Haryana Financial Corporation and Another vs Bhagat Foods Private Limited and Another

Ashok Bhan, J.—Haryana Tanneries Limited, which was a sick unit was taken over by the Haryana Financial Corporation (hereinafter referred to as the HFC) on 23.4.1992 u/s 29 of the Financial Corporations Act as it had failed to pay the outstanding balance of approximately Rs. 260 lacs to the HFC. HFC issued an advertisement inviting tenders for sale of the Haryana Tanneries Limited. In response to the advertisement, M/s Bhagat Foods Private Limited, Plaintiff-respondent (hereinafter referred to as ''the plaintiff'') submitted a tender for purchase of the unit for Rs. 90 lacs. Plaintiff was the sole bidder. In response to an earlier advertisement issued by the HFC, bids for more than Rs. 1 crore were received. Plaintiff was called for negotiations for further increase in price. On 20.7.1993, plaintiff increased its offer from Rs. 90 lacs to Rs. 97 lacs. As per the advertisement, 10% of the bid money was to be deposited as earnest money. Plaintiff had deposited Rs. 9 lacs as earnest money. After the increase of the purchase price by Rs. 7 lacs, plaintiff deposited Rs. 70,000/- more as earnest money being 10% of the increased purchase price. Offer was subject to confirmation by the Managing Director of the HFC. The right to change the terms and conditions of the tender and to reject any or all the tenders without assigning any reason was also reserved. As per the terms of payment 15% of the purchase price was payable within 80 days from the date of acceptance of the tender and the remaining 75% in quarterly instalments from the date of acceptance of the offer along with the present rates of interest. Plaintiff sent a Bank Draft for Rs. 14,55,000/- dated 25.8.1993 to the HFC, an amount equal to 15% of the total purchase price payable within 30 days from the acceptance of the offer on 25.8.1993, presumably on the assumption that his tender was deemed to be accepted after the increase in price. A request was also made to the HFC to hand over the possession of the Unit to the plaintiff on 27.8.1993 at 11 A.M. HFC did not accept the amount of Rs. 14,55,000/- and returned the same along with a letter dated 1.9.1993 conveying that the balance amount was to be paid after confirmation of the sale and since no decision had been taken on the revised offer of Rs. 97 lacs, so the amount of Rs. 14,55,000/- was returned to the plaintiff. On 7.9.1993, HFC sent another letter requesting the plaintiff to participate in the fresh tender proposed to be floated by the HFC plaintiff, instead of participating in the fresh tenders filed a suit for seeking the relief of permanent injunction restraining the HFC from inviting fresh tenders from the sale of Haryana Tanneries Limited alongwith an application under Order 39 Rule 1 and 2 read with Section 151, Code of Civil Procedure.

The suit as well as the application filed under order 39 rules 1 and 2 read with Section 151, CPC was contested by the HFC, Preliminary objection regarding the maintainability of the suit in the present form was challenged on the ground that mere suit for declaration was not maintainable without seeking the relief of specific performance of the contract. It was pleaded that the ad volerum Court fee on Rs. 97 lacs had not been paid and, therefore, the suit was liable to be dismissed. The pecuniary and territorial jurisdiction of the Court to entertain the suit was also challenged. It was admitted that the offer of Rs. 97 lacs for purchase of M/s Haryana Tanneries Limited was made by the plaintiff but it was denied that the said offer had ever been accepted. It was further pleaded that the draft of Rs. 77,000/- was sent to the HFC by the plaintiff of his own; that the draft of Rs. 14,55,000/- had been returned to the plaintiff and that there was no completed contract between the parties.

Application filed under Order 39 Rules 1 and 2 read with Section 151, Code of Civil Procedure, was taken up by the trial Court. Trial Court granted the injunction prayed for and the HFC was restrained from inviting fresh tenders. It was further held that the plaintiff was liable to pay advolerum Court Fee on the sum of Rs. 97 lacs within one month failing which the suit for declaration simpliciter for permanent injunction shall not be maintainable without seeking the relief of specific performance. Aggrieved against this order, two appeals were filed; one by the HFC and the other by the plaintiff.

HFC challenged the order of the trial Court on the first point i.e. regarding the grant of injunction on the ground that there was no completed contract between the parties and, therefore, prima facie, no case was made out for grant of injunction. Plaintiff challenged the order of the trial Court on the point of maintainability of the suit and with regard to payment of advolerum Court Fee on the sum of Rs. 97 lacs.

Both these appeals were disposed of by the appellate Court by one judgment. Appeal filed by the HFC was dismissed whereas the appeal filed by the plain- tiff was accepted holding that there was an implied acceptance of offer and, therefore, plaintiff was entitled to the injunction prayed for. It was further held that the plaintiff was not liable to pay advolerum Court Fee at this stage and the question regarding Court fee would be gone into by the trial Court after framing proper issues in that behalf. Aggrieved against the aforesaid judgments of the Courts below, the present revision petition has been filed.

Counsel for the parties have been heard at length.

Three things have to be taken into consideration while dealing with the grant of temporary injunction under Order 39 Rules 1 and 2, Code of Civil Procedure: (i) Prima facie case, (ii) balance of convenience and (iii) irreparable loss and injury to the parties concerned. Courts below have held that although there was no completed contract between the parties but there was an implied completed contract be- cause the HFC had accepted Rs. 70,000/- as additional earnest money after the plaintiff had increased the purchase price from Rs. 90 lacs to Rs. 97 lacs. Courts below have clearly failed to take notice of the terms of the tender notice. Tender notice provided that the sale was subject to confirmation by the Managing Director and that the corporation had reserved its right to change the terms and conditions of tender or to reject any or all the tenders without assigning any reason or negotiate with the tenderers for improving upon their offer. There was no valid and completed contract between the parties. After the initial offer of Rs. 90 lacs, plaintiff increased the offer to Rs. 97 lacs at the negotiating table. Rs. 9 lacs, being 10% of the amount offered initially as the purchase price, had been deposited by the plaintiff. After the increase in the offer of the purchase price by Rs. 7 lacs, plaintiff became liable to deposit another Rs. 70,000/- being 10% of the increased offer of purchase price as terms of the tender notice. Simply because HFC accepted that money, it does not mean that there was any implied completed contract. The tender given by the plaintiff was subject to confirmation and acceptance by the Managing Director. No communication was ever addressed to the plaintiff conveying the acceptance of his tender; thereby making it a valid and binding contract between the parties. The Courts below have, thus, clearly erred in recording the finding that there was an implied completed contract between the parties from their conduct. There is no document of the HFC which could possibly be read as a completed contract. Plaintiff himself was aware of this fact and in fact he addressed a communication on 20.7.1993 to the HFC, which reads as under:-

"This is for your kind information that the tender for M/s Haryana Tanneries Limited Jind was opened on 19.7.1993. We have quoted Rs. 97 lacs. If the tender will be approved by your goodself, we will plan to run the tanneries after full enquiry. If the scope will be good, then we will run the unit as Tanneries."

This letter clearly shows that the plaintiff was aware of the fact that the tender was subject to the approval of the Managing Director.

By merely giving a bid, a bidder does not acquire any vested right. There is no completed contract until the bid is accepted and it is open to the bidders to withdraw their bids and for the Government to reject any bid. Almost on parallel facts, Supreme Court of India in Union of India (UOI) and Others Vs. Bhim Sen Walaiti Ram, , held as under:-

"Under Clause 21 of Rule 5.34 the person to whom the shop has been sold is required to deposit one-sixth of total annual fee within seven days. But that sale is deemed to have been made in favour of the highest bidder only on the completion of the formalities before the conclusion of the sale and where one of the conditions of auction provides that final bid would be made subject to the confirmation of the Chief Commissioner then the contract of sale is not complete till the bid is so confirmed. Till such confirmation the person whose bid has been provisionally accepted is entitled to withdraw his bid and when the bid is so withdrawn before the confirmation of the Chief Commissioner the bidder will not be liable for damages on account of any breach of contract of for shortfall on the resale. So where the highest bider in an auction sale of a liquor shop did not deposit one-sixth of the purchase price within seven days of the auction whereupon the resale was ordered without the bid having been confirmed by the Chief Commissioner then the essential prerequisites of a completed sale being missing no liability could be imposed on the auction purchaser for payment of the deficiency in the price on the resale."

In this case as well the bid was subject to confirmation and it could not be deemed to be accepted till the same was confirmed.

Relying upon the proceedings of the meeting of the Committee constituted to consider the auction proposal, which had decided that the offer of the Plaintiff was reasonable and may be accepted it was argued by the counsel for the plaintiff that the bid given by the plaintiff stood accepted and, thereafter the same could not be rejected or made subject to approval by the Commissioner who was the chairman of the HFC as well. Again, I find no merit in this contention. Prima facie, the Committee had decided that the offer made by the plaintiff was reasonable and should be accepted but the same was subject to confirmation. Till the bid given by the plaintiff was accepted, no binding contract came into being. In the absence of any binding/completed contract between the parties it cannot be held that the plaintiff had a prima facie case which would entitle him to the grant of temporary injunction. Plaintiff himself was all-through aware that his bid has not been confirmed and till the same is confirmed no binding contract between the parties came into being. Plaintiff, of his own sent a draft in the sum of Rs. 14,55,000/- being 15% of the purchase price by way of first instalment presuming that there was an implied contract. This draft was not accepted by the HFC and the same was promptly returned by them on 1.9.1993 informing the plaintiff that there was no binding contract between the parties and till a binding contract came into being between the parties, the sum of Rs. 14,55,000/- towards the first instalment could not be accepted. Under the circumstances, the plaintiff was not entitled to the injunction prayed for, restraining the HFC not to invite fresh tenders for the sale of Haryana Tanneries Limited.

Prima facie, simple suit for declaration, with injunction as prayed for, in this case was not maintainable without seeking the relief of specific performance of the contract. This be no taken as a final pronouncement on the point and shall be subject to any decision which may be arrived at by the Courts below in the course of regular trial of the suit after the framing of the issues. Thus, the Plaintiff failed to prove a prima facie case in his favour and, therefore, was not entitled to the injunction prayed for.

Nothing stated in this order shall be deemed to be a finding on the merits of the case and would be confined to the controversy canvassed before me for the purposes of disposal of the application under order 39, Rules 1 and 2 read with Section 151 Code of Civil Procedure. HFC would now be at liberty to proceed in the matter in accordance with law and the Rules if any, framed by them.

For the reasons recorded above, this revision petition is accepted. Orders of the Courts below are set aside and the application filed by the plaintiff for grant of interim injunction under Order 39 Rules 1 and 2 read with Section 151, Code of Civil Procedure, is dismissed.

Parties, through their counsel, are directed to appear before the trial Court on 24.5.1995. No Costs. The suit be decided early.