BASIC TELE SERVICES LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) 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.

(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 alongwith 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 to 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 asked the plaintiff to convey their unconditional and unequivocal 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 inter connect agreement which was a mandatory requirement as per the terms and conditions of the tender documents. 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 inter connect agreement as the same were to be defined by the said documents. In the above circumstances the plaintiff requested defendant No. 1 to extend the time to submit the letter of acceptance. 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 through 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 July 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 signing 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 agreements. The said request was acceded to and the date for acceptance was extended upto October 18, 1996. 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 said 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.

(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 bank 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.