2015 (1) TMI 17 - SC - Companies Law

Rejection of application filed u/s 9 Arbitration & Conciliation Act, 1996 - Whether the appellant was entitled to interim injunction in aid of his claim for specific performance of an agreement to sell iron ore or not Held that - The arbitration proceedings between the parties herein are pending where the main question is - whether the respondent is entitled to seek specific performance of the agreement dated 27.02.2005 by which the appellant agreed to sell iron ore excavated from the mines specified in the agreement to the respondent? If the answer to the said question is in affirmative then the next question would be what is the rate at which the appellant is required to sell the iron ore to the respondent - the appellant stated that in the SLP that during the pendency of this litigation, it has already set up a beneficiation-cum-pelletisation plant where the entire quantity of iron ore extracted by the appellant is being consumed as a raw material - Therefore, the question of the appellant selling the iron ore to any third party does not arise at all. In view of the categorical assertion made by the appellant and the undertaking that the appellant would consume the entire iron ore excavated captively, there is no reason to give any direction to the appellant to sell the iron ore to the respondent during the pendency of the arbitration - Such a direction, would virtually amount to the enforcement of the agreement without adjudication of the right of the respondent to seek specific performance of the agreement - no doubt, if the appellant company were to be selling the iron ore excavated by it to any third party, there was some justification by the respondent to seek an interim direction to the appellant to sell the ore to the respondent, subject of course to the determination of the cause finally in the arbitration proceedings - But it is not the case here respondent submitted that in case an interim order is not granted, even if the respondent eventually succeeds in the arbitration proceedings and obtains an award for the specific performance of the agreement, the success would remain only on paper as huge amount of mineral excavated by the appellant would already have been sold by that time and there is no way of the respondent obtaining the said mineral. No doubt, if the respondent eventually succeeds in the arbitration, it would be entitled to specific performance of the agreement in question - The respondent can always seek monetary compensation for the loss sustained by it by virtue of the non-supply of the minerals by the appellant during the pendency of the arbitration proceedings - appellant gave an undertaking that during the pendency of the arbitration proceedings the appellant will not sell any part of the iron ore excavated from the mines covered by the agreement and such ore would be consumed captively by the appellant in its plant and the appellant would maintain a complete account of the minerals excavated and consumed captively by the appellant Decided in favour of appellant.

Summary

Issues:
1. Interpretation of agreements related to mining operations and sale of iron ore.
2. Validity of termination of agreements and subsequent legal actions.
3. Granting of interim injunction in aid of specific performance of the agreement.
4. Applicability of Arbitration & Conciliation Act, 1996 in resolving disputes.
5. Enforcement of orders related to sale of iron ore during arbitration proceedings.

Issue 1: Interpretation of agreements related to mining operations and sale of iron ore:
The appellant secured a mining lease and entered into agreements with the respondent for mining activities and sale of iron ore. The agreements were interdependent, and failure of one would result in the failure of the other. Disputes arose regarding the termination of agreements due to violations of rules, leading to legal actions and arbitration proceedings to determine the rights and obligations of the parties.

Issue 2: Validity of termination of agreements and subsequent legal actions:
The appellant terminated agreements due to violations, leading to disputes with the respondent. Legal actions were taken, including filing applications under the Arbitration & Conciliation Act, 1996. The High Court considered the legality of termination and subsequent actions, leading to conflicting judgments by the single Judge and the Division Bench, which were further challenged in higher courts.

Issue 3: Granting of interim injunction in aid of specific performance of the agreement:
The High Court granted an interim injunction restraining the appellant from selling iron ore to third parties without offering it to the respondent first. The court considered the interdependence of agreements and the need to protect the respondent's interests during arbitration proceedings to determine specific performance of the agreement.

Issue 4: Applicability of Arbitration & Conciliation Act, 1996 in resolving disputes:
The legal proceedings involved applications under the Arbitration & Conciliation Act, 1996 to resolve disputes related to the mining agreements and sale of iron ore. The Act governed the arbitration proceedings between the parties to determine their rights and obligations under the agreements.

Issue 5: Enforcement of orders related to sale of iron ore during arbitration proceedings:
The Supreme Court directed the appellant not to sell iron ore to third parties during the arbitration proceedings and to maintain accounts of the iron ore extracted. The court considered the appellant's assertion of consuming all extracted iron ore internally and rejected the respondent's request for the appellant to sell iron ore at the current market rate, ensuring that the arbitration process would determine the rights and obligations of the parties conclusively.

In conclusion, the judgment addressed the complex legal issues surrounding mining agreements, termination disputes, interim injunctions, and arbitration proceedings under the Arbitration & Conciliation Act, 1996, ensuring fair resolution and protection of the parties' rights during the ongoing legal process.