Bangalore District Court
M/S. Athena Infrastructure & ... vs S.L.N.Company on 15 February, 2022
IN THE COURT OF THE LXXXVI ADDL. CITY CIVIL JUDGE
AT BANGALORE [CCH.No.87]
Present:
Sri.SUNIL ANDANEPPA SHETTAR, B.Sc., LLB., (SPL)
LXXXVI ADDL. CITY CIVIL JUDGE
Dated this the 15th day of February, 2022
Com.A.A.No.118/2021
Plaintiff/s : M/s. Athena Infrastructure & Constructions,
A Partnership Firm,
Having its registered office at No.24/62,
"Neeladri Sapphire", 1st 'A' Main,
Service Road, Mahalakshmi Layout Entrance,
Bengaluru-560 086,
Karnataka, India
Represented herein by its
Managing Partner,
Mr. Girish Kumar K.
(By B.N. Advocate)
- Vs -
Defendant/s : S.L.N.Company
A Partnership Firm,
Having its office at, No.4/95,
Byadigere Village, Agali (M),
Anantpur Dirstict-515 311
Andhra Pradesh, India
Represented herein by its
Managing Partner,
Mr.B.N.Chikka Honnappa
alias B.N.Chikkavannappa
(By. B.S.N Advocate)
2 Com.A.A.No.118/2021
JUDGMENT
This is the petition filed by the petitioner company against the respondent company under section 9 (ii) of the Arbitration & Conciliation Act, 1996 seeking an order of interim measure of injunction restraining the respondent, its partners and representatives agents etc, from selling or dealing with the minerals that has occurred/may occur in the quarrying lease which are extracted, wined, mined and removed from the quarry at the pit mouth of the quarry/stockyard of the respondent in any manner to the third parties pending disposal of the arbitral proceedings to be commenced between the parties.
2. The petitioner being a registered partnership firm is involved in the business of rock cutting, excavation, earth moving, rock breaking, rock excavation, surface preparation etc,. The respondent being a company represented to the petitioner that the government by its order dated 15.04.2013 and 24.09.2014 has granted a quarrying lease for colour granite in its favour and has got a lease deed dated 12.06.2014 in respect of Sy.No.301 measuring 4630 hectares of land situated at H.D halli village, Agali (m), Ananthpur district, Andhra Pradesh from the government of Andhra Pradesh under the provisions of mines and minerals (Development and Regulations) Act, 1957 R/w Andhra Pradesh Minor Mineral Concession Rules, 1966. The 3 Com.A.A.No.118/2021 petitioner on the basis of the said representation approached the respondent for purchase of entire minerals, which will be extracted from the quarry on the basis of quarrying lease and after mutual discussions they have entered into a 'Granite sale agreement' on 08.08.2016, under which the respondents have agreed to sell and deliver the entire quantity of minerals extracted, wined, mined and removed for the quarry at the pit mouth of the quarry/stockyard and the period of agreement was for twenty years from the date of execution of the agreement.
3. As per the agreement the respondent has agreed to deliver the minerals at the pit mouth at the rate of INR 12,000.00 (Rupees Twelve Thousand Only) per cubic meter for Gang-saw size, INR 10,600.00 (Ten Thousand and Six Hundred Only) per cubic meter for the granite blocks which are lesser than the Gang-saw Granite blocks. The petitioner has paid a sum of INR 25,00,000.00 (Rupees Twenty Five Lakhs only) to the respondents under the agreement, through cheque bearing No. 734873 dated 03.08.2016 drawn on Canara Bank, Mahalakshmi Layout Branch, Bengaluru. It was agreed that, the said amount shall be returned at the time of expiry of the agreement or upon termination of the agreement, whichever is earlier. Further, the petitioner has an option to deduct 10% of the sale value of the mineral supplied by the respondent out of the security deposit 4 Com.A.A.No.118/2021 amount. It is the allegation of the petitioner that, the respondent has failed to supply the goods as agreed and has sold the materials to outsiders/third parties for a higher price, in violation of the terms of the agreement. Thereafter, when the petitioner demanded for supplies, the respondent continuously assured the petitioner that it would supply the materials as agreed.
4. It is further contented that the respondent, under the letter dated 03.10.2016 made a request for additional interest free refundable advance of INR 5,00,000.00 (Rupees Five Lakhs only), with reference to the agreement, indicating that, the same would be returned or adjusted towards the sale value of the minerals to be supplied. The petitioner was also informed that the respondent has defaulted in repayment of dead rent payable to the Department of Mines & Geology, Andhra Pradesh, and are unable to do any production work. The respondent has neither supplied the products, nor terminated the agreement, which goes to show that the respondent has entered into the agreement only to take the amount of INR 25,00,000.00 (Rupees Twenty Five Lakhs only) as security deposit and additional amounts from the petitioner, and the respondent had no intention to supply the materials to the petitioner as agreed.
5. It is also the case of the petitioner that he had made arrangements for sale of the granite to its customers, but he 5 Com.A.A.No.118/2021 could not sell the same in view of the breach committed by the respondent. Due to failure on the part of the respondent to supply the granite minerals, the petitioner has incurred huge loss as he has to pay interest to his banker and could not carry out the supply orders of granite Blocks for their customers. The petitioner has availed overdraft facility for making the aforesaid payment and paying the interest at 16% per annum and has paid approximately INR 14,00,000.00 to the bank only towards interest for which the respondent is solely responsible, in addition to the damages caused to the petitioner. Hence, the petitioner has terminated the agreement and seek refund of security deposit along with interest and consequential damages. The petitioner has issued notice dated 14.02.2020 to the respondent and its partners terminating the agreement and seeking refund of the security deposit along with interest and damages. In spite of service of the said notice, the respondent and its partners have neither replied nor complied with the demands made therein. The petitioner has issued another notice dated 11.05.2020, indicating that he is ready and willing to resolve the dispute and calling upon the respondent and its Partners to resolve the disputes through mutual discussions, within 45 days from the date of notice and in the event of failure or non-compliance of the same by the respondent and its 6 Com.A.A.No.118/2021 partners, the petitioner would be constrained to invoke the arbitration clause to resolve the dispute and the said notices were returned unserved. The respondents have neither chosen to amicably settle the issue by mutual discussions nor have complied with the legal and legitimate demands made in the notice and as such a dispute has arisen between the parties. Clause 10 of the Agreement provides for 'dispute resolution'. The petitioner by invoking the said Arbitration clause issued Arbitration Notice dated 29.06.2020 nominating Mr. M.R. Krishnamurthy, Advocate to adjudicate the dispute. The said Notice was duly served upon respondent, its Managing Partner B.N. Chikka Honnappa (alias B.N. Chikkavannappa), Narayanaswamygari Gangaraju H.T. Honnesh, but the notice issued to K, Krishnappa, and N. Rajkumar were returned unserved, but the respondents have neither replied to the notice, nor consented for Arbitration. The petitioner has therefore, preferred a petition under Section 11 of the Arbitration and Conciliation Act, 1996 before the Hon'ble High Court of Karnataka, Bengaluru in 'C.M.P. (F.R) No. 111/2021' on 15.03.2021, seeking for appointment of an Arbitrator, to enter upon reference for adjudication of all disputes between the parties, and the same is pending for consideration. 7 Com.A.A.No.118/2021
6. It is further alleged that that the respondent is continuing to sell the minerals extracted, wined, mined and removed from the Quarry at the pit mouth of the Quarry/Stockyard to third parties in order to frustrate the rights and interests of the petitioner and to deprive and deny the petitioner of the amount of INR 25,00,000.00 as security deposit along with interest of INR 14,00,000.00 and consequential damages and also to derive unlawful gains at the cost of the petitioner and frustrate / defeat / delay / obstruct the execution of any possible Award in the Arbitral proceedings to be commenced between the parties. Hence, it is just and necessary to temporarily restrain the respondent from selling and/or dealing with the minerals occurred/may occur in the Quarrying Lease, and are extracted, wined, mined and removed from the Quarry at the pit mouth of the Quarry/Stockyard in any manner and further, directing the respondent to render to the petitioner the true, correct, and actual accounts with regard to sales of all the minerals extracted, wined, mined and removed from the Quarry at the pit mouth of the Quarry/Stockyard, pursuant to the granite sale agreement dated 08.08.2016 with the petitioner, and further direct the respondent deposit the entire sale proceeds received by the respondent, before this Hon'ble Court, pending final disposal of the Arbitral proceedings to be 8 Com.A.A.No.118/2021 commenced between the parties in order to secure the interest and rights of the petitioner and until the Arbitral Tribunal to be constituted determines the real questions in controversy between the parties.
7. The petitioner is under apprehension that, if the protection as sought in the application is not granted, the respondent will further deal with and continue to sell the materials in order to deprive and deny the petitioner of the amount of INR 25,00,000.00 (Indian Rupees Twenty Five Lakhs only) as security deposit, along with interest along with interest of INR 14,00,000.00 (Indian Rupees Fourteen Lakhs only) further interest and consequential damages and place the same beyond the reach of the petitioner and frustrate the legal and legitimate rights and interest of the petitioner under the agreement. Hence, on these grounds the petitioner has prayed to allow the petition
8. The cause of action for the above petition is mentioned as it arose on 09.06.2099, when the petitioner learnt that, the respondent has sold the materials to outsiders/third parties for a higher price, in violation of the terms of the Agreement and thereafter, in the last week of April 2021, when the petitioner learnt that the respondent is continuing to sell the minerals extracted, wined, mined and removed from the quarry at the pit mouth of the Quarry/Stockyard to third parties. 9 Com.A.A.No.118/2021
9. In pursuance to the notice of the petition, the respondent has appeared and resisted the petition by filing its objections. The respondent has denied the entire averments of the petition in toto.
10. It is the case of the respondent that the representative of the petitioner had approached the respondent through one Varadaraju, the proprietor of M/s Mahalakshmi Granities at Byadigera village with whom the respondent had entered into an agreement dated 27.03.2014 for raising granite blocks. Since the said varadaraju expressed his inability to comply with the agreement, he got introduced the petitioner by canceling the said agreement.
11. The respondent has denied and disputed the granite sale agreement dated 08.08.2016 and contended that the said agreement is created one and it does not bear the signatures of all the partners of the respondent. It is further contended that the said agreement is not valued properly and is improperly stamped and the proper stamp duty is not paid as per the stamp act (Andhra Pradesh Amendment) Act,1992 and hence, the said agreement is not an agreement in the eye of law and the same has to be impounded. There is no individual delegation of power and the power of signature to the managing partner or anybody under the partnership agreement of the respondent. The terms 10 Com.A.A.No.118/2021 of the agreement and the receipt of a sum of Rs.25,00,000/- from the petitioner under the agreement is denied and disputed. It is further contended that the government of Andhra Pradesh has issued the license for quarry work for a period of twenty years from 15.04.2014, but the petitioner has got created the agreement for a period of twenty years from the date of alleged agreement dated 08.08.2016. The receipt of notice as averred in the petition is denied. The cause of action for the petition and all the allegations made against the respondent are denied.
12. The respondent claims ignorance of petition filed by the petitioner under section 11 of the arbitration and conciliation act before the Hon'ble High Court of Karnataka in CMP (FR) No.111/2021. The valuation made and payment of court fee is also disputed. Hence, on these grounds the respondent has prayed to dismiss the petition.
13. Based on the averments of the petition and the materials available on record, the following points arise for my consideration:-
Whether the petitioner has made out sufficient grounds for grant of an injunction as prayed in the petition U/Sec.9 (ii) of the Arbitration and Conciliation Act, 1996?
14. Having heard the arguments of the counsel for the petitioner and considering the entire materials available on 11 Com.A.A.No.118/2021 record, I answer the above point No.1 in the 'Affirmative' for the following :
REASONS
15. Point No.1:- The petitioner in support of its contentions has furnished the copy of the granite sale agreement dated 08.08.2016, copies of the notices and the postal receipts and the postal acknowledgments and track consignment. The petitioner has got issued the notice dated 29.06.2020 for appointment of an arbitrator.
16. The respondent in support of its contentions has also furnished the copy of its partnership deed, registration certificate, the correspondence between the respondent and the government of Andhra Pradesh, declaration of all partners of respondent company, cancellation of the agreement between the respondent and mahalakshmi granities as well as the copy of the stamp act.
17. The avernments of the petition and the materials available on record disclose that the nature of dispute between the parties is a commercial dispute as defined U/s 2 (1) (c) of the commercial courts act, 2015 and the specified value of the subject matter of the dispute between the parties is more than Rs.3,00,000/- as prescribed U/s 2 (1) (i) of the said act and hence, this court has jurisdiction to entertain the suit. 12 Com.A.A.No.118/2021
18. In order to appreciate the rival contentions of the respective parties it is necessary to go through the provisions of the Sec.9 of the Arbitration and Conciliation Act 1996. Sec.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 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 proceedings before it.
19. As per Sec.9 of the Arbitration and Conciliation Act, 1996, the parties are permitted to seek interim measure in order to safeguard their interest if the other party violates the terms 13 Com.A.A.No.118/2021 and conditions of the agreements. Any contracting party is at liberty to file an application U/s 9 of the said act for interim measure during or before the arbitration proceedings. Merely because there is an arbitration agreement between the parties to the suit is not sufficient to grant an interim relief. The party who has no intention to ultimately refer the dispute to arbitration and seek final relief cannot be permitted to seek interim relief. When such being the facts of the case the conduct of the parties have to be looked into.
20. The first and the foremost objection raised by the respondent is that no proper stamp duty is paid on the agreement and the same has to be impounded. The learned counsel for the respondent has relied upon the judment of the Hon'ble Supreme Court reported in (2011) 14 SCC 366, wherein the aspect of registration of arbitration agreement and payment of stamp duty has been discussed. It has been held in the same judgment that:
"arbitration clause in compulsorily registrable document, but which is not registered can be acted upon and enforced as it if were an independent agreement, solely for the purpose of dispute resolution. However if the said document is not properly stamped court cannot act upon the said document or enforce 14 Com.A.A.No.118/2021 arbitration clause contained therein only after deficit duty and penalty is paid and said defect is cured".
The principles laid down in the aforesaid judgment is not at all disputed. It must be kept in mind that the aforesaid case was not decided under section 9 of the Arbitration and Conciliation Act, 1996.
21. At this juncture it is necessary to go through the judgment of the Hon'ble High Court of Bombay reported in 2019 (2) ARBLR 413 (Bom) before Gautam Landscapes Private limited and others V/s Shailesh S.Shah and others as well as the judgment of the Hon'ble Supreme Court reported in 2021 (1) CTC 868, before N.N.Global Mercantile Pvt.Ltd., V/s Indo Unique Flame Ltd., and others, wherein they have dealt with the sufficiency and insufficiency of stamp duty on the agreement and held that the same cannot be decided in the proceedings U/ Sec.9 of the Arbitration and Conciliation Act, 1996, which is interlocutory in nature and the proceedings are summary proceedings. It is a fact that the main petition is filed U/sec.9 of the Arbitration and Conciliation Act, which is an interim measure and the provision confers power on the court to pass any interim order of protection in respect of any movable or immovable property. The ratio decidendi laid down in the aforesaid judgment is that:
15 Com.A.A.No.118/2021
"court can grant any interim measure in application U/ Sec.9 of Arbitration Act when document containing arbitration clause is unstamped or insufficiently stamped". The Hon'ble High Court has further held that "under the scheme of arbitration and conciliation act, an arbitration clause is severable from other clauses of the contract and an arbitration agreement is not required to be stamped or required to be registered. There can also be a separate/independent arbitration agreement between the parties which would be distinct from the principal contract".
22. It is also necessary to go through the relevant portion of the judgment at paragraph No.73 and 74, which reads as under:
"In the light of the above deliberation, we are of the considered opinion that the decision of the division bench in universal enterprises (Supra) takes a correct view that the court can grant an ad-interim reliefs in exercise of its jurisdiction under section 9 of the ACA even if the document containing the arbitration agreement is not sufficiently stamped. We may thus further observe that the court under Section 9 of the ACA would be empowered to grant ad-interim and 16 Com.A.A.No.118/2021 interim reliefs even if the document, containing arbitration agreement, is not adequately stamped.
Thus, in our view, the question of law i.e., whether a court, under the arbitration and conciliation act, 1996, can entertain and grant any interim or ad interim relief in an application under section 9 of the said act when a document containing arbitration clause is unstamped or insufficiently stamped, is required to be answered in the affirmative."
23. In another judgment of the Hon'ble Supreme Court of India between N.N.Global Mercantile Private Limited V/s Indo Unique Flame Limited and others it has been held that:
"if an application of urgent interim relief is filed U/Sec.9 before the court, and it is brought to the attention of the court that the substantive contract is not duly stamped, the court would grant ad-interim relief to safeguard the subject matter of the arbitration".
Hence, the aspect of stamp duty need not be considered in this case.
17 Com.A.A.No.118/2021
24. On going through the granite sale agreement furnished by the petitioner it can be seen that B.N.Chikkahonappa the managing director of the respondent and other partners have signed as consenting witness. The learned counsel for the petitioner has brought to the notice of the court about the document No.2 produced along with the petition in which the managing director of the respondent and other partners have addressed a letter to the petitioner company requesting for refund of advance amount of Rs.5,00,000/- in which there is a reference to the granite sale agreement dated 08.08.2016. The document No.3 relied upon by the petitioner is a legal notice issued by the plaintiff company to the respondent company, its managing director and other partners terminating the agreement dated 08.08.2016. The address mentioned in the partnership deed is same as that of the address mentioned in document No.3. It is the arguments of the learned counsel for the respondents that all the consenting witnesses have not signed the granite sale agreement and one of the partner shown as N.Gangaraju is dead and hence the agreement is a created document. At this juncutre it is to be seen that the managing partner of the respondent No.1 firm B.N.Chikahonnappa is the signatory to the agreement along with consenting partners by name N.Rajakumar and B.T.Honnesh. When the firm itself which 18 Com.A.A.No.118/2021 has entered into an agreement, the objections raised by the respondents as to the signature of all the consenting witnesses and death of one of the partner will not come in the way of this petition.
25. Though the respondent has taken a contention that it is not aware of filing of the petition for appointment of an arbitrator under section 11 of Arbitration and Conciliation Act, but it is a fact that the petitioner has preferred a petition in CMP No.111/2021 on 15.03.2021 under section 11 of the said act, which goes to show that the petitioner is in the process of initiating arbitration proceedings by appointing an arbitrator.
26. At this stage it is necessary to go through the judgment of the Hon'ble High Court of Orissa reported in 2006 SCC online Orissa 68, wherein the Hon'ble High Court has discussed the requirement of Sec.9 of the Arbitration and Conciliation Act, 1996. In the said judgment the Hon'ble High Court at para No.29 has discussed that :
" The order U/s.9 can be passed by way of an interim measure of protection before or during the arbitral proceeding or at any time after making of arbitral award but before it is enforced in accordance with Sec.36 of the Act. So, it is an interim measure of protection. The act is implicit that the dispute must have arisen, it si 19 Com.A.A.No.118/2021 referable to arbitration tribunal and when an application U/s.9 is filed before commencement of the arbitral proceeding, there has to be manifest intention on the part of the applicant to take recourse to the arbitral proceeding, if at the time when application U/s.9 is filed, the proceeding has not commenced U/s.21 of the Act. While exercising the jurisdiction U/s.9, the court should satisfy itself that effective steps have been taken to commence the arbitral proceeding. The court could also pass a conditional order to put the applicant to such term as it may deem fit with a view to see that steps".
"The party having succeeded in securing an interim measure of protection before arbitral proceedings cannot afford to sit and sleep over the relief, conveniently forgetting the 'proximately contemplated' or 'manifestly intended' arbitral proceedings itself. If arbitral proceedings are not commenced within a reasonable time of an order U/s.9, the relationship between the order U/s.9 and the arbitral proceedings would stand snapped and the relief allowed to the party shall cease to be an order made 'before' i.e., in contemplation or arbitral proceedings. The court, 20 Com.A.A.No.118/2021 approached by a party with an application U/s.9, is justified in asking the party and being told how and when the party approaching the court proposes to commence the arbitral proceedings. Rather, the scheme in which Sec.9 is placed obligates the court to do so. The court may also while passing an order U/s.9 put the party on".
27. Clause 10 of the granite sale agreement dated 08.08.2016 deals with dispute resolution which says that:
" any dispute arising in relation to or connected with the performance of or the interpretation of this agreement that is not resolved by mutual discussions between parties within 45 days shall be referred to Arbitration. The Arbitrator so appointed shall be a 'practicing advocate', having put in a practice of 25 years and who has expertise in conducting arbitration. The arbitration shall be subject to the provisions of the Arbitration and Conciliation Act, 1996 and shall be held at Bangalore or any other place as may be mutually agreed upon by the parties and the proceedings of arbitration shall be in English".
28. It is an established principle of law that in order to get the relief of injunction the petitioner has to make out prima facie 21 Com.A.A.No.118/2021 case and the balance of convenience should lean in favour of petitioner. The prima facie case means that there are issues to be tried and points and pleas to be decided and determined by the court. On going through the averments of the petition and the entire materials available on record, the petitioner has made out sufficient grounds for grant of an injunction as prayed in the petition. In other words the petitioner has made out a prima- facie case. The balance of convenience also leans in favour of the petitioner. If the injunction as prayed in the petition is not granted it is the petitioner who will be put to irreparable injury if the injunction is granted.
29. On going through the averments of the petition and the objections of the respondents as well as the materials available on records there exists a dispute between the parties to the proceedings arising out of the granite sale agreement. Under the facts and circumstances of the case until the dispute is resolved through an arbitration and the rights of the parties are determined, the respondents must be restrained by an order of injunction from selling the minerals extracted, wined, mined and remove from the query at the pit mouth of query/stockyard in favour of third parties i.e., from the landed property as mentioned in the granite sale agreement dated 08.08.2016. The respondent must also render the actual accounts in respect of 22 Com.A.A.No.118/2021 the sale of minerals extracted, wined, mined and removed from the query at the pit mouth of query/stockyard and to deposit the sale proceeds received by the respondents before the Arbitral Tribunal. Hence, under the facts and circumstances of the case the petitioner is entitled for injunction as prayed in the petition. Hence, I answer the above point in the 'Affirmative' and proceed to pass the following;
ORDER The petition filed by the applicant/petitioner U/s 9(ii) of the Arbitration and Conciliation Act, 1996 is hereby allowed with costs.
It is hereby ordered that the respondent, its partners, represntatives, agents or anybody claiming under them are restrained by an order of injunction from selling or dealing with the minerals extracted, wined, mined and removed from the quarry at the pit mouth of quarry/stockyard in favour of third parties pending disposal of the arbitral proceedings.
It is hereby further ordered that the respondent, its partners, representatives, agents or anybody claiming under them are directed to render the true accounts in respect of the sales 23 Com.A.A.No.118/2021 of all the minerals extracted, wined, mined and removed from the quarry at the pit mouth of query/stockyard and to deposit the entire sales proceeds received by the respondent before the Arbitral Tribunal.
It is hereby made clear that the order of injunction shall remain inforce till the commencement of arbitral proceedings.
[Dictated to the stenographer online, transcribed & computerized by her, corrected on computer and signed by me then pronounced in the Open Court, dated this the 15th day of February, 2022] (SUNIL.A.SHETTAR) LXXXVI Addl. City Civil Judge Bangalore.