(The Judgment of the Court was made by M.CHOCKALINGAM, J.) These two appeals challenge the order of the learned Single Judge of this Court made in O.A.No.134 of 2009 and Application No.928 of 2009.
2. The Court heard the learned Senior Counsel for the appellant and also for the respondent.
3.The short facts necessary for the disposal of these appeals can be stated thus:
(a) On the request made by the respondent/applicant, the appellant/respondent has to carry out the maintenance activities to aircraft including obtaining of registration certificate and Air worthiness Certificate from the Director General of Civil Aviation etc. An agreement was entered into between the parties on 1st November 2007 whereby it was agreed that the contract would come into force from 1st February 2008 and in the event of delay in commencing the maintenance operation, the appellant would compensate the respondent by making payment of Rs.30 lakhs for every month of delay beyond 1st February 2008 till start of operation of airline to cover minimum cost as retainer fee.
(b) The delay was noticed and hence the appellant before this Court, as per the agreement, was liable to pay the invoices raised by the respondent/applicant. But no payments were forthcoming. There was exchange of communications and correspondence. On 12th September, 2008, the respondent/applicant decided to terminate the contract and only if all the dues were paid and commitment made to the effect of the continuous payment, the respondent/applicant would consider the services as per the agreement. The notice issued by the respondent/applicant was replied to by the appellant/respondent, denying the allegations that the demand of Rs.2,22,28,908/- made by the respondent/applicant could not be sustained. Following the same, another notice was issued by the respondent/applicant reiterating the earlier claim.
(c) While the matter stood thus, both the parties entered into a memorandum of understanding on 6th December 2008 to the effect that either of the parties should not have any claim against other for the period after 18th September, 2008, save in respect of such rights that had accrued to the parties on or before the said date, the matter has got to be decided by the Arbitration and without prejudice to any claim in any manner any of its rights, remedies and contentions, the appellant should handover to the respondent a demand draft of Rs.1,00,00,000/- less the tax.
(d) Pursuant to the agreement, actually a sum of Rs.1,00,00,000/- was paid by the appellant/respondent, received by the respondent/applicant.
(e) Under such circumstances, an application was filed under
Section 9 of the Arbitration and Conciliation Act, 1996 before the learned Single Judge, stating out the reasons, sought the interim relief that the appellant should not be allowed to move the aircraft. Originally, an ad interim injunction was granted. On appearance of the appellant/respondent, it was subsequently modified whereby the appellant was directed to place the Bank Guarantee for Rs.1,50,00,000/-. Pursuant to the same, the aircraft was allowed to be moved.
(f) When the said application was taken up for consideration, the Court thought it fit under such circumstances, that the Bank Guarantee of Rs.1,50,00,000/- originally given by the appellant should be continued till the disposal of the arbitral proceedings.
(g) Aggrieved over the said order, the appellant has broughtforth these appeals.
4.Advancing arguments on behalf of the appellants, Mr.AR.L.Sunderasan, learned senior counsel would submit that it is true that in the original agreement entered into between the parties, compensation at the rate of Rs.30 lakhs per month to be paid by the appellant when there was a delay in commencing the maintenance operation was contemplated. As per the notice given by the respondent, a demand for Rs.2,62,00,000/- was actually made. There was a reply given by the appellant whereby not only the claim was denied, but it was also stated in clear terms that the liability was only to the extent of Rs.11 lakhs and odd. Only after exchange of those notices, the parties have entered into a memorandum of understanding on 6th December 2008, wherein it was clearly stated that the appellant should make payment of Rs.1,00,00,000/- and all the documents should be given back and the original agreement entered into between the parties stood terminated and would not have any effect from 18th September, 2008. Insofar as the claim made by the parties, it must be solved in the arbitral proceedings. It is also an admitted position that the appellant has paid a sum of Rs.1,00,00,000/- and insofar as the rest of the claim of Rs.1,62,00,000/- was concerned, it was denied by the appellant in the reply notice. Under such circumstances, it was considered by the parties that parties must putforth their respective claim in the arbitral proceedings and settle the same accordingly. On the contrary, the respondent has move the Court under
Section 9 of the Arbitration and Conciliation Act stating that the aircraft should be restrained from movement.
5. Added further the learned counsel, after the order which was originally passed, termed as interim injunction, subsequently it was modified directing the appellant to place Bank Guarantee for a sum of Rs.1,50,00,000/- and a final order that it should continue till the disposal of the arbitration proceedings was in the nature of attachment before the Judgment.
6. In the instant case, even the averments found in the affidavit filed in support of the application do not make out a case. The allegations was so bald. It is known fact that the financial condition of the appellant company was so sound. Apart from that, when an agreement was entered into between the parties on 6th December, 2008, it was also agreed by the parties to commence the arbitration proceedings within a period of thirty days there from. The respondent has not moved within this time. On the contrary, it was the appellant who had sent communication to the respondent for the initiation of the arbitral proceedings and also naming an Arbitrator. It is also indicative to note that the application filed for interim injunction was nothing but to pressurise payment by getting an interim order.
7. The learned counsel would further add in the instant case the circumstance do not warrant for either grant of interim injunction or for a direction to place any Bank Guarantee or continuance of the same till the disposal of the arbitral proceedings as done by the learned Single Judge and hence the order has got to be set aside.
8. The learned Senior Counsel in support of his contentions has putforth the following decisions:-
(1) Ganesh Benzoplast Ltd. vs. Sundaram Finance Ltd. Reported in 2002(2) CTC 238.
(2) Apple Finance Ltd., vs. Gayathri Sugars Complex Ltd., reported in 2004(2) CTC 412.
(3) Techmo Car SPA vs. The Madras Aluminium Company reported in 2004(3) CTC 754.
(4) Adhunik Steels Ltd., vs. Orissa Managanese and Minerals Pvt. Ltd., reported in 2007(4) CTC 340.
9. Countering the above contentions, the learned counsel appearing for the respondent would submit that as per the second agreement entered into between the parties on 06.12.2008, it is true that the original agreement should have effect till 18th September 2009. It is also true that the appellant has agreed so by the second agreement dated 06.12.2008 has paid Rs.1 crore and the documents have been naturally released. Even as per the respondent, the claim was not only Rs.2,62,00,000/- representing the charges due for the delay, apart from that there was a demand for Rs.5 crores towards damages. It is a case where originally an interim injunction was sought for invoking
Section 9 of the Arbitration and Conciliation Act in order to secure proper payment as the only property available at the hands of the appellant/respondent was the aircraft. Under such circumstances, it became necessary to seek the Court under
Section 9 and this Court, after the appellant appeared before the Court and placed the circumstances that the aircraft did not belong to the appellant, but there is only a leasehold right and hence it should be allowed for moving the aircraft, thought it fit to mould the order directing the appellant to furnish Bank Guarantee for a sum of Rs.1,50,00,000/- and thereafter at the time of final disposal, the Court, under the circumstances, in order to secure proper payment by the appellant company to the respondent to meet the claims, thought it fit that the bank guarantee should be continued. Accordingly, an order has been made. Under such circumstances, it is true that the arbitral proceedings were actually to commence and under
Section 9 could be invoked even before the commencement of the arbitral proceedings, in order to safeguard the situation and accordingly it has been done and hence the order of the learned Single Judge was correct in the eye of law and it has got to be sustained.
10. The court has paid its anxious consideration on the submissions made.
11. It is not in controversy that originally an agreement was entered into between the parties on 01.11.2007, to give effect to the same from 1st February, 2008. It is also true that two notices were served by the respondent on the appellant claiming Rs.2,62,00,000/- towards the maintenance charges for the delay caused and Rs.5 crores towards damages. It is pertinent to point out that there was actually a reply made by the appellant stating that the balance due was only Rs.11 lakhs and odd and nothing more. While the matter stood thus, the parties have entered into a memorandum of understanding on 6th December, 2008 wherein clauses (3) and (4) read as follows:-
"3. Without prejudice to and without limiting in any manner any of its rights, remedies and contentions against BA, QJ shall, against taking custody of the Documents, handover to BA a demand draft in the sum of Rs.1,00,00,000/- (Rupees one crore only) less the amount of tax to be withheld therefrom. BA shall receive the same without prejudice to its rights, remedies and contentions.
4. Each party shall be at liberty to make claims the other in relation to the agreement, for rights that have accrued prior to 18th September 2008. Such claims, if any, shall be made in arbitration, to be instituted under the rules of arbitration of the Indian Merchants Chamber.....".
12. From a reading of the above clauses, it clearly indicates that at the time when the memorandum of understanding was entered into between the parties on 6th December, 2008, it was clearly understood that when both the claims were actually pending between the parties, Rs.1 crore was to be paid by the appellant to the respondent for release of documents, which according to the parties have actually been done and thus the Memorandum of understanding dated 6th December, 2008 has been acted upon.
13. Further, while it was understood by the parties that there was respective claim and a sum of Rs.1 crore was to be paid and the rest of the claim was actually in dispute, it is clear from the terms of agreement that without prejudice, payment of Rs.1 crore to be made by the appellant as per the agreement and rest of the claim, without prejudice to their rights of the respective parties and contentions, to be made before the arbitral proceedings. Under such circumstances it would be quite clear that the parties have entered into a memorandum of understanding on 06.12.2008 and their respective claim have got to be putforth before the arbitral proceedings.
14. It is pertinent to point out that an agreement was entered into on 06.12.2008 and it is stipulated that arbitral proceedings have to be initiated within a period of 30 days. But the admitted position is that though an agreement was entered into on 06.12.2008, till this date, the respondent has not moved his little finger to commence the arbitral proceedings. On the contrary, it is the appellant who has actually issued a communication for initiation of arbitral proceedings and also naming an Arbitrator. Under such circumstances, it is clear that the appellant has taken steps for initiation of the arbitral proceedings as found in the agreement. On the contrary, the respondent has not done so.
15. Apart from this, by invoking
Section 9, the party who seeks the relief of interim injunction must show a prima-facie case and also irreparable injury as per the settled position of law. In the instant case, the contention putforth by the appellant side that the financial position of the appellant company is so sound cannot be disputed in view of the only available materials namely an averment in the affidavit that it is the only property available in the hands of the appellant company. Under such circumstances, the injunction has got to be granted. The Court is unable to see that there is any prima-facie case made out in the face of the agreement entered into between the parties on 06.12.2008 whereby the parties have to decide their dispute before the arbitral proceedings in respect of the rest of their claim.
16. Added further, in the instant case, what is necessary for the grant of interim order is irreparable injury, which the Court is unable to notice. Added circumstances are, in the instant case, the respondent having failed to take any steps to initiate arbitral proceedings have come under
Section 9 stating that the property must be secured. Both the parties have got their respective claim. It is clear that all the claims are yet to be decided. For this, as understood between the parties, they must go before arbitral proceedings. Under such circumstances, in the considered opinion of the Court, it is not a fit case to grant interim injunction as one done.
17. Added further, in the instant case, what was sought for was only an interim injunction which requires not only a prima-facie case, but also irreparable injury. As pointed out earlier, the respondent has not proved the same. Apart from that, now the learned Single Judge, while vacating the interim injunction has modified the relief by directing the appellant to place bank guarantee for Rs.1.50 crores, which finally was allowed to continue till the disposal of the entire claim before the arbitral proceedings.
18. Hence, in the considered opinion of the Court, the circumstance do not warrant making such an order that was passed which is in the nature of an attachment as contemplated under Order 38 Rule 5. The allegations, as could be seen from the statement in the affidavit, are so bald and apart from that the respondent has not made out a case for the interim relief as envisaged under
Section 9 of the Arbitration and Conciliation Act.
19. Under such circumstances, the order of the learned Single Judge has got to be set aside by allowing the appeals. Accordingly, these original side appeals are allowed. No costs. Consequently, connected miscellaneous petition is closed.
rg