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Judgment
Dr. S.K. Panigrahi, J.
This Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “A & C Act”) has been filed seeking setting aside of the judgment dated 03.09.2018 passed by the learned District and Sessions Judge, Jharsuguda in Arbitration Case No.1 of 2015 which was filed under Section 9 of the A & C Act.
I. FACTUAL MATRIX OF THE CASE:
The present Appellants – M/s. Singhal Enterprises Pvt. Ltd. and its Director, are the owners of a Sponge Iron Factory situated at Jharsuguda. Due to certain financial issues, the said factory was decided to be entrusted to the Respondent Company – M/s. Stylish Commotrade Pvt. Ltd. on a leave and license basis for three years.
Pursuant to negotiations, a Memorandum of Understanding (hereinafter referred to as “MoU”) was executed between the parties on 01.09.2011 at Kolkata and the MoU was to remain in effect from 01.09.2011 to 31.08.2014 unless extended further with mutual consent of the parties. It is pertinent to note that the said MoU was unregistered.
Clause (m) of the unregistered MoU stated that in the event of dispute or differences arising between the parties, the parties would resolve the same by mutual understanding and no party would approach the court of law. Furthermore, the clause provided that the parties could settle such dispute or difference by referring the matter to an arbitrator or settle the same mutually.
The Respondent Company thereafter immediately took possession of the factory and commenced operation. However, it is alleged that the Respondent Company did not pay the security deposit of Rs.1.5 crores as it was required to pay under the MoU.
It appears that a notice was issued by the State Pollution Control Board for violation of certain norms and therefore, the factory was shut down pursuant to the order of the State Pollution Control Board in about 59 days since the Respondent Company took over the operation.
Since then there have been disputes and differences between the parties over possession of the Factory and monies invested in the Factory which has led to multiple litigations by the Respondent Company, the details of which are too voluminous to go into.
The Respondent Company amongst other things, filed an application under Section 9 of the A & C Act before the learned District and Sessions Judge, Jharsuguda bearing Arbitration Case No.1 of 2015 seeking an interim relief of restraining the present Appellants from (a) creating any third party interest over the properties of the Factory, (b) not to enter into any sort of transactions pertaining to the Factory, ( c) from taking possession of the Factory and (d) from creating any nuisance over the Factory till the dispute is resolved between the parties.
The learned District and Sessions Judge vide order dated 03.09.2018 was pleased to allow the application under Section 34 of the A & C Act after hearing the parties. This application under Section 37 of the A & C Act has been filed assailing the same.
The possession of the Factory was granted to the Appellants in the interim vide this Court order dated 16.11.2018, but the remaining portion of the impugned order was directed to be maintained. Thereafter, the Factory remained in the possession of the Appellants.
II. APPELLANTS’ SUBMISSIONS
The counsel for the Appellants contended that the subject matter of the dispute revolved around monetary compensation for damages and the Factory per se was not the subject matter of dispute. Therefore, no interim protection should have been granted to the Respondent Company in respect of the Factory.
Furthermore, it was earnestly submitted that the MoU itself stipulates in Clause (c) that the Respondent Company shall not disturb the ownership, interests and rights of the Appellant with respect to the Factory.
It was also urged that the Respondent Company itself defaulted on its primary obligation to pay security deposit and therefore the Respondent Company is not entitled to the equitable relief of injunction.
III. OPPOSITE PARTY’S SUBMISSIONS
Per contra, learned counsel for the Respondent Company submitted that it was the responsibility of the Appellants to comply with the notice issued by the State Pollution Control Board but it was their abject failure which led to the ultimate closure of the Factory. The Respondent Company has invested Rs.15 crores and procured raw materials of Rs.10 crores which are still in the premises of the Factory. Since the disputes arose between the parties, the Appellant Company showed some interest in settling the matter and paying the Respondent Company back, but it was then learnt that the Appellant Company was planning to evict the Respondent Company from the Factory premises and sell the raw materials lying in the Factory premises. It was in these circumstances the application under Section 9 of the A & C Act was preferred.
As such, it was earnestly submitted that the learned District and Sessions Judge has rightly allowed the application under Section 9 of the A & C Act and the same is just and proper.
IV. ISSUES FOR CONSIDERATION
Having heard the parties and perused the materials available on record, this Court here had identified the following issues to be determined:
A. Whether the learned District Judge has correctly exercised his power under Section 9 of the A & C Act?
B. What is the scope of this Court’s power under Section 37 of the A & C Act with respect to Section 9 of the A & C Act?
V. FURTHER DEVELOPMENTS
During the pendency of the present case, this Court vide order dated 14.11.2022 had, sensing a scope for reconciliation, directed the parties to explore the possibility of mediation and settlement in the interest of justice. It has since been brought to this Court’s notice that a settlement meeting took place between the parties on 19.11.2022 wherein the parties agreed to settle and resolve all disputes and differences between them. The Appellants vide Memo dated 14.12.2022 have submitted that the parties have mutually arrived at a settlement with respect to all pending claims and disputes. A Deed of Settlement dated 13.12.2022 was entered into and the same has been placed on record before this Court.
The relevant terms of the “Deed of Settlement” dated 13.12.2022 are reproduced hereunder, wherein SEJPL is Singhal Enterprises (Jharsuguda) Private Limited (the present Appellants) and SCPL is Stylish Commotrade Private Limited (the present Respondent Company). The Deed of Settlement dated 13.12.2022 as extracted hereinbelow:
“1. SEJPL and SCPL agree that the MOU has been terminated and SEJPL and SCPL under the MOU will not have any claims or counter claims against each other whether in contract, equity or tort and on any account whatsoever.
SEJPL shall pay a sum of INR 4,00,00,000/-(Indian Rupees Four Crore Only), in lieu of full and final settlement of any and all such claims whatsoever pertaining to all the disputes and the MOU between SEJPL and SCPL (“Consideration”), in the following manner:
1 INR 3,00,00,000/- (Indian Rupees three Crore only) shall be payable simultaneously, on handover of the following to SEJPL on the same date (“Handover Date”):
(a) All inventory and stock and goods which are lying at the Factory on “as is where is and whatever there is” basis which also includes below items & quantity:-
Items Quantity (Approx.)
IRON ORE 3,293 MT
IRON ORE FINES 3,169 MT
REJECT COAL 5,384 MT
DOLOCHAR 75,000 MT
(b) executed applications for withdrawal/ quashing of all cases against SEJPL and its Affiliates as listed in Annexure 3 hereto, including vacation of order of injunction dated 3 September 2018 passed by the District & Sessions Judge, Jharsuguda (Odisha) and appealed by SEJPL in ARBA No.48 of 2018 before Hon’ble Cuttack High Court.
2.2 INR 1,00,00,000/- (Indian Rupees One Crore only) shall be payable with one week of both:-
(a) handover of 15 (fifteen) original bounced cheques pertaining to which cases are filed by affiliates of SCPL as per Annexure-4 hereto. Right now, the cheques are filed at the respective Hon’ble Courts, which will be returned to SEJPL only on the same being returned to SCPL by the said respective Hon’ble Courts.
(b) confirmation/ acknowledgement of withdrawal/ quashing of all cases as listed in Annexure-3 hereto.
2.3 For the purpose of this deed of settlement, bank details of the respective parties are as follows:-
(a) Singhal Enterprises (Jharsuguda) Private Limited Bank Name:- Punjab National Bank Bank Address: Kolkata, Princep Street, West Bengal
Account Number:- 3183002101724024
IFSC Code:- PUNB0014510
(b) Stylish Commotrade Private Limited Bank Name:- State Bank of India
Bank Address:- Near Gopinath Temple, Rajgangpur, Orissa
Account Number:- 40369819692
IFSC Code:- SBIN0017195
SCPL or its representatives shall be physically present to appear before all court of law for the purpose of disposal of cases or for withdrawal/ quashing of cases against SEJPL and its Affiliates pertaining to all cases as listed in Annexure-3 and also for any other pending cases if any without the knowledge of SEJPL.
In the event of any notice received by SEJPL and or its Affiliates in relation to Factory during the period 1 September 2011 to 7 June 2012 within one year from the date of this deed of settlement, the SCPL or its representatives shall be liable to address and resolve such issues before such authorities.
SCPL undertakes in relation to SEJPL that:
5.1 The Consideration of INR 4,00,00,000/- (Indian Rupees Four Crore Only) is towards full and final settlement of all the dues and claims of SCPL against SEJPL and its Affiliates. SEJPL and its Affiliates shall no more be liable to pay or perform anything in any manner whatsoever except payment of the Consideration.
5.2 Upon the full payment of Consideration, there shall not be any claim, counter claim, claim of interest/ damages, grievance and/or allegations in any manner by SCPL and/or any affiliates of any party related to SCPL against SEJPL and/or its director/ employees and SCPL shall issue a No Claim Certificate in favour of SEJPL and its Affiliates in the manner as mentioned hereinbelow in Annexure-5 stating that SCPL shall henceforth will not have any claim against SEJPL and its Affiliates in relation to any dispute and MOU.
5.3 None of its employees/ executives/ affiliates shall enter the premises of the Factory from the date of execution of this deed of settlement.
5.4 As on the Handover Date no documents(s)/information(s)/ data(s)/ book(s) of account/ statutory record(s)/ statutory return(s) are available with SCPL and they shall always provide any such document, once the same are available with them. It shall not retain in original or in copy, any copies of the books, records, cheque books, documents related to the SEJPL and its affiliates.
5.5 It shall always cooperate with SEJPL and/or its Affiliates in getting recorded this settlement in the court of Law and will assist each other if a joint application is required to be filed and to appear for making statement on the date to be fixed for recording of their statement before such court of law.
5.6 It shall be solely and unequivocally responsible for all the liabilities relating to employees/ workmen/ contract labours employed at the Factory during the period 1 September 2011 to 7 June 2012 within one year from the date of this deed of settlement, including compliance with the applicable laws, employee benefit policies or contracts governing the employment of the employees/ workmen/ contract labours (“Employee Related Claims”)
5.7 Nothing contained in the office or Factory or in the premises of the Factory, belongs to SCPL and its affiliates and as such SCPL and its affiliates shall have no claim in respect thereof
5.8 Presently there is no outstanding or liability from any third party in relation to the production. It shall settle all claims that may arise in relation to the Factory during the period 1 September 2011 to 7 June 2012 within one year from the date of this deed of settlement.
SCPL covenant and agree to indemnify, defend and hold harmless, promptly on demand at any time and from time to time, SEJPL and their respective affiliates and employees (“SEJPL Indemnified Parties”), from and against, and pay or reimburse SEJPL Indemnified Parties for any aforementioned Claims pertaining to period 1 September 2011 to 7 June 2012 within one year from the date of this deed of settlement and any breach, default or violation of any obligation by SCPL in this Deed.
SCPL and its affiliates shall withdraw all other pending cases, if any, in addition to the cases as listed in Annexure 3, against SEJPL and its directors or other related parties of SEJPL pending before any court of law/ tribunal/ authorities/ forums etc. In case any other case is found pending after execution of this agreement, SCPL shall commit breach of the agreement & SEJPL shall have all right to prosecute against SCPL in accordance with law.
SEJPL and its affiliates shall withdraw pending cases, if any against SCPL and its directors or other related parties of SCPL pending before any court of law/ tribunal/ authorities/ forums etc. In case any case is found pending against SCPL after execution of this agreement, SEJPL shall commit breach of the agreement & SCPL shall have all right to prosecute against SEJPL in accordance with law.
Upon successful completion and performance of the terms of this Deed of Settlement, neither SEJPL nor SCPL (including their respective affiliates) shall enter into any civil or criminal cases/ litigation against each other in future challenging the terms of this Deed of Settlement, as it has been entered voluntarily, irrevocably and with the free consent of both SEJPL and SCPL (including their respective affiliates) and is binding upon SEJPL and SCPL (including their respective affiliates). Also, SEJPL and SCPL (including their respective affiliates) will further not revive/ appeal any disposed of/ withdrawal cases by any means in any of the forums.
Both SEJPL & SCPL will equally bear all fees/ charges/ levies as may be charged by competent court for withdrawal & settlement of cases. Whereas all costs and expenses in relation to fees of legal advisors, counsels, court fees and all such related expenses shall be in the respective individual party’s account.
Subject to correct and complete performance of their respective obligations under this Deed of Settlement, both SEJPL and SCPL hereby release and discharge the other – and/or their past or present employees, directors, managers or agents – from any and all claims and causes of action pursued by themselves, or their Affiliates or subsidiaries, on the basis of or in relation to any fact, element, document, omission, action, transaction, event or fault which occurred prior to the date of the Deed of Settlement, whether or not that is or was part of the dispute, and which is connected with the dispute, its conclusion, execution (performance), interpretation, validity, application or termination, or which is otherwise directly or indirectly connected to or pertaining to the dispute.
The Parties agree to keep confidential and not disclose to any third party the terms and conditions of this Deed of Settlement or the existence thereof, except as is necessary to effectuate any term or provision of this Deed of Settlement except as required by law or court order.
This Deed constitutes the entire agreement between SEJPL and SCPL concerning the settlement and release of claims and supersedes all prior agreements, letters an all previous communications between SEJPL and SCPL on honouring of the terms of settlement and payment of settlement amount by SEJPL.
If any provision of this Agreement is found under the laws of any jurisdiction to be invalid, illegal or unenforceable it shall to that extent be deemed not to form part of this Deed of Settlement. The invalidity, illegality or unenforceability of that provision in that jurisdiction shall not in any way affect the other provisions of this Deed of Settlement in that jurisdiction, and shall not affect the validity, legality or enforceability of all the provisions of the Deed of Settlement in any other jurisdiction.
This Deed of Settlement shall be binding on the Parties, their successors in interest, and present and future Affiliates, subsidiaries, assignees or acquirers, including any acquirer of substantially all of the assets of a Party.
The courts at Cuttack shall have the exclusive jurisdiction to entertain and/or adjudicate any dispute arising out of or in connection with or in relation to the terms of this Deed of Settlement.”
On consensus between the parties, as in the earlier memo dated 14.12.2022 filed by the Appellants, it was stated that the instant appeal vide ARBA No.48 of 2018 may be allowed in terms of the Deed of Settlement dated 13.12.2022 by setting aside the impugned order dated 03.09.2018 passed by the learned District and Sessions Judge, Jharsuguda in Arbitration Case No.1 of 2015, this ARBA is allowed. The impugned order dated 03.09.2018 passed by the learned District and Sessions Judge, Jharsuguda in Arbitration Case No.1 of 2015 is hereby set aside. The averments made in the Memo dated 14.12.2022 submitted by the Appellants and the Deed of Settlement dated 13.12.2022 with respect to all pending claims and disputes entered into between the parties containing the terms and conditions shall form a part of this order.
Needless to clarify and as mentioned in the Deed of Settlement itself, in the event there is any dispute arising out of or in relation to the Deed of Settlement, the parties herein are at liberty to adopt any recourse available to them in accordance with law. There will be no order as to costs. Ordered accordingly.
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