2015 (3) TMI 1365 - HC - Indian Laws

Interim measure pending resolution of dispute in the pending arbitration proceedings - restraint on appellant herein from bringing or hiring any new machinery, from entering with any other individual or concern for mining, lifting of the iron ore, red oxide or any other mines from the schedule property pending adjudication of the dispute - Section 11(6) of the Arbitration and Conciliation Act. Whether an injunction in the manner as granted by the Court below is justified or whether the respondent herein can be compensated in terms of money by way of damages andtherefore is the injunction liable to be vacated? HELD THAT - Keeping in view Clause 6 contained in the agreement between the parties herein, the attempt made by the appellant to shutout the respondent even before the procedure as indicated in Clause 7 and 8 of the agreement for termination was followed would certainly entitle the respondent for grant of interim measure to protect their right pending the arbitration proceedings. The terms of the agreement and in that regard, the sequence that was followed would indicate that the respondent has made out not only a prima facie case, but the balance of convenience is also in their favour. Though the appellant has contended that the mining lease is sought to be cancelled if the rectification is not made, rectification if any can happen if the respondent is instructed by the appellant to carry out such rectification work. Therefore, in that circumstance, if the appellant is permitted to prevent the respondent from working and as an alternative, the appellant secure any other party to carry out the work, it will cause irreparable injury to the respondent. A perusal of the order passed by the Court below which is impugned herein would indicate that the Court below in fact has made a detailed consideration of all aspects of the matter relating to grant of interim measure pending consideration of the dispute by the Arbitrator and the decision relied upon by the Court below to arrive at such conclusion is also appropriate - Hence, the order impugned does not call for interference. Appeal dismissed.

Summary

Issues Involved:
1. Validity of the interim injunction granted by the lower court.
2. Applicability of specific relief principles in the context of the contract.
3. Prima facie case, balance of convenience, and irreparable injury in granting interim measures.
4. Interpretation and enforcement of the contract terms, especially regarding termination and restrictive covenants.

Detailed Analysis:

1. Validity of the interim injunction granted by the lower court:
The appellant challenged the order dated 25.09.2014, where the lower court restrained the appellant from engaging new machinery or third parties for mining activities pending the arbitration. The appellant argued that the lower court wrongly relied on the case of Adhunik Steels Ltd. vs. Orissa Manganese and Minerals (P) Ltd., and cited other cases to support their contention that the injunction was not justified. The respondent, however, supported the injunction citing the same case and additional precedents, arguing that the injunction was necessary to prevent unjust actions by the appellant.

2. Applicability of specific relief principles in the context of the contract:
The appellant contended that the injunction amounted to specific performance of the contract, which is not permissible under Sections 14 and 41 of the Specific Relief Act. They cited cases like Gemini Communications Ltd. vs. Chief General Manager and Indian Oil Corporation Ltd. vs. Amritsar Gas Service to argue that specific performance cannot be enforced in contracts involving continuous duties or terminable agreements. The respondent countered by emphasizing that the negative covenant in the contract (Clause 6) warranted the injunction to prevent the appellant from breaching the agreement by engaging third parties.

3. Prima facie case, balance of convenience, and irreparable injury in granting interim measures:
The court considered whether the respondent made out a prima facie case, whether the balance of convenience favored the respondent, and whether non-grant of the interim order would cause irreparable injury. The respondent argued that the appellant's attempt to engage third parties violated Clause 6 of the agreement, and the termination notice issued after the interim order was an attempt to circumvent the agreement. The court noted that the dispute primarily involved alleged inflated bills, which could be resolved through arbitration, and that the termination notice was issued after the interim order, indicating the appellant's intent to bypass the agreement.

4. Interpretation and enforcement of the contract terms, especially regarding termination and restrictive covenants:
The court examined the agreement dated 11.12.2012, focusing on Clauses 6, 7, and 8. Clause 6 prohibited the appellant from engaging third parties for mining activities, while Clauses 7 and 8 provided conditions for termination. The court found that the appellant's termination notice did not follow the agreed procedure and that the dispute over inflated bills did not justify termination. The court also noted that the agreement involved long-term engagement until the expiry of the mining lease, making it difficult to quantify compensation if the respondent was not allowed to perform the work.

Conclusion:
The court upheld the interim injunction, finding that the respondent had made out a prima facie case, the balance of convenience was in their favor, and irreparable injury would result if the injunction was not granted. The court emphasized that the interim measure was necessary to protect the parties' interests pending arbitration and that the lower court's detailed consideration of the matter was appropriate. The appeal was dismissed, and the parties were directed to bear their own costs.