Finman Finance (India) Pvt. Ltd. v. Assam Gas Company Limited
2010-03-08
ANIMA HAZARIKA
body2010
DigiLaw.ai
Anima Hazarika, J.;- This appeal being numbered as Arbitration Appeal No. 2 of 2008 has been filed at the instance of the appellant under Section 37 (1)(a) of the Arbitration and Conciliation Act, 1996 ('the Act' for short) questioning the legality and validity of the judgment and order dated 03.01.2008 passed by the learned District Judge, Dibrugarh in Miscellaneous (Arbitration) Case No. 4 of 2007 filed under Section 9 of the Act read with Section 151 of the Code of Civil Procedure, 1908 ('Code' for short) whereby and whereunder the learned District Judge vacated the order of status-quo passed earlier and thereby rejecting the prayer of interim injunction. 2. The facts leading to the filing of this appeal may be summarized as follows: The appellant is the owner of the Tea Manufacturing unit under the name and style of "Dekhari Tea Factory" situated at Dekhari in the district of Dibrugarh. The appellant's company along with seventeen other companies executed an agreement on 03.12.2002 with the responent for availing supply of gas for a period often (10) years under the terms and conditions stipulated in the said agreement for the purpose of consumption of gas in the factories including the generation of electricity for running the factories of the companies. The appellant, therefore, is a Buyer of the gas and the respondent is the Seller of the gas as per the said agreement. The appellant is also a member of Moran Plantation Gas Grid Suppliers Association (hereinafter referred to as 'MPGGSA' only) who is the confirming party to the said agreement executed on 03.12.2002. But, when the said agreement was executed on 03.12.2002, the company did not have any gas generator for generating electricity and only in the month of March 2007 the company had purchased gas generator sets of total 375 KV capacity, the same was commissioned on 02.05.07 and started using gas for generating electricity for consumption in its factory in terms of unnumbered paragraph 2 of page 2 of the agreement. The appellant by its letter dated 30.5.2007 duly informed the respondent and MPGGSA about its using gas for the purpose of generating electricity from the aforesaid date 02.05.2007.
The appellant by its letter dated 30.5.2007 duly informed the respondent and MPGGSA about its using gas for the purpose of generating electricity from the aforesaid date 02.05.2007. The use of gas for generating electricity by the company was noticed by MPGGSA and accordingly, it requested the respondent to disconnect the gas line to the appellant's generating sets which, however, was informed vide communication dated 01.06.2007 and as such the cause of action for initiation of legal proceeding arose and consequently thereupon an application under Section 9 of the Act read with Section 151 of the Code was filed being Misc. (Arbitration) Case No. 4 of 2007 on the file of the learned District Judge, Dibrugarh, who initially directed the respondent to maintain status quo vide order dated 18.06.2007 and subsequently rejected the same after hearing the parties vide order dated 03.01.2008 which is under challenge before this Court. 3. Referring to the agreement, executed on 03.12.2002, Mr. K. Agarwal, the learned counsel appearing for the appellant has submitted that the unnumbered paragraph 2 at page 2 would show that the respondent (Seller) agreed to supply gas to the Buyer for consumption in the factory as well as for generating electricity for running the factory as mentioned in Annexure-I, II and III (Part of the agreement dated 03.12.2002) and the company consumes the gas in the factory either for running the Dryer Machine, Withering trough or for running the generating sets which are in the factory and not outside the factory and as such the learned trial judge committed an error apparent on the face of the record in rejecting the prayer for interim injunction vide order dated 03.01.2008 which requires interference or else it would cause irreparable loss and injury which cannot be compensated in terms of money. 4. Mr. Agarwal has further contended that there is a clause viz., Arbitration clause being Clause No. 17 of the agreement dated 03.12.2002 whereby it is stpulated that any dispute or difference arising out of or in connection with the agreement including any dispute or difference regarding its interpretation or any clause thereof, shall be referred to a mutually agreed arbitrator under Indian Arbitration Act, 1940 and the decision taken by the Arbitrator shall be final and binding on the parties.
Existence of dispute and the Arbitration Agreement and party's intention to resolve the dispute through arbitration by serving notice dated 9.6.2007 on the respondent are present in the case in hand. Therefore, rejection of the prayer for interim injunction by the learned trial Court has frustrated the very purpose of enacting Section 9 of the Act. The impugned order thus deserves to be interfered with in the facts and circumstances of the case. 5. Drawing the attention of the Court to the agreement dated 03.12.2002, the learned counsel submitted that there is no stipulation in the agreement that the Buyer who does not have any generating sets at the time of execution of the agreement cannot use the gas supplied by the respondent for the purpose of generating electricity for running the Buyer's factory or require prior permission from MPGGSA or the respondent for using gas for the purpose of generation of electricity for running its factory and the agreement do not empower the respondent to disconnect the gas supply to the appellant's factory and as such the learned District Judge has committed an error apparent on the face of the record in interpreting the agreement in its true spirit and hence, the order under challenge is required to be set aside and quashed. 6. The counsel has further submitted that the total booked volume of gas for 18 Companies/Consumers (Buyer) is 112 lakhs Standard Cubic Meters ('SCUM' for short), therefore, there is no specific stipulation in the agreement dated 3.12.2002 as to how much gas each Buyer is entitled to use annually and there being 18 Buyers including the appellant, each of them are entitled to consume at least 6.22 lakhs SCUM of gas annually and the record would show that the appellant has never exceeded its share of booked quantity of gas and the learned trial Court has failed to take note of the entire situation including the pleadings set forth by the parties and as such the impugned order dated 03.01.2008 required to be modified in the facts and circumstances of the case by granting interim injunction till the case is settled through arbitration. 7. Refuting the argument advanced by the counsel appearing for the appellant, Mr. K.H. Choudhury, learned Senior Counsel, assisted by Mr. Sk.
7. Refuting the argument advanced by the counsel appearing for the appellant, Mr. K.H. Choudhury, learned Senior Counsel, assisted by Mr. Sk. Muktar, learned counsel appearing for the respondent drawing the attention of this Court to the agreement dated 03.12.2002 along with the Annexures-1, II and III which are the part of the agreement would urge that Annexure-II disclosed the names of the 9 (nine) consumers having generating sets for generation of electricity in the factories and the Annexure-III contains the names of 18 companies/consumers having their factories only. The name of the appellant company does not figure in Annexure-II and as such there was no contract of supply of natural gas to the generating sets of the appellant. The appellant is entitled to consumption of natural gas for running its factory only, inasmuch as, there was no contract agreement for supply and transportation of natural gas to the generating sets of the appellant and as such the appellant is the Buyer through MPGGSA of the gas for consumption in their factory only and not to its generating set. The MPGGSA is also the confirmatory party in the contract agreement. The appellant in the instant case without any authority and without executing any contract commissioned the pipe line for consumption of gas for their generating set and also started using the gas for generation of electricity in the factory without any information and prior permission either from MPGGSA and the respondent company and as such no interference with the impugned order is called for. 8. The Senior counsel has further contended that the clause 3.1 and 21 of the agreement provides a stipulation which is mandatory for the parties of the agreement to obtain permission from the respondent about laying of the pipeline to their generating sets or handing over the same to the respondent which has not been done by the appellant rather, commissioned the pipeline stealthily and started consumption of gas in their generating sets without any information which resulted in disconnection and thus the appeal deserves to be dismissed considering the conduct of the appellant. 9. Considered the arguments advanced by the contesting parties. Perused the pleadings along with the annexures appended thereto. The entire dispute revolves around the agreement executed on 03.12.2002 and the annexure appended to the agreement, which arc parts of the agreement and have been admitted by the parties.
9. Considered the arguments advanced by the contesting parties. Perused the pleadings along with the annexures appended thereto. The entire dispute revolves around the agreement executed on 03.12.2002 and the annexure appended to the agreement, which arc parts of the agreement and have been admitted by the parties. Therefore, in order to determine the lis between the parties, it would be appropriate to quote unnumbered paragraph 2 at page 2, 3.1 and 21 of the agreement, which retids as follows: "That the Buyer is desirous of having natural Gas (hereinafter called 'Gas') for consumption in the factories as well as for generation of electricity for running of their factory of the Tea Estates/Consumers as mentioned in Annexure-I, II & III enclosed herewith and the Seller being the distributor of Gas in the area is agreeable to supply Gas to the Buyer for the purposes as aforementioned. 3.1. With effect from the commencement of this agreement, the Seller shall take charge of the branch lines (previously installed and owned by the Buyer) and maintain at their cost, complete repair/modification of the branch lines and responsibility of these lines shall henceforth be vested on the Seller. For all purposes, the Seller will be responsible for transportation and supply of gas from source to the Consumer's premises of all members of the Grid/Buyer. The Buyer will provide and operate its own pipelines from the said offtake points up to the points of consumption of gas by the Buyer, and such installation of the Buyer's pipeline shall have to be to the satisfaction of the Seller who will have the right to inspect the Buyer's pipeline from time to time and the Buyer undertakes to afford all facilities for such inspection and to rectify immediately any defects in the pipelines and accessories, as may be pointed out by the Seller and pending such rectification, the Seller shall not supply any Gas to the defective portion of the line on safety grounds. 21. It is hereby agreed by and between the parties hereto that for convenience of supply and management and maintenance of Gas supply, the Buyer/Confirmatory Party will hand over the entire Branch pipelines leading to the individual Tea Estates from the offtake points at Moran and Deroi, diameters of which are ranging from 50 mm to 150 mm and approx.
21. It is hereby agreed by and between the parties hereto that for convenience of supply and management and maintenance of Gas supply, the Buyer/Confirmatory Party will hand over the entire Branch pipelines leading to the individual Tea Estates from the offtake points at Moran and Deroi, diameters of which are ranging from 50 mm to 150 mm and approx. length 84 km owned by the Buyer to the Seller with effect from the date of signing of this agreement on "as is where is" basis and the Seller will be the owner of the said pipelines henceforth and shall from the date of execution of the agreement be responsible for its proper maintenance, ensuring supply of Gas at the Battery limits of the number Tea Estates of the Buyers." 10. Admittedly on the date of execution of the agreement dated 03.12.02 the appellant company did not have any gas generator set for generating electricity, which, however, commissioned on 02.05.07 and started using gas for generating electricity. On 1.6.2007, the Secretary of MPGGSA issued a letter (Annexure-III) to the respondent company whereby he informed regarding insufficient gas pressure situation prevailing in the pipe line due to the unauthorized connection of gas pipe line and consumption for generation of electricity by generating set by the appellant. The MPGGSA by their said letter requested the respondent to disconnect the line. Accordingly, the officials of the respondent in response to the said information made by the MPGGSA inspected the appellant factory on 1.7.2007 and when they found the illegal pipe line connection to its generating set, the officials of the respondent Company disconnected the supply and transportation of gas and on 8.6.2007 informed the appellant about disconnection of the pipeline. But despite the disconnection of the pipeline the appellant turned the main valve of the pipeline for restoration of the supply of gas of its factory as well as to its generating set and thus continued the consumption of gas and even after its disconnection by the respondent company. On 3.7.2007 when the respondent found extreme low pressure and gas volume in transportation of gas in the pipeline it necessitated immediate stoppage of gas flow and the respondent, therefore, for technical reason was compelled to stop the supply of gas in the main pipeline.
On 3.7.2007 when the respondent found extreme low pressure and gas volume in transportation of gas in the pipeline it necessitated immediate stoppage of gas flow and the respondent, therefore, for technical reason was compelled to stop the supply of gas in the main pipeline. However, after improvement of gas pressure in the pipeline the respondent again restored the supply of gas to the appellant's factory only excluding the generating set as per terms and conditions of the agreement as contained in Annexure-III, inasmuch as, the name of appellant company do not figure in annexure-II. In Annexure-II of the agreement, only 9 (nine) tea estates' names find place for supply of gas required for running generation sets. 11. Apart from the facts stated hereinabove. Clause 6 to the agreement is also relevant in deciding the case as to whether ad interim injunction can be granted restraining the respondent to disconnect the gas for generating sets. Clause 6.4 of the agreement provides that in case the Buyer requires greater volume of Gas, he shall issue notice to the Seller of not less than 6 months in writing and shall state in such notice estimated future requirement of gas by the Buyer. Clause 7 of the agreement speaks about pressure of gas to be supplied by the Seller, compliance of which clause could not be substantiated by the appellant in this case. 12. In order to obtain an order of injunction, the party, who seeks for grant of such injunction has to prove that he has made out a prima facie case, the balance of convenience is also in his favour and he will suffer irreparable loss and injury if injunction is not granted. But it is also equally settled law that when a party fails to prove the prima facie case, the question of considering the balance of convenience or irreparable loss and injury would not be material. Existence of a strong prima facie case is a sine-qua-non for grant of injunction, therefore, if the party fails to prove a prima facie case even if a case of balance of convenience is made out in his favour and that he would suffer irreparable loss and injury if no injunction order is granted, injunction order may not be granted. 13.
13. In the instant case, the proven facts pleaded and established, it would go to show that the appellant was not a party included in Annexure-II of the agreement executed on 3.12.2002 between the parties. In absence of benefit available to the appellant in Annexure-II of the agreement, supply of gas to his generating set would not be available and thus, the appellant has failed to prove a prima facie case to go for trial. Apart from the three basic principles as mentioned hereinabove. there is another factor which is required to be considered in order to get the benefit of equity. Admittedly on the date of execution of the agreement, there was no generating set in the premises of the factory of the appellant company, which, however, was installed in the year 2007 and get the electric connection to the generating set violating Clause 6 of the agreement dated 3.12.2002. Therefore, the conduct of the appellant precluded him to get the benefit of equity in the matter of granting ad interim injunction and the appellant has failed to prove prima facie case in order to get the benefit of ad interim injunction. 14. That being the position, this Court is in full agreement with the views expressed by the learned trial Court rejecting the prayer for ad interim injunction holding that the appellant has violated Clause 6 and 7 of the agreement dated 3.12.2002 which requires no interference in this appeal. 15. In the result, the appeal fails, whereof the order under challenge is affirmed holding that no case is made out for interference with the order dated 3.1.2008 passed by the learned District Judge, Dibrugarh in Miscellaneous (Arbitration) Case No. 4/ 2007. 16. Parties are left to bear their own costs.