Holding

The Supreme Court held that the High Court ought not to have granted an unconditional temporary injunction and modified the order by imposing security and deposit conditions while preserving the status quo pending trial.

Summary

The dispute concerned the exclusive right to operate an iron‑ore mine. Hardesh Ores (the old contractor) claimed that its contract with the mining‑lease owner had been renewed by the parties' conduct, while Timbolo Minerals (the new contractors) asserted that the owner had refused renewal and entered into a fresh, higher‑priced contract with them. The trial court initially granted an ex parte temporary injunction to the new contractors, later vacated it, and the High Court subsequently granted an unconditional temporary injunction in their favour. The Supreme Court, applying the principles of prima facie case, balance of convenience and irreparable loss, held that the High Court should not have granted an unconditional injunction and modified the order by imposing a bank guarantee, monthly deposits, and other conditions to protect the old contractor’s investments while allowing the new contractors to continue mining. The appeals were partly allowed, with the order of the High Court modified and the suit directed to be expedited.

Issues considered

Whether a contract can be deemed renewed by the conduct of the parties after its expiry.
Whether the High Court was justified in granting an unconditional temporary injunction under Order 39 of the CPC.
Whether the requirements of prima facie case, balance of convenience and irreparable loss were satisfied for granting the injunction.
Whether Section 14(1)(c) of the Specific Relief Act bars enforcement of a determinable contract.

Legislation cited

Code of Civil Procedure, 1908s. Order 39 Rule 1, s. Order 39 Rule 2, s. Order 39 Rule 3
Specific Relief Act, 1963s. Section 14(1)(c)

Subjects

contract renewalimplied contracttemporary injunctionOrder 39 CPCSpecific Relief Actmining leaseiron orebalance of convenienceprima facie caseirreparable loss

Judgment

A HARD ESH ORES PVT. LTD.
v.
TIMBLO MINERALS PVT. LTD.,AND ORS.

MARCH 16, 2004

B [SHIVARAJ V. PATIL AND D.M. DHARMADHIKARI, JJ.]

Code of Civil Procedure, 1908:

Order 39, rr. 1and2-Interim injunction-Iron ore mine-Contractor-
C Continuing mining activities claiming renewal of contract by conduct-New
contractor filing a suit claiming that mining lease owner had refused to renew
the contract of old contractor and entered into. a fresh contract with him- (
High Court granted interim injunction in favour of new contractor-Held, the
suit is pending for trial on merits-On the basis ofthree established principles
D for grant oftemporary injunction e.g., prim a facie case, balance ofconvenience
and irreparable loss, it would not be appropriate to interfere with the order
of High Court at the present stage of the suit and disturb the working of the
mine by the new contractors who have already commenced operations and
stated to have entered into business commitments for supply of iron ore to
different parties in and outside India-However, the High Court ought not to
E have granted unconditional order of temporary injunction by ignoring the
huge investments which have been made by the old contractor to operate the
mine under an existing arrangement and alleged renewal of the contract by
their mutual conduct-The temporary injunction passed by the High Court is
accordingly modified with addition of certain conditions.
F Provash Chandra Dalui and Anr. v. Biswanaih Banerjee and Anr.,
(1989] Supp. 1 SCC 487 and State of U.P. and Ors: v. Lalji Tandon (dead)
through Lrs., (2004) 1 SCC 1, cited.

Gardner v. Blaxill, (1960) 2 All ER 457, cited.
G CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 8586-8587
of 2003.

From the Judgment and Order dated 5.9.2003 of the Bombay High

H
Court at Panaji in A.F.O. No. 49/2003 and 11.9.2003 in C.A. No. 239/2003
in A. No. 49/2003.
•
1212
HARDESH ORES (P.). LTD. '" TIMBLO MINERALS (P. l LTD. 1213
~---
WITH A
C.A. Nos. 8588-89 of 2003.

Fali S. Nariman, R.F. Nariman, Dr. M.S. Usganonkar, B.R. Zaiwalla,
K. Parasaran, M.N. Krishnamani, Kapil Sibal, G.R. Mallaya, Ms. Pallavi
Barua, Rajan Narain, Ms. Shirin Khajuria, Bhavanisnankar V. Gadnis, Umapati B
Ganesh, Ms. B. Sunita Rao, Nitin Popli, Bodhankar, P.H. Parekh, Rohit Alex,
Sumit Goel, Sameer Parekh, Bodhankar, Ms. Hari Priya and Ms. Asha Gopalan
Nair for the appearing parties.

The following Order of the Court was delivered :
c
DHARMADHIKARI, J. The dispute in these appeals between the
appellant as Iron Ore raising/purchase contractor and the respondents who
claim to have been duly appointed as new contractors by the mine owner
is regarding their rival claims to exclusively run the Iron Ore mine which
is the subject matter of the suit instituted by the new contractors.
D
The appellant company [shortly referred to as the old contractor] claims
right to run the mine on the basis of their alleged existing contract with the
mining-lease-owner. According to the appellant, the contract with them was
renewed by acceptance of their offer of renewal and consequent conduct of
permitting them to work the mine on periodical payments of price in E
accordance with the original terms of the contract.

The case of the contesting respondent nos. 1 & 2, who are plaintiffs
before the trial cqurt [shortly referred to as the new contractors], is that the
mining-lease-owner has refused to renew the contract with the appellant and
has entered into a fresh contract on payment of higher price with them. F

-- The trial court granted an ex parte temporary injunction in favour of
the new contractors. After hearing both the parties at length, the ex parte
interim injunction earlier granted under Order 39 Rules l & 2 of the Code
of Civil Procedure was vacated by the trial court.
G
Aggrieved by the order of the trial court refusing to confirm the order
of temporary injunction, the new contractors appealed to the High Court. The
High Court by its impugned order has allowed the appeal and in terms of the
prayer made by the new contractors, has granted temporary injunction in
their favour without any conditions. The old contractor is, therefore, before
u~ in these appeals. H
1214 SUPREME COURT REPORTS (2004] 2 S.C.R.

A We have heard all the learned counsel appearing for the parties at great
length.

Learned senior counsel appearing for the appellant after referring to
various documents on record and strongly relying on the decision in Gardner
v. Blaxill- [1960] 2 All.E.R. 457, contended that renewal of the contract can
B be implied by conduct of the parties. It is further contended that admittedly
after expiry of the term of the contract, the appellant was running the mine
and making payments for the extraction of the ore to the mining-lease-
owner. The new contractors by offering higher price to the owner made a
surreptitious attempt to take possession of the mine by seeking ex parte
C injunction. The appellant had already filed a caveat in the trial court in
anticipation of filing of a suit against them and threat to. their rights in the
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(
mine. Ignoring the caveat, the trial court was misled into passing an ex parte
order of temporary injunction without any notice to the appellant. An ex
parte order of temporary injunction on ground of urgency by invoking proviso
to Order 39 Rule 3 CPC was obtained when there existed none and in any
D case no emergent circumstances confronted the plaintiffs as not to notice the
opposite party and grant opportunity of hearing to it. The trial court in the
order granting ex parte temporary injunction did not record reasons. Hence,
the order suffered incurable infirmity.

It is submitted that thus practising misrepresentation and deception, the
E new contractors obtained an ex parte order of temporary injunction and being
armed with it, made forcible entry into the mine. The trial court, later on,
vacated the temporary injunction, after hearing both the parties. The submission
made on behalf of the appellant is that as the new contractors could not have
obtained a contract in their favour during existence of a renewed contract in
p favour of the old contractor, this Court should allow these appeals, vacate the
order of temporary injunction and restore the status quo ante by permitting
the appellant to take possession of the mine for uninterrupted working.

On the other hand, learned counsel appearing for the mining lease
owner and the new contractors submitted that, in terms of the original contract,
G a renewal could be made only in writing. Reliance is placed on Provash
Chandra Dalui and Anr. v. Biswanath Banerjee and Anr., [1989] Supp. 1
SCC 487 and State ofU.P. and Ors. v. Lalji Tandon (dead) Thr. LRs., [2004]
1 sec 1. The contention advanced is that after expiry of the term of the
contract, under some ad hoc arrangements with the owner, even if the old
H contractor might have made some extractions of ore and paid price that
HARDESH ORES PVT.LTD. v. TIMBLO MINERALS PVT.LTD. 1215

cannot be held to be an act of renewal of the contract. The mining lease A
owner by an express notice sent in writing has refused to renew and terminated
the contract of the old contractor. Thereafter, he has entered into a written
contract on higher price with the new contractors. The old contractor, therefore,
has no right in presenti to remain in possession of the mine and to operate
it. According to learned counsel for the new contractors, there is no counter
suit filed by the old contractor to specifically enforce any alleged agreement B
of renewal of the contract and such relief cannot be legally granted in view
of the bar contained in clause (c) of sub-section (1) of Section 14 of the
Specific Relief Act which provides that a Contract in its nature determinable'

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is unenforceable.

The suit is pending for trial on merits. We would not, therefore, express
c
any opinion, one way or the other, on the merits of the contentions advance.
On the basis of three established principles for grant of temporary injunction
e.g., prima facie case, balance of convenience and irreparable loss, in our
. considered opinion, it would not be appropriate to interfere with the order of
the High Court at the present stage of the suit and disturb the working of the D
mine by the new contractors who have already commenced operations from
June 2003 and, as alleged, entered into business commitments for supply of
iron ore to different parties in and outside India.

After considering the comparative merit of the case of either parties
·and their rival claims, we have formed an opinion that the High Court ought E
not to have granted unconditional order of temporary injunction by ignoring
the huge investments which have been made by the old contractor to operate
the mine under an existing arrangement and alleged renewal of the contract
by their mutual conduct.
F
In the course of hearing, on behalf of the old contractor, learned
counsel has handed over to us in writing the proposed terms and conditions
on which it seeks restoration of possession of the mine and permission to
operate the same. The proposed terms suggested by the appellants have been
opposed by the new contractors and their response in writing has also been
placed before. us. Taking tentatively the figures mentioned by the new and G
olq contractors in their proposed terms and responses submitted orally and in
writing indicating the extent of investments and estimated profits, we consider
it appropriate to modify the impugned order of grant of temporary injunction
passed by the High Court by imposing the following conditions :-

(1) As a pre-condition for further operating the mine, the new H
1216 SUPREME COURT REPORTS [2004] 2 S.C.R.

A contractors shall furnish a Bank Guarantee or a Solvent Security to the
satisfaction of the Trial Court in the sum of Rupees Five Corers towards the
estimated investments already made by the old contractor in the mine from
the year 1984 in prospecting, developing, digging bore holes, removal of
rejection, making benches, putting up infrastructural facilities, acquiring surface
B rights, to dump rejects, cost of shifting of school, electrification, research and
development etc. The Bank guarantee or solvent security, as the case may be,
to the satisfaction of the trial court shall be furnished within a period of four
weeks from today. - ..

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(2) The new contractors shall, by the end of every month, deposit in
C the trial court a sum of Rupees 50 per metric ton, on the basis of payment
slips of trucks and monthly returns submitted to the statutory mine authorities,
on each quantity of ore extracted and exported by them, in order to reimbourse, (
in the event of dismissal of the suit, the loss of estimated profit caused to the
old contractor.

D (3) The amounts aforementioned to be deposited in respect of the
q~antities of Ore extracted and exported shall be kept by the Trial Court,
when deposited, in fixed deposit in a nationalised Bank so that they earn
current rate of interest. The amounts shall be paid on final decision of the suit
by the Trial Court to the party held entitled to it.

E (4) At the conclusion of the trial and decision of the suit, the trial court
shall pass consequential orders for payment of the amount covered by the
Bank Guarantee or solvent security and the. amounts periodically deposited
for the ore extracted and exported in the manner directed above.
--
(5) As admitted by the parties, the quantity of iron ore already extracted
F during period of working by the old contractor is stacked at the site in the
mining area. Without going into the dispute of extent of quantity of iron ore
extracted and stacked at site and its value, we direct that the old contractor
shall be allowed to collect and transport the same in accordance with the then
existing terms of the written contract between the old contractor and the
G mining-lease-owner. In collecting and transporting the aforementioned quantity
of iron ore, the old contractor shall follow not only the terms of the contract
but also all statutory provisions and rules regulating the extraction and
transportation of minerals. It shall also submit necessary statutory returns and
clear dues, if any, of statutory Authorities in accordance with law. In order
of allow the old contractor to take away the iron ore extracted by it and
H stacked at the site, the trial court shall appoint a Commissioner to be assisted
HARD ESH ORES PVT. LTD. v. TIMBLO MINERALS PVT. LTD. 121 T
-- by a statutory mining authority to supervise the work. A
Looking to the nature of the dispute, the rival claims and high stakes
of the parties involved in running the mine, we direct the Trial Court to
expedite the trial of the suit and to make all endeavour to decide the same
early and in any event before December 2004.
B
·~
....... _ All legal grounds and contentions are left open to the parties to be
urged before the Trial Court. The trial court shall, on the basis of the evidence
produced before it, decide the suit in accordance with law and regardless of
any observations made by the trial court and the High Court in their orders
while disposing of the subject matter of grant of temporary injunction.
c
The impugned order of the High Court is, thus, modified with the
addition of the conditions mentioned above. The appeals are partly allowed
to the above extent. The costs incurred by the parties shall abide the final
result of the suit.

R.P. Appeals Partly allowed. D
'

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