1. Appellant impugns order dated 31.07.2024 passed by the
Commercial Court whereby the learned judge has returned the plaint filed
by the Appellant on the ground of non-compliance of Section 12A of the
Commercial Courts Act, 2015 (hereinafter referred to as the Act).
F.A. 1550-2024
2. Appellant had filed the subject Suit contending that the respondents
owned and had a stored total stock of 1,70,000 MT Iron Ore at its
principal place of business in Sihora, Jabalpur and that the Appellant also
has its Iron Ore Beneficiation Plant in Sihora, Jabalpur (MP). Respondent
approached the Appellant for sale and supply of its Iron Ore stock in the
year 2023 and an agreement dated 03.04.2023 was entered into, whereby
the Respondent agreed to sell its stock to the appellant for an agreed price
of Rs. 525/- per MT inclusive of royalty, DMF, NMET etc.
3. Appellants contended in the plaint that as per Clause 5.1 of the
Agreement, the ownership of the afore-stated stock stood transferred from
the Respondent to the Appellant after initial payment made on 04.04.2023
amounting to Rs. 1,00,00,000/-. Further, Clause 5 read with Annexure - I
of the Agreement, provided the schedule of tentative deliveries to be
made by the Respondent to the Appellant. Annexure - II of the
Agreement provided the manner of payments to be made by the Appellant.
4. It is further contended that since the execution of the Agreement,
Appellant has been seeking compliance from the Respondent for its
obligation to lift the material from its Stock Yard and deliver the same to
the Appellant and Respondent has developed ill-will and intends to
bypass its obligations to supply the material to the Appellant.
5. It is contended that to circumvent the terms of the Agreement,
Respondent filed Writ Petition No. 5083/2024 before this Court seeking
police protection for transportation of the material. By order dated
05.03.2024 this Court directed the state authorities to ensure that no
untoward incident takes place in the premises of the Respondent, however,
nothing was expressed regarding transportation of material.
F.A. 1550-2024
6. It is further contended that by misreading order dated 05.03.2024,
Respondent approached the State Authorities seeking permission to
transport the material and Appellant filed objections before the Collector
at Jabalpur inter alia seeking cancelation of the E- transit permit issued in
favour of the Respondent. It is contended that Respondent denied the
claim of the Appellant of ownership over the mineral giving rise to cause
of action to file the Suit.
7. In the Suit it is contended that Respondent in violation of the terms
of the Agreement dated 03.04.2023 is clandestinely transporting the iron
ore belonging to the Appellant and selling the same to third parties.
Appellant has also filed a complaint with the Station House Officer, P.S,
Khitaula, Tehsil Sihora, District Jabalpur (MP) on 27.07.2024.
8. Subject Suit has been filed by the Appellant contending that it is
imperative that the subject-matter of the Agreement i.e. the iron ore is
preserved and a restraint issued on the Respondent and its
associates/agents from lifting and transporting the stocked mineral. It is
contended that the ownership of the material stood transferred to the
Appellant and that it has become imperative to compel the Respondent to
immediately stop misappropriation of the mineral and return possession
of the mineral to the Appellant. Appellant in the Suit inter alia seeks a
declaration that upon receiving the advance consideration of Rs. One
crore, Respondent is bound by the terms of the agreement dated
03.04.2023 and also seeks a direction to the Respondent to keep the stock
of the mineral to the tune of 1,70,000 Mt. Tonne lying at their premises
intact and for retraining the respondents from misappropriating the same
by alienation.
F.A. 1550-2024
9. Along with the Suit Appellant filed an application under Order 39
Rule 1 and 2 of the Code of Civil Procedure, contending that the
Respondent is bent on dishonouring the terms of the Agreement dated
03.04.2024 and is continually violating the terms of the Agreement by
clandestinely transporting the iron ore belonging to the Appellant, selling
it to third parties thereby causing breach of trust. It is further contended in
the application that in case Respondent succeeds in achieving its illegal
designs of forcibly ousting and unjustly enriching itself with 1,70,000 MT
of Iron Ore that lawfully belongs to the Appellant, then Appellant will
suffer an irreparable loss and injury which cannot be compensated in
terms of money.
10. Appellant also filed an application under Section 12A (1) of the
Commercial Courts Act, 2015 (hereafter referred to as "the Act") seeking
exemption from compliance of pre-litigation mediation. It is inter alia
contended in the application that due to the urgent nature of the situation,
Appellant was preferring an Application seeking interim injunction under
Order 39, Rule 1 and 2 of the Code of Civil Procedure (CPC) to prevent
the defendants from disposing of or transferring the Iron Ore stock. Given
the urgent interim relief, Appellant sought exemption from pre-institution
mediation under Section 12A (1) of the Act as the matter required
immediate hearing.
11. By the impugned order dated 31.07.2024, the Commercial Court
dismissed the application filed by the Appellant under Section 12 A (1) of
the Act.
12. The Trial Court has held that the Respondent had approached the
High Court by way of a Writ Petition (W.P. No. 5083/2024) and the High
F.A. 1550-2024
Court by its order dated 05.03.2024, had directed the Superintendent of
Police, Jabalpur to ensure that no untoward incident happens at the
premises of the Respondent and law and order situation is maintained at
the place of the respondent. It is observed by the trial court that from the
pleadings of the Appellant, it appears that the Respondent is in the
business of sale and supply of iron ore and instead of the agreed upon
iron ore, respondent could supply some other iron ore. It is further held
that from the pleadings of the Appellant, it appears that the only dispute is
that respondent is committing a breach of the agreement for monetary
gain.
13. The trial court has held that despite being aware of the Writ
Petition filed by the Respondent, appellant did not file any application for
referring the disputes to mediation. If the appellant wanted he could have
requested for mediation at the appropriate time. The trial court has held
that as per clause 7 of the agreement, if the seller fails to deliver the
agreed quantity of the stock to the buyer and the buyer is constrained to
purchase products from outside, then the buyer shall arrange the material
from other sources and the losses if any incurred by the buyer shall be
recovered from the seller. It is held that in effect if the execution of the
agreement is proved, then appellant would be entitled to specific
performance of the agreement, which does not come in the category of
urgent interim relief. The trial court thus dismissed the application filed
by the Appellant under Section 12A (1) of the Act, leading to the filing of
the subject Appeal.
14. Reference may be had to Section 12 A (1) of the Act, which reads
as under:
15. Section 12A (1) of the Act stipulates, that a suit which does not
contemplate any urgent interim relief shall not be instituted unless
plaintiff exhausts the remedy of pre-institution mediation. Reading of
Section 12A (1) of the Act shows that cases where no urgent interim relief
is contemplated cannot be instituted unless the plaintiff has exhausted the
remedy of pre-institution mediation. The effect of such a stipulation by
the Act is that suits where urgent interim relief is contemplated can be
filed and would be maintainable without resorting to pre-institution
mediation.
"74. It is noteworthy that Section 12-A provides for a bypass and a
fast-track route without for a moment taking the precious time of a
court. At this juncture, it must be immediately noticed that the lawgiver
has, in Section 12-A, provided for pre-institution mediation only in
suits, which do not contemplate any urgent interim relief. Therefore,
pre-institution mediation has been mandated only in a class of suits.
We say this for the reason that in suits which contemplate urgent
interim relief, the lawgiver has carefully vouchsafed immediate access
to justice as contemplated ordinarily through the courts. The carving
out of a class of suits and selecting them for compulsory mediation,
harmonises with the attainment of the object of the law. The load on
the Judges is lightened. They can concentrate on matters where urgent
interim relief is contemplated and, on other matters, which already
crowd their dockets."
F.A. 1550-2024
17. The Supreme Court has held that the lawgiver has, in Section 12-A
of the Act, provided for pre-institution mediation only in suits, which do
not contemplate any urgent interim relief and that pre-institution
mediation has been mandated only in a class of suits.
18. Further, the Supreme Court in Yamini Manohar v. T.K.D. Keerthi,
(2024) 5 SCC 815, referring to Patil Automation (supra) held as under:
"10. We are of the opinion that when a plaint is filed under the CC
Act, with a prayer for an urgent interim relief, the commercial court
should examine the nature and the subject-matter of the suit, the cause
of action, and the prayer for interim relief. The prayer for urgent
interim relief should not be a disguise or mask to wriggle out of and
get over Section 12-A of the CC Act. The facts and circumstances of
the case have to be considered holistically from the standpoint of the
plaintiff. Non-grant of interim relief at the ad interim stage, when the
plaint is taken up for registration/admission and examination, will not
justify dismissal of the commercial suit under Order 7 Rule 11 of the
Code; at times, interim relief is granted after issuance of notice. Nor
can the suit be dismissed under Order 7 Rule 11 of the Code, because
the interim relief, post the arguments, is denied on merits and on
examination of the three principles, namely : (i) prima facie case, (ii)
irreparable harm and injury, and (iii) balance of convenience. The fact
that the court issued notice and/or granted interim stay may indicate
that the court is inclined to entertain the plaint.
11. Having stated so, it is difficult to agree with the proposition
that the plaintiff has the absolute choice and right to paralyse Section
12-A of the CC Act by making a prayer for urgent interim relief.
Camouflage and guise to bypass the statutory mandate of pre-litigation
mediation should be checked when deception and falsity is apparent or
established. The proposition that the commercial courts do have a role,
albeit a limited one, should be accepted, otherwise it would be up to
the plaintiff alone to decide whether to resort to the procedure under
Section 12-A of the CC Act. An "absolute and unfettered right"
approach is not justified if the pre-institution mediation under Section
12-A of the CC Act is mandatory, as held by this Court in Patil
Automation [Patil Automation (P) Ltd. v. Rakheja Engineers (P) Ltd.,
(2022) 10 SCC 1 : (2023) 1 SCC (Civ) 545] .
12. The words "contemplate any urgent interim relief" in Section
12-A(1) of the CC Act, with reference to the suit, should be read as
conferring power on the court to be satisfied. They suggest that the suit
must "contemplate", which means the plaint, documents and facts
F.A. 1550-2024
should show and indicate the need for an urgent interim relief. This is
the precise and limited exercise that the commercial courts will
undertake, the contours of which have been explained in the earlier
paragraph(s). This will be sufficient to keep in check and ensure that
the legislative object/intent behind the enactment of Section 12-A of the
CC Act is not defeated."
19. The Supreme Court in Yamini Manohar (supra) has held that when
a plaint is filed under the Act, with a prayer for an urgent interim relief,
the commercial court should examine the nature and the subject-matter of
the suit, the cause of action, and the prayer for interim relief to ascertain
that the prayer for urgent interim relief is not a disguise or mask to
wriggle out of and get over Section 12-A of the Act. Court should
holistically consider the facts and circumstances of the case. The
consideration has to be from the standpoint of the plaintiff.
20. The Supreme Court has explained that merely because interim
relief is not granted at the ad interim stage, would not justify dismissal of
the commercial suit under Order 7 Rule 11 of the Code. At times, interim
relief is granted after issuance of notice. The Supreme Court has held that
the suit cannot be dismissed under Order 7 Rule 11 of the Code, even
when the interim relief, post the arguments, is denied on merits on
examination of the three principles, namely : (i) prima facie case, (ii)
irreparable harm and injury, and (iii) balance of convenience.
21. The Supreme Court further held that plaintiff does not have an
absolute choice and right to parlayse Section 12-A of the Act by making a
prayer for urgent interim relief. Camouflage and guise to bypass the
statutory mandate of pre-litigation mediation should be checked when
deception and falsity is apparent or established. The words "contemplate
any urgent interim relief" in Section 12-A(1) of the Act, with reference to
F.A. 1550-2024
the suit, is to be read as conferring power on the court to satisfy itself
from the pleadings that the documents that there is a need for an urgent
interim relief and that the legislative object and intent behind Section 12A
of the Act is not defeated.
22. In view of the law as laid down by the Supreme Court, it is to be
considered as to whether the subject plaint has been filed with a prayer
for interim relief or not and if so, whether the prayer for urgent interim
relief is a disguise or mask to wriggle out of and get over Section 12A of
the Act? Another question which arises for consideration is whether the
Trial Court could have dismissed the Suit by considering the merits of the
claim of the Appellant?
23. Appellant in the Plaint has contended that an agreement dated
03.04.2023 was executed between the Appellant and the Respondent for
purchase of stock of 1,70,000 MT Iron Ore stored by the Respondent at
its principal place of business in Sihora, Jabalpur. Respondent agreed to
sell its stock to the appellant for an agreed price of Rs. 525/- per MT
inclusive of royalty, DMF, NMET etc. As per Clause 5.1 of the agreement,
ownership of the stock stood transferred from the Respondent to the
Appellant after initial payment was made on 04.04.2023 amounting to Rs.
1,00,00,000/-. The agreement provided the schedule of tentative
deliveries to be made by the Respondent to the Appellant as also the
manner of payments to be made by the Appellant.
24. It is contended that Appellant has been seeking compliance from
the Respondent for its obligation to lift the material from its Stock Yard
and deliver the same to the Appellant and Respondent has developed ill-
will and intends to bypass its obligations to supply the material to the
F.A. 1550-2024
Appellant and further that the Respondent, in violation of the terms of the
Agreement dated 03.04.2023, is clandestinely transporting the iron ore
belonging to the Appellant and selling the same to third parties for which
a complaint has been filed with the concerned Police Station on
27.07.2024.
25. It is contended in the plaint that it is imperative that the subject-
matter of the Agreement, i.e. the iron ore, is preserved and a restraint
issued on the Respondent and its associates/agents from lifting and
transporting the stocked mineral.
26. It is contended that the ownership of the material stood transferred
to the Appellant, thus it has become imperative to compel the Respondent
to immediately stop misappropriation of the mineral and return
possession of the mineral to the Appellant. Appellant in the Suit inter alia
seeks a declaration that upon receiving the advance consideration of Rs.
One crore, Respondent is bound by the terms of the agreement dated
03.04.2023 and also seeks a direction to the Respondent to keep the stock
of the mineral to the tune of 1,70,000 Mt. Tonne lying at their premises
intact and for restraining the respondents from misappropriating the same
by alienation. It is further contended that if Respondent succeeds in
achieving its illegal designs of forcibly ousting and unjustly enriching
itself with 1,70,000 MT of Iron Ore that lawfully belongs to the Appellant,
then Appellant will suffer an irreparable loss and injury which cannot be
compensated in terms of money.
27. In the Agreement dated 03.04.2024, parties have stipulated in the
recitals as under:
"WHEREAS
F.A. 1550-2024
A. *****
B. *****
C. The Seller owns and has stored a total stock of 1,70,000 MT
( One Lakh Seventy Thousand Metric Tonnes) iron ore (the
"Stock") at Plot No,55-58 & 61-64, Hargarh Industrial Area,
Sihora, 'Jabalpur 483225 where the Iron Ore Beneficiation
Plant of the seller is located (the "Plant Site"),
D. The Seller forthwith sell and the Buyer forthwith purchase the
Stock at the Plant Site in accordance with the terms, conditions,
specifications, quantity, quality, price, payment, and delivery
terms described in this Agreement"
28. Clause 2 of the Agreement provides for "Specifications of the
Stock" and clause 2.1 reads as under:
"2.1 The Seller hereby sells the Stock to the Buyer on an exclusive
basis and the Buyer hereby buys the Stock on a non- exclusive
basis"
29. Clause 2.2 provides for the specification of the Iron Ore. Clauses
2.3 and 2.4 provide for dispatch as per quality parameters and read as
under:
"2.3 The Seller shall ensure that the material should be dispatched
as per the quality parameters of Buyer's specification. However,
acceptance of material on a pro rata basis shall be at the
Buyer's discretion.
2.4 No modification / variation / amendment including but not
limited to quantity, quality, specifications in the Stock shall be
permitted unless made in writing and duly signed by the
Buyer."
30. Clause 5 deals with "Ownership and Delivery" and reads as under:
"5. OWNERSHIP AND DELIVERY
5.1 The ownership of the Stock stands transfer from the Seller to
the Buyer on the Effective Date of this Agreement subject to the
initial payment done by the Buyer as stipulated in Clause 6.1 of
this Agreement. However, the delivery of the Stock shall
commence post March 31st, 2024, at the sole discretion of the
Buyer in the mode, interval, batches, place as and when
instructed by the Buyer to the Seller after giving a 3 (three)
F.A. 1550-2024
days" notice in writing, The tentative intervals of delivery are
stipulated in Annexure -L Until the commencement and
completion of delivery the Stock shall be stored at the Plant Site
and the Buyer shall have all the rights to ensure safety of the
Stock including right to access the Plant Site of the Seller and
deputation of staff to protect the Stock from rain, winds, other
threats etc.
5.2 The Seller shall have no right to sell, transfer, alienate, pledge,
mortgage the Stock to Third Party on and from the Effective
Date of this Agreement irrespective of the possession of the
Stock with the Seller due to delivery as agreed in Clause 5.1
above."
31. Clause 6 provides for the Payment Terms and reads as under:
6.1 The Buyer agrees to transfer an advance payment to the Seller
on the timelines as follows:
INR 1,00,00,000/- only (INR Within 7 (Seven) days from the
One Crore only) Effective Date of this Agreement
6.2 All payments in connection with the deliveries shall be made in
manner as Stipulated in 'Annexure-I,
32. Reading of the agreement executed between the parties shows that
parties had identified the specified stock of 1,70,000 Metric Tonne of iron
ore that was available at the Plant Site of the Respondent referred to the
same as "the stock" subject matter of the agreement. It was agreed that
the stock shall be sold by the Respondent to the Appellant on an exclusive
basis. However the appellant bought the stock on a non-exclusive basis.
This prima facie implies that the Respondent did not retain the right to
sell the stock to any third party. The dispatch had to be as per the quality
parameters of the Appellant (buyers) specifications. No modification,
variation or amendment to inter alia the quantity, quality or specification
was permitted unless agreed to by the Buyer i.e. the Appellant.
F.A. 1550-2024
33. The price per MT of the iron ore of the specified specification was
agreed. Clause 2.2 also provides for price adjustment in case of any
variation in the quality or moisture content.
34. Clause 5 stipulates that the ownership of the Stock would stand
transferred from the Respondent to the Appellant on the effective date of
the agreement i.e. 03.04.2023, subject to Appellant making the initial
payment of Rs. One Crore to the Respondent as per clause 6.1, which
provides for payment within seven days from the effective date. It is the
case of the Appellant that the payment of Rs. One crore has been made
and thus the ownership stands transferred to the Appellant.
35. Clause 5 further stipulates that delivery of the Stock shall
commence post March 31st, 2024, at the sole discretion of the Appellant
in the mode, interval, batches, place as and when instructed by the
Appellant to the Respondent. Said Clause also provides that until the
commencement and completion of delivery, the Stock shall be stored at
the Plant Site and the Appellant shall have all the rights to ensure safety
of the Stock including right to access the Plant Site of the Respondent and
deputation of staff to protect the Stock from rain, winds, other threats etc.
Clause 5.2 specifically provides that the Respondent has no right to sell,
transfer, alienate, pledge, mortgage the Stock to Third Party on and from
the Effective Date of this Agreement irrespective of the possession of the
Stock with the Respondent.
36. The terms of the clauses of the agreement executed between the
parties, prima facie show that the 1,70,000 MT of the iron ore was
identified and allocated to the agreement. On the payment of Rs. One
Crore by the Appellant to the Respondent, the ownership of the same
F.A. 1550-2024
stood transferred to the Appellant. Respondent ceased to have any right to
deal with it or sell it to any third party.
37. Appellant has filed the subject Suit claiming an urgent ad interim
relief on the ground that the respondent was clandestinely selling the
stock to third parties. Clearly the Suit contemplates an urgent interim
relief and is thus squarely covered by the exception carved out in Section
12A of the Act.
38. The Trial Court has clearly ignored the terms of the agreement
and has misread Clause 7 of the agreement which provides for Risk
and Cost purchase by the Appellant in case, Respondent fails to deliver
the agreed quantity. Said Risk and Cost purchase does not imply that
the Respondent has the right to sell the stock to any third party and
Appellant cannot seek any urgent interim relief to protect the Stock,
ownership of which would stand transferred to the Appellant on
making payment of Rs. One Crore in terms of the agreement.
39. The Trial Court has clearly erred in holding that the relief sought
for does not come in the category of urgent interim relief. The
impugned order dated 31.07.2024 is clearly not sustainable.
40. The Trial Court has further erred in adverting to the merits of the
claim of the plaintiff to deny the application. Trial Court has referred to
the Risk and Cost clause to hold that the Respondent could have
supplied some other iron ore. Supreme Court in Yamini Manohar (supra)
has clearly held that merely because interim relief is not granted at the ad
interim stage, would not justify dismissal of the commercial suit under
Order 7 Rule 11 of the Code. The Trial Court could not have adverted to
F.A. 1550-2024
the merits of the claims of the Appellant, while deciding the Application
under Section 12A of the Act. It had only to ascertain, if the Suit
contemplated an urgent interim relief. On this ground also the impugned
order is not sustainable.
41. Further we may note that by order dated 07.11.2024, in Review
Petition No. 1306 of 2024, this Court directed that status quo of the site
in question shall be maintained by the parties. By order dated
09.01.2025, while permitting the appellant to withdraw the Review
Petition, liberty was granted to the Appellant to purse its remedy in the
present appeal and the interim protection granted on 07.11.2024 was
continued till 15.01.2025. By order dated 10.01.2025, the interim
protection was continued till the disposal of the appeal and parties were
directed to maintain status quo in the meantime and Respondents were
directed not to transport and sell the minerals from the stockyard. The
interim protection has continued till date.
42. In view of the above, order dated 31.07.2024 rejecting the plaint is
set aside. The Application of the Appellant under section 12A of the Act
is allowed. It is held that since the Suit contemplates an urgent interim
relief, same is not barred under Section 12A (1) of the Act. The Suit is
restored on the record of the Commercial Court to be proceeded with and
adjudicated in accordance with law.
43. Further, till the disposal, by the Commercial Court, of the
application under Order 39 Rules 1 & 2 Code of Civil Procedure, filed by
the Appellants along with the Suit, Respondent is restrained from
transporting and selling the 170,000 MT of iron ore, subject matter of the
F.A. 1550-2024
agreement dated 03.04.2023. In case any part of the agreed upon stock
had been removed prior to the passing of the interim order dated
07.11.2024, Respondent are restrained from transporting and selling the
deficit quantity of iron ore from its other stock, if available and subject to
the same being of the prescribed specification, failing which the default
clauses in the agreement dated 03.04.2023 shall be applicable.
44. It is clarified that the Commercial Court shall decide the
application under Order 39 Rules 1 and 2 CPC and the Suit in accordance
with law, without being influenced by anything stated on merits in this
Order.
45. The Appeal is disposed of in the above terms.
(SANJEEV SACHDEVA) (VINAYSARAF)
CHIEF JUSTICE JUDGE
RAVIKANT KEWAT
2025.08.14 10:53:21
+05'30'
