Tamilnadu Newspring and Papers Ltd. Vs Adani Exports Ltd.

K.A. Puj, J.@mdashThis Appeal From Order is filed against an order of an ex-parte ad-interim injunction, passed by the learned City Civil Judge, Ahmedabad below an application Exh.5 in Civil Suit No. 1076 of 2004 on 08.04.2004 whereby the Trial Court has granted ad-interim injunction in terms of para 7 (a) & (b) of the application till 16.04.2004. The Trial Court has observed that Exh.3/7 shows that the default is by the defendant No. 3 and it does not speak about plaintiff. It is further observed that the bank guarantee is given by the plaintiff to defendant No. 1 and hence, the bank can not honour the guarantee. The Trial Court has also observed that if injunction is not granted, it will defeat purpose of the suit and hence, the order regarding ad-interim injunction was passed.

2. The brief facts giving rise to the present Appeal From Order are that the appellant - original defendant No. 1 had entered into a Contract bearing No. MM/SS/IMP/25216/0/2003 dated 24.12.2003 with M/s. Adani Global Pte. Ltd., Singapore, defendant No. 3 herein, for supply of quantity of non-coking coal to defendant No. 1 in terms of the said contract. For due performance of the said contract by the defendant No. 3, M/s. Adani Exports Limited, the plaintiff agreed to furnish a performance bank guarantee bearing No. 4042-ITG 00 1803 dated 29.12.2003 in the sum of Rs.1,60,00,000/- (Rupees One Crore Sixty Lacs Only) and the said bank guarantee was drawn by M/s. Punjab National Bank, International Banking Branch, Ahmedabad, defendant No. 2 in favour of the present appellant.

3. It is the case of the appellant that the defendant No. 3 has failed to supply the material as per the contract and hence, the appellant vide its letter dated 06.04.2004 addressed to the defendant No. 2 sought invocation of Bank guarantee in terms of the said bank guarantee. Though the appellant had invoked the Bank Guarantee in terms of the said irrevocable First Demand Letter of Guarantee, the defendant No. 2 Bank vide its letter dated 08.04.2004 did not permit invocation of the Bank Guarantee and requested the appellant to submit a fresh Letter of Invocation as indicated in the letter dated 08.04.2004. The appellant thereafter, on 09.04.2004 approached the defendant No. 2 with a request for invocation of bank guarantee as per the format desired by the defendant No. 2 bank vide its letter dated 09.04.2004. However, the appellant was told that an injunction order has been issued by the City Civil Court, Ahmedabad restraining defendant No. 2 from allowing the invocation of the said bank guarantee till 16.04.2004.

4. On coming to know about the said development in the matter, the appellant has filed the present Appeal From Order challenging the order passed by the City Civil Court, Ahmedabad granting ex-parte ad-interim relief against the invocation of the bank guarantee.

5. The Court has issued notice on 12.04.2004 making it returnable on 13.04.2004 and it was made clear that the matter will be finally heard and no adjournment will be granted. Mr. Mihir Joshi with Mr. Mayank B. Buch, the learned advocates appearing for the appellant original defendant No. 1, Mr. S.B. Vakil, the learned Senior counsel with Mr. Amar N. Bhatt appear for respondent No. 1 - original plaintiff and Mr. A.V. Trivedi for Mr. A.C. Gandhi, the learned advocate appears for respondent No. 2 - original defendant No. 2 Bank. During the course of hearing, an affidavit-in-reply is filed on behalf of the respondent No. 1, wherein challenge was, interalia, made against entertaining appeal from order on legal grounds as well as on merits.

6. Mr. Mihir Joshi, learned advocate for the appellant submits that the Trial Court has passed the impugned order without any application of mind and without perusing the documents on record. The only reason given by the Trial Court was that the default was committed by the defendant No. 3, whereas the bank guarantee was given by the plaintiff and hence, the bank was justified in not honouring the said bank guarantee. The impugned order itself is not tenable at law looking to the documents produced by the plaintiff along with the plaint, on the record of the Trial Court. He has further submitted that in the plaint itself, the plaintiff has made an averment that the Contract was entered into by and between the defendant No. 1 and the defendant No. 3 and the plaintiff was acting on behalf of the defendant No. 3. At number of places in the plaint itself, the plaintiff has specifically made averments to the effect that the bank guarantee was given by the plaintiff on behalf of the defendant No. 3. Though it was an admitted position that contract was to be performed by the defendant No. 3, the bank guarantee was furnished by the plaintiff. He has further invited the attention to the tender notice, more particularly, clauses 26, 27, 29 & 35 of the tender notice. Clause 26 discusses about the earnest money deposit, 27 discusses about security deposit and 29 discusses about the performance of bank guarantee. The bank guarantee was in relation to the performance of the contract and not with regard to payment. Clause 35 of the tender notice is also more important which talks of the jurisdiction and parties have agreed that the jurisdiction is exclusively vested in Civil Court at Chennai. Mr. Joshi has further invited the attention to the purchase order dated 24.12.2003. In that purchase order also, the delivery schedule was fixed and first shipment was to be effected from the load port on or before 20.01.2004 and second shipment was to be effected on or before 03.03.2004. Clause 17 of the purchase order deals with force majeure. According to Mr. Joshi, this force majeure clause does not grant any exemption to the defendant No. 3 from performing the Contract. This purchase order also talks about the security deposits, performance guarantee and the jurisdiction of the Court. The bank guarantee itself makes it clear that the bank guarantee was executed pursuant to the purchase order dated 24.12.2003 and it was in the nature of irrevocable First Demand Letter of Guarantee which was issued in reference to the supply of non-coking coal of 80,000/- MT confirming to the specification as per the purchase order dated 24.12.2003. Even Clause 3 of the Bank Guarantee makes it clear that upon presentation to the Bank with signed declaration that M/s. Adani Exports Limited on behalf of M/s. Adani Global Pvt. Ltd. has defaulted in the performance of Work order on them including due fulfillment of guarantee in regard to the specification and technical properties of M/s. Adani Exports Ltd., on behalf of supplier M/s. Adani Global Pte. Ltd., the amount of Bank guarantee would be payable without any demur. This documentary evidence itself proves that the plaintiff has acted for and on behalf of the defendant No. 3 and bank guarantee was also given by the plaintiff though the contract was to be performed by the defendant No. 3. The performance of the Contract by the plaintiff was never contemplated as in that case, Bank guarantee could never be invoked.

7. Mr. Joshi has further submitted that despite the aforesaid documentary evidence on record, the Trial Court has not considered the same and ad-interim relief granted which was contrary to the pleadings made by the plaintiff in the plaint and against the settled legal position. In such a situation, the suit itself is not maintainable and hence, there is no question of granting any interim relief by the Trial Court.

8. In support of his submission, Mr. Joshi relied on the decision of the Hon''ble Supreme Court in the case of Dwarikesh Sugar Industries Ltd. Vs. Prem Heavy Engineering Works (P) Ltd., and another, He has invited my attention to para 29 to 32 of the judgment and submitted that the Hon''ble Supreme Court has heavily bent upon the Courts below including the subordinate courts with regard to granting of interim relief and not taking into consideration the settled legal propositions as well as the documentary evidence on record. The observations made by the Hon''ble Supreme Court are very pertinent so far as the injunction granted by the Trial Court in the present case is concerned. Though these observations are in the context of the High Court granting interim relief despite the fact that Trial Court has not granted the same, they may equally apply to the Trial Court.

9. Mr. Joshi has further relied on the decision of this Court in the case of Continental Construction Ltd. V/S. State Of Gujarat And Ors. 37 (1) G.L.R. 651 wherein this Court has held that injunction cannot be granted merely on the ground of hardship, which may be suffered on account of loss of liquidity. On the basis of this judgement, Mr. Joshi has submitted that even the principal relief claimed in the suit cannot be granted and hence, there is no question of granting any interim relief.

10. Mr. Joshi has further relied on the decision of the Hon''ble Supreme Court in the case of AIR 1997 1644 (SC) wherein the Hon''ble Supreme Court has after referring to the earlier judgments of the Court has held that where Irrevocable and unconditional Bank guarantee payable on demand without demur is sought to be encashed by the beneficiary, bank is bound to honour the guarantee irrespective of any dispute raised by the customer against the beneficiary. It is further observed that it was however subject to two exceptions viz. a fraud committed in the notice of the bank which would vitiate the very foundation of the guarantee or encashment of the bank guarantee would result in irretrievable harm or injustice of the kind which make it impossible for the guarantor to reimburse himself. Mr. Joshi has submitted that as far as the present case is concerned, no fraud has been alleged nor there is any question of irretrievable injury as even if the plaintiff ultimately succeeds in the suit, the plaintiff would be in a position to recover the amount from defendant No. 1 being a Govt. undertaking and hence, there is no justification to restrain the defendant No. 1 from invoking the said bank guarantee and no stay can be granted by the Trial Court ignoring the settled legal position.

11. Mr. Joshi has further relied on the decision of the Hon''ble Supreme Court in the case of A. Venkatasubbiah Naidu Vs. S. Challappan and Others, for the proposition that even an ex-parte ad-interim stay can also be challenged in appeal before this Court. It is observed in this judgment that it cannot be contended that the power to pass interim ex parte order of injunction does not emanate from O.39, R.1. In fact, the said rule is the repository of the power to grant orders of temporary injunction with or without notice, interim or temporary, or till further orders or till the disposal of the suit. Hence, any order passed in exercise of the aforesaid powers in Rule 1 would be appealable as indicated in O.43, R.1 of the Code. The choice is for the party affected by the order either to move the appellate Court or to approach the same Court which passed the ex-parte order for any relief.

12. Based on the aforesaid judgments, Mr. Joshi has submitted that the impugned order is unjust, improper, illegal and contrary to the well settled principles of law enunciated by Hon''ble Supreme Court and by this Court in the matter of grant of injunction against encashment of Bank guarantee. Therefore, ad-interim relief granted by the Trial Court is required to be vacated and the bank be directed to allow the appellant to encash the said bank guarantee.

13. Mr. S.B. Vakil, learned Senior counsel for the respondent No. 1 original plaintiff has submitted that the requirement of the bank guarantee interalia is declaration that Adani Exports on behalf of supplier M/s. Adani Global Pte. Ltd. (for short ''Adani Global''), the third respondent herein has defaulted in the performance of work order on them including due fulfillment of guarantee in regard to the specification and technical properties of Adani Exports on behalf of Adani Global conforming to the specification as per purchase order dated 23.12.2003, Mark 4/3 in the suit. It is settled law ( Tarapore and Co. Vs. V/O Tractoroexport and Another, para 6; United Commercial Bank Vs. Bank of India and Others, that the banker is not bound or entitled to honour the bills of exchange drawn by the seller unless they and such accompanying documents as may be required there under are an exact compliance with the terms of the credit. In the later decision, the Apex Court has followed the observations of Justice Bailhache''s view that a Bank is not bound or indeed entitled to honour draft presented to it under a Letter of Credit unless those drafts with the accompanying documents are in strict accord with the credit as opened and that there is no room for documents which are almost the same or which will do just as well. The Trial Court has made the notice returnable on 16.04.2004. It is in this context that the maintainability and scope of the Appeal falls for consideration.

14. Mr. Vakil has further submitted that the Appeal is from an ex-parte ad-interim injunction. This Court has held ( PATEL JASMAT SANGAJI V/S. GUJARAT ELECTRICITY BOARD AND OTHERS, 23 (2) G.L.R. 104 & M/S. SUN PHARMACEUTICAL INDUSTRIES V/S. CIBA GEIGY LIMITED AND ANOTHER 33 (2) G.L.R. 1049) that though the Appeal is technically appealable it will be entertained only in exceptional and rarest of rare cases. There is nothing exceptional or rare in the present Appeal, particularly when the Trial Court has issued a short notice returnable on 16.04.2004. It is significant that the bank guarantee is valid till 27.06.2004. In the context, the order of this Court issuing notices on the Appeal and the C.A. returnable on 13.04.2004 is harsh on the respondents. The Trial Court has in the order under Appeal observed that if injunction is not granted it will defeat the purpose of the suit. It is apparent that if ad-interim exparte injunction was not granted there was likelihood of the bank paying TNPL the amount of Rs.1,60,00,000/- of the bank guarantee causing irreparable damage to Adani Exports and rendering the Suit infructuous. The scope of an Appeal from order even from a final interim order is limited as held by this Court in the case of BUREAU OF INDIAN STANDARD V/S. WESTERN INDIA ENGINEERING COMPANY (PG) 1998 (2) G.L.H. 863, GUJARAT ELECTRICITY BOARD, SURAT V/S. (MS) SHIVKRUPA ASSOCIATES 1999 (2) G.L.H. 549 and the Apex Court in the case of Wander Ltd. and Another Vs. Antox India P. Ltd., N.R. Dongre and Others Vs. Whirlpool Corpn. and Another, para 8. The Scope of Appeal from an ex-parte ad-interim order is much more limited. Hence, this Appeal From Order should not be entertained.

15. Mr. Vakil has further submitted that the appellant has not come to this Court with clean hands. In place of its letter dated 06.04.2004, Mark 4/7 invoking the bank guarantee the appellant has annexed to the Memo of Appeal an incorrect copy (page 19 Annexure C) with addition of one more paragraph. Neither the letter, Mark 4/3 in the Suit nor Annexure C to the Memo of Appeal shows that the invocation was in terms of the bank guarantee. Though the appeal would be required to be considered on the basis of the record of the Trial Court, when the order under Appeal was passed, the appellant has annexed to the Memo of Appeal documents both dated 09.04.2004 (page 22 Annexure E and page 23 Annexure F) purporting to be a subsequent invocation of bank guarantee by TNPL which has no relevance to the question of validity of the order under Appeal. There is no scope for additional evidence in Appeal from an ex-parte ad-interim order of injunction. However, even otherwise production of additional evidence would be governed under O.41, Rule 27 read with Order 42, R. 2 of CPC and if the appellant was seeking production of additional evidence it was required to make an application under O.41, R.27 and to comply with the provisions thereof. Adani Exports has relied upon the decisions reported in the case of NEW INDIA ASSURANCE CO. LTD. V/S. PRITAMSINGH CHANNANSINGH AND OTHERS 2001 (2) G.L.R. 1054 & STATE OF GUJARAT V/S. MAHENDRAKUMAR PARSHOTTAMBHAI DESAI AND OTHERS 43 (2) G.L.R. 2249. It is significant that TNPL''s both letters (page 19 Annexure C dated 06.04.2004 and page 23 Annexure F dated 09.04.2004) bear the same reference No. Fin.Lc.515/04.

16. Mr. Vakil has further submitted that both the tender notice dated 19.11.2003, Mark 4/1 and the purchase order dated 24.12.2003, Mark 4/3 contain the Force Majeure clause. TNPL has not terminated the contract. Adani Exports has relied upon the letter of statement, Mark 4/5 dated 23.01.2004 confirming the happening of damage of bridge and road in mining site of Pit Bhumi Ramtav Energy because of continuous torrential rain and Adani Export''s letter dated 14.01.2004, Mark 4/6 to TNPL declaring Force Majeure owing to incessant rain, which caused flood and landslide in Indonesia disrupting the supply, transportation and loading of coal.

17. Mr. Vakil has further submitted that this is not a rarest of rare case or any case for entertaining the Appeal. The Trial Court''s order does not suffer from any error of procedure or merits requiring interference in the Appeal. The Trial Court has given a short notice returnable within 8 days, i.e. on 16.04.2004 whereas the bank guarantee is valid upto 27.06.2004. The suit and the application for interim relief in the suit involve questions of law and facts not appropriate for determination at this stage in the appeal. No irreparable damage would be caused to TNPL if the Trial Court were to decide the matter on 16.04.2004 or soon thereafter.

18. Based on the aforesaid judgments of this Court as well as of the Hon''ble Supreme Court, Mr. Vakil has submitted that the Trial Court has exercised its judicial discretion and granted ad-interim injunction which cannot be interfered with by this Court in this Appeal From Order. The matter is still open at large and the defendant No. 1 could have filed its reply and could have placed all these facts before the Trial Court and after hearing both sides, the Trial Court will pass an appropriate order. This Appeal is, therefore, premature and it is filed only with a view to forestall the hearing before the Trial Court. Mr. Vakil has also placed on record affidavit-in-reply of the plaintiff raising several contentions against vacation of an ad-interim relief and the merits of the matter and submitted that the appeal should not be entertained by this Court at this stage. He has, therefore, submitted that the Appeal may be dismissed with cost.

19. Mr. A.V. Trivedi, the learned advocate appearing for the respondent No. 2 Bank has submitted that on careful scrutiny of the appellant''s letter dated 06.04.2004, for invocation of Bank guarantee, it was found that it did not contain the necessary declaration as contemplated by guarantee agreement. The appellant was, therefore, asked to submit the proper letter in that behalf. When this letter was submitted on 09.04.2004, the City Civil Court has already granted ad-interim injunction. The Bank, therefore, could not allow the appellant to encash Bank guarantee. Mr. Trivedi has, however, submitted that the Bank is abide by the decision of this Court.

20. After having heard learned advocates appearing for the respective parties and after having gone through their respective pleadings, the Court is of the view that the Trial Court has not properly and correctly applied its mind to the documents produced before it and the pleadings made by the plaintiff in the plaint. The Trial Court has granted ad-interim relief without taking into consideration the settled legal proposition so far as the encashment of bank guarantee is concerned. Here in the present case, it is an admitted position that the bank guarantee was furnished by the plaintiff for and on behalf of the defendant No. 3. The contract was to be performed by the defendant No. 3. In the tender notice, purchase order and in all other correspondence, it was specifically stated that the contract was to be performed by the defendant No. 3 and the bank guarantee was to be furnished by the plaintiff and in the event of there being any breach or violation of the terms and conditions of the contract or the contract was not performed within the stipulated period, the defendant No. 1 was entitled to invoke the bank guarantee. A dispute was raised to the effect that the bank guarantee was furnished by the plaintiff and the breach if any was by the defendant No. 3. In such a situation, the defendant No. 1 is not entitled to encash the bank guarantee. However, rejection of the request for encashment on this ground does not tend to any logic or reasoning as it has been agreed in very clear terms that the bank guarantee furnished by the plaintiff can be encashed in the event of non-performing of the contract by the defendant No. 3. Despite this fact, neither the bank nor the plaintiff is justified in taking and raising the ground that the plaintiff has not committed any default and hence, bank guarantee cannot be encashed. This was the solitary ground on which the Trial Court has granted interim injunction and this Court is of the view that this ground is not at all tenable or sustainable at law and contrary to the settled legal position. Hence, ad-interim relief granted by the Trial Court is required to be vacated.

21. The Court is also not much impressed with the arguments of Mr. Vakil with regard to entertainment of appeal from order. There is no dispute about the legal proposition that appeal is maintainable under O.43, R.1 of the Civil Procedure Code, against an ad-interim injunction granted by the Trial Court. However, discretion can be exercised by the appellate Court in the rarest of rare course. This Court is of the view that this can also be considered as the request of rare case as the plaintiff''s case does not deserve for grant of an ex-parte ad-interim relief, either on facts or in law and yet the Trial Court has granted such relief. The Court, therefore, can not shut its eyes when the Trial Court has exercised its discretion without any application of mind and in complete violation of the judicial principles.

22. Though this Court has heard the learned advocates appearing for the respective parties at length on several issues, however, looking to the fact that the suit is still pending before the Trial Court and even notice of motion application is also not finally disposed of, the Court does not think it fit and proper to express any opinion on the issues regarding jurisdiction of the Court, applicability of Force Majeure clause etc., except recording the submissions made by the respective parties. It is open for the parties to raise all these questions before the Trial Court either at the stage of hearing of the notice of motion application or during the course of the trial and the Trial Court would decide all these issues in accordance with law and on the basis of the settled propositions of law as well as in the light of documentary evidence produced before the Trial Court and without being influenced by the prima facie finding recorded by this Court in this judgment.

23. In this Appeal From Order along with the compilation, letter dated 09.04.2004 is produced by the appellant. However, the said letter was not produced before the Trial Court. Mr. Vakil has also raised objection against production of same letter. The Court''s decision is, however, not influenced by the said letter nor any support is derived therefrom. The Trial Court should not have granted ad-interim injunction even on the basis of materials produced before it. Since ad-interim injunction is hereby vacated, there is no reason for the Bank to prevent the appellant from invoking the bank guarantee. It is, however, made clear that after invocation of bank guarantee and on receipt of the amount in question from the Bank, the appellant shall have to file an undertaking in the City Civil Court, Ahmedabad that in case the plaintiff succeeds in the suit, the appellant shall have to return the amount to the Bank or the plaintiff, at the option of the plaintiff, within one week from the date of such decision with interest at such rate as the Court may determine, subject to the right of the appellant to challenge the decision of the Trial Court, if it goes against the appellant.

24. In the above view of the matter, this Appeal From Order is allowed. Ad-interim relief granted by the Trial Court below an application Exh.5 on 08.04.2004 in Civil Suit No. 1076 of 2004 is hereby vacated.

25. In view of the order passed in Appeal From Order, Civil Application does not survive and is accordingly disposed of.

26. At this stage, Mr. Vakil has prayed for suspension of this order and extension of the stay granted by the Trial Court for two weeks so as to approach higher forum. However, looking to the facts and circumstances of the case, the said request is not accepted.