Uoi vs Basic Tele Services Ltd. And Anr.
2012 Latest Caselaw 5125 Del

$~R-5
*     IN THE HIGH COURT OF DELHI AT NEW DELHI

                                     Date of Decision: 30th August, 2012

+      RFA(OS) 30/2010

       UOI                                            ..... Appellant
                   Represented by:Mr.Rajeeve Mehra, ASG
                                  instructed by Mr.Sumeet
                                  Pushkarna, Mr.Gaurav Varma &
                                  Mr.Ashish Virmani, Advocates.
                   versus

       BASIC TELE SERVICES LTD. AND ANR. ..... Respondents
                Represented by:Ms.Anushree Tripathi, Advocate
                               for R-1.
                               Mr.Kartik Bajpai, Adv. for R-2.
       CORAM:
       HON'BLE MR. JUSTICE PRADEEP NANDRAJOG
       HON'BLE MR. JUSTICE MANMOHAN SINGH


PRADEEP NANDRAJOG, J. (Oral)

1. All the various reasons given by the learned Single Judge to decree the suit filed by the respondent, one reason is that the bank guarantee was not invoked in terms of the guarantee and thus the demand was not to be satisfied.

2. Suffice would it be to state that with respect to a claim under a bank guarantee, it is the mantra recited which decides the fate of the claim. He who recites the correct mantra finds the door of the guarantee opened on its own force without any other intervening fact. If the mantra is not recited properly the door would not open.

3. The bank guarantee in question reads as under:-

       "                                Guarantee No.796/372/95
                                             Dated June 22, 1995

       To,
               The President of India

Acting Through the TELECOM AUTHORITY

Whereas Basic Tele Services Limited (hereinafter called "the Bidder") has submitted its bid dated June 22, 1995 for the Provision of Telephone Service on licence to be granted by TELECOM AUTHORITY (hereinafter called the "Authority") in compliance to DOT Tender No.314- 7/94-PHC for Service Area Tamil Nadu. KNOW ALL MEN by these presents that We, Deutsche Bank Ag, New Delhi Branch (hereinafter called the "Bank") are bound unto the Authority in the sum of `50,00,00,000/- (Rupees Fifty crore only) for which payment will and truly be made to the said Authority.

CONDITIONS OF THIS OBLIGATIONS ARE:

1. If the bidder withdraws its bid during the period of bid validity specified by Authority or

2. If the bidder having been notified of the acceptance of its bid by the Authority during the period of the bid validity

a) fails or refuses to execute the contract form if required; or

b) fails or refuses to furnish the Performance Bank Guarantees and/or Financial Bank Guarantees in accordance with the Instructions to Bidders;

3. We undertake to pay to the Authority, an amount not

exceeding `50,00,00,000/- upon receipt of its first written demand, without any demur if the Authority note that the amount claimed by is due to or owing to the occurrence of one or both of the two conditions, specifying the occurred condition or conditions.

4. The bank binds itself, its successors and assigns by these presents.

5. Notwithstanding anything herein above contained, our liability under this guarantee is restricted to the sum of Rupees 50,00,00,000/- (Rupees Fifty crore only) and the guarantee shall remain in force up to and including six months from the date of opening of the bid and shall be extended further by a period of six months upon receipt of a request from the Authority and unless a demand is made on us in writing on or before such expiry date all rights of the Authority under this guarantee shall be forfeited and we shall be relieved of an discharged from all liabilities here under.

       Dated:       June 22, 1995
       Place:       New Delhi"

4. The letter invoking the bank guarantee reads as under:-

" To The Manager, Deutsch Bank, Tolstoy House, 15-17, Tolstoy Marg, New Delhi- 110 001.

Subject: Encashment of Bank Guarantee No.796/473/95 dated 22.06.95 for Rs.Fifty Crores.

Dear Sir,

Please refer your above mentioned Bank Guarantee and Extensions submitted on behalf of M/s. Basic Tele Service Ltd. Authority, has ordered that above mentioned bank guarantee be forfeited for Tamil Nadu Services Area in Tender No.314-7/94-PHC.

The Director General Telecom you are, therefore, requested to encash the above mentioned Bank guarantee and remit the amount through a crossed Account Payee Demand Draft in favour of Pay and Accounts Officer, Dept. of Telecom (HQ) payable at Delhi.

Please acknowledge the Receipt.

Thanking You,

Yours faithfully,

Sd/-

(S.C. Sharma) Asstt. Director General (MMX) For and on behalf of Telecom Authority"

5. Suffice would it be to state that as per condition 3 of the bank guarantee, the obligation of Deutsche Bank i.e. the bank which has issued the guarantee is to pay without demur the demand raised provided the demand specified the occurred condition or conditions in respect whereof demand has been made.

6. Admittedly, the invocation does not specify the condition or conditions occurrence whereof has led to the demand and the bank guarantee being invoked.

7. The reasoning of the learned Single Judge on this count, that the

amount payable under the guarantee need not be paid is correct.

8. We do not go into the other issues concerning whether a contract concluded between the parties or not and the other issues raised.

9. It is well settled law that a bank guarantee is an independent contract.

10. This appeal fails on the merit of the challenge, however, with the consent of the learned counsel for the respondents the cost imposed by the impugned decree is waived.

11. The appeal stands disposed of affirming the impugned judgment, except the cost levied in favour of the respondents and against the appellant. To said extent the decree stands modified.

12. The parties shall bear their own costs throughout.

(PRADEEP NANDRAJOG) JUDGE

(MANMOHAN SINGH) JUDGE AUGUST 30, 2012 gm