Remanded

Nelito Systems Limited v. the Jammu Central Coop.Bank Ltd.and Anr.

J&K HC13 Aug 2021MA/91/2016

Case brief

AI extract

What is this about?

High Court allowed appeal against trial court order dismissing interim stay in suit for specific performance. Held that trial court should not decide conclusory questions regarding contract validity at interim stage; order set aside for fresh consideration.

What did the court decide?

Impugned order dismissed; application for interim relief remanded to trial court for fresh consideration within four weeks; status quo interim order maintained pending compliance.

Nelito Systems Limited Vs the Jammu Central… — Contract and Commercial Disputes | J&K HC (2021)

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Sr. No. J1

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HIGH COURT OF JAMMU & KASHMIR AND LAKAKH AT JAMMU

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

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Reserved on : 29.07.2021 Pronounced on: 13 .08.2021

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

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Nelito Systems Limited

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….Appellant (s)

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

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The Jammu Central Cooperative Bank Ltd and another

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…. Respondent(s)

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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

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

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The present miscellaneous appeal is directed against order

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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-

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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‟).

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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:-

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Respondent-bank is stated to have approached the appellantcompany 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.

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It is being stated that upon extensive exchange of interaction and communication inter se the appellant-company and the respondentbank 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.

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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

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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.

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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.

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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

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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.

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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.

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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.

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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

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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.

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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.

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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.

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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

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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.

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It is being stated that aggrieved of the acts of the respondentbank, 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.

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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,

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The observations and findings made and recorded in the

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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:-

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“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.

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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.

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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.

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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.

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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.

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

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

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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.”

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Heard learned counsel for the parties and perused the

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record.

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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.

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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.

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

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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:-

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“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:

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

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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;

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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;

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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,

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

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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."

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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.

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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.

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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

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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 .

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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.

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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:-

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

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usually, is at the earliest possible stage so far as the

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time-frame is concerned.”

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Further the Apex Court in case titled as Anand Prasad Agarwalla vs. Tarkeshwar Prasad and others, 2001 (5) SCC 568 , has observed as follows:-

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“ It may not be appropriate for any court to hold a mini-trial at the stage of grant of temporary injunction………..”

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Otherwise as well application for interim in question seemingly has not received proper consideration from the trial court, while having regard to the reasons (supra) detailed out by the appellant-company in the memo of appeal at para 13. The trial court also has dealt with the other relevant principles qua interim relief in the impugned order, proceeding on the assumption that there has been no concluded contract or else, even if assumed to be concluded the contract is contingent which indisputably it could not have in law proceeded on.

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Having regard to what has been observed, considered and analyzed hereinabove, the impugned order is held to be legally not sustainable and is, accordingly, set aside. The trial court is directed to revisit and reconsider the application for interim relief filed by the appellant-company accompanying the suit, afresh on its own merit uninfluenced by any observation made by this Court and pass fresh order after hearing the parties, preferably within four weeks from the date of passing of this order.

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