2007 Supreme(SC) 944

2007(5) Supreme 844
Supreme Court of India
(From Orissa High Court)
H.K. Sema & P.K. Balasubramanyan, JJ.
Adhunik Steels Ltd. — Petitioner
versus
Orissa Manganese and Minerals Pvt. Ltd. — Respondent
Appeal (Civil) 6569 of 2005
[with C.A. No. 6570 of 2005]
Decided on : 10-07-2007

important point
It would not be correct to say that the power under Section 9 of the Act is totally independent of the well known principles governing the grant of an interim injunction that generally govern the courts in this connection.

Headnote:Arbitration and Conciliation Act, 1996 – Section 9 – The grant of an interim prohibitory injunction or an interim mandatory injunction are governed by well known rules and it is difficult to imagine that the legislature while enacting Section 9 of the Act intended to make a provision which was de hors the accepted principles that governed the grant of an interim injunction – It is not possible to keep out the concept of balance of convenience, prima facie case, irreparable injury and the concept of just and convenient while passing interim measures under Section 9 of the Act. (Para 10)

       Arbitration and Conciliation Act, 1996 – Section 9 – The process of arbitration is dependant on the underlying support of the courts who alone has the power to rescue the system when one party seeks to sabotage it. (Para 11)

       1994 (2) Lloyd’s Report 109 – Relied upon.

       Words and phrases – Injunction – Injunction is a form of specific relief. It is an order of a court requiring a party either to do a specific act or acts or to refrain from doing a specific act or acts either for limited period or without limit of time. In relation to a breach of contract, the proper remedy against a defendant who acts in breach of his obligations under a contract is either damages or specific relief. The two principal varieties of specific relief are decree of specific performance and the injunction. (Para 13)

       1993 Appeal Cases 334 – Relied upon.

       Specific Relief Act, 1963 – Scope – The law of specific relief is said to be, in its essence, a part of the law of procedure, for, specific relief is a form of judicial redress – Thus, the Specific Relief Act, 1963 purports to define and amend the law relating to certain kinds of specific reliefs obtainable in civil courts – It does not deal with the remedies connected with compensatory reliefs except as incidental and to a limited extent – The power to grant injunctions by way of specific relief is covered by the Specific Relief Act, 1963. (Para 13)

       Arbitration and Conciliation Act, 1996 – Section 9 r/w Specific Relief Act, 1963 – When the grant of relief by way of injunction is, in general, governed by the Specific Relief Act, and Section 9 of the Act provides for an approach to the court for an interim injunction, the relevant provisions of the Specific Relief Act cannot be kept out of consideration. (Para 14)

       AIR 1999 M.P. 57 – Overruled impliedly.

       Arbitration and Conciliation Act, 1996 – Section 9 – In absence of any special condition or special procedure contained in section 9, the approach that at the initial stage, only the existence of an arbitration clause need be considered is not justified. (Para 15 and 17)

       [1979] AC 210; [2007] 1 W.L.R. 320 – Relied upon.

       Arbitration and Conciliation Act, 1996 – Section 9 – It was open to the court to pass an order by way of an interim measure of protection that the existing arrangement under the contract should be continued pending the resolution of the dispute by the arbitrator – But whether an interim mandatory injunction could be granted directing the continuance of the working of the contract, had to be considered in the light of the well-settled principles in that behalf – Similarly, whether the attempted termination could be restrained leaving the consequences thereof vague would also be a question that might have to be considered in the context of well settled principles for the grant of an injunction – Therefore, it would not be correct to say that the power under Section 9 of the Act is totally independent of the well known principles governing the grant of an interim injunction that generally govern the courts in this connection. (Para 18)

       Code of Civil Procedure, 1908 – Order XXXIX Rule 2 – An interim injunction could be granted restraining the breach of a contract and to that extent Adhunik Steels may claim that it has a prima facie case for restraining O.M.M. Private Limited from breaching the contract and from preventing it from carrying on its work in terms of the contract, notwithstanding the reasons therefor – O.M.M. Private Limited directed not to enter into a contract for mining and lifting of minerals with any other entity until the conclusion of the arbitral proceedings. (Paras 20 and 21)

       Arbitration and Conciliation Act, 1996 – Section 11(6) – In view of the issue of appointing an arbitrator being pending in the Orissa High Court for more than two years, Supreme Court appointed a sole arbitrator. (Para 25)

       Facts of the case :

       O.M.M. Private Limited obtained a mining lease from the Government of Orissa for mining manganese ore from certain extents of land situate in Sundargarh district in the State of Orissa. For reasons of its own, O.M.M. Private Limited entered into an agreement dated 14.5.2003 with Adhunik Steels for raising the manganese ore on its behalf. The term of the agreement was 10 years with effect from 18.5.2003, it conferred on Adhunik Steels an option to seek a renewal for a further term.

        According to Adhunik Steels, pursuant to this agreement, it had mobilized huge resources for carrying on the excavation and extraction of the mineral by arranging for the necessary labour, staff, equipments, and so on. It had also incurred expenditure for removing the overburden. On 24.11.2003, O.M.M. Private Limited issued a notice to Adhunik Steels purporting to terminate the agreement. The notice also called upon Adhunik Steels to remove their workmen and equipment from the site. According to O.M.M. Private Limited, it had realized that the contract it had entered into with Adhunik Steels was one in violation of Rule 37 of the Mineral Concession Rules, 1960 and since there was danger of O.M.M. Private Limited itself losing its rights as a lessee, the contract had to be terminated. Adhunik Steels, alleging that it had incurred considerable expenditure and had already incurred losses, moved the District Court at Sundargarh under Section 9 of the Act for an injunction restraining O.M.M. Private Limited from terminating the contract and from dispossessing Adhunik Steels from the site of the mines and for other consequential reliefs. The said application was opposed by O.M.M. Private Limited on various grounds. Ultimately, by order dated 18.8.2004, the District Court allowed the application and restrained O.M.M. Private Limited from relying on, acting upon or giving effect to the letter of termination dated 24.11.2003 and further restraining O.M.M. Private Limited from dispossessing Adhunik Steels from the mines in question. The order was to remain in force till the final award that was to be passed by an Arbitral Tribunal constituted in terms of the arbitration agreement.

       Aggrieved by the order of the District Court, Sundargarh, O.M.M. Private Limited filed an appeal before the High Court of Orissa. The High Court allowed the appeal filed by O.M.M. Private Limited and set aside the order of injunction passed by the District Court, Sundargarh.

       Findings of the Court:

       When the stand of O.M.M. Private Limited is that it was canceling the agreement mainly because it was hit by Rule 37 of the Mineral Concession Rules, 1960; it is clear that O.M.M. Private Limited cannot enter into a similar transaction with any other entity.

       Result : Appeal filed by O.M.M. Private Limited dismissed. The appeal filed by Adhunik Steels also dismissed substantially except to the extent of grant of an order of injunction restraining O.M.M. Private Limited from entering into a transaction for mining and lifting of the ore with any other entity.