Rajasthan High Court - Jaipur
The Indian Aluminium Cables Limited vs Rajasthan State Electricity Board And ... on 31 July, 1991
Equivalent citations: 1992(1)WLC268, 1991WLN(UC)451
JUDGMENT S.N. Bhargava, J.
1. This is an appeal under Order 43 Rule 1(r). CPC read with Section 104, CPC against the order of the Distt. Judge, Jaipur City, Jaipur, dismissing the application filed by the plaintiff appellant, under Section 41 of the Arbitration Act, 1940 read with Order 9 Rules 1 and 2 CPC and Section 151 C.P.C. whereby the petitioner-plaintiff had prayed for stay of encashment of the bank guarantee.
2. Rajasthan State Electricity Board, respondent No. 1 (hereinafter referred to as the 'Board') accepted an offer of the appellant company for supply of 10 of ACSR Zebra Conductor, on the terms and conditions contained in the purchase order. A formal contract agreement was executed in writing between the parties on 22.10.1979. The said contract contained an arbitration clause mentioned in Section 26 thereof. As per the term No. 16 of the contract, the appellant was to furnish security deposit for the due fulfilment of the contract equivalent to 5% of the contract value in the form of a composite bank guarantee within fifteen days of the receipt of order and if the supplier, failed on neglected to observe or perform any of its obligations under the contract, it will be lawful for the defendant to operate either in whole or in part, the composite bank guarantee as furnished by the supplier. In pursuance of the said contract, the appellant furnished a bank guarantee No. 1750 dated 3.3.1979 issued by the respondent No. 2 in favour of respondent No. 1 for a sum of Rs. 1,43,500/- equivalent to 5% of the value of the contract. The material terms of the said bank guarantee are as under:
1. The Bank hereby guarantees to the Chief Engineer, Rajasthan State Electricity Board, the fulfilment by the contractors of the various obligations imposed on them under the aforesaid contract including the obligation of the contractors to supply materials of the good quality and workmanship and the bank further guarantees to the Rajasthan State Electricity Board that the contractor shall substitute and supply free of cost any material, that may be required due to defects arising from faulty material, design and workmanship and the Bank undertakes to indemnify and keep the Chief Engineer, Rajasthan State Electricity Board, indemnified to the extent of Rs. 1,43,5001- (Rupees one lac forty three thousand and five hundred only) against any loss or damage that may be caused to or suffered by the Rajasthan State Electricity Board, by reason of any failure by the contractors to supply materials of good quality, design and workmanship as aforesaid and further under-take, to pay to the Chief Engineer, Rajasthan State Electricity Board, on demand a sum of not exceeding Rs. 1,43,500l- (Rupees one lac forty three thousand and five hundred only) in the event of the contractor failing or neglecting to perform and discharge the aforesaid duties and obligations on their part to be observed and performed under the said contract.
2. The Bank on demand by the Chief Engineer shall make payment of the amount without question to the purchaser. In the case in which the contractor, on receipt of the order and for after the acceptance of his tender has been communicated to him by the purchaser, makes default in entering into an agreement or having entered into such agreement or otherwise the contractor makes default in carrying out the contract thereof. As to whether the occasion or ground has arisen for such demand and decision of the Chief Engineer, shall be final.
3. The decision of the Chief Engineer including Additional Chief Engineer & any other officer exercising the powers of Chief Engineer Rajasthan State Electricity Board, as to whether the contractor have failed or neglected to perform or discharge their duties and obligations as aforesaid and as to the amount payable to the Chief Engineer, Rajasthan State Electricity Board by the Bank herein shall be final and binding on the Bank.
3. The aforesaid bank guarantee had been extended, from time to time and at present is valid upto 30.9.1991. The appellant's case is that it supplied the entire quantity of the material under the contract, to the respondent No. 1 and received full payment against it. It has further been submitted that there was a joint inspection in regard to certain quantities of the alleged defective Conductors and it was agreed that the quantity of 50.2 Kg Conductors jointly inspected shall be accepted and untilsed on the transmission lines and that the appellant was to pay the cost for repairs, replacement as mentioned in the inspection report but the respondent Board has utilised the said quantity of Conductors but did not mention the cost, if any, incurred by it for getting the same repaired. However, the Board wrote to the respondent No. 2 vide letter dated 23.11.1983 to remit the amount of Rs. 1,43,500/- to it immediately. The appellant came to know about this on 26.11.1983. According to the plaintiff appellant the respondent No. 1 Board is in the habit of making such unfounded claims and trying to encash the bank guarantee. In respect of one such unfounded claim, the appellant had to take legal proceedings in the court of Additional Distt. Judge, Delhi, being Suit No. 111/1983 against the respondents. In such proceedings an injunction was granted restraining respondent Board from enforcing or operating the bank guarantee. According to the appellant, respondent No. 1 is not entitled to receive any amount under the said bank guarantee as the appellant has not failed nor neglected to perform its part of the contract, including the obligation to supply material of good quality and workmanship. Moreover, there is no decision of the Chief Engineer as such, till now that the appellant has committed any breach of the terms of the contract or it his failed to perform its part of the contract. Since there is a dispute and some differences have arisen between the parties, concerning or arising out of the contract, the same should be referred to arbitration and the respondent Board cannot encash the bank guarantee unless the matter is decided by the Arbitrators. Therefore, the present application Under Section 20, Arbitration Act for getting a reference of the disputes and differences between the parties to the Arbitrator, has been filed.
4. Along with the said application, the plaintiff (also filed an application the) appellant had also filed an application on 29.11.1983, under Section 41 of the Arbitration Act read with Order 39 Rules 1 and 2 CPC r/w Secection 151 CPC, for stay and praying that the respondent No. 1 may be restrained from reconvering or realising any amount under the bank guarantee No. 1750 dated 3.3.79 until further orders of the Court. It was also prayed that the respondent No 2 may be restrained from making any payment under the said bank guarantee to the respondent No. 1. By an exparte order, the trial court was pleased to issue temporary injunction as prayed. After service of the notices, the respondents filed reply to the said application. Trial court, after hearing the counsels for the parties, dismissed the said application and it is against this order that the present appeal has been filed by the appellant.
5. Learned Counsel for the respondent Board has raised a preliminary objection that appeal against the order challenge does not lie and in this connection has drawn my attention to Section 39 of the Arbitration Act, 1940 which runs as under:
39 Appealable orders. - (1) An appeal shall lie from the following orders passed under this Act and from no others to the Court authorised by law to hear appeals from original decrees of the Court passing the order:
An order-
(i) superseding an arbitration;
(ii) on an award stated in the form of a special case;
(iii)modifying or correcting an award;
(iv)filing or refusing to file an arbitration agreement;
(v) staying or refusing to stay legal proceedings where there is an arbitration agreement.
(vi)setting aside or refusing to set aside an award;
Provided that the provisions of this section shall not apply to any order passed by a Small Cause Court.
(2) No second appeal shall lie from an order passed in appeal under this Section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.
He has argued that no appeal is provided under the Arbitration Act for dismissing the injunction application. In this connection, he has placed reliance on Union of India v. Mohinder Supply Co. wherein a bench consisting of four Judges has held that when an appeal has been disposed of by a learned Single Judge Under Section 39(1) of the Arbitration Act, there is no further right of appeal under Clause 10 of the Letters patent in view of Section 39(2) of the Arbitration Act which prohibits a second appeal from an order passed in an appeal Under Section 39(1). It has further been observed that Under Section 39(1) of the Arbitration Act, an appeal lies from the order specified in that sub Section and from no others. The Legislature has plainly expressed itself that the right of appeal against the orders passed under the Arbitration Act may be exercised only in respect of certain orders. The right to appeal against other orders is expressly taken away. This authourity has been considered in Rebati Ranjan v. Suranjan Chakravarti and Ors. wherein relying on Section 39(1) it has been held that the Arbitration Act being a special Act controls the general right of appeal and therefore, an order dismissing an application for appointment of a Receiver made Under Section 41 of the Arbitration Act is not appealable in view of Section 39(1)
6. He has also placed reliance on Union of India v. N.K. Private Limited wherein after relying on Mohinder Supply Co. and Rebati Ranjan cases (supra), it has been held that an order passed on an application for temporary injunction along with an application Under Section 20 of the Arbitration Act is an order Under Section 41 of the Act and this would be governed by Section 39 and therefore, not appealable.
7. My attention has also been drawn to Krishnavati Devi v. H.M. Misra wherein it has been held that an order passed on an application for appointment of a Receiver Under Section 41(b) is not appealable in view of Section 39 and the provisions of C.P.C. will not apply.
8. Learned Counsel for the Board has further placed reliance on Mis. Banwarilal Radhey Mohan v. Punjab State Corporation Supply wherein the court relying on Mohinder Supply Co.'s case (supra), has confirmed its earlier view taken in N.K Private Ltd. (supra).
9. Learned Counsel for the respondent Board has further submitted that an appeal is a creature of the statute and the right of appeal cannot be extended by implication. Therefore, when the legislature thought it fit to provide in Section 39(1) for appeals only in six cases, it is beyound scope of the court to confer a right of appeal in other cases by inference and in this connection, reliance has been placed on Puppalla Ramulu v. Nagidi Appalaswami and Ors. A.I.R. 1957 A.P. 11.
10. Reliance has also been placed on The State of HP v. H.S. Sobti and Co. wherein relying on Rebati Ranjan and Mohinder Supply Co. (supra) a division bench observed that an order granting interim injunction by virtue of Section 41(b) of the Act is not appealable order Under Section 39(1) of the Arbitration Act.
11. He has also placed reliance on Sharma Ice Factory v. Jewel Ice Factory and Ors. A.I.R. 1975 J & K 25 (DB) wherein it has been held that an order of injunction should be deemed to be one passed Under Section 41(a) of the Arbitration Act and therefore is not appealable Under Section 39(1).
12. On the other hand, learned Counsel for the appellant in reply to the preliminary objection has submitted that the impugned order is an order passed on a composite application Under Order 39 Rule 1 & 2 CPC r/w Section 41 of the Arbitration Act and therefore it falls under Order 43 Rule 1(r) CPC. Order 43 Rule 1 CPC provides a separate forum of appeal applicable to all civil proceedings and terefore, the present appeal against the order dismissing an application for injunction is maintinable. He has further submitted that the Arbitration Act provides an additional forum of appeals Under Section 39 & is in no way contrary or inconsistent with Order 43 Rule 1 CPC and in this connection, has placed reliance on a decision of three Judges' Bench, in Shah Babulal Khimji v. Jaya Ben D. Kania wherein their lordships have considered Mohinder Supply Co's case (supra) and several other cases, and observed that Section 104 CPC read with Order 43 Rule 1 CPC expressly authorises and creates a forum for appeal against the orders falling under various clauses of Order 43 Rule 1 CPC. In that case, their lordships were considering whether an appeal lies against the order of a Single Judge, on an application of interim injunction within the meaning of Clause 15 of the Letters patent, to the High Court and in that connection, it was observed that there was no inconsistency between Section 104 read with Order 43 Rule 1 CPC and the appeals under the Letters Patent and there is nothing to show that the Letters Patent in any way excludes or over-rides the application of Section 104 r/w Order 43 Rule 1 CPC and relying on this reasoning, he has submitted that the present appeal is maintainalbe. He has also placed reliance on a division bench decision in Omaji Kesho Mashram v. Smt. Radhikahai and Anr. in which case of Babulal (supra) has been explained. He has distinguished the cases of Mohinder Supply and Banwarilal (supra) & other cases relied by respondents.
13. He has also brought to my notice Tirath Singh v. Ishar Singh A.I.R. 1948 Lahore 50 wherein a division bench has held that there is nothing in Section 39 or Section 41 which, in any way takes away the powers that the High Court possesses, of entertaining petition of revision Under Section 115 CPC and has submitted that even if the appeal does not lie, a revision would lie and this Court is competent to examine the correctness of the judgment of the trial court.
14. I have given my thoughtful consideration to the whole matter and have also gone through the record of the case as well as the judgment of the trial court, so also the authorities cited before me.
15. In the present case, the facts are not disputed. The appellant along with an application Under Section 20 of the Arbitration Act, for referring the disputes and the differences between the parties to the Arbitrator, filed an application Under Section 41 of the Arbitration Act r/w Order 39 Rules 1 and 2 CPC and Section 151 C.P.C. praying that the respondent No. 1 may be restrained from recovering or realising any amount under the bank guarantee and also that the respondent No. 2 be restrained from makaing any payment under the said bank guarantee to the respondent No 1 Section 41(b) of the Act provides that the Civil Procedure Code applies to all proceedings before the court and the court has the same power of making orders in respect of any matters setout in Second Schedule and the Second Schedule also authorises the court to issue interim injunctions. Order 39 Rules 1 and 2 CPC also empowers the court to issue temporary injunction whereas Section 151 CPC deals with the inherent powers of the court saving that nothing in this Act shall be deemed to limit or otherwise affect the inherent powers of the court to make such orders as may be necessary for the ends of justice or to prevent abuse of the process of the court. Therefore, the power of issuing temporary injunction is coextensive both Under Section 41 of the Arbitration Act and Order 39 Rules 1 and 2 CPC, and the court has power to issue temporary injunction. Apart from the powers Under Section 41 Arbitration Act and Order 39 Rules 1 and 2 CPC, the court has also inherent power Under Section 151 to pass such orders which may as may be necessary for the ends of justice and this will not exclude the power to issue temporary injunction in the interest of justice. Section 39 of the Arbitration Act, quoted above, permits an appeal from the orders passed under the Act enumerated in that Section and issue of temporary injunction is not covered by either of the orders mentioned in Section 39, so, if an order passed on the application is strictly only within Section 41 of the Arbitration Act, Section 39 is a bar for filing appeal but if the orders on the said application are under Order 39 Rules 1 and 2 CPC and Section 151 CPC, Section 39, Arbitration Act will not come in the way and the appeal will lie. Their lordships of the Supreme Court in Shah Babulal Khimji's case (supra) while considering whether an appeal lies against an order of Single Judge on an application for interim injunction, within the meaning of Clause 15 of the Letters patent, observed that Section 104 C.P.C. read with Order 431(r) CPC expressly authorises and creates a forum for appeal against the orders falling under various clauses of Order 43 Rule 1 CPC. Order 43 CPC provides that an appeal shall lie under the provisions of Section 104 CPC from an order under Rules 1 and 2of order 39 CPC. It has further been observed that the Letters Patent does not exclude or over-ride application of Section 104 CPC r/w Order 43 Rule 1 CPC and therefore their Lordships held that the Letters Patent Appeal was maintainable. Their lordships of the Supreme Court in an earlier case - Mohinder Supply Co. (supra) relied by learned Counsel for the respondent, has not dealt with this argument, though it was observed that Under Section 39(1), Arbitration Act, an appeal lies from the order specified in that sub-section and from no others. In Shah Babulal Khimji (supra), the lordships of the Supreme Court have noticed its earlier case of Mohinder Supply Co. (supra). In Rebati Ranjan (supra) reliance was placed on Mohinder Supply Co. 's case (supra) and the argument considered by the Supreme Court in Shah Babulal Khimji (supra) was not made before them and they have not considered the import of Section 104 CPC read with Order 43 Rule 1 (r) CPC. Similarly, in N.K Private Ltd. and Banwari Lal Radhey Mohan (supra), Delhi High Court has not dealt with this argument and placed reliance only on earlier view of the Supreme Court in Mohinder Supply Co. and Rebati Ranjan (supra). Before the Allahabad High Court also, in Krishnavati (supra), this argument was not advanced but they thought, revision may lie against such an order : Supreme Court again in Smt. Radhikabai (supra) has noticed Shah Bahulal Khimji (supra) with approval.
16. Thus, in view of the latest decision of the Supreme Court in Shah Babulal Khimji approved in Smt. Radhikabai (supra), I am of the opinion that the view of the other High Court - Delhi, Allababad and Calcutta, does not lay down a good law. Supreme Court in Mohinder Supply Co. had not considered the argument which has prevailed in Shah Babulal. Khimiji (supra). In this view of the matter, I do not find any force in this argument of the learned Counsel for the respondent and hold that appeal is maintainable.
17. It will not be out of place to mention here that the appellant had also filed a revision petition Under Section 115 CPC against the same order, in which prayer clause was so the same. Both, the present appeal and the revision petition came up before this Court on 18.1.1991 when notices of the appeal were issued but the revision petition was dismissed on the ground that no revision is maintainable on the ground of mis construction of a document. However, if both these matters had been decided together, all this futile exercise as to whether an appeal lies or not, would not have been made because in any case, even if the appeal did not lie, the order was clearly revisable as has been held by Lahare High Court in Tirath Singh and observed in Krishnavati (supra).
18. Thus, the preliminary objection raised by the learned Counsel for the respondent Board that appeal is not maintainable is over ruled and it is held that appeal is maintainable.
Put up for arguments on merits on 19.8.1991.