Arbitration Case No. 17 of 2010 · High Court
Case Details
Arb.A. 20/2012 BEFORE THE HON’BLE MR.JUSTICE B.D. AGARWAL JUDGMENT & ORDER (CAV) Since a common question of law is involved in all these three arbitratio n appeals I propose to dispose of all these appeals by this common judgment. The appeals have been filed under Section 37 (1) (a) of the Arbitration 2. and Conciliation Act, 1996 (hereinafter referred to as the ’Arbitration Act’) ag ainst the judgments dated 22.8.2012, 31.8.2012, and 7.9.12 passed by the learn ed District Judge, Tinsukia, Assam putting the seal of the court on the interim orders passed in Misc. Arbitration Case Nos. 17 of 2010, 1 of 2011 and 2 of 2011 . By these impugned judgments, the court has directed the appellant to maintain the ’status quo’ of supply of gas to the factories of the respondents. The impug ned orders have been passed by the learned District Judge on the basis of an app lications filed by the respondents under Section 9 of the Arbitration Act.
Legal Reasoning
ced below: (cid:28)17. There are two other factors which are weighing heavily with us and which we proceed to record. As per the law laid down by this Court in Sundaram Finance L td. an application under Section 9 seeking interim relief is maintainable even b efore commencement of arbitral proceedings. What does that mean? In Sundaram Fin ance Ltd. itself the Court has said: It is true that when an application under Section 9 is filed before the commence ment of the arbitral proceedings, there has to be manifest intention on the part of the applicant to take recourse to the arbitral proceedings. Section 9 permits application being filed in the court before the commencement o f the arbitral proceedings but the provision does not give any indication of how much before. The word (cid:28)before (cid:29) means, inter alia, (cid:28)ahead of; in presence or sig ht of; under the consideration or cognizance of (cid:29). The two events sought to be in terconnected by use of the term (cid:28)before (cid:29) must have proximity of relationship by reference to occurrence; the later event proximately following the preceding eve nt as a foreseeable or (cid:28)within-sight (cid:29) certainty. The party invoking Section 9 ma y not have actually commenced the arbitral proceedings but must be able to satis fy the court that the arbitral proceedings are actually contemplated or manifest ly intended (as Sundaram Finance Ltd. puts it) and are positively going to comme nce within a reasonable time. What is a reasonable time will depend on the facts and circumstances of each case and the nature of interim relief sought for woul d itself give an indication thereof. The distance of time must not be such as wo uld destroy the proximity of relationship of the two events between which it exi sts and elapses. The purpose of enacting Section 9, read in the light of the Mod el Law and UNCITRAL Rules is to provide (cid:28)interim measures of protection (cid:29). The or der passed by the court should fall within the meaning of the expression (cid:28)an int erim measure of protection (cid:29) as distinguished from an all-time or permanent prote ction. (cid:29) 17. Essentially, in the case of Sundaram Finance Ltd the issue before the Ap ex Court was that of jurisdiction of the court to pass an interim order even be fore commencement of an arbitral proceeding and not the issue of passing of in terim orders after the determination and expiry of the contract agreement. In th e aforesaid case, the dispute between the parties related to non-payment of hire purchase instalments as per the agreement. Besides this, the Arbitration Clause was clothed with the following words. (cid:28)All disputes, differences and/or claims, arising out of this hire-purchase agre ement whether during its subsistence or thereafter shall be settled by arbitrati on in accordance with the provisions of the Indian Arbitration Act, 1940 or any statutory amendments thereof and shall be referred to the sole arbitration of an arbitrator nominated by the Managing Director of the owner. The award given by such an arbitrator shall be final and binding on all the parties to this agreeme nt................... (cid:29). Referring to Section 21 of the Act, their Lordships, in the case of Sund 18. aram Finance Ltd (Supra), have held that an arbitral proceeding commences on the date on which a request for referring the dispute to an arbitrator is made. The Apex Court also recognised and took into consideration Article 9 of the UNCITR AL Model Law which also provided that there should be a Clause in the arbitratio n agreement that a party can request a court for an interim order before or duri ng arbitral proceedings. In the light of the facts and circumstances of the case , the court held that the trial court had jurisdiction to entertain an applicati on under Section 9. The authority is distinguishable on the sole ground that in the case at hand the dispute is not related to any subsisting or alive agreemen t. The dispute is out and out for settlement of terms and conditions of the prop osed agreement. 19. The case of Olympus Superstructures (Supra) is also based on different f ooting. In that case also, the arbitral Clause permitted the disputes to be refe rred for arbitration during the continuance of the agreement or even after its d etermination. The dispute was related to non-payment of instalments of apartment flats. The said case is arising out of an award and not against any interim ord er. The award was subsequently challenged in the court raising a question of jur isdiction of the arbitrator to pronounce award against certain claims in view of two arbitration Clauses in the same agreement and their relativity to refer the dispute for arbitration. In that context, the Hon’ble Supreme Court was examini ng the arbitrator’s jurisdiction. In other words, this judgment is not an author ity under Section 9 of the Arbitration Act. 20. The judgment of Tarapore and Company (Supra), relied upon by the respond ents, also cannot be said to be a judgment to decide the issue for passing an in terim order under Section 9 of the Act with respect to terms and conditions of a proposed agreement. In the cited authority, the contractor company was allowe d to import equipments and know-how from abroad at his own cost up to Rs. 2 cror es (Rupees two crores) only in foreign exchange. During the continuance of the a greement the prices of equipments gone up due to variation in the rate of foreig n exchange and a claim for re-imbursement of the increase of the cost of equipme nts was laid. This claim was resisted by the respondents on the ground that it w as out of purview of Clause 40, which provided reference of disputes to the sole arbitrator arising out of execution of the contract and not for importing machi nes from abroad. After referring to Clauses 31 and 40 of the agreement, the Hon’ ble Supreme Court held that the claim of the contractor on the basis of price es calation of the equipment had arisen out of the contract or it was otherwise in execution of the contract. Their Lordships further held that the claim was allow ed on the basis of arbitration clause which was (cid:28)widely worded\. In this way, th e dispute was intrinsically arising out of a subsisting contract and not applica ble in the case before me. Similar is the situation with regard to the judgment of this court rendered in the case of BK Construction (Supra). This is also a ju dgment arising out of various claims under a contract agreement and not an autho rity under Section 9 of the Arbitration Act. 21. On the other hand, in the case of Gaya Electric Supply Co. (Supra), the Apex Court has observed that no dispute can be referred for arbitration de-hors to the contract clause. Similarly, in the case of O.N.G.C. (Supra), the Hon’ble Supreme Court has held that there cannot be any order of supply of gas at a pric e demanded by a party without any contract. In the case before me the contract a greement is yet to be executed between the parties. Be that as it may, in this s et of appeals, I am not examining the issue with regard to the rate of gas or tr ansportation cost that can be charged by the appellant. The question of fact is yet to be decided by an appropriate authority. 22. In the case of M/s Rickmers (Supra), the Hon’ble Supreme Court was exami ning as to whether correspondences exchanged between the parties can form a cont ract. In this cited authority, their Lordships have held that it is beyond the p urview of the court to create a contract. The relevant observations of the Apex Court are re-produced below: (cid:28)In this connection the cardinal principle to remember is that it is the duty of the court to construe correspondence with a view to arrive at a conclusion whet her there was any meeting of mind between the parties, which could create a bind ing contract between them but the court is not empowered to create a contract fo r the parties by going outside the clear language used in the correspondence, ex cept insofar as there are some appropriate implications of law to be drawn. Unle ss from the correspondence, it can unequivocally and clearly emerge that the par ties were ad idem to the terms, it cannot be said that an agreement had come int o existence between them through correspondence. The court is required to review what the parties wrote and how they acted and from that material to infer wheth er the intention as expressed in the correspondence was to bring into existence a mutually binding contract. The intention of the parties is to be gathered only from the expressions used in the correspondence and the meaning it conveys and in case it shows that there had been meeting of mind between the parties and the y had actually reached an agreement upon all material terms, then and then alone can it be said that a binding contract was capable of being spelt out from the correspondence. (cid:29) 23. The aforesaid authority was cited by the learned counsel for the appella nt to buttress his submission that so far there is no conclusive commitment by e ither party, far less executing a formal agreement and, as such, there cannot be any direction from the court to supply gas at the previous rates. 24. In view of the aforesaid discussions, it appears to me that there cannot be any legal embargo for the court to entertain an application under Section 9 of the Arbitration Act and pass interim order (s) even before a formal arbitrati on proceeding is drawn up, provided the appellant convinces the court that it ha s the intention to refer the dispute for arbitration. No doubt, in the case befo re me, the parties have already written letters to the appellant seeking certain clarifications to formulate the terms and conditions of the new agreements. How ever, the fact is that there does not appear to be any dispute arising out of th e previous agreements nor is there any indication of referring the disputes for arbitration by the appellant. In this way the facts are against the theory of an y contemplated arbitration proceeding. I have already mentioned earlier that th e appellant’s case is that neither is there any dispute arising out of any contr act for referring the same to the arbitrator nor is there any scope of passing i nterim or final orders by the court under Section 9 of the Act. 25. The arbitration Clause of the agreement between the parties clearly spel ls out as to what dispute and differences can be referred to the Board of Direct ors to resolve the same. Clause 17.01 unambiguously speaks that any dispute or d ifference arising out of or in connection with this agreement (emphasis supplied ) can be referred for settlement by way of arbitration. It is difficult to compr ehend that just because Clause 19 provides for a fresh agreement for supply of g as it can be construed that until a new agreement is executed the previous agree ment shall remain in force. If presumption can be drawn by the court it would am ount to re-writing the terms of the previous agreement, where there was no such stipulation. Besides this, Clause 10 provides revision of price of gas at any t ime during the subsistence of the agreement. Even otherwise, in Clause 19 also i t has been provided that the transmission cost may be revised in the new agreeme nt. In this way, I hold that though the terms and conditions of the expired agre ement may have relevance in formulating the new agreement, but it does not mean that the new agreement should be on the same terms and conditions. Besides this, I hold that till new agreements are executed between the parties there is no sc ope of referring the proposed terms and conditions of the new agreement for arbi tration and on the same principle there is no scope for invoking section 9 of th e Arbitration Act. In my view, the remedy for the petitioners/respondents lies in a different forum and in different form other than an application under Secti on 9 of the Arbitration Act. 26. For the reasons assigned hereinabove I hold that the impugned judgments have been passed by the learned District Judge without any jurisdiction. Consequ ently, the impugned judgments and interim orders are hereby set aside. 27.
Arguments
3. Heard Sri. SN Sarma, learned Sr. counsel for the appellant and Shri BC D as, learned Sr. Advocate and Sri SS Dey, learned counsel for the respondents. Al so gone through the pleadings of both the parties; impugned orders and documents annexed with the pleadings. 4. The moot question that arises for consideration before this court is as to whether a prohibitory and protection order can be passed by the court under S ection 9 of the Arbitration Act after the expiry of the period of contract. 5. Shorn of the details, the appellant and the respondents had entered into agreements whereby M/s Assam Gas Company Ltd., a Government of Assam undertakin g, agreed to supply gas to the factories of the respondents for a certain period at a fixed price as per the terms and conditions stipulated in the agreements. It may be mentioned herein that the stipulations in all the agreements are ident ical. 6. In the case of M/s Sankar Tea Company Pvt. Ltd., the agreement was execu ted on 23.8.2003 for a period of five years. The agreement of M/s J.M. Agro Indu stries was also for a period of 5 years with effect from 25.9.2003. However, the agreement of M/s Evergreen Tea Pvt. Ltd. was for a period of 10 years. In this way, the contract agreements expired long back in the year 2008 so far as two re spondents are concerned and so far as M/s Evergreen Tea Private Ltd. is concerne d, though the agreement is dated 18.11.1999 the same expired on 15.6.2010 due to some delay in the commencement of the agreement. After the expiry of the period of contract, the appellant wrote to the tea companies to renew their agreements . In the proposal of renewal of the agreements, the appellant proposed a new rat e of transmission charges of the gas and also stipulated that the tea companies shall have to pay the cost of the gas as per price fixed by the Ministry of Petr oleum and Natural Gas. 7. There were exchanges of letters from both sides. The respondents wanted certain clarifications regarding fixation of the quantity and price of gas to be supplied to them, whereas, the appellant was insisting for execution of new agr eements on their own terms with a veil threat of discontinuation of supply of ga s in the absence of any agreement. Hence, the respondent companies filed separat e applications under Section 9 of the Arbitration Act seeking a direction to Ass am Gas Company to continue to supply gas to the petitioners’ factories and also to restrain Assam Gas Company from withholding supply of gas. Pursuant to these applications, interim orders were passed directing the appellant company to cont inue to supply gas, subject to the condition that the companies shall make payme nt of the bills raised by Assam Gas Company. The interim orders were subsequentl y made absolute, which are under challenge in these appeals. 8. The controversy in the appellants revolve around Clauses 10, 17 and 19. Clause 10 relates to fixation of gas price; Clause 17 relates to arbitration of the dispute and Clause 19 is regarding tenure of the agreement. For better appre ciation of the contentious arguments of the learned counsel for the parties it w ould be just and proper to reproduce the relevant portions of the aforesaid Clau ses: (cid:28)10.00 GAS PRICE 10.01. The CONSUMER shall pay to the COMPANY the price of gas Rs. 1700.00 (Rupe es One Thousand Seven Hundred) only per 1000 SCUM of gas delivered plus Royalty, taxes and other levies, etc., as applicable from time to time. Price discount i f any agreed to by Govt. of India for this case specifically will also be appli cable.\ 10.01.01. The price of gas as above shall be subject to any revision effec ted by Ministry of Petroleum and Natural Gas, Govt. of India/Oil India Limited, from time to time. 10.01.02 10.01.03 ***** ***** ***** ***** ***** ***** (cid:29) (cid:28)17.00 ARBITRATION Any dispute or difference arising out of or in connection with this Agre 17.01. ement including any dispute or difference regarding its interpretation or any Cl ause thereof, shall be referred to the Board of Directors of Assam Gas COMPANY L imited. The CONSUMER will nominate a representative(s) and at the discretion of the CONSUMER a Lawyer, who will discuss about the disputed matters with the Boar d of Directors in a meeting. The decision arrived at by the Board shall be final and binding on the COMPANY as well as on the CONSUMER. Notwithstanding dispute or difference which might have been referred to 17.02. the arbitration as mentioned in Clause 17.01, all obligations under these agreem ent shall continue to be fulfil by both COMPANY and CONSUME unless otherwise dir ected by the COMPANY in writing, except as provided expressly in the Agreement i tself (cid:29). (cid:28)19.00 TERMS 19.00. This Agreement shall be valid in force and binding on the COMPANY as wel l as the CONSUMER for a period of 5 (Five) years from the date of commencement o f supply of gas by the COMPANY to the CONSUMER. On the expiry of this period of 5 (Five) years both the COMPANY and the CONSUMER may enter into a fresh Agreemen t for the transportation of gas, and the transmission cost will be revised inte r-alia keeping in view the depreciated cost of the pipeline by then and escalate d cost of operation, maintenance, overheads, etc. (cid:29) 9. Sri Sarma, learned Sr. counsel for the appellant submitted that contract for supply of gas was for a definite period of 5/10 years and, as such, Section 9 of the Arbitration Act cannot be invoked in relation to proposed terms and co nditions of the new agreement. The learned counsel further contended that the ar bitration clause, inserted in the previous agreement, has to be confined to any dispute or difference arising out of that agreement and cannot be extended to th e proposed agreement. 10. In support of the submission, the learned Sr. counsel referred to the j udgments of the Hon’ble Supreme Court rendered in the case of Gaya Electric Sup ply Co. Ltd. -Vs- The State of Bihar; reported in (AIR 1953 SC 182); Oil & Natu ral Gas Commission -Vs- The Association of Natural Gas Consuming Industries of G ujarat; reported in (AIR 1990 SC 1851) and M/s Rickmers Verwaltung GMB H -Vs- T he Indian Oil Corporation Ltd.; reported in (AIR 1999 SC 504). Sri Sarma, learned Sr. counsel for the appellant also submitted that und 11. er the policy of the Central Govt. a consumer is entitled to certain quantity of natural gas at a subsided rate, known as Administered Price Mechanism (\A.P.M.\ ) and if the consumer exceeds consumption of committed quantity of gas he is lia ble to pay (cid:28)Non-A.P.M.\ rates. According to the learned counsel if the impugned orders are sustained it would amount to supply of gas to the respondents irrespe ctive of the quantity of gas as consumed by them. The learned counsel for the ap pellant has also submitted that the appellant is drawing/purchasing gas from Oil India Ltd. and it is merely a transmission agency and has little role in fixa tion of the price of the gas. According to the learned counsel, since the respon dents are drawing excess quantity of gas they are liable to pay (cid:28)non-A.P.M.\ rat es but the impugned order is silent in this regard. The learned counsel for the appellant drew my attention to the Debit Notes dated 2.4.2008 and 10.4.2008 is sued by Oil India Ltd. for excess drawal of natural gas making Assam Gas Compan y liable for payment of gas price at \non- A.P.M.\ rates. 12. Per contra, the learned counsels for the respondents strongly urged that the terms and conditions of the proposed agreements cannot be read in isolation sans the terms and conditions of the previous agreements. To put it differently , the learned counsels for the respondents submitted that since there is specifi c mention of renewal of the agreement in clause 19 any dispute arising out of fi xation of price of gas or transmission charges, even for new agreement, the same would come within the ambit of a dispute arising out of the existing agreement. Sri Dey, learned counsel appearing for the respondents in Arbitration Appeal Nos. 20 and 23 submitted that the respondent companies are being supplied natu ral gas from Doomdooma Gas Grid and the said Grid has neither purchased excess q uantity of gas from Oil India Ltd. nor excess quantity of gas has been consumed in their factories. In support of this submission, the learned counsel referred to a reply by OIL on 1.11.2012. Since this aspect was not raised in the trial c ourt and since I have decided to confine only on the legal issue about the maint ainability of the applications under Section 9 of the Arbitration , I am not ex amining the question as to whether the respondents are liable to pay APM or (cid:28)non -APM (cid:29) rates. 13. On the other hand, Sri Das, learned Sr. counsel appearing in Arbitration Appeal No. 22 of 2012 submitted that M/s Evergreen Tea Pvt. Ltd. did not raise any objection with regard to the fixation of price of gas or transmission cost b ut merely requested the appellant to consider their capital contribution in layi ng of the pipe line during the previous term. However, the appellant has not con sidered the representation and, instead, is contemplating to discontinue gas sup ply. In support of their submissions, regarding jurisdiction of the court to 14. entertain their applications U/s 9 of the Act, the learned counsels for the resp ondents cited the judgments of the Hon’ble Supreme Court rendered in the case of Sundaram Finance Ltd -Vs- NEPC India Ltd; reported in (1999) 2 SCC 479, Olympu s Superstructures Pvt. Ltd. -Vs- Meena Vijay Khetan; reported in (1999) 5 SCC 6 51, Tarapore and Company -Vs- Cochin Shipyard Ltd., Cochin; reported in (1984) 2 SCC 680 and a judgment of Gauhati High Court rendered in the case of Union of I ndia -Vs- B.K. Construction(M/s); reported in 2003 (3) GLT 712. 15. As could be gathered from the interim orders as well as final judgments passed by the learned District Judge, the prohibitory and protection orders have been passed holding that the balance of convenience lies in favour of the petit ioners in view of the previous agreements and that the petitioners would suffer irreparable loss if supply of gas is discontinued by the appellant company till the dispute is resolved by way of arbitration. 16. The learned District Judge has rejected the objection of Assam Gas Compa ny regarding non-maintainability of applications under Section 9 of the Arbitrat ion Act on the basis of the judgment of the Hon’ble Supreme Court in the Case of Firm Ashok Traders -Vs- Gurumukh Das Saluja, (2004) 3 SCC 155 which are reprodu
Decision
In the result, all the three arbitration appeals stand allowed.