2001 (12) TMI 799 - HC - Companies Law

Issues Involved:
1. Interim injunction under Section 9 of the Arbitration and Conciliation Act, 1996.
2. Validity of unilateral termination of the agreement.
3. Applicability of the Specific Relief Act in granting interim relief.
4. Manifestation of intention to arbitrate.
5. Specific performance and enforceability of the contract.

Detailed Analysis:

1. Interim Injunction under Section 9 of the Arbitration and Conciliation Act, 1996:
The applicant sought an interim injunction to restrain the respondent from canceling the agreement dated December 1, 1999, pending arbitration. The court evaluated whether the applicant had demonstrated a clear intention to arbitrate the dispute, as required under Section 9. The applicant's affidavit indicated a clear manifestation of intention to arbitrate, satisfying the requirement of Section 9.

2. Validity of Unilateral Termination of the Agreement:
The respondent argued that the agreement, which was set to expire on November 30, 2001, could be terminated by either party with one month's notice as per clause 22. The court found that the respondent had the right to terminate the agreement by giving the stipulated notice, and the applicant's claim for injunction to prevent termination was not supported by the terms of the agreement.

3. Applicability of the Specific Relief Act in Granting Interim Relief:
The respondent contended that the relief sought by the applicant was barred under the Specific Relief Act, citing sections 14(1)(a), (c), and 41(e). The court agreed, noting that:
- Section 14(1)(a) states that a contract for which monetary compensation is adequate cannot be specifically enforced.
- Section 14(1)(c) specifies that a contract that is determinable in nature cannot be specifically enforced.
- Section 41(e) prohibits injunctions to prevent the breach of a contract that cannot be specifically enforced.

Given that the contract was terminable by nature, the court concluded that the Specific Relief Act barred the granting of an interim injunction.

4. Manifestation of Intention to Arbitrate:
The court referenced the Supreme Court's decision in Sundaram Finance Ltd. v. NEPC India Ltd., which requires a manifest intention to arbitrate for an application under Section 9 to be maintainable. The applicant's affidavit demonstrated such an intention, and the court found that the requirement was met.

5. Specific Performance and Enforceability of the Contract:
The applicant argued that the contract was capable of specific performance based on the renewal clause. However, the court distinguished the present case from precedents like Secretary of State for India v. Volkart Bros. and Damodhar Tukaram Mangalmurti v. State of Bombay, where renewal clauses were deemed enforceable. In this case, clause 22 allowed for termination with notice, making the contract inherently terminable. The court concluded that the contract's terminable nature and the provisions of the Specific Relief Act precluded specific performance and interim injunction.

Conclusion:
The court dismissed the application for an interim injunction, finding that the contract was terminable by nature and that the Specific Relief Act barred the relief sought. The applicant's remedy, if any, would be to seek damages in the arbitral proceedings. The dismissal of the application did not preclude the applicant from pursuing a claim for damages.

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