Case Note & Summary
The petitioner, Welspun Enterprises Limited, filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking an interim injunction to restrain respondent no.3, Orissa State Road Transport Corporation, from making payment of Rs.18,66,66,667/- or any other amount to respondent no.1, ARSS Infrastructure Projects Limited, in relation to the cancellation of a concession agreement. The dispute arose from a project for the development of a modern bus terminal at Baramunda, Bhubaneswar, on a public-private partnership (BOT) basis. Respondent no.1 submitted a bid of Rs.56 crores and was selected as the preferred bidder. A special purpose vehicle, respondent no.2 (ARSS Bus Terminal Private Limited), was incorporated to implement the project. The petitioner entered into a share subscription agreement with respondent no.2, investing Rs.18.66 crores for a 49% stake, with an arbitration clause. Subsequently, the concession agreement between respondent no.1 and respondent no.3 was cancelled, and respondent no.3 proposed to pay compensation to respondent no.1. The petitioner sought to restrain such payment, claiming that the share subscription agreement and concession agreement were part of a composite transaction and that the arbitration clause covered disputes arising from the concession agreement. The court examined whether a prima facie case existed, the balance of convenience, and the likelihood of irreparable loss. It held that the agreements were interconnected, and the arbitration clause in the share subscription agreement could be invoked for disputes under the concession agreement. The court also rejected the argument of novation, finding that respondent no.1 remained liable under the concession agreement. Consequently, the court granted an interim injunction restraining respondent no.3 from making any payment to respondent no.1 or any other person except by way of refund to respondent no.2, pending the arbitration proceedings.
Headnote
A) Arbitration - Interim Measures - Section 9 of the Arbitration and Conciliation Act, 1996 - Injunction against payment - Petitioner sought to restrain respondent no.3 from paying Rs.18,66,66,667/- to respondent no.1 on account of cancellation of concession agreement - Court held that a prima facie case exists as the share subscription agreement and concession agreement are part of a composite transaction, and the arbitration clause in the share subscription agreement covers disputes arising out of the concession agreement - Balance of convenience in favour of petitioner and irreparable loss likely if payment made (Paras 1-22). B) Arbitration - Composite Transaction - Arbitration Clause - Share Subscription Agreement and Concession Agreement - Court held that where two agreements are part of the same commercial project and one contains an arbitration clause, disputes under the other agreement can be referred to arbitration if they are interconnected - The arbitration clause in the share subscription agreement between petitioner and respondent no.2 covers disputes relating to the concession agreement between respondent no.1 and respondent no.3 (Paras 10-15). C) Contract Law - Novation - Section 62 of the Indian Contract Act, 1872 - Substitution of parties - Court held that there was no novation of the concession agreement as the original parties remained liable; the special purpose vehicle (respondent no.2) was merely a project implementer, not a substitute for respondent no.1 (Paras 16-18).
Issue of Consideration
Whether the petitioner is entitled to an interim injunction under Section 9 of the Arbitration and Conciliation Act, 1996, restraining respondent no.3 from making payment to respondent no.1 in relation to the cancellation of the concession agreement, pending arbitration.
Final Decision
The court allowed the petition and granted an interim injunction restraining respondent no.3 from making any payment to respondent no.1 or any other person in relation to the cancellation of the concession agreement, except by way of refund to respondent no.2, pending the arbitration proceedings.
Law Points
- Section 9 of the Arbitration and Conciliation Act
- 1996
- interim measures
- prima facie case
- balance of convenience
- irreparable loss
- composite transaction
- arbitration clause in related agreements
