Allowed

The Hyderabad Cricket Association v. M/s.Visakha Industries Limited

Telangana HC11 Oct 2011CMA/1025/2011

Case brief

AI extract

What is this about?

This court considered a civil miscellaneous appeal challenging an order granting interim injunction in favor of a sponsor during pendency of arbitration. The court held that the injunction was valid to preserve contractual rights during the arbitration process.

What did the court decide?

The Civil Miscellaneous Appeal was dismissed; the interim injunction order in favor of the respondent company was upheld.

The Hyderabad Cricket Association Vs M/s.Visakha Industries… — Arbitration | Telangana HC (2011)

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*** HONOURABLE SRI JUSTICE A. GOPAL REDDY AND**

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HON'BLE SRI JUSTICE K.S. APPA RAO

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+ CIVIL MISCELLANEOUS APPEAL No.1025 of 2011

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%17-10-2011

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# The Hyderabad Cricket Association, Gymkhana Grounds, Opp.Lamba Theatre, Secunderabd, rep. by its Honorary Secretary Sri D.S.Chalapathi, S/o.Late Sri Brahmanandam, Aged 55 years, r/o.Andhra Bank Colony, Malakpet, Hyderabad.

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….Appellant

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Vs.

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$ M/s.Visaka Industries Limited, Regd. Office at 315, Yelumala village, R.C.Puram Mandal, Medak District and corporate office at Visaka Towers, 1-8-303/69/3, S.P.Road, Secunderabad, Rep. by its authorized signatory Sri K.V.Soorinarayanam, S/o.late Sri K.S.Vaidyanatha Iyer, aged about 57 years, Occ.President (Corporate) And Company Secretary, C/o.Visaka Towers, 1-8-303/69/3, S.P.Road, Secunderabad.

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…. Respondent

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!Counsel for the Appellant: Sri B.Adinarayana Rao

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Counsel for the Respondent: Sri M.Papa Reddy

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<Gist :

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>Head Note:

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? Cases referred:

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1. 2007(7) SCC 125 2. 1971 AP 380 3. 2011(1) SCC 429 4. 2007(6) SCC 798 5. 2001(113) Bom LR 749 6. 1990(2) SCC 117 7. 2003(2) RAJ 132 8. 2004(5) scc 741 9. 2003(3) RAJ 435 10. 2003(2) RAJ 582 11. AIR 1991 SC 1092

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12. 2004(6) SCC 649 13. 1973(2) SCC 515 14. 2009(5) SCC 182 15. AIR 1999 SC 565 = 1999(2) SCC 479

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IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD

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MONDAY, THE 17^th DAY OF OCTOBER, TWO THOUSAND AND ELEVEN

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PRESENT

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HON’BLE SRI JUSTICE A.GOPAL REDDY AND

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HON’BLE SRI JUSTICE K.S.APPA RAO

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CIVIL MISCELLANEOUS APPEAL No.1025 of 2011

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Between: The Hyderabad Cricket Association, Rep. by its Honorary Secretary, D.S.Chalapathi.

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… Appellant

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And

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M/s.Visakha Industries Limited, Rep. by its Authorised signatory

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… Respondent

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This Court made the following:

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HON’BLE SRI JUSTICE A.GOPAL REDDY AND

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HON’BLE SRI JUSTICE K.S.APPA RAO

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CIVIL MISCELLANEOUS APPEAL No.1025 of 2011

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JUDGMENT: - (Per Hon’ble Sri Justice A.GOPAL REDDY)

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This Civil Miscellaneous Appeal is filed under Section 37(1)(a) of the Arbitration and Conciliation Act, 1996 (for short, “the Act”), against the order passed in Arbitration O.P.No.754 of 2011, dated 16.09.2011, by the Chief Judge, City Civil Court, Hyderabad, whereunder the

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petition filed by the respondent/petitioner therein for grant of interim injunction restraining the appellant/respondent therein from acting in any way in breach of clauses 2(A) & 2(B) of the Agreement, dated 16.10.2004 etc., was partly allowed.

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2. The relevant facts, which are necessary for disposal of the present appeal, are briefly stated as under:-

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M/s.Visakha Industries Limited, a company incorporated under the Companies Act, 1956 (hereinafter referred to as “the Company”), respondent herein, manufactures Asbestos Cement Sheets, Yarn and Building Boards. The Hyderabad Cricket Association (hereinafter referred to as “Association”), appellant herein, is a registered society and is an affiliated member of the Board of Control for Cricket in India. The Association has been established for promoting, organizing, managing and conducting game of Cricket in Hyderabad and for holding various tournaments in cricket including those of Board of Cricket Control in India (BCCI) besides International Cricket matches held in Hyderabad. The Association proposed to construct an International Cricket Stadium on all that of its leased land admeasuring Ac.16-00 guntas situated at Tarnaka-Uppal Road. The Association had been making efforts to find a corporate body willing to sponsor or part finance the construction of the new Stadium and in return the Association offers to such party in-Stadium advertising rights and certain other privileges and benefits. It inter alia engaged a third party to act, on commission basis, as agent to persuade a reliable party to come forward and accept the Association’s offer as aforesaid. On termination of the contract with the said third party, the Association approached various companies including M/s.Visakha Industries Limited and after discussions and negotiations, an irrevocable agreement was arrived, which was reduced into writing on 16.10.2004. The relevant clauses of the said agreement are as follows:-

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“(A) The petitioner agreed to pay Rs.6.5 crores to the

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respondent for the exclusive vesting in the petitioner of the irrevocable right to name the said Stadium as ‘Visaka International Cricket Stadium’ and Advertisement, publicity and display rights at the places specified the company’s products, name, logo, trademarks and promotional materials and devices.

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(i) An extent of 9,000 running feet in the entire outer rim advertising space of the stadium shall be reserved exclusively for Corporate advertising and publicity and display purposes; out of which 1200 running feet divided into 400 running feet in front of the pavilion on the structure of the stadium’s south stand and 200 running feet each on the structure of the stadium’s East and West stands, and space on the electronic Score Board shall be available exclusively for advertising and publicity and display purposes.

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(ii) The entire rooftop of the stadium shall be available exclusively for advertising and publicity and display purposes.

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(iii) Two permanently fixed Runner Boards of 20 running feet length and 3 feet width size each, i.e., a total of 40 running feet displayed between 5 to 10 feet outside the boundaries in the third man region on either side of the wicket shall be available exclusively to the company or its nominees for advertising, publicity and display purposes.

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(iv) The name of the stadium after ‘Visaka International Cricket Stadium’ shall be displayed at the main gates at the cost of respondent and two big hoardings shall be placed above the East and West sides.

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(v) A balloon at the appropriate place and height in the stadium for advertisement shall be allowed to be displayed at the cost of petitioner and a ball will be allowed to be displayed in metal or other medium as found feasible by the company at the location and height mutually decided.

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(b) At clause (A)(ix), it is specificallys tated that “for the removal of doubts, it is expressly agreed and stated here that the places/space and facilities aforesaid shall be reserved for the exclusive use of the company and at all times irrespective of whether there is or there is no any match or other event being held or conducted or taking place in the said stadium or any part thereof.

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(c) Certain privileges are listed out available to the petitioner company undewr clause –B. they include allowing free of charge (4) air-conditioned corporate boxes kept in good maintenance by the Association bearing Box Nos.6 and 7, 10 and

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12; the association shall give the petitioner 150 VVIP complimentarty passes free of cost in the main Pavilion of the South Stand for every match taking place in the stadium; 100 tickets of assorted denominations sold for the match wil be offered on right to first refusal basis to the company for purchase at the rates applicable to for the given match; the company shall be allowed free of cost (5) Corporate Memberships in the Club proposed to be established by the Association at the stadium; 10 VVIP car parking slots shall be allotted to the company, free of cost; the company shall have the right to use, free of charge, the stadium for two full days each year with electricity and water facilities for the company’s corporate and social purposes and the representatives or nominees of the petitioner company making use of the aforesaid facilities shall do so without violating the association’s rules and regulations.

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d) At clause-6, the association had undertaken certain responsibility on its part, viz., that it will not insist for additional funds to be provided by the petitioner which shall keep the petitioner company informed regularly about the development of the construction, securing and confirming the insurance coverage. The important clause is sub-clause (v) in Clause-6 which reads, “in the event the Association fails to provide to the company in any year during the currency of this Agreement advertisement and publicity and display place/space and /or any one or more of the facilities/privileges/benefits aforesaid, the Association shall be liable to pay to the company liquidates damages (not amounting to penalty) an amount equal to six times the consideration paid by the company to the association under this agreement.” Clause-8 demonstrates the following. The petitioner shall have the right to assign, lease or sub-lease any of the advertisement or publicity or display places/spaces as also the spaces of the four corporate boxes to any party or parties, provid4ed that such assignment or licence etc. is not in conflict in any manner whatsoever with any of the sponsorships or arrangements made by the association with ICCI/BCCI for the matches; the association shall kept the petitioner informed at all times, the various arrangements with regard to the advertisements, publicity, display and sponsorship contract etc, the association has or enters with third parties so as to facilitate the company in its planning of allotment of spaces for its own use in terms of these covenants. Clause-10 had provided the exclusive ownership on the association only and not on the company. Clause-015 provides settlement of any dispute by

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appointment of three arbitrators in accordance with the provisions of Arbitration and Conciliation Act, 1996 and to be held at Hyderabad.

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In pursuance of the said agreement, the Company invested 4.32 crores. Subsequently, the parties negotiated to rename the International Cricket Stadium as “Rajiv Gandhi International Cricket Stadium” in view of the proposal from the Government which is reflected in the letter, dated 10.11.2005, written by the Association limiting the contractual consideration with the company to the extent of the amount spent i.e., Rs.4.32 crores in full and final settlement of the contract and to continue the existing terms and conditions as mentioned in the contract, dated 16.10.2004, and the proposal to effect variance of the terms of the said Contract shall be by way of a supplemental Agreement. Thereafter, both the parties mutually agreed and the same was informed by the Association in its letter, dated 25.04.2006, noting the points of agreement viz., shifting of name of the South end to the North End to be called as Visaka End, and the playing grounds to be hereafter called as Visakha Cricket Grounds in all future correspondence and to be displayed inside on the south side of the Pavilion, besides the change of name of Visaka Stadium to Rajiv Gandhi International Cricket Stadium, which has been effected and all other facilities and areas of sponsorship agreed to remain the same. While so under the guise of an alleged arrangement with BCCI vis-à-vis IPL, the Association issued a communication, dated 21.04.2008, asking the Company to forego their rights and privileges which were available to them under agreement, dated 16.10.2004, which is nothing but an attempt to wriggle out the contractual terms and conditions. Thereby, the company filed O.P.No.689 of 2008 under Section 9 of the Act to protect its rights and in the said O.P. obtained an interim injunction in I.A.No.1385 of 2008, dated 19.04.2008, restraining the Association from acting in any way in breach of clauses 2(A) & 2(B) of the Agreement, dated 16.10.2004, denying the exclusive irrevocable rights of the Company and its

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nominees for advertisement of their product name, logo, trademark, promotional material and devices as well as the enjoyment of privileges/benefit in the nature of use of four air conditioned corporate boxes in the Stadium along with rights, privileges, benefits, identical to those attached to similar corporate boxes along with entry and exit rights in Visakha Cricket Ground, Rajiv Gandhi International Stadium at Uppal during DLF Indian Premier League (DLF-IPL) matches held between 18.04.2008 and 01.06.2008, which has later became final.

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In view of the orders passed in O.P.No.689 of 2008, the Association in its letter, dated 19.04.2008, had come forward to honour their commitment in letter and spirit under the agreement, dated 16.10.2004, to which the Company agreed to the said offers in its letter, dated 21.04.2008. When the Association filed a counter in the said O.P. with false and pretentious averments, with regard to the rights of the Company, it served a notice on 08.10.2010 to the Association invoking the arbitration clause and appointed Mr.M.R.Vikram, Partner, M/s.M.Anandam & Co., as an arbitrator on its behalf for resolution of disputes taking recourse to the provisions of the Act and requested the Association to nominate an arbitrator on its behalf so that appropriate steps for appointment of presiding Arbitrator can be taken by the parties. In spite of service of notice, the company filed A.A.No.26 of 2011 under Section 11(6) of the Act seeking appointment of the arbitrator for resolution of the dispute, which was allowed by this Court appointing Dr.Justice Motilal B.Naik, as arbitrator to decide the disputes relatable to the agreement, dated 16.10.2004. In view of the plea taken by the Association that it terminated the agreement by issuing a notice, dated 16.07.2011, after filing the application, both the parties chosen Justice B.Subhasan Reddy, Former Chief Justice of Madras and Kerala High Court as a third and presiding arbitrator.

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While the matter stood thus, the Association sent a communication on 07.03.2011 informing the company that as per the

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agreement the Company had with the Association, the IPL matches are not covered by it. Therefore, the company is required to buy the Corporate Box, if they so desire. In acknowledgment of the said letter, the company inturn replied to withdraw the communication violating the conditions of the agreement and ensured that the company will enjoy all their rights during the Fourth Edition of IPL in terms of the agreement, dated 16.10.2004, without any hindrance. In view of the above claim made by the Association in its letter, dated 07.03.2011, the company again filed the present O.P.No.754 of 2011 seeking an injunction as follows:-

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a) Injunction orders be passed in favour of the company and against the association restraining the association from acting in any way in breach of clauses 2(A) & 2(B) of the agreement, dated 16.10.2004 by denying the exclusive irrevocable rights of the company and its nominees for advertisement of their product name, logo, trademark, promotional material and devices as well as enjoyment of privileges/benefits in the nature of use of four air conditioned corporate boxes in the Rajiv Gandhi International Stadium along with rights, privileges, benefits identical to those attached to similar corporate boxes along with entry and exit rights in Visaka Cricket Ground, Rajiv Gandhi International Stadium at Uppal during 08.04.2011 to 22.04.2011 or otherwise to interfere in any of the rights available to the petitioner or their nominees in any manner whatsoever.

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3. The Association filed a detailed counter admitting the execution of the agreement, dated 16.10.2004, inter alia stating that initially the game of cricket was played in the format of three days and five days game. Later a one-day format of the game was introduced which was recognized by the BCCI as an acceptable format. In the year 2007, a further short cut format of the game known as 20-20 (T-20) game was recognized by the International Cricket Council (ICC) which is the world body of the game. All the matches being organized by the BCCI were being played at places decided by the BCCI and allotted by it to its members for the purpose of organizing and conducting the matches. In

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view of the success of short format of the game, the said game format was introduced in India. The said format of the game is being organized by some individuals also. For example, the Indian Cricket League is such an Organizer. The BCCI had decided to promote the said format of the game having regard to the huge expenditure involved in the conduct of the said format of the game. BCCI had formulated a scheme for the purpose of organizing the matches by the franchisees under an agreement/arrangement, whereunder the franchisee would be at liberty to enter into agreements with National and International players of repute to be part of the team, to be played under the name and style chosen by the Franchisee. The teams belonging to various franchisees would play at the venues fixed for the said purpose. The matches will be organized and conducted by the franchisees and for the conduct of such matches by the franchisees, the BCCI asked its member associations to make available the Stadia. The respondent being member associate had agreed to provide infrastructure facilities for organization of such matches by the franchisees. The BCCI is providing funds to its members for providing/upgrading the facilities available in the stadia to international levels. The respondent does not possess any stadium on its own to enable it to organize the domestic and international matches at Hyderabad. At the request of the respondent, the Government had allotted the land for constructing an International Stadium. As the funds for construction of Stadium were inadequate, the respondent had approached various Corporate Bodies who are willing to sponsor or part finance the construction. In that regard, the petitioner and the respondent entered into an agreement, dated 16.10.2004, setting out the terms and conditions agreed to between the parties. The agreement, dated 16.10.2004, is confined to the matches that are organized and are conducted by the Association, but not the matches conducted by BCCI-IPL. At the time when the agreement was entered shortcut format of game i.e., 20-20 was not in existence. The agreement does not in any way confer any ownership or right in the Stadium in

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favour of company, but recognizes the Association as the exclusive owner of the Stadium and does not in any way impinge upon the rights of the Association to enter into the agreements either with BCCI or any other association for the purpose of organizing the cricket matches on such terms as it thought fit. The Company’s rights under the agreement are limited to the matches conducted by the association in the said stadium and it cannot claim any rights in respect of the matches being organized and are conducted by the third parties. Further, it will give liberty to the BCCI-IPL and the franchisee to choose another available stadium and in which event also the Association will not be able to claim the advertisement and other rights. The franchisees, who invest huge sums of money cannot be tied down to the terms of the agreement between the parties herein since it will have the effect of denying them their right to manage the matches and commercially exploit them. The company is trying to place fetters on rights of the association in dealing with the stadium and denying it the opportunity to better its facilities. The Association would not derive any financial benefit except the sum that would be fixed for providing infrastructural facilities to the franchisees. The association apart from getting reimbursement of expenditure incurred would only get 20% of the entry tickets which the association has no authority to sell as they would be branded as free/complimentary and it will have to be distributed among the members of the association and its sponsors like the company. The BCCI did not give any chance to negotiate it would have imposed conditions which the association is obliged to comply. Further the terms and conditions are applicable to all the seven centers where BCCI-IPL is organizing the matches. The franchisees are organizing/conducting matches. The contention of the company that the association could have purchased the said rights and made them available to the company is to be rejected. The agreement between the company and the association is confined to matches that are organized and conducted by the association, but it does not extend to the matches

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conducted by the franchise of BCCI-IPL. Therefore, the company can avail privileges, benefits and exercise rights under the agreement against the association and the association organizes and conducts the matches. The company cannot convert the application under Section 9 of the Act into a suit for specific performance and if the company establishes any breach on the part of the Association, it can always claim damages, which in fact is provided in the agreement. Where damages are ascertainable and payable consequent upon the breach, such party is not entitled to injunction but only for damages and that is the specific mandate under the Specific Relief Act. The company has not made out a prima facie case nor balance of convenience in its favour for grant of injunction and prayed for dismissal.

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4. To substantiate the plea of the Company, Exs.P1 to P22 were marked and on behalf of the Association no documents were marked.

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5. Learned Chief Judge, City Civil Court, after considering the rival contentions of the parties and the documents made as part of the record, allowed the O.P. with the direction as aforementioned. Questioning the same, the present appeal by the Association.

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6. Sri B.Adinarayana Rao, learned counsel for the appellant, contends that the application under Section 9 of the Act and the relief claimed thereunder is not to interfere with the rights available to the company or their nominees during 08.04.2011 to 25.04.2011. In the absence of any amendment carried out, the learned trial court ought to have dismissed the O.P. as infructuous. On termination of the contract/agreement with the Company by the Association through its letter, dated 16.07.2011, a new cause of action had arisen for appointment of an arbitrator. Therefore, the earlier cause of action in terms of the relief claimed earlier vanishes. He secondly contends that Section 9(ii) of the Act deals with interim measures of protection in respect of the matters from (A) to (E). Therefore, the injunction under

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Section 41(h) of the Specific Relief Act bars the grant of injunction when equally efficacious relief by way of damages can be obtained by the parties. The arbitrators, who are now appointed, can determine the damages payable to the petitioner in the event of an award is passed to enforce the agreement. When the agreement is terminated, the terms cannot be given effect to pending arbitral proceedings, which can ultimately be granted finally by the arbitrators. The lower court having noticed the validity of the termination cannot be gone into in the present proceedings, erred in consequently directing to enforce the agreement, which can be enforced only if an award is passed in favour of the Company. He thirdly contends that at the time when the parties have entered into an agreement, the formats of the game that were being played were different from the formats of the games at present being played and the Association is obliged to conduct games as directed by the BCCI, but it has no right in respect of the matches which are not organized by it and organized by the franchisees. The IPL matches and the Championship League Matches are being organized by BCCI and ICC and as such the Association cannot provide or adhere to the terms of the agreement and it is only providing ground facilities to the BCCI/ICC who will have their own sponsor. Therefore, it is impossible to adhere to the clauses under 2(A) & (B). Therefore, the finding of the lower court that clause 2(A)(ix), 2(B)(ii) and its sub-clause (1) should be read in harmonious with other clauses which shows that the company will enjoy the benefits/rights/privileges etc., in respect of every match taking place in the stadium without reference to the person/persons or organization/s organizing/ staging/conducting such matches, is incorrect. Equally, the finding that the company’s rights are not restricted in juxta position to the sponsorships or arrangements of the association with BCCI/ICC for the match/matches, is erroneous. Therefore, the impugned order is liable to be set aside as the company failed to establish prima facie case, balance of convenience for grant of injunction in its favour and is liable to be set aside. In support of the said

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submissions, reliance is placed on Adunik Steels v. Orissa Mangenism Minerals Pvt. Limite d^[1] .

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7. Per contra, Sri Sunil B.Ganu, learned counsel for the respondent contends that the parties are consciously entered into a contract with open eyes. The agreement does not restrict the format of cricket matches or its organizers leading that matches conducted by BCCI/ICC is outside the purview of the contract. When the company’s rights are co-terminus with the life of the stadium or to the lease period, in the absence of any right reserved by the Association to terminate the contract, the clauses under 2(A) and (B) have to be enforced whenever a match of any format is being played in the stadium. Rights conferred under clause 2(A) cannot be adequately compensated in terms of the money if it has prevented to exercise the said rights during the playing of the matches. Equally the rights under Clause 2(B), which are privileged rights provided to the company for the amounts invested for the period of the life of the stadium or for the co-terminus with the lease period. Clause 4 of the agreement clearly provides the circumstances in which sub-clause(v) of clause 6 becomes applicable. In the absence of any restrictions on the benefits/rights/privileges etc., available to the Company under the agreement, merely because the company is allowing BCCI/ICC/IPL to conduct the matches in the stadium, the company cannot loose its rights and still they can exercise the said rights. He further contends that the petition has not become infructuous and the prayer in toto has to be taken into consideration. In support of the same he placed reliance on R.Lakshmaiah v. N.Lakshm i^[2] and J.P.Builders and another vs. A.Ramdas Rao and anothe r^[3] . He further contends that as the place for advertisement, the rights and certain other privileges granted to the company under the agreement are made known to the viewers through out the world when the matches are telecasted, it is impossible to ascertain the damage caused to the respondent. Therefore, the lower court is justified in granting the

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injunction to enforce the clauses in the agreement. In support of the said submission, reliance is placed on the following-

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1. Arvind Construction Co. (P) Ltd., v. Kalinga Mining Corporatio n^[4] .

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2. Board of Control for Cricket in India v. KPH Dream Cricket Private Limite d^[5]

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3. Dorab Kawazji VArden vs. Coomi Sorabji Varde n^[6] .

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4. Adunik Steels v. Orissa Mangenism Minerals Pvt. Limited (1 supra).

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5. Budha Films Pvt. Ltd., vs. Prasar Bharati

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6. Pioneer Publicity Corporation vs. Delhi Transport Corporation^[7] { 2003(2) RAJ 132.

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7. BCCI VS. Netaji Cricket Club^[8] { 2004(5) SCC 741.

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8. Vipin Mehra vs. Star IPL^[9] { 2003(3) RAJ 435}

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9. Harti Finance Limited vs. ATV Projects India Ltd. ,^[10]

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10. Suresh Jindal vs. RCDSP^[11]

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He further contends that mere award of liquidated damages for breach of contract will not preclude grant of such relief where the liquidated damages is provided. To buttress the said submission reliance is placed on the following:-

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1. P.Desoza vs. S.Naid u^[12]

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2. AML Devender Singh and others vs. Syed Khaja & other s^[13]

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3. N.Srinivasa v. Kuttukar Machine tool s^[14]

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8. In the light of the submissions as referred to above, the

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points that arise for consideration in this appeal are:

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1) Whether the relief claimed by the respondent Company in the O.P. has become infructuous and the O.P. is liable to be dismissed as such or not?

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2) Whether the civil court can grant temporary injunction restraining the parties to the agreement from acting in any manner in breach of clauses of the agreement, not to interfere with the rights available to the party and to protect the said rights under the agreement before or during the pendency of the arbitral proceedings or not and whether the Company has made out prima facie case, balance of convenience for grant of injunction or not?

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POINT No.1: -

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9. Section 9 of the Act corresponds to Article 9 of the UNCITRAL Model Law and also corresponds to section 41(b) read with Second Schedule to the Act. Under Section 9 of the Act, the Court may, on application by a party, grant interim relief “before or during arbitral proceedings or at any time after making of the arbitral award but before it is enforced.” Thus, under Section 9 of the Act, a party can make application for grant of interim reliefs of protection as provided therein not only during arbitral proceedings, but even before commencement of the arbitral proceedings. Justice B.N.Kripal, as he then speaking for the Court in Sundaram Finance Ltd. V. M/s.NEPC India Ltd. ,^[15] observed as follows:-

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“The material words occurring in section 9 are ‘before or during the arbitral proceedings’. This clearly contemplates two stages when the Court can pass interim order, ie.., during the arbitral proceedings or before the arbitral proceedings. There is no reason as to why section 9 of the 1996 Act should not be literally construed. Meaning has to be given to the word ‘before’ occurring in the said section. The only interpretation that can be given is that the Court can pass interim orders before the commencement of arbitral proceedings. Any other interpretation, like the one given by the high Court, will have the effect of rendering the word ‘before’ in section 9 as redundant. This clearly not permissible.

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Not only does the language warrants such an interpretation but it was necessary to have such a provision in the interest of justice. But for such a provision no party would have a right to apply for interim measure before notice under Section 21 is received by the respondent. It is not unknown when it becomes difficult to serve the respondents. it was, therefore, necessary that provision was made in the Act which could enable a party to get interim relief urgently in order to protect its interest. Reading the section as a while it appears to us that the Court has jurisdiction to entertain an application under Section 9 either before arbitral proceedings or during arbitral proceedings or after the making of the arbitral award but before it is enforced in accordance with section 36 of the Act.”

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The following observation of Staughton LJ of the Court of

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Appeal of England in theChannel Tunnel Group Ltd. And Finance Manche S.A.V.Balfour Beauty Construction Ltd., where quoted with approval and held to be in conformity with the view taken above that even before the commencement of arbitration proceedings the Court can grant interim measures of protection :

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“In my view, this power can be exercised before there has been any request for arbitration or the appointment of arbitrators, provided that the applicant intends to take the dispute to arbitration in due course. Whatever the meaning of ‘reference’ to section 12(6)(h) (and it is always easy to determine the precise meaning of the word in arbitration statutes) I would hold that the power of the Court in such a case would be exercised for the purpose of and in relation to a reference.”

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10. The types of interim measures of protection could be ordered by an arbitral tribunal under sub-section (1) of Section 17 of the Act have not been specified. The expression “interim measures of protection” is wide enough to mean and include all those measures whch the parties themselves could have achieved by agreement. Examples of interim measures designed to prvent or mitigate loss include the measures for preservation, custody or sale of goods which are the subject matter of the idpsute, measures designed provisionally to determine and ‘stabilise’ the relationships of the parties in a long term project. Orders of the latter type include the use or maintenance of machines or works or the continuation of a certain phase of a construction if necessary to prevent irreparable harm.

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11. In para 12 of the application filed under Section 9 it was specifically pleaded by the company that the Association having received the legal notice, dated 08.10,2010, issued by it, has not taken any steps for nominating an arbitrator on behalf of the association till date and pending constitution of arbitral tribunal they have no right to once again raise any such untenable and false disputes especially in view of specific orders in the earlier litigation in O.P.No.689 of 2008. Further, in para 13 it was pleaded that the Association once again sent

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a communication dated 07.03.2011 in total contradiction to their earlier commitment and in specific in gross violation of the terms and conditions of the agreement, dated 16.10.2004. The cause of action for the suit arose on 16.10.2004 when the agreement was executed between the petitioner and the respondent and subsequently on 10.12.2005 and 25.04.2006 when basic terms are modified to a certain extent and finally arose on receipt of the communication, dated 07.03.2011, when the association made untenable claim as to IPL matches not being covered by the terms of the agreement, dated 16.10.2004 and on 14.03.2011 when the company issued a detailed reply to the same and claimed the relief as aforementioned.

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12. The company invoked the jurisdiction of the civil Court under Section 9 of the Act during the pendency of the arbitral proceedings, before the arbitrators entered the reference and served a notice on 08.10.2010 naming its arbitrator calling upon the Association to appoint their arbitrator and filed A.A.No.26 of 2011, seeking injunction restraining the Association from acting in any way in breach of clauses 2(A) and 2(B) of the agreement, dated 16.10.2004, by denying the exclusive irrevocable rights of the company and its nominees for advertisement of their products etc., during 08.04.2011 to 22.05.2011 or otherwise to interfere in any of the rights available to the petitioner. The relief claimed has not become infructuous after expiry of 22.05.2011 as contended by the learned counsel for the appellant. The earlier portion of the relief claimed is clarificatory in nature that the Association should be restrained from interfering with the rights of the petitioner during 08.04.2011 to 22.05.2011 and it should be read together by applying the ejusdem generis principle, but cannot be read in contra distinction as contended by the learned counsel for the appellant.

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13. Further, it is also pleaded that the words in the prayer portion, “during 08.04.2011 to 22.05.2011 or otherwise to interfere” includes to preserve the rights of the company under the agreement

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pending the arbitration proceedings or before initiation of the arbitration proceedings. Therefore, the finding recorded by the trial court on point No.1 that the prayer in the application has not become infructuous has been sustained and the same needs no interference.

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POINT No.2:-

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14. The agreement as referred to above does not authorise either by an instrument in writing signed by a duly authorized representative of each of the parties as per clause 13 of the agreement. Clause 15(iii) provides resolution all the disputes through arbitration. It is not disputed that in terms of the agreement, the company has invested an amount of Rs.4.32 crores as against Rs.6.50 crores. The change of the name of the Visakha Industries Cricket Stadium to that of Rajiv Gandhi International Cricket Stadium has been agreed through the correspondence between the parties as referred to above, in consideration of restricting the amounts to be spent by the Company to Rs.4.32 crores as against Rs.6.50 crores, whereas the agreement conditions clearly stipulates that the Association is meant for promoting, organizing, managing and conducting the game of cricket in the area covered by the Association and holding of various tournaments in the cricket including those of BCCI besides international cricket matches held in Hyderabad and the Association is an affiliated member of the BCCI. The Clauses 2(A)(ix) and 2(B)(ii) clearly shows that the company shall enjoy all benefits/rights/privileges/ etc., conferred under the Agreement on it in respect of every match taking place in the stadium without reference to the person or persons or organization/s organizing/staging/conducting such matches nor any rights are reserved with the association to the sponsorship or arrangements of the Association with ICC/BCCI for the match/matches excluding from the purview of the agreement, except restricting the rights of the Company or its nominees like assignees, lessees, sub-leases that may be created by the Company shall not be in conflict with any arrangement for

¶99

sponsorship made by the Association with the BCCI or ICC nor giving exclusive right to the Association that any arrangement by it allowing the BCCI or ICC or BCCI/IPL to conduct any cricket matches in the stadium that the company cannot exercise that privilege rights. Further, the conditions under clause (I) of the agreement shows that the agreement is irrevocable, valid and binding on the parties during the entire life of the new International Cricket Stadium to be built up by the Association leased out to it by the Government and the initial period of lease is 25 years. Further, in the absence of any term in the agreement that either parties can terminate the agreement or the agreement comes to an end on expiry of the lease period, the parties are intended to abide by the agreement during the period of subsistence of the agreement.

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15. The Supreme Court in Arvind Construction Company Pvt. Ltd.’s case (3 supra) held that the well-recognized principles governing the grant of interim injunction under Order 39 CPC and Specific Relief Act would be applicable to exercise of powers under Section 9 of the Act. Prima facie, the exercise of power under Section 9 should be based on well recognized principles governing the grant of interim injunctions and orders of interim protection or the appointment of a receiver keeping in view of the principles recognized for grant of injunction under Order 39 and Specific Relief Act.

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16. The Bombay High Court in Board of Control for Cricket in India’s case (4 supra), in appeal No.811 of 2010 in Arbitration Petition No.1303 of 2010, dated 15.12.2010, after referring to the clauses under the agreement particularly the clause 21.6 which makes business sense held that after all, the franchise agreement reflects a business understanding between parties to a commercial document. When the Court construes a commercial document, the effort must be to give business efficacy to a commercial understanding between the parties. In para 27, referring to the circumstances as to why the franchise agreement needs to be specifically enforced summarised

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the circumstances out of which 1 to 3 are necessary, which are as follows:

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1. There exists no standard for ascertaining the actual damage that may be caused by the non performance of the franchise agreement and compensation in money would not afford an adequate relief;

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2. The franchise agreement is a perpetual agreement, co-terminus with the life of the IPL and not one which in its nature is determinable;

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3. The subject matter of the franchise agreement is of special value and interest to the respondent and the rights acquired by the respondent are not readily available in the market.

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The Bombay High Court referred to the judgment of the Supreme Court in Hindustan Petroleum Corporation Ltd. Sriman Narayana, {(2002) 5 SCC 760}, in para 29, whereunder the Supreme Court reiterated the principles laid down in Dorab Cawasji Warden v. Coomi Sorab Warden {(1990) 2 SCC 117} for grant of interlocutory mandatory injunctions and enunciated the circumstances viz., (1) the plaintiff must establish a strong case for trial, a higher standard than a prima facie case normally required for a prohibitory injunction; (ii) the plaintiff must establish that it is necessary to prevent irreparable or serious injury which normally cannot be compensated in terms of money; (iii) The balance of convenience must be in favour of one seeking such relief, upheld the grant of interlocutory injunction holding that we are more than satisfied that the learned Single Judge is justified in coming to the conclusion that these principles are duly fulfilled for grant of injunction.

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17. In Adhunik Steels Ltd.’s case (4 supra) the Supreme Court while considering the scope of Section 9 of the Act for grant of injunction held that it would not be correct to say that the power under Section 9 of the Act is totally independent of the well-known principles governing the grant of an interim injunction that generally govern the Courts in this connection and to see whether the High Court was justified in refusing the interim injunction on the facts and in the

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circumstances of the case.

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18. In Buddha Films Pvt. Ltd.’s case (5 supra), the learned single Judge of the Delhi High Court in an application under Section 9 of the Act read with Order 39 Rules 1 and 2 with regard to the question as to whether the website address www.dd.now.com displayed during the domestic cricket events which admittedly in the form of super imposition passed through on the bottom of the screen every half an hour is merely a graphic without any commercal value or a branded graphic with commercial value, at paras 36 and 37 observed as under: -

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36. As regards the concept of irreparable loss or injury it cannot be solely stretched to the Quantify ability of the loss to be suffered by a person on account of the breach of the terms of the contract. The concept varies from case to case. In view of the facts of the instant case what is material for that purpose iis whether the action amounting to infringement of legal rights of a party is of recurring or irreversible nature and if it is so the element of irreparable loss or injury for the purpose of ad-interim injunction order will exist even if it is ultimately found to be quantifiable.

¶111

37. in the instant case the action of displaying the website on day-to-day basis is irreversible action and at the same time not only causes financial loss but also results in irreparable injury in terms of customers and viewer ship. Every moment the site is displayed not only the right of the petitioner is impinged but irreparable loss or injury is also caused.

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19. The Delhi High Court in Pioneer Publicity Corporation’s case (6 supra) considering the power of the court to prohibit or prevent the breach of contract by way of injunction under Order 39 rules 1 and 2 CPC, allowed the appeal restraining the Delhi Transport Commissioner from taking down or defacing the advertisements portrayed on the back, side panels and inside panels of the DTC Buses during the pendency of the agreement period and pending the arbitration proceedings.

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20. In Vipin Mehra’s case (8 supra), the Delhi High Court

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granted an injunction restraining the parties from disconnecting its signals to the petitioner, subject to the condition that on petitioner furnishing security of Rs.5,00,000/- to the satisfaction of the Registrar (General) and allowing the petitioner therein for running a cable distribution network.

¶115

21. The Madras High Court in Harita Finance Limited’s case (9 supra) in an application filed for appointment of an Advocate Commissioner to seize with the police protection and sell the equipments subject to the matter of the lease agreement and for adjustment of the proceeds to the outstanding of the company, held that under Section 9 of the Act no such restriction is contemplated. Wide power has been given to Court under Section 9(2)(e) of the Act to pass interim measure of protection, which according to the Court is just and convenient. Though the machinery etc., could not be the subject matter of any dispute before the Arbitrator as the applicant is the owner of the property, the appointment of Commissioner for the purpose of repossessing and sale of the machinery etc., can be made “to secure the amount in dispute” in the arbitration proceedings at an early date and accordingly allowed the application.

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22. From the above conspectus discussion of the principles laid down in various judgments as referred to above, it is clear that the court as an interim measure can prevent the mitigating loss and as a measure for preservation, custody or sale of goods, which are the subject matter of the dispute, can take measures designed provisionally to determine and stabilize the relationships of the parties in a long term project and can preserve such rights either before initiation or during pendency of the arbitral proceedings. The Company has made out a prima facie case that it has invested Rs.4.32 crores pursuant to the irrevocable rights for advertisement, publicity and display at the places specifying the company’s products, name, logo, trademarks and promotional materials and devices etc., co-terminus either with the

¶117

expiry of the lease or with the life of the stadium. When its rights are impaired, the Company moved the Court to preserve such rights in the O.P.No.689 of 2008 and obtained an interim injunction, which was made final. The Association addressed a letter, dated 19.04.2008, as per the understanding arrived between the parties reaffirming their commitment to the company to ensure that the company’s rights are protected to the maximum extent possible which are under the purview of the Association and confirmed the services provided to the company agreeing that the arrangement will be limited to the said edition of the IPL tournament only, which comprise of seven matches at Hyderabad. In the said letter, it was agreed that they will discuss the matter with the BCCI to protect the interests of the company and association and will communicate to the BCCI that they must keep their joint interests of the company as well as the association in mind before allotting any matches/tournament in future and protect the interests of principal sponsors as per their agreement, dated 16.10.2004. In reply to the said letter, the Company addressed a letter, dated 21.04.2008, agreeing for one time exemption to forego certain of their rights during 7 matches of IPL tournament to be held between 22.04.2008 and 01.06.2008 with a request to ensure that in all future matches their rights as per the agreement, dated 16.10.2004, are fully protected. Even in the letter, dated 19.04.2008, the association has not expressed its impossibility of the performance of the agreement conditions and agreed to take up the matter with the BCCI. In that view of the matter, the balance of convenience lies in favour of the company to protect its rights during the pendency of the arbitral proceedings, which have already been in progress and if their rights are not protected, the loss which they are likely to sustain for not allowing them to advertisement, publicity and display rights and certain other privileges granted to them under clause 2(A), cannot be ascertained in terms of money.

¶118

23. In view of the same, the trial court is justified in granting injunction as the company established prima facie case and balance of

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convenience in their favour for preservation of their rights during the pendency of the arbitral proceedings. Therefore, we do not see any ground to interfere with the order passed by the trial court.

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24. The Civil Miscellaneous Appeal is, accordingly, dismissed. There shall be no order as to costs.

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_____________________ A. GOPAL REDDY, J

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___________________ K.S.APPA RAO, J

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17.10.2011 lmv

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HON’BLE SRI JUSTICE A.GOPAL REDDY AND HON’BLE SRI JUSTICE K.S.APPA RAO

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CIVIL MISCELLANEOUS APPEAL No.1025 of 2011

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17.10.2011

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lmv

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[1] 2007(7) SCC 125 [2] 1971 AP 380 [3] 2011(1) SCC 429 [4] 2007(6) SCC 798 [5] 2001(113) Bom LR 749 [6] 1990(2) SCC 117 [7] 2003(2) RAJ 132 [8] 2004(5) scc 741 [9] 2003(3) RAJ 435 [10] 2003(2) RAJ 582 [11] AIR 1991 SC 1092 [12] 2004(6) SCC 649 [13] 1973(2) SCC 515 [14] 2009(5) SCC 182 [15] AIR 1999 SC 565 = 1999(2) SCC 479

The Hyderabad Cricket Association v. M/s.Visakha Industries Limited

Case brief

What is this about?

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The Hyderabad Cricket Association v. M/s.Visakha Industries Limited

Case brief

What is this about?

What did the court decide?

What the court decided

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