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2013 Supreme(Bom) 620
High Court of Judicature at Bombay
R.D. DHANUKA, J.
M/s. Goldstar Metal Solutions Pvt. Ltd.
Versus
Dattaram Gajanan Kavtankar & Others
Arbitration Appeal No. 12 of 2013 In Arbitration Application No. 1 of 2012 Alongwith Civil Application No. 7 of 2013 With Arbitration Appeal No. 13 of 2013 Alongwith Civil Application No. 6 of 2013
Decided on : 13-03-2013
For the Petitioner:Ravi Kadam, Senior Advocate, a/w. Premlal Krishnan, Chetan Kapadia, i/b. Indialaw, D.D. Madon, Senior Advocate, a/w. Jose George, Advocates.
For the Respondents:R1, Atul Rajadhayaksha, Senior Advocate, a/w. S. Khandeparkar, i/b. Amogh Karandikar, R2, Prasad Dhakephalkar, Senior Advocate, a/w. Sangram D. Desai, Lokesh Zade, Advocates.
The court held that the existence of an arbitration agreement is a jurisdictional issue that must be decided by the court before it can grant interim relief under Section 9 of the Arbitration and Conciliation Act, 1996.
Headnote:
JUDGMENT - [KEYWORD] - [SUBJECT] - [ACT SECTION LIST] - [SUMMARY]
Fact of the Case:
M/s. Goldstar and M/s. Vidharbh filed two separate appeals under Section 37 of the Arbitration and Conciliation Act, 1996, challenging the order dated 30th January 2013 passed by the District Judge - 1, Sindhudurg, allowing the application filed by Mr. Dattaram Kavtankar under Section 9 of the Arbitration Act, 1996, and granting injunction against the applicants.
Finding of the Court:
The court found that the impugned order passed by the learned District Judge is totally perverse and is contrary to law laid down in the judgment of the Supreme Court in case of S.B.P. & Co. (supra) and deserves to be set aside in toto.
Issues: 1. Whether the learned District Judge could have passed interim order against M/s. Vidharbh though the said company was not a party to any arbitration agreement in the facts of this case? 2. If there are serious allegations of fraud and fabrication in respect of the arbitration agreement itself made by a party to the arbitration petition under section 9, the learned District Judge could himself decide that issue under section 9 or such issue could be decided only by a civil court? 3. Whether in the facts of this case, the learned District Judge was justified in granting mandatory injunction against both the appellants in application under section 9 of the Arbitration and Conciliation Act.
Ratio Decidendi: 1. The court held that the learned District Judge was bound to decide the issue about existence of arbitration agreement before proceeding with the matter on merits and before granting any interim relief under section 9. The court would have jurisdiction to grant interim measures under section 9 of the Arbitration Act, 1996 only if an arbitration agreement exist between the parties and not otherwise. 2. The court held that in view of such serious allegations which were prima facie demonstrable, such issue could not be left open to be decided by the Arbitral Tribunal. The existence of such MOU would also have bearing on the existence of the arbitration clause between Mr. Kavtankar and M/s. Goldstar. Therefore, in view of such serious allegations made by M/s. Goldstar and in the court's prima facie view appears to have substance, it was not proper on the part of the learned District Judge to refer the said issue or keep those issues open to be decided by the Arbitral Tribunal. 3. The court held that unless the learned District Judge could have decided the issue about existence of arbitration agreement, the learned judge could not have granted by interim measures and that also to make such order operative till the appointment of arbitrator. The impugned order, in the court's view disclose the perversity and deserves to be set aside.
Final Decision: The court allowed the appeals, set aside the impugned order, and dismissed the arbitration application.
By these two appeals filed under section 37 of the Arbitration and Conciliation Act, 1996, (for short ‘Arbitration Act, 1996’) the appellant seeks to challenge the order dated 30th January, 2013 passed by the Learned District Judge – 1, Sindhudurg allowing the application filed by the 1st respondent, Mr.Dattataram Gajanan Kavtankar under section 9 of the Arbitration Act, 1996, and granting injunction against the applicants (hereinafter referred to as Mr. Kavtankar). M/s. Goldstar Metal Solutions Pvt. Ltd., the appellant in Arbitration Appeal No. 12 of 2013 is hereinafter referred to as M/s. Goldstar. M/s. Vidharbh Mining Pvt. Ltd., the appellant in Arbitration Appeal No. 13 of 2013 is hereinafter referred to as M/s. Vidharbh. Mr.Ravindra Sadanand Phatak, the 2nd respondent in these two appeals is hereinafter referred to as Mr. Phatak.
2. As both these appeals arise from the same order, by consent of parties, both these appeals were heard together and are being disposed of by a common order.
3. Some of the relevant facts for the purpose of deciding these appeals are as under:-
4. The Government of Maharashtra had executed mining lease for iron ore mines in Sindhudurg District, Maharashtra of admeasuring 20 : 24 hectare vide agreement dated 9th July, 1987, admeasuring 36 : 91 hectare vide agreement dated 29th June, 1976, admeasuring 52 : 12 hectare vide agreement dated 30th October, 2004 in favour of the M/s. Deccan Minerals Pvt. Ltd. By an agreement dated 21st October, 2007 M/s.Deccan Minerals Pvt. Ltd. agreed to sell the entire ROM extracted from the mine, admeasuring 20 : 24 hectare to M/s. Goldstar and M/s. Goldstar agree to purchase from the said M/s. Deccan on payment of royalty at the rate of Rs.175/-PWMT upto 56% Fe grade in excess of the raising charges agreed between M/s.Deccan and M/s. Vidharbh M/s.Deccan simultaneously entered into a separate agreement with M/s. Vidharbh for raising iron ore from the said mines. It was provided that both these agreements were co-terminus with the period of extracted agreement dated 21st October, 2007. Both these agreements were valid for a period of five years. By a Memorandum of Understanding dated 28th December, 2008 entered into between M/s. Goldstar and Mr. Phatak, M/s. Goldstar appointed Mr. Phatak as a facilitator. Under the said agreement, M/s. Goldstar agreed to share 30% of net profit arrived from the sale of iron ore excavated from the mines admeasuring 20.24, 36.91 and 52.12 hectares with Mr. Phatak. In the said agreement it was provided that the tenure of the said agreement would be co-terminus with the period of ore raising agreement and sale/purchase agreement executed between M/s. Goldstar and M/s.Deccan from the said mines. It was provided that Mr. Phatak and M/s. Goldstar would make joint efforts to ensure smooth operation and would ensure that all legal requirements were duly and timely complied with and would jointly ensure all responsibilities as provided by M/s.Deccan to M/s. Goldstar vide ore raising and sale/purchase agreement. The said agreement was signed by the director of M/s. Goldstar Mr.Prem Prakash Saraogi on behalf of M/s. Goldstar and was also signed by Mr. Phatak.
5. On 10th May, 2011, M/s.Deccan Pvt. Ltd. entered into a sale purchase agreement with M/s. Goldstar thereby agreeing to sale ore raised by M/s. Vidharbh under the ore raising agreement to M/s. Goldstar only on the terms and conditions recorded therein. The parties referred to earlier agreement dated 21st October, 2007, in the said agreement M/s. Goldstar had deposited a sum of Rs.5 lacs as deposit in the said mines with M/s.Deccan which continued to be held by as such by M/s.Deccan. By efflux of time, earlier agreement dated 21st October, 2007 came to an end. The period of the said agreement was to be co-terminus with the period of ore raising agreement of even date between M/s.Deccan and M/s. Vidharbh. Under the said agreement, M/s. Goldstar agreed to pay the consideration to M/
