Gujarat High Court
Triveni Structurals Ltd. vs Steelex Engineering Corporation on 28 August, 1989
Equivalent citations: (1990)1GLR273
JUDGMENT A.P. Ravani, J.
1. The respondent herein filed application under Section 20 of the Arbitration Act, 1940 ('the Act' for short) praying that the Arbitration Agreement between the parties be ordered to be filed in Court and an arbitration be appointed in respect of the disputes between the parties. In this application (hereinafter referred to as 'the suit') an application Exh. 5 has been filed by the plaintiff praying that the defendant (appellant herein) be restrained from disposing of the iron scrap lying at the Vanakbori Thermal Power Station. The application has been granted and against that order this appeal from order is filed.
2. The appellant-defendant had entered into a contract for construction of a portion of Vanakbori Thermal Station. The defendant entered into sub-contract with the plaintiff for a part of the construction work. The sub-contract was entered into in the year 1982. According to the plaintiff, the plaintiff firm completed the contract work in the year 1987. Thereafter some additional work was required to be done at the revised rate. According to the plaintiff the defendant assured that for the additional work payment will be made at the revised rate.
Despite repeated demands made by the plaintiff, the defendant did not make payment. There was a dispute between the parties with regard to the work in question. The plaintiff invoked the arbitration clause and filed application under Section 20 of the Act which is being treated as suit as per the provisions of Section 20 of the Act itself. As indicated hereinabove, by Exh. 5 the plaintiff prayed for injunction restraining the defendant from disposing of the iron scrap lying at Vanakbori Thermal Power Station. The same has been granted by the trial Court by its order dated March 17, 1989. The trial Court held that it had jurisdiction of proceed further with the suit; that the plaintiff had strong prima facie case and the balance of convenience was in favour of the plaintiff. The trial Court restrained the defendant from disposing of the iron scrap worth Rs. 30 lacs and permitted to dispose of iron scrap to the extent of Rs. 30 lacs only. The trial Court also directed that it will be open to the appellant-defendant to show any other property to be attached instead of the property in question i.e. iron scrap. It is against this order that the appeal from order is filed.
3. Learned Counsel for the respondent-plaintiff submitted that the appeal from order is not maintainable. In her submission the trial Court had passed order under Section 41 of the Act, and therefore Provisions of Civil Procedure Code would be applicable only to the proceedings before the trial Court and not before the appellate stage in the High Court. In her submission at any rate the provisions of C.P. Code relating to appeal from order contained in Order 43 would not be applicable.
4. Section 41(a) provides that the provisions of Civil Procedure Code shall apply to all proceedings before the Court and all appeals under the Act. The only limitation contained is in the initial past of sentence of the Section. It is contained in the phrase "subject to the provisions of this Act and the rules made thereunder". No provision of the Act or the Rules framed thereunder has been pointed out to me which excludes the applicability of the provisions contained in Order 43 of the Code of Civil Procedure. On the contrary, items No. 1 and 4 of the Second Schedule of the Act reads as follows:
1. The preservation, interim custody or sale of any goods which are the subject matter of the reference.
2. ... ... ... ... ...
3. ... ... ... ... ...
4. Interim injunction or the appointment of a receiver.
The aforesaid items No. 1 to 4 read with the provisions of Section 41(a) of the Act clearly indicate that the provisions relating to injunctions are applicable to "all proceedings before the Court, and to all appeals, under the Act. In this connection reference may be made to a decision of the Supreme Court in the case of Hakam Singh v. Gammon (India) Ltd. In para 3 of the judgment the Supreme Court has considered the provisions of Section 41(a) of the Act. After quoting this part of the section, the Supreme Court has observed as follows:
The Code of Civil Procedure in its entirety applies to proceedings under the Arbitration Act. The jurisdiction of the Courts under the Arbitration Act to entertain a proceeding for filing an award is accordingly governed by the provisions of the Code Civil Procedure.
In view of this settled legal position the contention that A. O. is not maintainable cannot be accepted.
5. Assuming for a moment that the provisions regarding A. 0. contained in Order 43 of Code of Civil Procedure are not applicable to this particular proceedings, even so, in view of the aforesaid decision of the Supreme Court all the provisions of the Code of Civil Procedure would be applicable. Therefore, provisions of Section 115 of the Code of Civil Procedure would apply to these proceedings. Even if these proceedings be treated as revision application under the provisions of Section 115 of the Code of Civil Procedure, revision before this High Court would be maintainable. However, as indicated hereinabove, in view of the provisions of Section 41(a) read with items No. 1 and 4 of the Second Schedule of the Act and the decision of the Supreme Court in the case of Hakam Singh (supra) appeal from order against the order of injunction passed by the trial Court would be maintainable.
6. The order or injunction passed in this case is in the nature of an order of attachment before judgment. There is no averment to the effect that the defendants are trying to dispose of their property with a view to defraud the creditor or that the defendants would not be in a position to satisfy the decree in case decree is ultimately passed. Moreover, it must have been realised that at this stage there is only an application for filling of arbitration agreement in Court and thereafter there will be appointment of arbitrator. The arbitrator may decide the disputes between the parties. Therefore, at this stage there cannot be any question of attachment before judgment. Thus the trial Court has acted illegally and without jurisdiction. On this ground also the order passed by the trial Court cannot be sustained.
7. Learned Counsel for the respondent plaintiff submitted that the appellant-defendant was adopting delaying tactics and was not making payment of its dues. There may be such apprehension in the mind of the respondent-plaintiff. This apprehension may be genuine, may not be genuine. Even assuming that there is some substance in harbouring such apprehension, that would not justify the order of attached before judgment. As indicated hereinabove, at this stage everything is in a state of flux. Even the disputes are still to be resolved and no amount is ascertained. Therefore, the order of injunction which is, as indicated hereinabove, in the nature of attachment before judgment, cannot be sustained. It may also be noted that the goods in question i.e. the iron scraps lying at Vanakbori Thermal Power Station, have already been sold by auction held on October 16, 1988. The auction purchaser has not been made party in these proceedings. No notice has been served upon the auction purchaser. The order that is passed by the trial Court would adversely affect the interest of the auction purchaser. In this view of the matter it is not understood how the trial Court thought it fit to pass an order which would adversely affect a third party which is not before the Court and to which no notice has been served. It ought to have been realised by the trial Court that if the order of injunction as passed by it is allowed to remain in operation till final disposal of suit, the appellant-defendant as well as the third party which has purchased the goods in auction sale would suffer loss of interest to a considerable extent. This loss alone would be irreparable. While on the other hand, as far as the plaintiff is concerned, even if the ultimate decree is passed there is no reason or ground to believe that the decree will be defeated. To secure the interest of the respondent-plaintiff certain terms and conditions could have been imposed upon the appellant-defendant. However, in the facts and circumstances of the case and in a suit (rather application) under Section 20 of "the Act" it would not be just and proper for the trial Court to insist or to impose any condition upon the appellant-defendant. This is so, because in the facts of the case at this stage everything is in a state of flux. At this stage nothing can be said about the rival claims of the parties. Simply because one of the parties has filed application under Section 20 of "the Act" for filing arbitration agreement in the Court and for appointment of arbirator, the party does not become entitled to an injunction restraining the other side from disposing of the goods belonging to it. Thus, there is no prima facie case whatsoever in favour of the plaintiff.
8. Even if it is assumed for the sake of argument that there is prima facie case in favour of the plaintiff, then also as indicated hereinabove the balance of convenience is certainly not in favour of the plaintiff. The plaintiff would not be put to any loss whatsoever if the order of injunction as prayed for is not granted. While on the other hand, the appellant-defendant as well as third party would be put to considerable loss by way of interest loss only. Moreover the goods also will be deteriorating. Thus from the point of view of balance of convenience also the injunction ought not to have been granted. In fairness to the learned Counsel for the appellant-defendant it should be said that he has pointed out that the Secretary of the defendant-Company has filed an affidavit to the effect that in case the award is passed and the award is ultimately made rule of the Court, then the Company will satisfy the same. At the time of hearing of the appeal it is further stated that subject to the rights of filing of appeal against the order making the award the rule of the Court and subject to the right of the appellant-defendant for obtaining appropriate interim orders from the appellate forum, the appellant-defendant will satisfy the ultimate decree that may be passed by the trial Court within a period of 90 days from the date of passing of the same. It is clarified that in case no award is passed and the award is not made rule of the Court, the aforesaid statement shall lose its significance.
9. All the aforesaid observations made in this order are ad hoc observations and the same are not to be taken into consideration at all by the trial Court while proceeding further with the suit. The observations have been made by this Court only with a view to deciding the application Exh. 5 and this appeal from order. They shall be treated as irrelevant for deciding the suit on merits.
10. In the result the appeal is allowed. The order passed by the trial Court is reversed and set aside. Application Exh. 5 filed by the respondent-plaintiff is dismissed. Appeal from order is allowed accordingly with no order as to costs.
11. If the parties apply for expeditious hearing of the suit, it is hoped that the trial Court will make earnest effort to accede to such a request.