TaxTMI 
TaxTMI 
2007 (7) TMI 667
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....ertain extents of land situate in Sundargarh district in the State of Orissa. For reasons of its own, O.M.M. Private Limited entered into an agreement dated 14.5.2003 with Adhunik Steels for raising the manganese ore on its behalf. The term of the agreement was 10 years with effect from 18.5.2003, it conferred on Adhunik Steels an option to seek a renewal for a further term. 3. According to Adhunik Steels, pursuant to this agreement, it had mobilized huge resources for carrying on the excavation and extraction of the mineral by arranging for the necessary labour, staff, equipments, and so on. It had also incurred expenditure for removing the overburden. On 24.11.2003, O.M.M. Private Limited issued a notice to Adhunik Steels purporting to terminate the agreement. The notice also called upon Adhunik Steels to remove their workmen and equipment from the site. According to O.M.M. Private Limited, it had realized that the contract it had entered into with Adhunik Steels was one in violation of Rule 37 of the Mineral Concession Rules, 1960 and since there was danger of O.M.M. Private Limited itself losing its rights as a lessee, the contract had to be terminated. Adhunik Steels, alleg....
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....tion under Section 9 of the Act was the existence of an arbitration clause and the necessity of taking interim measures and the court could issue any direction that is deemed appropriate. Rejecting the contention of O.M.M. Private Limited that Adhunik Steels had been dispossessed subsequent to the letter terminating the contract, the court held that in its opinion it would be equitable to grant the orders sought for under Section 9 of the Act. It also stated that an order of injunction would be necessary to preserve the mines in dispute so that the arbitrators at a later point of time can have an effective and proper adjudication of the dispute referred to them. It was thus that the order of injunction was granted. 6. Aggrieved by the order of the District Court, Sundargarh, O.M.M. Private Limited filed an appeal before the High Court of Orissa. It was argued on behalf of O.M.M. Private Limited that the contract between the parties was in violation of Rule 37 of the Mineral Concession Rules, 1960 and hence the agreement itself was illegal and no right could be founded on such an illegal agreement by Adhunik Steels. It was alternatively contended that in terms of Section 41 of th....
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....elief Act. Learned counsel contended that by way of an interim measure, the court could pass an order for the preservation or custody of the subject matter of the arbitration agreement irrespective of whether the order that may be passed was in a mandatory form or was in a prohibitory form. The subject matter of arbitration in the present case was the continued right of Adhunik Steels to mine and lift the ore to the surface on behalf of O.M.M. Private Limited and until the arbitrator decided on whether O.M.M. Private Limited was entitled to breach the agreement or terminate the agreement and what would be its consequences, the court had not only the power but the duty to protect the right of Adhunik Steels conferred by the contract when approached under Section 9 of the Act. Learned counsel emphasized that what was liable to be protected in an appropriate case was the subject matter of the arbitration agreement. Learned counsel referred to 'The Law and Practice of Commercial Arbitration in England' by Mustill and Boyd and relied on the following passage therefrom: "(b) Safeguarding the subject matter of the dispute: The existence of a dispute may put at risk the....
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....t for certain interim measures and it enables the court to pass orders by way of interim measures of protection in respect of the matters enumerated therein. Neither this Section nor the Act elsewhere has provided the conditions for grant of such interim protection leaving it to the court to exercise the jurisdiction vested in it as a court to adjudge whether any protective measure is called for. In that context, neither the provisions of the Code of Civil Procedure nor the provisions of the Specific Relief Act can be kept out while the court considers the question whether on the facts of a case, any order by way of interim measure of protection should be granted. So, the court had necessarily to consider the balance of convenience, the question whether at least a triable issue arises if not the establishment of a prima facie case by the applicant before it and the other well known restrictions on the grant of interim orders, like the principle that a contract of personal service would not be specifically enforced or that no injunction would be granted in certain circumstances as envisaged by Section 14 and Section 41 of the Specific Relief Act. Thus, it was contended that grant of....
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....) Lloyd's Report 109 at 116): "there is plainly a tension here. On the one hand the concept of arbitration as a consensual process reinforced by the ideas of transnationalism leans against the involvement of the mechanisms of state through the medium of a municipal court. On the other side there is a plain fact, palatable or not, that it is only a Court possessing coercive powers which could rescue the arbitration if it is in danger of foundering." In Conservatory and Provisional Measures in International Arbitration, 9th Joint Colloquium, Lord Mustill in "Comments and Conclusions" described the relationship further: "Ideally, the handling of arbitral disputes should resemble a relay race. In the initial stages, before the arbitrators are seized of the dispute, the baton is in the grasp of the court; for at that stage there is no other organization which could take steps to prevent the arbitration agreement from being ineffectual. When the arbitrators take charge they take over the baton and retain it until they have made an award. At this point, having no longer a function to fulfil, the arbitrators hand back the baton so that the court can in case of need....
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.... to refrain from doing a specific act or acts either for a limited period or without limit of time. In relation to a breach of contract, the proper remedy against a defendant who acts in breach of his obligations under a contract, is either damages or specific relief. The two principal varieties of specific relief are, decree of specific performance and the injunction (See David Bean on Injunctions). The Specific Relief Act, 1963 was intended to be "An Act to define and amend the law relating to certain kinds of specific reliefs." Specific Relief is relief in specie. It is a remedy which aims at the exact fulfilment of an obligation. According to Dr. Banerjee in his Tagor Law Lectures on Specific Relief, the remedy for the non performance of a duty are (1) compensatory, (2) specific. In the former, the court awards damages for breach of the obligation. In the latter, it directs the party in default to do or forbear from doing the very thing, which he is bound to do or forbear from doing. The law of specific relief is said to be, in its essence, a part of the law of procedure, for, specific relief is a form of judicial redress. Thus, the Specific Relief Act, 1963 purports to define ....
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....not an international commercial arbitration. So, it cannot certainly be inferred that Section 9 keeps out the substantive law relating to interim reliefs. 15. The approach that at the initial stage, only the existence of an arbitration clause need be considered is not justified. In The Siskina [1979] AC 210, Lord Diplock explained the position: "A right to obtain an interlocutory injunction is not a cause of action. It cannot stand on its own. It is dependent upon there being a pre-existing cause of action against the defendant arising out of an invasion, actual or threatened by him, of a legal or equitable right of the plaintiff for the enforcement of which the defendant is amenable to the jurisdiction of the court. The right to obtain an interlocutory injunction is merely ancillary and incidental to the pre-existing cause of action. It is granted to preserve the status quo pending the ascertainment by the court of the rights of the parties and the grant to the plaintiff of the relief to which his cause of action entitles him, which may or may not include a final injunction." He concluded: "To come within the sub-rule the injunction sought in the action mus....
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.... under the contract should be continued pending the resolution of the dispute by the arbitrator. May be, there is some force in this submission made on behalf of the Adhunik Steels. But, at the same time, whether an interim measure permitting Adhunik Steels to carry on the mining operations, an extraordinary measure in itself in the face of the attempted termination of the contract by O.M.M. Private Limited or the termination of the contract by O.M.M. Private Limited, could be granted or not, would again lead the court to a consideration of the classical rules for the grant of such an interim measure. Whether an interim mandatory injunction could be granted directing the continuance of the working of the contract, had to be considered in the light of the well-settled principles in that behalf. Similarly, whether the attempted termination could be restrained leaving the consequences thereof vague would also be a question that might have to be considered in the context of well settled principles for the grant of an injunction. Therefore, on the whole, we feel that it would not be correct to say that the power under Section 9 of the Act is totally independent of the well known princip....
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....from preventing it from carrying on its work in terms of the contract. It is in that context that the High Court has held that this was not a case where the damages that may be suffered by Adhunik Steels by the alleged breach of contract by O.M.M. Private Limited could not be quantified at a future point of time in terms of money. There is only a mention of the minimum quantity of ore that Adhunik Steels is to lift and there is also uncertainty about the other minerals that may be available for being lifted on the mining operations being carried on. These are impoundables to some extent but at the same time it cannot be said that at the end of it, it will not be possible to assess the compensation that might be payable to Adhunik Steels in case the claim of Adhunik Steels is upheld by the arbitrator while passing the award. 21. But, in that context, we cannot brush aside the contention of the learned counsel for Adhunik Steels that if O.M.M. Private Limited is permitted to enter into other agreements with others for the same purpose, it would be unjust when the stand of O.M.M. Private Limited is that it was canceling the agreement mainly because it was hit by Rule 37 of the Mine....