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State Of West Bengal & Ors. v. Anil Kumar Bhuiya
Structured Summary of the Opinion (Anil K. Sen, J. & S. N. Sanyal, J.)
Factual and Procedural Background
The opposite party (plaintiff in the lower court) entered into a contract on 6 June 1981 with the State of West Bengal (petitioners before the High Court) for relaying and raising a water main under the Durgapur Interim Water Supply Scheme. The contract's estimated value was Rs. 92,168, with a tender value of Rs. 57,144. A dispute arose before work began: the petitioners alleged that the opposite party failed to commence work without reasonable cause; the opposite party alleged the petitioners had not fulfilled their contractual obligations, preventing performance. The petitioners rescinded the contract on 30 November 1981.
Because the contract contained an arbitration clause, the opposite party filed an application under S.20 of the Arbitration Act to file the agreement in court for a reference to arbitration. The opposite party also applied under S.41(b) of the Arbitration Act for an injunction restraining the petitioners from giving effect to the rescission. The learned Subordinate Judge issued a show-cause notice and granted an ad interim injunction by an order dated 15 December 1981.
The petitioners appealed that interim order to the learned District Judge (Misc. Appeal No. 224/14 of 1981). The District Judge dismissed the appeal on 8 March 1982, not on merits, but holding the appeal not maintainable: (1) for want of pecuniary jurisdiction (on the view the contract's value exceeded Rs. 92,000), and (2) because orders under S.41(b) are not appealable under S.39(1) of the Arbitration Act. The petitioners then filed this revisional application in the High Court.
Legal Issues Presented
- Whether the learned District Judge had pecuniary jurisdiction to entertain the appeal from the Subordinate Judge's ad interim injunction.
- Whether an order granting an injunction issued under S.41(b) of the Arbitration Act can be made prior to a reference to arbitration (i.e., whether S.41(b) is limited to proceedings after a reference) and whether such an order is appealable.
- Whether the ad interim injunction granted by the Subordinate Judge was legally sustainable, having regard to the nature of the contract (construction work) and the principles in the Specific Relief Act regarding specific performance and availability of damages as an adequate remedy.
Arguments of the Parties
Mr. Banerjee (appearing for the petitioners)
- Contended the District Judge was wrong to hold the appeal not maintainable; the District Judge erred both on pecuniary jurisdiction and appealability points.
- On pecuniary jurisdiction: pointed out that the opposite party had assessed the value of the relief in his S.20 application at Rs. 9,999 and paid court fee accordingly; therefore the District Judge could not treat the proceeding's value as above Rs. 92,000 for the purpose of jurisdiction.
- On appealability: argued the Subordinate Judge's injunction was, in substance, an order passed under Order 39 Rules 1 & 2 of the Code of Civil Procedure as invoked by S.41(a) of the Arbitration Act (i.e., protective measures prior to any reference), and thus an appeal would lie under Order 43 of the Code.
- On the injunction's propriety: argued that because the contract was for construction work and the plaintiff's remedy was essentially one in damages, an injunction should not have been issued.
Mr. Motilal (appearing for the opposite party)
- Contended the order challenged in the appeal was made under S.41(b) of the Arbitration Act, and S.41(b) is not limited to post-reference arbitration proceedings but extends to proceedings leading up to arbitration; therefore no appeal lies against such an order as it is not appealable under S.39(1).
- Supported the Subordinate Judge's grant of ad interim injunction and submitted the petitioners should be left to contest the pending injunction application before that court.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Nagarchand Guenka v. Surendra Nath Sarkar, AIR 1946 Patna 10 | Held S.41(b) should be given a wide connotation to include all proceedings for arbitration from the very start (i.e., not limited to post-reference arbitration proceedings). | The Court described this Patna view and contrasted it with other authorities; ultimately the Court declined to accept this broad interpretation. |
| Sundarlal Haveliwala v. Smt. Bhagwati Devi, AIR 1967 All 400 | Followed the Patna Court's wider interpretation of S.41(b). | The Court noted this decision as following the Patna view but did not adopt it; it was part of the divergence of authority the Court considered. |
| Boby Pal v. Hindusthan Paper Corporation, AIR 1918 Kerala 223 | Held clauses (a) and (b) of S.41 contemplate two separate situations: S.41(a) for protective measures before reference, S.41(b) for the stage when dispute has gone to the arbitrator on a reference. | The High Court aligned with this Kerala view and treated it as more consistent with the statutory scheme; the Court accepted this interpretation over the Patna/Allahabad view. |
| Monoranjan Banerjee v. Tilakram Ghose (Civil Revision No. 984 of 1958 — disposed 31-8-1956) | This Court observed that clause (a) sufficed to enable the court to make orders in respect of matters in the second schedule and that clause (b) served a separate purpose for arbitration pending before the arbitrator; two clauses provide for similar powers in different contingencies. | The Court relied on this Bench decision as supporting the Kerala interpretation and used it to reject the Patna/Allahabad approach. |
| Veeramalai Chettiar v. Ramayee Ammal, AIR 1962 Mad. 437 | Decision of a Madras High Court judge supporting the view that S.41(a) and S.41(b) serve different contingencies. | The Court cited this decision as additional support for the interpretation it adopted (i.e., S.41(b) does not extend to pre-reference situations). |
| State of Himachal Pradesh v. H. S. Sobti and Co., AIR 1973 H.P. 1 | Bench decision referenced to show that an order impugned was made on express invocation of S.41(b) (supporting the proposition that an order expressly made under S.41(b) should be treated as such). | The Court referred to this decision to illustrate that where an order is expressly made under S.41(b), there is little scope to assume it was made under S.41(a). |
| Union of India v. Mohindra Supply Co., AIR 1962 SC 256 | Supreme Court observation that when the Arbitration Act limits the right of appeal to specified orders (S.17 and S.39(1)), by necessary implication other orders under the Act are not appealable. | The Court relied on this Supreme Court authority to hold that even if the injunction had been made under S.41(a), it would not be appealable under Order 43 of the Code because the Act restricts appeals to specified provisions. |
Court's Reasoning and Analysis
The Court proceeded in a stepwise analysis:
- Pecuniary jurisdiction: The Court disagreed with the District Judge's conclusion that he lacked pecuniary jurisdiction because the contract value exceeded Rs. 92,000. The Court observed that the applicant (opposite party) had valued his relief in the S.20 application at Rs. 9,999 and had paid court fee accordingly; the valuation made by the applicant is the proper criterion for jurisdiction. Therefore, the District Judge was wrong to dismiss the appeal on the ground of pecuniary jurisdiction.
- Scope of S.41(b): The Court reviewed a divergence of judicial authority. It summarized the Patna (Nagarchand Guenka) and Allahabad (Sundarlal Haveliwala) approach that S.41(b) has a wide scope to cover proceedings from the start, and the Kerala (Boby Pal) approach that S.41(a) and S.41(b) cover distinct contingencies (pre-reference protective measures vs. measures when proceedings are before the arbitrator). The Court found this Court's own Bench decision in Monoranjan Banerjee and a Madras decision (Veeramalai Chettiar) consistent with the Kerala view. On that basis the Court rejected the contention that S.41(b) could be invoked prior to a reference to arbitration.
- Could the Subordinate Judge's order be treated as one under S.41(a) (and thus appealable under Order 43)? The Court rejected this for two reasons: (a) the challenged order was expressly made invoking S.41(b), leaving little scope to treat it as S.41(a); and (b) even an order under S.41(a) would not be appealable because the Arbitration Act limits appeals to specific provisions (S.17 and S.39(1)), and by necessary implication other orders under the Act are not appealable — supported by Union of India v. Mohindra Supply Co. Consequently, the Court upheld the District Judge's ultimate conclusion that the appeal was not maintainable in law.
-
Legality and propriety of the injunction: Although the Court agreed with the District Judge's conclusion on appealability, the Court examined the merits of the injunction and found it unsustainable. Key points in this examination:
- The underlying contract was for construction (relaying/raising a water main); contracts of this nature are not generally specifically enforceable under S.10 and S.14 of the Specific Relief Act except in exceptional cases — and no exception was shown.
- An injunction is appropriate where it prevents loss that cannot be compensated by money; the Court found the loss here was compensable by damages and thus the real remedy available was damages rather than injunctive relief.
- The injunction had the effect of holding back a public utility work to safeguard the individual interest of the plaintiff; the Subordinate Judge did not take this public-interest consideration into account.
- Because the injunction had been in force for over four months without final disposal of the application and had already caused "sufficient mischief" by delaying a public utility service, the High Court considered it proper to exercise revisional powers suo moto to set aside the ad interim injunction.
- Conclusion of reasoning: While agreeing the appeal to the District Judge was not maintainable, the Court used its revisional jurisdiction to set aside the Subordinate Judge's ad interim injunction as an order made in material irregular exercise of jurisdiction (if not without jurisdiction).
Holding and Implications
Holding:
The revisional application is disposed of by vacating the ad interim order of injunction dated 15 December 1981, passed by the learned Subordinate Judge in Title Suit No. 224 of 1981.
Ancillary procedural outcome: The Court upheld the District Judge's ultimate conclusion that the appeal before him was not maintainable in law (for reasons relating to the appealability of orders under the Arbitration Act), although it disagreed with the District Judge on the point of pecuniary jurisdiction.
Implications:
- Direct effect on the parties: The ad interim injunction restraining the petitioners from giving effect to the rescission of the contract (order of 15.12.1981) has been vacated; the petitioners are no longer restrained by that interim order. The injunction application before the Subordinate Judge remains pending but the interim protection has been removed.
- Appealability / procedural implication: The opinion affirms that the Arbitration Act limits appeals to specified provisions and that other orders under the Act are not appealable by necessary implication (relying on the Supreme Court decision cited). The Court therefore treated the appeal as not maintainable on that ground.
- No new binding precedent was expressly stated by the Court as creating a novel rule; the decision chiefly applied and reconciled existing authorities and exercised revisional powers in the facts of this case. (The opinion does not state that it is laying down any new precedent beyond its application to these facts.)
Disposition and costs: The revisional application was disposed of by vacating the ad interim injunction; there will be no order as to costs. The concurrence of S. N. Sanyal, J. is recorded.
Anil K. Sen, J.:— The respondents in a proceeding under S. 20 of the Indian Arbitration Act are the petitioners before us in this revisional application. The revisional application is being heard on notice to and on contest by the opposite party to this application who was applicant before the court below.
2. The opposite party entered into a contract on June 6, 1981 with the State of West Bengal, petitioner no. 1 before us, for relaying and raising the water main under the Durgapur Interim Water Supply Scheme. The estimated value of the contract work was Rs. 92,168.00 but the tender value was Rs. 57,144.00. Before the opposite party could take up the work, dispute arose between the parties. While the petitioners accused the opposite party of having failed to take up the work without any reasonable cause, the opposite party accused the petitioners for not fulfilling their part of the contract as a result whereof he could not undertake the work. In such a situation the petitioners rescinded the contract on November 30, 1981. Since the contract incorporated an arbitration clause, the opposite party filed an application under S. 20 of the Arbitration Act before the learned Subordinate Judge, Burdwan for filing the agreement in court for a reference to be made to the arbitrator in terms of the agreement.
3. Having filed such an application, the opposite party filed another application under S. 41(b) of the Arbitration Act praying for an order of injunction restraining the petitioners from giving effect to the said rescission of the contract. The learned Subordinate Judge in issuing a show cause notice granted an ad interim injunction as prayed for by an order dated December 15, 1981. Feeling aggrieved by such an ad interim order of injunction the petitioners preferred an appeal before the learned District Judge being Misc. Appeal No. 224/14 of 1981. The learned District Judge has dismissed this appeal by an order dated March 8, 1982 not on merits but on the view that such an appeal is not maintainable in law. Two reasons have been assigned by the learned District Judge for holding as such. The first reason assigned by him is that since the value of the work under the contract is above Rs. 92,000.00 he had not the pecuniary jurisdiction to entertain such an appeal. The second reason given by him is more important. According to the learned District Judge the order impugned in the appeal having been made in exercise of powers under S. 41(b) of the Act no appeal lies therefrom since such an order is not appealable under S. 39(1) of the Act. Feeling aggrieved the petitioners have now moved this court in revision.
4. Mr. Banerjee, appearing in support of this revisional application, has first contended that the learned District Judge went wrong in thinking that no appeal lay before him against the order of the learned Subordinate Judge. Neither of the two reasons assigned by the learned District Judge is, according to Mr. Banerjee, a valid reason for refusal to entertain the appeal on its merits. Mr. Banerjee contends that when the opposite party himself valued the application under S. 20 of the Arbitration Act at Rs. 9,999/- assessing that amount to be the value of his relief, it was non open to the learned District Judge to say that the value of the proceeding was above Rs. 92,000/-. Secondly, it has been contended by Mr. Banerjee that the order of the learned Subordinate Judge is in substance one passed in exercise of his powers under Order 39 Rules 1 and 2 of the Code as invoked by S. 41(a) of the Arbitration Act and not under S. 41(b) which clause could be invoked only in case of a reference to arbitration being made and thus bringing into existence the arbitration proceeding. The order being one made in exercise of his powers under Order 39 Rules 1 and 2 of the Code according to Mr. Banerjee an appeal lies under Order 43 of the same Code. Mr. Banerjee has next assailed the propriety and the legality of the order of injunction as passed by the learned Subordinate Judge on the ground that since only available remedy for the plaintiff is in damages, no injunction could have been issued as done in the present case.
5. Mr. Motilal, appearing on behalf of the opposite party has contested all the points raised by Mr. Banerjee. According to Mr. Motilal, the order challenged in the appeal was one made under S. 41(b) of the Arbitration Act the powers whereunder are not limited to any arbitration proceeding arising on a reference but extends to proceedings leading to such arbitration as well. Hence, according to Mr. Motilal, no appeal lay against such an order as the same was not made appealable under the provisions of S. 39(1) of the Arbitration Act. Mr. Motilal in his turn has supported the order of ad interim injunction as passed by the learned Subordinate Judge and has contended that the petitioners must be left to contest the application for injunction which is still pending before the learned Subordinate Judge.
6. So far as the objection as to pecuniary jurisdiction is concerned, we are unuable to agree with the learned District Judge that he had not the pecuniary jurisdiction to entertain the appeal. It may be that the value of the conteract was above Rs. 92,000/- but that, in our view, is not the true crierion. In the presseut case, the applicant before the learned Subordinate Judge had valued his relief claimed in the application at Rs. 9,999/- and has paid court fee accordingly. There is no reason why the valuation so made will not be the valuation for the purpose of jurisdiction as well. Such being the position, we are unable to agree with the learned District Judge that he had not the necessary pecuniary jurisdiction to entertain the appeal if the appeal otherwise be competent in law. This takes us to consider the more important objection regarding the maintainability of the appeal.
7. On a careful consideration of the rival contentions put forward before us, we find that there exists a divergence in judicial opinion on the point whether the powers under S. 41(b) of the Arbitration Act can at all be invoked until there is a reference to arbitration and such power is exercised for the purpose of and in relation to the arbitration proceeding initiated on such a reference. A Division Bench of the Patna High Court in the case of Nagarchand Guenka v. Surendra Nath Sarkar, AIR 1946 Patna 10 held that the term ‘arbitration proceeding’ in S. 41(b) of the Arbitration Act should be given a wide connotation to include all proceedings for arbitration from the very start and not to mean the proceeding which starts on a reference being made. Such a view is taken, as, according to the learned Judges, any other view would render the court powerless to make any order for preservation and safety of the property in dispute before the reference is made so that pending the making of the reference the other side may waste the property as well. This view was followed and accepted by a learned single Judge of the Allahabad High Court in the case of Sundarlal Haveliwala v. Smt. Bhagwati Devi AIR 1967 All 400. A contrary view has been expressed by the Kerala High Court in the case of Boby Pal v. Hindusthan Paper Corporation AIR 1918 Kerala 223 where it was pointed out that clauses (a) and (b) of S. 41 contemplates two separate situations. While S. 41(a) contemplates taking of necessary protective measure during the proceedings before the court and before any reference has been made to the arbitrator, S. 41(b) covers the same field when the dispute has once gone to the arbitratrator on a reference. It was pointed out by the Kerala High Court that the only ground which led the Patna High Court to hold it otherwise cannot be said to be any ground because S. 41(a) of the Act is there to confer the necessary power on the court to take the necessary protective measure before the reference. So far as this court is concerned, it appears to us that a Bench decision of this court in the case of Monoranjan Banerjee v. Tilakram Ghose (Civil Revision No. 984 of 1958 disposed of on August 31, 1956) appears to be more consistent with the Kerala view than the view expressed by the Patna or the Allahabad High Courts. In the above case this court observed that “the words used in clause (a) are sufficient to enable the court to make order in respect of matters set out in the second schedule of the Arbitration Act. Another clause giving the court power to make orders in these matters was not therefore necessary in respect of the arbitration proceedings before the court, that is, under Chapter III or IV of the Act.
8. It is reasonable to think that in view of the peculiar nature of the arbitration proceedings the legislature thought fit to give the court the extraordinary powers of passing orders in some specified matters even though the arbitration proceedings may not be under orders of the court and used the words in clause (b) to express their intention in this respect.” To us it appears that this court took the view that the two clauses of S. 41 provide for same powers for two different contingencies; S. 41(b) was intended to confer power on the court to take protective measures in cases where the proceeding for arbitration is pending before the arbitrator even without any order of the court and that such a power was independent of clause (a) of S. 41. Indeed, what was pointed out by this court lends support to the view that to adopt the interpretation of S. 41(b) as made by the Patna High Court or the Allahabad High Court would render clause (a) to be nugatory because if the two clauses provide for the same power of taking protective measure, then clause (b) would cover the situation contemplated by clause (a) and no separate provision as in clause (a) would be necessary. The view expressed by this court therefore, is more consistent with the view of the Kerala High Court and that again is supported by the decision of a learned single judge of the Madras High Court in the case of Veeramalai Chettiar v. Ramayee Ammal, AIR 1962 Mad. 437. Such being the position, we are unable to accept the contention of Mr. Motilal that the powers under S. 41(b) are not limited to be exercised in cases of arbitration proceeding before the arbitrator but extends to proceedings leading to such a proceeding as well.
9. Although we may accept the contention of Mr. Banerjee that in the present case there being no reference and as such no arbitration proceedings as yet the learned Subordinate Judge could not have assumed any jurisdiction to make any order under S. 41(b), yet we are unable to accept his further contention that the appeal as filed before the learned District Judge should be held to be maintainable on the footing that such an order was really made in exercise of jurisdiction under S. 41(a) of the Arbitration Act. First of all there is little scope for such an assumption when the order impugned had been made on express invocation of powers under S. 41(b) of the Arbitration Act. Reference may be made to a Bench decision of the Himachal Pradesh High Court in the case of The State of Himachal Pradesh v. H.S Sobti and Co., AIR 1973 H.P 1. Secondly even an order made under S. 41(a) of the Arbitration Act would not be appealable for the very same reason for which we hold that an order under S. 41(b) is not appealable. An order of injunction made in exercise of powers under the Code as adopted by the Arbitration Act is an order under the Act and as such is subject to the other provisions of the Act. Except for provisions in S. 17 and S. 39(1) there is no right of appeal conferred as against orders made under the Act. It has been observed by the Supreme Court that when the Arbitration Act limited the right of appeal in respect of orders specified in the aforesaid provision the necessary implication is that other orders are not so appealable. Reference may be made to the decision of the Supreme Court in the case of The Union Of India v. Mohindra Supply Co. , AIR 1962 SC 256 relied on by the learned District Judge. Such being the position, even if it be assumed that the order that was passed by the learned Subordinate Judge was really one made in exercise of powers under S. 41(a) of the Arbitration Act, we are uaable to accept the contention of Mr. Banerjee that such an order would be appealable under Order 43 Rule 1 of the Code. We, therefore, uphold the ultimate conclusion of the learned District Judge that the appeal filed by the petitioners before the learned District Judge was not maintainable in law.
10. Though the order of the learned District Judge may be upheld on the view expressed by us hereinbefore, we are unable to sustain the order passed by the learned Subordinate Judge. We would prefer in the facts and circumstances of the present case to exercise our revisional powers to set aside such on order which, according to us, is clearly unsustainable in law. We have pointed out hereinbefore what was the contract between the parties. That contract was a contract for certain construction works. On the provisions of S. 10 and 14 of the Specific Relief Act such a contract is not specifically enforceable except in exceptional cases. No exception has been made out to take the case out of the said general rule. When such a contract is not specifically enforceable, we fail to appreciate how there can be an order of injunction which can only be issued in support of such performance. Further it is the basic consideration for the court in the matter of granting an injunction that such injunction should be granted in order to prevent a loss which otherwise cannot be compensated by money and the mutual convenience of the parties has to be taken into consideration for granting such an injunction. Judged from that aspect the injunction as granted by the learned Subordinate Judge is unsutainable, because the loss which the applicant may incur is not only capable of being compensated by damages but such damage is the real remedy open to the applicant. There is yet another aspect, viz., that order of injunction has held back a public utility work only to safeguard the individual intenrest of the plaintiff. None of these considerations were taken note of by the learned Subordinate Judge when he made the order. Such being the position, we are clearly of the opinion that the learned Subordinate Judge acted in material irregular exercise of his jurisdiction if not without jurisdiction when he made the order. We are conscious of the position that the application for injunction has not yet been disposed of but since such an application has not been deposed for over four months and when sufficient mischief has been done by granting an ad interim injunction and thereby holding back a public utility service, we feel impelled to exercise our revisional powers even suo moto to set aside such an order.
11. This revisional application is accordingly disposed of by vacating the ad interim order of injunction dated December 15, 1981, passed by the learned Subordinate Judge in Title Suit No. 224 of 1981.
12. There will be no order as to costs.
13. S.N Sanyal, J.:— I agree.
Revisional application disposed of vacating the ad interim order of injunction.
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