REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.    4918         OF 2008 (Arising out of S.L.P. (C) No. 24175 of 2007)

M/s. GAIL (I) Ltd. …..Appellant

Versus

Bal Kishan Agarwal Glass Industries Ltd. ….Respondent

J U D G M E N T

Dr. ARIJIT PASAYAT.

1. Leave granted.  

2. Challenge in this appeal is to the judgment of a Division

Bench of the Allahabad High Court disposing of appeal (FAFO

No.  1339-D of  2007)  which  was  preferred  by  the  appellant

against the order dated 31.8.2007 passed by learned Judge of

Small Causes Court/Civil Judge (Senior Division) Agra, in Suit

No. 285 of 2007.  By the said order the application for interim

mandatory injunction was disposed of with certain directions.

3. Background  facts  as  projected  by  the  appellant  giving

rise to the appeal in a nutshell are as follows:

On 17.9.1996 an agreement  was entered into  between

the  appellant  and  the  respondent  for  supply  of  gas.   The

agreement was valid upto 31.3.2002 and was further extended

from time to time upto 31.3.2006.  On 3.12.2004 officials of

the appellant inspected the factory premises of the respondent

and found that gas supply has been tampered with.  Similar

incidents  were  noticed  on  15.1.2005  and  17.3.2005.

Therefore  on  28.5.2005  gas  supply  was  discontinued.

Respondent filed writ petition No. 44679 of 2005 before  the

Allahabad High Court.   By order  dated 18.7.2005 the High

Court  dismissed  the  writ  petition  on  the  ground  that

alternative remedy of arbitration was available under Section

9 of the Arbitration and Conciliation Act, 1996 (in short the

‘Arbitration  Act’).   The  order  was  not  challenged  by  the

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respondent.  On 10.8.2005 proposal was given for restoration

of  gas  supply  on  the  respondent  furnishing  undertakings,

which  was  in  fact  done.   Thereafter  gas  supply  was

reconnected on 22.2.2006.  It  was again found that the gas

meter  was  tampered  with,  which  lead  to  disconnection  on

28.2.2006.  On 27.3.2006 an order was passed by the District

Judge,  Agra  to  continue  gas  supply  till  31.3.2006.   On

3.4.2006 gas supply was stopped. Again a writ petition was

filed by the respondent i.e. Writ petition No. 2283 of 2006.  By

order dated 1.11.2006 the Allahabad High Court disposed of

the  writ  petition  holding  that  the  proper  remedy  for  the

respondent  was  to  make  a  representation  to  the  appellant

since no mandamus can be issued for extension of contract or

for  giving  benefit  to  any  proposed  contract.   On  29.3.2007

appellant  indicated  the  terms  for  re-connection  namely

deposit of 50% of the outstanding amount of Rs.8,10,79,057/-

and  security  for  balance  through  mortgage  of  immovable

property and clearance of all  outstanding dues in respect of

the gas supply.   Civil  Suit No.285 of 2007 was filed by the

respondent with inter alia a prayer for directing the appellant

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to  execute  the  deed  of  renewal  of  gas  supply  without

demanding any payment or security.  An application was filed

by the appellant in terms of Order VII Rule 11 of the Code of

Criminal Procedure, 1908 (in short the ‘CPC’) and Section 8 of

the  Arbitration  Act.   Learned  Civil  Judge  directed  that  the

fresh  proposal  dated  9.2.2006  should  be  given  effect  to

without any further terms and conditions.  As noted above an

appeal was preferred which was disposed of by the impugned

order dated 18.9.2007 on certain terms.  The terms read as

follows:

1. The Plaintiff-Respondent shall deposit a sum of two

crores  with  the  respondent  and a  security  to  the

tune of six crores in the form of second charge of

the  immovable  property  along  with  bond  for

payment with the Defendant-Appellant.

2. Out  of  two  crores,  the  plaintiff-respondent  shall

deposit  a  sum  of  Rs.50  lac  with  the  defendant-

appellant  within  a  period  of  one  month.   The

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security  to  the  tune  of  six  crore  will  also  be

deposited within a month.

3. They will further continue to deposit a sum of Rs.5

lac per month with the plaintiff-respondent in the

first week of every month till entire Rs. two crores

are deposited.  The first installment of Rs.5 lac will

start  from the  month of  November,  2007  i.e.,  the

first  installment  of  5  lac  has to be  paid  by 7th of

November, 2007.  These deposits will be in addition

to  the  charges  of  the  gas  to  be  supplied  to  the

Plaintiff-Respondent.  They  will  be  kept  by  the

Defendant-Appellant  in  fixed  deposit  in  any

nationalised  bank  and  will  abide  the  Arbitration

proceedings  and  subject  to  final  decision  of  the

case.

4. The Defendant-Appellant will resume gas supply of

the Plaintiff-Respondent after deposit of Rs. 50 lac

and the security for 6 crores.

5. It will be open to the Defendant-Appellant to stop

the gas supply in case of default in depositing the

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payment within the above stipulated time.

6. Defendant-Appellant will also be entitled to inspect

the meters and any if tampering in meter is found,

it will  be open to the Defendant-Appellant to stop

the supply of gas after giving notice to the Plaintiff-

Respondent.

4. According  to  Mr.  G.E.  Vahanvati  learned  Solicitor

General what in essence the respondent sought for in the suit

is relief in terms of Section 10 of the Specific Relief Act, 1963

(in short the ‘Act’).  In order to bring application of the said

provision there must be a contract.  Section 39 of the said Act

relates to an obligation flowing from a contract upon mutually

agreed upon terms. There was no question of any automatic

renewal.   As a matter of fact the extension of the period of

contract  is  not  automatic  and has to  be  done  on mutually

agreed upon terms.  In the instant case, there was no contract

in existence, and therefore there is no question of granting any

relief  in  the  suit.  Additionally,  there  was  a  specific  clause

relating to arbitration.  It is pointed out that the Civil court

was  aware  of  the  earlier  order  of  the  High  Court.   It  is,

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therefore,  submitted  that  the  learned  Civil  judge  could  not

have passed the order which was impugned before the High

Court.  Unfortunately the High Court  disposed of  the appeal

before it  without taking note of the fact that earlier in Writ

Petition No. 44679 of 2005, the court had dismissed the writ

petition on the ground of alternative remedy. The said order

was not challenged.  It is accepted that an arbitrator has in

fact been appointed.

5. Mr.  T.R.  Andhyarujina,  Learned  Senior  Counsel

appearing  for  the  respondent  on  the  other  hand submitted

that the appellant’s conduct was not above board.  Initially, it

had suggested certain terms for reconnection. But backed out

of  it  and even it  was not keen on the early  disposal  of  the

proceeding before the arbitrator.  The question whether any

amount is payable as penalty as claimed by the appellant can

be the subject matter of adjudication by the arbitrator.  Since

unreasonable  terms  were  indicated  for  resumption  of  gas

supply, the respondent had no alternative but to avail the civil

suit.   It  was  suffering  huge  losses  and  there  were  human

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problems like unemployment of a large number of employees

who  earn  their  livelihood  from  their  employment  in  the

respondent’s factory.  A proposal has also been filed by the

respondent during the hearing of the appeal.

6. Mr.  Vahanvati,  submitted  that  since  the  matter  is

pending before the Arbitrator, the Civil Court should not have

passed  any  order  and  the  High  Court  was  not  justified  in

practically  affirming  the  order  of  the  trial  court  except

variation of certain conditions.

7. Undisputedly,  the  proceedings  are  pending  before  the

arbitrator. Under Section 17 of the Act, interim orders can be

passed by the Arbitrator.   

8. In the circumstances we dispose of the appeal with the

following directions:

1. Within a  period  of  ten  days  from today

the  respondent  shall  make  an

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appropriate  application  for  interim

arrangement before the Arbitrator;

2. Within  a  period  of  three  days  from the

date of receipt of copy of the application,

the  appellant  shall  file  the

response/objection, if any;

3. Within a period of ten days thereafter the

Arbitrator is requested to dispose of the

application in accordance with law.  It is

open  to  the  respondent  to  place  the

proposal  which  was  filed  in  the  Court.

Needless  to  say,  the  Arbitrator  shall

consider  the  matter  in  proper

perspective.    

9. We make it clear that we have not expressed any opinion

on the terms of the conditions, if any, which can be imposed

and/or whether any interim order is called for in the matter.

The appeal is accordingly disposed of without any order as to

costs.

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………………………………….J. (Dr. ARIJIT PASAYAT)

……………………………………J. (Dr. MUKUNDAKAM SHARMA)

New Delhi, August 7, 2008

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