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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

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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

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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

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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

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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

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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.