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2022 Supreme(All) 1025
IN THE HIGH COURT OF JUDICATURE AT ALLAHABAD
Devendra Kumar Upadhyaya, Rajnish Kumar, JJ.
M/s Sri Sai Nath Associates Thru. Partner Sri Upendra Bahadur Singh - Appellant
Versus
Babasaheb Bhimrao Ambedkar University, Through Its Registrar And Others - Respondents
Appeal Under Section 37 Of Arbitration And Conciliation Act 1996 No. 4 of 2022
Decided On : 08-08-2022
For the Appellant : Nilaya Gupta.
For the Respondent: Dr. V.K. Singh,Dr. V.K. Singh.
The main legal point established in the judgment is the importance of considering a prima facie case, irreparable loss, and balance of convenience when deciding on interim protection under Section 9 of the 1996 Act.
Headnote:
Arbitration - Termination of Contract - 1996 Act - [ARBITRATION] - [Arbitration, Termination of Contract] - [Section 37 of the Arbitration and Conciliation Act, 1996] - The court discussed the application of Section 9 of the 1996 Act and the principles for granting interim injunction. It highlighted the importance of a prima facie case, irreparable loss, and balance of convenience in granting interim protection. The court emphasized that the purpose of granting interlocutory orders is to preserve the rights of parties and mitigate the risk of injustice during pending proceedings.
Fact of the Case:
A contract was entered into between the appellant-firm and respondent-University for providing manpower services. The contract was terminated by the respondent-University, and the appellant-firm sought interim protection under Section 9 of the 1996 Act. The court below refused the prayer for interim protection, leading to the appeal.
Finding of the Court:
The court found that the lower court did not adequately consider the principles for granting interim injunction under Section 9 of the 1996 Act. It noted that the lower court failed to determine whether the appellant-firm had established a prima facie case and whether it would suffer irreparable loss or prejudice if the interim protection was not granted. The court also found that the balance of convenience was not adequately considered.
Issues: The issues revolved around the proper application of Section 9 of the 1996 Act and the principles for granting interim protection, including the establishment of a prima facie case, irreparable loss, and balance of convenience.
Ratio Decidendi: The court emphasized the importance of considering a prima facie case, irreparable loss, and balance of convenience when deciding on interim protection under Section 9 of the 1996 Act. It highlighted that the purpose of granting interlocutory orders is to preserve the rights of parties and mitigate the risk of injustice during pending proceedings.
Final Decision: The appeal was allowed, and the order of the lower court was set aside. The matter was remitted to the lower court for a fresh decision on the application under Section 9 of the 1996 Act. The court directed expedited proceedings and clarified that its observations should not influence the lower court's decision. No costs were awarded.
JUDGMENT :
1. Heard Sri Nilaya Gupta, learned counsel representing the appellant and Sri Rajesh Tiwari, learned counsel appearing on behalf of the respondent-University.
2. By instituting these proceedings of appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (herein after referred to as ‘1996 Act’), the appellant has laid a challenge to an order dated 11.03.20022, passed by the Commercial Court, Lucknow in Arbitration Case No. 03 of 2022, whereby the application made by the appellant under Section 9 of the 1996 Act praying grant of interim protection/order has been rejected.
3. A contract was entered into between the appellant-firm and respondent-University on 16.11.2017 for providing manpower services by the appellant-firm to the respondent-University. As per Clause 4 of the said agreement period of contract was initially for one year which was extendable upto 3 years on year to year basis at the discretion of the respondent-University and basis of such extension, as spelt out in the contract, was requirement and performance of the manpower and the Agency.
4. The contract entered into on 16.11.2017 was extended from time to time, however, by means of an order dated 07.01.2022, passed by the Registrar of the respondent-University, the contract between the parties was terminated w.e.f. 11.01.2022 and consequently the security deposit made by the appellant-firm was also forfeited giving the reason that work of the appellant-firm was not satisfactory.
5. The contract between the parties contains an arbitration clause which provides that in the event of any dispute or difference arising between the parties in respect of or under the agreement, the same shall be referred to the Vice Chancellor of the respondent- University whose decision shall be binding on the parties, however, if the appellant-firm is still not satisfied, then arbitration shall be conducted in accordance with the provisions of 1996 Act.
6. On passing of the order dated 07.01.2022 terminating the contract, the appellant-firm instituted a petition under Section 9 of 1996 Act before the Commercial Court at Lucknow seeking interim injunction against the respondent-University. The prayer made in the said petition under Section 9 of 1996 Act was that an ad interim/interim injunction may be granted to stay the operation and implementation of the order dated 07.01.2022 to the extent that it holds the appellant-firm guilty of unsatisfactory performance in respect of the agreement dated 16.11.2017, till disposal of the arbitral proceedings. It was further prayed that an ad interim/interim injunction may be granted to the appellant-firm restraining the respondent-University from taking any adverse action and also from rejecting the bid of the appellant-firm on the basis of the order dated 07.01.2022 in case the appellant participates in any future tender process.
7. The appellant-firm before the learned trial court pleaded, inter alia, that the order dated 07.01.2022 was passed on the basis of some report by some Committee and such a procedure was not envisaged in the contract. It was further pleaded by the appellant-firm before the learned court below that the Committee, pursuant to whose report the order dated 07.01.2022 has been passed, was constituted by the respondent-University and since such a Committee has not been envisaged in the contract entered into between the parties, hence it did not have any legal sanctity and accordingly the findings based on such a Committee’s report cannot supersede the contractual obligation between the parties. It was also pleaded that the order dated 07.01.2022 could not have been passed by the respondent-University and in fact it has been passed only to restrain the appellant-firm from participating in future tender process. Further submission of the appellant before the learned court below was that the order dated 07.01.2022 is stigmatic and that the same has been passed with malafide on the ground of unsatisfactory per
