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2017 Supreme(Del) 2287
IN THE HIGH COURT OF DELHI AT NEW DELHI
JAYANT NATH, J.
V.K. Sood Engineers & Contractors - Petitioner
Versus
Northern Railways - Respondent
OMP (I) (COMM.) 242 of 2016
Decided On : 17-07-2017
Advocate Appeared:
For the Petitioner: Ms. Anusuya Salwan, Mr. Abhishek Pundir
For the Respondent: Ms. Geetanjali Mohan
Prima facie illegality of withholding dues of one entity on account of alleged liability of another entity, and the principles for grant of injunction order under Section 9 of the Arbitration and Conciliation Act, 1996
Headnote:
Arbitration - Stay of Order - Arbitration and Conciliation Act, 1996, Section 9
Fact of the Case:
The petitioner sought a stay of the order passed by the respondent and to direct the release of admitted payments. The respondent withheld payments citing an order for recovery of excess payment made to a different concern with a similar name.
Finding of the Court:
The court found that the petitioner firm was distinct from the concern with the alleged liability. The court also noted that the petitioner had reconstituted and invoked the arbitration clause.
Issues: Dispute over withheld payments, reconstitution of the petitioner firm, invocation of arbitration clause
Ratio Decidendi: The court held that the respondent's action of withholding dues of the petitioner on account of alleged liability of another entity was prima facie illegal and contrary to the interim order. The court also emphasized the principles for grant of injunction order under Section 9 of the Act.
Final Decision: The court stayed the operation of the recovery order and the directive to deposit amounts in a miscellaneous account, and directed the release of the deposited amount to the petitioner.
Key Points: - The respondent withheld payments to the petitioner citing an order for recovery of excess payment made to a different concern with a similar name (!) (!) (!) (!) . - The court held that the petitioner firm was distinct from the concern with the alleged liability (!) (!) . - The principles for grant of injunction order under Section 9 of the Act include establishing a prima facie case, balance of convenience, and irreparable loss (!) (!) . - The court found that the respondent’s action of withholding dues of the petitioner on account of alleged liability of another entity was prima facie illegal (!) (!) . - The petitioner had reconstituted its firm and invoked the arbitration clause (!) (!) (!) . - The court stayed the operation of the recovery orders and directed release of admitted payments (!) (!) . - The amount already deposited by the respondent shall be released to the petitioner (!) . - The present petition is finally disposed of (!) .
What are the principles for grant of injunction order under Section 9 of the Arbitration and Conciliation Act?
Whether a party can be made to bear liabilities of a different entity merely due to similarity in names?
Whether the respondent can withhold dues of the petitioner on account of alleged liability of another entity?
Jayant Nath, J.
1. At the outset I may note that the matter was fixed for pronouncement on 7.7.2017. However, some factual clarifications were felt necessary before the order could be pronounced. Mrs. Anusuya Salwan, Advocate, has appeared and her submissions on 12.07.2017.
2. This petition is filed under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) seeking stay of the order dated 31.03.2016 passed by the respondent by which the amounts payable to the petitioner are being kept in a miscellaneous account and to stay the implementation of the letter dated 20.01.2015 issued by the respondent qua M/s. V.K. Sood Engineers and Contractors i.e. petitioner and to direct the respondent to release the admitted payments payable to the petitioner.
3. It is the case of the petitioner that the respondent invited tenders for the work of construction of road/bridges in lieu of level crossing at Garhmukteshwar on Moradabad-Ghaziabad Section. The petitioner was awarded the work on 03.01.2012 and a contract was executed in Delhi on 30.03.2012. It is the case of the petitioner that it has been carrying out the work and has been requesting for release of its payments which are being needlessly withheld by the respondent. On one of the visits to the office of the respondent, the petitioner was informed that the payments were not being released in view of an order circulated by the respondent for recovery of excess payment made to a concern V.K. Sood Engineers and Contractors-DDS (JV). It is the case of the petitioner that the recovery order has been passed with regard to a sole proprietorship concer of Mr. Vaneet Kumar Sood which has nothing to do with the petitioner. It is urged that the petitioner firm comprises Mr.Puneet Kumar Sood and Mr. Promod Kumar Bhatia. The partner, namely, Mr. Puneet Kumar Sood is the brother of Mr. Vaneet Kumar Sood both being the sons of Mr. V.K. Sood on whose name the two concerns are being run.
4. There is a long dispute pending between the respondent and Mr. Vaneet Kumar Sood/V.K. Sood Engineers and Contractors-DDS(JV). They had been awarded a contract on 21.06.2006 for fabrication, supplying, assembling, erection of Rocker and Roller bearing with base plate etc. Disputes having arisen between the Railways and the said concern, on a petition filed before this court, Mr. Justice Jagnanda Rao (Retd.) by order dated 21.11.2013 was appointed as the arbitrator. The respondent claims that on account of some issue of price variation clause, a sum of Rs.1.79 crores has been over paid to V.K. Sood Engineers and Contractors-DDS (JV) and hence, the respondent seek to recover the said sum of Rs.1.79 crores from them. It is stated that the said concern challenged the said demand letter by filing a petition under Section 9 of the Act being OMP 71/2015 in which a stay order was passed on 20.01.2015 by this court restraining the respondent from taking coercive steps to recover the said sum of Rs.1.79 crores. On 20.01.2015, the respondent issued an order to all the divisions of the Railways stating that an amount of Rs.1.79 crores be recovered from M/s V.K. Sood Engineers and Contractors (i.e. petitioner) on account of excess payment made. It is urged that the petitioner firm is totally distinct from V.K. Sood Engineers and Contractors-DDS (JV) which is a proprietorship concern of Mr. Vaneet Kumar Sood and the acts of the respondent are illegal. Hence, the present petition has been filed.
5. I have heard learned counsel for the parties.
6. Learned counsel appearing for the petitioner has pointed out that the petitioner, namely, V.K. Sood Engineers and Contractors is a partnership firm of Mr. Puneet Kumar Sood and Mr. Promod Kumar Bhatia. In fact Mr. Promod Kumar Bhatia has only 1% share in the firm and it is wholly run by Mr. Puneet Kumar Sood. On the other hand, V.K. Sood Engineers and Contractors-DDS (JV) is a proprietorship concern of Mr. Vaneet Kumar Sood. It is stated that the
