Interim injunction in mining contract upheld where restrictive covenant protected contractual rights pending arbitration.

An interim injunction under Section 9 of the Arbitration and Conciliation Act was upheld where a long-term mining machinery hire agreement contained a restrictive covenant and the agreement had not been terminated when relief was sought. The Court applied the prima facie case, balance of convenience and irreparable injury tests, and also considered the negative covenant principles under Sections 41 and 42 of the Specific Relief Act. It held that allowing third parties to replace the respondent or permitting new machinery would defeat the contractual bargain and cause injury not adequately compensable in damages. The termination clause was left for arbitration, so interim protection of the respondent's contractual rights was properly continued.

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Issues: Whether the interim order under Section 9 of the Arbitration and Conciliation Act, 1996 restraining the appellant from engaging third parties and from introducing new machinery for mining operations was justified pending arbitration.

Analysis: The agreement was a long-term arrangement for hiring machinery and equipment for mining operations and contained a restrictive covenant in favour of the respondent. The dispute initially arose over bills and reconciliation, while the agreement had not been terminated when the Section 9 petition was filed. The Court applied the principles governing interim injunctions, including the existence of a prima facie case, balance of convenience and irreparable injury, and also considered the effect of the negative covenant under Sections 41 and 42 of the Specific Relief Act, 1963. It found that preventing the respondent from performing the work and permitting third parties to step in would defeat the contractual bargain and cause injury not adequately compensable in damages. The termination clause was treated as a matter to be decided in arbitration and did not, at the interim stage, displace protection of the respondent's contractual rights.

Conclusion: The interim injunction was justified and was rightly continued in favour of the respondent.

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