Concrete Products Construction Co. vs Chief Engg Southern Railway

Vinod K. Sharma, J.—This application u/s 9 of the Arbitration and Conciliation Act, 1996, has been filed by M/s. Concrete Products &

Construction Company with the prayer for issuance of ad-interim injunction, restraining the respondent/Railways from recovering any amount from

the applicant in pursuance to the proceedings of the respondent in W456/4/CS/160/updation dated 10.07.2012 and in proceedings No.

W456/4/CS/ABU/160/07 dated 09.08.2012 insofar as it relates to C.S. No. 160 of 2007, pending disposal of the arbitration proceedings

between the applicant and respondent Railways. In support of the application, it is pleaded as under:

I am the Joint Managing Partner of the Petitioner Company herein and I am well acquainted with the facts and circumstances of the above case.

It is submitted that the Petitioner Company is involved in the manufacture and supply of Pre-Stressed Mono-block Concrete Sleepers. In the

year 2008, the Petitioner Company participated in a tender (C.S. 160/2007) for the manufacture and supply of Pre-Stressed Mono Block

Concrete Sleeper for broad gauge. Accordingly, the Petitioner Company was successful in the tender and Agreement No. CE/7/CS of 2008

dated 10.11.2008 for manufacture and supply of 40,000 Nos. of Pre-Stressed Mono Block Concrete Sleeper was entered into between both the

Petitioner and the Respondent herein. According to the agreement the said order was to be completed within 4 months from the date of issue of

the acceptance letter i.e. By 14.01.2009. The rate per sleeper was fixed at Rs. 1132/-. The Agreement, among other conditions, also contains the

provisions for reference to Arbitration, if there is any dispute between the Petitioner and Respondent Railway in so far as to it relates to the above

mentioned Agreement.

It is submitted that subsequently in the year 2009, the Respondent increased the number of sleepers to be supplied from 40,000 nos. to

1,60,000 nos. vide Rider Agreement No. CE/RIDER3/CS of 2009 dated 24.02.2009. The date of completion of the said amended/increased

order was fixed as 31.10.2009. The rate per sleeper was unaltered and it was also mentioned in the rider agreement that on the finalization of a

new tender the ordered quantity in the current tender/agreement (C.S. 160/2007) shall be reduced to the number of sleepers manufactured till the

date of issue of Letter of Acceptance (LOA) for the new contract. The Respondent Railway has included this option mainly because upon

finalization of the rates in the new tender, the Respondent Railway usually directs (i) the Petitioner to supply the remaining number of sleepers in the

old contract in the new rate, i.e., if the new rate is lower than the old rate, or (ii) may direct the Petitioner to complete the old contract and supply

the product at the rate mentioned therein, if the new rate is higher than the old rate.

It is submitted that subsequently the Petitioner and the Respondent entered into another Rider Agreement No. CE/RIDER1/CS of 2010 dated

24.01.2010 wherein the date of completion of the above mentioned order was fixed as 31.01.2010. The Respondent Railway had in the latter

rider agreement stipulated that the rate payable will be the updated rate of existing contract or the rate finalized against the new contract, whichever

is lower, for completion of the running/current contract.

It is submitted that subsequently in November, 2009, the new tender i.e. C.S. 162/2008 was finalized, wherein the rate specified was lower

than the current contract. Accordingly, in December 2009, the Respondent Railway foreclosed the current contract being performed by the

Petitioner. It is pertinent to mention here that at the time of foreclosure by the Respondent Railway, the Petitioner already completed the

manufacture and supply of 123831 Nos. (almost 80%) of the contracted quantity and there was still time left in the currency of the contract to

complete manufacture and supply of the remaining quantity. It is submitted here that the Respondent Railway rather than directing the Petitioner to

complete the contract at the rate, suitable to them, suddenly decided to foreclosure/stop further production of sleepers under the old contract,

despite time still available in the currency of the contract. The Petitioner had incurred losses due to the abrupt foreclosure by the Respondent

Railway. Either way, the Petitioner had complied with the Respondent''s direction and stopped supply in the earlier contract and commenced work

in the new contract. The Petitioner was paid the dues entitled to them for the supply made after necessary deductions had been made by the

Respondent Railway towards taxes/delayed delivery of consignment etc.

It is submitted that as the matter lay thus, the Petitioner was shocked and surprised to receive a communication from the Respondent, wherein

payment/deposit made in the Petitioner''s account, towards the bill raised by the Petitioner with regard to current contracts have been

recovered/withheld on the alleged ground that the Petitioner is liable to pay liquidated damages (LD) on unsupplied quantity in C.S. 160/2007. The

Liquidated damages towards the latter tender/contract alleged to be paid by the Petitioner was calculated to be Rs. 24,66,757/- (Rupees Twenty

Four Lakhs Sixty Six Thousand Seven Hundred and Fifty Seven only) at the rate of 5% on the value of 36,169 Nos. of Sleepers, reduced by the

Respondent Railway itself from the contract. The Petitioner immediately addressed in a representation dated 30.07.2012, to the Respondent

stating the fact that there was no short supply or fault by the Petitioner and as such the supply was foreclosed/stopped on the behest of the

Respondent Railway based on the Rider Agreement. It was also mentioned by the Petitioner that in an earlier circumstances when the rate of a

new contract was higher than an old/running contract, the Respondent Railway had specifically directed the then supplier, who was also the

Petitioner herein to complete the contract based on the lower/older rate. The Respondent Railway could have directed the Petitioner to complete

the old contract, which they did not do. It is submitted that there was time still remaining in the currency of the contract and only 36,169 Nos.

sleepers were to be supplied, which the petitioner would have done so had they been permitted to continue with the contract. In light of the same

the Petitioner requested the Respondent to refund the recovered amount of Rs. 37,753/-.

It is submitted that the Respondent vide Letter Dt.: 09.08.2012 had replied to the Petitioner stating that the competent authority has not

considered the request for refund of the amounts recovered and that the recovery of the balance amount is being made in accordance with the

directions of the Respondent Railway. It is submitted that the Petitioner again addressed a letter Dt.: 10.08.2012, to the Respondent, stating all the

relevant facts and finally requesting the Respondent to treat the abovementioned issue as a dispute and refer the same to Arbitration. Till date there

has been no response to the same.

It is submitted that the Petitioner had never opted/requested for foreclosure of the contract leading to short-supply. In fact it was the

Respondent Railway who had decided to foreclose the contract, in order to facilitate production under the new contract, wherein the rates were

lower than the previous contract. The Respondent Railway had unilaterally stopped supply in the contract, which in itself had caused considerable

loss to the Petitioner. Moreover the Respondent Railway, during the closure of the contract, had collected all the necessary dues/levies payable to

them. It is pertinent to mention here that as per the Agreement, no liquidated damages is contemplated when production under a contract is

reduced in light of the finalization of a new tender. This has to be considered with the fact that the Petitioner still had time under the contract to

complete production and was willing to do so. The Petitioner cannot be held liable for any penalty especially in circumstances where the contract

was stopped on the instance of the Respondent at their option, with no fault attributable to the Petitioner. It is also submitted that the alleged

liquidated damages are sought to be levied based on false reasons and after a delay of almost three years. The action of the Respondent Railway is

totally arbitrary, illegal and against the principles of natural justice.

It is almost submitted that the Petitioner has not been made aware of the alleged LD and no proper opportunity was given to the Petitioner to

submit any form of explanation before initiation of recovery from the account/amounts payable to the petitioner. Assuming without admitting any

liability, it is submitted that, had the Petitioner been permitted to continue with the contract, they could have been able to pay any proposed LD out

of the profit/remuneration received on completion of the entire contract. As stated earlier the Petitioner had already suffered losses due to the

sudden/abrupt foreclosure by the Respondent Railway and is being penalized again by being illegally forced to pay penalty in form of LD, for

alleged non-supply of sleepers. It is an admitted fact that the Petitioner had not refused supply of sleepers and the supply was stopped by the

Respondent Railway, in order to commence work in the new contract wherein the rates were lower. The Respondent Railway by the impugned

proceedings are seeking to unjustly enrich themselves by levying penalty upon the petitioner, in form of LD for alleged non-supply. The

Respondent Railway is seeking to make such recovery towards concluded contract in running contracts, not only after a substantial delay of 3

years but also without any proper enquiry/proceedings or order in their favour. The said recovery, if made would cause considerable loss and

hardship to the Petitioner and thereby affecting the work done by them in the current contracts.

It is submitted that even according to the agreement/contract between the petitioner and the respondent, there is no provision that permits the

Respondent to levy penalty upon the Petitioner under the circumstances when the Respondent decides and forecloses a contract. Moreover, the

question of recovering alleged liquidated damages from the bills submitted in the ongoing projects would be wholly without jurisdiction and illegal.

The unilateral and arbitrary action of the Respondent if not injuncted, will cause a profound and considerable loss and damage to the Petitioner

Company.

It is submitted that either way, the Petitioner has already raised a dispute with the Respondent and also sought for initiation of Arbitration

proceedings. It would only be appropriate for the Respondent Railway to make any such purported recovery after the due process of law is

followed. In light of the aforementioned circumstances it would only be just and appropriate that interim orders are passed restraining the

Respondent Railway from collecting/recovering any amount from the Petitioner towards alleged LD payable towards non-supply of sleepers in

tender C.S. 160/2007.

The reading of the affidavit shows, that in pursuance to the tender C.S. 160/2007, an order was passed for manufacture and supply of 40,000

Nos. of Pre-Stressed Mono Block Concrete Sleeper for broad gauge. Subsequently, in the year 2009, the number of sleepers to be supplied was

increased from 40,000 to 1,60,000 nos. vide Rider Agreement No. CE/RIDER3/CS of 2009 dated 24.02.2009. The amended/increased order

was to be completed on 31.10.2009. It was made clear that the respondent was in the process of taking out a new tender and the quantity will be

reduced to the number of sleepers manufactured till the date of issue of Letter of Acceptance (LOA) of the new contract. The completion of

contract under another Rider Agreement was extended to 31.01.2010.

That in November, 2009, a new tender i.e. C.S. 162/2008 was finalized, wherein the rate specified was lower than the current contract, and

consequently the contract was foreclosed in December, 2009. Till the date of foreclosure, the applicant had already completed the manufacture

and supply of 123831 Nos. (almost 80%) of the contracted quantity and there was still time left to complete the balance.

That the applicant incurred losses due to the abrupt foreclosure of contract by the Railway. The applicant was also paid the dues entitled to

them for the supply made after necessary deductions had been for supply made after necessary deductions towards taxes/delayed delivery of

consignment etc.

The affidavit further shows, that it is proposed to deduct a sum of Rs. 24,66,757/- (Rupees Twenty Four Lakhs Sixty Six Thousand Seven

Hundred and Fifty Seven only) at the rate of 5% at the value of 36,169 Nos. of Sleepers, reduced by the Respondent Railway itself from the

contract. The prayer is also made to refund the recovered amount of Rs. 37,753/-(Rupees Thirty Seven Thousand Seven Hundred and Fifty Three

only).

It is the case of applicant, that this action of the respondent in seeking recovery from the amount payable under the different contract is not

sustainable in law, therefore, the applicant is entitled to injunction against effecting recovery of the amount.

It is submitted, that as there is no adjudication of damages, nor any proceedings were held before ordering recovery, the applicant has prima

facie case, that the balance of convenience is in favour of the applicant and that it would suffer irreparable loss in case injunction as prayed is not

granted.

The application is opposed by filing counter, which reads as under:

I am working as the Deputy Chief Engineer/Concrete Sleepers, Southern Railway, Park Town, Chennai-600 003, and I know the facts of the

case. I am filing this counter affidavit for and on behalf of the Respondent herein.

I state that the present application filed praying for an order of injunction restraining the Railway from recovering any amount from the applicant

pursuant to the proceedings dated 10.07.2012 and 9.8.2012 in so far as it relates to C.S. No. 160 of 2011 pending disposal of the arbitration

proceedings is not legally sustainable and the applicant herein is not entitled to the order of injunction as sought for. Action has been taken by the

administration strictly in terms of the contract and therefore the present application field praying for injunction is not legally sustainable.

With regard to the averments set out in para-1 of the affidavit, I state that the applicant participated in a Railway Board tender C.S. 160/07 for

manufacture and supply of PSC mono block sleepers (BG). The applicant was successful in the Tender and agreement no. CE/7/CS of 2008

dated 10.11.2008 was executed with Railway. The supply to be completed within four months from the date of issue of acceptance letter, that is

by 14.1.2009. The rate per sleeper was fixed at Rs. 1132/-. The accepted rate and other conditions under this contract will remain current and

valid for a period of for months (that is 3 months + 1 month) from the date of issue of Railway Board''s Letter of Acceptance, that is by

14.1.2009.

With regard to the averments set out in para-2 of the affidavit, I state that the original quantity is increased to 1,60,000 numbers duly extending

the DP up to 31.10.2009. A rider agreement was executed between Railway and the applicant on 24.2.2009 to the effect of increasing the supply

of sleepers with amendment no. 1 to clause 1.0 and 1.1 of the detailed letter of acceptance and incorporated the new clause 1.2 in the same terms

and conditions. Railway board issued the amendment to cl. 1.0 and 1.1 with new clause under letter dated 27.1.2009 bearing No. 2008/TK-

II/22/11/54/71015/Ambattur/SR. The clause is as follows:

1.1 The supply against this order shall be completed by 31.10.2009

1.2 On finalisation of the new tender, the ordered quantity in C.S. 160/2007 shall be reduced to the number of sleepers manufactured till date of

issue of LOA for the new contract. If the rate accepted in the new tender is higher than the updated rate of CS-160/2007 on the date of issue of

LOA and the manufactured quantity is less than the pro-rata quantity then the supplier will have to recoup the shortfall in the quantity on the same

rate terms & conditions. This updated rate will be frozen on the date of issue of LOA for the shortfall quantity.

All other terms and conditions of the contract will remain unchanged. The applicant accepted the Amendment no. 1 and signed in the rider

agreement.

With regard to the averments set out in para-3 of the affidavit, I state that the applicant has not completed the production within the delivery

period, that is 31.10.2009 as agreed and signed in the rider agreement. The applicant requested for extension of delivery period up to 31.1.2010

for the purpose of completing the agreement quantity. Based on the applicant''s letter, this office under letter dated 11.12.2009 asked the applicant

to accept the condition. The applicant under their letter No. 103 dated 14.12.2009 have signified unconditional acceptance of the stipulations.

Railway Board under letter dated 30.11.2009 bearing No. 2000/TK-II/22/11/54/71017/Ambattur/SR have extended the delivery period of the

subject agreement up to 31.1.2010. To the effect, rider agreement was executed on 24.1.2010 with a condition that the rate payable will be the

updated rate of existing contract or the rate finalized against the new contract, whichever is lower for completion of the running/current contract.

With regard to the averments set out in para-5 of the affidavit, I state that letter of acceptance for the new tender was issued under Board''s

letter dated 9.12.2009 bearing No. 2009/Tk.II/22/11/52/71098/Ambattur/Southern. The rate per sleeper for the new contract is Rs. 1194, which

is lower than the updated rate of C.S. 160/07. The applicant also participated in the new tender and was successful. In the letter of acceptance it is

mentioned under cl 1.2, that order placed against Railway Board tender C.S. 160/07 will get regulated as per following condition:-

1.2.1 On finalisation of the new tender, the ordered quantity in C.S. 160/07, shall be reduced to the number of sleepers manufactured till the date

of issue of LOA for the new contract, that is C.S. 162/08.

While executing the rider for enhanced supply of sleepers under C.S. 160/07, was incorporated the amendment no. 1 as clause 1.2. Clause 1.2

reads as under:-

On finalisation of the new tender, the ordered quantity in C.S. 160/2007 shall be reduced to the number of sleepers manufactured till date of issue

of LOA for the new contract. If the rate accepted in the new tender is higher than the updated rate of C.S. 160/2007 on the date of issue of LOA

and the manufactured quantity is less than the pro-rata quantity then the supplier will have to recoup the shortfall in the quantity on the same terms

& conditions. This updated rate will be frozen on the date of issue of LOA for the shortfall quantity. All other terms and conditions of the contract

will remain unchanged.

The applicant accepted the above condition and signed in the rider agreement. The applicant produced 123831 nos. sleepers up to date of issue of

new LOA against the ordered quantity of 1,60,000 numbers. The contention of the applicant that this Respondent suddenly decided to

foreclose/stop the production of sleeper under the agreement no. C.S. 160/07 is in correct and denied. The applicant had full knowledge of the

Railway''s decision regarding the agreement no. C.S. 160/07. The applicant had not taken steps to increase their production to make up the

shortfall before issue of LOA for new contract.

With regard to the averments set out in para-6 of the affidavit, I state that the applicant has not supplied the sleepers within the extended

delivery period as agreed by them in the rider agreement executed. Clause 10.3 of agreement stipulates that if the contractor fails to deliver the

stores within the delivery period as per contract or as extended or at any time repudiates the contract before the expiry of such period due to any

circumstances whatsoever, save as provided in clause 10.4 and force majeure clause 17, the purchaser reserves the right to cancel the contract for

the balance quantity in whole or in part and recover from him the liquidated damages as per clause-12. The applicant failed to supply the sleepers

as per prorate quantity within the extended delivery period. For short supply of 36169 nos. at the end of the delivery period, liquidated damages

have been withheld as per clause 702 of IRS condition of contract and clause 10.3 of subject contract.

With regard to the averments set out in para-7 of the affidavit, I state that the amount is withheld for the short supply of sleepers by the

Applicant. The withholding of amount is within the purview of clause 10.3 and clause 12 of subject agreement and clause 702 of IRS condition of

contract. Accordingly, Railway replied to the letter of the applicant dated 30.7.2012. The General Manager, Southern Railway, Chennai, has

appointed Shri D.R. Shyama Sundar, CGE/MAS, as the Sole Arbitrator to adjudicate the disputes, as per request of the applicant.

With regard to the averments set out in para-8 of the affidavit, I state that the applicant has not supplied the sleepers as stipulated in the

agreement, that is within the delivery period. The applicant accepted the condition put forth in amendment and incorporated in the rider agreement.

Railway did not intend to stop the production within the delivery period. The applicant failed to supply the sleepers within the delivery period. As

per amendment No. 1 and the rider agreement executed on 24.2.2009, the supply of sleepers in the old agreement will get reduced from the date

of issue of LOA of new agreement. The liquidated damages have been levied for short supply of sleepers as per clause 12 of subject agreement.

With regard to the averments set out in para-9 of the affidavit, I state that the applicant is well aware that the liquidated damages will be levied

for short supply of sleepers. The levy of LD is included in the agreement which is mutually agreed and signed by the applicant. As per the

amendment No. 1 and rider agreement for extending the delivery period, it is clearly mentioned that in cl. 1.2 in lieu of issue of LOA for new

agreement the quantity to be supplied in the old agreement will get reduced at the date of issue of LOA. The supply of sleepers was not stopped

by the Railway as claimed by the Applicant. The applicant failed to supply the sleepers within the delivery period, the prorate supply was not

followed by the applicant. For the short supply effected, liquidated damages are levied.

With regard to the averments set out in para-10 of the affidavit, I state that the agreement clause 12 stipulates that liquidated damages in

pursuance of clause 702 of IRS condition of contract will be limited to maximum of 5% of the cost of stores which the contractor fails to deliver

within the period fixed for delivery in the contract as extended, where the delivery of the stores is accepted after expiry of the aforesaid period.

The applicant has not supplied the sleepers which are due to railway within the delivery period or extended period. The quantity to be supplied

was 1,60,000 nos. The applicant supplied 1,23,831 nos. The total shortfall is 36,169 nos. For this quantity liquidated damage is levied.

With regard to the averments set out in para-11 of the affidavit, I state that in view of the submissions made above, the balance of

conveniences very much on the side of the Respondent and the applicant has not made out any prima facie case nor satisfied the provisions as

contained in Section-9 of the Arbitration and Conciliation Act. An Arbitrator has also been appointed to adjudicate on the disputes raised by the

applicant. The applicant is not therefore entitled to the relief of injunction and it is prayed that the present application be dismissed with costs.

The reading of the counter affidavit shows, that the stand of the respondent is that recovery is strictly in terms of the contract, therefore, the

present application is not competent.

It further shows, that it is not disputed, that initially contract was for 40,000 sleepers, which was increased to 1,60,000/-, which were to be

supplied till 31.10.2009 and the supply completed by 31.10.2009.

It is admitted in the counter, that the ordered quantity in C.S. 160/07, could be reduced to the number of sleepers manufactured till the date of

issue of LOA for the new contract, that is C.S. 162/08. It was also stipulated that if the rate accepted in the new tender is higher than the updated

rate of C.S. 160/2007 on the date of issue of LOA and the manufactured quantity is less than the pro-rata quantity then the supplier will have to

recoup the shortfall in the quantity on the same terms & conditions and the updated rate will be frozen on the date of issue of LOA for the shortfall

quantity.

It is the case of respondent, that the applicant has failed to supply the sleepers within the delivery period, and period was extended upto

31.01.2010. The applicant also accepted the condition and the delivery period was extended upto 31.01.2010. In the new contract, the rate was

fixed at Rs. 1,194/- as against Rs. 1,132 earlier. But, it was lower than the updated rate of C.S. 160/07. The applicant also participated in the new

tender and was successful and that order was placed with respondent. The conditions accepted were as under:

1.2.1 On finalisation of the new tender, the ordered quantity in C.S. 160/07, shall be reduced to the number of sleepers manufactured till the date

of issue of LOA for the new contract, that is C.S. 162/08.

While executing the rider for enhanced supply of sleepers under C.S. 160/07, was incorporated the amendment no. 1 as clause 1.2. Clause 1.2

reads as under:-

On finalisation of the new tender, the ordered quantity in C.S. 160/2007 shall be reduced to the number of sleepers manufactured till date of issue

of LOA for the new contract. If the rate accepted in the new tender is higher than the updated rate of C.S. 160/2007 on the date of issue of LOA

and the manufactured quantity is less than the pro-rata quantity then the supplier will have to recoup the shortfall in the quantity on the same terms

& conditions. This updated rate will be frozen on the date of issue of LOA for the shortfall quantity.

It is also the stand of the respondent, that sleepers were not supplied within the extended period. In fact, there was short supply of 36169

numbers, therefore liquidated damages were withheld as per clause 702 of IRS condition of contract and clause 10.3 of subject contract. It is thus

the case of the respondent, that deduction was as per the terms of the contract.

The reading of the counter affidavit clearly shows, that the deduction is proposed to be made on the contract as per the agreed terms between

the parties. Therefore, it cannot be said that there has been any violation of any condition of the terms of the contract.

The Hon''ble Supreme Court in the case of H.M. Kamaluddin Ansari and Co. Vs. Union of India (UOI) and Others, , has been pleased to lay

down as under:

While construing the scope of Section. 41(b) of the Arbitration Act this Court held:

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 16th July, 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 s. 41(b)"" 17. The appellant in the instant case took the

stand that there was no concluded contract between the parties including arbitration. Therefore, the order of injunction passed in the instant case

could not be for the purpose of and in relation to arbitration proceedings. Faced with this difficulty Shri S.N. Kacker, learned counsel for the

appellant, fell back upon cl. (a) of s. 41 to contend that cl. (a) makes the CPC applicable to all proceedings before the Court and to all appeals

under the Act and, therefore, the appellant was entitled to invoke order 39 of the Code to get an injunction order even if the conditions of cl. (b) of

s. 41 were not satisfied. We are afraid this contention cannot be accepted.

Clause (a) of s. 41 makes only the procedural rules of the CPC applicable to the proceedings in Court under the Arbitration Act. This clause

does not authorities the Court to pass an order of injunction. The power is conferred by cl. (b) of s. 41. The source of power, therefore, cannot be

traced to cl. (a). If the contention of Shri Kacker is accepted, the appeals would lie under ss. 96, 100 or 104 of the I.P.C. but the Arbitration Act

itself provides for appeal under s. 39. Besides, if cl.(a) of s. 41 gave wide powers to pass an order of injunction, cl. (b) of s. 41 would become

otiose.

The learned counsel Shri Kacker, however, strongly relied on the following observations of the Court in Union of India v. Raman Iron

Foundry:

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 in Junction. It has

no positive content. What it does is merely to injunct the appellant from recovering, suo moto, 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 respondents. 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 s. 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 s. 41(b) read with the Second Schedule.

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.

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 ii 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 withhold 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 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 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.

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 expound and not to legislate, is a fundamental rule.

If we apply the same principle to the interpretation of cl. 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 sum due'' will not control

cl. 18. The clause in our opinion gives wide powers to 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.

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 cl. 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:

We do not think it is legitimate to construe cl. 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.

The Court itself while interpreting cl. 18 of the contract has observed:

It is true that the words ""any claim for the payment of a sum of money"" occurring in the opening part of cl. 18 are words of great amplitude, wide

enough to cover even a claim for damages, but it is well settled rule of interpretation applicable alike to instruments as to statutes.......

But while dealing with another aspect of cl. 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 cl. 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.

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 the amount to the contractor-appellant. Such an order was clearly beyond the purview of cl. (b)

of s. 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 cl. 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.

We find no error in the impugned order passed by the Allahabad or the Delhi High Courts in the two cases. The appeals, therefore, must fail

and they are accordingly dismissed. In the circumstances of the case, however, we direct that the parties should bear their own costs.

It is very strange, that though the applicant is seeking injunction against the order W456/4/CS/160/updation dated 10.07.2012, but has not

placed it on record and has only placed the subsequent order W456/4/CS/ABU/160/07 dated 09.08.2012 on record, vide which respondent

declined the request of the applicant for refund of the amount recovered.

As stated, the decision to effect recovery of the balance amount is also in accordance with the direction of the Railway Board. The record

shows, that the order is in the knowledge of applicant.

In view of the settled law, the adverse interference deserves to be drawn against the applicant for not producing the relevant order to find out

as to whether the amount being recovered is in terms of the contract or by way of damages.

If it is only damages that can be stayed, if not adjudicated, but not other recoveries in accordance with terms of contract.

In this case, a positive stand is that recovery is being made in terms of the contract, whereas the applicant has not chosen to place on record

the order under which recovery is being effected, for this Court to see the basis for recovery.

The applicant cannot be said to have come to this Court with clean hand to seek injunction. Otherwise also, recovery cannot be said to result

in irreparable loss or injury, which could entitle grant of injunction in favour of the applicant in exercise of powers u/s 9 of the Arbitration and

Conciliation Act. No merit. Dismissed. No costs.