Cases Referred
· S.K. Bhargava Vs. The Collector, Chandigarh and Others, (1998) 4 AD 342 : AIR 1998 SC 2885 : (1998) 92 CompCas 791 : (1998) 3 JT 658 : (1998) 3 SCALE 374 : (1998) 5 SCC 170 : (1998) 2 SCR 1158 : (1998) AIRSCW 1796 : (1998) 4 Supreme 370
· Union of India (UOI) Vs. Raman Iron Foundry, AIR 1974 SC 1265 : (1974) 2 SCC 231 : (1974) 3 SCR 556
Counsel for Appearing Parties
Ajay Kanthed, Advocates for the Appellant; Hitendra Mehta, Advocates for the Respondent
JUDGMENT
Jarat Kumar Jain, J.—This appeal under Order XLIII Rule 1(r) of the C.P.C. is filed against the order dated 2-8-2014 passed by First Additional District Judge, Ratlam in Civil Suit No. 10-A/2013 by which learned Court below has dismissed the application under Order XXXIX Rules 1 and 2 of C.P.C. filed by appellant. Brief facts in this case are that appellant/plaintiff was awarded a works contract for supply 50 mm. size machine crushed stone ballast in quantity of 50,000 cu. mtr. for the amount of Rs. 2.44 crores. As per contract, appellant has to complete the work within 9 months. For this purpose, appellant requested the respondents/defendants to make available the place for work at Morwani Yard, but the respondents were failed to do so. After 9 months, respondents extended the period unilaterally. Appellant shown inability to supply the material on the agreed rate as the rates of material and services were increased substantially. Ultimately, respondents have terminated the contract and forfeited the security amount deposited by appellant. Appellant has filed civil suit praying that it be declared that the respondents have arbitrarily terminated the contract and they be restrained from forfeiting the security amount deposited by the appellant. Meanwhile, respondents have not only forfeited the security amount but they have threatened the appellant to recover some more amount from other works contracts, which were awarded by the respondents. Therefore, appellant filed an application under Order XXXIX Rules 1 and 2 of C.P.C. praying that the respondents be restrained from recovering the amount from bills of other works contracts.
2. Respondents/defendants resisted the application on the ground that there is no prima facie case or balance of convenience in favour of appellant and no irreparable loss is caused if the amount is recovered from other works contracts.
3. Learned Court below after hearing the parties dismissed the application holding that if the amount is recovered from other works contracts, then it will not cause any irreparable injury to appellant as it can be compensated in terms of money. Aggrieved by this order, appellant has preferred this appeal.
4. Learned Counsel appearing for appellant submits that learned Court below has not considered that respondents have unilaterally extended the period of contract and without providing any opportunity of hearing, they terminated the contract arbitrarily. Thus, the appellant has a prima facie. So far as balance of convenience is concerned, respondents have already recovered the huge amount of security/earnest money and performance guarantee amounting to Rs. 14.42 lakhs without adjudication. If after adjudication, it is found that the appellant is guilty of breach of contract, then the respondents can easily recover the amount from the running bills of other works contracts of appellant. Thus, the balance of convenience is in favour of appellant. It is also submitted that a huge sum is involved in this case and if the respondents are not restrained from recovering the amount from other works contracts, the appellant has to face great financial difficulties. Therefore, the finding of the Court below is not correct that the appellant has not to suffer any irreparable loss. The impugned order is liable to be set aside and an injunction be granted in favour of the appellant and against the respondents restraining the respondents from recovering any amount from the other works contracts of appellant till final decision of the suit.
5. On the other hand, learned Counsel for respondents supports the impugned order and submits that there is no prima facie case or balance of convenience in favour of appellant and as per terms of the contract, the respondents can recover the amount, which is due. He also submits that in the application, the appellant has not given any particulars of the other works contracts from which the respondent are likely to recover the remaining amount. In such circumstances, there is no substance in the appeal and it be dismissed with costs.
6. Heard learned Counsel for the parties at length and gone through the record.
7. Learned Lower Court in Para 6 of the impugned order mentioned that for granting any injunction, the Court has to consider three ingredients, viz., (i) prima facie case; (ii) balance of convenience; and (iii) irreparable loss. But the learned Court below in the impugned order has not at all considered two ingredients, i.e., prima facie case and balance of convenience. He has dismissed the application only on the ground that there is no irreparable loss to the appellant and if there is any loss, it can be compensated in terms of money.
8. I have considered whether there is a prima facie case in favour of the appellant. For this purpose, I would like to refer the judgment of Honble Apex Court in the case of Union of India (UOI) Vs. Raman Iron Foundry, . The Honble Apex Court has held as under:--
"This statement in our view represents the correct legal position and has our full concurrence. A claim for damages for breach of contract is, therefore, not a claim for a sum presently due and payable and the purchaser is not entitled, in exercise of the right conferred upon it under Clause 18, to recover the amount of such claim by appropriating other sums due to the contractor. On this view, it is not necessary for us to consider the other contention raised on behalf of the respondent namely, that on a proper construction of Clause 18, the purchaser is entitled to exercise the right conferred under that clause only where the claim for payment of a sum of money is either admitted by the contractor, or in case of dispute, adjudicated upon by a Court or other adjudicatory authority. We must, therefore, hold that the appellant had no right or authority under Clause 18 to appropriate the amounts of other pending bill of the respondent in or towards satisfaction of its claim for damages against the respondent."
9. Honble Apex Court in the case of S.K. Bhargava Vs. The Collector, Chandigarh and Others, , held as under:--
"In our opinion, even though Section 3 does not expressly provide for an opportunity being given to the alleged defaulter to explain as to whether any amount is due or not but in view of the nature of the said provisions, the principles of natural justice must be read into it. The requirement of determination of the sum due by the Managing Director must be regarded as providing for the Managing Director hearing the alleged defaulter before coming to the conclusion as to what is the sum due. The very use of the words determine and sum due implies that there may be a lis between the parties and they have to be heard before a final conclusion is arrived at by the Managing Director. It is not a mere claim of the Corporation, which is forwarded to the Collector for realisation, but it is the sum due determined by Managing Director, which alone is recoverable. As already observed, this determination cannot be done without notice to the alleged defaulter."
10. In the light of these judgments, I have examined the facts of this case. In the present case, admittedly, no show-cause notice was ever given to the appellant before deducting the amount. The respondents have unilaterally determined the recoverable amount and forfeited the amount. The claim for payment of a sum of money is not admitted by the appellant or the dispute is not adjudicated upon by the Court below or any adjudicatory authority. Therefore, this question is yet to be tried and adjudicated that the appellant is guilty of breach of contract and as per terms of the contract, the respondents are entitled to recover a particular amount. Thus, there is & prima facie case in favour of appellant.
11. It is an admitted fact that there was works contract of Rs. 2.44 crores and the respondents have already forfeited the security/earnest money and performance guarantee amounting to Rs. 14.42 lakhs. It is also an admitted fact that still some works contracts are going on between the parties, therefore, the respondents can very well recover the amount after proper adjudication. Thus, the balance of convenience is also in favour of appellant.
12. So far as irreparable loss is concerned, the contract of Rs. 2.44 crores has already been terminated by the respondents and they have also forfeited the security/earnest money and performance guarantee amounting to Rs. 14.42 lakhs. It respondents have recovered some more money from other works contracts of appellant. Then, certainly, it will affect the business of the appellant, when the huge amount is involved. Only to say that it can be compensated in terms of money is not sufficient.
13. With the above discussion, I find that learned Court below has not considered the matter in its right perspective. Thus, the impugned order is liable to be set aside and it is hereby set aside. Consequently, it is ordered that during pendency of the suit, the respondents are restrained from recovering any amount from the running bills of appellants other works contracts or from the security/earnest money deposited or performance guarantee given by appellant in other works contracts.
Appeal stands allowed to the extent indicated above. No order as to costs.
