Back
2009 Supreme(Bom) 1339
In the High Court of Bombay at Goa
THE HONOURABLE MR. JUSTICE A.H. JOSHI
M/s. Timblo Private Limited & Another
Versus
Smt. Kamalini R. Painguinkar & Others
Appeal From Order No.60 of 2009 & Appeal From Order No.61 of 2009
Decided on : 07-10-2009
For the Appellants:V.B. Nadkarni, Senior Advocate with Y.V. Nadkarni, Advocate. For the Respondents:S.G. Dessai, Senior Advocate with C. Mascarenhas, Advocate.
Headnote:Arbitration & Conciliation Act, 1996 - Section 9 - Appeal - Against order rejecting application filed under Section 9 of Act - Contract between Mine owner and appellant - Dispute arisen between - Appellants appointed Arbitrator in terms of agreement - Held - Loss to appellants/buyer far higher in magnitude than loss to mine owners - Impugned order set aside - Status quo prevailing between parties shall remain in operation for four weeks - Appeal allowed with costs. - Considering the collective effect, it is clear that loss to appellants is far higher in magnitude than loss to the mine owners. The loss to buyer is about 10 to 15 multiplier of loss to the mine owners. As the price of ore is fixed and fluctuation is meagre this loss and its preventive measures are reconstable This loss can be mitigated by directing the buyer to furnish a continuing security by way of Bank guarantee and directing monthly deposit towards weight in tonnes of processed ore delivered to buyer.
In the result, the appeals are allowed in the following terms :
(a) Both appeals are allowed with costs.
(b) impugned orders are set aside.
(c) Appellant’s arbitration Application No. 10 and No. 11 of 2009 of the file of District Court, Margao are allowed.
(d) Injunction shall operate against mine owners so long conditions stated in paragraph No. 52(b) are fulfilled.
(e) One month’s time is granted to fulfill/comply with condition (a) in para No. 52.
(f) The injunction shall operate and remain in force during pendency of arbitration and sixty days after delivery of certified copy of award or the completion of five years of renewal which ever period would end prior, and subject to compliance of conditions contained in foregoing to order clauses (d) and (e).
(g) The arbitrator shall be competent to deal with the manner in which the Bank Guarantee and amount in deposit in the form of fixed deposit receipts shall be dealt with.
Observations contained in this judgment shall not bind the arbitrator who would be bound to decide the reference according to facts as brought before him, law and justice.
(i) Status quo as prevailing between the parties shall remain in operation for four weeks from today.
Learned Advocates appearing for the respective parties have agreed for disposal of both these appeals, finally, at the stage of admission itself.
Background in brief:-
2. Respondents, who are common in both appeals are Mine Owners who are, for the sake of brevity, referred to as Mine Owners.
The appellants are Limited Companies.
Both the appellant-Companies are seen to be belonging to one and the same group of Management/Promoters. Two different contracts are entered by mine owner with these different appellants. These two transactions are in fact a package.
Respective appellants in Appeal no. 61/09 and 60/09 are referred to for the sake of brevity as “Buyer” and “Extractor”.
3. It appears that there are legal impediments in subleasing of the mining licence. Most of the Mine Owners and buyers / extractors have devised modality of entering into two contracts, one with buyer and another with extractor to undertake mining activity and processing. Same modality has been used/adopted in the present case as well.
4. The Mine Owners have been giving the work of extraction and processing to a firm or undertaking, which is a different business organization or to different commercial entity from the Buyer. The ore so extracted and treated is sold to the Buyer already contracted for. A long term arrangement is ordinarily worked out with the extractors and Buyer in the shape of a written contract / agreement.
5. In the suits at hand, the background and the modalities which reveal from record and respective submissions are summarized as follows:
(a) Deployment of Large amount of men machinery, monetary resource and expertise is required to be done for extraction and treatment of the Ore.
(b) Mine Owners normally do not have the arrangement of men Machinery and resource for extraction of the Ore and the treatment thereon.
(c) The Buyer and the extractor therefore, enter into contracts with Mine owners for a long tenure.
(d) The Buyer, therefore, make arrangement of a concern of its business associate to extract the Ore and to do the processing of ore for converting the raw Ore into marketable varieties of Ore.
(e) Such marketable Ore is sold by the Mine Owner to the Buyer.
(f) The Buyer pays to the Mine Owner the agreed price towards the marketable varieties of iron ore.
(g) Mine Owner pays to the extractor the charges towards extraction job work / labour / processing.
(h) Such contracts provide for an exclusive right of extraction and at purchase, in favour of extractor and Buyer.
(i) These contracts also contain a negative covenant operating against the Mine Owner stipulating that during currency of the of the agreed duration for extraction and sale, the Mine Owner is not entitled either to allot the work of extraction or sell the varieties at marketable ore, produced from the Mine to any other person other than the party with whom the agreement had been entered.
(j) It is common knowledge that these Agreements that those are replication of practice in vogue.
6. In present case, two separate Agreements were entered on 16.06.2003 by the Mine Owner namely:-
(i) One with appellant in Appeal From Order no. 60/2009 – the Agreement for extraction; and another
(ii) Another with the appellant in Appeal From Order no. 61/2009 – the Agreement for extraction sale.
7. Perusal of the Agreement entered with Buyer reveals that crucial clauses contained therein which govern the subject matter are Clause nos. 4(a), 9 and 22 of the Agreement for Sale. These clauses would be referred to whereever required by quoting those.
8. It appears that parties were under a belief that the first spell of agreed period of five years had to end on 15.06.2008. The appellant-buyer states that it has sent letter dated 19.11.2007 to the Mine Owner, offering / opting to renew and proposing a meeting for that purpose and for signing of agreement.
9. The letter dated 19.11.2007 contains expression of decision to continue to buy under earlier arrangement. It i
