Gujarat High Court
Ivrcl Limited vs Gujarat State Petroleum Corporation ... on 13 October, 2015
Author: Akil Kureshi
Bench: Akil Kureshi
C/FA/1714/2015 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
FIRST APPEAL NO. 1714 of 2015
With
FIRST APPEAL NO. 1715 of 2015
With
CIVIL APPLICATION NO. 9606 of 2015
In
FIRST APPEAL NO. 1714 of 2015
With
CIVIL APPLICATION NO. 9607 of 2015
In
FIRST APPEAL NO. 1715 of 2015
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE MOHINDER PAL
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1 Whether Reporters of Local Papers may be allowed to see the
judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law as to
the interpretation of the Constitution of India or any order
made thereunder ?
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IVRCL LIMITED....Appellant(s)
Versus
GUJARAT STATE PETROLEUM CORPORATION LIMITED & 1....Defendant(s)
=======================================================================
Appearance:
MR AS VAKIL, ADVOCATE for the Appellant(s) No. 1
MR BD KARIA, ADVOCATE for BHARGAV KARIA & ASSO, ADVOCATE for the
Defendant(s) No. 2
MR ASPI M KAPADIA, CAVEATOR for the Defendant(s) No. 1
=======================================================================
CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
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HONOURABLE MR.JUSTICE MOHINDER PAL
Date : 08-13/10/2015
ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. These appeals were taken up for early hearing on account of urgent issues involved. Though there are two appeals, facts being similar, we record those arising in First Appeal No.1714 of 2015.
2. In the First Appeal, the appellant-original opponent No.2 in Civil Misc.Application No.126 of 2015 has challenged an order dated 20.08.2015 passed by the learned District Judge, Gandhinagar below application Exh.19. By such order, the learned Judge rejected the application of the appellant for recalling an ex parte interim injunction order dated 16.07.2015. Under such order, pending arbitration petition, the learned Judge directed the opponents to produce conditional bank guarantee worth USD 35.86 Million and till then, restrained the opponents from transferring, alienating or disposing of or creating any interest in any manner in any of its immovable properties.
3. Brief facts are as under:-
3.1 Opponent No.1 herein Gujarat State Petroleum Corporation Limited ("GSPCL" for short) is a company registered under the Companies Act, 1956 and majority of Page 2 of 46 HC-NIC Page 2 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT its holding is that of the State Government. Opponent No.2 - Alkor Petroo Limited (hereinafter to be referred as "Alkor") is a company registered under the Companies Act, 1956 and is a subsidiary of the appellant-IVRCL Limited.
3.2 On 18.07.2011, a Joint Operating Agreement ("JOA" for short) was executed between GSPCL, Alkor and one Geoglobal Resources for oil exploration. The said agreement contained an arbitration clause requiring the parties to resort to arbitration in case any dispute arose while working out the bilateral relations arising out of the contract. On 19.08.2013, IVRCL had written to the Directors of Alkor that IVRCL had resolved to extend financial support to Alkor. According to the appellant, however, this communication was for the sole benefit of Alkor alone.
3.3 Be that as it may, serious disputes surfaced some time in the year 2012, when according to GSPCL, Alkor stopped paying its share of the charges under the said JOA. On 26.03.2014, GSPCL issued a notice to Alkor activating arbitration clause. When the parties did not agree to resort to arbitration, GSPCL filed Arbitration Petition No.42 of 2014 before the designate of the Chief Justice of the Gujarat High Court. On 10.10.2014, such Arbitration Petition came to be allowed, two arbitrators Page 3 of 46 HC-NIC Page 3 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT were appointed, who in turn would appoint third arbitrator.
3.4 On 30.01.2015, GSPCL lodged its claim before arbitrators, in which reference was made to the liability of the present appellant-IVRCL and to hold it jointly and severally liable to discharge the debts of Alkor. In this claim itself, request of GSPCL, was to join IVRCL as a respondent in the arbitration proceedings. On 11.06.2015, GSPCL filed an application before the Arbitral Tribunal and requested to decide the issue of joinder of IVRCL as a preliminary issue and to implead it as a party.
3.5 On 16.07.2015, GSPCL filed Civil Misc.Application No.126 of 2015 before the District Court, Gandhinagar for interim injunction under Section 9 of the Arbitration and Conciliation Act, 1996. Prayer in such application was for direction to Alkor as well as IVRCL to jointly and severally deposit with the Court amount of 35.86 million USD with interest and for a further direction to IVRCL not to transfer, alienate or dispose or create interest in any manner in any of its immovable properties till determination of the arbitration proceedings. In such application, GSPCL asserted that Alkor had discharged its liability to share the expenditure under the JOA only till February 2012 and Page 4 of 46 HC-NIC Page 4 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT thereafter had stopped making payments and till the date of filing of the application, such amount had reached 35.86 million USD. GSPCL further averred that IVRCL is a parent company of Alkor and since 2007, has acquired 100% of its stake. IVRCL has also been running day-to-day and strategic operations of Alkor. GSPCL referred to an e-
mail dated 15.08.2013 under which Alkor informed GSPCL that IVRCL holds 64% of share in Alkor and balance 36% is held by the promoters of IVRCL. The e-mail further mentioned that Alkor is only special purpose vehicle. GSPCL also referred to a letter dated 19.08.2013 from the Board of Directors of IVRCL, in which, according to GSPCL, the company had resolved to extend financial support to its subsidiary in order to meet with its financial obligations required from time to time. The case of GSPCL therefore in such application was that on account of several factors such as common ownership of the companies, common Directors of the companies, operations and day-to-day functioning by the parent company and such other factors, IVRCL should be held liable for the debts of Alkor. It was contended that Alkor had recently reported net loss of 50% of the net- worth of the company. It was therefore contended that the financial condition of both the companies was weak. Even, IVRCL was facing serious losses in the business and in the last quarter ending 31.03.2015, the company had Page 5 of 46 HC-NIC Page 5 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT suffered loss to the extent of Rs.155 crores. Primarily on such grounds, GSPCL filed application Exh.5 and urged the learned Judge to grant ex parte injunction. On such application, the learned Judge passed order on 16.07.2015 and as noted above, granted injunction as prayed for. 3.6 The learned Judge recorded the submissions of the Counsel for GSPCL that huge amount of 35.86 million USD remained unpaid by Alkor. Both the companies, according to the Counsel, were about to sell off their movable and immovable properties in order to defeat the decree which may be passed in the arbitration proceedings. The learned Judge also recorded contention of GSPCL that under certain circumstances, injunction can also be granted against the party who may not be party to an arbitration agreement. Considering such submissions, the Court passed the following order:-
"[5] Considering the submissions made by learned Advocate for the applicant, and on perusal of the record, I am of the view that if the ex-parte injunction as prayed for is not granted, it would be defeat the purpose of filing this application, and arbitration proceedings before the Tribunal. Hence, following order:-
ORDER The opponents shall produce conditional bank guarantee worth USD 35.86 Million, till then, they are restrained from transferring, alienating, or disposing off or creating any interest in any manner in any of its immovable properties till 01/08/2015.
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Notice of the application for the same to be given to the opposite party, returnable on 01/08/2015."
3.7 This order of the District Court was challenged by IVRCL in First Appeal No.1602 of 2015. This appeal came to be disposed of by an order dated 07.08.2015 in following manner:-
"1. Pursuant to suggestion of this Court, the parties have agreed for following arrangement:
The learned advocate for the appellant original defendant No. 2 will move an application akin to under O.39 R.4 of the Code of Civil Procedure, 1908 and the same will be served to the original applicant by Sunday i.e. 09th August 2015. Reply, if any, shall be filed by Monday i.e. 10th August 2015.
2. On such application being filed, the trial Court is directed to hear the said application on 11th & 12th August 2015 and we hope that it will be decided not beyond 14th August 2015.
3. It is made clear that we have not gone into the merits of the matters nor have expressed any opinion on merits and it will be open for the parties to take all the contentions available to them under the law and the trial Court shall decide the matter on its own merits, in accordance with law.
4. With the aforesaid observations and directions, the present appeals are disposed of.
4.1 In view of the main First Appeals are disposed of, no orders are required to be passed on Civil Applications and the same Page 7 of 46 HC-NIC Page 7 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT stand disposed of accordingly.
4.2 Direct service is permitted."
3.8 IVRCL thereupon approached the trial Court and filed application Exh.19 and requested the trial Court to set aside the ex parte order dated 16.07.2015. In such application, IVRCL strongly disputed its liabilities concerning the debts of Alkor. More importantly, however, IVRCL harped on the question of the need for granting injunction without a notice to the opponents. Elaborate facts and dates were mentioned primarily to demonstrate that there was no pressing urgency why the Court should have issued ex parte injunction without a notice to the opponents. It was also contended that consideration which would weigh with the Civil Court in granting injunction under R-1 of O-XXXIX of CPC would also apply while exercising discretion whether to grant or not to grant injunction in terms of Section 9 of the Arbitration and Conciliation Act, 1996. It was also urged that likewise, the requirements R-3 of O-XXXIX of CPC would apply making it compulsory for the Court to issue notice to the opponent before granting injunction unless it appears to the Court that object of granting injunction would be defeated by delay. It was urged that while doing so, it was obligatory on part of the Court to record its reasons. In the present case, the Court had Page 8 of 46 HC-NIC Page 8 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT failed to do so.
3.9 GSPCL filed its detailed reply to such application of IVRCL and contended that such application of IVRCL was filed with an oblique motive to derail the arbitral proceedings. In the meantime, if the companies were allowed to dispose of the properties, public exchequer would seriously suffer. The arbitral tribunal has also issued notice to IVRCL why it should not be joined as a party. GSPCL also supported the order of the trial Court on merits contending that the powers under Section 9 of the Arbitration and Concerning Act, 1996 are very wide and could be exercised at any stage of arbitral proceedings or even before the proceedings commenced. 3.10 The learned District Judge, Gandhinagar on such application Exh.19 of the appellant passed the impugned order on 20.08.2015. The learned Judge recorded that the applicant was a company owned by the Government and referring to the decision of the High Court in case of Bhavnagar Bricks Manufacturing Co. M/s. Vs. Bank of Baroda, reported in 1990(2) GLR, page No.1150 observed that when recovery suits are by nationalized banks, the Court would bear in mind that such claims are ordinarily bonafide and are ordinarily preceded by legal demand based on prima facie documentary evidences and in filing such suits, basically public interest is involved. At Page 9 of 46 HC-NIC Page 9 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT this stage itself, we may record that these observations were completely out of tune with the issues presented before the learned Judge and any observations by the High Court in the context of the suit for recovery by nationalized bank had no application. The learned Judge equally, in our opinion, made certain general observations with which also we cannot concur. Such observations are as under:-
"It is true that ordinarily when the learned Advocates are engaged to conduct proceedings, parties relying upon them may not bother as regards the day-to-day conduct of the suit in the Court proceedings, but then there are cases and cases where these days parties also have to take some interest and initiative in these cases and must remain in direct tough with it to act upon of their own, more particularly, when the parties to the suit proceedings are either Government Banks or any other Statutory Corporations, Boards and Bodes etc. and further when some important question of public interest is involved."
3.11 The learned Judge thereafter proceeded to examine the request of IVRCL on the premise of R-4 of O- XXXIX to examine whether order of injunction was required to be discharged, varied or set aside. The case of the applicant was examined within the parameters of R-4 and it was observed that R-4 of O-XXXIX of CPC, which enables the Court to vary or set aside or discharge the ex parte order, no appeal lies as a matter of course against such ex parte order except in extraordinary circumstances of Page 10 of 46 HC-NIC Page 10 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT the rarest of the rate cases where the order is perverse or bias or suffers from lack of jurisdiction. However, in the opinion of the learned Judge, this was not the case of the applicant. To the contention of the applicant that the order granting ex parte injunction did not record reasons, the learned Judge opined that even a one line reason would be sufficient in given set of circumstances. He concluded that there were sufficient reasons in the order itself. The order therefore was not unreasoned. This order IVRCL has challenged in the present appeal.
4. Learned Counsel Shri Apurva Vakil for the appellant raised following contentions:-
13.10.2015 I. That the application of the appellant before the trial Court was for recalling the ex parte injunction order. The trial Court instead treated the application as one for confirmation or vacating the interim relief and in the process, while, keeping the application for interim injunction pending, virtually decided the fate of it.
II. It was contended that the trial Court Page 11 of 46 HC-NIC Page 11 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT failed to apply the principles for grant of interim injunction flowing from O-XXXIX R-1 of CPC.
III. The trial Court granted ex parte injunction without fulfilling the requirements flowing from R-3 of O-XXXIX of CPC.
IV. Counsel contended that the appellant-IVRCL was not the signatory to the contract in which arbitration clause was contained. IVRCL therefore could not be joined as a party in the said arbitration proceedings. Application of GSPCL for such purpose is not yet decided. The question whether IVRCL would eventually be joined as an opponent in the arbitral proceedings is not yet answered. At that stage, no injunction against IVRCL could have been granted, that too ex parte.
V. Counsel further submitted that GSPCL had not made out any grounds for granting ex parte injunction in the application filed for such purpose. No reasons are forthcoming in such application. There Page 12 of 46 HC-NIC Page 12 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT are no reasons stated in the order passed by the trial Court which would demonstrate that the object of granting injunction would be defeated by delay or that the Court was of the opinion that object of granting injunction would be defeated by such delay. It was contended that in any case, the conduct of GSPCL would dis-
entitle it from claiming any such ex parte injunction. Our attention was drawn to the detailed chronology of events to argue that there was no urgency shown by GSPCL in either seeking appointment of an arbitrator or making application for interim injunction.
VI. Counsel also contended that reasons which are not cited by the trial Court while granting ex parte injunction could not be supplanted in the later order passed in the application filed by the appellant for vacating the interim relief.
5. Mr.Vakil relied upon following decisions in context of his contention that exercise of powers under Section 9 of the Arbitration and Conciliation Act, 1996 would be subject to the provisions contained in O-XXXIX Page 13 of 46 HC-NIC Page 13 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT R-1 of CPC:-
I. In case of Adhunik Steels Ltd. Vs. Orissa Manganese and Minerals (P) Ltd. reported in (2007) 7 SCC, page No.125, in which following observations were made:-
"11. It is true that Section 9 of the Act speaks of the court by way of an interim measure passing an order for protection, for the preservation, interim custody or sale of any goods, which are the subject matter of the arbitration agreement and such interim measure of protection as may appear to the court to be just and convenient. 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. Same is the position regarding the appointment of a receiver since the Section itself brings in, the concept of 'just and convenient' while speaking of passing any interim measure of protection. The concluding words of the Section, "and the court shall have the same power for making orders as it has for the purpose and in relation to any proceedings before it" also suggest that the normal rules that govern the court in the grant of interim orders is not sought to be jettisoned by the provision. Moreover, when a party is given a right to approach an ordinary court of the country without providing a special procedure or a special set of rules in that behalf, the ordinary rules followed by that court would govern the exercise of power conferred by the Act. On that basis also, it is not possible to keep out the concept of balance of convenience, prima facie case, irreparable injury and the concept Page 14 of 46 HC-NIC Page 14 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT of just and convenient while passing interim measures under Section 9 of the Act.
21. ..... 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, on the whole, we feel that 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. So viewed, we have necessarily to see whether the High Court was justified in refusing the interim injunction on the facts and in the circumstances of the case."
II. In case of Arvind Construction Co. (P) Ltd.
Vs. Kalinga Mining Corporation & Ors., reported in (2007) 6 SCC, page No.798, in which following observations were made:-
"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 Ashok Traders & Anr. Vs. Gurumukh Das Saluja & Ors. [(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 Page 15 of 46 HC-NIC Page 15 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT 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."
(emphasis supplied by us) III. In case of Suzlon Energy Ltd. Vs. Vishal Plastomer Pvt. Ltd., reported in 2007 (4) Page 16 of 46 HC-NIC Page 16 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT GLR, page No.3274, in which it was observed as under:-
"8.6 I have considered the facts and circumstances of the case in this behalf. I have also considered the decisions in this behalf. This Court is of the view that the trial Court is obliged to consider the principles governing the grant of injunction under Order 39 of CPC for considering interim measures under Sec.9 of the Arbitration Act. All the principles governing grant of injunction including grant of ex-parte injunction are required to be adhered to by the Court while considering Sec.9 of the Arbitration Act. This Court is of the view that the trial Court has failed to appreciate that as a matter of rule as provided in Order 39 Rule 3, the Court is obliged to give notice before granting ex-parte injunction. No notice in the present case has been issued by the learned trial Judge and therefore, the impugned order made by the learned trial Judge is contrary to the provisions of Order 39 Rule 3 of CPC and Sec.9 of the Act."
6. In support of his contention that the trial Court ought to have recorded reasons for coming to conclusion that in the opinion of the trial Court, the object of granting injunction would be defeated by delay, Counsel relied on following decisions:-
I. In case of Morgan Stanley Mutual Fund Vs. Kartick Das, reported in (1994) 4 SCC, page No.225, in which the Supreme Court laid down certain guidelines to govern the discretion for grant of ex parte interim Page 17 of 46 HC-NIC Page 17 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT injunction in following terms:-
"36. As a principle, ex parte injunction could be granted only under exceptional circumstances. The factors which should weigh with the court in the grant of ex parte injunction are-
(a) whether irreparable or serious mischief will ensue to the plaintiff;
(b) whether the refusal of ex parte injunction would involve greater injustice than the grant of it would involve;
(c) the court will also consider the time at which the plaintiff first had notice of the act complained so that the making of improper order against a party in his absence is prevented;
(d) the court will consider whether the plaintiff had acquiesced for sometime and in such circumstances it will not grant ex parte injunction;
(e) the court would expect a party applying for ex parte injunction to show utmost good faith in making the application.
(f) even if granted, the ex parte injunction would be for a limited period of time.
(g) General principles like prima facie case balance of convenience and irreparable loss would also be considered by the court."
II. In case of Shiv Kumar Chadha Vs. Municipal Corporation of Delhi & Ors., reported in (1993) 3 SCC, page No.161, in which it was observed as under:-
"32. Power to grant injunction is an extraordinary power vested in the Court to Page 18 of 46 HC-NIC Page 18 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT be exercised taking into consideration the facts and circumstances of a particular case. The Courts have to be more cautious when the said power is being exercised without notice or hearing the party who is to be affected by the order so passed. That is why Rule 3 of Order 39 of the Code requires that in ail cases the Court shall, before grant of an injunction, direct notice of the application to be given to the opposite party, except where it appears that object of granting injunction itself would be defeated by delay. By the Civil Procedure Code (Amendment) Act, 1976, a proviso has been added to the said rule saying that "where it is proposed to grant an injunction without giving notice of the application to the opposite party, the Court shall record the reasons for its opinion that the object of granting the injunction would be defeated by delay......"
33. It has come to our notice that in spite of the aforesaid statutory requirement, the Courts have been passing orders of injunction before issuance of notices or hearing the parties against whom such orders are to operate without recording the reasons for passing such orders. It is said that if the reasons for grant of injunction are mentioned, a grievance can be made by the other side that Court has prejudged the issues involved in the suit. According to us, this is a misconception about the nature and the scope of interim orders. It need not be pointed out that any opinion expressed in connection with an interlocutory application has no bearing and shall not affect any party, at the stage of the final adjudication. Apart from that now in view of the proviso to Rule 3 aforesaid, there is no scope for any argument. When the statute itself requires reasons to be recorded, the Court cannot ignore that requirement by saying that if reasons are recorded, it may amount to expressing an opinion in favour of the plaintiff before hearing the defendant. The imperative nature of the Page 19 of 46 HC-NIC Page 19 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT proviso has to be judged in the context of Rule 3 of Order 39 of the Code. Before the Proviso aforesaid was introduced, Rule 3 said "the Court shall in all cases, except where it appears that the object of granting the injunction would be defeated by the delay, before granting an injunction, direct notice of the application for the same to be given to the opposite party". The proviso was introduced to provide a condition, where Court proposes to grant an injunction without giving notice of the application to the opposite party, being of the opinion that the object of granting injunction itself shall be defeated by delay. The condition so introduced is that the Court "shall record the reasons"
why an ex parte order of injunction was being passed in the facts and circumstances of a particular case. In this background, the requirement for recording the reasons for grant of ex parte injunction, cannot be held to be a mere formality. This requirement is consistent with the principle, that a party to a suit, who is being restrained from exercising a right which such party claims to exercise either under a statute or under the common law, must be informed why instead of following the requirement of Rule 3, the procedure prescribed under the proviso has been followed. The party who invokes the jurisdiction of the Court for grant of an order of restraint against a party, without affording an opportunity to him of being heard, must satisfy the Court about the gravity of the situation and Court has to consider briefly these factors in the ex parts order. We are quite conscious of the fact that there are other statutes which contain similar provisions requiring the Court or the authority concerned to record reasons before exercising power vested in them. In respect of some of such provisions it has been held that they are required to be complied with but non-compliance there of will not vitiate the order so passed. But same cannot be said in respect of the proviso to Rule 3 Page 20 of 46 HC-NIC Page 20 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT of Order 39. The Parliament has prescribed a particular procedure for passing of an order of injunction without notice to the other side, under exceptional circumstances. Such ex parte orders have far reaching effect, as such a conditions has been imposed that Court must record reasons before passing such order. If it is held that the compliance of the proviso aforesaid is optional and not obligatory, then the introduction of the proviso by the Parliament shall be a futile exercise and that part of Rule 3 will be a surplusage for all practical purpose. Proviso to Rule 3 of Order 39 of the Code, attracts the principle, that if a statute requires a thing to be done in a particular manner, it should be done in that manner or not all. This principle was approved and accepted in well-known cases of Taylor v. Taylor. (1875) 1 Ch. D. 426, Nazir Ahmed v. Emperor, AIR 1936 PC 253. This Court has also expressed the same view in respect of procedural requirement of the Bombay Tenancy and Agricultural Lands Act in the case of Ramachandra Keshav Adke v. Govind Joti Chavare, AIR 1975 SC 915.
34. As such whenever a Court considers it necessary in the facts and circumstances of a particular case to pass an order of injunction without notice to other side. It must record the reasons for doing so and should take into consideration, while passing an order of injunction, all relevant factors, including as to how the object of granting injunction itself shall be defeated if an ex parte order is not passed. But any such ex parte order should be in force upto a particular date before which the plaintiff should be required to serve the notice on the defendant concerned. In the Supreme Court Practice 1993, Vol. 1, at page 514, reference has been made to the views of the English Courts saying:-
"Exparte injunctions are for cases of real urgency where there has been a Page 21 of 46 HC-NIC Page 21 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT true impossibility of giving notice of motion....
An ex parte injunction should generally be until a certain day, usually the next motion day. . . ."
7. For the same purpose, reliance was also placed on decisions of learned Single Judges of this Court in case of Nautanswami Guru Vasudev Vs. Harjibhai Nanjibhai Bhimani, reported in 2003 (1) GLH, page No.560 and Suzlon Energy Ltd. (supra).
8. Counsel relied on decisions of the Supreme Court in case of S.N.Prasad, Hitek Industries (Bihar) Limited Vs. Monnet Finance Limited & Ors., reported in (2011) 1 SCC, page No.320 and in case of Sukanya Holdings (P) Ltd. Vs. Jayesh H.Pandya & Anr., reported in (2003) 5 SCC, page No.531 in support of his contention that the appellant, not being a signatory to the arbitral agreement, cannot be joined in the arbitral proceedings.
9. On the other hand, learned Counsel Shri Aspi Kapadia opposed the appeals raising following contentions:-
I. Law is well settled that even a party who is not signatory to arbitral agreement can, in special circumstances, be joined in arbitration proceedings.
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II. Scope of Section 9 of the Arbitration and
Conciliation Act, 1996 is very wide and is not circumscribed by R-1 of O-XXXIX.
III. It is even open to the Civil Court to
grant injunction in contemplation of or
during pendency of arbitral proceedings
against non-opponent in certain
circumstances.
IV. In the present case, Alkor was only a
special purpose vehicle created by IVRCL for entering into a contract for gas exploration with GSPCL. IVRCL is a 100% holding company. It had also agreed to finance Alkor. This was thus a clear case for lifting the corporate veil.
Application of GSPCL to join IVRCL in the arbitral proceedings was filed at the outset in the statement of claim. That application was also moved promptly for hearing such a prayer.
V. Counsel further submitted that there was
sufficient material on record to
demonstrate that IVRCL was in weak
financial condition, was in the process of Page 23 of 46 HC-NIC Page 23 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT disposing of its assets and any delay would have defeated the claims of GSPCL if ex parte injunction was not granted. The trial Court therefore, after recording its reasons granted such an injunction.
Merely because the reasons were brief
would not mean that no reasons were
recorded.
VI. Counsel also submitted that the Counsel
for IVRCL having raised several additional contentions, the trial Court was bound to decide the same in the impugned order.
The same would not, however, mean that the pending application for injunction becomes infractuous.
10. In support of his contention that even a non- party to an arbitral agreement can be joined in arbitration proceedings, Counsel relied on following decisions:-
I. In case of Chloro Controls (I) P. Ltd. Vs. Severn Trent Water Purification Inc. & Ors., reported in (2013) 1 SCC, page No.641, in which it was observed as under:-Page 24 of 46
HC-NIC Page 24 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT "66. Though the scope of an arbitration agreement is limited to the parties who entered into it and those claiming under or through them, the Courts under the English Law have, in certain cases, also applied the "Group of Companies Doctrine".
This doctrine has developed in the
international context, whereby an
arbitration agreement entered into by a company, being one within a group of companies, can bind its non-signatory affiliates or sister or parent concerns, if the circumstances demonstrate that the mutual intention of all the parties was to bind both the signatories and the non-
signatory affiliates. This theory has been applied in a number of arbitrations so as to justify a tribunal taking jurisdiction over a party who is not a signatory to the contract containing the arbitration agreement. ['Russell on Arbitration' (Twenty Third Edition)].
99. Joinder of non signatory parties to arbitration is not unknown to the arbitration jurisprudence. Even the ICCA's Guide to the Interpretation of the 1958 New York Convention also provides for such situation, stating that when the question arises as to whether binding a non-signatory to an arbitration agreement could be read as being in conflict with the requirement of written agreement under Article I of the Convention, the most compelling answer is "no" and the same is supported by a number of reasons.
100. Various legal basis may be applied to bind a non-signatory to an arbitration agreement. The first theory is that of implied consent, third party beneficiaries, guarantors, assignment and other transfer mechanisms of contractual rights. This theory relies on the discernible intentions of the parties and, to a large extent, on good faith principle. They apply to private as well as public legal entities. The second theory includes the legal doctrines of agent-principal relations, apparent Page 25 of 46 HC-NIC Page 25 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT authority, piercing of veil (also called the "alter ego"), joint venture relations, succession and estoppel. They do not rely on the parties' intention but rather on the force of the applicable law."
II. In case of State of U.P. & Ors. Vs. Renusagar Power Co. & Ors., reported in AIR 1988 SC, page No.1737, in which it was observed as under:-
"63. Mr Justice O. Chinnappa Reddy speaking for this Court in Life Insurance Corpn of India v. Escorts Ltd. & Ors [1985] Suppl 3 SCR 909 had emphasized that the corporate veil should be lifted where the associated companies are inextricably connected as to be, in reality, part of one concern. It is neither necessary nor desirable to enumerate the classes of cases where lifting the veil is permissible, since that must necessarily depend on the relevant statutory or other provisions, the object sought to be achieved, the impugned conduct, the involvement of the element of the public interest, the effect on parties who may be affected. After referring to several English and Indian cases, this Court observed that eversince A. Salomon & Co. Ltd's case (supra), a company has a legal independent existence distinct from individual members. It has since been held that the corporate veil may be lifted and corporate personality may be looked in. Reference was made to Pennington and Palmer's Company Laws.
64. It is hightime to reiterate that in the expanding of horizon of modern jurisprudence, lifting of corporate veil is permissible. Its frontiers are unlimited. It must, however, depend primarily on the realities of the situation. The aim of the legislation is Page 26 of 46 HC-NIC Page 26 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT to do justice to all the parties. The horizon of the doctrine of lifting of corporate veil is expanding. Here, indubitably, we are of the opinion that it is correct that Renusagar was brought into existence by Hindalco in order to fulfill the condition of industrial licence of Hindalco through production of aluminum. It is also manifest from the facts that the model of the setting up of power station through the agency of Renusagar was adopted by Hindalco to avoid complications in case of takeover of the power station by the State or the Electricity Board. As the facts make it abundantly clear that all the steps for establishing and expanding the power station were taken by Hindalco, Renusagar is wholly-owned subsidiary of Hindalco and is completely controlled by Hindalco. Even the day-to-day affairs of Renusagar are controlled by Hindalco. Renusagar has at no point of time indicated any independent volition. Whenever felt necessary, the State or the Board have themselves lifted the corporate veil and have treated Renusagar and Hindalco as one concern and the generation in Renusagar as the own source of generation of Hindalco. In the impugned order of the profits of Renusagar have been treated as the profits of Hindalco.
65. In the aforesaid view of the matter we are of the opinion that the corporate veil should be lifted and Hindalco and Renusagar be treated as one concern and Renusagar's power plant must be treated as the own source of generation of Hindalco and should be liable to duty on that basis. In the premises the consumption of such energy by Hindalco will fall under section 3(1)(c) of the Act. The learned Additional Advocate- General for the State relied on several decisions, some of which have been noted.
67. It appears to us, however, that as mentioned the concept of lifting the corporate veil is a changing concept and is of expanding horizons. We think that Page 27 of 46 HC-NIC Page 27 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT the appellant was in error in not treating Renusagar's power plant as the power plant of Hindalco and not treating it as the own source of energy. The respondent is liable to duty on the same and on that footing alone; this is evident in view of the principles enunciated and the doctrine now established by way of decision of this Court in Life Insurance Corpn of India, (supra) that in the facts of this case sections 3(1)(c) and 4(1)(c) of the Act are to be interpreted accordingly. The person generating and consuming energy were the same and the corporate veil should be lifted. In the facts of this case Hindalco and Renusagar were inextricably linked up together. Renusagar had in reality no separate and independent existence apart from and independent of Hindalco.
III. In case of Purple Medical Solutions Pvt.
Ltd. Vs. MIV Therapeutics Inc & Ors., reported in 2015 (2) Scale, page No.127, in which the Supreme Court applied the principle of lifting of corporate veil.
IV. For the same purpose, reliance was also placed on the decisions of the Supreme Court in case of Balwant Rai Saluja & Ant.
Vs. Air India Ltd. & Ors., reported in 2013 (13) Scale, page No.647 and in case of Vodafone International Holdings B.V. Vs. Union of India & Anr., reported in (2012) 6 SCC, page No.613.
11. In support of the contention that injunction Page 28 of 46 HC-NIC Page 28 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT under Section 9 can be extended even against a non-party to arbitration proceedings, Counsel relied on following decisions:-
I. An unreported decision of Division Bench of this Court dated 26.07.2002 in case of Nirma Ltd. Vs. Lentjes Energy (India) Pvt.
Ltd. in First Appeal No.5252 of 2001.
II. Decision of Division Bench of the Bombay High Court dated 28.11.2013 in case of Housing Development and Infrastructure Limited Vs. Mumbai International Airport Private Limited & Ors.
III. Reliance was also placed on decisions of learned Single Judges of other High Courts, to which reference need not be made
12. We also heard learned Counsel Shri Bhargav Karia for Alkor, who adopted the same line as that of the appellant-IVRCL.
13. It is no longer res integra that in given set of circumstances, even a non-signatory to an arbitral agreement can be subjected to arbitration proceedings. Such instances may be rare and may arise in special facts Page 29 of 46 HC-NIC Page 29 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT of the case and would ordinarily provide an exception to the normal rule, that only a signatory to the arbitral proceedings can be compelled to submit to the jurisdiction of the arbitral tribunal. Nevertheless, instances have been recognized by Courts where either on the ground of piercing corporate veil as one entity found to be the alter ego of the other or some such similar ground, even a non-signatory entity to an arbitration agreement is allowed to be joined in the arbitration proceedings. As noted, in case of Chloro Controls (I) P. Ltd. (supra), the law on the point was discussed at length by 3 Judge Bench of the Supreme Court and it was concluded that various legal basis may be applied to bind a non-signatory to an arbitration agreement. Such instances would be of that of implied consent, third party beneficiaries, guarantors, assignment and other transfer mechanisms of contractual rights. Such theory relies on the discernible intentions of the parties and to a large extent, on good faith principle. The second stream of cases would be included in the legal doctrines of agent-principal relations, apparent authority, piercing of veil, joint venture relations, succession and estoppel. It was observed that this principle does not rely on the parties' intention but rather on the force of the applicable law. It would therefore be futile to argue that in no case, a non-signatory to an Page 30 of 46 HC-NIC Page 30 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT arbitration agreement can be compelled to submit to the jurisdiction of the arbitral tribunal so validly constituted. Whether in the present case, facts are such that any of the principles cited above or any other recognized by judicial precedent would apply or not is neither possible nor proper on our part to comment upon. Entire issue is pending before the appropriate forum. We would therefore not be justified in allowing the appeal and vacating the injunction only on this ground.
14. It also appears fairly well settled that in given set of circumstances, when facts so present, interim injunction under Section 9 of the Arbitration and Conciliation Act, 1996 can also extend to a person or entity who is not a party to the arbitral proceedings. Several decisions cited by the Counsel for GSPCL have expressed such a view. We are prepared to proceed on such basis. However, present is not a case of that kind. Case of the applicant-GSPCL is not that IVRCL, even if not allowed to be joined in the arbitral proceedings, can be subjected to the interim injunction. Under the circumstances, this issue would not decide the fate of the appeal at all.
15. Coming to the core issue of the appeal, at the centre lies the dispute whether ex parte injunction could have been, in facts of the present case. As noted, the Page 31 of 46 HC-NIC Page 31 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT case of the appellant-IVRCL is that the trial Court ought not to have granted ex parte injunction and instead should have issued only a notice pending further consideration. The subsidiary contention of the appellant is that even recording of proper reasons for dispensing with the notice before granting injunction were not recorded. On the other hand, case of GSPCL is that IVRCL was in the process of siphoning off its assets, was otherwise also not in sound financial condition. There is huge unpaid amount of Alkor which has accumulated to 35.86 million USD in one case and 7.6 million USD in the other. If no protection was granted, Government corporation would have suffered serious financial loss.
16. In this context, as noted, decisions of the Supreme Court lay down that the question of grant or non- grant of injunction under Section 9 of the Arbitration and Conciliation Act, 1996 would be governed by the principles flowing from R-1 of O-XXXIX of CPC. In case of Adhunik Steels Ltd. (supra), the Court observed that 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 guide the courts in this connection. In case of Arvind Construction Co. (P) Ltd.
Page 32 of 46
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C/FA/1714/2015 JUDGMENT
(supra) also, similar sentiments were expressed, though as stated in para-15 of the judgment, without expressing conclusive opinion thereon. Learned Single Judge of this Court in case of Suzlon Energy Ltd. (supra) also reiterated these principles. It can therefore not be gainsaid that while the Civil Court is sized of the issue of granting injunction under Section 9 of the Arbitration and Conciliation Act, 1996, it would be governed by the general principles flowing from R-1 of O-XXXIX of CPC for grant of interim injunctions. Even if we were for the moment to accept the contention of the Counsel for the opponent No.1 that jurisdiction of Section 9 of the Arbitration and Conciliation Act, 1996 is wider than that under O-XXXIX R-1 of CPC, nevertheless, when the question of grant of interim injunction arises, even under Section of the Arbitration and Conciliation Act, 1996, the Court cannot totally disassociate or divest itself from the grounds germane for grant of such injunction which in the civil jurisdiction flow from O-XXIX R-1 of CPC.
17. Seen thus, though the statutory requirements, those flowing from O-XXXIX R-1 for grant of ex parte injunction may not be foisted with a degree of rigidity, must be seen as guiding principles for grant of any ex parte injunction under Section 9 of the Arbitration and Conciliation Act, 1996. As is well known, R-3 of O-XXXIX Page 33 of 46 HC-NIC Page 33 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT provides for certain safeguards before granting ex parte injunction and lays down procedure under which the Court would consider such an issue. It essentially provides that the Court shall in all cases, except where it appears that the object of granting injunction would be defeated by delay, before granting such an injunction, direct notice of the application to be given to the opposite party. Proviso to R-3 further requires the Court before granting such an injunction, without issuing notice, to record reasons for its opinion that the object of granting injunction would be defeated by delay.
18. Two things thus emerge from the above discussion. Firstly that the trial Court, while granting ex parte injunction was required to consider the general principles flowing from O-XXXIX R-1 of CPC and while granting such injunction, by way of ex parte measure, was required to record its reasons for its opinion that the object of granting injunction would be defeated by delay.
19. We have noticed that the statutory recognition of seriousness of granting ex parte injunction has been further emphasized by judicial pronouncements. In case of Morgan Stanley Mutual Fund (supra), the Court culled out various principles for governing grant of ex parte injunction which would include the question whether irreparable or serious mischief will ensue to the Page 34 of 46 HC-NIC Page 34 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT plaintiff, whether the refusal to ex parte injunction would involve greater injustice than the grant of it would involve, the court will also consider the time at which the plaintiff first had notice of the act complained so that the making of improper order against a party in his absence is prevented. These factors would be in addition to the consideration of general principles of prima facie case, balance of convenience and irreparable loss.
20. We need to examine the order passed by the trial Court in the touchstone of such requirements. We may recall that at the base of the challenge in the present appeals, is the initial order passed by the trial Court on 16.07.2015. Against such order, the present appellant had approached the High Court in First Appeal No.1602 of 2015. Upon suggestion of the Court, the parties agreed to a formula under which the appellant would move "an application akin to under O.39 R.4 of the Code of Civil Procedure, 1908". The Court thereupon directed that upon such an application being filed, the same would be decided by 14.08.2015. The appellant therefore moved its application Exh.19 and urged the trial Court to recall its ex parte injunction order. It is true that in such application, the appellant raised several contentions which would touch even the issue of Page 35 of 46 HC-NIC Page 35 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT bi-parte hearing and vacating of the interim injunction already granted. Nevertheless, the thrust of the appellant's attempt initially before the High Court and thereafter in moving Exh.19 application was to persuade the trial Court to recall its initial order of ex parte injunction, which according to the appellant ought not to have been passed at the outset. Mind well, the Court recorded the words "akin to under O.39 R.4 of the Code of Civil Procedure, 1908". As is well known, O-XXXIX R-4 of CPC pertains to discharge, variance or setting aside of injunction order and essentially provides that any order for an injunction may be discharged, or varied, or set aside by the Court, on application made thereto by any party dissatisfied with such order. First proviso to R- 4 provides that if in an application for temporary injunction or in any affidavit in support such application, a party has knowingly made a false or misleading statement in relation to a material particular and the injunction was granted without giving notice to the opposite party, the Court shall vacate the injunction unless, for reasons to be recorded, it considers that it is not necessary so to do in the interests of justice. Further proviso to R-4 provides that where an order for injunction has been passed after giving to a party an opportunity of being heard, the order shall not be discharged, varied or set aside on the application of Page 36 of 46 HC-NIC Page 36 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT that party except where such discharge, variation or setting aside has been necessitated by a change in the circumstances, or unless the Court is satisfied that the order has caused under hardship to that party. Further proviso to R-4 thus provides a degree of permanency to an order of injunction passed after bi-parte hearing. The first proviso to R-4 obliges the Court to vacate the injunction unless for reasons to be recorded, it thinks if unnecessary to do so, an order of injunction which is passed on false or misleading statement and is passed ex parte. R-4 itself, however, gives wide discretion to the Court granting an injunction to discharge, vary or set aside the same, of course subject to the prescription made in the first and the second proviso. When therefore this Court permitted the appellant to move the trial Court for vacating the injunction, it did not bind down the appellant to demonstrate that such injunction was based on any false statement or misstatement made by the applicant. The Court used the words "akin to under O.39 R.4" to avoid a possible argument that strict requirements of OXXIX R04 may not apply. Be that as it may, when the trial Court rejected the application of the appellant by rather detailed consideration in the impugned judgment, our prime duty is to ascertain for ourselves whether at the outset, such an injunction should and ought to have been granted for the reasons Page 37 of 46 HC-NIC Page 37 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT recorded in the said order.
21. In the context, we may revisit some of the important events. As noted, the JOA between Alkor and GSPCL was entered into on 18.07.2011. According to GSPCL, Alkor did not honour its obligation to make payments post February 2012 for which attempt to appoint arbitrators commenced on 26.03.2014. GSPCL issued notice to Alkor invoking arbitration clause in the said JOA. After such notice failed to elicit response to the satisfaction of GSPCL, Arbitration Petition No.42 of 2014 was filed before the High Court in which designate of Chief Justice on 10.10.2014 appointed two arbitrators who in turn would select the third arbitrator to complete the constitution of the arbitral tribunal. In this Arbitration Petition, IVRCL was not joined as a respondent. Before filing the Arbitration Petition, no application under Section 9 of the Arbitration and Conciliation Act, 1996 was filed seeking any injunction. GSPCL lodged its claim before the arbitrators on 30.01.2015, in which, for the first time, any possible liability of IVRCL was sought to be invoked. The statement of claim contained prayer for joining IVRCL and for passing joint and several award.
22. Alkor opposed any attempt to join IVRCL as an opponent. The arbitrators issued notice on such Page 38 of 46 HC-NIC Page 38 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT proceedings on 29.07.2015. Though not important, for our purpose, to complete the recording of events, such notice has been challenged by IVRCL before the High Court and the petition is pending.
23. Section 9 application before the Civil Court came to be filed on 16.07.2015. In such application, GSPCL made a detailed reference to the relations between Alkor and IVRCL contending that IVRCL is a parent company of Alkor and has 100% holdings of Alkor and is also running day-to-day management and strategic operations. It was also contended that Alkor is a special purpose vehicle created by IVRCL and IVRCL had agreed to provide financial security for the operations of Alkor.
24. In the context of the weak financial position of the companies, GSPCL, in such application, had stated as under:-
"32) Furthermore as per the admission of the opponents 1 and 2 the financial position of the Opponent No.1 is weak and the Opponent no2 has agreed to stand by its subsidiary, it becomes important to include Opponent No.2 in these present proceedings.
33) Furthermore the application becomes even more important because as per recent press reports the financial position of Opponent No.2 has gone from bad to worse and as per the information available in the public domain the Opponent No.2 is facing serious losses in the business the last quarter ending on 31st March 2015 the losses for Page 39 of 46 HC-NIC Page 39 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT the opponent No.2 has been to the tune of Rs.155 crore. Furthermore the Opponent No.2 has been selling its assets and has plans to sell more of its assets. A copy of such press reports are enclosed herewith and marked as Annexure 17 (Colly.)
34) It is pertinent to note that the Applicant is claiming the dues from the Opponents vide the aforementioned arbitration proceedings and the press reports which came to light have necessitated the present application under section 9, Arbitration and Conciliation Act, 1996 since the financial condition of the Opponents is worsening and if the present application and the reliefs as claimed hereunder are not allowed the arbitration proceedings for claiming the dues will merely become an academic exercise and the applicant would not be in a position to recover its legitimate dues.
35) The Applicant is a public company and hence it is even more important to secure the dues of the Applicant as if the Opponents are allowed to continue the way they are the state exchequer shall be at a loss of the claim amount. Furthermore since the Opponents are under serious financial strain and are looking at ways and means to sell off their assets with a view to frustrate and defraud the legitimate claims of the Applicant which in turn could lead to serious questions on continuing the arbitration proceedings hence it is important that the Opponents are directed jointly and severally to deposit the money in the court and also are restrained from transferring, alienating or disposing off any immovable properties and also that the Opponents should jointly and severally deposit money with the Hon'ble court so as to securing the amount in dispute in arbitration along with interest."
25. In such application, GSPCL also moved application for ex parte injunction, which was granted by Page 40 of 46 HC-NIC Page 40 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT the trial Court, recording the contention of the Counsel for GSPCL that GSPCL apprehends that the said companies are about to sell their movable and immovable properties in order to defeat the decree which may be passed in the arbitral proceedings. The learned Judge also took note of the contention of the Counsel that there is no bar on the Court granting interim injunction against persons who may directly not be parties to the arbitration proceedings. The Court therefore stated that "considering the submissions made by learned advocates for the parties, and on perusal of record, I am of the view that if the ex parte injunction as prayed for is not granted, it would defeat the purpose of filing this application, and arbitration proceedings before the tribunal".
26. When the appellant moved the learned Judge for vacating such interim injunction, such application came to be dismissed by the impugned order inter alia making observations to the effect that when Government or its subsidiaries or statutory corporations move such application, they are ordinarily sub serving public interest. The Court also recorded further reasons why any delay would have defeated the purpose of granting injunction.
27. In our opinion, neither the events leading to Page 41 of 46 HC-NIC Page 41 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT the filing of the application under Section 9 nor material on record nor the reasons stated by the learned Judge were sufficient to grant such ex parte injunction. As noted, statute as well judicial pronouncements recognize that order of granting ex parte injunction is a strong measure and the grant of such injunction would be governed by, in addition to the general principles of prima facie case, irreparable loss and balance of convenience, several other factors such as whether serious mischief will ensue to the plaintiff refusal of ex parte injunction would involve greater injustice than the grant of it and the time of seeking such injunction by the plaintiff. Reference to events would demonstrate that the unpaid dues of Alkor according to GSPCL started mounting since February 2012. Arbitration clause was pressed in service only sometime in March 2014 or thereabouts. Even while filing application for appointment of arbitrator before the Chief Justice, no attempt was made to secure any injunction, ex parte or otherwise. Only after lodging the claim before the arbitral tribunal, so constituted by the designate of the Chief Justice, GSPCL moved such application under Section 9 of the Arbitration and Conciliation Act. In such application also, if one peruses minutely, there was nothing to suggest that a notice howsoever short, could not have been issued before taking up the question of Page 42 of 46 HC-NIC Page 42 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT grant of interim injunction. It is true that GSPCL tried to establish close relation between Alkor and IVRCL. However, this was only one of the steps needed to be taken by GSPCL before persuading the Court to grant ex parte injunction. Another and far more crucial question was of the impending requirement of granting ex parte injunction. In other words, it was necessary for GSPCL to demonstrate before the Court that the facts of the case are so pressing that it would brook no delay and that an injunction of the nature as serious as securing sizable sum in excess of 35 million USD needed to be granted. GSPCL also needed to convince the learned Judge that it had been prompt enough in filing the application. In essence, the injunction prayed was in the nature of attachment before judgment. It was not a preventive order, but required the opponent to secure the sum even before the dispute resolution mechanism commenced its effective hearing. We are not suggesting that in no case, not even in this case, such an injunction cannot be granted. We are suggesting that before granting injunction of such a nature by way of ex parte measure, much stronger reasons and weightier material was required to be brought on record.
28. In the present case, primarily what GSPCL could point out to the trial Court was that the financial Page 43 of 46 HC-NIC Page 43 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT condition of both the companies is weak; that they are in the process of disposing of their assets and that therefore to secure the amount in dispute, such injunction is necessary. There was no detailed reference to the balance sheet of either of the companies. There was no reference to when the companies had attempted to dispose of their assets so as to defeat any possible decree that the arbitral tribunal may pass.
29. As noted, the trial Court only recorded two contentions of the Counsel for the appellant, viz. that GSPCL apprehends that the companies would sell off their movable and immovable properties in order to defeat the decree, the outstanding amount having touched 35.86 million USD. The second contention was that there is no bar to the Court granting interim measures against persons who may not be parties to the arbitration agreement. None of these contentions take care of the pressing requirement of demonstrating (1) urgency shown by GSPCL in moving ex parte injunction application, (2) attempt on part of the said two companies to siphon off their properties in order to defeat the possible decree and (3) the reasons for not moving application under Section 9 at earlier point of time. In the later order that the trial Court passed while rejecting application of the appellant for vacating such ex parte injunction Page 44 of 46 HC-NIC Page 44 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT order, in our highest esteem, the learned Judge went into a wrong direction. Merely because GSPCL happened to be a Government corporation would not mean that it had any edge over any other private plaintiff. What was required to be seen was whether GSPCL, as a litigant, had made out a case for ex parte intervention, that too of the nature as strong as that the trial Court ultimately was persuaded to pass. On all counts thus, the order does not pass the test of legal requirements. The trial Court ought to have recognized these issues and vacated the injunction when requested by the appellant. As noted, R- 4 of O-XXXIX arms the trial Court to vary, set aside or recall its order of injunction, particularly when it is passed ex parte. It is not necessary that the element of misstatement or false statement must have crept-in in granting such an injunction in favour of the plaintiff.
30. In the result, the appeals are allowed. The impugned order of the trial Court dated 20.08.2015 is set aside. Application of the appellant Exh.19 is allowed and the ex parte injunction order dated 16.07.2015 is vacated. Connected Civil Applications are also disposed of.
31. These observations are made only in the context of ex parte injunction granted by the trial Court. We are conscious that the principal application under Page 45 of 46 HC-NIC Page 45 of 46 Created On Fri Oct 16 01:26:02 IST 2015 C/FA/1714/2015 JUDGMENT Section 9 is still pending. Whatever observations we may have made in the process of deciding these appeals would not come in any way of either side in pursuing all contentions in such pending application, which the trial Court may attempt to dispose of as expeditiously as possible preferably by 31.01.2016.
32. At this stage, learned Counsel Shri Aspi Kapadia requested that this order be stayed for reasonable period to enable GSPCL to move further appeal. This judgment shall stand stayed till 23.11.2015.
(AKIL KURESHI, J.) (MOHINDER PAL, J.) SHITOLE Page 46 of 46 HC-NIC Page 46 of 46 Created On Fri Oct 16 01:26:02 IST 2015