{"id":169754,"date":"1999-10-05T00:00:00","date_gmt":"1999-10-04T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/basic-tele-services-ltd-vs-union-of-india-anr-on-5-october-1999"},"modified":"2016-07-14T11:34:22","modified_gmt":"2016-07-14T06:04:22","slug":"basic-tele-services-ltd-vs-union-of-india-anr-on-5-october-1999","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/basic-tele-services-ltd-vs-union-of-india-anr-on-5-october-1999","title":{"rendered":"Basic Tele Services Ltd. vs Union Of India & Anr. on 5 October, 1999"},"content":{"rendered":"
Delhi High Court<\/div>\n
Basic Tele Services Ltd. vs Union Of India & Anr. on 5 October, 1999<\/div>\n
Equivalent citations: 1999 VIAD Delhi 316, AIR 2000 Delhi 1, 2000 101 CompCas 132 Delhi, 82 (1999) DLT 224, 1999 (51) DRJ 655<\/div>\n
Author: M Shamim<\/div>\n
Bench: M Shamim<\/div>\n<\/p>\n
<\/pre>\n
ORDER<\/p>\n
Mohd. Shamim, J.<\/p>\n
1.
\n     The plaintiff through the above application want this court to issue a direction to defendant No. 2 herein not to make payment to defendant No.  1 under  the  bank guarantee No. 796\/372\/95 dated June 22, 1995  for  Rs.  50 crores.\n<\/p>\n
2.   Brief facts which led to the presentation of the aforementioned application  are  as  under : that the plaintiff herein submitted  an  offer  in response to tender enquiry No. 314-7\/94-PHC dated June 22, 1995 on  January 1,  1996  along with an earnest money bank guarantee in the sum of  Rs.  50 crores  vide  bank guarantee No. 796\/372\/95 through Deutsche Bank  for  the Provision  of telephone services on license for the service area  of  Tamil Nadu.  The  guarantee period of the said bank guarantee was  extended  from time  time on the request of defendant No. 1. The bid of the plaintiff  for telecom  circle  of  Tamil Nadu was found to be  the  highest.  Accordingly defendant  No.  1 by their letter dated March 13, 1996 issued a  letter  of intent to the plaintiff for award of license to provide telephone  services on non exclusive basis in Tamil Nadu Telecom Territorial circle and ask the plaintiff to convey their unconditional and unique vocal acceptance of  the letter  of intent and to furnish performance bank guarantee  and  financial bank  guarantee  in the requisite amount on the prescribed form.  The  said letter  of  intent  dated March 30, 1996 issued by the  defendant  was  not accompanied  by a draft license agreement and draft interconnect  agreement which  was a mandatory requirement as per the terms and conditions  of  the tender  document. The Plaintiff through their letter dated March  29,  1996 informed  defendant  No. 1 their inability to furnish the  performance  and financial  bank guarantee, in the absence of the draft  license  agreement, and  interconnect  agreement  as the same were to be defined  by  the  said document. In the above circumstances the Plaintiff requested defendant  No. 1  to extend the time to submit the letter of accaptence. Defendant  No.  1 extended  the  date for acceptance of the letter of intent  by  four  weeks through  their  letter dated April 11, 1996. Defendant No.  1  subsequently
\nthrough  their  letter dated July 1, 1996 furnished to  the  plaintiff  the draft  of the license and the inter connect agreements and called upon  the plaintiff  to convey their unequivocal and unconditional acceptance of  the same  by  their letter dated July 17,1996. On receipt of  the  draft  inter connect  and license agreement the plaintiff undertook a detailed study  of the  said documents. After having studied the said documents the  plaintiff vide  their letter dated July 19, 1996 intimated defendant No.1 that  there were several issues which arose from the said agreements and the same  were to be negotiated and mutually resolved and a date for signing of the agreement should be fixed only after the resolution of the said issues.  Defendant  No.1 vide their letter dated July 23, 1996 communicated to the  plaintiff  their inability to extend the date. However, they agreed to  mutually discuss the above issues and a meeting in connection therewith was held  on
\nJuly 25, 1996. The plaintiff vide their letter dated July 26, 1996  submitted  an  initial list of comments on the draft license  and  inter  connect agreements. Defendant No.1 through their letter dated July 30,1996 extended the date for acceptance of the letter of intent upto September 12,1996. The plaintiff also accordingly extended the validity of the bid and the validity  of  the bank guarantee upto October 31, 1996. Defendant No.  1  through their  memorandum dated September 7, 1996 revised the draft of the  license and inter connect agreements and sent the same to the plaintiff and  called upon them to intimate the date and time of the singing of said  agreements. However  even the revised drafts received by the plaintiff did not  address all  the  issues raised by the plaintiff. Hence a request was made  to  the defendant  for time to study the revised license and inter  connect  agreement.  The  said  request was acceded to and the date  for  acceptance  was extended  upto  October 18, 1996 addressed to defendant  No.1  was  further informed  that there were quite a good number of deviations in the  revised draft  agreements and the same were as such in the nature of counter  offer to the plaintiff and the same were not in accordance with the tender  documents  or  the clarifications issued thereunder. The plaintiff  vide  their communication  dated October 18, 1996 enclosed a chart showing  substantial deviations  in  the  draft license and inter connect  agreements  from  the tender documents and the clarifications issued thereunder. Defendant No. 1, however,  instead of resolving the said issues raised by the  plaintiff  in regard  to the draft license and inter connect agreements by  their  letter dated October 19, 1996 addressed to defendant No. 2 invoked the bank  guarantee. The plaintiff in view of the above requested defendant No. 2 through letter dated October 30, 1996 not to make payment under the laid  guarantee as  the  invocation was inter alia contrary to the terms of  the  guarantee itself.  The said letter of invocation dated October 19, 1996  is  patently bad  in  law and liable to be set aside. The impugned bank guarantee  is  a conditional  guarantee which can be invoked only in the circumstances  provided  therein. Neither the draft license nor the inter connect  agreements were furnished with the letter of intent as required to be done in terms of the tender documents and were furnished only on July 1, 1996. These  drafts contained  several deviations from the tender documents and the  clarifications.  The Plaintiff have at no stage declined to sign the relevant  documents.  They  have repeatedly requested defendant No. 1 to  settle  various outstanding  issues so as to enable them to proceed further in the  matter. Clause  3  of  the guarantee deed requires that the  letter  of  invocation should  clearly  state the breach on the part of the  plaintiff  which  has occasioned  the  invocation of the bank guarantee. The impugned  letter  of invocation  does not specify the reason why the guarantee has been  invoked by defendant No. 1. The bidder i.e., the plaintiff herein were entitled  to decline to accept the license agreement if it contained substantial changes from the tender documents or if the same was in the nature of counter offer by defendant No. 1 without forfeiting the bank guarantee as per the  clarification issued to question No. 3 under Clause 11 and clarification issued in reply to question No. 1 under clause 12. It has thus been prayed that  a direction  be issued to defendant No. 2 not to make payment under the  bank guarantee in question.\n<\/p>\n
3.   Defendant  No.  1  have opposed the application, inter  alia,  on  the following  grounds : that the suit is liable to be dismissed for want of  a legal  notice under Section 80 of the Code of Civil Procedure. It is  wrong and  false  that the draft agreement and the inter connect  agreement  contained any deviations. In fact, essentially and substantially, they are  in line  with  the tender conditions. The issues raised by  the  plaintiff  in their  letter  dated  September 18, 1996 addressed to  the  defendant  were totally  outside  the  tender conditions. Hence, there  was  absolutely  no reason,  whatsoever,  as to why the same should have  been  considered  and dealt  with.  It is absolutely false and preposterous that  there  was  any counter  offer  from defendant No. 1 to the plaintiff so as to  enable  the plaintiff  to reject the agreement without forfeiture of the earnest  money
\nbank  guarantee. Furthermore, the plaintiff have clearly admitted in  their plaint that they were inclined to go ahead with the project. Hence, it  was not  open for the plaintiff now to allege that there were  deviations.  The plaintiff have failed to give acceptance of the letter of intent for  Tamil Nadu  circle and have also failed to submit the performance bank  guarantee and  the financial bank guarantee as required by the defendant.  Hence  the defendant were compelled to invoke the bank guarantee. It is incorrect  and wrong  that  clause 3 of the bank guarantee required that the  reasons  for invocation  should  be stated. It is sufficient enough to invoke  the  bank guarantee if there was a breach on the part of the plaintiff. The offer for award  of  license to the plaintiff as contained in the  letter  of  intent issued is as per the bid made by the plaintiff against the said tender  and it is in no way a counter offer. The question of counter offer would  arise only in those cases where defendant No. 1 were changing any of the  parameters  as  contained in the bid of the plaintiff. The  application  is  thus false and frivolous. It is liable to be dismissed.\n<\/p>\n
4.   Defendant  No.  2 have not filed any reply to the  above  application. However, they have supported the case of the plaintiff through an affidavit sworn by Shri Anil Malhotra, Manager of the bank.\n<\/p>\n
5.   Learned counsel for the plaintiff Mr. Mukul Rohatgi, Senior  Advocate, has  contended  that the impugned bank guarantee dated June 22,  1995  furnished by the plaintiff in favour of defendant No. 1 was a conditional one. Hence, the same could have been invoked as per the terms and conditions  of the  said  bank  guarantee i.e., the same could have been  invoked  on  the occurrence  of certain events mentioned therein. Defendant No. 1,  however, for the best reasons known to them have miserably failed to show the existence  of  the  said conditions preceding the invocation of  the  said  bank guarantee.  Hence  the invocation is bad in law and defendant  No.  2  were justified  in  declining the encashment of the same. It  has  further  been urged  for and on behalf of the plaintiff that there is no  concluded  contract  in  between the parties inasmuch as the parties were simply  at  the stage  of  negotiations.  The other limb of the argument  advanced  by  the learned counsel for the plaintiff is that there were material deviations in between  the conditions as set out in the draft license agreement  and  the conditions which were enumerated in the tender documents. Hence the  plaintiff  were entitled to decline to accept the letter of intent without  forfeiture  of their earnest money. The alleged acceptance of the bid  of  the plaintiff  vide letter of intent dated March 13, 1996 was in the nature  of counter offer which the plaintiff could have refused to accept.\n<\/p>\n
6.   Learned  counsel  for  the defendant No. 1,  Mr.  Trivedi,  Additional Solicitor  General,  on the other hand, has urged that the  defendant  were under no obligations to show any condition before invoking the bank guarantee. The plaintiff herein, according to Mr. Trivedi, failed to execute  the contract  form though their bid was accepted by defendant No. 1. They  also failed to furnish the performance bank guarantee and financial bank guarantee.  The reasons for the invocation and the bank guarantee find a  mention in the record of defendant No. 1 though the same were not specified in  the letter dated October 19, 1996 invoking the bank guarantee. Hence  defendant No.  1  were fully justified in invoking the bank guarantee.  Admittedly  a letter  of  intent was issued to the plaintiff on March 13, 1996  which  is tantamount  to acceptance of the bid as per the tender  conditions  itself. Thus the plaintiff were under an obligation on the acceptance of their  bid
\nto execute the contract form and to furnish the performance bank  guarantee and the financial bank guarantee. Their failure to do the needful  resulted in invocation of the bank guarantee by the defendant.\n<\/p>\n
7.   Since we are concerned with the construction of the terms of the  bank guarantee  it  would  be just and proper to examining the  said  terms  and conditions before proceeding any further in the matter. They are as under :\n<\/p>\n
     \"(1)  If  the bidder withdraws its bid during the period  of  bid      validity specified by Authority, or \n \n\n\n     (2)  If the bidder having been notified of the acceptance of  its bid by the Authority during the period of the bid validity. \n \n\n\n     (a)  Fails or refuses to execute the contract form if required  ; \n     or \n \n\n\n     (b)  Fails or refuses to furnish the performance Bank  Guarantees and\/or Financial Bank Guarantees in accordance with the  Instructions to Bidders : \n \n\n\n     (3) We undertake to pay to the Authority, an amount not exceeding Rs.  50,00,00,000\/-  upon  receipt of its  first  written  demand  without  any demur if the Authority note that the amount  claimed by is due to or owing to the occurrence of one or both of the two conditions, specifying the occurred conditions or conditions.\" \n \n\n\n<\/pre>\n
8.   It  is  fully manifest from the terms and conditions of  the  impugned bank guarantee alluded to above that the same could have been invoked  only under certain conditions and circumstances which find a mention therein. It can  be safely concluded from above that the impugned bank guarantee  is  a conditional  one. Even the learned Additional Solicitor General has  during the course of arguments not urged to the contrary. On the other hand, their defense is that the bank guarantee was invoked on account of the failure of the plaintiff to fulfill condition No. 2 i.e., to execute the contract  form on acceptance of their bid by defendant No. 1 and their subsequent  failure to furnish performance bank guarantee and financial bank guarantee.\n<\/p>\n
9.   Now  the question in view of the above which comes to the tip  of  the tongue is as to whether the defendant are correct in their submission ?\n<\/p>\n
10.  Admittedly  the plaintiff herein never withdrew their bid  during  the period of the bid validity. In fact the same was extended on the request of defendant No. 1 from time to time. The last extension was upto November 30, 1996 as is manifest from the letter dated September 27, 1996 written by the plaintiff to the defendant and the letter dated October 18, 1996  addressed by  the plaintiff to the Member (Production), Department of  Telecommunication, Sanchar Bhawan, New Delhi. Thus Condition No. 1 was not available  to defendant No. 1 and the same was as such not relied upon by them.\n<\/p>\n
11.  This  brings us to the second condition which is alleged to have  been committed breach of . The said condition as is manifest from the  guarantee deed  itself would be available to the defendant only when they succeed  in showing that there was a concluded contract or an unequivocal acceptance of the  bid  by the defendant. The first letter in this connection  which  was addressed  by defendant No. 1 to the plaintiff is dated March 13, 1996.  It was through the said letter that defendant No. 1 apprised the plaintiff  of the fact that the Director General, Telecommunication, was pleased to issue letter  of intent for award of a license to provide telephone  services  on non exclusive basis in the Tamil Nadu Circle as mentioned in Annexure 1  as per the details of license deed, payment schedules, performance bank  guarantee and financial bank guarantee. The award of license was to be governed by terms and conditions stipulated in the tender documents. Detailed  terms and  conditions  were to be enumerated in the license agreement  and  inter connect  agreement.  Copies of the said documents were  to  made  available within  a  short span of time. The plaintiff through the said  letter  were required  to forward their unequivocal and unconditional acceptance of  the letter  of intent, duly signed by the authorized signatory so as  to  reach the Department of Telecommunication by April 10, 1996 along with the  documents  which  find a mention in para 3 of the said letter. It  was  further required  through  the said letter that in case the  letter  of  acceptance along with the necessary documents was not received by the stipulated  date i.e., April 10, 1996 the letter of intent was to be treated as withdrawn.\n<\/p>\n
12.  It  is  fully  evident from above that the letter of  intent  was  not accompanied  by  the  license agreement and inter  connect  agreement.  The copies of the said documents were to be made available within a short  span of  time. Furthermore, the plaintiff were required to give their  un-conditional acceptance of the said letter of intent by April 10, 1996 i.e., near about within a month from the date of issue of the said letter i.e.,  March 13, 1996. Thus it cannot be said by any stretch of imagination that the bid of the plaintiff was accepted without any strings attached thereto.\n<\/p>\n
13.  Learned  counsel for the plaintiff is right in his submission that  it was in the nature of a counter offer which was to be accepted by the plaintiff.  Moreover, admittedly the letter of intent dated March 13,  1996  was not issued along with the license agreement and inter connect agreement. It was  one  of the tender conditions as is manifest from question  No.  2  of clause 12 which is in the following words :-\n<\/p>\n
     \"Q.  It  would be appropriate if a draft license  copy  with  all terms and conditions are provided to the bidder at this stage  or      at least prior to the issue of letter of intent.\" \n \n\n\n     In reply to the said query it was stated that the draft license agreement will be given to the selected bidders along with the letter of intent. \n \n\n\n<\/pre>\n
14.  Defendant No. 1 thus committed the breach of the said condition  inasmuch as they did not provide the plaintiff with a copy of the draft license and inter connect agreement along with the letter of intent. Admittedly the letter  of intent. Admittedly the letter of intent did not contain all  the terms and conditions which were to be followed by a bidder while  executing the contract. Hence, the plaintiff were in complete darkness with regard to the  terms and conditions of the contract at the time the letter of  intent was  issued. Consequently, how could they have accepted the letter  of  intent?  The said fact was, this court feels, known even to the defendant  at the  time of the issue of the letter of intent and that is why nearabout  a month’s time was provided to the plaintiff to accept the letter of intent.\n<\/p>\n
15.  There  was  no concluded contract is also manifest from quite  a  good number  of letters placed on the file of the court which were exchanged  in between the parties during the course of the negotiations which were  going on.  The  plaintiff were being requested through letters after  letters  to extend the bid validity and bank guarantee from time to time. The defendant in  this connection wrote a number of letters to the  plaintiff  requesting therein  to extend the bid validity and bank guarantee. In this  connection reference can be made to letters dated June 5, 1996 from the Government  of India, Ministry of Communication, to the plaintiff, letters dated June  14, 1996,  August 9, 1996 and September 12, 1996. The plaintiff, on  the  other hand,  have also been requesting to make them available the  draft  license agreement and inter connect agreement at the earliest so that they may have sufficient time to study and discuss the drafts with the defendant. In this connection  the  learned counsel for the plaintiff has led me  through  the letters dated March 29, 1996, April 10, 1996 and May 8, 1996 written by the plaintiff  to  the defendant. Their request for supply of  the  said  draft license  agreement and inter connect agreement was acceded to only on  July 1,  1996 as is manifest from the letter of the said date where through  the plaintiff  were  supplied the copies of draft license agreement  and  inter connect  agreement and were requested to give their unconditional and  unequivocal acceptance of the letter of intent by July 31, 1996.  Surprisingly enough  the final copies of draft license agreement and the  inter  connect agreement  were supplied to the plaintiff only on September 7, 1996, as  is clear from a letter of the said date. The plaintiff were requested  through the said letter to let the defendant know the convenient time and date  for signing of the agreements. The last letter on the record written by defendant  No. 1 to the plaintiff with regard to the signing of the agreement  is
\ndated October 17, 1996 where through the plaintiff were requested to convey their unequivocal and unconditional acceptance of the letter of intent. The plaintiff replied to the said letter through their letter dated October 18, 1996  wherein they brought to the notice of the defendant that  there  were certain deviations from the tender documents and clarifications. In view of the substantial deviations from the tender documents and the clarifications the drafts forwarded to them on September 7, 1996 were really in the nature of  a  counter offer. It can be safely concluded  from  the  correspondence exchanged  in between the parties alluded to above that  negotiations  with regard  to signing of the agreements were going on in between  the  parties till October 18, 1996.\n<\/p>\n
16.  I am thus of the view that there was no concluded contract in  between the  parties. There were offers and counter offers. Time was  being  sought for  discussions to thrash out the difference and there was in fact  no  ad idem on any point. There was no acceptance on the part of the plaintiff  to the counter made by the defendant.\n<\/p>\n
17.  A case very much akin to the case in hand came up for hearing before a Single  Judge  of this court as reported in Union of India Vs.  M\/s.  Uttam Singh Dugal & Co. (Pvt.) Ltd., , who on being faced  with a similar situation held (para 10) “… In my opinion, this letter,  called letter  of acceptance, is only a counter-offer and it cannot reasonably  be construed  to  be acceptance of an offer. Cl. 20 of the letter of  the  respondent-contractor  accompanying  the tender Exhibit R.1 kept  the  tender open  only  for a period of three months. The original  tender,  therefore, lapsed  by  sheer passage of time and over and above that,  the  additions, subtractions and modifications of the terms of the original tender effected during the course of more than seventeen months changed it beyond shape and the  letter of acceptance itself mentions a large number of conditions  and
\nprovides  that  in  the event of discrepancy, the terms of  the  letter  of acceptance  will prevail over the terms of the tender. This letter  of  acceptance also does not make any reference to any previously agreed term  or condition  or  any correspondence on the subject, and it is  impossible  to visualise that the officer accepting the tender had any other agreement  or offer of acceptance of the parties in view … The ultimate portion of  the letter,  therefore, properly required the respondent – contractor  to  complete  the  formal agreement which was being prepared on the basis  of  the tender and the letter of acceptance ….”\n<\/p>\n
     14….  “As a matter of law, when there is variance  between  the      offer  and acceptance even in respect of any material  term,  acceptance  cannot be said to be absolute and unqualified  and  the  same will not result in the formation of a legal contract.”\n<\/p>\n
18.  The  learned  Judge in support of the above opinion  relied  upon  the observations  of  Lord Parker in Von Hatzfeldt-Wilden-burg  Vs.  Alexander, (1912) 1 Ch D 284 at pages 288 & 289, which reads as under : “It appears to be well settled by the authorities that if the documents or letters  relied on  as constituting a contract contemplate the execution of a further  contract between the parties it is question of construction whether the execution  of  the  further contract is a condition or term of  the  bargain  or whether  it  is a mere expression of the desire of the parties  as  to  the manner in which the transaction already agreed to will in fact go  through. In  the  former case there is no enforceable contract  either  because  the condition  is unfulfilled or because the law does not recognize a  contract to  enter into a contract. In the latter case there is a  binding  contract and the reference to the more formal document may be ignored. The fact  that
\nthe  reference to the more formal documents is in words which according  to their natural construction import a condition is generally if not invariably conclusive against the reference being treated as the expression of a  mere desire. ”\n<\/p>\n
19.  The  above  view  was also given vent to by  their  Lordships  of  the Hon’ble Supreme Court in a recent judgment as reported in Rickmers  Verwaltung  GMBH Vs. Indian Oil Corporation Ltd.,   “An  agreement, even  if  not signed by the parties, can be spelt out  from  correspondence exchanged  between  the parties. It is the duty of the  court  to  construe correspondence with a view to arrive at a conclusion whether there was  any meeting of mind between the parties, which could create a binding  contract between  them but the court is not empowered to create a contract  for  the parties  by  going outside the clear language used in  the  correspondence, except  insofar  as there are some appropriate implications of  law  to  be drawn.  Unless  from the correspondence, it can unequivocally  and  clearly emerge  that the parties were ad idem to the terms, it cannot be said  that an  agreemet had come into existence between them through  correspondence. The  court is required to review what the parties wrote and how they  acted and  from that material to infer whether the intention as expressed in  the correspondence was to bring into existence a mutually binding contract. The intention  of the parties is to be gathered only from the expressions  used in the correspondence and the meaning it conveys and in case it shows  that there  had been meeting of mind between the parties and they  had  actually reached an agreement upon all material term, then and then alone can it  be said that a binding contract was capable of being spelt out from the correspondence.”\n<\/p>\n
20.  A perusal of the letter dated October 19, 1996 addressed to the Manager, Deutsche Bank, Tolstoy Marg, New Delhi, whether through the bank  guarantee  was invoked reveals that there was no reference therein with  regard to  the  existence of any of the conditions which were  mandatorily  to  be shown  before the invocation of the bank guarantee. The defendant  for  the best  reasons  known to them have simply contented  themselves  by  stating therein  that it has been ordered by the authority that the  impugned  bank guarantee  bearing No. 796\/372\/95 dated June 22, 1995 be forfeited and  the amount  secured  thereunder  be remitted through a  crossed  account  payee demand draft to the Pay and Accounts Officer, Department of  Telecommunication,  Delhi. The learned Additional Solicitor General, Mr. Trivedi,  while animadverting  on  the said point has argued that the defendant  were  not required  to mention therein existence of the conditions which find a  mention  in the bank guarantee. It was sufficient enough for the defendant  if they were satisfied that the said conditions were in existence and in  fact such  a satisfaction was recorded in the relevant documents of the  department.  The  learned  Additional Solicitor General in  this  connection  has referred  to certain notes of the department which have given out the  reasons  for invoking the bank guarantee. The reasons mentioned there are  the same which were put forward during the course of arguments. I am sorry I am unable  to  agree with the contention of the learned  Additional  Solicitor General.\n<\/p>\n
21.  I  have already observed above that the impugned bank guarantee was  a conditional one and the same could have been invoked only in those discerning  few cases where the said conditions existed i.e., the bidder  withdrew the  bid during the period of the bid validity and the bidder  having  been notified of the acceptance of the bid by the authority during the period of the  bid validity, failed to execute the contract. The other condition  was when a party failed to furnish a performance bank guarantee and a financial bank  guarantee. The defendant as observed above have miserably  failed  to show  the  existence  of any one of the said conditions  mentioned  in  the impugned bank guarantee. Hence they were not justified in invoking the bank guarantee at the time when they did so.\n<\/p>\n
22.  The recital of the terms and conditions in a bank guarantee has got  a definite meaning and purpose behind it. It is neither a mere formality  nor a surplusage to be flung to the winds. If it lays down that a bank  guarantee  can be invoked only when it is shown that certain conditions and  circumstances  are  in  existence then it can be invoked only  when  the  said conditions  are shown. In case the said conditions\/events are not shown  to have occurred the bank would be justified in refusing the encashment.\n<\/p>\n
23.  I  am  fortified in my above view by the observations of  the  Hon’ble Supreme  Court as reported in Larsen & Turbo Limited Vs. Maharashtra  State Electricity  Board & Others,  “… The appellant  wrote  to the  first respondent on 21.2.1994 that the plant was completed and so  all bank guarantees have served their contractual requirements. On a persual of the  relevant clauses in the contract, executed between the  appellant  and the  first respondent, and the communication of the first respondent  dated 10.6.1994, it is fairly clear that the stipulations or conditions mentioned as per clauses 70.2, 70.3 and 70.4 have been successfully fulfillled and the plant  was  admittedly taken over by the first  respondent.  The  guarantee given by the Citi bank, N.A. dated 10.5.1989 appearing in Vol.II at pp. 122 to 126 will ensure only till successful completion of the trial  operations and  the plant is taken over. That event having ensured, the invocation  of the guarantee given by the Citi bank dated 10.5.1985 in the sum of Rs. 2.72 crores is not encashable on its terms and in order to prevent irretrievable injustice,  an injunction as prayed for, to Respondents 1 to 4 deserves  to be  issued on that score. The court below was in error in not doing so.  We hereby restrain Respondents 1 and 4 from invoking the bank guarantee aforesaid. ”\n<\/p>\n
24.  The  above  view was also given vent to by a learned Single  Judge  of this  court as reported in Ansal Properties & Industries Ltd. Vs. Union  of India  &  Ors., 54 (1994) Delhi Law Times 307. To the same effect  are  the observations  of another learned Single Judge of this Court as reported  in Ansal  Properties  & Industries (P) Ltd. Vs. Engineering  Projects  (India) Ltd., .\n<\/p>\n
25.  I  am also tempted here to reproduce a few lines from the  enthralling commentary  by “Chitty on Contracts”, Vol. 2, 27th Edition,  Chap.  33-386, “Construction of terms of credit”. The insistence upon strict compliance is continually  reiterated. In English, Scottish and Australian Bank Vs.  Bank of  South Africa, Bailhache J. remarked :” It is elementary to say  that  a person  who  ships in reliance on a letter of credit must do  so  in  exact compliance with its terms. It is also elementary to say that a bank is  not bound or indeed entitled to honor drafts presented to it under a letter  of credit  unless those drafts with the accompanying documents are  in  strict accord with credit as opened.”\n<\/p>\n
     “33-387  Technical  defenses. If a tender of documents  does  not      strictly  comply with the requirements of the commercial  credit,      the  banker is entitled to reject it. It does not matter  whether      the discrepancy is significant or minute. The rule that de  minimis  non curat lex does not apply in commercial  credit  transaction.”\n<\/p>\n
26.  Learned  counsel for the Plaintiff Mr. Rohatgi has contended that  the plaintiff  herein  are  entitled  to  decline  to  accept  the  letter   of intent\/license  even otherwise because the terms and conditions  have  been changed  in  the  license agreement and inter connect  agreement  from  the original terms and conditions which find a mention in the original  tender, without forfeiting the earnest money. The learned counsel in support of his argument has led me through the clarifications as given out in the  tender. He has in this connection drawn my attention to Clause 12 of the clarifications.  One of the questions which was put by the bidders as per clause  12 was in the following words : ” Will the selected bidders have the right  to decaling  to  accept the license under the terms specified by the  Govt.  if they  have changed from the original tender without forfeiting the  Earnest Money ?” The answer to the above query was in the affirmative, i.e. in case there was a substantial change.\n<\/p>\n
27.  It  has thus been urged for and on behalf of the plaintiff that  there were  substantial changes in the terms and conditions of the draft  license agreement and the inter connect agreement from the terms which were  originally  set  out  in the tender document. The learned counsel  has  in  this connection  placed on record a chart showing crucial deviations which  were likely to affect the interests of the plaintiff. He has pointed out as many as 14 changes of vital importance to the interests of the plaintiff. However,  I  would like to refer to only two or three very  vital  changes.  The original Clause 16.9 at page 20 of the tender documents was in the  following words :\n<\/p>\n
     “Telecom Authority reserves the right to modify these  conditions  or incorporate new conditions considered necessary in the  interest of national security.” The said clause as per license  agreement  given to the plaintiff on September 7, 1996 was changed  to the follwoing: ” The licensor reserves the right to modify at any time the terms and conditions of the license covered under Schedules A, B and C annexed hereto, if in the opinion of the licensor it is necessary or expedient to do so in the interests of general  public  or  for the proper conduct of telegraphs or  on  security consideration.”\n<\/p>\n
28.  It is manifest from above that initially the clause provided a  change in  the terms & conditions in the interest of national  security.  However, the  said clause was modified and amended so as to enable the defendant  to amend  and modify the said clause in the interest of general public or  for the proper conduct of telegraphs or on security considerations. There is  a world  of difference between the two clauses i.e., the clause as it  originally  stood in the tender document and the clause as modified and  amended as per the license agreement given to the plaintiff on September 7, 1996.\n<\/p>\n
29.  There was no provision with regard to imposition of penalty in case of default of any of the terms and conditions stipulated in the license agreement.  However, the term with regard to penalty was incorporated in  clause 12  at  page 4. Thus there was a substantial deviation  from  the  original terms  and conditions inasmuch as there was no provision for imposition  of penalty in case of default of any of the terms and conditions stipulated in the  license agreement or inter connect agreement but the same  was  introduced  as per the license agreement given to the plaintiff on September  7, 1996.\n<\/p>\n
30.  Furthermore,  the learned counsel has argued that there was no  provision  in  the terms and conditions as set up in the  original  tender  with regard  to  the  fact that the licensor’s decision shall be  final  on  all matters  relating to the agreement and application of the terms and  conditions therein. There was no such provision earlier. However, this was added as  per clause 12 of the license agreement supplied to the plaintiff.  This is very vital change inasmuch as it forfeits the right of the plaintiff  to approach the Civil Courts.\n<\/p>\n
31.  In  view of the above substantial changes the plaintiff were  entitled to decline to accept the license without entailing the forfeiture of  their earnest money which was furnished in the form of a bank guarantee.\n<\/p>\n
32.  The  above  view was given vent to by a learned Single Judge  of  this Court as reported in HFCL BEZEQ Telecom Limited Vs. Union of India &  Ors., 69(1997)  DELHI LAW TIMES 317. The facts of the said case are pari  materia the  facts  of the present case. Hence the observations in the  said  case, pari  passu, can be made applicable to the case in hand. It was observed  : “…  The  question  is whether the first defendant issued  the  Letter  of Intent,  as agreed, during the currency of the bid validity period. In  the tender  document  and in particular, in the clarifications  issued  by  the first  defendant, the first defendant had agreed that draft License  agreement  will be issued along with the Letter of Intent. Admittedly, that  was not done. I have extracted the relevant portion from the written  statement that  till  1.7.1996 the first defendant could not get  the  Draft  License Agreement and Draft Interconnect Agreement from the Ministry of Law. There-\n<\/p>\n
fore, the first defendant did not act upto the terms of the tender document in providing the license Agreement along with Letter of intent. This is not a  mere  formality. Because as per the clarifications issued by  the  first defendant  it  was still open to the bidder to consider the  terms  of  the License  Agreement  and the Interconnect Agreement and resile  out  of  the bargain if they are contrary to the terms of the tender document ….”\n<\/p>\n
33.  I  am also tempted here to cite a few lines from a judgment  delivered by the Supreme Court as reported in Delhi Science Forum & Others Vs.  Union of India & Anr., , the Hon’ble Supreme Court laid  down the  guidelines as to under what circumstances administrative  decision  of the  Government  or  of the statutory authority of the  Government  can  be challenged.  It was observed: “… Many administrative decisions  including decisions  relating  to  awarding of contracts are vested  in  a  statutory authority or a body constituted under an administrative order. Any decision taken  by  such  authority or a body can be  questioned  primarily  on  the grounds : (i) decision has been taken in bad faith ; (ii) decision is based on irrational or irrelevant considerations ; (iii) decision has been  taken without  following the prescribed procedure which is imperative in  nature. While eercising the power of judicial review even in respect of  contracts entered  on behalf of the Government or authority, Which can be held to  be state  within  meaning  of Article 12 of the Constitution  courts  have  to address  while examining the grievance of any petitioner as to whether  the decision  has been vitiated on one ground or the other. It is well  settled that  the onus to demonstrate that such decision has been vitiated  because of  adopting a procedure not sanctioned by law, or because of bad faith  or taking  into consideration factors which are irrelevant, is on  the  person who questions the validity thereof …”.\n<\/p>\n
34.  Thus  a duty has been cast on the shoulders of the Union of  India  to act in accordance with law and not to deviate and depart from the procedure prescribed  which is imperative in nature . This is what has not been  done in  the  instant  case. The defendant did not act in  accordance  with  the procedure  prescribed and deviated from it. Hence the same cannot be  prima facie sustained.\n<\/p>\n
35.  It has next been contended by the learned Additional Solicitor General that  the defendant herein are Union of India and as such no suit is  maintainable  against the Union of India unless the defendant have been  served with  a notice under Section 80 of the Code of Civil Procedure. He  has  in this  connection led me through Section 80 of the Code of  Civil  Procedure which provides “No suit shall be instituted against the Government (including  the Government of the State of Jammu and Kashmir) or against a  public officer in respect of any act purporting to be done by such public  officer in  his  official capacity, until the expiration of two months  next  after notice in writing has been delivered to, or left at the office of –\n<\/p>\n
     “(a) …….\n<\/p>\n
     (b) …… “.\n<\/p>\n
36.  It is thus manifest from above that two months notice under Section 80
\nof  the Code of Civil Procedure is a must before the institution of a  suit against  the  Government of India. However, a suit to obtain an  urgent  or immediate relief can be instituted against the Government of India with the leave of the Court without serving the notice as required by Section 80(1). The  provisions  of Section 80(2) are quite clear on this point.  Thus  the only  thing  to be seen herein is as to whether the provisions  of  Section 80(1) were compiled with or not. Learned counsel for the plaintiff in  this connection  has drawn my attention to the order dated October 31,  1996  on interim  application No. 11071\/96. A perusal of the same reveals  that  the plaintiff moved an application for institution of the suit without  service
\nof  the  notice.  The said permission was granted. However,  a  notice  was ordered to be issued to the Union of India before granting the relief i.e., injuction, as the same was mandatory. Thus it does not lie in the mouth  of the  defendant  now to say that the suit is bad for want  of  notice  under Section 80 of the Code of Civil Procedure.\n<\/p>\n
37.  In  the above circumstances I am of the view that the  plaintiff  have shown  a  prima facie case in their favour. In case the  injuction  is  not issued  in that eventuality the bank guarantee which was furnished  by  the plaintiff  by  way of earnest money in favour of defendant No. 1  would  be encashed.  The plaintiff would suffer irreparable loss and injury  inasmuch as they would be deprived of their hard earned money without any justification and for no fault of their own. On the other hand, in case an injuction is  granted  it would be simply tantamount to delay in encashing  the  bank guarantee if the defendant ultimately succeed. In any case the plaintiff by the  institution  of the present suit have raised  a  substantial  question which  needs investigation and during the course of investigation it  would be desirable to direct the parties to maintain the status quo.\n<\/p>\n
38.  In the above circumstances the application is allowed. Defendant No. 2 are hereby restrained from making any payment to defendant No. 1 under  the bank guarantee No. 796\/372\/95 dated June 22, 1995 for Rs. 50 crores.<\/p>\n","protected":false},"excerpt":{"rendered":"
Delhi High Court Basic Tele Services Ltd. vs Union Of India & Anr. on 5 October, 1999 Equivalent citations: 1999 VIAD Delhi 316, AIR 2000 Delhi 1, 2000 101 CompCas 132 Delhi, 82 (1999) DLT 224, 1999 (51) DRJ 655 Author: M Shamim Bench: M Shamim ORDER Mohd. Shamim, J. 1. The plaintiff through the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[14,8],"tags":[],"class_list":["post-169754","post","type-post","status-publish","format-standard","hentry","category-delhi-high-court","category-high-court"],"yoast_head":"\nBasic Tele Services Ltd. vs Union Of India & Anr. on 5 October, 1999 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/basic-tele-services-ltd-vs-union-of-india-anr-on-5-october-1999\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Basic Tele Services Ltd. vs Union Of India & Anr. on 5 October, 1999 - 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