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Friday, May 13, 2016

in the absence of appeal, no court dismiss the interim injunction order made absolute pending disposal of the case = the District Judge having decided the injunction application in the first instance in appellant's favour vide order dated 04.01.2012 erred in rejecting the application made by the appellant second time vide order dated 12.07.2012. It is not in dispute that the respondents despite having suffered the injunction order dated 04.01.2012 did not file any appeal against this order. Such order thus attained finality and was, therefore, binding on the parties.=we hold that the appellants have made out a prima facie case in their favour for grant of injunction against the respondents so also they have made out a case of balance of convenience and irreparable loss in their favour as was held by this Court in the case of Union of India (DGS&D) (supra). They are, therefore, entitled to claim injunction against the respondent in relation to encashment of Bank Guarantee no. 12/2006 dated 04.08.2006.


                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO.4814 OF 2016
                  (ARISING OUT OF SLP(C) No. 27052 of 2012)

      M/s Gangotri Enterprises Ltd.                Appellant(s)


      Union of India & Ors.                  Respondent(s)

                               J U D G M E N T

Abhay Manohar Sapre, J.
1)    Leave granted.
2)    This appeal is filed  against  the  final  judgment  and  order  dated
23.07.2012 of the High Court of Uttar Pradesh  Judicature  at  Allahabad  in
F.A.F.O. No. 2930 of 2012 whereby the High Court dismissed the appeal  filed
by the appellant herein and upheld the order of  District  Judge  which  had
refused to grant an interim injunction restraining  encashing  of  the  Bank
Guarantee by the respondents herein.
3)    In order to appreciate the issue involved in this appeal,  which  lies
in a narrow compass, it is necessary to set out the relevant facts in  brief
4)    The respondents, i.e., North Central Railway invited tender for  doing
“earth work  in  embankment  and  cutting  including  provision  of  machine
crushed/blended material blanketing layer and construction of RCC  Box  type
minor bridges at CH-84700M to 114100M”, in connection with  laying  down  of
Agra-Etawah new BG Rail Line.  The appellant-a Limited Company  applied  for
the said tender and its tender being the lowest  one  was  accepted  by  the
respondents on 14.03.2005 and  accordingly  the  letter  of  acceptance  was
issued in appellant’s favour.  The  contract  agreement  No.  CE(C)  ‘North’
ALD/A-E/Contract/EW-III  dated  22.08.2005  was  then  signed  between   the
parties. The total value of the contract was  Rs.14,62,46,742/-,   the  date
of commencement of work was 14.03.2005 and the date of  completion  of  work
was  13.03.2007.  As the work could not be completed within  the  prescribed
time, on the request of the appellant-Company, the  period of completion  of
work was extended twice by the  respondents,  firstly,  from  14.03.2007  to
31.12.2007 and again upto 30.09.2008 without levy of penalty and with  price
variation clause benefit.
5)    On 14.07.2006, the appellant-Company was granted another work  by  the
respondents-North    Central     Railway     vide     letter     No.     74-
W/4/1/347/WA/ANVR/SERd./TCR for construction of New Station  Building  (G+2)
circulating  area,  various  service  buildings,  construction  of  platform
shelters with RCC Column and beam, Underground and  Overhead  water  storage
tanks, water supply pipeline network and other  misc.  works  in  connection
with the Development of New Passenger Terminal at Anand Vihar  (East  Delhi)
[hereinafter referred to as “Anand Vihar works”].  In  connection  with  the
grant  of  the  Anand  Vihar  works,  the  appellant-Company   submitted   a
Bank/Performance Guarantee bearing No. 12/2006  dated  04.08.2006  from  its
banker Indian  Mercantile  Co-operative  Bank  Ltd.,  Cantt.  Road,  Lucknow
(hereinafter referred to as ‘Bank’) for a sum of Rs.1,32,78,820/-.
6)    Since the work relating to contract  dated  22.08.2005  could  not  be
completed within the prescribed time/extended time by the appellant  due  to
non-availability of site because of the agitation of the  farmers  and  non-
supply of the specification or drawing of most of the small bridges  by  the
respondents, as complained by the appellant, the Agra-Etawah contract  dated
22.08.2005  was  terminated  by  the  respondents  vide  its  letter   dated
30.04.2009.  After  inviting  fresh  tenders,  the  rest  of  the  work  was
allocated  by  the  respondents  to  another  Company,  namely,   M/s   Hanu
Infrastructure Pvt. Ltd. Kasganj, Kashiram Nagar  for approximately  Rs.  11
Crores on 10.06.2011  without  giving  any  information  to  the  appellant-
7)    On 30.09.2010, the appellant got  the  completion  certification  from
the respondents for the Anand Vihar works with a defect liability period  of
six months, which also came to an end on  30.03.2011.   Thus  the  appellant
became entitled to seek the release of the  Bank/Performance  Guarantee  No.
12/2006 submitted by it for the said work from the respondents.
8)    On 27.06.2011,  the  appellant,  therefore,  wrote  a  letter  to  the
respondents-North  Central  Railway  for  return  of  the   Bank/Performance
Guarantee No. 12/2006.
9)    On 10.06.2011, the North Central Railway issued an  internal  circular
to all concerned departments of the Railways for withholding of dues of  the
appellant-Company stating  therein  that  the  contract  of  the  appellant-
Company dated 22.08.2005 or the New Agra-Etawah BG Line  was  cancelled  and
the same had caused the respondents a loss of Rs.5,58,16,036.33.   The  said
circular came to the knowledge of the appellant on 18.07.2011.
10)   On 30.11.2011,  the  respondents  through  their  accounts  department
wrote a letter to the Bank which had  furnished  Bank  Guarantee  No.12/2006
for and on behalf of the appellant for  the  encashment  of  the  said  Bank
11)   On 02.12.2011, the final bill for the Anand Vihar works  were  cleared
by the respondents and  the  payment  for  the  same  was  released  by  the
12)   Since the disputes had arisen between the parties in relation  to  and
arising out of the contract dated 22.08.2005, the appellant  invoked  Clause
36 read with Clause 64 of the  General  Conditions  of  Contract  (in  short
“GCC”) which provided for the settlement of dispute by arbitration.
13)   After initiation of the arbitration,  the  appellant,  on  04.01.2012,
moved an application under Section 9 of  the  Arbitration  and  Conciliation
Act, 1996 (hereinafter referred  to  as  “the  Act”)   before  the  District
Judge,  Allahabad  bearing  Arbitration  Suit  No.  411  of   2011   seeking
injunction on encashment of the Bank Guarantee deposited by it in the  Anand
Vihar works, against the respondents.  It was  inter  alia  alleged  in  the
application that the respondents-North Central  Railway  have  no  right  to
encash the Bank Guarantee No.12/2006 furnished by the appellant in  relation
to dispute arising  out  of  another  contract  dated  22.08.2005.   It  was
alleged that firstly, Bank Guarantee was not furnished by the  appellant  in
relation to contract dated 22.08.2005 but was furnished  in  performance  of
another contract dated 14.07.2006 (Anand Vihar works) which  is  a  separate
contract  and  has  nothing  to  do  with  the  contract  dated  22.08.2005.
Secondly, it was alleged that  so  far  as  the  contract  dated  14.07.2006
(Anand Vihar works) is concerned, the work was completed  well  within  time
and also to the satisfaction of the respondents  and  for  which  Completion
Certificate  was  also  given  to  the  appellant  by  the  respondents   on
30.09.2010.  Thirdly, it was  alleged  that  since  the  Bank  Guarantee  in
question was in the nature of performance Guarantee  for  due  execution  of
contract dated 14.07.2006 (Anand Vihar  works)  and  the  same  having  been
performed by the appellant to  the  satisfaction  of  the  respondents,  the
appellant-Company  was  entitled  to  get  its   Bank  Guarantee  No.12/2006
released from  the  respondents.  It  was  further  alleged  that  in  these
circumstances, the respondents have no right to encash  the  Bank  Guarantee
in relation to any dues arising out of other contract  with  the  appellant.
It was also alleged that in any event, so long as the disputes  arising  out
of the contract dated 22.08.2005 are not finally decided by  the  arbitrator
and liabilities of the parties are not   ascertained as to, who has  to  pay
how much sum by way of damages and whether any one is at all liable to  pay,
there is  no  sum  “due”  or  “payable”  either  by  the  appellant  to  the
respondents or/and vice  versa  and  hence  the  respondents  cannot  invoke
Clause 62(1) of GCC for realization of any money/sum by encashing  the  Bank
Guarantee from the appellant.
 14)  The respondents resisted the petition and inter  alia  contended  that
Clause 62(1) of GCC empowers the respondents to make recovery  of  any  dues
from the appellant.  It was contended that  since  the  respondents  have  a
claim/dues  for  payment  of  a  sum  of   money   against   the   appellant
(contractor), they (respondents) would be entitled to exercise  their  right
of recovery given to them under Clause 62(1) even if such claim is  not  for
a “sum due” and “sum payable” and is a claim for “damages”  though  disputed
by the appellant and remains to be adjudicated upon in a court of law or  by
the arbitrator.  It was contended  that  the  respondents  were,  therefore,
entitled to encash the Bank Guarantee in question in relation to  dues/claim
made by the respondents against the appellant.
15)   By order dated 04.01.2012, the District Judge allowed the  application
made by the appellant and restrained the  respondents  from  encashing  Bank
Guarantee  till  appointment  of  arbitrator  or  constitution  of  Arbitral
Tribunal.  It may be mentioned here that the respondents did  not  file  any
appeal against this order, which attained finality.
16)   By  letters  dated  20.01.2012  and  29.01.2012,  the  appellant  then
requested the respondents for return of its Bank Guarantee.
17)   On 13.03.2012, an arbitration Tribunal was constituted as  per  Clause
32 read with Clause 64 of the contract between the parties  which  comprised
of Shri Arun Kumar, CCE/NCR/ALD, Shri A.K. Bijalwan  FA&CAO/F&B/NCR/ALD  and
Shri R. Rajamani Former CCRS & Member/Arbitrator to  look  into  the  claims
and the counter claims of the  parties.   The  arbitration  proceedings  are
18)   On 21.03.2012, the  Deputy  Chief  General  Manager/Const./SE  Rd/NDLS
wrote to the Branch Manager of the Indian Mercantile  Cooperative  Bank  for
extension of Bank  Guarantee,  which  was  valid  upto  13.01.2012.  On  the
request of the respondents, the Bank extended the period of  Bank  Guarantee
for another six months, i.e., upto 13.07.2012.
19)   On 04.04.2012, the respondents through their accounts office  wrote  a
letter to the Branch Manager of the Bank to encash the said  Bank  Guarantee
in their favour.
20)   Since the respondents went on insisting for  encashment  of  the  Bank
Guarantee again and again saying  that  order  dated  04.01.2012  passed  by
District Judge no longer survives as its life was  only  upto  the  date  of
constitution of arbitral Tribunal and hence the respondents became  entitled
to encash the Bank Guarantee, the   appellant again filed a  petition  under
Section 9 of the Act bearing Arbitration Suit No. 216  of  2012  before  the
District Judge, Allahabad seeking injunction against  the  respondents  from
encashing the Bank Guarantee.
21)   By order dated 12.07.2012, the District Judge dismissed  the  petition
and declined to grant injunction to the appellant.  This time, the  District
Judge accepted the stand taken by  the  respondents  and  held  that  Clause
62(1) empowers the respondents to recover any dues/claim from the  appellant
and hence the respondents were  within  their  rights  to  invoke  the  bank
Guarantee and recover the dues relating to other contract.
22)   Aggrieved by  the  said  order,  the  appellant  preferred  an  appeal
bearing  F.A.F.O. No. 2930 of 2012 before the High Court.
23)   By impugned judgment dated 23.07.2012, the High Court  concurred  with
the view taken by the District Judge and dismissed the appellant’s appeal.
24)   Challenging the said judgment, the appellant has filed this appeal  by
way of special leave.
25)   Heard Mr. B. Adinarayan Rao, learned senior counsel for the  appellant
and Mr. Atul Chitaley, learned senior counsel for the respondents.
26)   Mr. B. Adinarayan  Rao,  learned  senior  counsel  appearing  for  the
appellant (Contractor) while assailing the legality and correctness  of  the
impugned order reiterated the same submissions,  which  were  urged  by  the
appellant before the two Courts below in support of  the  application  filed
by the appellant under Section 9 of the Act. His submission was  that  since
the Bank Guarantee in question was in the nature of
performance guarantee furnished by the appellant for due performance of  one
contract (Anand Vihar works) dated 14.07.2006   and  the  same  having  been
admittedly  performed  by  the  appellant  to  the   satisfaction   of   the
respondents (North  Central  Railway),  as  is  clear  from  the  completion
certificate dated  30.09.2010  issued  by  the  respondents  in  appellant's
favour, the purpose for which the Bank  Guarantee  had  been  furnished  was
over  as  soon  as  the  Satisfaction  Certification  was  issued   by   the
respondents in appellant’s favour.  Learned  counsel,  therefore,  contended
that the appellant became entitled to claim release of  the  Bank  Guarantee
in their favour on  and  after  30.09.2010  without  any  fetters  on  their
27)   In the second  place,  learned  counsel  urged  that  the  respondents
(North Central Railway) had no right to take recourse to Clause 62  of   GCC
for  encashing  the  Bank  Guarantee  in  question  because   firstly,   the
arbitration  proceedings  which  arose  out  of   another   contract   dated
22.08.2005 were still pending for final adjudication of  the  liability,  if
any, and secondly, so long as the liability as to how much sum  was  payable
and if so by whom it was payable was not finally  determined  in  accordance
with law in the arbitration proceedings by the  arbitrators,  there  was  no
"sum due" and nor any "sum payable" in praesanti by  the  appellant  to  the
respondents and vice versa in connection with another contract.
28)   In the third  place,  learned  counsel  contended  that  the  District
Judge, in the first instance, having rightly granted the injunction  to  the
appellant vide order  dated  4.01.2012  and  no  appeal  having  been  filed
against this order by the respondents, the said order had become  final  and
was binding  on  the  parties.  It  was,  therefore,  urged  that  when  the
appellant moved the second application for grant  of  injunction  after  the
matter was referred to arbitration because of insistence on the part of  the
respondents to encash the bank guarantee, the  District  Judge  should  have
extended the life of first order dated 04.01.2012 instead  of   again  going
into the merits of the case.
29)   Lastly, learned counsel  urged  that  in  the  light  of   this  legal
position arising in the case, the appellant had made out a prima facie  case
for grant of injunction against  the  respondents  (North  Central  Railway)
from encashing the bank guarantee in question.
30)   In reply, learned counsel for the respondents (North Central  railway)
supported the impugned order and contended that  no  case  is  made  out  to
interfere in the impugned order and hence it be upheld.
31)   Having heard the learned counsel for the parties  and  on  perusal  of
the record of the case, we find force in  the  submissions  of  the  learned
senior counsel for the appellant.
32)   In our considered opinion, it may not be necessary for us to  go  into
more details of the issue because, in our view, the controversy involved  in
this case remains no more res integra and stands decided by  this  Court  in
the case of Union of India vs. Raman Iron Foundry, (1974) 2 SCC  231.  Since
the issue stands already decided by this Court and hence it is necessary  to
examine the facts of the case and law laid down therein in detail  and  then
apply the same to the facts of the case at hand.
33)   The facts of the case of   Union of India (DGS&D)  (supra)  were  that
the respondent (Raman Iron Foundry) entered into a contract with  the  Union
of India (DGS&D)-the appellant for  supply  of  certain  quantity  of  "Foam
compound".  The contract, apart from  several  other  conditions,  contained
two clauses, namely, Clauses 18 and 24.  Clause  24  provided  that  in  the
event of any dispute arising between the  parties  in  connection  with  the
contract, the same shall be decided by means of Arbitration. Clause 18  with
which we are concerned provided for "recovery of sums due”  which  reads  as
under :

 “18. Recovery of sums due — whenever any claim for the payment of a sum  of
money arises out of or  under  the  contract  against  the  contractor,  the
purchaser shall be entitled to recover such sum by  appropriating  in  whole
or in part, the security, if any, deposited by the contractor, and  for  the
purpose aforesaid, shall be  entitled  to  sell  and/or  realise  securities
forming the whole or part of any such security deposit. In the event of  the
security being insufficient, the balance and if no security has  been  taken
from the contractor, the  entire  sum  recoverable  shall  be  recovered  by
appropriating any sum then due or which at any time  thereafter  may  become
due to the contractor under the contract or  any  other  contract  with  the
purchaser  or  the  Government  or  any  person  contracting   through   the
Secretary, if such sum even be not  sufficient  to  cover  the  full  amount
recoverable, the contractor  shall  on  demand  pay  to  the  purchaser  the
balance remaining due.”

34)   The performance of the contract  ran  into  difficulties  and  dispute
arose between the parties giving rise to claims by  either  parties  against
the other. The respondent contended that the appellant  committed  a  breach
of the contract and was, therefore, liable to pay to the  respondent  a  sum
of  Rs. 2,35,800/- by way of damages suffered by the  respondent  by  reason
of the breach of the contract whereas the  appellant,  on  the  other  hand,
said that it was the respondent who committed the  breach  of  the  contract
and was, therefore, liable to pay to the appellant by way of damages  a  sum
of  Rs.  2,28,900/-.  In  the  meantime,  the  appellant  through  Assistant
Director of Supplies sent a  letter  to  the  respondent  calling  upon  the
respondent to make payment to them a sum of Rs.  2,28,900/-  and  threatened
that if the said amount is not paid,  it  will  be  recovered  from  several
respondents’ pending bills in respect of other contracts.
35)   The respondent, therefore, filed an application under  Section  20  of
the Indian Arbitration Act 1940 in Delhi High Court  against  the  appellant
for  filing  the  arbitration  agreement.  The  respondent  also   made   an
application  for  an  interim  injunction  restraining  the  appellant  from
recovering the amount of damages claimed by it from  several  pending  bills
of the  respondent.  The  learned  Single  Judge  dismissed  the  injunction
application on the ground that it could not be proved that  there  were  any
pending bills but at the  same  time  allowed  the  application  made  under
Section 20 of  the  Indian  Arbitration  Act  and  referred  the  matter  to
arbitration as per Clause 24 of
GCC. This is how the claim/counter claim of the parties became  the  subject
matter of the arbitration proceedings.
36)    Pending  arbitration  proceedings,  the  appellant  made  attempt  to
recover the said amount from the respondent and hence the  respondent  again
made another interlocutory application under Section  41  read  with  second
schedule to the Indian Arbitration Act, 1940 and prayed for  status  quo  in
the case. The appellant resisted the  application.  It  was  contended  that
Clause 18 empowers the appellant to make recovery of  any  amount  from  the
respondent. The learned Single Judge allowed the  respondent's  application.
He took the  view  that  Clause  18  did  not  authorize  the  appellant  to
appropriate the amounts of any  pending  bills  of  the  respondent  towards
satisfaction of its claim for damages against  the  respondent  unless  such
claim for damages was either admitted by the respondent or adjudicated  upon
by the arbitrator or suit in civil court. Accordingly,  the  injunction,  as
prayed for, was granted to the respondent against the appellant. It is  this
issue, which was carried by the Union of India to this Court.
37)   The questions, which fell for consideration before this Court, were  -
first, what is the true interpretation of Clause 18;   second  what  is  the
meaning of the words   "sum due" and “may become due” under the contract  or
any other contract  with  the  purchaser  occurring  in  Clause  18;  third,
whether Clause 18 empowered the Union of India to make  recovery  of  amount
claimed by it by way of damages (liquidated or unliquidated) for  breach  of
contract pending arbitration proceedings from  the  contractor  and  lastly,
whether in such case, contractor is entitled  to  claim  injunction  against
the Union of India from making recovery of such sum.
38)   Justice Bhagwati (as His Lordship then was)  speaking  for  the  Bench
examined the issue in great detail in the light of law laid down by  English
and Indian Courts. The learned Judge in his  distinctive  style  of  writing
after examining the entire case law on the subject held that  an  expression
"sum due" occurring in Clause 18 would mean a sum  for  which  there  is  an
existing obligation  to  pay  in  praesenti  or  in  other  words  which  is
presently payable and due and, therefore, recovery of only such sums can  be
made subject matter of Clause 18 which is presently  payable  and  due.   It
was held that a claim, which is neither due and nor payable, cannot be  made
subject matter of Clause 18. It was further held that  Clause  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. It was also held that a claim for damages for breach of  contract
is 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
39)   Their Lordships approved the view taken by Chagla C.J. in the case  of
Iron and Hardware (India) Co. vs. Firm Shamlal and Bros., AIR  1954  Bom.423
by observing in para 11 as under.

“11. ………………………………………………….The same view has also been taken  consistently  by
different High Courts in India. We may mention only a few of the  decisions,
namely, Jabed Sheikh v. Taher Mallik,AIR 1941 Cal 639  S.  Milkha  Singh  v.
N.K. Gopala Krishna Mudaliar, AIR  1956  Punj  174  and  Iron  and  Hardware
(India) Co. v. Firm Shamlal and Bros., AIR 1954 Bom  423.  Chagla,  C.J.  in
the last mentioned case, stated the law in these terms: (at pp. 425-26)

In my opinion it would not be true to  say  that  a  person  who  commits  a
breach of the contract incurs any pecuniary liability, nor would it be  true
to say that the other party to the contract who complains of the breach  has
any amount due to him from the other party.

As already stated, the only right which he has is  the  right  to  go  to  a
Court of law and recover damages. Now, damages are the compensation which  a
Court of law gives to a party for the injury which he  has  sustained.  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. He gets compensation as a result of the  fiat  of  the
Court.  Therefore,  no  pecuniary  liability  arises  till  the  Court   has
determined that the party complaining of the breach is entitled to  damages.
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. The Court in the first place must  decide  that  the  defendant  is
liable and then it proceeds to assess what that liability is. But till  that
determination there is no liability at all upon the defendant.

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 bills of  the  respondent  in
or towards satisfaction of its claim for damages against the respondent  and
the  learned  Judge  was  justified  in  issuing   an   interim   injunction
restraining the appellant from doing so.
12. We accordingly dismiss the appeals. The appellant in  each  appeal  will
pay the costs of the respondent all throughout.”

40)   In our considered opinion, the case at hand being  somewhat  identical
to this case has to be decided keeping in view the law  laid  down  by  this
Court in the case of Union of India (DGS&D) (supra).
41)   Coming now to the facts of the case at hand, we find that wordings  of
Clause 62 of the contract  in  question  with  which  we  are  concerned  is
identical to that of Clause 18 of  Union of India (DGS&D)  (supra).   Clause
62 of GCC provides  for  determination  of  contract  owing  to  default  of
contractor.  The relevant portion of Clause 62 reads as under:
“The amounts thus to be forfeited or recovered may be  deducted  from    any
moneys then due or which at any  time  thereafter  may  become  due  to  the
Contractor by the Railway under this or any other contract or otherwise.”

42)   On  perusal  of  the  record  of  the  case,  we  find  that  firstly,
arbitration proceedings in relation to the  contract  dated  22.08.2005  are
still pending. Secondly,  the  sum  claimed  by  the  respondents  from  the
appellant does not relate to the contract for which the Bank  Guarantee  had
been furnished but it relates  to  another  contract  dated  22.08.2005  for
which no bank guarantee had been furnished. Thirdly, the sum claimed by  the
respondents from the appellant is in the nature of  damages,  which  is  not
yet adjudicated upon in arbitration proceedings. Fourthly, the  sum  claimed
is neither a sum due in praesenti nor a sum payable.  In  other  words,  the
sum claimed by the respondents is neither an admitted  sum  and  nor  a  sum
which stood adjudicated by any Court of law in any judicial proceedings  but
it is a disputed sum and lastly, the Bank Guarantee  in  question  being  in
the nature of a  performance  guarantee  furnished  for  execution  work  of
contract dated 14.07.2006 (Anand Vihar  works)  and  the  work  having  been
completed to the satisfaction of the  respondents,  they  had  no  right  to
encash the Bank Guarantee.
43)   We have, therefore, no hesitation in  holding  that  both  the  courts
below  erred  in  dismissing  the  appellant's  application  for  grant   of
injunction. We are indeed  constrained  to  observe  that  both  the  courts
committed jurisdictional error when they failed to  take  note  of  the  law
laid down by this Court in Union of India  (DGS&D)  (supra)  which  governed
the controversy and instead placed reliance on Himadri Chemicals  Industries
Ltd. vs. Coal Tar Refining Company, AIR 2007 SC 2798 and  U.P.  State  Sugar
Corporation vs. Sumac International Ltd., (1997) 1 SCC 568, which laid  down
general principle relating to Bank Guarantee.  There can be  no  quarrel  to
the proposition laid down in those cases.   However, every case  has  to  be
decided with reference to the facts of the case involved therein.  The  case
at hand was similar on facts with  that  of  the  case  of  Union  of  India
(DGS&D) (supra) and hence the law laid down in that case was  applicable  to
this case.   Even in this Court, both the learned counsel did not  bring  to
our notice the law laid down in Union of India (DGS&D) case  (supra).
44)   We are also of the view that the District  Judge  having  decided  the
injunction application in the first  instance  in  appellant's  favour  vide
order dated 04.01.2012 erred  in  rejecting  the  application  made  by  the
appellant second time vide order dated 12.07.2012.  It  is  not  in  dispute
that the respondents despite having  suffered  the  injunction  order  dated
04.01.2012 did not file any appeal  against  this  order.  Such  order  thus
attained finality and was, therefore, binding on the parties.
45)   In the light of foregoing discussion,  we  hold  that  the  appellants
have made out a prima facie case in their favour  for  grant  of  injunction
against the respondents so also they have made out  a  case  of  balance  of
convenience and irreparable loss in their favour as was held by  this  Court
in the case of  Union  of  India  (DGS&D)  (supra).   They  are,  therefore,
entitled  to  claim  injunction  against  the  respondent  in  relation   to
encashment of Bank Guarantee no. 12/2006 dated 04.08.2006.
46)   We, accordingly, allow the appeal, set aside the  impugned  order  and
in consequence allow the injunction application made by the appellant  under
Section 9 of the Act in Arbitration Suit no.  411/2011  in  District  Court,
Allahabad and grant injunction in  appellant's  favour  by  restraining  the
respondents jointly and severally from encashing Bank Guarantee no.  12/2006
dated 04.08.2006 furnished by the appellant in connection with  Anand  Vihar
Works. No costs.

                                     [J. CHELAMESWAR]

                                      [ABHAY MANOHAR SAPRE]
      New Delhi,
      May 05, 2016.


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