IMPORTANT POINT
Pending of any proceedings in the Court in relation to arbitration proceedings would be a pre-condition for exercise of power by Civil Court under the Second Schedule of the Arbitration Act.

ORDER

This appeal by special leave arises from the order of the single Judge of the Rajasthan High Court made in Civil Revision Petition No.293/90, dated August 7, 1990.

2. The admitted position is that the appellant had entered into a contract with the respondent-State for execution of the works of widening of Gagar Diversion Bridge at Bikaner in Sri Ganganagar Section. Pursuant to a dispute which arose between the parties, in terms of the contract, the matter by mutual agreement, was referred to the arbitrator by name Sri K.L. Sethia. Pending arbitration, the respondent sought to adjust the amounts due to the appellant in another contract. Thereon the appellant filed an application in the district Court under Order XXXIX Rule 1, Code of Civil Procedure, 1908 read with Section 41(b) of the Arbitration Act and the Second Schedule to the Arbitration Act, 1940 for ad interim injunction restraining the respondent from adjusting the same. The District Judge by his order held that such an application is not maintainable without the intervention of the Court; therefore, Section 41(b) and the Second Schedule have no application. The same came to be upheld by the learned Chief Justice in the impugned order. Thus this appeal by special leave.

3. Shri A.B. Rohtagi, learned senior counsel for the appellant, contends that for entertaining an application under section 41(b) read with Second Schedule, it is not a condition that the arbitration proceedings should be pending through the intervention of the Court. Independently thereof, when arbitration proceedings were pending between the parties in respect of the claim or counter-claim and when the respondent sought to adjust the same with the amounts due from other contracts, the Court would, in the circumstances, intervene and restrain the respondents from adjusting the same as a counter-claim. Otherwise, the arbitration proceedings would be nullified. He placed strong reliance on the judgment of a two Judge Bench of this Court in Union of India v. Raman Iron Foundry1. The question is no longer res integra. A Bench of three judges of this Court in Kamaluddin Ansari & Co. v. Union of India2 has considered the scope of Section 41(b) and the Second Schedule and had held thus :

"The first question that falls for consideration in this appeal is about the exact scope and ambit of Section 41 in order to appreciate the contention raised on behalf of the appellant :

"41. Procedure and powers of Court:- Subject to the provisions of this Act and of rules made thereunder :

(a) the provisions of the Code of Civil Procedure, 1908 shall apply to all proceedings before the Court, and to all appeals, under this Act, and

(b) the Court shall have, for the purpose of, and in relation to, arbitration proceeding, 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 :

Provided that nothing in clause (b) shall be taken to prejudice any power which may be vested in an arbitrator or umpire for making orders with respect to any of such matters."

In view of cl. (b) of Section 41 the Court has been given power of passing orders in respect of any of the matters set out in second Schedule for the purpose of and in relation to any proceedings before the Court. The Second Schedule of the Arbitration Act inter alia includes interim injunction and the appointment of receiver ."

4. In that case, an application under Section 33 of the Arbitration Act had come to be filed and then an application for ad interim injunction was filed. It will, therefore, be clear that to avail the remedy under the provisions of the Code of Civil Procedure, when an application for injunction under Section 41(b) read with Schedule is filed, the Court shall have, pending proceedings for the purpose of and in relation to the arbitration proceedings availed through the process of the Court, the sam