CS(OS) 2686/1996 Page 1 of 36 *IN THE HIGH COURT OF DELHI AT NEW DELHI + CS(OS)2686/1996 % Date of decision: 28th May, 2009 M/S BASIC TELE SERVICES LTD ….… Plaintiff Through: Mr. Rajiv Nayar, Sr Advocatte with Mr Ajay Roy and Mr B. Dubey, Advocates. Versus UNION OF INDIA & ANOTHER ....... Defendants Through: Mr. Dalip Mehra and Rahul Sood, Advocates for the defendant No.1. Mr Amar Gupta, Advocate for the defendant No.2. CORAM :- HON’BLE MR. JUSTICE RAJIV SAHAI ENDLAW 1. Whether reporters of Local papers may be allowed to see the judgment? Yes 2. To be referred to the reporter or not? Yes 3. Whether the judgment should be reported in the Digest? Yes RAJIV SAHAI ENDLAW, J. 1. The plaintiff has sued for declaration that the invocation dated 30th October, 1996 by the Ministry of Communications Department of Telecommunications of the defendant No.1 Union of India of the bank guarantee issued by the defendant No.2 Bank at the instance of the plaintiff in favour of the defendant No.1 is contrary to the terms of the guarantee and that the defendant No.1 is not entitled to invoke the said guarantee and for permanent injunction restraining the defendant No.2 from making payment under the guarantee and also for mandatory injunction directing the defendant No.1 to negotiate in good faith the terms and conditions of the licence and the interconnect agreement for which the bid of the CS(OS) 2686/1996 Page 2 of 36 plaintiff to the defendant No.1 had been accepted by the defendant No.1. 2. Vide interim order dated 1st November, 1996 after issuance of notice to the defendants and finding that the defendant No.1 had already invoked the bank guarantee, the defendant No.2 bank was restrained from remitting the proceeds of the bank guarantee to the defendant No.1. The plaintiff was, however, asked to keep the bank guarantee alive. On 28th August, 1998 on an application of the plaintiff for exemption from extension of bank guarantee it was held that there was no need for formal extension of bank guarantees and non-extension of the bank guarantee will not affect the rights of the defendant No.1 to get the remittance from the defendant No.2 bank in the event of the matter being decided finally in favour of the defendant No.1 on the basis of invocation made earlier during the term of validity of the bank guarantee. The defendant No.1 preferred FAO(OS) 217/1998 against the said order; on the concession of the counsel for the plaintiff and the counsel for the defendant No.2 bank, in the said appeal on 31st August, 1998, it was ordered that in the event of the plaintiff failing in the suit and the defendant No.1 succeeding therein, neither the plaintiff nor the defendant No.2 bank would object to payment of the bank guarantee amount being made to the defendant No.1 notwithstanding the non- extension of the validity of the bank guarantee. The counsel for the bank also stated that the defendant No.2 bank would not deny payment of the bank guarantee impugned, to the defendant No.1 on the ground that the bank guarantee had not been extended. 3. The order restraining the defendant No.2 bank from remitting the amount of the bank guarantee to the defendant No. 1 was confirmed vide order dated 5th October, 1999 during the CS(OS) 2686/1996 Page 3 of 36 pendency of the suit. The defendant No.1 Union of India preferred an appeal being FAO(OS)384/1999 against the said order and which was admitted. In the meanwhile, the suit proceeded. On change in pecuniary jurisdiction of this court, the suit was transferred to the district court. The plaintiff applied for amendment of the plaint to enhance the valuation of the suit and the said amendment was allowed and the suit transferred back to this court and given the original number. The FAO(OS) 384/1999 came up before the Division Bench of this court on 18th February, 2008 when finding that the trial in the suit had already been completed, the same was disposed of with direction for earlier disposal of the suit. 4. On the pleadings of the parties in the suit, the following issues were framed on 7th September, 2001. “1. Whether the present suit is liable to fail for want of legal notice contemplated under Section 80 of the Code of Civil Procedure? 2. Whether the plaint does not disclose a cause of action? 3. Whether there was no concluded contract between the plaintiff and the defendant No.1? 4. Whether the plaintiff is entitled to the relief for declaration and injunction as prayed? 5. Relief.” The defendant No.1 applied for allowing it to raise an objection that the suit is barred by Section 15 of the Telecom Regulatory Authority of India Act 1997. This court, on 7th October, 2002 finding that the issue sought to be raised is a pure and simple legal issue, allowed the amendment of the written statement to incorporate the said plea and framed the following additional issue. CS(OS) 2686/1996 Page 4 of 36 “Whether the present suit is barred by virtue of Section 15 of the Telecom Regulatory Authority of India Act, 1997, as amended?” 5. The plaintiff filed affidavit by way of examination in chief of only one witness who was cross examined by the counsel for the defendant No.1. The defendant No.1 also examined only one witness who was cross examined by the counsel for the plaintiff. The defendant No.2 did not lead any evidence. 6. The senior counsel for the plaintiff has been heard. The defendant No.1, inspite of several opportunities, did not make any oral submissions and while reserving judgment, opportunity was given to the defendant No.1 to file synopsis of submissions, if any. Written arguments have been filed on behalf of the defendant No.1. Thereafter, the plaintiff also filed synopsis of arguments. The counsel for the defendant no.2 bank stated that the defendant No.2 shall abide by whatever order is made by the court. My issue-wise findings are as under: Re: Issue No. 1: Whether the present suit is liable to fail for want of legal notice contemplated under Section 80 of the Code of Civil Procedure? 7. The suit was accompanied by IA.No.11071/1996 under sub- section (2) of Section 80 of the CPC. Notice of the suit as well as of the said application and of the application for interim relief was ordered to be issued to the defendant No.1 Union of India, when the suit came up first before the Court on 31st October, 1996. The application under Section 80(2) of the CPC was thereafter being listed alongwith the application for interim relief. The order dated 5th October, 1999 confirming the interim injunction during the pendency of the suit, in para 36 thereof also deals with the plea of the defendant No.1 of the suit being barred by Section 80 of the CS(OS) 2686/1996 Page 5 of 36 CPC. It was then held that a suit to obtain an urgent and immediate relief could be instituted against Government of India with the leave of the court without serving the notice as required under Section 80(1). On the basis of the order dated 31st October, 1996 (supra) it was held that the plaintiff was, vide the said order, granted the permission to institute the suit without serving the notice. This was deciphered from issuance of notice to the defendant No.1 before granting the relief of injunction. It was further held that it thus did not lie in the mouth of the defendant No.1 to plead that the suit was bad for want of notice under Section 80 of the CPC. Again when the matter came up for framing of issues on 7th September, 2001 it is recorded that IA.No.11701/1996 had already been disposed of on 5th October, 1999 and need not be listed again. Notwithstanding the same this issue was framed. 8. I may also record that it is the admitted position that a notice dated 30th October, 1996 under Section 80, CPC was given by the plaintiff to the defendant No.1. However, the suit was filed immediately thereafter, without waiting for two months. 9. In the written arguments of the defendant No.1 it is contended that on 31st October, 1996 the plaintiff was not granted leave to file the case against the defendant No.1; that the relief of declaration as prayed cannot be granted inasmuch as no notice under Section 80 had been given and the declaratory relief claimed is barred under Section 80 of the CPC and for which reason the suit is liable to fail. 10. Though undoubtedly the interim order on an application under Order 39 Rules 1 and 2 of the CPC, as the order dated 5th October, 1999 in which it was as aforesaid observed/held that the plaintiff had on 31st October, 1996 been granted leave to sue without complying with the provisions of Section 80(1) of the CPC, is not to colour the CS(OS) 2686/1996 Page 6 of 36 decision at the stage of final disposal of the suit but an order under Section 80(2) of the CPC is not such which once granted in a suit can be adjudicated again at the time of final disposal of the suit. Undoubtedly, the order dated 31st October, 1996 does not in as many words states that leave under Section 80 (2) CPC is granted to the plaintiff. The language thereof is as under: “IA.No.11071/1996 This is an application under sub Section (2) of Section 80 of the Code of Civil Procedure for leave of the court for institution of the suit without serving any notice as required under sub-section (1) of Section 80. The suit has been filed against the Union of India and, therefore, Section 80, notice is required before filing of the suit. However, sub section (2) of Section 80 may be utilized by the plaintiff for seeking leave of the court but before granting the leave that very sub section says that notice has to go to the Union of India giving it a reasonable opportunity of showing cause in respect of the limitation prayed for in the suit. Therefore, notice without process fee to go to Mr Madan Lokur, Standing Counsel for the Union of India for 1-11-1996. Notice be given dasti.” 11. The aforesaid order was interpreted by this court on 5th October, 1999 as granting leave. The principles of res judicata / constructive res judicata apply to successive stages in the same proceedings also. In my view, this part of the order dated 5th October, 1999 cannot be relooked by this court at this stage of final decision of the suit. 12. Independently, of the above also in my view the suit is not barred by Section 80 of the CPC. A suit to obtain an urgent or immediate relief is permitted to be instituted with the leave of the court without serving any notice as required by Section 80(1) of the CPC. If the court is satisfied after hearing the parties that no urgent or immediate relief need be granted in the suit, the court is required to return the plaint for presentation after complying with the CS(OS) 2686/1996 Page 7 of 36 requirements of section 80(1). In the present case the suit was accompanied with the application for leave of the court. This court also on 31st October, 1996 though not in express words granting such leave, in compliance with the procedure in Section 80(2) issued notice to the defendant No.1. The counsel for the defendant No.1 on receipt of notice did not urge that no urgent or immediate relief was required to be granted in the suit. On the contrary, on the very next date i.e., 1st November, 1996 consent was given for restraining remittance of the proceeds of the bank guarantee. No arguments, on any subsequent dates, also appear to have been made in this regard. The court also did not return the plaint with finding that no urgent or immediate relief need be granted in the suit. On the contrary urgent relief sought was granted. 13. At the fag end of the suit, it cannot be argued that the suit was not for urgent relief. The argument of the defendant that the suit for the relief of declaration cannot be for an urgent relief is also misconceived. No objection is raised to the urgency of the relief of injunction. The same is also borne out from the conduct of the proceedings not only by the plaintiff but also by the defendant No.1. A declaratory relief consequential whereto the urgent relief of injunction is sought, would not defeat the urgency of the relief. The two reliefs could not be split up and if as ancillary to the urgent or immediate relief claimed, any other relief is also sought, the provisions of Section 80(2) would not become inapplicable for such reason. I am also of the view that the relief of declaration in the present case is superfluous. The plaintiff even without claiming the said relief could have sought the relief of injunction averring that the invocation of the bank guarantee was not in terms thereof. The grant of every injunction necessarily entails an inquiry / adjudication CS(OS) 2686/1996 Page 8 of 36 by the court of the right or entitlement to the said injunction and with respect whereto declaration can also be claimed. Considering the purpose for which the suit was filed, the suit is held to be falling within the domain of Section 80(2) of the CPC. 14. The issue No.1 is accordingly decided in favour of the plaintiff and against the defendant No.1. Re: Additional Issue: Whether the present suit is barred by virtue of Section 15 of the Telecom Regulatory Authority of India Act, 1997, as amended? 15. The Telecom Regulatory Authority of India Act 1997 came into force on 25th January, 1997 first as the Telecom Regulatory Authority of India Bill. Section 15 of the said Act, on the basis whereof the jurisdiction of this court is pleaded to be barred, as amended w.e.f. 24th January, 2000 is as under: “15. Civil Court not to have jurisdiction – No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.” 16. The Appellate Tribunal is established under Section 14 of the said Act to adjudicate the disputes of the nature mentioned therein and or to dispose of appeals against any direction, decision or order of the Authority constituted under the Act. Under Section 14 A application to the Appellate Tribunal for adjudication of the said disputes is to be made and in the case of appeal period of 30 days for preferring the same has been prescribed. Section 14M provides for transfer of all applications pending for adjudication of disputes before the Authority immediately before the date of establishment of the Appellate Tribunal to the said Appellate Tribunal. Section 14N CS(OS) 2686/1996 Page 9 of 36 provides for transfer of all appeals pending before the High Court, before the commencement of the Telecom Regulatory Authority of India (Amendment) Act 2000 to the Appellate Tribunal on its establishment under Section 14. 17. There is no provision for transfer of the suits as the present one to the Appellate Tribunal. The present suit was instituted on or about 30th October, 1996 i.e., prior to the coming into force of the Telecom Regulatory Authority of India Act 1997 or the Amendment Act, 2000 thereof. There being no provision therein for transfer of the pending suits even if the subject matter thereof is covered by a dispute to be adjudicated by the Appellate Tribunal, it cannot be said that the Appellate Tribunal is empowered to adjudicate this suit. Hence, the question of the jurisdiction of this court being barred does not arise. 18. Similarly, the action of the defendant No.1 impugned in this suit had been taken not in pursuance of any power conferred by or under the TRAI Act but prior to the coming into force thereof. Thus, under the second limb of Section 15 of the said Act also it cannot be said that this court does not have any power to grant the injunction claimed. 19. The defendant No.1 has in its written arguments quoted Section 15 of the TRAI Act 1997 as it stood prior to the Amendment Act thereof of 2000. The same also does not provide for transfer of the suits instituted prior to the coming into force of the Act in 1997 to the Regulatory Authority. The objection in this regard itself was taken by the defendant No.1 for the first time after the coming into CS(OS) 2686/1996 Page 10 of 36 force of the Amendment Act, 2000 and thus the reliance on the provisions in the Act as originally passed is misconceived. 20. A perusal of the Act as it stood prior to the 2000 Amendment also shows that under Section 14 thereof if a dispute arose which the Authority was empowered to adjudicate the aggrieved person was required to make application with respect thereto to the Authority. The dispute within the meaning of Section 14 could only mean the dispute arising after the coming into force thereof and could not refer to the dispute which had already arisen and had been the subject matter of a lis before a Fora competent to adjudicate the same prior to coming into force of the said provision. There was no provision in the Act prior to 2000 Amendment also of transfer of pending disputes to the Authority which under the Act was empowered to adjudicate the same. 21. The additional issue is thus answered in favour of the plaintiff and against the defendant No.1. Re: Issue No.2: Whether the plaint does not disclose a cause of action? Issue No. 3: Whether there was no concluded contract between the plaintiff and the defendant No.1? Issue No. 4: Whether the plaintiff is entitled to the relief for declaration and injunction as prayed? 22. The discussion under these issues is found to be interconnected and hence they are taken up together. The plea of the plaint not disclosing any cause of action is taken on the ground that invocation/payment under the bank guarantee can be injuncted only on the ground of fraud and irretrievable loss or damage. It is contended that, neither of the two grounds are pleaded or made out; CS(OS) 2686/1996 Page 11 of 36 there is neither any pleading or averment of fraud nor of irretrievable loss or damage. It is also the contention of the defendant No.1 that though improper invocation could also be a ground for injuncting payment under the bank guarantee but the same has not been pleaded. It is further the contention in the written arguments that such an objection also could be available only to the defendant No.2 bank and not to the plaintiff and the defendant No.2 bank had not raised any such objection and thus the payment under the bank guarantee, on the ground / for the reason of the invocation being not proper, could not be injuncted. 23. The contention of the defendant No.1 of there being no plea of the plaintiff of the invocation being not proper is incorrect. The plaintiff has in para 7 of the plaint pleaded that clause 3 of the bank guarantee requires that the Letter of Invocation should clearly state the breach which has occasioned the invocation of the bank guarantee. It is further pleaded that the impugned Letter of Invocation does not state or specify the reason why the guarantee has been invoked by the defendant No.1. It is yet further pleaded that the impugned invocation is not in accordance with the terms of the guarantee itself and is thus bad in law, illegal and non-est. It is further the plea that “ it is well settled law that invocation of a bank guarantee has to be in terms of the guarantee. An invocation not in terms of the guarantee is bad and liable to be set aside”. 24. The defendant No.2 has also filed an affidavit dated 31st August, 1998 in this court in which also it is inter alia the case of the defendant No.2 bank that the Invocation Letter dated 19th October, 1996 of the defendant No.1 was not in conformity with the terms of the bank guarantee and as such the purported invocation was totally CS(OS) 2686/1996 Page 12 of 36 improper. It is further pleaded therein that the defendant No.2 bank had by its letter dated 31st October, 1996 to the defendant No.1 stated that the invocation of the said bank guarantee vide letter dated 19th October, 1996 was improper and invalid and accordingly the defendant No.2 bank was under no obligation to make any payment under the bank guarantee. The same plea has been taken by the defendant No.2 in its written statement also. 25. The only witness examined by the defendant No.1 did not deny the receipt of the letter dated 31st October, 1996 from the defendant No.2. Thus, the plea of the defendant No.1 of the defendant no.2 bank having not taken the plea of the invocation being not in terms of the agreement is also not found to be correct. Even otherwise, I am of the view that the plea of the invocation not being in terms of the bank guarantee is available to the person at whose instance the bank guarantee has been given and is not required to be taken by the bank alone. The bank has no personal interest in the matter and does not want to be a privy to any dispute. It is the person at whose instance the guarantee has been issued, who has vital interest in encashment or in restraining encashment thereof and if the invocation is not in terms of the bank guarantee, the plea is certainly available to that person. The matter can be looked at also from another angle. Even if the bank is to contend that the invocation is not in terms of the bank guarantee and the beneficiary of the bank guarantee contends otherwise, the matter will have to be resolved by some authority. In the facts of the present case, such authority could be the court only. The bank could not be expected to rush to the court for the said adjudication. For this reason also I am unable to uphold the contention of the said plea being not available to the plaintiff. CS(OS) 2686/1996 Page 13 of 36 26. Thus I find that there was cause of action for the plaintiff to approach the present court for restraining the encashment of bank guarantee and the reason of the invocation being not in terms of the bank guarantee is pleaded by the plaintiff. 27. The plaint in the circumstances discloses the cause of action. The issue No.2 is decided in favour of the plaintiff and against the defendant No.1. 28. The plaintiff has sued for restraining the encashment of the bank guarantee, besides on the ground of the invocation thereof being not in terms of the guarantee on the ground – (A) that the defendant No.1 had on 16/01/1995 issued tender for providing basic telephone services under a licence to be issued for that purpose on non exclusive basis for various telecom territories. The bidders were alongwith their bids required to submit bank guarantee valid for six months for each service area for which the bid was made and of the value prescribed in the tender document. The plaintiff in term of its bid furnished the bank guarantee of the defendant no.2 bank, in the sum of Rs 50 crores; (B) that the extended time for submission of the