Court Can't Grant Interim Relief Under Section 9 Of A&C Act, If The Contract Is Determinable: Bombay High Court

The Single Bench of Justice G.S. Kulkarni has held that specific performance cannot be granted in respect of an agreement that can be terminated by either of the parties without assigning any reasons. It held that Section 14(1)(c) and Section 41(e) of the Specific Relief Act would be attracted when the interim relief for specific performance is prayed for in respect of an agreement that is in its nature determinable.

Fact

The parties entered into a contract for the sale of scrap. The contract had an arbitration clause. Either party could terminate the contract by giving a 15 days notice.

A dispute arose when the respondent asked the petitioner to stop all further activities in respect of the contract for the reason that it was allegedly not complying with the safety norms. The respondent further issued notice for an auction in respect of a larger work which may include the work awarded to the petitioner. Aggrieved by the actions of the respondent, the petitioner approached the Court under S. 9 of the A&C Act praying for a specific performance of the contract and a temporary injunction to restrain the respondent from carrying out the proposed auction.

Contention Of The Parties

The petitioner filed the application for interim reliefs on the following grounds:

• That without the petitioner being informed of any substantive grievance, the respondent in an illegal manner has prevented the petitioner from performing the work in question of removing the scrap.
• The contract between the parties is subsisting as no notice of termination is issued by the respondent, therefore, it cannot carry out an inspection in respect of a work awarded to the petitioner under the contract.
• Section 14(c) is not attracted as the contract has yet not been terminated.
• The petitioner is incurring huge losses on a daily basis; therefore, an urgent interim relief must be granted by directing the respondent to perform its obligation under the contract and to prevent it from awarding the work to a third party.

The respondent objected to the maintainability of the petition on the following grounds:

• The petitioner is claiming relief for specific performance of the contract which is not permissible as the contract between the parties is a determinable contract.
• Any party can terminate the contract provided it shall give the other party a notice 15 days prior to the termination date, therefore, the contract is determinable and attract the provisions of S. 14(c) of the Specific Relief Act, 1963.

Analysis By The Court

The Court held that either of the parties can terminate the contract without assigning any reasons for the same on giving the other party a 15 days notice, therefore, the contract between the parties is a determinable contract. The Court held that an application for interim relief in the form of specific performance of the contract would not be maintainable when the nature of the contract is determinable.

The Court further held that although a relief under S.9 is available to the parties having an arbitration agreement between them, however, when relief for grant of an injunction is prayed for, certainly the Court would be guided by the principles as contained in the Specific Relief Act read with the provisions of Order 39 of the Code of Civil Procedure.

The Court held that specific performance cannot be granted in respect of an agreement that can be terminated by either of the parties without assigning any reasons. It held that Section 14(1)(c) and Section 41(e) of the Specific Relief Act would be attracted when the interim relief for specific performance is prayed for in respect of an agreement that is in its nature determinable. Accordingly, the Court dismissed the petition.

Case Title: Chetan Iron LLP v. NRC Ltd., Arbitration Petition (L) No. 1366 of 2022.

Date: 24.01.2022

Counsel for the Petitioner: Mr. Anupam Surve, Mr. Shahbaz Khan Pathan, and Mr. Abhinandan M. Waghmare.

Counsel for the Respondent: Mr. Vikram Nankani, Senior Advocate, Mr. Summet Nankani, Mr. Prashant Asher, and Mr. Naishadh Bhatia.

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