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Ranjit Chandra Mitter Vs. Union of India (Uoi) - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberMatter No. 1 of 1962
Judge
Reported inAIR1963Cal594
ActsArbitration Act, 1940 - Section 41
AppellantRanjit Chandra Mitter
RespondentUnion of India (Uoi)
Appellant AdvocateSubimal Roy, ;A.C. Bhabra and ;Salil Roy Chowdhury, Advs.
Respondent AdvocateSomenath Chatterjee, Adv.
DispositionApplication dismissed
Cases ReferredChedilal v. Brit Over Ltd.
Excerpt:
- .....'for the purpose of or in relation to arbitration proceedings.' it is not in terms limited to 'pending arbitration proceedings' and i do not see why the word 'pending' should be added to the section. further the application for injunction has been made in a suit which is pending and which has not yet been stayed and this court has power, apart from section 41 of the indian arbitration act, to make an order for interim injunction in a pending suit under the code of civil procedure as well as in exercise of its inherent powers',it seems to me that, having regard to the pendency of the suit, the point raised by mr. chaudhuri lost its importance according to the learned judge and the learned judge issued injunction in the pending suit. there is no doubt a criticism of mr. chaudhuri's.....
Judgment:
ORDER

P.C. Mallick, J.

1. This is an application for injunction. The object is to restrain the Union of India from accepting a tender for works of any other Contractor in respect to which the petitioner alleges to have a subsisting contract with the Government The application is made under the Indian Arbitration Act. There is no arbitration fending, though it is alleged in the petition that there is a dispute which is covered by the arbitration clause and the petitioner has already claimed that the disputes should be adjusted by arbitration. The petitioner is a contractor, and the contract subsisting between him and the Government is evidenced by an A/T dated March 16, 1960. The subject matter of the contract is construction works at Bon Hooghly. The estimated cost of the works is Rs. 5, 88, 938/-. The petitioner took up the construction works and from time to time Was paid on the running bills a total sum of Rs.1,30,000/-. The time within which the works were to be completed has long past. The petitioner's case is that the responsibility for the delay in completion is on the Union of India. It may be stated that the Government found fault with the construction of certain pillars, which according to the Government was not according to the specification and no payment was made on the running bills in respect to this work. The contractor further makes a grievance that by reason of the rising prices the contractor requested a revision of rates which request was unreasonably turned down by the Government. Attempt to iron out the differences between the parties having failed and the work not having been completed the petitioner Was notified by a letter of July 31, 1962 that he had not carried out the works with due diligence. He was called upon to show cause why action should not be taken against him under Clause 2 of the Conditions of the Contract. Steps indicated included the rescission of the contract under Clause 3(a) and to get the balance of the work done by another agency. By a letter dated October 31, 1962, the Government rescinded the contract and gave notice that the unexecuted part of the work would be completed by some other agency. On November 21, 1962 advertisements were issued inviting tenders for the unexecuted works. On December 21, 1962 the present notice was taken out. Four days prior, by a letter addressed by the solicitor of the petitioner dated December 17, 1962, to the Development Commissioner, the petitioner called upon the Development Commissioner to appoint an arbitrator under the arbitration clause to adjust the disputes and differences between the parties. In default of compliance within 3 days from the receipt of the letter, legal proceedings were threatened. A copy of this letter was sent to the Secretary, Ministry of Commerce and Industry.

2. It is contended by Mr. Subimal Roy learned counsel appearing for the petitioner that the Development Commissioner on behalf of the President will only be entitled to rescind the contract and to take the unexecuted part of the works out of the hand of the contractor and give it to another contractor, provided the contractor has made himself liable to pay compensation for breach committed by him. In the case of admitted breach, the Government may be empowered to act in terms of Clause 3 of the Contract. But if the contractor denies to have committed the breach, then there is a dispute. Before adjudication of the dispute by arbitration, there is no power under the contract to take the unexecuted works out of the hand of the contractor and give it to another contractor for completion. This is exactly what the Government is wrongfully trying to do in the instant case. That is the simple and clear case of the contractor.

Mr. Roy cited a decision of Farwell I. in the case of Foster and Dicksee v. Hastings Corporation, (1903) 87 LT 736. In this case a contractor was employed to sink certain wells. The work was to be performed to the satisfaction of the defendants' engineer and any dispute between the parties war, to go to arbitration. Difficulty having arisen in carrying out the work and delay being thereby occasioned, the Council gave notice dismissing the contractor. The contractor thereupon instituted a suit for injunction and asked for interim injunction in the suit. Farwell J. who heard the application granted the injunction In this judgment the learned Judge observed in the opening paragraph that the case turns solely on the true construction of the clauses in the contract. The question involved was expressly stated to be of some difficulty and nicety, and, had it not been an interlocutory application and a matter of some urgency upon which the learned Judge was bound to give judgment at once, the learned Judge would have preferred to reserve his judgment and gone into the matter more fully. At page 739 the learned Judge gave his reasons for his decision as under :

'I quite accept the argument that the Court cannot grant an injunction which can only be a necessarily incidental relief to the claim for specific performance. But if I can find, in addition, there arises necessarily out of an affirmative clause negative words, then the Court always could enforce the negative provisions of the contract. . . . ....... The general rule on the subject is very briefly and tersely stated by Bowen L. J. in one sentence in the case of Oriental Steamship Co. v. Taylor, (1893) 2 QB 518 at p. 527, namely 'where the contract as expressed in writing would be futile and would not carry out the intention of the parties, the law will imply any term obviously intended by the parties which is necessary to make the contract effectual'. Now, assuming that I am right in the view I have taken of the construction of the contract, it would be futile if the defendant in this case can turn out the contractor brevi manu without giving time to go to arbitration. To my mind, in order to give effect to the contract and carry out the intention of the parties, it is necessary to imply the negative clause, that they will not act upon any of the summary clauses as to which a reference to arbitration is given, if arbitration is properly claimed, unless the arbitrators shall have affirmed the judgment of the Engineer ....... I am more disposed to come to this conclusion because it does seem to me that the contractors have been carrying out the work without complaint and unless and until there is some explanation, there is certainly some apparent suspicion that it is the Council and not the Engineer who has been acting. It is very desirable therefore that the status quo allowing the contractors to go on should be preserved. ......'

3. The point to be noted is that, according to the learned Judge himself, the judgment is not a well considered judgment. Secondly, on a construction of the contract the learned Judga implied in it a negative covenant to the effect that till adjudication of the dispute under the arbitration agreement the contractor was not liable to be relieved of his works. Thirdly, the learned Judge noted that the work was being properly done by the contractor and there was no complaint against him. There were circumstances to raise a clear suspicion that the contractor was dismissed improperly by the Council and not by the Engineer. Lastly, the order for injunction was made in a pending suit. It is not for me to construe the contract in the cited case and express my opinion whether such a negative covenant can be implied on a proper construction of the said contract. An agreement to do an act, in one sense, implies that it would not be done by any other. From that point of view in every suit for specific performance an application for an injunction can be successfully maintained. But as noted by the learned Judge himself that no such injunction should be issued because if the allegation of breach by the defendant is proved at the trial, the plaintiff will be compensated in damages. Negative covenant is enforced by the Court, if there is an express covenant and very rarely, if at all, such a negative covenant is implied in the class of cases we are considering. The law of specific performance in India is regulated by Statute and Sections 12 and 21 of the Specific Relief Act make it clear beyond doubt that a decree for specific performance would only be passed if the act agreed to be done is such that pecuniary compensation for its non-performance would not afford adequate relief. Section 21(a) expressly lays down that a contract cannot be specifically enforced, for the non-performance of which compensation in money is an adequate relief. So also Section 21(b) provides that there can be no specific performance of a contract which runs into such minute or numerous details or otherwise from its nature is such, that the Court can't enforce its material terms. It is very strongly urged by Mr. Chatterjee appearing for the respondent that a building contract of the instant character cannot be specifically enforced. If there is a breach of such a contract the remedy is to compensate the party damnified in damages. In Hudson's Building and Engineering Contracts (8th Ed.) 405 a reference is made to the case of (1903) 87 LT 736 as a case in which an injunction was granted. The comment made by the learned author on this decision, is as follows:

'It is difficult to see on what principle this case proceeded as no decree for specific performance could have been obtained. The case turned solely upon the construction of the particular contract, and it was decided upon an interlocutory application and as a matter of urgency.'

4. In Donald Keating's Law and Practice of Building Contracts (2nd Ed.) the equitable remedies open to a contractor on a wrongful termination of the contract is stated in the following terms:

'In the ordinary case, the contractor cannot obtain an injunction restraining forfeiture by the employer because this would be equivalent to specific performance of the contract and the Court does not normally grant this remedy in the case of a building contract. The contractor can be adequately compensated in damages for any wrongful forfeiture.'

5. Reference was also made to the Building Contracts and Practice by Emden and Watson (6th Ed.) 207-208. -

6. I am unable to hold that the decision in (1903) 87 LT 736 covers the instant case and following the said decision, I should issue an order of injunction. I am unable to hold that in the instant case the forfeiture clause and arbitration clause should be read together and that a negative covenant should be implied so as to make the decision of the arbitrator a condition precedent to the right of forfeiture by the owner. I consider the instant contract to be nothing more than an ordinary building contract and on a wrongful forfeiture of such a contract by the owner, the contractor is only entitled to damages and to no specific performance.

7. An interesting point has been raised by Mr. Chatterjee, which, if sustained, would make the decision in the Law Times case, (1903-87 LT 736) inapplicable. The proposition contended for by Mr. Chatterjee, is that in the case of Government contract, which must comply with the conditions laid down in Article 299 of the Constitution, the terms and conditions of the contract must be express and there cannot be any implied terms. He confesses that this is a point of first impression and there is no decided authority on the point. Having regard to my decision, as stated above, it is not necessary to give a decision on this important point and I express no opinion on it.

8. Mr. Chatterjee also contended that there being no arbitration proceeding pending, this application under Section 41 of the Arbitration Act does not lie. Prior to the taking out of this notice, there may be dispute, and an arbitration clause in the contract may cover the dispute. But the dispute has not been referred to any arbitrator yet in the instant case. Only four days prior to the taking out of the Notice of Motion, i.e., on 17th December 1962, the petitioner's solicitor called upon the Development Commissioner to appoint an arbitrator in terras of the arbitration clause. In default of compliance within three days of the receipt of the letter, legal proceedings were threatened. A copy of this letter was sent to the Secretary, Ministry of Commerce and Industry. Mr. Chatterjee contends that this is not a proper letter asking for the appointment of an arbitrator. The proper person to be called upon to nominate an arbitrator in terms of the arbitration clause is the Secretary, Ministry of Commerce and Industry. The letter, however, has been addressed to the Development Commissioner and not to the Secretary of the appropriate Ministry. A copy of the letter no doubt was sent to the Secretary, but this is not the same thing as calling upon the Secretary to nominate an arbitrator. It is the common case that no arbitrator has been appointed and no arbitration proceeding is pending. I agree with Mr. Chatterjee that the letter of December 17, 1962 is not a proper letter asking for the appointment of an arbitrator in terms of the arbitration clause. I further agree with him that in any event at the date of the application, or even now, no arbitration proceeding is pending. Mr. Chatterjee therefore is entitled to contend that as there is no arbitration proceeding pending, no interlocutory application for injunction under Section 41 of the Arbitration Act would lie.

9. Mr. Bhabra appearing for the petitioner, submitted that an application under Section 41 would be maintainable even if no arbitration proceeding is pending. He relied on a decision of S. R. Das, J., (as he then was) in the case of Chedilal v. Brit Over Ltd., in 52 Cal WN 45. The observation relied on appears at page 48 and reads as follows:

'Mr. Chaudhuri refers me to Section 41 of the Arbitration Act and contends that the Court cannot under that section make any order for interim injunction unless there is an arbitration proceeding actually pending. That section provides inter alia that, subject to the provisions of the Act and of the rules thereunder, the Court shall have, for the purpose' of, and in relation to, arbitration proceedings the same power of making orders in respect of any of the matters set out in the Second Schedule as it' has for the purpose of or in relation to, any proceeding before the Court. The fourth item in the Second Schedule comprises 'interim injunction or the appointment of a receiver'. This power is conferred on the Court 'for the purpose of or in relation to arbitration proceedings.' It is not in terms limited to 'pending arbitration proceedings' and I do not see why the word 'pending' should be added to the section. Further the application for injunction has been made in a suit which is pending and which has not yet been stayed and this Court has power, apart from Section 41 of the Indian Arbitration Act, to make an order for interim injunction in a pending suit under the Code of Civil Procedure as well as in exercise of its inherent powers',

It seems to me that, having regard to the pendency of the suit, the point raised by Mr. Chaudhuri lost its importance according to the learned Judge and the learned Judge issued injunction in the pending suit. There is no doubt a criticism of Mr. Chaudhuri's argument in that he was attempting to import the word 'pending' in Section 41 which was not warranted. But the learned Judge did not feel called upon in the view taken by him to give a meaning to the expression 'arbitration proceeding' in Section 41. I am, therefore, unable to hold that the above passage is an authority for the proposition that the Court can issue an injunction even in the absence of any arbitration proceeding provided there is a dispute which can become the subject-matter of an arbitration proceeding under an arbitration agreement subsisting between the parties. An interim relief under Section 41 can only be asked for and granted by the Court in some proceeding or in a pending suit. In the absence of such a proceeding, in my judgment, an application under Section 41 is not maintainable. No case has been cited in which the Court passed an order under Section 41 in which no arbitration proceeding is pending, nor do I know of any. Mr. Bhabra and Mr. Roy Chowdhury submitted that this construction will lead to very great hardship. When there is a dispute which is covered by an arbitration agreement, there is always a time lag between the dispute and the reference. A good deal of mischief would be done in between if it is construed that the Court is debarred from entertaining an application for interim relief provided for in Section 41 of the Arbitration Act. I do not however find any hardship because of the so-called time lag. It is true that if the party proceeds under Chapter II of the Arbitration Act, there may be a time lag between the dispute and the arbitration proceeding. But the parties may well proceed under Section 20 of Chapter 111 of the Arbitration Act and such an application can be filed forthwith. Once an application is filed under Section 20, there is a proceeding -- a pending suit and an application for interim relief can be asked for in that proceeding. For reasons given above, I hold that in the absence of any arbitration proceedings in the instant case, the present application for injunction under Section 41 is not maintainable in law.

10. Granting of an interim relief like the appointment of a Receiver or an injunction, is always a matter of discretion. True, the discretion must be judicially exercised. In exercise of this discretion, the Court has to look to the balance of convenience. In the instant case, the granting of an injunction will further delay the construction work considered very urgent by the Government. Reversely even if the contractor succeeds ultimately that he was not guilty of having committed any breach and the offending party is the Government, the contractor will be compensated in damages. Indeed, in the solicitor's letter dated December 17, 1962, loss and damage suffered by the contractor has been quantified. If further damage is suffered, it can also be quantified. Having regard to these facts, it must be held that the balance of convenience in the instant case lies in not granting an injunction. The discretionary relief prayed for must therefore be refused on this ground as well.

11. I refrain from giving my view on the merits of the dispute. Any observation made by me in this judgment should not prejudice either party in any future proceeding that the parties may initiate. I do not think, therefore, proper to give my view on the merits except such as I must. By way of abundant caution I want, however, to record that nothing said in this judgment, should be taken into consideration, when the disputes between the parties on merit are decided in any future proceeding that any party may be advised to initiate.

12. Mr. Chatterjee contended that there has been suppression of material facts in the petition and an interim order has been obtained from the Court wrongfully by suppressing such material facts. He submits, therefore, that on this ground the application should be thrown out in limine. Mr. Roy Chaudhury contended that his client is guilty of no suppression and all facts will appear either in the petition or in the annexure to the petition. Having regard to my view indicated above, I do not think it necessary to decide the question.

13. In the result, the application fails and is dismissed. Interim order is vacated. Parties will bear their own costs.


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