Sekhsaria Exports vs Union Of India (Uoi) And Ors.
2003 Latest Caselaw 995 Bom

JUDGMENT

V. C. Daga, J.

1. This petition is directed against the action of the respondents seeking to encash the bank guarantees furnished by the petitioners to perform their part of obligation arising from the contracts, if allotted. The petitioners contend that since the offers or bids made by them itself having been withdrawn much before the acceptance thereof, the offers did not culminate in a concluded contracts, as such the respondents were not entitled to invoke bank guarantees alleging breach of contracts on the part of the petitioners.

FACTS:

2. The facts giving rise petition in nutshell are as under: The petitioners are the partnership firm, inter alia, carrying on business as Importers and Exporters of diverse quantities of cotton. Respondent No. 1 is Union of India. Respondents No. 2 and 3 are the Textile Commissioner and Joint Textile Commissioner respectively.

3. By order No. 1/2/89-Cotton, the respondent. No. 2 proclaimed that respondent No. 1 had decided to release export quota of 50,000 bales (of 170 kg. each) of Bengal Deshi Cotton of 1988-89 crop for the private rate during cotton year 1988-89.

4. In the aforesaid order, certain terms and conditions were set out. The relevant conditions with which we are concerned in the present petition amongst others are as under:

(a) All export prices were to be quoted in terms of US Cents per Kg. C&F (Term D).

(b) The Application form was to be submitted in triplicate and the original contract, duly signed by buyer and sellers along with the Bank guarantee to be kept alive till 15-11-1989. All sealed covers shall be opened at 15.30 hours on 3-4-1989 (Monday) and Applicants can remain present at the time of opening of covers.

(i) Original contract duly signed both by the buyers and the sellers or Fax copy of the contract duly signed both by the buyer and the seller provided the original contract together with zerox copy of the original contract duly attested by a partner or direction of the company under the seal of the company is submitted to the cotton section of the office of the Textile Commissioner, Bombay on or before 10-4-1989 (Monday) failing which export quota allocation letter will be cancelled and the Bank Guarantee submitted will be forfeited (E-II);

(c) The export quota released shall be allocated amongst the applicants on the basis of the highest unit value realisation quoted in application subject to the condition that no single exporter may be allowed more than 25% of the total quota, which terms can be waived in case there is balance quota available (Term F);

 (d)     .......        ........        ........
(e)     .......        ........        ........
(f)     .......        ........        ........
 

(g)    The Textile Commissioner reserves the right to reject any/all application if the contracted prices are not found reasonable and his decision shall be final (Term K).
 (h)     .......        ........        ........
 

5. On 3rd April 1989, the petitioners in pursuance of the public proclamation issued by respondent No. 2 applied for allotment of quota of 850 bales and 600 bales of the said Bengal Deshi Cotton for contract value at the rate of 361 cents and 365 cents respectively. The petitioners, in support of their applications, submitted two confirmed purchase contracts entered into by them with the foreign purchasers, the shipments of which were to be made between April to August 1989. The petitioners along with their applications also submitted two bank guarantees, one for a sum of Rs. 3,06,000/- and another for Rs. 4,33,500/- issued by the Allahabad Bank.

6. The Textile Commissioner, the respondent No. 2 opened all the tenders received by him, in presence of the tenderers. The petitioners were represented by their one of the partners. Though it was assured and normally required to have the communication of acceptance or rejection of the tenders immediately, the same was not done on the spot. However, the tenderers were informed that the fate of their tenders would be communicated to them within a reasonable time.

7. The petitioners did not receive any communication with respect to acceptance or rejection of their tenders. The petitioners, therefore, persistently and regularly approached the office of respondent Nos. 2 and 3 and regularly pursued the said matter so as to enquire about the outcome of their tender bids, since their foreign buyers were awaiting confirmation. In spite of repeated approaches made by the petitioners they were not informed about the acceptance or rejection of their tender bids but all the while they were told that their tender proposals are under consideration.

8. On 13th April 1989, the petitioners were telegraphically informed by their foreign buyers that if the petitioners did not confirm about the receipt of quota of cotton by 14th April 1989 they might have to cancel the contract, considering the fluctuations in the cotton prices in their country.

9. The petitioners by their letter dated 13th April 1989 (Exh. 'D', page 43) addressed to the respondent No. 2, inter alia, informed that their foreign buyers required confirmation by 14th April 1989 about receipt of quota of cotton, otherwise, they might cancel the contract and as a result the petitioners might have to withdraw the tender offer made by them. The said letter was delivered by hand on the same day in the office of respondent No. 2. The respondent No. 2 though received the said letter, did not give any reply to the said letter.

10. On 18th April 1989, the petitioners received telex message from their foreign purchaser cancelling contracts since they did not receive any confirmation of allotment of quota from the petitioners. The petitioners in turn vide their letter dated 19th April 1989 (Exh. 'F', page 45) addressed to respondent No. 2, inter alia, giving reference to their earlier letter dated 13th April 1989 and informed him that since their foreign buyers have cancelled the contracts, they are withdrawing their tender bids and requested for return of bank guarantees and other relevant documents. The said letter was delivered on 19th April 1989 itself in the office of respondent No. 2 but his office did not respond to the said letter by returning the Bank guarantees and the documents demanded by the petitioners. Since the respondent No. 2 did not return the bank guarantees and other documents, petitioners by their letter dated 2nd May 1989 (Exh. 'G', page 46) again requested to return the said documents and bank guarantees. The said letter was duly received by respondent No. 2, however, the same was also not replied by him.

11. The respondent. No. 3 by his letters dated 12th May 1989 (Exh. 'H' and 'H-1', pages 47 and 48) purported to issue letters of allotment without making any reference to the earlier three letters addressed by the petitioners to respondent No. 2 which were duly received by his office.

12. The petitioners by their letter dated 23rd May 1989 (Exh. 'I', page 49-50) acknowledged the receipt of those two letters dated, 12th May 1989 purported to be the letters of allotment and set out true and correct facts including the abovementioned correspondence. By the said letter, petitioners have recorded that the purported allotments were made only after knowing fully well that their foreign buyers had cancelled the contracts and thereafter, petitioners withdrawn their tender offers after expiry of more than 20 days, as such the said allocations and/or allotments were not binding on the petitioners. The petitioners, therefore, again requested respondent No. 2 to return the bank guarantees and other documents. The respondent No. 2 instead of returning bank guarantees threatened to encash the said bank guarantees, which compelled the petitioners to approach this Court by filing present writ petition under Articles 226 and 227 of the Constitution of India.

13. On being noticed, the respondents appeared and filed their counter affidavit, however, did not dispute the facts stated in the petition except contending that the withdrawals made by the petitioners were not bona fide.

THE ISSUE :

14. Having heard the parties, the issue which needs consideration is: whether in absence of any communication of acceptance of the offers or bids can it be said that the tender offers or bids submitted by the petitioners, culminated in the concluded contracts.

CONSIDERATION :

15. Having heard the parties and perused petition and counter affidavits, the above issue will have to be answered on the touch stone of the provisions of the law of contract. Section 2(b) of the Contract Act defines "acceptance". One cannot doubt that, as an ordinary rule of law, an acceptance of an offer made ought to be notified by the person who invites the offer to the person who makes the offer in order that the two minds may come together. Unless this is done the two minds may be apart, and there is not that consensus which is necessary according to the Contract Act to make a contract. The natural corollary of this principle is that the communication of acceptance should be from a person who has the authority to accept. The duty is cast on the offeree to accept or to reject, such tender offer within a reasonable time. Unless the acceptance is communicated, the contract cannot be said to be concluded. The tenderer does not become bound merely by submitting his offer or bid unless accepted in the same terms and conditions on which it was made. He becomes bound only if his bid is accepted in toto.

16. In the present case, before communication of acceptance of bids submitted by the tenderer/petitioners the contract bids themselves were withdrawn by the tenderer/petitioners. With the result, nothing was left with respondent No. 2 for acceptance, so as to give rise to the concluded contracts between the parties. The petitioners having withdrawn their bids much prior to its acceptances i.e. on 19th April 1989, the respondent No. 3 by his purported letters of allotment dated 12th May, 1989 could not have accepted the bids or offers, which were submitted by the petitioners, so as to contend that their acceptance gave rise to the concluded contracts. In this view of the matter, there were no concluded contracts between the parties. As such, the respondents were not entitled to invoke the performance (bank) guarantees alleging breach of contracts on the part of the petitioners. In this view of the matter, we hold and declare that there were no concluded contracts between the parties. Consequently, no breach of contract on the part of the petitioners could be alleged. Therefore, respondents were not entitled to invoke bank guarantees in question.

17. In the result, action of the respondents invoking bank guarantees stands quashed and set aside. The respondents are directed to return the bank guarantees with due necessary endorsements thereon, so as to enable the petitioners to submit them to their bankers for getting the same cancelled and to get, themselves relieved from the obligation of their bankers.

18. In the result, petition is allowed. Rule is made absolute in terms of this order with the above directions to the respondents to comply with their obligation within six weeks from today.

Petition stands disposed of with no order as to costs.

C. C. expedited.