Sanjib Banerjee, J.@mdashThe principal ground urged on behalf of the respondent at the final hearing of this petition u/s 9 of the Arbitration and
Conciliation Act, 1996 was not canvassed at the ad interim stage of this matter which prompted the court to deliberate on other aspects which
now pale into insignificance. The respondent''s choice of not putting forth the weighty argument on a substantial issue led the court, at the ad interim
stage, to be needlessly bogged down by matters of prejudice and the perceived dishonest stand of the respondent. The respondent obtained a
mining lease to extract iron ore from an area in Ghatkuri in the Singhbhum (West) District, now in the state of Jharkhand. On February 17, 2005
the parties entered into an agreement under which the respondent agreed to sell to the petitioner the entire iron ore excavated from the leasehold
area as per the terms and conditions contained therein. The agreement was valid for a period of seven years from the commencement of the mining
operations at the Ghatkuri mines and provided for renewal thereafter on mutually agreed terms and conditions. The effective date for the
commencement of the agreement was to be determined from the date of obtaining the permission for beginning the mining activities. The petitioner
claims that notwithstanding the agreement having been executed early in 2005, the necessary permissions for the commencement of mining
operations were not obtained for a substantial period thereafter and, at any rate, the respondent did not inform the petitioner prior to the
petitioner''s query late in 2009 of any temporary or final permission having been obtained by it to undertake the mining activities.
2. The petitioner claims that it was only in December of 2009 that the petitioner came to be aware that operations had apparently been
commenced at the Ghatkuri mines. The petitioner wrote a letter of December 24, 2009 suggesting that it had ""discreet information"" that the
respondent ""in violation of the stipulations contained in the Selling Agreement commenced supply of iron ore to some third party."" The petitioner
demanded in such letter that the respondent should let it know of the ""correct factual position"" within three weeks, failing which the petitioner would
infer that the respondent was in breach of the agreement. The respondent replied on January 11, 2010, asserting that it had issued two letters of
June 22, 2007 and August 1, 2008 on the subject to the petitioner wherein the respondent had ""clearly indicated the legal impediment in
performance of these Agreements in view of their complete and direct violation on Rule 37 making them void ab initio and also returned the
advance paid by you to our Company as per books of accounts amounting to Rs.1,67,50,000/- ..."" The petitioner claims that it did not receive
either previous letter referred to in the respondent''s reply of January 11, 2010 and suggests that the postal receipt referred to in the reply did not
evidence service of either previous letter on the petitioner. The petitioner proceeds to discredit the respondent''s assertion that the respondent had
terminated the agreement on any ground or had informed the petitioner of such alleged termination at any point of time prior to issuing the letter of
January 11, 2010. The petitioner insists that it is entitled to specific performance of the selling agreement of February 17, 2005, that the bogey
raised under Rule 37 of the Mineral Concession Rules, 1960 is an eye-wash and that, in the unlikely event of a tentative view being taken that
specific performance of the agreement may not be granted in the arbitral reference, it is entitled, nonetheless, to enforce the negative covenant
running through the agreement and crystallised in Clause 14.1 thereof. Much of the petitioner''s effort in obtaining the order that it seeks has been
expended in its endeavour to demonstrate that neither letter of June 22, 2007 and August 1, 2008 had been issued by the respondent or received
by the petitioner.
3. The main plank of the defence is founded on the selling agreement of February 17, 2005 being only a part of a larger agreement executed on the
same day. The respondent suggests that it would be misleading to treat the selling agreement that the petitioner seeks to enforce as a stand-alone
agreement entered into at arm''s length between the parties. The respondent shows, and it is also admitted by the petitioner, that there was another
agreement executed on February 17, 2005 between the respondent and one Metsil Exports Private Limited. According to the respondent, such
other agreement - styled as a raising agreement - along with the selling agreement executed in favour of the petitioner, formed a composite
agreement for Metsil and the petitioner herein to jointly conduct the mining operations and the sale of the extract therefrom. The respondent asserts
that the composite agreement, willy-nilly, amounted to the licence obtained by the respondent being assigned to the combine of Metsil and the
petitioner herein, with the respondent agreeing to receive a commission based on the quantum of ore extracted from the Ghatkuri mines. The
respondent submits that such agreement was in abject derogation of the ethos of Rule 37 of the 1960 Rules and amounted to the licence obtained
by the respondent being traded in favour of the combine of Metsil and the petitioner with the respondent reserving a cut unto itself based on the
extent of the produce from the mines.
4. The respondent refers to the agreement between Metsil and the respondent and, in particular, to the following clauses:
3.1.1 METSIL shall enter into the leasehold area and take all such steps and perform all such functions as are pre-requisite, essential and integral
for commencement of mining operations.
3.1.2. METSIL shall employ and depute inter-alia all necessary qualified mining personnel including but not limited to Foreman, Blaster, Driller,
Mate as may be required under Mines Act 1952, Mines & Minerals (Development & Regulation) Act 1957 and the Rules & Regulations made
there-under for technical guidance and supervision. Such personnel shall be deemed to be METSIL''s employee for all legal effects and purposes.
METSIL shall have the right to recall and/or replace all or any deputed personnel at any point of time as it may deem fit and proper without
assigning any reason. All payments of salaries, wages and other emoluments to such personnel shall be borne by METSIL. After the expiry of this
agreement METSIL shall remove all the people appointed by them with full and final payment to them.
3.1.4 METSIL shall, on behalf of OMM and wherever required on their behalf, sign and file such applications, declarations, affidavits and other
papers as may be necessary before the competent authorities for undertaking mining operations from the leasehold area and to represent OMM
before various authorities including the judicial, quasi judicial, statutory and local authorities.
4.2 All costs, charges, expenses, and liabilities in connection with the mine and mining operations till the commencement of mining operations
appointing METSIL as raising contractor shall be borne and payable by OMM. During the validity of this Agreement any liability arising out of
and/or in connection with the mining operations shall be borne and payable by METSIL. Both the parties indemnify and continue to keep other
party indemnified in this regard to the extent provided herein.
4.3 METSIL shall, during the period of this contact, bear all expenses incurred in carrying out mining operations and for excavation of IRON
ORE, which shall inter-alia include but not limited to expense relating to machines, preparation of mining plans from time to time, rents of all plots,
development, blasting, raising of minerals, sizing of minerals, analysis, transportation within the leasehold area, labour dues, provident fund, gratuity
and tax deducted at source etc.
4.5 METSIL shall cooperate and assist OMM in getting renewal of mining'' lease and DRP for and on behalf of OMM. Any expenses incurred
with approval of OMM in obtaining such permission(s) and approval(s) shall be reimbursed by OMM.
4.6 METSIL shall ensure payment on behalf of OMM within the stipulated time for all Government revenue such as royalty, forest cess, dead rent,
sales tax and any other new levies, etc payable by OMM so that mining operations are carried out uninterruptedly and OMM shall reimburse the
same to METSIL.
6.6. OMM shall notify the name of person(s) as per applicable mining laws in consultation and approval thereof for METSIL for the purpose of
representation before the Indian Bureau of Mines, Labour Enforcement Officer, District Magistrate, Department of Mines Safety and such other
authorities as are legally required.
(OMM is the respondent)
5. The excavation charges for iron ore under the raising agreement provided for payment for iron ore lumps at Rs.350 per MT and for iron ore
fines at Rs.150 per MT. The respondent emphasises on the following clause in the annexure to the raising agreement that governs the payment
envisaged to be made thereunder:
Excavation charges shall be payable by OMM to METSIL only after realisation of sales proceeds by OMM.
6. The parties have, for varying purposes, referred to the selling agreement which is the subject-matter of the present proceedings. The petitioner
insists that not much should be read into the reference to Metsil in the selling agreement since the raising agreement, with Metsil as the raising
contractor therein, was executed on the same day and merely because the respondent chose to engage a raising contractor and another selling
contractor would not necessarily lead to the inference that the raising contractor and the selling contractor were, in reality, a joint entity. The
respondent seeks to read the selling agreement as being subservient to or dependent on the raising agreement and suggests that a meaningful
reading of the selling agreement would reveal that it was incapable of being performed de hors the raising agreement. The following recitals and
clauses of the selling agreement are of immediate relevance:
AND WHEREAS OMM has approached SIPL with the proposal to exclusively sell the entire iron ore excavated by its RAISING
CONTRACTOR on their behalf from their leasehold area.
AND WHEREAS OMM has approached SIPL to set up a Plant in collaboration and association to partially and captively use Iron Ore within the
State of Jharkhand and OMM shall take all such steps as are required for the said purpose.
AND WHEREAS on this specific and unequivocal promise of OMM to sell exclusively to SIPL the entire IRON ores excavated by Raising
Contractor from their leasehold area, SIPL intents to install and set-up a Plant for value addition of mined ore at a substantial cost in the State of
Jharkhand.
AND WHEREAS relying upon the said promises, representations and assurances of OMM and believing the same to be correct, SIPL has
agreed to purchase exclusively the entire excavated iron ore from leasehold area raised by RAISED CONTRACTOR from leasehold area of
OMM on the terms and conditions mutually agreed contained herein.
AND WHEREAS proposed Joint Venture has agreed to commence production in its plant within two years from the effective date of
commencement of Mining operation. In the event the plaint is not set up within the period aforesaid and mining lease is cancelled due to this reason
this agreement shall stand terminated and all accounts with SIPL shall be settled by OMM.
2.1 This Agreement is valid for a period of 7 years from the effective date of its coming into force or commencement of Mining Operation and
thereafter the same may be renewed on mutually agreed terms & conditions.
2.2 The effective date of coming into force of this Agreement shall be determined from the date of obtaining TWP/DRP/Court Order/Working
Permission from concerned Department.
3.1 OMM shall during the currency of this agreement as mentioned in Clause No.2 hereinabove sell exclusively to SIPL the entire iron ore
excavated by RAISING CONTRACTOR from the leasehold area of OMM.
3.2 SIPL shall purchase the entire iron ore excavated by RAISING CONTRACTOR from the leasehold area of OMM. SIPL shall have sole and
exclusive rights to purchase the ores excavated by RAISING CONTRACTOR from the leasehold areas of OMM. In the event OMM sells the
said ore to any of the parties nominated by SIPL, different gain/loss, if any, shall be on account of SIPL.
8.1 OMM shall during the currency of this agreement as mentioned in Clause No.2 hereinabove sell exclusively to SIPL the entire iron ore
excavated by RAISING CONTRACTOR from the leasehold area of OMM.
9.10 OMM shall not in any manner whatsoever do or cause to be done either directly and/or indirectly any act, deed or thing whereby SIPLs''
right to get continuous and uninterrupted supply of ores under this contract shall or may in any manner whatsoever, be impaired and/or
jeogpardized or become ineffective, unenforceable and/or void at any time during the subsistence of this agreement.
14.1 Exclusivity It is unconditionally agreed by and between the parties that during the currency and validity of this agreement, OMM shall sell the
entire Iron Ore excavated from the mining lease hold area exclusively to SIPL alone. OMM shall not sell or deal in any manner or in any form or
way directly or indirectly whatsoever any other party in respect of the Iron ore under this agreement.
(SIPL is the petitioner)
7. There is also a longish clause in the selling agreement that records that iron ore is not an ordinary article of commerce and gives the petitioner
herein the right to seek specific performance of the agreement. The arbitration and jurisdiction clauses in the selling agreement remain undisputed.
Annexure A to the agreement indicates the payments terms. The petitioner was to pay Rs.550 per MT for all grades of ore in lump and Rs.250 per
MT for iron ore fines. The break-up of the amounts indicate a raising cost of Rs.350 per MT for iron ore lumps and Rs.200 per MT as margin to
the respondent; and Rs.150 per MT as raising cost for iron ore mines and Rs.100 per MT as margin to the respondent. The annexure records that
the price of lump had been arrived at on the basis of the market price of iron ore lump at Rs.1100 per MT for plus 65% grade of iron ore
extracted from certain named mines and that any increase or decease of the market price of lump would entail an increase or decrease in the
margin payable to the respondent at the rate of 21% of the price difference. The clause on price difference was to come into operation from the
second year of the start of the extraction and the market price was to be reviewed on annual basis thereafter.
8. There is a history to this matter that needs first to be recorded. A previous petition u/s 9 of the 1996 Act seeking almost the same orders as
sought in this petition was carried to the court in November, 2011. At the ad interim stage of the previous petition, AP No. 922 of 2011, no order
was passed upon it being noticed that it was the petitioner''s case that it came to be aware of the respondent operating the mines in breach of the
agreement sometime in December, 2009. Ad interim orders were refused since the petitioner had waited for nearly two years after coming to
know of the breach before applying to court. Directions were issued for filing affidavits in AP No. 922 of 2011 on November 14, 2011. Upon the
previous petition coming for final hearing after affidavits on March 14, 2012, it was disposed of without any effective order by recording the
respondent''s submission that the respondent was not operating the mines nor undertaking any mining activity thereat in view of the restrictive
orders of the appropriate authority being in operation. The respondent was, however, directed ""to issue notice to the petitioner, at least seven days
in advance addressed to advocate on record representing the petitioner, before the respondent commences its mining operations.
9. A request u/s 11 of the 1996 Act was also taken up on March 14, 2012. Since the respondent did not dispute the existence of the arbitration
agreement or that there were live disputes to be carried to a reference, the petitioner''s request was directed to be placed before the Hon''ble the
Chief Justice for constituting an arbitral tribunal in accordance with the arbitration agreement between the parties to adjudicate upon the disputes
covered thereby. It may be of some relevance that the Judge taking arbitration matters in this Court is authorised, by dint of the business allocated
by the Chief Justice, to adjudicate on a request u/s 11 of the 1996 Act, but the Judge taking arbitration matters is expressly precluded, again by
virtue of the business allocated, to name the arbitrator or constitute the arbitral tribunal. Traditionally, the Chief Justice of this Court or a Judge
other than the Judge taking arbitration matters has been assigned the business of naming an arbitrator or constituting an arbitral tribunal. Be that as
it may, in view of a subsequent agreement between the parties as recorded in an order dated April 17, 2012 passed at the ad interim stage of an
appeal arising out of the ad interim order of March 29, 2012 on this petition, the parties have already commenced the arbitral reference before an
arbitrator of their choice.
10. Within days of the previous petition u/s 9 of the 1996 Act being disposed of, the petitioner brought the present petition on which a substantive
order was passed at the ad interim stage on March 29, 2012. The opening paragraph of the order of March 29, 2012 recorded that though the
order was being made at the ad interim stage of a petition, it was a veritable rerun of a previous matter in which affidavits had already been
exchanged on the substance of the disputes between the parties. The order of March 29, 2012 dwelt primarily on whether the letters of June 22,
2007 and August 1, 2008 had been issued to or received by the petitioner. However, it is unnecessary to refer to any observation or tentative
finding recorded in such ad interim order of March 29, 2012 since it was substantially modified in appeal. Further, the appellate order of May 9,
2012 was challenged by way of a SLP before the Supreme Court and the Supreme Court in disposing of the petition, observed, inter alia, that ""the
learned Trial Judge shall hear and decide Section 9 application on its own merit uninfluenced by the Division Bench or the observations made by
him in the order under appeal before the Division Bench."" The Supreme Court order of July 27, 2012 required the petition u/s 9 of the 1996 Act
to be decided ""as expeditiously as may be possible and preferably within eight weeks from the date of production of the order of this Court."" The
Supreme Court order was placed by the department before this Court on or about August 13, 2012, but prior thereto the parties had brought such
order to the notice of this Court on August 2, 2012 when the matter was directed to appear a fortnight thereafter since the directions issued by the
Supreme Court for affidavits and documents to be filed rendered the petition unripe for final hearing when it was called on in the usual course on
August 2, 2012.
11. The petitioner insists that since the respondent cited the letters of June 22, 2007 and August 1, 2008 to suggest that the selling agreement of
February 17, 2005 stood determined, if the petitioner can demonstrate, prima facie, that such letters had not been issued to or received by the
petitioner, the interim protection that it seeks should follow. The petitioner asserts that it is not necessary to assess the respondent''s contention that
the selling agreement was in contravention of Rule 37 of the 1960 Rules or that the agreement would be incapable of being enforced on such
ground. The petitioner suggests that the issue as to whether the agreement falls foul of the relevant provision is a matter that ought to be left to the
arbitrator. As to the perceived inaction on the part of the petitioner to even prod the respondent into taking steps for the commencement of the
mining operations despite a period of nearly five years having elapsed from the date of the execution of the agreement till the petitioner sent its first
missive on December 24, 2009, the petitioner explains that the selling agreement envisaged myriad permissions and approvals being obtained by
the licencee; and, there was a tacit understanding between the parties that the petitioner would immediately be informed if the circumstances
ripened for the mining operations to be commenced. It is on similar lines that the petitioner seeks to justify its conduct of not having taken steps to
set up a plant in pursuance of, inter alia, clause 11.4 of the selling agreement. The petitioner, however, has not referred to any averment in such
regard in the petition or the affidavits filed by it in the present proceedings.
12. The petitioner refers to the shifting stands of the respondent in the several sets of affidavits filed in course of the previous and the present
proceedings. The petitioner insinuates that the respondent has laboured in every subsequent affidavit to improve on the case previously run,
primarily to establish that the letters of June 22, 2007 and August 1, 2008 had, indeed, been issued to and received by the petitioner. The
petitioner contends that, in any view of the matter, even if the court perceives that it is unlikely that the petitioner will obtain an award for specific
performance of the selling agreement, it is entitled to an injunction to enforce the negative covenant contained in the agreement. The petitioner
submits that, apart from the grounds that it has cited in support of its assertion that neither letter of June 22, 2007 and August 1, 2008 had been
issued to it as noticed in the ad interim order of March 29, 2012, the contemporaneous conduct of the parties was grossly inconsistent with the
allegation that either letter had been issued by the respondent. The petitioner suggests that it is inconceivable that the petitioner would have
received the letter of June 22, 2007 and not reacted to it, even if only to demand repayment of the sum in excess of Rs.1.69 crore that it had
advanced to the respondent. The petitioner claims that it would be absurd to lend credence to the respondent''s contention that it had forwarded a
cheque for about Rs.1.67 crore which remained unencashed, but the respondent was not the least bit curious to ascertain why such cheque had
not been banked. The petitioner says that apart from the dubious manner of the issuance and the service of the two letters of June 22, 2007 and
August 1, 2008, the circumstantial evidence would completely discredit the respondent''s case. The petitioner sifts through the various pages in the
several affidavits filed by the respondent in AP No. 922 of 2011 and in the present proceedings leading up to the recent supplementary affidavit
filed by the respondent. The petitioner claims that not only are the averments in the respondent''s several affidavits at variance with each other, but
the most recent affidavit has been fine-tuned upon the merits of the matter being deliberated upon in course of the protracted hearings at the ad
interim stage of the present petition and the appeal arising therefrom. In particular, the petitioner refers to paragraph 40 of the latest affidavit filed
by the respondent to dig holes in the defence now sought to be set up. The petitioner says that if there was a meeting between the representatives
of the parties following the cancellation of the agreement in June, 2007 and the petitioner''s alleged acceptance thereof, such matter would have
been recorded in contemporaneous correspondence, or even in the alleged letter of August 1, 2008, or, at any rate, in the respondent''s reply of
January 11, 2010 or the further communication of February 15, 2010 issued by it. The petitioner emphasises that though the venue of the meeting
is indicated in the respondent''s latest affidavit, the approximate date thereof is not mentioned nor has such alleged meeting being alluded to in any
of the three previous affidavits filed by the respondent in this Court.
13. On the legal issues that arise, the petitioner submits that the mere delay on the part of a suitor seeking specific performance of an agreement
would not defeat the claim if it is lodged within the period of limitation. As a corollary, the petitioner suggests that if the defence to a claim for
specific performance of a contract is that the contract was void, the conduct of the claimant and the perceived delay in instituting the action are of
no relevance. In such context, the plaintiff refers to a judgment reported at Madamsetty Satyanarayana Vs. G. Yellogi Rao and Others, where the
Supreme Court referred to English judgments and authoritative texts to deduce as follows in paragraphs 10 and 12 of the report:
10. It is clear from these decisions that the conduct of a party which puts the other party in a disadvantageous position, though it does not amount
to waiver, may in certain circumstances preclude him from obtaining a decree for specific performance.
12. The result of the aforesaid discussion of the case law may be briefly stated thus: While in England mere delay or laches may be a ground for
refusing to give a relief of specific performance, in India mere delay without such conduct on the part of the plaintiff as would cause prejudice to the
defendant does not empower a court to refuse such a relief. But as in England so in India, proof of abandonment or waiver of a right is not a pre-
condition necessary to disentitle the plaintiff to the said relief, for if abandonment or waiver is established, no question of discretion on the part of
the Court would arise. We have used the expression ""waiver"" in its legally accepted sense, namely, ""waiver is contractual, and may constitute a
cause of action: it is an agreement to release or not to assert a right""; see AIR 1935 79 (Privy Council) ). It is not possible or desirable to lay down
the circumstances under which a court can exercise its discretion against the plaintiff. But they must be such that the representation by or the
conduct or neglect of the plaintiff is directly responsible in inducing the defendant to change his position to his prejudice or such as to bring about a
situation when it would be inequitable to give him such a relief.
14. There is a further matter on facts that the petitioner refers to which raises an issue larger than the present dispute. The petitioner refers to the
balance-sheets of the respondent for the years ended March 31, 2009, March 31, 2010 and March 31, 2011 to insinuate that it was a regular
practice of this respondent to enter into agreements relating to its mining operations only to renege on them after, possibly, having used the
advances obtained in pursuance of the contracts. In the schedule to the balance-sheet and profit and loss accounts of the respondent for the year
ended March 31, 2009, there is a reference first to two agreements entered into by the respondent with Adhunik Steels Limited and B. K.
Coalfields Private Limited in 2003 and 2006, respectively, which the respondent terminated in 2003 and 2007 respectively, by citing the same
Rule 37 of the 1960 Rules that has been asserted by the respondent in defence to the petitioner''s claim herein. Adhunik Steels Limited is said to
have instituted an arbitral reference following the termination of its contract by the respondent and the arbitrator repelled the respondent''s
contention that the relevant agreement was void. B. K. Coalfields Private Limited, however, failed to discredit the respondent''s contention in
proceedings u/s 9 of the 1996 Act. The balance-sheet next refers to two agreements for sale of manganese ore to Futuristic Steels Private Limited
and Monnet Ispat and Energy Limited executed in 2003 and 2006, respectively. These two agreements were terminated on the ground of Rule 37
of the 1960 Rules in 2003 and 2007, respectively. At the time that the relevant balance-sheet was prepared, the arbitral references relating to the
two agreements were pending. The final reference in the said balance-sheet is to the agreements entered into by the respondent with Adhunik
Steels Limited, the petitioner herein, B. K. Coalfields Private Limited, Futuristic Steels Private Limited, Monnet Ispat and Energy Limited and
Metsil. The relevant note recorded that neither the petitioner herein nor Metsil had instituted any proceedings for enforcement of their contracts.
The note also stated that arbitration petitions filed by Adhunik Steels Limited and Futuristic Steels Private Limited had been dismissed on the
ground that the relevant contracts were violative of Rule 37 of the said Rules.
15. In the schedule to the respondent''s balance-sheet and profit and loss accounts for the financial year ended March 31, 2010, the information
was updated. Futuristic Steels Private Limited had obtained an award where the respondent''s objection on the ground of Rule 37 of the 1960
Rules was scotched. The reference to the petitioner''s contract and that of Metsil in the schedule to the relevant balance-sheet remained unchanged
from the previous year. In the schedule to the respondent''s balance-sheet and profit and loss accounts for the financial year ended March 31,
2011, the same entries were carried by updating the information on some other contracts which are not relevant in the present context.
16. The reference to the several similar contracts entered into by the respondent as recognised in its balance-sheets was otherwise unnecessary,
save for the purpose of it being deduced therefrom that by June, 2009 when the auditors'' report on the balance-sheet of the respondents for the
year ended March 31, 2009 was signed, there was an assertion by the respondent in a document which was to become public in the next few
months that the raising contract of Metsil and the selling contract of the petitioner herein had been terminated. But the issue has engaged the
attention of the court for an entirely unrelated purpose. It would appear from the aforesaid disclosures in the respondent''s balance-sheets for the
three successive financial years that the respondent had obtained a number of mining licences in its name. It would also be evident that the
respondent had entered into agreements with several persons for the mining operations to be conducted and had subsequently cited Rule 37 of the
1960 Rules to annul the agreements. It is unnecessary in this context to infer that the respondent must have obtained substantial advances from the
contractors and had subsequently annulled the contracts, since the facts pertaining to the advances and the return or retention of such advances
have, naturally, not been presented in course of these proceedings. But it would do well to merely notice the plethora of mining licences - of,
primarily, manganese and iron ores - obtained by the respondent and the respondent''s attempt to trade in such licences by entering into contracts
with third parties therefor before resiling therefrom on the ground that the mining operations could not be assigned in view of Rule 37 of the 1960
Rules. But, more on this seemingly alarming aspect of the matter later.
17. The petitioner has referred to a Supreme Court pronouncement on a petition u/s 9 of the 1996 Act pertaining to the agreement between the
respondent and Adhunik Steels Ltd. Vs. Orissa Manganese and Minerals Pvt. Ltd., of the report have been placed by the petitioner to
demonstrate that the matter pertaining to Rule 37 of the 1960 Rules was left for the arbitrator to pronounce on and the observation that, in view of
the agreement between the parties to that matter, the respondent herein was liable to be restrained from entering into a contract for mining and
lifting of minerals with any other entity until the conclusion of the arbitral proceedings. There is a point of distinction between the reported case and
the present matter; the contract in question before the Supreme Court was a raising contract and not a selling contract like the one in the present
case.
18. The petitioner has also relied on a Single Bench judgment of this Court reported at Vijay Minerals Pvt. Ltd. Vs. Bikash Chandra Deb, to
emphasise on the observation in paragraph 77 of the report that when enforcement of a negative covenant is sought, the considerations of balance
of convenience and adequacy of damages at the appropriate stage are immaterial. The judgment was affirmed in appeal in the decision reported at
Bikash Chandra Deb Vs. Vijaya Minerals Pvt. Ltd., though the Division Bench did not find occasion to specifically deal with such aspect of the
matter or render any concurring pronouncement thereon.
19. The final ground urged on behalf of the petitioner is one of pure prejudice though it had weighed with the court at the ad interim stage. The
petitioner refers to the conduct of the respondent immediately after the previous petition was disposed of and the attempt by the respondent to
steal a march over the petitioner. As to whether anything turns on such seemingly undesirable conduct of the respondent has, however, to be
assessed in the light of the defence now run by the respondent and the overwhelming perception that the choice here is not between which of the
parties comes off better, but which comes through as worse.
20. The respondent claims that the petition should be rejected out of hand as the claim carried by the petitioner to the reference is barred by the
laws of limitation. The respondent comments on the elaborate attempt by the petitioner to discredit the conduct of the respondent and remarks that
such endeavour on the petitioner''s part is to gloss over the delay in the petitioner asserting the claim. The respondent says that though only a
tentative view need now be taken by the court on the question of limitation, but if it is seen that a wholesome defence on such ground has been
presented, the petition is liable to be rejected on such score. The respondent asserts that if the letter of June 22, 2007 had been despatched by the
respondent in the usual course to the petitioner, the claim made in the year 2011 was beyond the prescribed period of limitation. The circumstantial
evidence that the respondent refers to in support of its assertion that the selling agreement of February 17, 2005 stood determined in June, 2007 is
intricately connected with the more substantial ground that it asserts for dismissal of this petition.
21. The respondent says that the raising contract with Metsil and the selling contract with the petitioner herein entered into by the respondent on
the same day should be seen to be the two inseparable parts to a composite agreement. The respondent also suggests that the delay between the
petitioner''s receipt of the respondent''s letter of January 11, 2010 and the institution of the first petition in November, 2011 should be regarded as
laches amounting to acceptance on the petitioner''s part of not only the termination of the agreement, but also the annulment thereof in June, 2007.
The respondent says that since it had indicated in its annual accounts for the year ended March 31, 2009 that the agreements executed by the
respondent with Metsil and the petitioner had been terminated in June, 2007, such information was available in the public domain since September,
2009. The respondent explains that since it was a private limited company till the better part of financial year 2007-08, it was not required to
disclose in its annual accounts during such time that the agreements with Metsil and the petitioner or, indeed, with several of the other contracting
parties, had been terminated. The respondent relies on Section 14 of the Specific Relief Act, 1963 to contend that the agreement of which the
petitioner seeks specific performance is incapable of being enforced. Taking a cue from the appellate order of May 9, 2012 that gave the petitioner
the first right of refusal of the ore extracted from the Ghatkuri mines at the prevailing market price, the respondent says that in the petitioner
declining to accept the material offered by the respondent, it has acted contrary to the case run that iron ore is not an ordinary article of commerce
or is not freely available in the market.
22. The respondent concedes that the question as to whether the selling agreement is in violation of Rule 37 of the 1960 Rules has to be
adjudicated in course of the arbitral reference, but says that as in the case of every issue that is likely to arise at the trial, the court is entitled to take
a prima facie view thereon at the interlocutory stage. Again, such argument is inexorably connected to the primary assertion of the respondent that
the raising agreement with Metsil and the selling agreement with the petitioner herein formed a composite deal. The respondent says that since the
respondent did all that was within its power to despatch the notice of termination of June 22, 2007 to the petitioner by way of a registered letter,
the presumption under the General Clauses Act would come into play and the mere denial of the receipt thereof by the petitioner or the petitioner''s
attempt to create a doubt by referring to the acknowledgement due card relating thereto should not hold good. The respondent submits that the
manner of its attempt to effect service of the letter of August 1, 2008, as noticed in the ad interim order, may have been immature; but it cannot be
conclusively held on affidavit evidence that the letter had not been issued at all.
23. In support of its assertion that the raising agreement and the selling agreement of February 17, 2005 were parts of a composite contract, the
respondent has referred to several recitals and clauses from either agreement. The respondent points out that the tenures of the two agreements
were concurrent. The respondent also seeks to demonstrate from a chart appended to its recent affidavit that the commonality of the directorial
composition in Metsil and the petitioner during the relevant period would show that the controlling minds in both companies were the same.
24. Indeed, it is evident from the relevant charts at annexure C to the respondent''s most recent affidavit that for at least two years prior to 2005-
06 and till several months after financial year 2005-06, the board of directors of Metsil comprised the same three persons. A fourth person was
inducted on the board of Metsil in September, 2007 and a fifth person in March, 2009. Santosh Kumar Sharma and Suresh Kumar Sharma
constituted the majority on the board of directors of Metsil from at least 2003-04 till September 7, 2007. These two Sharmas were also on the
board of the petitioner from September, 2004. At the time that the agreements of February 17, 2005 were entered into, the two Sharmas were
part of a three-member board of directors of Metsil and a five-member board of directors of the petitioner. Upon two of the five directors on the
petitioner''s board resigning by April, 2006, the two Sharmas formed the majority on the petitioner''s board of directors which continued
unchanged till the close of financial year 2010-11. These facts remain undisputed. What is apparent from the charts is that the two Sharmas had the
major say in the board of Metsil on February 17, 2005 and, though there were two other directors on such board in June, 2007, the two Sharma
directors could not have been by-passed in any business decision that ought to have been taken by the board of Metsil in 2007-08. The two
Sharma directors may not have constituted the majority on the board of the petitioner when the selling agreement of February 17, 2005 was
executed, but they were in a position to hold sway in decisions pertaining to the petitioner in June, 2007 when the two agreements are alleged to
have been terminated by the respondent. It may not be conclusive, but such fact goes a long way to sustain the respondent''s contention that the
two agreements of February 17, 2005 were part of a composite arrangement. It would also follow that if Metsil did not object to the raising
contract being annulled in June, 2007, which the two Sharma directors on Metsil ought to have been contemporaneously aware of, such directors
comprising the majority on the board of the petitioner may also have been aware of the selling agreement with the petitioner having been
simultaneously annulled.
25. More than the recitals and the clauses in the bodies of the two agreements of February 17, 2005, it is the pricing mechanism in either
agreement that, prima facie, establish the link between Metsil and the petitioner and give credence to the respondent''s submission that the two
agreements were part of a composite contract. Under the raising contract with Metsil, the respondent was to pay Metsil excavation charges for
lumps and fines at the same rates as it was to receive as raising costs from the petitioner under the selling agreement. That, by itself, can neither be
regarded as a coincidence or establishing a link between Metsil and the petitioner. If the respondent was obliged to pay the raising contractor
excavation charges, it was only natural that such amounts would be included in its costing in the selling agreement. However, the supplemental
clauses that follow the principal pricing clause in the annexure to either agreement clinch the issue. The raising agreement recorded that excavation
charges would be payable by the respondent to Metsil only upon the realisation of the sales proceeds by the respondent. It would be difficult to
accept that a prudent, commercially-minded entity rendering services under an agreement would subject its entitlement to receive payment therefor
to the vagaries of some other act over which it had no apparent control. This rider to the pricing clause in the raising agreement suggests that Metsil
would not be paid if the selling contractor, the petitioner, did not pay the respondent first; and Metsil could only have agreed to such condition if
Metsil had control over the selling contractor. Seen from a slightly different angle, a composite arrangement appears to have been put in place by
the two agreements of February 17, 2005 where the respondent would only receive its commission of Rs.200 per MT for iron ore lumps and Rs.
100 per MT for iron ore fines. The clause that follows the principal pricing clause in the selling agreement is even more tell-tale. Such ancillary
clause provided for only the margin payable to the respondent thereunder being increased or decreased upon the market price of crude iron rising
or falling. There is a ratio indicated in the relevant clause which is irrelevant for the present purpose. The inescapable inference that needs to be
drawn from the clause following the pricing clause in the selling agreement is that the raising costs would remain fixed for the duration of the
agreement only because the increase in production cost of the raising contractor would be offset by the higher selling price obtained by the selling
contractor. The inevitable corollary to such clause is that Metsil and the petitioner would share the increase or decrease in the selling price in such
manner as they chose, but the respondent''s commission or cut would only be proportionately increased or decreased on account of the fluctuating
market price of crude iron ore lumps.
26. If the selling contract is now seen as part of a composite arrangement, the petitioner must be regarded as wanting in candour in making out the
case as it has. If Metsil was a party to a tripartite arrangement (more precisely, a bipartite arrangement with Metsil and the petitioner being one and
the respondent being the other), the annulment of the raising agreement would, effectively, have implied the annulment of the selling agreement. At
any rate, there is more to the matter than the simplistic version presented by the petitioner, particularly since the two Sharmas were the common
directors on the board of Metsil and the petitioner in June, 2007. Given the association between Metsil and the petitioner as evident from the
presence of the majority directors on the board of the petitioner in the board of Metsil, it is difficult to imagine that the petitioner would not have
been aware of the respondent having commenced mining operations at the Ghatkuri mines after annulling the composite agreement with Metsil and
the petitioner. In the light of the facts as now presented by the respondent, it was incumbent on the petitioner to either demonstrate that it had no
connection with Metsil or explain why it woke up only in December, 2009. But it is understandable that the petitioner has made no endeavour to
answer the questions that have arisen upon the respondent''s latest affidavit being filed, since no justification that it proffered could have detracted
from its obvious tie-up and close link with Metsil as would be evident from the pricing clauses in the two agreements of February 17, 2005.
27. It is also evident that notwithstanding much having been made by the petitioner to obtain an order on the strength of the negative covenant
contained in the selling agreement, there is no positive pleading in support of the negative covenant in the petition. The respondent rightly contends
that if the composite agreements fell through, the negative covenant in the selling agreement cannot be pursued in isolation. In any event, the
relevant clause recognised the petitioner''s exclusive right to receive the produce extracted by Metsil; and Metsil is no longer in the fray.
28. The respondent has also relied on several judgments. A decision reported a M/s. Madan and Co. Vs. Wazir Jaivir Chand, has been referred
to for the proposition that the presumption u/s 27 of the General Clauses Act would fall into place once a postal article is despatched by registered
post and the mere denial of the receipt thereof would be inadequate rebuttal of the presumption. A yet unreported Supreme Court judgment
rendered on July 5, 2012 (Cox & Kings Ltd v. Indian Rly. Catering & Tourism Corporation Ltd) has been placed by the respondent for the
proposition that upon the termination of an agreement, the remedy generally would be in damages. Apropos the Vijaya Minerals case, the
respondent has referred to a judgment of this Court reported at Farinni Vs. Dream Food Products and Others, where, upon noticing the Supreme
Court pronouncement in at least two celebrated decisions, the court observed that the opinion in Vijaya Minerals that the question of balance of
convenience does not come into play when a negative covenant is sought to be enforced, may have been couched in words wider than the
Supreme Court dictum on such aspect would warrant. Paragraph 15 of the report has been placed:
15. The Supreme Court judgment could not have been considered by the learned Single Judge in the Vijaya Minerals case as it is a later judgment.
The absolute view expressed in the Vijaya Minerals case, that the question of balance of convenience would be immaterial in the enforcement of a
negative covenant, does not appear to be in consonance with the principle enunciated by the Supreme Court.
29. The petitioner is not entitled to any interlocutory injunction in aid the claim for specific performance of the selling agreement that it has carried
to the arbitral reference. In the light of the prima facie view taken that the Metsil and the petitioner combine had entered into a composite
arrangement with the respondent, the petitioner''s knowledge of the alleged breach of the agreement by the respondent would date back several
months before it made the polite enquiry with the respondent by its letter of December 24, 2009. Such delay would amount, in the circumstances
to laches and conduct encouraging the respondent to believe in the petitioner''s endorsement and acceptance of the breach. The petitioner is not
entitled to any order in furtherance of its claim on account of the negative covenant since the selling agreement cannot be seen to be a stand-alone
contract. In any event, the negative covenant in clause 14.1 of the selling agreement entitled the petitioner to exclusively obtain the ore extracted
from the Ghatkuri mines by Metsil and the petitioner ought to have been aware, in the light of the facts now brought on record by the respondent,
that the raising agreement with Metsil had been terminated by the respondent.
30. Though the petitioner has not sought any lesser order than an injunction in aid of its claims for specific performance of the agreement and its
exclusive rights thereunder, the respondent is liable to be burdened with the pay-out that it proffers to have offered. In view of the respondent''s
categorical assertion that it had forwarded a cheque for Rs.1,67,50,000/- to the petitioner under cover of its letter of August 1, 2008, the
respondent should be held to its bargain and required to deposit such sum, together with interest thereon at 10% per annum from August 1, 2008
till the date of the deposit to be made within three weeks from today. Such deposit should be made with advocate representing the petitioner at the
final hearing which advocate representing the petitioner will hold as Receiver without remuneration, free from any lien or encumbrance, and invest
on annual basis by way of a fixed deposit in a nationalised bank, subject to the orders or the award that may be made in the arbitral reference.
31. Neither party is deserving of costs; more so, by reason of the perception reflected in the footnote that appears hereafter. AP No. 245 of 2012
is disposed of without any order as to costs.
32. Footnote: Three decades or so ago, a few great Indians in whose reflected glory the judiciary basks even today, firmly founded the great
epistolary jurisdiction. This momentous judicial device came as a beacon of light and hope to millions of voiceless citizens who had been seared in
the flames of withering injustice. Over the years it ushered in an air of reform from pavements to jails, from the greens of the forests to what we
breathe in the cities. More rewardingly for the ordinary citizens, it shone the arclights into the seemingly black holes of intrigue as it sought to install
accountability ahead of the mumbo-jumbo of political and commercial expedience; it discovered a missing dimension to give more meaning to
constitutional democracy. In some measure it may have assuaged the misgivings of the countrymen for an earlier perceived institutional failure when
they stood denuded of their basic rights.
33. If the constitutional command to the judiciary is to bring about a social revolution and act in the larger public good, one would be missing the
wood for the trees if one fails to recognise the symptom of the social malaise that screams from behind the scenes of this inane skirmish that the
parties have presented in this matter. For sure, courts of law in this country decide disputes; but that is only a part - albeit, a major facet - of the
role of courts, individually and collectively as an institution. In the constitutional scheme of things, courts are the protectors of citizens'' rights.
34. The purpose of this digression is to highlight what cries for attention beyond the immediate facts that the parties have harped on. The
respondent appears to have been adept at obtaining mining licences only to trade in them. The notes to the respondent''s balance-sheets appended
to its latest affidavit abound in the reference to the respondent''s unerring modus operandi. In the respondent obtaining one mining licence after
another, spread over a basket of minerals, and thereafter not operating the mines and outsourcing the work for a cut, there is a story to catch. And,
it is such story that appears to be worthy of pursuit to arrest its repetition and ensure that what belongs to all Indians - never mind the immediate
traditional rights of the tribal folk and the locals - are not dealt with for the illegitimate benefit of a few. It appears that the respondent in its old
avatar, prior to its management being taken over by Adhunik Metaliks Ltd early in 2007, specialised only in procuring mining licences, not in
mining operations. The respondent could not have been the only specialist at this typically Indian game, akin to the mythical rope-trick. That may
be worth inquiring into for the larger good. At a time when screaming newspaper front-page headlines and photographs over the recent months fuel
a perception - in some cases, needlessly - of the servility of servants of the Constitution to other masters, it may be a commendable duty to
undertake, if only to instill confidence in the institution and wean away the disbelievers from the other disagreeable fora of dispute resolution.
35. This matter had reached the highest level at the ad interim stage and will, doubtless, be carried there again. This footnote is only an expression
of hope for then. Urgent certified photocopies of this judgment, if applied for, be supplied to the parties subject to compliance with all requisite
formalities.