K. K. Builders, Civil Engineering Contractors, Kerala v. General Manager, Southern Railway, Chennai
2006-06-13
S.RAJESWARAN
body2006
DigiLaw.ai
Judgment :- S. Rajeswaran, J. Application No.495/2005 has been filed under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter called "the Act") to stay the implementation of the order passed by the 2nd respondent under Ref. No. W.148/SM1533/CN dated 25.1.2005, dated 18.4.2000, 81/CN/2000, 89/CN/2000, 115/CN/2001 dated 16.4.2001, 145/CN/2001 dated 14/05/2001, 398/CN/96, 376/CN/99 dated 4.10.1999 and No.41 dated 31.1.2003 and No.89 dated 4.5.2000 and 144/CN/2002 dated 12.4.2002 for the security deposits and amounts of the petitioner. 2. A.No. 3372/2005 has been filed to direct the respondents to release the running bills, security deposits and other amounts which are entitled for the applicant in lieu of other agreements to the completed contracts and running bills relating to the running contracts, the sum of Rs.47,89,592/-. 3. The applicant partnership firm entered into an agreement dated 11.4.2000 with the 1st respondent and the 'nature of contract is doubling the track between Calicut and Cannore, construction of road over-bridge No. 1088 near Dharmdom. The general conditions of contract (GCC) provides for arbitration in Clause 63. The applicant firm has completed number of contracts but unfortunately the respondents have taken unreasonable stand in making the payments due to the applicant. In this contract alone the applicant is entitled to more than Rs. 40 lakhs. Apart from this contract, the applicant is entitled for payment of various other contracts from the respondents. The contracts are totally 16 in number. The security deposit in these contracts would itself come to a sum of Rs. 90 lakhs. As the respondents delayed the matter, the applicant was earlier forced to file a writ petition before the Kerala High Court. Even then, payments were not made necessitating the applicant to seek for arbitration. But the respondents forwarded the letters relating to other agreements directing them to withhold security deposit and also amounts for which the applicant is entitled to. A.No.495/2005 has been filed for the limited purpose of staying the implementation of order dated 25.1.2005 in relation to the various agreements mentioned therein. 4. This Court on 19.3.2005 granted interim stay until further orders. But at the intervention of the respondents informing this Court that a sum of Rs.
A.No.495/2005 has been filed for the limited purpose of staying the implementation of order dated 25.1.2005 in relation to the various agreements mentioned therein. 4. This Court on 19.3.2005 granted interim stay until further orders. But at the intervention of the respondents informing this Court that a sum of Rs. 33,16,177/- had already been withheld from and out of the amount payable by the respondents to the applicant, this Court on 24.3.2005 modified the order by granting interim stay for other amounts only by clearly stating that the interim order already granted would become inoperative to the extent of Rs. 33,16,177/-. 5. A counter affidavit has been filed on behalf of the respondents wherein it was stated that Clauses 52 and 52-A of the GCC enable the Railway administration to withhold amounts due to the applicant under the subject contract or any other contract between the applicant and any other department of the Railways or the Central Government pending adjudication in arbitration. The communication in respect of which stay has been sought for has been issued by the Railway administration on the basis of the Clauses 52 and 52-A of GCC which has been accepted by the applicant and they are binding on them. The validity of the said clauses has been upheld by this Court and the Hon'ble Supreme Court held that an application of this nature which in effect amounts to seeking a direction to pay the amounts due under other contracts is not maintainable. 6. The applicant has been awarded more than a dozen works under the jurisdiction of the 4th respondent and most of the works being high value contracts of Rs.1 crore and above. There was no wilful delay on the part of Railways in settling the final bills of the applicant and the final amount and the security deposits were not released and paid as the applicant has to pay Railways an amount of Rs. 33,16,177/- towards hiring charges and cost of materials not returned. As the available money and security deposit was insufficient, the Railway administration had no other alternative but to appropriate moneys from 2 other running contracts of the applicant to safeguard the interest of Railways. The amounts with held are the legitimate dues of the applicant to the Railways, i.e., the hiring charges for the Railway materials like steel cribs, wooden sleepers, rails, fish bolt, fish plate etc.
The amounts with held are the legitimate dues of the applicant to the Railways, i.e., the hiring charges for the Railway materials like steel cribs, wooden sleepers, rails, fish bolt, fish plate etc. There is no ambiguity or arbitrariness in quantifying the amounts the applicant is liable to pay. The amount is due by the applicant on account of the various materials given on hire to the applicant and the terms of the various materials given on hire to the applicant and the terms of hire are clearly given in the relevant Clauses 19.1.0 and 19.2.0 of special conditions of contract appended to the agreement. Therefore the contention of the applicant they have not yet arrived at the amount due to them is not correct. Railways have arrived at the hire charges of each class of materials based on the market rate and the same has been advised to the applicant under office letter dated 10.1.2005. 7. When the matter was pending before this Court, Application No.3372/2005, was filed by the applicant to direct the respondents to release the running bills, security deposits and other amounts for which the applicant is entitled to complete the contracts. In this application, the applicant has stated that he is entitled to final bill and security deposit for a sum of Rs.81,05,769/- whereas the recovery charges are only a sum of Rs.33,16,177/-. After deducting this recovery charges, the applicant was entitled to a sum of Rs.47,89,592/-. The applicant has also filed a petition under Section 11(4) of the Act before this Court to appoint an arbitrator and the same is pending. Hence the applicant has sought for a direction to release the balance amount. 8. A counter affidavit has been filed in A.No. 3372/2005 wherein it was stated that the sum of Rs. 33,16,177/- withheld by the respondents, represents dues by the applicant towards cost of hiring charges of Railway materials and cost of non-returned Railway materials given to the applicant during the execution of 5 different works, for which no amount was recovered nor paid by the applicant. The respondents denied the averment that the agreement dated 11.4.2000 has been terminated. The letter of termination referred to by the applicant is with regard to agreement dated 12.4.2002, the work of which was terminated at the applicant's risk and cost and the termination is not with reference to the agreement dated 11.4.2000.
The respondents denied the averment that the agreement dated 11.4.2000 has been terminated. The letter of termination referred to by the applicant is with regard to agreement dated 12.4.2002, the work of which was terminated at the applicant's risk and cost and the termination is not with reference to the agreement dated 11.4.2000. But the applicant is not clear as to whether they are referring to the agreement dated 11.4.2000 or the agreement dated 12.4.2002, as the two agreements are different in nature in all respects. The actual amount due in pending agreements of which two are terminated under the risk and cost and the assessment of risk amount and finalisation of the agreement are underway and after finalisation balance amount left with respondents would be approximately Rs. 34.00 lakhs. The final bill and security deposit of other contracts are to be withheld, pending quantification of the risk amount and adjudication of arbitrators. The respondents have clearly admitted that the running bills of the applicant will not be with-held on this account but only final bill and security deposit in terms of the letter dated 22.11.1990 will be withheld. After termination, due procedure is to be followed in floating and awarding risk tender which involves some time and if the said amounts are paid pending finalisation, the Railways would be put to irreparable hardship as sufficient amounts would not be available for being withheld. The respondents had admitted that after finalisation of all pending and terminated agreements, whatever amount is due to the applicant would be paid to him. The Railways has to safeguard the public money and in order to plug all the loopholes, finalisation of agreement is subjected to checks at various levels and the process is time consuming and it is inevitable. 9. Heard the learned counsel for the applicant as well as the respondents. I have also perused the documents filed in support of their submissions. 10. It is the case of the applicant that the Railways department without undergoing arbitration proceedings could not direct the issuing authority not to make any payment without even quantifying the claims of respondents which is an above (sic) of procedural law.
I have also perused the documents filed in support of their submissions. 10. It is the case of the applicant that the Railways department without undergoing arbitration proceedings could not direct the issuing authority not to make any payment without even quantifying the claims of respondents which is an above (sic) of procedural law. But as rightly pointed out by the learned counsel for the respondents, Clauses 52 and 52-A of GCC permit the Railways to withhold the payment due to the applicant not only in respect of present contract but also in respect of all other contracts. Having signed an agreement to that effect knowing fully well about its consequences, the applicant is estopped from raising the plea that the Railway administration should not invoke Clauses 52 and 52-A of GCC. But the learned counsel for the applicant has contended that if the Railways wanted to invoke Clauses 52 and 52-A of GCC, they should do so only after quantifying their claims and when quantification of such recoveries are not yet arrived at, the respondents could not issue the impugned letter dated 25.1.2005 directing that no refund or release of LSEMD, Security Deposit, etc., and payment of final bill should be done in respect of all works with the applicant till such time the entire risk amount is recovered from them. 11. But the learned counsel for the respondents submitted that due procedure is to be followed in floating and awarding the risk tender which involves some time. Therefore there is nothing wrong in issuing the direction to withhold the amount till such time the entire amount is recovered from the applicant. Even otherwise, after filing the above applications, the respondents have quantified the amount to be recovered and filed statements to that effect before this Court. The learned counsel for the respondents has also drawn my attention to the relevant Clauses, i.e., 19.1.0 and 19.2.0 of general conditions 'of contract, wherein the terms of the hire charges are clearly given. The learned counsel further added that having agreed to abide by the terms, the applicant cannot be permitted to resile from the same and rewrite the contract. 12. The question involved in this case is already settled by the Hon'ble Supreme Court in the judgment reported in H.M Kamaluddin Ansari and Co.
The learned counsel further added that having agreed to abide by the terms, the applicant cannot be permitted to resile from the same and rewrite the contract. 12. The question involved in this case is already settled by the Hon'ble Supreme Court in the judgment reported in H.M Kamaluddin Ansari and Co. v. Union of India AIR 1984 SC 29 : 1983 (4) SCC 417 , which was followed by another Bench of Hon'ble Supreme Court in the judgment reported in Santram and Co. v., State of Rajasthan and others 1997 (1) CTC 375. 13. The Hon'ble Supreme Court in H.K. Kamaluddin Ansari and Co. v. Union of India) (supra) has held as follows: "10. While construing the scope of Section 41 (b) of the Arbitration Act this Court held: The Court has, therefore, power under Section 4 1 (b) read with the 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 July 16, 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 Section 41 (b). With profound respect we find that the aforesaid observation is incongruous with the proposition of law laid down by this Court just before this observation. We find it difficult to agree with the observation of the Court that the impugned order in form and substance being the negative the respondent could refuse to pay such amounts if it thinks it has a valid defence, and if it chooses to do so there would be no breach of the injunction order. 21.
We find it difficult to agree with the observation of the Court that the impugned order in form and substance being the negative the respondent could refuse to pay such amounts if it thinks it has a valid defence, and if it chooses to do so there would be no breach of the injunction order. 21. The learned counsel Shri Kacker, however, strongly relied on the following observations of the Court in Union of India v. Raman Iron Foundry, AIR 1974 SC 1265 : 1974 (2) SCC 231 : 1974 (3) SCR 556 , (SCC p. 238, para 6): 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 injunction 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. 22.
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. 22. It is true that the order of injunction in that case was in negative form. But if an order injuncted a party from withholding the amount due to the other side under pending bills in other contracts, the order necessarily means that the amount must be paid. If the amount is withheld there will be a defiance of the injunction order and that party could be hauled up for infringing the injunction order. It will be a contradiction in terms to say that a party is injuncted from withholding the amount and yet it can with hold the amount as of right. In any case if the injunction order is one which a party was not bound to comply with, the Court would be loath and reluctant to pass such an ineffective injunction order. The Court never passes an order for the fun of passing it. It is passed only for the purpose of being carried out. Once this Court came to the conclusion that the Court has power under Section 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 and further that 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 and, therefore, the Court obviously could not make any interim order which, though ostensibly in form an order of interim injunction, in substance amount to a direction to the appellant to pay the amounts due to the respondent under other contracts, and such an order would clearly be not for the purpose of and in relation to the arbitration proceedings; the subsequent observation of the Court that the order of injunction being negative in form and substance, there was no direction to the respondent to pay the amount due to the appellant under pending bills of other contracts, is manifestly inconsistent with the proposition of law laid down by this Court in the same case. 27. The headings prefixed to a Section or a group of Sections in some modern statutes are regarded as preambles to those Sections.
27. The headings prefixed to a Section or a group of Sections in some modern statutes are regarded as preambles to those Sections. They cannot control the plain words of the statutes but they may explain ambiguous words. The view is now well settled that the headings or titles prefixed to a Section or a group of Sections can be referred to in determining the meaning of doubtful expressions. It is true that the Court is entitled to look at the headings in an Act of Parliament to resolve any doubt they may have as to ambiguous words. The law is clear that those headings cannot be used to give a different effect to clear words in the Section where there cannot be any doubt as to the ordinary meaning of the words. The golden rule is that when the words of a statute are clear, plain and unambiguous, that is, they are reasonably susceptible to only one meaning, the Courts are bound to give effect to that meaning irrespective of the consequences. The duty of a Judge is to ex-pound and not to legislate, is a fundamental rule. If we apply the same principle to the interpretation of Clause 18 of the standard form of contract, it would be clear that the Clause unequivocally contemplates a claim for the payment and it is open to the Union of India to appropriate any amount due to the contractor under other pending bills. It does not contemplate the amount due and, therefore, the heading of this Clause which talks of only 'Recovery of sums due' will not control Clause 18. The clause in our opinion gives wide powers t6 the Union of India to recover the amount claimed by appropriating any sum then due or which at any time thereafter may become due to the contractor under other contracts. 28.
The clause in our opinion gives wide powers t6 the Union of India to recover the amount claimed by appropriating any sum then due or which at any time thereafter may become due to the contractor under other contracts. 28. Clause 18 of the standard form of contract earlier was slightly differently worded and it read 'whenever under this contract any sum of money is recoverable from and payable by the contractor.' But this formula was deliberately and advisedly altered when the present standard form was introduced and instead the words 'whenever any claim for payment of a sum of money arises' were substituted and this change in phraseology indicated that in order to attract the applicability of the present Clause 18, it was not necessary that there should be a sum of money due and payable by the contractor to the purchaser, but it was enough if there was a mere claim on the part of the purchaser for payment of a sum of money by the contractor irrespective of the fact whether such sum of money was presently due and payable or not. This Court, however, did not attach importance to this aspect of the matter by observing (SCC p. 242, para 101): We do not think it is legitimate to construe Clause 18 of the contract between the parties by reference to a corresponding Clause, which prevailed in an earlier Standard Form of Contract. This is not a statute enacted by the Legislature where it can be said that if the Legislature has departed from the language used by it in an earlier enactment, it would be a fair presumption to make that the alteration in the language was deliberate and it was intended to convey a different meaning. It is a clause in a contract which we are construing and there, any reference to a similar or dissimilar clause in another contract would be irrelevant. 29. The Court itself while interpreting Clause 18 of the contract has observed (SCC p.240 para 8). It is true that the words "any claim for the payment of a sum of money" occurring in the opening part of Clause 18 are words of great amplitude, wide enough to cover even a claim for damages, but it is a well settled rule of interpretation applicable alike to instruments as to statutes....
It is true that the words "any claim for the payment of a sum of money" occurring in the opening part of Clause 18 are words of great amplitude, wide enough to cover even a claim for damages, but it is a well settled rule of interpretation applicable alike to instruments as to statutes.... But while dealing with another aspect of Clause 18 observed to the contrary that it should not be construed as a statute. It may, however, be pointed out that even after the change in the language of Clause 18 of the standard agreement the Union of India cannot be injuncted from withholding the amount under other bills of the contractor. But it can certainly be injuncted from recovering or appropriating it to the damages claimed. 31. We are clearly of the view that an injunction order restraining the respondents from withholding the amount due under other pending bills to the contractor virtually amounts to a direction to pay the amount to the contractor-appellant. Such an order was clearly beyond the purview of Clause (b) of Section 41 of the Arbitration Act. The Union of India has no objection to the grant of an injunction restraining it from recovering or appropriating the amount lying with it in respect of other claims of the contractor towards its claim for damages. But certainly Clause 18 of the standard contract confers ample power upon the Union of India to withhold the amount and no injunction order could be passed restraining the Union of India from withholding the amount." 14. The Hon'ble Supreme Court in the above judgment has clearly held that the law laid down in Union of India v. Raman Iron Foundry AIR 1974 SC 1265 : 1974 (2) SCC 231 is a contradiction in terms to say that a party is injuncted from withholding the amount and yet it can withhold as of right and such an injunction is an ineffective order. The Hon'ble Supreme Court further held that it is not necessary that there should be a sum of money due and payable by the contractor but it was enough if there was a mere claim for payment of the sum of money irrespective of the fact whether such sum of money was presently payable or not.
The Hon'ble Supreme Court further held that it is not necessary that there should be a sum of money due and payable by the contractor but it was enough if there was a mere claim for payment of the sum of money irrespective of the fact whether such sum of money was presently payable or not. Hence though the Government of India can certainly be injuncted from recovering or appropriating the amounts under the other bills of the contract to the damages claimed, it cannot be injuncted from withholding such amounts under the other bills. (emphasis supplied) 15. In Santram and Co. v. State of Rajasthan 1997 (1) CTC 375, the Hon'ble Supreme Court held as follows: "5. On merits, this Court had held in similar circumstances that such an injunction cannot be granted as it amounts to granting a relief which is not warranted under Section 41 (b) read with the Schedule of the Act. This Court had recorded a finding as under: "We are clearly of the view that an injunction order restraining respondents from withholding the amount due under other pending bills to the contractor virtually amounts to a direction to pay amount to the contractor-appellants. Such an order was clearly beyond the purview of Clause (b) of Section 41 of the Arbitration Act. The Union of India has no objection to the grant of an injunction restraining it from recovering or appropriating the amount lying with it in respect of other claims of the contractor towards its claim for damages. But certainly Clause 18 of the stand- direction to purchaser to pay the amounts due and contract confers ample power upon the to the contractor or under other contracts. Union of India to withhold the amount and no injunction order could be passed restraining the Union of India from withholding the amount." 6. The Division Bench decision on which reliance was placed, has reiterated that principle, namely, that "such an injunction can only be for the purpose of and in relation to the arbitration proceedings. The Court could not make an injunction order which, though ostensibly in the form of 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".
The Court could not make an injunction order which, though ostensibly in the form of 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". In fact, the ratio therein which the learned counsel tried to propound, was not approved and the said decision was expressly overruled in H.K. Kamaluddin's case AIR 1984 SC 29 : 1983 (4) SCC 417 . 7. It is seen that under Clause 50 of the contract, the appellant has expressly agreed for adjustment of the amount pending with the respondent in respect of the claim under the dispute or any other contract with the Department. Under these circumstances, neither on merits nor on principle of law, we find any illegality in the order passed by the High Court warranting interference." 16. In the above judgment also, the Hon'ble Supreme Court reiterated the legal position that a Court cannot make an injunction order which in substance amounted to direction to purchaser to pay the amounts due to the contractor or under other contracts. 17. In the present case if the interim injunction sought for is granted it would amount to a direction to the railway administration to pay the amounts to the applicant under other contracts and such an injunction cannot be granted by this Court. 18. 1 have already held in the order passed in O.A. No.683 of 2005, dated 12.6.2006 that the Railway administration is entitled to invoke Clauses 52 and 52-A to withhold payments pending arbitration and no injunction could be granted restraining the Railways from withholding the amount not only in the concerned contract but also under all other contracts. 19. It was also brought to my notice that a Retired High Court Judge was already appointed by this Court and the arbitral proceedings are going on and the parties herein are participating and adjudicating the disputes. 20. In such circumstances, it is for the applicant to expedite the arbitral proceedings by presenting all his claims to resolve the disputes. 21. In view of the above, A. No.495/2005 is dismissed. Consequently, A. No.3372/2005 is also dismissed, recording the averments made in the counter affidavit in this application filed by the respondents/Railway administration. Application dismissed.