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IN THE HIGH COURT OF ALLAHABAD
K. N. Seth, J.
UNION OF INDIA - Appellant
Versus
H.M.KAMALUDDIN ANSARI AND CO. - Respondents
Civil Revision 3542 Of 1978
Decided On : 01/24/1980
ARBITRATION - INJUNCTION - JURISDICTION - COURT'S POWER TO GRANT INJUNCTION - SCOPE - SECTION 41 OF THE ARBITRATION ACT, 1940 - COURT'S JURISDICTION TO GRANT INJUNCTION EXTENDS TO MATTERS RELATED TO ARBITRATION PROCEEDINGS - INJUNCTION CANNOT BE GRANTED TO PAY AMOUNTS DUE, WHICH IS OUTSIDE THE PURVIEW OF THE ARBITRATION PROCEEDING.
Fact of the Case:
The Union of India and the Director General of Supplies and Disposal challenged an order of the Civil Judge, Kanpur, directing them to release Rs. 99,776 to M/s. H. M. Kamaluddin Ansari and Company, a partnership firm, which had entered into contracts with the Union of India for the supply of webbing and web equipment. The firm claimed interest at 18% per annum on the amount due to them for delayed payment, and filed a petition under Section 20 of the Arbitration Act, 1940, seeking reference of the dispute to arbitration. During the pendency of the petition, the firm applied for an injunction under Section 41 of the Act, read with Order 39, Rules 1 and 2, and Section 151, C.P.C., to restrain the Union of India from withholding the payment.
Finding of the Court:
The court held that the Civil Judge did not have jurisdiction to grant a mandatory injunction directing the Union of India to pay the amount due to the firm under the contracts, as the subject-matter of the petition under Section 20 of the Act was confined to the dispute relating to interest and the claim had not yet been adjudicated upon. The court further held that an interim injunction could not be granted to pay the amounts due, which was outside the purview of the arbitration proceeding, as it would not be for the purpose of or in relation to the arbitration proceedings as required by Section 41(b) of the Act.
Issues: 1. Whether the Civil Judge had jurisdiction to grant an injunction directing the Union of India to pay the amount due to the firm under the contracts, when the subject-matter of the petition under Section 20 of the Act was confined to the dispute relating to interest? 2. Whether an interim injunction could be granted to pay the amounts due, which was outside the purview of the arbitration proceeding?
Ratio Decidendi: 1. The court's jurisdiction to grant an injunction under Section 41 of the Arbitration Act, 1940, extends to matters related to arbitration proceedings, but not to matters outside the purview of the arbitration proceeding. 2. An interim injunction cannot be granted to pay the amounts due, which is outside the purview of the arbitration proceeding, as it would not be for the purpose of or in relation to the arbitration proceedings as required by Section 41(b) of the Act.
Final Decision: The revision petition was allowed, and the impugned order of the Civil Judge, Kanpur, directing the Union of India to release Rs. 99,776 to the firm was set aside.
( 1 ) THIS revision by the Union of India and the Director General of Supplies and Disposal is directed against the order of the learned Civil Judge, Kanpur, directing the applicants to release the amount of Rs. 99,776 forthwith in favour of the opposite party. The impugned order was passed on an application for injunction made under Section 41 of the second schedule of the arbitration Act (hereinafter referred to as the Act) read with Order 39, Rr. 1 and 2 and Section 151, C. P. C. in a petition pending before the learned Civil Judge under Section 20 of the Act.
( 2 ) THE opposite party M/s. H. M. Kamaluddin Ansari and Company, a partnership firm, carried on the business of manufacture and sale of various items of webbing and web equipments. The firm and the Director of Supplies and Disposal, Tilak Nagar, Kanpur, and the Director General of Supplies and Disposal, New Delhi for and on behalf of the Union of India entered into contracts No. A/t No. KAN/109-J/kp-5/98/hmk/ 87-PAOD dated 29-10-1974 and A/t No. KAN/6989-M/kp/5/hmk/57/paod dated 7-7-1975 for supply of various items of webbing and web equipments. The case set up by the firm was that according to the terms and conditions of the contracts it made supplies of the contracted items within the stipulated period and submitted the bills. According to the payment terms 95% of the price of the goods supplied against those contracts was to be immediately made on submission of the bills along with proof of inspection and despatch of the same to the consignee, but the payment of some of the bills was Withheld. It was further asserted that there was no dispute regarding the amount of the bills but as the payment of the bills was not made in time, the firm was entitled to claim interest at the rate of 18 per cent per annum which amounted to Rs. 53,009. 23 up to 30-6-1978. It was further pleaded that since the Union of India failed to nominate and appoint an Arbitrator in terms of clause No. 24 of the Agreement, the petition was filed under Section 20 of the Act praying for an order of reference relating to the claim for interest. During the pendency of the petition the firm moved an application for an ad interim injunction as noted above.
( 3 ) IN the objection filed by the Union of India, which was supported by an affidavit, it was pleaded that the Union of India had a claim to the extent of Rupees 93,054 against the firm in respect of contract No. A/t. No. 109/j/kp- 55/98 dated 18-10-1973. The dispute relating to the aforesaid contract has already been referred to arbitration under the order of the Delhi High court passed in Suit No. 224a of 1975. During the pendency of the aforesaid proceedings before the Delhi High Court a restraint order was passed against the Union of India from realising or withholding or appropriating any payment which may be due to the firm on account of the supplies made in other contracts but that order came to an end on 23-5-1975 when the said Suit no. 224a of 1975 was finally disposed of on that date referring the dispute to the Arbitrator. It was asserted that since the claim for Rs. 93,054 was pending before the Arbitrator, no injunction pertaining to that amount could be granted. It was further pleaded that the general conditions of contract entitled the Union of India to adjust and recover its dues from the contractor against any contract under which the Contractor was entitled to get some payment. It was asserted that the payment due to the firm has been withheld in view of the firms own written undertaking in its letter dated 17-1-1976 and the application for injunction was barred by estoppel and acquiescence.
( 4 ) IT is clear from the pleadings of the parties that the bills submitted by the firm in respect of contracts dated 29-10-1974 and 7-7-1975 are not in dispute. It is further not in dispute that the union of India has made a claim against the firm for Rs. 93,054 and that dispute is pending before the Arbitrator appointed un
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