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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.