All these four appeals are directed against the orders passed by the District Judge on applications under Section 9 of the Arbitration and Cancellation Act, 1996 (herein after referred to as an 'Act') initially granting conditional interim protection and subsequently declining interim protection both at the stage of suspension of supply and thereafter on the termination of the dealership.
The facts in brief as emerging from pleadings which deserves to be mentioned are:-
Samay Singh, the sole Proprietor of M/s Deobhumi Gas Service, Narendranagar, district Tehri Garhwal in Uttarakhand was sanctioned dealership for distribution of liquid petroleum gas (L.P.G. for short hereinafter) by the Hindustan Petroleum Corporation Ltd. (hereinafter referred to as "the Corporation") in a Scheduled Caste Category. A dealership contract was entered into between the parties on 1.3.2008 and the distribution business commenced. Later a dispute arose between the two as dealers of Rishikesh and Dehradun continued or started distribution of L.P.G. in the area allotted to M/s Deobhumi Gas Service. Accordingly, Samay Singh invoked arbitration clause 39 of the agreement. The dispute was referred by the Corporation vide order dated 28.1.2010 to the Sole Arbitrator.
On 12.4.2010 Corporation suspended the supplies to M/s. Deobhumi Gas Service. The said order was challenged by Samay Singh by filing Writ Petition No.5320 of 2010 before the Nainital High Court. It was disposed of vide order dated 16.4.2010 holding that there is an alternative remedy. Accordingly, Samay Singh applied for enlargement of the scope of the dispute referred to the Arbitrator. The Chairman-cum-Managing Director of the Corporation vide order dated 21.5.2010 enlarged the scope of Arbitration and the dispute regarding suspension of sales and supplies was also referred to the same Arbitrator who was seized with the dispute with regard to the area of distribution.
Ultimately, the dealership of M/s Deobhumi Gas Service was terminated on 8.3.2011. Samay Singh, therefore, again invoked the arbitration clause and applied for enlargement of the scope of arbitration. The Chairman-cum-Managing Director of the Corporation vide order dated 20.4.2011 referred the dispute and differences arising out of the termination of the dealership agreement also to the Sole Arbitrator. Thus, all the three disputes, namely, (1) relating to the area of distribution; (2) differences arising out of the order dated 12.4.2010 suspending the supplies; and (3) relating to the order dated 8.3.2011 terminating the dealership agreement all stood referred to the Arbitrator.
In the meantime, the dispute of area of distribution or the common area of operation, if any, assigned to the respective dealers of Dehradun, Rishikesh and Narendra Nagar was decided vide order dated 16.3.2009. The said order was challenged through Writ Petition No.1096 of 2009. It was entertained on 16.7.2009 but with no interim order.
Simultaneously, on account of certain irregularities, an order imposing penalty of Rs.3,52,000/- upon M/s. Deobhumi Gas Service was passed on 13.5.2009. The said order was assailed by filing Writ Petition No.770 of 2009 before the Nainital High Court. In the said writ petition an order was passed on 22.5.2009 directing M/s. Deobhumi Gas Service to deposit the penalty amount.
In the wake of the aforesaid facts and circumstances, Samay Singh applied under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) on 22.4.2010 for grant of interim protection, primarily for the restoration of supplies, indirectly praying for grant of stay of the order dated 12.4.2010. On the said application, initially an interim protection was granted on 2.8.2010 against which the Corporation preferred First Appeal From Order Defective No.1412 of 2010 wherein a conditional interim order has been passed by this Court on 26.8.2010.
The aforesaid application under Section 9 of the Act which was numbered as Arbitration Case No.213 of 2010, was finally decided by the District Judge on 9.3.2011. The said order is under challenge by both the parties in respective First Appeal From Order No.1753 of 2011 of Samay Singh and in First Appeal From Order Defective No.571 of 2011 of the Corporation.
A day prior to the decision of above Arbitration Case No.213 of 2010 the Corporation terminated the dealership of M/s. Deobhumi Gas Service. Samay Singh filed another application under Section 9 of the Act for grant of interim protection against the said order also. The said application was registered as Case No.111 of 2011 and was dismissed vide order dated 2.5.2011 in view of the order dated 9.3.2011 passed in Arbitration Case No.213 of 2010. The aforesaid order of the District Judge is under challenge in First Appeal From Order No.1758 of 2011 preferred by Samay Singh.
This is how the above four First Appeal From Orders are before the Court for consideration.
Sri Ravi Kiran Jain, Senior counsel assisted by Sri R.K.Awasthi, learned counsel appearing for Samay Singh (M/s. Deobhumi Gas Service) and Sri Vikas Budhwar, learned counsel appearing for the Corporation agreed for disposal of all the four appeals finally at the stage of admission itself. They advanced arguments on the basis of the pleadings in First Appeal From Order No.1753 of 2011 arising out of the order dated 9.3.2011 passed by the District Judge, Ghaziabad in Arbitration Case No.213 of 2010 under Section 9 of the Act.
The basic submission of Sri Jain is that the court below has failed in appreciating the legislative intent of Section 9 of the Act and has thus committed a gross error of law in refusing to grant interim order particularly when the disputes have already been referred to the Arbitrator by the Corporation. Secondly, it was incumbent upon the court below to have granted interim protection after moulding the relief claimed by the appellant when findings with regard to prima-facie case, irreparable loss etc, were recorded in his favour. In terms of Clause 29-A of the agreement, the Chief Regional Manager of the Corporation was not competent to suspend the supplies of the appellant and as such the order passed by him was patently without jurisdiction. The court below having accepted the same coupled with the finding that under the aforesaid clause of the agreement suspension of supplies could have been made only for a specified period and not indefinitely was not justified in declining the interim injunction. The court below manifestly erred in refusing to grant the interim protection merely for the reason that the appellant had not asked for any relief against the order dated 12.4.2010. The order of suspension of supplies being the subject matter of dispute in arbitration, it was not necessary for the appellant to have claimed any relief or stay of the same in proceedings under Section 9 of the Act.
Sri Vikas Budhwar, learned counsel defending the impugned orders and in assailing some of the findings recorded in the order dated 9.3.2011 submitted that the relief of injunction claimed is a species of specific relief which is essentially governed by the provisions of the Specific Relief Act. The dealership contract was determinable in nature, therefore in view of Section 14 (1) (c) of the Specific Relief Act, 1963 it can not be enforced in law. In respect of a contract which is not enforceable under law no interim injunction can be granted and in support he has placed reliance upon a number of decisions which would be referred to by me during the course of discussion at the appropriate place. He further submitted that the relief of interim nature as prayed for by the appellant under Section 9 of the Act would have resulted in the restoration of supply to the appellant or for reviving the contract which was cancelled. The grant of such a relief as an interim measure would have resulted in the grant of final relief claimed in the arbitration and could not have been granted.
In venturing to deal with the respective submissions of the parties, I consider it profitable to summarise the admitted facts as under:-
On 1.3.2008 dealership contract for distribution of LPG was entered into between the parties.
Chief Regional Manager of the Corporation vide order dated 12.4.2010 suspended the supply of LPG to the dealer.
The above dispute was referred to arbitration.
On application for interim protection under Section 9 against the above order initially conditional protection was granted which has given rise to First Appeal From Order No. Defective 1412 of 2010.
Subsequently application was rejected on 9.3.2011 giving rise to First Appeal From Order No . Defective 571 of 2011 and FAFO No. 1753 of 2011.
On 8.3.2011 the dealership contract was terminated by the corporation.
The dispute about termination of contract has also been referred to Arbitrator.
At this stage on fresh application under Section 9 of the Act, the court below declined to grant interim relief in view of rejection of the earlier application under Section 9 of the Act.
From the narration of the above admitted facts it is evident that all disputes between the parties regarding area of distribution, suspension of supplies and termination of contract stand referred to arbitration and are pending consideration. The two applications of the appellant for interim protection under Section 9 of the Act stand rejected. The conditional interim protection granted initially in the first application on 2.8.2010 stood merged in the final order dated 9.3.2011 by which the application was rejected. Therefore, at this stage the order dated 2.8.2010 has lost relevance and so is the First appeal From Order No. Defective 412 of 2010 arising from it. Accordingly, I need not to dwell on the above appeal.
The orders of the court below passed on the first and the second application filed under Section 9 of the Act are interlinked. The second application has been rejected for some what the same reasons as contained in the order rejecting the first application. It is for this reason that learned counsel for the parties considered it convenient to refer to the pleadings and the documents forming part of First Appeal From Order No. 1753 of 2011 arising from the order dated 9.3.2011 rejecting the first application under Section 9 of the Act.
In short, after the dealership has been terminated and the disputes stand referred to Arbitration the only question which survives for consideration is whether during pendency of the above arbitration, Samay Singh (M/s Deobhomi Gas Service) is entitle to any interim relief or the refusal of such interim relief by the court below is justified.
The substantive provisions covering grant of interim relief of the nature of temporary injunction is contained in Section 94 CPC. It provides that in order to prevent the ends of justice from being defeated, the court, if so prescribed may issue a warrant of arrest; direct for furnishing security; grant temporary injunction; appoint receiver; make any other order as may appear to be just and convenient.
Injunction, temporary or permanent, is a kind of specific relief and grant or refusal of injunction is covered by the Specific Relief Act, 1963. The said Act in Sections 36 to 42 lays down the manner in which injunctions of temporary and perpetual nature or mandatory can be granted or refused.
Order XXXIX CPC speaks about temporary injunctions and interlocutory orders and lays down elaborately the manner for grant of temporary injunction, circumstances in which it can be granted and of consequence of disobedience of injunction order.
Thus, the substantive law relating to injunctions is contained in Section 94 CPC and Sections 36 to 42 of Chapter 3 of the Specific Relief Act,1963 whereas the procedural part is laid-down in Order XXXIX CPC.
In addition, in matters concerning arbitration or which are open to arbitration in view of Arbitration Clause contained in an agreement, Section 9 of the Act which is a special enactment, also empowers the court to grant protection as an interim measure before, after or during the arbitral proceedings.
Section 9 of the Act authorises the grant of temporary injunction at all the three stages of the arbitral proceedings. The aforesaid provision apart from laying down the matters for which purpose interim measures may be ordered by the court provide that court may pass interim order, as may appear to be just and convenient and in exercise of such power it shall have the same powers as in any other such proceedings, but it does not lay down the manner and circumstances for the exercise of interim measures.
Section 9 of the Act is quoted below:-
"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 or 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 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."
In Arvind Constructions Company Private Limited Vs. Kallinga Mining Corporation Limited and Others (2007) 6 SCC 798 the Supreme Court took the view that exercise of power under Section 9 of the Act must be based on well recognized principles governing grant of interim injunctions and other matters of interim protection or the appointment of a receiver. In other words, the Supreme Court approved the application of the principles governing grant of temporary injunctions as laid down under the Specific Relief Act and Order XXXIX CPC ie., prima-facie case, balance of convenience and irreparable loss as the three essential conditions for grant of temporary injunction. The argument that Section 9 of the Act is independent of the Specific Relief Act and the restrictions placed therein can not control the exercise of power under Section 9 of the Act was not accepted.
In Adhunik Steel Limited Vs. Orrisa Maganise and Minerals Private Limited (2007) 7 SCC 125 it was again reiterated that the well recognized principles applicable for grant of interim injunction as contained in Order XXXIX Rule 1 CPC would be applicable while granting protection as an interim measure under Section 9 of the Act.
Even in exercise of writ jurisdiction under Article 226 of the Constitution of India principle applicable for the grant of interim relief under Order XXXIX of the C.P.C. have been held to be applicable by the various decisions of the Supreme Court including AIR 2000 SC 1573 Union of India Vs. Era Educational Trust.
In Firm Ashok Traders and another Vs. Gurumukh Das Saluja and others AIR SC 1433, one of the question which fell for consideration before the Supreme Court was regarding the maintainability of the application under Section 9 of the Act filed by one of the partners of an unregistered firm. Their Lordships of the Supreme Court held that the bar of Section 69 of the Partnership Act does not effect the maintainability of an application under Section 9 of the Act. It was observed that though the venue of deciding application under Section 9 of the Act is different then the venue of the arbitral proceedings but the court in deciding such an application is conferred with the same power as for securing a relief which the court has power to grant before, during or after the arbitral proceedings even though an application under Section 9 of the Act is neither in the nature of a suit nor a right arising from a contract and the court is only enjoined upon to grant interim measure so as to protect the right to be adjudicated upon to the Tribunal from being frustrated.
The aforesaid decision nowhere provides anything contrary to the law laid down by the Apex Court in the case of Arvind Constructions Company Pvt. Ltd. (Supra) and Adhunik Steel Ltd. (Supra) and is of not of any assistance.
It is worth noting that Section 9 of the Act does not lay down any specific condition or any procedure for grant of interim relief. Therefore, when a party approaches a court of law for the grant of relief by way of injunction in the absence of any special set of rules in the special Act, the ordinary rules followed by the court would continue to govern the exercise of power of granting interim relief. Thus, the grant of interim measure under Section 9 of the Act has to be in accordance with the well recognized principles governing grant of interim relief by way of temporary injunctions in consonance with Special Relief Act as well as the provisions of C.P.C.
The basic object of granting interim measure is to protect and preserve the subject matter of litigation and at the same time not to allow the ends of justice to be defeated. In exercise of such powers, the Apex Court has consistently held that the court should not pass an interim order even though just and convenient, which amounts to granting the final relief and in passing orders of such interim measures the court ought not to be oblivion of the issues of public interest apart from host of other relevant factors including those set out under the Specific Relief Act and the provisions of C.P.C.
The Apex Court in a catena of authorities have repeatedly laid down that interim orders should not be passed or issued as a matter of right and they should not be in the nature of the final relief or of the nature which is beyond the scope of the final relief claimed or which can not be granted finally.
In (2005) 5 SCC 61 Bombay Dying and Manufacturing Company Vs. Bombay Environmental Action Group and others it has been observed that it is only in exceptional circumstances in a fool proof case, after balancing the extreme positions that a Court can grant an interim relief of a final nature for reasons to be recorded, if failure to grant such relief may tantamount to dismissal of the petition or denial of the main relief claimed and thus making the petition infructuous.
In Burn Standard Company Ltd. and others Vs. Deen Bandhu Majoomdar and another AIR 1995 SC 1499, the practice of grant of interim relief which amounts to allowing the final relief was deprecated by the Supreme Court and it was held if loss can be repaired by granting monetary benefits, no interim relief should be granted.
A similar view was expressed by the Supreme Court in State of U.P, and others Vs. Ram Sukhi Devi AIR 2005 SC 284 and it was ruled that grant of final relief at the interim stage is improper. To the same effect is the decision of the Supreme Court in Assistant Collector Central Excise Vs. Dunlop India Limited where granting of interim order practically giving the final relief merely because a prima-facie case was made out was deprecated.
In the case of Indian School Certificate Examination Vs. Esha Mittal and another (2000) 7 SCC 521 it has been laid down that interim/interlocutory orders ought not to grant relief which can only be granted at the time of final decision and that such orders passed on equitable considerations should not be contrary to law.
The two decisions of the Supreme Court in S.P. Subramanya Shetty and Others Vs. K.S.R.T.C. and Others JT 1997 (4) SC 594 and State of Bihar Vs. Dhirendra Kumar and Others AIR 1995 SC 1955 holds that where the suit itself is not maintainable the question of grant of any injunction does not arise.
In Era Educational Trust (Supra) the Apex Court, while laying down that in the grant of interim relief in exercise of power under Section 226 of the Constitution of India the principles laid down under Order XXXIX CPC are required to be taken into consideration, held that a relief which could not have been granted even at the final stage could not have been granted by way of interim measure.
In short in the matter of grant of interim relief the court is obliged to consider the nature of relief which the party is claiming as a interim measure and the relief which is ultimately available to him in law.
It is equally settled that a party would not be entitle to by way of an interim measure, a relief which it may not get finally.
In Indian Oil Corporation Ltd. Vs. Amritsar Gas Service and others (1991) 1 SCC 533, Amritsar Gas Service was awarded distributorship for sale of L.P.G. under the agreement with the Indian Oil Corporation. The distributorship was terminated allegedly for breach of conditions of the agreement. The distributor i.e. Amritsar Gas Service filed a suit against the termination of the distributorship. In the suit corporation filed application under Section 34 of the Arbitration Act 1940 for its stay but the same was rejected and the revision preferred to the High Court was also dismissed. Thus, the matter was taken to the Supreme Court where an arbitrator was appointed. The arbitrator made an award holding the corporation guilty of breach of contract and liable for restoration of distributorship and for compensation.
In the aforesaid facts and circumstances, the Supreme Court while considering the question of relief which could have been granted by the arbitrator, held that as the agreement was terminable/revocable, the only relief which could have been granted to the distributor was by way of award of compensation for the loss of earning instead of restoration of distributorship which was in contravention of Section 14(1)(c) of the Specific Relief Act. Thus, the learned Arbitrator was held to have fallen in error in directing for restoring the distributorship of the dealer.
The above three Judges decision of the Supreme Court in Amritsar Gas Service still holds the field and according to it a distributor is not entitle to restoration of distributorship in the ultimate analysis even on a finding of breach of agreement by the corporation as the contract happens to be determinable and not enforceable.
A similar view was expressed by another three Judges Bench of the Supreme Court in the case E. Venketakrishina Vs. Indian Oil Corporation and another (2000) 7 SCC. In the said case also the Supreme Court was considering the correctness of the award made by the arbitrator in connection with distributorship agreement with the Indian Oil Corporation. The Supreme Court upheld the view of the Division Bench of the High Court to the effect that the question of restoration of distributorship would not arise under the agreement which was revocable by either of the parties and as such the arbitrator was held to be in error in directing for restoring the distributorship.
In Bharat Petroleum Corporation Ltd. Vs. M/s Khaybar Transport Pvt. Ltd. 2011 (86) ALR 511, the distributorship licence was cancelled and a suit was filed for declaring the cancellation to be illegal arbitrary void and effective and for restoration of supplies. This court following the decision of the Supreme Court in Amritsar Gas Service (Supra) held that the suit for restoration of distributorship was not maintainable in law and stand specifically barred by Section 14(1)(c) of the Specific Relief Act and the remedy available to the distributorship is to lay a claim for damages.
In Aventis Pasteur S.A Vs. Cadila Pharmaceuticals Limited 2003 (2) Arb. LR 259 (Gujrat) a Single Judge of the Gujrat High Court while dealing with a matter arising out of order passed on an application under Section 9 of the Act following the Amritsar Gas Service (Supra) held that where an agreement provided that it is terminable on notice by either of the parties and it is revocable, it is not enforceable in law in view of Section 14(1)(c) read with Section 41 of the Specific Relief Act and therefore interim order granted by the trial court is without jurisdiction. In Star India Ltd. Vs. Aroop Bohra and others 2003 (2) Arbitration Law Reports 2002 (Ganhati) his Lordship Hon'ble Mr. Justice Ranjan Gagoi of the High Court (as he then was) held that where the contract between the parties is determinable in nature, the bar under Section 14(1)(c) of the Specific Relief Act would come into play and it would not be specifically enforceable and no injunction could be granted to enforce the same in view of Section 41 (e) of the Specific Relief Act.
In the light of the above decided cases, the legal position is clear that a contract which is determinable in nature cannot be specifically enforced and no injunction in respect thereof can be granted. The position which emerges is that a suit or any legal proceedings for enforcing such an agreement so as to restore the distributorship is not legally maintainable and therefore, when ultimately the relief of restoration of distributorship is not available, it cannot be extended by way of interim measure or an order of injunction.
Now reverting to the facts of this case, parties are ad idem that the distributorship agreement was determinable and it has been terminated. Samay Singh (Dev Bhoomi Gas Service) by moving two separate applications under Section 9 of the Act had applied for grant of interim protection. First in relation to the order dated 22.4.2010 by which supplies were stopped and secondly against the order of termination of distributorship dated 9.3.2011. In effect the interim protection claimed is to stay the above orders meaning thereby to restore the supplies and the distributorship. The supplies cannot be restored once the distributorship has been terminated and the stay of the order of termination of distributorship would tantamount to restoring the distributorship which is not legally permissible by way of interim measure in view of bar contained in Section 14(1)(c) read with Section 41 (e) of the Specific Relief Act and as interpreted by the Apex Court in the Amritsar Gas Service (Supra) and E. Venkatakrishna (Supra). It ultimately leads to the conclusion that prima-facie no relief of restoration of distributorship is available by recourse to any legal proceedings or even in arbitration and therefore no interim injunction can be granted to the above effect in view of Section 41(e) of the Specific Relief Act.
This is irrespective of establishment of a strong prima facie case, balance of convenience and irreparable loss and findings to that effect recorded by the court below in favour of Samay Singh (Dev Bhoomi Gas Service). They are of no avail as no interim injunction contrary to law or having the effect of granting relief which ultimately is prima-facie not available in law can be granted.
The proceedings under Section 9 of the Act are in contemplation of arbitral proceedings likely to be initiated or pending and the grant of interim measure though independent to the arbitral proceedings cannot go beyond the final relief which is likely to be claimed or claimed or are likely to be awarded therein.
I am therefore convinced that a relief which is per se not admissible can not be granted as an interim measure not even in exercise of jurisdiction under Section 9 of the Act as the said power is also circumscribed by the provisions of Specific Relief Act and the CPC.
Thus the court below has not erred in refusing interim protection as prayed for under Section 9 of the Act by Samay Singh (Dev Bhoomi Gas Service). The only remedy available to him is for the relief is for compensation by way of damages. The court below to that extent has sufficiently protected his interest by laying down certain guidelines which may ultimately help the arbitrator in quantifying the damages/compensation.
In view of the above, I am not inclined to strain myself on the findings on issues of prima-facie case, balance of convenience, irreparable loss and the competence of the authority passing the order of termination of distributorship.
In the aforesaid facts and circumstances, I find no error in the impugned orders. The appeals have no force. All of them stand dismissed with no order as to costs. However, as the arbitral proceedings are pending, Samay Singh (M/s. Dev Bhoomi Gas Service) is set at liberty to apply and seek interim measure as may be advised taking recourse to Section 17 of the Act before the Arbitrator.
It is made clear that any observation or finding herein above would not affect and prejudice the rights of the parties and the decision/award of the arbitrator which is expected to be made expeditiously.
Order Date :- 3.7.2012 SKS