Gujarat High Court
Vishal vs Kataria on 27 January, 2010
Author: H.K.Rathod
Bench: H.K.Rathod
Gujarat High Court Case Information System
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FA/4288/2009 39/ 42 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
FIRST
APPEAL No. 4288 of 2009
With
CIVIL
APPLICATION No. 12068 of 2009
In
FIRST APPEAL No. 4288 of 2009
For
Approval and Signature:
HONOURABLE
MR.JUSTICE H.K.RATHOD
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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, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
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VISHAL
RETAIL LTD - Appellant(s)
Versus
KATARIA
AUTOMOBILES LTD - Defendant(s)
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Appearance
:
MR SHALIN N MEHTA for
Appellant(s) : 1,
MR NITIN K MEHTA for Defendant(s) :
1,
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CORAM
:
HONOURABLE
MR.JUSTICE H.K.RATHOD
Date
: 27/01/2010
CAV
JUDGMENT
1.0 This matter was heard by this Court on 20th January 2010 and the matter was reserved for judgment.
2.0 Heard learned Advocate Mr. Shalin Mehta appearing on behalf of appellant and learned Advocate Mr. Nitin Mehta appearing for on behalf of respondent.
2.1 The appellant has challenged interim order, below exh. 1 filed by respondent herein before the City Civil Court, Ahmedabad in Civil Misc. Application No. 990 of 2009 dated 16th October 2009. The City Civil Court, Ahmedabad has passed following order:
Application is partly allowed. Interim relief granted earlier is confirmed.
(1) The respondent shall deposit before this Court an outstanding amount upto 31/12/2008 in terms of the two agreement calculated at the rate of Rs.18,63,812 (Rs. Eighteen Lacs Sixty Three Thousand Eight Hundred Twelve only) per month from 1st August, 2008. This shall be subject to final outcome in the arbitral proceedings.
(2) The respondent shall deposit a sum of Rs.10,21,000/- (Rs. Ten Lacs Twenty One Thousand only) every month in this Court effective from 01/01/2009 and upon such deposit, the applicant shall be entitled to withdraw the same.
(3) The respondent shall execute solvent security in the sum of Rs.2,50,00,000/- (Rs. Two Crore Fifty Lacs only) within a period 2 weeks from today.
(4) The applicant shall initiate the arbitration proceedings by giving notice to the respondent within a period of 4 weeks from today.
Application stand disposed of accordingly.
3.0 Learned Advocate Mr. Shalin Mehta raised contention before this Court challenging aforesaid interim order, which has been passed by the trial Court under Sec. 9 of the Arbitration and Conciliation Act, 1996 (for short the Arbitration Act ). Learned Advocate Mr. Shalin Mehta submitted that on 6th March 2007, Business Conducting Agreement signed by both parties. The premises in question, is belonging to respondent, where retails and departmental stores conducted by appellant in the name of 'Vishal Mega Mart'. On 4th April 2007 possession of property handed over to appellant by respondent. On 17th June 2007 rent period started, which is to be paid by appellant. About 15,000/- sq. ft. area for parking place was not provided by respondent and therefore, dispute has been arisen, which required renegotiation between both the parties. Therefore, on 20th October 2007, two separate agreements, after renegotiation, arrived at between both the parties viz. Business Conducting Agreement and Service and Amenities Agreement. The date of renegotiation commenced on is 13th October 2007. The minimum monthly rent for a period of three years decided, wherein one month rent is Rs.18,63,812/-. On 31st July 2008 alleged default of not paying rent by appellant committed meaning thereby that, the appellant stopped paying rent to the respondent. On 7th November 2008, the appellant wrote termination letter to terminate mutually both agreements. This aspect has been denied by respondent vide letter dated 10th November 2008. On 27th February 2009, Rs.12,69,923/- monthly rent towards November/December 2008 paid by appellant to respondent. Similarly, on 15th May 2009, Rs.12,69,923/- monthly rent for January/February 2009 paid by the appellant to respondent.
3.1 On 5th September 2009, an application under Sec. 9 of the Arbitration Act has been filed by respondent. The trial Court passed order on 16th October 2009 and certain directions have been issued by the trial Court, which are on page 13 to the appeal. The arbitration proceedings have commenced from November 2009 and no dispute is raised for commencing arbitration proceedings. However, respondent is not agree to this submission made by learned Advocate Mr. Shalin Mehta. In respect to security amount of Rs.62,80,000/-, according to learned Advocate Mr. Shalin Mehta, it has been wrongly forfeited by respondent. Learned Advocate Mr. Shalin Mehta emphasized that direction in respect to solvent security of 2.5 crores shall have to be executed by appellant is an unwarranted because there is no base established by respondent before the trial Court. He relied upon Para 8 of the impugned order and also relied upon a decision of the Honourable Apex Court, reported in 2009 AIR SCW 7551 in respect to fact that in absence of prima facie case, if not established by respondent before trial Court, then question of balance of convenience and irreparable loss caused to respondent have no meaning to grant to interim relief in favour of the respondent by trial Court. He also referred to Para 10 of the order and submitted that trial Court has secured the amount for respondent, which amounts to giving final direction by way of interim order. Therefore, impugned order is bad. He is also harping upon these facts that apparently the order passed by the trial Court, which amounts to a final or in permanent measure in favour of respondent, such order cannot be passed. For that, he relied upon a decision of the Honourable Apex Court, in the case of Firm Ashok Traders and Anr. Vs. Gurumukhdas Saluja and Ors., reported in (2004) 3 SCC 155, more particularly Para 17, which is quoted as under:
17. There are two other factors which are weighing heavily with us and which we proceed to record. As per the law laid down by this Court in M/s.
Sundaram Finance Ltd. an application under S. 9 seeking interim relief is maintainable even before commencement of arbitral proceedings. What does that mean? In M/s. Sundaram Finance Ltd., itself the Court has said (SCC p.488, Para.19) "It is true that when an application under S. 9 is filed before the commencement of the arbitral proceedings there has to be manifest intention on the part of the applicant to take recourse to the arbitral proceedings."
Section 9 permits application being filed in the Court before the commencement of the arbitral proceedings but the provision does not give any indication of how much before. The word 'before' means, inter alia, ahead of; in presence or sight of; under the consideration or cognizance of.' The two events sought to be interconnected by use of the term 'before' must have proximity of relationship by reference to occurrence; the later event proximately following the preceding event as a foreseeable or 'within sight' certainty. The party invoking S. 9 may not have actually commenced the arbitral proceedings but must be able to satisfy the Court that the arbitral proceedings are actually contemplated or manifestly intended (as M/s. Sundaram Finance Ltd. puts it) and are positively going to commence within a reasonable time. What is a reasonable time will depend on the facts and circumstances of each case and the nature of interim relief sought for would itself give an indication thereof. The distance of time must not be such as would destroy the proximity of relationship of the two events between which it exists and elapses. The purpose of enacting S. 9, read in the light of the Model Law and UNCITRAL Rules is to provide 'interim measures of protection.' The order passed by the Court should fall within the meaning of the expression 'an interim measure of protection' as distinguished from an all-time or permanent protection.
3.2 Learned Advocate Mr. Shalin Mehta submitted that order itself is harsh and unjust as well as disproportionate restoring possession in favour of respondent. He submitted that trial Court itself has observed in Para 9 that, who terminated the agreement is required to be proved during trial before arbitration and thus, there is a prima facie case in favour of applicant . Relying upon this observation he emphasized that prima facie case is not established before the trial Court. The trial Court is not clear about the fact that who has terminated the agreement. Therefore, according to him, no prima facie case is proved by respondent before the trial Court and there is clear perversity in direction issued by the trial Court and he relied upon Para 10 (Page 21) of the application made by respondent. He submitted that looking to the amount found to be due and payable by respondent means present appellant to the respondent an on 31st July 2009 it comes to Rs.52,40,938/- up to 31st July 2008, but present respondent is not giving any deduction to present appellant. He emphasized that due amount up to date of termination of agreement on 31st December 2008, it comes to Rs.52,40,938/- as per Para 10 (Page
21) of application. He submitted that security amount is lying with respondent but, for that, no adjustment is given. The Para 10 (Page21) of application filed by respondent before trial Court is quoted as under:
10. The applicant submits that till 31/7/09 the following amount is due and payable by the Respondent to the Applicant:
Sr. No. Nature of Claim Basic amount Service Tax Gross Amount Due Net Amount Due 1 Amount due under principal Agreements till termination i.e. 31/12/2008.
80,19,060 9,91,156 90,10,216 Less:
Amount for which Respondent is seeking deduction @ Rs.2,60,000 from 13/10/2007 till 31/07/2008.
24,99,355 24,99,355 Less:
Amount paid in April 12,69,923 12,69,923 52,40,938 2 Amount due under principal Agreements post termination till 3 months after completion of lock in period i.e. from 01/01/2009 till 12/10/2010 @ Rs.16,03,812/-
3,98,34,034 41,68,983 4,40,03,016 4,40,03,016 p.m. For basic amount and an escalation @ of 15% for last three months from 13/10/2010 till 12/01/2011 3 Liquidated damages calculated upto 31/07/2009 96,22,872 10,24,194 1,06,47,066 Less:
Balance Amount of security deposit adjusted 46,56,070 0 46,56,070 59,909,96 4 Interest payable @ 18% yearly rest from 1/06/2009 till 31/07/2009 on the above amounts (excluding:
a) interest payable till 30/6/2009, which has already been adjusted against security deposit,
b) interest on liquidated damages for the month of June, 09) 15,55,157 0 15,55,157 15,55,157 5 Interest on liquidated damages for the month of June, 09 24,057 0 24,057 24,057 6 Less:
Amount adjusted towards the exercise of the option for purchase of all goods lying at the said premises after termination vide letter dated 21/7/2009.
10,000 0 10,000 '(10,000) 7 Municipal Tax for the current year (approximately) 10,43,062 10,43,062 10,43,062 10,43,062 Total Amount Payable 5,78,47,226 3.3 He further relied upon Sec. 9 of the Arbitration Act and submitted that securing amount cannot be considered to permit withdrawal of said amount to present respondent. In short, his submission is that the trial Court has committed a gross error in granting interim relief in favour of respondent without considering prima facie case in favour of respondent and therefore, it requires interference of this Court. Therefore, present appeal is required to be admitted by this Court and to grant interim relief against impugned order dated 16th October 2009.
4.0 Learned Advocate Mr. Nitin Mehta appearing on behalf of respondent raised contention that question of termination of agreements itself proved by conduct of appellant itself. He submitted that a contract arrived at between both the parties one is in respect to Business Conducting Agreement and another is Service and Amenities Agreement, which have not been complied by the appellant means a legal and contractual obligation must have to be performed by the appellant and appellant should have to show bonafide to pay due amount to present respondent. But no payment is made by appellant as admitted by appellant from the date of application filed before the trial Court by respondent. No payment is made at all by appellant to the respondent. He submitted that appellant is enjoying property belong to respondent for more than 1? years continuously but no due payment is made by appellant to respondent.
Learned Advocate Mr. Nitin Mehta emphasized that conduct of appellant itself becomes prima facie case in favour of respondent because it is not bonafide litigation but in guise of litigation, the appellant is enjoying property without any payment to be made to the respondent.
4.1 Learned Advocate Mr. Nitin Mehta submitted that certain documents have been produced by appellant before the trial Court. From that documents, learned Advocate Mr. Nitin Mehta relied upon a letter dated 7th November 2008, where agreements have been terminated w.e.f. 1st January 2009 and appellant shall have to handover the possession of the premises on 1st January 2009. In the said letter it is made clear that agreements have been terminated, which had arrived at between both the parties dated 20th October 2007 w.e.f. 1st January 2009. A reply is given by the respondent by letter dated 10th November 2008 to appellant where it was made clear by respondent to appellant that, we deny that we had ever agreed to terminate the above Business Conducting Agreement dated 20th October 2007. We are extremely shocked to receive the above captioned letter . In Para 4 of the said letter of respondent, where it is made clear by respondent that, we never intended to terminate the said agreements since, if we would have intended, we certainly could have done it pursuant to the afore-stated non-payment at your end. We state that it is for the first time that such an intention of termination is communicated to us. We state that decision of termination is solely a unilateral action from your side and we do not consent to the same. The lock-in period as per the agreement Clause 3.4 of both the agreements is for 03 years, which expires on 12th October 2010 . Therefore, learned Advocate Mr. Nitin Mehta, relying upon the aforesaid Para 4 of the reply dated 10th November 2008 to the letter of the appellant dated 7th November 2008 submitted that agreements are unilaterally terminated by the appellant by letter dated 7th November 2008, which was replied by present respondent vide letter dated 10th November 2008, as referred above. Therefore, in such circumstances, he submitted that at least to show bonafide by appellant undisputed amount according to the appellant requires to be paid to respondent but no payment is made till date by the appellant considering application preferred by respondent under Sec. 9 of the Arbitration Act before the trial Court. He also made it clear that amount claimed by respondent is after deducting Security Deposit amount. In short, his submission is that both the agreements are terminated by appellant unilaterally for which respondent had never agreed to it. Therefore, it is a clear default committed by appellant, which itself shows a prima facie case established by the respondent before the trial Court, which has been rightly considered by the trial Court and on that basis, interim relief has been granted for which the trial Court has jurisdiction. He relied upon one decision of the Madhya Pradesh High Court in the case of Nepa Ltd. Vs. Manoj Kumar Agrawal, reported in AIR 1999 Madhya Pradesh 57, more particularly Head Note (B).
5.0 Learned Advocate Mr. Shalin Mehta again emphasized on Para 9 of the impugned order (Page 7) and submitted that trial Court is not sure about the fact as to who has terminated the agreement. That question is kept open, which do not establish the prima facie case in favour of respondent. He referred to a letter dated 1st December 2008 of M/s. K.C. Kalra & Co., Advocates, more particularly, Para 3 of the letter for suggesting, that in a joint meeting dated 5th November 2008, which took place at the Corporate Office of our client it was amicably decided between you and our client to terminate both the above-mentioned agreements. Pursuant to the discussions held amicably between you and our client that both above-referred agreements shall stand terminated w.e.f. 1st January 2009 . This letter of M/s. K.C. Kalra & Co., Advocates, dated 1st December 2008 is addressed to present respondent and it was given by Advocate under instructions and on behalf of M/s. Vishal Retails Ltd., Rangpuri, New Delhi present appellant.
5.1 These facts have been denied by learned Advocate Mr. Nitin Mehta relying upon letter dated 7th November 2008 communicated to respondent against which reply was given by present respondent vide letter dated 10th November 2008. Therefore, learned Advocate Mr. Shalin Mehta submitted that both agreements have been terminated by mutual agreement and therefore, agreements were not terminated by appellant.
6.0 Except, as referred above, no other and further contentions have been raised by either of the learned Advocates and no other decision is relied upon by them except as referred above.
6.1 In light of this background, this Court has to consider the question, whether the order passed by the trial Court dated 16th October 2009 in Civil Misc. Application preferred by the respondent under Sec. 9 of the Arbitration Act is legal and valid or not. Before dealing with the contentions raised by both learned Advocates, it is necessary to consider Sec. 9 of the Arbitration Act, which is quoted as under:
9. Interim measures, etc. by Court: - A party may, before or during arbitral proceedings or at any time after the making of the 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 purposes 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 authorizing for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorizing 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 proceedings before it.
6.2 A party or a person is entitled to interim protection if action of the other party is either in breach of the terms of the agreement or militates against equity, fair play or natural justice as per decision of Delhi High Court in case of Baby Arya Vs. Delhi Vidyut Board, reported in AIR 2002 Del 50. The scope of Sec. 9 of the Arbitration Act only deals with the interim measure by the Court. Obviously, it is not within the scope of this section to inquire into the claim and the counter claim made by both the parties in regard to the custody of the articles beyond what has been admitted by the respondent, reported in case of Narain Sahai Aggarwal Vs. Santosh Rani, reported in 1997 (2) Arb LR 322. The trial Court, while considering application under Sec. 9(ii)(b) of the Arbitration Act, is given power and jurisdiction securing the amount in dispute in the arbitration and also to pass any direction as interim measure of protection as may appear to the Court to be just and convenient.
6.3 The question of interim relief when it to be granted has examined by the Honourable Apex Court in case of M. Gurudas Vs. Rasaranjan, reported in 2006 AIR SCW 4773. While considering interim relief application, the Court has to consider finding on prima facie case which would finding fact. However, while arriving at such finding of fact, Court not only must arrive at a conclusion that a case for trial has been made out but would consider question in regard to balance of convenience of parties as also irreparable injury which might be suffered by plaintiffs if prayer for injunction is to be refused. Court has to consider the conduct of defendants was undisputedly relevant. The relevant Paras viz. Nos. 19 to 22 and 37 from aforesaid decision are quoted as under:
19.
While considering an application for injunction, it is well-settled, the courts would pass an order thereupon having regard to:
(i) Prima facie
(ii) Balance of convenience
(iii) Irreparable injury.
20. A finding on 'prima facie case' would be a finding of fact. However, while arriving at such finding of fact, the court not only must arrive at a conclusion that a case for trial has been made out but also other factors requisite for grant of injunction exist. There may be a debate as has been sought to be raised by Dr. Rajeev Dhawan that the decision of House of Lords in American Cyanamid v. Ethicon Ltd. [1975] 1 All ER 504 would have no application in a case of this nature as was opined by this Court in Colgate Palmolive (India) Ltd. v. Hindustan Lever Ltd. [(1999) 7 SCC 1] and S.M. Dyechem Ltd. v. Cadbury (India) Ltd. [(2000) 5 SCC 573], but we are not persuaded to delve thereinto.
21. We may only notice that the decisions of this Court in Colgate Palmolive (supra) and S.M. Dyechem Ltd (supra) relate to intellectual property rights. The question, however, has been taken into consideration by a Bench of this Court in Transmission Corpn. of A.P. Ltd. v. Lanco Kondapalli Power (P) Ltd. [(2006) 1 SCC 540] stating:
"The Respondent, therefore, has raised triable issues. What would constitute triable issues has succinctly been dealt with by the House of Lords in its well-known decision in American Cyanamid Co v. Ethicon Ltd. [(1975) 1 AER 504], holding :
"Your Lordships should in my view take this opportunity of declaring that there is no such rule. The use of such expression as 'a probability', 'a prima facie case', or 'a strong prima facie case' in the context of the exercise of a discretionary power to grant an interlocutory injunction leads to confusion as to the object sought to be achieved by this form of temporary relief. The court no doubt must be satisfied that the claim is not frivolous or vexatious; in other words, that there is a serious question to be tried."
It was further observed :
"Where other factors appear to be evenly balanced it is a counsel of prudence to take such measures as are calculated to preserve the status quo. If the defendant is enjoined temporarily from doing something that he has not done before, the only effect of the interlocutory injunction in the event of his succeeding at the trial is to postpone the date at which he is able to embark on a course of action which he has not previously found it necessary to undertake; whereas to interrupt him in the conduct of an established enterprise would cause much greater inconvenience to him since he would have to start again to establish it in the event of his succeeding at the trial.
* * * The factors which he took into consideration, and in my view properly, were that Ethicon's sutures XLG were not yet on the market; so that had no business which would be brought to a stop by the injunction; no factories would be closed and no workpeople would be thrown out of work. They held a dominant position in the United Kingdom market for absorbable surgical sutures and adopted an aggressive sales policy."
We are, however, not oblivious of the subsequent development of law both in England as well as in this jurisdiction. The Chancery Division in Series 5 Software v. Clarke [(1996) 1 All ER 853] opined:
"In many cases before American Cyanamid the prospect of success was one of the important factors taken into account in assessing the balance of convenience. The courts would be less willing to subject the plaintiff to the risk of irrecoverable loss which would befall him if an interlocutory injunction was refused in those cases where it thought he was likely to win at the trial than in those cases where it thought he was likely to lose. The assessment of the prospects of success therefore was an important factor in deciding whether the court should exercise its discretion to grant interlocutory relief. It is this consideration which American Cyanamid is said to have prohibited in all but the most exceptional case. So it is necessary to consider with some care what was said in the House of Lords on this issue."
In Colgate Palmolive (India) Ltd. v. Hindustan Lever Ltd. [(1999) 7 SCC 1], this Court observed that Laddie, J. in Series 5 Software (supra) had been able to resolve the issue without any departure from the true perspective of the judgment in American Cyanamid. In that case, however, this Court was considering a matter under Monopolies and Restrictive Trade Practices Act, 1969.
In S. M. Dyechem Ltd. v. Cadbury (India) Ltd. [(2000) 5 SCC 573], Jagannadha Rao, J. in a case arising under Trade and Merchandise Marks Act, 1958 reiterated the same principle stating that even the comparative strength and weaknesses of the parties may be a subject-matter of consideration for the purpose of grant of injunction in trade mark matters stating :
"21.
Therefore, in trademark matters, it is now necessary to go into the question of "comparable strength" of the cases of either party, apart from balance of convenience. Point 4 is decided accordingly."
The said decisions were noticed yet again in a case involving infringement of trade mark in Cadila Health Care Ltd. v. Cadila Pharmaceuticals Ltd. [(2001) 5 SCC 73]."
22. While considering the question of granting an order of injunction one way or the other, evidently, the court, apart from finding out a prima facie case, would consider the question in regard to the balance of convenience of the parties as also irreparable injury which might be suffered by the plaintiffs if the prayer for injunction is to be refused. The contention of the plaintiffs must be bona fide. The question sought to be tried must be a serious question and not only on a mere triable issue. [See Dorab Cawasji Warden v. Coomi Sorab Warden and Others , (1990) 2 SCC 117, Dalpat Kumar and Another v. Prahlad Singh and Others (1992) 1 SCC 719, United Commercial Bank v. Bank of India and Others (1981) 2 SCC 766, Gujarat Bottling Co. Ltd. and Others v. Coca Cola Co. and Others (1995) 5 SCC 545, Bina Murlidhar Hemdev and Others v. Kanhaiyalal Lokram Hemdev and Others (1999) 5 SCC 222 and Transmission Corpn. of A.P. Ltd (supra)].
37. The conduct of the defendants was indisputably relevant as has been held by this Court in Gujarat Bottling Co. Ltd. (supra) in the following terms. 1995 AIR SCW 3521, Para 50 "47.
In this context, it would be relevant to mention that in the instant case GBC had approached the High Court for the injunction order, granted earlier, to be vacated. Under Order 39 of the Code of Civil Procedure, jurisdiction of the Court to interfere with an order of interlocutory or temporary injunction is purely equitable and, therefore, the Court, on being approached, will, apart from other considerations, also look to the conduct of the party invoking the jurisdiction of the Court, and may refuse to interfere unless his conduct was free from blame. Since the relief is wholly equitable in nature, the party invoking the jurisdiction of the Court has to show that he himself was not at fault and that he himself was not responsible for bringing about the state of things complained of and that he was not unfair or inequitable in his dealings with the party against whom he was seeking relief. His conduct should be fair and honest. These considerations will arise not only in respect of the person who seeks an order of injunction under Order 39, Rule 1 or Rule 2 of the Code of Civil Procedure, but also in respect of the party approaching the Court for vacating the ad interim or temporary injunction order already granted in the pending suit or proceedings."
In Board of Control for Cricket in India (supra), it is stated: 2005 AIR SCW 230 "96.
The conduct of the Board furthermore is not above board. The manner in which the Board had acted leaves much to desire."
6.4 The aforesaid decision is also considered by the Honourable Apex Court in case of Zenit Metaplasts P. Ltd. Vs. State of Maharashtra and Ors., reported in 2009 AIR SCW 6454 decided on 11/09/2009. The relevant Paras from the above referred recent decision viz. Nos. 23 to 32 are quoted as under:
23. Interim order is passed on the basis of prima facie findings, which are tentative. Such order is passed as a temporary arrangement to preserve the status quo till the matter is decided finally, to ensure that the matter does not become either infructuous or a fait accompli before the final hearing. The object of the interlocutory injunction is, to protect the plaintiff against injury by violation of his right for which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial. (vide Anand Prasad Agarwalla v. State of Assam vs.Tarkeshwar Prasad & Ors. AIR 2001 SC 2367; and Barak Upatyaka D.U.Karmachari Sanstha (2009) 5 SCC 694).
24. Grant of an interim relief in regard to the nature and extent thereof depends upon the facts and circumstances of each case as no strait-jacket formula can be laid down. There may be a situation wherein the defendant/respondent may use the suit property in such a manner that the situation becomes irretrievable. In such a fact situation, interim relief should be granted (vide M. Gurudas & Ors. Vs. Rasaranjan & Ors. AIR 2006 SC 3275; and Shridevi & Anr. vs. Muralidhar & Anr. (2007) 14 SCC 721.
25. Grant of temporary injunction, is governed by three basic principles, I.e.
prima facie case; balance of convenience; and irreparable injury, which are required to be considered in a proper perspective in the facts and circumstances of a particular case. But it may not be appropriate for any court to hold a mini trial at the stage of grant of temporary injunction (Vide S.M. Dyechem Ltd. Vs. M/s. Cadbury (India) Ltd., AIR 2000 SC 2114; and Anand Prasad Agarwalla (supra).
26. In Colgate Palmolive (India) Ltd. Vs. Hindustan Lever Ltd., AIR 1999SC 3105, this court observed that the other considerations which ought to weigh with the Court hearing the application or petition for the grant of injunctions are as below :
(I) Extent of damages being an adequate remedy;
(ii) Protect the plaintiff s interest for violation of his rights though however having regard to the injury that may be suffered by the defendants by reason therefor ;
(iii) The court while dealing with the matter ought not to ignore the factum of strength of one party s case being stronger than the others;
(iv) No fixed rules or notions ought to be had in the matter of grant of injunction but on the facts and circumstances of each case- the relief being kept flexible;
(v) The issue is to be looked from the point of view as to whether on refusal of the injunction the plaintiff would suffer irreparable loss and injury keeping in view the strength of the parties case;
(vi) Balance of convenience or inconvenience ought to be considered as an important requirement even if there is a serious question or prima facie case in support of the grant;
(vii) Whether the grant or refusal of injunction will adversely affect the interest of general public which can or cannot be compensated otherwise.
27. In Dalpat Kumar & Anr. Vs. Prahlad Singh & Ors., AIR 1993 SC 276, the Supreme Court explained the scope of aforesaid material circumstances, but observed as under:-
The phrases `prima facie case , `balance of convenience and `irreparable loss are not rhetoric phrases for incantation, but words of width and elasticity, to meet myriad situations presented by man s ingenuity in given facts and circumstances, but always is hedged with sound exercise of judicial discretion to meet the ends of justice. The facts rest eloquent and speak for themselves. It is well nigh impossible to find from facts prima facie case and balance of convenience.
28. This Court in Manohar Lal Chopra Vs. Rai Bahadur Rao Raja Seth Hira Lal, AIR 1962 SC 527 held that the civil court has a power to grant interim injunction in exercise of its inherent jurisdiction even if the case does not fall within the ambit of provisions of Order 39 Code of Civil Procedure.
29. In Deoraj vs. State of Maharashtra & Ors. AIR 2004 SC 1975, this Court considered a case where the courts below had refused the grant of interim relief. While dealing with the appeal, the Court observed that ordinarily in exercise of its jurisdiction under Art.136 of the Constitution, this Court does not interfere with the orders of interim nature passed by the High Court. However, this rule of discretion followed in practice is by way of just self-imposed restriction. An irreparable injury which forcibly tilts the balance in favour of the applicant, may persuade the Court even to grant an interim relief though it may amount to granting the final relief itself. The Court held as under:-
The Court would grant such an interim relief only if satisfied that withholding of it would prick the conscience of the court and do violence to the sense of justice, resulting in injustice being perpetuated throughout the hearing, and at the end the court would not be able to vindicate the cause of justice.
30. Such a course is permissible when the case of the applicant is based on his fundamental rights guaranteed by the Constitution of India. (vide All India Anna Dravida Munnetra Kazhagam vs. Chief Secretary, Govt. of Tamil Nadu & Ors. (2009) 5 SCC 452)
31. In Bombay Dyeing & Manufacturing Co. Ltd. Vs. Bombay Environmental Action Group & Ors. (2005) 5 SCC 61, this Court observed as under:-
The courts, however, have to strike a balance between two extreme positions viz. Whether the writ petition would itself become infructuous if interim order is refused, on the one hand, and the enormity of losses and hardships which may be suffered by others if an interim order is granted, particularly having regard to the fact that in such an event, the losses sustained by the affected parties thereby may not be possible to be redeemed.
32. Thus, the law on the issue emerges to the effect that interim injunction should be granted by the Court after considering all the pros and cons of the case in a given set of facts involved therein on the risk and responsibility of the party or, in case he looses the case, he cannot take any advantage of the same. The order can be passed on settled principles taking into account the three basic grounds I.e. prima facie case, balance of convenience and irreparable loss. The delay in approaching the Court is of course a good ground for refusal of interim relief, but in exceptional circumstances, where the case of a party is based on fundamental rights guaranteed under the Constitution and there is an apprehension that suit property may be developed in a manner that it acquires irretrievable situation, the Court may grant relief even at a belated stage provided the court is satisfied that the applicant has not been negligent in pursuing the case.
6.5 The Division Bench of this Court, in the case of Jasoda Indralal Vadhva Vs. Hemedrabhai Kakulal Vyas and Ors., reported in 2009 (2) GLH 437, has decided the issue, that while considering the interim order passed by the trial Court that what are the powers of the Appellate Court in considering such interim order passed by the trial Court. The relevant discussion is made in Para 13 of the said judgment, which is quoted as under:
"13. Granting of injunction is a matter of discretion. Balance of convenience and irreparable injury are triable issues and are required to be examined and positively found. It is settled law that while hearing appeal against discretionary exercise of powers by the trial judge, while deciding the application under Order 39, Rule 1 and 2 of C.P.C. the appellate court is not expected to interfere with the discretion, unless it is shown that power has been exercised arbitrarily, capriciously or in perversity and against the settled principles of law. Appellate court is not expected to reassess the material and to reach a conclusion different than the one reached by the court below. If the one reached by the court was reasonably a plausible view, appellate court would normally not be justified in interfering with the order. But, if the exercise of discretion in appeal is only on the ground that the matter has not received consideration at trial court stage, then it would have come to a different conclusion and the appellate court can interfere with the exercise of discretion of trial court provided it is satisfied about prima facie strong case, balance of convenience and extreme urgency. "
7.0 In light of scope of Sec. 9 of the Arbitration Act and not to decide merits between parties while considering interim application, the observations made by trial Court in Paras 9 and 10 are quoted as under:
9. From the above discussion fact, it appears that applicant has substantial case for a trial during arbitration. As noticed herein above it is the case of applicant that respondent terminated the first agreement.
The respondent however claims that it was terminated by mutual agreement. As to who terminated the agreement is required to be proved during trial before arbitration and thus there is prima facie case in favour of applicant.
10. So far as balance of convenience and irreparable loss are concerned, undisputedly even after expressing its intention to handover the possession of the property in question to the applicant by the afore-mentioned letter, the respondent does not appear to have handed over the possession, except that the applicant has taken possession of the parking lot as indicated in the application. The rest of the area is admittedly being used and enjoyed by the respondent without paying any rent or charges whatsoever. The only basis for non payment of the rentals and other dues of applicant as propounded by the respondent is that there was a revision in rentals but even that aspect is prima facie not established by the respondent. Admittedly what has been produced by the respondent is a mere a draft of agreement which is not accepted by the applicant. It is submitted that a cheque, after such revision came to be accepted by the applicant. While, disputing the said facts and also disputing the execution of any agreement or modification of terms of the contract, learned Advocate for the applicant has rightly pointed out that even if said draft agreement produced at mark 20/4 is taken into consideration at face value, total monthly rental which according to respondent was agreed to be paid Rs.10,21,000/- per month and thus no prudent man would have accepted the sum of Rs.8,21,000/- by so called acknowledgment receipt mark 20/1. It is also pertinent to note that in the so called draft agreement mark 20/4 relied upon by respondent, it has been clearly stated that rest of the terms and conditions will remain to be same. Thus by making such a statement, the respondent approved all the terms and conditions in the aforementioned two agreements and if the respondent intends to enjoy the property in question, it is required to be put to suitable terms for such use before the disputes are settled during intended arbitration. For the purpose of interim orders, the court at this stage is inclined to take into consideration the admitted position by the respondent. As admitted by the respondent, it was required to pay Rs.3,21,000/- or 0.5% of the turn over which ever is higher as the Business Conducting fees and Rs.7,00,000/- towards services and amenities fees per month. Thus, if even after expressing its intention to return possession of property the respondent continues to use the same, there can be no difficulty in requiring the respondent to pay such admitted amount to the applicant every month from 01/01/2009 as indicated by the respondent in the draft agreement. The draft agreement mark 20/4 also indicates that respondent wanted to modify the terms of the agreement with effect from 01/01/2009 and it is further stated that rest of the conditions of previous agreements shall have to adhered to. Thus, as admitted by respondent, two agreements relied upon by the applicant continued upto 31/12/2008 is required to be adhered to and therefore, respondent is bound to release the outstanding as on 31/12/2008 on the basis of such agreements, since the respondent can not retain the possession of the property without paying anything to the applicant.
7.1 The trial Court has also considered overall circumstances before granting relief in favour of present respondent in Paras 12, 13 and 14 which are quoted as under:
12. Thus, considering overall circumstances, it appears that there is no dispute that the agreements mark 3/3 and 3/4 were executed between the parties. Admittedly respondent expressed its intention to handover the possession of the property to the applicant with effect from 01/01/2009, but it didn't. The respondent has stopped paying even a single pie to applicant. Thus, on one hand, by retaining possession of the property, the respondent has prevented the applicant from putting the property to other use. On the other hand, if the interim orders are passed, the respondent will not lose anything as it would be paying for the use of the property in question. The absence of interim order would cause irreparable injury to the applicant which can not be compensated in terms of money. Balance of convenience is also in favour of applicant.
13. Termination of the agreement mark 3/3 exposes respondent to severe consequences like double the rent etc. According to applicant, the total dues have crossed 5 Crores and these dues will keep on mounting during arbitral proceedings as the same is likely to consume time.
Therefore, to secure applicant's interest, the respondent must be required to execute a security at least in the sum of Rs.2,50,00,000/-.
14. It is true that under Section 9 of the Arbitration and Conciliation Act, 1996, application for interim orders can be preferred even before arbitration proceeding, however in order to see that the respondent is not put to hanging sword in the nature of this order, applicant shall be oblige to initiate arbitration proceeding within 4 weeks from today by giving notice to the respondent. Under the circumstances, the application must partly succeeds and hence following order is passed...
7.2 The contention is raised by learned Advocate Mr. Shalin Mehta that trial Court is not sure or clear as to who has terminated the agreements between both the parties, therefore only, prima facie case is not established by respondent before trial Court. But according to the trial Court, respondent has substantial case for a trial during arbitration. It is also necessary to note that if, at an interim stage, the trial Court decided the question as to who has terminated the agreements then it amounts to finding given by trial Court to decide merits of the matter. Therefore, that question has been left open which can be required to be proved by either party before the Arbitrator during trial in arbitration. But respondent has a substantial case for trial during arbitration, has been justified the prima facie case in favour of respondent. The trial Court has also considered in Para 11 that respondent has a prima facie good case and interest of respondent is required to be protected, otherwise award, which may be passed in favour of respondent, become paper award. Therefore, trial Court has taken care while dealing with question of interim relief not to give finding in respect to merits of the matter so it will not adversely affect either of party while deciding arbitration proceedings.
7.3 The trial Court has also considered certain facts which have been admitted by present appellant in Para 10 of the impugned order. The trial Court has also considered one important aspect that possession of the property is not handed over by appellant to respondent w.e.f. 1st January 2009 and without paying anything, retained the possession of the property of present respondent, which apparently amounts to clear breach of both agreements arrived at between both the parties. Once, breach has been committed or default has been committed by present appellant, found apparent from record and also from the conduct of appellant, that itself proves or establishes the prima facie case in favour of respondent, which has rightly been examined by the trial Court while deciding interim relief application. Therefore, decision which has been relied by the learned Advocate Mr. Shalin Mehta in case of Kashi Math Samsthan and Anr. Vs. Srimad Sudhindra Thirtha Swamy and Anr., reported in 2009 (14) scale 274, wherein, the Honourable Apex Court has observed that while considering the interim relief application under O.XXXIX R.1 and 2 read with Section 151 of the Code of Civil Procedure being a discretionary remedy and in such case when a party fails to prove prima facie case to go for trial then it is not open to the Court to grant injunction in his favour even if, he has made out case of balance of convenience being in his favour . The aforesaid observations are not applicable to the facts of the present case considering observations made by trial Court because in Para 9 the trial Court has made it clear that, from the above discussion fact, it appears that applicant (means present respondent) has substantial case for a trial during arbitration and in Para 10 also the trial Court has come to the conclusion that no prima facie case has been established by respondent present appellant in his favour and certain admitted facts by present appellant have also been considered which amounts to admitted position by present appellant. So, after perusing entire interim order passed by the trial Court, it is very clear that trial Court has made clear observation in favour of present respondent that present respondent has established prima facie case in his favour, which has been rightly decided by trial Court and thereafter, trial Court has rightly considered the question of balance of convenience and irreparable loss caused to respondent.
7.4 According to my opinion, the trial Court has rightly exercised its discretionary power while granting relief in favour of present respondent. For that even, trial Court has not committed any error, which requires interference by this Court.
7.5 The contention raised by learned Advocate Mr. Shalin Mehta that no prima facie case is established by respondent before trial Court. Prima facie case does not mean that the Court should examine the merits of the case closely and come to a conclusion that the petitioner has a case in which he has rightly succeeded. This would amount to prejudging the case on merits. All that the Court has to see is that on face of it, the person applying for interim relief has a case, which needs consideration. The balance of convenience has also to be looked into. This view has been taken by the Bombay High Court in the case reported in 2000 (2) Bom LR 624. For that, according to my opinion, the trial Court has not committed any error, which requires interference by this Court.
7.6 Learned Advocate Mr. Nitin Mehta relied upon a decision of Madhya Pradesh High Court in the case of Nepa Ltd. (supra), more particularly, Head Note (B) relating to Paras 14 and 17, which are quoted as under:
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 determinable 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. M/s. Mahesh Kumar and Co., AIR 1982 Gujarat 289 and M/s. Misra and Company v. Hindustan Aeronautics Ltd., AIR 1986 Orissa 22.
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 Sec. 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 Sec. 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.
8.0 This Court has considered submissions made by both learned Advocates appearing on behalf of respective parties. Most of submissions are related to merits while referring letter dated 7th November 2008 by appellant and reply given by respondent vide letter dated 10th November 2008. But this Court is not expressing any opinion on merits as merely referred all the three letters including letter dated 1st December 2008 of M/s. K.C. Kalra & Co., Advocates, addressed to present respondent by appellant. This Court has considered very limited scope in deciding legality and validity of interim order dated 16th October 2009, so, while deciding it, this Court may refer some of the merits without expressing any opinion on merits otherwise it will cause prejudice to either party while deciding the same in arbitration proceedings. Therefore, this Court has merely referred it because both learned Advocates have made their submissions on letters as referred above. But this Court has not expressed any opinion on merits and merely considering prima facie case in favour of respondent and also considered question of balance of convenience and irreparable loss caused to respondent decided by trial Court.
8.1 It is undisputed fact that after filing Sec. 9 application by respondent on 5th September 2009, no payment is made to respondent even though being an undisputed fact that appellant is enjoying property belong to respondent without paying any rent to the respondent. Even according to the appellant whatever amount being undisputed that has also not paid by the appellant to respondent.
8.2 This conduct and approach and behaviour of appellant suggested that some security measure, as directed by trial Court, is necessary in the interest of justice, otherwise, in future, if any award is passed by the arbitrator in favour of respondent, then it will become merely paper award and it is very difficult for respondent to recover the amount from appellant. Therefore, direction issued by trial Court while partly allowing interim relief application filed by respondent directing appellant to execute solvent security in a sum of Rs.2.5 crores within a period of two weeks from date of order cannot be considered to be harsh or unjust because, otherwise, entire property used by appellant and no due payment is made to respondent and accordingly, during pendency of arbitration proceedings, which likely to consume sometime, these dues will keep on mounting. Therefore, trial Court, keeping in mind this aspect and also keeping in mind termination of the agreement Mark 3/3, which exposed present appellant to severe consequences like double the rent, the interest of present respondent is required to be secured. Therefore, trial Court has rightly directed to present appellant to execute solvent security in a sum of Rs.2.5 crores, which protects and safeguards the interest of the present respondent. Therefore, according to my opinion, trial Court has taken more than sufficient care to pass interim order in such a given facts and circumstances of the case and also keeping in mind the conduct and approach and behaviour of the present appellant with respondent using premises but not paying due amount of rent only on the ground of dispute, which is not proper for appellant. Therefore, equity and fair play require some protection to be given to the right of respondent otherwise, entire arbitration proceedings become nugatory. The undisputed amount has been directed to be deposited w.e.f. 1st January 2009 and rightly permitted to withdraw such amount to respondent. For that also, the trial Court has not committed any error, which requires interference by this Court. In short, according to my opinion, contentions raised by learned Advocate Mr. Shalin Mehta cannot be accepted and after perusing entire interim order passed by trial Court dated 16th October 2009, it cannot be considered to be a final relief granted by trial Court in favour of respondent. Therefore, decision, which has been relied upon by the learned Advocate Mr. Shalin Mehta in the case of Firm Ashok Traders and Anr. (supra) is not applicable to the facts of the present case. The trial Court has not granted any relief having nature of permanent measure. On the contrary, the trial Court has kept certain facts open, which can be examined by the arbitrator and meanwhile, looking to the conduct and approach of the appellant, certain security has been imposed upon appellant, while keeping in mind equity and fair play principles, so that ultimate result of arbitration proceedings cannot become failure or it cannot become merely paper award for respondent. Therefore, such relief is squarely covered being an interim measure of protection and it cannot be considered to be a permanent protection given in favour of respondent because this will remain continue only during arbitration proceedings and also appellant having remedy to approach arbitrator by necessary application.
8.3 In view of principle examined by the Honourable Apex Court in both the cases as referred above viz. M. Gurudas and Ors. and Zenit Metaplast P. Ltd.in facts of present case, the trial Court has rightly examined the matter while granting interim relief in favour of respondent. All the principles are satisfied by respondent that having strong prima facie case as well as risk and responsibility of present appellant as per agreements. The conduct of present appellant is also rightly considered by the trial Court. The balance of convenience and irreparable loss caused to respondent if interim relief refused by trial Court. The respondent having triable case and contentions raised are bonafide. The questions which are raised by respondent before trial Court are serious questions looking to the facts and circumstances, which are self-eloquent. As per agreements itself legally due amounts disclosed by respondent before trial Court, which comes to more than Rs.5 crores, even though, premises belonged to respondent is fully enjoyed by appellant without paying any rent even agreed by appellant to the respondent. It may be some dispute between parties but undisputed amounts also not paid by appellant to respondent that shows conduct, attitude and behaviour of appellant. So, according to my opinion, looking to facts and circumstances of present case, trial Court has rightly exercise discretionary power in granting interim relief in favour of respondent, who satisfied all ingredients for granting interim relief in favour of respondent. For that, trial Court has not committed any error, which requires any interference by this Court. If such interim relief not granted then arbitration proceedings become infructuous or fait accompli before deciding finally.
9.0 Therefore, according to my opinion, no error has been committed by the trial Court while granting relief in favour of respondent. Therefore, there is no substance in the First Appeal preferred by the appellant before this Court. Therefore, present First Appeal is dismissed. Accordingly, interim relief granted by this Court on 13th November 2009 only extending the period for executing solvent security stands vacated. This Court has not granted any interim relief in favour of appellant except extending the period of executing solvent security, to be given by appellant.
9.1 The Civil Application No. 12068 of 2009 for Stay is also accordingly dismissed.
[ H. K. Rathod, J. ] Further Order:
After pronouncement of judgment by this Court, learned Advocate Ms. Viraj Fojdar for learned Advocate Mr. Shalin Mehta, appearing on behalf of appellant requested to extend the period to execute solvent security in the sum of Rs.2.5 crores for further 04 (four) weeks.
Learned Advocate Mr. Manav Mehta for learned Advocate Mr. Nitin Mehta, appearing on behalf of respondent raised objection against such request made by learned Advocate Ms. Fojdar.
However, in the interest of justice, the period for executing the solvent security in the sum of Rs.2.5 crores is further extended for a period of 04 (four) weeks from today.
[ H. K. Rathod, J. ] hiren Top