# UNION OF INDIA v. RAMAN IRON FOUNDRY

- **Citation:** [1974] 3 S.C.R. 556
- **Court:** Supreme Court of India
- **Decided:** 1974-03-12
- **Case number:** Civil Appeals Nos. 1224 & 1225 of 1973
- **Bench:** P. N. Bhagwati, P. K. Goswami
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/union-of-india-v-raman-iron-foundry-6109
- **Pages:** 14

## Headnote

Indian Arbitration Act (10of1940), s.
41 (b)-Court when can· issue· interim
in function, bldian Contract Act (9of1872), s. 74-Stipulation of amount -of danwges in contract-Cla1:n for damages for breach-If claim for liquidated
or un·
liquidated damages.
'Sqms due,' meaning of.
A dispute arose regarding the per(onnance of a coritract between the appellant
and respondent, each party contending that the other had committed a breach of
the contract and claiming large sums of money by way of damages. The appellant's claim was for damages stipulated under cl. 14 of the contract. The respondent was called upon to pay the amount claimed and was also informed that
on failure to make the payment the appropriate officer would be authorised to
recover the amount from the pending bills of the respondent in respect of other
contracts under cl. 18 of the Contract. The respondent thereupon moved the
High Court under s. 20 of the Arbitration Act, 1940, and the claim and counter
claim were referred to arbitration. During the pendency of the arbitration some
amounts became due and payable by the appellant to the respondent in respect of
other contracts between them. The respondent applied to the High Court for
an injunction restraining the appellant from recovering its claim for damages
from the an1ounts which had fallen due and the High Court granted the injunction
holding that cl. 18 did not authorise the appellant to appropriate the anlounts
of any pending bills of the respondent towards satisfaction of its claim for damages against the respondent
unless such claim was either admitted by the res~
pendent or adjudicated upon by the arbitrator or the Co.urt.
Dismissing the appeal to this Court,
HELD : (1) The order of interim injunction cannot be said to be outside the
scope of the High Court's power under s. 41 (b) of the Arbitr~tion Act. [563D-El
(a) Section 41 (b) says that the Court s1'all have, for the purpose· of and in relation
to arbitration proceedings, the same power of making orders in respect of any of
the matters set out in the second schedule as it has for the purpos~ of and in relation
to any proceedings before the Court and one of the matters set out in the second
A
B
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Schedufo is •interim injunction.' The Court has therefore power to issue interim
F
injunction. But such interim injunction can only be for the purpose of and in relation to arbitration proceedings.The Court could not therefore make an interim ofder 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.
{562F-563A]
(b) However, in the' present case, tlle order of 'interim injunction' does not
expressly or by necessary implication direct the appellant to pay amounts due to
the respondent under other contracts. The appellant can still refuse to pay such
G
amounts if it thinks it has a valid defence and the only remedy open to the respondent then would be to take measures in an appropriate forum. No breach of
the 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 satisfy its claim for damages by appropriating such amounts.
Such an order would be within the power of the court under s. 41 (b), because
the clain1 for damages forms the subject matter of .arbitration proceedings.
[563A-P]
(2) The appellant had no right or authority under cl. 18 to appropriate the
H
amounts of other pending bills of the respondent, in or towards satisfaction of
its claim f.or damages against the respondent, and so, the High Court has justified
in issuing the interim injunction. [5690]
A
B
c
D
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G
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UNION v, RAMAN IRON FOUNDRY
557
. <al, Thollg~ ~
words"w~ any claim for the payment of a sum of money
anses . ~og
10 the o~og part of cl 18 arc words of great amplitude, covering ·
eve_n a claun for damages, 1t is a wc)l settled rule of int

## Text

_Characters 0–39,966 of 46,966. This is a partial read: ask again with offset=39966 for what follows._

556
UNION OF INDIA
v.
RAMAN IRON FOUNDRY
March 12, 1974
(P. N. BHAGWATI AND P. K. GOSWAMI, JJ.]
Indian Arbitration Act (10of1940), s.
41 (b)-Court when can· issue· interim
in function, bldian Contract Act (9of1872), s. 74-Stipulation of amount -of danwges in contract-Cla1:n for damages for breach-If claim for liquidated
or un·
liquidated damages.
'Sqms due,' meaning of.
A dispute arose regarding the per(onnance of a coritract between the appellant
and respondent, each party contending that the other had committed a breach of
the contract and claiming large sums of money by way of damages. The appellant's claim was for damages stipulated under cl. 14 of the contract. The respondent was called upon to pay the amount claimed and was also informed that
on failure to make the payment the appropriate officer would be authorised to
recover the amount from the pending bills of the respondent in respect of other
contracts under cl. 18 of the Contract. The respondent thereupon moved the
High Court under s. 20 of the Arbitration Act, 1940, and the claim and counter
claim were referred to arbitration. During the pendency of the arbitration some
amounts became due and payable by the appellant to the respondent in respect of
other contracts between them. The respondent applied to the High Court for
an injunction restraining the appellant from recovering its claim for damages
from the an1ounts which had fallen due and the High Court granted the injunction
holding that cl. 18 did not authorise the appellant to appropriate the anlounts
of any pending bills of the respondent towards satisfaction of its claim for damages against the respondent
unless such claim was either admitted by the res~
pendent or adjudicated upon by the arbitrator or the Co.urt.
Dismissing the appeal to this Court,
HELD : (1) The order of interim injunction cannot be said to be outside the
scope of the High Court's power under s. 41 (b) of the Arbitr~tion Act. [563D-El
(a) Section 41 (b) says that the Court s1'all have, for the purpose· of and in relation
to arbitration proceedings, the same power of making orders in respect of any of
the matters set out in the second schedule as it has for the purpos~ of and in relation
to any proceedings before the Court and one of the matters set out in the second
A
B
c
D
E
Schedufo is •interim injunction.' The Court has therefore power to issue interim
F
injunction. But such interim injunction can only be for the purpose of and in relation to arbitration proceedings.The Court could not therefore make an interim ofder 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.
{562F-563A]
(b) However, in the' present case, tlle order of 'interim injunction' does not
expressly or by necessary implication direct the appellant to pay amounts due to
the respondent under other contracts. The appellant can still refuse to pay such
G
amounts if it thinks it has a valid defence and the only remedy open to the respondent then would be to take measures in an appropriate forum. No breach of
the 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 satisfy its claim for damages by appropriating such amounts.
Such an order would be within the power of the court under s. 41 (b), because
the clain1 for damages forms the subject matter of .arbitration proceedings.
[563A-P]
(2) The appellant had no right or authority under cl. 18 to appropriate the
H
amounts of other pending bills of the respondent, in or towards satisfaction of
its claim f.or damages against the respondent, and so, the High Court has justified
in issuing the interim injunction. [5690]
A
B
c
D
F
G
H
UNION v, RAMAN IRON FOUNDRY
557
. <al, Thollg~ ~
words"w~ any claim for the payment of a sum of money
anses . ~og
10 the o~og part of cl 18 arc words of great amplitude, covering ·
eve_n a claun for damages, 1t is a wc)l settled rule of interpretation, applicable alike
to 1mtruments .at to .statutes
tha~ the mea~g of ordinary words is to be found
not ~ much in stnct etymologacal propriety of language nor even in popular
~as ID the subject: or occasion on which they are used and the object which is
intended to be. attained. The context and collect.ion of a partic;ular expression
may show that It was not intended to be used in the sense which it ordinarily bears.
The word! must therefore be read not in isolation but in the-context of tt.e whole
clause. [S640-'-'S6SB]
(b) The heading of the cla""' reada "Recovery of sums due". The heading
cannot control the interpretation of a clause if its meaning is otherwise plain and
unambiauous. but it can be referred to as indicating the
general
drift
of the .clause
and affording a key to a better understanding of the
mcani.og. When there is an obligation to pay a sum of money at a future date
it is a debt owing, but when the obligation is to pay a sum of money in preseriti,
it is a debt due. A sum due would therefore mean a sum for which there is an exist·
in1 obligation to pay in presenti or in other words which is presently p1yable.
[S6S C·D, G-H]
(c) The language used in the b~dy of the clause a1so suppprts the view !hat it is
with recovery of sums presently due and payable by the respondent that thlS clal!se
deals. The claU!C is merely intended to provide a mode of recovery of 'a claim
for payment of a sum of money arising out of or under the contract."
It therefore
postulates a claim for a sum which is due and payable, that is, presently recover·
able and it may be recovered by the mode therein provided. · It is difficult to believe
that the contracting parties could have intended that even though a sum is not due
and payable by the respondent, the appellant should be· entitled to reco\o-er it by
adopting the mode set out in the clause. Such an interpretation would mean that
as soon as a claim is made by the appellant. it would immediately become recover·
able and the appellant, under the clause, would be entitled to sell of the securities
of the respondent and appropriate the sale proceeds in or towards satisfaction of
such claim, and in case that is insufficient, to recover the balance by appropriating other sums due to the respondent, and ir there is even then a shortfall, to
recover it penonaUy from the respondent. And this consequence would ensue e\len
if the claim is for a sum which the respondent is under no existing obligation to
pay or which is not presently payable or is disputed as regards liability or quantum. It would be more consonant with reason and good sense to take the
view. which is supported by the language of the clause that it does no more than
_merely proVide an additional mode of recovery to the appellant and that the
appellant is.entitled to exercise the right conferred under it only where there is a
claim for a .rum which i.1 pre.1ently due and payable by the respondent. The last
words of the clause namely, "the contractor shall on demand pay to' the purchaser
the balance remaining due", clearly postulate that the reference in the clause is to a
sum presently due and payable by the respondent to the appellant. [566B-567B]
(d) It is not legitimate to construe the clause hy reference to a corresponding
clause which prevailed in the earlier standard form of contract where the words
were 'whenever under the contract any sum of money is recoverable'. This is not
a statute enacted by the legislature where it can be said that if the legislature has
departed f.rom the language used by it in an earlier
enactment, it would
be a
fair. presumption to make that the alteration: in the language was ddiberate and
was intended to convey a different meaning. This is a clause in a contract and in
construing it any reference to a similar or dissimilar clause in another contract
would be irrelevant.· Moreover, on a question of construction of the clause
the mere use of word 'claim' caooot be a decisive factor. The clause has to be
read as a whole, and so read, it applies only where the appellant has a c\:J.im for
a sum presently due and payable by the respondent. [567B-G l
(e) In the present case, the claim is for-damages
for breach of t~1.:. i.A){ttract.
The damaJiCS claimed are liquidated damages under cl.
14 of the CQntract; but
under Indian law there is no difference in the nature of the claim whether it be for
liquidated damages or for unliquidated damages. Even if there is a stipulation
for liquidated damages a party complaining of breach of contract can recover
558
SUPREME COURT REPORTS
[ 1974 ] 3 S.C.R.
only reasonable compensation for the injury sustained by him, the Stipulated
A.
amount being merely the outside limit. The claim in the present case therefore
stands on the same footing aS a claim for unliquidatcd damages. A claim for un ..
liquidated damages does not give rise to a debt
until the liability is adjudicated
upon and damages assessed by an adjudicatory authority. When there is a breach
of contract, the party who commits the breach does not eo instanti incur any
pecuniary obligation nor does the party complaining of the breach become entitled
to a debt due from the other party. The only right which the party aggrieved
by th\! breach has is the right to ~ue for damages and this is not an actionable claim.
B
A clain1 for damages for breach of contract is therefore not a claim for a· sum presently due and payable and the appellant is not entitled, in exercise of the right
conferred upon it under cl. 18, to recover the amount of such claim by appropriating other sums due to the respondent.
{567H~569G]
Kesorani Industries v.
Co111ndssioner of Wealth Tax [1966] 2 S.C.R. 688
followed.
Jones v. Thompson (1858) 27 L. J., Q. B. 234, Jabed Sheikh v. Toher Malik
C
45 Cal. Weekly Notes, 519 and S. Malkha _Singh v. M/s. N. K. Gopala Krish·
na
.~luda/iar 1956 A.LR. Pun. 174, referred to.
Iron & Hardware (India) Co. v. Finn Shanlfa/ & BroJ. 1954 A.J.R. Born. 423
approved.
CIVIL APPELLATE JURISDICTION:
1973
Civil Appeal No. 1330
of
Appeal by special leave from the Judgment and Order dated
the 22nd January, 1973 of the D,lhi High Court in I. A. No. 1854 of
1972 in Suit No. 485 (A) of 1972 and
Civil Appeals Nos. 1224 & 1225 of 1973
I>
Appeals by special leave from the Judgment and Order dated the
E:
15th November, 1972 of the Delhi High Court in I. A. Nos. 846 and
119 of 1972 in Suit No. 158 of 1971.
L. N. Sinha,
Solicitor General oC India Shyamala Pappu &
S. P. Nayar for the appellant (in all the appeals)
D. G. Singhania,
M. K. Garg and Shir Khurana for responF
dent (in C. A. 1330)
D. D. Sharma for rospondent (in C.A.s. 1224-1225)
The Judgment of the Court was delivered by
BHAGWATI, J.-These appeals rai~e an interesting question relating to the interpretation ofcl.18 of the General Conditions of Contract contained in the Standard Form of Contract No. D.G.S. &
D. 68. That is the standard form in which constracts are entered into
bv the Central Purchase Organisation of the Government of India
rOr purchase of stores from third parties described as 'contractors
and the question of interpretation
which arises fo! determination
is, therefore, one of some importance, affecting as it does a 1argenu1nber of people who enter into such contracts with the Government of India.
The facts giving rise to these appeals follow a
common pattern and it would, therefore, be sufficient if we set out the
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UNION v. RAMAN IRON FOUNDRY (Bhagwati, /,)
559
facts relating to civil appeals Nos. 1221 and 1225 of 1973. They
bring out clearly the point which arises for consideration in all the
three appeals.
The respondent tendered for supply of certain quantity of foam
compound to the ap;>ellant and its tender was accopted by the. appellant by acc"ptance of Tender dated 16th July, 1968. The Acc,ptance
of Tender was subject to the Gene1 al Conditions of Contract con- .
tained in the Standard
Form . of Contract No. D.G.S. & D. 68.
The only clauses of the General
Conditions of Contract which are
material for our purpose are els. 18 and 24 and they read as follows:
"18. RECOVERY OF SUMS DUE
Whenever any claim for the payment of a sum of m>ney
arises out of or under the contract again it the c>ntractor, the
purchaser shall
be
entitled to
recover
such sum by
appropriating in whole or. in part, the security, if any,
deposited by the contractor, and for the purp)s' afores.id,
shall be entitled. to sen and/or realise securities forming the
whole or part of any 8"ch security deposit. Jn the ev.nt of
the security being insufficient, the balance and if no security
has b'en taken from the contractor, the entire sum recoverable shall be recovered by appropriating any sum then due or
which at any time thereafter may become due to the c~ntractor
under the contract or any other contract with the purchaser
or the Government or any person contracting through the
Secretary, if such sum even be not sufficient to cover the full
amount recoverable, the contractor shall on demand pay to
the purchaser the balance remaining due.
"24. ARBITRATION
In the event of any quest.ion, dispute, or difference arising
under these conditions or any speCial conditions of c~ntract,
or in ccnnection With thi' contract, (except as to any matters
F
the decision ·of which-is specially
provided for by !hes'
or the special conditions) the same shall be referred to the sole
arbitration of an Officer in the Ministry of Law,
appointed
to be the arbitrator by the Director General of Supplies & Disposal,. It will be no objection that the arbitrator is a Government Servant, that he had to deal with the matters to which
the contract relates or that in the course of his duties as a
G
Government servant he ha& expressed views on. all or any of
the matters in dispute or difference.
The award of the
arbitrator shall be final and binding on the parties to this contract.
H
'.,'"-Work. under the contract
shall, if reasonably possible,
cont;nue during the arbitration proceedings i.nd no payment
due to or payable by the purchaser shall be withheld on account of such proceedings.
560
SUPREME COURT REPORTS
I 1974 l 3 s.c.n.
The performance of this confract ran into difficulties and 'a dispute arose between the parties giving rise to claims by either party
against the other. The respondent contended that
the appellant
had committed a breach of the contract' and was, therefore, liable
to 'pay to the respondent a sum of Rs. 2,35,800/- by way of damages.
suffered by the respondent by reason of the breach of the contract.
The appellant, on the other hand, said that it was the respondent
who had committed the breach
of the contract and was liable to
pay to the appellant by way of damages a sum of Rs. 2.28,900/- under
clause 14 of the General Conditions of Contract. The
Assistant
Director of Suwlies by his letter dated 30th March, 1971 called
upon the respondent to make payment of the amount of Rs. 2,28,900/-
and intimattd that if the respondent failed to do so on or before 30th
April, 1971, the Pay and Accounts Officer, New Delhi/Madras would
be authorised to recover the same from the pending bills of the respondent in respect of other contracts. This dispute between
the
parties being a dispute arising out of the contract
was liable to be
settl<d by arbitration under cl. 24 of the General C<>nditions of Contract and the re&pondent, therefore, filed an application in the Delhi
High Court under s.
20 of the Indian Arbitration Act for filing the
Arbitration Agreement contained in that clause. The respondent
also at the 'ame time made en application to the Delhi High Court
for an interim injunction restraining the appellant from recovering
the amount of damages claimed by it from the pending bills of the
respondent. This application was, however, rejected by the Delhi
High Court on the ground that it was
not shown that there were
any pending bills of the respondent at that time out of which the
threatened recovery could be
made by the appellant. The application under s. 20 of the Indian Arbitration Act was thereafter heard
by the Delhi High Court and by an order dated 5th May, 1972 the
Delhi High Court
allowed that application and ordered the arbitration agreement contained in cl. 24 to be filed and made an order of
reference to arbitration in accordance with the arbitr{ltion
agreement. The claim of the respondent against the appellant for Rs.
2,35,800/-
and the counter-claim of the appellant against
the res·
pondent for Rs. 2,28,900/-
thus became the subject matter of reference to arbitration. During the pendency of the arbitration sGme
amounts became due and payable by the appellant to the respQJl'
dent in respect of otlter contracts entered into between the parties.
Jn view Gf the letter dated 30th March, 1971 the respondent apprehended that the ttppellant would appropriate these amoullt.'i towards
recovery of lhe amounts of damages claimed by it even I hough the
claim for damages \Vas disputed by the respondent and \va_., pending
adjudicalion lxfore the arbitrator. The respondent, therefoTe, made
interim Application No. 119 of 1972 to the Delhi High Court on
17th January, 1972 under s. 41 read with the Second Schedule to the
Indian Arbitrn!ion Act, 1940 praying that the status quo s!1ould be
1nai11tained and the appellant should be restrained. from recoverin,...
its claim for damages from the amounts due and payable by
th~
appellant to the resj)Ondent in respect of the pending bill;.
How it
appear> that this Interim Application No. 119 of 1972 wa3 made in
the Originnl Application
under s. 20 of the Indian Arbitration Act,
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UNION· V. RAMAN IRON FOUNDRY (Bhagwali, /.)
561
1940 and the appellant, therefore, raised a technical objection that
the Original Application under s. 20 having been disposed of,
Interim Application No.
119 of 1972, as filed, could not be maintained. The respondent, in view of this technical
objection raised
on behalf of the appellant, filed another Interim Application
No.
746 of 1972 as" an independent application under s. 41 read with the
Seci>nd Schedule to the Indian Arbitration Act, 1940 o 1 16th May,
1972 praying for the same interim relief a• was claimtd in the earlier
Interim'Application No. 119of1972. Both these interim applications
were resisted by the appellant relying on cl. 18 of the General Conditions of Contract but Mr. Justice Avadh Bihari of the Delhi High
Court, who.heard these 'interim application, took the view that cl.
18 did not authorise the appellant to appropriate the amounts of
any pending bills of the respondent towards satisfaction ·of its claim
for damages against· the respondent, unless such claim for damages
.was either admitted by the respondent or adjudicated upon by arbitration or suit in civil
court. The learned Judge accordingly
by an order dated 15th November, 1972 allowed both the interim
applications and issued an interim injunction restraining the appellant "from effecting recovery of the amounts claimed to be due
from the other pending bills" of the respondent. The appellan t
thereupon, with certificates obtained from the Delhi High Court,
preferred Civil Appeals Nos. 1224 and 1225 of 1973 in this Court.
One appeal was directed against the impugned order in so far it
related to Interim Application No. 119 of 1972 and the other in so
far as it related tQ Interim Application
No. 846 of 1972. The
appellant also preferred Civil Appeal No. 1330 of ·1913 against a
sillLlar order passed lJy the learned Judge in Interim Application No.
854 of 1972 in the other case.
There are in the main two grounds on which the learned Solicitor
General_,
ap~arin.g on behalf of the appellant, challenged the order
oflntenm 1n1unct1on made by Mr. Justice Avadh Bihari :
A. The
impugned order amounted in
effect and substance . to an. ord~r directing the appellant to pay the amounts
of the pending bills of the respondent in respect of the other
contracts ~nd s~nce ~he question of payment of the amounts of
such pen~ng bills did not form the subject matter of the reference which w~ ~n~n.g before the arbitrator., the learned
Judge had no 1unsdict1on under s. 41 · read with the Second
Schedule to ma!'e such an order and the impugned order was,
therefore, outside the scope of bis power and hence invalid.
B. Clause 18 comes
into
play when there is a claim
for payment ~fa sum of money arising out of or under · the
contract. It 1s not necessary that the sum of money must be
du~ . and payable to the purchaser. It is enough if there is a
cla1111 even. foi: damag~s.
Whenever there is such claim, the
P.~.rc~ase~.1s gtven a nghtunder cl. 18 to recover it by appropna11ng
any sum then due or which at any time thereafter
562
SUPllEME COURT llEPOJ.TS
[ 19741 3 S.c.L
may become due to the contractor under the contract" . or
A
11:nder any other contract. The appellant was, therefore,enlltled to recover the amount of its claim for damages against ·
the respondent by appropriating the sums which subsequently
became due to the respondent under other contracts, even
thOugh the claim for damages was contested by the respondent. and was pending adjudication ·before the arbitrator.
No interim injunction could be granted to prevent the exer8
dse of such right. If interim injunction were to be granted in
a case. of this kind as of course merely on the ground, without
an~thmg more, that the claim for damages is pending adjudi-
~at1on and until it. is determined in favour of the purchaser,
1t should not be allowod to be recovered by the pnrchaser out
of.0th" sums due to the contractor, it would render cl. 18
meaningless and inaffectual and the right to the purchaser under
C
that
clause would become
illu~ory. Of course, it would be
open to the court even in such a case to grant interim injunction, ifit is satisfied thatthe claim for damages is primafacie
not well founded and the balance of convenience requires that,
pending adjudication, the purchaser should be restrained from
effecting recovery of the claim for damages from out of other
sums due to the contractor. But
here admittedly
neither
D
of these two factors was taken into consideration by the
le.arned Judges and the order of interim injunction made by
him cannot,. therefore, be sustained.
We shall proceed to examine these grounds in the order in which we
have set them out.
·
Re: Ground A.
E
It was common ground between the parties that the order of interim injunction was made by the learned Judge under s. 41 (b) read
with the Second Schedule to the Indian Arbitration Act, 1940.
Nows. 4!(b) says that the court shall have, for the purpose of and
in relation to arbitration proceedings, the same power of maldng
orders in respect of any of the matters set out in the Second Schedule
F
as it has for the purpose of and in relation to any . proceedings before the Court and one of the matters set out in the Second Schedule
is "·intefim injunction". The Court bas, theref_ore, power under
s.41 {b) read with the Second Schedule to issue interim injunction, but
such interim injunction can only be "for the purpose of and in relation to arbitration proceedings".
The arbitration proceedings
in the present case were for determination of the mutual claims of the
G
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, there
fore, make an interim order which, though ostensibly in form an
Order of interim injunction, in substance amoYnted to a direction to,
H
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 requlled by
A
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UNION v. RAMAN IRON FOUNDRY (Bhagwati, !.)
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s. 41 (b). But here the order of interim injunction made by the learned
Judge does not, expressly or by necessary implication, carry any
direction to the appellant to pay the amounts due to the respondent
under other contracts .. It is not only in form but also in substance
a negative injunction. It has no posit\~• conter.t, 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 sti\\ refuse to pay such amounts
if it thinks it has a valid defence and ifthe 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 amopnts in satisfaction of the claim. That IS
clearly within the power of the Court under s. 41 (b) because the
c aim for damages forms the subject matter of the arbitration proceedings and tho Court can always say that until such claim. is
adjudicated upon, the appellant shall be restrained from recovenng
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.
Re: Ground B.
That takes us to the second ground of challenge against the order
of interim injunction. This ground of challenge is based on the
proper interpreta.tion of cl. 18. The argument of the appellant was
that what is required for attracting the applicability of cl. J 8 is a mere
claim for payment of a sum of money arising out of or under the contract against the contractor and it is not necessary that a sum of money
mmt be actually due
a~d payable from the contractor to the purchaser. If the purchaser has a claim for paymem of a sum of money
against the.contractor, he would be entitled to exercise the right given
under cl.
18, even though such claim may not be fo'r a sum due and
payable but
ay be for damages and it may be disputed by the contractor and may not have been 3.\1judicated upon in a court of law or
by arbitratiOJl. The purchaser can in such a case recoVer the amount
of his c1aim, without resort to a court of law or arbitration, by
appropriating sums due to the contractor under the same contract or
under· other contracts. If t.he claim of the purchaser is not well founded and the /appropriation made by him is, therefore, unjustified,
the contractor can always institute a suit or arbitration for recovering the sums due to him which have been wrongly appropriated
by the purchaser and in such suit or arbitration the court or the
arbitrator, as the case may be, would examine the' validity of the claim
ag~inst which appropriatidn has· been o'lade by purchaser and if the
claun is found to be unsustainable, set at naught the appropriation and
pass a decree or award for the sums due to the contractor:
But the
court cannot and should not restrain the purchaser ffom exercising
564
SUPREME COU](T REPORTS
[ 1974 J 3 S.C.R.
his right of appropriation merely
because the claim against which
appropriation is sought to be made by the purchaser is disputed by
the contractor and is pending adjudication before a court of law or
arbitrator. The court ~hould not prevent ihe normal operation of
cl. 18 by interfering with it, unless it appears to the court prima
facie that the claim which is sought tobe recovered by appropriation
is not well founded and the balance of convenience lies in· favour of
restraining the purchaser from recovering it by· appropriation. The
respondent, however, disputed the validity of this construction placed
on cl. 18 by.the appellant and contended that though the words used
/
in the opening part of cl. 18 are "any claim for the payment of a sum of
money", which are general
words of apparently wide amplitude
sufficient to cover even a claim for damages arising out the contract,
a proper construction of the clause read .as a whole clearly suggests
that these words are intended to refer only to a claim for a sum due
and payable and do not take in a claim for damages which is disputed by the contractor. It is only when a claim for damages
is
adjudicated upon by a civil court or an arbitrator and the breach of the
contract is established and the amount of damages ascertained and
decreed that a debt ·due and payable comes into existence; till then
it is nothing more than a mer<: right to sue for damages
and it
does not fall within the words of cl. 18. Moreover, cl.
18
merely provides a mode of recovery and it can have no application
where a claim, even though it be for a sum due and payable, is disputed by the contractor and has to be established in a court of law or
by arbitration: cL 18 applies only where a claim is either admitted,
or in case of dispute, substantiated by resort to the judicial process.
Therefore, when the purchaser has a claim for damages which is disputed by the contractor, the purchaser is not ·entitled under cl. _18 to
recover the amount of· its claim. for damages by appropriating other
sums due to the contractor until the claim for damages is adjudicated
upon and culminates in a decree. The appellant in the present case had
consequently no right under cl. 18 to appropriate sums due to the resp>ndent under other contracts in satisfaction of its claim for damages
against the respondent, when the claim for damages was pending
adjudication before the arbitrator and the learned Judge was right in
restraining the appellant from doing so by issuing an interim injunction. These were broadly the ci>ntentions of the parties under this
head of challenge and the question is whiCh of these rival contentions is correct.
It is true that the words "any claim for the payment of a sum of
mon,y" 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
a well sottled rule of interpretation applicable alike to instruments as
to statutes that the meaning of ordinary words is to be found not so
much ill'strict etymological propriety of language nor even in popular
use as in the subject or occasion on which they are usod and the object
which is intended to be
attained. The context and collocation of
a particular expression may show that it was not intended to be used
in the sense which it ordinarily bears. Language is at best an imperfect
medium of expression and a variety of meanings may often
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565lie in a word or expres.sion. The exact colour and shape of the meaning of any word or expression should not be ascertained by reading it
in isolation, but it should be read structurally and in its context, for
i)s meaning may vary with its contextual setting. We must, therefore, read the words 'any claim for the payment of a sum of money•·
occurring in the opening part of cl. 18 not in isolation but in the context of the whole clause, for the intention of the parties is to be gathered not from one part of the clause or the other but from the
claus: taken· as a whole.
It is in the light of this principle of in.
terpretation that we must determine whether the words. 'any claim
for the payment of a sum of money' refer only to a claim for a sum
due and payable which is admitted or in case of disputes, established
in a court of law or by arbitration or they also include a claim for
damages which is disputed by the contractor.
The first thing that &trikes one on looking at cl. 18 is its heading
which reads: "Recovery of Sums Due".
It is true that a heading
cannot control the interpretation of a clause_ if its meaning is other.
wise plain and unambiguous, but it can certainly be referred to as indicating the general drift of the clauses and affording a key to a better
understanding of its meaning. The heading of cl. 18 clearly suggests
that this clause is intended to deal with the·subject of recovery of·sum
due, Now a ·sum would be due to the purcltaser when there:is an
existing obligation to pay it ·in praesenti. It would be profitable in
this connection to refer to the concept of a 'debt', for a sum due is the
same thing as a debt due. The classical definition 1>f 'debt' is to be
found in Webb v. Stenton (I) where Lindley, L. J.,. said :" ....
a debt is a: sum of money which is now payable or will become pay.
able in the future by reason of a present obligation". There must be
debitum
in praesenti; solvendum may be in praesenti'or infuturethat is immaterial. There must be an c~isting obligation to pay a sum
of money now or in future.· The following passage from the judgment
of the Supreme Court of California in People v. Arguello. (2) which
was approved by this Court in Kesoram Industries v. Commissioner
of Wealth Tax (l) clearly bring<i out the es'IOntial characteristics of a
debt :
·
"Standing alone, the word 'debt' is as applicable to a sum
of money which has been promised at a future day as 'to a sum
now due and payable. If we wish to distinguish between the
two, we say of the former that it is a debt owing, and of the
latter that it is debt due.''
This passage indicates. that when there is an obligation to pay a sum.
of money at a future date, it is a debt owing but when the obligation.,
is to pay a sum of money in praesenti, it is a debt due. A sum due
would, therefore, mean a sum for which there is an existing . oJ:lligation to pay in praesenti or in other words, which is presently payable.
(I) {1883] 11 Q.B.D, SIS.
(2) [1861] 37 Calli'. 524. /
(3) [1966]2 S.C.R. 688.
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SUPREME COURT REPORTS
( 1974 J 3 S.C.R.
Recovery of such sums is the subject matter of cl. 18 according to the
heading. That is the dominant idea running through the entire cl.
18.
The language used in the body of cl. 18 also supports the view
that it is with recovery of sums presently due and payable by the
contractor to the purchaser that this clause deals. It may be noted
that cl. 18 does not lay down the substantive rights and obligations of
the parties under the contract. It is merely intended to provide a
mode of recovery of ''a claim for payment of a sum of money arising
out of or under the contract". It, therefore, postulates a claim for a
sum which is due and payable, that is, presently recoverable and may
be recovered by the mode therein provided. It is difficult to believe
that the contracting parties could have intended that even though a
sum is not due and payable by the contractor to the purchaser under
the contract, the purchaser should be entitled to recover it by adopting
the mode set out in cl. 18. It is important to note that cl. 18 does not
.create a lien on other sums due to the contractor or give to the purchaser
.a right to retain such sums until his claim against the contractor is
.satisfied. If merely a right of lien or retention were given to secure
payment of a claim, then ~~en if the claim were for a sum not presently
due and payable, the prov1s10n perhaps would not have been so startling
-0r un·1sual. But here the right given to the purchaser under. cl.
18 is a right to recover the amount of his claim by appropriating other
sums due to the contractor and, on the interpretation of the appellant,
this can be done even if the claim is for a sum which is not due or pay-
.able in praesenti and the purchaser is otherwise not entitled to recover
it. That would indeed be a highly extra-ordinary result which we
would be loathe to reach in the absence of clear and compelling language.
This interpretation, if accepted, would mean that as soon as
.a claim is made by the purchaser, it would immediately become
recoverable and the purchaser would be entitled to sell off the securities of the contractor and appropriate the sale proceeds in or towards
satisfaction of such claim and in case that is insufficient. recover the
balance by appropriating other sums due to the contractor and if there
is even then a shortfall, recover it. personally from the contractor, for
the last words of cl. 18 provide that "the contractor shall on demand pay to the purchaser the balance remaining due". And this
consequence would ensue even if .the claim is for a sum which the
contractor is under no existing obligation to pay or which is not pre-
•ently payable or is disputed as regards the existence of liability or its
quantum. A mere making of a claim by the purchaser would
impose a liability on the contractor to pay it. That surely could
·not have been the intention of the contracting parties. It would
be more consonant with reason and good sense to take ·the view, which
as pointed out above, is plainly and indubitably supported by the Ian~
guage used by the contracting parties, that cl. 18 does no more than
inerely provide an additional mode of recovery to the purchaser, and
the purchaser is entitled to exercise the right conferred under that
clause only where there is a claim for a sum which is presently due and
-payable by the contractor. This view, indeed, becomes irresistible
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UNION v. RAMAN· IRON FOUNDRY (Bhagwati, I.)
567
when we consider the last words of cl. 18, namely, "the contractor
shall on demand pay to the purchaser the balance remaining due",
which clearly postulate that the reference in the clause is to a sum
ptesently due and payable by the contractor to the purchaser, so that,
if any balance remains unre<:?vered after adopting the special mode
of recovery provided in the clause, such balance must be paid by the
. contractor to the purchaser on demand. The appellant laid great
emphasis on the use of the word 'claim' in the opening part of cl. 18
and contended that the Standard Form of Contract which was in use
prior to the adoption of the present Standard Form of Contract, cl. 14,
and which corresponded to the present cl. 18, opened with the
words " 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 the payment of 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 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 whether
such sum of money was presently due and payable or not.
This contention is, in our opinion, wholly untenable. We do not think
it is ligitimate 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 en.acted 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 irrele 4
vant. The only· question before us is, what does cl. 18 mean and that
depends on the plain interpretation of its language in the context
in which it occurs. Moreover, on a question of construction of cl. 18,
mere use of the word "claim" cannot be a decisive factor. Cl.