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Inter Ads Exhibition Private Limited Vs Busworld International Cooperative: An Injunction U/S 9 Of The Arbitration Act Could Not Be Granted To Revive Or Restore A Contract Which Is Specifically Determinable

Tushar Bansode ,
  16 September 2021       Share Bookmark

Court :
Delhi High Court
Brief :
In this case, the High Court reiterated that relief under Section 9 of the Arbitration and Conciliation Act, cannot be granted to reverse the termination by one party in contracts that are specifically determinable in nature.
Citation :
O.M.P.(I) (COMM.) 273/2019


Date of judgement:
January 13, 2020

Bench:
Hon'ble Ms. Justice Jyoti Singh

Parties:
Petitioner – Inter Ads Exhibition Private Limited
Respondent – Busworld International Cooperative Vennootschap Met BeperkteAnasprakelijkheid

Subject

In this case, the High Court reiterated that relief under Section 9 of the Arbitration and Conciliation Act, cannot be granted to reverse the termination by one party in contracts that are specifically determinable in nature.

Legal Provisions

  • Section 9 of the Arbitration and Conciliation Act, 1996 – A party may apply to the Court during or after the arbitral proceedings and seek interim relief.
  • Section 14(d) of the Specific Relief Act, 1963 – A contract that involves the performance of a continuous duty that the court cannot supervise, cannot be specifically enforced.

Overview

  • In the year 2003, a Joint Venture Agreement (JVA) was executed between the petitioner and respondent of this case. Its purpose was to organize an event called 'Busworld India'. After the success of the first event, a second JVA was executed between them to extend the co-operations for further editions of the event of 'Busworld India'. They were scheduled in 2013, 2015, 2016, and 2018.
  • The petitioner owed 67,000 Euros to the respondent, which they proposed to pay in three instalments. The first two were paid but the petitioner failed to pay the third instalment on time due to some genuine difficulty. They offered to compensate by paying interest at 12% per annum on the delayed payment, which wasagreed by the respondent.
  • However, within 10 days, a notice was served to the petitioner by the respondent stating that the second JVA between them stands terminated. The respondents also claimed 118,486,34 Euros against the petitioner. As per their contract, the venue of the arbitration proceeding shall be New Delhi. Hence, the matter came before Delhi High Court.
  • The main contention of the petitioner was that the aforementioned termination was illegal, not being in accordance with the terms and conditions laid down in the JVA. Therefore, they prayed to the court to quash and set aside the termination.

Issues

  • Whether the termination of the Joint Venture Agreement (JVA) by the respondent was justified?

Judgement Analysis

  • The counsel for the petitioner held that the termination is illegal. He stated that, as per the contract, the respondent can terminate the contract only after issuing a written notice specifying in detail the nature of the breach. He also argued that the termination of JVA was illegal and malafide, as the respondent intended to enter into an agreement with a third party, through a back door entry.
  • The counsel for the respondent claimed that the instant petition is not maintainable under Section 9 of the1996 Act, as it is actually seeking specific performance of the Contract.Since the JVA is a determinable contract, the relief sought by the petitioner should be rejected at the threshold, as specific performance of a determinable contract cannot be granted and in any case, this Court cannot order restoration of such acontract that is terminated.
  • The counsel further argued that the petitioner is a regular defaulter, and has defaulted on various occasions, and is in breach of the material obligation. Hence, he should not be granted any interim relief. Also, no bonafide attempts were madeby them to resolve the disputes with the respondent or to clear the outstanding payments. Moreover, the petitioner did not diligently forthwith approach this court and waited months to file this petition.
  • The Hon’ble High Court observed that the SR Act provides that an injunction cannot be granted to prevent the breach of a contract, the performance of which would not be specifically enforced. Since the contract cannot be enforced, the first relief prayed by the petitioner was rejected by the Court. Additionally, the Court supported the respondent's contention that the question of termination is outside the Court's domain and can be decided by the Arbitral Tribunal.
  • The court held that the second relief sought by the petitioner if granted, would impose a blanket restraint on the respondent from carrying any business in India. Also, it would amount to granting the first relief indirectly. Also, owing to the fact that the respondent has already entered into an agreement with a third party, 40 days prior to the present petition, the court rejected the second relief sought by the petitioner.
  • Relying upon judgements Jindal Steel & Power Ltd. v. SAP India Pvt. Ltd., and Indian Railway Catering &Tourism Corporation Ltd. Vs. Cox & Kings India Ltd. and Anr., the High Court concluded that once termination of contract takes effect, the operation cannot be stayed by an interim injunction. Hence, the petition of Inter Ads Exhibition Private Ltd. was dismissed.

Conclusion

All the judgements cited by the petitioner as reference were rejected by the Court. Hon'ble Justice Jyoti Singh supported the stand taken by the respondent that the contract was determinable and was terminated at the breach by the petitioner. Keeping in mind that no rejoinder was filed by the petitioner and the fact that the respondent has already entered into an agreement with a third party, the court rejected this petition and ruled in favour of the respondent.

Click here to download the original copy of the judgement

Please let us know in the comment section, what is your view of this judgement –

  1. Can an injunction for specific performance of contract be granted under such circumstances?
  2. Should the petitioner appeal to the Supreme Court? If yes, then based on what contentions?
 
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