material terms of the contract. When a party agrees to the material
terms of the contract, that contract comes into existence. Where the
condition inserted is immaterial or unnecessary and does not affect
the material terms of the contract, and the offeree also accepts the
contract as originally made, then it would be simply unjust to allow
the offeree to contend that there is no contract at all or to insist on
the counter-acceptance of such an immaterial or unnecessary term.
The mandate of the law, as I conceive it, is simple : parties will be
held to the bargain they made, and no one party will be permitted to
foist on another a condition not previously agreed to be
determinative of the contract. If that condition is material, then, of
course, there is no contract. But if that condition is not material, the
second party to whom the original offer is made cannot be permitted
to disavow entirely the contract on the footing that he has stipulated
some additional condition, even though that condition is immaterial
or collateral.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMPANY PETITION NO. 440 OF 2011
RELIANCE BROADCAST
NETWORK LIMITED,
versus
RAJ OIL MILLS LTD.,
CORAM : G.S.Patel, J.
JUDGMENT : (Per G.S. Patel, J.)
JUDGEMENT PRONOUNCED ON : 7th February 2014
Citation; 2014(3) ALL MR 797 Bom
The defence to this winding up petition turns on the
interpretation of a set of endorsements made to the contract or
agreement in question. Mr. Dwarkadas, learned senior counsel for
the petitioner, contends that the endorsements are of no effect,
since the respondent signed the contract and has, therefore,
accepted it. Where there is an unconditional acceptance, the
endorsement of an additional condition has no legal effect. It does
not constitute a counter-offer, and it is impossible to hold that there
is no valid contract because there is no acceptance of the offer as
originally made. For his part, Mr. Jain, learned counsel for the
respondent, submits that where the condition is imposed at or
before the acceptance of the original contract, then there are only
two possibilities in law: either there is a contract as modified by the
superadded condition, or there is no contract at all. The original
contract, sans the condition, cannot be said to exist.
2.
I heard Mr. Dwarkadas and Mr. Jain at some considerable
length. They took me through the filings and documents. Both cited
several authorities. Having considered all the material they placed
before me, I am inclined to make a conditional order on this petition.
My reasons follow.
These are the facts:
(a)
3.
II
The petitioner, Reliance Broadcast Networks Ltd
(“Reliance”), conducts various ‘on-ground’ activities
for their clients. I understand this to mean that it
organizes sponsored shows and similar events. It also
operates FM radio stations in various cities across the
The
respondent,
country.
ROML
Mills
Ltd
Before February 2011, the two companies had dealings,
(b)
ig
(“ROML”), manufactures and distributes edible oils.
and ROML had been Reliance’s client, sponsoring or
co-sponsoring some events, or having its products
promoted at events organised by Reliance.
(c)
In early 2011, Reliance planned to organize a series of
events for the regional television industry. Awards were
to be given in seven different categories for regional
language entertainment. ROML showed interest. It
wanted to be the ‘Presenting Sponsor’. Its product
brands, logo and trademarks would be used in the
promotion and marketing of these events and their
telecasts. According to Reliance, there were several
meetings
between
representatives
of
the
two
companies, and the terms of the sponsorship were
agreed. Reliance claims that ROML also wanted use of
‘commercial airtime’ on Reliance’s FM radio channels
to promote its brands. These terms were also discussed
ROML denies Reliance’s contention that the dates and
(d)
and settled.
schedules of the various events were ever agreed. What
is not in doubt, however, is that from 24th February
2011 to 8th March 2011, Reliance sent a number of
emails to ROML setting out the schedule for the seven
events, their tentative dates and venues. Reliance
repeatedly sought ROML’s confirmation. In the email
of 8th March 2011, Reliance set out brands to be
promoted at each event. The schedule of events ran
from 18th March 2011 to 6th April 2011 at close
intervals. Each event was at a different venue in a
different city.
(e)
Of particular relevance are two earlier emails of 1st and
2nd March 2011 from Reliance, each setting out a
scheduled event. The email of 1st March 2011 relates to
the press conference for the ‘Big Telugu Movie
Awards’ on 9th March 2011 at Hyderabad. On behalf of
Reliance, one Swapnil Raut invited two representatives
of ROML to this event. The email of 2nd March 2011
is in identical terms for an event on 8th March 2011 in
Kolkata for the ‘Big Bangla Movie Awards’.
(f )
Strangely, the record reflects no response from ROML,
not even by email.
(g)
8th March 2011 is one of the two pivotal dates in the
sequence of events. It is on this day that Reliance
signed and sent to ROML the original sponsorship
agreement (“the Sponsorship Agreement”). Reliance
claims that it was not until 18th March 2011 that it
received back the Sponsorship Agreement signed by
ROML with two conditions endorsed at two different
places on it; for its part, ROML claims that both copies
of the Sponsorship Agreement were signed and
A photocopy of the Sponsorship Agreement has been
(h)
March 2011.
returned, with the endorsements, on that very day, 8th
included in a compilation of documents. It shows a
handwritten endorsement on the first page. There is no
date to the endorsement. The handwriting is not
identified, even in the affidavit in reply. The
endorsement reads:
“Agreement valid on confirmation of actual
event date by Raj Oil Mills Ltd.”
(i)
On the first page, there are two rubber stamps of
ROML Mills. In itself, this is an even more unusual
circumstance. Every other page except the 11th (the
second page of the annexure to the Agreement) has
only one rubber stamp of ROML. On the 11th page,
there are two handwritten endorsements. Again, the
handwriting is not identified, and there are two rubber
stamps. The two endorsements are:
“*
Agreement
valid
on
confirmation of actual event date by
Raj Oil Mills Ltd.
(j)
*
Program date (Actual Event) &
Telecast Date to be finalized by
Monday [21-Mar-2011]”
In paragraph 3(xii) of the affidavit in reply, ROML
alleges that these endorsements were made in the
presence of three representatives of Reliance. The
representatives are named. The person from ROML
At this stage, there is one more event to be noted. On
(k)
who made the endorsement is not.
8th March 2011, the parties also entered into a second
agreement for commercial time on Reliance’s 92.7 Big
FM Radio stations. This is called the FCT Agreement.
It was intended to promote ROML’s brands.
(l)
ROML claims that on 18th March 2011, a Friday, it
received an email from Reliance setting out the dates of
the
events
proposed
under
the
Sponsorship
Agreement. This email came well after 10:59 PM, the
time-stamp on the email. The first of the scheduled
events had, by then, already taken place (the ‘Big
Bangla Movie Awards’). The subject-line of this email
is significant: it says “Dates of Regional awards
reworked”. The email also includes the lines:
“As discussed with you, please find below
the dates of regional Entertainment awards
(m)
As decided lets meet tomorrow & finalized
[sic] the same.
...
The earliest that ROML could respond to this email, it
says, was Monday, 21 March 2011; and it did so by an
email of that date, time-stamped 9:48 am, with a
subject-line that indicates that it was in reply to
Reliance’s email of 18th March 2011. ROML claimed
that a conflict with the then ongoing Indian Premier
League (“IPL”) cricket tournament made any date
before 1st/2nd April 2011 unviable. For the first time, it
purported to set out its ‘requirements’: “work out the
schedules on the pre and post event activites (which
will not be taken up by ROML in a rush); proper
ground work laid down and committed on an event
wise basis; keeping year end deadlines and availabilities
of Raj Oil Mills Ltd team at various locations”. It asked
Reliance to work out a schedule keeping these aspects
in mind. Then come these lines:
“The current time schedule is more than
ambitious and is useful from the perspective
of completing a commenced activity. Pl keep
the same on discussion on priority during the
next two days. The dates can be decided.
The current schedule is however
undoable.”
{emphasis supplied}
(n)
A significant dimension to this email is that it does not
anywhere make a reference to the Sponsorship
claims had by then been made on it.
There followed further correspondence by email in this
(o)
Agreement, or even to the endorsements that ROML
vein. On 7th April 2011, Reliance wrote to ROML
referencing both the Sponsorship Agreement and the
endorsements and claiming that these had been made
unilaterally, and that no change in the scheduling was
possible, especially since each event required several
(p)
weeks of advance planning and organisation.
The events took place as scheduled. At each of these,
ROML’s brands, logo and trademarks were displayed
and it was shown as a Presenting Sponsor. ROML
claims to have been wholly unaware of these events. It
says that it did not attend any of them. Reliance then
drew invoices on ROML for the services provided in
the aggregate sum of Rs.1,78,12,500/-. ROML refused
to accept the invoices. They were re-sent by email on
18th April 2011. Reliance requested meetings to resolve
the issue. ROML declined all requests.
(q)
Reliance then wrote to ROML on 29th April 2011
reiterating its demand and terminating the FCT
Agreement. Reliance’s advocates then sent a statutory
notice under sections 433 and 434 of the Companies
Act, 1956 to ROML on 6th June 2011. ROML’s
advocates replied on 11th July 2011, denying its liability,
saying that a detailed response would follow once
instructions were taken, and also alleging that ROML
had been defamed by Reliance. In turn, Reliance’s
advocates replied, and this correspondence between
the parties’ advocates continued through August-
September 2011. No resolution of the dispute was
effected. Reliance’s repeated requests for meetings
were rebuffed.
(r)
This Petition was filed in October 2011. ROML filed its
affidavit in reply in March 2012, and Reliance its
affidavit in rejoinder later that month.
4.
III
Mr. Dwarkadas, appearing for Reliance, emphasized that
under the Sponsorship Agreement, there was no correlation
between the payment schedule, a contractual term under clause 6 of
the Sponsorship Agreement, and the schedule of events. Clause 6
set out the dates when payments were due. Even if the events
schedule was later altered, this payment schedule would not flex,
being untied to the dates of the events themselves. He also stressed
clause 11 of the Agreement. This is a clause cast in a words common
to such agreements. It says that no amendment to the Sponsorship
Agreement (including its annexure) binds either party unless the
amendment is in writing and signed by both parties. ROML must,
he submitted, be deemed to have accepted the agreement with no
linkage between the date of the event/telecast and the time for
payment. The Sponsorship Agreement stands; the handwritten
endorsements containing ‘conditions’ must, he says, be ignored and
the Sponsorship Agreement must be read without the conditions. In
any view of the matter, the event schedule was firm on 18th March
2011. It could not have been changed thereafter. Every event
required days and weeks of advance planning. The last-minute
attempt by ROML to slip out of its contractual obligations should
not, Mr. Dwarkadas said, be countenanced for a moment; for there
can be no doubt that the events were held, that ROML was show-
cased at each of them, and that ROML derived an enormous benefit
from each of these shows/events and their corresponding telecasts.
ROML’s response, in both its affidavit in reply as also in its
advocates’ response to Reliance’s advocates statutory notice, that
ROML is a solvent company can never provide a defence sufficient
to dislodge the petition. If ROML has no substantial defence, or if
its defence is illusory, spurious or specious, and it has not complied
with the demand made, then it must be deemed to be insolvent.
Central to Mr. Dwarkadas’s submissions is that in the Sponsorship
Agreement there is no linkage between payment schedule and the
event/telecast schedule.
5.
In response, this is how Mr. Jain placed his case:
(a)
The petition and Mr. Dwarkadas’s arguments both
proceed on the entirely incorrect basis that everything
was decided before 8th March 2011. According to
Reliance, all dates and schedules were finalized in
January-February
2011.
There
is
intrinsic
and
contemporaneous evidence to show that this is
incorrect. Reliance’s own emails show that they
required confirmation. There is no consistency in the
schedules proposed at different times: the emails of
28th February 2011 (Ex. “D” to the petition) and 18th
March 2011 (Ex. “H” to the petition) show markedly
different dates for the same event. From 24th February
to 18th March, Reliance was seeking confirmation of
(b)
There was, thus, no agreement as to the schedule or
dates of events and telecasts.
(c)
the proposed dates.
The
endorsements
made
on
the
Sponsorship
Agreement by ROML only make this clear. ROML’s
acceptance, assuming there was one, was conditional;
ig
alternatively, if Reliance is held not to have accepted
ROML’s conditions, then there can be said to be no
concluded agreement at all; and ROML has no liability
to Reliance whatever. The endorsements on the
Sponsorship Agreement were made at the two most
important places: the first page and the last page of
Annexure A. These endorsements were made before
the Sponsorship Agreement was signed, not after; and,
in any event, they were made in the presence of three
representatives of Reliance, a fact that has been
repeatedly
stated
by
ROML,
including
in
correspondence, and never denied.
(d)
There were two ‘events’: the actual events on the
ground and the telecasts of those events at a later date.
ROML had issues about both. They wanted no dilution
with a programming conflict with the IPL telecasts and
matches. There is, Mr. Jain said, complete silence from
Reliance in regard to the telecast dates, and there is no
answer as to why these telecast dates were not
Under the Sponsorship Agreement, there is admittedly
(e)
approved.
no linkage of the event schedules to the payment
schedules. But the ‘deliverables’ under that agreement
are those set out in Annexure A to it, and when ROML
demanded clarity and agreement on the schedule, there
was no compliance; therefore Reliance could not be
(f )
said to have fulfilled its contractual obligations.
The copies of the agreement that Reliance sent ROML
were, Mr. Jain said, only a proposal. Under section 7 of
the Indian Contract Act, 1872, that proposal would
result in a concluded contract only if the acceptance
was absolute and unqualified. It was not. This was not
even Reliance’s case as pleaded. Before ROML
accepted it, ROML endorsed additional conditions.
These constituted a counter-proposal, or a conditional
acceptance. Therefore, Reliance could accept the
contract with the conditions endorsed by ROML, or
there was no contract at all.
(g)
Mr. Jain submitted that he was supported in this
contention by contemporaneous documents. In its 18th
March 2011 email, sent at 10:59 pm with the subject-
line “Dates of Regional awards reworked” (Ex. “H” to
the petition), Reliance asked ROML for a meeting to
finalize the dates. That it could not have done had the
dates already been finalized, as Reliance contends in its
petition. Further, after ROML replied on 21st March
2011, the next available working day, Reliance
responded within a few hours. That email of 21st
March 2011 from Reliance (Ex. “K” to the petition)
does not reference ROML’s endorsements on the
Sponsorship Agreement at all.
(h)
Reliance’s own conduct is not, Mr. Jain submitted,
consistent with its stand in the petitioin. Clause 6 of
the Sponsorship Agreement’s payment schedule sets
out dates of payment. The last of these dates is 22nd
March 2011; all other dates precede this one. Yet
Reliance made no demand for payment till as late as
2nd April 2011, as can be seen from paragraph 5 of
Reliance’s letter dated 7th April 2011 (Ex. “L-2” to the
petition).
(i)
Therefore, according to Mr. Jain, if, despite the
complete lack of any agreement on the dates of the
events and telecasts, Reliance went ahead with the
events, it can only look to itself. Certainly it cannot
expect ROML to foot the bill for something that was
never agreed, and, more importantly, something that
ROML specifically said (in its email of 21st March
2011) it did not want.
IV
6.
Mr. Dwarkadas’s and Mr. Jain’s submissions come at the
Sponsorship Agreement from opposite directions. Mr. Dwarkadas’s
position is that the conditions sought to be imposed by ROML are to
be disregarded altogether. Its acceptance of the Sponsorship
Agreement (by counter-signing it) is to be taken as absolute and
unqualified. Mr. Jain, on the other hand, claims that on account of
the endorsement of those conditions, ROML must be taken to have
made a counter-offer. If Reliance rejected those conditions, only one
result could ensue in law: there was no concluded contract at all.
7.
Mr. Dwarkadas’s submission is that there is no such thing in
law as the formation of a contract by a “conditional acceptance”.
ig
Either a contract is accepted, or it is not. If a condition is imposed, it
is a counter-offer, not a conditional acceptance; and where the
offeree has signed the contract, he cannot insist on a condition that
he also imposes. In other words, he cannot both sign the contract
and impose a condition. Mr. Dwarkadas relied on the 1921 decision
of a Division Bench of this Court in Sir Mahomed Yusuf Ismail v
Secretary of State.1 In that case, there was a proposal followed by an
acceptance. But in the last clause, the offeree, the Presidency Post-
Master, made a counter-offer by seeking the insertion of an optional
clause. The Division Bench held that this counter-offer would have
no effect on the acceptance of the offer made unless the counter-
offer was itself accepted. The Division Bench disagreed with the
view of the learned single Judge that the counter-offer had been
accepted. I do not see that this decision is of much assistance to Mr.
Dwarkadas.
8.
Mr. Dwarkadas is probably on much firmer ground in citing
the five-judge decision of the Federal Court in Jainarain Ram
1
AIR 1921 Bom 200; per Macleod, CJ
Lundia v Surajmull Sagarmull & Ors.2 The claim in that case was for
specific performance of an agreement of sale of shares in a company.
One of the contentions raised by the defendants was that there was
no concluded agreement. The Federal Court found that there was
evidence of an oral agreement. The terms of that letter were set out
in a letter addressed by one party and confirmed by the plaintiffs’
solicitors the following day. The submission before the Federal
Court was that the plaintiffs’ solicitors attempted to introduce new
terms in the contract, and as parties were clearly not ad idem on
these terms, no concluded contract could be said to have come into
existence. The Federal Court held that where there is an agreement
on the terms that are necessary in law to constitute a contract, and
an agreement on terms the parties considered material, the
introduction of a further, unnecessary or immaterial term would not
mean that there was no concluded contract. In paragraph 12, the
Federal Court said:
9.
“12. If after a contract is concluded and its terms settled
further negotiations are started with regard to new
matters, that would not prevent full effect being given to
the contract already existing, unless it is established as a
fact that the contract was rescinded or varied with the
consent of both the parties or that both parties treated it
as incomplete and inconclusive. Once completed, the
contract can be got rid of only with the concurrence of
both parties.”
This decision was relied on by a Division Bench of the
Andhra Pradesh High Court in Dhulipudi Namayya v The Union of
India.3 The Division Bench said that the mere fact that a new and
2
3
AIR (36) 1949 FC 211
AIR 1958 AP 533
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collateral terms is annexed to an absolute acceptance would not
affect the formation of the contract on the basis of the original offer
which is unconditionally accepted. The Court also observed that in
order to decide these matters, regard must be had to the entire
negotiations and the correspondence on which the contract
depends.
10.
Countering these submissions, Mr. Jain cited the decision of
the Supreme Court in Rickmers Verwaltung GmBH v Indian Oil
Corporation Ltd4 for the proposition that the correspondence and
ig
other contemporaneous material must unequivocally and clearly
show that the parties were ad idem as to terms in order to say that an
agreement had come into existence. The court drew a distinction
between negotiating a bargain and entering into a binding contract. I
do not see how this decision is of much assistance to Mr. Jain,
especially since it was a case of a contract attempted to be spelled
out from correspondence, very unlike the present case.
11.
Mr. Jain also cited Madhusudan Gordhandas & Co v Madhu
Woollen Industries5 and IBA Health (India) Private Limited v Info-
Drive Systems Sdn. Bhd.6 in support of his submission that where the
decision is of substance, bona fide, not “spurious, speculative,
illusory or misconceived”, then an order of winding up is not
justified. There can be no disputing these well-settled principles.
But IBA Health also says that where the defence is an “ingenious
mask invented to deprive a creditor of a just and honest
entitlement” or “a mere wrangle”, then it cannot and should not be
4
5
6
(1999) 1 SCC 1
AIR 1971 SC 2600
(2010) 10 SCC 553
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countenanced. What needs to be tested is whether or not ROML’s
In Haridwar Singh v Bagun Sumbrui & Ors.7, the Supreme
12.
case on the contract has any substance.
Court quoted a passage from Williston on Contracts:8
ig
“A nice distinction may be taken here between (1) a so-
called acceptance by which the acceptor agrees to
become immediately bound on a condition not named in
the offer, and (2) an acceptance which adopts
unequivocally the terms of the offer but states that it will
not be effective until a certain contingency happens or
fails to happen. In the first case there is a counteroffer and
rejection of the original offer; in the second case there is
no counter-officer, since there is no assent to enter into an
immediate bargain. There is, so to speak, an acceptance
in escrow, which is not to take effect until the future. In the
meantime, of course, neither party is bound and either
may withdraw. More over, if the time at which the
acceptance was to become effectual is unreasonably
remote, the offer may lapse before the acceptance
becomes effective. But if neither party withdraws and the,
delay is not unreasonable a contract will arise when the
contingency happens or stipulated event occurs.”
13.
The two situations outlined in Williston are a nebulous grey
area, a twilight zone as it were, in which Mr. Jain would have his
clients’ case fall. But let us test this: does ROML claim to have
“become immediately bound on a condition not named in the
offer”? Or does it adopt “unequivocally the terms of the offer but
state that it will not be effective until a certain contingency happens
or fails to happen”? It cannot be both. Indeed, I do not think it can
7
8
(1973) 3 SCC 889
3rd ed, Vol. I, S.77-A; para 7 of the SCC report
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be either. For the endorsement made by ROML is in no sense “a
condition not named in the offer”. The endorsement is a statement
made in generalities about an event schedule yet to be decided. This
was not a material term; had it been so, the event schedule would
have formed part of the Sponsorship Agreement itself; and its
omission would have caused ROML to simply return the document
unsigned. The endorsement also cannot be a statement that the
Sponsorship Agreement is not to be effective until a certain
contigency, viz., the finalizing of the event schedule, happens or
does not happen, simply because the event schedule, or its
ig
finalization, was in no sense a ‘contingency’. It was merely
something that needed to be done, if not already done. It was a mere
detail and, as we shall see, one that had been previously changed at
ROML’s instance.
There is seldom a contract that takes into account all the
14.
minutiae related to its working. There are always matters implicit,
often by necessity, that are to be done by parties to give full voice to
a contract. Was the fixing of the event schedule determinative? Or
did it merely need some adjustment? Would ROML be allowed to
evade all responsibility and liability only because it believed that the
schedule had not been fixed? This assessment requires a closer look
at two aspects. The first is the Sponsorship Agreement itself, and
the endorsements made on it. The second is the sequence of events
that led up to it, and immediately followed it.
15.
On a closer scrutiny, ROML’s endorsements of the so-called
conditions on the Sponsorship Agreement are disquieting, and for
more than one reason. ROML is an established company. It must, in
the routine course, be used to dealing with a variety of contracts. It
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cannot be unaware of the formality that these contracts require. The
act of making handwritten endorsements on the Sponsorship
Agreement and also then signing it is far too casual an act to sit
easily with such corporate and legal experience. Indeed, there is no
dispute that in 2010, Reliance and ROML had a very similar
agreement — ROML itself says so in its affidavit in reply. This is
one of a set of extremely strange circumstances that surround
ROML’s so-called endorsements.
Then there is the matter of the two rubber stamps on the
16.
ig
pages where the endorsements appear. As Mr. Dwarkadas says,
there is no reason for this. Had the endorsements been made before
the Sponsorship Agreement was signed, as ROML contends, there
would have been but a single rubber stamp on each page. Prima-
facie, this indicates that the endorsements were an after-thought,
made after ROML signed — and therefore accepted — without
qualification the agreement as sent to them.
17.
Perhaps most telling are words of the second endorsement on
the page 11 of the Sponsorship Agreement, the second page of its
annexure: “ Program Date (Actual Event) & Telecast Date to be
finalized by Monday [21-Mar-2011]”. Now ROML claims that the
Sponsorship Agreement was signed and returned on the very day it
was received, 8th March 2011. That was a Tuesday. It seems to me
extremely unlikely that anyone would have mentioned so specific a
date so far ahead. It is far more likely that this date of 21st March
2011 was inserted because the agreement was signed on 18th March
2011, a Friday, as Reliance contends. Earlier that day, the first of the
events had already been hosted earlier. On its own, there was
nothing very special about the date of 21st March 2011. It only
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assumes significance if, as Reliance says, ROML signed the
agreement on 18th March 2011. Again, this is, prima-facie, a strong
indicator tht ROML made its endorsements on the Sponsorship
Agreement after it signed, and therefore accepted, it as received
from Reliance.
18.
The annexure to the Sponsorship Agreement says that there
are matters yet to be decided: the telecast partner and news partner
were two such matters. Thus, where the Sponsorship Agreement
contemplated matters yet inchoate, and yet to be decided, it said so;
ig
and these did not affect the contract being concluded. This is clear
evidence of collateral matters not affecting the formation of the
contract. The finalization of the event schedule could not, therefore,
have been a matter that determined whether there was a concluded
contract or not. I believe Mr. Dwarkadas is therefore correct in his
submission that had it been as Mr. Jain suggests, then, having regard
to all the circumstances — including the fact that ROML was no
neophyte in matters legal or contractual — ROML would merely
have made the endorsement and returned the agreement unsigned.
It would have pointed out that an essential term of the contract was
missing or had been left out. That it did not do so is a third powerful
indicator of the endorsements being made after an unqualified and
absolute acceptance of the Sponsorship Agreement.
19.
What seems to have happened is that ROML probably
realized that it had left matters too late. Prima-facie the endorsement
was, therefore, made after the contract was signed. In any event, it is
not a material term sufficient to affect the creation of a concluded
contract. ROML’s signature on the Sponsorship Agreement must be
taken to be an unqualified and absolute acceptance; its superadded
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conditions are not only immaterial (apart from anything else, being
unlinked to the payment liability), but are after the acceptance and
20.
therefore of no effect.
In the making of a contract, there may be several distinct
possibilities. A proposal may be accepted straightaway, without
modification or change. The contract comes into being at once. The
proposal may be refused, and a condition added. This is a counter-
proposal, and it requires the proposer’s assent, for the original
contract has been entirely refused and a new contract proposed. On
ig
a conditional acceptance, no contract is brought into existence ipso
facto.9 A proposal or offer becomes a contract only when the
acceptance is absolute and unqualified. That is the plain meaning of
Section 7 of the Contract Act, and it is also the weight of authority. 10
An acceptance of a counter-offer is not to be readily inferred from
the subsequent conduct of the first party that made the original
offer.11
21.
The consensus ad-idem that the law requires must be on the
material terms of the contract. When a party agrees to the material
terms of the contract, that contract comes into existence. Where the
condition inserted is immaterial or unnecessary and does not affect
the material terms of the contract, and the offeree also accepts the
contract as originally made, then it would be simply unjust to allow
the offeree to contend that there is no contract at all or to insist on
9
10
11
UP State Electricity Board v Goel Electric Stores, AIR 1977 All 494
Chhotey Lal Gupta v Union of India, AIR 1987 All 329; Union of India v
Uttam Singh Dugal & Co, AIR 1972 Del 110; Badri Prasad v State of
Madhya Pradesh, AIR 1970 SC 706
UP Rajakiya Nirman Nigam Ltd v Indure Pvt Ltd, (1996) 2 SCC 667.
This was a decision in the context of an arbitration agreement.
the counter-acceptance of such an immaterial or unnecessary term.
The mandate of the law, as I conceive it, is simple : parties will be
held to the bargain they made, and no one party will be permitted to
foist on another a condition not previously agreed to be
determinative of the contract. If that condition is material, then, of
course, there is no contract. But if that condition is not material, the
second party to whom the original offer is made cannot be permitted
to disavow entirely the contract on the footing that he has stipulated
some additional condition, even though that condition is immaterial
or collateral. This, I believe, is the principle enunciated by the
ig
Federal Court in Surajmull Sagarmull.12 It has been most elegantly
set out in D. Wren International Ltd v Engineers India Ltd 13 by a single
Court said:
Judge of the Calcutta High Court. Quoting American law, 14 that
“It must not be inferred from the rule that an
acceptance must be unconditional, that the mere
mention in a letter of acceptance of matters upon
which the acceptance of the proposition does not
depend prevents the contract from being completed.
There is authority to the effect that although an
acceptance which introduces a new term as part of the
proposed contract is insufficient, the mere addition to
the acceptance of a collateral or immaterial
requisition not warranted by the terms of the offer
does not prevent the contract from being completed.
Thus, immaterial or minor differences or variances
between the offer and acceptance will not prevent the
formation of a contract. Although a request for a change
or modification of a proposed contract made before an
acceptance thereof amounts to a rejection of it, a mere
12
13
14
Supra.
AIR 1996 Cal 424
17 Am Jur 2d Contracts § 65
enquiry as to whether one proposing a contract will alter
or modify its terms, made before acceptance or rejection,
does not amount to a rejection; and if the offer is not
withdrawn, it may be accepted within a reasonable time.
Requested or suggested modifications of an offer will
not preclude the formation of a contract where it
clearly appears that the offer is positively accepted
regardless of whether the requests are granted.
Where the acceptance of an offer is initially
unconditional, the fact that it is accompanied with a
direction or request looking to the carrying out of its
provisions, but which does not limit or restrict the
contract, does not render it ineffectual or give if the
character of a counter-offer. This rule has been held to
apply to a request for information as to the manner of
remitting the price, to a request to a proposed seller of
real estate to fix the date for closing the transaction,
to a buyer's suggestion for a time and place of
closing made in accepting an offer which specified no
time for closing, and to a mere suggestion or request
that payment of delivery be made at a place other than
that specified in the offer.”
22.
15
{emphasis supplied}
Williston also says:15
“Frequently an offeree, while making a positive
acceptance of the offer, also makes a request or
suggestion that some addition or modification be
made. So long as it is clear that the meaning of the
acceptance is positively and unequivocally to accept
the offer whether such request is granted or not, a
contract is formed. So an inquiry as to the meaning of
an offer, or a request for an explanation, will not invalidate
a positive acceptance; nor will a request for
modification of the offer coupled with an unqualified
acceptance not dependent on the granting of the
request...”
23.
{emphasis supplied}
Where, therefore, the term added is immaterial or collateral,
its addition will not prevent the formation of the contract. Similarly,
where the condition sought to be added is a condition subsequent,
the contract will be treated as complete and concluded. In
Jawaharlal Barman v Union of India,16 the Supreme Court held that
although Section 7 of the Contract Act demands that the acceptance
be absolute and unqualified, and not conditional, the document
must be read as a whole. In that case, the acceptance ‘subject to
making security deposit’ was treated as a condition subsequent, one
that did not affect the making of the contract.
24.
Of course this cannot apply to the introduction of a mterial
term as a condition precedent. But the material before me indicates
that the fixing or finalizing of the event schedule was not a condition
precedent and neither party treated it as such at any time prior to
the signing of the Sponsorship Agreement. The event schedule also
forms no part of that agreement. Even after it was signed, ROML
demanded a reworking of the schedule without denying the validity
of the contract, a matter that I will examine in slightly greater detail
in the discussion that follows.
25.
What Mr. Jain proposes is, I think, some sort of contractual
hybrid: an acceptance that is not an acceptance, a counter-offer that
both is and is not, and a contract that exists but only on a wholly
alien basis, unilaterally made. It is rather like saying “I will sign the
16
AIR 1962 SC 378
contract you have sent me, and I will return it to you, signed, but I
will do so in a form we did not intend by imposing a condition that
does not affect the bargain we struck.” This is no counter-offer. It is
not an unconcluded contract. It is a fully formed contract, with an
unqualified and absolute acceptance; the alteration by ROML is
inconsequential and must be ignored.
V
There is also other material to indicate why ROML’s case
26.
cannot be accepted in its entirety. From 24th February 2011 onward,
Reliance emailed ROML several times seeking a confirmation of the
schedule. There is no reply on record from ROML, and nothing to
reflect the views expressed for the first time in its email of 21st
March 2011 that the schedule was entirely “undoable”. The
principal reason in ROML’s email of 21st March 2011 — the IPL
tournament — was not something that could possibly have been
unknown to anyone: it was a widely advertised and publicized event,
and its schedule was known several weeks or months earlier. Any
issues that ROML may have had about a so-called conflict could not
have arisen so late in the day as after the signing of the Sponsorship
Agreement. There is nothing whatever to indicate that ROML
raised this issue at any time earlier.
27.
ROML says that there is intrinsic evidence to show that the
schedule was not fixed. It points to the event schedule differences
between Reliance’s emails of 28th February 2011 (Exhibit “D” to
the petition), 4th March 2011 (Exhibit 4th March 2011) and 18th
March 2011 (Exhibit “H” to the petition). Several event dates were
changed. Mr. Jain’s argument is that this is the clearest possible
indicator that dates were not fixed. Without the dates being agreed,
he submits, the contract was unworkable. I must disagree. Not only
are the event dates unrelated to the payment schedule, but the
changes in these dates seem to have been made at ROML’s instance.
This is the categorical assertion in Reliance’s email of 21st March
2011 (Exhibit “K” to the petition), and there is no express denial of
it. The upshot of all this correspondence is that while the dates of
the events were being altered and adjusted, neither party considered
this to in any way affect the terms of the overall agreement. Had the
scheduling been determinative — in the sense that without its
finalization there could have been no contract — it is reasonable to
expect that ROML would have said so. It did not; to the contrary,
both parties proceeded on the basis that the agreement could be
drawn up and executed regardless.
I have already addressed the issue of whether it is likely the
28.
Sponsorship Agreement was signed on 8th March 2011 (as ROML
contends) or 18th March 2011 (as Reliance says), and concluded that
Reliance’s version is the more likely of the two. The events and
correspondence immediately on and after 18th March 2011 are
significant. On that date, the first of the events (‘Big Bangla Movie
Awards’) had already taken place. On 18th March 2011, Reliance
wrote to ROML (Ex. H to the petition). In that email, it asked for a
meeting to finalize the schedule. That email came late at night, at
about 10:59 pm. 18th March 2011 was a Friday. On 21st March 2011,
the following Monday, ROML replied to Reliance (Ex. J to the
petition), saying that the schedule was ‘undoable’. This is the first
time that ROML is seen to express any specific reservations about
the schedule, although proposals had been flowing from Reliance
from as early as 24th February 2011. ROML asked for closure on the
schedule in a short tight-frame. More interesting is the fact that in
its email, ROML did not anywhere say (a) that there was no
agreement because the schedule was not finalized or fixed; or (b)
that it had demanded the finalization of the schedule as a material
term of the contract. Reliance replied a few hours later. Again, it
pointed out that four award dates had been previously rescheduled
at ROML’s instance and that a further three would now have to
rescheduled as well. It explained — and this is reasonable — that
every event required days and weeks of advance preparation and
that last-minute alterations were virtually impossible. ROML’s
correspondence in this regard does not, prima-facie, inspire
confidence. Its attempt to scuttle the events comes at the very last
29.
minute.
The most telling circumstance, however, is not what ROML
did or said, but what it failed to do or say. ROML could not have
been unaware that the events were going ahead. It had the dates. It
knew that one event had already taken place on 18th March 2011,
the day when it received Reliance’s email. At every one of these
events, ROML’s products, brands and logos were on display and
were being show-cased. There is not one document to show that
ROML told Reliance to stop all events or to withdraw ROML’s
brands, logos and name. It never said that there is no agreement. In
its email of 22nd March 2011 (part of Ex. “L-1” to the petition), it
fell back on the lack of finality in the dates and said only that a
“unilateral implementation of dates and unilateral
execution of event renders the event/s unimplemented
and there would be no liability on our part. (i.e. Raj Oil
Mills Ltd). Raj Oil Mills Ltd. would not be liable for making
any payments in such case.”
This, in my view, is sheer sophistry. There is no call from ROML to
withdraw its brands, logos and names from the events, or to not
associate ROML with the events. At the same time, ROML also
said, in that very email, that it was in no hurry to finalize the dates.
Now this must be seen in the context of the manner in which the
agreement came to be formed. The events were already proposed.
ROML was asked if it had interest in sponsoring those events. It
agreed. I do not believe that it could, after signing the Sponsorship
Agreement, invoke the so-called lack of finality of the event dates to
disclaim all financial liability. That it obtained a benefit from these
events cannot be doubted. In any equitable jurisdiction, this is a
facet that must weigh, and weigh heavily, against ROML. In
particular, I must note that the question of finalizing the dates of the
events proposed was not one that was left open in the agreement.
The reason, evidently, was the complete de-linkage between the
events and the payment schedule. The event dates were a collateral
matter. A lack of finality in those dates could not allow ROML to
evade all liability if, in fact, it derived benefit from the shows that
were indisputably held.
30.
VI
How should the company court’s jurisdiction under Sections
433 and 434 of the Companies Act, 1956 be exercised in a matter
such as this? Mr. Dwarkadas points out that ROML’s latest financial
returns show it to be making significant losses. It is, he submits,
commercially insolvent, and on account its neglect to pay its debt to
Reliance without just cause, ROML must be deemed to be unable to
pay its debts.17 But given the fact that ROML has a large number of
17
IBA Health (India), supra
employees and workmen and is in active business (hence the
Sponsorship Agreement), these commercial losses are not
necessarily indicative of its inability to pay all debts. It is also true
that though ROML may not be flourishing, it is certainly active. An
order of winding up is not, I believe, justified. However, prima-facie I
am not persuaded that its actions are anything but an ingenious
attempt or stratagem to obtain benefit from the events arranged and
organized by Reliance at which ROML and its products were
showcased, while avoiding all liability on grounds that I have found
to be inconsequential. I see no real substance in the defence, and the
manner in which ROML has conducted itself inspires no
confidence. The defence, however cleverly mounted, is, in my view,
specious and untenable. I have no hesitation in holding that ROML
is indebted to Reliance in the amount claimed. It is only because it
seems to be still active and has a substantial workforce that I am
inclined to give it a final opportunity to pay its debt to Reliance.
31.
Hence the following order:
(a)
The Company, Raj Oil Mills Ltd., shall pay to the
petitioners the sum of Rs.1,78,12,500/- together with
interest at the rate of 12% per annum from the date of
presentation of the petition in six (6) monthly
instalments, commencing from 1 March 2014. Each
successive instalment shall be due on or before the 1st
of each month.
(b)
Should the Company be in default in payment of any
one instalment, or should the entire amount be not paid
by 1st August 2014, then—
This petition shall revive and stand admitted
without further reference to the court, and shall
be made returnable within four weeks of such
default. Service of the petition on the company
under Rule 28 of the Companies (Court) Rules,
1959 shall be deemed to have been waived;
(ii)
The petition shall be advertised in two local
newspapers, viz., (1) the Free Press Journal (in
English) and (2) Navshakti (in Marathi); as also
The petitioners shall deposit a sum of
(iii)
ig
in (3) the Maharashtra Government Gazette;
Rs.10,000/- with the Prothonotary & Senior
Master, with intimation to the Company
Registrar, toward publication charges within two
weeks of such default, failing which, the petition
shall stand dismissed for non-prosecution.
32.
All contentions of the parties are expressly kept open.
The petition is disposed of in these terms.
34. 33. At this stage, learned Advocate for the Company seeks a stay
of this order for a period of four weeks. The application is opposed
by the learned Advocate for the petitioner. The order allows the
Company three weeks before payment of the first installment. The
application for stay is refused.
(G.S. Patel, J.)
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