Case: M/S Gangotri Enterprises Ltd Vs. Union Of India

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 appellants 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. v. Coal Tar Refining Company, AIR 2007 SC 2798 and U.P. State Sugar Corporation v. 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 appellants 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.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]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 appellants 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. v. Coal Tar Refining Company, AIR 2007 SC 2798 and U.P. State Sugar Corporation v. 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 appellants 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.