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Arbitrator - Interim arrangement between parties

  09 August 2008       Share Bookmark

Court :
Supreme Court
Brief :
Pending arbitration, the Arbitrator can grant interim directions and make interim arrangement between the parties.
Citation :
Delivered on 7-8-2008 (Not yet reported)



(Arising out of S.L.P. (C) No. 24175 of 2007)

M/s. GAIL (I) Ltd. .....Appellant


Bal Kishan Agarwal Glass Industries Ltd. ....Respondent



1. Leave granted.

2. Challenge in this appeal is to the judgment of a Division

Bench of the Allahabad High Court disposing of appeal (FAFO

No. 1339-D of 2007) which was preferred by the appellant

against the order dated 31.8.2007 passed by learned Judge of

Small Causes Court/Civil Judge (Senior Division) Agra, in Suit

No. 285 of 2007. By the said order the application for interim

mandatory injunction was disposed of with certain directions.

3. Background facts as projected by the appellant giving

rise to the appeal in a nutshell are as follows:

On 17.9.1996 an agreement was entered into between

the appellant and the respondent for supply of gas. The

agreement was valid upto 31.3.2002 and was further extended

from time to time upto 31.3.2006. On 3.12.2004 officials of

the appellant inspected the factory premises of the respondent

and found that gas supply has been tampered with. Similar

incidents were noticed on 15.1.2005 and 17.3.2005.

Therefore on 28.5.2005 gas supply was discontinued.

Respondent filed writ petition No. 44679 of 2005 before the

Allahabad High Court. By order dated 18.7.2005 the High

Court dismissed the writ petition on the ground that

alternative remedy of arbitration was available under Section

9 of the Arbitration and Conciliation Act, 1996 (in short the

`Arbitration Act'). The order was not challenged by the


respondent. On 10.8.2005 proposal was given for restoration

of gas supply on the respondent furnishing undertakings,

which was in fact done. Thereafter gas supply was

reconnected on 22.2.2006. It was again found that the gas

meter was tampered with, which lead to disconnection on

28.2.2006. On 27.3.2006 an order was passed by the District

Judge, Agra to continue gas supply till 31.3.2006. On

3.4.2006 gas supply was stopped. Again a writ petition was

filed by the respondent i.e. Writ petition No. 2283 of 2006. By

order dated 1.11.2006 the Allahabad High Court disposed of

the writ petition holding that the proper remedy for the

respondent was to make a representation to the appellant

since no mandamus can be issued for extension of contract or

for giving benefit to any proposed contract. On 29.3.2007

appellant indicated the terms for re-connection namely

deposit of 50% of the outstanding amount of Rs.8,10,79,057/-

and security for balance through mortgage of immovable

property and clearance of all outstanding dues in respect of

the gas supply. Civil Suit No.285 of 2007 was filed by the

respondent with inter alia a prayer for directing the appellant


to execute the deed of renewal of gas supply without

demanding any payment or security. An application was filed

by the appellant in terms of Order VII Rule 11 of the Code of

Criminal Procedure, 1908 (in short the `CPC') and Section 8 of

the Arbitration Act. Learned Civil Judge directed that the

fresh proposal dated 9.2.2006 should be given effect to

without any further terms and conditions. As noted above an

appeal was preferred which was disposed of by the impugned

order dated 18.9.2007 on certain terms. The terms read as


1. The Plaintiff-Respondent shall deposit a sum of two

crores with the respondent and a security to the

tune of six crores in the form of second charge of

the immovable property along with bond for

payment with the Defendant-Appellant.

2. Out of two crores, the plaintiff-respondent shall

deposit a sum of Rs.50 lac with the defendant-

appellant within a period of one month. The


security to the tune of six crore will also be

deposited within a month.

3. They will further continue to deposit a sum of Rs.5

lac per month with the plaintiff-respondent in the

first week of every month till entire Rs. two crores

are deposited. The first installment of Rs.5 lac will

start from the month of November, 2007 i.e., the

first installment of 5 lac has to be paid by 7th of

November, 2007. These deposits will be in addition

to the charges of the gas to be supplied to the

Plaintiff-Respondent. They will be kept by the

Defendant-Appellant in fixed deposit in any

nationalised bank and will abide the Arbitration

proceedings and subject to final decision of the


4. The Defendant-Appellant will resume gas supply of

the Plaintiff-Respondent after deposit of Rs. 50 lac

and the security for 6 crores.

5. It will be open to the Defendant-Appellant to stop

the gas supply in case of default in depositing the


payment within the above stipulated time.

6. Defendant-Appellant will also be entitled to inspect

the meters and any if tampering in meter is found,

it will be open to the Defendant-Appellant to stop

the supply of gas after giving notice to the Plaintiff-


4. According to Mr. G.E. Vahanvati learned Solicitor

General what in essence the respondent sought for in the suit

is relief in terms of Section 10 of the Specific Relief Act, 1963

(in short the `Act'). In order to bring application of the said

provision there must be a contract. Section 39 of the said Act

relates to an obligation flowing from a contract upon mutually

agreed upon terms. There was no question of any automatic

renewal. As a matter of fact the extension of the period of

contract is not automatic and has to be done on mutually

agreed upon terms. In the instant case, there was no contract

in existence, and therefore there is no question of granting any

relief in the suit. Additionally, there was a specific clause

relating to arbitration. It is pointed out that the Civil court

was aware of the earlier order of the High Court. It is,


therefore, submitted that the learned Civil judge could not

have passed the order which was impugned before the High

Court. Unfortunately the High Court disposed of the appeal

before it without taking note of the fact that earlier in Writ

Petition No. 44679 of 2005, the court had dismissed the writ

petition on the ground of alternative remedy. The said order

was not challenged. It is accepted that an arbitrator has in

fact been appointed.

5. Mr. T.R. Andhyarujina, Learned Senior Counsel

appearing for the respondent on the other hand submitted

that the appellant's conduct was not above board. Initially, it

had suggested certain terms for reconnection. But backed out

of it and even it was not keen on the early disposal of the

proceeding before the arbitrator. The question whether any

amount is payable as penalty as claimed by the appellant can

be the subject matter of adjudication by the arbitrator. Since

unreasonable terms were indicated for resumption of gas

supply, the respondent had no alternative but to avail the civil

suit. It was suffering huge losses and there were human


problems like unemployment of a large number of employees

who earn their livelihood from their employment in the

respondent's factory. A proposal has also been filed by the

respondent during the hearing of the appeal.

6. Mr. Vahanvati, submitted that since the matter is

pending before the Arbitrator, the Civil Court should not have

passed any order and the High Court was not justified in

practically affirming the order of the trial court except

variation of certain conditions.

7. Undisputedly, the proceedings are pending before the

arbitrator. Under Section 17 of the Act, interim orders can be

passed by the Arbitrator.

8. In the circumstances we dispose of the appeal with the

following directions:

1. Within a period of ten days from today

the respondent shall make an


appropriate application for interim

arrangement before the Arbitrator;

2. Within a period of three days from the

date of receipt of copy of the application,

the appellant shall file the

response/objection, if any;

3. Within a period of ten days thereafter the

Arbitrator is requested to dispose of the

application in accordance with law. It is

open to the respondent to place the

proposal which was filed in the Court.

Needless to say, the Arbitrator shall

consider the matter in proper


9. We make it clear that we have not expressed any opinion

on the terms of the conditions, if any, which can be imposed

and/or whether any interim order is called for in the matter.

The appeal is accordingly disposed of without any order as to




New Delhi,
August 7, 2008


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