Case: M/S. Sant Ram &amp; Company Vs. The State Of Rajasthan &amp; Ors

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 and the Second Schedule tothe 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.

Court's reasoning:
The question is no longer reswill, therefore, be clear that to avail the remedy under the provisions of theCode 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 an in relation to the arbitration proceedings availed through the process of the Court, the same power of making orders in respect of any matters set out in the Second Schedule as it has for the purpose of and in relation to any proceeding before the Court. The initiation of pendency of any proceedings in the Court in relation to the arbitration proceedings would, therefore, be a precondition for the exercise of the power by the Civil Court under the Second Schedule of the Act.The Division Bench decision on which the reliance was placed, has reiterated that principle, namely, that "such an injunction can only be for the purpose of an in relation to the arbitration proceedings. The court could not make an injunction order which, though ostensibly in the form of an order of interim injunction, in substance, amounted to a direction to the appellant to pay the amounts due to the respondent under other contracts." In fact, the ratio therein which the learned counsel tried to propound, was not approved and the said decision was expressly overruled in Kamaluddins case (supra).7. It is seen that under Clause (50) of the contract, the appellant has expressly agreed for adjustment of the amount pending with the respondent in respect of the claim under the dispute or any other contract with the Department. Under these circumstances, neither on merits nor on principle of law, we find any illegality in the order passed by the High Court warranting interference.