IN THE HIGH COURT OF GUJARAT AT AHMEDABAD APPEAL FROM ORDER No 240 of 2001 For Approval and Signature: Hon'ble MR.JUSTICE A.M.KAPADIA ============================================================ 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 : NO 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 @ ENVISION ENGINEERING Versus SACHIN INFA ENVIRO LTD. -------------------------------------------------------------- Appearance: 1. Appeal from Order No. 240 of 2001 MR MIHIR THAKORE SR. ADVOCATE WITH MR VIPUL S MODI and MR MEHUL H RATHOD for appellant MR SURESH N SHELAT SR. ADVOCATE WITH MR MITUL K SHELAT for Respondent No. 1-2 MR RR MARSHALL for Respondent No. 3 Respondent No. 4 served -------------------------------------------------------------- CORAM : MR.JUSTICE A.M.KAPADIA Date of decision: 09/05/2002 C. A. V. JUDGEMENT 1. What is challenged in this Appeal from Order filed under Order 43 Rule 1 (r) of the Code of Civil Procedure ('the Code' for short) is the order dated May 5, 2001 recorded below application Ex.5 in Special Civil Suit No.350 of 2000 by the learned Civil Judge (S.D.)., Surat by which application Ex.5 filed under Order 39 Rule 1 and 2 of the Code by appellant against respondents restraining them from committing breach of the terms and conditions of the tender and consequential right existing in favour of the appellant and further to restrain the respondents from assigning to anyone the construction work of Common Effluent Treatment Plant ('CETP' for short) of Sachin Infa-Enviro Limited, respondent No.1, till disposal of the suit, came to be rejected and thereby the interim injunction granted earlier has been vacated. 2. Appellant is the original plaintiff whereas respondents are the original defendants and for the sake of convenience and brevity, they shall be referred to as 'the plaintiff' and 'the defendants' in this judgment. 3. The plaintiff is a registered partnership firm, doing the work of Pollution Control Consulting & Engineering. Defendant No.1 is a company for CETP in the area of Sachin at Surat. Defendant Nos.2 is the Chairman of defendant No.1 company and defendant No.4 is a consultant of the above-said project. 4. According to the plaintiff, the project is of basic cost of Rs.1950 lacs. The plaintiff and defendant No.3 jointly filled the pre-qualification tender for the project of CETP and their tender totalling Rs.15,70,57,872/- was accepted and they were informed accordingly. Thereafter defendant No.3 started the work of civil engineering. According to the plaintiff, at the time of filling tender, it had paid 40% of the tender amount of Rs.2 lacs of its share by cheque to defendant No.3 and in this way, the earnest money deposit was given by the plaintiff. According to the plaintiff, when the tender was sanctioned and letter of indent was given, defendant No.2 called the plaintiff and asked them to use low quality materials and as the plaintiff asked to give the said change in materials, if any, in writing, defendant No.2 threatened to remove the plaintiff from the project and the defendants in collusion with each other are not giving the details of work to the plaintiff though repeated requests are made to them by the plaintiff. According to the plaintiff, it is time to start technical work but the defendants are trying to ruin the valuable rights of the plaintiff by which the business reputation of the plaintiff will be affected. So the plaintiff is constrained to file the suit for specific performance of contract and tender sanctioned in favour of the plaintiff and defendant No.3 and letter of indent dated January 16, 1999 issued in their favour respectively. It is also prayed to award damage of Rs.2,91,10,000/- together with interest at the rate of 24% from the date of filing of the suit till its realization and also for permanent injunction against defendants restraining them from committing breach of the terms and conditions of the tender and consequential right existing in favour of the plaintiff and further to restrain the defendants from assigning to anyone the construction work of CETP of Sachin Infa-Enviro Limited, defendant No.1, till disposal of the suit and also mandatory injunction against the defendants to give details about the work and to get the work to be done through the plaintiff. 5. Alongwith the suit, application Ex.5 is also moved by the plaintiff wherein ad-interim relief is claimed against the defendants for restraining them from committing breach of the terms and conditions of the tender and consequential right existing in favour of the plaintiff and further to restrain the defendants from assigning to anyone the construction work of CETP of Sachin Infa-Enviro Limited, defendant No.1, till disposal of the suit. In the said application, prima facie case and balance of convenience in its favour is pleaded and it is also pleaded that if ad-interim injunction as prayed for is not granted, plaintiff will have to suffer irreparable loss and, therefore, it is prayed to grant ad-interim injunction as prayed for in prayer clause para 21 (A) of the application. 6. On service of notice, defendants appeared and filed their written objections. Defendant Nos.1 and 2 in their written objections, inter alia, denied all the allegations made in the application. It is contended that there is no relations between the plaintiff and defendant Nos.1 and 2. It is also contended that plaintiff has concealed the fact of contract dated February 27, 1999 indentionally and in these circumstances, under Order 7 Rule 11 of the Code, it is required to be stayed under Arbitration Act. It is further contended that as per the Partnership Act names of all partners are required to be shown but such names are not on record and looking to the pleadings of plaintiff, it is clear that the plaintiff intends to make service tender. It is also contended by the replying defendants that work of defendant No.1 is to be carried out as per direction of this High Court. It is also contended that the suit is bad for misjoinder of parties as the plaintiff has not joined Government of Gujarat, Central Government and Financial Institutions which have financed in the construction of CETP at Sachin. It is also denied by them that the tender was filled in by the plaintiff alongwith defendant No.3. It is also pleaded that plaintiff has never entertained these defendants and defendant No.1 has never acknowledged the plaintiff for tender procedures and since the plaintiff being a third party for defendant Nos.1 and 2, no right arises in its favour as per law on the basis of the Memorandum of Understanding existed between the plaintiff and defendant No.3. It is also contended that plaintiff has produced forged documents in the proceedings. There is no prima facie case nor balance of convenience in favour of the plaintiff and therefore there is no question of considering the aspect of irreparable loss in favour of the plaintiff. On the contrary, if the injunction as prayed for is granted, defendants will suffer irreparable loss as the construction work of CETP will not be completed though ordered by the High Court to complete the same in time bound programme. They, therefore, prayed to dismiss application Ex.5. 7. Defendant No.3 has also filed separate written objections in which it is contended that as per the provisions of Section 69 of the Partnership Act it is necessary to show names of all partners in the certificate of registration of firm but the plaintiff has not done so and looking to the dispute of the plaintiff it is of specific performance of contract in which circumstances it can only ask for the loss but no injunction can be granted. It is also contended that since the matter is pending before the High Court and the High Court has extended the time limit twice for completion of the construction work of CETP if the order of ad-interim injunction granted by the Court at the initial stage is continued for a long time the order of the High Court cannot be complied with. It is also asserted by defendant No.3 that it wanted to fill the tender floated by defendant No.1. No contract was made between the plaintiff and defendant No.3 and Memorandum of Understanding was made thereafter when the plaintiff becomes ready to move forward, the detailed contract will be made taking into account the Memorandum of Understanding and due to shortage of time, the pre-qualified tender was filled by the plaintiff and defendant No.3 jointly the arrangement of time and pre-qualified tender was filled by the plaintiff and defendant No.3 jointly. It is also contended that at the time of final tender, as plaintiff was not ready to take responsibility, defendant No.3 only filled in the final tender. It is also contended that as per the contract dated February 27, 1999 between defendant Nos.1 and 3, work was started in February 1999 within the knowledge of the plaintiff and others and there is no question of sending work acceptance letter dated January 16, 1999 to the plaintiff. It is also denied by defendant No.3 that amount of Rs. 2 lacs has been paid by the plaintiff. It is also asserted that the plaintiff has forged the document dated January 16, 1999. It is denied that defendants are in collusion with each other. Ultimately it is claimed that plaintiff has no prima facie case nor balance of convenience tilts in its favour and hence there no question of considering irreparable loss in favour of the plaintiff. Lastly it is contended that as per the provisions of Specific Relief Act and Contract Act, the dispute of the plaintiff is with respect to special work and the dispute is not tenable under the provisions of Arbitration Act. Defendant No.3 therefore prayed to dismiss the application Ex.5. 8. Defendant No.4 has also filed written objection contending that it has been wrongly impleaded in the suit. It is contended that it is the consultant appointed for the said project on behalf of defendant No.1 and its function is only to supervise as to whether the work is going on as per the design prepared by it. The plaint is bad for misjoinder of parties. So far as rest of the averments made in the application are concerned, defendant No.4 has no personal knowledge and therefore it prayed to dismiss the application Ex.5. 9. The learned Judge, after hearing the learned advocates appearing for the parties and on analysis, appreciation and evaluation of the pleadings and the documents annexed therewith, came to the conclusion that the tender was filled in by defendant No.3 only and the payment transactions are also made by defendant No.3 in the tender. In the entire correspondence, name of the plaintiff has not been shown and therefore there is no prima facie case in favour of the plaintiff nor balance of convenience tilts in its favour. It is further held that irreparable injury would be caused to the defendants if injunction as prayed for is granted because the construction work of CETP would be delayed which would tantamount to defying the order passed by this High Court by which it is ordered to complete the construction work of CETP at Sachin in time and resultantly the learned Judge of the lower Court has rejected the application Ex.5 and thereby interim injunction granted earlier has been vacated which has given rise to the present AO at the instance of the original plaintiff. 10. Mr. Mihir Thakore, learned Senior Counsel for the plaintiff contended that tenders were invited by defendant No.1 for establishment of CETP at Sachin Industrial Estate and pursuant to the same, the plaintiff, who is a qualified engineer in environmental science, in association with defendant No.3, filled up tender at pre-qualification stage and thereafter Memorandum of Understanding was signed between plaintiff and defendant No.1. Pursuant to the signing of the Memorandum of Understanding the plaintiff has paid Rs.2 lacs to defendant No.3 on 29.12.1998. Therefore there was a joint bid between the plaintiff and defendant No.1 which is established by various correspondence made by defendant No.1 in the joint name of the plaintiff and defendant No.3. Notwithstanding the voluminous evidence on record to establish that the tender was filled by plaintiff and defendant No.3 jointly which was accepted by defendant No.1, the learned Judge of the lower court has held that the plaintiff has failed to prove that it is a contracting party with defendant No.1. The said finding of the learned Judge of the lower court suffers from non-application of mind to the material on record. It is emphasized by the learned counsel that it is true that the xerox copy of the Memorandum of Understanding produced by defendant No.3 at mark 27/3 and xerox copy of the same Memorandum of Understanding produced by plaintiff at mark 3/3 are not similar. In case the document produced by defendant No.3 is accepted as a genuine document then also it is established beyond doubt that there is a joint bid between the plaintiff and defendant No.1 and, therefore, the finding recorded by the learned Judge is in total disregard to the material placed on record and is based on extraneous grounds even which are not borne out from the record of the case. It is also asserted by the learned counsel that the learned Judge has grossly erred in coming to the conclusion that the correspondence and letter of indent do not show name of the plaintiff. What is highlighted by the learned counsel is that the most important document, that is, letter of indent dated January 16, 1999 produced on record by the Court Commissioner at mark 58/3 and mark 59/13 were from the office of defendant No.1 and it bears name of the plaintiff as addressee of the letter and therefore the finding of the learned Judge of the lower court is perverse and suffers from the non-application of mind to the material placed on the record of the case and most important documents are not considered and appreciated by the learned Judge which were produced on a notice under Order 11 Rule 12 of the Code. Therefore, according to the learned counsel, the findings recorded by the learned Judge are contrary to the material on record and suffer from non-application of mind and therefore the Appeal from Order deserves to be allowed. Besides this, it is further contended that the project of setting up of CETP is being carried out with the financial assistance of Central Government, State Government, World Bank and also getting 25% subsidy. Thus, the entire project is being set up by the public money wherein the element of public interest is involved. It is not a case of contract of private nature wherein no public money or public interest is involved. In view of this also, considering the equity, justice and good conscience as public money and public interest cannot be jeopardized for unjust and illegal demand of defendant No.2 by using inferior quality material which has been stated by the plaintiff on oath and in view of this also the plaintiff is entitled to decree of specific performance of the acceptance of joint tender granted in favour of the plaintiff and defendant No.3 and letter of indent dated January 16, 1999. According to the learned counsel, there is voluminous evidence in favour of the plaintiff that it is entitled to get decree as prayed for in the plaint for the specific performance of contract and grant of tender in favour of the joint name of plaintiff and defendant No.3 and letter of indent dated January 16, 1999. The learned counsel further submitted that there is a prima facie case in favour of the plaintiff and if during the pendency of the suit defendant No.1 gives the said contract to other persons and in the event of passing a decree in favour of the plaintiff, it would become infructuous and therefore balance of convenience also tilts in its favour. So far as irreparable injury is concerned, it is emphasized by the learned counsel that if the injunction as prayed for is not granted, the plaintiff would have to suffer irreparable injury which cannot be compensated in terms of money as it would be deprived of completing the work which was jointly assigned to it and defendant No.3 inasmuch as the reputation of the plaintiff as an expert in environment engineering would be adversely affected if it will not be permitted to complete the work and therefore according to the learned counsel, the order recorded below application Ex.5 is contrary to the evidence produced before the trial court and settled principles with respect to granting of relief of specific performance of contract as well as ancillary relief of injunction and therefore the order impugned is liable to be quashed and set aside by granting the prayer made in application Ex.5 restraining the defendants from giving the work of the said CETP to any other agency till the disposal of the suit and, therefore, this Appeal from Order deserves to be allowed and the learned counsel urged that the Appeal from Order may be allowed. Mr. Thakore, learned counsel has cited the judgment of Madras High Court in the case of K.M. Jainabibi and others v. M.K. Govindswami, AIR 1967 Madras 269 to canvass the proposition that the Courts could take note of the subsequent event pending appeal and had the power to grant decree of specific performance of contract if during the pendency of the suit or appeal the tender which was granted for the work to be done is about to complete. 11. Mr. S.N. Shelat, learned Senior Counsel who appears for defendant Nos.1 and 2 contended that the letter of indent dated January 16, 1998 issued jointly in favour of plaintiff and defendant No.3 is a joint venture contract and, therefore, the plaintiff alone has no right to file the suit for specific performance of contract as sought for. It is also contended that the genuineness of the alleged letter of indent dated January 16, 1999 itself is doubtful and, therefore, unless that aspect is cleared, enforcement of the same cannot arise. The learned counsel further contended that there cannot be specific performance unless the enforcement which is sought for is clear and certain. What is asserted by the learned counsel is that there is no privity of contract between the plaintiff and defendant No.1. The documents on record clearly reveal that the presence of the plaintiff was only till the stage of pre-qualification. The documents on record unequivocally establish that the final tender was filled only by defendant No.3 and the letter of acceptance was also issued in favour of defendant No.3 only and, therefore, according to the learned counsel, there is no prima facie case in favour of the plaintiff. It is also emphasized by the learned counsel that balance of convenience also does not tilt in favour of the plaintiff. According to him, it tilts in favour of the defendant No.1 only. So far as irreparable injury is concerned, according to the learned counsel, it would be caused to defendants if the stay as sought for and ad-interim injunction as for is granted in favour of the plaintiff. There is already delay of two years as the suit came to be filed in the year 2000 and since then the work of CETP which is in public interest is incomplete and the delay in installation causes nuisance and escalation of costs. What is empathized by the learned counsel is that the relief sought for is the specific enforcement of the contract but no such relief can be granted in view of the clear bar contained in section 14 (1) of the Specific Relief Act ('the Act' for short) as the proviso to the said section is not applicable to the facts of the present case. It is also asserted by the learned counsel that the contention made by the learned counsel for the plaintiff that if the injunction is not granted to the plaintiff, his good will would be at stake and it would suffer loss of goodwill has no substance in view of the settled principles enunciated by the Supreme Court that relief of specific performance of contract cannot be granted merely on the ground that there will be loss of goodwill or the reputation is at stake. Lastly it is submitted that there is a very limited scope for interference in the Appeal from Order which is filed under Order 43 Rule 1 (r) of the Code unless it is shown that the impugned order is perverse, capricious or arbitrary and passed ignoring all the aspects of prima facie case, balance of convenience then and then only the appellate court can interfere. On the aforesaid premises, the learned counsel submitted that there is no substance in this AO which is meritless and hence deserves to be dismissed and therefore urged to dismiss the AO. So far as balance of convenience is concerned, the learned counsel contended that it does not tilt in favour of the plaintiff as CETP is to be installed in pursuance of the order issued by this Court and if the CETP is not installed in time there would be clear breach of the order passed by this Court and on account of injunction 60 industrial units who are members of defendant No.1 would be affected and may face prosecution for disobeying the directions of this Court as well as for breach of Environment Laws. In support of the aforesaid submission, learned counsel has relief upon the following decisions: (i) Ganesh Shet v. Dr. C.S.G.K. Setty & Ors., JT 1998 (4) SC 181; (ii) M.C. Chacko v. The State Bank of Travancore, AIR 1970 SC 504; (iii) Raunaq International Ltd. v. I.V.R. Construction Limited, AIR 1999 SC 393; (iv) Colgate Palmolive (India) Ltd. v. Hindustan Lever Limited, AIR 1999 SC 3105; and (v) Her Highness Maharani Shantadevi P. Gaekwad v. Savjibhai Haribhai Patel, 2001 (3) GLR 2097. (vi) Wander Limited and another v. Antox India P. Ltd., 1990 (Supp) SCC 727. 12. Mr. R.R. Marshall, learned counsel for defendant No.3 has contended that the project was not funded by the World Bank. It is also asserted that the plaintiff had made absolutely improper and ineffective attempt to show that it was involved along with defendant No.3 when the contract was awarded. The record does not indicate that the final bid was made by defendant No.3 in collaboration with the plaintiff as all the documents produced by the plaintiff in support of its say are of pre-bid stage. Since there is difference arose between the plaintiff and defendant No.3 the plaintiff decided not to bid for contract with defendant No.3 and defendant No.3 has made bid of contract and there is voluminous evidence in this regard. It is also emphasized by the learned counsel that the say of the plaintiff that it alone has the technical specialization for effluents treatment scheme is totally unfounded and baseless. It is emphasized by the learned counsel that the plaintiff has no right to ask for specific performance of letter of indent dated January 16, 1999 and the tender issued in favour of defendant No.3. According to the learned counsel, at the most, if at all ultimately the plaintiff succeeds, in such case, his only right is to claim damages either from defendant No.1 or from defendant No.3. The learned counsel has also contended that the Division Bench of this Court has passed the order for installation of CETP at Sachin which is to be carried out by defendant No.1 as the said work is entrusted to it by the order of this Court and therefore if there