Abhijeet Toll Road (Karnataka) Limited vs Karnataka Road Development Corporation Limited

S. Sujatha, J.—1. This appeal is directed against the orders on I.A. filed by the respondent under Order XXXIX Rules 1 and 2 CPC and I.A. filed by the appellant under Order XXXIX Rule 4 of CPC read with Section 9 of Arbitration and Conciliation Act, 1996 (the ''Act'' for short) passed by the XXXI Addl. City Civil and Sessions Judge, Bangalore City in A.A. No. 161/2015.

Briefly stated the facts are:

that the Government of Karnataka invited tender for the construction, expansion and improvement of 76.22 kms. from Chikkanayakanahlli-Tiptur-Hassan Road on build Operate Transfer Basis. The appellant is one of the successful contractor who was found to be eligible for undertaking the said project work. With the decision of the cabinet, concession agreement dated 03.06.2011 was entered into between the appellant, Governor of Karnataka and respondent as one of the implementing agency for and on behalf of the State Government. The respondent filed an application in Arbitration Application No. 161/2015 seeking for an order of injunction against the respondent, its affiliates, group companies, agents creditors or any third party claiming through them to restrain them from taking possession of or in any manner interfering with the petitioner''s-respondent''s possession of plant machineries, materials and equipments of schedule items till disposal of the petition. An ex-parte order of temporary injunction was granted by the learned Civil Judge as prayed. The appellant filed a detailed statement of objections along with the documents to vacate the ex-parte order of temporary injunction. The matter was heard on application filed by the respondent and the appellant. The learned Judge passed an order allowing the I.A. filed by the respondent and dismissing the I.A. of the appellant. Being aggrieved by the said common order passed by the trial Court, the appellant is before this Court.

Heard the learned counsel appearing for the parties and perused the material on record.

Learned counsel appearing for the appellant at the outset would contend that the Arbitration Application filed by the Superintending Engineer is not maintainable as the respondent is a Company registered under the Companies Act, 1956 and therefore without a resolution of the Board of Directors, the Arbitration Application is not maintainable. Accordingly, interim application filed under Order 39 Rules 1 and 2 of CPC read with Section 9 of the Act is also not maintainable. It is further contended that the injunctions are all personal in nature and therefore injunction cannot be granted to the persons who are not parties to the agreement. The respondent has no locus standi to file application under Section 9 of the Act as the agreement is between the Appellant and the State Government. The Act is applicable only to those who are parties to the arbitration agreement in terms of definition of ''party'' under Section 2[h] of the Act. Admittedly, the EPC Contractor is not a party to the arbitration agreement. The respondent has not appointed their Arbitrator till today though the appellant has invoked the arbitration clause. The trial Court failed to consider the fact that the injunction sought by the respondent is in respect of the machineries belonging to one M/s. Abhijeeth Projects Limited - which is an independent company, the Engineering Procurement Contractor (EPC) for the purpose of executing the project work. Further, it is contended that the respondent filed the application seeking for an injunction on the ground that the machineries are in possession of the respondent. No documentary evidence is produced in support of such claim.

Learned Counsel appearing for the appellant addressing the arguments on these grounds seeks to set aside the Orders passed by the Trial Court and vacate the ex-parte order of temporary injunction granted by the Trial Court.

Learned Counsel for the Appellant has placed reliance on the following Judgments.

[a] ''SUNDARAM FINANCE LTD., Vs. NEPC INDIA LTD.,'' reported in [, (1999) 2 SCC 479].

[b] ''FIRM ASHOK TRADERS AND ANOTHER Vs. GURUMUKH DAS SALUJA AND OTHERS'' reported in [, (2004) 3 SCC 155].

[c] STATE BANK OF TRAVANCORE vs. KINGSTON COMPUTERS (, (2011) 11 SCC 524.

Per contra, learned Counsel for the respondent would contend that though the respondent was provided with substantial encumbrance free stretches/chainages of road to execute the work, the appellant failed to adhere to the timeline in executing the work and virtually abandoned the works. The appellant has breached the contractual obligation and as such they have invoked the performance bank guarantee and the appellant approached this Court in Writ Petition No. 36130/2013 restraining the respondent from encashing the bank guarantee. This Court specifically directed the appellant to commence and continue the maintenance work of the road to the respondent''s satisfaction. The appellant wrongfully terminated the contract vide termination notice dated 8.9.2014. In terms of Article 37.4[b] of the contract, upon termination of the contract, the respondents are entitled to take possession and control of all the materials/construction plants and equipments on or about the site. The appellant on the pretext that plant and equipments belongs to the EPC Contractor and financiers, brought to the notice of the respondent, the order passed by the Calcutta High Court in A.P. No. 1418/2014 dated 26.11.2014 in favour of SREI Equipment Finance Limited and has taken over some equipments on the site dismantling the equipment. The remaining equipments and materials are in possession of the respondent. Due to the non performance and breach of the contractual obligation by the appellant, the respondent has suffered huge loss and the only security is the equipment and materials which are in its possession. Considering these facts, the Trial Court examining the material on record, rightly allowed the application filed by the respondent and dismissed the application filed by the appellant for vacating the ex-parte injunction order which does not call for any interference by this Court.

Having heard the learned Counsel for the parties and perusing the material on record, we have noticed that in the Arbitration Application No. 161/2015 filed by the respondent, application was filed under Order 39 Rules 1 and 2 of CPC read with Section 9 of the Act by the respondent, seeking an ad-interim order of temporary injunction restraining the respondent, its affiliates, group companies, agents, creditors or any third party claiming through them from taking possession of or in any manner interfering with the respondent''s possession of the plant, machineries, materials and equipments of the schedule items till disposal of the petition.

The respondent has produced the extract of the Board resolution of the respondent-company whereby full powers are delegated to the Managing Director to institute, conduct and defend any legal proceedings or against the company or its officers or otherwise concerning the officers of the Company etc., in terms of Clause 4.17 of the Board Resolution regarding delegation of powers made by the respondent-Company. In view of the full powers vested with the Managing Director, authorization was issued to the Superintending Engineer, Karnataka Road Transport Corporation Limited, Bangalore, to sign vakalat, statement, statement of objections, petitions etc., with respect to cases to be filed/already filed in the court cases and other legal matters in this court and City Civil Court on behalf of the Managing Director.

In the case of Kingston Computers (supra), no resolution was passed by the board of directors delegating its powers to Shri Raj K. Shukla, Chief Executive officer of the company to authorize another person to file a suit on behalf of the company. In the instant case, full powers are delegated to the Managing Director to institute, conduct and defend any legal proceeding as per the Board resolution placed before us. Thus, Kingston Computers case (supra) is not applicable to the present case.

Accordingly, we do not see any infirmity or illegality in the applications signed by Superintending Engineer, Karnataka Road Transport Corporation Limited, Bangalore, on behalf of the respondent.

The Concession Agreement dated 3.6.2011 is entered into between the Governor of Karnataka, appellant and the respondent. Hence, it cannot be said that the respondent has no locus to file Arbitration Application and interim application for injunction against the appellant. As per Article 37.4[b] of the contract, upon termination of the contract for whatever reason, the respondent is entitled to take possession and control entirely of all materials, construction plant and equipments on or about the site. The contention of the appellant that the EPC Contractor is not a party to the Arbitration Agreement and as such the trial court entertaining the application filed by the respondent is contrary to the provisions of Section 2[h] of the Act is misconceived. As borne out from the records, all along it was the case of the appellant that the plant and machinery and equipments were owned by the appellant itself, but only a different stance was taken by the appellant through its letter dated 30.04.2015 that the plant, machinery and equipments belongs to their EPC Contractor and Financiers. Prima facie, the plant, machinery and equipments are in the possession of the appellant. It is only due to the termination of the contract, the respondent has taken possession and control of all the construction materials, plants and equipments on or about the site.

The arguments advanced by the appellant as regards Rule 9[4] of the High Court of Karnataka Arbitration (proceedings before the Courts) Rules, 2011 is not applicable to the facts of the present case in view of the proceedings under Section 21 of the Act having been commenced, as rightly pointed out by the learned Counsel for the respondent.

The Apex Court in the case of Sundaram Finance Limited [supra] while considering the scope of Section 9 of the Act has held thus:

"19. When a party applies under Section 9 of the 1996 Act, it is implicit that it accepts that there is a final and binding arbitration agreement in existence. It is also implicit that a dispute must have arisen which is referable to the arbitral tribunal. Section 9 further contemplates arbitration proceedings taking place between the parties. Mr. Subramaniam is, there-fore, right in submitting that when an application under Section 9 is filed before the commencement of the arbitral proceedings there has to be manifest intention on the part of the applicant to take recourse to the arbitral proceedings if, at the time when the application under Section 9 is filed, the proceedings have not commenced under Section 21 of the 1996 Act. In order to give full effect to the words "before or during arbitral proceedings" occurring in Section 9 it would not be necessary that a notice invoking the arbitration clause must be issued to the opposite party before an application under Section 9 can be filed. The issuance of a notice may, in a given case, be sufficient to establish the manifest intention to have the dispute referred to arbitral tribunal, but a situation may so demand that a party may choose to apply under Section 9 for an interim measure even before issuing a notice contemplated by Section 21 of the said Act. If an application is so made the Court will first have to be satisfied that there exists a valid arbitration agreement and the applicant intends to take the dispute to arbitration. Once it is so satisfied the Court will have the jurisdiction to pass orders under Section 9 giving such interim protection as the facts and circumstances warrant. While passing such an order and in order to ensure that effective steps are taken to commence the arbitral proceedings, the Court while exercising jurisdiction under Section 9 can pass conditional order to put the applicant to such terms as it may deem fit with a view to see that effective steps are taken by the applicant for commencing the arbitral proceedings. What is apparent, however, is that the Court is not debarred from dealing with an application under Section 9 merely because no notice has been issued under Section 21 of the 1996 Act."

Applying the principles of law enunciated by the Apex Court in Sundaram Finance Limited [supra], a manifest intention on the part of the respondent to take recourse to the arbitral proceedings is forthcoming. The appellant has already invoked Section 21 of the Act whereas the respondent is suggesting to move before the Indian Council for Arbitration-the competent authority to appoint the Arbitrator as per the terms of the agreement.

The ingredients for granting interim injunction under Order 39 Rules 1 and 2 CPC viz., (i) establishing a prima facie case (ii) balance of convenience (iii) hardship and injury are all in favour of the respondent as could be seen from the records. In such circumstances, the order passed by the trial Court granting ad-interim injunction does not call for any interference by this Court. However, the main Arbitration application is pending for adjudication before the trial Court. In the circumstances, it would be appropriate for us to direct the trial Court to dispose of the main Arbitral application as expeditiously as possible within a period of eight weeks from the date of receipt of the certified copy of this Judgment. We direct the respondent to expedite the appointment of arbitrator(s) without further loss of time.

In the result, appeal stands dismissed.

Registry is directed to send the copy of this Judgment to the trial Court forth with.