Shephali arbpl.1922.13.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION (L) NO. 1922 OF 2013
ABG Shipyard Ltd.
A Company incorporated under the
companies Act 1 of 1956 having its
registered office at Near Magdala Port,
Dumas road, Surat and Corporate Office
at 5th Floor, Bhupati Chamber,
13, Mathew Road,
Mumbai 400 004. ....Petitioners
Versus
1. The Shipping Corporation of India Ltd.
"shipping House", 245, Madam Cama
Road, Mumbai 400 021.
2. State Bank of India,
Overseas Branch, International Banking
Division, World Trade Centre,
The Arcade Building, 2nd Floor,
Cuffe parade, Mumbai - 400 005,
India. ....Respondents
____________
Mr. Rajiv Kumar a/w Mihir Kamdar, Rushabh Jhaweri i/b
Udwadia Udeshi & Argus Partners for the Petitioners.
Mr. Amitava Majumdar a/w Mr. Shivkumar Iyer a/w Ms. Harini
Susarla a/w Mr. Arjun Mittal i/b Bose and Mitra & Co. for the
Respondent No. 1.
Mrs. H. K. Srivastav for the Respondent No. 2.
CORAM: G. S. PATEL, J.
Vacation Judge. 1 of 8
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Shephali arbpl.1922.13.doc
DATED : NOVEMBER 7, 2013.
ORAL JUDGMENT:
1. This is a Petition under Section 9 of the Arbitration and Conciliation Act, 1996. The Petitioners, ABG Shipyard Ltd ("ABG") seek an order of injunction restraining the 1st Respondent, the Shipping Corporation of India ("SCI"), from invoking and encashing the two Bank Guarantees dated 17th February 2012 and 25th April 2012, as subsequently extended.
2. As Mr. Majumdar, Learned Counsel for SCI, had no instructions to make any statement that would permit the matter to be held over till the High Court re-opens on Monday, 11th November 2013, I have heard Mr. Rajiv Kumar, Learned Senior Counsel for ABG and Mr. Majumdar at some length.
3. On 31st January 2012, ABG and SCI entered into a ship- building contract for the construction, sale and delivery by ABG to SCI of an 80-ton Anchor Handling Tug cum Supply Vessel Hull No.412. That contract contained various terms and conditions including, inter alia, specifications of various components of the vessel. Appended to the contract is a list of alternative manufacturers of these components. This list was proposed by ABG itself and was approved by SCI. There is no dispute that this list forms part of the contract in question.
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4. ABG entered into a sub-contract (as permitted by the principal agreement) with one ZF Marine for the supply of the required propulsion system for the vessel in question. For a variety of reasons, which, according to Mr. Kumar, were not in the control of his clients, that contract with ZF Marine came to be terminated. As a result, ABG was unable to meet the contractual delivery date of 22nd May 2013 plus a further 150 days' grace. It proposed alternative suppliers for this propulsion system. It is Mr. Kumar's case that SCI accepted one such alternative supplier, viz., M/s.
Kamome Propeller Company, in substitution of the original supplier M/s. ZF Marine. Mr. Kumar submits that this substitution amounts to a change in the specifications of the contract between ABG and SCI and that ABG is, therefore, entitled to an extension of time and an extended delivery date under the express terms of the contract itself. He drew my attention to an email dated 14th September 2013 by which SCI is supposed to have accepted not only the nomination of M/s. Kamome Propeller Company as supplier but, by necessary implication, an extended delivery date of the propulsion system.1 Mr. Kumar's submission regarding this deemed extension of the contract is based on the argument that the manufacture and supply of the propulsion system could not possibly take less than 9 to 11 months, and that both parties knew this. Therefore, he submits, by accepting the substitution of the supplier, SCI ipso facto accepted an extended date of delivery, and the contract stood modified accordingly. There is, therefore, in Mr. Kumar's submission an equitable estoppel that arises against SCI, 1 Page 152 of the Petition Paper Book 3 of 8 ::: Downloaded on - 27/11/2013 20:31:35 ::: Shephali arbpl.1922.13.doc for, at the time when it could have terminated the contract, it chose instead to reaffirm it.
5. Although I have been taken through several clauses of the contract in support of these arguments, as also in reply thereto, it is in my view, not necessary to consider these in detail for the present purposes, having regard to the nature of the reliefs sought. Did SCI at any point accept an extended date of delivery sufficient to raise the equitable estoppel that Mr. Kumar pleads, which in turn would give rise to special equities in favour of ABG warranting the grant of the injunction sought? The answer must be in the negative. My attention was drawn to a letter dated 13th June 2013 from ABG to SCI.2 By this letter the Petitioners sought an extension of the delivery dates. However, the reply dated 18th June 2013 from SCI makes it clear that SCI in terms rejected ABG's application for an extended delivery date.3 Mr. Majumdar also drew my attention to a revised delivery schedule proposed by the Petitioners sometime in March 2013.4 This revision proposed a delivery date within the extended time contractually permissible, i.e., 150 days from the scheduled date of delivery of 22nd May 2013. That, too, was not expressly accepted. Mr. Majumdar also pointed out that the troubles between ABG and M/s. ZF Marine were essentially of ABG's making. It had initially placed an order or indent for a propulsion system with air cooled thrusters rather than required water cooled thrusters. This delayed delivery. In addition, there 2 Page 124 of the Petition Paper Book 3 Reply, page 227 4 Pages 139 and 140 of the Petition Paper Book 4 of 8 ::: Downloaded on - 27/11/2013 20:31:35 ::: Shephali arbpl.1922.13.doc were also disagreements between ABG and ZF Marine in regard to financial matters. SCI was in no way concerned with these. It had, on the contrary, made a 20% payment of the contract price to ABG;5 if ABG failed to make adequate financial arrangements with ZF Marine, that was entirely to ABG's account. At a meeting on 22nd March 2013 these problems were noted. 6 On 18th June 2013 SCI made it clear that it was not agreeable to revised delivery dates proposed by ABG and that any "delay in delivery over and above contractual delivery dates will be dealt in line with terms and conditions of Ship Building Contract". 7 This was reiterated as late as 11th September 2013 in the minutes of a meeting held on that date,8 and reaffirmed in an email exchange on 22nd October 2013. 9 By its Advocates' notice dated 22nd October 2013, SCI rescinded the ship-building contract.10 It recalled the amount already advanced to ABG, the rupee equivalent of US$ 3,380,000, with interest, under Article XIII, of the ship-building contract. That clause allows 15 days for compliance, and that period ends today.
6. The result of this seems to be contrary to ABG's contentions. SCI has consistently maintained that it is not agreeable to any extension(s) of contractual delivery date. ABG had till 22nd May 2013 to deliver the vessel, and a further grace period of 150 5 In two instalments of US$ 1,690,000, on 16th March 2012 and 1st June 2012 6 Page 225 of the Petition paper book 7 Reply, Page 227 8 Reply, Page 229 9 Reply, Page 230 10 Petition, Page 211 5 of 8 ::: Downloaded on - 27/11/2013 20:31:35 ::: Shephali arbpl.1922.13.doc days, i.e., till 19th October 2013. ABG sought extensions of this delivery schedule. The extensions were refused, and there is contemporaneous documentary evidence of this refusal. If ABG has not been able to adhere to the contract schedule, prima-facie, it seems to be of ABG's own making; certainly there is nothing before me to indicate that SCI was in any way at fault. It is not possible to accept Mr. Kumar's argument that merely because in its email of 13th September 2013 SCI accepted an alternative vendor, it must, therefore and by necessary implication, be deemed to have agreed to an extension of the delivery schedule. That is in the teeth of the considerable documentation to the contrary. At best, SCI could be said to have accepted an alternative vendor or supplier, but not an extension or modification of the delivery schedule. There is no ambiguity about SCI's refusals at all. In addition, the contract has stringent requirements regarding amendment and modification.
These cannot be bypassed by implication or imputation. It is not, in my view, possible or even permissible to read into the contract an implicit extension of a contractual term of delivery when there is on record an explicit and unambiguous negation of it.
7. In my view there are no special equities that arise in ABG's favour. Certainly there can be no equitable estoppel of the kind claimed by Mr. Kumar, for an estoppel must at the very least be unambiguous.
8. ABG's has its remedies in arbitration. It is difficult to see how those remedies would be prejudiced if the present injunctive 6 of 8 ::: Downloaded on - 27/11/2013 20:31:35 ::: Shephali arbpl.1922.13.doc reliefs are refused. The extended or renewed bank guarantees in question are unconditional.11 The law relating to bank guarantees is too well-settled to warrant further discussion.12 Mr. Majumdar relies on the Supreme Court decision in Himadri Chemical Industries Ltd v Coal Tar Refining Co13 to emphasise that there is only a limited class of cases in which such an injunction can be granted, viz., where there is (i) fraud or (ii) irretrievable harm and injury likely to be caused to the applicant, and where special equities can be said to arise. As I have already noted, in the facts of this case, I do not see how there can be said to be any special equities in favour of ABG. There is no question of any irretrievable harm and injury to ABG either. The only such harm is financial, and here, too, the law is well-settled, that mere financial hardship is not "irretrievable harm or injury". All ABG's remedies in arbitration, including, if it succeeds, in damages, are open to it. As to the question of fraud, Mr. Kumar stated in fairness that although there is some pleading to that effect, the present application is not based on any such please.
9. It is not, in my view, possible to grant the reliefs sought by the Petitioners. The application is rejected. Mr. Kumar submits that the petition itself be made simply returnable. I regret that 11 Pages 39 and 48 of the Petitioners' additional compilation of documents.
12UP State Sugar Corporation v Sumac International Ltd, (1997) 1 SCC 568; Svenska Handelsbanken v M/s Indian Charge Chrome, (1994) 1 SCC 502; BSES Ltd (now Reliance Energy Ltd) v Fenner India Ltd, (2006) 2 SCC 728; Federal Bank Ltd v V.M. Jog Engineering Ltd, (2001) 1 SCC 663;
13 (2007) 8 SCC 110 7 of 8 ::: Downloaded on - 27/11/2013 20:31:35 ::: Shephali arbpl.1922.13.doc
is now not possible as I have heard parties at length. Nothing survives in the petition and it is, accordingly, dismissed. There will be no order as to costs.
(G. S. PATEL, J.) 8 of 8 ::: Downloaded on - 27/11/2013 20:31:35 :::