Rainbow ACE Shipping S.A. Panama vs Lufeng Shipping Co. Ltd.

S.J. Vazifdar, J.—This is an appeal by the owners of the first defendant m.v. RAINBOW ACE, a foreign vessel flying the flag of Panama, against the order and judgment of the learned single Judge dismissing its Notice of Motion seeking an order directing the first respondent i.e. the plaintiff to pay it a sum of US $ 2,310,225/- with interest at 18% per annum towards damages for wrongful arrest of its vessel.

(A) This appeal raises a question of law of considerable importance, involving the interpretation of Rule 941 of the High Court of Bombay (Original Side) Rules, 1980. Under Rule 941, a party applying for an order of arrest is required to give an undertaking to pay such sum by way of damages as the Court may award as compensation in the event of a party affected sustaining prejudice by such order. The Explanation to Section 73 of the Indian Contract Act, 1872 imposes the duty to mitigate upon the party suffering the loss or damage caused by the non-performance of the contract. The question that arises is whether the Explanation to Section 73 of the Indian contract Act applies to proceeding for the enforcement of an undertaking given under Rule 941.

(B) The question arises on these circumstances. The first respondent is the plaintiff. The second respondent is defendant No. 2. Defendant No. 1 is the vessel m.v. RAINBOW ACE. The appellant is the owner of this vessel. The first respondent obtained an order of arrest of the vessel upon furnishing an undertaking to pay damages as required by Rule 941. The arrest has been held, albeit at the interlocutory stage, to be wrongful. The appellant claims to have suffered damages on account of the wrongful arrest. The appellant, accordingly, filed the above Notice of Motion No. 1646 of 2013 to enforce the said undertaking claiming damages of about US Dollars 2.31 million. The learned Judge, by the impugned order, rejected the appellant''s claim on the ground that the appellant had failed to mitigate the loss suffered by it. The appellant contends that Rule 941 is a special law and, therefore, overrides the general law, including the provisions of section 73 of the Indian Contract Act, 1872, which imposes the duty to mitigate.

It would be convenient here to set out section 73 and Rule 941. We will also set out Rule 148, which contains a similar provision.

Section 73 of The Indian Contract Act, 1872:

"73. Compensation for loss or damage caused by breach of contract.-When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties know, when they made the contract, to be likely to result from the breach of it.

Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.

Compensation for failure to discharge obligation resembling those created by contract.-When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract.

Explanation.-In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account."

Rule 148:

"148. Undertaking to pay damages to be given by party applying for interim reliefs.-A party to whom interim relief has been granted shall, before the order is issued, unless the Court otherwise directs, give an undertaking in writing or through his Advocate to pay such sum by way of damages as the Court may award as compensation in the event of a party sustaining prejudice by such order."

Rule 941:

"941. Application to arrest property in a suit in rem.-If the suit is in rem an application for the arrest of the property proceeded against shall be made to the Judge in Chambers and shall be supported by affidavit. The affidavit shall state the nature of the claim and that it has not been satisfied. It shall also state the nature of the property to be arrested and if the property is a ship, the name and nationality of the ship. There shall be annexed to the affidavit a certificate of the Prothonotary and Senior Master certifying that search has been made in the Caveat Warrant Book and that no caveat has been filed against the issue of a warrant for the arrest of the said property.

A party applying under this rule shall give an undertaking in writing, or through his Advocate, to pay such sum by way of damages as the Court may award as compensation in the event of a party affected sustaining prejudice by such order. "

Considering the question that arises in this appeal, it is not necessary to deal with the merits of the claim in the suit or the claim in the appellant''s above Notice of Motion for damages. It is also sufficient to refer to the facts only briefly.

(A) The above Admiralty suit was filed by the first respondent for arrest of the first defendant vessel m.v. RAINBOW ACE and for a decree in the sum of US $ 1,628,658.07 together with interest at 9% per annum.

The plaintiff/respondent No. 1 contended that it is the owner of another vessel m.v. J. TONG; that it had entered into an agreement with defendant No. 2-Whim Star Chartering Company Limited for the use and hire of the vessel for carriage of goods, evidenced by a fixture note dated 6th April, 2011 and that it had suffered loss as a result of the detention of the vessel at the port of loading. Respondent No. 1 sought to recover the loss by filing the above suit. Respondent No. 1 sought the arrest of the first defendant i.e. the said vessel of which the appellant is the owner on the ground that it is in the same beneficial ownership as defendant No. 2/respondent No. 2. Respondent No. 1 contended that one Wang Wendong is the beneficial owner of the first respondent vessel and of respondent No. 2.

(B) The first defendant vessel arrived at Pipavav on 20th January, 2013. On 28th January, 2013, an order of arrest was passed directing the Admiralty Registrar of this Court to issue a warrant of arrest of the said vessel upon the plaintiff/first respondent giving an undertaking in writing to the Admiralty Registrar in terms of Rule 941. On the same day the first respondent furnished the following undertaking to the Admiralty Registrar:

"Undertaking

We Lufeng Shipping Co. Ltd., through their Constituted Attorney Mr. A.M. Krishnan, do hereby give an undertaking to this Hon''ble Court to pay such sums by way of damages as this Hon''ble Court may award as compensation in the event of the Defendant and/or any affected party sustaining prejudice pursuant to the order passed by this Hon''ble Court on the for the arrest of the m.v. "Rainbow Ace"."

On 29th January, 2013, the order of arrest was served on the vessel at the Pipavav port. On 5th February, 2013, the vessel completed its discharge of the cargo. On 6th February, 2013, the vessel was off-hired by the charterers.

(C)(i) The hearing of the plaintiff''s/first respondent''s Notice of Motion seeking interim reliefs, including for the arrest of the vessel, concluded on 6th March, 2013. The appellant filed Notice of Motion No. 235 of 2013, as the owner of the said vessel, for setting aside the order of arrest dated 28th January, 2013. The arguments on the Notice of Motion concluded on 8th March, 2013, and the judgment was pronounced on 6th May, 2013. The learned Judge vacated the order of arrest and released the vessel from arrest, allowed it to sail immediately and passed other consequential orders. At the request of the plaintiff, the learned Judge directed that the vessel shall not sail upto 10th May, 2013.

(ii) On 8th May, 2013, the plaintiff filed Appeal (Lodg.) No. 228 of 2013. On 17th June, 2013, the hearing of the appeal concluded. The Division Bench, by an order judgment dated 2nd July, 2013, dismissed the appeal. On 12th July, 2013, the plaintiff filed a petition for special leave to appeal to the Supreme Court being SLP (Civil) No. 22199 of 2013, which was dismissed by an order dated 16th July, 2013.

(D) Ultimately, the vessel sailed from Pipavav port on 19th July, 2013.

On 31st July, 2013, the appellant arrested m.v. LUFENG, a vessel owned by the plaintiff/first respondent in Korea contending that the plaintiff/respondent No. 1 was liable to the appellant on account of the wrongful arrest of the vessel in this suit. On 7th August, 2013, the plaintiff/first respondent provided security in the sum of US $ 2.5 million for the release of the said vessel. The amount continues to remain with the Court in Korea.

The appellant/original applicant filed the above Notice of Motion No. 1646 of 2013 to enforce the said undertaking, claiming that it had suffered damages on account of the wrongful arrest in the sum of US $ 2,310,225/-.

The appellant contended that the vessel was detained on account of the order of arrest from 28th January, 2013 to 18th July, 2013 i.e. for a period of about 164 days as a result whereof it had suffered losses on various counts. Respondent No. 1 contended that the appellant was bound to have taken necessary steps to mitigate its losses and that the appellant had refused to do so. Respondent No. 1 contended in its affidavits that when an arrest of a vessel is affected, it is necessary for the defendants who apply for vacating the order of arrest, to offer security; that the appellant had failed to mitigate its losses by furnishing security and that it was not the appellant''s case that it was unable to furnish security but that it was not obliged to do so. Various contentions were raised on behalf of Respondent No. 1 on facts to indicate how the loss could have been mitigated.

The respondent also contended that the appellant-vessel had a Protection and Indemnity Cover under which it would have been possible for the P&I Club, with whom the vessel was entered for P&I cover, to put up the securities. Mr. Pratap, however, agreed that the P&I cover that the appellant has, is not relevant. He, therefore, did not contend that the P&I cover was a mode of furnishing security and thereby mitigating the loss, if any. It is not necessary for us, therefore, to consider the observations of the learned Judge in this regard.

The learned Judge, by the impugned order, dismissed the application, inter-alia, on the ground that the appellant was bound to mitigate the loss if possible. The learned Judge held that the appellant had not taken any steps whatsoever to mitigate the loss in view of its contention that it was not bound to do so.

The only question that requires consideration in this appeal is whether the defendants or any other affected parties in an admiralty action are bound to take steps to mitigate the loss, if any on account of the vessel being wrongly arrested. In other words, the question that arises is whether the duty to mitigate applies in a case where a plaintiff, while obtaining an order of arrest, furnishes an undertaking as required by Rule 941.

Mr. Tulzapurkar, the learned senior counsel appearing on behalf of the appellant, submitted as follows. The requirement of a plaintiff furnishing an undertaking as contemplated by Rule 941 is mandatory. Furnishing an undertaking is a condition precedent to the grant of an order for arrest. Rule 941 being mandatory, must be fully complied with. The order of arrest would not take effect unless the undertaking as required by Rule 941 is furnished.

Rule 941 is a special law which requires the undertaking to be given by the plaintiff who seeks an order of arrest. Being a special statutory provision, it excludes all other considerations applicable in general law as a special law excludes the general law. The requirement of furnishing an undertaking under rule 941 being a provision of a special law overrides the general law, including the requirement of the party suffering a loss to take all necessary steps to mitigate the same. The Indian Contract Act, 1872, (hereinafter referred to as the Contract Act) being a general law, the provisions thereof, including section 73, do not apply to proceedings to enforce an undertaking furnished under Rule 941. If the rule of general law relating to mitigation applies, Rule 941 would be rendered otiose.

The Explanation to section 73 of the Contract Act does not apply to Rules 148 and 941. These Rules do not contain a provision similar to the Explanation to section 73 of the Contract Act. There is, therefore, no duty on the part of a defendant to mitigate. Rule 941 assumes that the party suffering the injunction is likely to suffer damages and, therefore, requires the plaintiff to furnish an undertaking as a condition precedent to the order of arrest. Rule 941 does not impose any conditions upon the defendants claiming damages by having the undertaking enforced. Rule 941 being a statutory provision does not subject the liability to pay damages to any limitations, including requiring the defendant concerned to mitigate the loss. The legislative intent, therefore, was to confer a benefit of damages upon a party which the general law of damages does not give him. If it was otherwise, there was no need for Rule 941. If the same rules of damages, as apply to general law are imported to Rule 941, it would render Rule 941 nugatory. Rule 941 is a special provision which gives an absolute right to damages untrammeled by the rules of general law, including the rule relating to the duty to mitigate losses.

The plaintiff having given the undertaking and having thereby availed the benefit of the order of arrest cannot now say that the undertaking is subject to the general law relating to the duty to mitigate.

The explanation to section 73 of Contract Act specifically refers to the duty to mitigate. Rule 941 does not contain such a requirement. The duty to mitigate also applies to actions in tort. However, rule 941 is a statute and, therefore, the rules relating to the law of torts do not apply to it.

The right to furnish security and have the vessel released from arrest is an option given to the defendant. An option cannot be enforced in law. Thus, a defendant who does not exercise the option of furnishing security cannot be denied the benefit of the undertaking.

Mr. Tulzapurkar submitted that a view to the contrary would encourage plaintiffs to make outlandish claims and pressurize the defendants unfairly. Such a view would require the defendant to spend money for the benefit of the plaintiff who is held to be a wrongdoer.

Mr. Tulzapurkar submitted that alternatively and assuming that the appellant was under a duty to mitigate its losses, furnishing security is not the only form of mitigation. An application to have the order of arrest vacated itself constitutes mitigation. He further submitted that even assuming that the appellant was under a duty to mitigate, the learned Judge was in error in rejecting the claim in its entirety. The learned Judge held that the appellant ought to have furnished security. Even furnishing security would require the defendant to incur considerable expenses. The appellant, therefore, urges that it is entitled at the very least to be granted damages to the extent of the sum required to mitigate damages.

We do not intend deciding these issues in this appeal. As the matter has arisen for the first time, in our opinion, the ends of justice warrant our granting the appellant an opportunity of meeting the case regarding mitigation on merits. Thus, although we have decided to dismiss the appeal, we intend keeping all points on mitigation on merits open, to be contended before the learned single Judge upon remand.

Mr. Tulzapurkar submitted that the requirement of the party applying for an order of arrest to furnish an undertaking is mandatory. He relied upon the judgment of a learned single Judge of this Court in Aviat Chemicals Private Limited Vs. Jagmohansingh Arora and others, . It is Rule 148 that fell for consideration. The learned Judge held that Rule 148 was mandatory in nature and that a party to whom interim relief has been granted is bound, before the order is issued, to give an undertaking in writing to pay such sum by way of damages as the Court may award as compensation in the event of the party affected sustaining prejudice by such order. The learned Judge further held that the undertaking could be waived only on the specific directions of the Court.

We are in agreement with the judgment. We also agree with Mr. Tulzapurkar that on a parity of reasoning, it must be held that the requirement of furnishing an undertaking stipulated in Rule 941 is also mandatory. Although Rule 941 does not say so expressly the Court has the power to relieve a party of the requirement of furnishing an undertaking in a given case. Absent such a dispensation, the requirement of furnishing an undertaking under Rule 941 is mandatory. In the present case, the requirement of giving an undertaking was not waived by the Court.

In this regard, Mr. Tulzapurkar also relied upon the judgment of another learned single Judge in Bulk Ship Management S.E.A. v. The Bunkers on board the ship m.v. African Eagle & Ors. dated 8th July, 2014, Notice of Motion No. 735 of 2013 in Admiralty Suit No. 42 of 2013. The learned Judge held that the liability under the undertaking is triggered if the order that has been obtained was without jurisdiction or if the order is held to be wrongful or the order of arrest is vacated.

We do not intend expressing any view regarding these observations. It is not necessary for us to decide whether irrespective of the facts and circumstances of the case upon an order of arrest being vacated, the liability to pay damages is triggered. The issue is kept open.

In deciding the main question, one of the important questions is whether the provision relating to an undertaking in Rule 941 is substantive law or procedural law. Mr. Tulzapurkar submits that it is substantive law. We, however, find Mr. Pratap''s submission that it is procedural law to be well founded.

Mr. Tulzapurkar contended that merely because the provisions relating to an undertaking are contained in the rules, it does not follow that the same are not substantive law and are only procedural law. Referring to the provisions of the Code of Civil Procedure, 1908, he submitted that merely because the title of an enactment uses the word ''Procedure'' it does not follow that the provisions thereof cannot be substantive.

We will presume this contention to be well founded. The question in each case, therefore, would be whether the provision that falls for consideration is substantial or procedural. In our opinion, the provisions relating to an undertaking in Rules 148 and 941 are procedural for more than one reason.

These Rules do not confer a right to claim damages. This right a party also has in common law and in tort. The requirement of furnishing an undertaking is recognized even otherwise and was also established by practice prior to the earlier Rules to this effect being brought into force. These aspects are dealt with in a judgment of the Supreme Court on which Mr. Tulzapurkar had placed reliance in respect of another submission which we will refer to later. In Mahadeo Savlaram Shelke and Others Vs. Puna Municipal Corporation and Another, , the Supreme Court considered whether the appellants were entitled to the injunction that they sought against eviction. While dealing with the law relating to injunctions, the Supreme Court held:

"13. In Injunctions by David Bean, 1st Edn., at page 22, it is stated that "if the plaintiff obtains an interlocutory injunction, but subsequently the case goes to trial and he fails to obtain a perpetual order, the defendant will meanwhile have been restrained in justly and will be entitled to damages for any loss he has sustained. The practice has therefore grown up, in almost every case where an interlocutory injunction is to be granted, of requiring the plaintiff to undertake to pay any damages subsequently found due to the defendant as compensation if the injunction cannot be justified at trial. The undertaking may be required of the plaintiff in appropriate cases in that behalf."

In Joyce on Injunctions, Vol. 1, in para 177 at page 293, it is stated:

"Upon a final judgment dissolving an injunction, a right of action upon the injunction bond immediately follows, unless the judgment is superseded. A right to damages on dissolution of the injunction would arise at the determination of the suit at law."

It would thus be clear that in a suit for perpetual (sic) injunction, the court should enquire on affidavit evidence and other material placed before the court to find strong prima facie case and balance of convenience in favour of granting injunction otherwise irreparable damage or damage would be ensue to the plaintiff. The court should also find whether the plaintiff could adequately be compensated by damages if injunction is not granted. It is common experience that injunction normally is asked for and granted to prevent the public authorities or the respondents to proceed with execution of or implementing scheme of public utility or granted contracts for execution thereof. Public interest is, therefore, one of the material and relevant considerations in either exercising or refusing to grant ad interim injunction. While exercising discretionary power, the court should also adopt the procedure of calling upon the plaintiff to file a bond to the satisfaction of the court that in the event of his failing in the suit to obtain the relief asked for in the plaint, he would adequately compensate the defendant for the loss ensued due to the order of injunction granted in favour the plaintiff. Even otherwise the court while exercising its equity jurisdiction in granting injunction has also jurisdiction and power to grant adequate compensation to mitigate the damages caused to the defendant by grant of injunction restraining the defendant to proceed with the execution of the work etc. The pecuniary award of damages is consequential to the adjudication of the dispute and the result therein is incidental to the determination of the case by the court. The pecuniary jurisdiction of the court of the first instance should not impede nor be a bar to award damages beyond its pecuniary jurisdiction. In this behalf, the grant or refusal of damages is not founded upon the original cause of action but the consequences of the adjudication by the conduct of the parties, the courts gets inherent jurisdiction in doing ex debito justitiae mitigating the damage suffered by the defendant by the act of the court in granting injunction restraining the defendant from proceeding with the action complained of in the suit. It is common knowledge that injunction is invariably sought for in laying the suit in a court of lowest pecuniary jurisdiction even when the claims are much larger than the pecuniary jurisdiction of the court of first instance, may be, for diverse reasons. Therefore, the pecuniary jurisdiction is not and should not stand an impediment for the court of first instance in determining damages as part of the adjudication and pass a decree in that behalf without relegating the parties to a further suit for damages. This procedure would act as a check on abuse of the process of the court and adequately compensate the damages or injury suffered by the defendant by act of court at the behest of the plaintiff."

[emphasis supplied]

The judgment indicates two important aspects. Firstly, it was a matter of practice of requiring the plaintiff to undertake to pay damages in the event of it being found that the defendant had suffered prejudice on account of an injunction wrongly obtained.

The present rules are of the year 1980. Prior thereto were the Rules And Forms Of The High Court Of Judicature At Bombay On The Original Side, 1957. The Admiralty Rules in Chapter I of Part III did not have a provision similar to Rule 941. Rule 941 was introduced only in the 1980 Rules. However, Rule 52 of the 1957 Rules relating to admiralty suits read as under:

"52. The other proceedings in suits brought in the Court in the exercise of its Jurisdiction under the Colonial Courts of Admiralty Act, 1890, not provided for by these Rules shall be regulated by the rules and practice of the Court in suits brought in it in the exercise of its Ordinary Original Civil Jurisdiction."

Rule 367 of the 1957 Rules which were similar to Rule 148 of the 1980 Rules read as under:

"367. A party to whom interim relief has been granted shall, before the order is issued, unless the Judge otherwise directs, give an undertaking in writing or through his Advocate to pay such sum by way of damages as the Court may award as compensation in the event of a party affected sustaining prejudice by such order. "

In England, this practice has its origin at least as far back as in the year 1841. In Hoffmann La-Roche v. Trade Secretary 1975 AC 295 (HL) Lord Walton observed at page 306:-

"Now, there can be no doubt at this time of day as to its being the universal practice, in a dispute between subject and subject, for the court to insist upon the giving by an applicant for an interim injunction of a cross-undertaking in damages in case at the end of the day he should be found to have caused the party injuncted unwarranted harm for which he ought to recompense him: see the history of the matter in Smith v. Day (1882) 21 Ch.D. 421. This is not to say that the requirement of such an undertaking is a rigid requirement; circumstances alter cases, and there may well be exceptional cases where it is not required. But they are completely exceptional.

Such an undertaking cannot, of course, be imposed by the court upon any applicant for an injunction; he must offer it, or be willing to submit to it. Be his case never so strong, if he is unwilling to proffer such an undertaking then he will not, in general, obtain his injunction."

The rules requiring an undertaking were, and continue to be, inter-alia, a recognition of and are pursuant to the practice that had grown of requiring the plaintiff to undertake to pay damages subsequently found due to the defendant as compensation if the injunction cannot be justified at trial. The right to claim damages/compensation is a part of the substantive law. The Rules only furnish a different, additional and a more efficacious mode of recovering the damages.

Secondly, as held by the Supreme Court, it is always open to a Court granting an injunction to impose a condition upon the party seeking an injunction to furnish an undertaking to pay damages in the event of it being found that the party against whom the injunction was issued suffered damages on account of the injunction which cannot be sustained. Thus even in the absence of Rules 148 and 941, the Court can insist upon such an undertaking as a condition to the grant of an injunction. It can hardly be suggested that such orders can be passed contrary to the general provisions of law relating to damages.

Rules 148 and 941 do not confer a right to claim damages. They do not even purport to enact any provisions regarding the law of or relating to damages.

All that Rules 941 and 148 do is to provide an additional and more efficacious mode of recovery of the damages. They do not, by any stretch of imagination, exclude the provisions of general law. They do not enunciate different principles relating to the law of damages.

In the circumstances, Rule 941 is procedural law and not substantive law. That being so the provisions of section 73 and in any event provisions analogous thereto apply to proceedings for the enforcement of an undertaking furnished under or pursuant to Rules 148 and 941.

Mr. Tulzapurkar''s submission to the contrary would result in the most peculiar consequences which the High Court while making the Rules could never have contemplated. Mr. Tulzapurkar''s contention is that while considering a defendant''s application for enforcement of an undertaking and recovering damages in the very suit in which the injunction was obtained, the provisions of general law stand excluded. He admitted that if a suit is filed to recover such damages, the provisions of section 73 of the Contract Act would apply.

This would lead to a peculiar result. It would amount to holding that for the same relief, based on the same cause of action, the substantive law to be applied is different in a suit and in an application for enforcement of the undertaking filed in the suit in which the injunction was granted. There is nothing that even remotely suggests that this was the intention of the High Court while framing the Rules. It could never have been. There is no reason or basis for such a distinction to be drawn.

The general law of damages would apply while computing the damages. The extreme proposition suggested by Mr. Tulzapurkar would render it enormously difficult if not impossible to arrive at any principles for the award of damages in proceedings for enforcement of an undertaking to pay damages. Indeed, in that event, there would be no rules whatsoever for computing the damages. If Mr. Tulzapurkar''s submission is accepted, even remote damages could be claimed. Moreover, in that event, all the principles of general law would also have to be ignored. This could not have been and was not the intention of the High Court while making the Rules. Rules 148 and 941 are not a self-contained code relating to the law of damages applicable to proceedings for the enforcement of an undertaking given pursuant thereto. They provide for nothing more than the requirement of furnishing the undertaking. If the principles of general law are not to apply in such proceedings we fail to see on what principles or basis damages are to be assessed.

The judgments relied upon by Mr. Tulzapurkar do not militate against our view that Rules 148 and 941 are procedural law and not substantive law.

Mr. Tulzapurkar relied upon the judgment of the Supreme Court in Raj Rajendra Sardar Maloji Marsingh Rao Shitole Vs. Sri Shankar Saran and Others, . The question in that case was whether the decree passed by the Gwalior Court on 18th November, 1948, was executable in the State of Uttar Pradesh which was at one time a part of British-India. Gwalior, at that time was a part of Madhya Bharat. The Supreme Court held that the Court in Gwalior was a foreign court and the judgment passed by it would be a foreign judgment as defined in section 2(6) of the Indian Code. In paragraph 10, which was relied upon by Mr. Tulzapurkar, the Supreme Court observed that under the Indian Code, the judgment obtained by the appellant in the Gwalior court would be governed by section 13 of that Code and its conclusiveness was governed by clauses (a) to (f) of that section. The Supreme Court further held: "The rules laid down in that section are rules of substantive law and not merely of procedure." The observation was obviously in relation to section 13 of the Indian Code. In other words, it is the provisions not of any rules but of section 13 that were held to be substantive law. Mr. Tulzapurkar, of course, relied upon the judgment only to indicate that the title of an Act or Code does not determine whether the provisions thereof are substantive or procedural. Thus, he submitted, though the title is "Code of Civil Procedure", it does not necessarily follow that all the provisions thereof are only procedural law and not substantive law. We will presume that, accordingly, even the Original Side Rules can and do contain both substantive and procedural provisions. The question in each case would be whether a particular rule is substantive law or procedural law. It would be necessary, therefore, to consider each provision independently. We find that rules 148 and 941 are procedural.

As Mr. Pratap rightly pointed out, there is no conflict between Rule 941 and the general law, including the Explanation to section 73 which requires the party suffering the damage to mitigate the loss if possible.

Mr. Pratap relied upon paragraph 14 in Iridium India Telecom Ltd. Vs. Motorola Inc., in support of his contention that a special law prevails over a general law only in the event of a conflict between the two laws. We see no conflict between the provisions of the general law viz. section 73 of the Contract Act and the provisions of Rules 148 and 941. Moreover, as we held earlier, neither Rule 148 nor Rule 941 are self contained codes or provisions relating to the law of damages in such cases.

Mr. Tulzapurkar''s reliance upon the judgments to the effect that special laws overrule the general law are, therefore, of no assistance.

Thus, irrespective of whether rule 941 is held to be substantive or procedural law, it would make no difference. The provisions of section 73 of the Contract Act would apply even assuming that Rule 941 is held to be substantive. In any view of the matter, we are not inclined to accept Mr. Tulzapurkar''s contention that Rule 941 supersedes the general law, including the provisions of section 73 of the Contract Act.

Thus even assuming that these rules are substantive law, it would make no difference to our finding that they do not exclude the operation of the general law, at least insofar as it relates to the principles relating to computation of damages. In particular, these rules do not exclude the operation of the principle relating to mitigation of damages and the requirement of a party to mitigate the losses.

For the same reasons, the judgment of the Supreme Court in Nahar Industrial Enterprises Ltd. Vs. Hong Kong and Shanghai Banking Corporation, does not carry the matter further. In paragraph 128, relied upon by Mr. Tulzapurkar, the Supreme Court held that the Code not only contains procedural provisions, but also substantive provisions, the right of appeal being substantive law.

The judgment of the Full Bench of the Delhi High Court in Print Pak Machinery Ltd. Vs. Jay Kay Papers Conveters, is of no assistance in determining the question before us. The Full Bench held that the Rules on the Original Side of the Delhi High Court prevail over the Civil Procedure Code and that the amending Act of 1976 made no difference in this respect. The decision was arrived at, inter-alia, in view of section 129 of the Code of Civil Procedure. The provisions that fell for consideration were in conflict with one another. The issue that falls for consideration before us was neither raised before nor considered by the Full Bench. As observed by the Full Bench in paragraph 7, the issue before it would arise where the Rules and the Code "are at variance". The decisions referred to by the Full Bench also dealt with cases where the provisions of the Civil Procedure Code and the Rules were inconsistent with each other.

Considering the view that we have taken, it is not necessary for us to consider the judgment of the Supreme Court in Raj Kumar Yadav Vs. Samir Kumar Mahaseth and Others, and Dr. Vijay Laxmi Shadho v. Jagdish.

Mr. Tulzapurkar relied upon the judgments of the Supreme Court in Waverly Jute Mills Co. Ltd. Vs. Raymon and Co. (India) Private Ltd., and Fuerst Day Lawson Ltd. and Others Vs. Jindal Exports Ltd. and Others etc. etc., , in support of his contention that where there is a conflict, the general law must give way to special law. We have proceeded on the basis that that is so. There is, however, no conflict between the provisions of Rules 148 and 941 on the one hand and section 73 of the Contract Act on the other.

Mr. Pratap''s reliance upon the following observations of Lord Diplock at page 361 in Hoffman La-Roche v. Trade Secretary 1975 AC 295 (HL), is well founded: -

" The court has no power to compel an applicant for an interim injunction to furnish an undertaking as to damages. All it can do is to refuse the application if he declines to do so. The undertaking is not given to the defendant but to the court itself. Non-performance of it is contempt of court, not breach of contract, and attracts the remedies available for contempts, but the court exacts the undertaking for the defendant''s benefit. It retains a discretion not to enforce the undertaking if it considers that the conduct of the defendant in relation to the obtaining or continuing of the injunction or the enforcement of the undertaking makes it inequitable to do so, but if the undertaking is enforced the measure of the damages payable under it is not discretionary. It is assessed on an inquiry into damages at which principles to be applied are fixed and clear. The assessment is made upon the same basis as that upon which damages for breach of contract would be assessed if the undertaking had been a contract between the plaintiff and the defendant that the plaintiff would not prevent the defendant from doing that which he was restrained from doing by the terms of the injunction: see Smith v. Day (1882) 21 Ch.D. 421, per Brett L.J., at p. 427."

We are in respectful agreement with these observations. They apply equally to Rules 148 and 941. As we observed earlier, there is no reason to exclude the operation of such principles while assessing damages in an application for enforcement of an undertaking furnished under and pursuant to the provisions of Rules 148 and 941.

We have held that Rules 148 and 941 are procedural. Even assuming that they are substantive law, there being no conflict between these rules and the general law viz. section 73 of the Contract Act, the rules relating to the principles of mitigation apply. In this view of the matter, the judgment of the Queens Bench Division in Panos Eliades & Ors. v. Lennox Lewis 2005 EWHC 2996 (QB) supports Mr. Pratap''s contention that even in cases where such undertakings are sought to be enforced, the ordinary principles of law of contract, including those relating to mitigation apply, is well founded. The judgment clearly supports his contention. Mr. Tulzapurkar had submitted that this judgment was obviously in view of the fact that as there was no statutory rule such as rules 148 and 941 in England. In view of our finding, the submission is rejected.

In European Bank Ltd. vs. Robb Evans & Associates 2010 HCA 6, the Australian High Court held applicable the rule in Hadley vs. Baxendale (1854) 9 Exch. 341 : 156 ER 145 to proceedings relating to such undertakings. Mr. Tulzapurkar had relied upon the judgment in another context which we will refer to later. The judgment however, supports the present view that we have taken regarding the applicability of the principles underlying section 73 to proceedings in respect of such undertakings.

Mr. Tulzapurkar had relied upon the judgment of the Supreme Court in Mahadeo Savlaram Shelke and Others Vs. Puna Municipal Corporation and Another, , to contend that a party is, in any event, entitled to file proceedings for damages for a wrongful injunction. This, he submitted, the party could do even in the absence of Rules 148 and 941. He contended that some meaning must be given and purpose attributed to these rules. If the general law is to apply to actions instituted under these rules, they would be rendered purposeless.

Rules 148 and 941 are not rendered purposeless merely because the provisions of section 73 of the Contract Act are held to be applicable to proceedings to enforce the undertakings furnished in accordance with these rules. Rules 148 and 941 have been framed for more than just one reason and serve more than one purpose. They confer upon a party, additional and more efficacious remedies relating to the recovery of damages than by the mere filing of a civil suit.

The rules require the party seeking an injunction to give an undertaking. Even absent such rules and undertakings, the party suffering damages on account of an injunction wrongly obtained would be entitled to file proceeding for recovery of damages. Such a claim would be one for money. Absent an undertaking, all that the claimant would be entitled to is a decree and to proceed to have the same executed under the provisions of the Code of Civil Procedure, 1908. The requirement of furnishing an undertaking as a condition to the grant of an injunction is, inter-alia, to facilitate the recovery of such damages. The undertaking can be enforced in the very action in which it is given for a breach thereof would constitute contempt. The undertaking would obviously imply an assurance to the court to pay damages as per law. Where an undertaking is furnished, the very same damages on the very same cause of action can be sought to be recovered by an additional and more efficacious mode viz. by seeking to have the undertaking enforced. The provision of an undertaking, therefore, is far from purposeless merely because the provisions of section 73 of the Contract Act are held to be applicable while computing the quantum and the right to claim damages. There is nothing in Rule 148 or Rule 941 to suggest that while conferring such benefits the general law relating to damages is excluded or was even intended to be excluded.

It is useful to examine the authorities which have dealt with the purpose of and the object underlying the provisions requiring a party to furnish such undertakings. They indicate other reasons for and advantages of such undertakings.

(A) In Hoffmann-La Roche v. Trade Secy. 1975 AC 295, one of the questions that arose for the consideration of the House of Lords was whether the Crown was required to issue such an undertaking. We are not concerned with the same. After referring to the practice of exacting such an undertaking, Lord Diplock observed at Page 360: -

" The advantages of this practice in any suit for the protection or enforcement of personal or proprietary rights are plain enough. An interim injunction is a temporary and exceptional remedy which is available before the rights of the parties have been finally determined and, in the case of an ex parte injunction, even before the court has been apprised of the nature of the defendant''s case. To justify the grant of such a remedy the plaintiff must satisfy the court, first, that there is a strong prima facie case that he will be entitled to a final order restraining the defendant from doing what he is threatening to do, and, secondly, that he will suffer irreparable injury which cannot be compensated by a subsequent award of damages in the action if the defendant is not prevented from doing it between the date of the application for the interim injunction and the date of the final order made on trial of the action. Nevertheless, at the time of the application it is not possible for the court to be absolutely certain that the plaintiff will succeed at the trial in establishing his legal right to restrain the defendant from doing what he is threatening to do. If he should fail to do so the defendant may have suffered loss as a result of having been prevented from doing it while the interim injunction was in force; and any loss is likely to be damnum absque injuria for which he could not recover damages from the plaintiff at common law. So unless some other means is provided in this event for compensating the defendant for his loss there is a risk that injustice may be done.

It is to mitigate this risk that the court refuses to grant an interim injunction unless the plaintiff is willing to furnish an undertaking by himself or by some other willing and responsible person

"to abide by any order the court may make as to damages in case the court shall hereafter be of opinion that the defendant shall have sustained any damages by reason of this order ''(sc., the interim injunction)'' which the plaintiff ought to pay."

........................

Besides mitigating the risk of injustice to the defendant the practice of exacting an undertaking as to damages facilitates the conduct of the business of the courts. It relieves the court of the necessity of embarking at an interlocutory stage upon an inquiry as to the likelihood of the defendant being able to establish facts to destroy the strong prima facie case which ex hypothesi will have been made out by the plaintiff. The procedure on motions is unsuited to inquiries into disputed facts. This is best left to the trial of the action, and if the plaintiff then succeeds in establishing his claim he suffers no harm from having given the undertaking, while if he fails to do so the defendant is compensated for any loss which he may have suffered by being temporarily prevented from doing what he was legally entitled to do."

(B) The practice in England of the requirement of such an undertaking being given dates back, at least to the year 1841 which is before the relevant rules of this Court to that effect were made. We do not, however, read these observations as exhaustive of the reasons for requiring a party to furnish an undertaking. Lord Diplock referred only to some of the reasons for requiring a party to furnish such an undertaking. Thus, the purpose of the undertaking is not only in cases where a party cannot recover damages from the plaintiff at common law or even on the basis of any statutory provision. In other words, a defendant would be entitled to seek an enforcement of the undertaking in the very action in which it was furnished or otherwise even if the defendant is entitled to recover damages from the plaintiff in the common law where it so applies or on the basis of any statutory enactment. Rules 148 or 941 of the High Court Original Side Rules, in any event, do not place any such limitation or restriction. These rules permit a party aggrieved to seek an enforcement of the undertaking either in the very action in which it was furnished or in an independent proceeding irrespective of whether or not the party has a remedy at common law or on the basis of any statutory provision or enactment.

(C) Further the observations in the last paragraph quoted immediately above do not suggest that where disputed facts are involved, the undertaking cannot be enforced in the action in which it was furnished. The observations merely suggest that an application to enforce the undertaking may be left to the trial of the action in which it was furnished at which stage the Court would have the benefit of all the facts and circumstances necessary to decide whether the undertaking ought to be enforced and if so, to what extent. In any event, Rules 148 and 941 entitle a party to seek to have the undertaking enforced in the very action in which it was furnished. The court would, of course, be entitled to decide the stage at which such an application for enforcement of the undertaking ought to be considered. It may do so even before the commencement of the trial. That would depend upon the facts of each case.

In Bank of Maharashtra Vs. M.V. ''River Ogbese'', A Vessel Registered Outside India and others, , a learned single Judge held as under:

"12. Lastly it was urged that the loss or damages to the defendant resulting from an interim relief granted after hearing the defendant, is caused by an act of the Court and, the argument proceeds, "an act of the Court shall prejudice no man" (Broom''s Legal Maxims). The relevant rules which require a party securing interim relief to give the undertaking take into account the general doctrine founded on justice and good sense. The Rule 941 assumes that the party who obtains interim relief is, by such relief, likely to cause loss or damage to the defendant. The party who suffers such loss or damage cannot be left without recompense. But for undertaking which the Court can enforce, the Defendants would suffer damage from the Court''s order. That is why the rule requiring the undertaking is designed to ensure that "an act of the Court shall prejudice no man". The rule requiring the undertaking is manifestation of the Court''s anxiety to ensure that its act prejudices none. That is why an undertaking is demanded. If there were no undertaking, the Court''s act would certainly prejudice the Defendants."

In Aviat Chemicals Private Limited Vs. Jagmohansingh Arora and others, , the learned single Judge held that the object underlying Rule 148 is to put the party at whose instance the interim order was obtained on notice that if the other party sustains any injury then the party obtaining the interim order is bound to compensate the party injured.

While putting the party to such notice may be one of the objects of Rule 148, it certainly is not the only object of the Rule. We have referred to the other objects of the Rule earlier.

Mr. Tulzapurkar referred to the judgment of the High Court of Australia in European Bank Limited v. Robb Evans & Associates 2010 HCA 6 only insofar as the Court stated the purpose of such undertakings. A similar undertaking is referred to in the judgment. The Australian High Court observed that the undertaking as to damages and its origin in equity practice is of the 19th Century if not earlier. It was observed that a party seeking an equitable remedy is required to do equity and this is the origin of the requirement that the party giving undertaking as to damages submit to such order for payment of compensation as the Court may consider to be just. It was further observed that the process of assessment of compensation cannot be warranted by a rigid formulation. It is pertinent to note that the rule in Hadley v. Baxendale (1854) 9 Exch. 341 : 156 ER 145 relating to remote damages was applied. The judgment, therefore, supports our view.

The authorities indicate a variety of reasons for the requirement of a party seeking an injunction to furnish an undertaking to pay damages. Each of them is a valid reason for the requirement of furnishing an undertaking in such cases. We ventured earlier only to add to these reasons.

Mr. Tulzapurkar relied upon the judgments in Balram Kumawat Vs. Union of India (UOI) and Others, ; and Tinsukhia Electric Supply Co. Ltd. Vs. State of Assam and others, in support of his contention that the Court ought not to place an interpretation on a provision of law which would render it futile. We agree. For reasons we have already stated, the provisions of Rules 148 and 941 are not futile on account of the provisions of section 73 of the Contract Act being held to be applicable thereto.

Mr. Tulzapurkar relied upon the judgment of the Supreme Court in Bharat Aluminium Company and Others Vs. Kaiser Aluminium Technical Service, Inc. and Others etc. etc., to contend that while interpreting a provision the Court must also have regard to what is not said in a provision. The judgment does not carry his case further. Merely because Rules 148 and 941 do not contain a provision requiring a party to mitigate the law it does not follow that the provisions to that effect in section 73 do not apply. These Rules being procedural, it was not necessary to enumerate all the circumstances in which they apply and the rules of law to which they are subject.

Mr. Tulzapurkar submitted that the defendant has an option to furnish security to obtain a release of the vessel. The defendant is not bound to furnish the security. To hold that the defendant is bound to furnish security as a measure to mitigate possible losses, would be to deprive the defendant the right to exercise the option. In other words, according to him, if the defendant does not exercise the option of furnishing the security, he cannot be denied the benefit of the undertaking. Mr. Tulzapurkar relied upon the following observations of the Supreme Court in V. Pechimuthu Vs. Gowrammal, :

"13. The conclusion of the High Court is unsustainable in law and contrary to the facts. The learned Judge erred in holding that it is a general principle of law that every agreement of sale by which the original owner agrees to buy back the property is a privilege or concession granted to such owner. A privilege has been defined as a particular and peculiar benefit or advantage enjoyed by a person, and a concession as a form of privilege. An option to purchase or repurchase has been held (Blacks Law Dictionary, 6th Edn.) to be such a privilege or concession. (See Shanmugham Pillai v. Annalakshmi, AIR 1950 FC 38: K. Simrathmull Vs. S. Nanjalingiah Gowder, . This is because an option by its very nature is dependent entirely on the volition of the person granted the option. He may or may not exercise it. Its exercise cannot be compelled by the person granting the option. It is because of this one sidedness or "unilaterality", as it were, that the right is strictly construed and "(a)n option for the renewal of a lease, or for the purchase or repurchase of property, must in all cases be exercised strictly within the time limited for the purpose, otherwise it will lapse "(Halsbury''s Laws of England, 3rd Edn. Vol. 3, Art. 281, p. 165)."

The judgment has not answered the question whether it is necessary for a defendant to mitigate the loss. The person wronged does have a right or option to take steps to mitigate. If he does not do so, he suffers the consequences of being denied damages or being denied damages to the extent that it was bound to mitigate and/or could have mitigated the losses. That the defendant cannot be sued for not mitigating the losses is another matter altogether. He cannot be sued for not mitigating the losses, but he suffers the consequence of not doing so. In other words, the aggrieved party is not bound to mitigate the loss in the sense that if he does not mitigate, action cannot be taken against him. However, if he wishes to claim damages, he has a duty to mitigate. If he fails to do so, he suffers the consequences. The view taken is supported by the decision in Hoffmann La-Roche v. Trade Secretary 1975 AC 295. Lord Diplock, in his concurring judgment observed: -

" The court has no power to compel an applicant for an interim injunction to furnish an undertaking as to damages. All it can do is to refuse the application if he declines to do so. The undertaking is not given to the defendant but to the court itself. Non-performance of it is contempt of court, not breach of contract, and attracts the remedies available for contempts, but the court exacts the undertaking for the defendant''s benefit. It retains a discretion not to enforce the undertaking if it considers that the conduct of the defendant in relation to the obtaining or continuing of the injunction or the enforcement of the undertaking makes it inequitable to do so, but if the undertaking is enforced the measure of the damages payable under it is not discretionary. It is assessed on an inquiry into damages at which principles to be applied are fixed and clear. The assessment is made upon the same basis as that upon which damages for breach of contract would be assessed if the undertaking had been a contract between the plaintiff and the defendant that the plaintiff would not prevent the defendant from doing that which he was restrained from doing by the terms of the injunction: see Smith v. Day (1882) 21 Ch.D. 421, per Brett L.J., at p. 427.

Besides mitigating the risk of injustice to the defendant the practice of exacting an undertaking as to damages facilitates the conduct of the business of the courts. It relieves the court of the necessity of embarking at an interlocutory stage upon an inquiry as to the likelihood of the defendant being able to establish facts to destroy the strong prima facie case which ex hypothesi will have been made out by the plaintiff. The procedure on motions is unsuited to inquiries into disputed facts. This is best left to the trial of the action, and if the plaintiff then succeeds in establishing his claim he suffers no harm from having given the undertaking, while if he fails to do so the defendant is compensated for any loss which he may have suffered by being temporarily prevented from doing what he was legally entitled to do."

Mr. Tulzapurkar relied upon the following observations at page 250 in the judgment of the learned single Judge of the Calcutta High Court in Rogers Pyatt Shellac Co. Vs. John King and Co., Ltd., :

"............ How can a wrong doer be heard to complain that the person injured has not laid out money for the wrong-doer''s benefit, and in order to minimise the damages which he is liable to pay by reason of the tort which he has committed ? I can conceive no ground in reason or in equity why the injured party should incur expenditure, or invest money which otherwise he might employ for his own benefit, in order that a possible advantage thereby may accrue to the wrong-doer."

The judgment does not, by any stretch of imagination, exclude from the ambit of Rules 148 and 941, the principle of mitigation. The observations were in the facts of that case. The sentence that preceded the above observations of the learned Judge said: "I am of opinion, however, that in the circumstances of this case the plaintiffs were under no obligation either to purchase shellac to replace that which was damaged, or to load the same in the "City of Agra"." The question whether a party was bound to mitigate would depend upon the facts of each case. All other questions incidental or related thereto would depend upon the facts of each case.

Mr. Tulzapurkar and Mr. Pratap relied upon the judgment of a learned single Judge of this Court in Haji Abdul Rehman and Haji Mahomed Kadwani Vs. Munjibhai khatao and Company, . Mr. Tulzapurkar relied upon the judgment insofar as the learned Judge held that Rule 329 of the High Court Rules, then in force, which required such an undertaking to be furnished supplanted section 95 of the Code of Civil Procedure. Whereas section 95 of the Code placed a limit on the quantum of damages, the rule placed no limit as to the quantum of damages to be awarded thereunder. There being a variance between section 95 of the Code and Rule 329, the learned Judge held that the Rules supplemented the Code. In the case before us, there is no inconsistency between the Rules and the provisions of section 73 of the Contract Act.

The judgment, however, does not support the respondent''s case either as the issue before the learned Judge is not the issue before us. The learned Judge merely held that the plaintiffs would be entitled to urge all points before the Commissioner who was to ascertain the damages. This judgment, in any event, is of no assistance in determining the question before us viz. whether the principle of mitigation contained in section 73 of the Contract Act or otherwise is exclude by Rules 148 and 941.

Mr. Tulzapurkar relied upon the judgment of a learned single Judge of this Court dated 11th February, 2014 in Coromandel International Ltd. v. m.v. GLORY I, Notice of Motion No. 1026 of 2011 in Admiralty Suit No. 33 of 2010, in support of his contention that an application to contest an order of arrest itself constitutes mitigation. Mr. Pratap, on the other hand, relied upon a judgment of the Queens'' Bench Division (Commercial Court) in Standard Chartered Bank v. Pakistan National Shipping Corpn. & Ors. 1991 I Lloyds LR 747 in support of his contention that there is duty to mitigate even in cases where fraud is alleged. We did not permit the learned counsel to address us on merits of the matter relating to mitigation. We have kept these questions open to be decided by the learned single Judge as mentioned hereinafter.

Mr. Tulzapurkar referred to the judgment of a learned single Judge of this Court in Navbharat International Ltd. v. Cargo Onboard m.v. Amitees (at Kandla) and Ors. dated 10th March, 2014, in Notice of Motion No. 2853 of 2010 with Notice of Motion No. 3649 of 2010 in Admiralty Suit No. 19 of 2010. He relied upon certain observations in the judgment to the effect that the rules constitute special law and that once it is held that an order of arrest was passed without jurisdiction or if the order is held to be wrongful and is vacated, the liability under the undertaking is triggered. He submitted that the learned Judge held that questions such as malice do not arise in view of the mandatory provisions of Rule 941. Mr. Tulzapurkar, however, submitted that the concluding words in paragraph 10 to the effect that the factors of the absence of malice and gross negligence etc. come into play only at the stage when the Court determines the quantum of damages to be awarded as compensation by exercising its judicial discretion are inherently inconsistent with and contrary to the observations in the earlier part of the same paragraph.

The issue before us did not fall for the consideration of the Court. We are not concerned with the question as to whether absence of malice and negligence are irrelevant to fasten liability and are relevant only in determining the quantum of damages to be awarded as compensation. The question of the obligation to mitigate the loss has not been decided by this case. We, therefore, express no opinion in this regard.

We, therefore, hold that Rules 148 and 941 do not exclude the provisions of section 73 of the Contract Act. Even in proceedings to enforce undertakings furnished under Rules 148 and 941 of the Original Side Rules, the principles of mitigation apply.

This issue has been decided for the first time in these proceedings. The learned Judge has recorded that the appellant only contended that it had no duty to mitigate; that it was not mandatory that whenever an arrest of a vessel is effected, it is obligatory on the part of the party that applies for vacating such order of arrest to offer security in terms of the claim made by the plaintiff and that the aggrieved party is entitled to claim loss suffered on account of such wrongful arrest without any effort to mitigate the loss on account of such wrongful arrest without any effort to mitigate the loss. In paragraph 24, the learned Judge noted that the consistent stand of the appellant to the respondent''s submission on mitigation was not that it was unable to take steps to mitigate or that it took all reasonable steps to mitigate, but that furnishing of security is only an option which they chose not to avail of.

Despite the same, we intend granting the appellant an opportunity of meeting the case on merits. Firstly, this is the first time that the issue has arisen and has been decided. Secondly, in any event, mitigation itself involves the party aggrieved incurring costs. This is evident even from the respondent''s contention. The respondent contended that the appellant ought to have furnished security. Security would be by depositing the claim in court or furnishing a bank guarantee in that amount. Furnishing a bank guarantee involves costs such as depositing the amounts with the bank and/or paying the bank a commission. Thus, a claim cannot be rejected absolutely even if a party does not take steps to mitigate, for, any attempt to mitigate would also involve expenditure. A defence of mitigation would give rise to various contentions on merits. The Court would be required to decide a variety of facts such as whether in the facts and circumstances of the case, there was, in fact, a duty to mitigate; whether a party was in a position to mitigate; even if a party is in a position to mitigate, whether he was bound to do so considering the facts of a given case.

The appeal is, accordingly, disposed of by holding that the principles of mitigation apply to proceedings for enforcement of an undertaking furnished under Rules 148 and 941 of the Bombay High Court (Original Side) Rules. The matter is, however, remanded for a decision on merits on the issue of mitigation. The parties are at liberty to file further affidavits on the merits of the matter relating to mitigation. There shall, however, be no order as to costs.

It is not necessary to stay this order for in view of the matter on mitigation pending on merits before the single Judge, the respondents would not be entitled to withdraw the amounts deposited in the Korean Court in any event.