SANJIB BANERJEE,J. - (1.) THE principal ground urged on behalf of the respondent at the final hearing of this petition under Section 9 of the Arbitration and Conciliation Act, 1996 was not canvassed at the ad interim stage of this matter which prompted the court to deliberate on other aspects which now pale into insignificance. THE respondent's choice of not putting forth the weighty argument on a substantial issue led the court, at the ad interim stage, to be needlessly bogged down by matters of prejudice and the perceived dishonest stand of the respondent. THE respondent obtained a mining lease to extract iron ore from an area in Ghatkuri in the Singhbhum (West) District, now in the state of Jharkhand. On February 17, 2005 the parties entered into an agreement under which the respondent agreed to sell to the petitioner the entire iron ore excavated from the leasehold area as per the terms and conditions contained therein. THE agreement was valid for a period of seven years from the commencement of the mining operations at the Ghatkuri mines and provided for renewal thereafter on mutually agreed terms and conditions. THE effective date for the commencement of the agreement was to be determined from the date of obtaining the permission for beginning the mining activities. THE petitioner claims that notwithstanding the agreement having been executed early in 2005, the necessary permissions for the commencement of mining operations were not obtained for a substantial period thereafter and, at any rate, the respondent did not inform the petitioner prior to the petitioner's query late in 2009 of any temporary or final permission having been obtained by it to undertake the mining activities.
(2.) THE petitioner claims that it was only in December of 2009 that the petitioner came to be aware that operations had apparently been commenced at the Ghatkuri mines. The petitioner wrote a letter of December 24, 2009 suggesting that it had "discreet information" that the respondent "in violation of the stipulations contained in the Selling Agreement commenced supply of iron ore to some third party." The petitioner demanded in such letter that the respondent should let it know of the "correct factual position" within three weeks, failing which the petitioner would infer that the respondent was in breach of the agreement. The respondent replied on January 11, 2010, asserting that it had issued two letters of June 22, 2007 and August 1, 2008 on the subject to the petitioner wherein the respondent had "clearly indicated the legal impediment in performance of these Agreements in view of their complete and direct violation on Rule 37 making them void ab initio and also returned the advance paid by you to our Company as per books of accounts amounting to Rs.1,67,50,000/- ..." The petitioner claims that it did not receive either previous letter referred to in the respondent's reply of January 11, 2010 and suggests that the postal receipt referred to in the reply did not evidence service of either previous letter on the petitioner. The petitioner proceeds to discredit the respondent's assertion that the respondent had terminated the agreement on any ground or had informed the petitioner of such alleged termination at any point of time prior to issuing the letter of January 11, 2010. The petitioner insists that it is entitled to specific performance of the selling agreement of February 17, 2005, that the bogey raised under Rule 37 of the Mineral Concession Rules, 1960 is an eye-wash and that, in the unlikely event of a tentative view being taken that specific performance of the agreement may not be granted in the arbitral reference, it is entitled, nonetheless, to enforce the negative covenant running through the agreement and crystallised in Clause 14.1 thereof. Much of the petitioner's effort in obtaining the order that it seeks has been expended in its endeavour to demonstrate that neither letter of June 22, 2007 and August 1, 2008 had been issued by the respondent or received by the petitioner. The main plank of the defence is founded on the selling agreement of February 17, 2005 being only a part of a larger agreement executed on the same day. The respondent suggests that it would be misleading to treat the selling agreement that the petitioner seeks to enforce as a stand-alone agreement entered into at arm's length between the parties. The respondent shows, and it is also admitted by the petitioner, that there was another agreement executed on February 17, 2005 between the respondent and one Metsil Exports Private Limited. According to the respondent, such other agreement - styled as a raising agreement - along with the selling agreement executed in favour of the petitioner, formed a composite agreement for Metsil and the petitioner herein to jointly conduct the mining operations and the sale of the extract therefrom. The respondent asserts that the composite agreement, willy-nilly, amounted to the licence obtained by the respondent being assigned to the combine of Metsil and the petitioner herein, with the respondent agreeing to receive a commission based on the quantum of ore extracted from the Ghatkuri mines. The respondent submits that such agreement was in abject derogation of the ethos of Rule 37 of the 1960 Rules and amounted to the licence obtained by the respondent being traded in favour of the combine of Metsil and the petitioner with the respondent reserving a cut unto itself based on the extent of the produce from the mines. The respondent refers to the agreement between Metsil and the respondent and, in particular, to the following clauses: "3.1.1 METSIL shall enter into the leasehold area and take all such steps and perform all such functions as are prerequisite, essential and integral for commencement of mining operations." "3.1.2. METSIL shall employ and depute inter-alia all necessary qualified mining personnel including but not limited to Foreman, Blaster, Driller, Mate as may be required under Mines Act 1952, Mines and Minerals (Development and Regulation) Act 1957 and the Rules and Regulations made there-under for technical guidance and supervision. Such personnel shall be deemed to be METSIL's employee for all legal effects and purposes. METSIL shall have the right to recall and/or replace all or any deputed personnel at any point of time as it may deem fit and proper without assigning any reason. All payments of salaries, wages and other emoluments to such personnel shall be borne by METSIL. After the expiry of this agreement METSIL shall remove all the people appointed by them with full and final payment to them." "3.1.4 METSIL shall, on behalf of OMM and wherever required on their behalf, sign and file such applications, declarations, affidavits and other papers as may be necessary before the competent authorities for undertaking mining operations from the leasehold area and to represent OMM before various authorities including the judicial, quasi judicial, statutory and local authorities." "4.2 All costs, charges, expenses, and liabilities in connection with the mine and mining operations till the commencement of mining operations appointing METSIL as raising contractor shall be borne and payable by OMM. During the validity of this Agreement any liability arising out of and/or in connection with the mining operations shall be borne and payable by METSIL. Both the parties indemnify and continue to keep other party indemnified in this regard to the extent provided herein." "4.3 METSIL shall, during the period of this contact, bear all expenses incurred in carrying out mining operations and for excavation of IRON ORE, which shall inter-alia include but not limited to expense relating to machines, preparation of mining plans from time to time, rents of all plots, development, blasting, raising of minerals, sizing of minerals, analysis, transportation within the leasehold area, labour dues, provident fund, gratuity and tax deducted at source etc." "4.5 METSIL shall cooperate and assist OMM in getting renewal of mining' lease and DRP for and on behalf of OMM. Any expenses incurred with approval of OMM in obtaining such permission(s) and approval(s) shall be reimbursed by OMM." "4.6 METSIL shall ensure payment on behalf of OMM within the stipulated time for all Government revenue such as royalty, forest cess, dead rent, sales tax and any other new levies, etc payable by OMM so that mining operations are carried out uninterruptedly and OMM shall reimburse the same to METSIL." "6.6. OMM shall notify the name of person(s) as per applicable mining laws in consultation and approval thereof for METSIL for the purpose of representation before the Indian Bureau of Mines, Labour Enforcement Officer, District Magistrate, Department of Mines Safety and such other authorities as are legally required." (OMM is the respondent)
(3.) THE excavation charges for iron ore under the raising agreement provided for payment for iron ore lumps at Rs.350 per MT and for iron ore fines at Rs.150 per MT. The respondent emphasises on the following clause in the annexure to the raising agreement that governs the payment envisaged to be made thereunder: "Excavation charges shall be payable by OMM to METSIL only after realisation of sales proceeds by OMM." The parties have, for varying purposes, referred to the selling agreement which is the subject-matter of the present proceedings. The petitioner insists that not much should be read into the reference to Metsil in the selling agreement since the raising agreement, with Metsil as the raising contractor therein, was executed on the same day and merely because the respondent chose to engage a raising contractor and another selling contractor would not necessarily lead to the inference that the raising contractor and the selling contractor were, in reality, a joint entity. The respondent seeks to read the selling agreement as being subservient to or dependent on the raising agreement and suggests that a meaningful reading of the selling agreement would reveal that it was incapable of being performed de hors the raising agreement. The following recitals and clauses of the selling agreement are of immediate relevance: "AND WHEREAS OMM has approached SIPL with the proposal to exclusively sell the entire iron ore excavated by its RAISING CONTRACTOR on their behalf from their leasehold area. AND WHEREAS OMM has approached SIPL to set up a Plant in collaboration and association to partially and captively use Iron Ore within the State of Jharkhand and OMM shall take all such steps as are required for the said purpose. AND WHEREAS on this specific and unequivocal promise of OMM to sell exclusively to SIPL the entire IRON ores excavated by Raising Contractor from their leasehold area, SIPL intents to install and set-up a Plant for value addition of mined ore at a substantial cost in the State of Jharkhand. AND WHEREAS relying upon the said promises, representations and assurances of OMM and believing the same to be correct, SIPL has agreed to purchase exclusively the entire excavated iron ore from leasehold area raised by RAISED CONTRACTOR from leasehold area of OMM on the terms and conditions mutually agreed contained herein. AND WHEREAS proposed Joint Venture has agreed to commence production in its plant within two years from the effective date of commencement of Mining operation. In the event the plaint is not set up within the period aforesaid and mining lease is cancelled due to this reason this agreement shall stand terminated and all accounts with SIPL shall be settled by OMM." "2.1 This Agreement is valid for a period of 7 years from the effective date of its coming into force or commencement of Mining Operation and thereafter the same may be renewed on mutually agreed terms and conditions." "2.2 The effective date of coming into force of this Agreement shall be determined from the date of obtaining TWP/DRP/Court Order/Working Permission from concerned Department." "3.1 OMM shall during the currency of this agreement as mentioned in Clause No.2 hereinabove sell exclusively to SIPL the entire iron ore excavated by RAISING CONTRACTOR from the leasehold area of OMM." "3.2 SIPL shall purchase the entire iron ore excavated by RAISING CONTRACTOR from the leasehold area of OMM. SIPL shall have sole and exclusive rights to purchase the ores excavated by RAISING CONTRACTOR from the leasehold areas of OMM. In the event OMM sells the said ore to any of the parties nominated by SIPL, different gain/loss, if any, shall be on account of SIPL." "8.1 OMM shall during the currency of this agreement as mentioned in Clause No.2 hereinabove sell exclusively to SIPL the entire iron ore excavated by RAISING CONTRACTOR from the leasehold area of OMM." "9.10 OMM shall not in any manner whatsoever do or cause to be done either directly and/or indirectly any act, deed or thing whereby SIPLs' right to get continuous and uninterrupted supply of ores under this contract shall or may in any manner whatsoever, be impaired and/or jeogpardized or become ineffective, unenforceable and/or void at any time during the subsistence of this agreement." "14.1 Exclusivity It is unconditionally agreed by and between the parties that during the currency and validity of this agreement, OMM shall sell the entire Iron Ore excavated from the mining lease hold area exclusively to SIPL alone. OMM shall not sell or deal in any manner or in any form or way directly or indirectly whatsoever any other party in respect of the Iron ore under this agreement." (SIPL is the petitioner);