Madhya Pradesh High Court
Nepa Limited vs Manoj Kumar Agrawal on 14 May, 1998
Equivalent citations: AIR1999MP57, AIR 1999 MADHYA PRADESH 57, (1999) 2 ARBILR 60 (1999) 1 JAB LJ 106, (1999) 1 JAB LJ 106
Author: D.M. Dharmadhikari
Bench: D.M. Dharmadhikari
JUDGMENT D.M. Dharmadhikari, J.
1. A common order is being passed, in this appealed the connected appeal between the same parties registered as M.A. No. 37/98.
2. Both the appeals arise out of two orders passed on 3-5-1997 and 24-2-1997 by Additional District Judge, Burhanpur in proceedings, under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter shortly referred to as 'the Act of 1996').
3. The facts leading to raising of an arbitration dispute and institution of proceedings under Section 9 of the Act of 1996 are as under :
The Nepa Limited invited tenders in April 1996 for sale of coal ash. The respondent Manoj Agrawal submitted his tender. The offer was accepted and agreement was executed between the parties on 25-10-96.
4. According to the case of the respondent Manoj Agrawal (hereinafter referred to as 'the contractor'), contrary to Clause 4.1 of the contract, the company sent a letter on 28-2-1997 to the contractor compelling him to lift straightway lump sum quantity of 10,000 M.Ts. on payment of full price. It was also threatened that if the quantity was not lifted, it would be disposed of to third parties. The action of the company led to exchange of legal notices between the, parties.
Ultimately, on 17-4-97, the contractor approached the Civil Court under Section 9 of the Act of 1996 seeking directions in the nature of injunctions and for preservation of the subject-matter in dispute. Section 9 of the Act of 1996 empowers the Court to take interim measure including, if necessary, of issuing orders of injunction and appointment of receiver for preservation, interim custody or sale of any goods which are subject-
matter of the arbitration agreement. The provisions also empower the Court to secure any amount in dispute in the arbitration. Section 9 of the Act deserves to be quoted :
"9. Interim measures by Court :--
A party may, before or during arbitral award but before it is enforced in accordance with Section 36, apply to a Court -
(i) for the appointment of a guardian for a minor or a person of unsound mind for the purpose of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the following matters, namely -
(a) the preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any. party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as,may appear to the Court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceeding before it."
5. On the application under Section 9 filed by the contractor, the Court by the impugned order dated 3-5-97 directed the company to preserve the contracted quantity of coal ash and for the purpose directed the representatives of the parties to measure quantity at the spot. The above order of the Court is under challenge at the instance of the company in M. A. No. 26/98. According to the contractor's case, no proper measurement of the quantity of coal ash was made by the company and, therefore, the contractor requested for taking up conciliation proceedings for settlement of disputes. The company rejected that prayer. The contractor, therefore, made a request for referring the disputes between the parties to arbitration. The contractor made the second application under Section 9 of the Act of 1996 on 26-6-1997 seeking directions from the Court for appointment of an expert for measurement of the quantity of coal ash at the spot and for keeping the security deposit under the contract intact by directing its deposit with the Court or in a nationalised bank. On 30-6-1997 the Civil Court rejected the fresh application filed by the contractor stating that the earlier order made on 3-5-97 is operative and is sufficient to protect the interest of the parties.
6. During pendency of proceedings under Section 9 of the Act of 1996, the company on 28-8-97 terminated the contract and in September 1997 invited fresh tenders for sale of coal ash. The above action led to filing of another application by the contractor under Section 151 C.P.C. before the Court for seeking further directions. By impugned order dated 24-12-97. the Court held that its order made on 3-5-97 directing the company to maintain the contracted quantity of coal ash intact and to deposit the security amount in bank was still in force and no further orders are required till the parties get the matter decided through arbitrator in accordance with the arbitration clause contained in the agreement. The order made on 24-12-97 by the Court is under challenge in M. A. No. 37/98.
7. In M. A. No. 26/98 an application seeking condonation of delay in filing the appeal has been filed which is registered as I. A. No. 134/98. In the application it has been stated that the appellant was advised to prefer appeal only against the order dated 24-12-97 because the earlier order dated 3-5-97 has emerged in the subsequent order.
8. The application for condonation filed by the appellant has been opposed by the respondent. But as the subject matter in two appeals is interconnected and cause of delay shown is the legal advice received by the company, I condone the delay in preferring the appeal, M. A. No. 26/98.
9. In assailing the two impugned orders in the two appeals, Shri Abhay Sapre, learned counsel for the appellant-company first raised the question of jurisdiction of the Civil Court to entertain application under Section 9 of the Act. The legal contention advanced is based on the provisions contained in Paragraph 3 of the Scheme for Appointment of Arbitrators by the Chief Justice of M. P. High Court 1996 framed under Subsection (10) of Section 11 of the Act of 1996. Under Paragraph 3 of the Scheme, for initiating arbitration proceedings under Section 11, the designated authority is District Judge/Additional Judge to the Court of District Judge where the value of the subject matter does not exceed twenty-five lacs rupees. In cases involving subject matter exceeding twenty-five lacs rupees, the power is conferred under Section 11 on the Chief Justice or any Judge of the High Court designated by him by general of special order. The relevant paragraph 3 of the Scheme framed under Section 11(10) of the Act of 1996 reads as under ;
"3. Authority to deal with the request. -
(1) For the purpose of dealing with the request made under paragraph 2 the Chief Justice hereby designates the District Judge/Addl. Judge to the Conn of District Judge, where the value of the subject matter does not exceed 25 lakhs rupees :
(2) the request involving the subject matter exceeding 25 lakh rupees shall be dealt with by the Chief Justice himself or he may designate any Judge of the High Court for this purpose by a general or special order.
(3) The requests falling under Sub-para (1) shall be placed before the District Judge for appropriate allotment and the requests falling under Sub-para (2) shall be placed before the Chief Justice or his designate."
10. On behalf of the appellant-company, the learned counsel argued that since the power in the matter of _ arbitration under Section 11 in the present case involving subject matter exceeding twenty-five lacs rupees vests in the Judge designated by the Chief Justice of the High Court, the Proceedings under Section 9 of the Act would be competent only in the High Court and not in the Court of District Judge or Additional Judge to the Court of District Judge.
11. Shri Ravindra Shrivastava, learned counsel appearing for the contractor, in 'his reply submitted that the contention advanced on the point of jurisdiction is not legally sound and cannot be accepted on the clear language of the provisions contained in Sections 9 and 11 of the Act of 1996. Reliance is placed on the order of rejection of a similar preliminary objection of jurisdiction by learned single Judge, S. P. Khare, J. passed on 22-12-1997 in M.C.C. No. 1183/97 (Klen & Marshalls Manufacturers v. M.P.E.B.).
12. I have carefully examined the provisions contained in Section 9 which confers power on the Court to take interim measures and those contained in Section II providing for procedure for appointment of arbitrator by the parties and, if necessary, through the Court. Section 9 of the Act/as reproduced above, provides for making of an application to a "Court".
The word "Court" has been defined in Section 2(e) of the Act of 1996 as under : "2. Definitions :
(1) In this Part, unless the context otherwise requires,--
XXX XXX XXX "Court" means the Principal Civil Court of original jurisdiction in a district and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court or any Court of Small Causes.".
13. Compared to Section 9, Section 11 confers power on the Chief Justice or any person or institution designated by him for appointment of arbitrator on the request of either of the parties. Under Sub-section (10) of Section 11, the Chief Justice has to frame a scheme for dealing with the matters brought before him by way of request for appointment of arbitrators in terms of the Arbitration agreement between the parties. There is thus a clear distinction in the procedure contemplated by Section 9 and Section 11 of the Act of 1996. Under Section 9, a Court has to be approached for taking interim measures whereas under Section 11, the Chief Justice or his designate has to be approached for appointment of arbitrator. In exercise of powers under Section 11. Chief Justice or the Judge designated by him docs not act as a "Court" as defined in Section 2(e) of the Act of 1996. The 'Court' as defined means 'the principal civil Court of original jurisdiction in a district and includes the High Court in exercise of its ordinary original civil jurisdiction'. For the purpose of Section 9, High Court does not exercise any original jurisdiction and, therefore, it is not included in the definition of "Court" as given in Section 2(e) of the Act. The contention, therefore, is misconceived that in this matter merely because the valuation of the subject matter is more than 25 lacs rupees, for the purpose of Section 11 of the Act and in terms of the Scheme framed thereunder, the jurisdiction for exercise of powers under Section 9 of the Act would also lie in the High Court. In my considered opinion, the Court for the purpose of Section 9 would be the principal Civil Court of original jurisdiction which is not the High Court in the present case. I, therefore, entirely agree with the opinion expressed by Section P. Khare, J. in the case referred to above. The preliminary objection raised on behalf of the appellant-company regarding jurisdiction has thus no merit and is rejected.
14. On the merits of the two orders passed by the Civil Court, learned counsel for the appellant company contended that the Court in making directions for measurement of the quantity of coal ash and preserving the same totally lost sight of the legal position that the contract for sale and purchase of movable property is not specifically enforceable under Section 14(c) of the Specific Relief Act, 1963. The contract was determinate in its nature. The Court, therefore committed an error in granting an injunction contrary to the provisions contained in Section 41(c) of the Specific Relief Act. It is argued that accepting the case of commission of alleged breaches of the contract by the company, the remedy of the contractor would be only of claiming compensation in terms of money. It was wrong on the part of Civil Court to have restrained the company from disposing of the coal ash by inviting fresh tenders after the existing contract with the present contractor was terminated. Reliance is placed on Gujarat Electricity Board v. Mahesh Kumar & Co., AIR 1982 Gujarat 289 and Misra and Company v. Hindustan Aeronautics Ltd., AIR 1986 Orissa 22.
15. Learned counsel appearing for the contractor in his reply on merits of the case pointed out that the Nepa Limited is now a sick company. It has already approached the competent authority for rehabilitation under the Sick Industrial Companies (Special Provisions) Act, 1985. The provisions of Specific Relief Act are no inhibitions in getting the matter decided through the Arbitration. In the aforesaid circumstances, the Civil Court committed no error in directing the company to preserve the contracted quantity of coal ash after its due measurement and to keep the security amount of the contractor in a nationalised bank so that it is kept intact until decision of the dispute through the Arbitration. Reliance on behalf of the respondent is placed on U. P. State Electricity Board v. Ram Barai Prasad, AIR 1985 Allahabad 265. It is submitted that ihe order made by the Court under Section 9 being discretionary this Court should decline to interfere. Reliance is placed on Wander Ltd. v. Antox India P. Ltd., 1990 (Supp) SCC 727 and N. R. Dongre v. Whirpool Corporation ((1996) 5 SCC 714 : (1996 AIR SCW 3514)).
16. After hearing the learned counsel for the parties and on perusal of the two impugned orders under these connected appeals, I find no merit in the appeals.
17. The provisions of Section 9 empower the Civil Court only to take interim measures for preservation and safe custody of the subject matter in arbitration agreement and for that purpose issue interim injunctions. The aforesaid measures by the Civil Court are of interim nature only to enable the parties to effectively get their disputes adjudicated through the forum of arbitration agreed to by them under the terms of the agreement. To such arbitration proceedings and the interim measures taken by the Court under Section 9, the provisions of Specific Relief Act cannot be made applicable. In taking interim measures under Section 9, the Court does not decide the merits of the case or the rights of the parties. Existence of an arbitration clause and the necessity of taking interim measures alone are required to be considered by the Court for issuing necessary directions or orders. In the instant case, undoubtedly, there exists an arbitration clause and the parties have in fact resorted to the provisions of Section 11 of the Act for appointment of Arbitrator. A separate case has been registered being M. C. C. No. 178 of 1998. It has also not been disputed by the appellant company that it is a sick industry and proceedings under the Sick Industrial Companies (Special Provisions) Act are pending. The industry may be still in production, but for that reason alone it cannot be said that the subject matter of dispute i.e. the stipulated quantity of coal ash can be made available to the contractor even if the existing contracted quantity is allowed to be sold to third parties. The validity of the action of termination of the contract is also a subject matter to be decided by the arbitrator in the arbitration forum. The Court in the two orders passed by it, which are under consideration in these appeals, has held that looking to the poor financial condition of the appellant company it is necessary to safeguard and preserve the subject matter of the contract and the security amount furnished by the contractor. It is with that view that the Court has passed the two orders and insisted on the company that it should preserve the contracted quantity of coal ash after due measurement and keep the security amount safe in a nationalised bank. The two orders made by the Civil Court are just and fair in the circumstances mentioned above, and there is no scope for interference by this Court.
18. Consequently, the appeals fail and are hereby dismissed, but in the circumstance, without any order as to costs.