M/s. Mohinder Singh and Co. vs Executive Engineer Jammu and Central Construction Division, C.P.W.D. and others

J.N. Bhat, J.—This is an application u/s 41 of the Arbitration Act read with Order 39, Rules 1 and 2 of the CPC for issue of an injunction

restraining the respondents from executing any items of work either departmentally or through other contractors on the Samba Batal Link road.

The application recites that the contract of constructing Samba-Batal Link Road was sanctioned in favour of the petitioner for Rs. 78,83,287-00

vide agreement No. 1/EE-Jammu of 1967-68. The work was commenced by the petitioner on 15-6-1967 and completed on 30-4-1970; the

original time for the completion of the contract was six months but the petitioner indicated in his letter dated 8-5-1967 that the construction would

be delayed because of the late acceptance of the tender and consequent setting in of the Monsoon season; that due to defaults of !he department in

various manners, the time of completion was extended upto 30th April 1970 thus making time not the essence of the contract. The items of work

to be done by the petitioner are given in Paragraph 6 of the petition; that the departmental officers of the respondent in-charge of the work gave

instructions to other contractors to start other works while the work of the petitioner was still in progress. Final measurements have not been

recorded by the department so far. On account of the dispute between the petitioner and the department Shri V.V. Vaze of the Ministry of Works.

Housing and Urban Development, was appointed as an Arbitrator by the Chief Engineer C.P.W.D. under the arbitration clause. The instructions

given by the officers of the department to other contractors have resulted in the latter contractors' starting their work thus undoing and effacing the

work done by the petitioner. Final measurements were requested for vide letters dated 14-5-1970 and 6th July 1970. This application was

supported by an affidavit.

Mr. Amarchand, the Additional Advocate General put in his objections on behalf of the respondent to this application which can be summarized

as under:-

That there being an arbitration clause in the agreement, this petition is not maintainable. The petitioner started the work on 15-6-1967 but has not

yet completed his work. From 30-4-1970 the petitioner is not doing any work at the spot; that it took the department a longer time than originally

stipulated i.e. the period of three months to accept the tender of the petitioner. The petitioner agreed to the delay by means of his letter dated 8th

May 1967 and ultimately started working on 15-6-1967 The petitioner had to construct 27 Kilometres of road; out of this possession of about 2

Kilo-meters of land could not be given to him at once but was given to him after three months and eight days. It is admitted that time off and on

was extended subject to the condition that time was of the essence of the contract and extension did not in any way affect the rights of the

respondent. This road is a strategic and defence road. As the petitioner did not do any work on this road after 30-4-1970 other contractors had to

be asked to carry on other items of work which did not clash with the work of the petitioner. The other contractors are doing their work from 30-

4-1970. Mr. V.V. Waze has been appointed Arbitrator to settle certain disputes between the parties who is competent to decide all disputes

between the parties. Final measurements have been taken. There are no valid grounds for granting the relief claimed by the petitioner.

After these objections were put in by the respondent the petitioner again put in a rejoinder. In the rejoinder he says that the matter of issue of

injunction is outside the jurisdiction of the Arbitrator. The work was completed by the petitioner on 30-4-1970 when he handed over the site to

the respondent. Other contractors have since been working on this road. The allegation of leaving the work unfinished is denied. The petitioner

reiterates that by means of his letter dated 5-6-1967 he conveyed to the department that the road could not be constructed within six months as

originally stipulated owing to the delay caused by the department itself and that continues to be a part of the contract. Time was not the essence of

the contract. That the work was completed by the petitioner before 30th April 1970 is admitted by the Executive Engineer in his letter dated 6th

March 1970. Work of catch-pits had not to be done by the petitioner as alleged by the respondent; the nature of the road being strategic is

denied. According to the petitioner the work which has been started by the new contractors on this road will definitely disturb and damage the

work done by the petitioner and will make it difficult to take the final measurements. The petitioner approached the department as per his letters

dated 14th May 1970 and 6th July, 1970 to finalise his bills which was not done. No final measurements upto date have been taken or recorded.

Against this further rejoinder Mr. Amarchand, the learned counsel for the respondents, filed objections that this rejoinder was only arguments

and repetition of the main application so not covered by any provisions of law. Nonetheless a reply thereto has been filed. In this reply it is said that

the contractor petitioner left the work incomplete. Time was of the essence of the contract. Work of catch pits also was to be done by the

petitioner. The dispute raised by the petitioner relates only to measurements of earth-work; final measurements of earth work were recorded and

paid for in the bill dated 9th January 1970. Final measurement of the work done by the petitioner was taken in presence of the representative of

the petitioner; on the petitioner's desire a date was appointed and the petitioner was asked to be at the spot but he did not turn up.

Parties produced a number of documents in support of their contentions-I shall now deal with the points argued at length by the learned counsel

for the parties and even by the petitioner and the Executive Engineer Mr. J.L. Humar, Executive Engineer, Central Const. Div: Central C.P.W.D.

The first point is about the maintainability of this petition. The learned counsel for the petitioner has drawn my attention to Section 41(b) of the

Arbitration Act, which reads as under:-

(b) 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 Court:

Provided that nothing in Clause (b) shall be taken to prejudice any power which may be vested in an arbitrator or umpire for making orders with

respect to any of such matters.

The second schedule of the Arbitration Act mentions the powers of Court u/s 41 about which the Court can pass orders, and they are:-

The preservation, interim custody or sale of any goods which are the subject matter of the reference;

Securing the amount in difference in the reference;

The detention, preservation or inspection of any property or thing which is the subject of the reference or as to which any question may arise

therein and authorising for any of the aforesaid purposes any person to enter upon or into any land or building in the possession of any party to the

reference, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient

for the purpose of obtaining full information or evidence.

Interim injunctions or the appointment of a Receiver;

The appointment of a guardian for a minor or person of unsound mind for the purposes of arbitration proceedings.

This Section 41(b) read with the second Schedule gives ample powers to the Court to pass orders in the nature of preservation, interim custody or

sale of goods which are the subject matter of the reference, to pass interim injunctions or appoint a receiver or pass orders regarding detention,

preservation or inspection of any property or authorising any person to enter upon any land or building etc., etc. The power given to the court to

pass such emergency orders even when the matter is before the Arbitrator is very wide and this Section 41(b) of the Act is to clothe the Court with

the same powers in relation to arbitration proceeding, to issue interim orders for the preservation and safety of the subject matter of the dispute and

in relation to other matters as it would have in relation to proceedings before itself. Where an application is filed before the Court u/s 20(1) of the

Act, or where the reference to arbitration is made through the intervention of the Court, the Court having seized of the case, can pass every

appropriate interim order. The only limitation is that an interim relief under this section can be granted by the Court in some proceedings or in a

pending suit. In the absence of such proceedings an application under this section is not maintainable - See Ranjit Chandra Mitter Vs. Union of

India (UOI), . The result is that the Court has inherent authority under this provision of law to pass necessary interim orders. I have also held so in

some earlier cases, some of which are reported also. The case is pending in this Court started on an application of the petitioner on 23-7-1970.

The dispute between the parties has been referred to the arbitration of Mr. Waze and the next date fixed in the case in this Court is 31st January

1971.

The power being there, the question is whether such power should be exercised by the Court or not. The grant of interim relief in any suit or

proceedings is always discretionary with the Court. No party can as a matter of right claim an injunction or an interim relief. The grant or refusal of

such reliefs is to be determined after taking all the circumstances as also the balance of convenience as it is said, into consideration.

The second point that was debated before me with great vigour by the parties is whether time was the essence of this contract or not. Let me

first take the case of the respondents in stressing that time was of the essence of the contract. Mr. Humar submitted written arguments also.

According to him the following facts indicate that time was of essence in this contract. In the letter of acceptance dt. 5-6-1967 the petitioner was

told that the tenders shall be required from the 10th day after the date of the order to commence work. This work was a priority work connected

with the defence of the country, therefore, such a short period of six months was fixed for the completion of this road. About time being the

essence of the contract, he has with his reply rejoinder placed on record the documents viz.-

Letter No. 23(1) 67-Camp Madho-pur/1 dated Jammu, the 5-6-1967 from the Executive Engineer to the petitioner. In the last para thereof it is

said that:-

You are also directed to start the work at once. Please note that the time allowed for carrying out the work, as entered in the tender shall be

reckoned from the tenth day after the date of this order to commence work.

On this, argues the learned counsel, that time was of the essence in this contract. He has also referred to:-

Letter No. MCCD/SBR/4 (69) 70/ 1440-41 dated Madhopur, the 3-3-1970 from the Executive Engineer to the petitioner. In the last para of

this letter it is said that:-

Provided that notwithstanding the extension hereby granted time is and shall continue to be essence of the said agreement.

As against these documents, the petitioner has relied on the following facts and documents:-

Facts:- 1. The acceptance of the tender preferred by the petitioner was to be given within 90 days but this was not done as admitted by the

respondents in paragraph 3 of their original objections dated 30-10-1970. The petitioner informed the authorities by means of his letter dated 8th

May, 1967 that as the matter of final acceptance of the tender had been delayed by the authorities for more than the stipulated time and the rainy

season had set in, he could not keep to his original schedule of six months.

The entire site was not handed over to the petitioner as admitted by the respondents in their paragraph 4 of the objections wherein they state

that the petitioner had to construct 27 kilometres; out of this possession of 2 kilometres of land could not be given to him at once but was given to

him after 3 months and 8 days.

It is also admitted that on the petitioner's request time for completion of the work was extended off and on.

No completion time was fixed in the agreement. In the original agreement, the provision of extension of time was also given along with the time

limit of six months:

Running account bills had to be paid every fortnight but from 15-6-1967 upto 30-4-1970 only 29 on account bills were paid whereas 69 bills

should have been paid.

Documents:-

Letter No. MCCD/SBR/4 (69) 70/ 1440-41 dated Madhopur, the 3-3-1970 already referred to above. Paragraph 2 of this letter reads as

under:-

The provisional extension of time for the completion of the above noted work is granted upto 30-4-1970 without prejudice to the right of

Government to recover liquidated damages in accordance with the provisions of the clause 2 of the agreement.

Letter No. 63(4) 69/1028 dated Madhopur the 12-2-1970 from the Executive Engineer to the petitioner wherein it is stated that the items of

work listed therein are pending completion ""....you are requested to please complete the pending items of work...."" In the last paragraph it is stated

that ""....you are therefore requested to take in hand these items of work early so that the work is completed in all respects....

Letter No. 63(4) 70-Works (Vol. VI)/3531 dated Madhopur the 5-6-70 from the Executive Engineer to the petitioner. In this letter a request

to complete the work is reiterated and a reference has been made to earlier letters dated 20th Feb., 1970, 25th March, 1970 and 27th April,

1970 and it is stated that ""in spite of these requests you have not taken any steps to resume the work and complete the same..

The petitioner's case further is that under the C.P.W.D. Manual Vol 2, time for execution of works of different types and kind is given.

For every work of 12 months

Rs. 5 lacs to Rs. ten

lacs ..

For every additional 3 months.

work of Rs. 5 lacs

and part thereof

The petitioner, according to this table, was entitled to complete this work in 4 years and 6 months, i.e., upto 14th Dec., 1971.

This is the case put forward by the parties regarding whether the time was of the essence of the contract or not. Let me now discuss the

authorities on this point.

The Privy Council as far back as in 1915 in a case reported in AIR 1915 PC (sic) had to remark that equity would look to substance to

determine it time is of essence and held that:-

In England the law of equity, which governs the rights of the parties in cases of specific performance of contracts to sell real estate, looks not at the

letter but at the substance of the agreement in order to ascertain whether the parties, notwithstanding that they named a specific time within which

completion was to take place, really and in substance intended more than that it should take place within a reasonable time.. Prima facie, equity

treats the importance of such time limits as being subordinate to the main purpose of the parties, and it will enjoin specific performance

notwithstanding that from the point of view of a Court of Law the contract has not been literally performed by the plaintiff as regards the time limit

specified....

Their Lordships further said that undue delay could not be excused and reasonable notice was sufficient nor should injustice be caused and what

has passed between the parties prior to the signing of the contract had to be taken into consideration in determining whether time was of the

essence of a contract.

It has also been held by numerous authorities that whether time is of the essence of a contract is primarily a question of the intention of parties,

and this intention of the parties has to be determined on the facts of that particular case Even if originally there is a stipulation that time should be of

the essence of the contract, it can be subsequently waived and that waiver can be ascertained from the facts of the case. When the original terms

are altered and the original condition in regard to time is waived, subsequent notice fixing the time must be reasonable. See (1950) 1 All ER 420.

In AIR 1957 Punj 141 the plaintiff firm by a tender had contracted to supply the Government a certain quantity of bhusa, to its various military

farms, at various periods. The plaintiff deposited a certain sum as security for due performance of the contract. By the terms of the contract, the

Government undertook to arrange for railway wagons but did not guarantee the supply. The plaintiff however was to supply beforehand the wagon

programme. The non-supply of wagons, however, was not to be the ground for non-fulfilment of the contract. There was a contemporaneous oral

agreement that the Government would supply the wagons. On the requisition of the plaintiff the Government sent wagon permits to the plaintiff, but

on two occasions there were some clerical mistakes on the permits, and wagons could not be had. The plaintiff had purchased the required

quantity of bhusa at various centres and was frequently applying for wagons. The plaintiff could not supply the bhusa. The Government sought to

forfeit his security deposit but the Punjab High Court rejected the contention of the Government.

In Zakir Sadagar Vs. Dolegobind Ghose and Others, it was held that in a contract for sale of land there must be an express stipulation making

time essence of the contract and in AIR 1931 205 (Lahore) it was held that the court should look at the substance of the contract in order to

ascertain whether the time was the essence of contract and the mere fact that time is specified for the performance of a certain act is not, by itself,

sufficient to prove that time was of the essence of the contract.

In Gomathinayagam Pillai and Others Vs. Pallaniswami Nadar, their Lordships have held that fixation of period within which contract is to be

performed does not make stipulation as to time being the essence of the contract nor does a default clause by itself evidence intention to make the

time as an essence of the contract.

The following two cases are more akin and apply to the facts of this case viz., AIR 1923 Nag 140 and AIR 1940 Sind 1.

In AIR 1923 Nag 140 a contract ran as follows:

The whole work will be completed in 4 months from the date of getting permission in writing from Mr. D.W. Roberts. A fine of Rs. 5/- per day will

be exacted for every day after that date if the work is not completed within the above noted time.

It was held that time was not of the essence of the contract in this case.

In AIR 1940 Sind 1 the appellant who was a contractor took up two contracts from the Public Works Department in Sind in 1929 in

partnership with one A.C. Aggarwala (1) to excavate a distributary called D/1/R and D/6/R from a rice canal and erect banks thereto to a length

of over fen miles from head to tail, involving the excavation of approximately 47,00,000 cubic feet of earth; (2) to fill up gaps in the banks of

distributary called D/5/L ex Warah branch involving the excavation of approximately 1,22,600 cubic feet of earth. Formal agreements were drawn

up which contained different recitals. It was expressly provided that time will be the essence of the contracts but at the same time another clause of

the contracts made provision for extension of time. Another clause authorised levy of penalty in case of non-performance. On these facts when a

dispute arose between the parties, i.e., the contractors and the Government it was argued on behalf of the Government that time was of essence of

the contract. Their Lordships negatived this contention of the counsel for the Government holding that the question whether or not time is of the

essence of a contract is a question of the intention of the parties to be gathered from the terms of the contract. Where there is an express provision

that time is of the essence of the contract and at the same time provisions for extension of time in certain contingencies without limit or qualification

and for the levy of a penalty, it cannot be said that it was intended that time should be of the essence of the contract.

I have given the facts of these cases and certain authorities covering the subject whether time is of the essence of a contract. In this case even a

cursory glance at the documents and the facts mentioned above leave no doubt in my mind that time was not of essence of the contract. In the first

place the tender was made in a particular month under certain specified conditions. The acceptance was to be made within 90 days which

admittedly was not done. The petitioner by his letter dated 8th May, 1967 pointed out before he started working of the contract that in view of the

changed conditions the time limit of six months could not be stuck to. Then even the possession of the full tract of land was not admittedly given to

the petitioner by the respondents within time. Thirdly the department has itself given extension after extension to the contractor to finalize the

agreement. Even the last letter namely Letter No. 63(4)69/1028 dated Madhopur, the 12-2-1970 (Annexure RD) at more than one place requests

the contractor to complete the pending items of the work and it summarises the pending items of the work. Another letter dated 5-6-1970 being

No. 63(4)70-Works (Vol. VI)/3581 (Annexure RC) from the Executive Engineer to the contractor wherein the contractor has been directed to

complete the contract. So even in the year 1970 without specifying any particular period in which the work had to be completed the contractor is

asked to complete the pending items which shows that the department and its authorities never considered the original time of six months as the

essence of the contract. They have themselves been extending it from time to time upto the year 1970. It would be a contradiction in terms that

time was the essence of the contract yet time being extended not once but a number of times. There is one more circumstance negativing this plea

of time being the essence of this contract. In the original agreement running payments had to be made fortnightly. According to the petitioner only

29 running bills had been paid from 1967 to 1970 whereas 69 such bills should have been paid. If time was of the essence of the contract it should

be for both the parties and not for only one of them. The respondents could not commit defaults so far as their part of the performance of the

contract is concerned, and insist on the performance of the contract by the other party within the time limit fixed.

Next I consider the reliefs claimed by the petitioner in the petition. The petitioner contended that before other contractors work on this road

final measurements may be taken in his presence. It was argued at one stage on behalf of the respondents that final measurements had been taken

in presence of the contractor or his representative. But it was admitted that there was no such indication available from the record of the

respondents as to who on behalf of the petitioner-contractor was present when any particular measurement was taken. During arguments also the

Executive Engineer present made a statement in the court that the Department had no objection to the measurements being taken in presence of the

petitioner or his representative but in the written arguments he has not stuck to this position. In my opinion it would be in the interest of the parties

to get measurements taken again in presence of the petitioner or his representative. This would minimise the dispute between the parties and lessen

the area of conflict thus making the learned Arbitrator's work less burdensome. The parties shall therefore, after fixing time by mutual consent,

complete the measurement of the work done by the petitioner in the presence of the petitioner or his representative. If the petitioner even after due

notice is not represented he shall have to thank himself.

The petitioner's learned counsel has vehemently argued that I should issue an injunction restraining the respondents not to allow other

contractors to work on this road till the case of the petitioner is finally decided. On the other hand it is argued that the road is a very strategic and

being a defence road no such injunction should be granted. Mr. Amarchand has referred me to an authority reported as Ranjit Chandra Mitter Vs.

Union of India (UOI), . In that case the applicant who was a contractor had undertaken construction of certain works for the Government under

an agreement. The agreement contained a rescission clause under which the Government could rescind the contract in case it was not completed

within the stipulated time and get the unexecuted part done through another agency. There was also an arbitration clause in the contract. As the

contractor failed to complete the works in the time prescribed, the Government rescinded the contract and invited fresh tenders for the execution

of the said works. On an application filed by the contractor for issue of an interim relief by way of an injunction restraining the Government from

accepting another tender and seeking a reference to arbitration of the dispute between him and the Government in specific performance of the

arbitration clause, the injunction was refused by the Calcutta High Court because the injunction would cause further delay in the construction work

considered very urgent by the Government.

In this case according to the Contractor he has completed the work and handed over the road to the department on 30-4-1970. The

department's case is that the petitioner had not completed the work allotted to him and he has not done any work after 30-4-1970. Some

documents on the file would indicate that the road has been taken over by the department on that date. There is Annexure No. 1, being letter No.

63(4)70-CCD/4-5 dated Madhopur. the 6-3-1970 wherein a request is made by the Executive Engineer Madhopur Central Construction

Division, to the Executive Engineer, Madhopur Central Division, to withhold an amount of Rupees 70,000/- from the next bill of M/s. Mohinder

Singh and Co. as ""the accounts of M/s. Mohinder Singh and Co. for the work (earth work retaining walls, parapets and culverts on Samba Battal

Link Road) are going to be finalized shortly"", and secondly there is Annexure IT being letter No. MCC D/SBR/4(69)70/1440-41 dated

Madhopur the 3-3-1970 from the Executive Engineer, Madhopur Central Construction Division, to the petitioner extending the time for the

completion of the work upto 30-4-1970. Thirdly on 12-2-1970 vide Letter No. 63/(4)69/1028 (Annexure No. RB) to the supplementary

objections of the respondents the contractor was requested by the Executive Engineer, Madhopur Central Division, to complete the pending items

of work given in that letter.

These letters lend support to the contention that the road has been taken over by the Department on 30-4-1970.

Keeping this fact and the ratio decidendi of Ranjit Chandra Mitter Vs. Union of India (UOI), in view and taking into consideration the agruments

advanced by the learned counsel for the respondent, I do not think it is a case in which I should exercise my discretion in favour of the petitioner in

directing the respondents that further items of work entrusted to other contractors may be held up indefinitely till the Arbitrator decides the

petitioner's case. Whether the road is a strategic one, a defence road or not to hold up the construction and completion of the road would be

against all canons of justice. Better roads are a source of convenience to everybody, it may be the army or the civil public. Although this prayer is

vehemently pressed by the learned counsel for the petitioner, it is rejected.

A copy of this order may also be sent to the learned Arbitrator.