* THE HON’BLE SRI JUSTICE V. ESWARAIAH AND *THE HON’BLE SRI JUSTICE NOUSHAD ALI +CIVIL MISCELLANEOUS APPEAL NOs.490, 491 & 492 OF 2010 %Dated 12-11-2010 C.M.A. NO.490 OF 2010 B e t w e e n: # M/s. Wockhardt Hospitals Limited, Having its office at Wockhardt Towers, Bandra Kurla Complex, Bandra (East), Mumbai – 400 051, Rep. by its authorized signatory Mr. Ullhas Kelkar. - - - Appellant/Petitioner. A n d $ M/s. Kamineni Hospitals Limited, Having its registered office at L.B. Nagar, Hyderabad – 500 068, Rep. by its Director, 1 Dr. Shashidar Kamineni. - - - Respondent/ Respondent. C.M.A. NO.491 OF 2010 B e t w e e n: # M/s. Wockhardt Hospitals Limited, Having its office at Wockhardt Towers, Bandra Kurla Complex, Bandra (East), Mumbai – 400 051, Rep. by its authorized signatory Mr. Ullhas Kelkar. - - - Appellant/Petitioner. A n d $ M/s. Kamineni Health Services Private Limited, Having its registered office at No.1 Kanchanjanga Complex, King Koti Road, Hyderabad – 500 001, Rep. by its Director, Dr. Shashidar Kamineni. - - - Respondent/ Respondent. C.M.A. NO.492 OF 2010 B e t w e e n: # M/s. Wockhardt Hospitals Limited, Having its office at Wockhardt Towers, Bandra Kurla Complex, Bandra (East), Mumbai – 400 051, Rep. by its authorized signatory Mr. Ullhas Kelkar. - - - Appellant/Petitioner. A n d $ M/s. Kamineni Health Services Private Limited, Having its registered office at No.1 Kanchanjanga Complex, King Koti Road, Hyderabad – 500 001, Rep. by its Director, Dr. Shashidar Kamineni. - - - Respondent/ Respondent. ! Counsel for the Appellant : Sri S. Niranjan Reddy. ^ Counsel for Respondent. : M/s. E. Ajay Reddy < GIST : > HEAD NOTE : ? Cases referred : --- 1) 2009 (5) SCC 182. 2) 2009 (4) ALD 7 (SC) 3) 2007 (6) ALD 145 4) AIR 1955 Madras, 430 5) 1996 (4) ALD 241 6) 1993 (2) ALT 154 IN THE HIGH COURT OF JUDICATURE OF ANDHRA PRADESH AT HYDERABAD. (Special Original Jurisdiction) THE TWELFTH DAY OF NOVEMBER, TWO THOUSAND AND TEN PRESENT THE HON’BLE SRI JUSTICE V. ESWARAIAH AND THE HON’BLE SRI JUSTICE NOUSHAD ALI CIVIL MISCELLANEOUS APPEAL NOs.490, 491 & 492 OF 2010 C.M.A. NO.490 OF 2010 B e t w e e n: M/s. Wockhardt Hospitals Limited, Having its office at Wockhardt Towers, Bandra Kurla Complex, Bandra (East), Mumbai – 400 051, Rep. by its authorized signatory Mr. Ullhas Kelkar. - - - Appellant/Petitioner. A n d M/s. Kamineni Hospitals Limited, Having its registered office at L.B. Nagar, Hyderabad – 500 068, Rep. by its Director, Dr. Shashidar Kamineni. - - - Respondent/ Respondent. C.M.A. NO.491 OF 2010 B e t w e e n: M/s. Wockhardt Hospitals Limited, Having its office at Wockhardt Towers, Bandra Kurla Complex, Bandra (East), Mumbai – 400 051, Rep. by its authorized signatory Mr. Ullhas Kelkar. - - - Appellant/Petitioner. A n d M/s. Kamineni Health Services Private Limited, Having its registered office at No.1 Kanchanjanga Complex, King Koti Road, Hyderabad – 500 001, Rep. by its Director, Dr. Shashidar Kamineni. - - - Respondent/ Respondent. C.M.A. NO.492 OF 2010 B e t w e e n: M/s. Wockhardt Hospitals Limited, Having its office at Wockhardt Towers, Bandra Kurla Complex, Bandra (East), Mumbai – 400 051, Rep. by its authorized signatory Mr. Ullhas Kelkar. - - - Appellant/Petitioner. A n d M/s. Kamineni Health Services Private Limited, Having its registered office at No.1 Kanchanjanga Complex, King Koti Road, Hyderabad – 500 001, Rep. by its Director, Dr. Shashidar Kamineni. - - - Respondent/ Respondent. The court made the following : THE HON’BLE SRI JUSTICE V. ESWARAIAH & THE HON’BLE SRI JUSTICE NOUSHAD ALI CIVIL MISCELLANEOUS APPEAL NOs.490, 491 & 492 OF 2010 COMMON ORDER: (Per Hon’ble Sri Justice V. Eswaraiah) These three Civil Miscellaneous Appeals are filed by the same Appellant under Section 37 of the Arbitration and Conciliation Act, 1996 (for short, ‘the Act’) R/w Order 43 Rule 1 of C.P.C., against the same Respondent, aggrieved by the orders dated 13-04-2010 in O.P. NO.s 169 of 2010, O.P. No. 155 of 2010 and O.P. No. 2417 of 2009 respectively, on the file of the learned II Additional Chief Judge, City Civil Court, Hyderabad. 2. The Appellant-Wockhardt Hospitals Limited (For short, ‘Wockhardt’) filed the aforesaid three O.P.s against the Respondent- M/s. Kamineni Health Services and Kamineni Hospitals (For short, ‘Kamineni’) under Section 9 of the Act. O.P. 169 of 2010 against which C.M.A. 490 of 2010 is preferred, was filed under Section 9 of the Act by the appellant against the respondent for the following reliefs : a) Direct the Respondent, its men, employees etc., from interfering in conducting, management and operation of the Wockhardt Kamineni Hospital by the Appellant ; b) Restrain the Respondent, its agents, employees, representative or any person claiming through Respondent from creating any rights or interest in favour of any third party in respect of the Schedule property by way of entering into any agreement/deeds etc., including by way of charges, mortgage, encumbrance etc.; c) Restrain the Respondent, its men, agents, employees etc., from using/utilizing/interfering with the movable properties, as detailed in Document No.12, lying in the Schedule Property belonging to and absolutely owned by the Appellant including but not limited to causing damage and/or moving/shifting the same from its original locations ; d) Appoint an Advocate Commissioner to take inventory and possession of the movable and other valuable properties belonging to and absolutely owned by the Appellant, as detailed in Document No.12, lying in the Schedule Property in the presence of the Appellant ; e) Appoint the Appellant Company as a Receiver to take control of the administration of the Wockhardt Center including handling of income and expenditure ; f) Pass such other necessary and appropriate orders under Section 9 of the Arbitration and Conciliation Act, 1996. 3. O.P. 155 of 2010 and O.P. 2417 of 2009 against which C.M.A. 491 of 2010 and C.M.A. 492 of 2010 are preferred, were filed under Section 9 of the Act by the appellant against the respondent for the following reliefs : a) Direct the Respondent, its men, employees etc., from interfering in conducting, management and operation of the Wockhardt Kamineni Hospital by the Appellant ; b) Restrain the Respondent, its agents, employees, representative or any person claiming through Respondent from creating any rights or interest in favour of any third party in respect of the Schedule property by way of entering into any agreement/deeds etc., including by way of charges, mortgage, encumbrance etc.; c) Restrain the Respondent, its men, agents, employees etc., from using/utilizing/interfering with the movable properties, as detailed in Document No.13, lying in the Schedule Property belonging to and absolutely owned by the Appellant including but not limited to causing damage and/or moving/shifting the same from its original locations ; d) Appoint an Advocate Commissioner to take inventory and possession of the movable and other valuable properties belonging to and absolutely owned by the Appellant, as detailed in Document No.13, lying in the Schedule Property in the presence of the Appellant ; e) Appoint the Appellant as a interim receiver to take control of the administration of the Wockhardt Center including handling of income and expenditure ; f) Pass such other necessary and appropriate orders under Section 9 of the Arbitration and Conciliation Act, 1996. 4. For the sake of convenience, the parties hereinafter are referred to as they are arrayed in the trial Court. 5. It is the case of the petitioner that C.M.A.s 491 and 492 of 2010, the subject matter of the O.P. Nos. 155 of 2010 and 2417 of 2009, which were filed for the aforesaid reliefs pertains to the hospital situated at King Koti, Boggulkunta, Hyderabad, whereas, C.M.A. 490 of 2010, subject matter of O.P.169 of 2010 relates to the hospital situated at L.B. Nagar, Hyderabad, Ranga Reddy District. 6. Submissions of the Petitioner: It is the case of the petitioner that Wockhardt is a reputed hospital having full equipment to manage and operate heart care and after verification of the credentials of the petitioner, the respondent had entered into Ex.P-3 agreement dated 19-05-2005, and Ex.P-6 agreement dated 23-04-2005 with the respondent and enabled the petitioner to have exclusive right and management of the heart care center for an initial period of ten years with two renewals with initial lock in period of 5 years. The Management Agreement was provided for various reciprocal obligations on the parties and after adhering to the management agreement for about four years, the respondent without any notice and without any authority of law, contrary to the terms of the management agreement, created a situation in which all the doctors, consultants and medical staff of the petitioner have tendered resignations on 15-12-2009 and became employees of the respondent and appointment orders were issued to them on 16-12- 2009. Thus, the respondent has created a situation by substituting doctors, consultants and medical staff of the petitioner by resorting to employment of the same personnel and thereby claimed that it has taken charge of the heart center on 16-12-2009. The petitioner had become apprehensive about the conduct of the respondent and therefore it had filed the aforesaid O.P.s for a preventive relief of injunction. Since no injunction was granted, notice was ordered, the respondent has created a situation where the employees and staff of the Petitioner Wockhardt have submitted resignations to their services and thereupon they were appointed by the respondent on the very next day i.e., on 16-12-2009 claiming that the respondent has taken charge of heart center on 16-12-2009 and stated that the petitioner has committed breach of management agreement. The resignations of the doctors and staff of the petitioner were never accepted and without waiting for the acceptance of the resignations, they were shown as employees of the respondent from the next day of their resignations. Thus, the respondent has adopted a strange and fraudulent design to highjack the management of the hospital of the petitioner and started claiming that the respondent is running the heart center and that the petitioner had abandoned performance of the management agreement. By the time huge equipment and movable property of the petitioner was stationed in the premises of the respondent, since there is no confidence to the petitioner that such property will be properly used without any damage, it has decided to take away all its movable property from the hospital premises since there remained no staff or consultants of the petitioner to put the equipment to proper use, during the pendency of the said O.P.s. Complaint of the petitioner is that the respondent committed fraudulent breach of the management agreement and since the said agreement had contained an arbitral clause No.23, it has filed the said O.P.s for the aforesaid relief’s but the trial Court had dismissed the O.P.s against which, these appeals are preferred. 7. The petitioner further contends that the respondent is the owner of the two hospitals one at L.B. Nagar, Hyderabad, Rangareddy District and another at King Koti, Boggulkunta, Hyderabad. Admittedly, the parties herein had entered into Ex.P-3 agreement dated 19-05- 2005 in respect of the heart center at LB. Nagar hospital and Ex.P-6 agreement dated 23-04-2005 in respect of its hospital at King Koti, Boggulkunta, Hyderabad. Thereby the petitioner has become entitled to exclusive management of the hospital in accordance with the terms and conditions contained in the management agreement. The text and context of both the said agreements is the same and identical. The tenure of the exclusive management contract is initially for a period of ten years with two renewals for initial lock in period of 5 years. 8. The terms and conditions of the two agreements would demonstrate that the petitioner should manage and run the two hospitals of the respondent without any interference of the respondent. The terms and conditions of the management agreement are exhaustive as regards the exclusive right of the management and revenue sharing etc., Clause 16 of the two agreements provided for a contingency of termination and it has laid down that a period of 5 years shall be “lock in period.” After expiry of the said lock in period, the respondent can terminate the management agreement after it has issued notice of 180 days. In other words, when the respondent issues a notice of termination disclosing the deficiency or defect, the petitioner shall cure the same remedy within 180 days and only on such default, the termination of the agreement would come into effect. Thus, it is clear that there is a prohibition against both the parties from committing a breach of the agreement for/during the lock in period of 5 years, which will be valid up to 23-04-2-010 in respect of King Koti hospital, Boggulkunta, Hyderabad, and up to 19-05-2010 in the case of L.B. Nagar hospital. Thus, the action of the respondent in eliminating the petitioner from the management of the hospitals and styling and assuming to have taken over the management of the two hospitals from 16-12-2009 is contrary to the specified lock in period condition. That apart, the respondent has not issued any notice to the petitioner pointing out any defect, within the scope and ambit of Clause 16 of the management agreement. Thus, the action of the respondent in assuming the management of two hospitals with effect from 16-12- 2009 is a clear breach of contract. 9. The petitioner further contends that the stand taken by the respondent that the petitioner has absconded from the management of the hospital with effect from 16-12-2009 is without any basis whatsoever. There is no evidence on record to substantiate such a contention except one letter, which was marked as Ex.R-2 dated 15- 12-2009. The genuineness and correctness of the same was seriously disputed by the petitioner in O.P. 155 of 2010 at paragraph 23, wherein, it is contended that the authorized representative of the petitioner is Mr. Habil Khoraki wala, Chairman and Managing Director of the petitioner, has executed the management agreement and the executants of the disputed letter Ex.R-2 dated 15-12-2009 is Mr. Sudhakar Jadhav, who was never appointed as authorized signatory of the petitioner. That apart, the contents of the disputed letter Ex.R-2 is unbelievable in the face of the police complaint (Ex.P-10), which was given by the petitioner. Above all, very circumstance that all the employees of the petitioner were made to resign to their employment on 15-12-2009 and the same set of persons were appointed as employees of the respondent, would clearly demonstrate that the respondent has enforced a strategy to create the situation of taking over the management of the hospital by resorting to deceit and fraud. When the lock in period has not expired and if there is an attempt of abandonment of performance of the agreement by the petitioner, the respondent should have taken steps to prevent such a contingency since the management agreement is binding on both the parties and both of them are entitled to enforce the same against the defaulting party. Thus, the probabilities clearly demonstrate the contention of the respondents that petitioner has absconded from performing the management agreement, is false and invented for the purpose of the case. Another circumstance i.e., the petitioner filing O.P. 2417 of 2009 for an injunction to restrain the respondent from interfering with the performance of the management agreement is a positive circumstance that the petitioner has always been attempting to abide by the management agreement and implement the same. Hence, there is no force in the contention of the respondent that the petitioner has abandoned the performance of the management agreement. On the other hand, the probabilities of the case would point out that the petitioner has been desperately attempting to perform its obligations under the management agreement and it is the respondent who has been trying to find ways and means to wriggle out of the performance of the management agreement. Hence, it is prima-facie established by the petitioner that the respondent had committed breach of contract by winning over the employees and the staff of the petitioner and making them to resign to service with the petitioner and further making them to take appointment in the service of the respondent. Suffice it to say that the respondent had adopted a novel technique of creating a situation whereby the staff and control of the petitioner over the hospital has gone into the hands of the respondent with the same staff. Adding to this, the respondent has filed documents which are resignation letters submitted by the employees of the petitioner and appointment orders issued by the respondent to them. It is not known as to how the respondent was able to get hold of a copy of the resignation letters that were submitted by the employees of the petitioner. Without an acceptance, a resignation letter would not come into force. The petitioner had never accepted the resignation letters. Strangely, all the employees of the petitioner without waiting for acceptance of their resignations have been appointed in the respondent hospital. All the circumstances, would clearly point out that the respondent has played fraud upon the petitioner and invented a game plan to get back into the control of the hospitals by forcibly eliminating the petitioner from enforcing the management agreement. The petitioner submits that a prima-facie case is made out for an appropriate interim orders in its favour so that the arbitration clause contained in para 23 of the Management Agreement can ensure to the benefit of the petitioner who suffered serious damage on account of the fraudulent action of the respondent. 10. Petitioner further submits that clause 23 of the Management Agreement has provided for resolution of the dispute by way of arbitration under clause 23.2 (d) reads as under. “Performance during arbitration. Pending the submission of and/or decision on a dispute, a difference, or claim or until the arbitral award is published, the parties shall continue to perform all their obligations under this agreement without prejudice to a final adjustment in accordance with such award.” Above covenants between the parties would require performance of the agreement even during the arbitration and until the award is published. Thus, there is no escape to the respondent to contend that the petitioner cannot perform the management agreement and that it will manage two hospitals on its own. The above clause in the management agreement is binding on the parties and in the face of such a covenant, even a valid termination of the agreement would not enable any party from the liability of continued performance of the agreement. In the light of the above covenants, whatever defence is taken by the respondent, the petitioner is entitled to have exclusive right of the management over the two hospitals. Thus, it is contended that the petitioner is entitled to be appointed as receiver to run the hospitals pending arbitrary proceedings. The learned counsel appearing for the petitioner submits that out of the various prayers that were made in the petitions, filed under Section 9 of the Act, the petitioner is seriously agitating the following two reliefs. a) Appointment of Petitioner as receiver to run the hospitals. b) Injunction restraining the respondent from entering into any agreement with third party as regards the management of the hospital or property of the respondent in which the hospitals are housed. Written submissions are also made by the petitioner Wockhardt hospitals to that effect. 11. As regards the relief of appointment of the petitioner as receiver, the trial Court has rejected the same on the ground that counsel for the petitioner during the course of arguments has agreed that either the petitioner be appointed as receiver or the respondent be appointed as receiver and therefore there is no merit in the claim of the petitioner for his appointment as receiver. Further the Court below held that when the petitioner is out of possession, it cannot be appointed as receiver, which amounts to dispossessing the respondent from the suit schedule property. This conception of the Court below is not correct. The present contract is not in the nature of title and possession dispute. The exclusive entitlement of the petitioner is to manage the hospitals without any interference from the respondent for the term or further terms i.e., initially 10 years and/or subsequent 20 years. When the parties have entered into such a contract with the idea of the time span be 30 years, it has to be construed that the result of the management agreement is spread over a long term and a term of 30 years is more than the effective time of one generation. When the agreement has provided that the lock in period itself is 5 years, conduct of the respondent in unilaterally taking over the management even before the expiry of the lock in period, is a gross illegality and hence the respondent is guilty of breach of the contract. The remedy for such breach has to be given by the arbitrator under Clause 23 of the agreement. The contention of the learned counsel for the respondent that the management agreement is not specifically enforceable and therefore the remedy available for the petitioner is for the damages to be awarded by the arbitrator is unsustainable but impermissible in a petition under Section 9 of the Act. While exercising jurisdiction under Section 9 of the Act, it is not open to the Court to record a finding as to whether the agreement between the parties is specifically enforceable or not. Such a finding would be nothing but usurping the jurisdiction of the arbitrator. The further contention of the respondent placing reliance under Section 14 of the Specific Relief Act, 1936, that a contract of this nature cannot be specifically enforceable, should not be considered at this stage. Such a contention is permissible before the arbitrator. The mind of the arbitrator and the relief which the arbitrator can/may grant shall not be visualized by the Court while deciding petition under section 9 of the Act. Limited jurisdiction under Section 9 of the Act is to pass appropriate interim orders preserving subject matter of the dispute so that an effective award can be passed by the arbitrator. The learned counsel appearing for the petitioner placed reliance on para 41 of the judgment of the Supreme Court, in a decision reported in N. Srinivass Vs. Kuttukaran Machine Tools Limited[1], wherein it was held as follows : “41. At the same time, considering the fact that some time would be required for the arbitrator to pronounce his award wherein the question whether time was of the essence of the contract or not would be required to be determined and if the parties are directed to maintain status quo in respect of the property in dispute till such award is passed, and for that reason, the respondent would not be entitled to transfer, alienate the property in dispute during the pendency of the arbitration proceeding and considering the balance of convenience and inconvenience of the parties, we feel it proper to direct the appellant to deposit the balance amount of Rs.4,99,03,829/- (Four crores ninety-nine lakhs three thousand eight hundred twenty-nine) within a period of three months from the date of supply of a copy of this order to the VI Additional City Civil Judge, Bangalore, in fixed deposit for a minimum period of six months initially in a nationalized bank in favour of the respondent and renew the same till the disposal of the dispute before the arbitrator. The original fixed deposit receipt shall be kept with the arbitrator.” 12. The jurisdiction under Section 9 has to be exercised with reference to each case on its own facts. Having entered into the management agreement and having allowed the petitioner to manage the hospitals for about 4 years, respondent cannot unilaterally eliminate the petitioner from the hospital by resorting to fraud and deceit. The conduct of the parties is paramount consideration for the purpose of exercise of judicial discretion in the