CASE NO.:
Appeal (civil) 2707 of 2007
PETITIONER:
M/s Arvind Constructions Co. Pvt. Ltd
RESPONDENT:
M/s Kalinga Mining Corporation & Ors
DATE OF JUDGMENT: 17/05/2007
BENCH:
TARUN CHATTERJEE & P.K. BALASUBRAMANYAN
JUDGMENT:
J U D G M E N T
CIVIL APPEAL NO. 2707 OF 2007
(Arising out of SLP(C) No. 3294 of 2007)
P.K. BALASUBRAMANYAN, J.
1. Leave granted.
2. M/s Kalinga Mining Corporation, a partnership
firm bearing registration No. 71/1949, came into existence
on 10.12.1949. During the years from 1973 to 1980, the
firm obtained three mining leases from the State
Government. The partnership firm was reconstituted in
the year 1980, taking in some additional partners, again
in the year 1991 and yet again in the year 1994.
3. On 14.3.1991, the firm entered into an agency
agreement with the appellant, a private limited company
for a term of 10 years. Thereby, the appellant was
engaged as a raising contractor in respect of the mines for
which the firm had obtained leases from the State
Government. On 25.3.1991, the firm executed an
irrevocable Power of Attorney in favour of the appellant
authorizing it to administer the mines and sell the iron ore
extracted therefrom.
4. On 13.3.2001, the term of 10 years fixed in the
agency agreement expired. New terms were negotiated
between the parties and on 22.9.2001, the agreement was
extended for a period of three years commencing from
14.3.2001. The term was to end with 31.3.2003. Again,
on 3.9.2003, the term of the agreement was extended for a
further period of three years commencing from 1.4.2003.
Thereby, the period was to end with 31.3.2006.
5. The appellant sought a further extension of the
term of the agency agreement. Apparently, the firm was
not willing for an extension. Certain disputes thus arose
and by letter dated 19.11.2005, the appellant-company
sought resolution of the said disputes. The appellant-
company followed this up by a letter dated 9.12.2005
invoking the arbitration clause in the agency agreement
and nominating Mr. Sanjeev Jain as its arbitrator in terms
of the arbitration agreement.
6. It is seen that the respondent firm, for reasons
best known to itself, sought for and got a fresh registration
on 24.12.2005 and a firm having the same name was
again registered and assigned registration No. 595/2005.
Prima facie, this was unwarranted and the excuse put
forward was that the partners, some of whom were
partners even originally, could not trace the papers
relating to the registration of the firm in the year 1949. Be
that as it may, on receipt of the communication in that
behalf from the appellant-company nominating an
arbitrator, the firm in its turn named an arbitrator. In
terms of the arbitration clause, the arbitrators had to
name the Presiding Arbitrator. In spite of lapse of time, the
arbitrators did not meet and nominate a Presiding
Arbitrator. In that context, the appellant-company filed a
petition under Section 11(4)(b) of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as, "the
Act") requesting the Chief Justice of the High Court of
Orissa to appoint the third arbitrator on the basis that the
firm had failed to act in terms of the procedure agreed to
by the parties. The said application is said to be pending.
7. The appellant-company also moved an
application under Section 9 of the Act before the District
Court, Cuttack seeking interim relief essentially to permit
it to continue to carry on the mining operations and to
restrain the respondent firm from interfering with it.
According to the appellant, the agreement between the
parties was co-terminus with the subsistence of the
mining lease granted by the State in favour of the
respondent firm and since the leases continue to subsist,
the appellant-company was entitled to an extension of the
period of the contract and what remained was only a
negotiation regarding the terms at which the agreement
has to be worked by the appellant-company. The
appellant further pleaded that it had made all the
investments for the purposes of carrying on the mining
operations and had brought in the requisite machinery for
that purpose. All the necessary investments had been
made by it and in that situation, the balance of
convenience was in favour of the grant of an interim order
as sought for by the appellant. The respondent firm
resisted the application, inter alia, contending that the
agreement between the parties was essentially an agency
agreement. Such an agreement could not be specifically
enforced. On the expiry of the term, the appellant-
company had no subsisting right or status to carry on
mining and in that situation the injunction sought for
could not be granted. It was also contended that going by
Section 14 and Section 41 of the Specific Relief Act, such a
contract is unenforceable. Therefore the injunction prayed
for could not be granted.
8. The District Court, while entertaining the
application had made an order on 8.3.2006 directing the
parties to maintain the status quo. After hearing the
parties, the District Court took the view that it would be
just and appropriate to maintain the order of status quo
until the disputes are referred to the Arbitral Tribunal and
the Tribunal takes seisin of the dispute. Thus, the order
of status quo originally granted was directed to continue
until the Arbitral Tribunal was constituted to take up the
disputes between the parties. Feeling aggrieved, the
respondent firm --- there is a plea that the appeal was
filed by the firm of 2005 and not by the firm of 1949 which
we shall deal with --- filed an appeal before the High Court
of Orissa. The High Court took the view that the District
Court was in error in granting an order to maintain the
status quo since prima facie the agreement between the
parties was not a specifically enforceable one in terms of
the Specific Relief Act and since the term of the agreement
had expired it was not appropriate to grant an interim
order as granted by the District Court. Thus, the High
Court reversed the decision of the District Court and
dismissed the application filed by the appellant-company
under Section 9 of the Act.
9. Feeling aggrieved by the said decision, the
appellant-company has filed this appeal. It is contended
on its behalf that the appeal filed before the High Court
was not by the firm bearing registration No. 71/1949 with
which the appellant-company had the agreement. The
arbitration clause, which the appellant-company had
invoked, was in relation to that agreement and hence the
appeal before the High Court, at the instance of the firm
bearing registration No. 595/2005, was not maintainable.
It was further contended that since the agreement relied
upon by the appellant in the light of the irrevocable Power
of Attorney was co-terminus with the mining lease granted
to the respondent firm by the State Government, the same
could not be terminated and would not come to an end by
efflux of time. The entire approach made by the High
Court to find otherwise was erroneous. It was further
submitted that this was a case in which the agreement
could be specifically enforced in the light of Sections 10
and 42 of the Specific Relief Act. It was also faintly
suggested that the powers under Section 9 of the Act were
independent of any restrictions placed by the Specific
Relief Act and viewed in that manner, nothing stood in the
way of the appellant-company being granted an order of
injunction or at least an order to maintain status quo
until the Arbitral Tribunal decided the dispute.
10. On behalf of the respondent firm, it was
contended that it was only a case of reconstitution of the
1949 firm. It was a mistake to have the firm registered
again in the year 2005 under a different registration
number. Steps have been taken to rectify the mistake in
that regard. It was further submitted that the appeal
before the High Court was filed by the firm represented by
its partner, who was also a partner in the firm registered
in the year 1949. The appellant-company had impleaded
in its application under Section 9 of the Act all those who
were presently partners of the firm and there was no grace
in the contention of the appellant-company that the
appeal in the High Court was not filed by the firm which
was a party to the contract with the appellant. On merits,
it was submitted that the agreement was for a specific
term, there was no irrevocability in the agency agreement
and an agreement like the one entered into between the
parties by way of a raising contract, could not be
specifically enforced as rightly held by the High Court. It
was also pointed out that the respondent firm had lost
confidence in the appellant-company and in such a
situation, the appellant-company cannot claim to continue
as an agent of the respondent firm since the creation or
continuation of an agency arrangement depends on the
confidence reposed by the principal on the agent. It was
also pointed out that subsequent to the expiry of the term,
a tripartite agreement had been entered into with a labour
union and it contained a recognition that the period of the
contract between the respondent firm and the appellant-
company had come to an end. It could be seen therefrom
that the appellant-company had taken over, directly, the
liability in respect of the labourers who were being
employed by the appellant-company during the
subsistence of the raising contract. It was also submitted
that the respondent firm had started mining operations on
its own and the balance of convenience was not in favour
of grant of any interim order as was done by the District
Court. At best, the damages, if any, suffered by the
appellant-company was determinable in terms of money
and this was a case in which no injunction to perpetuate
the agreement could be granted, especially as it involved
supervision of minute details which the court would not
normally undertake. It was also pointed out that grant of
any injunction in favour of the appellant-company would
put the respondent firm in danger of being exposed to
prosecutions and other liabilities under law since it was
the mining agency under the State Government. It was
therefore submitted that the appellant-company had no
prima facie case for an injunction as sought for.
11. The objection that the appeal filed before the
High Court was not competent need not detain us much.
It was the appellant who filed the application under
Section 9 of the Act impleading the firm and its partners.
The said firm represented by a partner, who even
admittedly was a partner of the firm as constituted in the
year 1949 and was also a party to the agreement with the
appellant-company itself, had filed the appeal before the
High Court. There is no case that the firm registered in
the year 1949 had been dissolved. On the other hand, we
find that it was being reconstituted from time to time.
Therefore, the fact that, foolishly or otherwise, a firm in
the same name was again registered in the year 2005,
does not affect the status of the firm with which the
appellant-company had a contract and the filing of the
appeal by that firm represented by its partner. It was
brought to our notice that the respondent firm had sought
a rectification of the register realizing the mistake that was
made in having the same firm registered all over again,
and that the said matter is pending. Considering the
circumstances, we are of the view that the argument that
the appeal before the High Court was not competent, it not
having been filed by the firm with which the appellant-
company had the contract, is unsustainable. The said
contention is therefore overruled.
12. The effect of the agreement dated 14.3.1991 and
the Power of Attorney dated 25.3.1991 admittedly
executed between the parties and the rights and
obligations flowing therefrom are really matters for
decision by the Arbitral Tribunal. We do not think that it
is for us, at this interlocutory stage, to consider or decide
the validity of the argument raised on behalf of the
appellant-company that the agreement between the
parties was co-terminus with the mining leases and the
respondent firm could not terminate the agreement so
long as the mining leases in its favour continued to be in
force. Nor do we think it proper to decide the
sustainability of the argument on behalf of the respondent
firm that it was mainly an agency agreement for a fixed
term and on the expiry of the term, no right survives in
the appellant-company unless of course the respondent
firm agreed to an extension of the period. We leave that
question open for decision by the Arbitral Tribunal.
13. Prima facie, it is seen that the mining lessee had
entered into an agreement with the appellant-company for
the purpose of raising the iron ore from the area covered
by the mining lease. The term of the original agreement
expired and this was followed by two extensions for three
years each. Thereafter, the respondent firm had refused
to extend the agreement and claims that it wants to do the
mining itself. Prima facie, it is not possible to say that the
High Court was wrong in thinking that it may be a case
where an injunction could not be granted in view of the
provisions of the Specific Relief Act. Here again, we do not
think that we should pronounce on that question since
that again will be a question for the arbitrator to
pronounce upon. Suffice it to say that the position is not
clear enough for us to assume for the purpose of this
interlocutory proceeding that the appellant is entitled to
specifically enforce the agreement dated 14.3.1991 read in
the light of the Power of Attorney dated 25.3.1991. Of
course, this aspect will be again subject to the contention
raised by the appellant-company that the agreement
created in his favour was co-terminus with the mining
lease itself. But, as we have stated, these are the aspects
to be considered by the Arbitral Tribunal. We refrain from
pronouncing on them at this stage.
14. We think that adequate grounds are not made
out by the appellant at this interlocutory stage for
interfering with the order of the High Court. In that view
alone, we consider it proper to decline to interfere with the
order of the High Court and leave the parties to have their
disputes resolved in terms of the arbitration agreement
between the parties.
15. The argument that the power under Section 9 of
the Act is independent of the Specific Relief Act or that the
restrictions placed by the Specific Relief Act cannot control
the exercise of power under Section 9 of the Act cannot
prima facie be accepted. The reliance placed on Firm
Ashok Traders & Anr. Vs. Gurumukh Das Saluja & Ors.
[(2004) 3 S.C.C. 155] in that behalf does not also help
much, since this Court in that case did not answer that
question finally but prima facie felt that the objection
based on Section 69 (3) of the Partnership Act may not
stand in the way of a party to an arbitration agreement
moving the court under Section 9 of the Act. The power
under Section 9 is conferred on the District Court. No
special procedure is prescribed by the Act in that behalf.
It is also clarified that the Court entertaining an
application under Section 9 of the Act shall have the same
power for making orders as it has for the purpose and in
relation to any proceedings before it. Prima facie, it
appears that the general rules that governed the court
while considering the grant of an interim injunction at the
threshold are attracted even while dealing with an
application under Section 9 of the Act. There is also the
principle that when a power is conferred under a special
statute and it is conferred on an ordinary court of the
land, without laying down any special condition for
exercise of that power, the general rules of procedure of
that court would apply. The Act does not prima facie
purport to keep out the provisions of the Specific Relief Act
from consideration. No doubt, a view that exercise of
power under Section 9 of the Act is not controlled by the
Specific Relief Act has been taken by the Madhya Pradesh
High Court. The power under Section 9 of the Act is not
controlled by Order XVIII Rule 5 of the Code of Civil
Procedure is a view taken by the High Court of Bombay.
But, how far these decisions are correct, requires to be
considered in an appropriate case. Suffice it to say that
on the basis of the submissions made in this case, we are
not inclined to answer that question finally. But, we may
indicate that we are prima facie inclined to the view that
exercise of power under Section 9 of the Act must be
based on well recognized principles governing the grant of
interim injunctions and other orders of interim protection
or the appointment of a receiver.
16. It is seen that in spite of the parties naming
their respective arbitrators, in terms of the arbitration
agreement, more than one year back, the arbitrators so
appointed had not been able to nominate a Presiding
Arbitrator in terms of the arbitration agreement. We
therefore put it to counsel on both sides as to why we
shall not constitute an Arbitral Tribunal in view of their
failure to constitute the Arbitral Tribunal in terms of the
arbitration agreement and in view of the urgency involved
in resolving the disputes between the parties. Counsel on
both sides agreed that this Court may appoint either a
Presiding Arbitrator or a sole arbitrator for the purpose of
resolving the disputes between the parties. A panel of
names was furnished. Having considered the names
shown therein and taking note of the submissions at the
bar, we think that it would be appropriate and just to both
the parties to appoint Mr. Justice Y.K. Sabharwal, former
Chief Justice of India as the sole arbitrator for deciding all
the disputes between the parties. We therefore appoint
Mr. Justice Y.K. Sabharwal, former Chief Justice of India
as the sole arbitrator to decide on the disputes between
the parties springing out the agreement dated 14.3.1991
and the Power of Attorney dated 25.3.1991. The arbitrator
would be free to fix his terms in consultation with the
parties. We would request the arbitrator to expeditiously
decide the dispute on entering upon the reference and to
give his award as early as possible.
17. In the result, we decline to interfere with the
order of the High Court and dismiss this appeal. While
doing so, we revoke the nomination made by the parties of
two arbitrators. We appoint Mr. Justice Y.K. Sabharwal,
former Chief Justice of India as the sole arbitrator to
decide the dispute between the parties. The parties are
directed to suffer their respective costs.
