http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 14  

PETITIONER: UNION OF INDIA

       Vs.

RESPONDENT: RAMAN IRON FOUNDRY

DATE OF JUDGMENT12/03/1974

BENCH: BHAGWATI, P.N. BENCH: BHAGWATI, P.N. GOSWAMI, P.K.

CITATION:  1974 AIR 1265            1974 SCR  (3) 556  1974 SCC  (2) 231  CITATOR INFO :  O          1984 SC  29  (9,13,20,25)  RF         1992 SC 847  (53)

ACT: Indian Arbitration Act (10 of 1940 s. 41 (b)-Court when  can issue interim in function.  Indian Contract Act (9 of 1872), s. 74-Stipulation of amount of damages in contract-Claim for damages for branch--If claim for liquidated or  unliquidated damages. ’Sums due,’ meaning of.

HEADNOTE: A  dispute  arose regarding the performance  of  a  contract between the appellant and respondent, each party  contending that  the other had committed a breach of the  contract  and claiming large sums of money by way of damages.  The  appel- lant’s claim was for damages stipulated under cl. 14 of  the contract.  The respondent was called upon to pay the  amount claimed  and was also informed that on failure to  make  the payment  the  appropriate  officer would  be  authorised  to recover the amount from the pending bills of the  respondent in respect of other contracts under cl. 18 of the  Contract. The respondent thereupon moved the High Court under s. 20 of the  Arbitration Act, 1940, and the claim and counter  claim were  referred to arbitration.  During the pendency  of  the arbitration  some  amounts  became due and  payable  by  the appellant  to the respondent in respect of  other  contracts between them.  The respondent applied to the High Court  for an injunction restraining the appellant from recovering  its claim for damages from the amounts which had fallen due  and the  High Court granted the injunction holding that  cl.  18 did  not authorise the appellant to appropriate the  amounts of any pending bills of the respondent towards  satisfaction of its claim for damages against the respondent unless  such claim  was either admitted by the respondent or  adjudicated upon by the arbitrator or the Court. Dismissing the appeal to this Court, HELD : (1) The order of interim injunction cannot be said to be  outside the scope of the High Court’s power under s.  41 (b) of the Arbitration Act. [563D-E] (a)  Section 41 (b) says that the Court shall have, for  the purpose  of and in relation to arbitration proceedings,  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 14  

same power of making orders in respect of any of the matters set out in the second schedule as it has for the purpose  of and in relation to any proceedings before the Court and  one of  the matters set out in the second Schedule  is  ’interim injunction.’ The, Court has therefore power to issue interim injunction.  But such interim injunction can only be for the purpose  of and in relation to  arbitration  proceedings.The Court  could  not  therefore make an  interim  order  which, though ostensibly in form an order of interim injunction, in substance  amounted to a direction to the appellant  to  pay the  amounts  due to the respondent under  other  contracts. [562F-563A] (b)  However,  in  the present case, the  order  of  interim injunction’  does not expressly or by necessary  implication direct  the appellant to pay amounts due to  the  respondent under other contracts.  The a appellant can still refuse  to pay such amounts if it thinks it has a valid defence and the only  remedy  open to the respondent then would be  to  take measures in an appropriate forum.  No breach of the  interim injunction as such would be involved in non-payment of  such amounts by the appellant to the respondent.  The only  thing which the appellant is interdicted from doing is to  satisfy its  claim for damages by appropriating such amounts.   Such an order- would be within the power of the court under s. 41 (b), because the claim for damages forms the subject  matter of arbitration proceedings. [563A-D] (2)  The appellant had no right or authority under cl. 18 to appropriate  the  amounts  of other  pending  bills  of  the respondent,  ’in  or towards satisfaction of its  claim  for damages  against the respondent, and so, the High Court  has justified in issuing the interim injunction-. [569G] 557 (a)  Though  the words"where any claim for the payment of  a sum of money arises" occurring in the opening part of cl. 18 are  words  of great amplitude, covering even  a  claim  for damages,  it  is  a well  settled  rule  of  interpretation, applicable  alike  to instruments as to  statutes  that  the meaning  of  ordinary words is to be found not  so  much  in strict  etymological  propriety  of  language  nor  even  in popular use as in the subject or occasion on which they  are used  and the object which is intended to be attained.   The context  and collection of a particular expression may  show that  it was not intended to be used in the sense  which  it ordinarily  bears.  The words must therefore be read not  in isolation  but  in the context of the whole  clause.  [564G- 565B] (b)  The heading of the clause reads "Recovery of sums due". The heading cannot control the interpretation of a clause if its  meaning is otherwise plain and unambiguous, but it  can be referred to as indicating the general drift of the clause and  affording  a  key  to a  better  understanding  of  the meaning.  When there is an obligation to pay a sum of  money at a future date it is a debt owing, but when the obligation is  to pay a sum of money in present, it is a debt  due.   A sum  due  would therefore mean a sum for which there  is  an existing  obligation  to pay in present or  in  other  words which is presently payable. [565 C-D, G-H] (c)  The  language  used  in the body  of  the  clause  also supports the view that it is with recovery of sums presently due  and payable by the respondent that this  clause  deals. The  clause is merely intended to provide a mode of a  claim for  payment of a sum of money arising out of or  under  the contract.’  It therefore postulates a claim for a sum  which is  due and payable, that is, presently recoverable  and  it may  be  recovered  by the mode  therein  provided.   It  is

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 14  

difficult to believe that the contracting parties could have intended  that even though a, sum is not due and payable  by the respondent, the appellant should be entitled to  recover it  by  adopting the mode set out in the  clause.   Such  an interpretation would mean that as soon as a claim is made by the  appellant, it would immediately become recoverable  and the  appellant, under the clause, would be entitled to  sell of the securities of the respondent and appropriate the sale proceeds  in or towards satisfaction of such claim,  and  in case  that  is  insufficient,  to  recover  the  balance  by appropriating other sums due to the respondent, and if there is even then a shortfall, to recover it personally from  the respondent.   And this consequence would ensue even  if  the claim is for a sum which the respondent is under no existing obligation  to pay or which is not presently payable or,  is disputed as regards liability or quantum.  It would be  more consonant with reason and good sense to take the view, which is  supported by the language of the clause that it does  no more than merely provide an additional mode of recovery.  to the appellant and that the appellant is entitled to exercise the right conferred under it only where there is a claim for a sum which is presently due and payable by the  respondent. The  last words of the clause namely, "the contractor  shall on  demand pay to the purchaser the balance remaining  due", clearly  postulate that the reference in the clause is to  a sum  presently  due  and payable by the  respondent  to  the appellant. [566B-567B] (d)  It  is  not  legitimate  to  construe  the  clause   by reference  to a corresponding clause which prevailed in  the earlier  standard  form  of contract where  the  words  were whenever   under   the  contract  any  sum   of   money   is recoverable’.   This  is  not  a  statute  enacted  by   the legislature where it can be said that if the legislature has departed  from  the  language  used  by  it  in  an  earlier enactment,  it would be a fair presumption to make that  the alteration in ,the language was deliberate and was  intended to  convey  a  different  meaning’ This is  a  clause  in  a contract and in construing it any reference to a similar  or dissimilar  clause in another contract would be  irrelevant. Moreover,  on a question of construction of the  clause  the mere  use of word ’claim’ cannot be a decisive factor.   The clause  has  to  be  read  as  a  whole,  and  so  read,  it applies.only  where  the  appellant has a claim  for  a  sum presently due and payable by the respondent. [567B-G] (e)  In  the  present  case, the claim is  for  damages  for breach of the contract.  The damages claimed are  liquidated damages  under cl. 14 of the Contract; but under Indian  law there is no difference in the nature of the claim whether it be for liquidated damages or for unliquidated damages.  Even if  there  is a stipulation for liquidated damages  a  party complaining of breach of contract can recover 558 only  reasonable  compensation for the injury  sustained  by him,  the stipulated amount being merely the outside  limit. The  claim in the present case therefore stands on the  same footing  as a claim for unliquidated damages.  A  claim  for unliquidated damages does not give rise to a debt until  the liability  is  adjudicated upon and damages assessed  by  an adjudicatory authority.  When there is a breach of contract, the party who commits the breach does not eo instanti  incur any  pecuniary obligation nor does the party complaining  of the  breach  become entitled to a debt due  from  the  other party.   The  only right which the party  aggrieved  by  the breach  has is the right to sue for damages and this is  not an  actionable  claim.  A claim for damages  for  breach  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 14  

contract  is therefore not a claim for a sum  presently  due and  payable and the appellant is not entitled, in  exercise of the right conferred upon it under cl. 18, to recover  the amount of such claim by appropriating other sums due to  the respondent. [567H-569G] Kesoram  Industries v. Commissioner of Wealth Tax  [1966]  2 S.C.R. 688 followed. Jones v. Thompson (1858) 27 L. J. , Q. B. 234, Jabed  Sheikh v.  Taher  Malik 45 Cal.  Weekly Notes, 519  and  S.  Malkha Singh  v. M/s.  N. K. Gopala, Krishna Mudaliar  1956  A.I.R. Pun. 174, referred to. Iron  &  Hardware (India) Co. v. Firm Shamlal &  Bros.  1954 A.I.R. Bom. 423 approved.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1330 of 1973 Appeal  by special leave from the Judgment and  Order  dated the 22nd January, 1973 of the Delhi High Court in I. A.  No. 1854 of 1972 in Suit No. 485 (A) of 1972 and Civil Appeals Nos. 1224 & 1225 of 1973. Appeals  by special leave from the Judgment and Order  dated the  15th  November, 1972 of the Delhi High Court in  I.  A. Nos. 846 and 119 of 1972 in Suit No. 158 of 1971. L.   N. Sinha, Solicitor General of India Shyamala pappu & S.   P. Nayar for the appellant (in all the appeals) D.   G.  Singhania, M. K. Garg and Shiv Khurana for  respon- dent (in C. A. 1330) D. D. Sharma for respondent (in C.A.s. 1224-1225) The Judgment of the Court was delivered by BHAGWATI,  J.-These appeals, raise an  interesting  question relating  to  the interpretation of cl. 18  of  the  General Conditions  of  Contract contained in the Standard  Form  of Contract  No. D.G.S. & D. 68. That is the standard  form  in which  contracts  are entered into by the  Central  Purchase Organisation  of  the Government of India  for  purchase  of stores from third parties described as ’contractors and  the question  of interpretation which arises  for  determination is, therefore, one of some importance, affecting as it  does a large number of people who enter into such contracts  with the  Government  of India.  The facts giving rise  to  these appeals follow a common pattern and it would, therefore,  be sufficient if we set out the 559 facts relating to civil appeals Nos. 1221 and 1225 of  1973. They   bring  out  clearly  the  point  which   arises   for consideration in all the three appeals. The  respondent tendered for supply of certain  quantity  of foam  compound to the appellant and its tender was  accepted by  the appellant by acceptance of Tender dated  16th  July, 1968.   The Acceptance of Tender was subject to the  General Conditions  of  Contract contained in the Standard  Form  of Contract  No.  D.G.S.  & D. 68.  The  only  clauses  of  the General  Conditions of Contract which are material  for  our purpose are cls. 18 and 24 and they read as follows:               "18.  RECOVERY OF SUMS DUE               Whenever any claim for the payment of a sum of               money  arises  out  of or  under  the  contrat               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  for  the               purpose  aforesaid, shall be entitled to  sell

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 14  

             and/or realise securities forming the whole or               part  of  any such 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   the               contract  or  any  other  contract  with   the               purchaser  or  the Government  or  any  person               contracting through the Secretary, 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.               "24.  ARBITRATION               In  the  event  of  any  question,  dispute,or               difference  arising under these conditions  or               any  special  conditions of  contract,  or  in               connection  with this contract, (except as  to               any matters the decision of which is specialty               provided   for   by  these  or   the   special               conditions) the same shall be referred to  the               sole arbitration of an Officer in the Ministry               of Law, appointed to be the arbitrator by  the               Director General of Supplies & Disposals.   It               will be no objection that the arbitrator is  a               Government  Servant, that he had to deal  with               the  matters to which the contract relates  or               that  in  the  course  of  his  duties  as   a               Government  servant he has expressed views  on               all  or  any  of the  matters  in  dispute  or               difference.  The award of the arbitrator shall               be  final and binding on the parties  to  this               contract.               Work  under the contract shag,  if  reasonably               possible,  continue’  during  the  arbitration               proceedings  and no payment due to or  payable               by the purchaser shall-be withheld on  account               of such proceedings. 560 The performance of this contract ran into difficulties and a dispute  arose between the parties giving rise to claims  by either  party against the other.  The  respondent  contended that  the appellant had committed a breach of  the  contract and was, therefore, liable to pay to the respondent a sum of Rs. 2,35,800/- by way of damages. suffered by the respondent by reason of the breach of the contract.  The appellant,  on the  other  hand, said that it was the  respondent  who  had committed the breach, of the contract and was liable to  pay to  the appellant by way of damages a sum of Rs.  2.28,900/- under clause 14 of the General Conditions of Contract.   The Assistant  Director  of Supplies by his  letter  dated  30th March,  1971 called upon the respondent to make  payment  of the  amount  of  Rs.  2,28,900/and  intimated  that  if  the respondent  failed to do so on or before 30th  April,  1971, the  Pay  and Accounts Officer, New  Delhi/Madras  would  be authorised  to recover the, same from the pending  bills  of the respondent in respect of other contracts.  This  dispute between  the  parties  being a dispute arising  out  of  the contract  was liable to be settled by arbitration under  cl. 24 of the General Conditions of Contract and the respondent, therefore,  filed  an application. in the Delhi  High  Court under  s.  20 of the Indian Arbitration Act for  filing  the Arbitration   Agreement  contained  in  that  clause.    The

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 14  

respondent  also, at the same time, made an  application  to the  Delhi High Court for an interim injunction  restraining the appellant from recovering the amount of damages  claimed by  it  from  the pending bills  of  the  respondent.   This application  was, however, rejected by the Delhi High  Court on  the  ground that it was not shown that  there  were  any pending  bills of the respondent at that time out  of  which the threatened recovery could be made by the appellant.  The application  under s. 20 of the Indian Arbitration  Act  was thereafter  heard  by the Delhi High Court and by  an  order dated  5th  May,  1972 the Delhi  High  Court  allowed  that application and ordered the arbitration agreement  contained in  cl.  24 to be filed and made an order  of  reference  to arbitration  in accordance with the  arbitration  agreement. The  claim of the respondent against the appellant  for  Rs. 2,35,800/-  and the counter-claim of the  appellant  against the  respondent for Rs. 2,28,900/- thus became  the  subject matter of reference tO arbitration.  During the pendency  of the  arbitration some amounts became due and payable by  the appellant  to the respondent in respect of  other  contracts entered  into  between the parties.  In view of  the  letter dated  30th March, 1971 the respondent apprehended that  the appellant  would appropriate these amounts towards  recovery of  the  amounts of damages claimed by it  even  though  the claim  for  damages was disputed by the respondent  and  was pending adjudication before the arbitrator.  The respondent, therefore,  made interim Application No. 119 of 1972 to  the Delhi High Court on 17th January, 1972 under s. 41 read with the  Second  Schedule to the Indian  Arbitration  Act,  1940 praying  that  the status quo should be maintained  and  the appellant should be restrained from recovering its claim for damages from the amounts due and payable by the appellant to the  respondent  in respect of the pending  bills.   How  it appears  that this Interim Application No. 119 of  1972  was made  in the Original Application under s. 20 of the  Indian Arbitration Act, 561 1940  and  the  appellant,  therefore,  raised  a  technical objection  that the Original Application under s. 20  having been  disposed of, Interim Application No. 119 of  1972,  as filed, could not be maintained.  The respondent, in view  of this technical objection raised on behalf of the  appellant, filed  another  Interim Application No. 746 of  1972  as  an independent  application  under s. 41 read with  the  Second Schedule  to the Indian Arbitration Act, 1940 on  16th  May, 1972  praying for the same interim relief as was claimed  in the earlier Interim Application No. 119 of 1972.  Both these interim applications were resisted by the appellant  relying on  cl.  18 of the General Conditions of  Contract  but  Mr. Justice  Avadh  Bihari of the Delhi High  Court,  who  heard these interim application, took the view that cl. 18 did not authorise  the appellant to appropriate. the amounts of  any pending bills 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 arbitration or suit in civil court.  The learned  Judge accordingly by an order dated 15th  November, 1972  allowed  both the interim applications and  issued  an interim injunction restraining the appellant "from effecting recovery  of the amounts claimed to be due from-  the  other pending bills" of the respondent.  The appellant  thereupon, with  certificates  obtained  from  the  Delhi  High  Court, preferred  Civil Appeals Nos. 1224 and 1225 of 1973 in  this Court.  One appeal was directed against’ the impugned  order in so far it related to Interim Application No. 119 of  1972

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 14  

and the other in so far as it related to Interim Application No. 846 of 1972.  The appellant also preferred Civil  Appeal No.  1330  of  1973 against a similar order  passed  by  the learned Judge in Interim Application No. 854 of 1972 in  the other case. There  are  in  the main two grounds on  which  the  learned Solicitor  General,  appearing on behalf of  the  appellant, challenged  the  order  of Interim injunction  made  by  Mr. Justice Avadh Bihari A.The impugned order amounted in effect and substance to  an order  directing  the appellant to pay the  amounts  of  the pending  bills  of the respondent: in respect of  the  other contracts  and since the question of payment of the  amounts of such pending bills did not form the subject matter of the reference  which  was pending before  the  arbitrator.,  the learned Judge had no jurisdiction under s. 41 read with  the Second Schedule to make such an order and the impugned order was,  therefore,  outside the scope of his power  and  hence invalid., B.Clause  18  comes  into play when there  is  a  claim  for payment  of  a  sum of money arising out  of  or  under  the contract.  It is not necessary that the sum of money must be due and payable to the purchaser.  It is enough if there  is a  claim even for damages.  Whenever, there is  such  claim, the purchaser is given a right under cl. 18 to recover it by appropriating  "any  sum  then  due or  which  at  any  time thereafter 562 may  become  due to the contractor under  the  contract"  or under any other contract.  The appellant was, therefore, en- titled  to  recover  the amount of  its  claim  for  damages against  the  respondent  by appropriating  the  sums  which subsequently  became  due  to  the  respondent  under  other contracts,  even though the claim for damages was  contested by  the respondent and was pending adjudication  before  the arbitrator.   No  interim  injunction could  be  granted  to prevent  the exercise of such right.  If interim  injunction were  to  be  granted in a case of this kind  as  of  course merely on the ground, without anything more, that the  claim for  damages  is  pending  adjudication  and  until  it   is determined  in  favour of the purchaser,’ it should  not  be allowed  to be recovered by the purchaser out of other  sums due  to the contractor, it would render cl.  18  meaningless and  ineffectual and the tight to the purchaser  under  that clause would become illusory. of course, it would be open to the  court even in such a case to grant interim  injunction, if it is satisfied that the claim for damages is prima facie not  well  founded and the balance of  convenience  requires that,   Pending  adjudication,  the  purchaser   should   be restrained from effecting recovery of the claim for  damages from  out  of other sums due to the  contractor.   But  here admittedly  neither  of  these two factors  was  taken  into consideration by the learned Judges and the order of interim injunction made by’ him cannot, therefore, be sustained. We  shall proceed to examine these grounds in the  order  in which we have set them out. Re: Ground A. It was common ground between the parties that the order  of. interim injunction was made by the learned Judge under s. 41 (b) read with the Second Schedule to the Indian  Arbitration Act, 1940.  Now s. 41(b) says that the court shall have, for the  purpose of and in relation to arbitration  proceedings, the  same , power of making orders in respect of any of  the matters  set  out in the Second Schedule as it has  for  the purpose  of  and in relation to any proceedings  before  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 14  

Court and one of the matters set out in the Second  Schedule is  "interim injunction".  The Court has,  therefore,  power under  s.41  (b)  read with the  Second  Schedule  to  issue interim injunction, but such interim injunction can only  be "for   the  purpose  of  and  in  relation  to   arbitration proceedings".  , The arbitration proceedings in the  present case  were  for determination of the mutual  claims  of  the appellant  and  the respondent arising out of  the  contract contained in the acceptance of Tender dated 16th July, 1968. The  question  whether  any  amounts  were  payable  by  the appellant  to the respondent under other contracts  was  not the  subject  matter of the  arbitration  proceedings.   The Court obviously could not, there fore, make an interim order which,  though  ostensibly  in  form  an  order  of  interim injunction,  in  substance amounted to a  direction  to  the appellant  to pay the amounts due to’ the  respondent  under other contracts.  Such an interim order would clearly not be for  the  purpose  of  or in  relation  to  the  arbitration proceedings as required by 563 s.   41 (b).  But here the order of interim injunction  made by  the  learned judge does not, expressly or  by  necessary implication, carry any direction to the appellant to pay the amounts due to the respondent under other contracts.  It  is not   only  in  form  but  also  in  substance  a   negative injunction.   It has no positive content.  What it  does  is merely  to injunct the appellant from recovering, suo  moto, the  damages claimed by it from out of other amounts due  to the respondent.  It does not direct that the appellant shall pay  such  amounts to the respondents.   The  appellant  can still refuse to pay such amounts if it thinks it has a valid defence  and if the appellant.does so, the only remedy  open to   the  respondent  would  be  to  take  measures  in   an appropriate  forum  for recovery of such  amounts  where  it would be decided whether the appellant is liable to pay such amounts to the respondent or not.  No breach of the order of interim injunction as such would be involved in  non-payment of  such  amounts by the appellant to the  respondent.   The only thing which the appellant,is interdicted from doing  is to  make recovery of its claim for damages by  appropriating such amounts in satisfaction of the claim.  ’That is clearly Within  the power of the Court under s. 41 (b)  because  the claim   for  damages  forms  the  subject  matter   of   the arbitration  proceedings and the Court can always  say  that until  such claim, is adjudicated upon, the appellant  shall be  restrained  from recovering it  by  appropriating  other amounts  due  to  the  respondent.   The  order  of  interim injunction  made by the learned Judge cannot, therefore,  be said  to be outside the scope of his power under s.  41  (b) read with the Second Schedule Re: Ground B. That takes us to the second ground of challenge against  the order  of interim injunction.  This ground of  challenge  is based on the proper interpretation of cl. 18.  The  argument of  the appellant was that what is required  for  attracting the applicability of cl. 18 is a mere claim for payment of a sum  of money arising out of or under the  contract  against the  contractor and it is not necessary that a sum of  money must be actually due and payable from the contractor to  the purchaser.   If the purchaser has a claim for payment  of  a sum of money against the contractor, he would be entitled to exercise  the  right given under cl. 18,  even  though  such claim  may not be for a sum due and payable but pay  be  for damages and it may be disputed by the contractor and may not have  been  adjudicated  upon  in  a  court  of  law  or  by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 14  

arbitration.   The purchaser can in such a case recover  the amount  of  his claim, without resort to a court of  law  or arbitration,  by  appropriating sums due to  the  contractor under  the  same contract or under other contracts,  if  the claim  of  the  purchaser  is  not  well  founded  and   the appropriation  made by him is, therefore,  unjustified,  the contractor  can always institute a suit or  arbitration  for recovering  the  sums  due to him which  have  been  wrongly appropriated   by  the  purchaser  and  in  such   suit   or arbitration,the court or the    arbitrator,  as the  case may be, would examine theclaim     against        which appropriation has been made bypurchaser   and  if   the claim  is  found  to be unsustainable,  set  at  naught  the appropriation and   pass a decree or award for the sums  due to the contractor. But the    court  cannot and  should  not restrain the purchaserfrom exercising 564 his right of appropriation merely because the claim  against which appropriation is sought to be made by the purchaser is disputed  by  the  contractor and  is  pending  adjudication before  a court of law or arbitrator.  The court should  not prevent  the normal operation of cl. 18 by interfering  with it,  unless  it appears to the court prima  facie  that  the claim  which is sought to be recovered by  appropriation  is not  well  founded and the balance of  convenience  lies  in favour  of restraining the purchaser from recovering  it  by appropriation.    The  respondent,  however,  disputed   the validity  of  this  construction placed on  cl.  18  by  the appellant  and contended that though the words used  in  the opening  part of cl. 18 are "any claim for the payment of  a sum  of money", which are general words of  apparently  wide amplitude  sufficient  to  cover even a  claim  for  damages arising  out  the  contract, a proper  construction  of  the clause read as a whole clearly suggests that these words are intended to refer only to a claim for a sum due and  payable and do not take in a claim for damages which is disputed  by the  contractor.   It is only when a claim  for  damages  is adjudicated  upon by a civil court or an arbitrator and  the breach  of  the contract is established and  the  amount  of damages ascertained and decreed that a debt due and  payable comes  into existence; till then it is nothing more  than  a mere  right to sue for damages and it does not  fall  within the  words  of cl. 18.  Moreover, cl. 18 merely  provides  a mode  of  recovery and it can have no  application  where  a claim, even though it be for a sum due and payable, is  dis- puted by the contractor and has to be established in a court of law or by arbitration: cl. 18 applies only where a  claim is  either admitted,or in case of dispute, substantiated  by resort  to  the  judicial  process.   Therefore,  when   the purchaser  has a claim for damages which is disputed by  the contractor,  the purchaser is not entitled under cl.  18  to recover the amount of its claim for damages by appropriating other sums due to the contractor until the claim for damages is  adjudicated  upon  and  culminates  in  a  decree.   The appellant  in  the present case had  consequently  no  right under cl. 18 to appropriate sums due to the respondent under other  contracts  in satisfaction of its claim  for  damages against  the  respondent,  when the claim  for  damages  was pending  adjudication before the arbitrator and the  learned Judge  was right in restraining the appellant from doing  so by  issuing an interim injunction.  These were  broadly  the contentions of the parties under this head of challenge  and the question is which of these rival contentions is correct. It  is true that the Words "any claim for the payment  of  a sum  of money" occurring in the opening part of, cl. 18  are

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 14  

words of great amplitude, wide enough to cover even a  claim for damages, but it is a well settled rule of interpretation applicable  alike  to instruments as to  statutes  that  the meaning  of  ordinary words is to be found not. so  much  in strict  etymological  propriety  of  language  nor  even  in popular use as in the subject or occasion on which they  are used  and the object which is intended to be attained.   The context and collocation of a particular expression may  show that  it was not intended to be used in the sense  which  it ordinarily  bears.  Language is at best an imperfect  medium of expression and a variety of meanings may often 565 lie in a word or expression.  The exact colour and shape  of the  meaning  of  any  word  or  expression  should  not  be ascertained  by  reading it in isolation, but it  should  be read  structurally and in its context, for its  meaning  may vary with its contextual setting.  We must, therefore,  read the  words  ’any claim for the payment of a  sum  of  money’ occurring in the opening part of cl. 18 not in isolation but in the context of the whole clause, for the intention of the parties is to be gathered not from one part of the clause or the  other but from the clause taken as a whole.  It  is  in the  light of this principle of interpretation that we  must determine whether- the words ’any claim for the payment of a sum  of  money’  refer only to a claim for  a  sum  due  and payable   which  is  admitted  or  in  case   of   disputes, established in a court of law or by arbitration or they also include  a  claim  for  damages which  is  disputed  by  the contractor. The first thing that strikes one on looking at cl. 18 is its heading which reads: "Recovery of Sums Due". It is true that a heading      cannot control the interpretation of a clause if its meaning is other-      wise  plain  and  unambiguous, but  it  can  certainly be referred  to  as  indicating  the general drift of the clauses and affording a key to a better understanding of its meaning. The heading of cl. 18  clearly suggests  that  this  clause is intended to  deal  with  the subject  of recovery of sum due. Now a sum would be  due  to the purchaser when there is an existing obligation to pay it in present. It would be profitable in,  this  connection  to refer to the concept of a ’debt’, for a sum due is the  same thing as a debt due.   The classical definition of ’debt’ is to  be found in Webb v. Stenton (1) where Lindley,   L.  J., said  :  "a debt is a sum of money which is now  payable  or will  become  payable in the future by reason of  a  present obligation".  There must be debitum in praesenti;  solvendum maybe  in praesenti or in future that is  immaterial.  There must be an existing obligation to pay a sum, of money now or in  future. The following passage from the judgment  of  the Supreme  Court  of  California in People  v.  Arguello.  (2) which,  was approved by this Court in Kesoram Industries  v. Commissione  of  Wealth  Tax  (3)  clearly  brings  out  the essential characteristics of a debt               "Standing  alone,  the  word  ’debt,’  is   as               applicable  to a sum of money which  has  been               promised  at a future day as to a sum now  due               and  payable.   If  we  wish  to   distinguish               between the two, we say of the former that  it               is.  a debt ’owing, and of the latter that  it               is debt due." This passage indicates, that when there is an obligation  to pay a sum of money at a future date, it is a debt owing  but when the obligation, is to pay a sum of money in  praesenti, it  is a debt due.  A sum due would, therefore, mean  a  sum for  which  there  is  an  existing  obligation  to  pay  in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 14  

praesenti or in other words, which is presently payable.. (2)  [1869] 37 Calif. 524 (1)  [1883] 11 Q.B.D. 518. (3) [1966] 2 S.C.R. 688. 566 Recovery-of  such  sums  is the subject  matter  of  cl.  18 according to the heading.  That is the dominant idea running through the entire cl.18. The  language used in the body of cl. 18 also  supports  the view  that  it is with recovery of sums  presently  due  and payable by the ,contractor to the purchaser that this clause deals.   It may be noted that cl. 18 does not lay  down  the substantive rights and obligations of the parties under  the contract. It is merely intended to provide a mode         of recovery of ’ a claim for payment of a sum of money  arising out  of or under the contract". It, therefore, postulates  a claim for a    sum  which  is  due  and  payable,  that  is. presently recoverable and may be   recovered  by  the   mode therein provided. it is difficult to believe that        the contracting  parties could have intended that even though  a sum  is  not  due  and payable  by  the  contractor  to  the purchaser under     the  contract, the purchaser  should  be entitled to recover it by adopting ,the mode set out in  cl. 18. It is important to note that cl. 18 does not  -create  a lien  on  other sums due to the contractor or  give  to  the purchaser a  right  to  retain such  sums  until  his  claim against the contractor is     satisfied.If merely a right of lien or retention were given to secure  payment of a  claim, then even if the claim were for a sum not presently due  and payable,  the  provision  perhaps would  not  have  been  so startling ,or  unusual.  But  here the right  given  to  the purchaser under. cl.     18 is a right to recover the amount of his claim by appropriating other     sums   due  to   the contractor  and,  on the, interpretation of  the  appellant, this can be done even if the claim is for a sum which is not due  or payable in praesenti and the purchaser is  otherwise not  entitled to recover it. That would indeed be  a  highly extra-ordinary result which we     would  be loathe  to reach in the absence of clear and compelling language.  This interpretation,  if accepted, would mean that as soon  as  a claim is made by the purchaser, it would immediately  become recoverable and the purchaser would be entitled to sell  off the  securities of the contractor and appropriate  the  sale proceeds in or towards   satisfaction  of such claim and  in case that is insufficient, recover the  balance           by appropriating other sums due to the contractor and if  there is  even  then a shortfall, recover it personally  from  the contractor, for     the  last words of cl. 18  provide  that "the  contractor  shall on demand pay to the  purchaser  the balance remaining due". And this   consequence  would  ensue even if the claim is for a sum which the     -contractor  is under  no  existing  obligation  to  pay  or  which  is  not presently payable or is disputed as regards the existence of liability or its    quantum. A mere making of a claim by the purchaser would     impose a liability on the contractor  to pay it. That surely could     -not  have been the  intention of the contracting parties. It would    be  more   consonant with  reason  and  good sense to take the  view,  which,  as pointed  out above, is plainly and indubitably supported  by the  language used by the contracting parties, that  cl.  Is does no more than   merely  provide  an additional  mode  of recovery to the purchaser, and     the purchaser is entitled to exercise the right conferred, under that  clause     only where there is a claim for a sum which is presently due  and payable  by  the  contractor.  This  view,  indeed,  becomes

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 14  

irresistible 567 when  we  consider the last words of cl.  18,  namely,  "the contractor shall on demand  pa to the purchaser the  balance remaining due", which clearly postulate          that    the reference  in  the  clause is to a  sum  presently  due  and payable     by the contractor to the purchaser, so that,  if any balance remains  unrecovered after adopting the  special mode  of recovery provided in the clause, such balance  must be  paid by the contractor to the purchaser on demand.   The appellant laid great emphasis on the use of the word ’claim’ in  the  opening  part  of cl. 18  and  contended  that  the Standard  Form  of Contract which was in use  prior  to  the adoption  of the present Standard Form of Contract, cl.  14, and  which corresponded to the present cl. 18,  opened  with the words " whenever under this contract any sum of money is recoverable  from and payable by the contractor",  but  this formula  was  deliberately and advisedly  altered  when  the present Standard Form was introduced and instead, the  words "whenever  any  claim  for  the  payment  of  sum  of  money arises...." were substituted and this change in  phraseology indicated that in order to attract the applicability of  the present  cl. 18 it was not necessary that there should be  a sum  due and payable by the contractor to the purchaser  but it  was enough if there was a mere claim on the part of  the purchaser  for payment of a sum of money by the  contractor, irrespective of whether such sum of money was presently  due and  payable or not.  This contention is, in  our  opinion,. wholly  untenable.   We  do not think it  is  legitimate  to construe  cl.  18  of the contract between  the  parties  by reference  to a corresponding clause which prevailed  in  an earlier  Standard Form of Contract.  This is not  a  statute enacted by the Legislature where it can be said that if  the Legislature  has departed   from the language used by it  in an earlier enactment, it would be a fair presumption to make that  the alteration in the language was deliberate  and  it was intended to convey a different meaning.  It is a  clause in  a  contract  which  we are  construing  and  there,  any reference  to  a  similar or dissimilar  clause  in  another contract  would be irrelevant.  The only question before  us is,  what  does cl. 18 mean and that depends  on  the  plain interpretation  of its language in the context in  which  it occurs.  Moreover, on a question of construction of cl.  18, mere  use of the word "claim" cannot be a  decisive  factor. Cl.  18 has to be read as a whole, each part throwing  light on the other, without any undue emphasis on one word or  the other.   We cannot allow our interpretation of cl. 18 to  be hijacked from its true course by the use of a solitary  word such  as "claim", but we must arrive at the true meaning  of the  clause  by construing it in all its parts  and  in  its proper contextual setting.  So viewed, it is clear that  cl. 18  applies only where the purchaser has a claim for  a  sum presently due and payable by the contractor. Having discussed the proper interpretation of cl. 18, we may now  turn to consider what is the real nature of  the  claim for   recovery  of  which  the  appellant  is   seeking   to appropriate  the  sums  due to the  respondent  under  other contracts:  The  claim  is admittedly one  for  damages  for breach of the contract between the parties.  Now, it is true that  the damages which are claimed are  liquidated  damages under cl. 14, 568 but  so  far as the law in India is concerned, there  is  no qualitative difference in the nature of the claim whether it be for liquidated damages or for unliquidated damages.  Sec.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 14  

74  of  the  Indian Contract Act  eliminates  the  some-what elaborate  refinements made under the English common law  in distinguishing between stipulations providing for payment of liquidated  damages  ’and  stipulations  in  the  nature  of penalty.   Under  the common law a  genuine  preestimate  of damages  by  mutual agreement is regarded as  a  stipulation naming liquidated damages and binding between the parties  a stipulation  in a contract in terrors is a penalty  and  the Court  refuses  to enforce it, awarding to  aggrieved  party only  reasonable compensation.  The Indian  Legislature  has sought to cut across the web of rules and presumptions under the  English  common law, by enacting  a  uniform  principle applicable to all stipulations naming amounts to be paid  in case  of  breach, and stipulations by way  of  penalty,  and according to this principle, even if there is a  stipulation by way of liquidated damages, a party complaining of  breach of contract can recover only reasonable compensation for the injury sustained by him, the stipulated amount being  merely the outside limit.  It, therefore makes no difference in the present  case  that  the  claim  of  the  appellant  is  for liquidated  damages.   It stands on the same  footing  as  a claim for unliquidated damages.  Now the law is well settled that a claim for unliquidated damages does not give rise  to a  debt  until  the liability  is  adjudicated  and  damages assessed  by  a  decree  or  order  of  a  Court  or   other adjudicatory authority.  When there is a breach of contract, the party who commits the breach does not eo instanti  incur any pecuniary obligation, nor does the party complaining  of the  breach  becomes entitled to a debt due from  the  other party.   The  only right which the party  aggrieved  by  the breach of the contract has is the right to sue for  damages. That  is not in actionable claim and this position  is  made amply  clear by the amendment in s. 6(e) of the Transfer  of Property  Act, which provides that a mere right to  sue  for damages cannot be transferred.  This has always been the law in  England  and as far back as 1858 we, find it  stated  by Wightman, J., in Jones v. Thompson (1) "Exparte Charles  and several  other cases decide that the amount of a verdict  in an  action  for  unliquidated damages is  not  a  debt  till judgment has. been signed".. It was held in this case that a claim for damages dots not become a debt even after the jury has  returned a verdict in favour of the plaintiff till  the judgment is actually delivered.  So also in  O’ Driscoll  v. Manchester Insurance Committee,(2) Swinfen Eady, L. J., said in  reference to cases where the claim was for  unliquidated damages  "in  such cases there is no debt at all  until  the verdict of the jury is pronounced assessing the damages  and judgment  is  given.  The same view   has  also  been  taken consistently  by  different High Courts in  India.   We  may mention only a few of the decisions, namely, Jabed Sheikh v. Taher Mallik,(3) S. Malkha Singh v. M/s N. K. Gopala Krishna Mudaliar(4) and Iron & Hardware (India) Co. v. Firm  Shamlal & Bros.(5) (1)  [1858] 27 L. J. Q.B. 234. (3)  45 Cal.  Weekly Notes, 519. (2)  [1915] 3 K. D. 499. (4)  1956 A.I.R. Pun. 174. (5) 1954 A.I.R. Bom. 423. 569 Chagla, C. J. in the last mentioned case, stated the law  in these terms:               "   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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 14  

             to  the contract who complains of  the  breach               has  any  amount  due to him  from  the  other               party.               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 of 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 compensation by reason               of any existing obligation on the part of  the               person who has committed the breach.  He  gets               compensation  as a result of the fiat  of  the               Court.   Therefore,  no  pecuniary   liability               arises till the Court has determined that  the               party complaining of the breach is entitled to               damages.    Therefore,   when   damages    are               assessed,  it  would not be true to  say  that               what  the  Court is doing  is  ascertaining  a               pecuniary  liability  which  already               existed.   The Court in the first  place  must               decide  that the defendant is liable and  then               it proceeds to assess what that liability  is.               But  till  that  determination  there  is   no               liability at all upon the defendant." This  statement  in our view represents  the  correct  legal position and has our full concurrence.  A claim for  damages for breach of contract is, therefore, not a claim for a  sum presently due and payable and the purchaser is not entitled, in exercise of the right conferred upon it under cl. 18,  to recover the amount of such claim by appropriating other sums due  to the contractor.  On this view, it is  not  necessary for us to consider the other contention raised on behalf  of the respondent, namely, that on a proper construction of cl. 18,  the  purchaser  is  entitled  to  exercise  the   right conferred under that clause only where the claim for payment of  a sum of money is either admitted by the contractor,  or in  case  of dispute, adjudicated upon by a court  or  other adjudicatory  authority.  We must, therefore, hold that  the appellant  had  no  right  or  authority  under  cl.  18  to appropriate  the  amounts  of other  pending  bills  of  the respondent  in  or  towards satisfaction of  its  claim  for damages  against  the respondent and the learned  Judge  was justified  in issuing an interim Injunction restraining  the appellant from doing so. We  accordingly dismiss the appeals.  The appellant in  each appeal will pay the costs of the respondent all throughout, V.P.S. Appeals dismissed. -45Sup.CI/75 570