WP/25617/2006 of Imperial Tubes Private Ltd.a company incorporated under the Vs Rastriya Ispat Nigam Limited, a Government company on 27 December 2007

COMMON ORDER:

1. Heard Sri Vilas V Afzul Purkar, the learnedSenior Counsel representing the petitioner, Sri V. RavinderRao, the learned counsel representing respondents 1 to 3and the learned Assistant Solicitor General representingrespondent No.4.

2. W.P.No.25617 of 2006 is filed praying for a writor order or direction in the nature of Mandamus, to declarethe action of the respondents in appropriating the paymentreceivable by the petitioner towards other contracts againstthe risk purchase of the petitioner’s contract, ascommunicated and evidenced by the letter of respondentNo.1 bearing No.Pur/2.63.058/059/8883 dated 01.11.2006impugned herein as illegal, arbitrary and non-est in the eyeof law and consequently direct the respondents to forthwithrefund the said appropriated amount together with costs ofthe writ petition.

3. W.P.No.25600 of 2006 is filed praying for a writor order or direction in the nature of Mandamus, to declarethe action of the respondents in appropriating the paymentreceivable by the petitioner towards other contracts againstthe risk purchase of the petitioner’s contract, ascommunicated and evidenced by the letter of respondent No.1 bearing No.Pur/2.63.058/059/8883 dated 01.11.2006impugned herein, as illegal arbitrary and non-est in the eyeof law and consequently direct the respondents to forthwithrefund the said appropriated amount together with costs ofthe writ petition.

4. Sri Vilas V Afzul Purkar, the learned SeniorCounsel representing the petitioner had taken this Courtthrough the contents of the affidavits filed in support of thewrit petitions and would maintain that in the facts andcircumstances, the action of the respondents inappropriating the payment receivable by the petitionertowards other contracts against the risk purchase ofpetitioner’s contract cannot be sustained. Learned SeniorCounsel also would maintain that the stand taken by therespondents to the effect that the writ petitions are notmaintainable cannot be sustainable, especially in the light ofthe view expressed by the Apex Court in ABLINTERNATIONAL LTD v. EXPORT CREDIT GUARANTEE CORPN.OF INDIA LTD[[1]]. The learned Senior Counsel further wouldmaintain that in the light of the similarity of clauses in thepresent writ petitions and also that specified in UNION OFINDIA v. RAMAN IRON FOUNDRY[[2]], the view expressed bythe Apex Court in the said decision is to be madeapplicable. The learned Senior Counsel also had drawn theattention of this Court to the decisions of the Apex Court inH.M.K.ANSARI & CO. v. UNION OF INDIA[[3]]and M/S. SANTRAM & CO. v. STATE OF RAJASTHAN[[4]]and would maintainthat the clauses, which had been discussed in the saiddecisions being cited different, the decision of the Apex Court in UNION OF INDIA’s case (2 supra) is to be preferredto that of the other decisions in H.M.K.ANSARI & CO.’s case(3 supra) and M/S. SANT RAM’s case (4 supra).

5. Per contra, Sri V. Ravinder Rao, the learnedcounsel representing respondents 1 to 3 had taken thisCourt through the contents of the common counter affidavitand would maintain that in the light of the facts andcircumstances, the writ petitions are not maintainable. Thelearned counsel also would maintain that even if it is to betaken as a subsequent cause of action, the petitioner is atliberty to invoke arbitration clause. Viewed from any angle,the writ petitions are liable to be dismissed.

6. This Court issued Rule Nisi on 20.12.2006. The reliefs prayed for had already been specified supra.

7. It is averred that the 1[st] respondent is aGovernment Company within the meaning of Section 617 ofthe Companies Act, 1956 and is an instrumentality of theState being Union of India, 4[t h ]respondent herein. The 1[st]respondent and officers of the 1[st] respondent which is aState and/or other authority within the meaning of Article 12of the Constitution of India and as such are amenable to thewrit jurisdiction of this Court. It is also stated that the 1[st]respondent owns and operates Visakhapatnam Steel Plant,which is claimed to be the largest shore based steel plant inthe country. For its aforesaid steel plant the 1[st] respondentrequires continuous annual supply of ERW pipes. Havingregard to its aforesaid requirement the 1[st] respondent fromtime to time invites tenders for purchase of ERW pipes.

8. Further, it is averred that on or about October 10, 2002 the 1[st] respondent invited a tender for entering intoa rate contract for supply of ERW pipes for a period of 12months. A copy of the said invitation to tender had beenplaced before this Court. Pursuant to negotiations, a ratecontract was entered into by and between the petitioner andthe 1[st] respondent in respect of supply of 17 items of ERWpipes. A copy of the said rate contract also had been placedbefore this Court. It is further specified that the said ratecontract, inter alia, provided as follows:- “11. Delivery Schedule: Order shall be confirmed by the PURCHASER based on the requirement andmaterials shall be supplied within 60 days”.materials shall be supplied within 60 days”.

“12. Period of the Contract: The rate contractshall be valid upto 28.02.2004. The prices shall beconfirmed and valid for the orders placed upto28.02.2004”.shall be valid upto 28.02.2004. The prices shall beconfirmed and valid for the orders placed upto28.02.2004”.

9. Pursuant to the said Rate contract, the 1[st]respondent from time to time issued purchase orders uponthe petitioner for supply of the required quantity of ERWpipes. The said purchase orders were referred to as“Acceptance to Tender”. Such acceptance to tender(purchase orders) are 4 in number and were issued onMarch 24, 2003, May 24, 2003, July 26, 2003 andSeptember 22, 2003. Pursuant to the purchase orders, thepetitioner from time to time supplied to the 1[st] respondentE.R.W. pipes of various descriptions. On account of reasonsbeyond the control of the petitioner, supply of certainquantity of E.R.W. pipes could not be executed by it. Itappears that on account of failure of supply by the petitioner,the 1[st] respondent resorted to make risk purchase on account of the petitioner from alternative sources. Such riskpurchase appears to have been made by the 1[st]respondent on January 9 2004, by orderNo.Pur.3.63.008/0613 and on May 13, 2004 by PurchaseOrder No.Pur.4.63.0016/2737 from one M/s Jindal IndiaLimited totaling to Rs.24,81,882.60ps.

10. It is further stated that for items which are onaccount of risk purchase made by the 1[st] respondent onJanuary 9, 2004 within the validity period of the RateContract which expired on 28.02.2004, the petitioner dulycompensated the respondent No.1 by making deposit ofRs.1,.36,344/- by a Demand Draft NO.112607 dated16.01.2005 reimbursing the additional cost incurred by the1[st] respondent in respect of the bill raised by it in this behalf.

11. It is also averred that the purported riskpurchase made by the 1[st] respondent to the petitioner’saccount on May 13, 2004 for Rs.24,81,881.60 ps. for thebalance quantity of materials not supplied by the petitioneras per the Rate Contract is bad, wrongful, arbitrary andillegal, inasmuch as the said purported risk purchase wasmade by respondent No.1 beyond the validity period of thesaid rate contract, which expired on 28.02.2004. It issignificant that even after having resorted to the purportedrisk purchase, the respondents continued to demand deliverof the quantity of E.R.W. pipes, despite the expiry of theperiod of the Rate Contract, as is seen from letters datedMarch 29, 2004, April 30, 2004, July 3, 2004 and September6, 2004. The said letters had been placed before this Court.

12. It is also averred that the demand made by the respondents dated January 29, 2005 from the petitionerfor a sum of Rs.24,81,882.60 ps. being the difference of theprice in respect of the purported risk purchase made by therespondent No.1 is bad and illegal, inasmuch as thepurchase was made beyond the validity period of the ratecontract. The petitioner by letter dated 21.02.2005 replied tothe letters dated 29.01.2005 and 08.02.2005 disputing theclaim of the respondents. Copies of the same hadbeen placed before this Court. In fact, the purporteddispute by and between the parties, the 1[st] respondent hadinvoked the arbitration clause provided in the “GeneralConditions of Contract for Supply” by referring the matter tothe India council of Arbitration, New Delhi, knowing thesame to be disputed amounts between the parties.

13. It is further averred that in or about July,2006, the 1[st ]respondent filed its Statement of Claim againstthe petitioner before the Indian Council of Arbitration, NewDelhi. A copy thereof had been placed before this court.Pursuant to the direction given by Indian Council ofArbitration, New Delhi, the petitioner has duly filed itsStatement of Defence denying and disputing the purportedclaims raised by the respondents. The petitioner furthermade payment of Rs.48,750/- towards the tentative cost ofthe arbitration proceedings, as directed by the said IndianCouncil of Arbitration, New Delhi.

14. It is also stated that on or about September30, 2006 and October 17, 2006, the respondent requestedthe Indian Council of Arbitration, New Delhi, for extension oftime to deposit the cost of arbitration. The 1[st] respondent

further requested an extension till October 31, 2006. Copiesof the said two letters of request made by respondent No.1dated September 30, 2006 and October 17, 2006 had beenplaced before this court. On or about November 1, 2006 therespondents informed the Indian Council of Arbitration, NewDelhi, that 1[st] respondent was withdrawing its request forinitiation of arbitration in the matter as it had recovered itsdues. A letter, dated November 1, 2006 written by theAssistant Manager of 1[st] respondent to the Registrar, IndianCouncil of Arbitration, New Delhi, a copy whereof wasendorsed to the petitioner, had been placed before thisCourt. In terms of the said letter, it is evident thatrespondent No.1 having initiated the arbitration proceedingsas per the contract suddenly backtracked and wrongfullyrecovered the disputed amount from the petitioner’s otherongoing contracts.

15. On or about November 2, 2006 the petitionerreceived a fax message being letter dated November02,2006 sent on behalf of 1[st] respondent, a copy whereofhad been placed before this Court. From the said message,it appears that the respondent No.1 has purportedly invokedArticle 9 of the General Conditions for Supply and hasdeducted and recovered the purported claim amount fromout of the amount payable to the petitioner by it from othercontracts between the parties.

16. It is further states that the purporteddeduction and/or recovery made by the 1[st] respondent iswrong, arbitrary and illegal inasmuch as such recovery and/or deduction was made during the pendency of the arbitration proceedings between the parties without anyadjudication as to whether any sum is due and payable bythe petitioner to 1[st] respondent. In any event after invocationof the arbitration clause and initiation of arbitrationproceedings it was and is not open to the respondents totake unilateral and convenient stand and appropriate thepetitioner’s receivables under the garb of Article 9 of theGeneral Conditions of Contact for Supply. It is reiteratedthat the 1[st] respondent knowing fully that the amount wasdisputed between the parties ought not to have takenrecourse to Article 9 of the General Conditions of Contractfor the supply, which has no application to disputed claims.

17. It is also averred that having regard to theprovision of the said Article 9 of the General Conditions ofContract for supply and on a true, proper and correctinterpretation thereof, the purported amount claimed by the1[st] respondent is not and cannot be said to be “recoverablefrom and payable by the Contractor”, having regard to thependency of the arbitration proceedings between theparties. The 1[st ]respondent and its officers are bound,liable and obliged to act fairly, reasonably in all its dealingswith third parties including the petitioner, which therespondents have failed and neglected to do. It is alsostated that the purported acts and conduct of therespondents is null and void, wrongful, arbitrary and illegaland the respondents ought to be compelled to act inaccordance with law

18. It is further averred that the petitioner hasalready demanded justice from the 1[st] respondent by its letter dated November 10, 2006 and a copy thereof hadbeen placed before this court. However, the respondent,having received the same, had not responded. In the lightof the said facts, the petitioner is left with no other option,except to approach this Court by invoking Article 226 of theConstitution of India.

19. In the common counter-affidavit, it is statedthat the relief sought in the Writ Petitions is in the realm of anon-statutory contract. The grievance of the petitionerrelates to an action taken by the respondent in terms of anon-statutory contract. Hence a public law remedy underArticle 226 of Constitution of India cannot be invoked. Onthis ground, the writ petitions are liable to be dismissedwithout going into the merits of the dispute. It is stated thatthe pleadings in paras 3 to 7 relate to contracts between theparties for supply of ERW pipes and terms thereof, whichare evident from the agreements and need not betraversed.

20. It is also stated that in the contract dated27.01.2003 the respondent issued 6 purchase orders andnot five as mentioned by the petitioner. The 6[th] purchaseorder is dated 28.04.2003. It is not correct to allege that thepetitioner supplied ERW pipes against all the purchaseorders. It is also incorrect to contend that non-supply ofcertain quantity of pipes was on account of reasons beyondthe control of the petitioner. On account of petitioner’sdefault in making the supplies, the respondent had noalternative but to resort to risk purchase.

21. It is further submitted that as per the rate contract the prices are firm and orders are to be placedwithin the validity of the contract i.e., before 31.01.2004 and28.02.2004 respectively, and need to be executed as perthe terms and conditions of the purchase order. It is not indispute that the non-executed orders were placed on thepetitioner within the validity period of the contract as per theagreed terms and conditions. Hence the petitioner wascontractually under an obligation to make the supplies,failure to supply attracted the risk purchase action. Thepetitioner has compensated the respondent for part of riskpurchase that was undertaken within the validity period ofthe rate contract. Some of the risk purchases were madebeyond the validity period of the contract, though the ordersfor supply were made and defaulted within the validity periodof the contract. Such risk purchases were made by therespondent on 13.05.2004 and 17.05.2004 respectively. These purchases also represent the orders placed withinthe validity period of rate contract. Having committed defaultin supplies, the petitioner is under a contractual obligation tocompensate the respondent for the additional cost incurredin exercising the risk purchase option.

22. It is also stated that in terms of the contract,orders for supply can be placed any time during its validityperiod and the contract provides for supplies to be madewithin 60 days from the date of the order. Therefore, thedates of supply would extend beyond the validity period ofthe contract for orders placed during the 2 months ofcontract. As a routine notices were sent to the petitioner forpending orders beyond the contractual period. Suchnotices do not by themselves operate against the action of risk purchase invoked earlier. The claim of the respondent inboth the cases relating to the difference in price between thecontractual rate and risk purchase rate is just andpermissible in law.

22. It is further stated that in view of the defaultand the consequential loss incurred by the respondent oninvocation of risk purchase, the arbitration clause for properadjudication of the claim and for recovery of the amount wasinvoked. At the time of invocation of Arbitration Clause therespondent was not holding any amount payable to thepetitioner. Contention of the petitioner that it has submittedthe statement of defence is not correct. No such statementwas served to the respondent after invocation of ArbitrationClause and reference of the matter to the Arbitrator. Afterinvocation of the arbitration clause, the respondent found inits possession certain amounts payable to the petitioner. Toensure that the loss suffered by the respondent on accountof risk purchase is mitigated, Clause 9 of GeneralConditions of contract was invoked and adjusted theamount payable to the petitioner against other contracts. Even after invocation of Arbitration Clause the provisions ofGeneral Conditions of Contract can still be invoked. Thecontract provides for different options to be exercised by 1[st]respondent to recover the amounts due to it. Hence the 1[st]respondent having invoked Clause 9 of General Conditionsof Contract, has withdrawn the Arbitration proceedings. Such an action is well within the terms of the contract. The1[st] respondent being the “Dominus Litus” in the Arbitrationproceedings, it is open to withdraw the Arbitral proceedings, since its claim is satisfied through other valid meansavailable under the contract. The 1[st] respondent hasalready sent a reply dated 13.12.2006 to the petitioner’sletter dated 10.11.2006 and hence, the dismissal of thesewrit petitions had been prayed for.

23. The relevant material papers, which hadbeen placed before this Court, the correspondence andletters would reflect certain factual controversies betweenthe parties. Be that as it may, the learned Senor Counselrepresenting the petitioner in both the writ petitions hadplaced strong reliance on ABL INTERNATIONAL LTD’s case (1 supra), wherein the Apex Court observed as under:

16. In the present case, in our judgment, the High Court wasnot justified in dismissing the petition on the ground that itwill not determine disputed question of fact. The High Courthas jurisdiction to determine questions of fact, even if theyare in dispute and the present, in our judgment, is a case inwhich in the interests of both the parties the High Courtshould have entertained the petition and called for anaffidavit-in-reply from the respondents, and should haveproceeded to try the petition instead of relegating theappellants to a separate suit”.

19.

Facts

Therefore, it is clear from the above enunciation of lawthat merely because one of the parties to the litigation raisesa dispute in regard to the facts of the case, the Courtentertaining such petition under Article 226 of theConstitution is not always bound to relegate the parties to asuit. In the above case of Gunwant Kaur this Court evenwent to the extent of holding that in a writ petition, if thefacts require, even oral evidence can be taken. This clearlyshows that in an appropriate case, the writ Court has thejurisdiction to entertain a writ petition involving disputedquestions of fact and there is no absolute bar for entertaininga writ petition even if the same arises out of a contractualobligation and/or involves some disputed questions of fact.

27. From the above discussion of ours, the following legal principles emerge as to the maintainability of a writ petition:

a)In an appropriate case, a writ petition as against a State oran instrumentality of a State arising out of a contractualobligation is maintainable.an instrumentality of a State arising out of a contractualobligation is maintainable.

b)Merely because some disputed questions of fact arise forconsideration, same cannot be a ground to refuse toentertain a writ petition in all cases as a matter of rule.

c)A writ petition involving a consequential relief of monetaryclaim is also maintainable.claim is also maintainable.

51. From the terms of the contract, we have noticed inclause 6, as amended by the addendum,consideration by way of barter of goods is not the solemode of payment of consideration. The said clausecontemplates alternate modes of payment ofconsideration, one of them being by barter of goodsand the other by cash payment in US $. The terms ofthe insurance contract which were agreed betweenthe parties were after the terms of the contractbetween the exporter and the importer were executedwhich included the addendum, therefore, withouthesitation we must proceed on the basis that the firstrespondent issued the insurance policy knowing verywell that there was more than one mode of payment ofconsideration and it had insured failure of all themodes of payment of consideration. From thecorrespondence as well as from the terms of thepolicy, it is noticed that existence of only twoconditions has been made as a condition precedentfor making the first respondent Corporation liable topay for the insured risk, that is : (i) there should be adefault on the part of the Kazak Corporation to pay forthe goods received; and (ii) there should be a failureon the part of the Kazakhstan Government to fulfil theirguarantee. This is clear from the terms of theinsurance contact read with the letter of the firstrespondent dated 8-9-1993 wherein at clause 3-A, it isstated: “Our liability will arise only after default hasbeen established on the guarantee of the Ministry”.From the above, it is clear that both the grounds as putforth by the learned counsel for the respondent before

us as well as in the two letters of repudiation issued bythe first respondent are unsustainable. In our opinion,the first respondent insured the export risk of theappellants in regard to the non-payment of theconsideration for the tea exported, whether it arosefrom the non-fulfilment of the barter clause or from thenon-fulfilment of the cash payment clause. Theargument advanced on behalf of the respondent thatthe appellants refused to accept the barter by goodsoffered by the Kazak Corporation which amounted to adefault under the contract on the part of the appellantshas no legs to stand in view of the clear language ofthe amended clause 6 of the agreement which asnoted above, states that the obligation of the buyer,namely, the Kazak Corporation to pay for the goodsreceived by it in US $ arises when payment by barterfails for “any reason whatever”. The use of the words“any reason whatever” in the said amended clauseincludes the reasons of refusal by the appellants toaccept the goods offered in barter. On the fact of thesaid language of the amended clause, there could beno room for two opinions at all in regard to the liabilityof the first respondent to pay for the loss suffered bythe appellants even in cases where payment by barterfails at the instance of the appellant. The learnedcounsel for the respondent contended that for acorrect interpretation of this amended clause and theother clauses of the contracts i.e., the contract ofexport and the contract of insurance, between theparties there is need for oral evidence being ledwithout which a proper interpretation of this clause isnot possible, therefore, it is a fit case in which theappellants should be directed to approach the civilCourt to establish their claim. We find no force in thisargument. We have come to the conclusion that theamended clause 6 of the agreement between theexporter and the importer on the fact of it does not giveroom for a second or another construction than theone already accepted by us. We have also noted thatreliance placed on sub-clause (d) of the proviso to the insurance contract by the Appellate Bench is alsomisplaced which is clear from the language of the saidclause itself. Therefore, in our opinion, it does notrequire any external aid, much less any oral evidenceto interpret the above clause. Merely because the firstrespondent wants to dispute this fact, in our opinion, itdoes not become a disputed fact. If such objection asto disputed questions or interpretations is raised in awrit petition, in our opinion, the courts can very well gointo the same and decide that objection if facts permitthe same as in this case. We have already; noted thedecisions of this Court which in clear terms have laiddown that mere existence of disputed questions of factipso facto does not prevent a writ court fromdetermining the disputed questions of fact.

24. A two Judge Bench of the Apex Court inUNION OF INDIA’s case (2 supra)observed at paragraphs 7and 9 as under:

7. The first thing that strikes one on looking at clause18 is its heading which reads: "Recovery of SumsDue". It is true that a heading cannot control theinterpretation of a clause if its meaning is otherwiseplain and unambiguous, but it can certainly be referredto as indicating the general drift of the clause andaffording a key to a better understanding of itsmeaning. The heading of Clause 18 clearly suggeststhat this clause is intended to deal with the subject ofrecovery of sums due. Now a sum would be due tothe purchaser when there is an existing obligation topay it in praesenti. It would be profitable in thisconnection to refer to the concept of a 'debt', for a sumdue is the same thing as a debt due. The classicaldefinition of 'debt' is to be found in Webb v. Stenton,(1883) 11 QBD 518 where Lindly, I.J., said; "......a debtis a sum of money which is now payable or willbecome payable in the future by reason of a presentobligation." There must be debitum in prasesenti;

solvendum may be in prasenti or in futuro - that isimmaterial. There must be an existing obligation to paya sum of money now or in future. The followingpassage from the judgment of the Supreme Court ofCalifornia in People v. Arguello, (1869)37 Calif. 524,which was approved by this Court in KesoramIndustries v. Commr. of Wealth Tax, (1966) 2 SCR688 = (AIR 1966 SC 1370), clearly brings out theessential characteristics of a debt:

"Standing alone, the word 'debt' is as applicable to asum of money which has been promised at a futureday as to a sum now due and payable. If we wish todistinguish between the two, we say of the former thatit is a debt owing, and of the latter that it is a debt due."This passage indicates that when there is an obligationto pay a sum of money at future date, it is a debtowing but when the obligation is to pay a sum ofmoney in praesenti it is a debt due. A sum due would,therefore, mean a sum or which there is an existingobligation to pay in prasenti, or in other words, which ispresently payable Recovery of such sums is thesubject-matter of Clause 18 according to the heading.That is the dominant idea running through the entireClause 18.

9. Having discussed the proper interpretation of clause18, we may now turn to consider what is the realnature of the claim for recovery of which he appellant is seeking to appropriate the sums due to therespondent under other contracts. The claim isadmittedly one for damages for breach of the contractbetween the parties. Now, it is true that the damageswhich are claimed are liquidated damages underclause 14, but so far as the law in India is concerned,there is no qualitative difference in the nature of theclaim whether it be for liquidated damages or forunliquidated damages Section 74 of the IndianContract Act eliminates the somewhat elaboraterefinements made under the English common law indistinguishing between stipulations providing forpayment of liquidated damages and stipulations in thenature of penalty. Under the common law a genuinepreestimate of damages by mutual agreement is

regarded as a stipulation naming liquidated damagesand binding between the parties; a stipulation in acontact in terrorem if a penalty and the Court refusesto enforce it, awarding to the aggrieved party onlyreasonable compensation. The Indian Legislature hassought to cut across the web of rules andpresumptions under he English common law, byenacting a uniform principle applicable to allstipulations naming amounts to be paid in case ofbreach, and stipulations by way of penalty, andaccording to this principle, even if there is a stipulationby way of liquidated damages, a party complaining ofbreach of contract can recover only reasonablecompensation for the injury sustained by him, thestipulated amount being merely the outside limit. It,therefore makes no difference in the present case thatthe claim of the appellant is for liquidated damages. Itstands on the same footing as a claim for unliquidateddamages. Now the law is well settled that a claim forunliquidated damages does not give rise to a debt untilthe liability is adjudicated and damages assessed by adecree or order of a Court or other adjudicatoryauthority. When there is a breach of contract, the partywho commits the breach does not eo instanti incurany pecuniary obligation, nor does the partycomplaining of the breach become party. The onlyright which the party aggrieved by the breach of thecontract has is the right to sue for damages. That isnot an actionable claim and this position is madeamply clear by the amendment in Section 6(e) of theTransfer of Property Act, which provides that a mereright to sue for damages cannot be transferred. Thishas always been the law in England and as far backas 1858 we find it stated by Wightman, J., in Jones v.Thompson, (1858) 27 LJQB 234. "Ex parte Charlesand several other cases decide that the amount of averdict in an action for unliquidated damages is not adebt till judgment has been signed." It was held in thiscase that a claim for damages does not become adebt even after the jury has returned a verdict infavour of the plaintiff till the judgment is actuallydelivered. So also in O'Driscoll v. ManchesterInsurance Committee, (1915) 3 KB 499. SwinfenEady, L., J., said in reference to cases where the claim was for unliquidated damages "....... in suchcases there is no debt at all until the verdict of the juryis pronounced assessing the damages and judgmentis given". The same view has also been takenconsistently by different High Court in India. We maymention only a few of the decisions, namely, JabedSheikh v. Taher Mallik, 45 Cal WN 519 = (AIR 1941Cal 639); S. Milkha Singh v. M/s. N. K. GopalaKrishna Mudaliar, AIR 1956 Punj 174 Iron andHardware (India) Co. v. Firm Shamlal and Bros, AIR1954 Bom 423. Chagla, C. J., in the last mentionedcase, stated the law in these terms:

"In my opinion it would not be true to say that a personwho commits a breach of the contract incurs anypecuniary liability, nor would it be true to say that theother party to the contract who complains of thebreach has any amount due to him from the otherparty.

As already stated, the only right which he has is theright to go to a Court of law and recover damages.Now, damages are the compensation which a Court oflaw gives to a party for the injury which he hassustained. But, and this is most important to note, hedoes not get damages or compensation by reason ofany existing obligation on the part of the person whohas committed the breach. He gets compensation asa result of the fiat of the Court. Therefore, no pecuniaryliability arises till the Court has determined that theparty complaining of the breach is entitled to damages.Therefore, when damages are assessed, it would notbe true to say that what the Court is doing isascertaining a pecuniary liability which alreadyexisted. The Court in the first place must decide thatthe defendant is liable and then it proceeds to assesswhat that liability is. But till that determination there isno liability at all upon the defendant."

This statement in our view represents the correct legalposition and has our full concurrence. A claim fordamages for breach of contract is, therefore, not aclaim for a sum presently due and payable and thepurchaser is not entitled, in exercise of the right conferred upon it under clause 18, to recover theamount of such claim by appropriating other sums dueto the contractor. On this view, it is not necessary forus to consider the other contention raised on behalf ofthe respondent, namely, that on a proper constructionof clause 18, the purchaser is entitled to exercise theright conferred under that clause only where the claimfor payment of a sum of money is either admitted bythe contractor, or in case of dispute, adjudicated uponby a Court or other adjudicatory authority. We must,therefore, hold that the appellant had no right orauthority under Clause 18 to appropriate the amountsof other pending bill of the respondent in or towardssatisfaction of its claim for damages against therespondent and the learned Judge was justified inissuing an interim injunction restraining the appellantfrom doing so.

25. A three Judge Bench of the Apex Court inH.M.K.ANSARI’s case (3 supra), while overruling thejudgment in UNION OF INDIA’s case (2 supra), observed atparagraphs 19,20, 26 and 27 as under:

19. On the own case of the appellant that there was noconcluded contract between the parties containing anarbitration clause it will be difficult to say that theapplication for injunction moved by the appellant wasfor the purpose of and in relation to arbitrationproceedings. This apart, the amount due under thepending bills to the appellant was not the subject-matter of the present proceedings and therefore, theinjunction order restraining the respondents fromwithholding the amount due to the appellant under thepending bills in respect of other contracts could not besaid to be for the purpose of and in relation to thepresent arbitration proceedings. In this view of thematter it was not open to the Court to pass the interiminjunction restraining the respondents from withholdingthe amount due to the appellant under pending bills inrespect of other contracts.

20. The learned counsel Shri Kacker, however,strongly relied on the following observations of theCourt in Union of India v. Raman Iron Foundry, (AIR1974 SC 1265 at p. 1269) (supra):

"But here the order of interim injunction made by thelearned Judge does not expressly or by necessaryimplication, carry any direction to the appellant to paythe amounts due to the respondent under othercontracts. It is not only in form but also in substance anegative injunction. It has no positive content. What itdoes is merely to injunct the appellant fromrecovering, suo motu, the damages claimed by it fromout of other amounts due to the respondent. It doesnot direct that the appellant shall pay such amounts tothe respondents. The appellant can still refuse to paysuch amounts if it thinks it has a valid defence and ifthe appellant does so, the only remedy open to therespondent would be to take measures in anappropriate forum for recovery of such amountswhere it would be decided whether the appellant isliable to pay such amounts to the respondent or not.No breach of the order of interim injunction as suchwould be involved in non-payment of such amounts bythe appellant to the respondent. The only thing whichthe appellant is interdicted from doing is to makerecovery of its claim for damages by appropriatingsuch amounts in satisfaction of the claim. That isclearly within the power of the Court under Section 41(b) because the claim for damages forms the subjectmatter of the arbitration proceedings and the Court canalways say that until such claim is adjudicated upon,the appellant shall be restrained from recovering it byappropriating other amounts due to the respondent.The order of interim injunction made by the learnedJudge cannot, therefore, be said to be outside thescope of his power under Section 41 (b) read with theSecond Schedule."

With profound respect we find that the aforesaidobservation is incongruous with the proposition of lawlaid down by this Court just before this observation.

We find it difficult to agree with the observation of theCourt that the impugned order in form and substancebeing in the negative the respondent could refuse topay such amounts if it thinks it has a valid defenceand if it chooses to do so there would be no breach ofthe injunction order.

26. The headings prefixed to a section or a group ofsections in some modern statutes are regarded aspreambles to those sections. They cannot control theplain words of the statutes but they may explainambiguous words. The view is now well settled thatthe headings or titles prefixed to a section or a groupof sections can be referred to in determining, themeaning of doubtful expressions. It is true that theCourt is entitled, to look at the headings in an Act ofParliament to resolve any doubt they may have as toambiguous words. The law is clear that thoseheadings cannot be used to give a different effect toclear words in the section where there cannot be anydoubt as to the ordinary meaning of the words. Thegolden rule is that when the words of a statute areclear, plain and unambiguous, that is, they arereasonably susceptible to only one meaning, theCourts are bound to give effect to that meaningirrespective of the consequences, duty of a judge is toexpound and not to legislate, is a fundamental rule. Ifwe apply the same principle to the interpretation ofclause 18 of the standard form of contract, it would beclear that the clause unequivocally contemplates aclaim for the payment and it is not open to the Union ofIndia to appropriate any amount due to the contractorunder other pending bills. It does not contemplate theamount due and, therefore, the heading of this clausewhich talks of only 'Recovery of sums due' will notcontrol Clause 18. The clause in our opinion giveswide powers to the Union of India to recover theamount claimed by appropriating any sum then due orwhich at any time thereafter may become due to thecontractor under other contracts.

27. Clause 18 of the standard form of contract, earlier

27. Clause 18 of the standard form of contract, earlier was slightly differently worded and it read. 'wheneverunder this contract any sum of money is recoverablefrom and payable by the contractor'. But this formulawas deliberately and advisedly altered when thepresent standard form was introduced and instead thewords 'whenever any claim for payment of a sum ofmoney arises' were substituted and this change inphraseology indicated that in order to attract theapplicability of the present Cl. 18, it was not necessarythat there should be a sum of money due and payableby the contractor to the purchaser, but it was enough ifthere was a mere claim on the part of the purchaserfor payment of a sum of money by the contractorirrespective of the fact whether such sum of moneywas presently due and payable or not. This Court,however, did not attach importance to this aspect ofthe matter by observing :

"We do not think it is legitimate to construe Cl. 18 ofthe contract between the parties by reference to acorresponding clause which prevailed in an earlierstandard form of contract. This is not a statuteenacted by the legislature where it can be said that ifthe legislature has departed from the language usedby it in an earlier enactment, it would be a fairpresumption to make that the alteration in thelanguage was deliberate and it was, intended toconvey a different meaning. It is a clause in a contractwhich we are construing and there any reference to asimilar or dissimilar clause in another contract wouldbe irrelevant.

26. Further, in M/S. SANT RAM & CO’s case (4supra), a three Judge Bench of the Apex Court observed atparagraphs 4 and 7 as under:

4. In that case, an application under Section 33 of theArbitration Act had come to be filed and then anapplication for ad interim injunction was filed. It will,therefore, be clear that to avail the remedy under theprovisions of the Code of Civil Procedure, when an application for injunction under Section 41(b) read withSchedule is filed, the Court shall have, pendingproceedings for the purpose of and in relation to thearbitration proceedings availed through the process ofthe Court, the same power of making orders inrespect of any matters set out in the Second Scheduleas it has for the purpose of and in relation to anyproceedings before the Court. The initiation ofpendency of any proceedings in the Court in relation tothe arbitration proceedings would, therefore, be a pre-condition for the exercise of the power by the CivilCourt under the Second Schedule of the Act.

7. It is seen that under Clause (50) of the contract, theappellant has expressly agreed for adjustment of theamount pending with the respondent in respect of theclaim under the dispute or any other contract with theDepartment. Under these circumstances, neither onmerits nor on principle of law, we find any illegality inthe order passed by the High Court warrantinginterference.

27. In the light of the views expressed inH.M.K.ANSARI & CO.’s case (3 supra) andM/S. SANT RAM’scase (4 supra), the petitioner is not entitled to the reliefsprayed for in these writ petitions. However, liberty is given tothe petitioner to invoke arbitration clause or to pursue theother appropriate legal remedies. Except making thisobservation, no positive relief as prayed for can be grantedin these writ petitions.

28. Subject to the above observation, the writpetitions are hereby dismissed. No order as to costs.

Dated: 27.12.2007Note: L.R.Copy to be marked.

__________________

(P.S.NARAYANA, J)

(B/o)

JSU

WRIT PETITION Nos.25617 & 25600 of 2006

Dated:27.12.2007

[1]2004(3) SUPREME COURT CSES 553[2]AIR 1974 SUPREME COURT 1265[3]AIR 1984 SUPREME COURT 29

[4]AIR 1997 SUPREME COURT 2557