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Adhunik Steels Ltd Versus Orissa Manganese and Minerals

2007 (7) TMI 667 - SUPREME COURT

Civil Appeal No. 6569 of 2005 - Dated:- 10-7-2007 - H.K. SEMA AND P.K. BALASUBRAMANYAN JJ. JUDGMENT: P.K. BALASUBRAMANYAN, J. 1. These Cross Appeals by Special Leave challenge the order passed by the High Court of Orissa in an appeal under Section 37(1)(a) of the Arbitration & Conciliation Act, 1996. The said appeal was one filed by the respondent in C.A. No. 6569 of 2005 which is the appellant in C.A. No. 6570 of 2005 challenging an order of the District Court at Sundargarh in a petition un .....

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tate of Orissa. For reasons of its own, O.M.M. Private Limited entered into an agreement dated 14.5.2003 with Adhunik Steels for raising the manganese ore on its behalf. The term of the agreement was 10 years with effect from 18.5.2003, it conferred on Adhunik Steels an option to seek a renewal for a further term. 3. According to Adhunik Steels, pursuant to this agreement, it had mobilized huge resources for carrying on the excavation and extraction of the mineral by arranging for the necessary .....

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ere was danger of O.M.M. Private Limited itself losing its rights as a lessee, the contract had to be terminated. Adhunik Steels, alleging that it had incurred considerable expenditure and had already incurred losses, moved the District Court at Sundargarh under Section 9 of the Act for an injunction restraining O.M.M. Private Limited from terminating the contract and from dispossessing Adhunik Steels from the site of the mines and for other consequential reliefs. The said application was oppose .....

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tration agreement. 4. We may notice here that prior to approaching the District Court at Sundargarh, Adhunik Steels had moved the Calcutta High Court under Section 9 of the Act seeking identical reliefs. O.M.M. Private Limited had raised an objection to jurisdiction in the Calcutta High Court and the said objection was upheld by the Calcutta High Court and that had led to Adhunik Steels approaching the District Court at Sundargarh. We may also notice that it is contended that Adhunik Steels had .....

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unction against O.M.M. Private Limited as sought for by Adhunik Steels, and that if an order of injunction was not granted, the very purpose of initiating the arbitration proceeding would be defeated. Following the decision of the Madhya Pradesh High Court in Nepa Limited Vs. Manoj Kumar Agrawal [AIR 1999 MADHYA PRADESH 57], it accepted the principle that there was a distinction between Section 9 and Section 11 of the Act and that the powers under Section 9 are wide and what is relevant to be co .....

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order of injunction would be necessary to preserve the mines in dispute so that the arbitrators at a later point of time can have an effective and proper adjudication of the dispute referred to them. It was thus that the order of injunction was granted. 6. Aggrieved by the order of the District Court, Sundargarh, O.M.M. Private Limited filed an appeal before the High Court of Orissa. It was argued on behalf of O.M.M. Private Limited that the contract between the parties was in violation of Rule .....

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ract and in such a situation, an interim injunction ought not to be granted. It was also contended that in terms of Section 14 of the Specific Relief Act, the agreement was not specifically enforceable as it was terminable and in any event, since Adhunik Steels could be compensated in terms of money, even if its claim was ultimately upheld, it was not a case for grant of an interim injunction in terms of Section 14(3) of the Specific Relief Act. The learned judge of the High Court came to the pr .....

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pecific Relief Act, an injunction as prayed for by Adhunik Steels could not be granted. The court did not go into the question of balance of convenience in granting an order of injunction in the light of its conclusion that this is not a fit case for grant of an interim injunction. 7. Thus, the High Court allowed the appeal filed by O.M.M. Private Limited and set aside the order of injunction passed by the District Court, Sundargarh. Feeling aggrieved thereby, Adhunik Steels has filed its appeal .....

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e of Civil Procedure and the exercise of power thereunder was also not trammeled by anything contained in the Specific Relief Act. Learned counsel contended that by way of an interim measure, the court could pass an order for the preservation or custody of the subject matter of the arbitration agreement irrespective of whether the order that may be passed was in a mandatory form or was in a prohibitory form. The subject matter of arbitration in the present case was the continued right of Adhunik .....

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subject matter of the arbitration agreement. Learned counsel referred to 'The Law and Practice of Commercial Arbitration in England' by Mustill and Boyd and relied on the following passage therefrom: "(b) Safeguarding the subject matter of the dispute: The existence of a dispute may put at risk the property which forms the subject of the reference, or the rights of a party in respect of that property. Thus, the dispute may prevent perishable goods from being put to their intended u .....

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fit of the award. In cases such as this, the Court (and in some instances the arbitrator) has power to intervene, for the purpose of maintaining the status quo until the award is made. The remedies available under the Act are as follows:- (i) The grant of an interlocutory injunction. (ii) The appointment of a receiver (iii) The making of an order for the preservation, custody or sale of the property. (iv) The securing of the amount in dispute." Learned counsel also relied on 'Internatio .....

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only way assets can be saved for a future arbitration. Otherwise, the claimant could end up with a worthless arbitral award due to the fact that the losing party has moved his attachable assets to a "safe" jurisdiction where they are out of reach of the claimant's seizure. The importance of such a provision in an arbitration law is therefore evident, and a comparison of the adopting jurisdictions shows that all jurisdictions include some kind of provision on the issue, all granting .....

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vested in it as a court to adjudge whether any protective measure is called for. In that context, neither the provisions of the Code of Civil Procedure nor the provisions of the Specific Relief Act can be kept out while the court considers the question whether on the facts of a case, any order by way of interim measure of protection should be granted. So, the court had necessarily to consider the balance of convenience, the question whether at least a triable issue arises if not the establishme .....

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ation proceedings notwithstanding the termination of the contract by O.M.M. Private Limited was not permissible in law. 10. It is true that Section 9 of the Act speaks of the court by way of an interim measure passing an order for protection, for the preservation, interim custody or sale of any goods, which are the subject matter of the arbitration agreement and such interim measure of protection as may appear to the court to be just and convenient. The grant of an interim prohibitory injunction .....

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s of the Section, "and the court shall have the same power for making orders as it has for the purpose and in relation to any proceedings before it" also suggest that the normal rules that govern the court in the grant of interim orders is not sought to be jettisoned by the provision. Moreover, when a party is given a right to approach an ordinary court of the country without providing a special procedure or a special set of rules in that behalf, the ordinary rules followed by that cou .....

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rue partnership. The process of arbitration is dependant on the underlying support of the courts who alone has the power to rescue the system when one party seeks to sabotage it. The position was stated by Lord Mustil in Coppee Levalin NV vs. Ken-Ren Fertilisers and Chemicalsb (1994 (2) Lloyd's Report 109 at 116): "there is plainly a tension here. On the one hand the concept of arbitration as a consensual process reinforced by the ideas of transnationalism leans against the involvement .....

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a relay race. In the initial stages, before the arbitrators are seized of the dispute, the baton is in the grasp of the court; for at that stage there is no other organization which could take steps to prevent the arbitration agreement from being ineffectual. When the arbitrators take charge they take over the baton and retain it until they have made an award. At this point, having no longer a function to fulfil, the arbitrators hand back the baton so that the court can in case of need lend its .....

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asure where no irreparable or substantial harm comes to the movant in the event the measure is not granted. The final award offers the means of remedying any harm, reparable or otherwise, once determined." The question was considered in Channel Tunnel Group Ltd. And another vs. Balfour Beatty Construction Ltd. (1993 Appeal Cases 334). The trial judge in that case took the view that he had the power to grant an interim mandatory injunction directing the continuance of the working of the cont .....

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tated at page 367: "It is true that mandatory interlocutory relief may be granted even where it substantially overlaps the final relief claimed in the action; and I also accept that it is possible for the court at the pre-trial stage of the dispute arising under a construction contract to order the defendant to continue with a performance of the works. But the court should approach the making of such an order with the utmost caution and should be prepared to act only when the balance of adv .....

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ation to a breach of contract, the proper remedy against a defendant who acts in breach of his obligations under a contract, is either damages or specific relief. The two principal varieties of specific relief are, decree of specific performance and the injunction (See David Bean on Injunctions). The Specific Relief Act, 1963 was intended to be "An Act to define and amend the law relating to certain kinds of specific reliefs." Specific Relief is relief in specie. It is a remedy which a .....

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, specific relief is a form of judicial redress. Thus, the Specific Relief Act, 1963 purports to define and amend the law relating to certain kinds of specific reliefs obtainable in civil courts. It does not deal with the remedies connected with compensatory reliefs except as incidental and to a limited extent. The right to relief of injunctions is contained in part-III of the Specific Relief Act. Section 36 provides that preventive relief may be granted at the discretion of the court by injunct .....

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the performance of which would not be specifically enforced, the granting of an injunction to perform a negative covenant. Thus, the power to grant injunctions by way of specific relief is covered by the Specific Relief Act, 1963. 14. In Nepa Limited Vs. Manoj Kumar Agrawal [AIR 1999 MADHYA PRADESH 57], a learned judge of the Madhya Pradesh High Court has suggested that when moved under Section 9 of the Act for interim protection, the provisions of the Specific Relief Act cannot be made applicab .....

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ow the relevant provisions of the Specific Relief Act can be kept out of consideration. For, the grant of that interim injunction has necessarily to be based on the principles governing its grant emanating out of the relevant provisions of the Specific Relief Act and the law bearing on the subject. Under Section 28 of the Act of 1996, even the arbitral tribunal is enjoined to decide the dispute submitted to it, in accordance with the substantive law for the time being in force in India, if it is .....

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g cause of action against the defendant arising out of an invasion, actual or threatened by him, of a legal or equitable right of the plaintiff for the enforcement of which the defendant is amenable to the jurisdiction of the court. The right to obtain an interlocutory injunction is merely ancillary and incidental to the pre-existing cause of action. It is granted to preserve the status quo pending the ascertainment by the court of the rights of the parties and the grant to the plaintiff of the .....

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y a final judgment for an injunction." 16. Recently, in Fourie Vs. Le Roux [2007] 1 W.L.R. 320, the House of Lords speaking through Lord Scott of Foscote stated: "An interlocutory injunction, like any other interim order, is intended to be of temporary duration, dependent on the institution and progress of some proceedings for substantive relief." and concluded: "Whenever an interlocutory injunction is applied for, the judge, if otherwise minded to make the order, should, as .....

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cedure is indicated. In American Jurisprudence, 2nd Edition it is stated: "In judicial proceedings under arbitration statutes ordinary rules of practice and procedure govern where none are specified; and even those prescribed by statute are frequently analogous to others in common use and are subject to similar interpretation by the courts." 18. It is true that the intention behind Section 9 of the Act is the issuance of an order for preservation of the subject matter of an arbitration .....

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open to the court to pass an order by way of an interim measure of protection that the existing arrangement under the contract should be continued pending the resolution of the dispute by the arbitrator. May be, there is some force in this submission made on behalf of the Adhunik Steels. But, at the same time, whether an interim measure permitting Adhunik Steels to carry on the mining operations, an extraordinary measure in itself in the face of the attempted termination of the contract by O.M.M .....

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s thereof vague would also be a question that might have to be considered in the context of well settled principles for the grant of an injunction. Therefore, on the whole, we feel that it would not be correct to say that the power under Section 9 of the Act is totally independent of the well known principles governing the grant of an interim injunction that generally govern the courts in this connection. So viewed, we have necessarily to see whether the High Court was justified in refusing the .....

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he parties. We do not think that it is proper for us at this stage to pronounce on the applicability or otherwise of Rule 37 of the Mineral Concession Rules, 1960 and its impact on the agreement entered into between the parties. We therefore leave open that question for being decided by the arbitrator. The attempt made by O.M.M. Private Limited to rely upon some other arbitral award in support of its claim that Rule 37 of the Mineral Concession Rules, 1960 would apply, is neither here nor there. .....

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her in the circumstances, an order of injunction could be granted restraining O.M.M. Private Limited from interfering with Adhunik Steels' working of the contract which O.M.M. Private Limited has sought to terminate. Whatever might be its reasons for termination, it is clear that a notice had been issued by the O.M.M. Private Limited terminating the arrangement entered into between itself and Adhunik Steels. In terms of Order XXXIX Rule 2 of the Code of Civil Procedure, an interim injunction .....

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point of time in terms of money. There is only a mention of the minimum quantity of ore that Adhunik Steels is to lift and there is also uncertainty about the other minerals that may be available for being lifted on the mining operations being carried on. These are impoundables to some extent but at the same time it cannot be said that at the end of it, it will not be possible to assess the compensation that might be payable to Adhunik Steels in case the claim of Adhunik Steels is upheld by the .....

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.M. Private Limited cannot enter into a similar transaction with any other entity since that would also entail the apprehended violation of Rule 37 of the Mineral Concession Rules, 1960, as put forward by it. It therefore appears to be just and proper to direct O.M.M. Private Limited not to enter into a contract for mining and lifting of minerals with any other entity until the conclusion of the arbitral proceedings. 22. At the same time, we see no justification in preventing O.M.M. Private Limi .....

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e contract on the principles well settled in that behalf. Therefore, it is not possible to accede to the contention of learned counsel for Adhunik Steels that in any event O.M.M. Private Limited must be restrained from carrying on any mining operation in the mines concerned pending the arbitral proceedings. 23. We think that we should refrain from discussing the various issues at great length since we feel that any discussion by us in that behalf could prejudice either of the parties before the .....

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