Arbitration and Conciliation Act, 1996-Section 9:

Interim prohibitory/mandatory injunction - Grant of - Held - It is governed by Specific Relief Act, 1963 and well known concepts of balance of convenience, prima facie case, irreparable injury and interim measure appearing to court to be just and convenient - Section 9 was not de hors them - It was more so since a right to approach ordinary court was given without providing a special procedure in that behalf - Approach that at initial stage only existence of arbitration clause need be considered is not justified.

One party obtaining mining lease from Government and contracting with another for raising ore on its behalf - Notice by former to latter purporting to terminate contract on ground that contract was violative of Rule 37 of Mineral Concession Rules, 1960 and there was danger of their losing rights as a lessee, and also asking latter to remove their workmen and equipment from site - The latter alleging that pursuant to contract it had mobilized huge resources for extraction of mineral arid incurred losses, moved District Court under Section 9 for injunction restraining termination of contract and dispossession from site of mines - District Court refusing it but High Court granting it - Correctness of - Held - Whatever might be reasons for termination of contract, a notice had been issued regarding same and in terms of Order XXXIX Rule 2 of Code of Civil Procedure, 1908, an interim injunction could be granted restraining breach of contract - To that extent, there was a prima facie case - However, it was possible to assess compensation payable to fatter if their claim was upheld by arbitrator - Though the former could not enter into a similar transaction with any other entity since that would also entail violation of Rule 37 there was no justification in preventing them from carrying on mining operations by themselves as that would not prejudice the latter who in case of success of their claim were entitled to get compensation for termination of contract - Question of application of Rule 37 left to be decided by arbitrator.

Arbitration - Precedent - Other arbitral award - Held - Court is not concerned with what arbitrator who may be appointed will hold in impugned case and not what some other arbitrator held in some other arbitration and some other contract even if it be between same parties - Moreover, Court could not be bound by what an arbitrator might have held in an arbitration proceeding unless it be that the said award operates as a bar between the parties barring either of them from raising a plea in that behalf.

O.M.M. obtained a mining lease from the Government and entered into a contract with AS for raising the ore on its behalf. However, a few months thereafter, O.M.M. issued a notice to AS purporting to terminate the contract and asking them to remove their workmen and equipment from the site. According to O.M.M., it had realized that its contract with AS was violative of Rule 37 of the Mineral Concession Rules, 1960 and since there was danger of itself losing its rights as a lessee, the contract had to be terminated. AS alleged that pursuant to contract it had mobilized huge. resources for the extraction of the mineral and incurred losses, and moved the local District Court under Section 9 of the of the Arbitration and Conciliation Act, 1996 for an injunction restraining O.M.M. from terminating the contract and dispossessing it from the site of the mines. O.M.M. contested the application but the District Court allowed it However, the High Court allowed the appeal of O.M.M holding that (i) in view of Section 14(3)(c) of the Specific Relief Act, 1963 the loss, if any, that may be sustained by AS, could be calculated in terms of money; (ii) the question of balance of convenience for grant of injunction was not required to be gone into as it was otherwise not a fit case p for grant thereof. However, the High Court also held that prima facie neither Rule 37 ibid nor Section 14(1)(c) of the Act of 1963 were applicable to the facts of the case. Feeling aggrieved thereby, both AS and O.M.M. filed the present cross appeals. 

AS contended that (i) Section 9 of the Act of 1996 was independent of Order XXXIX of the Code of Civil Procedure and Act of 1963; (ii) by way of an interim measure, the court could pass mandatory or prohibitory order for the preservation of the subject matter of the arbitration agreement; (iii) until the arbitrator decided whether O.M.M. was entitled to terminate the contract and its consequences, the court had not only the power but the duty under Section 9 Act of 1996 to protect their contractual right to mine and lift the ore to the surface on behalf of O.M.M; (iv) if O.M.M. is permitted to enter into agreements with others for the same purpose, it would be unjust as it cancelled the agreement mainly because it was hit by Rule 37 ibid; (v) O.M.M. must be restrained from carrying on any mining operation in the mines concerned pending the arbitral proceedings.

O.M.M. contended that (i) since neither Section 9 of the Act of 1996 B nor any other of its provisions provided the conditions for grant of interim protection; the provisions of the Code of Civil Procedure and the Act of 1963 cannot be kept out while the court considers the question whether on the facts of a case, any interim protection should be granted; so, the court had necessarily to consider the well known restrictions on the grant of interim orders; (ii) grant of an injunction by way of interim measure to permit AS to carry on the mining operations pending the arbitration proceedings notwithstanding the termination of the contract by O.M.M. was not permissible in law.