Delhi Lotteries vs Rajesh Aggarwal and others

Mohd. Shamim J.

This petition under article 227 of the Constitution of India has been preferred by Delhi Lottery (hereinafter referred as the petitioner in order to

facilitate the reference) against the judgment and order dated March 9, 1995, whereby defendant-bank/respondent No. 3 (hereinafter referred to

as respondent No. 3 for the sake of convenience) was restrained from allowing the encashment of the bank guarantees (BG No. 1 of 1994, dated

January 18, 1994, and BG No. 2 of 1994, dated February 4, 1994). It was further ordered that the securities furnished against the said bank

guarantees be released.

The brief facts which led to the presentation of the present petitions are as under : that the plaintiff-respondent No. 2 (hereinafter referred to as

respondent No. 2 for the sake of brevity) filed a suit (No. 34 of 1995) for perpetual injunction on February 8, 1995, with the allegations that

respondent No. 2 is the sales manager of Hanumant Sales Corporation, Inderpuri, New Delhi. He is as such fully competent to sign and verify the

plaint for and on behalf of the firm. Defendant No. 2 in the said suit (petitioner herein) was holding the lotteries till the month of December, 1994,

when the same was finally closed. The petitioner in connection therewith used to appoint stockists in Delhi and other parts of the country. The

petitioner as per their practice used to supply lottery tickets to their stockists for selling the same in the market. Hanumant Sales Corporation was

appointed a stockist for the State of Punjab in the month of February, 1993, on the condition that the above said firm would furnish a conditional

bank guarantee. The said firm furnished two bank guarantees for a sum of Rs. 10 lakhs and Rs. 20 lakhs as per the said conditions the same were

to expire on January 18, 1993, and February 3, 1995, respectively. Except the above bank guarantees no other agreement/undertaking was

executed by the firm. In case of failure on the part of the petitioner to deposit the winning tickets no lottery tickets for the next day were to be given

to them. On account of protests and objections raised by the members of the public the Delhi Government was forced to close the lottery business

in the month of December, 1994. Respondent No. 2 till date has not been served with any notice in regard to the arrears, if any, due from the firm

since the closure of the business. In fact, nothing is due from respondent No. 2. The bank guarantees furnished by respondent No. 2 through

respondent No. 3 are conditional. Hence, the same cannot be encased by the petitioner till they show fulfillment of the said condition. Respondent

No. 2 has never been served with any notice of default and as such the petitioner cannot encash the bank guarantees in the absence of the default.

Furthermore, the period of the said guarantees has expired and the same as such cannot be invoked. After the closure of the lotteries respondent

No. 2 made all possible efforts for the return of the securities furnished against the said bank guarantees, but to no avail. All his efforts ended in

fiasco. The petitioner extended the threat on February 7, 1995, for encashment of the bank guarantees. Respondent No. 2 would suffer

irreparable loss and damage in case the petitioner is not restrained from encashing the said bank guarantees. Hence, arose the necessity for the

institution of the present suit.

Respondent No. 2 along with the suit moved an application before the learned lower court for ad interim injunction restraining the petitioner

from encashing the bank guarantees, alluded to above. Respondent No. 2 also moved an application dated March 7, 1995, u/s 151 of the CPC

for the release of the securities furnished against the said bank guarantees.

The petitioner put in contest, inter alia, on the following grounds that respondent No. 2 was not competent to file the suit. As per the averments

in the plaint Hanumant Sales Corporation was a proprietorship concern. Respondent No. 2 is only the sales manager thereof. He is neither the

proprietor nor a power of attorney holder. Respondent No. 2, Vijay Kumar, is as such not competent to bring forward the present suit as the sales

manager of the said firm. The suit is bad for non-joinder of necessary parties, i.e., Government of the National Capital Territory of Delhi and the

Union@ of India. Delhi Lottery is simply a department of the Government of the National Capital Territory of Delhi and hence proceedings, if any,

are to be initiated against the Government of the National Capital Territory of Delhi. It is wrong and false that nothing is due from respondent No.

Shri Sanjay Kumar, proprietor of Hanumant Sales Corporation, was appointed as stockist by the petitioner vide their letter dated March 7,

1994, for the sale of lottery tickets of Delhi Lotteries in the State of Punjab. He in this connection executed an agreement in September, 1994. The

terms and conditions of the said agreement have been suppressed. As per the said terms and conditions the above said firm were required to

render detailed accounts of the sale of lottery tickets of each draw and to remit the sale proceeds of the tickets to the petitioner after each draw.

The said firm have failed to clear the amount which fell due from them on account of the sale of tickets. They are liable to pay to the petitioner a

sum of Rs. 33,91,851 on account of the arrears of the sale proceeds of the lottery tickets ''Since the above firm failed to clear the said arrears

consequently the petitioner were compelled to invoke the said two bank guarantees on December 15, 1994, which were furnished by way of

security by the said firm. The said act of the petitioner is thus legal, valid and justified. The said firm, vide their letter dated January 5, 1995,

informed the petitioner that they had suffered heavy losses and were thus unable to pay the arrears on account of paucity of funds. It was further

averred that they had all fair intentions to pay the arrears and sought a year''s time to clear the same. Shri Sanjay Kumar, proprietor of the firm thus

acknowledged his liability to pay the arrears. He also submitted a representation to the ''Finance Minister of the Government of the National

Capital Territory of Delhi stating therein that he had suffered heavy losses in the lottery business. It was further admitted by him that he had to pay

the arrears to the petitioner. Thus, in view of the above said letter and the aforementioned representations respondent No. 2 can now not be

permitted to allege to the contrary and to take a different stand. The suit as well as the applications are false and frivolous and thus liable to be

dismissed.

The learned lower court after hearing arguments and considering the relevant documents issued an ad interim injunction in favor of respondent

No. 2 restraining the petitioner from encashing the bank guarantees adverted to above, furnished at the instance of respondent No. 2. He further

ordered the release of the securities furnished against the said bank guarantees, vide the impugned judgment and order dated March 9, 1995.

Aggrieved and dissatisfied with the said judgment and order the petitioner has approached this court under article 227 of the Constitution of

India for setting aside the said judgment and order dated March 9, 1995.

Learned counsel for the petitioner, Mr. Arvind Nigam, has vehemently contended that respondent No. 2 herein is none else but the sales

manager of Hanumant Sales Corporation. He neither furnished the bank guarantees nor has he got anything to do with the same. Thus the learned

lower court fell into a grave error by issuing the ad interim injunction at his instance. He is neither the proprietor of the firm nor is he a power of

attorney holder on behalf of the firm. Thus, respondent No. 2, Vijay Kumar, who is a complete stranger to the proceedings, how could he have

instituted the suit for perpetual injunction. The invocation of the bank guarantees was neither challenged by the above said firm nor by the bank.

The next limb of the argument advanced by Mr. Nigam is that it is now a well-settled principle of law by the apex court of this country that a

restraint order against the encashment of the bank guarantees can be issued in those deserving few cases where the petitioner shows that the bank

guarantee was procured by fraud and in case the injunction was not issued it would lead to irretrievable injustice. He thus wants the quashment of

the above-said order by this court under article 227 of the Constitution of India.

Mr. Madan Bhatia, senior advocate, on the other hand, while counter-veiling the objections to the impugned order has contended that the

present suit has been instituted for and on behalf of Hanumant Sales Corporation. It has been so stated vide paras. 1 and 6 of the plaint. Thus the

intention is quite clear that the suit was filed for and on behalf of the firm through their sales manager, i.e., respondent No. 2. Thus, the frame of the

suit can by no stretch of imagination be called defective. In any case the power of attorney dated September 12, 1997, executed by the proprietor

of Hanumant Sales Corporation in favor of Shri Vijay Kumar, respondent No. 2, has been placed on record which ratifies all the past acts done by

the said Vijay Kumar, for and on behalf of the firm, including the institution of the suit. Thus, according to learned counsel, there is nothing wrong

with the frame of the suit. Learned counsel has then contended that the petitioner has leveled wild and baseless allegations against the presiding

officer, vide para. 15, which are false and preposterous and which were subsequently withdrawn. Thus, the petitioner has not approached this

court with clean hands. Hence, the petitioner is not entitled to any relief, whatsoever, from this court. The next contention raised by learned counsel

for the respondent is that the impugned bank guarantees dated January 18, 1994, and February 4, 1994, are conditional bank guarantees. Thus,

the same could have been invoked only when the petitioner had shown the fulfillment of the said conditions. The said conditions incorporated in the

said bank guarantees are sine qua non for the encashment of the bank guarantees. Thus, the fulfillment of the said conditions is a condition

precedent for the encashment of the same. The petitioners in the instant case have miserably failed to show the existence of the said conditions

which can entitle them for the invocation of the said bank guarantees. The petition is false and frivolous and is thus liable to be dismissed.

It is manifest from the argument and the relevant contentions of learned counsel for the petitioner canvassed above that learned counsel Mr.

Arvind Nigam wants this court to quash the impugned order on the ground that the suit in the instant case was filed by one Vijay Kumar who is

only the sales manager of Hanumant Sales Corporation. Admittedly, according to him, he neither furnished the bank guarantee nor has he got

anything to do with the same. He is completely a stranger to the proceedings. Hence, he has got no interest in the proceedings. Consequently the

learned lower court should not have issued the ad interim injunction at his instance. Thus, the same is liable to be vacated.

Learned counsel for the respondent Mr. Madan Bhatia, senior advocate has urged to the contrary. According to him, Shri Vijay Kumar is the

sales manager. He brought forward the said suit for and on behalf of Hanumant Sales Corporation, Inderpuri, New Delhi, which is a proprietorship

concern. It has been so stated in para. 1 of the plaint. The same thing has again been repeated in para. 6 of the plaint. Hence the frame of the suit is

neither bad nor defective and this argument is not available to learned counsel for the petitioner. In any case the present case at the most can be

said to be a case of misdescription which is not fatal to the maintainability of the suit and the said defect can be corrected even at a subsequent

stage.

I find myself in agreement with learned counsel for the respondent. A perusal of paras. 1 and 6 of the plaint makes it quite clear that the suit has

been filed by the sales manager, Shri Vijay Kumar, in the instant case, for and on behalf of Hanumant Sales Corporation which is a proprietorship

concern. It is further manifest from the said para. that the sales manager is fully competent, authorised to sign and verify the pleadings and to

institute the suit for and on behalf of the firm. Thus, the intention of the respondent as this court gathers from the averments made in paras. 1 and 6

of the plaint is quite clear that the present suit was filed for and on behalf of Hanumant Sales Corporation and the same should be read as such.

Under Order VI, rules 14 and 15 of the CPC any person who is acquainted with the facts of the case and who has been duly authorised to verify

and sign the pleadings by the plaintiff can do so. Thus the sales manager who is duly authorised to sign and verify the plaint and who is acquainted

with the facts of the case could institute the present suit for and on behalf of the Hanumant Sales Corporation which is a proprietorship concern

and the petitioner thus as such should have no quarrel at the said score.

Learned counsel for the respondent in support of his contention has led me through quite a good number of authorities which lay down in

unequivocal terms that if the suit is filed by a manager of a proprietorship concern who is authorised to do, so and the intention to do so can be

gathered from the averments in the plaint, in that eventuality the frame of the suit cannot be said to be defective. The power of attorney can be

placed on record, if it has already not been done, even at a subsequent stage to ratify the acts of the manager, including the institution of the suit. It

was so held by a Division Bench of the Madras High Court in M.C.S. Rajan and Company Vs. National Nail Industries and Others, . The facts of

the said authority are in pari materia with the facts of the present case. Hence, the observations in the said case pari passu can be made applicable

to the facts of the present case without any difficulty. I am tempted here to cite a few lines from para. 4 of the said judgment (page 152) : ""But in a

case where a manager of a proprietorship concern signs the pleadings and verifies them as a person who has been duly authorised to sign the same

and as one who has been acquainted with the facts of the case, then it is reasonable to say that, if at any material point of time and particularly

when the defendants raise a specific plea that the pleading has not been properly signed or verified, he produces the requisite authority from the

sole proprietor or satisfies the court that he is fully acquainted with the facts of the case, the principles and substance of rules 14 and 15 are

satisfied. The case has to be decided on the elementary principle of ratification of an act by a principal. That the person who signed the pleadings

and verified it, is the manager of the concern is not in dispute ... Exhibit A-20 is the power of attorney produced during the trial of the case which

establishes that Padmanabhan has appointed and constituted Mr. Narayanan to file a suit against the defendants and take all such steps necessary

in the said matter.

To the same effect are the observations of a Division Bench of the Rajasthan High Court in Madhosingh v. Union of India, AIR 1955 Raj 57,

and Alexander Mountain and Co. v. Rumere Ltd. [1948] 2 All ER 482.

It is now a well-settled principle of law that a suit is not to be dismissed for technical reasons such as the plaint was not signed and verified by a

competent person because such type of objections do Dot go to the root of the matter if a party has otherwise substantiated his claim. It was

opined by their Lordships of the Supreme Court in United Bank of India v. Naresh Kumar [1997] 90 CompCas 329 ; United Bank of India Vs.

Naresh Kumar and others, (headnote) : ""Where the courts came to a conclusion that money had been taken by certain parties from bank and

certain persons had stood as guarantors and that the claim of the bank was justified it will be a travesty of justice if the bank is to be non-suited for

a technical reason such as plaint was not signed by competent person which does not go to the root of the matter and the only defect which was

alleged on behalf of the parties was one which was curable.

There is another aspect of the matter. Respondent No. 2 has placed on record a general power of attorney executed by Shri Sanjay Kumar,

proprietor, Hanumant Sales Corporation in his favor which shows that Shri Sanjay Kumar has authorised his attorney to do all acts on behalf of the

firm, Hanumant Sales Corporation. He has further ratified the acts of his aforesaid attorney which he has done including the institution of Suit No.

34 of 1995 titled Vijay Kumar v. Indian Overseas Bank.

Learned counsel for the petitioner has led me through certain authorities in support of his contention that the frame of the suit is bad, i.e., (1)

Afsaar Hussain and Another Vs. Trilokchand Premchand, ,Gandhi and Co. v. Krishna Glass Pvt. Ltd., AIR 1987 Born 348. I have very carefully

gone through the said authorities, yet I find myself unable to agree with the contention of learned counsel for the petitioner that the frame of the suit

is bad. To my mind, the said authorities are not applicable to the facts of the present case.

Learned counsel for the petitioner, Mr. Arvind Nigam, has vehemently contended that the impugned order passed by the learned lower court is

an order based on no evidence. It is perverse. By the impugned order the learned civil judge has construed amiss the law laid down by the

Hon''ble Supreme Court. In fact, the court below has tried to circumvent and ignore the law laid down by the Hon''ble Supreme Court in a catena

of authorities. According to learned counsel, an injunction to restrain the beneficiary from encashment of the bank guarantee can be issued in these

discerning few cases where fraud is alleged to have been committed in securing the bank guarantee. The other cases in which an injunction to

restrain the bank from allowing encashment of the bank guarantee can be issued are those where the petitioner shows that it is a case of

irretrievable injustice or there is special equity in his favour. Respondent No. 2 in the instant case has failed to show any of the above ingredients.

Yet for the best reasons known to the learned court the injunction was granted.

Learned counsel for respondent No. 2, Mr. Madan Bhatia, on the other hand, has submitted that the instant case is neither a case of fraud nor

a case of irretrievable injustice. The bank guarantees which were furnished in the instant case by respondent No. 2 through respondent No. 3 were

conditional bank guarantees. Hence, the bank guarantees in the instant case could not have been encased unless the beneficiary, i.e., the petitioner

herein should have fulfilled the conditions enumerated in the bank guarantees. The petitioner has miserably failed to show the existence of the said

conditions. Hence, the learned lower court was perfectly justified in granting the injunction order.

Before embarking upon a detailed discussion of law and evidence placed on record in the present case it would be just and proper to advert to

the authorities which elucidate the position of law on the controversy in between the parties. It was observed by the Hon''ble Supreme Court as

reported in AIR 1997 1644 (SC) (headnote). ""When in the course of commercial dealings an unconditional bank guarantee is given or accepted,

the beneficiary is entitled to realize such a bank guarantee in terms thereof irrespective of any pending disputes. The bank giving such a guarantee is

bound to honour it as per its terms irrespective of any dispute raised by its customer. The very purpose of giving such a bank guarantee would

otherwise be defeated. The courts should, Therefore, be slow in granting an injunction to restrain the realisation of such a bank guarantee. The

existence of any dispute between the parties to the contract is not a ground for issuing an injunction to restrain the enforcement of bank guarantees.

The courts have carved out only two exceptions. A fraud in connection with such a bank guarantee would vitiate the very foundation of such a

bank guarantee. Hence if there is such a fraud of which the beneficiary seeks to take advantage, he can be restrained from doing so. The second

exception relates to cases where allowing the encashment of an unconditional bank guarantee would result in irretrievable harm or injustice to one

of the parties concerned. Since in most cases payment of money under such a bank guarantee would adversely affect the bank and its customer at

whose instance the guarantee is given, the harm or injustice contemplated under this head must be of such an exception and irretrievable nature as

would override the terms of the guarantee and the adverse effect of such an injunction on commercial dealings in the country"". I cannot resist the

temptation of citing a few lines from the judgment of the Hon''ble Supreme Court in Hindustan Steel Works Construction Ltd. Vs. Tarapore and

Co. and another, wherein their Lordships have in clear and unequivocal words delineated the principles which should govern the courts below

while granting an injunction restraining banks from encashment of bank guarantees executed in favor of a beneficiary. Their Lordships opined

(headnote of SCC) ""A bank guarantee is an independent and distinct contract between the bank and the beneficiary and is not qualified by the

underlying transaction and the primary contract between the person at whose instance the bank guarantee is given and the beneficiary. What the

High Court has observed would be applicable only to the parties to the underlying transaction or the primary contract but can have no relevance to

the bank guarantee given by the bank, as the transaction between the bank and the beneficiary is independent and of a different nature. In case of

an unconditional bank guarantee the nature of obligation of the bank is absolute and not dependent upon any dispute or proceeding between the

party at whose instance the bank guarantee is given and the beneficiary. Commitment of banks must be honoured free from interference by the

courts and it is, only in exceptional cases, that is to say, in case of fraud or in a case where irretrievable injustice would be done if bank guarantee

is allowed to be encashed, the court should interfere. In this case fraud had not been pleaded and the relief for injunction was sought by the

respondent-contractor on the ground that special equities or the special circumstances of the case required it. The special circumstances and/or

special equities which had been pleaded in this case were that there was a serious dispute on the question as to who had committed breach of the

contract, that the contractor had a counter-claim against the appellant, that the dispute between the parties had been referred to the arbitrators and

that no amount could be said to be due and payable by the contractor to the appellant till the arbitrators declared their award. These factors are

not sufficient to make this case an exceptional case justifying interference by restraining the appellant from enforcing the bank guarantees"".

To the same effect are the observations of the Hon''ble Supreme Court in Larsen and Toubro Limited Vs. Maharashtra State Electricity Board

and others, ; The State Trading Corporation of India Ltd. Vs. Jainsons Clothing Corporation and another, ; Dwarikesh Sugar Industries Ltd. v.

Prem Heavy Engineering Works (P.) Ltd. [1997] 89 Comp Cas 619; JT [1997] 5 416.

After a careful scrutiny of the observations of the Hon''ble Supreme Court alluded to above, the following principle can be neatly and

succinctly culled :

An injunction can be granted (a) where the petitioner puts forward a case which shows that the bank guarantee was procured after practicing

fraud on the bank;

(b) where the petitioner makes out a case and shows that in case an injunction is not granted he is likely to suffer an irretrievable injustice, and

(c) where the petitioner shows a case of special equity in his favour.

The Hon''ble Supreme Court has further held in unequivocal terms that a contract. of bank guarantee is an independent and distinct contract

between the bank and the beneficiary. It has got absolutely nothing to do with the agreement/contract between the beneficiary and the person at

whose instance the bank guarantee is given.

With the above background let us now examine the facts of the case in hand. Two bank guarantees dated January 18, 1994, and February 4,

1994, were furnished by respondent No. 2 in favor of the petitioner herein. The language of the said two bank guarantees is identical. Hence if this

court refers to the words and the language used in any of the said guarantees that would serve the purpose of the court in arriving at a correct

conclusion. The bank guarantee dated January 18, 1994, is in the following words :

And whereas the stockist is required to furnish a bank guarantee to secure payment of all money which shall from time to time be due from the

stockist to the Delhi lotteries within the limits of Rs. 10 lakhs (rupees ten lakhs only) at any one time. Now, Therefore, Indian Overseas Bank,

Narayana, J.J. Colony, New Delhi-110 012, hereby guarantee the payment of all sums of money by the stockist to the Delhi Lotteries as and

when such sums become payable on default by the said stockist. The aforesaid bank shall on demand pay the said sum to the Delhi Lotteries up to

Rs. 10 lakhs (rupees ten lakhs only) . . .

The other bank guarantee dated February 4, 1994, is also exactly in the same words with the difference that it secures the payment to the extent of

Rs. 20 lakhs.

Learned counsel for the respondent Mr. Bhatia, on the basis of the above bank guarantees has very strenuously argued that the same are

conditional in nature. Consequently, the observations of the Hon''ble Supreme Court in the judgments adverted to above would not be applicable

in the instant case. The learned lower court while passing the impugned injunction order was not oblivious of the said authorities and in fact he has

referred to some of them in the impugned judgment and order. Learned counsel contends, while arguing, that the impugned bank guarantees are

conditional ones and unless and until the beneficiary, i.e., the petitioner herein showed the fulfillment of the said conditions they could not have been

allowed to encash the same. The bank guarantees in question are hedged around with the following conditions : (a) demand from the side of the

beneficiary, i.e., the petitioner on the respondent for the amount due; (b) failure of respondent No. 2 to meet the said demand; and (c) to show that

such and such amount is due from respondent No. 2 to the petitioner. The petitioners in the instant case have failed to fulfill the said conditions.

Hence the restraint order was issued in favor of the respondent No. 2 by the learned lower court. Thus the petitioners must drink as they have

brewed. They can blame none but themselves for the impasse which they find themselves in.

Learned counsel in support of his argument has led me through the observations of a Division Bench of this court as reported in Harparshad and

Co. Ltd. Vs. Sudarshan Steel Mills, Punjab National Bank, . In the instant case, the intention of the parties according to the language of the bank

guarantee was that the absolute liability should arise only after the terms of the bank guarantee are fulfilled .The duty of the beneficiary in making

the demand on the bank is like the duty of the plaintiff to disclose the cause of action in the plaint just as a plaint is liable to be rejected for non-

disclosure of the cause of action, a demand by the beneficiary of the bank guarantee is liable to be rejected by the bank. Learned counsel has then

led me through the observations of a single judge of this court as reported in V.K. Constructions Works Ltd. Vs. The Bank of Rajasthen Ltd. and

Another, . ""The bank guarantee in question does not admit of encashment on the basis of a mere averment of default. The extent of default has to

be averred and to that extent it is uncashable nothing more, nothing less. The court will intervene to prevent any action on the part of the beneficiary

which may be contrary to the terms of the bank guarantee. Strict adherence to the terms of the bank guarantee has to be ensured"".

Learned counsel has then relied upon the observations of a single judge of this court as reported in Nangia Construction India (P) Ltd. Vs.

National Buildings Construction Corporation Ltd. and Others, wherein the learned judge was of the view that a bank guarantee is not an

independent contract.

The next judgment which was placed reliance upon is Puri International (P) Ltd. Vs. National Building Construction Co. Ltd., where the

learned single judge opined (vide para. 10) : ""Accordingly, I hold that since the bank guarantees in question have not been invoked in accordance

with the terms of the bank guarantees, Therefore, the bank guarantees cannot be permitted to be encashed.

Learned counsel on the basis of the above authorities has urged that since the bank guarantees were conditional and the same were not

invoked as per their terms hence the learned lower court was justified in passing the restraint order which he did.

I am sorry I am unable to agree with the contention of learned counsel. A close scrutiny of the said bank guarantees reveals that the said bank

guarantees are unconditional. The only condition attached to the encashment of the bank guarantees is simply this much that the amounts should

have fallen due from respondent No. 2 to the petitioner. I fail to understand as to wherefrom the learned lower court or for that matter even

learned counsel for the respondent read that there should have been a demand by the beneficiary (the petitioner) from respondent No. 2 who

furnished the bank guarantees ? All that I could gather from the language used in the bank guarantees is that the only condition precedent for the

invocation of the bank guarantees is that the amount should have fallen due. The word ""demand"" has been used therein in connection with the bank

that the bank on demand by the beneficiary would pay the said amount to the Delhi lottery. Thus, the only question which comes to the tip of the

tongue is as to whether the amounts have fallen due to the petitioner from respondent No. 2 ?

Learned counsel for the petitioner in this connection has led me through certain documents which are in unmistaken able terms a pointer to the

fact that respondent No. 2 has fallen in arrears. There is an undated letter (annexure P-3) placed on the record which was@ addressed by

respondent No. 2 to the Finance Minister, National Capital Territory of Delhi wherein respondent No. 2 Shri Sanjay Kumar has prayed that he be

granted one year''s time to pay the arrears to the petitioner and till then the bank guarantees should not be encashed. In the second letter dated

January 5, 1994 (annexure P-4), addressed by Sanjay Kumar, respondent No. 2, to the Director, Delhi Lotteries, Delhi Administration, a similar

request was made that at least 12 months time be granted to clear the arrears as he was facing difficulty on account of paucity of funds in paying

the arrears and he has all the intentions to pay the same. It is a well-settled principle of law that admissions are conclusive proof of the facts stated

therein unless they are satisfactorily explained. There cannot be a better prima facie evidence of the fact that certain amounts had fallen due to the

petitioner from the respondents.

The petitioners have placed on record a copy of the written statement wherein it has been clearly stated that a sum of Rs. 33,95,851 has fallen

due to the petitioner from the respondents on account of arrears. There is no refutation of the said averment inasmuch as respondent No. 2 did not

file any replication to the said written statement. Thus there is no gain saying the fact that the above said amount has fallen due to the petitioners

from the respondents which impelled and compelled the petitioners to invoke the bank guarantees vide their letter dated December 15, 1994,

addressed to the Indian Overseas Bank. Thus learned counsel for the respondent should not have any quarrel on the said score.

Learned counsel for the respondent Mr. Bhatia has led me through a letter dated January 4, 1995, addressed by the petitioner to the Manager,

Indian Overseas Bank where the bank was requested not to encash and release the bank guarantees issued by the bank in favor of the Delhi

Lotteries to any of the stockists without obtaining specific instructions from the said office. Learned counsel on the basis of the said letter has

contended that the petitioners themselves issued instructions to the bank, i.e., respondent No. 3 not to encash the bank guarantees. Thus if the

court issued a restraint order against the petitioner then they should blame none but themselves. The contention of learned counsel may be an

ingenious one but can be brushed aside within an anon without any difficulty. The letter dated January 4, 1995, is of a general nature and the same

should be interpreted in the said way. It has got absolutely nothing to do with the case in hand inasmuch, as the bank guarantees in the instant case

have already been invoked vide letter dated December 15, 1994, i.e., prior to the present letter. I have already observed above that a specific

amount, i.e., Rs. 33,95,851 was found due vide para. 6 of the preliminary objections of the written statement to which there is no refutation.

Furthermore, a clarification of the said letter was issued vide letter dated February 9, 1995, addressed to the bank. It was specifically stated

therein ""what was advised in our letter dated January 4, 1995, was that irrespective of the date of maturity the lien of Delhi Lotteries on all the

FDRs/bank guarantees may be retained and that the same may not be released to any of the stockists without specific instructions"".

There is another aspect of the matter. Some of the authorities cited by learned counsel for respondent No. 2 are of no avail. The learned single

judge of this court in the judgment as reported in V.K. Constructions Works Ltd. Vs. The Bank of Rajasthen Ltd. and Another, placed reliance on

a judgment of this court (vide para. 10), i.e., Nangia Construction India (P.) Ltd. v. National Buildings Construction Corporation Ltd. [19921 73

Comp Case 701 (Delhi) which has based on a judgment as Jainsons Clothing Corporation Vs. The State Trading Corporation of India Ltd. and

Another, . The said judgment was overruled by the Supreme Court, vide judgment as reported in The State Trading Corporation of India Ltd. Vs.

Jainsons Clothing Corporation and another, . Thus, the above authorities cannot be said to be good law and do not come to the rescue of the

respondents.

Furthermore, the judgment reported in Harparshad and Co. Ltd. Vs. Sudarshan Steel Mills, Punjab National Bank, , whereby the injunction

was granted restraining the beneficiary from encashment of the bank guarantee was modified by a Division Bench of this court as reported in

Harprashad and Co. Ltd. Vs. Sudarshan Steel Rolling Mills and Others, . Thus, the said judgment is not of any assistance to respondent No. 2.

There is yet another side of the picture. It is manifest from the two letters adverted to above, i.e., annexure P-3 from the proprietor of

respondent No. 2 to the Finance Minister, National Capital Territory of Delhi, which is an undated letter and the letter dated January 5, 1994,

from the proprietor of respondent No. 2 to the Director, Delhi Lotteries, Delhi, wherein he has admitted in unequivocal terms that he has fallen in

arrears and he requested through the same to grant him a year''s time to clear the said arrears and till then he prayed that there should not be

encashment of the bank guarantees. Despite the said admission on his part respondent No. 2 has got the audacity and the courage which he took

in both of his hands and pleaded with impunity that nothing was due from him to the petitioner (vide paras 12 and 16 of the plaint). Thus,

respondent No. 2 did not approach the court with clean hands. Hence, he was not entitled to the discretionary relief of injunction. It is a well

recognised principle of civil jurisprudence that those who do not approach the courts with clean hands are not entitled to the discretionary relief

such as an injunction. I am supported in my above view by the observations of a Full Bench of this court as reported in Digambar Prasad v. S. L.

Dhani [1969] Delhi 1016 etc., . . ""The court would be justified in declining to exercise such a discretion in the petitioner''s favor where he does not

come to the court with clean hands or his conduct otherwise is such that it would be inequitable and unjust to grant him the relief . . ."" Hence, the

lower court was not justified in granting an injunction on this score also.

In view of my above discussion, I am of the view that the impugned order passed by the learned lower court is based on no prima facie

evidence. It is against the law laid down by the Hon''ble Supreme Court in a catena of authorities referred to above and is thus perverse and

arbitrary.

Learned counsel for the respondent has then contended with great zeal and fervor that the present petition under article 227 of the Constitution

of India is not maintainable inasmuch as the impugned order passed under Order 39, rules 1 and 2 of the CPC is an appealable order under Order

43, rule 1(r). Hence, the petitioner instead of approaching this court under article 227 of the Constitution of India should have preferred an appeal.

It is true that an order passed under Order 39, rules 1 and 2 of the CPC is an appealable order under Order 43, rule 1(r). However, a close

scrutiny of the impugned order reveals that it is not a single order. It is a composite order. The learned lower court while passing the impugned

order not only restrained the bank, i.e., respondent No. 3, from allowing encashment of the bank guarantees but also passed an order for the

return of the securities to respondent No. 2. This was highly unjust and unbecoming on the part of the learned lower court inasmuch as there is no

such prayer in the plaint. Respondent No. 2 never sought that relief through the present suit, yet the said relief was granted on the basis of an

application u/s 151 of the Civil Procedure Code. Admittedly, an order u/s 151 of the CPC is not an appealable order (vide Keshardeo Chamria

Vs. Radha Kissen Chamria and Others, , on which misrepresentation by his client had taken place.

Regarding the correction of the mistakes alleged to have been committed by the subordinate courts, whether legal or factual, learned counsel in

support of his argument has led me through a number of authorities. He has in this connection referred to Mohd. Yunus Vs. Mohd. Mustaqim and

Others, . It is in the following words : ""The supervisory jurisdiction conferred on the High Courts under article 227 of the Constitution is limited ''to

seeing that an inferior court or Tribunal functions within the limits of its authority'', and not to correct an error apparent on the face of the record,

much less an error of law"". To the same effect are the observations of the Hon''ble Supreme Court as reported in Nagendra Nath Bora and

Another Vs. The Commissioner of Hills Division and Appeals, Assam and Others, ; Shaik Mohammed Umar Saheb Vs. Kaleskar Hasham

Karimsab and Others, ; Waryam Singh and Another Vs. Amarnath and Another, ; AIR 1975 1297 (SC) and Ebrahim Aboobakar and Another

Vs. Custodian General of Evacuee Property, .

Learned counsel for the petitioner, Mr. Arvind Nigam, on the other hand, has contended that it is not only when a subordinate court oversteps

its jurisdiction and passes an order which it is not competent to pass but the High Court also would intercede in all those cases where there is an

abuse of the process of the court, when, the impugned order is based on no evidence and when the order in question is arbitrary and perverse.

Learned counsel in this connection has drawn inspiration from quite a good number of authorities cited before this court in order to substantiate his

contention. He has placed reliance on the observations of the Hon''ble Supreme Court in Trimbak Gangadhar Telang and Another Vs.

Ramchandra Ganesh Bhide and Others, ""It is also well established that it is only when an order of a Tribunal is vocative of the fundamental basic

principles of justice and fair play or where a patent or flagrant error in procedure or law has crept in or where the order passed results in manifest

injustice, that a court can justifiably intervene under article 227 of the Constitution. In the instant case, we have not been able to find any such flaw.

The same view was again reiterated by their Lordships of the Supreme Court in Chandavarkar Sita Ratna Rao Vs. Ashalata S. Guram, ""It is well-

settled that the High Court can set aside or ignore the findings of fact of an appropriate court if there was no evidence to justify such a conclusion

and if no reasonable person could possibly have come to the conclusion to which the courts below have come or in other words a finding which

was perverse in law. This principle is well settled. In D.N. Banerji Vs. P.R. Mukherjee and Others, , it was laid down by this court that unless

there was any grave miscarriage of justice or flagrant violation of law calling for intervention it was not for the High Court under articles 226 and

227 of the Constitution to interfere . . ."" To the same effect are the observations of the Hon''ble Supreme Court in Mani Nariman Daruwala and

Mani Nariman Daruwala alias Bharucha (Deceased) through Lrs. and Others Vs. Phiroz N. Bhatena and Others, ; Laxmikant Revichand Bhojwani

v. Pratapsingh Mohansingh Pardeshi JT[1995] 7 400, State of U.P. Vs. District Judge, Unnao and Others, and Waryam Singh and Another Vs.

Amarnath and Another, . According to the facts of the said authority, a petition under article 227 was entertained and the judicial Commissioner

was held justified in quashing the order which was held to be arbitrary.

On a conspectus of the authorities adverted to above it can be safely concluded :

(i) that the High Court under article 227 of the Constitution of India owes a duty to intervene in a case where a subordinate court has over-stepped

its jurisdiction;

(ii) When the impugned order has been passed in flagrant disregard of the principle of law well established; and

(iii) It will also intercede when the impugned order is based on no evidence and no reasonable and prudent man would have arrived at the

conclusion which it has arrived at, on the basis of material before it;

(iv) when an order is perverse, arbitrary and mala fide.

It is manifest from the observations of this court, while dealing with the impugned order that this court came to the conclusion that the impugned

order was passed in flagrant disregard to the law laid down by the Hon''ble Supreme Court. Relief with regard to the release of the securities was

granted even when no such relief was claimed in the suit itself. Thus, this court would be justified, nay, it is the duty of this court to intervene in the

present case in order to do justice to the petitioner, inasmuch as manifest injustice has been done by granting the injunction in the instant case since

prima facie the respondent owes a huge amount to the tune of Rs. 33,91,851 to the petitioner and is not ready to pay the same. In fact he has

denied his liability through counter-affidavit filed in response to the present petition by saying that nothing is payable to the petitioner from him.

Thus, in case this court does not interfere and set aside the order it would be tantamount to allowing a party to reap the fruits of his illegal acts.

It has been next urged for and on behalf of respondent No. 2 that very grave and serious type of allegations have been leveled in the instant

case against the learned lower court, vide para. 15 of the petition under disposal inasmuch as according to the said paras it was alleged that the

judgment was not signed when it was pronounced. Such type of allegation tantamounts to scandalising the entire subordinate judiciary and would

demoralise them. Learned counsel in this connection has led me through the affidavit of M.P. 8. Kasana, advocate, dated October 30, 1995,

wherein it is stated that the judgment was signed when it was pronounced. In view of the said scandalous allegation against the learned lower court,

the petitioners are not entitled to any relief. According to learned counsel the present petition is liable to be flung to the winds on this short ground

alone without disposing of the same on the merits.

Learned counsel in order to substantiate his argument has led me through a number of decisions rendered by the Hon''ble Supreme Court and

the High Courts. The Hon''ble Supreme Court, while deciding the case reported in Udai Chand Vs. Shankar Lal and Others, , relied upon the

observations of the Hon''ble Supreme Court (as reported in Rajabhai Abdul Rehman Munshi Vs. Vasudev Dhanjibhai Mody, ; Hari Narain Vs.

Badri Das, . It was observed ""in dealing with applications for special leave, the court naturally takes statements of fact and grounds of fact

contained in the petitions at their face value and it would be unfair to betray the confidence of the court by making statements which are untrue and

misleading.

In that case, this court revoked the grant of special leave despite the fact that Mr. Setalvad, who had argued the SLP at the time of its grant,

had stated that, so far as he recollected, the special leave was not granted on the ground on which misrepresentation by his client had taken place"".

Learned counsel has then led me through Sheonandan Paswan Vs. State of Bihar and Others, . ""Before leaving this case I may refer to another

circumstance which is rather disturbing. The review petition was filed before this court after the retirement of Baharul Islam. J. Allegations of bias

were made against him apparently to get the petition admitted. But later on they were withdrawn before the court hearing the review petition

pronounced its order. But again in the course of the hearing before this Bench an attempt was made to repeat the allegation of bias against the

learned judge. But on objection being taken by the court, it was promptly withdrawn. This conduct on the part of the appellant deserves to be

deprecated."" Almost the same view has been given vent to by the Punjab and Haryana High Court in Charanji Lal and Others Vs. Financial

Commissioner Haryana, Chandigarh and Others, .

Learned counsel for the petitioner has urged to the contrary while countervailing the above argument. According to learned counsel the only

allegation against the presiding officer as contained in para. 15 of the petition is that when the impugned order was pronounced the same was not

signed. Neither any motive nor any bias or mala fides was imputed to the learned lower court. It is just possible that the said allegation was leveled

under a bona fide impression that till then the judgment was not signed. In any case the said allegation is innocuous and does not call for any action.

Furthermore, the said allegation was even too withdrawn and an apology was tendered (vide para. 7 of the affidavit filed by the petitioner, sworn

by P. S. Bhatnagar).

It is abundantly clear from the above that the only allegation leveled against the presiding judge was that when the judgment was pronounced

the same was not signed. There is nothing on record to show as to under what circumstances the said allegation was leveled. It is just possible that

learned counsel who was representing the petitioner was under the impression that till then the judgment was not signed. In any case, para. 15 of

the petition was drafted on the instructions which the petitioner received from their counsel, Mr. Pradeep Nandrajog. The same has now been

withdrawn and an apology tendered. In the above circumstances no action is called for against the petitioner. In any case, the dismissal of the

petition on the said score would be a punishment out of all proportions. The authorities which learned counsel for respondent No. 2 has cited in

support of his contention relate to those cases where the allegations of bias, mala fides were leveled and the motives were imputed to, the judges.

Hence, they are not applicable to the facts and circumstances of the present case.

It has next been urged for and on behalf of respondent No. 2 that proceedings under contempt of court be initiated against the petitioner. In

view of my observations above this argument of learned counsel for respondent No. 2 is also not tenable and does not hold any water.

The next argument advanced by the counsel for the respondent is that an action be taken against the petitioner under sections 191, 192 and

193 of the Indian Penal Code for giving a false affidavit. Learned counsel has in this connection referred to the affidavit of P. S. Bhatnagar,

Additional Secretary to the Government of India (vide para. 6) where he has stated that in the earlier affidavit in support of the petition the

verification was on the basis of the personal knowledge of the deponent received from the information received from the counsel who was

representing the petitioner in the case. Hence, according to learned counsel, the earlier affidavit filed in support of the petition is not correct and is

tantamount to false evidence. Hence, learned counsel urges that action be taken under the aforementioned sections of the Indian Penal Code

against the petitioner.

Learned counsel for the petitioner has urged to the contrary.

The contention of learned counsel for respondent No. 2 is devoid of any force. A close scrutiny of sections 191, 192 and 193 shows that they

deal with false evidence. The question in the instant case, which falls for determination, in view of the above, is as to whether the affidavits placed

on the file of this court are tantamount to evidence u/s 3 of the Evidence Act ? My answer to the above question is an emphatic no. An affidavit

can be termed to be an evidence within the ambit of section 3 of the Evidence Act only in those cases when the same is filed at the instance and

under the direction of the court. Admittedly, the affidavit alluded to above are not such affidavits. They were filed by the petitioner suo motu and

not under any direction from this court. This view was given vent to in Sudha Devi Vs. M.P. Narayanan and Others, , (headnote 3) : ""affidavits are

not included in the definition of ''evidence'' in section 3 of the Evidence Act and can be used as evidence only if for sufficient reasons the court

passes an order under Order 19, rules 1 and 2 of the Code of Civil Procedure.

In view of the above, the petitioners are entitled to succeed. The petition is allowed with costs. The impugned order dated March 9, 1995,

passed by the learned civil judge, Delhi, on the application under Order 39, rules 1 and 2 of the CPC in Suit No. 34 of 1995 is hereby quashed.

The application for grant of injunction is hereby dismissed.