Arvind Constructions Co. Pvt. Ltd Vs. M/S Kalinga Mining Corporation & Ors 
Insc 616 (17 May 2007)
TARUN CHATTERJEE & P.K. BALASUBRAMANYAN
CIVIL APPEAL NO. 2707 OF 2007 (Arising out of SLP(C) No. 3294 of 2007) P.K.
1. Leave granted.
2. M/s Kalinga Mining Corporation, a partnership firm bearing registration
No. 71/1949, came into existence on 10.12.1949. During the years from 1973 to
1980, the firm obtained three mining leases from the State Government. The
partnership firm was reconstituted in the year 1980, taking in some additional
partners, again in the year 1991 and yet again in the year 1994.
3. On 14.3.1991, the firm entered into an agency agreement with the
appellant, a private limited company for a term of 10 years. Thereby, the
appellant was engaged as a raising contractor in respect of the mines for which
the firm had obtained leases from the State Government. On 25.3.1991, the firm
executed an irrevocable Power of Attorney in favour of the appellant
authorizing it to administer the mines and sell the iron ore extracted
4. On 13.3.2001, the term of 10 years fixed in the agency agreement expired.
New terms were negotiated between the parties and on 22.9.2001, the agreement
was extended for a period of three years commencing from 14.3.2001. The term
was to end with 31.3.2003. Again, on 3.9.2003, the term of the agreement was
extended for a further period of three years commencing from 1.4.2003.
Thereby, the period was to end with 31.3.2006.
5. The appellant sought a further extension of the term of the agency
agreement. Apparently, the firm was not willing for an extension. Certain
disputes thus arose and by letter dated 19.11.2005, the appellant-company
sought resolution of the said disputes. The appellant- company followed this up
by a letter dated 9.12.2005 invoking the arbitration clause in the agency
agreement and nominating Mr. Sanjeev Jain as its arbitrator in terms of the
6. It is seen that the respondent firm, for reasons best known to itself,
sought for and got a fresh registration on 24.12.2005 and a firm having the
same name was again registered and assigned registration No. 595/2005.
Prima facie, this was unwarranted and the excuse put forward was that the
partners, some of whom were partners even originally, could not trace the
papers relating to the registration of the firm in the year 1949. Be that as it
may, on receipt of the communication in that behalf from the appellant-company
nominating an arbitrator, the firm in its turn named an arbitrator. In terms of
the arbitration clause, the arbitrators had to name the Presiding Arbitrator.
In spite of lapse of time, the arbitrators did not meet and nominate a
Presiding Arbitrator. In that context, the appellant-company filed a petition
under Section 11(4)(b) of the Arbitration and Conciliation Act, 1996
(hereinafter referred to as, "the Act") requesting the Chief Justice
of the High Court of Orissa to appoint the third arbitrator on the basis that
the firm had failed to act in terms of the procedure agreed to by the parties.
The said application is said to be pending.
7. The appellant-company also moved an application under Section 9 of the
Act before the District Court, Cuttack seeking interim relief essentially to
permit it to continue to carry on the mining operations and to restrain the
respondent firm from interfering with it.
According to the appellant, the agreement between the parties was
co-terminus with the subsistence of the mining lease granted by the State in favour
of the respondent firm and since the leases continue to subsist, the
appellant-company was entitled to an extension of the period of the contract
and what remained was only a negotiation regarding the terms at which the
agreement has to be worked by the appellant-company. The appellant further
pleaded that it had made all the investments for the purposes of carrying on
the mining operations and had brought in the requisite machinery for that
purpose. All the necessary investments had been made by it and in that
situation, the balance of convenience was in favour of the grant of an interim
order as sought for by the appellant. The respondent firm resisted the
application, inter alia, contending that the agreement between the parties was
essentially an agency agreement. Such an agreement could not be specifically
enforced. On the expiry of the term, the appellant- company had no subsisting
right or status to carry on mining and in that situation the injunction sought
for could not be granted. It was also contended that going by Section 14 and
Section 41 of the Specific Relief Act, such a contract is unenforceable.
Therefore the injunction prayed for could not be granted.
8. The District Court, while entertaining the application had made an order
on 8.3.2006 directing the parties to maintain the status quo. After hearing the
parties, the District Court took the view that it would be just and appropriate
to maintain the order of status quo until the disputes are referred to the
Arbitral Tribunal and the Tribunal takes seisin of the dispute. Thus, the order
of status quo originally granted was directed to continue until the Arbitral
Tribunal was constituted to take up the disputes between the parties. Feeling
aggrieved, the respondent firm --- there is a plea that the appeal was filed by
the firm of 2005 and not by the firm of 1949 which we shall deal with --- filed
an appeal before the High Court of Orissa. The High Court took the view that
the District Court was in error in granting an order to maintain the status quo
since prima facie the agreement between the parties was not a specifically
enforceable one in terms of the Specific Relief Act and since the term of the
agreement had expired it was not appropriate to grant an interim order as
granted by the District Court. Thus, the High Court reversed the decision of
the District Court and dismissed the application filed by the appellant-company
under Section 9 of the Act.
9. Feeling aggrieved by the said decision, the appellant-company has filed
this appeal. It is contended on its behalf that the appeal filed before the
High Court was not by the firm bearing registration No. 71/1949 with which the
appellant-company had the agreement. The arbitration clause, which the
appellant-company had invoked, was in relation to that agreement and hence the
appeal before the High Court, at the instance of the firm bearing registration
No. 595/2005, was not maintainable.
It was further contended that since the agreement relied upon by the
appellant in the light of the irrevocable Power of Attorney was co-terminus
with the mining lease granted to the respondent firm by the State Government,
the same could not be terminated and would not come to an end by efflux of
time. The entire approach made by the High Court to find otherwise was
erroneous. It was further submitted that this was a case in which the agreement
could be specifically enforced in the light of Sections 10 and 42 of the
Specific Relief Act. It was also faintly suggested that the powers under
Section 9 of the Act were independent of any restrictions placed by the
Specific Relief Act and viewed in that manner, nothing stood in the way of the
appellant-company being granted an order of injunction or at least an order to
maintain status quo until the Arbitral Tribunal decided the dispute.
10. On behalf of the respondent firm, it was contended that it was only a
case of reconstitution of the 1949 firm. It was a mistake to have the firm
registered again in the year 2005 under a different registration number. Steps
have been taken to rectify the mistake in that regard. It was further submitted
that the appeal before the High Court was filed by the firm represented by its
partner, who was also a partner in the firm registered in the year 1949. The
appellant-company had impleaded in its application under Section 9 of the Act
all those who were presently partners of the firm and there was no grace in the
contention of the appellant-company that the appeal in the High Court was not
filed by the firm which was a party to the contract with the appellant. On
merits, it was submitted that the agreement was for a specific term, there was
no irrevocability in the agency agreement and an agreement like the one entered
into between the parties by way of a raising contract, could not be specifically
enforced as rightly held by the High Court. It was also pointed out that the
respondent firm had lost confidence in the appellant-company and in such a
situation, the appellant-company cannot claim to continue as an agent of the
respondent firm since the creation or continuation of an agency arrangement
depends on the confidence reposed by the principal on the agent. It was also
pointed out that subsequent to the expiry of the term, a tripartite agreement
had been entered into with a labour union and it contained a recognition that
the period of the contract between the respondent firm and the appellant-
company had come to an end. It could be seen therefrom that the
appellant-company had taken over, directly, the liability in respect of the labourers
who were being employed by the appellant-company during the subsistence of the
raising contract. It was also submitted that the respondent firm had started
mining operations on its own and the balance of convenience was not in favour
of grant of any interim order as was done by the District Court. At best, the
damages, if any, suffered by the appellant-company was determinable in terms of
money and this was a case in which no injunction to perpetuate the agreement
could be granted, especially as it involved supervision of minute details which
the court would not normally undertake. It was also pointed out that grant of
any injunction in favour of the appellant-company would put the respondent firm
in danger of being exposed to prosecutions and other liabilities under law
since it was the mining agency under the State Government. It was therefore
submitted that the appellant-company had no prima facie case for an injunction
as sought for.
11. The objection that the appeal filed before the High Court was not
competent need not detain us much.
It was the appellant who filed the application under Section 9 of the Act
impleading the firm and its partners.
The said firm represented by a partner, who even admittedly was a partner of
the firm as constituted in the year 1949 and was also a party to the agreement
with the appellant-company itself, had filed the appeal before the High Court.
There is no case that the firm registered in the year 1949 had been dissolved.
On the other hand, we find that it was being reconstituted from time to time.
Therefore, the fact that, foolishly or otherwise, a firm in the same name
was again registered in the year 2005, does not affect the status of the firm
with which the appellant-company had a contract and the filing of the appeal by
that firm represented by its partner. It was brought to our notice that the
respondent firm had sought a rectification of the register realizing the
mistake that was made in having the same firm registered all over again, and
that the said matter is pending. Considering the circumstances, we are of the
view that the argument that the appeal before the High Court was not competent,
it not having been filed by the firm with which the appellant- company had the
contract, is unsustainable. The said contention is therefore overruled.
12. The effect of the agreement dated 14.3.1991 and the Power of Attorney
dated 25.3.1991 admittedly executed between the parties and the rights and
obligations flowing therefrom are really matters for decision by the Arbitral
Tribunal. We do not think that it is for us, at this interlocutory stage, to
consider or decide the validity of the argument raised on behalf of the
appellant-company that the agreement between the parties was co-terminus with
the mining leases and the respondent firm could not terminate the agreement so
long as the mining leases in its favour continued to be in force. Nor do we
think it proper to decide the sustainability of the argument on behalf of the
respondent firm that it was mainly an agency agreement for a fixed term and on
the expiry of the term, no right survives in the appellant-company unless of
course the respondent firm agreed to an extension of the period. We leave that
question open for decision by the Arbitral Tribunal.
13. Prima facie, it is seen that the mining lessee had entered into an
agreement with the appellant-company for the purpose of raising the iron ore
from the area covered by the mining lease. The term of the original agreement
expired and this was followed by two extensions for three years each.
Thereafter, the respondent firm had refused to extend the agreement and claims
that it wants to do the mining itself. Prima facie, it is not possible to say
that the High Court was wrong in thinking that it may be a case where an
injunction could not be granted in view of the provisions of the Specific
Relief Act. Here again, we do not think that we should pronounce on that
question since that again will be a question for the arbitrator to pronounce
upon. Suffice it to say that the position is not clear enough for us to assume
for the purpose of this interlocutory proceeding that the appellant is entitled
to specifically enforce the agreement dated 14.3.1991 read in the light of the
Power of Attorney dated 25.3.1991. Of course, this aspect will be again subject
to the contention raised by the appellant-company that the agreement created in
his favour was co-terminus with the mining lease itself. But, as we have
stated, these are the aspects to be considered by the Arbitral Tribunal. We
refrain from pronouncing on them at this stage.
14. We think that adequate grounds are not made out by the appellant at this
interlocutory stage for interfering with the order of the High Court. In that
view alone, we consider it proper to decline to interfere with the order of the
High Court and leave the parties to have their disputes resolved in terms of
the arbitration agreement between the parties.
15. The argument that the power under Section 9 of the Act is independent of
the Specific Relief Act or that the restrictions placed by the Specific Relief
Act cannot control the exercise of power under Section 9 of the Act cannot
prima facie be accepted. The reliance placed on Firm [(2004) 3 S.C.C. 155] in
that behalf does not also help much, since this Court in that case did not
answer that question finally but prima facie felt that the objection based on
Section 69 (3) of the Partnership Act may not stand in the way of a party to an
arbitration agreement moving the court under Section 9 of the Act. The power
under Section 9 is conferred on the District Court. No special procedure is
prescribed by the Act in that behalf.
It is also clarified that the Court entertaining an application under
Section 9 of the Act shall have the same power for making orders as it has for
the purpose and in relation to any proceedings before it. Prima facie, it
appears that the general rules that governed the court while considering the
grant of an interim injunction at the threshold are attracted even while
dealing with an application under Section 9 of the Act. There is also the
principle that when a power is conferred under a special statute and it is
conferred on an ordinary court of the land, without laying down any special
condition for exercise of that power, the general rules of procedure of that
court would apply. The Act does not prima facie purport to keep out the
provisions of the Specific Relief Act from consideration. No doubt, a view that
exercise of power under Section 9 of the Act is not controlled by the Specific
Relief Act has been taken by the Madhya Pradesh High Court. The power under
Section 9 of the Act is not controlled by Order XVIII Rule 5 of the Code of
Civil Procedure is a view taken by the High Court of Bombay.
But, how far these decisions are correct, requires to be considered in an
appropriate case. Suffice it to say that on the basis of the submissions made
in this case, we are not inclined to answer that question finally. But, we may
indicate that we are prima facie inclined to the view that exercise of power
under Section 9 of the Act must be based on well recognized principles
governing the grant of interim injunctions and other orders of interim
protection or the appointment of a receiver.
16. It is seen that in spite of the parties naming their respective
arbitrators, in terms of the arbitration agreement, more than one year back,
the arbitrators so appointed had not been able to nominate a Presiding
Arbitrator in terms of the arbitration agreement. We therefore put it to
counsel on both sides as to why we shall not constitute an Arbitral Tribunal in
view of their failure to constitute the Arbitral Tribunal in terms of the
arbitration agreement and in view of the urgency involved in resolving the
disputes between the parties. Counsel on both sides agreed that this Court may
appoint either a Presiding Arbitrator or a sole arbitrator for the purpose of
resolving the disputes between the parties. A panel of names was furnished.
Having considered the names shown therein and taking note of the submissions at
the bar, we think that it would be appropriate and just to both the parties to
appoint Mr. Justice Y.K. Sabharwal, former Chief Justice of India as the sole
arbitrator for deciding all the disputes between the parties. We therefore
appoint Mr. Justice Y.K. Sabharwal, former Chief Justice of India as the sole
arbitrator to decide on the disputes between the parties springing out the
agreement dated 14.3.1991 and the Power of Attorney dated 25.3.1991. The
arbitrator would be free to fix his terms in consultation with the parties. We
would request the arbitrator to expeditiously decide the dispute on entering
upon the reference and to give his award as early as possible.
17. In the result, we decline to interfere with the order of the High Court
and dismiss this appeal. While doing so, we revoke the nomination made by the
parties of two arbitrators. We appoint Mr. Justice Y.K. Sabharwal, former Chief
Justice of India as the sole arbitrator to decide the dispute between the
parties. The parties are directed to suffer their respective costs.