Jammu & Kashmir High Court

Nelito Systems Limited vs The Jammu Central Cooperative ... on 13 August, 2021

                                                            Sr. No. J1

      HIGH COURT OF JAMMU & KASHMIR AND LAKAKH
                      AT JAMMU


                                               MA No. 91/2016
                                               IA Nos. 01/2016 & 01/2017

                                          Reserved on : 29.07.2021
                                         Pronounced on: 13 .08.2021


                                                  MA No. 91/2016
                                             IA Nos. 01/2016 & 01/2017

Nelito Systems Limited

                                                         ....Appellant (s)


                      Through: - Mr. R. K. Gupta, Sr. Advocate with
                                 Mr. Udhay Bhaskar, Advocate
             v/s


The Jammu Central Cooperative Bank Ltd and another
                                                         .... Respondent(s)



                     Through: - Mr. Abhinav Sharma, Sr. Advocate with
.                               Mr. Parkhi Parihar, Advocate for R-1
                                Mr. U. K. Jalali, Sr. Advocate with
                                Mr. Anuj Sawhney, Advocate


Coram: HON'BLE MR. JUSTICE JAVED IQBAL WANI, JUDGE
                              JUDGMENT

1. The present miscellaneous appeal is directed against order

dated 24.05.2016 (for brevity „impugned order‟) passed by the learned

Principal District Judge, Jammu (for brevity „trial court‟) in an application

for interim relief accompanying a suit filed by the plaintiff-

company/appellant herein (hereafter called „appellant-company‟) for

specific performance with a relief of mandatory and permanent prohibitory

injunction against the defendants-respondent-bank herein (hereafter called

„respondent-bank‟).

2. Before adverting to the contentions raised and grounds urged

in the instant appeal, a brief background of the case as stated in the memo

of appeal is outlined hereunder:-

3. Respondent-bank is stated to have approached the appellant-

company for updating its software from Total Branch Automation

Software (TBA) mode to Core Banking Solution (CBS) mode pursuant to

the mandate of the Reserve Bank of India, as the appellant-company had

provided TBA in 18 branches and head office of the respondent-bank as

Turnkey Vendor. The appellant-company is stated to have agreed to supply

its „FinCraft‟ software being CBS compliant to the respondent-bank.

4. It is being stated that upon extensive exchange of interaction

and communication inter se the appellant-company and the respondent-

bank through e-mails and communications and the respondent-bank having

satisfied about the quality and suitability of the software to be provided by

the appellant-company to its requirements and also in terms of financial

aspects, vide its e-mail dated 13.03.2014, informed the appellant-company

that it had decided to go in for computerization of its 70 branches initially

and for other branches at a later stage. Respondent-Bank is also stated to

have suggested the mode of payment in respect thereof in three stages.

5. The respondent-bank is further stated to have requested to the

appellant-company to accept its said offer taking into consideration that the

respondent-bank had been working with the appellant-company for the last

about seven years. The respondent-bank is stated to have vide its letter No.

ADMN/467 dated 18.04.2014 informed the appellant-company that it has

approved the appellant-company as CBS Software vendor of the

respondent-bank. Subsequently, the respondent-bank in terms of letter

dated 17.05.2014 is stated to have requested the appellant-bank to provide

training to its officers for explaining the Master Data Entry Process and

that the said training was provided by the appellant-company to the

officers of the respondent-bank on 20.05.2014 and the same was conveyed

to the respondent-bank vide e-mail dated 21.05.2014.

6. It is next stated that the respondent-bank thereafter vide letter

No. ADMN/4447 dated 30.06.2014 placed an order in favour of the

appellant-company for obtaining Corporate License of Latest Fin Craft

"the Net Browser Based Centralized Single Data Bass True Core Banking

Software-application" for 70 branches for a sum of Rs. 82, 95,000/- The

said purchase order dated 30.06.2014 is stated to have provided that the

same shall be executed as per the terms and conditions of MOU to be

mutually signed between the respondent-bank and the appellant-company.

The order of Software for 70 branches of the respondent-bank is thus,

stated to have been confirmed by the respondent-bank. A final draft of

MOU/ Core Banking Managed Services Agreement is also stated to have

been shared with the appellant-company based on drafts already shared

between the parties.

7. It is further stated that the appellant-company acknowledged

the receipt of final draft of MOU and started acting thereon, whereafter

vide e-mails dated 24.12.2014 & 24.03.2015, the appellant-company states

to have shared with the respondent-bank an updated MOU/agreement for

its acceptance and the respondent-bank vide its e-mail dated 26.03.2015 is

stated to have confirmed the updated functional deliverables in CBS as

shared by the appellant-company being one of the most important/essential

feature of the MOU finalized by the respondent-bank and accepted by the

appellant-company relating to the customization of the software as per the

peculiar requirements of the respondent-bank. The appellant-company is

stated to have made the software ready with customization as per the

respondent-bank‟s specification to be installed in 70 branches of the

respondent-bank.

8. It is being next stated that act of issuance of formal purchase

order by the respondent-bank in favour of the appellant-company

subsequent to negotiations between the parties itself formed a concluded,

valid and binding contract, more particularly in that the purchase order was

not subject to any further event for execution of any other document.

9. It is being further stated that after the customization of the

software, the appellant-company was ready and willing to execute the

implementations of is Fin Craft CBS Software at 70 branches of the

respondent-bank in accordance with the purchase order, however same

could not be supplied/installed on account of non-setting up of the

Hardware by the respondent-bank, which setting up of Hardware was not

responsibility of the appellant-company and was required to be arranged

by the respondent-bank through other service providers.

10. It is next stated that by the time when the contract between

the parties had already come into existence and the software to be

supplied/installed by the appellant-company had already been developed

in the beginning of 2015, the respondent-bank started having difficulties

in the installation of the Hardware upon refusal by JakaGa and despite the

respondent-bank entered into negotiations with few other service

providers, such as, Bharti Airtal Limited, M/s Tata communications etc.

No open advertisement/NIT for the purposes is stated to have been issued

or any process undertaken thereof by the respondent-bank in this regard

and, therefore, the process of execution of the contract in question is stated

to have got delayed, as such.

11. It is being stated that the appellant-company on account of

inability of the respondent-bank informed the respondent-bank vide e-mail

dated 24.12.2015 that the appellant-company is providing both Software as

well as Hardware technology to many banks in the country and that it

could provide the Hardware.

12. It is being next stated that respondent-bank instead of going

ahead with the purchase order and execution of the concluded contract

between the parties or instead of issuance of an NIT/open advertisement

for acquiring of Hardware/data centre issued fresh "Expression of Interest

(EOI) for Banking Application on ASP Model" bearing reference No.

Admn/18300-03 dated 23.02.2016. By the said EOI respondent-bank is

stated to have invited proposals for implementation of Core Banking

Solutions on ASP Model in existing 89 braches, 16 extension counters and

Head office of the respondent-bank. The fresh EOI is stated to be the

revocation of the concluded contract between the appellant-company and

respondent-bank without issuance of a notice to the appellant-company.

13. It is being stated that aggrieved of the issuance of EOI, a

legal notice dated 09.03.2016 came to be sent to the respondent-bank by

the appellant-company with a request not to give effect to the EOI, as the

same being against the concluded contract between the parties and the

terms and conditions of the MOU agreed upon between them. The said

notice is stated to have been received by the respondent-bank and replied

vide e-mail dated 14.03.2016, and though admitting the contents of the

legal notice, yet the respondent-bank is stated to have justified issuance of

fresh EOI on the ground that MOU has not been formally signed between

the parties and, therefore, contract is not binding upon it.

14. It is being stated that aggrieved of the acts of the respondent-

bank, the appellant-company filed the suit before the trial court

15. In the application for interim relief accompanying the said

suit, the trial court is stated to have initially passed an order on 15.03.2016,

restraining the respondent-bank from acting upon EOI.

16. The respondent-bank is stated to have filed its written

statements and objections in response to the suit and application for interim

relief, whereafter upon consideration, the trial court vide impugned order

dated 24.05.2016 is stated to have dismissed the application for interim

relief and vacated the interim stay granted vide order dated 15.03.2016.

17. The impugned order is being challenged inter alia on the

ground that the same is ex facie bad, contrary to the facts of the case and

law on the point inasmuch as, that the trial court failed to appreciate the

factual and legal position of the case and thus, erred while passing the

impugned order, virtually dismissing the suit of the appellant-company at

the interim stage. It is urged in the grounds that the trial court erred in

holding that the contract was not concluded or else if concluded was a

contingent one,

18. The observations and findings made and recorded in the

impugned order by the trial court are contended to be legally unsustainable

for the reasons detailed out in the memo of appeal at page 13 which are

extracted hereunder:-

            "i)    That the question is not simply whether
            damages or an           adequate remedy, but whether
            specific performance will do more perfect and
            complete justice than an award of damage.

            ii.    This   was   a    contract    where     the    basic

technology/software i.e. FinCraft(CBS compliant) though available with the appellant company, the same had to be customized according to the requirement of the respondent-bank.

iii) That the appellant company after discussing the minute details of the peculiar requirements of the respondent bank spread over four months, proceeded to develop the same on the instructions of respondent bank. Each bank has its own peculiar needs and the software is customized accordingly.

iv) once the software has been customized to the peculiar needs of the customer, it is of no use to any other bank and becomes a useless product which cannot be utilized anywhere else.

v) That the customized software as per the requirement of the customer, is not a ordinary article of commerce which can be sold by any other customer.

vi) That the quantification of the amount mentioned in the supply order was only tentative in

nature as it was only limited to 70 branches with the rest of the 35 branches to be added later on.

vii) That besides above the AMC (Annual Maintenance Contract) as per the MOU provided for payment of 20% of the licence fee i.e. contract value of the contract. The AMC was to continue for an indefinite period till the time the aforesaid technology was to remain in use."

Heard learned counsel for the parties and perused the

record.

19. Mr. R. K. Gupta, learned senior counsel for the appellant

while making his submissions in line with the contentions raised and

grounds urged in the memo of appeal prayed for setting aside of the

impugned order and resorting of the initial interim order dated 15,03,2016,

whereas, per contra Mr. Abhinav Sharma and Mr. U. K. Jalali, appearing

counsel for the respondent-bank while making their submissions defended

the validity of the impugned order and sought dismissal of the appeal inter

alia on the grounds that the order passed by the trial court has been passed

validly and legally and in tune with the law, in regard to specific

performance of a contract and the parameters envisaged by law in a suit for

specific performance.

20. According to learned counsel for the respondents, there has

been no concluded contract between the parties and thus, the suit is grossly

misconceived, disentitling the appellant-company to any relief including of

an interim one as well.

21. Before adverting to the rival contentions, law in regard to the

specific performance of contract needs to be appreciated. There is a long

line of decisions rendered by the Apex Court on the subject in this regard

and reference to the judgment of the Apex Court passed in case Kamal

Kumar vs. Premlata Joshi and others, reported in 2019 (3) SCC 704,

would be relevant and germane herein, wherein at para 7 following has

been noticed and laid down:-

"7. It is a settled principle of law that the grant of relief of specific performance is a discretionary and equitable relief. The material questions, which are required to be gone into for grant of the relief of specific performance, are:

7.1. First, whether there exists a valid and concluded contract between the parties for sale/purchase of the suit property;

7.2. Second, whether the plaintiff has been ready and willing to perform his part of contract and whether he is still ready and willing to perform his part as mentioned in the contract;

7.3. Third, whether the plaintiff has, in fact, performed his part of the contract and, if so, how and to what extent and in what manner he has performed and whether such performance was in conformity with the terms of the contract;

7.4. Fourth, whether it will be equitable to grant the relief of specific performance to the plaintiff against the defendant in relation to suit property or it will cause any kind of hardship to the defendant and, if so,

how and in what manner and the extent if such relief is eventually granted to the plaintiff; and

7.5. Lastly, whether the plaintiff is entitled for grant of any other alternative relief, namely, refund of earnest money etc. and, if so, and on what grounds."

22. Law is also no more res-integra that in a commercial contract

the course of contract of the parties, the exchange of correspondences

communications, are all important considerations for the conclusion

whether there existed a concluded contract or not. Drawing an inference or

forming an opinion in respect of an isolated documents that the contract is

not concluded may not be appropriate in the facts and circumstance of a

particular case.

23. Perusal of the record reveals that the nature of material

pressed into service by the parties, whether there exist a concluded contract

between the parties itself become a matter for trial to be decided on the

basis of the evidence that may be led. Appellant-company admittedly,

contended that there has been concluded contract inter se the parties

leaving the signing of the MOU as a mere formality of course, denied by

the respondent-bank. In such kind of a situation onus thus, lays on the

appellant-company during trial to demonstrate that the parties were ad

idem having discharged their obligations.

24. In law an interim or temporary injunction/relief is a judicial

remedy by which a person is ordered to refrain from doing or to do a

particular act or thing. The primary purpose of granting interim relief is the

preservation of property in dispute till legal rights and conflicting claims of

the parties before the court are adjudicated. The object of making an order

of interim relief is to evolve a workable formula required in a particular

situation, keeping in mind pros and cons of the matter while striking a

delicate balance between two conflicting interests. The underlying object

of grant temporary injunction is to maintain and preserve the lis/subject

matter and to prevent any change in it until the final determination of the

suit. An injunction may be in a restrictive form or a mandatory form .

25. True it is that the grant of relief in a suit for specific

performance is discretionary and a plaintiff seeking temporary injunction

in a suit for specific performance shall have to establish a strong prima

facie case, yet there can be no denial to the fact that grant of interim relief

in such a suit is not forbidden by law.

26. Perusal of the impugned order manifestly demonstrates that

the trial court while considering the application for interim relief has

indisputably proceeded to express opinions qua existence of a concluded

contract between the parties inasmuch as, qua its nature as well as

contingent, if the contract is assumed to be concluded. The said approach

of the trial court runs with conflict with the principle and proposition of

law laid down by the Apex Court in "Colgate Palmolive (India) Ltd. Vs.

Hindustan Lever Ltd., reported in 1999 (7) SCC 1, wherein at Para 24,

wherein at Para 24 following has been laid down:-

"24.We, however, think it fit to note herein below certain specific considerations in the matter of grant of interlocutory injunction, the basic being non- expression of opinion as to the merits of the matter by the court, since the issue of grant of injunction,

usually, is at the earliest possible stage so far as the time-frame is concerned."

27. Further the Apex Court in case titled as Anand Prasad

Agarwalla vs. Tarkeshwar Prasad and others, 2001 (5) SCC 568, has

observed as follows:-