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2013 Supreme(Mad) 4026
High Court of Judicature at Madras
V. RAMASUBRAMANIAN, J.
M/s. SBQ Steels Limited
Versus 3
M/s. Goyal Gases Private Limited
O.A. No. 813 of 2013
Decided On : 04-12-2013
For the Petitioner:S.R. Raghunathan for V. Anilkumar, Advocates.
For the Respondent:AR.L. Sundaresan, Senior Counsel for S.L. Sudharsanam, Advocate.
Headnote:
The Court held that the applicant had a prima facie case, balance of convenience, and would suffer irreparable hardship if an injunction was not granted. The Court also found that the respondent would not be put to any hardship if the parties went back to the position they were in before the contract was entered into. The Court granted a conditional order of injunction restraining the respondent from presenting the cheques and taking any action in pursuance thereof, on the condition that the applicant returned 17 postdated cheques to Goyal MG Gases Private Limited within a week of receipt of the order.
Fact of the Case:
The applicant, a steel plant, entered into an agreement with Goyal MG Gases Private Limited for the supply of oxygen and nitrogen gases. The agreement required the applicant to provide land on lease to Goyal MG Gases Private Limited to set up an Air Separation Plant. The applicant also agreed to take a minimum quantity of gas or pay for the minimum quantity to Goyal MG Gases Private Limited. Disputes arose between the applicant and Goyal MG Gases Private Limited, resulting in an interim order of injunction restraining the applicant from purchasing gas from anyone other than Goyal MG Gases Private Limited and a claim petition before the Arbitral Tribunal seeking various reliefs, including damages for termination of the contract. During the pendency of the arbitration proceedings, a fresh agreement was entered into between the applicant and the respondent, Goyal Gases Private Limited, which was described as the successor in interest of Goyal MG Gases Private Limited. The applicant contended that the contract was vitiated by fraud and misrepresentation and that the cheques were not supported by consideration. The respondent contended that the applicant had failed to implead Punjab National Bank, the ultimate beneficiary of the payments under the cheques, that the relief sought was barred by Section 41(d) of the Specific Relief Act, 1963, that the legal presumption under Section 139 of the Negotiable Instruments Act about the existence of a valid consideration in support of cheques issued in favour of a person was rebuttable only through evidence during trial, that the application for injunction was based on the premise that the agreement was void due to fraud, but a declaration that a contract was void could not be made by an Arbitral Tribunal, that the allegations of fraud were not referable to arbitration, but had to be adjudicated only in a Civil Court, and that after having signed the contract with eyes wide open to the covenants contained therein that the earlier disputes would remain unaffected, it was not open to the applicant to rely upon the earlier disputes to set at naught the agreement.
Finding of the Court:
The Court found that the applicant had a prima facie case that the contract was vitiated by fraud and misrepresentation, that the balance of convenience was in favour of the applicant, and that the applicant would suffer irreparable hardship if an injunction was not granted. The Court also found that the respondent would not be put to any hardship if the parties went back to the position they were in before the contract was entered into.
Issues: Whether the applicant had a prima facie case that the contract was vitiated by fraud and misrepresentation; Whether the balance of convenience was in favour of the applicant; Whether the applicant would suffer irreparable hardship if an injunction was not granted; Whether the respondent would be put to any hardship if the parties went back to the position they were in before the contract was entered into.
Ratio Decidendi: The Court held that the applicant had a prima facie case that the contract was vitiated by fraud and misrepresentation because the respondent had represented itself to be the successor in interest of Goyal MG Gases Private Limited, which was not true. The Court also found that the balance of convenience was in favour of the applicant because the respondent would not be put to any hardship if the parties went back to the position they were in before the contract was entered into, while the applicant would suffer irreparable hardship if an injunction was not granted because they would be forced to pay the value of the cheques or face other proceedings.
Final Decision: The Court granted a conditional order of injunction restraining the respondent from presenting the cheques and taking any action in pursuance thereof, on the condition that the applicant returned 17 postdated cheques to Goyal MG Gases Private Limited within a week of receipt of the order.
1. The applicant established a Steel Plant in Andhra Pradesh and entered into an agreement on 7.8.2008 with a company by name Goyal MG Gases Private Limited, for the supply of Oxygen and Nitrogen Gases. Under the said agreement, the applicant was obliged to provide a land on lease to Goyal MG Gases Private Limited, to enable them to design, build, commission and operate a 100 TPD Oxygen Capacity Production Facility and Storage System, by setting up an Air Separation Plant. It was intended that the gas generated from this Air Separation Plant would be supplied by Goyal MG Gases P. Ltd., to the applicant.
2. To enable them to set up the plant, Goyal MG Gases Private Limited appears to have obtained the sanction of a term loan of Rs.30 crores from the Punjab National Bank. It is relevant to note here that in order to enable Goyal MG Gases to repay their loan to the Bank duly and promptly, the agreement dated 7-8-2008 provided for a minimum off take of gas by the applicant, failing which the applicant was obliged to pay the price of such minimum quantity of gas. The sanction of the said loan by Punjab National Bank was on the condition that Goyal MG Gases Private Limited should obtain post dated cheques from the applicant herein towards the cost of supply of gases and deposit the same with the Bank. The post dated cheques were to be for the value of the minimum off take. Therefore, for the purpose of bringing on record the mutual rights and obligations, a tripartite agreement was entered into on 25.5.2009 between Goyal MG Gases Private Limited, the applicant herein and the Punjab National Bank. Under the said agreement, the applicant herein agreed to give 60 post dated cheques of Rs.35 lakhs each.
3. A further agreement known as Escrow Account Agreement was also entered into on 25.5.2009 between all the three parties, for the purpose of enabling the borrower viz., Goyal MG Gases Private Limited to open an escrow account and deposit into the account, all the amounts collected by them. The applicant herein acted as the confirming party to the said agreement.
4. Pursuant to the above agreements, Goyal MG Gases Private Limited also obtained an exclusive license on 22.4.2009 from the concerned Authority. But, unfortunately, the applicant went into difficulties in view of the ban of mining activities in several States. This led to disputes between the applicant and Goyal MG Gases Private Limited.
5. Since the agreements contained a clause for the arbitration, Goyal MG Gases Private Limited filed an application on the file of the Delhi High Court under Section 9 of the Arbitration and Conciliation Act, 1996, seeking an interim order of injunction. By an order dated 26.3.2012, the Delhi High Court granted an interim order in favour of Goyal MG Gases Private Limited, restraining the applicant herein from taking the supply of Oxygen and Nitrogen Gases from any supplier other than Goyal MG Gases Private Limited. The statement that Goyal MG Gases Private Limited will continue to supply gases as per the terms of the agreement and also maintain the pressure of gases, was also recorded in the said order.
6. Thereafter, the dispute between the parties appears to have been referred to an Arbitral Tribunal comprising of Hon'ble Mr. Justice A.S.Anand (Retd.), Hon'ble Mr. Justice Doraiswamy Raju (Retd.) and Hon'ble Mr. Justice R.C.Chopra.
7. During the pendency of the arbitration proceedings, the applicant herein filed an application under Section 9 of the Act, before this Court seeking an interim order of injunction restraining the Goyal MG Gases Private Limited from presenting 33 postdated cheques given by them, till the disposal of the arbitration proceedings. But the said application was dismissed by this Court, on the basis of Section 42 of the Arbitration and Conciliation Act, 1996, in view of the Delhi High Court entertaining the first application under Section 9.
8. It appears that after the dismissal of the application of the applica
