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It was common ground between the parties that the order of interim injunction was made by the learned Judge under section 41 (b) read with the Second Schedule to the Indian . Ratio |
Now section 41(b) says that the court shall 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 purpose of and in relation to any proceedings before the Court and one of the matters set o... |
The Court has, therefore, 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". Ratio |
, The arbitration proceedings in the present case were for determination of the mutual claims of the appellant and the respondent arising out of the contract contained in the acceptance of Tender dated 16th July, 1968. Ratio |
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. Ratio |
The Court obviously could not, there fore, make an interim order which, though ostensibly in form an order of interim injunction, in substance amounted to a direction to the appellant to pay the amounts due to ' the respondent under other contracts. Ratio |
Such an interim order would clearly not be for the purpose of or in relation to the arbitration proceedings as required by 563 section 41 (b). Ratio |
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. Ratio |
It is not only in form but also in substance a negative injunction. Ratio |
It has no positive content. Ratio |
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. Ratio |
It does not direct that the appellant shall pay such amounts to the respondents. Ratio |
The appellant can still refuse to pay such amounts if it thinks it has a valid defence and if the appellant.does so, the only remedy open to the respondent would be to take measures in an appropriate forum for recovery of such amounts where it would be decided whether the appellant is liable to pay such amounts to the ... |
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. Ratio |
The only thing which the appellant,is interdicted from doing is to make recovery of its claim for damages by appropriating such amounts in satisfaction of the claim. 'That is clearly Within the power of the Court under section 41 (b) because the claim for damages forms the subject matter of the arbitration proceedings ... |
The order of interim injunction made by the learned Judge cannot, therefore, be said to be outside the scope of his power under section 41 (b) read with the Second Schedule Re: Ground B. Ratio |
That takes us to the second ground of challenge against the order of interim injunction. Ratio |
This ground of challenge is based on the proper interpretation of cl. 18. Ratio |
The argument of the appellant was that what is required for attracting the applicability of cl. 18 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 must be actually due and payable from the contractor to the purchaser. ... |
If the purchaser has a claim for payment 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 for a sum due and payable but pay be for damages and it may be disputed by the contractor and may not have been adjudicated upon in a court ... |
The purchaser can in such a case recover the amount of his claim, 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 the claim of the purchaser is not well founded and the appropriation made by him is, therefore, unjustified,... |
But the court cannot and should not restrain the purchaserfrom exercising 564 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. Ratio |
The court should not prevent the normal operation of cl. 18 by interfering with it, unless it appears to the court prima facie that the claim which is sought to be recovered by appropriation is not well founded and the balance of convenience lies in favour of restraining the purchaser from recovering it by appropriatio... |
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 damage... |
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 mere right to sue for damages and it does not fa... |
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 dis puted 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, substant... |
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. Ratio |
The appellant in the present case had consequently no right under cl. 18 to appropriate sums due to the respondent 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 restraini... |
These were broadly the contentions of the parties under this head of challenge and the question is which of these rival contentions is correct. Ratio |
It is true that the Words "any claim for the payment of a sum of money" occurring in the opening part of, cl. 18 are words of great amplitude, wide enough to cover even a claim for damages, but it is a well settled rule of interpretation applicable alike to instruments as to statutes that the meaning of ordinary words ... |
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. Ratio |
Language is at best an imperfect medium of expression and a variety of meanings may often 565 lie in a word or expression. Ratio |
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 its meaning may vary with its contextual setting. Ratio |
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 clause taken as a whole. Ratio |
It is in the light of this principle of interpretation 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 damage... |
The first thing that strikes one on looking at cl. 18 is its heading which reads: "Recovery of Sums Due". Ratio |
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. Ratio |
The heading of cl. 18 clearly suggests that this clause is intended to deal with the subject of recovery of sum due. Ratio |
Now a sum would be due to the purchaser when there is an existing obligation to pay it in present. Ratio |
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. Ratio |
The classical definition of 'debt ' is to be found in Webb vs Stenton (1) where Lindley, L. J., said : "a debt is a sum of money which is now payable or will become payable in the future by reason of a present obligation". Ratio |
There must be debitum in praesenti; solvendum maybe in praesenti or in future that is immaterial. Ratio |
There must be an existing obligation to pay a sum, of money now or in future. Ratio |
The following passage from the judgment of the Supreme Court of California in People vs Arguello (2) which, was approved by this Court in Kesoram Industries vs Commissione of Wealth Tax (3) clearly brings out the essential characteristics of a debt "Standing alone, the word 'debt, ' is as applicable to a sum of money w... |
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. Ratio |
" 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. Ratio |
A sum due would, therefore, mean a sum for which there is an existing obligation to pay in praesenti or in other words, which is presently payable. (2) [1869] 37 Calif. 524 (1) (3) ; 566 Recovery of such sums is the subject matter of cl. 18 according to the heading. Ratio |
That is the dominant idea running through the entire cl.18. Ratio |
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. Ratio |
It may be noted that cl. 18 does not lay down the substantive rights and obligations of the parties under the contract. Ratio |
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". Ratio |
It, therefore, postulates a claim for a sum which is due and payable, that is. Ratio |
presently recoverable and may be recovered by the mode therein provided. Ratio |
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. Ratio |
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. Ratio |
If merely a right of lien or retention were given to secure payment of a claim, then even if the claim were for a sum not presently due and payable, the provision perhaps would not have been so startling ,or unusual. Ratio |
But here the right given to the purchaser under. Ratio |
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 payable in praesenti and the purchaser is otherwise not entitled to recover it. Ratio |
That would indeed be a highly extra ordinary result which we would be loathe to reach in the absence of clear and compelling language. Ratio |
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 insuffici... |
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 presently payable or is disputed as regards the existence of liability or its quantum. Ratio |
A mere making of a claim by the purchaser would impose a liability on the contractor to pay it. Ratio |
That surely could not have been the intention of the contracting parties. Ratio |
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 language used by the contracting parties, that cl. Ratio |
Is does no more than merely 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. Ratio |
This view, indeed, becomes irresistible 567 when we consider the last words of cl. 18, namely, "the contractor shall on demand pa to the purchaser the balance remaining due", which clearly postulate that the reference in the clause is to a sum presently due and payable by the contractor to the purchaser, so that, if an... |
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 t... |
This contention is, in our opinion wholly untenable. Ratio |
We do not think it is legitimate to construe cl. 18 of the contract between the parties by reference to a corresponding clause which prevailed in an earlier Standard Form of Contract. Ratio |
This is not a statute enacted by the Legislature where it can be said that if the Legislature has departed from the language used by it in an earlier enactment, it would be a fair presumption to make that the alteration in the language was deliberate and it was intended to convey a different meaning. Ratio |
It is a clause in a contract which we are construing and there, any reference to a similar or dissimilar clause in another contract would be irrelevant. Ratio |
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. Ratio |
Moreover, on a question of construction of cl. 18, mere use of the word "claim" cannot be a decisive factor. Ratio |
18 has to be read as a whole, each part throwing light on the other, without any undue emphasis on one word or the other. Ratio |
We cannot allow our interpretation of cl. 18 to be hijacked from its true course by the use of a solitary word such as "claim", but we must arrive at the true meaning of the clause by construing it in all its parts and in its proper contextual setting. Ratio |
So viewed, it is clear that cl. 18 applies only where the purchaser has a claim for a sum presently due and payable by the contractor. Ratio |
Having discussed the proper interpretation of cl. 18, we may now turn to consider what is the real nature of the claim for recovery of which the appellant is seeking to appropriate the sums due to the respondent under other contracts: The claim is admittedly one for damages for breach of the contract between the partie... |
Now, it is true that the damages which are claimed are liquidated damages under cl. 14, 568 but so far as the law in India is concerned, there is no qualitative difference in the nature of the claim whether it be for liquidated damages or for unliquidated damages. Ratio |
74 of the Indian Contract Act eliminates the some what elaborate refinements made under the English common law in distinguishing between stipulations providing for payment of liquidated damages 'and stipulations in the nature of penalty. Ratio |
Under the common law a genuine preestimate of damages by mutual agreement is regarded as a stipulation naming liquidated damages and binding between the parties a stipulation in a contract in terrors is a penalty and the Court refuses to enforce it, awarding to aggrieved party only reasonable compensation. Ratio |
The Indian Legislature has sought to cut across the web of rules and presumptions under the English common law, by enacting a uniform principle applicable to all stipulations naming amounts to be paid in case of breach, and stipulations by way of penalty, and according to this principle, even if there is a stipulation ... |
It, therefore makes no difference in the present case that the claim of the appellant is for liquidated damages. Ratio |
It stands on the same footing as a claim for unliquidated damages. Ratio |
Now the law is well settled that a claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a Court or other adjudicatory authority. Ratio |
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 becomes entitled to a debt due from the other party. Ratio |
The only right which the party aggrieved by the breach of the contract has is the right to sue for damages. Ratio |
That is not in actionable claim and this position is made amply clear by the amendment in section 6(e) of the Transfer of Property Act, which provides that a mere right to sue for damages cannot be transferred. Ratio |
This has always been the law in England and as far back as 1858 we, find it stated by Wightman, J., in Jones vs Thompson (1) "Exparte Charles and several other cases decide that the amount of a verdict in an action for unliquidated damages is not a debt till judgment has been signed". PRE |
It was held in this case that a claim for damages dots not become a debt even after the jury has returned a verdict in favour of the plaintiff till the judgment is actually delivered. PRE |
So also in O ' Driscoll vs Manchester Insurance Committee,(2) Swinfen Eady, L. J., said in reference to cases where the claim was for unliquidated damages "in such cases there is no debt at all until the verdict of the jury is pronounced assessing the damages and judgment is given. PRE |
The same view has also been taken consistently by different High Courts in India. Ratio |
We may mention only a few of the decisions, namely, Jabed Sheikh vs Taher Mallik,(3) section Malkha Singh vs M/s N. K. Gopala Krishna Mudaliar(4) and Iron & Hardware (India) Co. vs Firm Shamlal & Bros.(5) (1) (3) 45 Cal.Weekly Notes, 519.(2) (4) (5) 569 Chagla, C. J. in the last mentioned case, stated the law in these ... |
As already stated, the only right which he has is the right to go to a Court of law and recover damages. Ratio |
Now, damages are the compensation which a Court of law gives to a party for the injury which he has sustained. Ratio |
But, and this is most important to note, he does not get damages or compensation by reason of any existing obligation on the part of the person who has committed the breach. Ratio |
He gets compensation as a result of the fiat of the Court. Ratio |
Therefore, no pecuniary liability arises till the Court has determined that the party complaining of the breach is entitled to damages. Ratio |
Therefore, when damages are assessed, it would not be true to say that what the Court is doing is ascertaining a pecuniary liability which already existed. Ratio |
The Court in the first place must decide that the defendant is liable and then it proceeds to assess what that liability is. Ratio |
But till that determination there is no liability at all upon the defendant. Ratio |
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