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Partnership Act : 1832 : Partnership firm-Re-registration-Effect of-Firm registered in 1949-Again registered comprising some of the original partners in 2005 with the same name-Earlier firm not dissolved-Held, registration of the firm in the same name again in 2005 does not affect the status of the firm. Arbitration and Conciliation Act, 1996 : ss. 9 and 11 (4) (b)-Interim order by District Judge u/s 9-Propriety of-Arbitration clause is an agency agreement-Agreement for a specific period having come to an end-Parties nominating their respective arbitrators but both the arbitrators so nominated failing to nominate presiding arbitrator-Application u/s 11 (4)(b) before Chief Justice of High Court for appointing third arbitrator-Meanwhile on application, District Judge granting interim order to maintain status quo until arbitral tribunal takes the matter-High Court vacating the interim order-Held, Adequate grounds are not made out at this interlocutory stage for interfering with order of High Court and parties are left to have their disputes resolved in terms of arbitration agreement-As agreed by both the parties, sole arbitrator appointed to decide the disputes between the parties-Except the question of maintainability of appeal filed by respondent before High Court on the pretext of re-registration, since, the appeal has been held to be maintainable, all the other questions are left open for decision by the sole arbitrator. Respondent no. 1, a partnership firm was constituted in the year 1949 bearing registration no. 71/1949. It was reconstituted in subsequent years taking in some additional partners. On 14.3.1991 the respondent-firm entered into an agency agreement with the appellant, a private limited company, engaging the latter as a raising contractor in respect of the mines for which the former had obtained leases from the State Government. On 25.3.1991 the respondent firm executed an irrevocable power of attorney in favour of the appellant authorizing it to administer the mines and sell the iron ore extracted therefrom. The agency agreement was to end on 31.3.2006. The appellant sought a further extension of the term but respondent no.1 was not willing for an extension. Disputes arose between the parties and by a letter dated 9.12.2005 the appellant invoked the arbitration clause in the agency agreement and nominated its arbitrator. The respondent firm registered itself again on 24.12.2005 bearing registration no. 595/2005. It, however, in turn also nominated an arbitrator. The arbitrators so nominated were to name the presiding arbitrator but since they failed to do so the appellant filed a petition under Section 11(4)(b) of the Arbitration and Conciliation Act, 1996 requesting the Chief Justice of the High Court to appoint the third arbitrator. While the said application was pending, the appellant company also filed an application under Section 9 of the Act before the District Judge for interim relief to permit it to continue to carry on the mining operations and to restrain the respondent from interfering with it. The District Judge directed status quo to be maintained until arbitral tribunal was constituted to adjudicate the dispute between the parties. The respondent filed an appeal before the High Court which held that since prima facie the agreement between the parties was not a specifically enforceable one in terms of the Specific Relief Act and since the terms of the agreement had expired, it was not appropriate to grant the interim order, and reversing the order of the District Judge, dismissed the application filed by the appellant-company. Aggrieved, the latter filed the instant appeal. It was contended for the appellant that it had entered into agreement with the firm bearing registration no. 71/1949, and since the appeal before the High Court was filed by the firm bearing registration no. 595/205, the same was not maintainable; that since the agreement entered with the appellant was, in the light of irrevocable Power of Attorney, co-terminus with the mining lease granted to the respondent firm, the same could not be terminated and would not come to an end by efflux time; and that powers under Section 9 of the Act, were independent of any restrictions placed by Specific Relief Act. =Dismissing the appeal, the Court HELD: 1. It was the appellant who filed the application under Section 9 of the Arbitration and Conciliation Act, 1996 impleading the respondent firm and its partners. The said firm represented by a partner, who even admittedly was a partner of the firm as constituted in the year 1949 and was also a party to the agreement with the appellant-company itself, had filed the appeal before the High Court. There is no case that the firm registered in the year 1949 had been dissolved. On the other hand, it was being reconstituted from time to time. Therefore, the fact that a firm in the same name was again registred in the year 2005, does not affect the status of the firm with which the appellant-company had a contract and the filing of the appeal by that firm represented by its partner. [Part 11] [187-B, C, D] 2. The effect of the agreement dated 14.3.1991 and the Power of Attorney dated 25.3.1991 admittedly executed between the parties and the rights and obligations flowing therefrom are really matters for decision by the Arbitral Tribunal. [Para 12] [187-F] 3.1. In the facts and circumstances, prima facie, it is not possible to say that the High Court was wrong in thinking that it may be a case where an injunction could not be granted in view of the provisions of the Specific Relief Act. But, that again will be a question for the arbitrator to pronounce upon. Suffice it to say that the position is not clear enough for this Court to assume for the purpose of this interlocutory proceeding that the appellant is entitled to specifically enforce the agreement dated 14.3.1991 read in the light of the Power of Attorney dated 2.5.3.1991. Of course, this aspect will be again subject to the contention raised by the appellant-company that the agreement created in his favour was co-terminus with the mining lease itself. But, these are the aspects to be considered by the Arbitral Tribunal Adequate grounds are not made out by the appellant at this interlocutory stage for interfering with the order of the High Court. In that view alone, it would be proper to decline to interfere with the order of the High Court and leave the parties to have their disputes resolved in terms of the arbitration agreement between the parties. [Para 13 and 14] [188-B, C, D, E] 4. The argument that the power under Section 9 of the Act is independent of the Specific Relief Act or that the restrictions placed by the Specific Relief Act cannot control the exercise of power under Section 9 of the Act cannot prima facie be accepted. Suffice it to say that prima facie exercise of power under Section 9 of the Act must be based on well recognized principles governing the grant of interim injunctions and other orders of interim protection or the appointment of a receiver. [Para 15] [188-F; 189-C, D] Firm Ashok Traders and Anr. v. Gurumukh Das Saluja and Ors., [2004] 3 SCC 155, held inapplicable. 5. It is seen that in spite of the parties naming their respective arbitrators in terms of the arbitration agreement, the arbitrators so appointed had not been able to nominate a presiding arbitrator. Since counsel on both sides agreed that this Court may appoint either a presiding arbitrator or a sole arbitrator for the purpose of resolving the disputes between the parties from the panel of names furnished, the Court appointed the sole arbitrator to decide on the disputes between the parties springing out the agreement dated 14.3.1991 and the Power of Attorney dated 25.3.1991. The arbitrator would be free to fix his terms in consultation with the parties. [Para 16] [189-D-G] Dr. A.M. Singhvi, Jaideep Gupta, Sr. Adv., Ashutosh Kaitan, P.K. Bansal, Deepak Khurana, Vishvjit Das, Umesh Kumar Khaitan, Amit Bhandari for the Appellant. A.K. Ganguly, Surya Prakash Mishra, K.K. Venugopal, Sr. Adv., S. Ravi Shankar, Rateesh, Barnali Basak, Visushi Chandana, S. Ravishankar, Yamunah Nachiar, S. Ravishankar for the Respondents.

CASE NO.:
UndergroundAtomExpl

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Appeal (civil) 2707 of 2007

PETITIONER:
M/s Arvind Constructions Co. Pvt. Ltd

RESPONDENT:
M/s Kalinga Mining Corporation & Ors

DATE OF JUDGMENT: 17/05/2007

BENCH:
TARUN CHATTERJEE & P.K. BALASUBRAMANYAN

JUDGMENT:
J U D G M E N T 

CIVIL APPEAL NO. 2707 OF 2007
(Arising out of SLP(C) No. 3294 of 2007)

P.K. BALASUBRAMANYAN, J.

1. Leave granted.

2. M/s Kalinga Mining Corporation, a partnership 
firm bearing registration No. 71/1949, came into existence 
on 10.12.1949. During the years from 1973 to 1980, the 
firm obtained three mining leases from the State 
Government. The partnership firm was reconstituted in 
the year 1980, taking in some additional partners, again 
in the year 1991 and yet again in the year 1994. 

3. On 14.3.1991, the firm entered into an agency 
agreement with the appellant, a private limited company 
for a term of 10 years. Thereby, the appellant was 
engaged as a raising contractor in respect of the mines for 
which the firm had obtained leases from the State 
Government. On 25.3.1991, the firm executed an 
irrevocable Power of Attorney in favour of the appellant 
authorizing it to administer the mines and sell the iron ore 
extracted therefrom. 

4. On 13.3.2001, the term of 10 years fixed in the 
agency agreement expired. New terms were negotiated 
between the parties and on 22.9.2001, the agreement was 
extended for a period of three years commencing from 
14.3.2001. The term was to end with 31.3.2003. Again, 
on 3.9.2003, the term of the agreement was extended for a 
further period of three years commencing from 1.4.2003. 
Thereby, the period was to end with 31.3.2006. 

5. The appellant sought a further extension of the 
term of the agency agreement. Apparently, the firm was 
not willing for an extension. Certain disputes thus arose 
and by letter dated 19.11.2005, the appellant-company 
sought resolution of the said disputes. The appellant-
company followed this up by a letter dated 9.12.2005 
invoking the arbitration clause in the agency agreement 
and nominating Mr. Sanjeev Jain as its arbitrator in terms 
of the arbitration agreement. 

6. It is seen that the respondent firm, for reasons 
best known to itself, sought for and got a fresh registration 
on 24.12.2005 and a firm having the same name was 
again registered and assigned registration No. 595/2005. 
Prima facie, this was unwarranted and the excuse put 
forward was that the partners, some of whom were 
partners even originally, could not trace the papers 
relating to the registration of the firm in the year 1949. Be 
that as it may, on receipt of the communication in that 
behalf from the appellant-company nominating an 
arbitrator, the firm in its turn named an arbitrator. In 
terms of the arbitration clause, the arbitrators had to 
name the Presiding Arbitrator. In spite of lapse of time, the 
arbitrators did not meet and nominate a Presiding 
Arbitrator. In that context, the appellant-company filed a 
petition under Section 11(4)(b) of the Arbitration and 
Conciliation Act, 1996 (hereinafter referred to as, "the 
Act") requesting the Chief Justice of the High Court of 
Orissa to appoint the third arbitrator on the basis that the 
firm had failed to act in terms of the procedure agreed to 
by the parties. The said application is said to be pending. 

7. The appellant-company also moved an 
application under Section 9 of the Act before the District 
Court, Cuttack seeking interim relief essentially to permit 
it to continue to carry on the mining operations and to 
restrain the respondent firm from interfering with it. 
According to the appellant, the agreement between the 
parties was co-terminus with the subsistence of the 
mining lease granted by the State in favour of the 
respondent firm and since the leases continue to subsist, 
the appellant-company was entitled to an extension of the 
period of the contract and what remained was only a 
negotiation regarding the terms at which the agreement 
has to be worked by the appellant-company. The 
appellant further pleaded that it had made all the 
investments for the purposes of carrying on the mining 
operations and had brought in the requisite machinery for 
that purpose. All the necessary investments had been 
made by it and in that situation, the balance of 
convenience was in favour of the grant of an interim order 
as sought for by the appellant. The respondent firm 
resisted the application, inter alia, contending that the 
agreement between the parties was essentially an agency 
agreement. Such an agreement could not be specifically 
enforced. On the expiry of the term, the appellant-
company had no subsisting right or status to carry on 
mining and in that situation the injunction sought for 
could not be granted. It was also contended that going by 
Section 14 and Section 41 of the Specific Relief Act, such a 
contract is unenforceable. Therefore the injunction prayed 
for could not be granted. 

8. The District Court, while entertaining the 
application had made an order on 8.3.2006 directing the 
parties to maintain the status quo. After hearing the 
parties, the District Court took the view that it would be 
just and appropriate to maintain the order of status quo 
until the disputes are referred to the Arbitral Tribunal and 
the Tribunal takes seisin of the dispute. Thus, the order 
of status quo originally granted was directed to continue 
until the Arbitral Tribunal was constituted to take up the 
disputes between the parties. Feeling aggrieved, the 
respondent firm --- there is a plea that the appeal was 
filed by the firm of 2005 and not by the firm of 1949 which 
we shall deal with --- filed an appeal before the High Court 
of Orissa. The High Court took the view that the District 
Court was in error in granting an order to maintain the 
status quo since prima facie the agreement between the 
parties was not a specifically enforceable one in terms of 
the Specific Relief Act and since the term of the agreement 
had expired it was not appropriate to grant an interim 
order as granted by the District Court. Thus, the High 
Court reversed the decision of the District Court and 
dismissed the application filed by the appellant-company 
under Section 9 of the Act. 

9. Feeling aggrieved by the said decision, the 
appellant-company has filed this appeal. It is contended 
on its behalf that the appeal filed before the High Court 
was not by the firm bearing registration No. 71/1949 with 
which the appellant-company had the agreement. The 
arbitration clause, which the appellant-company had 
invoked, was in relation to that agreement and hence the 
appeal before the High Court, at the instance of the firm 
bearing registration No. 595/2005, was not maintainable. 
It was further contended that since the agreement relied 
upon by the appellant in the light of the irrevocable Power 
of Attorney was co-terminus with the mining lease granted 
to the respondent firm by the State Government, the same 
could not be terminated and would not come to an end by 
efflux of time. The entire approach made by the High 
Court to find otherwise was erroneous. It was further 
submitted that this was a case in which the agreement 
could be specifically enforced in the light of Sections 10 
and 42 of the Specific Relief Act. It was also faintly 
suggested that the powers under Section 9 of the Act were 
independent of any restrictions placed by the Specific 
Relief Act and viewed in that manner, nothing stood in the 
way of the appellant-company being granted an order of 
injunction or at least an order to maintain status quo 
until the Arbitral Tribunal decided the dispute. 

10. On behalf of the respondent firm, it was 
contended that it was only a case of reconstitution of the 
1949 firm. It was a mistake to have the firm registered 
again in the year 2005 under a different registration 
number. Steps have been taken to rectify the mistake in 
that regard. It was further submitted that the appeal 
before the High Court was filed by the firm represented by 
its partner, who was also a partner in the firm registered 
in the year 1949. The appellant-company had impleaded 
in its application under Section 9 of the Act all those who 
were presently partners of the firm and there was no grace 
in the contention of the appellant-company that the 
appeal in the High Court was not filed by the firm which 
was a party to the contract with the appellant. On merits, 
it was submitted that the agreement was for a specific 
term, there was no irrevocability in the agency agreement 
and an agreement like the one entered into between the 
parties by way of a raising contract, could not be 
specifically enforced as rightly held by the High Court. It 
was also pointed out that the respondent firm had lost 
confidence in the appellant-company and in such a 
situation, the appellant-company cannot claim to continue 
as an agent of the respondent firm since the creation or 
continuation of an agency arrangement depends on the 
confidence reposed by the principal on the agent. It was 
also pointed out that subsequent to the expiry of the term, 
a tripartite agreement had been entered into with a labour 
union and it contained a recognition that the period of the 
contract between the respondent firm and the appellant-
company had come to an end. It could be seen therefrom 
that the appellant-company had taken over, directly, the 
liability in respect of the labourers who were being 
employed by the appellant-company during the 
subsistence of the raising contract. It was also submitted 
that the respondent firm had started mining operations on 
its own and the balance of convenience was not in favour 
of grant of any interim order as was done by the District 
Court. At best, the damages, if any, suffered by the 
appellant-company was determinable in terms of money 
and this was a case in which no injunction to perpetuate 
the agreement could be granted, especially as it involved 
supervision of minute details which the court would not 
normally undertake. It was also pointed out that grant of 
any injunction in favour of the appellant-company would 
put the respondent firm in danger of being exposed to 
prosecutions and other liabilities under law since it was 
the mining agency under the State Government. It was 
therefore submitted that the appellant-company had no 
prima facie case for an injunction as sought for. 

11. The objection that the appeal filed before the 
High Court was not competent need not detain us much. 
It was the appellant who filed the application under 
Section 9 of the Act impleading the firm and its partners. 
The said firm represented by a partner, who even 
admittedly was a partner of the firm as constituted in the 
year 1949 and was also a party to the agreement with the 
appellant-company itself, had filed the appeal before the 
High Court. There is no case that the firm registered in 
the year 1949 had been dissolved. On the other hand, we 
find that it was being reconstituted from time to time. 
Therefore, the fact that, foolishly or otherwise, a firm in 
the same name was again registered in the year 2005, 
does not affect the status of the firm with which the 
appellant-company had a contract and the filing of the 
appeal by that firm represented by its partner. It was 
brought to our notice that the respondent firm had sought 
a rectification of the register realizing the mistake that was 
made in having the same firm registered all over again, 
and that the said matter is pending. Considering the 
circumstances, we are of the view that the argument that 
the appeal before the High Court was not competent, it not 
having been filed by the firm with which the appellant-
company had the contract, is unsustainable. The said 
contention is therefore overruled. 

12. The effect of the agreement dated 14.3.1991 and 
the Power of Attorney dated 25.3.1991 admittedly 
executed between the parties and the rights and 
obligations flowing therefrom are really matters for 
decision by the Arbitral Tribunal. We do not think that it 
is for us, at this interlocutory stage, to consider or decide 
the validity of the argument raised on behalf of the 
appellant-company that the agreement between the 
parties was co-terminus with the mining leases and the 
respondent firm could not terminate the agreement so 
long as the mining leases in its favour continued to be in 
force. Nor do we think it proper to decide the 
sustainability of the argument on behalf of the respondent 
firm that it was mainly an agency agreement for a fixed 
term and on the expiry of the term, no right survives in 
the appellant-company unless of course the respondent 
firm agreed to an extension of the period. We leave that 
question open for decision by the Arbitral Tribunal.

13. Prima facie, it is seen that the mining lessee had 
entered into an agreement with the appellant-company for 
the purpose of raising the iron ore from the area covered 
by the mining lease. The term of the original agreement 
expired and this was followed by two extensions for three 
years each. Thereafter, the respondent firm had refused 
to extend the agreement and claims that it wants to do the 
mining itself. Prima facie, it is not possible to say that the 
High Court was wrong in thinking that it may be a case 
where an injunction could not be granted in view of the 
provisions of the Specific Relief Act. Here again, we do not 
think that we should pronounce on that question since 
that again will be a question for the arbitrator to 
pronounce upon. Suffice it to say that the position is not 
clear enough for us to assume for the purpose of this 
interlocutory proceeding that the appellant is entitled to 
specifically enforce the agreement dated 14.3.1991 read in 
the light of the Power of Attorney dated 25.3.1991. Of 
course, this aspect will be again subject to the contention 
raised by the appellant-company that the agreement 
created in his favour was co-terminus with the mining 
lease itself. But, as we have stated, these are the aspects 
to be considered by the Arbitral Tribunal. We refrain from 
pronouncing on them at this stage.

14. We think that adequate grounds are not made 
out by the appellant at this interlocutory stage for 
interfering with the order of the High Court. In that view 
alone, we consider it proper to decline to interfere with the 
order of the High Court and leave the parties to have their 
disputes resolved in terms of the arbitration agreement 
between the parties. 

15. The argument that the power under Section 9 of 
the Act is independent of the Specific Relief Act or that the 
restrictions placed by the Specific Relief Act cannot control 
the exercise of power under Section 9 of the Act cannot 
prima facie be accepted. The reliance placed on Firm 
Ashok Traders & Anr. Vs. Gurumukh Das Saluja & Ors. 
[(2004) 3 S.C.C. 155] in that behalf does not also help 
much, since this Court in that case did not answer that 
question finally but prima facie felt that the objection 
based on Section 69 (3) of the Partnership Act may not 
stand in the way of a party to an arbitration agreement 
moving the court under Section 9 of the Act. The power 
under Section 9 is conferred on the District Court. No 
special procedure is prescribed by the Act in that behalf. 
It is also clarified that the Court entertaining an 
application under Section 9 of the Act shall have the same 
power for making orders as it has for the purpose and in 
relation to any proceedings before it. Prima facie, it 
appears that the general rules that governed the court 
while considering the grant of an interim injunction at the 
threshold are attracted even while dealing with an 
application under Section 9 of the Act. There is also the 
principle that when a power is conferred under a special 
statute and it is conferred on an ordinary court of the 
land, without laying down any special condition for 
exercise of that power, the general rules of procedure of 
that court would apply. The Act does not prima facie 
purport to keep out the provisions of the Specific Relief Act 
from consideration. No doubt, a view that exercise of 
power under Section 9 of the Act is not controlled by the 
Specific Relief Act has been taken by the Madhya Pradesh 
High Court. The power under Section 9 of the Act is not 
controlled by Order XVIII Rule 5 of the Code of Civil 
Procedure is a view taken by the High Court of Bombay. 
But, how far these decisions are correct, requires to be 
considered in an appropriate case. Suffice it to say that 
on the basis of the submissions made in this case, we are 
not inclined to answer that question finally. But, we may 
indicate that we are prima facie inclined to the view that 
exercise of power under Section 9 of the Act must be 
based on well recognized principles governing the grant of 
interim injunctions and other orders of interim protection 
or the appointment of a receiver.

16. It is seen that in spite of the parties naming 
their respective arbitrators, in terms of the arbitration 
agreement, more than one year back, the arbitrators so 
appointed had not been able to nominate a Presiding 
Arbitrator in terms of the arbitration agreement. We 
therefore put it to counsel on both sides as to why we 
shall not constitute an Arbitral Tribunal in view of their 
failure to constitute the Arbitral Tribunal in terms of the 
arbitration agreement and in view of the urgency involved 
in resolving the disputes between the parties. Counsel on 
both sides agreed that this Court may appoint either a 
Presiding Arbitrator or a sole arbitrator for the purpose of 
resolving the disputes between the parties. A panel of 
names was furnished. Having considered the names 
shown therein and taking note of the submissions at the 
bar, we think that it would be appropriate and just to both 
the parties to appoint Mr. Justice Y.K. Sabharwal, former 
Chief Justice of India as the sole arbitrator for deciding all 
the disputes between the parties. We therefore appoint 
Mr. Justice Y.K. Sabharwal, former Chief Justice of India 
as the sole arbitrator to decide on the disputes between 
the parties springing out the agreement dated 14.3.1991 
and the Power of Attorney dated 25.3.1991. The arbitrator 
would be free to fix his terms in consultation with the 
parties. We would request the arbitrator to expeditiously 
decide the dispute on entering upon the reference and to 
give his award as early as possible. 17. In the result, we decline to interfere with the 
order of the High Court and dismiss this appeal. While 
doing so, we revoke the nomination made by the parties of 
two arbitrators. We appoint Mr. Justice Y.K. Sabharwal, 
former Chief Justice of India as the sole arbitrator to 
decide the dispute between the parties. The parties are 
directed to suffer their respective costs.

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