N.D. Radhakrishen vs Union of India (UOI) and Others

Sethi, J.—The appellants whose agreement to act as city booking agents and out agents for Northern Railways commencing from the year

1971 initially for a period of five years and extended from time to time ultimately expired on 30th of June, 1986, are continuing the business of the

agency on the basis of an interim order of the District & Sessions Judge, Srinagar dated 30-3-1987 directing the maintenance of status quo. The

respondent-Union of India filed an application on 20th of May, 1989 praying therein that as the court had ordered the maintenance of status quo

regarding the termination of the agency, the appellants herein be directed to deposit savings/earnings which they have collected on behalf of the

Northern Railways in the account of Northern Railways at State Bank of India Branch, Srinagar on the basis of the old agreement executed

between the parties. The trial court after hearing the learned counsel for the parties, perusing the record and admission of the appellants directed

them to deposit sum of Rupees 22,79,739.20 in the State Bank of India, Residency Road Branch, Srinagar before the next date of hearing vide

the order now impugned in this appeal. The order of the trial court has been challenged in this appeal on various grounds as detailed in sub-paras (i

to vi) of para 5 of the memo of appeal. It is submitted that the impugned order is without jurisdiction, not arising out of the proceedings pending

before the trial court, wrong in law, contrary to facts and based upon no evidence.

The facts giving rise to the filing of the present appeal are that the appellants herein were acting as City booking agents and out agents for the

Northern Railways on the basis of the agreement executed between the parties initially in the year 1971 which was extended from time to time vide

addemda issued in that behalf. As the appellants request for renewal of contract was not accepted, they addressed a letter dated 18-6-1984 to the

Chief Marketing Superintendent Northern Railways calling upon him to refer the disputes and differences which had arisen between the parties to

an arbitrator in terms of an arbitration clause incorporated in the agreement executed between the parties. The District Judge, Sri-nagar vide his

order dated 18-6-1985 appointed General Manager, Northern Railways New Delhi as an arbitrator between the parties and referred him the

disputes specified in his order. The arbitrator who entered upon the reference filed his award dated: 28-1-1987 deciding all the points raised and

disputes referred against the appellants-claimants. The Union of India filed an application in the trial court under sections Hand 17 of the

Arbitration Act praying therein for direction to the arbitrator to file the award in the court and make the same a rule of the court. The appellants

herein prayed for setting aside the award passed in the case. The main petition for either setting aside the award or making the award a rule of the

court remained pending and has not been decided so far. However, during the pendency of the proceedings the claimants-appellants filed an

application for the maintenance of status quo on 20th March, 1987, which was allowed and an ex parte order was passed directing the

maintenance of status quo till the award matter was disposed of subject to the objections of the other side. The respondent-Union of India filed an

application on 20th of May, 1989 praying that despite getting the order of status quo the appellants herein were not depositing savings/earnings

collected on behalf of Northern Railways in their Bank Account according to the terms and conditions of the old agreement executed between the

parties. The trial court vide its order dated 24th June, 1989 directing the counsel for the petitioner therein to place the original accounts prepared

according to the terms of the agreement before the court so that necessary orders could be passed in the case. It appears that a statement as

summary of misappropriation of Govt. cash (railways earnings)"" was filed by the Railways which showed that the appellants herein had with-held

a sum of Rs. 38,82,172.90 as on 5th June, 1989, giving them the credit of Rupees 16,02,433.70 as their commission they were held liable to

deposit net amount of Rs. 22,79,739.20. After perusing the record and hearing the learned counsel for the parties the impugned order in this

appeal was passed.

We have heard the learned counsel for the parties and perused the record.

Mr. Shah the learned counsel appearing for the appellants has submitted that the impugned order being without jurisdiction is liable to be

quashed. It is submitted that the trial court had no jurisdiction to pass the impugned order by giving the direction to the appellants to deposit the

amount as the court was not seized of the matter arising independently between the parties according to the terms of the agreement. It is submitted

that after the order of reference the trial court had no jurisdiction to deal with any matter and had the limited jurisdiction of dealing with the issues

arising collaterally in the case as provided under the Arbitration Act. The trial court should have only decided as to whether the award is to be

made a rule of the court or set aside, argued the learned counsel. The amount has been determined without any evidence or perusal of any record

which is alleged to be against the principles of law rendering it liable to be set aside. The order impugned is alleged to be cryptic and illegal. Mr.

Shah has referred to a case entitled Union of India (UOI) Vs. Raman Iron Foundry, in support of his contention.

It is not disputed that the court below had the jurisdiction to issue interim injunction for the purposes of and in relation to arbitration proceedings

u/s 41(b) of the Arb. Act read with IInd Schedule. It is now well settled that during the pendency of arbitration proceedings the court has the

jurisdiction to pass interim orders to safeguard and protect the interests of the parties. The learned counsel of the appellants does not dispute the

power of the court to pass the interim direction regarding the maintenance of status quo. The effect and substance of the order impugned in this

appeal is that the trial court has impliedly modified its order of maintenance of status quo and directed that during the subsistence of the order of

status quo the appellants would deposit the amount received by them for and on behalf of the Indian Railways. It cannot be said that the direction

given to the appellants vide the order impugned in this appeal did not form the subject matter of the dispute pending adjudication before the trial

court. The reliance placed by the learned counsel on the Supreme Court judgment referred to herein-above does not in any way support his case.

The Supreme Court has held that a court dealing under the Arbitration Act has a power to issue interim injunction but such interim injunctions can

be issued only for the purposes of and in relation to arbitration proceedings. In the instant case the arbitration proceedings in the trial court related

to the continuance or otherwise of the agency of the applicants regarding which interim injunction was issued and on prayer made by the other-side

for vacation of the order and deposit of the savings/earnings which the appellants were alleged to have collected on behalf the Northern Railways,

the court below passed the order impugned after referring to the documents produced which were alleged to have been admitted by the appellants.

The direction given by the trial court in the instant case was for the purposes of and in relation to the arbitration proceedings pending before the

court below. The respondent-Railways had not preferred any separate counter claim which could be held to be distinct and not connected with the

subject matter of the proceedings pending. The order of the court below cannot in any way be termed amounting to a direction to the appellants to

pay the amount due to the other side under ""the contract. It is not the form but the substance of the interim injunction which has to be taken into

account while deciding the question as to whether the interim direction given was for the purposes of and in relation to the arbitration proceedings

or the subject matter of the litigation between the parties. The facts of the judgment of the Supreme Court are clearly distinguishable from the facts

of the present case. We have also perused the record and do not find any substance in the argument of the learned counsel of the appellant that the

impugned order was passed without referring to any document on the file or that the amount was determined unilaterally. The appellants had

nowhere submitted that they were not liable to pay the amount sought to be deposited in the accounts of the Indian Railways. The appellants who

have admittedly collected the savings/earnings on behalf of the Indian Railways have no right to withhold the same on false pleas and pretexts. The

order impugned therefore is legal, valid and according to law which does not suffer from any illegality or error of jurisdiction. The appeal filed by

the appellants is misconceived which is liable to be dismissed.

Mr. M.M. Din has submitted that the present appeal is not maintainable u/s 39 of the Arbitration Act. In view of what we have held hereinabove

we do not propose to give any finding on this plea of the learned counsel for the respondents.

There is no merit in this appeal which is hereby dismissed with costs. The interim stay granted by this court on 24th of July, 1989 shall stand

vacated and CMP No.303/ 89 disposed of. CMP No. 383/ 89 shall also stand disposed