Union Of India vs Raman Iron Foundry on 12 March, 1974
82. Mr. Datar's reliance in support of the propositions on damages being
awarded to Docomo, and payable by Tata in the arbitral proceedings, is premised
as to what would be the legal character of the amount of damages being received,
and as considered by the Supreme Court in Union of India vs. Raman Iron
Foundry27, which, according to him, would aptly apply to the present facts. In
Raman Foundry, tender was accepted by the Government of India, which was
subject to the General Conditions of Contract, contained in the Standard Form of
Contract. The performance of the contract ran into difficulties. Dispute had
arisen between the parties which gave rise to claims by both parties. The
Government of India intimated to Raman Iron Foundry, that in case of failure to
pay the damages within the stipulated time, the amount would be recovered from
its pending bills in respect of other contracts. Consequent thereto, Raman Iron
Foundry filed an application under Section 20 of the Arbitration Act, 1940 for
filing the arbitration agreement. Such application was allowed and accordingly
27 (1974) 2 SCC 231
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arbitration proceedings were initiated. During the pendency of the arbitration,
apprehending that the amounts due and payable by the Government of India are
likely to be appropriated towards the recovery of the amount of damages, Raman
Iron Foundry made an interim application before the High Court under Section
41 read with the Second Schedule of the Arbitration Act, praying that the status
quo be maintained and the appellant should be restrained from recovering its
claim for damages from the pending bills of Raman Iron Foundry. The High
Court issued an interim injunction. It is such order, which was the subject matter
of consideration. In such context, the issue which fell for consideration of the
Court, was to the purport of Clause 18, which intended to provide a right to
recovery of claim for payment of a sum of money arising out of or under the
contract. It is in such context, in examining as to whether there was any
qualitative difference in the nature of a claim whether it be for liquidated
damages or for unliquidated damages, it was held that, it makes no difference of
the claim being for liquidated damages, as such claim stood on the same footing,
as a claim for unliquidated damages.