UNION OF INDIA Vs. RAMAN IRON FOUNDRY:AIR FOAM INDUSTRIES PRIVATE LIMITED

JUDGEMENT

(1.) THESE appeals raise an interesting question relating to the interpretation of Cl. 18 of the General Conditions of Contract contained in the Standard Form of Contract No. D.G.S. and D. 68. That is the standard form in which contracts are entered into by the Central Purchase Organization of the Government of India for purchase of stores from third parties described as 'contractors' and the question of interpretation which arises for determination is, therefore, one of some importance, affecting as it does a large number of people who enter into such contracts with the Government of India. The facts giving rise to these appeals follow a common pattern and it would, therefore, be sufficient if we set out the facts relating to Civil Appeals Nos. 1224 and 1225 of 1973. They bring out clearly the point which arises for consideration in all the three appeals.

(2.) THE respondent tendered for supply of certain quantity of foam compound to the appellant and its tender was accepted by the appellant by Acceptance of Tender dated 16/07/1968. THE Acceptance of Tender was subject to the General Condition of Contract contained in the Standard Form of Contract No. D.G.S. and D. 68. THE only clauses of the General Conditions of Contract which are material for our purpose are clauses 18 and 24 and they read as follows:

(3.) IT was common ground between the parties that the order of interim injunction was made by the learned Judge under Section 41(b) read with the Second Schedule to the Indian ARBITRATION AND CONCILIATION ACT, 1940. Now Section 41(b) say that the Court shall have, for the purpose of and in relation to arbitration proceedings, the same power of making order in respect of any of the matters set out in the Second Schedule as it has for the purpose of and in relation to any proceedings before the Court and one of the matters set out in the Second Schedule is "interim injunction". The Court has, therefore, power under S. 41.(b) read with Second Schedule to issue interim injunction, but such interim injunction can only be "for the purpose of and in relation to arbitration proceedings". The arbitration proceedings in the present case were for determination of the mutual claims of the appellant and the respondent arising out of the contract contained in the Acceptance of Tender dated 16/07/1968. The question whether any amounts were payable by the appellant to the respondent under other contracts was not the subject-matter of the arbitration proceedings. The Court obviously could not, therefore, make an interim order which, though ostensibly in form an order of interim injunction, in substance amounted to a direction to the appellant to pay the amounts due to the respondent under other contracts. Such an interim order would clearly not be for the purpose of or in relation to the arbitration proceedings as required by Sec. 41(b). But here the order of interim injunction made by the learned Judge does not, expressly or by necessary implication, carry any direction to the appellant to pay the amounts due to the respondent under other contracts. IT is not only in form but also in substance a negative injunction. IT has no positive content. What it does is merely to injunct the appellant from recovering, suo motu, the damages claimed by it from out of other amounts due to the respondent. IT does not direct that the appellant shall pay such amounts to the respondent. The appellant can still refuse to pay such amounts if it thinks it has a valid defence and if the appellant does so, the only remedy open to the respondent would be to take measures in an appropriate forum for recovery of such amounts where it would be decided whether the appellant is liable to pay such amounts to the respondent or not. No breach of the order of interim injunction as such would be involved in non-payment of such amounts by the appellant to the respondent. The only thing which the appellant is interdicted from doing is to make recovery of its claim for damages by appropriating such amounts in satisfaction of the claim. That is clearly within the power of the Court under Section 41(b) because the claim for damages forms the subject-matter of the arbitration proceedings and the Court can always say that until such claim, is adjudicated upon, the appellant shall be restrained from recovering it by appropriating other amounts due to the respondent. The order of interim injunction made by the learned Judge cannot, therefore, be said to be outside the scope of his power under Section 41(b) read with the Second Schedule.