M/S GANGOTRI ENTERPRISES LTD.versusUNION OF INDIA & ORS.

                            [2016] 2 S.C.R. 1074



A                 M/S GANGOTRI ENTERPRISES LTD.
                                      v.
                        UNION OF INDIA & ORS.
                       (Civil Appeal No. 4814 of2016)
B                              MAYOS,2016
    (J. CHELAMESWAR AND ABHAY MANOHAR SAPRE, JJ.]
           Arbitration and Conciliation Act, 1996 ·- s. 9 - Bank guarantee
    - Encashment - Injunction against - Award of two contracts by
    Railway Department to Contractor - Termination of the first contract
c   for non-completion of work-As regards second contract, contractor
    on its completion asked for return of Bank guarantee - However.
    Railway Department sought encashment of Bank Guarantee -
    Invocation of arbitration clause by Contractor - Application uls. 9
    by contractor seeking injunction against the Department from
D   encashing Bank Guarantee - Dismissed by the courts below - On
    appeal, held: Arbitration proceedings in relation to the first contract
    still pending - Sum claimed from the contractor does not relate to
    the contract for which the Bank Guarantee was furnished but relates
    to another contract for which no bank guarantee was furnished -
    Further. the sum claimed by the contractor neither an admitted sum
E
    and nor a sum which stood adjudicated by any court of law in any
    ;udicial proceedings but a disputed sum - Bank Guarantee being
    in the nature of a· performance guarantee furnished for execution
    work of second contract and work having been completed to the
    satisfaction of the Department, they had no right to encash the Bank
F   Guarantee - Contractor made out a prillia facie case in their favour
    for grant of injunction against the Department so also balance of
    convenience and irreparable loss - Thus, entitled to claim injunction
    against the Department in relation to encashment of Bank Guarantee
    - Order passed by the High Court set aside.
G         Allowing the appeal, the Court
           HELD: 1.1 On perusal of the record of the case, it is found
    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
H   for which the Bank Guarantee had been furnished but it relates
                                     1074
  M/S GANGOTRI ENTERPRISES' LTD. v. UNION OF INDIA                       1075


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 iu the nature of da~.ages, which is not yet
adjudicated upon. in arbitration proceedings. Fourthly, the sum
claimed is neither a sum due in praesenti no~ a sµm 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 (AV works) and the work ha_vjng b.een
completed to th{ satisfaction of the respondents, they had iio            c
right to encash the·BankGuarantee. Both the courts below erred
in dismissing the appellant.'s application for grj\nt of_injunction.
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) relating to the Bank Guarantee. [Paras 42, 43) [1086-
                                                                          D
G-H; 1087-A-C]
      Union of India vs.· Ralnan Iron Foundry 1974 (3) SCR
      556:(1974) 2 sec 231 - relied on.
       1.2 The District Judge having decided the· injunction
application in the first i.nstance in appellant's favour in, rejecting    E
the application made by. the appellant second. time. It is ,not in
dispute that the respondents despite having suffered the
injunction order did not file any appeal against this order. Such
order thus attained finality and was, therefore, binding on the
pa_rties. [Para 44) [1087-F-G]
                                                                          F
      1.3 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. They are, therefore, entitled to claim
injunction against the. respondent in relation to eucashment of
Bank Guarantee. The impugned order is set .aside and in                   G
consequence the injunction application made by the appellant
under Section 9 of the Act in Arbitration Suit is aliowed and
injunction is granted in appellant's favour by restraining the
respondents jointly and severally from encashing Bank Guarantee
furnished by the appellant in connection with AV Works. [Para             f-1
1076            SUPREME COURT REPORTS                          [2016]2'>( .R


 A     45, 46) (1087-G-H; 1088-A-B)
             Iron and Hardware (India) Co. vs. Firm Sham/al and
             Bros. AIR 1954 Born. 423; Himudri Chemicals
             Industries Ltd. vs. Coal Tar Refining Company AIR 2007
             SC 2798 :2007 (8) SCR 869; U.P. State Sugar
 B           Corporation vs. Sumac International Ltd. 1996 (9)
             Suppl. SCR 511 : (1997) 1 SCC 568 - referred to.
                               Case Law Reference
       1974 (3) SCR 556                 relied on        Paras 40, 43, 45

 c     AIR 1954 Born. 423               referred to      Para 39
       2007 (8) SCR 869                 referred to      Para 43
       1996 (9) Suppl. SCR 511          referred to      Para 43
            CIVIL APPELLATE JURJSDJCTION : Civil Appeal No. 4814
       of2016.
 D
             From the Judgment and Order dated 23.07.2012 of the High Court
       of Judicature at Allahabad in First Appeal No. 2930 of2012.
              B. Adinarayan Rao, Sr. Adv., Aditya Singh, M. P. Shorawala, Advs.
       for the Appellant.
 E          Atul Ch.italey Sr. Adv., Shreekant N. Terdal, Su render Kumar Gupta,
       Ms. Vimla Sinha, Advs. for the Respondents.
             The Judgment of the Court was delivered by
             ABHAY MANOHAR SAPRE, J. I . Leave granted.
 F           2. This appeal is filed against the final judgment and order dated
       23.07.2012 of the High Court of Uttar Pradesh Judicature at Allahabad
       in F.A.F.O. No. 2930 of 2012 whereby the High Court dismissed the
       appeal filed by the appellant herein and upheld the orderofDistrict Judge
       which had refused to grant an interim injunction restraining encashing of
 G     the Bank Guarantee by the respondents herein.
              3. In order to appreciate the issue involved in this appeal, which
       lies in a narrow compass, it is necessary to set out the relevant facts in
       brief infra.
             4. The respondents, i.e., North Central Railway invited tenderfor
 H     doing "earth work in embankment and cutting including provision of
  M/S GANGOTRI ENTERPRISES LTD. v. UNION OF INDIA                             1077
            [ABHAY MANOHAR SAPRE, J.]

machine crushed/blended material blanketing layer and construct inn of         A
RCC Box type minor bridges at CH-84700M to I 141 OOM", in connection
with laying down of Agra-Etawah new BG Rail Line. The appellant-a
Limited Company applied for the said tender and its tender being the
lowest one was accepted by the respondents on 14.03.2005 and
accordingly the letter of acceptance was issued in appellant's favour.
                                                                               B
The contract agreement No. CE(C) 'North' ALDIA-E/Contract/EW-
111 dated 22.08.2005 was then signed between the parties. The total
value of the contract was Rs.14,62,46, 742/-, the date ofcommencement
of work was 14.03 .2005 and the date of completion of work was
13.03.2007. As the work could not be completed within the prescribed
time, on the request of the appellant-Company, the period of completion        c
of work was extended twice by the respondents, firstly, from 14.03.2007
to 31.12.2007 and again upto 30.09.2008 without levy of penalty and
with price variation clause benefit.
      5. On 14.07.2006, the appellant-Company was granted another
work by the respondents-North Central Railway vide letter No. 74-W/            D
4/1/347/WA/ANVR/SERd./TCR for construction of New Station
Building (G+2) circulating area, various service buildings, construction
of platform shelters with RCC Column and beam, Underground and
Overhead water storage tanks, water supply pipeline network and other
misc. works. in connection with the Development of New Passenger
Terminal at Anand Vihar (East Delhi) [hereinafter referred to as "Anand        E
Vihar works"]. In connection with the grant of the Anand Vihar works,
the appellant-Company submitted a Bank/Performance Guarantee bearing
No. 12/2006 dated 04.08.2006 from its banker Indian Mercantile Co-
operative Bank Ltd., Cantt. Road, Lucknow (hereinafter referred to as
'Bank') for a sum of Rs.1,32,78,820/-.
                                                                               F
       6. Since the work relating to contract dated 22.08.2005 could not
be completed within the prescribed time/extended time by the appellant
due to non-availability of site because of the agitation of the farmers and
non-supply of the specification or drawing of most of the small bridges
by the respondents, as complained by the appellant, the Agra-Etawah
                                                                               G
contract dated 22.08.2005 was terminated by the respondents vide its
letter dated 30.04.2009. After inviting fresh tenders, the rest of the
work was allocated by the respondents to another Company, namely, M/
s Hanu Infrastructure Pvt. Ltd. Kasganj, Kashiram Nagar for
approximately Rs. 11 Crores on 10.06.2011 without giving any information
to the appellant-Company.                                                      H
1078            SUPREME COURT REPORTS                            [2016] 2 S.C.R.


 A           7. On 30.09.2010, the appellant got the completion certification
       from the respondents for the Anand Vihar works with a defect liability
       period of six months, which also came to an end on 30.03.2011. Thus
       the appellant became entitled to seek the release of the Bank/
       Performance Guarantee No. 12/2006 submitted by it for the said work
 B     from the respondents.
             8. On 27.06.2011, the appellant, therefore, wrote a letter to the
       respondents-North Central Railway for return of the Bank/Performance
       Guarantee No. 12/2006.
             9. On 10.06.2011, the North Central Railway issued an internal
 c     circular to all concerned departments of the Railways for withholding of
       dues of the appellant-Company stating therein that the contract of the
       appellant-Company dated 22.08.2005 or the New Agra-Etawah BG Line
       was cancelled and the same had caused the respondents a loss of
       Rs.5,58, 16,036.33. The said circular came to the knowledge of the
       appellant on 18.07.2011.
 D
             I 0. On 30.11.2011, the respondents through their accounts
       department wrote a letter to the Bank which had furnished Bank
       Guarantee No.12/2006 for and on behalf of the appellant for the
       encashment of the said Bank Guarantee.

 E           11. On 02.12.2011, the final bill for the Anand Vihar works were
       cleared by the respondents and the payment for the same was released
       by the respondents.
              12. Since the disputes had arisen between 'the parties in relation to
       and arising out of the contract dated 22.08.2005, the appellant invoked
       Clause 36 read with Clause 64 of the General Conditions ofContract(in
 F
       short "GCC") which provided for the settlement of dispute by arbitration.
              13. After initiation of the arbitration, the appellant, on 04.01.2012,
       moved an application under Section 9 of the Arbitration and Conciliation
       Act, 1996 (hereinafter referred to as "the Act") before the District Judge,
 G     Allahabad bearing Arbitration Suit No. 411 of201 l seeking injunction
       on encashment of the Bank Guarantee deposited by it in the Anand
       Vihar works, against the respondents. It was inter alia alleged in the
       application that the respondents-North Central Railway have no right to
       encash the Bank Guarantee No.12/2006 furnished by the appellant in
       relation to dispute arising out of another contract dated 22.08.2005. It
 H     was alleged that firstly, Bank Guarantee was not furnished by the appellant
    M/S. GANGOTRI ENTERPRISES LTD. v. UNION OF INDIA                             1079
               [ABHAY MANOHAR SAPRE, J.]

  in relation to contract dated 22.!)8.2005 but was furnished in performance      A
  ofanoth.er contract dated 14.07.2006 (Anand Vihar works) which is a
  separate contract and has nothing to do with the contract dated
  22.08.2005. Secondly, it was alleged that so far as the contract dated
  14.07.2006 (Anand Vihar works) is concerned, the work was completed
  well within time and also to the satisfaction of the respondents and for
                                                                                  B
  which Completion Certificate was also given to the appellant by the
  respondents on 30.09.20 I 0. Thirdly, it was alleged that since the Bank
  Guarantee in question was in the nature of performance Guarantee for
  due execution of contract dated 14.07.2006 (Anand Vihar works) and
  th.e same having been performed by the appellant to the satisfaction of
  the respondents, the appellant-Company was entitled to get its Bank             c
  Guarante~ No.12/2006 released from the respondents. It was further
  alleged that in these circumstances, the respondents have no right to
  encash the Bank Guarantee in relation to any dues arising out of other
  contract with the appellant. It was also alleged that in any event, so long
  as the disputes arising out ofthe contract dated 22.08.2005 are not finally
                                                                                  D
  decided by the arbitrator and liabilities of the parties are not ascertained
  as to, who has to pay how much sum by way of damages and whether
' any one is at all liable to pay, there is no sum "due" or "payable" either
  by the appellant to th.e ·respondents. or/and vice versa and hence the
  respondents cannot in\;'pke Clause 62( 1) of GCC for realization of any
  money/sum
   .        .    by encashing
                     .
                     ~
                               the Bank Guarantee from the appellant.             E
        1.4. The respondents resisted the petition and i11ter alia contended
  that Clause 62( I) of GCC empowers the respondents to make recovery
  of ary dues from the appellant. It was contended that since the
  respondents have a claim/dues for payment of a sum of money against
  the appellant (contractor), they (respondents) would be entitled to             F
  exercise their right ofrecovery given to them under Claust~2(1) even if
  such claim is not for'a "sum due" and "sum payable" and is a claim for
  "damages" though disputed by the appellant and remains to be adjudicated
  upon in a court of law or by the arbitrator. It was contended that the
  respondents were, therefore, entitled to encash the Bank Guarantee in
  question in relation to dues/claim made by the respondents against the          G
  appellant.
        15. By order dated 04.01.2012, the District Judge allowed the
  application made by the appellant and restrained the respondents from
  encashing Bank Guarantee till appointment of arbitrator or constitution
  of Arbitral Tribunal. It may be mentioned here that the respondents did         H
1080             SUPREME COURT REPORTS                           [2016] 2 S.C.R.


 A     not file any appeal against this order, which attained finality.
             16. By letters dated 20.01.2012 and 29.01.2012, the appellant then
       requested the respondents for return of its Bank Guarantee.
              17. On 13.03.2012, an arbitration Tribunal was constituted as per
       Clause 32 read with Clause 64 of the contract between the parties which
 B     comprised of Shri Arun Kumar, CCE/NCR/ALD, Shri A.K. Bijalwan
       FA&CAO/F&B/NCR/ALD and Shri R. Rajamani Former CCRS &
       Member/ Arbitrator to look into the claims and the counter claims of the
       parties. The arbitration proceedings are pending.
              18. On 21.03.2012, the Deputy Chief General Manager/Const./
 c     SE Rd/NDLS wrote to the Branch Manager of the Indian Mercantile
       Cooperative Bank for extension of Bank Guarantee, which was valid
       upto 13.01.2012. On the request of the respondents, the Bank extended
       the period of Bank Guarantee for another six months, i.e., upto 13.07.2012.
             19. On 04.04.2012, the respondents through their accounts office
 D     wrote a letter to the Branch Manager of the Bank to encash the said
       13ank Guarantee in their favour.
            20. Since the respondents went on insisting for encashment of the
   · Bank Guarantee again and again saying that order dated 04.01.2012
     passed by District Judge no longer survives as its life was only upto the
 E date of constitution of arbitral Tribunal and hence the respondents became
     entitled to encash the Bank Guarantee, the appel Iant again filed a petition
     under Section 9 of the Act bearing Arbitration Suit No. 216 of 2012
     before the District Judge, Allahabad seeking injunction against the
     respondents from encashing the Bank Guarantee.
              21. By order dated 12.07.2012, the District Judge dismissed the
       petition and declined to grant injunction to the appellant. This time, the
       District Judge accepted the stand taken by the respondents and held
       that Clause 62( I) empowers the respondents to recover any dues/claim
       from the appellant and hence the respondents were within their rights to
       invoke the bank Guarantee and recover the dues relating to other contract.
 G
             22. Aggrieved by the said order, the appellant preferred an appeal
       bearing F.A.F.O. No. 2930 of 2012 before the High Court.
             23. By impugned judgment dated 23.07.2012, the High Court
       concurred with the view taken by the District Judge and dismissed the
 H     appellant's appeal.
   MIS GANGOTRI ENTERPRISES LTD. v. UNION OF INDIA                               1081
             [ABHAY MANOHAR SAPRE, J.]

     24. Challenging the said judgment, the appellant ha5 filed this appeal       A
by way of special leave.
      25. Heard Mr. 8. Adinarayan Rao, learned senior counsel for the
appellant and Mr. Atul Chitaley, learned senior .counsel for the
respondents. ·
         26. Mr. B. Adinarayan Rao, learned senior counsel appearing for          B
 the appellant (Contractor) while assailing the legality and correctness of
 the impugned order reiterated the same submissions, which were urged
 by the appellant before the two Courts below in support of the application
 filed by the appellant under Section 9 of the Act. His submission was
 that since the Bank Guarantee in question was in the nature of                   c
 performance guarantee furnished by the appellant for due performance
·of one contract (Anand Yihar works) daied 14.07.2006 and the same
 having been admittedly performed by the appellant to the satisfaction of
 the respondents (North Central Railway), as"is clear from the completion
 certificate dated 30.09.2010 issued by the respondents in. appellant's
 favour, the purpose for which the Bank Guarantee had been furnished              D
 was over as soon as the Satisfaction Certification was issued by the
 respondents in appellant's favour. Learned counsel, therefore, contended
 thatthe appellant became entitled to claim release of the Bank Guarantee
  in their favour on and after 30.09.2010 without any fetters on their rights.
       27. In the second place, learned counsel urged that the respondents        E
 (North Central Railway) had no right to take recourse to Clause 62 of
 GCC for encashing the Bank Guarantee in question because firstly, the
 arbitration proceedings which arose out of another contract dated
 22.08.2005 were still pending for final adjudication of the liability, ifany,
 and secondly; so long as the liability as to how much sum was payable            F
 and if so by whom it was payable was not finally determined in
 accordance with law in the arbitration proceedings by the arbitrators,
 there was no "sum due" and nor any "sum payable" in praesami by
 the appellant to the respondents and vice versa in connection with another
 contract.
                                                                                  G
       28. In the third place, learned couns.el contended that the District
 Judge, in the first instance, having rightly granted the injunction to the
 appellant vide order dated 4.01.2012 and no appeal having been filed
 against this order by the respondents, the said order had become final
 and was binding on the parties. It was, therefore, urged that when the .
 appellant moved the second application for grant of injunction after the H
1082            SUPREME COURT REPORTS                          [2016] 2 S.C.R.


 A     matter was referred to arbitration because of insistence on the part of
       the respondents to encash the bank guarantee, the District Judge should
       have extended the life of first order dated 04.01.2012 instead of again
       going into the merits of the case.
             29. Lastly, learned counsel urged that in the light of this legal
 B     position arising in the case, the appellant. had made out a prima facie
       case for grant of injunction against the respondents (North Central
       Railway) from encashing the bank guarantee in question.
             30. In reply, learned counsel for the respondents (North Central
       railway) supported the impugned order and contended that no case is
 c     made out to interfere in the impugned order and hence it be upheld.
              31. Having heard the learned counsel for the parties and on perusal
       of the record of the case, we find force in the submissions of the learned
       senior counsel for the appellant.
              32. ln our considered opinion, it may not be necessary for us to go
 D     into more details of the issue because, in our view, the controversy
       involved in this case remains no more rq i11fegra and stands decided by
       thi_s Court. in the case of Union of India vs. Raman Iron Foundry,
       (1974) 2 SCC 231. Since the issue stands already decided by this Court
       and hence it is necessary to examine the facts of the case and law laid
 E     down therein in detail and then apply the same to the facts of the case at
       hand.
             33. The facts of the case of Union oflndia (DGS&D) (supra)
       were that the respondent (Raman Iron Foundry) entered into a contract
       with the Union of India (DGS&D)-the appellant for supply of certain
       quantity of"Foam compound". The contract, apart from several other
 F
       conditions, contained two clauses, namely, Clauses 18 and 24. Clause
       24 provided that in the event of any dispute arising between the parties
       in connection with the contract, the same shall be decided by means of
       Arbitration. Clause 18 with which we are concerned provided for
       "recovery of sums due" which reads as under :
 G             "18. Recovery of sums due - whenever any claim for the
              payme.nt of a sum of money ar.ises out of or under the
              contract against the contractor, the purchaser shall be
              entitled to recover such sum by appropriating in whole or
              in part, the security, if any, deposited by the contractor, and
 H            for the purpose aforesaid, shall be entitled to sell and/or
  MIS GANGOTRI ENTERPRISES LTD. v. UNION OF INDIA                             1083
            [ABHAY MANOHAR SAPRE. J.)

       realise securities forming the whole or part of any such                A
       security .deposit. In the event of the security being
       insufficient, the balance and if no security has been taken
     . from the contractor, the entire sum recoverable shall' be
       recovered by appropriating any sum then due or which at
       any time thereafter may become due to the contractor under
                                                                               B
       the contract. or any other contract with the purchaser or
       the Government or any. person contracting through the
       Secr~tary, if such sum even be not sufficient to cover the
       full amount recoverable, the contractor shall on demand
       pay to the purchaser the balance remaining due."
       34. The perfonnance ofthe"contract rah into difficulties and dispute    c
arose between the parties giving rise to claiins by either parties against
the other. The.respondent contended that the appellant committed a breach
of the contract and was, therefore, liable to pay to the respbndenfa sum
of. Rs. 2;35;8001- by way of damages suffered by the ·respondent by
reason of the breach of the contract whereas the appellant, on the other       D
hand; said that it was the respondel1twhb"comniittedthe breach of the
contract and was, therefore, liable to pay to the appellant by way of
damages•a sum of Rs. 2;28,900/-. In the meantime, the appellant through
Assistant Director of Supplies sent a letter to the respondent calling
upon the respondent to make payment to them a sum of Rs. 2,28,900/-
and threatened that if the said a,mount is not paid, it will be recovered      E
from several respond~nts' pending bills in respect of other contracts.
         35. The respondent, therefore, filed an application under Section
20 of the Indian Arbitration Act· 1940 in Delhi High Court against the
appellant for filing the arbitratioil agreement. The tespondent also made
an application for an' interim injunction restraining the appellant from       F
recovering the ·amount of damages claimed by i"t from several pending
bills of the respondent. The learned Single Judge dismissed the injunction
application orithe·ground that it could not be proved that there were any
pehdin'g bills but at the same time allowed the application made under
Section 20 of the Indian Arb'itration Act and referred the matter to           G
arl:iiiration· as per Clause 24 of GCC. This is how the claim/counter
Claim of the parties became· the subject matter of the arbitration
proceedings: · ·
 .     36. Pending arbitrati.on proceedings,. the appellant made attempt
to recover the said amount from the respondent and hence the respondent
                             :                    '        '        '+
                                                                               H
1084             SUPREME COURT REPORTS                           [2016] 2 S.C.R.


 A     again made another interlocutory application under Section 41 read with
       second schedule to the Indian Arbitration Act, 1940 and prayed for status
       quo in the case. The appellant resisted the application. It was contended
       that Clause 18 empowers the appellant to make recovery of any amount
       from the respondent. The learned Single Judge allowed the respondent's
       application. He took the view that Cfause 18 did not authorize the appellant
 B
       to appropriate the amounts of any pending bil Is of the respondent towards
       satisfaction of its claim for damages against the respondent unless such
       claim for damages was either admitted by the respondent or adjudicated
       upon by the arbitrator or suit in civil court. Accordingly, the injunction,
       as prayed for, was granted to the respondent against the appellant. It is
 C     this issue, which was carried by the Union of!ndia to this Court.
             3 7. The questions, which fell for consideration before this Court,
       were - first, what is the true interpretation of Clause I 8; second what is
       the meaning of the words "sum due" and "may become due" under the
       contract or any other contract with the purchaser occurring in Clause
 D     18; third, whether Clause I 8 empowered the Union of India to make
       recovel) of amount claimed by it by way of damages (liquidated or
       unliquidatcd) for breach of contract pending arbitration proceedings from
       the contractor and lastly, whether in such case, contractor is entitled to
       claim injunction against the Union of India from making recovery of
       such sum.
 E
         38. Justice Bhagwati (as His Lordship then was) speaking for the
   Bench examined the issue in great detail in the light oflaw laid down by
   English and Indian Courts. The learned Judge in his distinctive style of
   writing after examining the entire case law on the subject held that an
   expression "sum due" occurring in Clause 18 would mean a sum for
 F which there is an existing obligation to pay in praesmti or in other
   words which is presently payable and due and, therefore, recovery of
   only such sums can be made subject matter of Clause 18 which is presently
   payable and due. It was held that a claim, which is neither due and nor
   payable, cannot be made subject matter of Clause I 8. It was further
   held that Clause 18 does not create a lien on other sums due to the
 G
   contractor or give to the purchaser a right to retain such sums until his
   claim against the contractor is satisfied. It was also held that a claim for
   damages for breach of contract is 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 I 8 to recover the amount of such claim
 H by appropriating other sums due to contractor.
  M/S GANGOTRI ENTERPRISES LTD. v. UNION OF INDIA                                1085
            [ABHAY MANOHAR SAPRE, J.]

      39. Their Lordships approved the view taken by Chagla C.J. in               A
the case of Iron and Hardware (India) Co. vs. Firm Shamlal and
Bros., AIR 1954 Bom.423 by observing in para 11 as under.
      "11. .......................................................... The same
      view. has also been taken consistently by different High
      Courts in India. We may mention only a few of the decisions,                B
      namely, Jabed Slteiklt v. Talter M11llik,AlR 1941 Cal 639 S.
      Milklw Singh v. N.K. Gopaltt Krislm11 Muda/iar, AIR 1956
      Punj 174 and Iro11 am/ H11rdw11re (llldi11) Co. v. Firm S/wmlttl
      and Bros., AIR 1954 Bom 423. Chagla, C.J. in the last
      mentioned case, stated the law in these terms: (at pp. 425-
      26)                                                                         c
         In my opinion it would not be true to say that a person
         who commits a breach of the contract incurs any
         pecuniary liability, nor would it be true to say that the
         other party to the contract who complains of the breach
         has any amount due to him from the other party.                          D

      As already stated, the only right which he has is the right
      to go to a Court of law and recover damages. Now, damages
      are the compensation which a Court or law gives to a party
      for the injury which he has sustained. But, and this is most
      important to note, he does not get damages or                               E
      compensation by reason of any existing obligation on the
      part of the person who has committed the breach. He gets
      con1pensation 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                     F
      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.              G

      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,                 H
1086            SUPREME COURT REPORTS                          (2016] 2 S.C.R.


 A           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
 B
              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
 c            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 fro~ doing so.
             12. We accordingly dismiss the appeals. The appellant in
 D           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 Comi in the case of Union oflndia (DGS&D) (supra).
 E          . 41. Coming now to the facts of the case at hand, we find that
       wordin.gs of Clause 62 of the contract in question with. which we are
       concerned is identical to that of Clause 18 of Union oflndia (DGS&D)
       (supra). Clause 62 ofGCC provides for.determination of contract owing
       to default of contractor. The relevant portion of Clause 62 reads as
 F     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 auy other contract or otherwise."
 G            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
 H
  MIS GANGOTRI ENTERPRISES LTD. v. UNION OF INDIA                               1087
            [ABHAY MANOHAR SAPRE, J.]

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 SU!)l
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
                                                                                 B
in question being in the nat~re 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 appellant's application for grant ofinjunction.
                                                                                 c
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. vs. Coal Tar Refining Company, AIR 2007 SC 2798                  D
and U.P. State Sugar Corporation vs. 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                E
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 oflndia (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 appellant's favour vide      F
order dated 04.01.20 I 2 erred in rejecting the application made by the
appellant second time vidc 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.                    G
     45. In the Iight of foregoing discussion, we hold that the appellants
have made out a primafacie 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,
                                                                                 H
1088                SUPREME COURT Rf PORTS                     [2016] 2 S.C.R.



 A     therefore, entitled to claim injunction against the respondent in relation
       to encashment of Bank Guarantee no. 12/2006 dated 04.08.2006.
              46. We, accordingly, allow the appeal, set aside the impugned order
       and in consequence allow the injunction application made by the appellant
       under Section 9 of the Act in Arbitration Suit no. 411/2011 in District
 B     Court, Allahabad and grant injunction in appellant's favour by restraining
       the respondents jointly and severally from encashing Bank Guarantee
       no. 12/2006 dated 04.08.2006 furnished by the appellant in connection
       with Anand Vihar Works. No costs.
       Nidhi Jain                                                 Appeal allowed.