Supreme Court of India
M/S. GAIL (I) LTD.versusBAL KISHAN AGARWAL GLASS INDUSTRIES LTD.
- Citation
- 2008 INSC 915
- Decided
- 7 August 2008
- Disposal
- Disposed off
- Bench
- ARIJIT PASAYAT
Holding
Under section 17 of the Arbitration and Conciliation Act, 1996, interim orders in a dispute pending before an arbitrator must be made by the arbitrator, and the parties should approach the arbitrator for such relief.
Summary
GAIL (I) Ltd. entered into a gas‑supply agreement with Bal Kishan Agarwal Glass Industries Ltd., but the gas meter was repeatedly found tampered, leading to successive disconnections. The respondent filed a civil suit seeking reconnection of gas without any payment or security, even though arbitration proceedings under the Arbitration and Conciliation Act, 1996 were already pending. The trial court and the Allahabad High Court issued interim orders directing the appellant to resume supply on terms suggested by the court, which the appellant contested, arguing that only the arbitrator could grant such interim relief under section 17 of the Act. The Supreme Court held that when arbitration is pending, interim orders may be made only by the arbitrator and directed the respondent to apply to the arbitrator for an interim arrangement, setting timelines for the application, response, and decision. Consequently, the appeal was disposed without any order on costs.
Issues considered
- Whether a civil court can pass interim orders when the dispute is already referred to arbitration under the Arbitration and Conciliation Act, 1996.
- Whether section 17 of the Arbitration and Conciliation Act, 1996 empowers the arbitrator to grant interim relief in place of the civil courts.
- What procedure the parties must follow to obtain interim relief pending arbitration.
Legislation cited
- Arbitration and Conciliation Act, 1996s. 17, s. 8, s. 9
- Code of Civil Procedure, 1908s. Order VI Rule 11
- Specific Relief Act, 1963s. 10, s. 39
Subjects
ArbitrationInterim reliefSection 17Gas supply contractCivil suitSpecific Relief ActContract renewalMeter tampering
Judgment
[2008] 11 S.C.R. 1025
'"'(
M/S. GAIL (I) LTD. A
v.
BAL KISHAN AGARWAL GLASS INDUSTRIES LTD.
(Civil Appeai No. 4918 of 2008)
AUGUST 7, 2008
B
[DR. ARIJIT PASAYAT AND DR.MUKUNDAKAM
SHARMA, JJ.]
A(bitration and Conciliation Act, 1996 - s. 17 - Interim
orders -Agreement between appellant and respondent for sup- c
ply of gas - Supply discontinued - Dispute over terms of re-
connection - Suit filed by respondent notwithstanding pend-
ing arbitral proceedings - Orders passed by Civil Court and
High Court - Held: Under s. 17, interim orders can be passed
by arbitrator - Respondent directed to make application for
interim· arrangement before the arbitrator. D
An agreement was entered into between the appel-
lant and the respondent for supply of gas. The gas meter
. was found tampered and consequently, the gas supply
was discontinued. The appellant, in accordance with the
E
terms for re-connection asked the respondent to deposit
50% of the outstanding amount and security for balance.
The respondent filed a civil suit praying for direction to
the appellant to execute deed for renewal of gas supply
without demanding any payment or security. The interim
orders passed by the trial court and the High Court to re- F
sume supply of ·gas on the terms suggested gave rise to
the instant appeal.
It was contended for the appellant that inasmuch as
the matter was pending before the Arbitrator, the Civil Court
ought not to have passed any order in the civil suit and the G
High Court was not justified in practically affirming the or-
~.+
der of the Civil Court except variation of certain conditions.
Disposing of the appeal, the Court
1025 H
1026 SUPREME COURT REPORTS [2008] 11 S.C.R.
A HELD: In the instant case, proceedings are pending
before the arbitrator. Under s.17 of the Arbitration and Con-
ciliation Act, 1996, interim orders can be passed by the
Arbitrator. In the circumstances of the case, the following
directions are being given: (1) Within a period of ten days,
B 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/ob-
jection, if any and (3) Within a period of ten days thereaf-
C ter the Arbitrator is requested to dispose of the applica-
tion in accordance with law. It is open to the respondent
to place the proposal which was filed in the Court. The
Arbitrator shall consider the matter in proper perspective.
[Paras 7, 8] [1030 E,F 1030 F,G,H, 1031 A,8]
D CIVILAPPELLATE JURISDICTION: Civil Appeal No. 4918
of 2008
From the final Judgment and Order dated 18.9.2007 of
the High Court of Judicature at Allahabad in F.A.F.O. No. 1339-
D of 2007
E
G. Vahanvati, S.G. Udit Kumar, Chanchal Biswal and Rajiv
Tyagi for the Appellant.
T.R. Andhyarujina, Abhishek Mohan Sinha, Jaya Bharuka,
Hansa Bharuka and Devashish Bharuka for the Respondent.
F
The Judgment of the Court was delivered by
Dr. ARIJIT PASAYAT. 1. Leave granted.
2. Challenge in this appeal is to the judgment of a Division
G 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
H mandatory injunction was disposed of with certain directions.
I
M/S. GAIL (I) LTD. v. BAL KISHAN AGARWAL 1027
GLASS INDUSTRIES LTD. [DR. ARIJIT PASAYAT.]
3. Background facts as projected by the appellant giving . A
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 agree-
ment was valid upto 31.3.2002 and was further extended from , 8
time to time upto 31.3.2006. On 3.12.2004 officials of the ap-
pellant 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 ··c
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 0
by the respondent. On 10.8.2005 proposal was given for resto-
ration 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 tam-
pered with, which lead to disconnection on 28.2.2006. On E
27.3.2006 an order was passed by the District Judge, Agra to,
continue gas supplytill 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 F
the proper remedy for the respondent was to make a represen-
tation to the appellant since no mandamus can be issued for
exten·sion of contract or for giving benefit to any proposed con-
tract. On 29.3.2007 appellant indicated the terms for re-con-
nection namely deposit of 50% of the outstanding amount of G
Rs.8, 10,79,057/- and security for balance through mortg~ge 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 ap-
pellant to execute the deed of renewal of gas supply without H
1028 SUPREME COURT REPORTS [2008] 11 S.C.R.
.A demanding any payment or security. An application was filed
by the appellant in te_rr:ns of Order VI I Rule 11 of the Code of
Cini. Procedure, 1908 (in short the 'CPC') and Section 8 of the
. Arbitration Act. Learned Civil Judge directed that the fresh pro-
posal dated 9.2.2006 should be given effect to without any fur-
B ther terms and conditions. As noted above an· appeal was pre- -t-
.ferred which was disposed of by the impugned order dated
. 18.9.2007 on certain terms. The terms read as follows:
1. The. Plaintiff-Respondent shall depo~·ita sum of two
crores with the respondent and a security to the tL1ne
c 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 dep.osit
D:, 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
depo$ited. 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
F
cha.rges 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 case.
G
4. The Defendant-Appellant will resume gas supply of
the Plaintiff-Respondent after deposit of Rs. 50 lac -r
and the security for 6 crores.
5. It will be open to the Defendant-Appellant to stop the
H
_I
M/S. GAIL (I) LTD. v. BAL KISHAN AGARWAL 1029
GLASS INDUSTRIES LTD. [DR. ARIJIT PASAYAT.]
gas supply in case of default in depositing the A
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
B
--r supply of gas after giving notice to the Plaintiff-
Respondent.
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 c
Specific Relief Ad, 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 D
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 E
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 F
J• 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 G
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
H
1030 SUPREME COURT REPORTS [2008] 11 S.C.R.
'"'(
A 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 I
before the arbitrator. The question whether any \
B amount is payable as penalty as claimed by the
appellant can be the subject matter of adjudication f-
by the arbitrator. Since unreasonable terms were
indicated for resumption of gas supply, the
respondent had no alternative but to avail the civil
c 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
D 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
E
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.
F
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
G 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 C>,t~
shall file the response/objection, if any;
H 3. Within a period of ten days thereafter the
M/S. GAIL (I) LTD. v. BAL KISHAN AGARWAL 1031
GLASS INDUSTRIES LTD. [DR. ARIJIT PASAYAT.]
Arbitrator is requested to dispose of the A
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 perspective.
B
9. We make it clear that we have not expressed any opin-
ion 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 costs.
B.B.B. Appeal disposed of. C
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