Arvind Constructions Co. Pvt. LTD. vs Kalinga Mining Corporation.

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2007 Supreme(SC) 795

2007(5) Supreme 568
Supreme Court of India
(From Orissa High Court at Cuttack)
Tarun Chatterjee & P.K.Balasubramanyan, JJ.
M/s Arvind Constructions Co. Pvt. Ltd. — Appellant
versus
M/s Kalinga Mining Corporation & Ors.— Respondents
Appeal (civil) 2707 of 2007
Decided on : 17-05-2007
Counsel for the Parties :
For the Appellant : Dr. A.M. Singhvi, Jaideep Gupta, Sr. Adv., Ashutosh Kaitan, P.K. Bansal, Deepak Khurana, Vishvjit Das, Umesh Kumar Khaitan, Amit Bhandari, Advocates.
For the Respondent : A.K. Ganguly, Surya Prakash Mishra, K.K. Venugopal, Sr. Advs., S. Ravi Shankar, Rateesh, Ms. Barnali Basak, Ms. Vidushi Chandana, S. Ravishankar, Ms. Yamunah Nachiar, S.Ravishankar, Advocates.

Headnote:Arbitration and conciliation Act, 1996 – Section 11(4)(b) – Specific Relief Act, 1963 — Section 14 & 41 – Agency agreement entered into between Respondent corporation a partnership firm and appellant a private limited company for a term of 10 years engaging appellant as a raising contractor in respect of mines for which firm had obtained leases from State government – Execution of irrevocable power of attorney in favour of appellant authorizing it to administer mines and sell iron ore extracted therefrom – On expiry of term of agency agreement, it was extended for a period of three year twice – Further extension of period – Denied by firm – Disputes arose between parties - Nomination of an arbitrator by appellant firm in terms of arbitration clause in agency agreement – Arbitrator nominated by partnership firm – However no presiding arbitrator nominated inspite of lapse of time – Application u\s 9 filed by appellant co. seeking interim relief essentially to permit it to continue to carry on mining operations and to restrain respondent firm form interfering interfering with it – Plea of appellant company that agreement between parties was co-terminus with subsistence of mining lease granted by State in favour of Respondent firm – Grant of status quo by District Court until Arbitral Tribunal was constituted – Appeal - High Court reversed decision of District Court and dismissed application u\s 9 by appellant company - Appeal - Contention of appellant that appeal filed before High Court was not by firm bearing registration No. 71\1949 with which appellant Co. had agreement and hence appeal before High Court at instance of firm bearing registration No. 595\2005 was not maintainable – Fact that, foolishly or otherwise, a firm in same name was again registered in year 2005, not affected status of firm with which appellant-company had a contract and filing of appeal by that firm represented by its partner – Contention that appeal before High Court was not competent, it not having been filed by firm with which appellant- company had contract, held unsustainable - Effect of agency agreement admittedly executed between parties and rights and obligations flowing therefrom were really matters for decision by Arbitral Tribunal – Held not proper at this interlocutory stage, to consider or decide validity of argument raised on behalf of appellant-company that agreement between parties was co-terminus with mining leases and respondent firm could not terminate agreement so long as mining leases in its favour continued to be in force - Adequate grounds not made out by appellant at interlocutory stage for interfering with order of High Court – Direction given for appointment of Mr. Justice Y.K.Sabharwal former Chief Justice of India as sole arbitrator to decide dispute between parties – Order of High Court not interfered with – Appeal dismissed. (Paras 11 to 17)
       Facts of the case:
       An Agency agreement was entered into between Respondent corporation a partnership firm and appellant a private limited company for a term of 10 years engaging appellant as a raising contractor in respect of mines for which firm had obtained leases from State government. An Irrevocable power of attorney was executed in favour of appellant authorizing it to administer mines and sell iron ore extracted therefrom. On expiry of term of agency agreement, it was extended for a period of three year twice. Further extension of period being denied by firm, disputes arose between parties. On nomination of an arbitrator by appellant firm in terms of arbitration clause in agency agreement, an Arbitrator was nominated by partnership firm. However no presiding arbitrator was nominated inspite of lapse of time.
       An Application u\s 9 was filed by appellant co. seeking interim relief essentially to permit it to continue to carry on mining operations and to restrain respondent firm from interfering with it. Plea of appellant company that agreement between parties was co-terminus with subsistence of mining lease granted by State in favour of Respondent firm. Status quo was granted by District Court until Arbitral Tribunal was constituted. On Appeal, High Court reversed decision of District Court and dismissed application u\s 9 by appellant company.
       Present Appeal has been filed against said order of High Court.
       Findings of the Court:
       The Court held that fact that, foolishly or otherwise, a firm in same name was again registered in year 2005, not affected status of firm with which appellant-company had a contract and filing of appeal by that firm represented by its partner. Contention that appeal before High Court was not competent, it not having been filed by firm with which appellant- company had contract was held unsustainable. Effect of agency agreement admittedly executed between parties and rights and obligations flowing therefrom were really matters for decision by Arbitral Tribunal. Held not proper at this interlocutory stage, to consider or decide validity of argument raised on behalf of appellant-company that agreement between parties was co-terminus with mining leases and respondent firm could not terminate agreement so long as mining leases in its favour continued to be in force. Since Adequate grounds were not made out by appellant at interlocutory stage for interfering with order of High Court. Hence direction was given for appointment of Mr. Justice Y.K.Sabharwal former Chief Justice of India as sole arbitrator to decide dispute between parties. Order of High Court held not interfered with. Appeal was accordingly dismissed.
       Result: Appeal dismissed.

Judgement Key Points

Certainly. Based on the provided legal document, here are the key points summarized:

The dispute involves an agency agreement between a partnership firm and a private limited company for a fixed term, which was extended multiple times. The agreement authorized the appellant to operate as a raising contractor for mining activities (!) (!) .
The appellant sought interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, to continue mining operations and prevent interference by the respondent. The District Court initially granted a status quo order, but the High Court reversed this decision, dismissing the application (!) (!) .
The appellant argued that the agreement was co-terminus with the mining lease, which was still in force, and thus the agreement should continue. They also contended that the agreement was capable of specific enforcement and that the powers under Section 9 are independent of restrictions under the Specific Relief Act (!) (!) .
The respondent claimed that the agreement was for a fixed term and had expired, and that subsequent registration of a similarly named firm did not affect the legal status of the original firm. They also argued that the agreement was primarily an agency agreement not specifically enforceable and that the respondent had lost confidence in the appellant, justifying termination (!) (!) .
The Court observed that the matter of validity and enforceability of the agreement and its co-terminus nature with the mining lease are issues to be decided by the arbitral tribunal, not at the interlocutory stage. It emphasized that the rights and obligations arising from the agreement are matters for arbitration (!) (!) .
The Court found that the appeal filed before the High Court was properly maintained, despite the change in registration number, as the same firm and its partners were involved. The appeal was deemed competent and properly filed by the firm that had the contractual relationship with the appellant (!) (!) .
Given that the appointed arbitrators failed to nominate a presiding arbitrator within a reasonable time, the Court appointed a former Chief Justice of India as the sole arbitrator to resolve the disputes expeditiously. This appointment was made to ensure the dispute was settled efficiently (!) (!) .
The Court declined to interfere with the High Court’s order at this interlocutory stage, emphasizing that the questions regarding enforceability and the co-terminus nature of the agreement are to be determined by the arbitral tribunal. The appeal was accordingly dismissed (!) (!) .
The parties were directed to bear their respective costs, and the Court revoked the previous nominations of arbitrators, appointing a single arbitrator to decide all pending disputes (!) (!) .

These points capture the essential legal principles and procedural decisions made in the case, focusing on arbitration, interim relief, and the enforceability of contractual agreements in the context of ongoing disputes.

JUDGMENT

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 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 re

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2007 Supreme(SC) 795

Cases Referred (1)