B.P. Das, J.

1. These appeals under Section 37(1)(a) of the Arbitration and Conciliation Act, 1996 (in short the) are directed against the judgment dated 13.9.2006 passed by the District Judge, Khurda in Arbitration Petition No. 117/2006 under Section 9 of the.

2. The M.K.D. Mineral and Exports (P) Ltd. (hereinafter called as M.K.D.), which is the Appellant in ARBA No. 21/2006, was the Petitioner before the District Judge, Khurda and Birat Chandra Dagara (hereinafter called as B.C. Dagara), who is the Appellant in ARBA No. 18/2006, was the O.P. before the District Judge. The M.K.D. had filed Arbitration Petition No. 117/2006 praying for an order restraining the O.P.-B.C. Dagara from terminating the contracts dated 24.1.2004 and 9.4.2004, from entering into any contract with any third party in any manner whatsoever and from selling/disposing of the iron ore raised from the scheduled mines to any third party. The District Judge after hearing the parties passed the impugned judgment dated 13.9.2006, the operating part of which is reproduced hereinbelow:

xxx In the result, the arbitration petition is allowed on contest against the opposite party but in the circumstances without cost. The opposite party is prevented from entering into any contract with any third party in any manner whatsoever relating to the mines in question and to preserve the iron ore which is the subject matter of arbitration, the opposite party is also restrained from disposing of the iron ore raised from the mines to a third party/outsider till the commencement of arbitral proceedings.

In ARBA No. 18/2006 the Appellant-B.C. Dagara challenges the impugned judgment dated 13.9.2006 on the ground that the District Judge, Khurda did not examine the provisions under Order 39 Rules-1 and 2 of the Code of Civil Procedure, while granting interim order of preservation of iron ore. According to him, the order impugned would bring irreparable loss to him as without the sale of iron ore, he is not in a position to meet the expenses of his establishment, which, in other words amounts to a direction for closing down the mines. A prayer is made in the appeal filed by him to set aside the judgment dated 13.9.2006.

3. The facts narrated in ARBA No. 18/2006 discloses that the M.K.D. entered into a contract with B.C. Dagara on 24.1.2004 for the purpose of purchasing iron ore from him. According to the said contract, it was agreed that the contract would remain in force with effect from 24.1.2004 till expiry of the existing lease period. Ultimately, the lease period expired on 23.5.2006 and it was also agreed between the parties that in the event of renewal of the lease by the Government, the agreement shall be renewed for a further period of five years and thereafter, for subsequent periods. The M.K.D. under the contract agreed to purchase 30,000 MTs of iron ore per month from B.C. Dagara at the rate of 250 per metric ton, which was subsequently enhanced to Rs. 500/Per- mts. Accordingly, the M.K.D. paid a sum of Rs. 2.50 crores to B.C. Dagara as security to be adjusted from the sale proceeds and in course of execution of the work, the same has been adjusted. In course of time, after execution of the contract, the Respondent alleged to have committed serious breach of the contract, such as, it did not lift the required 30000 MT iron ore per month and failed to pay the bills on the ore purchased from B.C. Dagara and it did not respond to his several requests to clear up the dues. That too, the M.K.D. resorted to illegal transportation of iron ore from the mining area and selling the same in outside market.

On account of breach committed by the M.K.D., B.C. Dagara sent the letter dated 13.3.2006 calling upon the M.K.D. to clear the outstanding dues and sort out other problems, as it was felt that immediate discussion was required to be made, whether to continue with the operation under the agreement or not. It is alleged that the M.K.D. upon receipt of the aforesaid letter dated 13.3.2006, without responding to the same by meeting B.C. Dagara, straight away moved the Court under Section 9 of thewith a prayer for injunction and obtained the order as indicated. According to Mr. R.K. Rath, learned Counsel for B.C. Dagara, despite B.C. Dagara filing a written note of submission with the photo copies of the decisions relied upon by him and specifically, bringing to the notice of the Court below that Sections 14 and 41 of the Specific Relief Act stood as a bar against grant of injunction, the Court below has not even made a bare reference to the decisions cited by the Appellant including the leading decisions of this Court and passed the interim order directing the Appellant to preserve the iron ore and not to dispose of the same raised from the mines.

4. Peculiarly, the M.K.D., which was the Petitioner in Arbitration Petition No. 117/2006 under Section 9 of thebefore the District Judge, Khurda, and got interim order dated 13.9.2006, has also filed Arbitration Appeal No. 21/2006, in which Birat Chandra Dagara was the Respondent. Arbitration Appeal No. 21/2006 was filed on the grounds, inter alia, that the Court below failed to issue necessary direction to B.C. Dagara to sell 30,000 MT of iron ore each month to the Appellant-M.K.D. as per the terms of the contract. According to him, the Court below has also failed to exercise the jurisdiction vested in it by law by limiting the operation of the injunction order till the commencement of the Arbitration proceeding. So the relief sought for in Arbitration Appeal No. 21/2006 by the M.K.D. is that the impugned judgment dated 13.9.2006 be modified directing the injunction order to remain operative till the termination of the Arbitral proceeding.

The aforesaid Appeals being connected to each other and as both the parties have challenged the judgment dated 13.9.2006 in Arbitration Petition No. 117/2006, the same were heard analogously and are being disposed of by this common judgment.

5. The facts narrated in Arbitration Appeal No. 21/2006 tend to reveal that Birat Chandra Dagara, the Respondent, is the lessee of "Suleipat Mines", Suleipat in the district of Mayurbhanj and as he could not operate the mines scientifically and with the object of augmenting the income from sale of iron ore, he was in search of time bulk-buyer having adequate experience and capacity in mining production and marketing thereof. The Respondent, B.C. Dagara, negotiated with the Appellant, M.K.D., which is expertise and experienced in mining operation and marketing the products, agreed to undertake the work and the terms and conditions for execution of the said work settled and an agreement was executed on 24.1.2004. Apart from other terms and conditions, the agreement provides that B.C. Dagara shall sell the entire quantity of iron ore raised from the mines to the M.K.D. exclusively for a period of ten years and that the M.K.D. shall pay Rs. 250/ - only per metric ton of iron ore, which is inclusive of Government royalty, forest cess/pass charges and any other charges and any other charges levied and payable to the Government. It was further agreed between the parties that the Respondent shall not sell or otherwise part with or dispose of any quantity of iron ore from the aforesaid mines and the Appellant shall have the exclusive right to purchase the entire iron ore raised from the said mines. In pursuance of the aforesaid contract, M.K.D. paid a sum of Rs. 2.5 crores to B.C. Dagara as security deposit by way of cheques. As B.C.D. Dagara had no required machinery and equipment to raise the required quantity of 30,000 MTs of iron ore per month, he entered into Anr. agreement with M.K.D. on 9.4.2004 in continuation of the earlier agreement dated 24.1.2004 for over burden clearing and scientific operation and also to transport the raised iron ore. In order to clear the over burden and to start the mining work by virtue of the agreement dated 9.4.2004, M.K.D. was permitted to execute necessary documents with the bank to procure all the required machinery and equipments and to invest the working capital for the purpose of over burden clearing. M.K.D. as also given liberty under the said agreement dated 9.4.2004 to adjust the borrowed amount along with interest as well as any other expenses incurred against the sale of iron ore. Armed with two agreements, M.K.D. entered into borrowing agreement with the Bank of India, Bhubaneswar for availing a loan of Rs. 7,00 crores and when it ultimately found that B.C. Dagara had some other litigation in respect of the said mine, the mining operation could not be continued resulting in loss to M.K.D.

6. According to the M.K.D., as per the over burden clearing agreement dated 9.4.2004, the cost of over burden clearing was to be calculated at the rate of Rs. 198/ - per cubic meter and the M.K.D. cleared a total quantity of 7,62,191.23 cubic meters of overburden and raised and submitted a bill of Rs. 15,09,13,863.54, which it was to be paid by B.C. Dagara. But he defaulted in paying the same. According to the M.K.D., it was to receive payment of more than Rs. 22.00 crores from B.C. Dagara, i.e., Rs. 7.00 crores on account on account of investment in machinery and equipments and Rs. 15,09,13,863.54 on account of over burden clearing. Against the aforesaid dues, B.C. Dagara has raised a bill for an amount of Rs. 2,60,48,620.22 payable by M.K.D. towards the sale of 1,00,187 MTs of iron ore up to 12.03.2005. According to the M.K.D., it is still to get more than Rs. 20.00 crores from B.C. Dagara. By passage of time, B.C. Dagara started avoiding to clear up the outstanding dues of M.K.D. and sold 32 Mts of iron ore to outsiders in violation of the conditions of the agreement. According to the M.K.D., as it has incurred loan to the tune of Rs. 7.00 cores from the bank for procuring machinery, the non-supply of iron ore by B.C. Dagara in turn resulted in failure on the part of the M.K.D. to fulfil its commitments made to its customers in the market. According to M.K.D., instead of clearing the bills, B.C. Dagara issued a notice dated 13.3.2006, which was duly replied on 26.3.2006 and as M.K.D. had incurred huge loss everyday due to idle labour and machineries as well as its growing liability on account of the interest payable by it for the loan taken from the bank and failure on its part to meet the commitments to the customers, the M.K.D. invoked the Arbitration Clause by filing an application under Section 9 of the Act, which resulted in passing of the impugned judgment.

7. In this factual background, interestingly both the parties came up in these appeals against the order dated 13.9.2006 passed by the District Judge, Khurda in Arbitration Petition No. 117 of 2006. The prayer of B.C. Dagara, in Arbitration Appeal No. 18/2006 is to set aside the impugned judgment dated 13.9.2006 and the prayer of the Appellant, M.K.D., in Arbitration Appeal No. 21/2006 is to correct/modify the impugned judgment by directing the injunction to remain operative till the termination of the arbitral proceeding.

8. Mr. R.K. Rath, learned Counsel for B.C. Dagara, Appellant in Arbitration Appeal No. 18/2006, submitted that the District Judge, Khurda has not taken into consideration the questions of law and facts raised by the Appellant in its proper perceptive, which resulted in passing of the impugned order dated 13.9.2006. By the impugned order, the District Jude, Khurda restrained B.C. Dagara from entering into any contract with any third party in any manner whatsoever relating to the mines in question and to preserve the iron ore raised by restraining B.C. Dagara from disposing of the iron ore raised from the mines to a third party/outsider till the commencement of arbitral proceeding. Mr. Rath also submitted that unless the said judgment is set aside, B.C. Dagara shall suffer irreparable loss as he being the mines owner would not be able to operate the mines. According to him, the loss, if any, that would be caused to M.K.D., can be quantified in money value and can be paid by B.C. Dagara, if ultimately the arbitrator decides the case in favour of M.K.D. According to Mr. Rath, the District Judge has not discussed the balance of convenience and irreparable injury, which is the basic requirement for grant of order of injunction. He further submitted that in the meantime, arbitrators on both the sides have been appointed and this matter can be settled by the arbitration. He further submitted that during pendency of these Appeals, B.C. Dagara has already terminated the agreement in question.

9. In my considered opinion, the legality of termination of agreement or otherwise can be decided by the arbitrator. But the fact remains that both the parties stated to have appointed their respective arbitrators and the third arbitrator in the meantime in pursuance of the agreement in question. The questions now fall for consideration are as follows:

(i) Whether the impugned judgment is liable to be set aside and B.C. Dagara shall be allowed to sell the minerals to any third party he likes as prayed for; and

(ii) Whether the order of injunction shall be allowed to remain operative till the termination of the arbitral proceeding.

Mr. R.K. Rath, learned Counsel relying upon the decision in the case of M/s. Reena Silicate Industries Pvt. Ltd. v. GAIL (India) Ltd. reported in : AIR 2006 Mad 266 [LQ/MadHC/2006/388] , submitted that after obtaining the order under Section 9 of the Act, the M.K.D. conveniently slept over the matter till the notice on arbitration was issued for a long time, for which the interim order so passed should have been vacated because there was no manifest intention on the part of the M.K.D. to go for the arbitration. Mr. Rath also referring to the decisions in the case of Percept D Mark (India) (P) Ltd. v. Jahir Khan reported in : 2006 (4) SCC 227 [LQ/SC/2006/242] and in Firm Ashok Traders v. Gurumukh Das Saluja reported in : (2004) 3 SCC 155 [LQ/SC/2004/39] submitted that the party invoking Section 9 of themay not have actually commenced the arbitral proceeding but must be able to satisfy the Court that the arbitral proceedings were actually contemplated or manifestly intended as were positively going to commence within a reasonable time. According to Mr. Rath, a party seeking an interim order cannot afford to sit and sleep over the relief. Further relying upon the decision of this Court rendered in the case of M/s. Bhanja Minerals Pvt. Ltd. v. M/s. Bihar Sponge Iron Ltd. and Aer. reported in : 102 (2006) CLT 657, Mr. Rath submitted that in the aforesaid case, this Court relied upon the decision of M/s. Sundaram Finance Ltd. v. M/s. NEPC India Ltd. reported in : AIR 1999 SC 565 [LQ/SC/1999/29] , wherein it was held that the is implicit that the dispute must have arisen, it is referable to Arbitration Tribunal and when an application under Section 9 is filed before commencement of the arbitral proceeding, there has to be manifest intention on the part of the applicant to take recourse to the arbitral proceeding if at the time when application under Section 9 is filed, the proceeding has not commenced under Section 21 of the. While exercising the jurisdiction under Section 9, the Court should satisfy itself that effective steps have been taken to commence the arbitral proceeding.

Mr. Rath further submitted that there was no manifest intention on the part of the M.K.D. to initiate the arbitral proceeding and after taking the order under Section 9 of the Act, M.K.D. sat silent over the same for a long period; hence, the interim order should be vacated. The further argument of B.C. Dagara is that the agreement entered into between the parties is void as the same is hit by the provisions of Sub-Rule (1)(b) of Rule 37 of the Mineral Concession Rules, 1960 because the agreement would show that the lessee, i.e., B.C. Dagara, is not to operate the mines and the lessees operation is undoubtedly controlled by M.K.D. In the averments made in the Arbitration Petition, M.K.D. stated that they were in control over the mines and that the same read with the power to terminate lead to the only conclusion that the lessee would not have any right in respect of the mining lease and the operations connected with the same.

9. Mr. K.B. Panda, learned Counsel for the Respondent, M.K.D. in Arbitration Appeal No. 18/2006, submitted that the power of the Court to make an order under Section 9 of the Act, under which the present petition has been filed, is discretionary and equitable in nature and here is a case where the District Judge, Khurda has found that the order of injunction is necessary in order to avoid imminent irreparable loss to M.K.D.

10. In answering the question raised by Mr. Rath, learned Counsel for B.C. Dagara, that the dispute is a pre-condition for involving Section 9 of the Act, Mr. K.B. Panda, learned Counsel for the M.K.D. drew my attention to Section 9 of theand rightly indicated that there is no pre-condition that there must be a dispute before taking recourse to Section 9 of the. He further submitted that the order of restraint, as passed by the District Judge, should continue till any arbitral proceeding is concluded. As per clause-1 of the agreement dated 9.4.2004, the M.K.D. was allowed to go for any money borrowing from any bank to purchase or hire the mechanical equipments and machinery to engage in clearing the over burden areas at the Suliapat iron ore mining site of B.C. Dagara. Clause-2 of the said agreement also shows that B.C. Dagara was not in a position to repay the cost of equipments and other expenses incurred by the M.K.D. in procuring the equipment, machinery and expenditure incurred for the job, for which it was agreed that the cost thereof shall be adjusted by selling the iron ore lump to the M.K.D. at the rate agreed by the parties. As per Clause-6 of the said agreement, it was agreed that B.C. Dagara shall not enter into any agreement/contract to sell the iron ore lump or the mining site to any third party till the expenses of the M.K.D. is adjusted in every manner. Even considering the contention of B.C. Dagara, the District Judge, found that the M.K.D. failed to purchase 30,000 MTs of iron ore from B.C. Dagara, which amounts to violation of the condition of Clause-7 of the agreement dated 24.1.2004, the District Jude thought it proper to pass an interim measure of protection in respect of preservation of interim custody or sale of goods, which is the subject matter of the agreement.

11. Law is well settled that even the interim direction ordinarily would precede finding of a prima facie case. When existence of a prima facie case is established, the Court shall consider the other relevant factors, namely, balance of convenience and irreparable injuries (See Transmission Corporation of Andhra Pradesh Ltd. v. Lanco Kondapalli Power (P) Ltd. : (2006) 1 SCC 540 [LQ/SC/2005/1258] ). Law is also well settled that if there is no irreparable injury, the Court should not grant order of injunction or restraint. According to Section 41(e) of the Specific Relief Act, an injunction cannot be granted to prevent the breach of a contract the performance of which would not be specifically enforced. Clause (C) of Sub-section (1) of Section 14 of the said Act provides that a contract, which is in its nature determinable, cannot be specifically enforced. To this, Mr. K.B. Panda, learned Counsel for the M.K.D. submitted that this is an arrangement made by the District Judge in order to protect the irreparable loss that would be sustained to the M.K.D., which should continue till the conclusion of the arbitral proceeding.

12. On perusing the judgment dated 13.9.2006, I find that the District Judge, Khurda considering the entire circumstances passed the interim order as indicated above. But the undisputed fact is that B.C. Dagara is the owner of the mines. By virtue of two agreements, basing upon which, M.K.D. procured man and material and machine by availing a loan of Rs. 7.00 crores, to which B.C. Dagara is a guarantor, and started removal of over burden by investing some considerable amount. According to M.K.D., it has also made commitments to different parties for supply of ore. Though the ore agreed to be supplied to M.K.D., can be quantified in money value, the machinery employed by it, the loan taken from the bank and the commitments stated to have been made to different parties for supply of iron ore, if M.K.D. goes unprotected, it shall bring irreparable loss to it.

13. At the same time, if the impugned order dated 13.9.2006 is allowed to continue, the mines will remain closed. The materials that would be excavated will be in the pit mouth of the mines and B.C. Dagara cannot sell to Anr. . This will also bring loss to B.C. Dagara, who is admittedly the owner of the mines. In my opinion, the District Judge, Khurda while passing the impugned judgment failed to understand the purport of the provisions of Section 9(ii)(a) of the. In my considered opinion, the order dated 13.9.2006 totally restraining B.C. Dagara, as indicated, is not just and proper because it will bring inconvenience and loss to the mines owner.

14. At the same time, as the M.K.D. has invested a substantial amount by taking a loan from the bank and as it has committed to provide materials to its clients, there will be injustice if its interest is not protected because it will not be able to service its debt undertaken for the purpose apart from damaging its reputation in the market. In this regard, I may refer to a decision of the apex Court in the case of Dalpat Kumar v. Prahlad Singh reported in : AIR 1993 SC 276 [LQ/SC/1991/704] , wherein it is held as follows:

xxx The phrases "prima facie case", "balance of convenience" and "irreparable loss" are not rhetoric phrases for incantation, but words of width and elasticity, to meet myriad situations presented by mans ingenuity in given facts and circumstances, but always is hedged with sound exercise of judicial discretion to meet the ends of justice. xxx

This Court in Bhanja Minerals (supra), dealt with a similar situation and considering the prayer of the Bihar Sponge Iron Ltd. (BSIL) and directed the Bhanja Minerals Pvt. Ltd. (BMPL) to supply iron ore to BSIL on payment of certain amount as per the agreement subject to BSIL therein taking all steps to refer the disputes to arbitration including appointment of arbitrator in terms of the agreement. The case of BMPL, as submitted by Mr. Rath, was challenged in the apex Court, and the apex Court in its judgment dated 13.10.2006, copy of which was produced before this Court, sustained the judgment of this Court subject to certain variations and ultimately, allowed BSIL, which was the purchaser of iron ore, to get its supply in order to run the factory under certain terms and conditions.

15. It is worthwhile to mention here that the agreement dated 24.1.2004 contains a negative covenant that B.C. Dagara cannot sell the materials to any third party. In my considered opinion, as Clause-5 of the said agreement contains such a provision and B.C. Dagara has agreed not to sell or otherwise part with or dispose of any iron ore from the said mine to any other party and the second part shall have an exclusive right to purchase iron ore from the said mines, the said covenant is clearly binding on the Defendant. This view of mine gets support from the decision in the case of Vijaya Minerals Pvt. Ltd. v. Bikash Chandra Deb, reported in : AIR 1996 Cal 67 [LQ/CalHC/1995/227] .

16. However, considering the facts and circumstances of the case and taking into consideration the constraint of the parties, I set aside the judgment dated 13.9.2006 passed by the District Judge, Khurda in Arbitration Petition No. 117/2006. At the same time I direct that B.C. Dagara shall go on supplying 30,000 MTs of iron ore per month to M.K.D. Minerals on payment as per the agreement till the arbitral proceeding is concluded. I further direct that effort shall be made for conclusion of the arbitral proceeding within a period of six months from today. Accordingly, Arbitration Appeal No. 18/2006 is allowed in part, resultantly Arbitration Appeal No. 21/2006 is disposed of.