Nirmal Lotteries vs D.D.A and Another

Reva Khetrapal, J.—This is a suit for recovery of Rs. 21,41,145/-(Rupees Twenty One Lakh Forty One Thousand One Hundred and Forty Five only) from the defendant with pendente lite and future interest at 24% per annum from the date of the institution of the suit till the date of realisation.

The facts as set out in the plaint are that the plaintiff is a partnership firm duly registered under the Indian Partnership Act, 1932. The defendant No. 1 is the Delhi Development Authority through the Director, State Lotteries. The defendant No. 2 is the Delhi Administration through its Finance Secretary. At the time of the institution of the suit, the defendant No. 1 was engaged in the business and trade of running lotteries and had invited tenders for the appointment of main stockist for running various State lotteries run by the defendant No. 1 on the terms and conditions set out in the invitation to tender. The plaintiff submitted a tender dated 19.12.1990 for running a lottery in the name of Bhagyanidhi Weekly Lottery, of which the draw was to be conducted every Wednesday. As per Clause 3 of the terms and conditions of tender, 52 weekly draws and 2 bumper draws in a year were to be held with the time gap between the two draws to be not less than seven days for weekly draws and three months for bumper draws respectively. As per Clause 9 of the tender, the plaintiff was required to furnish to the defendant a bank guarantee in the sum of Rs. 50,00,000/-(Rupees Fifty Lakh only) for the due performance of all its obligations. Clause 14 related to the pricing of the tickets while Clause 16 contained the terms and conditions, the fulfillment of which was to be made on acceptance of the tender.

The defendant accepted the tender of the plaintiff vide its letter No. D.Lott./Main Stockist/Sunday-Wednesday Lottery/90-91/2524 dated 26th December, 1990. In terms of the acceptance letter, the defendant called upon the plaintiff to deposit with the defendant the following amounts:

a) Amount of First Prize Rs. 3,00,000/ b) Royalty Rs. 3,87,900/ c) Printing charges Rs. 1,53,000/ d) Publicity Rs. 90,000/ e) Administration & Misc. charges Rs. 18,900/ --------------- Total Rs. 9,48,900/

The plaintiff deposited the said amount with the defendant and thus started functioning as the main stockist of the defendant.

As per Clause 9 of the tender, the plaintiff was required to furnish to the defendant a bank guarantee in the sum of Rs. 50,00,000/-(Rupees Fifty Lakh only), which bank guarantee was obtained by the plaintiff from the Canara Bank, Vithalvadi Branch, Bombay and submitted to the defendant.

The plaintiff''s case is that as per Clause 16(vii) of the tender, an option was given to the parties to terminate the contract by giving four months notice of termination and the plaintiff by letter dated 17th May, 1991 gave to the defendant four months notice of termination of the contract . The plaintiff''s further case is that the said notice was accepted by the defendantDDA vide its letter No. D.Lott/Misc.MS/Royalty/91/8115 dated 10th September, 1991 (Exhibit PW1/D-2). By the said letter, the defendant informed the plaintiff that the defendant would issue a separate demand letter in due course in respect of the amount which was payable by the plaintiff under the terms and conditions of the contract and also intimated the plaintiff that it had been decided to run the lottery in question departmentally from the 35th draw falling on 18.09.1991. In response to the letter dated 10th September, 1991, the plaintiff sent a reply dated 16.09.1991 stating therein that the defendant should inform the amount due to the plaintiff and that the plaintiff would pay the amount within 48 hours.

The plaintiff alleges that the defendant dishonestly instead of making any demand on the plaintiff invoked the bank guarantee for the amount of Rs. 53,74,667/-(Rupees Fifty Three Lakh Seventy Four Thousand Six Hundred and Sixty Seven only) and after invoking the same, the defendant sent a letter dated 20th September, 1991 to the plaintiff raising a demand of Rs. 53,74,667/( Rupees Fifty Three Lakh Seventy Four Thousand Six Hundred and Sixty Seven only) [Exhibit PW1/D-3]. The demand as contained in the said letter consisted of six items as enumerated hereunder:

i) Difference on royalty upto 34th Draw Rs. 16,62,668/ ii) Interest on difference of royalty Rs. 1,06,183/ iii) Amount of dishonoured cheques Rs. 29,75,900/ iv) Interest on amount of dishonoured cheques Rs. 95,852/ v) 10% penalty on royalty of Rs. 1,78,202/ from 35th to 52nd draw Rs. 3,20,764/ vi) Cost of 54,000/- tickets of Baishakhi Bumper Rs. 2,13,300/ ----------------- Total Rs. 53,74,667/

It is further the case of the plaintiff that as regards item (i), there was no question of any difference in royalty upto the 34th draw, inasmuch as royalty was fixed at Rs. 1,29,300/-(Rupees One Lakh Twenty Nine Thousand and Three Hundred only) per week as was made clear by the defendant''s letter of acceptance of the tender dated 26th December, 1990 (Exhibit DW2/D-12) and the said royalty was paid and in any event, this amount was included in the dishonoured cheques of Rs. 29,75,900/-(Rupees Twenty Nine Lakh Seventy Five Thousand and Nine Hundred only) referred to in item No. (iii) reproduced hereinabove. According to the plaintiff, since no difference of royalty was payable upto the 34th draw, there was no question of making any payment of interest in respect of item No. (i) as claimed in item No. (ii) above. As regards the amount claimed in item No. (iii) above, i.e., the amount of dishonoured cheques, the plaintiff admits that this amount is payable by the plaintiff (para 20 of the plaint). As regards interest on the amount of the dishonoured cheques as claimed in item No. (iv) above, the plaintiff asserts that there was no agreement for payment of any interest and further the defendant has not charged any interest from other stockists in respect of dishonoured cheques. As regards item No. (v), it is stated that the total penalty amount payable is Rs. 4,87,030/-(Rupees Four Lakh Eighty Seven Thousand and Thirty only) [as against Rs. 3,20,764/-(Rupees Three Lakh Twenty Thousand Seven Hundred and Sixty Four only) claimed by the defendants] and the said amount is admitted as payable by the plaintiff. As regards item No. (vi), it is stated that the plaintiff never conducted Baishakhi bumper, which was conducted by another stockist and not by the plaintiff. Therefore, no amount of Rs. 2,13,300/-(Rupees Two Lakh Thirteen Thousand and Three Hundred only) is payable by the plaintiff on this account. Thus, the total amount payable by the plaintiff was Rs. 34,62,930/-(i.e. Rs. 29,75,900/-plus Rs. 4,87,030/-) and the defendant having already encashed the bank guarantee and received a payment of Rs. 53,74,667/-(Rupees Fifty Three Lakh Seventy Four Thousand Six Hundred and Sixty Seven only) against the said amount, had illegally enriched itself to the tune of Rs. 19,11,737/-(Rupees Nineteen Lakh Eleven Thousand Seven Hundred and Thirty Seven only) and this amount the defendant is liable to pay to the plaintiff with interest for illegal detention of money at the rate of 24% per annum. The plaintiff served a legal notice dated 14.01.1992 on the defendant, which was duly served, for payment of the said amount, but the defendant has failed to pay the amount,which is now claimed in the suit with pendente lite and future interest at 24% per annum.

It may be mentioned at this juncture that the suit though was originally filed against the Delhi Development Authority, on the plaintiff''s subsequently moving an application under Order I Rule 10 CPC, the Delhi Administration was impleaded as defendant No. 2 by order of this Court dated 31st July, 2006.

Written statement was filed by the defendant No. 2, wherein, at the outset, it was submitted that the plaint was liable to be rejected as the plaintiff had intentionally and deliberately concealed the facts with regard to his offer dated 21st December, 1990, whereby the plaintiff had itself offered the minimum annual turnover of Rs. 21.50 crores (Rupees Twenty One Crore Fifty Lakh only). The tender of the plaintiff was accepted by the Delhi Lotteries vide letter dated 26.12.1990, only on the basis of the said minimum annual turnover offered by the plaintiff. Thus, in case the amount due from the plaintiff to the defendant No. 2 is calculated on the basis of the annual turnover of Rs. 21.50 crores (Rupees Twenty One Crore Fifty Lakh only), no amount would be found due to the plaintiff against the defendant No. 2. The suit filed by the plaintiff, in the circumstances, was misconceived.

Next, it was submitted by the defendant No. 2 Delhi Administration that the plaintiff had earlier filed a suit, being Suit No. 2858/1991 (Exhibit DW2/D8) against the Delhi Development Authority seeking an injunction restraining the DDA (the defendant No. 1) from encashing the bank guarantee. The said suit was contested by the DDA, which filed a detailed written statement (Exhibit DW2/D-9) whereby the plaintiff was apprised of the amount of Rs. 53,74,667/-(Rupees Fifty Three Lakh Seventy Four Thousand Six Hundred and Sixty Seven only) standing due against the plaintiff. The details of this amount of Rs. 53,74,667/-(Rupees Fifty Three Lakh Seventy Four Thousand Six Hundred and Sixty Seven only) were also mentioned in the defence. However, as no injunction was granted by this Court, the bank guarantee was encashed and on encashment thereof, the suit was withdrawn by the plaintiff. The present suit, according to the defendant, is an abuse of the process of the Court.

On merits, the defendants'' case is that the Delhi Lotteries had floated a scheme for the sale of tickets under the name of Bhagyanidhi Weekly Lottery to be conducted every Wednesday. This scheme was initially for the sale of a minimum of 15 lakh tickets of Rs. 2/- each per week for one year of 52 weekly draws. In case the weekly sale of tickets fell short of the target of 15 lakh tickets, then the facility of two bumper draws so as to make up the deficiency in the sale of 15 lakh tickets per week was also provided under this scheme. The scheme sponsored by the defendant was, in any case, for 52 weekly draws only. This scheme was subject to the various terms and conditions as contained in the document Exhibit PW1/D-1. The sale of 15 lakh tickets per week was the minimum, but as per Clause 9 thereof, it was open to the main stockist to get the number of tickets increased at any time during the year. The plaintiff had submitted an incomplete tender dated 19.12.1990 (Exhibit D-1) for running the aforesaid Bhagyanidhi Weekly Lottery as the plaintiff had not filled up Column Nos. 10 and 12 of the form, which related to the Minimum Annual Turnover Offered and the Minimum Assured Profit on Turnover. In the circumstances, the plaintiff was required to offer the minimum annual turnover and also the minimum assured profit on such turnover, whereupon, the plaintiff vide his letter dated 21.12.1990 (Exhibit D2) addressed to the defendant offered the same. The said letter, being apposite, is reproduced hereunder:

Sub: Tenders for Wednesday Lottery.

Sir,

With reference to the negotiations conducted with the members of the Committee on 21.12.90 at 2.00 p.m. in the chamber of Director (Lott.) I offer the minimum annual turn over of Rs. 21.5 crore @ 4.31% with guaranteed profit of Rs. 9266500/- per annum.

This offer is final.

The above offer submitted by the plaintiff, being the highest among the tenderors, was accepted by the defendant vide their letter of acceptance dated 26.12.1990, Exhibit DW2/D-12. In the said acceptance letter, it was categorically stated that the Director, Delhi Lotteries had been pleased to accept the tender dated 19.12.1990 on the following terms and conditions:

1) Minimum annual turnover : 21.5 crores 2) Rate of profit offered : 4.31% 3) Assured profit on turnover : Rs. 92,66,500/per annum

In the penultimate paragraph of the aforesaid letter, it was further stated as follows:

Your letter dated 21.12.90 will form the part of the agreement.

In the above circumstances, the defendant claims that the plaintiff was obliged to pay a sum of Rs. 1,78,202/-(Rupees One Lakh Seventy Eight Thousand Two Hundred and Two only) per week by way of royalty amount on the minimum annual turnover of Rs. 21.50 crores (Rupees Twenty One Crore Fifty Lakh only), calculated at the rate of 4.31%, and that accordingly the amount of Rs. 9,48,900/-(Rupees Nine Lakh Forty Eight Thousand and Nine Hundred only) was demanded by the defendant in its letter dated 26.12.1990 (which was only provisional), stating that in case the plaintiff could not increase the sale of tickets per week proportionately so as to make up the proposed annual turnover of Rs. 21.50 crores (Rupees Twenty One Crore Fifty Lakh only), the defendant would be left with no option, but to raise a demand on the difference of royalty amount worked out on the basis of minimum annual turnover of Rs. 21.50 crores (Rupees Twenty One Crore Fifty Lakh only) at the rate of 4.31% assured by the plaintiff vide their letter dated 21.12.1990. The defendant submits that the plaintiff therefore sent a notice dated 17th May, 1991 to the defendant, whereby the plaintiff requested the defendant to reduce the minimum annual turnover of Rs. 21.50 crores (Rupees Twenty One Crore Fifty Lakh only), as offered by the plaintiff firm vide letter dated 21.12.1990, to Rs. 15.60 crores (Rupees Fifteen Crore Sixty Lakh only). It was further informed by the plaintiff firm vide letter dated 17.05.1991 (Exhibit D-3) that in case the defendant is unable to reduce the annual turnover as required from Rs. 21.50 crores (Rupees Twenty One Crore Fifty Lakh only) to Rs. 15.60 crores (Rupees Fifteen Crore Sixty Lakh only), then the letter dated 17th May, 1991 may be treated as four months notice to discontinue with the running of the said weekly lottery. The aforesaid request of the plaintiff was considered by the defendant and was found not acceptable by the defendant. By their letter dated 27th May, 1991 (Exhibit DW2/D-4), after referring to the plaintiff''s letter dated 21st December, 1990 under which the tender dated 19.12.1990 for appointment of the plaintiff as the main stockist was accepted, the defendant No. 1 called upon the plaintiff to deposit the amount of proportionate royalty of Rs. 1,78,202/-(Rupees One Lakh Seventy Eight Thousand Two Hundred and Two only) per weekly draw in future and to clear the difference amount of Rs. 9,78,040/-(Rupees Nine Lakh Seventy Eight Thousand and Forty only) as worked out on the said basis for the last 20 draws. The plaintiff by its letter dated 22nd August, 1991 (Exhibit D-5) proposed to bring out one bumper draw each on the occasion of Diwali and New Year Day. The defendant No. 1, on receipt of the aforesaid letter dated 22nd August, 1991 from the plaintiff, informed the plaintiff vide their letter dated 29th August, 1991 (Exhibit DW2/D-6) that the plaintiff''s proposal for bumper draw could only be considered on the following conditions:

(i) Prompt remittance/payment of Rs. 47,40,900/-(21 cheques) by the plaintiff to the defendant towards the dishonoured cheques;

(ii) Withdrawal of the notice of termination by the plaintiff; and

(iii) An undertaking by the plaintiff that they would be depositing future payment of dues of Delhi Lotteries through Bank Drafts/Pay Orders. It was further made clear in the letter dated 29th August, 1991 that a reply to the said letter be given before 30th September, 1991, failing which action as per terms and conditions of the tender would be initiated. The plaintiff firm by letter dated 30th August, 1991 (Exhibit PW1/DA) stated that they were not in a position to make prompt payment in view of the adverse market conditions, etc. and, thus, failed to accept the conditions as contained in the letter dated 29th August, 1991 from the defendant No. 1 to the plaintiff. In the circumstances, the Delhi Lotteries issued letter dated 10th September, 1991 (Exhibit PW1/D-2) to the plaintiff conveying their acceptance to the notice of termination sent by the plaintiff on 17.05.1991 and, thus, the contract of running the lottery stood terminated with effect from the date on which the 35th draw fell due, which was admittedly conducted by the defendant No. 1 departmentally. As per the defendant No. 1, therefore, the value of the tickets in respect of the remaining 18 weekly draws worked out to Rs. 11.30 crores (i.e. Rs. 21.50 crores minus Rs. 10.20 crores). This, in a nutshell, is the defence raised in the written statement.

Replication to the written statement was filed by the plaintiff, reiterating the contents of the plaint and denying the averments made in the written statement.

With the consent of the parties, the following issues were framed for consideration on 17th April, 1998:

Whether the plaintiff firm is a registered partnership firm and the plaint has been signed and verified by one of the registered partners thereof?

Whether the plaintiff committed breach of the agreement to give minimum turnover of Rs. 21.50 Crores @ 4.31% with guaranteed profit of Rs. 92,66,500/-per annum in terms of Ex.D-2? If so, to what effect? OPD

Whether the plaintiff is entitled to claim any damages for invoking bank guarantee and for withholding the amount as alleged in paragraph 22 of the plaint? If so, its amount? Interest on the said amount?

Relief? Costs?

It may be mentioned at this juncture that initially, before the impleadment of the defendant No. 2, the defendant No. 1 DDA had adduced the evidence of DW1 Mr. R.D. Sharma, Deputy Chief Accounts Officer on the aforesaid issues, but since he stated that in the absence of the records, which had been transferred to the NCT of Delhi, he was not aware of the particulars of the case, the plaintiff sought impleadment of the defendant No. 2 Delhi Administration, to whom the Department of Lotteries had been transferred vide Notification dated 31.03.1992 with effect from 01.04.1992.

After the impleadment of the Delhi Administration as defendant No. 2 on the application of the plaintiff, an additional issue was framed by this Court on 24.09.2007, which is as under:

3A. Which of the defendants, if any, is liable to the plaintiff? OPP

In the course of trial, the plaintiff tendered in evidence the affidavit by way of evidence of PW1 Shri Bakul U. Shah, while the defendant tendered in evidence the affidavit of Shri Ajay Garg, Joint Director, Small Savings & Lotteries, Government of NCT of Delhi. Both the aforesaid witnesses were subjected to extensive cross-examination. No other evidence was led by the parties on the issues reproduced hereinabove.

After hearing Mr. Amit P. Deshpande, the learned Counsel for the plaintiff and Mr. Amiet Andlay, the learned Counsel for the defendant No. 2 Delhi Administration, my findings on the issues are as recorded below.

Issue No. 1:

With regard to the registration of the plaintiff firm, PW1 Mr. Bakul U. Shah in his affidavit by way of evidence asserted that the firm was a registered firm and that Form A issued by the Registrar of Firms evidencing registration of the plaintiff firm w.e.f. 28th February, 1989 vide No. BA-22096 was Exhibit PW1/1. His name was shown at serial No. 3 in the list of partners in Exhibit PW1/1. The plaint had been signed and verified by him and the vakalatnama was also signed by him on behalf of the plaintiff firm.

Mr. Amiet Andlay, the learned Counsel for the defendant Delhi Administration contended that the instant suit was filed on 02.04.1992 and at the time of the filing of the suit, the firm had seven partners as admitted by PW1 Mr. Bakul U. Shah in his cross-examination and admittedly the registration certificate of the firm, being of seven partners, was not on record though the registration certificate of the firm, being of four partners, was on the record (Exhibit PW1/1). Mr. Andlay also pointed out that there was on record the copy of an application filed with the Registrar of Firms for carrying out the changes with regard to the reconstitution of the firm and this was sufficient to show that the firm had been reconstituted.

Reliance was placed by Mr. Andley on the judgments rendered by the Hon''ble Supreme Court in Purushottam and Another Vs. Shivraj Fine Art Litho Works and Others, and U.P. State Sugar Corporation Ltd. Vs. Jain Construction Co. and Another, to contend that the bar of Section 69(2) of the Act was applicable to the instant case and that subsequent registration of the firm, even assuming it to be registered on a subsequent date, could not cure the initial defect in the filing of the suit.

It is trite that the question of registration of a partnership firm is essentially a question of fact. It is also indisputable that if the Court finds that the plaintiff firm is not a registered one, the suit would not be maintainable at the instance of an unregistered firm, having regard to the mandatory provisions of Section 69 of the Indian Partnership Act, 1932. There also cannot be any doubt that the firm must be registered at the time of the institution of the suit and not later [ Delhi Development Authority Vs. Kochhar Construction Work and Another, ; U.P. State Sugar Corporation Ltd. Vs. Jain Construction Co. and Another, and Purushottam and Another Vs. Shivraj Fine Art Litho Works and Others, ]. Further, as held by the Hon''ble Supreme Court in Shreeram Finance Corporation Vs. Yasin Khan and Others, , a suit filed by the existing partners of the firm after reconstitution is also not maintainable if the newly added partners are not shown as partners in the Register of Firms under the Act. In the said case, the suit was filed in the name of the current partners as on the date of the institution of the suit, whose names were not shown as partners in the Register of Firms maintained under the Act. The Court held that the bar of Section 69 was attracted not on account of non-registration of the partnership firm, but on account of the fact that the persons suing had not been shown in the Register of Firms as partners of the firm.

In the instant case, however, the position is exactly the reverse, and I am, therefore, unable to agree with the contention of Mr. Andlay. It is not in dispute that the plaintiff firm was registered with the Registrar of Firms originally on 28th February, 1989. The suit was filed by the firm on 02.04.1992 and the partner who filed the plaint, namely, Bakul U. Shah (PW1) was admittedly a partner of the firm at the time of the filing of the suit. Thus, it cannot be said that as on the date of the filing of the suit, i.e., on 02.04.1992, the registered firm was not in existence. It is on record that the firm was reconstituted by inducting three more partners and notice thereof was given to the Registrar, specifying the date from which the change had occurred, i.e., 20th February, 1991. It is the Registrar who is authorized to carry out the formal act of recording the change in the constitution of the firm. The application for the aforesaid purpose was filed on 20th February, 1991 and as stated by PW1 (Bakul U. Shah), the firm was subsequently registered with seven partners. Such change was effected by the Registrar with effect from the date of the application, i.e., 20th February, 1991, prior to the date of filing of the suit.

I am buttressed in coming to the aforesaid conclusion from a judgment of the Hon''ble Supreme Court in the case of Gwalior Oil Mills Vs. Supreme Industries, . In the said case, the firm was originally registered with the Registrar of Firms on 29.07.1953. A suit was filed by the firm for breach of contract on 26.05.1977. An application for reconstitution of the firm was filed on 23.08.1976 and the changes were made by the Registrar only on 28.02.1978. It was contended by the respondent that the suit was liable to be dismissed in view of the provisions of Section 69 of the Indian Partnership Act, as on the day when the suit was filed, the firm as reconstituted was not duly registered with the reconstituted partners of the firm. The High Court dismissed the suit. In appeal, the Hon''ble Supreme court held that:

The implication of the registration so granted clearly was that the reconstituted partnership firm came into existence w.e.f. 1-1-1976. In any case, the firm of M/S Gwalior Oil Mills never ceased to be a registered partnership firm. The suit was filed by the firm in 1977 and the partner who filed the plaint, namely, Arvind Naranji Patel was admittedly a partner in the firm in his individual capacity and then as a Karta of his Hindu undivided family. Even if the reconstitution of the firm is ignored, it cannot be said that on 26-5-1977, the registered firm was not in existence.

In such circumstances, in my view, keeping in mind the fact that the suit has been filed by a duly registered firm, the bar of Section 69 of the Partnership Act will not apply.

It is apposite that in M/s. Haldiram Bhujiawala and Another Vs. M/s. Anand Kumar Deepak Kumar and Another, , the Hon''ble Supreme Court noticed the recommendations made by the Special Committee in its report, which were considered by the legislature while enacting the Partnership Act, 1932. Paragraphs 18 and 19 of the Report are particularly pertinent and are reproduced hereunder:

Once registration has been effected the statement recorded in the register regarding the constitution of the firm will be conclusive proof of the facts therein contained against the partners making them and no partner whose name is on the register will be permitted to deny that he is a partner -with certain natural and proper exceptions which will be indicated later. This should afford a strong protection to persons dealing with firms against false denials of partnership and the evasion of liability by the substantial members of a firm.

...On the other hand, a third party who deals with a firm and knows that a new partner has been introduced can either make registration of the new partner a condition for further dealings, or content himself with the certain security of the other partners and the chance of proving by other evidence, the partnership of the new but unregistered partner. A third party who deals with a firm without knowing of the addition of a new partner counts on the credit of the old partners only and will not be prejudiced by the failure of the new partner to register.

Thus viewed, the bar of Section 69(2) clearly is not applicable to the instant case. A third party who deals with a firm without knowing the addition of new partners cannot possibly be prejudiced by the failure of the new partner/s to register. If the third party knows that a new partner has been introduced, it can make registration of the new partner a condition for further dealings or content itself with the security offered by the other partners.

In view of the aforesaid, Issue No. 1, in my opinion, must be decided in favour of the plaintiff and against the defendants. Issue No. 2:

As regards this issue, a bare glance at document Exhibit D-1, which is the tender dated 19.12.1990 submitted by the plaintiff with the defendant for running the Bhagyanidhi Weekly Lottery and is an admitted document, shows that Column No. 10 captioned Minimum Annual Turnover Offered and Column No. 12 captioned Absolute Assured Profit on Turnover were left blank by the plaintiff. The version of the defendant that in the circumstances, the plaintiff was required to spell out the Minimum Annual Turnover and also the Minimum Assured Profit on such turnover, therefore, appears to be perfectly plausible. This also stands corroborated by the fact that the plaintiff firm vide its letter dated 21st December, 1990 (Exhibit D-2), offered the minimum annual turnover of Rs. 21.50 crores at 4.31% with guaranteed profit of Rs. 92,66,500/-(Rupees Ninety Two Lakh Sixty Six Thousand and Five Hundred only) per annum, stating: This offer is final. Yet again, letter dated 26th December, 1990, which is the letter of acceptance of the tender of the plaintiff firm and is also an admitted document, specifically corroborates the version of the defendants, in that, the said letter unequivocally states that the acceptance of the tender is on the following terms and conditions:

1) Minimum annual turnover : 21.5 crores 2) Rate of profit offered : 4.31% 3) Assured profit on turnover : Rs. 92,66,500/per annum In the penultimate paragraph, it is further stated:

Your letter dated 21.12.90 will form the part of the agreement.

In view of the aforesaid, in my opinion, it does not lie in the mouth of the plaintiff to now contend that the letter dated 21.12.1990 (the contents of which have nowhere been disputed by the defendants) was not part of the agreement between the parties. More so, as the plaintiff by its own letter dated 17th May, 1991 (Exhibit D-3) categorically admitted that it had given the highest offer of a minimum turnover of Rs. 21.50 crores (Rupees Twenty One Crore Fifty Lakh only) presuming that the market trend would remain healthy, and requested the defendant to reduce the minimum turnover from Rs. 21.50 crores (Rupees Twenty One Crore Fifty Lakh only) to Rs. 15.60 crores (Rupees Fifteen Crore Sixty Lakh only). The plaintiff, in my view, having failed to give the minimum turnover assured by it must be held guilty of breach of the said agreement in terms of Exhibit D-2. This being so, the plaintiff must be held liable in terms of the said agreement to pay the difference of royalty paid provisionally and the royalty assured upto the 34th draw, i.e., Rs. 1,78,202/minus Rs. 1,29,300/- = Rs. 48,902/- x 34, totalling Rs. 16,62,668/-.

As regards the interest, Clause 17 of the agreement provides for 18% interest per annum on the amount found due from the main stockist in the event of breach of any of the terms and conditions of the agreement by the main stockist. Thus calculated, the interest on the difference of royalty works out to Rs. 1,06,183/- (Rupees One Lakh Six Thousand One Hundred and Eighty Three only), which the plaintiff is liable to pay.

What now remains to be examined is the plaintiff''s contention that this amount of Rs. 16,62,668/-(Rupees Sixteen Lakh Sixty Two Thousand Six Hundred and Sixty Eight only) is included in the amount of the dishonoured cheques of Rs. 29,75,900/-(Rupees Twenty Nine Lakh Seventy Five Thousand and Nine Hundred only).

A look at the evidence adduced by the defendant shows that DW-2, Shri Ajay Kumar Garg, in the course of his cross-examination, was unable to deny that the amount of Rs. 16,62,668/-(Rupees Sixteen Lakh Sixty Two Thousand Six Hundred and Sixty Eight only) was included in the amount of the dishonoured cheques. The relevant part of the said evidence is being reproduced hereunder:

Q. Is it correct to say that your claim for difference in royalty was included in the amounts of the dishonoured cheques as referred in EX.DW2/D-6?

A. As far as I remember, it was not.

Q. Is your reply to the above question reflected in any of the documents on the record of this case specially EXDW2/D-6?

A. It is on record but I have to check it out. Further cross-examination is deferred. xxxx By Sh. Amit P. Deshpandey, Counsel for plaintiff I have not checked out whether the amount on account of difference in royalty is included in the amount of the dishonoured cheques as mentioned in Ex.DW-2/2/D6. I do not remember if Ex.PW-1/D3 is the last communication with the plaintiff on my part. It is wrong to suggest that plaintiff had made the payment of Rs. 17,70,000/-to the DDA during 29/08/1991 to 20/09/1991....

In the light of the above cross-examination of DW-2, in my view, the plaintiff''s contention that the amount of the dishonoured cheques included the difference in the royalty amount to the extent of Rs. 16,62,668/-(Rupees Sixteen Lakh Sixty Two Thousand Six Hundred and Sixty Eight only), being claimed by the defendant, must be upheld. The plaintiff, not having disputed that the amount of Rs. 29,75,900/-(Rupees Twenty Nine Lakh Seventy Five Thousand and Nine Hundred only) was the amount payable by it on account of dishonoured cheques (inclusive of the sum of Rs. 16,62,668/-), the defendant must be held entitled to receive the said amount. The amount of other dishonoured cheques excluding the dishonoured cheques of Rs. 16,62,668/-, thus, works out to Rs. 13,13,232/-(Rupees Thirteen Lakh Thirteen Thousand Two Hundred and Thirty Two only), i.e. (Rs,29,75,900 minus Rs. 16,62,668).

As regards interest thereon, the plaintiff contends that the defendant has not charged any interest from other stockists in respect of dishonoured cheques. There is, however, no evidence on record to substantiate the aforesaid contention of the plaintiff and even otherwise there appears to be no reason why the plaintiff should not be called upon to pay interest on the dishonoured cheques. The plaintiff must accordingly be held liable to pay interest at the contractual rate of 18% on the dishonoured cheques of Rs. 29,75,900/-, in accordance with Clause 17 of the agreement between the parties.

Adverting next to the claim of the defendant for payment of 10% penalty on the royalty amount of Rs. 1,78,202/-(Rupees One Lakh Seventy Eight Thousand Two Hundred and Two only) per week in respect of the remaining 18 weekly draws, the first part of Clause 16(vii) is apposite, which provides as under: If the Main stockists wants to terminate this agreement before the stipulated terms, he shall have to give prior notice of 4 months in writing or pay the royalty amount and all the expenses for 4 months. In either case, he shall also have to pay additionally, a penalty of 10% of the total profit amount relating to unexpired term of the contract. If the main stockists withdraw from the contract without first giving requisite notice or paying amount of royalty expenses and requisite penalty as specified above that shall be recovered out of the bank guarantee and other dues/deposits, if any payable to him.

In terms of the above clause, the defendant must be held entitled to receive from the plaintiff the penalty amount of 10% of the total profit amount relating to the unexpired term of the contract. Thus calculated, the same works out to Rs. 1,78,202/-per week x 18 weekly draws x 10% penalty= Rs. 3,20,764/-(Rupees Three Lakh Twenty Thousand Seven Hundred and Sixty Four only).

As regards item No. (vi), i.e., the costs of 54,000 tickets of the Baishakhi bumper draw amounting to Rs. 2,13,300/-(Rupees Two Lakh Thirteen Thousand Three Hundred only), the second part of Clause 16(vii) is relevant, which is as under:

In the event of any act of omission and/or commission on the part of the main stockist after the announcement but before the completion of any draw, resulting in any loss to Delhi Lotteries, the main stockist shall make good the loss caused to Delhi Lotteries. The loss shall be calculated on the assumption that having once announced the draw/draws, Delhi Lotteries shall have to complete the draw/draws and incur necessary expenditure in connection therewith. The decision of Director (Lott.) in this regard shall be final & binding and shall not be called into question in any proceedings whatsoever.

In the event of the main stockist, committing breach of any of the terms & conditions of the agreement or failing to fulfil all his commitment and obligations, the contract shall stand determined and without any notice, without prejudice to its rights under the terms/conditions of the agreement, Delhi Lotteries shall be at liberty to continue the Lotteries of its own utilising the tickets printed on behalf of the main stockist and without payment of any compensation to them and hold the draw(s) on the stipulated date or to float new Lotteries or proceed in any other manner deemed appropriate by it.

In view of the above, clearly the defendant must be held liable to recover the amount of Rs. 2,13,300/-(Rupees Two Lakh Thirteen Thousand Three Hundred only) from the plaintiff and the decision of the Director of Lotteries in this regard cannot be interfered with by this Court. Issues No. 3, 3A and 4

Adverting next to the question as to whether the plaintiff is entitled to claim any damages for the invocation of the bank guarantee from the defendants. According to the plaintiff, the defendant had wrongly and illegally invoked the bank guarantee for the amount of Rs. 53,74,667/-(Rupees Fifty Three Lakh Seventy Four Thousand Six Hundred and Sixty Seven only), and, in any case the defendant had illegally enriched itself to the tune of Rs. 19,11,737/-(Rupees Nineteen Lakh Eleven Thousand Seven Hundred and Thirty Seven only) and is thus liable to pay to the plaintiff damages for the illegal retention of the said sum at the rate of 2% per month for the excess amount, as the nationalized banks were charging interest @ 24.75% per annum on overdrafts and even otherwise, the market lending rate at the relevant time was over 2% per month. Thus, calculated, the plaintiff claims to be entitled to the interest of Rs. 2,29,408/-, and the total amount due from the defendant to the plaintiff works out to Rs. 19,11,737/-plus Rs. 2,29,408/-i.e. Rs. 21,41,145/( Rupees Twenty One Lakh Forty One Thousand One Hundred and Forty Five only).

As already discussed hereinabove, the plaintiff in the instant case was guilty of breaching the terms of the agreement and even the cheques tendered by the plaintiff to the defendants had been dishonoured from time to time. The defendants, therefore, had every right to resort to encashment of the bank guarantee furnished by the plaintiff in terms of the agreement and cannot be faulted for the same. There is, however, no denying the fact that the defendants had recovered an excess amount of Rs. 16,62,668/-(Rupees Sixteen Lakh Sixty Two Thousand Six Hundred and Sixty Eight only) from the plaintiff, the said amount having already been included in the amount of the dishonoured cheques. Thus, the defendants must be held liable to reimburse to the plaintiff the said amount with interest thereon. Since the agreement provided for 18% interest (Clause 17 of the agreement), interest at the rate of 18% must be taken to be the contractual rate of interest. The plaintiff is accordingly held entitled to recover from the defendant No. 2 a sum of Rs. 16,62,668/-(Rupees Sixteen Lakh Sixty Two Thousand Six Hundred and Sixty Eight only) plus interest @ 18% thereon from the date of the encashment of the bank guarantee till the date of realisation. The plaintiff shall also be entitled to costs of the suit.

CS(OS) 1760/1992 stands disposed of accordingly.