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Allied Construction Co. Vs. Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtOrissa High Court
Decided On
Case NumberCivil Revns. Nos. 33 and 34 of 1976
Judge
Reported inAIR1976Ori221; 42(1976)CLT996
ActsCode of Civil Procedure (CPC) , 1908 - Sections 115 - Order 39, Rule 1; ;Arbitration Act - Sections 8 and 20
AppellantAllied Construction Co.
RespondentUnion of India (Uoi) and ors.
Appellant AdvocateR. Mohanty and ;S.C. Ghosh, Advs.
Respondent AdvocateStanding Counsel
DispositionApplication allowed
Cases ReferredL. Subudhi Bros. v. D. Bhaskar
Excerpt:
..... - the learned trial judge failed to appreciate the distinction between secu-rity in the shape of bank guarantee and security in terms of cash. the court had been moved well in time and long before the guarantees were to lapse. (3) an interlocutory order deciding a question of this kind as distinguished from purely formal and incidental orders is a case decided within the meaning of section 115. (4) such an order will, however, be open to revision only if the other conditions expressly laid down in section 115 are satisfied and the order has resulted or is likely to result in such gross injustice or irreparable injury as cannot be remedied otherwise than by the exercise of the extraordinary jurisdiction of the high court at that stage. i am thus satisfied that the learned subordinate..........alternative form as the authorities would approve. in the instant case, petitioner-firm furnished bank guarantees for the aforesaid amounts through the central bank of india, cut-tack branch, and while the guarantee for rs. 25,500/- was valid till 25-4-1975, the other one was to remain in force till 31-12-1975.disputes arose between the contracting parties and on the basis of the arbitration clause contained in the contracts the petitioner-firm applied to the court of the learned subordinate judge at balasore under sections 8 and 20 of the arbitration act for filing of the arbitration agreements and for reference of the disputes to an arbitrator. while the cases were pending in the court of the learned subordinate judge, the petitioner applied under order 39, rule 1 of the code of civil.....
Judgment:
ORDER

R.N. Misra, J.

1. Petitioner is a firm of contractors which undertook construction of certain buildings for the defence authorities at Balasore and Chandipur. Two separate contracts were to be executed and petitioner was required to make initial security deposits of Rs. 60,000/-and Rs. 25,500/- which were to be in cash or at the request of the contractor could be in any prescribed alternative form as the authorities would approve. In the instant case, petitioner-firm furnished Bank guarantees for the aforesaid amounts through the Central Bank of India, Cut-tack Branch, and while the guarantee for Rs. 25,500/- was valid till 25-4-1975, the other one was to remain in force till 31-12-1975.

Disputes arose between the contracting parties and on the basis of the arbitration clause contained in the contracts the petitioner-firm applied to the Court of the learned Subordinate Judge at Balasore under Sections 8 and 20 of the Arbitration Act for filing of the arbitration agreements and for reference of the disputes to an arbitrator. While the cases were pending in the Court of the learned Subordinate Judge, the petitioner applied under Order 39, Rule 1 of the Code of Civil Procedure for an injunction against the opposite parties from encashing the guarantees on the ground that the security was intended to be utilised in the event of loss or damage arising out of breach of contract by the contractor andno claim on such score having become due, the guarantees could not be encashed. The learned Subordinate Judge rejected both the applications by saying almost in similar terms thus :--

'............ It was contended on behalf of the petitioner that the opposite parties cannot, when the matter is sub-judice, themselves decide that the amount of Rs. 25,500/- (and in the other case Rs. 60,000/-) is liable to be forfeited and the same has to be decided by the proper authority. At the same time it must be said that in place of Bank Guarantee, the plaintiff-petitioner might also have made cash deposit with the opposite parties by way of security under the contract, in which case the money would have been at the entire disposal of the opposite parties. So, because the security is in the form of Bank guarantee it does not mean that the opposite parties would have no control over the same as such security forms a part of the original contract. If ultimately it would be found that the opposite parties are at fault, they would be compelled to return the amount in pursuance of any decree that may be passed. Loss of money for the present does not, in my opinion, constitute any irreparable injury which cannot be compensated by way of damages or compensation. At any rate, the petitioner is not going to get the amount of the security deposit so long as its payment to the opposite parties has been guaranteed. There is, therefore, no compelling reason to restrain the opposite parties as prayed for ... ... ... ... '

These revision applications are directed against the said order. The original proceeding being under the Arbitration Act, though a similar order otherwise made would have been appealable, no appeal lies against refusal of injunction.

2. Learned Counsel for the defendants-opposite parties does not dispute that the stage for appropriating the security money had not arisen as there is no ascertained claim yet for compensation on account of breach of contract. It is not disputed that the learned trial Judge correctly stated the position that the security was intended to be used only when such a claim arose. It is true that the security deposit could be furnished in different modes and if petitioner had furnished cash security, the money would have been at the disposal of the opposite parties. On being moved by the petitioner, the appropriate opposite parties had permitted the firm to furnish security in an alternative mode, i. e. by Bank guarantee. A Bankguarantee is a very convenient mode of furnishing security and for a commercial; firm furnishing of & bank guarantee is an easier mode than furnishing security in cash. The learned trial Judge failed to appreciate the distinction between secu-rity in the shape of bank guarantee and security in terms of cash. If the distinction had been maintained and the inconvenience which would be caused by encashment of the guarantee had been noticed, the learned Subordinate Judge would not have disposed of the matter by accepting the contention that if cash security had been furnished, petitioner could not have made the grievance in question. The Court is not called upon to consider what would have happened if cash security had been initially furnished. The learned trial Judge has further stated that there was no irreparable loss and if ultimately the withdrawal of the amount is found to be unjustified, the petitioning firm could be compensated. The Court had been moved well in time and long before the guarantees were to lapse. If these aspects had been kept in view, the defendants could have been restrained from encashing the guarantees and the petitioner-firm could have been directed to furnish new bank guarantees to satisfy the requirement of the contracts.

3. Two objections have been raised on behalf of the opposite parties: firstly, that the impugned order of the learned Subordinate Judge does not amount to a 'case decided' and, therefore, the revisions do not lie; and secondly even if revisions lay, within the purview of Section 115 of the Code of Civil Procedure, there was no scope for interference. Reliance has been placed on the decision of the Supreme Court in the case of Baldevdas v. Filmistan Distributors, AIR 1970 SC 406, in support of the proposition that the impugned order does not amount to 'a case decided'. A Bench of this Court in the case of K L. Subudhi Bros. v. D. Bhaskar, ILR (1972) Cut 628, considered at length the interpretation to be placed on the expression 'case decided' viewed from Section 115 of the Code of Civil Procedure, Therein, it has been observed:--

'For a long time the exact meaning and scope of the word case was subject to keen difference of opinion between different High Courts in India. The word case is not defined either in the Civil Procedure Code or in the General Clauses Act The dictionary meaning of the word is 'the state of facts judicially considered'. It is not clear whether this means the stateof facts of the whole case or only a branch of a case and whether the word case is synonymous in its scope to the word suit or it is wider. This gave rise to two interpretations of the word case. According to one interpretation, the word is wide enough to include not only the order finally disposing of the case but also an interlocutory order. The second and which is a narrow interpretation is that the words case decided do not include a part of the case decided; in other words,they do not include interlocutory orders.....'

The, Court examined several decisions and came to the following conclusion:--

'An analysis of Section 115, Civil Procedure Code, in the light of the principles elucidated in the decisions of the various High Courts and the Supreme Court lead to the following conclusions:(1) That the word case under Section 115, Civil Procedure Code, does not always mean the whole suit. It is of a very wide import, and means any state of facts juridically considered.

(2) It is wide enough to include a decision on any substantial question in controversy between the parties affecting their rights even though such order is passed in the course of the trial of the suit.

(3) An interlocutory order deciding a question of this kind as distinguished from purely formal and incidental orders is a case decided within the meaning of Section 115.

(4) Such an order will, however, be open to revision only if the other conditions expressly laid down in Section 115 are satisfied and the order has resulted or is likely to result in such gross injustice or irreparable injury as cannot be remedied otherwise than by the exercise of the extraordinary jurisdiction of the High Court at that stage.

(5) ... ...'

Rejection of an application for grant of injunction by application of this test would certainly amount to a case having been decided. The first objection raised on behalf of the opposite parties must accordingly be repelled.

4. The next point for consideration is whether it is a case which calls for interference. As I have pointed out, there is no dispute that the learned Subordinate Judge had jurisdiction to grant an injunction as prayed for. The refusal to restrain the defendants from encashing the bank guarantees was mainly due to not maintaining the distinction betweenthe cash security and the bank guarantee and the effect of encashing the guarantee before entitlement was ascertained. Petitioner did not claim that the guarantees should be released. All that the petitioner insisted upon was that the guarantees must continue in the same shape until the defendants had a right to encash the guarantees. There has been no dispute at all either before the learned trial Judge or before me that the condition precedent for encashing the guarantees had not yet happened. In that view of the matter, there was absolutely no justification for I encashing the bank guarantees and depositing the amount as security except for the apprehension that they might lapse and petitioner-firm may not renew the guarantees. In fact, learned Standing Counsel has advanced that as the only justification for encashing the guarantees. I am thus satisfied that the learned Subordinate Judge failed to exercise jurisdiction vested in him by not applying his mind to the matter properly. Consequently injustice has resulted. It is stated that on account of refusal of injunction, the opposite parties had already encashed the amounts and have deposited the same in a suspense account pending determination of petitioner's liability.

5. Taking note of all these aspects, I would allow the applications and give the following directions :--

(1) Petitioner shall furnish bank guarantees for the sums of Rs. 25,500/- and Rs. 60,000/- as it had done earlier within a month from today. These guarantees shall be valid for one year. On the guarantees being made over to the concerned defendants, the amounts taken from the Bank shall be refunded to the petitioner-firm within two weeks thereafter.

(2) One month before the expiry of the guarantees, the same should be renewed and renewal notified to the appropriate defendants until the plaintiff ceases to have its liability under the contracts which could be adjusted out of the security.

(3) In the event of failure to have the guarantees renewed in terms of the earlier direction, it shall be open to the appropriate defendants to encash the securities before the same would be due to lapse by efflux of time.

Both parties are directed to bear their own costs of these proceedings.


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