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Court cannot issue injunction for determinable contract which fall U/s.14(1)(c) of the SRA: High Court of New Delhi

The CA being a determinable contract, under the provisions of Section 14(1)(c) of the SRA, no injunction could have been issued for howsoever short a duration and the impugned order to the extent it directs that the termination notice to be kept in abeyance is against the settled law. This was held in NATIONAL HIGHWAYS AUTHORITY OF INDIA v. PANIPAT JALANDHAR NH-I TOLLWAY PVT.LTD[FAO(OS)(COMM)55/2021] in the High Court of New Delhi by division bench consisting of JUSTICE MANMOHAN and  JUSTICE ASHA MENON.

Facts are that the respondent and the appellant had entered into a  Concession Agreement in which the appellant had issued a ‘Suspension Notice’ under Clause 36.1 of the CA suspending all rights of the respondent under the CA, which was followed by a Termination notice. The respondent had filed a petition U/S.9 of the Arbitration and Conciliation Act, 1996, where the court-ordered interim reliefs. The same has given rise to the present appeal by the appellant.

The counsel for the appellant the NHAI has prayed that interim order be set aside. The action taken by the appellant was fully in accordance with the terms of the CA, to suspend all rights of the concessionaire which relate to the collection of fee and other revenues and authorize itself or some other person to collect these revenues during the suspension period, that termination was not dependent on time limits. It was submitted that Articles 36 and 37 provide for a “composite scheme”.

The learned counsel for the respondent contended the Termination Notice was a colorable exercise of the power. It was further argued that none of the orders in the previous proceedings approved of such exercise of power of termination by the NHAI. If such termination was allowed, it would render the challenge of the respondent of the suspension, infructuous. Therefore, the interim order was just, fair, and equitable and called for no interference.

The court in order to discuss the maintainability of such appeals that are under the purview of an appellate court referred to the judgment of Wander Ltd. and Anr. v. Antox India (P) Ltd., wherein the following observations were made, “14. The appeals before the Division Bench were against the exercise of discretion by the Single Judge. In such appeals, the appellate court will not interfere with the exercise of discretion of the court of the first instance and substitute its own discretion except where the discretion has been shown to have been exercised arbitrarily, or capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions…”

The court also made reference to the judgment of the Apex court in, Indian Oil Corporation Ltd. v. Amritsar Gas Service and Others., wherein it was held that, “The finding in the award being that the Distributorship Agreement was revokable and the same being admittedly for rendering personal service, the relevant provisions of the Specific Relief Act were automatically attracted. Sub-section (1) of Section 14 of the Specific Relief Act specifies the contracts which cannot be specifically enforced, one of which is ‘a contract which is in its nature determinable. In the present case, it is not necessary to refer to the other clauses of sub-section (1) of Section 14, which also may be attracted in the present case since clause (c) clearly applies on the finding read with reasons given in the award itself that the contract by its nature is determinable. This being so granting the relief of restoration of the distributorship even on the finding that the breach was committed by the appellant-Corporation is contrary to the mandate in Section 14(1) of the Specific Relief Act and there is an error of law apparent on the face of the award which is stated to be made according to ‘the law governing such cases’ The grant of this relief in the award cannot, therefore, be sustained.

Considering the facts of the case and keeping in mind the settled proposition of law on the subject. The Court held that as per the articles and clauses of the CA there was no doubt that the CA was determinable in nature. Just as in Indian Oil Corporation Ltd. (supra), both parties had been given a right to seek termination of the CA by issuing a notice under Article 37. The CA being a determinable contract, under the provisions of Section 14(1)(c) of the SRA, no injunction could have been issued for howsoever short a duration. The court thus allowed the appeal and set aside the impugned order passed by the learned Single Judge.

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