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TMI Blog2016 (5) TMI 516X X X X Extracts X X X X X X X X Extracts X X X X ..... f RCC Box type minor bridges at CH-84700M to 114100M", in connection with laying down of Agra-Etawah new BG Rail Line. The appellant-a Limited Company applied for the said tender and its tender being the lowest one was accepted by the respondents on 14.03.2005 and accordingly the letter of acceptance was issued in appellant's favour. The contract agreement No. CE(C) 'North' ALD/A-E/Contract/EW-III dated 22.08.2005 was then signed between the parties. The total value of the contract was Rs. 14,62,46,742/-, the date of commencement of work was 14.03.2005 and the date of completion of work was 13.03.2007. As the work could not be completed within the prescribed time, on the request of the appellant-Company, the period of completion of work was extended twice by the respondents, firstly, from 14.03.2007 to 31.12.2007 and again upto 30.09.2008 without levy of penalty and with price variation clause benefit. 5) On 14.07.2006, the appellant-Company was granted another work by the respondents-North Central Railway vide letter No. 74-W/4/1/347/WA/ANVR/SERd./TCR for construction of New Station Building (G+2) circulating area, various service buildings, construction of platform shelters with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for the encashment of the said Bank Guarantee. 11) On 02.12.2011, the final bill for the Anand Vihar works were cleared by the respondents and the payment for the same was released by the respondents. 12) Since the disputes had arisen between the parties in relation to and arising out of the contract dated 22.08.2005, the appellant invoked Clause 36 read with Clause 64 of the General Conditions of Contract (in short "GCC") which provided for the settlement of dispute by arbitration. 13) After initiation of the arbitration, the appellant, on 04.01.2012, moved an application under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") before the District Judge, Allahabad bearing Arbitration Suit No. 411 of 2011 seeking injunction on encashment of the Bank Guarantee deposited by it in the Anand Vihar works, against the respondents. It was inter alia alleged in the application that the respondents-North Central Railway have no right to encash the Bank Guarantee No.12/2006 furnished by the appellant in relation to dispute arising out of another contract dated 22.08.2005. It was alleged that firstly, Bank Guarantee was not furnished by the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 04.01.2012, the District Judge allowed the application made by the appellant and restrained the respondents from encashing Bank Guarantee till appointment of arbitrator or constitution of Arbitral Tribunal. It may be mentioned here that the respondents did not file any appeal against this order, which attained finality. 16) By letters dated 20.01.2012 and 29.01.2012, the appellant then requested the respondents for return of its Bank Guarantee. 17) On 13.03.2012, an arbitration Tribunal was constituted as per Clause 32 read with Clause 64 of the contract between the parties which comprised of Shri Arun Kumar, CCE/NCR/ALD, Shri A.K. Bijalwan FA&CAO/F&B/NCR/ALD and Shri R. Rajamani Former CCRS & Member/Arbitrator to look into the claims and the counter claims of the parties. The arbitration proceedings are pending. 18) On 21.03.2012, the Deputy Chief General Manager/Const./SE Rd/NDLS wrote to the Branch Manager of the Indian Mercantile Cooperative Bank for extension of Bank Guarantee, which was valid upto 13.01.2012. On the request of the respondents, the Bank extended the period of Bank Guarantee for another six months, i.e., upto 13.07.2012. 19) On 04.04.2012, the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose for which the Bank Guarantee had been furnished was over as soon as the Satisfaction Certification was issued by the respondents in appellant's favour. Learned counsel, therefore, contended that the appellant became entitled to claim release of the Bank Guarantee in their favour on and after 30.09.2010 without any fetters on their rights. 27) In the second place, learned counsel urged that the respondents (North Central Railway) had no right to take recourse to Clause 62 of GCC for encashing the Bank Guarantee in question because firstly, the arbitration proceedings which arose out of another contract dated 22.08.2005 were still pending for final adjudication of the liability, if any, and secondly, so long as the liability as to how much sum was payable and if so by whom it was payable was not finally determined in accordance with law in the arbitration proceedings by the arbitrators, there was no "sum due" and nor any "sum payable" in praesanti by the appellant to the respondents and vice versa in connection with another contract. 28) In the third place, learned counsel contended that the District Judge, in the first instance, having rightly granted the injunction to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntractor, the purchaser shall be entitled to recover such sum by appropriating in whole or in part, the security, if any, deposited by the contractor, and for the purpose aforesaid, shall be entitled to sell and/or realise securities forming the whole or part of any such security deposit. In the event of the security being insufficient, the balance and if no security has been taken from the contractor, the entire sum recoverable shall be recovered by appropriating any sum then due or which at any time thereafter may become due to the contractor under the contract or any other contract with the purchaser or the Government or any person contracting through the Secretary, if such sum even be not sufficient to cover the full amount recoverable, the contractor shall on demand pay to the purchaser the balance remaining due." 34) The performance of the contract ran into difficulties and dispute arose between the parties giving rise to claims by either parties against the other. The respondent contended that the appellant committed a breach of the contract and was, therefore, liable to pay to the respondent a sum of Rs. 2,35,800/- by way of damages suffered by the respondent by reason of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on before this Court, were - first, what is the true interpretation of Clause 18; second what is the meaning of the words "sum due" and "may become due" under the contract or any other contract with the purchaser occurring in Clause 18; third, whether Clause 18 empowered the Union of India to make recovery of amount claimed by it by way of damages (liquidated or unliquidated) for breach of contract pending arbitration proceedings from the contractor and lastly, whether in such case, contractor is entitled to claim injunction against the Union of India from making recovery of such sum. 38) Justice Bhagwati (as His Lordship then was) speaking for the Bench examined the issue in great detail in the light of law laid down by English and Indian Courts. The learned Judge in his distinctive style of writing after examining the entire case law on the subject held that an expression "sum due" occurring in Clause 18 would mean a sum for which there is an existing obligation to pay in praesenti or in other words which is presently payable and due and, therefore, recovery of only such sums can be made subject matter of Clause 18 which is presently payable and due. It was held that a claim, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no liability at all upon the defendant. This statement in our view represents the correct legal position and has our full concurrence. A claim for damages for breach of contract is, therefore, not a claim for a sum presently due and payable and the purchaser is not entitled, in exercise of the right conferred upon it under clause 18, to recover the amount of such claim by appropriating other sums due to the contractor. On this view, it is not necessary for us to consider the other contention raised on behalf of the respondent, namely, that on a proper construction of clause 18, the purchaser is entitled to exercise the right conferred under that clause only where the claim for payment of a sum of money is either admitted by the contractor, or in case of dispute, adjudicated upon by a court or other adjudicatory authority. We must, therefore, hold that the appellant had no right or authority under clause 18 to appropriate the amounts of other pending bills of the respondent in or towards satisfaction of its claim for damages against the respondent and the learned Judge was justified in issuing an interim injunction restraining the appellant from doing so. 12. We acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Chemicals Industries Ltd. vs. Coal Tar Refining Company, AIR 2007 SC 2798 and U.P. State Sugar Corporation vs. Sumac International Ltd., (1997) 1 SCC 568, which laid down general principle relating to Bank Guarantee. There can be no quarrel to the proposition laid down in those cases. However, every case has to be decided with reference to the facts of the case involved therein. The case at hand was similar on facts with that of the case of Union of India (DGS&D) (supra) and hence the law laid down in that case was applicable to this case. Even in this Court, both the learned counsel did not bring to our notice the law laid down in Union of India (DGS&D) case (supra). 44) We are also of the view that the District Judge having decided the injunction application in the first instance in appellant's favour vide order dated 04.01.2012 erred in rejecting the application made by the appellant second time vide order dated 12.07.2012. It is not in dispute that the respondents despite having suffered the injunction order dated 04.01.2012 did not file any appeal against this order. Such order thus attained finality and was, therefore, binding on the parties. 45) In the light of foreg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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