CASE LAW PARAGRAPH NO.

IN WHICH THE RAMAN IRON FOUNDRY RELEVANCE OF THE

CASE WAS CITED RAMAN FOUNDRY
CASE IN THE DECREE
1. Gangotri 33. The facts of the case of Union of India (DGS&D) (supra) Upheld.
Enterprises Ltd. were that the Respondent (Raman Iron Foundry) entered into 45. In the light of
Vs. a contract with the Union of India (DGS&D)-the Appellant for foregoing discussion,
Union of India (UOI) supply of certain quantity of "Foam compound". The contract, we hold that the
and Ors. apart from several other conditions, contained two clauses, Appellants have
namely, Clauses 18 and 24. Clause 24 provided that in the made out a prima
event of any dispute arising between the parties in connection facie case in their
with the contract, the same shall be decided by means of favour for grant of
Arbitration. Clause 18 with which we are concerned provided injunction against
for "recovery of sums due" which reads as under: the Respondents so
also they have made
18. Recovery of sums due--whenever any claim for the out a case of balance
payment of a sum of money arises out of or under the contract of convenience and
against the contractor, the purchaser shall be entitled to irreparable loss in
recover such sum by appropriating in whole or in part, the their favour as was
security, if any, deposited by the contractor, and for the held by this Court in
purpose aforesaid, shall be entitled to sell and/or realise the case of Union of
securities forming the whole or part of any such security India (DGS&D)
deposit. In the event of the security being insufficient, the (supra). They are,
balance and if no security has been taken from the contractor, therefore, entitled to
the entire sum recoverable shall be recovered by appropriating claim injunction
any sum then due or which at any time thereafter may become against the
due to the contractor under the contract or any other contract Respondent in
with the purchaser or the Government or any person relation to
contracting through the Secretary, if such sum even be not encashment of Bank
sufficient to cover the full amount recoverable, the contractor Guarantee No.
shall on demand pay to the purchaser the balance remaining 12/2006 dated
due. 04.08.2006.

38. Justice Bhagwati (as His Lordship then was) speaking for
the Bench examined the issue in great detail in the light of law
laid down by English and Indian Courts. The learned Judge in
his distinctive style of writing after examining the entire case
law on the subject held that an expression "sum due" occurring
in Clause 18 would mean a sum for which there is an existing
obligation to pay in praesenti or in other words which is
presently payable and due and, therefore, recovery of only
such sums can be made subject matter of Clause 18 which is
presently payable and due. It was held that a claim, which is
neither due and nor payable, cannot be made subject matter
of Clause 18. It was further held that Clause 18 does not create
a lien on other sums due to the contractor or give to the
purchaser a right to retain such sums until his claim against the
contractor is satisfied. It was also held that a claim for damages
for breach of contract is not a claim for a sum presently due
 and payable and the purchaser is not entitled in exercise of the
right conferred upon it under Clause 18 to recover the amount
of such claim by appropriating other sums due to contractor.

2.State of Gujarat vs. 12. The Respondent has sought to place reliance on Section 19 Dismissed the claim
Kothari and of the Limitation Act. It would be apposite to reproduce this of the Respondents.
Associates Section:
14. It is thus clear
19. Effect of payment on account of debt or of interest on that the Respondent
legacy.--Where payment on account of a debt or of interest on failed to file the suit
a legacy is made before the expiration of the prescribed period for damages within
by the person liable to pay the debt or legacy or by his agent the period
duly authorised in this behalf, a fresh period of limitation shall prescribed in the
be computed from the time when the payment was made. Limitation Act. The
suit is required to be
This Section would not come to the aid of the Respondent, as dismissed on this
the suit before us is not for payment on account of a debt or of ground alone. The
interest on legacy, but is a suit for damages for additional costs impugned Order is,
incurred as a result of the extension of the contract period. therefore, set aside,
This Court in Union of India v. Raman Iron Foundry and the Appeal is
MANU/SC/0005/1974 : 1974 (2) SCC 231, after placing reliance allowed, but with no
on Jones v. Thompson [1858] 27 L.J.Q.B. 234, has opined that a order as to costs.
claim for damages does not give rise to a debt until the liability
is adjudicated and damages have been assessed by a decree or
any order of a Court or any other adjudicatory authority or
forum.

3.H.M. Kamaluddin 9. One of these matters Union of India v. Air Foam Industries Overruled.
Ansari and Co. and was taken to this Court, which was decided by the Court along
Ors. vs. Union of with Union of India v. Raman Iron Foundry. 31. We are clearly of
India (UOI) and Ors. MANU/SC/0005/1974 : [1974]3SCR556 . In that case the Union the view that an
of India put forward the extreme claim that by virtue of Clause injunction order
18 of General Conditions of Contract it was entitled to recover restraining
damages claimed by appropriating any sum which may become respondents from
due to the contractor under other pending bills from the Union withholding the
of India. This Court, however, negatived the plea on the amount due under
ground that the amount of damages claimed by the Union was other pending bills to
only a claim and unless there was adjudication of the claim by the contractor
Court or admission by the contractor the Union of India had no virtually amounts to
authority to appropriate the amount due under pending bills of a direction to pay the
the contractor towards the satisfaction of its claim for amount to the
damages. contractor-appellant.
Such an order was
28. Clause 18 of the standard form of contract earlier was clearly beyond the
slightly differently worded and it read 'whenever under this purview of Clause (b)
contract any sum of money is recoverable from and payable by of Section 41 of the
 the contractor'. But this formula was deliberately and Arbitration Act. The
advisedly altered when the present standard form was Union of India has no
introduced and instead the words 'whenever any claim for objection to the
payment of a sum of money arises' were substituted and this grant of an
change in phraseology indicated that in order to attract the injunction restraining
applicability of the present Clause 18, it was not necessary that it from recovering or
there should be a sum of money due and payable by the appropriating the
contractor to the purchaser, but it was enough if there was a amount lying with it
mere claim on the part of the purchaser for payment of a sum in respect of other
of money by the contractor irrespective of the fact whether claims of the
such sum of money was presently due and payable or not. This contractor towards
Court, however, did not attach importance to this aspect of the its claim for
matter by observing : damages. But
certainly Clause 18 of
We do not think it is legitimate to construe Clause 18 of the the standard
contract between the parties by reference to a corresponding contract confers
clause which prevailed in an earlier standard form of contract. ample power upon
This is not a statute enacted by the legislature where it can be the Union of India to
said that if the legislature has departed from the language withhold the amount
used by it in an earlier enactment, it would be a fair and no injunction
presumption to make that the alteration in the language was order could be
deliberate and it was intended to convey a different meaning. passed restraining
It is a clause in a contract which we are construing and there the Union of India
any reference to a similar or dissimilar clause in another from withholding the
contract would be irrelevant. amount.
29. The Court itself while interpreting Clause 18 of the contract
has observed :

It is true that the words "any claim for the payment of a sum of
money" occurring in the opening part of Clause 18 are words
of great amplitude, wide enough to cover even a claim for
damages, but it is well settled rule of interpretation applicable
alike to instruments as to statutes....
But while dealing with another aspect of Clause 18 observed to
the contrary that it should not be construed as a statute. It
may, however, be pointed out that even after the change in
the language of Clause 18 of the standard agreement the
Union of India cannot be injuncted from with holding the
amount under other bills of the contractor. But it can certainly
be injuncted from recovering or appropriating it to the
damages claimed.

4. B.P. Agrawal vs. 13. The Hon'ble Supreme Court in Union of India Vs. Raman 23. In view of the
Chhattisgarh Rural Iron Foundry MANU/SC/0005/1974 : AIR 1974 SC 1265 (Supra) aforementioned
Road Development has held that when there is an obligation to pay a sum of reasons and findings,
Agency (05.04.2018 - money at a future debt, it is a debt owing to when the we do not find any
Other) obligation is to pay a sum of money in presenti, it is debt due. substance in the
A sum due would, therefore, mean a sum for which there is an petition and the
existing obligation to pay in presenti or in other words which is petition being devoid
presently payable. Recovery of such sums is a subject-matter of merits deserves to
of clause 18 according to the heading i.e. the dominant idea be dismissed and
running fully entire clause 18 the Hon'ble Supreme Court has hereby accordingly
held that clause 18 does not lay down the substantive rights dismissed.
and obligation of the parties under the contract. It is merely
intended to provide a mode of recovery of a claim for payment
of a sum of money arising out of or under the contract. It
therefore postulates a claim for a sum which is due and
payable, i.e., presently recoverable and may be recovered by
the mode therein provided.

5. KSL and Industries 6. The defendants acknowledged that a balance amount of Rs. Upheld.
Ltd. vs. Nath Seeds 9.25 lakhs were outstanding, since by their letter dated 25th The defendants are
(13.02.2001 - September, 1997, they made it clear that they were paying an granted conditional
BOMHC) amount of Rs. 1 lakh against the balance of Rs. 10.25 lakh. leave to defend the
Apart from the factual position, it is well settled that a claim suit on the deposit of
for damages does not constitute a liquidated demand or a debt an amount of Rs. 6
payable. Reliance in this regard may be placed on the lakhs in this Court
judgment of the Supreme Court in Union of India v. Iron within a period of 16
Foundry, MANU/SC/0005/1974 : [1974]3SCR556 , where the weeks from today.
Supreme Court referred with approval to the judgment of On such deposit, the
Chief Justice, M.C. Chagla, in Iron and Hardware (India) Co. v. suit shall be
Firm Shamlal and Bros. MANU/MH/0115/1954 : transferred to the list
AIR1954Bom423 . In para 9 of its judgment, the Supreme Court of commercial
held as follows : causes. The
defendants shall file
"Now the law is well settled that a claim for unliquidated their written
damages does not give rise to a debt until the liability is statement within 8
adjudicated and damages assessed by a decree or order of a weeks from today.
Court or other adjudicatory authority. When there is a breach Inspection and
of contract, the party who commits the breach does not discovery will be
Constantia incur any pecuniary obligation, nor does the party completed within 8
complaining of the breach become entitled to a debt due from weeks thereafter.
the other party. The only right which the party aggrieved by
the breach of the contract has, is the right to sue for damages. In the event the
That is not an actionable claim and this position is made amply amounts are
clear by the amendment in Section 6(e) of the Transfer of deposited as
Property Act, which provides that a mere right to sue for aforesaid, the
damages, cannot be transferred...... We may mention only a Prothonotary and
few of the decisions, namely, Jabed Sheikh v. Taher Mallik Senior master to
MANU/WB/0067/1941 : AIR1941Cal639 , S. Milkha Singh v. initially deposit the
N.K. Gopal Krishna Mudaliar, MANU/PH/0067/1956 and Iron said amount in a
and Hardware (India) Co. v. Firm Shamlal and Bros, (supra). nationalised Bank for
Chagla, C.J. in the last mentioned case, stated the law in these a period of one year
 terms : and thereafter for
Therefore, no pecuniary liability arises till the Court has equal successive
determined that the party complaining of the breach is entitled periods till the
to damages. Therefore, when damages are assessed, it would disposal of the suit.
not be true to say that what the Court is doing is ascertaining a
pecuniary liability which already existed. The Court in the first
place must decided that the defendants able and then it
proceeds to assess what that liability is. But, till that
determination there is no liability at all upon the defendant.

This statement in our view represents the correct legal position

and has our full concurrence".

The Supreme Court thus held that the law is settled that
acclaim for unliquidated damages does not give rise to a debt
until the liability is adjudicated and damages assessed by a
decree or order of a Court or other adjudicatory authority. A
learned Single Judge, of this Court, my learned Brother, Mr.
Justice S. Radhakrishnan, has followed the aforesaid judgment,
in Krishna Texport Industries Limited v. Phar-East Laboratories
Ltd. reported in II (2001) BC 528: 2001(1) All. MR 147.

6. Krishna Texport The learned Counsel for the plaintiffs also relied upon a Upheld.
Industries Ltd. vs. judgment of the Apex Court in Union of India v. Raman Iron
Phar-East Foundry, reported in MANU/SC/0005/1974 : AIR 1974 SC 1265.
Laboratories Ltd. In the aforesaid judgment also the Supreme Court has very
(31.01.2000 - clearly held that a claim for damages for breach of contract is,
BOMHC) therefore, not claim for a sum presently due and payable
(emphasis added). From the aforesaid two judgments, it is very
clear that debt must be existing. What the defendants are now
seeking to establish is that they may have the counter-claim by
way of damages. These facts will have to be established by the
clear evidence. As of today, there is no existing debt whereas
defendants had pledged the entire 1,98,500 shares for the
liability of Rs. 25,89,500/-. In the above matter there is
absolutely no dispute about the defendants liability to pay Rs.
26,89,350/- and they had in fact issued the' post-dated cheque
which, was dishonoured.

7 Orissa Concrete 28. It is the submission of Mr. Shrivastava, learned Senior Dismissed.
and Allied Industries Counsel appearing for the appellant, that the impugned 30. The arbitration
Limited vs. Union of amount is sought to be recovered without the amount due is court has not found
India and Ors. adjudicated by the competent court of law or arbitral tribunal prima facie case,
(03.11.2017 - CGHC) : duly constituted and therefore such an amount cannot be balance of
recovered/withheld by the respondent in view of the decision convenience in
 rendered by the Supreme Court in Raman Iron Foundry's case favour of the
(supra). appellant and finding
of the arbitration
court not being
perverse or
capricious, it would
be inappropriate to
grant any interim
injunction in favour
of the appellant
reversing the order
of the arbitration
court following the
principle of law laid
down by the
Supreme Court in
Wander Ltd. (supra).
I do not find any
illegality in the
impugned order.

8. Lord Shiva 3. The aforesaid issue is really not res-integra in view of various Upheld.
Construction judicial pronouncements. Learned counsel has drawn our 4. In the conspectus
Company Private Ltd. attention to a Division Bench judgement of this Court in CWP of the aforesaid legal
vs. State of Haryana No. 13285 of 2012 titled SECL Industries Limited v. The State of position, the right
and Ors. (10.07.2013 Haryana and others, decided on 09.10.2012. The said course of action for
- PHHC) judgement in fact after formulating the aforesaid proposition the respondents in
in turn relied upon the judgements of the Hon'ble Supreme the present case was
Court in Union of India v. Raman Iron Foundry, to go to the Court
MANU/SC/0005/1974 : AIR 1974 SC 1265 and Murlidhar (there is stated to be
Chiranjilal v. Harishchandra Dwarkadas and another, no arbitration clause)
MANU/SC/0113/1961 : AIR 1962 SC 366. Once again, the to recover damages
Superintending Engineers of the State of Haryana were called and not to treat the
upon to make deductions on account of damages/penalty mere quantification
imposed on the termination of the contracts. While examining of the outer limit of
this issue, the Division Bench observed that the provisions of damages as a debt
Section 73 of the Indian Contract Act, 1872 (hereinafter due for which
referred to as the Act) would have to be referred to. Thus, straightway recovery
there has not only to be a breach of contract, but reasonable could take place. The
steps to mitigate the losses arisen on account of the breach. legal principle is,
Section 74 of the Act entitles the parties to claim a reasonable thus, quite clear that
compensation from the offending party which has broken the a claim for liquidated
contract and such a compensation can be determined even at damages does not
the time of entering into the contract being the pre-estimated give rise to the debt
damages. They cannot, however, be penal in nature. Thus, until the liability is
what is dispensed with is proof of actual loss or damage. The adjudicated and the
Supreme Court in Union of India v. Raman Iron Foundry's case damages assessed by
 (supra), thus, held that the claim for liquidated or unliquidated a decree or order of
damages would, thus, stand on the same footing with the a Court or other
condition that in case of the stipulated amount it has the outer adjudicatory
limit of the damages. The right of a party aggrieved by breach authority.
of contract is to sue for damages and the claim for damages
does not become a debt until adjudication. There has to be, 5. The respondents
thus, an adjudication by a judicial forum or by arbitration. in the present case
have sought to
recover the amount
without following
the process of law
and even today they
insist that the action
taken should be
upheld. Ex-facie, the
action is not
sustainable and
contrary to the
settled legal position.

9. State of Gujarat The judgment in Gangotri Enterprises (supra) is primarily based 20. In our opinion,
and Ors. vs. Amber on the judgment of a two Judges' Bench of this Court in Union the judgment
Builders (08.01.2020 of India v. Raman Iron Foundry MANU/SC/0005/1974 : (1974) rendered in Gangotri
- SC) 2 SCC 231. In this case, this Court held that the Government Enterprises Limited
had no right to appropriate the amount claimed without (supra) is per
getting it first adjudicated. The relevant portion of the incuriam because it
judgment reads as follows: relies upon Raman
Iron Foundry (supra)
6. ... But here the order of interim injunction made by the which has been
learned Judge does not, expressly or by necessary implication, specifically overruled
carry any direction to the Appellant to pay the amounts due to by three Judge Bench
the Respondent under other contracts. It is not only in form in the case of H.M.
but also in substance a negative injunction. It has no positive Kamaluddin Ansari
content. What it does is merely to injunct the Appellant from (supra).
recovering, suo moto, the damages claimed by it from out of
other amounts due to the Respondent. It does not direct that 21. On a conjoint
the Appellant shall pay such amounts to the Respondent. The reading and a careful
Appellant can still refuse to pay such amounts if it thinks it has analysis of the Acts
a valid defence and if the Appellant does so, the only remedy together, we are of
open to the Respondent would be to take measures in an the view that insofar
appropriate forum for recovery of such amounts where it as the powers vested
would be decided whether the Appellant is liable to pay such in the Arbitral
amounts to the Respondent or not. No breach of the order of Tribunal in terms of
interim injunction as such would be involved in non-payment the Section 17 of the
of such amounts by the Appellant to the Respondent. The only A & C Act are
thing which the Appellant is interdicted from doing is to make concerned, such
recovery of its claim for damages by appropriating such powers can be
amounts in satisfaction of the claim. That is clearly within the exercised by the
power of the Court Under Section 41(b) because the claim for Tribunal constituted
damages forms the subject matter of the arbitration under the Gujarat
proceedings and the Court can always say that until such claim Act because there is
is adjudicated upon, the Appellant shall be restrained from no inconsistency in
recovering it by appropriating other amounts due to the these two Acts as far
Respondent. The order of interim injunction made by the as the grant of
learned Judge cannot, therefore, be said to be outside the interim relief is
scope of his power Under Section 41(b) read with the Second concerned. This
Schedule. power is already
vested in the tribunal
xxx xxx xxx under the Gujarat
Act and Section 17 of
11. ...We must, therefore, hold that the Appellant had no right the A & C Act
or authority under Clause 18 to appropriate the amounts of compliments these
other pending bills of the Respondent in or towards powers and
satisfaction of its claim for damages against the Respondent therefore it cannot
and the learned Judge was justified in issuing an interim be said that the
injunction restraining the Appellant from doing so. provisions of Section
17 of the A & C Act
The judgment in Raman Iron Foundry (supra), was specifically are inconsistent with
overruled on the issue in hand by a three Judge Bench of this the Gujarat Act.
Court in the case of H.M. Kamaluddin Ansari & Co. v. Union of
India MANU/SC/0002/1983 : (1983) 4 SCC 417. In this case 22. In view of the
there was a general condition which entitled the Government above discussion,
to recover the damages claimed by appropriating any sum both the appeals
which may become due to the contractor under other pending filed by the State of
bills. In this case, this Court disagreed with the findings in the Gujarat are allowed,
Raman Iron Foundry (supra) and held as follows: and the judgments of
the High Court of
21. ...With profound respect we find that the aforesaid Gujarat are set aside.
observation is incongruous with the proposition of law laid However, liberty is
down by this Court just before this observation. We find it given to the
difficult to agree with the observation of the Court that the contractor(s) to
impugned order in form and substance being the negative the approach the Gujarat
Respondent could refuse to pay such amounts if it thinks it has Public Works
a valid defence, and if it chooses to do so there would be no Contract Disputes
breach of the injunction order. Arbitration Tribunal
and if the Tribunal is
approached within 2
months from today,
the tribunal shall not
dismiss the claim on
the issue of
limitation. It shall
decide the same on
merits. Pending
application(s), if any,
 shall stand(s)
disposed of.

10. Zeal Construction 7. Mr. Haqani, learned counsel for the petitioner, submitted 15. In view of clause
vs. Union of India that the dispute which has been raised in respect of earlier 67 of the GCC and as
and Ors. (03.08.2011 contract which was allotted to the petitioner in the year 2006 observed by the
- JKHC) : and in which arbitration proceedings are pending, cannot Hon'ble Supreme
MANU/JK/0522/201 become basis in law for withholding the amount to which the Court, the
1 petitioner has been found entitled to in respect of the second respondents have
work allotted to him in the year 2009. He further submitted power to withhold
that as the sum which is, allegedly, to be recovered from the and retain the
petitioner, has neither been ascertained nor found to be due in amount from the
a properly constituted judicial forum, the respondents cannot amount payment of
either recover the said amount or withhold the same from the which has been
petitioner from his payments which are due to him as per deferred in terms of
second contract. Learned counsel, in support of his contention, the impugned
referred to and relied upon case titled Union of India appellant communication. The
v. Raman Iron Foundary respondents, reported in said action of the
MANU/SC/0005/1974 : AIR 1974 SC 1265 (for short Raman Iron respondents does
Foundary case). not call for any
The judgement passed in Raman Iron Foundary case, upon interference in view
which both the learned counsel relied, does not help either of of the aforesaid
the two, in as much as, the clause which was under discussion.
consideration in the said case before the Hon'ble Supreme
Court is, materially and substantially, different from the clause 16. This writ petition,
which is applicable to the facts of this case. Under clause 18 of to the extent of
the GCC in Raman Iron Foundary case, the Union of India was dispute raised, is not
given power of recovery of amount, for which claim would be maintainable as the
made, from the amount which would be due to the contractor dispute is of pure
in any other contract. Clause 67 of the GCC, which is attracted civil nature and could
to the facts of this case and which is referred to and relied be settled in
upon, does not confer power of recovery on the Union of India arbitration or by
until same is determined or adjudicated upon, but authorizes it filing appropriate
to withhold the amount and retain the sum by way of lien. The proceedings before a
law laid down by the Hon'ble Supreme Court in Raman Iron legally constituted
Foundary case, would not be applicable to the facts of this case judicial forum. There
and reliance placed by the learned counsel for the petitioner is, is no breach of
thus, rendered inconsequential. No reliance can be further contract in view of
placed on the said judgement in view of the observations the language in
made by the Hon'ble Supreme Court in Ansari's case which clause 67 of
aforementioned, in as much as, it was stated that clause 18 of the GCC is couched.
the GCC gives wide powers to the Union of India to "recover In absence of any
the amount claimed by appropriating any sum then due or challenge to clause
which, at any time thereafter, may become due to the 67 of the GCC, this
contractor or other contractors." The Hon'ble Supreme Court writ petition is held
in Raman Iron Foundary case, at its paragraph 8, has approved to be not
the manner and method of withholding and retaining of a sum maintainable.
as lien when it stated that "if merely a right of lien or retention
was given to secure payment of claim, where if the sum not
presently due and payable, the aforesaid provisions of the GCC
would not have been so startling and unusual."