiffs were stockist of tickets of Rs. 5/- and 10/- also. The draws of the lottery scheme were to be conducted at Chandigarh or at any such place as may be decided. The plaintiffs were liable to pay the royalty, printing charges, result publication charges and miscellaneous expenses as mentioned in the agreement itself. The draw was being conducted before the general public in presence of three Judges of high repute and also in presence of senior officers of the State Government as such there was no leakage of the price winning number of tickets. The plaintiffs wrote various letters informing the defendants about their financial crisis and did not pay the outstanding amount which clearly establishes the breach of the terms and conditions on the part of the -8- plaintiffs. Since 15.9.1992, the plaintiffs neither paid the royalty nor other charges as such committed breach of the terms and conditions of the agreement so the plaintiffs are liable to pay to the State of Haryana a sum of Rs.5,70,13,920/-. The cheques issued by the plaintiffs for some amount were dishonoured by the bank and, therefore, the defendants are entitled to enforce the bank guarantee. The defendants suffered huge loss and goodwill on account of decrease in the sale of the lottery tickets. 12. An additional written statement was filed denying the leakage of price winning tickets and also it was stated that the plaintiffs executed the agreement after reading the terms and conditions of the agreement with conscious mind. On these grounds the defendants submitted that the plaintiffs’ suit is liable to be dismissed. 13. The defendant No.3 Dena Bank did not file any written statement and did not contest the suit. 14. In view of the pleadings of the parties, the learned Court below framed 7 issues, which are as follows : (i) Is the suit as framed maintainable ? (ii) Have the plaintiff got valid cause of action for the suit ? (iii) Is the suit bard by law of limitation and principles of estopple, waiver and acquiescence ? (iv) Has this Court got jurisdiction to try this suit ? (v) Is the agreement dated 29.6.1992 in between the plaintiffs and the defendants, illegal, void, arbitrary and not enforceable in law ? (vi) Are the defendants entitled to encash the bank guarantee No. G.T./110/92 dated 28.7.1992 and are the -9- plaintiffs liable to pay the damages to the defendants ? (vii) Are the plaintiffs entitled to the relief/reliefs if any ? 15. After trial while deciding issue Nos. 4 and 5, the lower Court below came to the conclusion that the Court has jurisdiction to try the suit and the agreement dated 29.6.1992 Ext. G is illegal, void and not enforceable in law and while deciding issue Nos. 1, 2 and 6 at paragraph 7, the lower Court below found that the defendant Nos. 1 and 2 are not entitled to encash the bank guarantee No. G.T./100/92 dated 28.7.1992 which is also void and then decreed the plaintiffs’ suit. 16. It appears that earlier both these appeals were heard by this Court and by terms of the judgment dated 3.2.1995, three issues were framed and the matter was remanded to the trial Court under Order XLI Rule 25 C.P.C. for trying those issues giving liberties to the parties to leave additional evidence. The three issues are as follows : (i) Did the defendants-appellants practice fraud upon the plaintiffs-respondents by not inserting the terms and conditions determined and finalized between the Director of Lottery, Harayana State and the plaintiff at Patna ? (ii) Did the defendants-appellants insert the terms and conditions in the deed of contract contrary to the terms and conditions of tender on which the plaintiffs were appointed stockist ? (iii) Was the performance of contract made impossible by leaking out the first price winning ticket on behalf of the defendants-appellants subsequent to the contract ? 17. Against the said judgment the State of Harayana filed Civil Appeal No. 10301 of 1995 before the Hon’ble Supreme Court of India. The Hon’ble Supreme Court by terms of order dated 6.11.1995 directed -10- the trial Court to decide the issues framed by this Court in the order of remand within three months and the Hon’ble Supreme Court observed that it is only desirable that the High Court should immediately take of the matter for the disposal of the appeals after the findings are sent back by the trial Court. From perusal of the order of the Hon’ble Supreme Court, it appears that the matter of jurisdiction to entertain the suit in the State of Bihar was also raised. Regarding this question of jurisdiction of the Court the Hon’ble Supreme Court observed as follows:- “It is not necessary for us to make any observation on such rival contention of the parties since the appeal pending before the Patna High Court and the issues including the issues regarding the maintainability of the suit will be gone into in disposing of the appeals”. 18. Pursuant to the remand order, the trial Court by terms of the order dated 18.2.1997 passed by Sri Subesha Nand Jha, Sub Judge, 1st Patna recorded the findings on all the three issues deciding all these issues in favour of the plaintiffs. 19. Against the said finding of the lower Court below the appellants in First Appeal No. 594 of 1993 i.e. State of Haryana have filed an objection under Order XLI Rule 26 C.P.C. on 9thy July 1997. 20. Mr. Chatterji, learned counsel appearing on behalf of appellants in First Appeal No. 594 of 1993 i.e. State of Haryana assailed the impugned judgment and decree on two counts. Firstly, that the Civil Court in Bihar i.e. at Patna has no jurisdiction to try the suit because of the fact that the execution of the agreement dated 29th June 1992 was done at Chandigarh. The lotteries were being drawn at Chandigarh. The bank guarantee was payable at Chandigarh. The terms of agreement stipulates clearly that the Civil Court at Chandigarh will have the -11- jurisdiction only to decide the dispute between the parties concerned and also clause (c) of the bank guarantee mentions that in the event of any dispute, the only Civil Court at Chandigarh shall have the jurisdiction to decide the dispute. In such view of the matter, no cause of action arose at Patna. The learned counsel further submitted that the plaintiffs with mala fide intention making false allegations and statements in plaint filed the suit at Patna and, therefore, in the written statement the defendants raised the question of jurisdiction of the Court. The defendants also filed an application under order XIV Rule 2 to decide the question of jurisdiction but since the Court below proceeded to decide the suit itself on merit, the defendants consented for the disposal of the suit and in the suit itself the jurisdiction matter was an issue. The learned counsel further submitted that while deciding the said issue of jurisdiction, the learned Court below has not at all considered the legal position and in only one line stated that this Court had got jurisdiction without their being any basis. The learned counsel further submitted that the learned Court below did not even care to mention in the impugned judgment as to how cause of action or part of cause of action arose at Patna. According to the learned counsel Civil Court at Chandigarh has only the exclusive jurisdiction to try the suit because no part of cause of action arose at Patna and the plaintiffs filing the suit at Patna is, therefore, not bona fide. According to the learned counsel by mere statement made by the plaintiffs in the plaint to the effect that cause of action arose at Patna jurisdiction will not be conferred on Civil Court at Patna. The cause of action is bundle of facts from which it can be gathered about the jurisdiction of the Court. 21. So far the merit of the case is concerned, Sri Chatterji submitted that the lower Court below has wrongly held that the agreement is void and illegal on the ground that the terms which were agreed upon -12- between the parties were not inserted in the agreement dated 29.6.1992 and the terms which were not agreed upon have been inserted in the said agreement. Learned counsel further submitted that according to Section 92 of the Evidence Act, the oral evidence is inadmissible to prove the terms and conditions of the agreement particularly, when it was reduced to writing which was produced in the Court which has been marked as Ext. G. The learned counsel further submitted that there was no specific pleading of fraud as required under Order VI Rule 4 C.P.C. and further that the plaintiffs have not proved the fraud beyond all reasonable doubts as it is well settled principles of law that fraud must be established beyond all reasonable doubts just like criminal case. The learned counsel further submitted that the plaintiffs entered into the agreement with open eyes and carried on his business up to 14.9.1992 and because of financial crises they could not perform the contract and so with mala fide intention filed the suit at Patna making false allegations. Since the default was on part of the plaintiffs for non-performing the terms and conditions and because of the fact that the defendants incurred heavy loss because of the abrupt stopping of the business by the plaintiffs, the defendants were entitled to have bank guarantee encashed. On these grounds, the learned counsel Mr. Chatterji submitted that the impugned judgment and decree are liable to be set aside and the plaintiffs’ suit is liable to be dismissed. 22. On the other hand, Sri Sukumar Sinha, the learned senior counsel appearing on behalf of the plaintiffs-respondents in both the appeals submitted that the plaintiffs in the plaint have given specific instances regarding cause of action which arose at Patna. The learned counsel further submitted that the bank guarantee was provided by the defendant No.3 i.e. Dena Bank of Patna prior to entering into the -13- agreement. This bank guarantee was condition precedent for entering into the agreement which was furnished by the plaintiffs and, therefore, Civil Court at Patna has the jurisdiction to decide the suit. The learned counsel further submitted that all the discussions between the parties regarding the terms and conditions were finalized at Patna, therefore, this Civil Court has got the jurisdiction and the learned Court below rightly held so. The learned counsel further submitted that although application under Order XIV Rule 2 C.P.C. was filed before the Court below but the defendants did not press the said application and with the consent of the parties the suit itself was disposed of and now, therefore, in the appeal the defendants –appellants cannot be allowed to raise the said question again in view of Section 21 C.P.C. The learned counsel further submitted that moreover, according to Section 21 sub section (1) the said question of jurisdiction cannot be allowed unless there has been a consequence failure of justice. 23. So far the merit is concerned, the learned counsel submitted that bar of Section 92 of the Evidence Act regarding inadmissibility of oral evidence in this case is not applicable because the plaintiffs are not challenging the terms and conditions of the agreement but according to the plaintiffs agreed terms and conditions were not written in the agreement and the terms and conditions which were not agreed between the parties have been mentioned in the agreement and moreover, some of the terms and conditions are beneficial and unilateral in favour of the State Government. The learned counsel further submitted that the defendants made the business impossible by not performing the terms and conditions of the agreement and, therefore, the defendants were at fault so plaintiffs are not liable for damages and the bank guarantee cannot be encashed by the State Government of Harayana. According to the learned counsel the -14- agreement is void because it is a wagery contract as such it is void under Section 30 of the Contract Act. The learned counsel further submitted that after