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RAJASTHAN HIGH COURT AT JAIPUR
BELA M TRIVEDI, J.
Rajasthan Rajya vidyut Utpadan Nigam Ltd.
vs.
Manglam Cement Ltd.
S.B. Civil Misc. Appeal No. 1862 of 2012
Decided On: 18/11/2013
ARBITRATION - INTERIM MEASURES - RESTRAINING APPELLANT FROM PROCEEDING WITH NIT AND SUPPLY OF FLY ASH - VALIDITY OF AGREEMENTS - INTERPRETATION OF CLAUSES - JURISDICTION OF COURT UNDER SECTION 9 OF ARBITRATION AND CONCILIATION ACT, 1996.
Fact of the Case:
Appellant, a power generation company, entered into agreements with respondent cement companies for the disposal of fly ash generated during electricity generation. The agreements were for a period of 5 years, with a provision for review and continuation beyond that period. After the expiry of 5 years, the appellant floated a NIT for fresh work contracts. The respondents approached the court under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim measures to restrain the appellant from proceeding with the NIT and to continue supplying fly ash.
Finding of the Court:
The court held that the agreements in question had come to an end by efflux of time and that the appellant was entitled to invite fresh tenders. The court also held that the proposal made by one of the respondents for a 25-year contract was not accepted by the appellant and could not be taken into consideration. The court further held that the agreements were in the nature of determinable contracts and could not be specifically enforced. Therefore, the court below had exceeded its jurisdiction in granting the interim measures.
Issues: 1. Whether the agreements between the appellant and the respondents were still in force after the expiry of 5 years? 2. Whether the court below had the jurisdiction to grant interim measures under Section 9 of the Arbitration and Conciliation Act, 1996, to restrain the appellant from proceeding with the NIT and to continue supplying fly ash?
Ratio Decidendi: 1. The court held that the agreements in question had come to an end by efflux of time and that the appellant was entitled to invite fresh tenders. The court relied on the specific terms of the agreements, which provided for a period of 5 years, with a provision for review and continuation beyond that period. The court also held that the proposal made by one of the respondents for a 25-year contract was not accepted by the appellant and could not be taken into consideration. 2. The court held that the agreements were in the nature of determinable contracts and could not be specifically enforced. Therefore, the court below had exceeded its jurisdiction in granting the interim measures.
Final Decision: The court allowed the appeals filed by the appellant and set aside the impugned order of the court below.
With the consent of the learned counsels for the parties all the four appeals are heard finally at the admission stage.
2. All the four appeals arise out of the common order dated 18-2-2012 passed by the Addl. District Judge No. 9, Jaipur Metropolitan Court, Jaipur (hereinafter referred to as Court below) in Applications being Civil Misc. Application (Arbitration) Nos. 438/11, 439/11, 440/11 and 445/11, under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the said Act), whereby the Court below has allowed the said applications filed by the respective respondents-applicants in all the matters, and has restrained the appellant-non-applicant from proceeding further with the notice inviting tender (NIT for short) dated 24-8-2011 and also from causing any obstruction to the respondent-companies in the supply of fly ash till the pendency of the arbitration proceedings that may be initiated between the parties.
3. The short facts giving rise to the present appeals are that the appellant company is engaged in the process of electricity generation, having its thermal power plant at Kota and the respondent-companies are the companies registered under the Companies Act, and are the manufacturers of the cement. The appellant company generates the electricity by using the coal and during such generation, the ash which is produced as a waste, is being used by the cement companies in the production of the cement. The appellant company, therefore, had invited the respondent-companies for the disposal of the fly ash being generated in its different units since the respondent-companies also intended to utilise the fly ash blending for the production of cement, the appellant entered into the four separate agreements with four respondent-companies i.e. with Manglam Cement Ltd. on 14-10-2004, with Shree Cement Ltd. on 2-11-2004, with Ultratech Ltd. (earlier Grasim Industries Ltd.) on 15-10-2004 and with ACC Cement Ltd. on 7-10-2004. Pursuant to the said agreements, the said respondent companies installed the fly ash commissioning system on 31-7-2007, 16-10-2007, 30-3-2007 and 10-7-2007 respectively. The relevant clauses of the agreements in question entered into between the appellant and the respondents are reproduced herein for the sake of convenience.
“2.2 KSTPS will provide the above land on lease to GIL for installing infrastructure facility on token lease money. The lease of land shall be initially for a period of 5 years only which may be extended by RRVUNL. Ownership and other rights shall remain with KSTPS.
2.8 RRVUNL agrees to supply fly ash free of cost, initially for a period of 5 years and the same may be reviewed every year on the basis of performance of the firm (GIL) and then prevailing circumstances. The agreement shall finally be reviewed on fresh terms and conditions as agreed mutually for continuation beyond the period of 5 years.
2.11 In case GIL may not be able to take delivery of fly ash from Units 4 and 5 for a period of more than a month for reasons other than unforeseen situations/routine break downs or any other conditions beyond the control of GIL, KSTPS will reserve the right to own the system. Similarly under any other situation of non-fulfillment of Agreement on the part of GIL, the permission will be withdrawn and the installed system shall be taken over by RRVUNL/KSTPS.
2.12 The system installed by GIL shall become sole property of KSTPS/RRVUNL on expiry/termination of the agreement.
2.13 GIL agrees to pay Rs.12 lakhs per annum to RRVUNL, out of which, Rs.10 lakhs will be reimbursement towards maintenance cost of the approach road from storage silos to Gate No. 4 and Rs.2 lakhs for maintaining the cleanliness of the surrounding, where the transit silos and storage silos will be installed and the road used for the purpose.
2.14 The dry ash collection system to be installed by GIL will be generally in line with the proposal submitted by GIL as annexed at Appendix A, subject to tech
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