JUDGMENT
Jayant Patel, J.
1. The short facts of the case appear to be that the petitioner is cooperative bank doing banking business registered under the Gujarat Cooperative Societies Act (hereinafter referred to as the ‘Act’). The respondent No. 2 is State Electricity Board hereinafter referred to as the ‘board’ for the sake of convenience) and respondent No. 5 is the State of Madhya Pradesh (hereinafter referred to as the ‘State Government’ for the sake of convenience).
2. It appears that the board had floated the issue of bonds of Rs. 200 Crores and the scheme for issuance of such bonds are known as MPEB Bonds (1)-98 as per Annexure-A, and on such aspect there is no dispute. As per the said pamphlet SBI Capital Markets Limited was appointed as the adviser and co-ordinating lead arranger, and the bonds were issued by Madhya Pradesh Electricity Board respondent No. 2 herein. Annexure A shows that the nature of the bonds were as the debenture and are State Guaranteed redeemable, non-convertible, non-cumulative. Under the head of guarantee, it was mentioned as under:
Interest Payments and Principal Repayments under the bonds are Unconditionally and irrevocably guaranteed by the Government of Madhya Pradesh (GOMP). The GOMP has issued a Guarantee vide No. 9226/F.5.68/13/97 dated October 3, 1998 to this effect, the text of which has been reproduced elsewhere in the offer documents.
3. Therefore, the State of Madhya Pradesh guaranteed unconditionally and irrevocably to the interest payment and the principal repayment under the bonds. It further appears that the collection of money of such bonds were through different branches of the State Bank of India, and it is not in dispute that petitioner invested the money in such bonds through State Bank of India, Ahmedabad branch. The pertinent aspect is that the State Bank of India was appointed as collection center to receive money of the bonds by the board. As per the details mentioned in paragraph A of the issue structure, the interest warrant would be dispatched by Registered Post along with the Letter(s) of Allotment/Refund orders to the sole/first applicant, but also at the risk of the applicant.
4. There is no express clause for conferring jurisdiction in the event any dispute arise and on the said aspect the learned Counsel appearing for both the sides have also not disputed the said factual position.
5. Part B of the pamphlet provided for issuance of the bonds in addition and to the payment of interest is in the same manner as referred to hereinabove. On the aspect of redemption in part B, it has been provided as under:
For Option I and II, the face value of the Bonds will be redeemed at par in the three annual installments in the ratio 33:33:34 at the expiry of the firth, sixth and seventh years from the Deemed Date of Allotment. For option III, the face value of the Bonds will be redeemed at para at the end of the seventh year from the Deemed Date of Allotment. Payment of redemption will be made only on surrender of the Bond Certificate(s)/Letters of Allotment(s) and duly discharged by the Bondholder(s). The interest on the Bonds will cease to accrue from the date of redemption.
6. Under the head of Security it has been provided as under:
The bonds, interest, Trustees remuneration and all other monies relating hereto shall be secured by a structured payment mechanism (described under the head ‘Payment Mechanism’ elsewhere) and an unconditional and irrevocable guarantee of the Government of Madhya Pradesh for the payment of interest and the repayment of principal.
7. Under the heard of application by Urban Cooperative Banks it has been mentioned as under:
The Reserve Bank of India vide its circular No: BR.CIR.72/16.20.00/93-94 dated May 16, 1994 has allowed primary co-operative banks to invest their surplus funds upto 10% of their deposits in bonds of Public Sector Undertaking.
8. Under the head of Trustees in second paragraph it has been mentioned as under:
The responsibilities and duties of the Trustees, inter alia include protection of the interest of the Bondholders in the event of default by MPEB in regard to timely payment of interest and repayment of principal and taking necessary action including enforcement of securities at the cost of MPEB. The major events of default that will necessitate repayment before maturity will be decided at the discretion of the Trustees at the time of execution of the Trustees agreement.
9. The aforesaid pamphlet issued by the board to the public at large can be said as an invitation to subscribe bond on the terms and conditions of the bond.
10. It is not in dispute that the petitioner bank invested Rs. 1,50,000,00/- in the aforesaid bond, and the said part of subscription to the bond is admitted by the respondent, coupled with the documents which are produced for payment of the amount and also letter of allotment. It appears that after investment of the amount, as the interest was not paid, as it became due as per the terms and conditions of the bond, the petitioner bank entered into correspondence calling upon the board to forward the payment of the accrued interest. However, it appears that the same was not properly responded by way of disbursement of the amount of the interest as it became due. It also appears that the petitioner approached various authorities, but no positive action resulting the disbursement of the amount, as per the terms and conditions of the bonds and therefore, the petitioner has approached this Court by the present petition.
11. The pertinent aspect is that the bonds were issued in the year 1998 and they were for seven years. However, as per the clause of redemption in the ratio of 33:33:34 the redemption was to be made at the fifth, sixth and seventh year and each bond comprised of Rs. 1 lac. In any case, no redemption was beyond the period of seven years from the date of issuance of the bond. The said period of seven years would be completed in the year 2005.
12. I have heard learned Counsel for the petitioner Mr. Pandey, for the respondent Ms. Bhaya, for the State of Madhya Pradesh Mr. Oza and for the SBI Capital Markets Limited Mr. Gupta and for the respondent No. 3 Mr. AM Hawa for Singhi & Company.
13. The preliminary contention raised on behalf of the board and State Government deserves to be considered before other aspect on merits are examined by this Court. The contention of learned Counsel for the respondent board and State Government are that no cause of action has accrued for filing the present petition to the petitioner within the territorial jurisdiction of this Court and therefore, this Court will have no jurisdiction to entertain the petition much less to grant any relief to the petitioner. It was submitted that the petition came to be admitted by this Court ex-parte and therefore, the respondent had no opportunity to raise such preliminary contentions at the admission stage, but now in response to the order passed by this Court as the respondents are appearing and have raised such contentions, this Court may examine the same and decide accordingly.
14. In order to examine the said contention, it deserves to be recorded that once the invitation to offer is given to the petitioner for subscribing to such bond and in response thereto the petitioner has subscribed to such bond and respondent board having accepted amount of such bond, it can be said that there is concluded contract between the respondent board and the petitioner, as per the terms and conditions of the bond. If the matter is examined in light of the law of contract, it appears that collecting agent for receiving money of the bond was appointed by the board, and such agent was to collect the money from various places including at Ahmedabad, which is in the present case. It is true that merely because the amount is collected, it does not result into acceptance of the contract by the respondent board, and such acceptance would be completed only when the amount is credited towards bounds, and the bonds are issued in favour of the petitioner. The issuance of such bond is at the Registered office at Jabalpur, but the relevant aspect is that letter of allotment/refund orders were to be sent by RPAD to the applicant concerned. The scheme of bond also provides for dispatching to the interest warrant letter of allotment/refund orders by RPAD passed to the applicant concerned. Therefore, agreement can be read as for the forwarding of the payment of the bond, may be to the interest or may be of the refund amount to the applicant at the place, where the address is so notified by the applicant.
15. As per the provisions of Section 3 read with Section 4 of the Indian Contract Act, 1872, the contract would be completed when the communication of acceptance of the proposal comes to the knowledge of the person, to whom it is made. As observed earlier after issuance of the letters of allotment of the bond, the same were agreed to be forwarded to the applicant concerned, and in fact they have been forwarded by the board to the petitioner, and the petitioner has received the same at the address in Gujarat State. Therefore, the contract can be said as completed in Gujarat Sate from the date on which, the communication is received by the petitioner.
16. As per the terms and conditions of the aforesaid contract of bond, the refund order including the interest warrants were also to be dispatched by the RPAD to the applicant concerned at the address mentioned in the bond. It is not even the case of the respondent board that such refund order or interest warrants were not to be dispatched to the concerned applicant of the bond by RPAD, but the contention of the respondent board is that if there is failure to comply with such condition, the cause of action would accrue not at the place, where the bondholders has given address, but would accrue at the place, where the Registered Office of the board is situated.
17. If the said contention is further examined, it appears that it was the case for performance of concluded contract between the petitioner, and the respondent board. It may be that the interest warrants or the refund order may be prepared at the registered office of the board, but the said preparation of the refund order, or interest warrants would not result into completion of the performance of the contract and such contract would stand performed only when interest warrant/refund order are prepared, may be at the registered office of the board, and are dispatched by the RPAD to the concerned applicant, and are received and the payment is so realised of the amount. It is only when the amount of interest warrants or refund order, as the case may be when received by the applicant of the board, the contract would stands as performed. If the occurrence of the performance of the contract is at the place where the applicant/holder of the bond is available, or at the address where it is so notified, such in case of the present petitioner would be in Gujarat State.
18. In a matter of concluded contract, if the cause of action is traced in light of the aforesaid facts, it would start from the moment the interest warrant/refund orders are not prepared or dispatched or not received by the concerned Bond holder. It is by now well settled that the cause of action would be bundle of facts which may have relevance for the purpose of granting relief to such party who approaches before the Court for the relief. In a matter of concluded contract, when the performance is agreed, the cause would start from the time at which the party who is to perform the contract either denies the performance by express or implied conduct or avoids performance of the contract. Further, the cause of action in the matter of concluded contract where the performance is agreed or guaranteed, would not be the same of both the parties to the contract. As for the respondent Board, there is no cause for litigation, such aspects may not assume much importance. But the cause which is brought before the Court is by the petitioner who has been allotted the Bond. Therefore, if as per the aforesaid concluded contract of the Bond, the amount of interest or refund order which were agreed to be forwarded to the petitioner by the respondent Board, if not forwarded, the cause would accrue to the petitioner who is one of the party to the contract in whose favour the performance to pay the interest and refund order was agreed under a concluded contract. Therefore, non-receipt of the interest warrant/refund orders from the respondent Board by the petitioner in such concluded contract would result into the cause of action to the petitioner against the respondent Board and the State Government. In the event there is failure on the part of the respondent Board to discharge the obligation as per the concluded contract, since as per the concluded contract, the interest warrant/refund orders were to be received by the petitioner at the address in Gujarat State, it can be said that such cause of action accrued to the petitioner within Gujarat State. As observed earlier, it may be that after accrual of such cause of action, for entitling the petitioner to get the interest warrant/refund orders, such cause of action would continue until such interest warrant/refund orders are so prepared or directed to be prepared and would further continue until the same are received by the petitioner at the address notified in the letter of allotment which is in Gujarat State. Therefore, when the performance can be said as completed of a concluded contract of Bond, only when the interest warrant/refund orders are received by the Bond holder at the address notified through registered post, it can be said that the cause of action in part has accrued to the petitioner at the address notified in the letter of allotment which is in Gujarat, i.e. the territorial jurisdiction of this Court.
19. At this stage, it would be profitable to refer to certain observations of the Apex Court in the case of Laxman Prasad v. Prodigy Electronics Ltd. reported at , wherein the Apex Court had an occasion to consider the cause of action vis-a-vis the applicability of the law and consequentially the maintainability of the proceedings. At para 33, after extracting Section 20 of the Civil Procedure Code, which inter alia by Clause (c) provides for institution of the Suit in the Court within the local limits of whose jurisdiction, the cause of action, wholly or in part arises, it was observed by the Apex Court at para 35 onwards as under:
Section 20 has been designed to secure that justice might be brought as near as possible to every man’s heartstone and that the defendant should not be put to the trouble and expense of travelling long distances in order to defend himself.
It was inter alia observed at para 46 as under:
Territorial jurisdiction of a court, when the plaintiff intends to invoke jurisdiction of any court in India, has to be ascertained on the basis of the principles laid down in the Code of Civil Procedure. Since a part of ’cause of action’ has arisen within the local limits of Delhi as averred in the plaint by the plaintiff Company, the question has to be considered on the basis of such averment. Since it is alleged that the appellant-defendant had committed breach of agreement by using trade mark/trade name in Trade Fair, 2005 in Delhi, a part of cause of action has arisen in Delhi. The plaintiff Company, in the circumstances, could have filed a suit in Delhi.
20. If the statement made in the petition are to be examined together with the documentary evidence produced in the present petition, it appears that in the petition, the petitioner has mainly relied upon the pamphlet circulated at Annexure-A through Ahmedabad Branch, the payment made at Ahmedabad, and if Annexure-A is considered, it does provide for the dispatch of the interest warrant and the redemption of the Bond by refund order to the applicant concerned. Therefore, in light of the documents which are produced in the petition together with the observations made hereinabove at the first instance by the petitioner, it is not possible to accept the contention of the learned Counsel for the respondent Board that a cause of action in part has not arisen within the jurisdiction of this Court.
21. The learned Counsel for the respondent heavily relied upon the decision of the Apex Court in case of Alchemist Ltd. and Ors. v. State Bank of Sikkhim and Ors. reported at for contending that in more or less, similar fact situation, the Apex Court held that the High Court of Chandigarh had no jurisdiction.
22. If the facts of the case before the Apex Court in the case of Alchemist Ltd.(Supra) are considered, it was not a case for discharge of the obligation of a concluded contract but, was a case of invitation to offer for a strategic partnership and it was not a case where after a concluded contract was entered into between the parties and at the time when the obligation was not so discharged between the party to the contract, the Court had an occasion to consider the cause of action. Therefore, the said decision is of no help to the respondent Board as well as the State Government.
23. The aforesaid is coupled with the two additional aspects; one is that the capacity of the petitioner in a concluded contract is that of a creditor who has to recover money of a concluded contract from the respondent Board as the principal debtor and the State Government as guarantor. At this stage, it would be worthwhile to extract certain observations of this Court in its decision in the case of H.S. Shobasing & sons v. Saurashtra Iron Foundry & Steel Works Pvt. Ltd. reported at 1968 GLR 932, wherein at para 2, this Court (through N.K. Vakil, J.) observed thus:
Section 49 of the Contract Act does not oust the the rule of English common law of the obligation to pay the creditor and the further obligation of finding the creditor so as to pay. Section 49 of the Contract Act only comes in to operation when there is an application by the promisor to the promisee. Where it is not suggested that the promisor made any application to the promisee for performance of the contract, Section 49 would have no application. If Section 49 have no application, then there is no reason why the common law rule should not apply in India. It is further laid down that the common law rule is a reasonable rule and it is in conformity with the justice and equity because it recognises the obligation of the debtor to pay his debt and that obligation can only be discharged by the debtor going to his creditor and repaying the amount and the common law rule imposes this obligation only when there is no express contract to the contrary
24. As observed earlier, the express contract in the present case does provides for the obligation to pay the amount of interest and the refund of the Bond by the Board to the petitioner by dispatching the same to the petitioner/bond holder by registered post at the address so notified. But even if such aspects is considered without there being any express condition, then also, as per the common law rule, the obligation stands created against the debtor to pay the amount to the creditor at a place where the creditor is available.
25. The second aspect is that the respondent Board is a State within the meaning of Article 12 of the Constitution, which is having the principal liability to pay the interest and the refund of the amount of the Bond. The guarantor who has unconditionally and unequivocally guaranteed the repayment of the Bond with interest is the State Government of Madhya Pradesh itself. It is hardly fair on the part of any State Government or its instrumentality to back out from its obligation to refund the amount with interest of a money which is borrowed or accepted on express condition to refund that interest from the citizen or any legal entity entitled to have the fundamental rights. On the contrary, such an approach on the part of the State or its instrumentality which is also a State within the meaning of Article 12 of the Constitution of India would be unfair. When the monies of citizens are borrowed by the State or its instrumentality or are accepted with the express obligation to repay the same on a particular date with interest, State or its instrumentality must act in absolutely just, fair and reasonable manner. It hardly lies in the mouth of the State or its instrumentality to back out from its monetary obligation to discharge the liability even though it was expressly agreed and the performance thereof was guaranteed. Therefore, the aforesaid two aspects are the additional circumstances to permit the petitioner to invoke the jurisdiction of this Court under Article 226 of the Constitution of India when the cause of action in part has already accrued as observed earlier within the territorial jurisdiction of this Court.
26. Much grievance has been raised on behalf of the respondent Board as well as the State Government that the present petition can be termed as a monetary claim or money suit for which the writ powers may not be exercised by this Court and the petitioner may be relegated to the remedy of filing a Civil Suit before the Civil Court. In furtherance to the submission, it was also contended by the learned Counsel appearing for the respondent Board and the State Government that there are disputed questions of facts about the attribution of the liability to be discharged by the Board or the State Government, as the case may be, on account of the division of the then Madhya Pradesh State into new territory of Madhya Pradesh State now and formation of Chattisgarh State. It was submitted that therefore, this Court may relegate the petitioner to the remedy of filing a suit where the question of apportionment of the liability would also be considered.
27. The said contention if examined, it appears that a cloud is created with a view to avoid the obligation by the respondent Board or the State Government, as the case may be, by making such submissions. Whereas, facts and record of such apportionment of the liability is clear as stated hereinafter.
28. In the affidavit-in-reply filed on behalf of the respondent No. 2 Board, there is a reference to the order of the Government of India dated 23.05.2003 for apportionment of the liability between the Madhya Pradesh State Electricity Board and Chattisgarh State Electricity Board. The pertinent aspect is that the aforesaid order came to be issued based on the report of the Central Electricity Authority for ascertaining of the liabilities between the aforesaid two Boards. The relevant part of the order of the Central Government reads as under:
Now therefore, the Central Government after due consideration of the report of the Central Electricity Authority, do hereby order the provisional allocation of the various liabilities of the existing Board between two Boards namely the Madhya Pradesh State Electricity Board and Chattisgarh State Electricity Board with immediate effect as indicated in the Schedule attached to this order. Both these SEBs are liable to discharge the liabilities allocated to them under this order.
The Schedule for allocation of the liability to respondent No. 2 Board vide Sr. No. 22 provides for the investment of the amount by the petitioner Bank of Rs. 150 Lakhs and it also shows the interest due as on 14.04.2001. Therefore, as per the documents produced by the respondent No. 2 Board itself, in view of the aforesaid order of the Central Government, the liability is allocated to the respondent No. 2 Board. Further, the respondent No. 2 Board had challenged the action of apportionment of the assets, liabilities and incidentally, there was also reference to the order of the Central Government dated 23.05.2003 referred to hereinabove in such challenge. Ultimately, as per the decision of the Apex Court in the case of Madhya Pradesh State Electricity Board v. Union of India and Ors. reported at , the Apex Court has not interfered with the decision of the Central Government for apportionment of the assets and the liabilities. Therefore, in view of the aforesaid decision of the Apex Court, it hardly lies in the mouth of the respondent Board to contend that there are disputes about the liabilities to be discharged by the respondent Board on account of the division of the Madhya Pradesh State into two States, more particularly when the highest Court of the land has finalised the issue.
1. It was submitted on behalf of the respondent Board or the State Government that the State of Madhya Pradesh has filed a Suit in the Apex Court for division of the properties of the then Madhya Pradesh State as against the decision of the Central Government and the said Suit is pending.
2. No documents are produced by the respondent State Government or the Board about the prayers made in the Suit proceedings. It is not even the contention of the learned Counsel appearing for the Board or the State Government that any prohibitory orders have been passed by the Apex Court staying the discharge of the obligation by the State of Madhya Pradesh pertaining to any guarantee given. Therefore, under these circumstances, merely because the suit is preferred by the State Government for additional assets from the property of the then State of Madhya Pradesh, it cannot be said that the liability as the guarantor of the State Government would not remain in existence or would automatically get suspended or would remain in abeyance. When the State of Madhya Pradesh unequivocally and unconditionally guaranteed the interest and repayment of the amount of bond invested by the citizen or the Bank, such obligation as a guarantor would continue in spite of the division of the then Mandya Pradesh State and it can hardly be considered as valid ground to dis-entitle the petitioner to the relief, if otherwise permissible in law under the cloud of disputed questions of fact, though in reality, there is none.
3. It may incidentally be recorded that pending the petition, the learned Counsel for the respondent Board had placed on record the proposal for settlement received by her from the Board dated 17.03.2005. The copy of the same is produced with the affidavit in rejoinder filed on behalf of the respondent No. 6. The said proposal reads as under:
(i) Interest @7% p.a. from the date of default in making payment of half yearly installment or interest to 31.03.2005 or date of maturity whichever is earlier, alongwith principal overdue as on 31.03.2005 shall be paid in two equal installments in March ’05 and June ’05.
(ii) Interest from 01.04.2005 on principal not yet due, shall be paid @ 8% p.a. in place of coupon rate. This interest and principal not yet due shall be paid on the scheduled dates of i.e. 1/7/05 (interest) and 1/12/05 (interest and balance principal)
(iii) No overturn or penal interest on principal under default and interest instalments under default shall be claimed by the investors.
(iv) Court case or other litigation shall be withdrawn unconditionally by the investors.
(v) The settlement would be subject to finalisation of apportionment of liability of MPSEB. Any additional liability of MPSEB arisinng out of this finalisation shall also be settled on above principle.
Together with the said proposal, different dates have been provided for actual repayment. However, it appears that the said proposal is not acceptable to the petitioner and has ultimately not materialised.
30. The aforesaid takes me to examine the aspects for passing appropriate orders since in view of the discussion and observations made hereinabove, the cause of action, in part, in the present petition has accrued within the territorial jurisdiction of this Court and there are no disputed questions of facts as sought to be canvassed for the relief prayed in the petition, more particularly when the acceptance of the amount and the Scheme of the Bond are admitted position. The aforesaid is coupled with the circumstance that pending the petition, the offer was made to make the payment, but at the interest rate of 7% as referred and 8%, as the case may be, as referred to hereinabove.
31. The matter as such for the purpose of granting relief can be segregated into two parts:
32. Until the date on which the interest or the principal, as the case may be, were payable as per the scheme of the Bond and the another is for the period thereafter. As observed earlier, since the terms and conditions of the Bond are admitted, the respondent Board and the State Government would be required to pay the amount of interest and the principal as per the conditions of the Bond vide Annexure-A.
33. So far as the period after the date on which the interest or the repayment of the principal as were payable is concerned, including the realisation thereof, i.e. of the interest or the principal as the case may be, as per the Scheme of the bond, the contention of the petitioner is that the agreed rate of interest at the rate of 15% p.a. as per the scheme of the bond may be ordered to be paid, whereas, the respondent Board as well as the State Government have resisted the prayer, by contending that no interest is payable.
32. In my view, when the respondent Board has enjoyed the money, in any case, the petitioner would be entitled for Bank rate interest prevailing by way of a compensatory measure.
33. Even otherwise also when the money in reality is not parted with by the respondent Board and the respondent Board has continued to enjoy the same, may be by way of unauthorised retention thereof for the subsequent period, i.e. the period after the date on which the interest or the principal has become due, the reasonable interest by way of compensatory measure would be 8% p.a. until the actual payment is made.
34. Hence, in view of the aforesaid, the respondent Board as well as the State Government are jointly and severally directed to make the payment of the requisite amount of interest and the principal of the Bond as per the Scheme of the Bond with the interest as agreed under the Bond within a period of 3 months from the receipt of the order of this Court. It is further directed that in addition to the agreed amount of interest and of the principal of the Bond, the respondent Board and the State Government jointly and severally shall also be required to pay the interest @ 8% p.a. to the petitioner for the period during which the due amount of interest and the principal of the Bond remained unpaid. The aforesaid payment of interest shall also be simultaneously made by the respondent Board and the State Government, as the case may be, within 2 months thereafter. As pursuant to the order passed by this Court (Coram:D.A.Mehta, J.) on 16.11.2006, the respondent Board has deposited the amount of Rs. 50 Lakhs, the petitioner shall be at the liberty to withdraw the same, but the Board shall be entitled to have credit of the same while complying with the final direction issued in the present petition.
35. The petition is allowed to the aforesaid extent. Rule made absolute accordingly. Cost in cause and no additional costs.
36. The learned Counsel for the respondent Board after pronouncement of the Judgement prays that the operation of this Judgement be suspended for some time so as to enable the respondent Board to approach before the Higher Forum. Considering the facts and circumstances, such request is declined.