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The State of Rajasthan Vs. Indian Aluminium Cables Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtDelhi High Court
Decided On
Case NumberCivil Miscellaneous Appeal No. 516, 533, 540, 593, 594 of 1975
Judge
Reported inILR1976Delhi735
ActsConstitution of India - Article 227
AppellantThe State of Rajasthan
RespondentIndian Aluminium Cables Ltd. and ors.
Advocates: L.M. Sanghvi,; A.N. Parekh,; Maehswar Dayal,;
Excerpt:
.....failed everywhere. this was the conclusion of the courts here as well as in rajasthan. against the banks the state failed to get the money. l thought that the best course to finish this litigation, so far as it lay in my power, was to require the banks to deposit the amount in this court. (32) my reasons for giving the money to the state are these :(a) first previous litigation between the parties clearly shows that the state is entitled to have this money. the courts here as well as in rajasthan refused to grant injunction. they cannot keep the money as well as the goods. (34) lastly it is not difficult to get restitution from the state in the event of success of the company. nariman on behalf of the company that this court has no jurisdiction to make an order like this. not to use this..........____________________________________________________________________________ the company furnished bank guarantees worth rs. 92,92,941 to the state. this was in terms of the contract. (5) supplies were made by the company over a period of six years. the original penod of 16 months was extended from time to time. the last extension expired on december 31, 1970. till then the company was able to supply 2652 kms. in april 1972 the company supplied 13 kms of the value of rs. 40,721,46, the net result is that the remaining quantity of 465 of cbles has not been supplied. both parties agree that this is the balance quantity remaining under the contract. (6) the bank guarantees were renewed from time to time their amounts were reduced. as the company had supplied substantial quantifies to the.....
Judgment:

Avadh Behari Rohatgi, J.

(1) This is a tortuous litigation. Two parties are locked in a battle. One party is the State of Rajasthan. They are trying to get a sum of Rs. 16,08,000 from two banks-Canara Bank and Dena Bank. The other party Indian Aluminium Cbles Ltd. are preventing them from getting the money. What I hve to decide is whether the State of Rajasthan should be allowed to hve this money or not. For The sake of brevity I will call the State of Rajasthan as the state. Indian Aluminium Cbles Limited will be called the Company. Canara Bank and Dena Bank will be referred to as the banks.

(2) Thse are the facts. The State had a project in hand. The proiect was the building of Rana Pratap Sagar and Kota Dams. For this project they wanted a supply of 3130 KMs of 'Panther' Aluminium Conductor (ACSR) Cble. The company agreed to supply.

(3) On March 31, 1964, the State placed an order with the Company for the supply of Aluminium Conductor at the rate of Rs. 3500 per Km less a rebale of 1-1/2 per cent, that is, Rs. 3447,50 per Kilometer. The agreed total price was Rs. 1,07,90,675. The delivery of the material was to commence from September, 1964 at the rate of 200 KMs per month. Total supply was to be made within 16 months.

(4) This was a large contract. For the execution of the contract the Company needed both money and raw-material. The State gave both. They gave the following :

____________________________________________________________________________ (a) Towards Aluminium Rod Advance of Rs. 50,26,806 (b) For Steel. Rs. 20,00,000 (c) in cash Rs. 21,58,185 (d) As Security at the rate of 1 per cent. Rs. 1,08,000 ____________________________________________________________________________ Total: Rs. 92,92,991. ____________________________________________________________________________

The Company furnished bank guarantees worth Rs. 92,92,941 to the State. This was in terms of the contract.

(5) Supplies were made by the Company over a period of six years. The original penod of 16 months was extended from time to time. The last extension expired on December 31, 1970. Till then the company was able to supply 2652 KMs. In April 1972 the Company supplied 13 KMs of the value of Rs. 40,721,46, The net result is that the remaining quantity of 465 of cbles has not been supplied. Both parties agree that this is the balance quantity remaining under the contract.

(6) The bank guarantees were renewed from time to time Their amounts were reduced. As the Company had supplied substantial quantifies to the State the amount of the bank guarantees came down to Rs. 16,08,000 as on April 30, 1974. The amounts of the reduced four bank guarantees are given below:

____________________________________________________________________________ Sl. Bank Guarantee Extension Amount. Validity Name of Remark No. No. & date No. & date. the bank ____________________________________________________________________________ 1. BD/BG/1319 ND/1025/73 6,30,000.00 30.4.74 DenaBank Cost of Dt. 8.1.71. Dt.21.5.73. New Delhi balance Aluminium rods. 2. BD/BO/1317 HO/S/Kota 3,40,000/ 30.4.74 -do- 20% adva Dt. 8.1.71. P-S dated nce towa- 7.5.73. rds the cost of balance finished Conductor. 3. ND/BG/1318 -do- 1,08,000/ 30.4.74 -do- 1% Security Dt. 8.1.71. deposit. 4. 6/67 dated 22/SL/GTEE 5,30,000/ 30.4.74 Canara Cost of 26.11.69. Dt 7.5.73. Bank, steel N. Delhi. Wire. ____________________________________________________________________________

(7) The above four guarantees were executed in favor of the Govenor of the State of Rajasthan by the two banks. Thse four guarantees hve been the subject-matter of litigation during the last more than one year. They are the subject-matter of litigation before me.

(8) After the last extension, that is, December 31, 1970 no supply was made by the Company except 13 KMs.

(9) By their notice dated April 22, 1974, the Company daims to hve cancelled the contract. They charged the State with bredach of contract. Their case is that in 1973 they were prepared to deliver the balance quantity but the State was not willing to accept. The State on the other hand daims that the Company is in breach.

(10) The four bank guarantees were due to expire on April 30, 1974. On April 26, 1974, by a telegraphie notice the State called upon the banks to pay them the sum of Rs. 16,08,000 on account of bank guarantees.

(11) The Company came to this court. They filed a suit for perpetuai injunction on the original side. They wanted the State to be restrained from encashing the bank guarantees. Sitting on the original side I issued an ex parte ad interim injunction. The Company agreed to hve the guarantees renewed by the banks till October, 1974.

(12) On October 9, 1974, Kapur J. discharged the order of injunction. He permitted the State to encash the bank guarantees. Against this order the Company appealed.

(13) In appeal before the Division Bench The Company again agreed to hve the guarantees renewed so as to bc valid up to April 30, 1975 on the same terms and conditions as before. The injunction continued. The matter was remanded.

(14) Kapur J, again discharged the order of injunction on January 13, 1975. He again permitted the State to encash the bank guarantees which were operative till April 30, 1975. Subsequently by order dated March 6, 1975, he rejected the plaint on the ground that it disclosed no cause of action.

(15) The Company filed two appeals. One was against the order vacating the temporary injunction and the other was directed against the rejection of the plaint. A Division Bench of this court (S. N. Shankar and F. S. Gill JJ) dismissed both the appeals on April 1, 1975.

(16) This is the history of litigation in Delhi courts. We now turn to Rajasthan.

(17) On September 6, 1974, the Company filed petition under sections 20 and 33 of the Arbitration in the Court of the District Judge, Jaipur. They also moved an application under O. 39 r. 1 and 2, Code of Civil Procedure praying for an order restraining the State fromencashing the bank guarantees. The District Judge issued an ad interim injunction on vember 6, 1964. The State was summoned. After hearing both parties the District Judge discharged the injunction order on April 11, 1975. He wrote detailed order.

(18) The Company went in appeal to the High Court of Rajashthan. A Division Bench (P. N. Shingal, Cj and M. L. Shrimal J.) of that court dismissed the appeal summarily on May 7, 1975.

(19) We come back to Delhi again. On April 11, 1975, the Company filed a suit in the Court of Shri Ravi Kumar, Subordinate Judge, First Class, Delhi. He granted an injunction. The important thing about the suit was that the State was not made a party. The Company brought the suit only against the banks. They were directed by the Subordinate Judge not to pay the amount to the State.

(20) From a resume of the litigation it will appear that the attempt of the State to get The money of the bank guarantees was thwarted at every step. One injunction after another was obtained. Matters were litigated in Delhi courts as well as at Jaipur. The sum total of the litigation was that the Company failed everywhere. The right of the State to encash The bank guarantees was upheld. The courts held that the State was entitled to get the money. In essence they held that there will be no restraint on the State. This was the conclusion of the courts hre as well as in Rajasthan.

(21) Because the Subordinate Judge had granted an injunction now. against the banks The State failed to get the money. This was on April 11,.1975.

(22) On April 23, 1975, the State made a petition under Article 227 of the Constitution of India in this court. Seven more days were to go before the expiry of guarantees on April 30, 1975

(23) The amount involved was a huge one. l thought that the best course to finish this litigation, so far as it lay in my power, was to require the banks to deposit the amount in this court. On April 28, 1975, I made an order directing Dena Bank to deposit Rs. 10,78,000 in this court by April 29, 1975. Canara Bank was required to deposit Rs. 5,30,000 by April 29, 1975. I made it clear in my order that the money deposited by the banks will not be paid till further orders.

(24) Canara Bank deposited the amount on April 29, 1975. Dena Bank did not, though they were served with my order dated April 28, 1975, in the course of that day. On April 30, 1975, with my leave, an urgent application (Cr. O. 5, of 1975, was moved by the State. I directed the manager of the bank to appear before me at 2 p.m. I directed him to deposit the amount before evening. This was done. The State moved for contempt proceedings against Dena Bank. I hve separately dealt with that application.

(25) Against my order dated, April 28, 1975, the Company made a special leave petition to the Suprme Court. The petition was dismissed on May 21, 1975. The court, however, observed that money be not paid to the State till the disposal of the matter by this court.

(26) On May 27, 1975, the company withdrew the suit from the court of the Subordinate Judge. Money having been put in the hands of the court the question now is : What should be the destination of this money? What is to be done with it?

(27) Two applications hve been made. The State has claimed that the money should be given to them (C.M. 540 of 1975). The Company has made its own daim to The money by means of Cm 593 of 1975. This is the matter I hve to decide now.

(28) Three courses are open to me. One is that I should give the money back to the banks from where it came. This is what the Company wants. Mr. Nariman on behalf of the Company has argued that I hve no jurisdiction except to do this. It is said that money must go to the banks as there is no pending suit of the Company in the court of the Subordinate Judge. The burden of the argument was that under Article. 227 of the Constitution this court has the power of superintendence over all courts throughout the territory in relation to which it exercises jurisdiction. But as there is no suit in a subordinate court now pending there is no question of superintendence. The petition, it was urged, had become infructuous.

(29) I cannot accept this submission. At the time the petition was brought a suit was pending. Jurisdiction of this court was invoked at that time on the ground that the suit by the Company in Subordinate /udge's court was an abuse of legal process. It was said that huge amount of Rs. 16,08,000 must be saved from being lost to The State.

(30) Jurisdiction once assumed by a court cannot be taken away by what a party does subsequently, This I think is aximoatic. The company asks me to put the money back into the banks. This I will certainly not do. This course will promote further litigation. The object ought to be to shorten litigation and not to multiply it. The company's conduct hitherto shows that this will not be the right thing to do. They or the banks cannot be trusted with money.

(31) The second course is to continue to keep the money in this court. The third course is to give it to the State. On balance I am of the view that the money must go to the State. The State has superior daim to it. There is no point in keeping the money in this court.

(32) My reasons for giving the money to the State are thse : (a) First previous litigation between the parties clearly shows that the State is entitled to hve this money. The courts hre as well as in Rajasthan refused to grant injunction. The right of the State has throughout been upheld. If I do not make an order now in their favor I will be going against the whole current of decisions rendered in this case during recent past. (b) Secondly it is the State's own money. They gave it to the Company for purchase of raw-materials and other things. (c) Thirdly the bank guarantees are payable on demand. In terms of the bonds the State is entitled to hve the money on demand being made. Without let or hindrance they can hve it on demand. Thse are independent contracts. This is how I read The bank guarantees. This was the view of the learned single judge of this court. It was upheld in appeal. The same was the view of the District Judge Jaipur. A Division Bench of Rajasthan High Court agreed with it. The appeal was dismissed summarily by a speaking order. (d) Fourthly it is admitted by both parties that except for 13 KMs the quantity of 478 KMs has not been supplied by the Company Before the Division Bench of Rajasthan High Court it was said that the market price of the goods today was Rs. 12,000 per Km according to the State. Even according to the Company the price was more than 7000 per KM. thereforee 465 KMs today are worth about Rs. 53 lakhs according to the market price as given by the State. They are worth about Rs. 33 lakhs according to the market price as given by thc Company. The Company is retaining the unsupplied goods. They cannot hve both. They cannot keep the money as well as the goods. They hve no right to return Rs. 16,08,000. (e) Fifthly the bank guarantees are separate and independent contracts between the banks and the State. Under thse four guarantees the banks are under an obligation to make the payment when demanded. The banks throughout hve not raised any objection. The Company hve no right to ask the banks not to pay the amount. They are not parties to the garantee bonds though it is true that in the last analysis their financial interests will be affected. But it is not Company's money. It is the money of the State. It was given to the Company for the performance of the contract. If the State has committed breach, which is for the arbitrator to decide, the Company can daim damages. They hve no other right.

(33) For any such daim of damages for breach of contract as the Company may hve against the State the remedy is provided by clause 29 of the conditions of contract. It provides for arbitration. The Company can daim damages in arbitration for breach of contract. But payment of the bank gurantees is not dependent on ascertainment of damages. Nor is it subject to the determination of disputes in arbitration. If the Company succeeds in getting award in their favor they can recover the amount of damages from the State.

(34) Lastly it is not difficult to get restitution from the State in the event of success of the Company. This is an important consideration. Money can thereforee be given to the State. If the arbitrator mulots them in damages the Company will hve no difficulty in getting reparation. I hve no fears on that account.

(35) For thse reasons I would permit the State to withdraw the money. l would allow their C.M. 540 of 1975. I would dismiss C.M. 593 of 1975.

(36) I, however, make it clear that the State will be entitled to withdraw only Rs. 15,67,278.54 from this court. The amount due under the guarantees is Rs. 16,08,000. It is admitted that the Company supplied 13 KMs in April 1972. This was of the value of Rs. 40,721.46. After reducing this amount for which the goods hve been supplied the State can only hve the balance of Rs. 15,67,278.54. The sum of Rs. 40,721. 46 will, however, go back to Dena Bank.

(37) It was said by Mr. Nariman on behalf of the Company that this court has no jurisdiction to make an order like this. I do not agree. This is a case emminently fit for The exercise of powers under Article 227. I should perhaps say this. Not to use this power in a case like this is to misuse it.

(38) Ft was said that under Article 227 I should not decide the contractual obligations of the parties nor deal with monetary claims. It is enough to say that I pretend to do neither the one nor the other. I am securing to the State their rightful money which the banks are willing to pay under the guarantees. It was argued that a matter such as this cannot be the subject of superintendence. I entirely disagree. High Courts of Delhi and Rajasthan have pronounced on the dispute. They decided in favor of the State. Even then a suit was filed in the court of Subordinate Judge on substantially the same subject matter. What else was it if not an abuse of judicial process? Our courts arc not to be used as instruments of dilatoriness and abuse. If this is sought to be done this court will not be slow to exercise its power of superintendence to see that law is vindicated and justice is done.

(39) For these reasons I allow the petition as well as C.M. 540 of D J 975 of the State. The State will be entitled to withdraw Rs. 15,67, 278.54. The balance, that is to say. Rs. 40,721.46 will go back to Dena Bank, M-36 Cannaught Circus, New Delhi. The State will also have costs of the petition. C. M. 593 of 1975 is dismissed. Counsel's fee Rs. 500.


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