IN THE HIGH COURT OF GUJARAT AT AHMEDABAD APPEAL FROM ORDER No 287 of 2000 For Approval and Signature: Hon'ble MR.JUSTICE H.H.MEHTA ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : YES of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- ADANI EXPORTS LTD. Versus HINDUSTAN ORGANIC CHEMICALS LTD. -------------------------------------------------------------- Appearance: NANAVATI & NANAVATI for Petitioner MR SB VAKIL for Respondent No. 1 -------------------------------------------------------------- CORAM : MR.JUSTICE H.H.MEHTA Date of decision: 06/09/2000 CAV JUDGEMENT This is an appeal under Sec.104 of the Civil Procedure Code read with Order 43 Rule 1(r) of the Civil Procedure Code challenging an order dt. 31st July, 2000 passed below Notice of Motion Ex.6 in Civil Suit No. 2971 of 2000 by learned Auxi. Chamber Judge, City Civil Court, Ahmedabad ( who will be referred to hereinafter as the learned Judge of the trial court). When this appeal was taken up for hearing at admission stage, both the parties submitted to this court that this appeal be taken up for final hearing as if it is already admitted, and therefore, at the request of both the parties, this appeal is finally heard and decided and disposed of at admission stage. 2. Here in this appeal, appellant is a plaintiff, while respondent nos. 1 and 2 are defendant nos. 1 and 2 respectively in Civil Suit No. 2971 of 2000 which is pending on the file of learned Judge of the trial court, and therefore, for the sake of convenience, parties will be referred to hereinafter as the plaintiff, defendant no.1 and defendant no.2 respectively at appropriate place. 3. The facts leading to this present appeal in a nutshell are as follows:- The defendant no.1 obtained a piece of land situated at Uran in the State of Maharashtra from Jawaharlal Nehru Port Trust ( in short " JNPT ") on lease for the purpose of constructing and installing storage tank for liquid Cargo, known as "Tank Farm Project" ( in short "TFP"). The said work was partly performed by the defendant no.1 and the defendant no.1 could not complete the project, and therefore, defendant no.1 invited Tenders to transfer the liability of the aforesaid TFP on JNPT. In response to the invitation of Tenders, plaintiff received Tender from defendant no.1 on 28th October, 1999. Plaintiff filled in the particulars in the Tender, signed and then submitted it to defendant no.1 under its covering letter dt. 29th November, 1999. As it was one of the terms and conditions of the Tender, that the tenderer must pay Rs.100 Lacs by Demand Draft or Rs.200 Lacs by way of Bank Guarantee in favour of M/s. Hindustan Organic Chemicals Ltd. (i.e. defendant no.1) ( In short "HOCL") by any Scheduled Bank, and therefore, the plaintiff submitted its tender under its covering letter dt. 29th November, 1999 along with a Bank Guarantee dt. 19th November, 1999 issued by defendant no.2, in favour of defendant no.1. Thereafter, there was an exchange of letters in connection with Tender in between the plaintiff and defendant no.1 inter se. As it appears from record that offer made by plaintiff vide its letter dt. 29th November, 1999, was valid for the period upto 15th January, 2000. From record, it also appears that for the first time, the defendant no.1 addressed a letter dt. 12th January, 2000 to plaintiff with a request to extend validity of offer of plaintiff for a period upto 31st March, 2000. In reply to said letter dt. 12th January, 2000 of defendant no.1, plaintiff by its letter dt. 25th January, 2000 extended the validity period of its offer for the period upto 31st May, 2000. Thereafter, defendant no.1 wrote a letter dt. 13th March, 2000 to plaintiff inviting plaintiff for negotiations with defendant no.1 at Bombay on 18th March, 2000. Accordingly a Joint Meeting of plaintiff's officers and defendant no.1's officers was held at Bombay on 18th March, 2000. It is pertinent to note that Minutes of that Meeting held at Bombay on 18th March, 2000 were not drawn either by plaintiff or by defendant no.1. In continuation of negotiations made by Officers of Plaintiff and Defendant No.1 in that Joint Meeting held on 18th March, 2000, plaintiff by its letter dt. 21st March, 2000 modified its earlier offer dt. 29th November, 1999 and put its new offer by increasing the bid price by a figure of Rs.25 Lacs extra for TFP. Thereafter, the defendant no.1 wrote a letter dt. 23rd March, 2000 to plaintiff, in continuation of Meeting held at Bombay on 18th March, 2000. In that letter dt. 23rd March, 2000, defendant no.1 invited plaintiff to put an offer with regard to two additional liabilities that have accrued/not mentioned in the Tender. That invitation to put offer was for- (1) "Land lease rentals due by HOCL upto March, 2000 ...........1.47 crores",; and (2) "Notional dues towards Minimum Guaranteed Throughput (MGT) for five months i.e. for the period from November, 1999 to March, 2000...... 0.47 crorers". By that letter dt. 23rd February, 2000, defendant no.1 also requested plaintiff to discuss with regard to invitation to offer for aforesaid two additional liabilities with the Chairman of the plaintiff and send offer to defendant no.1. That means, the earlier offer put by plaintiff was not accepted by the defendant no.1, till 23rd March, 2000. Thereafter, plaintiff wrote and sent by FAX, a letter dt. 01st April, 2000 to defendant no.1 wherein plaintiff did not agree for invitation to offer for Land lease rentals due by HOCL upto March, 2000 which was for 1.47 corers. The plaintiff in its letter dt. 01st April, 2000 referred this item of Rs.1.47 corers in third Para of said letter. The plaintiff informed the defendant no.2 that this amount (Rs.1.47 corers) has not been mentioned anywhere in the Tender document and there is no reason for AEL (Plaintiff) agreeing to pay for the land lease rentals due by HOCL to JNPT for a period upto March, 2000. As per pen-ultimate para of letter dt. 01st April, 2000 of the plaintiff addressed to defendant no.1, plaintiff agreed to put its offer for "Notional dues towards Minimum Guaranteed Throughput (MGT) for five months for .... ...... Rs. .047 corers", and therefore, the plaintiff modified its earlier latest offer put under its letter dt. 21st March, 2000 by increasing the bid price by a figure of Rs. 0.47 corers. Thereafter, the plaintiff wrote a letter dt. 20th April, 2000 (which is very important letter to decide this appeal) to defendant no.1, wherein plaintiff again modified its earlier latest offer put by it under its letter dt. 01st Aril, 2000 addressed to the defendant no.1 and that modification was with regard to following two new conditions- (a) all contingent liabilities related to JNPT authority may be settled by defendant no.1 giving plaintiff "No Due Certificate" from JNPT before transfer of assets; and (b) the dues of private parties which are mentioned in Tender, Section 7 - M/s. CME Industries Ltd., M/s. AFCON, M/s. Dalal Consultants and M/s. Srinivas Plates and Structurals Co. Ltd. will be settled by plaintiff and other dues, if any, not mentioned in Tender will be settled by defendant no.1. 4. The plaintiff made it clear in last Para of said letter dt. April, 20, 2000 and requested defendant no.1 to consider the offer put in that very letter i.e. letter dt. 20th April, 2000 treating it as plaintiff's final offer on or before 31st May, 2000 with a specific further offer that if defendant no.1 will fail to consider that final offer before 31st May, 2000, then that final offer will stand as cancelled. 5. Looking to this correspondence upto 20th April, 2000, any of the offers were not accepted by defendant no.1 and plaintiff modified its earlier first offer dt. 29th November, 1999 from time to time and ultimately, plaintiff put its last final offer by its letter dt. 20th April, 2000. It is interesting to note that defendant no.1 did not reply to that letter dt. 20th April, 2000 of plaintiff. Thereafter, plaintiff wrote another letter dt. 26th April, 2000 in continuation of its last final offer put in letter dated 20th April, 2000. The plaintiff made it clear that at no point, plaintiff had agreed to proposal of defendant no.1 which defendant no.2 had mentioned in its earlier letter dt. 23rd March, 2000 with regard to "Land lease rentals due by HOCL upto March, 2000 for ........ Rs. 1.47 Crores ". The plaintiff reiterated that fact again in pen-ultimate para of letter dt. 26th April, 2000 that plaintiff in the said Meeting held on 18th March, 2000 did not agree for the same (i.e. for Rs. 1.47 Corers). It is interesting to note that defendant no.1 did not reply letter dt. 26th April, 2000 of the plaintiff for considerable long period of about one month. Thereafter, the plaintiff again wrote a letter dt. 20th May, 2000 to defendant no.1 and extended the validity period of its offer for the period upto 31st July, 2000 together with extension of validity of EMD Bank Guarantee upto 31st July, 2000. In response to plaintiff's two letters one dated 20th April, 2000 and another dated 26th April, 2000, defendant no.1 suddenly accepted the offer by its letter dt. 25th May, 2000. It is pertinent to note that defendant no.1 has not made any clarification in its letter dt. 25th May, 2000 for two conditions in form of offer of plaintiff which are referred to in its letter dt. 20th April, 2000 and also with regard to offer for "Land lease rentals due by HOCL upto March, 2000 which is for Rs.1.47 Crores". It appears from the record that defendant has advanced its case that by its letter dt. 25th May, 2000, the offer of plaintiff was accepted, as a result of which contract was completed and plaintiff was legally duty bound to act upon further as per that contract. By its letter dt. 25th May, 2000, defendant no.1 called upon the plaintiff to make Down Payment of 25% of Rs. 18.21 Crores i.e. Rs. 4.5 Crores within seven days of receipt of that letter by plaintiff, as per the Tender conditions. 6. It appears from the record that immediately on receipt of letter dt. 25th May, 2000, plaintiff rushed to the City Civil Court, Ahmedabad and filed Civil Suit No. 2971 of 2000 against the defendant no. 1 and defendant no.2 on 30th May, 2000 and by filing that suit, the plaintiff sought a decree for perpetual injunction restraining the defendant no.1 from invoking and encashing Bank Guarantee given to defendant no.1 by defendant no.2 on behalf of the plaintiff. 7. The day on which plaintiff filed aforesaid Civil Suit No. 2971 of 2000, plaintiff submitted Notice of Motion Ex.6 and requested the Court to grant in its favour an interim injunction, pending the suit, on the line of perpetual injunction prayed for in the suit, restraining defendant no.1 from invoking and encashing Bank Guarantee given by defendant no.2 on behalf of the plaintiff and also for interim injunction restraining defendant no.2 from making payment to the defendant no.1 pursuant to the Bank Guarantee given by defendant no.2 on behalf of the plaintiff till final disposal of the suit. 8. It appears from the record that on 30th May, 2000, the learned Judge, Court No.25, City Civil Court, Ahmedabad passed following order- " The defendant no.1 is hereby restrained to encash the Bank Guarantee (Ex.3/4) on the condition that plaintiff shall extend the Bank Guarantee Ex.3/4 which is lasting upto 31-05-2000. R/O. 15-6-2000 ". Dt.30.5.2000 Sd/- Judge, Court No.25." After passing aforesaid order, the learned Judge of Court No.25, passed further order as follows: " After passing the order the undertaking to the effect that the Bank Guarantee shall be extended by the plaintiff is produced which is taken on record. The registry to give it exhibit. 31/5 Sd/- Judge, Court No.25." 9. From record, it appears that defendant no.1 appeared and submitted its affidvit-in-reply to the said Notice of Motion, on 26th June, 2000. Thereafter, the plaintiff filed its affidavit-in-rejoinder to the affidavit filed by defendant no.1 in reply to the Notice of Motion on 30th June, 2000 and again, defendant no.1 filed its affidavit-in-Sur-rejoinder to plaintiff's affidavit-in-rejoinder, on or about 12th July, 2000. Thereafter, the learned Judge of the trial court heard the arguments of the learned advocates of both the parties and after taking into consideration the documents and affidavits filed by the respective parties, came to a conclusion that plaintiff has no prima facie case and further that before revoking the order put by plaintiff, defendant accepted the offer of plaintiff and a concluded, enforceable and binding agreement had come into existence on 25th May, 2000, and therefore, now plaintiff cannot ask for injunction restraining defendant no.1 from encashing the Bank Guarantee given by defendant no.2. Hence the learned Judge, by passing an elaborate order dt. 31st July, 2000 below Ex.6, rejected the Notice of Motion Ex.6 of the plaintiff, and ad-interim injunction granted earlier on 31st July, 2000 was ordered to be vacated. As against that order dt. 31st July, 2000 passed below Ex.6 in Civil Suit No. 2971 of 2000, the plaintiff has preferred this present appeal challenging the legality of that order. 10. I have heard Shri S.N.Shelat, learned Additional Advocate General for the appellant and Shri S.B.Vakil, learned Senior Advocate for the respondent no.1 in detail at length. Here, in this present appeal, the appellant has produced copies of certain documents in one compilation under caption "Paper Book". That documents produced by appellant are perused and taken into consideration while deciding this appeal. I have also gone through the impugned order dt. 31st July, 2000 passed below Ex.6 in Civil Suit No. 2971 of 2000 which is challenged in this present appeal. 11. During the course of arguments, Shri S.N.Shelat representing the appellant has challenged the impugned order on the ground that learned Judge of the trial court did not take into consideration most material two important documents to reach a conclusion on the point as to whether plaintiff has got a prima facie case or not. That two documents namely (i) Letter dt. 01st April, 2000 of plaintiff addressed to defendant no.1 which is comprising Pages 93 and 94 in the paper book and (ii) letter dt. 20th April, 2000 of plaintiff addressed to defendant no.1 which is comprising Pages 95 and 96 in the paper book. His main thrust of the arguments to challenge the impugned order of the learned Judge of the trial court is two fold. (a) Looking to series of documents of which exchange took place in between plaintiff and defendant No.1 interse, it can be safely be said that no concluded, enforceable and binding agreement has ever come into existence between plaintiff and defendant no.1, and therefore, question does not arise for invoking and encashing bank guarantee given to defendant no.1 for and on behalf plaintiff by defendant no.2. (b) Another attack of the appellant is to the effect that contract, as alleged to have been concluded agreement, as alleged by defendant no.1, is voidable contract, because in this present case, fraud had been committed by defendant no.1 when invitation to make offer was made by defendant no.1 by floating tenders, and therefore, while making an offer, it cannot be said to be offer with free consent, because while making an offer persuant to invitation to make offer by Tender was caused by fraud as defined in Se.17 of the Indian Contract Act, 1872 and therefore, in view of Sec.19 of the Indian Contract Act 1872, when consent to an alleged agreement is caused by fraud, that contract is voidable at the option of party whose consent was so caused". 12. It is an admitted fact on part of both the parties that defendant no.1 had undertaken a work of Tank Farm Project (for short TFP ) on JNPT. As defendant no.1 could not complete the said project of TFP, defendant no.1 decided to transfer the liability of the aforesaid TFP on JNPT for which defendant no.1 floated tenders. That tender is produced in paper book at Pages from Page 76 to 83. This tender has been produced in the suit at Mark 3/1. As per General Tender Notice and conditions for tendering at Page 79, the tenderer was required to pay Rs.100 Lacs by Demand Draft or Rs.200 Lacs by way of Bank Guarantee in favour of defendant no.1, by any Scheduled Bank (vide Condition No. 7.0). It was another condition recited on Page 79 that earnest money deposited by successful tenderer will be retained towards the security deposit for the fulfillment of the agreement, but shall be forfeited, if the tenderer fails to comply with the agreement (Vide Condition No.8.1). Thus, it is very much clear that Bank Guarantee can be forfeited only and only, if the tenderer fails to comply with the agreement. Shri S.N.Shelat, the learned Additional Advocate General for the appellant has vehemently argued that respective conditions at Serial Nos. 7 and 8.1 on Page 79 on the paper book clearly suggest that defendant no.1 shall become entitled to forfeit the earnest money deposit which has been made by plaintiff in form of Bank Guarantee, only if a concluded, enforceable and binding agreement has come into existence between plaintiff and defendant no.1. He has further argued that looking to the exchange of letters between plaintiff and defendant no.1 interse, no concluded contract has been made in between plaintiff and defendant no.1. He has further argued that letters exchanged between the parties referred to above go to show that the parties were only negotiating and had not reached to stage of any final agreement. He has further argued that in exchange of letters, stage never reached when the negotiations were going on giving rise to a binding contract. 13. It is an admitted fact that in response to tender which was issued to plaintiff on 28th October, 1999 (Page 81 of paper book), the plaintiff made his proposal or so to say, put its offer by its letter dt. 29th November, 1999 (Page 84 of paper book) and along with that letter dt. 29th November, 1999, plaintiff sent a Bank Guarantee dt. 19th November, 1999 issued by defendant no.2 in favour of defendant no.1 (Page 85 and 86 of the paper book). Thereafter, there was exchange of letters in between defendant no.1 and plaintiff. 13.1 Then on 13th March, 2000, defendant no.1 convened a Joint Meeting of defendant no.1 with plaintiff at Bombay inviting plaintiff for negotiation (Page 89 of the paper book). Thus till, 13th March, 2000, negotiations were going on. Offer put by plaintiff vide its letter dated 29-11-1999 was not at all accepted by the defendant no.1. It is also an admitted fact that a Joint Meeting was held by defendant no.1 with plaintiff on 18th March, 2000, but no Minutes were drawn. It is very much necessary to know as to what was the end result of that meeting. Still however, defendant no.1 tried to incorporate certain alleged decisions taken in that Meeting, in its letter dt. 23rd March, 2000 addressed to plaintiff. In Para 3 of that letter ( Pages 91 and 92 of the paper book), it is stated by defendant no.1 that finally it was agreed that M/s. Adani Exports Limited will improve on their offer and that the additional liabilities that have been accrued/not mentioned in Tender, were brought to an attention of plaintiffs' officers. That additional Liabilities are stated as follows :- (i) One of that additional liabilities was with regard to "Land lease rentals due by HOCL to JNPT upto March, 2000 total amounting to Rs. 1.47 Crores". Thus, it seems that for the first time, an attention for the item which is not reflected in Tender was brought to plaintiff as alleged by defendant no.1, in Meeting held on 18th March, 2000. (ii) Another liability of which an attention of plaintiff was brought was, as alleged by defendant no.1, with regard to Notional dues towards Minimum Guaranteed Throughput (MGT) for five months total amounting to Rs. 0.47 Crores. 14. Thus for the first time, defendant no.1, invited plaintiff to put an offer on aforesaid two new additional liabilities of which there is no reference in Tender. It is not stated in said letter dt. 23/3/2000 of defendant no.1 addressed to plaintiff that plaintiff had agreed upon to make that offer for aforesaid two additional liabilities to defendant no.1. It is stated in said letter dt. 23/3/2000 of the defendant no.1 addressed to plaintiff that officers of the plaintiff who attended the said joint meeting held on 18th March, 2000 informing the plaintiff that plaintiff's officers desired that they would like to discuss with their Chairman in connection with aforesaid two additional liabilities and after discussing with their Chairman, plaintiff would send their revised offer to defendant no.1, and therefore, invitation to offer by floating Tender was modified by defendant no.1 itself, in Meeting held on 18th March, 2000, and therefore, it can be said that invitation to new offer with regard to two new additional liabilities was extended by defendant no.1 to plaintiff on 23rd March, 2000. 14.2 Within a week from date of receipt of letter dt. 23rd March, 2000 of defendant no.1, plaintiff addressed a letter dt. 01st April, 2000 to defendant no.1 and it was sent by FAX. That letter dt. 01/04/2000 is at Pages 93 and 94 of the Paper Book. The plaintiff, at the earliest, made it clear in its said letter dt. 01/04/2000 addressed to defendant no.1 that they have come to know by letter dt. 23/3/2000 of defendant no.1 that the Land lease rentals due by HOCL to JNPT for the period upto March, 2000 which is of Rs. 1.47 Crores, is payable by plaintiff. The plaintiff also made it clear that said amount has not been mentioned anywhere in Tender document, and further that there is no reason for plaintiff agreeing to pay for the Land lease rentals due by HOCL to JNPT. 14.3. Plaintiff by its letter dated 01-04-2000 puts its offer for an amount of Rs. 0.47 Crores for Notional dues towards Minimum Guaranteed Throughput (MGT) upto March, 2000, and therefore, plaintiff again modified and revised its earlier offer which it put by letter dt. 29/11/1999. On reading that letter dt. 01/04/2000, it is crystal clear that plaintiff did not put its offer for Rs. 1.47 Crores against the head "Land Lease Rentals due by HOCL to JNPT for the period upto March, 2000". It is interesting to note that defendant no.1 did not reply that letter at. 1/4/2000 of plaintiff addressed to defendant no.1, which was sent to defendant no.1 by FAX. Thereafter, plaintiff wrote one another important letter dt. 20/4/2000 to defendant no.1. In Clause (d) of that letter dt. 20/4/2000 (Page 95 of the Paper Book), plaintiff informed the defendant no.1 that during the Meeting dt. 18/3/2000, plaintiff confirmed to pay dues towards minimum guaranteed throughput to JNPT for the period from 29/11/1999 to 28/3/2000, total amounting to Rs. 47 Lacs. Looking to this recital with regard to Rs. 47 Lacs, in the Meeting held on 18/3/2000, plaintiff agreed for invitation to offer only for dues towards minimum guaranteed throughput for the period from 29/11/1999 to 28/3/2000. In said letter dated 20-04-2000 at the second breath, the plaintiff modified and revised its offer and stated that plaintiff puts forward that all the dues to be payable to JNPT/Government would be borne by defendant no.1 till transfer of assets except minimum guaranteed throughput to