Canara Bank vs Global Elec-Tech Ltd. And Ors.

Canara Bank has filed two separate appeals, one is to challenge the order passed by the Tribunal dismissing in the O.A. filed by the Bank and the second one to challenge the order allowing the S.A. filed by Mr. Surinder Singh Sachdev.

Facts are being noticed from Appeal No. 408/2012 vide which the order passed in the S.A. is challenged,

The Bank had filed O.A. for recovery of Rs. 1,60,67,669.56 against M/s. Global Elec-Tech Ltd. and other respondents including Mr. Surinder Singh Sachdev who had filed the S.A. in question. Mr. Yinod Kumar (defendant No.2) and Mr. Yikas Gupta (defendant No.3) were the two directors of the borrower company. Smt. Rajni Sanwal and Mr. Surinder Singh Sachdev were the guarantors as well as mortgagors of their immovable property. M/s. J.V. Mercantile Pvt. Ltd. and M/s. J.M.A. Engineering Ltd. were the corporate guarantors for this loan.

The Bank had sanctioned open cash credit limit of Rs. 200 lac with sub-limit of book debts of Rs. 100 lac with a minimum charging of interest @ 15.75% p.a. compounded quarterly or such other rates as may be specified by RBI from time-to-time, and inland letter of credit/foreign letter of credit of Rs. 100 lac. The company executed loan documents whereas other respondents gave letter of guarantees. Additional limit of Rs. 75 lac was granted in the nature of Bank guarantee for which security documents were executed on 13.2.2002.

When the respondent company failed to observe financial discipline, the account was declared NPA on 30.9.2004. As part of settlement the applicant Bank permitted the respondents to sell the Daman property for a sum of Rs. 75 lacs, which was deposited with the Bank on 29.10.2005. The title deed of the Daman property was accordingly released.

The borrower company and its director Mr. Vinod Kumar approached the Bank for settlement/satisfaction of the outstanding liability for Rs. 75 lac as can be made out from the letter dated 13.1.2006. The Bank, however, wrote on 24.2.2006 to the respondent company to improve its offer. When under the SARFAESI Act by issuing notice under Section 13(2) of the Act on 25.4.2006. On this, the respondent company approached the Bank to sell the Pondicherry property towards the settlement of the outstanding dues. The company made an offer to settle the entire outstanding liability for Rs. 125 lac on 1.3.2007. As per the Bank, it had only agreed to release the property at Pondicherry from its charge subject to receipt of amount Rs. 105 lac before 31.3.2007. The respondent, however, states to have deposited a sum of Rs. 125 lac by way of demand draft and the appellant Bank confirmed the receipt of this demand draft. Thereafter, the title deed of the Pondicherry property was released. As per the Bank, a sum of Rs. 105 lac was adjusted towards loan account and the balance amount of Rs. 20 lac was kept in no-lien account till the acceptance of the one-time settlement proposal.

The appellant Bank would claim that the OTS proposal was not found acceptable. Through the letter 20.6.2008 the respondent company was asked to improve the offer. The company did not submit any revised proposal or offer, when the appellant issued notice on 28.9.2008.

The Bank would state that the account had been declared NPA on 30.9.2004 and thus one cannot debit any interest from 1.9.2014. The O.A. was accordingly filed for Rs. 1,60,67,669.56 as per the following details:

"A. Amount due (inclusive of interest up to 31.8.2004)Rs.2,10,29,073.56

B. Amount recovered/paid (-)Rs.65,00,000.00

C. Amount transferred/adjusted: (-)Rs.1,05,00,000.00

D. Unapplied interest from 1.9.2004 to 23.10.2008:Rs.1,05,66,687.00

E. Penal interest from 1.9.2004 to 23.10.2008:Rs,14,70,109.00

F. Legal charges:Rs.1,500.00

TotalRs.1,66,67,669.56-

The appellant, therefore, claimed the amount with interest @ 16.75% p.a. compounded monthly with penal interest @ 2% p.a. simple from respondents.

Respondent Nos. 2, 4 and 5 filed joint written statement whereas respondent No.3 filed a separate written statement. The stand of the company (respondent No. 1) is that full OTS amount was paid on 30.3.2007 and nothing remained payable. The company accordingly would plead that there was no cause for the Bank to file this O.A.

Respondent No.5, who filed S.A., pointed out in reply that he was Padmashree awardee and that on deposit of Rs. 125 lacs on 30.3.2007 made by the company, the Pondicherry property was handed over to the company. Reference is made to a letter dated 21.4.2007 whereby the Bank had written to R.O.C., Delhi confirming the receipt of the compromise amount under OTS and to vacate the lien on the mortgaged property at Pondicherry. Respondent would urge that after 15 months, the Bank wrote a letter on 28.6.2008 stating that OTS proposal had not been accepted in view of substantial value of the remaining property. As per the appellant, the acceptance of the amount would show an implied conduct on the part of the appellant that it had expressed its consent to the OTS. It is accordingly stated that the Bank has filed this O.A. with mala fide intention towards the guarantors.

Reference is made to a writ petition filed by respondent No.2, one of the Directors, stating that Mr. Vikas Gupta (respondent No.3) had resigned from the Board of the Company on 30.4.2004 with the knowledge of the Bank. Plea is that the respondent No. 3 acknowledged the liability on 23.8.2001 only and the acknowledgements dated 13.2.2002 and 20.2.2003 relied on in this regard are false having not been signed by the respondent.

This O.A. was heard with the connected S.A. and both the S.A. and the O.A. have been disposed on 15.10.2012. In the S.A. filed by respondent No.5, it is pleaded that the property was offered as collateral security for creating an equitable mortgage in favour of Canara Bank. Reference is made to the amount claimed in the O.A. Reference is also made to the NPA amount to point out that the borrower had approached the Bank for settlement and as part of settlement, property at Daman was permitted to be sold for Rs. 65 lacs, which was deposited with the Bank. The borrower company had also given a proposal for settlement on payment of Rs. 90 lac on 13.1.2006, which was not accepted by the Bank, It is stated that the Bank had asked the company to make substantial improvement in the offer. When the Bank issued notice under Section 13(2) of the SARFAESI Act, the respondent company came up with a proposal of Rs. 125 lacs on 12.2.2007. Respondent Mr. Surinder Singh Sachdev would urge that the Bank agreed to accept the sum of Rs. 125 lac towards full and final settlement of entire dues out of which Rs. 105 lacs were received from the sale of Pondicherry property and the remaining sum of Rs. 20 lac was deposited. The respondent would urge that the Bank had conveyed its approval through letter 26.3.2007 and the sum of Rs. 125 lacs towards full and final settlement of entire dues was deposited. It is only after 15 months, that too to wriggle out of the settlement, the Bank had written on 28.6.2008 and legal notice raising the claim in the O.A. were issued.

The Tribunal below accepted contention of the respondent that Bank had accepted the OTS proposal of the company and, therefore, has dismissed the O.A. and has allowed the S.A. filed by respondent No.5. Aggrieved against these orders, the Bank has filed these two appeals.

The Tribunal below while dismissing the O.A. has considered the contents of communication which came to be exchanged between the parties relating to the settlement of the dues. Reference is also made to payment voucher. The Tribunal has declined to accept the submissions that amount of Rs. 125 lacs was not deposited towards the full and final settlement of the account and that the title deed of Pondicherry property was released on accepting a sum of Rs. 105 lacs.

The Counsel for the appellant Bank has invited my attention to all these letters and communication to urge that this amount of Rs. 125 lacs was not received as full and final settlement. Accordingly, these communications would call for detailed examination to see as to what would be revealed therefrom.

The admitted position otherwise is that the account was declared NPA on 30.9.2004 and the company initially had approached the Bank on 22.7.2005 for part settlement. The perusal of the letter dated 22.7.2005 would show that the company had been successful in negotiating the sale of Daman unit for a sum of Rs. 65 lacs. The company had further written that it had decided to follow the below mentioned course of action:

A. Sell Pondicherry Unit, specially since it has been closed since September 2003.

B. Also sell Daman Unit - as Income Tax Exemptions had ended here and VAT will make CST exemption redundant by the year 2006.

B. Shift to a small rented place in Daman to continue with production level till March 2006 to continue enjoying 1% CST exemption.

B. Hunt for suitable place in Uttaranchal which like Himachal, J & K and Northeast is offering a 10 year long Income Tax and Excise duty holiday.

The company also disclosed the action it had taken in this regard and this was as under:

"A. We have already put Pondicherry Unit for sale - in fact a deal was finalized @ Rs. 90,00,000.00 (Rs. ninety lacs only) for which you had already given us your kind consent.

It appears unfortunately though that the above said buyer from Chennai (Dubai) seams unsure of this transaction as their own project funding (expansion proposal) with their Bankers (SBI) has not found favours and has been delayed up to October 2005.

Finding the above situation/delay unacceptable we have once again put the unit on the market and are negotiating with two more customers currently.

In fact after conducting Daman, my next destination will be Pondicherry but somehow we have a feeling that selling Pondicherry may take some more time which cannot be predicted today as after Tsunami the coastal properties are finding buyers with difficulty.

B. In the meanwhile as stated earlier we have concluded a deal for Daman Unit and a memorandum of understanding is enclosed herewith for your kind perusal.

It is mentioned in the MOU that we have to forward to the customer our Banker's permission for this sale.

It is a matter of record that this Unit was valued by your valuers for Rs. 71.00 lacs.

C. We have already located a smaller factory in Daman quite near to our current location and subject to this sale happening we intend to shift by 15th August, 2005.

D. We have yet to physically survey the Pantnagar Industrial Area which I tend to do upon my return from Pondicherry/Daman; though it has been informed us by other industries in the same trade of Gen-Set that plots are available in plenty and cheap and also the SIDCUL (Small Industrial Development Corporation of Uttaranchal) has developed ready sheds which can be occupied immediately.

It may be clarified here that subsidies in Uttaranchal will be available to those who start operations before 31.3.2007."

The company accordingly wrote to the Bank that the sale of Daman property immediately will not hurt company's operation and hence prayed for according sanction for sale of Daman unit so as to conclude the sale by 15.8.2005.

The Bank approved the proposal through its letter dated 5.9.2005. The Bank wrote to the company that the authorities have permitted the company to sell the property at Daman for Rs. 65 lacs within 15 days of conveying the Bank's acceptance. The sale proceeds were directed to be remitted to the branch by way of demand draft. The Bank released documents of the Daman property through letter dated 15.9.2005 and in this manner the credit of Rs. 75 lacs was acknowledged in the account of the company on 29.10.2005.

Despite this deposit, the account of the company was running irregular. In this background, the Bank received another proposal from the company through letter dated 13.1.2006. The respondent company in this letter has acknowledged that their account was declared NPA and at that time the outstanding approximately stood at Rs. 2.11 crore including interest up to September 2004. In this letter, the company in this letter has further written that during the meetings with the Bank at Regional Office it was decided that at least one for the factories either at Daman or at Pondicherry be sold off to reduce the exposure. Reference is made to the sale of Daman factory which resulted in reducing the demand by Rs. 65 lac. The exposure of Rs. 1.45 crore is thus acknowledged and conceded in its letter dated 13.1.2006.

Reference is then made to the securities one of which was factory at Pondicherry. Fair market value of this property was recorded as Rs. 90 lacs. It is also stated that the company was trying to sell this factory for two years but was not able to make final sale. The company accordingly expected the distress sale of this property at Rs. 70-80 lacs. Another two properties referred to in this letter are Flat in a Town House in DLF City Phase-I, Gurgaon fair value of which is Rs. 20 lac and Flat at Chitranjan Park. The fair market value of this was said to be not exceeding Rs. 40 lacs. The company had also stated that the flat at Chitranjan Park could not be sold as it was owned and possessed by Mr. Surinder Singh Sachdev and his wife Mrs. Padma Sachdev who were senior citizen and Padma Bhushan awardees. The company accordingly stated that it could raise Rs. 90 lac to Rs. 1 crore by disposing of the property, i.e., factory at Pondicherry and flat in Town House in DLF city. The company accordingly requested the Bank to consider the proposal for settlement of the outstanding amount by paying Rs. 90 lacs.

The appellant Bank while acknowledging the receipt of this letter requested the company to enhance the offer so as to enable the higher authorities to consider the OTS proposal. In this background, the notice under Section 13(2) of the SARFAESI Act was issued on 25.4.2006, when the company came up with permission to sell the property at Pondicherry. Since lot may depend upon this proposal, it may need a minute examination.

This letter is addressed to Astt. General Manager of the appellant Bank and the subject thereof reads:

'Subject: Permission to sell that Factory at Pondicherry".

After making reference to some discussion, it is stated that one-time proposal was submitted on 3.2.2007 and as part of the proposal the sale of the factory at Pondicherry was envisaged. It is disclosed that they have an intending buyer and Rs. 1 crore which can be deposited with the Bank. Reference is made to the valuation of the property done by the valuer at Rs. 105 lac and the fact that the Bank had earlier accorded sanction for selling the same at Rs. 90 lac. Accordingly, the company requested the Bank to accord fresh sanction for sale of the factory.

On 1.3.2007, the compromise proposal was prepared on Format III for submission to the appropriate sanctioning authorities. On 26.3.2007, the Bank informed Vinod Kumar (respondent No.2) that the compromise proposal dated 1.3.2007 had been permitted by the controlling authority as under:

"Title Deeds pertaining to the property at Pondicherry shall be released by the Branch after receiving credit of Rs. 105.00 lacs in your a/c with our Branch on or before 31.3.2007."

On 30.3.2007, the Bank acknowledged the receipt of a demand draft for Rs. 1.25 crore. The Bank had further stated that the title deed in respect of property at Pondicherry would be handed over against acknowledgement consequent upon realization of the proceeds through clearing.

It is from here that the serious contests ensued between the parties. The respondent will term this as an acceptance of the compromise proposal as full and final settlement on payment of Rs. 1.25 crore whereas the Bank would state that it had only granted permission to sell the Pondicherry properly for sum of Rs. 105.00 lac which amount was to be deposited with the Bank and it was not an acceptance of the compromise proposal. In order to substantiate its plea, the Bank would refer to the two credit slips where the sum of Rs. 105 lacs was adjusted towards the loan amount and the remaining sum of Rs. 20 lacs was deposited in the no-lien account. The Counsel for the Bank from this would urge that this would clearly show the conduct of the Bank, which was not to accept this amount as full and final settlement but had only realized this amount granting permission for the sale of Pondicherry property.

In this regard only, the Counsel for the Bank refer to a letter dated 20.6.2008 whereby the Bank had written to the respondent as under:

"Dear Sir,

Sub: Your OTS proposal regarding M/s. Global Electech Ltd.

With reference to your subject OTS proposal, we wish to inform you that on placing the proposal before the appropriate authority, it is advised that in view of the substantial value of remaining properties you are requested to improve your offer and submit the revised proposal afresh.

On receiving the same we shall forward it for placing before the appropriate authority."

The Counsel for the Bank would thus contend that the OTS proposal only had been sent for the approval of the competent authority and by the adjustment of Rs. 105 lac by the Bank it cannot be taken to have accepted the OTS proposal. The proposal was placed before the competent authority but in view of substantial value of the remaining properties the borrower was advised to improve the offer and submit revised proposal. This was followed with legal notice dated 28.9.2008. Respondent No.2 then filed writ petition before the High Court on 23.10.2008 in which notice was issued with the direction that the petitioner may in the meanwhile approach the Bank for settlement. This writ petition, however, ultimately came to be dismissed on 27.9.2010. The Hon'ble Court found that the petitioner, i.e., respondent No.2, had no locus to pray for the relief as the settlement alleged was between the company and respondent Bank. The stand of the Bank also was noticed which was to the effect that there was no settlement. The Bank had further submitted that money was accepted only to release charge on the Pondicherry property and only a sum of Rs. 105 lacs had been adjusted. The High Court further noticed that in the absence of settlement agreement in writing, the settlement claim by the petitioner would entail disputed questions off act which could not be adjudicated in writ jurisdiction. After having observed so, the High Court writ jurisdiction. After having observed so, the High Court had gone on record some observation finding something incongruous as under:

"(i) as to why if a full and final settlement had been arrived at and upon payment of Rs. 1.25 crores nothing more remained to be paid to the respondent Bank, why the letter dated 26th March, 2007 supra of the respondent Bank did not refer to the sum of Rs.1.25 crores and referred only to release of Title Deeds of the property at Pondicherry upon receipt or Rs. 1.05 crores;

(ii) why the letter dated 26th March, 2007 did not refer to release of Title Deeds of the other properties of the Company, petitioner and other guarantors deposited with the respondent Bank;

(iii) why the petitioner and/or the Company for all this time did not insist upon release of Title Documents of the other properties;

(iv) why no proper record of settlement was obtained and settlement is sought to be shown from a reference here and a reference there in the correspondence."

The High Court had termed the writ petition to be an abuse of process of the Court and dismissed the same by imposing a cost of Rs. 50,000/-.

In the light above noted facts, I have considered the submissions made before me. The Counsel for the Bank would contend that there was no concluded contract and the Tribunal below has wrongly accepted the submission of the respondent that amount of Rs. 125 lacs was accepted as OTS. There is enough material on record to show that the Bank had not conveyed any acceptance of the OTS proposal. No doubt, the authorities at the Bank had initiated the proposal for settlement but the authority competent to accord approval for the settlement was yet to consider the same. The respondents have made much from the contents of letter dated 26.3.2007 through which the Bank had written to respondent No.2 that the compromise proposal had been permitted by the competent authority. What was permitted was also clearly recorded in the letter. The contents of the same has been reproduced above and it was only that the title deed of the property at Pondicherry shall be released on receiving credit of Rs. 105 lacs. The respondent would term this to be acceptance of the proposal. This, in my view, would be stretching things too far. The acceptance has to be in clear and categorical terms if the plea is that there was a concluded contract between the parties in this regard.

Another important thing to notice here is that this letter cannot be taken to have conveyed the acceptance of the compromise proposal. Reading this letter in any manner would only show that the Bank had written to the respondent that the title deed pertaining to property at Pondicherry shall be released on receiving Rs. 105 lacs. This, at best, can be construed a permission to sell the property at Pondicherry for a sum of Rs. 105 lacs. The respondents are taking advantage of the fact that in response they had deposited DD worth Rs. 125 lacs with the Bank. The clear answer to this is found available on record of the Bank. The record cannot be taken to have been manipulated and/or prepared subsequently. Out of this amount of Rs. 125 lacs, only a sum of Rs. 105 lacs was adjusted towards the loan account and the remaining amount of Rs. 20 lacs was kept in no-lien account. This would give enough indication that this amount of Rs. 125 lacs was not received pursuant to the one-time settlement.

There is no document available on record to show that the proposal submitted by the respondent was ever accepted by the Bank. The documents and the communication available on record would support the stand of the Bank. Not only that, subsequently, the Bank wrote to the respondents to revise their proposal afresh. Mere delay on this count cannot be taken that there was acceptance of the proposal. Though the writ petition filed by one of the respondents was dismissed, yet the uncomfortable posers addressed by the Hon'ble High Court would be enough to negate the stand of the respondents. No satisfactory answer is forthcoming to the observations so made by the Hon'ble High Court. The respondents thus perhaps have no answer.

It is observed by the High Court that if sum of Rs. 125 lacs was full and final settlement, then why the Bank did not refer the same in its letter dated 26.3.2007 and wrote that the title deed of the property would be released on receipt of Rs. 105 lacs. It is further observed that if that was the position, why the Bank did not refer to the release of titled deed of the other properties of the company or that of the guarantors. The High Court has also questioned the conduct of the respondent for not seeking or insisting upon the title documents of other property because there was full and final settlement. The conduct of the respondents in not seeking and obtaining the record of the settlement when reference was only for release of the title deed of the property was questioned. If, indeed, there was settlement, the respondents could be expected to immediately contest the letter informing them of release of Pondicherry property on deposit of Rs. 105 lac. The respondent did not write to the Bank that in view of the settlement, Bank should release all the title deeds of the remaining properties as well.

The Tribunal below has mainly referred to various parts of proposal submitted for settlement and has highlighted the recommendation made in Para 14 of the settlement proposal. In this para, the authority at Bank had recorded their opinion that the present offer of the party was reasonable and had recommended the acceptance of the offer. From this, the Tribunal below has held that there was no confusion or doubt at branch level that the proposal was accepted. The reference is also made to some minutes which, however, were not signed by the officials of the Bank. The Tribunal, on the basis of material placed, has posed some questions which are as under:

"What happened to this proposal? Was it proper on the side of the higher officials of the Bank to reject this proposal? Was there any fault on the side of the Bank at the lower level in accepting Rs. 125 lac as the amount towards full and final settlement of account? These are the further questions to be answered."

Making reference to the observation recorded in Para 33 of the judgment in the case of Sardar Associates & Ors. v. Punjab & Sind Bank & Ors., VI (2009) SLT 473=III (2009) BC 705 (SC)=III (2009) CLT 186 (SC)=2009(8) SCC 257, and in Para 32 thereof, the Tribunal has held that scheme of one-time settlement promulgated by the Reserve Bank of India is non-discretionary and non-discriminatory. The deviation from the scheme in any form is not permitted unless it is with convincing reason.

No doubt, the Hon'ble Supreme Court has made such observation as were noticed by the Tribunal below, but the issue before the Hon'ble Supreme Court was in regard to the source of power on the part of the RBI to issue circular and guidelines as regard one-time settlement. The Hon'ble Court was dealing with an order passed by the High Court which had dealt with an order of the Debts Recovery Appellate Tribunal, Delhi directing the Bank to settle the case of the appellant in terms of the guidelines as applicable for declaring the account as NPA and not to recover said amount in terms of the judgment of DRT at Chandigarh. The Hon'ble Supreme Court has ruled that Tribunal has the requisite jurisdiction to consider the prayer made by the debtor for one-time settlement particularly in view of the fact that the same is within the purview of OTS of the Reserve Bank of India. While referring to its own guidelines issued by the Bank, when it has accepted the guidelines of Reserve Bank of India, the Supreme Court has posed a question if the guidelines of the Bank would satisfy the non-discriminatory clause laid down by the Reserve Bank of India. It is thus observed that while making deviation, the Board of Directors of public sector Bank could not have taken recourse to a policy decision which is per se discriminatory.

In the present case, it cannot be made out from the record that the proposal for settlement was made by the Bank on the basis of any guidelines issued by Reserve Bank of India. This proposal was made by the respondent and it was considered and forwarded with the recommendation for the approval of the competent authority. There is no document on record that this proposal was ever accepted. The parties in this case have not relied upon any Reserve Bank of India guidelines. The question is not to see if the amount was received but to see for what purpose this amount was received. This fact is well made out from the documentary evidence on record. Merely on account of encashment of DD for Rs. 200 lac submitted, in my view, cannot be construed as acceptance of consideration and reciprocal promise to hold that the contract was concluded between the parties.

To prove concluded contract, Mr. Hemant Chaudhary has invoked the provisions of the Contract Act. Section 7 of the Contract Act provides that the acceptance must be absolute. This section provides that in order to convert a proposal into a promise the acceptance should be absolute and unqualified and it must be expressed in some usual and reasonable manner unless the proposal prescribes the manner in which it is to be accepted. This section further provides that if the proposal prescribes a manner in which it is to be accepted and the acceptance is not made in such a manner the proposal may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but if he fails to do so, he accepts the acceptance. Section 8 of the said Act talks of acceptance by a performing conditions, or receiving consideration. It provides that performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.

It can thus be noticed that the acceptance must be unqualified and without condition. It is a well settled proposition that the offer and acceptance must be based or founded on three components-certainty, commitment and communication. If anyone of the three components is lacking either in the offer or acceptance there cannot be a valid contract (see Kilburn Engineering Ltd. v. Oil and Natural Gas Corporation Ltd., AIR 2000 Bom. 405). An acceptance with variance is no acceptance. It would simply be a counter proposal which must be accepted by original promise before a contract is made.

The Counsel for the respondent has in this regard relied upon India Tourism Development Corporation Ltd. v. Integrated Digital Solution (P) Ltd., 2014 (2) Arb. LR 129 (Delhi). In this case, the respondent had accepted a tender with respect to a sound and light show as per which the respondent was to supply material required for the execution of the sound and light show. The original proposal was for a particular sum which was a comprehensive one for supply of mannequins and other material. Subsequently the quantity of mannequins was reduced and the second proposal by the respondent for a different sum was made. The second proposal did not include motorized mannequins but in the final contract seven motorized mannequins were included for a total amount of contract. In this background, the issue arose in regard to the validity of the contract and acceptance thereof. The COUl1 in this case has held that the appellant was justified in relying upon Sections 7 and 8 of the Contract Act as one of the ways in which a contract is entered into is by giving performance under the offer. The finding in this case has been returned on the basis of documents and material on record which was for supply of mannequins at a particular rate per mannequin. The Court accordingly found that there was no compulsion for the respondent to supply additional mannequins if according to the respondent the price stated in toe letter was inadequate.

The provisions of Sections 7 and 8 of the Contract Act having regard to these facts may be relevant and so was considered and relied upon by the Court. The applicability of these provisions, however, would depend upon the fact situation in the present case. What is to be seen in the present case is whether the act of the Bank in considering the proposal for settlement could be termed as a concluded contract by holding that the proposal submitted was accepted by the Bank. I have considered the communications which were exchanged, in detail, which would clearly show that the Bank had not accepted the proposal for settlement and had only forwarded the proposal for settlement to the competent authority. The acceptor in this case had put condition that on deposit Rs. 105 lac the property would be released. This in a way was a new condition. At the most it could be acceptance with variation which is no acceptance in the eyes of law.

Similarly, the case of Saubhagya Ranjan Kanungo v. Smt. Prafulata Mohapatra, 2007 (Suppl.) OLR 90, in my view, apparently has no applicability. The plea in this case was that to constitute a valid contract there should be an offer by one party and acceptance by the other. The Court in this case considered the provisions of Section 10 of the Contract Act as well as Sections 7, 8 and 9 thereof. It is observed that if a party to the contract makes an offer and the same is accepted in an absolutely unqualified manner by the other party then the contract becomes valid and complete. It is noticed that law does not require such proposal and acceptance to be always in writing. On the basis of cumulative reading of the noted cases along with Sections 7 to 10 of the Contract Act, it is held that written contract containing signatures of both the parties is not sine qua non to constitute a valid and executable contract. That is not the issue under consideration in the present case. Thus, the judgments relied upon by the Counsel are not relevant.

It is noticed that the S.A. filed by respondent No.5 Mr. Surinder Singh Sachdev has been allowed by the Tribunal below primarily because the O.A. had been dismissed and accordingly it is held that the Bank could not proceed against the property of the said respondents. Since the order passed by the Tribunal in the O.A. has now been set aside, the impugned order passed in the S.A. cannot be allowed to stand. However, the S.A. filed by the respondent would require consideration on merits, especially, in the background that the properties with which the amount due was secured were allowed to be sold by the borrower. The effect of release of the securities may have to be considered to determine the liability of the guarantors. It would have been different matter if the Bank had resorted to sale of the property and in that event, it may not have been possible to make any allegation that the main security has been lost. In any case, all the pleas raised in the S.A. may have to be considered by the Tribunal below.

The appeal is accordingly allowed and the impugned order passed by the Tribunal is set aside. The Bank is held entitled to recover the amount claimed in the O.A. The order passed in the S.A. is also set aside and the S.A. is remanded back to the Tribunal to consider and decide the same on merit in accordance with law.

However, the respondents herein would still be at liberty to approach the Bank for some settlement, if they so wish.