M/s Quickjet Cargo Airlines (P) Ltd. v. M/s Bharat Aviation Private Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 02.09.2009 CORAMTHE HONOURABLE MR.JUSTICE M.CHOCKALINGAMANDTHE HONOURABLE MR.JUSTICE R.SUBBIAHO.S.A.Nos.279 and 280 of 2009andM.P.No.1 of 2009 in O.S.A.No.280 of 2009 M/s Quickjet Cargo Airlines (P) Ltd.,Formerly known as Aviation Consultancy(P) Ltd.,rep. By its DirectorAFL House, Lok Bharti ComplexMarol Maroshi Road, Andheri East, Mumbai 400 059.. Appellant in both AppealsVs.M/s Bharat Aviation Private Ltdrep. By its DirectorMr.Joseph Doss, No.1, Sitha Dham, N.P.Takker Cross RoadVili Parle East, Mumbai 400 057... Respondent in both Appeals These Original Side appeals preferred under Order 36 Rule 1 ofO.S.Rules read with Clause 15 Letters patent Act against the order dated 23.04.2009 passed in O.A.No.134 of 2009 and A.No.928 of 2009in O.A.No.l34 of 2009.For Appellant : Mr.AR.L.Sunderasan, Senior Counsel for M/s Sivam SivanandarajFor Respondent : Ms.S.P.Arthi for M/s P.R.Raman Associates - - - - JUDGMENT(The Judgment of the Court was made by M.CHOCKALINGAM, J.)These two appeals challenge the order of the learned SingleJudge of this Court made in O.A.No.134 of 2009 and ApplicationNo.928 of 2009. https://hcservices.ecourts.gov.in/hcservices/

The Court heard the learned Senior Counsel for the appellant and also for the respondent.

The short facts necessary for the disposal of these appeal scan be stated thus: (a) On the request made by the respondent/applicant, theappellant/respondent has to carry out the maintenance activities to aircraft including obtaining of registration certificate and Airworthiness Certificate from the Director General of Civil Aviationetc. An agreement was entered into between the parties on 1stNovember 2007 whereby it was agreed that the contract would come into force from 1st February 2008 and in the event of delay in commencing the maintenance operation, the appellant would compensate the respondent by making payment of Rs.30 lakhs for every month of delay beyond 1st February 2008 till start of operation of airline to cover minimum cost as retainer fee. (b) The delay was noticed and hence the appellant before this Court, as per the agreement, was liable to pay the invoices raised by the respondent/applicant.

Advancing arguments on behalf of the appellants, Mr.AR.L.Sunderasan, learned senior counsel would submit that it is true that in the original agreement entered into between the parties, compensation at the rate of Rs.30 lakhs per month to bepaid by the appellant when there was a delay in commencing the maintenance operation was contemplated. As per the notice given by the respondent, a demand for Rs.2,62,00,000/- was actually made. There was a reply given by the appellant whereby not only the claim was denied, but it was also stated in clear terms that the liability was only to the extent of Rs.11 lakhs and odd. Only after exchange of those notices, the parties have entered into a memorandum of understanding on 6th December 2008, wherein it was clearly stated that the appellant should make payment of Rs.1,00,00,000/- and all the documents should be given back and the original agreement entered into between the parties stood terminated and would not have any effect from 18th September, 2008. Insofar as the claim made by the parties, it must be solved in the arbitral proceedings. It is also an admitted position that the appellant has paid a sum ofRs.1,00,00,000/- and insofar as the rest of the claim ofRs.1,62,00,000/- was concerned, it was denied by the appellant in the reply notice. Under such circumstances, it was considered by the parties that parties must put forth their respective claim in thearbitral proceedings and settle the same accordingly. On the contrary, the respondent has move the Court under Section 9 of the Arbitration and Conciliation Act stating that the aircraft should be restrained from movement.

Added further the learned counsel, after the order which was originally passed, termed as interim injunction, subsequently it was modified directing the appellant to place Bank Guarantee for asum of Rs.1,50,00,000/- and a final order that it should continue till the disposal of the arbitration proceedings was in the nature of attachment before the Judgment.

In the instant case, even the averments found in the affidavit filed in support of the application do not make out acase. The allegations was so bald. It is known fact that the financial condition of the appellant company was so sound. Apartfrom that, when an agreement was entered into between the parties on6th December, 2008, it was also agreed by the parties to commence the arbitration proceedings within a period of thirty days there from. The respondent has not moved within this time. On the contrary, it was the appellant who had sent communication to the respondent for https://hcservices.ecourts.gov.in/hcservices/ the initiation of the arbitral proceedings and also naming an Arbitrator. It is also indicative to note that the application filed for interim injunction was nothing but to pressurise payment by getting an interim order. 7. The learned counsel would further add in the instant case the circumstance do not warrant for either grant of interim injunction or for a direction to place any Bank Guarantee or continuance of the same till the disposal of the arbitralproceedings as done by the learned Single Judge and hence the order has got to be set aside.

The learned Senior Counsel in support of his contentions has put forth the following decisions:-(1) Ganesh Benzoplast Ltd. vs. Sundaram Finance Ltd. Reported in 2002(2) CTC 238.(2) Apple Finance Ltd., vs. Gayathri Sugars Complex Ltd., reported in 2004(2) CTC 412.(3) Techmo Car SPA vs. The Madras Aluminium Company reported in 2004(3) CTC 754.(4)Adhunik Steels Ltd., vs. Orissa Managanese and Minerals Pvt. Ltd., reported in 2007(4) CTC 340.

Countering the above contentions, the learned counsel appearing for the respondent would submit that as per the second agreement entered into between the parties on 06.12.2008, it is true that the original agreement should have effect till 18th September2009. It is also true that the appellant has agreed so by the second agreement dated 06.12.2008 has paid Rs.1 crore and the documents have been naturally released. Even as per the respondent, the claim was not only Rs.2,62,00,000/- representing the charges due for the delay, apart from that there was a demand for Rs.5 crorestowards damages. It is a case where originally an interim injunction was sought for invoking Section 9 of the Arbitration and Conciliation Act in order to secure proper payment as the only property available at the hands of the appellant/respondent was the aircraft. Under such circumstances, it became necessary to seek the Court under Section 9 and this Court, after the appellant appeared before the Court and placed the circumstances that the aircraft did not belong to the appellant, but there is only a leasehold right and hence it should be allowed for moving the aircraft, thought it fit to mould the order directing the appellant to furnish Bank Guaranteefor a sum of Rs.1,50,00,000/- and thereafter at the time of final disposal, the Court, under the circumstances, in order to secure proper payment by the appellant company to the respondent to meet the claims, thought it fit that the bank guarantee should be continued. Accordingly, an order has been made. Under such circumstances, it is true that the arbitral proceedings were actually to commence and under Section 9 could be invoked even before the commencement of the arbitral proceedings, in order to https://hcservices.ecourts.gov.in/hcservices/ safeguard the situation and accordingly it has been done and hence the order of the learned Single Judge was correct in the eye of law and it has got to be sustained.

The court has paid its anxious consideration on the submissions made.

It is not in controversy that originally an agreement was entered into between the parties on 01.11.2007, to give effect to the same from 1st February, 2008. It is also true that two notices were served by the respondent on the appellant claimingRs.2,62,00,000/- towards the maintenance charges for the delay caused and Rs.5 crores towards damages. It is pertinent to pointout that there was actually a reply made by the appellant stating that the balance due was only Rs.11 lakhs and odd and nothing more. While the matter stood thus, the parties have entered into amemorandum of understanding on 6th December, 2008 wherein clauses(3) and (4) read as follows:-"3. Without prejudice to and without limiting in any manner any of its rights, remedies and contentions against BA, QJ shall, against taking custody of the Documents, handoverto BA a demand draft in the sum ofRs.1,00,00,000/- (Rupees one crore only) less the amount of tax to be withheld therefrom. BA shall receive the same without prejudice to its rights, remedies and contentions.4. Each party shall be at liberty to make claims the other in relation to the agreement, for rights that have accrued prior to 18thSeptember 2008. Such claims, if any, shall bemade in arbitration, to be instituted under the rules of arbitration of the Indian MerchantsChamber.....".

From a reading of the above clauses, it clearly indicates that at the time when the memorandum of understanding was entered into between the parties on 6th December, 2008, it was clearly understood that when both the claims were actually pending between the parties, Rs.1 crore was to be paid by the appellant to the respondent for release of documents, which according to the parties have actually been done and thus the Memorandum of understanding dated 6th December, 2008 has been acted upon.

Further, while it was understood by the parties that there was respective claim and a sum of Rs.1 crore was to be paid and the rest of the claim was actually in dispute, it is clear from the terms of agreement that without prejudice, payment of Rs.1 croreto be made by the appellant as per the agreement and rest of the claim, without prejudice to their rights of the respective parties and contentions, to be made before the arbitral proceedings. Undersuch circumstances it would be quite clear that the parties have entered into a memorandum of understanding on 06.12.2008 and their https://hcservices.ecourts.gov.in/hcservices/ respective claim have got to be put forth before the arbitralproceedings.

It is pertinent to point out that an agreement was entered into on 06.12.2008 and it is stipulated that arbitral proceedings have to be initiated within a period of 30 days. But the admitted position is that though an agreement was entered into on 06.12.2008,till this date, the respondent has not moved his little finger to commence the arbitral proceedings. On the contrary, it is the appellant who has actually issued a communication for initiation ofarbitral proceedings and also naming an Arbitrator. Under such circumstances, it is clear that the appellant has taken steps for initiation of the arbitral proceedings as found in the agreement. On the contrary, the respondent has not done so.

Apart from this, by invoking Section 9, the party who seeks the relief of interim injunction must show a prima-facie case and also irreparable injury as per the settled position of law. In the instant case, the contention put forth by the appellant side that the financial position of the appellant company is so sound cannot be disputed in view of the only available materials namely an avermentin the affidavit that it is the only property available in the hands of the appellant company. Under such circumstances, the injunction has got to be granted. The Court is unable to see that there is anyprima-facie case made out in the face of the agreement entered into between the parties on 06.12.2008 whereby the parties have to decide their dispute before the arbitral proceedings in respect of the rest of their claim.

Added further, in the instant case, what is necessary for the grant of interim order is irreparable injury, which the Court is unable to notice. Added circumstances are, in the instant case, the respondent having failed to take any steps to initiate arbitralproceedings have come under Section 9 stating that the property must be secured. Both the parties have got their respective claim. Itis clear that all the claims are yet to be decided. For this, as understood between the parties, they must go before arbitralproceedings. Under such circumstances, in the considered opinion of the Court, it is not a fit case to grant interim injunction as one done.

Added further, in the instant case, what was sought for was only an interim injunction which requires not only a prima-faciecase, but also irreparable injury. As pointed out earlier, the respondent has not proved the same. Apart from that, now the learned Single Judge, while vacating the interim injunction has modified the relief by directing the appellant to place bank guarantee for Rs.1.50 crores, which finally was allowed to continue till the disposal of the entire claim before the arbitralproceedings.