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Attorney(S)
  • Sanjeev Bhandari
  • S.D.Singh
  • Rajeev Mehra
  • Rahul K.Singh
  • Bharti Tyagi
  • Arvind Sharma
Judges
  • Manmohan Singh, J.
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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • Sanjeev Bhandari
  • S.D.Singh
  • Rajeev Mehra
  • Rahul K.Singh
  • Bharti Tyagi
  • Arvind Sharma
Judges
  • Manmohan Singh, J.
Acts
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Smart Summary

Structured Summary of the Opinion (Manmohan Singh, J.)

Factual and Procedural Background

This petition was filed under Section 9 of the Arbitration and Conciliation Act, 1996. An interim order was passed on 26th December, 2008 directing the respondents to "maintain status quo with regard to the material and the work at the construction site of Provision of Married Accommodation Project for ORS (196 DUS) JCO (53 DUS) including external allied services at Kabul Lines, New Delhi."

The dispute arises from a main contract (work order dated 28th August, 2005) awarded to respondent Nos. 1 and 2 by respondent No. 3 (Director General, MAP) for construction of the Kabul Line Project, valued at Rs. 23,14,68,336/-. Respondent Nos. 1 and 2 had executed work to the value of Rs. 8,74,56,426/- but were unable to complete the rest due to ill health of respondent No. 2. At the request of respondent No. 3, respondent Nos. 1 and 2 assigned the remaining work to the petitioner by a work order dated 28th November, 2007 and formal agreement dated 25th January, 2008.

The subcontract assigned to the petitioner had an approximate net value of Rs. 16.50 crores (Rs. 15 crores plus Rs. 1.50 crores). Payment terms were back-to-back. Clause No. 9 (arbitration clause) of the formal agreement provided for arbitration to be appointed by the First Party from CPWD panel in case mutual consultation failed.

Parties disputed (inter alia) the extent of work done by the petitioner, payment due, material/equipment at site and termination of the subcontract. The parties consented to appointment of a Local Commissioner to verify site position after the interim order. A contempt petition (CCP No. 14/2009) was also filed by the petitioner alleging disobedience of the interim order.

Legal Issues Presented

  1. Whether the validity of the termination of the subcontract agreement by respondent Nos. 1 and 2 and the justifiability of that termination should be decided by this Court or by an arbitrator under the parties' agreement.
  2. Whether the interim status quo order dated 26th December, 2008 (maintaining the material and work at the site) should continue pending resolution of the dispute.
  3. What relief, if any, is appropriate under Section 9 of the Arbitration and Conciliation Act, 1996 in respect of a construction contract involving disputed payments, materials and termination.
  4. Which arbitration clause (work order clause or Clause 9 of the formal agreement) governs appointment of an arbitrator and whether the Court should appoint an arbitrator under Section 11 (noting that no Section 11 application had been filed by the parties).

Arguments of the Parties

Petitioner's Arguments

  • The petitioner began work in full force from the date of the work order and obtained extension of time from respondent No. 3 till 14th August, 2008.
  • There was delay attributable to the respondents (e.g., opening of Escrow Account, obtaining extensions), causing impediments to the petitioner.
  • The petitioner raised running bills (16th and 17th) and received payments (after statutory deductions) from the Escrow Account; a final bill dated 15th November, 2008 claimed amounts due and value of material/machinery at site (summary Annexure P-12 claiming total Rs. 2,21,83,067/- and a claim that petitioner had completed about 48% of the work).
  • The petitioner relied on a letter dated 16th June, 2008 from respondent Nos. 1 and 2 to respondent No. 3 which (the petitioner contends) admitted infrastructure at site valued not less than Rs. 3 crores and stated the petitioner's work was satisfactory; the petitioner says this supports its entitlement to amounts for material and work used in the Project.
  • The petitioner filed a contempt petition alleging disobedience of the interim order and relied on the Local Commissioner's report to support the contempt allegations.

Respondent Nos. 1 & 2's Arguments

  • Respondent Nos. 1 and 2 deny that the petitioner performed significant work at site; any work by the petitioner was negligible, as indicated by complaints from respondent No. 3 about no/slow work.
  • They contend the 16th and 17th running bills were sent by the petitioner directly to respondent No. 3, whereas the alleged final bill dated 15th November, 2008 was sent to respondent Nos. 1 and 2 only later (UPC on 2nd December, 2008), creating doubt about service.
  • Respondent Nos. 1 and 2 point to communications from the petitioner (letters of 14th November, 2008 and 15th November, 2008) which include admissions/undertakings by the petitioner to complete the work by 10th December, 2008 and an undertaking which, in their view, is inconsistent with the alleged final bill.
  • They assert that payments against later RA bills (18th, 19th) were received by them after furnishing bank guarantees and that material at site belongs to respondent Nos. 1 and 2; unbilled amounts and stock are yet to be adjusted.
  • They allege the petitioner concealed material facts in the petition (e.g., that an Escrow account was opened, specific letters and undertakings were not pleaded, and receipt of advance Rs. 26,92,162/- was not disclosed) and therefore the petition should be dismissed for concealment.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Techno Construction v. Kunj Vihar Co-operative Group Housing Society Ltd., 2005 (81) DRJ 233 The law on grant of interim injunction under Section 9 of the Arbitration Act: protection under Section 9 requires prima facie case, balance of convenience and irreparable injury. A construction contract generally cannot be specifically enforced if compensation in money is adequate (referencing Section 14(1)(a) and proviso to Clause (c) of Sub-section (3) of Section 14 of the Specific Relief Act, 1963). The Court relied on these principles to observe that construction contract disputes primarily attract monetary compensation and are not normally enforceable by injunction; therefore interim relief in the form of status quo/injunction should not be continued if it would interfere with completion of the project.
B.S.M Contractors Pvt. Ltd. v. Rajasthan State Bridge & Construction Corpn. Ltd., AIR 1999 Delhi 117 A building/ construction contract of the nature under consideration cannot be specifically enforced by granting interim relief under Section 9; where damages are an adequate remedy, injunctive relief is inappropriate and may prejudice completion of urgent construction. The Court used this authority to support the conclusion that an injunction or continuation of status quo would likely delay project completion and that the balance of convenience did not favour continuing the interim order unconditionally.

Court's Reasoning and Analysis

The Court's analysis proceeded in the following logical steps, based exclusively on the material in the opinion:

  1. Identification of the core dispute: The Court recognized that the primary controversy was whether termination of the subcontract by respondent Nos. 1 and 2 was justified and validly effected. The Court considered that this question arises under the parties' agreement and therefore falls within the scope of arbitration as per the contract's arbitration clause(s).
  2. Arbitrability and forum: The Court concluded that questions about the termination and the contractual rights and obligations should be adjudicated by an arbitrator in terms of the agreement between the parties. The Court observed that deciding the validity of termination at this interlocutory stage could prejudice either party.
  3. Limits of Section 9 relief for construction contracts: Relying on precedent (Techno Construction and B.S.M Contractors) and principles in the Specific Relief Act, the Court reiterated that interim relief under Section 9 requires a prima facie case, balance of convenience and irreparable injury, and that construction contracts are ordinarily not specifically enforceable where monetary compensation would be adequate. Consequently, negative injunctions enforcing a construction contract are generally inappropriate.
  4. Potential prejudice to employer and project completion: The Court was mindful that continuing the status quo or granting injunctions could delay the overall project and cause irreparable harm to the employer (respondent No. 3), who was not a party to the present controversy. That consideration weighed against continuing the interim order without condition.
  5. Protective measure to preserve parties' interests: To protect the petitioner's monetary interest while allowing the project to proceed, the Court vacated the unconditional status quo order but imposed a conditional and provisional security requirement: respondent Nos. 1 and 2 were directed to deposit Rs. 25,00,000/- within three weeks by way of security (to be kept in fixed deposit with the Registrar General) so that if the petitioner ultimately succeeds before the arbitrator, the amount may be paid to the petitioner.
  6. Administrative directions to safeguard accounting and arbitrator's scope: The Court permitted respondent Nos. 1 and 2, upon deposit, to execute the remaining work (themselves or through others) after taking measurements of work already done and maintaining a separate account to be produced before the arbitrator. The Court emphasized that the arbitrator, when appointed, would be free to consider the entire gamut of disputes and that the Court's observations were tentative and would not bind the Arbitral Tribunal.
  7. Disposition of related proceedings: The main petition and the contempt petition were disposed of by the order; parties were directed to bear their own costs.

Holding and Implications

Holding: The Court vacated the status quo order dated 26th December, 2008, subject to conditions, and disposed of the main petition and the contempt petition.

Specific directives and immediate effects:

  • Respondent Nos. 1 and 2 were directed to deposit Rs. 25,00,000/- within three weeks as security in a fixed deposit with the Registrar General of this Court. This deposit is an interim protective measure so that, if the petitioner succeeds before the arbitrator, the amount may be paid to the petitioner.
  • On deposit of the security, respondent Nos. 1 and 2 were permitted to execute remaining work themselves or through another contractor after taking measurements of work already done. A separate account of such execution and adjustments was to be maintained and produced before the arbitrator.
  • The arbitrator (when appointed) was authorized to consider all claims, counterclaims and adjustments (including unbilled work, stock and materials and advances) on merits. The Court expressly stated its observations were tentative and would not bind the Arbitral Tribunal.
  • Both parties were to bear their own costs. The main petition and the related contempt petition were disposed of by the order.

Broader implications:

  • The order follows established principles limiting the grant of interlocutory injunctive relief in construction contracts under Section 9 of the Arbitration Act where monetary compensation is an adequate remedy.
  • The Court did not set aside or decide the substantive contractual disputes; instead it provided an interim, conditional mechanism (security deposit and procedural directions) to balance the competing interests of allowing project completion while preserving the petitioner's monetary remedy pending arbitration.
  • No new legal precedent was established by the Court; the decision applies settled principles and expressly preserves the arbitrator's jurisdiction to adjudicate the substantive dispute.

Ordered accordingly.

Show full summary ...

    Kunj Bihari Construction Co. Pvt. Ltd. v. Nidhi Builders Pvt. Ltd. & Ors.

    Manmohan Singh, J.— This petition under Section 9 of the Arbitration and Conciliation Act, 1996 (for short ‘the Act’) has been filed by the petitioner before this Court which was listed on 26th December, 2008 and on the said date the following interim orders were passed:

    “In the meanwhile the respondents shall maintain status quo with regard to the material and the work at the construction site of Provision of Married Accommodation Project for ORS (196 DUS) JCO (53 DUS) including external allied services at Kabul Lines, New Delhi.”

    2. The controversy in the matter arises out of a contract whereby the respondent Nos. 1 and 2 were awarded the contract by respondent No. 3 Director General, Marketing Accounts Project (for short ‘DG, MAP) vide work order dated 28th August, 2005 with respect to construction of Married Accommodation Project including external allied services of Kabul Lines, Delhi Cantt, New Delhi commonly known as Kabul Line Project. The value of the contract was Rs. 23,14,68,336/-. The project was to be completed by respondent Nos. 1 and 2 till 15th June, 2007 who were unable to execute the works. Admittedly, the respondents had completed and executed the work to the value of Rs. 8,74,56,426/- but due to the ill health of respondent No. 2, the work got adversely affected and on the request of respondent No. 3 to make alternate arrangements, the respondent Nos. 1 and 2 decided to give the remaining work to the petitioner herein pertaining to Kabul Line Project.

    3. The work order in this respect dated 28th November, 2007 was issued to the petitioner for balance/left out work. The value of the work assigned to the petitioner by respondent Nos. 1 and 2 was of the value of Rs. 15 crores plus additional value of Rs. 1.50 crores. Hence, the net value of the contract assigned to the petitioner was approximately Rs. 16.50 crores. The mode of payment of the contract between the petitioner and respondent Nos. 1 and 2 was back to back in nature. Clause F(b) of the contract contemplates the mode of payment of Rs. 1.50 crores in the following manner:

    (i) Rs. 10,00,000/- as advance paid to the petitioner.

    (ii) Rs. 40,00,000/- payable on back to back basis (“Received Rs. 24,35,000/- by way of adjustment towards unbilled works done by respondent Nos. 1 and 2). The petitioner further received a sum of Rs. 6,92,162/- and Rs. 10 lakh by way of cheques.

    (iii) Rs. 36,27,162/- was to be adjusted towards materials lying at the site as on 28th November, 2007 (adjusted).

    (iv) Rs. 43,72,838/- on back to back basis towards S.D deducted from the bills of respondent Nos. 1 and 2.

    (v) Rs. 20,00,000/- was payable on completion of the Project.

    4. A formal agreement dated 25th January, 2008 was entered into between the parties. Most of the clauses in the formal agreement were same except the arbitration clause No. 9 which provides as under:

    “In case of dispute between the First and Second parties in connection with the interpretation and application of any term, condition or otherwise, first the matter shall be resolved by mutual consultation and discussion and in case it is not possible then through arbitration to be appointed by the First Party from the panel of CPWD arbitrators.”

    5. The value of the material lying on the site at the time of handing over the site to the petitioner was assessed at Rs. 35 lakh. At the time of the agreement, the unbilled amount of work was to the tune of Rs. 24,35,000/-. The said amount was to be adjusted later on. Most of the material left at the site and unbilled amount formed part of the contract and agreement.

    6. As per agreement, it was the petitioner's obligation to seek extension of time from respondent No. 3. However, it is not in dispute that respondent Nos. 1 and 2 had been obtaining extension of time from respondent No. 3.

    7. Admittedly the 15th running bill of the Project was raised by respondent Nos. 1 and 2 prior to 28th November, 2007 i.e on 28th May, 2007. The cumulative value of the 15th running bill of work done by respondent Nos. 1 and 2 was Rs. 8,74,57,756/-.

    8. The petitioner has not disputed the fact that approximately 35% of the work was already completed by respondent Nos. 1 and 2 on the date of the contract. The petitioner was to complete the remaining work left out by respondent Nos. 1 and 2.

    9. According to the Counsel for the petitioner, the petitioner started the work in full force from day one of the work order and the extension of time was granted by respondent Nos. 3 till 14th August, 2008 for completion of the Project. The contention of the petitioner is that there has been delay on the part of the respondents on various counts viz. opening of Escrow Account as well as obtaining the extension of time for work to be executed from the employer.

    10. The petitioner raised the 16th running bill dated 28th June, 2008 for a sum of Rs. 69,91,000/- against the work done. The respondent No. 3 duly passed the entire payment of Rs. 65,63,092/- against this bill after deduction of TDS, VAT, Surcharges, Educational Cess and postage charges. The said amount was issued in favour of the petitioner from the Escrow Account. Similarly, the petitioner raised 17th running bill dated 13th August, 2008 for a sum of Rs. 47,28,115/- which was approved by respondent Nos. 3 and 4 and admittedly the petitioner received payment of Rs. 42,78,357/- after deduction of taxes.

    11. It is not in dispute between the parties that the petitioner was at the site till 15th November, 2008 and on that date according to the petitioner, the value of the material and work executed by the petitioner at site would be Rs. 2,21,83,067/- summary wherein is provided in Annexure P-12 of the petition as under:

    “Summary

    (A) Kabul Line Site Amount (Rs.) (1) Bill due against work done (Annexure I, Page 1-31) 94,06,000.00 (2) Balance stock/material at site (Annexure II, Page 1-4) 58,31,817.00 (3) Infrastructure/machinery installed Lying at site (Annexure III, Page -1) 19,45,250.00 (4) Difference in %age of yardstick as per Stage of payment and current market Price (Details to be produced on demand) 50,00,000.00 Total 2,21,83,067.00”

    12. It is submitted by the petitioner that during this period, the petitioner had executed the work worth Rs. 94,06,000/-. The material worth Rs. 58,31,818/- purchased on credit by the petitioner and various infrastructure, equipments and machines lying at the site were also brought by the petitioner.

    13. According to the petitioner, it has completed the work allotted to him upto 48% of the entire work which comes to approximately Rs. 4,30,00,000/- and the petitioner has only received Rs. 1,08,29,399/- plus TDS plus WTC and other taxes and, therefore, the petitioner is entitled to receive about Rs. 3 crores towards the work executed during the period.

    14. In support of his contention, the petitioner has relied upon the letter dated 16th June, 2008 written by respondent Nos. 1 and 2 to respondent No. 3 wherein an admission was made by respondent Nos. 1 and 2 that infrastructure lying at the work site was not less than Rs. 3 crores and manpower at site was more than 250 workers and the petitioner's work was stated to be satisfactory at the site. It was also stated in this letter by respondent Nos. 1 and 2 that there was no possibility of the petitioner/contractor running away without completion of the work. The contention of the petitioner is that in view of the admission made by respondent Nos. 1 and 2 to the respondent Nos. 3 and 4, in the abovesaid letter, it is apparent that when there exists material costing such a huge amount, it must have been used by the petitioner in the Project. Hence, the petitioner is entitled to the said amount.

    15. On the other hand, the respondent Nos. 1 and 2 have denied that the petitioner has performed any work at the site. It is submitted that if any work was performed by the petitioner it was negligible, as appeared from the various complaints of no work/slow work by the respondent No. 3 to respondent Nos. 1 and 2. As regards the letter dated 16th June, 2008 by the petitioner, the respondents have stated that the said letter was written by respondent Nos. 1 and 2 to respondent No. 3 only at the instance of the petitioner to seek extension of time from the employer. During that time, there were cordial relations between the petitioner and respondent Nos. 1 and 2, therefore, in order to present a good picture of the petitioner, the said letter was written. According to respondent Nos. 1 and 2, the statement made in the said letter is not an admission.

    16. Respondent Nos. 1 and 2 further stated that the alleged final bill dated 15th November, 2008 raised by the petitioner was not received by respondent Nos. 1 and 2 as it was purportedly sent by petitioner only by UPC on 2nd December, 2008. The respondent Nos. 1 and 2 submit that the 16th and 17th running bills were sent by the petitioner directly to respondent No. 3 but the alleged final bill dated 15th November, 2008 has been raised upon respondent Nos. 1 and 2. Therefore, it creates doubt about the service of letter by the petitioner. It is further submitted that one day earlier i.e on 14th November, 2008 the petitioner had sent a letter to the respondent Nos. 1 and 2 wherein the petitioner had, inter alia, made the following statement:

    “We are indeed indebted to you, Sir, for helping us and our company M/s. Kunj Behari Construction Co. Pvt. Ltd. from financial and liquidity crunch although your firm had been very helpful to us in order to enable us to complete the work entrusted to our company but due to financial constraints and financial mismanagement of our company we could not complete the work within the stipulated time of two months. Our intention is to complete the work earlier but not later than 10th December, 2008. and we also hereby give an irrevocable undertaking that the said work shall be completed by 10th December, 2008. In case we fail to complete the said work by the said date the agreement for the work as well as for the work of Kabul Line work will stand automatically terminated without any further reference to us and we shall be liable to pay damages as per the terms and conditions of the agreement and all decisions taken by you in he matter shall be final and binding on us.”

    17. On the same day another handwritten letter was issued by Mr. Dinesh Sharma, Managing Director of the petitioner company to the respondent No. 2 to the following effect:

    “I, Dinesh Sharma, Managing Director, Kunj Behari Construction Co. Pvt. Ltd. by passing a resolution has terminated Mr. Navin Kumar Jain and his wife Ms. Shikha Jain from their services of monitoring the R.R Hospital Project and Kabul Line works on behalf of our company and I shall submit a copy of resolution to this effect of our company within 4 or 5 days.”

    18. On 15th November, 2008 the respondent Nos. 1 and 2 wrote a letter to the petitioner acknowledging the letter dated 14th November, 2008 accepting the proposal to make payment for the material procured after 15th November, 2008 and clearly mentioned that in case the work is not completed by the petitioner by 10th December, 2008 as promised by the petitioner in his letter, the agreement of both the works i.e R.R Hospital and Kabul Line work dated 25th January, 2008 will stand automatically terminated without making any further reference.

    19. The contention of the respondents is that the writing of the said letter is totally contrary to the alleged final bill raised by the petitioner on 15th November, 2008 for the amount of Rs. 94,06,000/- wherein the summary of the total amount due pertaining to the Kabul Line project and balance of another project to the tune of Rs. 2,21,83,067/- was also made.

    20. The payments against the 18th running bill has been received by the respondent Nos. 1 and 2 qua the mobilization advance given by DG (MAP) on interest @ 14% against 100% bank guarantee to be recovered in four equal installments. The payment qua the 19th running bill made to the respondent is against the retention money claimed against bank guarantee given by the respondent Nos. 1 and 2. As such the payment qua the 18th and 19th RA Bills in any event has been given on respondent Nos. 1 and 2 furnishing BGs.

    21. The respondents submit that the entire payment against the work done by the petitioner has been made and the material lying at the site belong to the respondents. The unbilled amount of work of Rs. 24,35,000/- plus stock and material of Rs. 35 lakh which were left on the date of contract are yet to be adjusted. The respondents have admitted during the course of hearing that the total value of the work completed during the said period was Rs. 1.40 crores approximately out of which admittedly Rs. 1,15,00,000/- have been paid to the petitioner. The above said details are also mentioned in the written submission of respondent Nos. 1 and 2. The respondent Nos. 1 and 2 further submit that the amount of Rs. 26,92,162/- as advance payment made to the petitioner by respondent Nos. 1 and 2 by cheque has not been mentioned by the petitioner in its petition.

    22. The other contention of respondent Nos. 1 and 2 is that the petitioner has concealed various material facts and documents from this Court while filing the present petition. The details of the same are given as under:

    (i) The petitioner has made a wrong statement in the petition that the Escrow account was not opened by respondent Nos. 1 and 2.

    (ii) The petitioner has not filed the letter dated 27th June, 2008 and undertaking dated 1st July, 2008 to complete the work by 14th August, 2008 and further did not plead the letter dated 14th October, 2008 and similarly not pleaded his two letters dated 14th November, 2008 as well as letter dated 15th November, 2008.

    (iii) The factum of receipt of Rs. 26,92,162/- by the petitioner as an advance payment has also not been mentioned in the petition.

    23. In view of concealment of facts, the learned Counsel for the respondent Nos. 1 and 2 contends that the petition filed by the petitioner is liable to be dismissed on this ground itself. Various decisions have been referred by the learned Counsel for the respondents on this point. He further submits that the entire issue is as to whether the petitioner is entitled to any amount for the work done by him during the period mentioned earlier has to be decided by the arbitrator and in case the petitioner succeeds he can be compensated in terms of damages as per settled law. As the petitioner has to establish his case before the arbitrator about the work done by him, granting of any relief at this stage would amount to granting the relief to the petitioner without the matter being considered on merit.

    24. There is no dispute that the agreement between the parties has been terminated. The parties are also disputing about the material, equipment and machinery lying at the site. During the hearing of this petition on 27th January, 2009, this Court, with the consent of the parties, appointed a Local Commissioner to verify the latest position about the construction of the project in question and execution of the work done at the site. The learned Local Commissioner in Paras 10 to 14 of his report gave full details about the present state of construction and execution of the work done at the site after 26th December, 2008 and the details of the equipment and worth of material lying at the site.

    25. The petitioner has also filed contempt petition being CCP No. 14/2009 on the ground that the respondents have disobeyed the interim orders of this Court granted on 26th December, 2008 and has referred the report of local commissioner in support of his contempt petition.

    26. I have heard learned Counsel for the parties for considerable time and perused the pleadings and documents of the parties. Considering the rival contentions of the learned Counsel for both parties, this Court feels that the sole dispute is as to whether the termination of sub-contract agreement by the respondents was justified or not and whether the said action of termination was taken by the respondents as per the sub-contract agreement amongst the parties validly or not. Such a dispute has to be adjudicated by the arbitrator in terms and conditions of the said agreement. This Court, therefore, is of the opinion that it is not prudent to decide this question at this stage as, it may prejudice either of the parties in view of the allegations and counter allegations raised by them.

    27. Thus, the only question left for consideration of this Court is as to whether it is a fit case where the interim order granted by this Court on 26th December, 2008 should continue or not and secondly as to whether the petitioner is entitled to any other relief at this stage, as the main dispute which has arisen is to be adjudicated upon by the arbitrator.

    28. There is no consensus between the parties as far as appointment of arbitrator is concerned. The petitioner has relied upon the arbitration clause (16) mentioned in the Work Order dated 28th November, 2007. On the other hand, the respondent Nos. 1 and 2 by letter dated 30th December, 2008 have already invoked the arbitration under Clause 9 of the formal agreement dated 25th January, 2008. None of the parties have so far filed the application under Section 11 of the Act. At this stage, the question arises as to what relief can be granted to the petitioner in its application under Section 9 of the Arbitration Act.

    29. The law relating to grant of injunction in exercise of power under Section 9 of the Act in the commercial contract has been discussed by this Court in the case of Techno Construction v. Kunj Vihar Co-operative Group Housing Society Ltd., 2005 (81) DRJ 233, wherein it was held as under:

    “9. Law with regard to grant of interim injunction while exercising jurisdiction under Section 9 of the Arbitration and Conciliation Act, 1996 is well settled. The protection under this section can be granted only when prima facie case, balance of conveniences and irreparable loss and injury is made out. The first question requiring consideration is, whether the contract for construction of building can be ordered to be specifically enforced? Section 14(1)(a) of the Specific Relief Act, 1963 provides hat a contract for non-performance, of which compensation in money is adequate relief, cannot be specifically enforced. In a suit for enforcement of contract for construction of a building, the party seeking specific performance of the contract has to satisfy three conditions, contained in proviso to Clause (c) of Sub-section (3) of Section 14. These are (i) the building or other work is described in the contract in sufficiently precise terms to enable the Court to determine the exact nature of the building or work; (ii) the plaintiff has a substantial interest in the performance of the contract and the interest is of such a nature that compensation in money for non-performance of the contact is not an adequate relief; and (iii) the defendant has, in pursuance of the contract, obtained possession of the whole or any part of the land on which the building is to be constructed or other work is to be executed. In short, before a construction contract can be ordered to be enforced, it has to be held that compensation in money is not the adequate relief. It cannot be disputed that where a contract which cannot be enforced by a decree for specific performance, the same cannot be negatively enforced by issue of an injunction.”

    30. In the case of B.S.M Contractors Pvt. Ltd. v. Rajasthan State Bridge & Construction Corpn. Ltd., AIR 1999 Delhi 117 it was held as under:

    “9. On a consideration of the facts and circumstances of the case, I am of the opinion that a building contract of the instant nature cannot be specifically enforced by granting interim relief under Section 9 of the Act. If there is a breach of such a contract, the appropriate remedy is to compensate the party damnified in damages. That apart, the granting of an injunction in favour of the petitioner will further delay the construction work considered very urgent by the respondent No. 3. Thus, the balance of convenience also swings against the grant of injunction sought by the petitioner.”

    31. From the above discussion, it becomes clear that where contract is not specifically enforceable as per the clauses stipulated under Section 14 of the Specific Relief Act, 1963, the interim order in the form of injunction qua contract cannot be passed enforcing negatively. In the present case also, the contract being the construction contract relates to disputes between the parties about the payment of amount, material lying at the site, machinery and equipment as well as the adjustment of the amount for unbilled work. The same can be enforced and compensated in terms of monetary relief as at this stage there are allegations made by the parties against each other and some of them are of serious nature.

    32. Any order or interim relief in the form of status quo or injunction granted cannot be continued as it will further delay the completion of the project in question causing irreparable harm to the employer i.e respondent No. 3 who is not concerned with the present controversy between the parties.

    33. As a result, the status quo order dated 26th December, 2008 about the work of construction and material is vacated on the condition that respondent Nos. 1 and 2 shall deposit a sum of Rs. 25 lacs within three weeks as security in order to secure the interest of the petitioner so that, in case the petitioner ultimately succeeds, the said amount may be paid to the petitioner from the said security deposited by the respondent Nos. 1 and 2. This condition is being imposed as interim measure without any prejudice to the rights and contentions of the parties. The security deposit of Rs. 25 lac shall be kept in fixed deposit with the Registrar General of this Court pending adjudication of the right of the parties before the Arbitrator. This figure of Rs. 25 lacs is a tentative figure fixed by this Court due to the reason that the respondent during the course of hearing has stated that the total value of work completed by the petitioner during the period was Rs. 1.40 crores approximately and out of which admittedly Rs. 1.15 crores have been paid, although both the parties are claiming huge sum to recover against each other on various reasons.

    34. But, nevertheless the respondent Nos. 1 and 2 would be entitled to raise their alleged claims regarding other adjustment i.e unbilled work of Rs. 24,35,000/- and Rs. 35 lac for stock and material and advance payment of Rs. 26,92,162/- which shall be considered by the Arbitrator at the appropriate stage as per merit of the case. Similarly, the petitioner would also be entitled to raise his claims and alleged pending bills pertaining to the work done by him before the learned Arbitrator.

    35. On deposit of the above said amount, the respondents shall be free to execute the remaining work, by themselves or from any other contractor after taking measurements of the work already done. A separate account in this regard shall be maintained and produced before the learned arbitrator to be appointed in the matter. The main petition as well as the contempt petition are disposed of with the directions. The arbitrator when appointed shall be within his rights and power to consider and go into the entire gamut of dispute and effectively adjudicate the disputes between the parties. It is made clear that the observations made in this order are tentative and will not bind the Arbitral Tribunal.

    36. Parties to bear their own cost.

    Ordered accordingly.
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    Comments

    Kunj Bihari Construction Co. Pvt. Ltd. v. Nidhi Builders Pvt. Ltd. & Ors.
    (Mar 20, 2009)