AMICUS AI
Citation Codes
Neutral Citations
2008 INSC 915
Equivalent Citations
citation codes
Case Number
Disposition
Attorney(S)
Judges
Acts
  • Order 7 Rule 11 of the Code of Civil Procedure, 1908
  • Section 9 of the Arbitration and Conciliation Act, 1996
  • Section 10 of the Specific Relief Act, 1963
  • Section 39 of the Specific Relief Act, 1963
  • Section 8 of the Arbitration Act
  • Section 17 of the Act
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Cites
Cited by
Citation Codes
Neutral Citations
2008 INSC 915
Equivalent Citations
citation codes
Case Number
Disposition
Attorney(S)
Judges
Acts
  • Order 7 Rule 11 of the Code of Civil Procedure, 1908
  • Section 9 of the Arbitration and Conciliation Act, 1996
  • Section 10 of the Specific Relief Act, 1963
  • Section 39 of the Specific Relief Act, 1963
  • Section 8 of the Arbitration Act
  • Section 17 of the Act
Smart Summary

Factual and Procedural Background

The appellant and the respondent entered into a gas-supply agreement on 17-9-1996. The contract, originally valid until 31-3-2002, was successively extended up to 31-3-2006. Alleging repeated tampering with the gas meter (3-12-2004, 15-1-2005 and 17-3-2005), the appellant disconnected supply on 28-5-2005.

The respondent challenged the disconnection in Writ Petition No. 44679 of 2005, which the Allahabad High Court dismissed on 18-7-2005, citing the availability of arbitration under the Arbitration and Conciliation Act, 1996. After a brief restoration in February 2006, supply was again cut off on 28-2-2006 due to fresh allegations of tampering.

A second writ petition (No. 2283 of 2006) ended similarly on 1-11-2006, the High Court directing the respondent to pursue contractual remedies. On 29-3-2007 the appellant proposed reconnection on payment of 50 % of outstanding dues (₹8.10 crore) and security for the balance.

The respondent instead filed Civil Suit No. 285 of 2007 seeking a mandatory injunction for reconnection without payment or security. The trial court granted interim relief compelling reconnection under earlier, less onerous terms. The appellant’s appeal (FAFO No. 1339-D of 2007) was partly allowed by a Division Bench of the High Court on 18-9-2007, prescribing deposits of ₹2 crore and security of ₹6 crore as conditions for supply.

The present Supreme Court appeal challenges the High Court’s order.

Legal Issues Presented

  1. Whether a civil court can grant interim mandatory injunction for reconnection of gas supply when the underlying contract contains an arbitration clause and arbitral proceedings are pending.
  2. Whether the respondent is entitled to specific performance or renewal of a lapsed contract in the absence of a subsisting agreement under Sections 10 and 39 of the Specific Relief Act, 1963.

Arguments of the Parties

Appellant's Arguments

  • The relief sought amounts to specific performance under Section 10 of the Specific Relief Act, which presupposes an existing contract; no contract subsisted after 31-3-2006.
  • Renewal could occur only on mutually agreed terms; therefore the civil suit was not maintainable.
  • An arbitration clause exists and an arbitrator has been appointed; interim relief, if any, must be sought under Section 17 of the Arbitration and Conciliation Act.
  • The trial court and High Court ignored the earlier High Court orders that directed the respondent to pursue arbitral remedies.

Respondent's Arguments

  • The appellant’s conduct was inequitable: it proposed terms for reconnection and then resiled from them, causing business losses and employment hardship.
  • Unreasonable financial conditions left the respondent with no option but to approach the civil court.
  • The quantum of alleged penalty for meter tampering can be adjudicated by the arbitrator, but interim supply is essential for survival of the enterprise.
  • A fresh proposal for securing the appellant’s dues was placed before the Supreme Court during the hearing.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Supreme Court noted that arbitral proceedings are already underway and emphasized Section 17 of the Arbitration and Conciliation Act, which empowers the arbitrator to issue interim measures. Consequently, the civil court should not have entertained or granted interim mandatory relief, and the High Court erred in substantially affirming that relief without considering the prior writ-court orders directing the parties to arbitration.

Recognising that urgent interim arrangements may still be necessary, the Court refrained from evaluating the merits of the parties’ proposals. Instead, it channelled all interim-relief questions to the arbitrator, preserving the arbitral forum’s primacy while ensuring expedited consideration through strict timelines for filing and disposal of the application.

Holding and Implications

APPEAL DISPOSED OF. The Court directed:

  • The respondent to file an interim-relief application before the arbitrator within ten days.
  • The appellant to respond within three days of receiving the application.
  • The arbitrator to decide the application within ten days thereafter, taking into account any proposal submitted by the respondent.

Implications: The decision reinforces the principle that where an arbitration agreement exists and an arbitrator is seized of the dispute, interim relief should be sought under Section 17 of the Arbitration and Conciliation Act rather than through civil-court injunctions. No new legal precedent was created, but the ruling underscores the Supreme Court’s commitment to minimal judicial interference in arbitral matters.

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    Gail India Limited v. Bal Kishan Agarwal Glass Industries Limited .

    Dr. Arijit Pasayat, J.— Leave granted.

    2. Challenge in this appeal is to the judgment of a Division 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 the learned Judge of the Small Cause Court/Civil Judge (Senior Division), Agra, in Suit No. 285 of 2007. By the said order the application for interim mandatory injunction was disposed of with certain directions.

    3. Background facts as projected by the appellant giving 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 agreement was valid up to 31-3-2002 and was further extended from time to time up to 31-3-2006. On 3-12-2004, officials of the appellant 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.

    4. The respondent filed Writ 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 by the respondent.

    5. On 10-8-2005 proposal was given for restoration 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 tampered with, which led to disconnection on 28-2-2006. On 27-3-2006 an order was passed by the District Judge, Agra to continue gas supply till 31-3-2006. On 3-4-2006 gas supply was stopped.

    6. 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 the proper remedy for the respondent was to make a representation to the appellant since no mandamus can be issued for extension of contract or for giving benefit of any proposed contract.

    7. On 29-3-2007 the appellant indicated the terms for reconnection, namely, deposit of 50% of the outstanding amount of Rs 8,10,79,057 and security for balance through mortgage of immovable property and clearance of all outstanding dues in respect of the gas supply.

    8. Civil Suit No. 285 of 2007 was filed by the respondent with inter alia a prayer for directing the appellant to execute the deed of renewal of gas supply without demanding any payment or security.

    9. An application was filed by the appellant in terms of Order 7 Rule 11 of the Code of Civil Procedure, 1908 (in short “CPC”) and Section 8 of the Arbitration Act. The learned Civil Judge directed that the fresh proposal dated 9-2-2006 should be given effect to without any further terms and conditions. As noted above, an appeal was preferred which was disposed of by the impugned order dated 18-9-2007 on certain terms. The terms read as follows:

    1. The respondent-plaintiff shall deposit a sum of rupees two crores with the respondent (sic appellant) and a security to the tune of rupees six crores in the form of second charge of the immovable property along with bond for payment with the appellant-defendant.
    2. Out of two crores, the respondent-plaintiff shall deposit a sum of rupees fifty lakhs with the appellant-defendant within a period of one month. The security to the tune of rupees six crores will also be deposited within a month.
    3. They will further continue to deposit a sum of rupees five lakhs per month with the respondent-plaintiff (sic appellant-defendant) in the first week of every month till entire rupees two crores are deposited. The first instalment of rupees five lakhs will start from the month of November 2007 i.e the first instalment of rupees five lakhs has to be paid by 7-11-2007. These deposits will be in addition to the charges of the gas to be supplied to the respondent-plaintiff. They will be kept by the appellant-defendant in fixed deposit in any nationalised bank and will abide the arbitration proceedings and subject to final decision of the case.
    4. The appellant-defendant will resume gas supply of the respondent-plaintiff after deposit of rupees fifty lakhs and the security for rupees six crores.
    5. It will be open to the appellant-defendant to stop the gas supply in case of default in depositing the payment within the above stipulated time.
    6. The appellant-defendant will also be entitled to inspect the meters and if tampering in any meter is found, it will be open to the appellant-defendant to stop the supply of gas after giving notice to the respondent-plaintiff.

    10. 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 Specific Relief Act, 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 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 the suit. Additionally, there was a specific clause relating to arbitration.

    11. 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 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 not challenged. It is accepted that an arbitrator has in fact been appointed.

    12. Mr T.R Andhyarujina, learned Senior Counsel appearing for the respondent on the other hand 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 before the arbitrator. The question whether any amount is payable as penalty as claimed by the appellant can be the subject-matter of adjudication by the arbitrator. Since unreasonable terms were indicated for resumption of gas supply, the respondent had no alternative but to avail the civil 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 the hearing of the appeal.

    13. 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 trial court except variation of certain conditions.

    14. Undisputedly, the proceedings are pending before the arbitrator. Under Section 17 of the Act, interim orders can be passed by the arbitrator.

    15. 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 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/objection, if any;
    3. Within a period of ten days thereafter the arbitrator is requested to dispose of the 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.

    16. We make it clear that we have not expressed any opinion 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.

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    Gail India Limited v. Bal Kishan Agarwal Glass Industries Limited .
    (Aug 7, 2008)