2007 (5) TMI 642 - SC - Indian Laws

Mining leases from the State Government - arbitration agreement between the parties - Application u/s 9 of the Arbitration and Conciliation Act 1996 ( the Act ) - agreement specifically enforced in the light of Sections 10 and 42 of the Specific Relief Act - Powers u/s 9 of the Act independent of any restrictions placed by the Specific Relief Act ? - HELD THAT - 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. 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 u/s 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 u/s 9 of the Act is not controlled by the Specific Relief Act has been taken by the Madhya Pradesh High Court. The power u/s 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. 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.

Summary

Issues Involved:
1. Validity and enforceability of the agency agreement.
2. Competence of the appeal filed by the firm.
3. Grant of interim relief under Section 9 of the Arbitration and Conciliation Act, 1996.
4. Applicability of the Specific Relief Act to the interim relief sought.
5. Appointment of the Arbitral Tribunal.

Issue-wise Detailed Analysis:

1. Validity and Enforceability of the Agency Agreement:
The appellant-company argued that the agency agreement was co-terminus with the mining leases and thus could not be terminated while the leases were in force. Conversely, the respondent firm contended that the agreement was for a specific term and could not be specifically enforced after its expiration. The Supreme Court refrained from deciding on the validity of these arguments at this interlocutory stage, leaving the determination to the Arbitral Tribunal.

2. Competence of the Appeal Filed by the Firm:
The appellant-company claimed that the appeal before the High Court was not maintainable as it was filed by a firm registered in 2005, not the original firm from 1949. The Supreme Court dismissed this objection, noting that the firm had been reconstituted over time and that the appeal was filed by a partner who was part of the original firm. The Court found no dissolution of the original firm and considered the re-registration in 2005 as a rectifiable mistake.

3. Grant of Interim Relief under Section 9 of the Arbitration and Conciliation Act, 1996:
The District Court initially granted an order to maintain the status quo, which was later reversed by the High Court. The High Court held that the agreement was not specifically enforceable under the Specific Relief Act, and therefore, the interim relief sought by the appellant-company could not be granted. The Supreme Court agreed with the High Court's approach, emphasizing that the balance of convenience and prima facie case did not favor granting the injunction.

4. Applicability of the Specific Relief Act to the Interim Relief Sought:
The appellant-company suggested that the powers under Section 9 of the Arbitration and Conciliation Act were independent of the Specific Relief Act. The Supreme Court did not accept this argument, indicating that the general principles governing the grant of interim injunctions apply even to applications under Section 9. The Court referenced the case of Firm Ashok Traders & Anr. Vs. Gurumukh Das Saluja & Ors., noting that the question of the Specific Relief Act's applicability was not conclusively answered there but leaned towards its relevance.

5. Appointment of the Arbitral Tribunal:
Given the failure of the parties' appointed arbitrators to nominate a Presiding Arbitrator, the Supreme Court decided to appoint a sole arbitrator. Both parties consented to this approach. The Court appointed Mr. Justice Y.K. Sabharwal, former Chief Justice of India, as the sole arbitrator to resolve the disputes arising from the agreement and Power of Attorney. The arbitrator was urged to expedite the resolution process.

Conclusion:
The Supreme Court declined to interfere with the High Court's order, dismissing the appeal and revoking the nominations of the two arbitrators. The Court appointed Mr. Justice Y.K. Sabharwal as the sole arbitrator to decide the disputes between the parties, directing them to bear their own costs.