State Bank of India v. Vindhya Telelinks Ltd. — 1992 DIGILAW 789 (MP)

ORDER Shacheendra Dvivedi, J. -- 1. This miscellaneous appeal is directed against the order rejecting the application filed by the appellant in the trial Court under Rule 4 of Order XXXIX of the Code of Civil Procedure refusing to vary or set aside the order of injunction passed against the appellant and respondents 2 and 3 and postponing the decision, on the appellant's application filed under Rule 11 of Order 7 C.P.C., after the framing of issues. 2. Facts relevant for the decision of this appeal may briefly be stated. Respondent No.2/defendant No.1 floated a tender-enquiry inviting offers from suppliers and manufacturers for the supply of telephone cables and wires. Under the conditions of the tender- enquiry, the desirous suppliers intending to participate were required to submit also a tender bond in the form of Bank Guarantee, in the sum of one lakh U.A.E. Dirhams, irrevocable and unconditional with the stipulation that the tender bond submitted by the prospective supplier would authorise respondent No.2/defendant No.1 to withdraw the total amount of the guarantee of its first demand without recourse, if the tendered fails to enter into a contract within the stipulated period or if the tendered withdraws his tender wholly or in part before the expiration of the validity of the guarantee or if the tendered fails to deposit the performance bond as specified in the tender- enquiry para 3.3 within 10 calendar days of awarding the contract. 3. On such tender-enquiry of respondent No.2/defendant No.1 the plaintiff/respondent No.1 with a view to comply with the conditions of respondent No.2 made a request to appellant/defendant No.3 to issue a unconditional and irrevocable Bank Guarantee as required under the tender-enquiry of respondent No.2. The appellant in view of such a request, contracted respondent No.3/defendant No.2 at Abu Dhabi and on the request of the appellant, respondent No.3 issued the required Bank Guarantee for an amount of one lakh U.A.E. Dirhams and the appellant in that regard on 8.3.1990 gave a counter Bank Guarantee to the respondent No.3, under the similar terms. The Bank Guarantee remained valid upto 30.9.1990. The Bank Guarantee remained valid upto 30.9.1990. In the meantime, the plaintiff having failed to supply the goods, wanted to withdraw from the agreement submitting that due to the eruption of war in the Middle East, supplies to him of raw-material were adversely affected and therefore, wanted the agreement to be suspended for such period as it amounted to Force Majeure condition, stipulated under section 3.1.13 of the conditions of tender form. 4. But respondent No.2/defendant No.1 invoked the Bank Guarantee with respondent No.3 which in its turn, invoked the Bank Guarantee with the appellant, the State Bank of India. In the suit filed by respondent No.1 in the Court below for declaration and the relief of permanent injunction against respondents 2, 3 and the appellant was also sought. It was prayed that respondent ~0.2 be restrained from claiming and respondent no.3 and the appellant from making any payment of the amount under the Bank Guarantee to respondent No.2. The plaint also accompanied an application under Rules 1 and 2 of Order XXXIX of the Code of Civil Procedure for seeking temporary injunction in the same terms and the learned trial Court on 24.9.1990, passed the ex-parte order of injunction st the appellant and respondents no.2 and 3 restraining no.2 from claiming encashment of the Bank Guarantee and respondent no.3 and the appellant from making payment thereof. 5. It is pertinent to mention that respondents no.2 and 3 were not served nor they subjected themselves to the jurisdiction of the trial Court. Respondent" No.2 and 3 have no office or any property in this country. They are neither the subjects nor are the residents of a place within the jurisdiction of Indian Courts. Both the respondents are residing surely beyond the jurisdiction of the Indian Courts and therefore, the question of jurisdiction and then the validity and effect of any order passed against these two respondents, should have been considered at the very outset by the Court below. The appellant has submitted only a counter Bank Guarantee in lieu of the Guarantee submitted by the Bank of Oman, respondent No.3, in favour of respondent No.2, on the request of respondent No.1/plaintiff who wanted to satisfy the requirement of respondent No.2. The appellant has submitted only a counter Bank Guarantee in lieu of the Guarantee submitted by the Bank of Oman, respondent No.3, in favour of respondent No.2, on the request of respondent No.1/plaintiff who wanted to satisfy the requirement of respondent No.2. The order of temporary injunction passed ex-parte was conditionally confirmed by order dated 8.3.1991 on the consideration that it may be varied or vacated as the situation may permit, on the appellant applying under rule 4 of Order XXXIX C.P.C., in the event respondent No.2 i.e., defendant No.1 invokes the Bank Guarantee as against the appellant. It is contended by the appellant that the learned Court below while conditionally so confirming the ex-parte order of injunction, acted under a misunderstanding that Bank Guarantee was not in fact invoked till then and therefore, on the assumption that there was no cause of complaint or grievance to the appellant. But the documents as also the reply of the appellant to plaintiff's application under Order 39, Rule 1 and 2 clearly go to indicate that the Bank Guarantee was already invoked by respondent No.2 with respondent No.3 and in its turn by respondent No.3 against the appellant. The appellant, in the circumstances, moved an application under Rule 4 of Order XXXIX, C.P.C., as ordered on 8.3.1991 by the trial Court with the prayer that in the circumstances, the order of injunction be vacated, discharged or set aside. 6. The learned trial Court, under the impugned order, refused to vary, discharge or set aside the order dated 8.3.1991 and finally confirmed the order passed by it on 24.9.1990. 7. It is contended by the appellant that the trial Court had no jurisdiction to entertain the suit as firstly, under the 'ouster clause' the parties by agreement, ousted the jurisdiction of Indian Courts and subjected themselves to the jurisdiction of the Courts of United Arab Emirates. Secondly, the respondents No.2and 3 are foreign based and are beyond the jurisdiction of the Indian Courts. They are neither the residents nor they owned property in this country. They also did not subject themselves to the jurisdiction of the trial Court. Further contention is that the autonomy of an irrevocable letter of credit or the Bank Guarantee is entitled to protection and the trial Court fell in error in interfering with the autonomy, by passing the order of injunction against the appellant and respondents Nos. They also did not subject themselves to the jurisdiction of the trial Court. Further contention is that the autonomy of an irrevocable letter of credit or the Bank Guarantee is entitled to protection and the trial Court fell in error in interfering with the autonomy, by passing the order of injunction against the appellant and respondents Nos. 2 and 3. An objection with regard to the under valuation of the suit and deficient payment of court-fee is also agitated. 8. Respondent No.1 has urged that there being no demand in terms of guarantee, the appellant and respondent no.3 were under no legal obligation to make the payment to respondent No.2, of disputed amount under the guarantee and in that regard they have been rightly injected by the Court below. Bank Guarantee could also not be invoked as there was no concluded contract. Further it is urged that the trial Court's order dated 8.3.1991, confirming the ex-parte order of injunction, had attained finality as the order was not challenged by the appellant and instead an application was filed under Order 39 Rule 4, Civil Prodedure Code, before the trial Court itself, which could not vacate its earlier order, as there was no change in the circumstances. As against the question of under valuation, the appellant cannot agitate the grievance in this appeal as that part of the impugned order was revisable and no revision was preferred. 9. Before granting an injunction, even ex-parte, the Court is required to consider the existence of prima facie case which would also imply the prima facie consideration of the jurisdiction of that Court. There would not be a prima facie case, if the Court considering the matter, has apparently no jurisdiction to entertain the suit. The Court must bear this aspect in mind and seek prima facie satisfaction to itself that it has jurisdiction to entertain the suit, before it proceeds to pass an order injuncting the defendant Any consequential order may be passed by the Court, once it is found that the suit or proceeding fall within the jurisdiction of the Court, as held by Full Bench of Bombay High Court in Dattatraya v. Jairam (AIR 1965 Bom.177). 10. 10. On appearance of defendant, if the jurisdiction of Court is challenged, the issue must be decided prior to the confirmation of the ex-parte order of injunction, because if a Court has no jurisdiction over the matter brought before it, any injunction order passed by it will be treated as null and void. A void judgment or order in its legal effect is no judgment or order. It is non-est By it no rights are divested. From it no rights can be obtained. Being worthless in itself, all proceedings founded upon it are equally worthless. It neither binds or bars anyone. 11. In the instant case, the service of trial Court's notice was not effected on respondents no.2 and 3. Both the concerns are foreign based. They never subjected themselves to the jurisdiction of the Court. The appellant alone appeared in the Court below to challenge its jurisdiction and the maintainability of the suit. 12. Furthermore, the suit itself was based on the "Standard Instructions And Conditions" of the tender, which were accepted by the plaintiff and copy thereof was also filed. The learned Court below did refer and rely upon section 3 thereof but did not care to look at its clause 27, which is an 'ouster clause' with regard to jurisdiction of other Courts, except the Courts of United Arab Emirates. Although, the parties by an agreement cannot confer the jurisdiction on a Court which otherwise has no jurisdiction, but where two or more Courts have jurisdiction, the parties may by agreement oust the jurisdiction of one and agree to subject themselves to the jurisdiction of the other only. Their Lordships of Supreme Court in Hakam Singh v. Gammon (India) Ltd. ( AIR 1971 SC 740 ) observed: "It is not open to the parties by agreement to confer by their agreement jurisdiction on a Court which it does not possess under the Code. But where two Courts or more have under the Code of Civil Procedure jurisdiction to try a suit or proceeding an agreement between the parties that the dispute between them shall be tried in one of such Courts is not contrary to public policy. Such an agreement does not contravene S.28 of the Contract Act" The learned trial Court failed to address itself to these serious questions and proceeded to pass the orders dated 24.9.90, 8.3.91 and 27.11.91. Such an agreement does not contravene S.28 of the Contract Act" The learned trial Court failed to address itself to these serious questions and proceeded to pass the orders dated 24.9.90, 8.3.91 and 27.11.91. The Court exercising jurisdiction in the above situation may also be required to consider the effect of its order under the International Law. 13. As stated above, it was at the request of the plaintiff/respondent no. 1 that the appellant contacted respondent no.3/ the Bank of Oman which executed the Bank Guarantee and undertook to pay the disputed amount to respondent no.2 on its demand, and in lieu thereof the appellant in the same terms executed a counter guarantee in favour of Bank of Oman. The two banks, therefore, remained under the liability to make the payment of guaranteed amount unless the fraud was specifically shown to have been practiced and/or the Court issued an effective order of injunction restraining such claim and the payment thereof. Although such an order was passed, but it came without considering the question of the tenability of the suit itself. An order to be effective, must be passed by a Court of competent jurisdiction and must have the force of law behind it, else its disobedience would follow no consequences. Mookerjee and Carnduff, JJ. in Subhadra Koer v. Dhajadhari Goswami (65 I.C. 380) discussing the question held: "Before proceedings can be taken on account of disobedience of an injunction issued by a Court, it must be ascertained that the Court had jurisdiction over the subject-matter in controversy. If the Court has no jurisdiction over the matter, or if it exceeds its powers by granting an injunction in matters beyond its jurisdiction, the injunction must be treated as absolutely void, and the person who disobeys it cannot be punished." 14. Unless there was a legal and effective order against the creditor and the first guarantor, the appellant alone cound not be restrained from the payment of guaranteed sum as that would only be a consequence of the acts of respondents 2 and 3 and the amount would be reimbursed by respondent no.3 from the securities given by the appellant under the counter Bank Guarantee on ~he payment thereof to respondent no.2. Without an effective order of the Court restraining the creditor from claiming the amount, the liability of the surety would be co- extensive with that of the principal debtor under section 128 of the Contract Act. 15. It is strenuously argued by the respondent/plaintiff that on an application under Order 39, Rule 4, C.P.C., the order of injunction could not be vacated or varied, as there was no change in the circumstances and that the order dated 8.3.1991 confirming the ex-parte injunction had become final, since no appeal against that order was preferred by the appellant The trial Court vide order dated 8.3.1991 had conditionally and not finally confirmed the ex-parte order dated 24.9.1990 by further ordering that the appellant may move the application for the vacation of injunction order on the respondent no.2, invoking the Bank Guarantee. Therefore, the application under Order 39, Rule 4, C.P .C., was made. It appears that the trial Court passed the order on a misunderstanding that the Bank Guarantee was in fact not enforced. But this fact can safely be taken to be well within the knowledge of the plaintiff/respondent No.1 through telex messages that there was such a demand. It was not so disclosed in the plaint. Later, when certain telex messages were filed and relied by the appellant on preferring the application under Order 39, Rule 4, C.P.C., the plaintiff/respondent No.1, pleaded its ignorance submitting that it did not receive the telex messages as it has no concern with Universal Cabels Ltd., Satna, nor they are the plaintiffs promotors, but the telex message dated 11.9.1990 which was relied upon by the plaintiff/respondent itself and also by the trial Court in para 7 of the order dated 8.3.1991, also came through the same media i.e. Universal Cabels Ltd., Satna. Therefore, the plea taken by the plaintiff has no substance. In the circumstances, the impugned order dated 27.11.1991 in its effect, is the order of confirmation of orders dated 24.9.1990 and 8.3.1991. 16. Both the parties have cited a number of authorities to support their other contentions, but since I am inclined to allow the appeal only on the short ground of non-consideration and non-determination by the trial Court, of the question of its jurisdictional competence to entertain the suit, the other questions are not being considered. 17. 16. Both the parties have cited a number of authorities to support their other contentions, but since I am inclined to allow the appeal only on the short ground of non-consideration and non-determination by the trial Court, of the question of its jurisdictional competence to entertain the suit, the other questions are not being considered. 17. On the foregoing discussion, the appeal deserves to succeed and is allowed, setting aside the impugned order and the case is remanded back to the trial Court with a direction to pass a fresh order on the determination of its jurisdictional competence to entertain the suit in view of the observations made herein above. In the peculiar facts and circumstances, there shall be no order as to the costs. Parties are directed to appear in the Court below on 5.1.1993.