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Section 9 in The Arbitration Act, 1940
The Specific Relief Act, 1963
Section 9 in The Specific Relief Act, 1963
Section 41 in The Specific Relief Act, 1963
Adhunik Steels Ltd vs Orissa Manganese And Minerals ... on 10 July, 2007

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Madhya Pradesh High Court
Indian Oil Corporation Ltd. vs M/S Agrawal Agro Auto Service on 18 April, 2016
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                              Arbitration Appeal No.20/2016




18.4.2016.
                   Shri Aditya Adhikari, learned Senior Counsel with Shri

             Ritwik Parashar, learned counsel for appellants.

                   Shri Naman Nagrath, learned Senior Counsel with Shri

             Jubin Prasad, learned counsel for respondent.

                   With consent of learned counsel for the parties, matter is

             finally heard.

             1.    Quashment of order-dated 24.9.2014 of suspending sale

             of all products, closing of totalizer reading and dip stock, in a

             proceedings under Section 9 of the Arbitration and Conciliation

             Act, 1996 (for short 'the 1996 Act'), by order-dated 15.2.2016

             by the trial Court, has led the appellant-Indian Oil Corporation

             Ltd. and its functionaries, prefer this Appeal under Section

             37(1)(a) of 1996 Act.

             2.    In a surprise inspection conducted at respondent's outlet

             on   24.9.2014,     following    irregularities/discrepancies   were

             observed -

                   (i)    Positive stock variation beyond permissible
                   limits by 3403 litre in HSD (High Speed Diesel).
                   (ii)   HSD DU (Delivery unit) L&T line Model
                   71324, Sr. No.2927 in the picher cable an additional
                   electronic fitting in form of electronic chip was
                   found at the mother board end of the cable. Four
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              Arbitration Appeal No.20/2016




      small   wires   running     from    chip   which   were
      connected to an on-off switch at the bottom of the
      Z portion of DU.

3.   These irregularities led to immediate suspension of sales

of all products, closing of totalizer reading and closing of dip

stock On 24.9.2014, followed by a show cause notice on

26.9.2014 and termination of dealership agreement dated

31.8.2009 for violation of Clauses 8(1), 42, 45 of dealership

agreement read with MDG 2012 Clause 8.2(iv) read with 5.1.4.

4.   So far as termination of dealership is concerned, it is

informed on behalf of respondent that he has invoked the

arbitration clause and an application under Section 11 of 1996

Act is pending consideration before the Gwalior Bench.

5.   As against suspension of sale of all products, closing of

totalizer reading and dip stock as was ordered on 24.9.2014,

respondent instituted proceedings under Section 9 of 1996 Act

on 29.10.2015. The trial Court in the said proceedings on the

finding that the suspension order is illegal, has quashed the

same by impugned order.

6.   It is urged that the trial Court having lost sight of the

scope of interference under Section 9 of 1996 Act and the

nature of contract of distributorship being determinable leaving
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               Arbitration Appeal No.20/2016




no scope for restoration of supply which cannot even be

granted as final relief, committed gross error in law in quashing

the suspension order and directing for restoration of dealership.

It is further contended that the impugned order being

mandatory in nature, is not countenanced in exercise of powers

under Section 9 of 1996 Act. It is urged that there being an

arbitration clause, the respondent at best could have been left

to pursue the said remedy, moreso, in the fact situation,

wherein the respondent-applicant was found of committing

serious   irregularities.   To   substantiate   these   submissions,

appellant has placed reliance on the decisions by Supreme

Court in Indian Oil Corporation Ltd. v. Amritsar Gas

Service (1991) 1 SCC 533, Percept D'Mark (India) (P)

Ltd. v. Zaheer Khan (2006) 4 SCC 227 and Adhunik

Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd.

(2007) 7 SCC 125.

7.    Respondent refutes all these contentions and raises a

preliminary objection as to maintainability of present appeal. It

is contended that the appellant having restored the supply in

compliance to the order under challenge, no cause now exist,

therefore, the Appeal is not tenable. This contention deserves
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               Arbitration Appeal No.20/2016




to be rejected at the outset. As merely because pending

decision to challenge the order, supply is restored, it will not be

a bar to challenge the order in Appeal.

8.    Further contentions on behalf of the respondent borders

on the merit of the matter, which being subjected to an

arbitration proceeding, the propriety demands not to be

analytical about the pros and cons of the action taken against

the respondent, and more particularly, when the extant of

jurisdiction of the Court in the context of Section 9 of 1996 Act

is being questioned, i.e. whether it would be within the

jurisdiction of the trial Court in a proceedings under Section 9

of 1996 Act to grant injunction, which is mandatory in nature.

9.    Section 9 of 1996 Act envisages that-

      "9. Interim measures etc. by Court.- A party
      may, before, or during arbitral proceedings or at
      any time after the making of the arbitral award but
      before it is enforced in accordance with section 36,
      apply to a court -
      (i) for the appointment of a guardian for a minor or
      person of unsound mind for the purposes of arbitral
      proceedings; or
      (ii) for an interim measure or protection in respect
      of any of the following matters, namely:-
      (a) the preservation, interim custody or sale of any
      goods    which    are   the   subject-matter   of   the
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              Arbitration Appeal No.20/2016




      arbitration agreement;
      (b) securing the amount in dispute in the
      arbitration;
      (c) the detention, preservation or inspection of any
      property or thing which is the subject-matter of the
      dispute in arbitration, or as to which any question
      may arise therein and authorising for any of the
      aforesaid purposes any person to enter upon any
      land or building in the possession of any party or
      authorising any samples to be taken or any
      observation to be made, or experiment to be tried,
      which may be necessary or expedient for the
      purpose of obtaining full information or evidence;
      (d) interim injunction or the appointment of a
      receiver;
      (e) such other interim measure of protection as
      may appear to the Court to be just and convenient,
      and the Court shall have the same power for
      making orders as it has for the purpose of, and in
      relation to, any proceedings before it."

10.   The provision thus, aims at the preservation, interim

custody or sale of any goods which are subject-matter of the

arbitration agreement; securing the amount in dispute in the

arbitration; the detention, preservation or inspection of any

property or thing which is subject-matter of the dispute in

arbitration, authorizing any person to enter upon any land or

building in the possession of any party or authorizing any
                               :: 6 ::


                Arbitration Appeal No.20/2016




sample to be taken or any observation to be made or

experiment to be tried, which may be necessary or expedient

for the purpose of obtaining full information or evidence;

interim injunction or the appointment of a receiver; or such

other interim measure of protection as may appear to the Court

to be just and convenient. However, the provision does not

empower the Court to order for restoration as the same

tantamount to mandatory injunction at interim stage.

11.   In Adhunik Steels Ltd. v. Orissa Manganese and

Minerals (P) Ltd. (2007) 7 SCC 125, while observing

"whether an interim mandatory injunction could be granted

directing the continuance of the working of the contract, had to

be considered in the light of well settled principles in that

behalf", their Lordships were pleased to hold-

      "21. 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
      agreement. According to learned counsel for
      Adhunik     Steels,   the   subject-matter   of   the
      arbitration agreement in the case on hand, is the
      mining and lifting of ore by it from the mines leased
      to O.M.M. Private Limited for a period of 10
      years and its attempted abrupt termination by
      O.M.M. Private Limited and the dispute before
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          Arbitration Appeal No.20/2016




the   arbitrator        would be          the    effect    of the
agreement        and     the      right     of   O.M.M. Private
Limited    to        terminate     it     prematurely     in   the
circumstances of the case. So viewed, it was 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 Steelsto carry on the mining
operations, an extraordinary measure in itself in the
face of the attempted termination of the contract
by O.M.M. Private Limited or the termination
of the contract by O.M.M. Private Limited, could
be granted or not, would again lead the court to a
consideration of the classical rules for the grant of
such an interim measure.                  Whether an interim
mandatory injunction could be granted directing
the continuance of the working of the contract, had
to be considered in the light of the well-settled
principles in that behalf. Similarly, whether the
attempted termination could be restrained leaving
the consequences 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
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          Arbitration Appeal No.20/2016




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 interim injunction on the facts and in
the circumstances of the case.
..

23. The question here is whether 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 could be granted restraining the breach of a contract and to that extent Adhunik Steels may claim that it has a prima facie case for restraining O.M.M. Private Limited from breaching the contract and from preventing it from carrying on its work in terms of the contract. It is in that context that the High Court has held that this was not a case where the damages that may be suffered by Adhunik Steels by the alleged breach of contract by O.M.M. Private Limited could not be quantified at a future 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 :: 9 ::

Arbitration Appeal No.20/2016 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 arbitrator while passing the award.

12. In the case at hand, the agreement being determinable, even if the trial Court found a prima facie case in favour of respondent, it was impermissible as per express prohibition under Sections 14 and 16 of the Specific Relief Act, 1963 to have granted the relief for restoration of supply and sale of all products when, in fact, the dealership agreement was terminated on 31.8.2009.

13. In Adhunik Steels Ltd. (supra), it is held -

11. 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 or an interim mandatory injunction are governed by well known rules and it is difficult to imagine that the :: 10 ::

Arbitration Appeal No.20/2016 legislature while enacting Section 9 of the Act intended to make a provision which was dehors the accepted principles that governed the grant of an interim injunction. Same is the position regarding the appointment of a receiver since the Section itself brings in, the concept of just and convenient while speaking of passing any interim measure of protection. The concluding words 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 court would govern the exercise of power conferred by the Act. On that basis also, it is not possible to keep out the concept of balance of convenience, prima facie case, irreparable injury and the concept of just and convenient while passing interim measures under Section 9 of the Act.

...

16. Injunction is a form of specific relief. It is an order of a court requiring a party either to do a specific act or acts or to refrain from doing a specific act or acts either for a limited period or :: 11 ::

Arbitration Appeal No.20/2016 without limit of time. In relation 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 aims at the exact fulfilment of an obligation. According to Dr. Banerjee in his Tagor Law Lectures on Specific Relief, the remedy for the non performance of a duty are (1) compensatory, (2) specific. In the former, the court awards damages for breach of the obligation. In the latter, it directs the party in default to do or forbear from doing the very thing,which he is bound to do or forbear from doing. The law of specific relief is said to be, in its essence, a part of the law of procedure, for, 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 :: 12 ::

Arbitration Appeal No.20/2016 preventive relief may be granted at the discretion of the court by injunction temporary or perpetual. Section 38 indicates when perpetual injunctions are granted and Section 39 indicates when mandatory injunctions are granted. Section 40 provides that damages may be awarded either in lieu of or in addition to injunctions. Section 41 provides for contingencies when an injunction cannot be granted. Section 42 enables, notwithstanding anything contained in Section 41, particularly clause (e) providing that no injunction can be granted to prevent the breach of a contract 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.

17. In Nepa Limited v. 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 applicable since in taking interim measures under Section 9 of the Act, the court does not decide on the merits of the case or the rights of parties and considers only the question of existence of an arbitration clause and the necessity of taking interim measures for issuing necessary directions or orders. When the grant of :: 13 ::

Arbitration Appeal No.20/2016 relief by way of injunction is, in general, governed by the Specific Relief Act, and Section 9 of the Act provides for an approach to the court for an interim injunction, we wonder how 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 not an international commercial arbitration. So, it cannot certainly be inferred that Section 9 keeps out the substantive law relating to interim reliefs.

14. In view of above analysis, it is inappropriate for the trial Court to (a) grant injunction which would lead to enforcement of dealership agreement which has been terminated; (b) it is barred by Section 14(1)(c) of the Specific Relief Act, 1963, which mandates that the contract which is in its nature determinable cannot be enforced and (c) amounted to grant of final relief, which otherwise could not be granted at the end of the trial, as the agreement being determinable, the respondent, :: 14 ::

Arbitration Appeal No.20/2016 at most, would be entitled for compensation rather than restoration (please see. Indian Oil Corporation Ltd. v.

Amritsar Gas Service (1991) 1 SCC 533).

15. In view whereof, the impugned order is set aside.

16. In the result, appeal is allowed to the extent above. No costs.




                                                  (SANJAY YADAV)
vinod                                                 JUDGE