Radhe Shyam Sharma, J.@mdashAppellant-Himcon Projects Private Limited has preferred the instant appeal against the impugned order dated 30.06.2010 passed by the District Judge, Bilaspur in MJC No. 155/2009, whereby the application moved by the appellant u/s 9 of the Arbitration and Conciliation Act, 1996 (henceforth ''the Act, 1996'') seeking an interim protection has been dismissed. Facts of the case, as projected by the appellant, in brief, are that the appellant is a reputed business company dealing in civil and other construction works. Its registered office is situated at Bilaspur. Respondent No. 1 is a company having its registered office at New Delhi and managed by its Managing Director and respondent No. 2/Engineer-in-chief is officer-in-charge of the respondent No. 1/company. A tender was invited by the respondents for construction of a guest house at Seepat Road in Bilaspur. Total value of contract for construction of the guest house was worth Rs. 4,80,86,890.00 and entitlement of remuneration for the work was in accordance with the rates indicated in the document (Annexure P-2). The appellant got the contract and entered into an agreement with the respondents for construction of the guest house. After the agreement, construction was started by the appellant. The appellant mobilised its staff and machines at the site for construction of the guest house. As per the terms and conditions of the agreement, the appellant was entitled for a free mobilisation advance equal to 10% of the contract value against bank guarantee of an equal amount from any scheduled bank on the pro forma acceptable to respondent No. 1/company and stage-wise payment of the work as per the document (Annexure P-3). The appellant executed the work at the site with quality as per the instructions of the respondents and utmost efforts were made to complete the guest house as early as possible. The term of the agreement regarding stage-wise payment of the work done has not been fulfilled by the respondents. The appellant has submitted bills for payment with respect to the work done. Several letters were sent by the appellant to the respondents regarding the payments on 15.04.2008 (Annexure P-4), 02.06.2008 (Annexure P-5) and 14.08.2008 (Annexure P-6), but the respondents did not turn up and neither bothered to reply a single letter nor gave any indication for releasing any payment. The appellant sent e-mail to the respondents, requested them telephonically and visited them at their offices in person, but all the efforts became futile. The respondents are not responding to the appellant properly. This attitude of the respondents was causing heavy financial loss to the appellant and, therefore, the appellant was finding it difficult to continue the work of construction of the guest house. The appellant had completed about 90% of the work and was/is maintaining the constructed guest house. Despite that, the respondents are not responding in regard to release of payment of the work done. The amount falling due for payment is Rs. 85,34,534.00 along with the building maintenance charges of approximately Rs. 50,000 per month, which is still pending with the respondents. Payment of the electricity charges is also pending with the respondents. Since the respondents did not make the payments even after several efforts, the appellant sent a legal notice dated 23.10.2008 (Annexure P-7) to respondent No. 2/Engineer-in-chief, wherein the appellant made demand of the payment of Rs. 85,34,534.00 along with interest @ 24% on the said amount within 7 days. The respondents replied the legal notice after expiry of 7 days, i.e. on 12.12.2008 (Annexure P-9) and denied all the contentions of the legal notice. The appellant got an information that the respondents were preparing to handover possession of the constructed guest house to other person or company, which may cause it irreparable loss, therefore, it preferred an application u/s 9 of the Act, 1996 before the learned District Judge, Bilaspur.
2. The District Judge, holding that the balance of convenience and irreparable loss, in the facts of the case, did not seem to be in favour of the appellant for the simple reason that the appellant itself failed to follow the terms of the agreement, dismissed its application u/s 9 of the Act, 1996.
3. Learned counsel for the appellant contended that the tender was invited by the respondents for construction of the guest house at Seepat Road in Bilaspur. The total value of the contract for construction of the guest house was a sum of Rs. 4,80,86,890.00. The appellant had executed the work at the site with quality and satisfaction as per the instructions of the respondents and made utmost efforts to complete construction of the guest house as early as possible. The appellant submitted bills for stage-wise payment with respect to the work done as mentioned in the agreement, but the respondents did not respond. Letters dated 15.04.2008 (Annexure P-4), 02.06.2008 (Annexure P-5) and 14.08.2008 (Annexure P-6) and e-mails were sent to the respondents regarding the payments, but the respondents did not turn up and neither bothered to reply a single letter nor gave any indication to release any payment. The appellant has completed about 90% of the construction work of the guest house and is maintaining the building thereafter. The amount outstanding for payment is Rs. 85,34,534.00 along with the building maintenance charges approximately Rs. 50,000 per month. Payment of the electricity charges is also pending with the respondents till date. Sending legal notice dated 23.10.2008 (Annexure P-7) to respondent No. 2/Engineer-in-chief for payment of the outstanding amount of Rs. 85,34,534.00 along with interest @ 24% on the said amount also became futile. The respondents, in their reply dated 12.12.2008 (Annexure P-9) to the legal notice, denied all the contentions made therein. It was contended that the respondents, without considering the facts and prayer made by the appellant, have terminated the contract.
Learned counsel further contended that the court below did not consider the decision in
Learned counsel prayed for an interim protection u/s 9 of the Act, 1996, direction to release outstanding dues of principal amount of Rs. 85,34,534.00 as well as interest @ 24% on the said principal amount till the date of payment and permission to the appellant to take over possession of the guest house legally till release of the outstanding dues by the respondents.
Learned counsel placed reliance on Globe Cogeneration Power Ltd. vs. Sri Hiranyakeshi Sahakari Sakkare Karkhane Niyamit, Sankeshwar, Karnataka, AIR 2005 Karnt. 94:2005(1) Arb. LR 502 (Karnt.) (DB)
4. Learned counsel for the respondents submitted that the instant appeal involves disputed question of facts which cannot be adjudicated upon by this court and hence this appeal is not maintainable and liable to be dismissed in limine. The dispute raised by the appellant relates to disputed contractual obligation of the parties. The remedy for a breach of contract, being purely in the realm of contract, is to be dealt with by the civil court. The remedy in the instant appeal is not available to seek specific performance of contract. The averment made by the appellant is unacceptable. The construction of guest house in question was to be completed within 9 months from 10.02.2006, i.e. before 10.11.2006, hence, there was a gross breach of the contract on the part of the appellant. The respondents never failed to fulfil their contractual obligations. It is the appellant which itself failed to complete the construction work within stipulated period. The entire stage-wise payments were made to the appellant and no amount whatsoever is due to them. The appellant should have started the construction work forthwith to ensure completion of the guest house as per terms of the contract and then claim the residual amount. It was further submitted that the appellant has already received 89% of the contract value, whereas much less than 75% work has been performed by it. The respondents replied the appellant''s letters whenever received. In the meeting held with the appellant on 17.11.2008, the respondents made it very clear to the appellant that all legal dues in accordance with the contract may be considered provided the appellant recommences the pending work at the site of guest house so as to complete the same in all respects at an early date, but the appellant preferred not to start the pending work. It was further submitted that no amount is due for payment to the appellant as on today and its legal notice has been comprehensively replied by the respondents by stating therein that all the allegations made in the legal notice are false and untenable. On the basis of the above submissions, learned counsel submitted for dismissal of the instant appeal.
5. We have heard learned counsel for the parties and perused the record with utmost circumspection.
6. Learned counsel for the respondents raised the question of maintainability of the application u/s 9 of the Act, 1996. Firstly, we shall see whether the application u/s 9 of the Act, 1996 is tenable before commencement of the arbitral proceedings.
7. Section 9 of the Act, 1996 runs thus:
9. Interim measures, etc. by court--A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to a court:
(i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the following matters, namely:
(a) the preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the court to be just and convenient,
and the court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.
8. In Sundaram Finance Ltd. vs. NEPC India Ltd. (supra) the Hon''ble Supreme Court held thus (paras 14 and 20, pages 310, 311 and 313 of Arb. LR):
Under the 1996 Act, the court can pass interim orders u/s 9. Arbitral proceedings commence only when the request to refer the dispute is received by the respondent as per Section 21 of the Act. The material words occurring in Section 9 are "before or during the arbitral proceedings". This clearly contemplates two stages when the court can pass interim orders, i.e. during the arbitral proceedings or before the arbitral proceedings. There is no reason as to why Section 9 of the 1996 Act should not be literally construed. Meaning has to be given to the word "before" occurring in the said section. The only interpretation that can be given is that the court can pass interim orders before the commencement of arbitral proceedings. The court has jurisdiction to entertain an application u/s 9 either before arbitral proceedings or during arbitral proceedings or after the making of the arbitral award but before it is enforced in accordance with Section 36 of the Act.
However, when a party applies u/s 9 of the 1996 Act, it is implicit that it accepts that there is a final and binding arbitration agreement in existence. It is also implicit that a dispute must have arisen which is referable to the arbitral tribunal. Section 9 further contemplates arbitration proceedings taking place between the parties. When an application u/s 9 is filed before the commencement of the arbitral proceedings, there has to be manifest intention on the part of the applicant to take recourse to the arbitral proceedings if, at the time when the application u/s 9 is filed, the proceedings have not commenced u/s 21 of the 1996 Act. In order to give full effect to the words "before or during arbitral proceedings" occurring in Section 9, it would not be necessary that a notice invoking the arbitration clause must be issued to the opposite party before an application u/s 9 can be filed. The issuance of a notice may, in a given case, be sufficient to establish the manifest intention to have the dispute referred to an arbitral tribunal, but a situation may so demand that a party may choose to apply u/s 9 for an interim measure even before issuing a notice contemplated by Section 21 of the said Act. If an application is so made, the court will first have to be satisfied that there exists a valid arbitration agreement and the applicant intends to take the dispute to arbitration. Once it is so satisfied, the court will have the jurisdiction to pass orders u/s 9 giving such interim protection as the facts and circumstances warrant. While passing such an order and in order to ensure that effective steps are taken to commence the arbitral proceedings, the court, while exercising jurisdiction u/s 9, can pass a conditional order to put the applicant to such terms as it may deem fit with a view to see that effective steps are taken by the applicant for commencing the arbitral proceedings. What is apparent, however, is that the court is not debarred from dealing with an application u/s 9 merely because no notice has been issued u/s 21 of the 1996 Act.
9. In
19. It is also not possible to accept the argument that there is an exclusive conferment of jurisdiction on the arbitral tribunal, to decide on the existence or validity of the arbitration agreement. Section 8 of the Act contemplates a judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement, on the terms specified therein, to refer the dispute to arbitration. A judicial authority as such is not defined in the Act. It would certainly include the court as defined in Section 2(1)(e) of the Act and would also, in our opinion, include other courts and may even include a special tribunal like the consumer forum. [See
10. The provisions of Section 9 of the Act, 1996 and the principles laid down by the Hon''ble Supreme Court in the judgments under discussion make it manifest that an interim order can be passed by the court on an application u/s 9 of the Act, 1996 even before commencement of arbitral proceedings.
11. Now, we shall examine the matter whether the appellant has made out a case for grant of an interim measure/protection u/s 9 of the Act, 1996.
12. The grant of interim injunction is a discretionary remedy and in exercise of a judicial discretion in granting or refusing to grant an injunction, the court will take into reckoning the following as guidelines:
(i) Whether the person seeking temporary injunction has made out a prima facie case. This is sine qua non.
(ii) Whether the balance of convenience is in his favour, that is, whether it could cause greater inconvenience to him if the injunction is not granted than the inconvenience which the other party would be put to if the injunction is granted. As to that, the governing principle is whether the party seeking injunction could be adequately compensated by awarding damages and the defendant would be in a financial position to pay them.
(iii) Whether the person seeking temporary injunction would suffer irreparable injury. It is, however, not necessary that all the three conditions must obtain. With the first condition as sine qua non, at least two conditions should be satisfied by the petition conjunctively and a mere proof of one of the three conditions does not entitle a person to obtain temporary injunction.
13. In
14. It is undisputed that the terms and conditions as laid down in the tender document (Annexure P-1) were agreed upon by both the parties, thus the appellant was bound by these terms and conditions. Perusal of term 3(i) of Annexure P-1 makes it evident that the condition is mandatory in case of any dispute between the parties, that is, the appellant has to first approach respondent No. 2/Engineer-in-chief and if being dissatisfied by the decision of the Engineer-in-chief to file an appeal before the Managing Director of respondent No. 1/company. It is not clear from the documents filed by the appellant that it ever approached these authorities as per the agreed terms and conditions. In such circumstances, the appellant itself failed to abide by the terms and conditions of the agreement. Thus, it cannot be alleged that the respondents have breached the contract. Although Section 9 of the Act, 1996 deals with interim relief, it is to be seen whether the relief prayed for by the appellant by way of release of outstanding dues and handing over possession of the guest house can be granted by way of interim relief or not ? We are of the considered opinion that both these disputes involve detailed enquiry without which it is not possible to release the outstanding dues or to handover possession of the guest house. Thus, these reliefs cannot be granted by way of interim relief.
15. In Rashmi Cement Ltd. vs. Trafigura Beheer B.V., AIR 2011 Calcutta 37 it has been held thus:
13. It is now well settled law that if it appears that the learned trial judge, while exercising discretion of passing any interim order, wrongly applied the principles for grant of such discretion or if it is established that such discretion has been unreasonably or capriciously exercised, an appellate court should interfere. As pointed out by the Supreme Court in the case of Manjunath Anandappa Urf Shivappa Hansi vs. Tammanasa and others reported in AIR 2003 SC 1391, while hearing an appeal against a discretionary order, "an appellate power interferes not when the order appealed is not right but only when it is clearly wrong. The difference is real, though fine.
16. From the above discussion, we find that the impugned order does not suffer from any infirmity. The learned District Judge has rightly arrived at the finding that the balance of convenience and the irreparable loss, in the facts and circumstances of the case, were not in favour of the appellant as the appellant itself failed to abide by the terms of the agreement, Consequently, the order under appeal, being impeccable, is affirmed and the appeal is dismissed. No order as to costs.
