UNITED INDIA PERIODICALS v. RANK OF BARODA — 1993 DIGILAW 283 (DEL)

S. C. JAIN,j. ( 1 ) MAHANAGAR Telephone Nigam Ltd, (hereinafter referred to as to MTNL), invited tenders for publication of directories in the metropolis of Delhi and Bombay. Tender of United India Periodicals Pvt Ltd, in short UIP, being-tie highest was accepted and an agreement dated 14. 3. 87 ( original agreement) duly entered into. Under the agreement UIP was to publish directories every. year from 1987 to 1991 for Delhi and Bombay separately and was to pay a total amount of Rs 20. 16 crores as royalty to MTNL and to supply to the MTNL certain number of directories free of cost which depended upon the number of subscribers. Under the original agreement UIP furnished a performance guarantee in the sum of rupees one crore. Apart from the number of free directories to be supplied by UIP to the MTNL, UIP was also to supply same number of supplementary directories to MTNL as well. Supplementary directory was to be brought out between two issues of the directory i. e. six months. after the publication of the annual issue. The supplementary directory was to indicate the changes that had taken place during this interval. The original agreement also mentioned that first issue of the telephone directory shall be published in Novcmber/ December, 1987. UIP was given right to print any additional directory and also to sell the same to any other person including any Govt department. If UIP was required to publish any additional supplementary directory it was to charge certain amount as mentioned in the agreement but that is not quite relevant. It may, however, be mentioned that on the issue of new directory, old directories were to be arranged to be collected by the General Managers concerned and these were to be given to UIP. In case of short fall of old directories below 85% MTNL was to pay Rs 6. 00 per copy of short fall for the main directory and rupee one for the supplementary directory to UIP. UIP was given exclusive right for procurement of the advertisements included in the yellow pages as well as strips, bold and extra entries in the white pages. The rates of advertisements were to be Fixed by the UIP in each issue of the directory and these rates were to be printed in a place allotted p73 in the directory for general information. The rates of advertisements were to be Fixed by the UIP in each issue of the directory and these rates were to be printed in a place allotted p73 in the directory for general information. Any revision in the rates were to be intimated to MTNL. The UIP was to ensure that before any advertisement was accepted for printing in the directory the advertiser was to be made fully aware of the fact that MTNL was not a party to the agreement between the UIP and the advertiser and any liability, claim or charge arising out of the advertisement was to be the sole responsibility of UIP. The clauses of the agreement were to be published in the directory by the UIP in bold letters and UIP was to indemnify MTNL against any litigation or damages that it might suffer on account of breach of any of the terms of the agreement. The amount of royalty was payable by the UIP to MTNL within ten days of the publication of the directory each year. The original agreement also had an annexure which contained more terms and conditions of printing of the directories. Some of these terms specified that the UIP shall clarify to all the individual advertisers that MTNL would not be a party to any agreement between UIP and the advertiser. Further on account of default of UIP paying the royalty within the due date an interest was to be charged at the rate of 18% per annum. If UIP still failed to pay the royalty and interest as accrued thereupon within 20 days of the publication of the directory, this amount was to be adjusted against security deposit. In these circumstances, MTNL was also authorised in its discretion to terminate the contract. This power was without prejudice to any of the MTNL s rights or legal remedies under the original agreement or any other law for the time being in force. The UIP was to execute all the work on its own cost and it specifically said that it bad made the offer under the original agreement after taking into consideration all the cost factors including future escalation in cost of material required for printing, shortage of such material in the market, cost of labour, compilation etc. The UIP was to execute all the work on its own cost and it specifically said that it bad made the offer under the original agreement after taking into consideration all the cost factors including future escalation in cost of material required for printing, shortage of such material in the market, cost of labour, compilation etc. procurement and use of paper of approved quality, procurement of advertisement and supply and delivery of the required number of copies free of cost to MTNL. Clause 16 of Annexure-A to the original agreement also provided that without prejudice to the rights and remedies of the MTNL against any of the provisions of the contract or otherwise in law, if UIP committed any default or breach of the terms and conditions of the contract and or failed in the due performance thereof within the time fixed by the contract ( which was the essence of the contract) and did not complete the entire work on the stipulated due date, the MTNL shall be entitled to recover from the UIP to which the UIP agreed to be bound to pay to the MTNL as and by way of compensation or liquidated damages an amount calculated at the rate of Rs. 1 lakh per day or part thereof of the delay beyond the stipulated date in respect of the item on the stipulated date as mentioned in the contract. ( 2 ) MTNL vide letter dated 24. 2. 1993 invoked the said performance bank guarantee No. 16/3 dated 3. 3. 87 for Rs. l crore mentioning therein that as per the contract dated 14. 3. 84 UIP was to print from 1987 to 1991 five main ( and supplementary) directories each for Delhi and Bombay i. e. a total of 10 main and 10 supplementary issues. But UIP has in these five years published only three main and three supplementries and that also after substantial delay in the required quantity. Thus there has been non performance of contract to the extent of balance directories and supply of inadequate number of directories supplied. Other defaults were also pointed out by the MTNL in this letter. It has been alleged that monies arc due and payable by UIP as there has been a loss of royalty to the extent of Rs 19. Thus there has been non performance of contract to the extent of balance directories and supply of inadequate number of directories supplied. Other defaults were also pointed out by the MTNL in this letter. It has been alleged that monies arc due and payable by UIP as there has been a loss of royalty to the extent of Rs 19. 80 crores, apart from liquidated damages/compensation for late deliveries of directories published during 1987-1991 resulting in loss of reputation etc. As UIP has failed to perform and discharge their duties and obligations under the agreement the said performance bank guarantee to. the extent of Rs 1 crore has been sought to be invoked by writing this letter to Bank of Baroda. ( 3 ) AGGRIEVED, UIP the plaintiff, filed this suit for permanent injunction seeking to restrain Bank of Baroda, defendant No. 1 from making any payment under the bank guarantee and restraining the MTNL, defendant No. 2 from claiming the said amount from the bank under the bank guarantee. In the suit, this application for ad interim injunction has been filed seeking to restrain defendant No. l from making the payment of Rs I crore or any other amount to defendant No. 2 and also restraining defendant No. 2 from claiming any such amount till the decision of the suit. ( 4 ) THIS application has been contested by defendant No. 2 MTNL and a written reply has been filed. ( 5 ) THE main thrust of the arguments advanced by the counsel for the plaintiff- applicant is that a perusal of the bank guarantee would show that the same was issued with reference to purchase order,l 7. 2. 87 and not with reference to the agreement dated 14. 3. 87. In fact, when the bank guarantee was furnished the agreement dated 14. 3. 87 was not in existence. According to the learned counsel the breaches alleged in the letter dated 24. 2. 93 invoking the bank guarantee by defendant No. 2 are irrelevant and therefore no amount can be claimed on the basis of MTNL s letter dated 24. 2. 93 and the defendant bank is not liable to make payment of any such amount. The next submission made by the counsel for the plaintiff is that in the year 1987 the plaintiff floated a new company named United Data Base (lndia)Pvt Ltd, hereinafter referred to as UDI. 2. 93 and the defendant bank is not liable to make payment of any such amount. The next submission made by the counsel for the plaintiff is that in the year 1987 the plaintiff floated a new company named United Data Base (lndia)Pvt Ltd, hereinafter referred to as UDI. UDI was a wholly owned subsidiary company of the plaintiff company and with the consent of defendant No. 2 MTNL the said agreement was assigned to UDI, who in pursuance with the said assignment, carried out the work of publishing the directories as postulated in agreement dated 14. 3. 87 and did print and publish two telephone directories for Delhi in 1987 and 1988 and one telephone directory for Bombay. UDI ran into some financial difficulties. In 1991, Sterling Computers Ltd, in short referred to as SCL, a company incorporated under the Companies Act having its registered office in Madras came forward and undertook to print and publish the remaining directories which were required to he printed and published under the 1987 agreement. The matter was discussed jointly by the plaintiff company, UDI and SCL with MTNL. On 19. 7. 91 a tripartite agreement was executed between the plaintiff, UDI as one parly, MTNL as second party and SCL as third party. This tripartite agreement was followed by a supplementary agreement dated 20. 9. 91 executed between the same parties. Under the supplementary agreement, MTNL agreed to extend the contract for 3 more issues each for Delhi and Bombay i. e. 7 Main issues for Bombay and 6 main issues of Delhi directories, SCL undertook to print and publish 13 main issues of Delhi and Bombay directories within a period of seven years including 1991 and to pay Rs 10 crores as royalty over and above the royalty stipulated in the agreement dated 14. 3. 87. The royalty figure thus stood increased to Rs 30. 16 crores. The effect of the said tripartite agreement and the supplementary agreement is that the said agreements were in accord and satisfaction of MTNL s alleged claims against the plaintiff. MTNL had accepted SCL to be the party responsible for making payments including of the royalty. MTNL thus bad no claim of any royalty against the plaintiff company. My attention has been drawn towards various clauses of the performance bank guarantee. MTNL had accepted SCL to be the party responsible for making payments including of the royalty. MTNL thus bad no claim of any royalty against the plaintiff company. My attention has been drawn towards various clauses of the performance bank guarantee. According to the learned counsel, the said bank guarantee was to remain in force and effect for one year from the date of its execution and was renewable at the option of MTNL for a further period upto 1. 12. 92 and also that the extension of this guarantee will be provided for by the bank for such period beyond the said date i. e. 1. 12. 92 as the MTNL may feel necessary in this behalf provided further that if any claim accrues or arises against the bank before the expiry of the said date i. e. 1,12. 1992 or an extension thereof, the same shall be enforceable against the bank notwithstanding the fact the same is enforced after the said date or any extension thereof. It further provides that the bank guarantee shall remain in force for one year with renewable option upto 1. 12. 92 or earlier invocation of the guarantee and unless a demand or claim under this guarantee is made on or before 16. 12. 92 ail the rights and claims under the bank guarantee shall be terminated and be unenforceable. ( 6 ) ACCORDING to the learned counsel, though the period of bank guarantee was extended upto 3. 3. 93 but the period upto 16. 12. 92 before which date the claim had to be filed has not been changed meaning thereby that invocation after 16. 12. 92 was not permissible in any case. in view of these facts the counsel argued that the plaintiff has a prima facie case and the balance of convenience is also in its favour and irreparable loss would be caused if injunction older as prayed for is not granted. ( 7 ) THE argument advanced by the counsel for the plaintiff is devoid of force in the present circumstances of the case. The so-called purchase order is only an intimation to the plaintiff of the tender being the highest and therefore acceptable and that they may proceed to arrange for the guarantee on the receipt of which the contract would be signed. This guarantee is for the performance of the contract/ agreement dated 14. 3. The so-called purchase order is only an intimation to the plaintiff of the tender being the highest and therefore acceptable and that they may proceed to arrange for the guarantee on the receipt of which the contract would be signed. This guarantee is for the performance of the contract/ agreement dated 14. 3. 87, breach of which is actionable. Under the original agreement dated 14. 3. 1987, it is UIP who is responsible for due performance of the contract/ agreement. UDI is wholly owned subsidiary of UIP and was floated by them for carrying out the agreement. UIP has not been discharged from its liability for due performance of the agreement. EVen if UIP and UDI had entered into any agreement with the knowledge of MTNL for performing the work under the contract. Judgement of this Court in CWP 1872/92 and of Supreme Court in Civil Appeal No 90/93 and 91/93 are there to point out that the action of MTNL in entering into the supplementary agreement with UDI is illegalmeaning thereby that the plaintiff alone is responsible ) for the performance of the agreement. The said performance bank guarantee, invocation of which has been sought by defendant No. 2 for the breach of the contract/ agreement, was extended on 16-2-1989 upto 3-3-90. The second extension was on 2-3-90 upto 3-3-91. The third extension was made on 28-2-1991 upto 3-3-92. The fourth extension was made on 5-5-92 upto 3-3-1993. This fact has not been disputed either by the bank or by the plaintiff. On the date, when defendant No. 2 invoked the bank guarantee by writing letter dated 24. 2. 1993, this bank guarantee was valid. The plea of the plaintiff that the invocation should have been made up to 16. 12. 1987, as mentioned in the original agreement, is not at ail tenable. When the bank guarantee was extended upto 3-3-1993, this clause, as contained in the original agreement, that claim should have been made up to 16. 12. 1987 has become redundant. When the bank guarantee was extended up to 3-3-1993 it means that it was valid up to 3-3-93 and invocation could have been made at any time before 3-3-1993. In this case, invocation was made on 24-2-93 during the validity of the bank guarantee. As per owncaseoftheplaintiff/ applicant, they could not complete the work in time. 1987 has become redundant. When the bank guarantee was extended up to 3-3-1993 it means that it was valid up to 3-3-93 and invocation could have been made at any time before 3-3-1993. In this case, invocation was made on 24-2-93 during the validity of the bank guarantee. As per owncaseoftheplaintiff/ applicant, they could not complete the work in time. Record shows that there has been non-performance of the contract and balance directories and supply of identical number of directories. The royalty amount, which the plaintiff was to pay was Rs. 20. 16 crores and only a part of it was paid leaving a balance of Rs 19. 80 crores. Besides that there is clause of liquidated damages and compensation for late delivery of directories published in 1987-1991. In view of these circumstances, it cannot besaid that the plaintiff has got a prima facie case or that the balance of convenience is in their favour or that they would suffer irreparable loss and injury if injunction is not granted. A bank guarantee is an independent contract. None of the pleas sought to be raised by the plaintiff are available. I, therefore, dismiss this application filed by the plaintiff/applicant.