Andhra Pradesh High Court - Amravati
M/S.Dredging Corporation Of India vs M/S.Shoft Shipyard Private Limited on 4 October, 2024
Author: Ninala Jayasurya
Bench: Ninala Jayasurya
1
APHC010532762023
IN THE HIGH COURT OF ANDHRA PRADESH
AT AMARAVATI [3494]
(Special Original Jurisdiction)
FRIDAY, THE FOURTH DAY OF OCTOBER
TWO THOUSAND AND TWENTY FOUR
PRESENT
THE HONOURABLE SRI JUSTICE NINALA JAYASURYA
AND
THE HONOURABLE SMT JUSTICE SUMATHI JAGADAM
I.A.No.1 of 2014 in Commercial Court Appeal No.13 of 2024;
I.A.No.1 of 2014 in Commercial Court Appeal No.14 of 2024;
I.A.No.1 of 2014 in Commercial Court Appeal No.15 of 2024;
&
I.A.No.1 of 2014 in Commercial Court Appeal No.16 of 2024
I.A.No.1
A.No.1 of 2024 in Commercial Court Appeal No.13 of 2024
Between:
M/s.Dredging Corporation of India Ltd., ...Appellant/
Respondent No.1
AND
M/s.Shoft Shipyard Pvt. Ltd. ...Respondent
Respondent No.1
No.1/
Petitioner
Vishnu Dadige & Others ....Respond
.Respondents/
Respondents
Counsel for the Appellant:
Mr.D.S.Sivadarshan
Counsel for the Respondent No.1:
Mr.Sai Sanjay Suraneni
The Court made the following Common Order:
The Dredging Corporation of India Limited (hereinafter referred to as
'DCI'), the petitioner
ner / appellant filed the above Appeals along with the
miscellaneous applications, in the facts and circumstances, which may briefly
be stated as follows:
2. M/s.Shoft Shipyard Private Limited (hereinafter referred to as 'Shoft') /
respondent herein entered into an Agreement dated 23.06.2014 for
construction and delivery of Multi Utility Craft (DCI MUC-1 Yard No.252). The
value of the Vessel was fixed at Rs.25,93,50,000/- and scheduled to be
delivered by 23.09.2015. Delay occurred in the delivery of the Vessel and in
view of the same, the DCI imposed liquidated damages to a tune of
Rs.92,62,500/-.
3. Shoft entered into a separate Agreement dated 27.08.2015 with DCI to
build and supply an Inland Cutter Suction Dredger for a contract value of
Rs.19,86,00,000/-. As per the said Agreement, the said Vessel was
scheduled for delivery on 26.04.2016, but it was delayed. Therefore, the DCI
imposed liquidated damages to a tune of Rs.1,98,60,000/- on Shoft.
4. Aggrieved by the imposition of liquidated damages in respect of the
above two Agreements, M/s.Shoft invoked the arbitration clause and initiated
arbitration proceedings. The Arbitral Tribunal after considering the rival
contentions, passed two Arbitral Awards both dated 11.09.2019. Answering
the issues formulated by it, the Arbitral Tribunal in respect of the Agreement
dated 23.06.2014 held that the DCI is entitled to Rs.25,93,500/- out of the
liquidated damages of Rs.92,62,500/- imposed and directed refund of an
amount of Rs.66,69,000/- to Shoft. Apart from the same, the Tribunal also
directed the DCI to refund Shoft, an amount of Rs.38,90,250/- which was
deducted towards Service Tax on liquidated damages.
5. Insofar as the Agreement dated 27.08.2015 is concerned, the Arbitral
Tribunal through a separate Award dated 11.09.2019 held that DCI is entitled
to Rs.1,10,64,857/- out of the liquidated damages of Rs.1,98,60,000/-
imposed and directed refund of the balance amount of Rs.87,95,143/- to
Shoft. Further, the Arbitral Tribunal also directed DCI to refund Shoft, an
amount of Rs.29,79,000/- deducted towards Service Tax on the liquidated
damages.
6. Aggrieved by the Arbitral Award, dated 11.09.2019 in respect of the
Agreement dated 23.06.2014 to the extent of the direction to refund an
amount of Rs.66,69,000/- and the Service Tax amount of Rs.38,90,250/-, DCI
filed an application under Section 34 of the Arbitration and Conciliation Act (for
short 'the Act') vide CAOP No.17 of 2020 on the file of the Court of the Special
Judge for Trial and Disposal of Commercial Court, Visakhapatnam
(hereinafter referred to as Commercial Court).
7. Insofar as the Award dated 11.09.2019 in respect of the Second
Agreement dated 27.08.2015 directing the refund of Rs.87,95,143/- and
Service Tax amount of Rs.29,70,000/-, DCI filed CAOP No.18 of 2020 under
Section 34 of the Act.
8. Whereas, Shoft aggrieved by the adverse findings against it with
reference to the liquidated damages and that part of the Award granting an
amount of Rs.1,10,64,857/- to DCI, filed CAOP No.8 of 2021 under Section 34
of the Act before the Commercial Court, Visakhapatnam to modify / set aside
the Arbitral Award in respect of the Agreement dated 27.08.2015.
9. Likewise, Shoft aggrieved by the other Award dated 11.09.2019 in
respect of Agreement dated 23.06.2014 filed CAOP No.9 of 2021 under
Section 34 of the Act before the Commercial Court, Visakhapatnam to modify /
set aside the Arbitral Award to the extent of awarding Rs.25,93,500/- in favour
of DCI towards liquidated damages.
10. The Commercial Court, on an appreciation of the above mentioned
O.Ps., filed by the DCI as also Shoft, passed separate Orders dated
18.08.2023. Insofar as the CAOP Nos.17 and 18 of 2020 filed by the DCI with
reference to refund of liquidated damages as also Service Tax amount to a
tune of Rs.66,69,000/- and Rs.38,90,250/- as also Rs.87,95,143/- and
Rs.29,70,000/- pertaining to Agreement dated 23.06.2014 and Agreement
dated 27.08.2015 respectively, the Commercial Court was not inclined to
interfere with the Award of the Arbitral Tribunal and accordingly dismissed the
said O.Ps. Aggrieved by the dismissal of the same, the DCI filed COMCA.
Nos.13 and 14 of 2024 respectively.
11. As regards CAOP Nos.8 and 9 of 2021 filed by Shoft, the Commercial
Court vide separate Orders dated 18.08.2023, set aside the Arbitral Awards in
so far as the amount of Rs.1,10,64,857/- and Rs.25,93,500/- granted to the
DCI towards liquidated damages. The Commercial Court while granting the
said relief, inter alia opined that the Award is separable and severable.
12. Aggrieved by the Orders passed by the Commercial Court in respect of
the said O.Ps., the DCI filed Commercial Court Appeal Nos.15 and 16 of 2024
respectively.
13. Heard Mr.D.Satya Siva Darshan, learned counsel for the petitioners /
appellants. Also heard Mr.Sai Sanjay Suraneni, learned counsel for the
respondent No.1.
14. Mr.Shiva Darshan, learned counsel for the DCI made detailed
submissions. He inter alia contends that the Orders passed by the learned
Commercial Court in the O.Ps., filed by the petitioner are not sustainable. He
submits that the Awards dated 11.11.2019 approving the liquidated damages
only for few days and the direction to the DCI to refund the amounts is not
sustainable. He submits that the Commercial Court without appreciating the
matters in a proper perspective, confirmed the Awards though the same are
contrary to public policy.
15. Insofar as the Judgments and Decrees in the Original Petitions filed by
the Shoft, the learned counsel submits that the Commercial Court went wrong
in modifying the Award of the Arbitral Tribunal and the same is contrary to the
well settled legal position of Law. He submits that the learned Commercial
Court failed to appreciate that it has no power to modify the Arbitral Award;
that it has to either accept the Award as a whole or set aside the same. He
submits that in the present case, the portion of the Award which was set aside
is not severable one, is completely an integral part of the issue concerning the
entitlement of DCI to impose liquidated damages. He contends that none of
the parameters set out under Section 34 of the Arbitration Act are fulfilled and
in such circumstances, the Commercial Court grievously erred in allowing the
claims of 'Shoft' instead of dismissing the Original Petitions.
16. With reference to impermissibility of modification of Arbitral Award, the
learned counsel placed reliance on the Judgment of the Hon'ble Supreme
Court in Project Director, National Highways Authority of India v.
M.Hakeem1. While fairly stating that the Two Member Bench judgment in the
said decision was referred to by a Three Member Bench to a Larger Bench
vide Orders dated 20.02.2024 in Gayatri Balasamy v. I.S.G.Novasoft
Technologies Limited (Special Leave to Appeal (C) Nos.15336-15337/2021),
he submits that till the decision in M.Hakeem referred to above is overruled by
the Larger Bench, the same holds the field. In support of his contention, the
learned counsel placed reliance on the decision of the Hon'ble Supreme Court
in Union Territory of Ladakh v. Jammu and Kashmir National
Conference2. The learned counsel while submitting that these matters require
some detailed examination, that there is no straight jacket formula for granting
of interim stay on condition of depositing a particular percentage of amount
awarded and there is no dispute about the applicability of Order 41 Rule 5 of
Code of Civil Procedure either to an application under Section 34 or an Appeal
(2021) 9 SCC 1
2023 SCC OnLine SC 1140
under Section 37 of the Act, pleads for interim stay of execution of the
Judgments and Decrees, subject to payment of 50% of the decretal amount,
else the appellant, a Government of India Undertaking would suffer great
hardship, serious prejudice and irreparable loss. The learned counsel also
referred to the decisions of the Hon'ble Supreme Court in Toyo Engineering
Corporation v. Indian Oil Corporation Limited3 and Goa Shipyard Limited
v. Shoft Shipyard Pvt. Ltd.4.
17. On the other hand, the learned counsel for "Shoft" opposing the
petitions for interim reliefs, argued the matter elaborately. He contends that
the scope of interference by the Appellate Court under Section 37 of the Act is
too remote. He submits that the orders under challenge are well considered,
contains cogent reasons; that the submission seeking stay of execution of the
Judgments and Decrees, subject to the condition of depositing 50% of the
decretal amounts merits no acceptance. He submits that having suffered
adverse orders, the Appellant / DCI has to deposit the entire decretal amount
(100%), as the stay is not a matter of right. He submits that the status of
appellant as a Government of India Undertaking would not place it on a higher
pedestal and enable it to seek exemption / relaxation from depositing 100%
decretal amount. In fact, he submits that in one of the proceedings before the
Delhi High Court, DCI made a categorical statement on oath that it is in a
financial crisis and in such circumstances, if the interim stay on deposit of 50%
of the decretal amount is granted as sought for, the respondent / Shoft would
2021 SCC OnLine SC 3455
2024 SCC OnLine Bombay 1168 (Division Bench)
be deprived of enjoying the fruits of the decrees granted in its favour and it
would be highly difficult to recover the amount from the DCI, in the event of
dismissal of the appeals.
18. With reference to the contention that modification of Award is not
permitted / contemplated under Section 34 of the Act, the learned counsel
emphatically submitted that it is well within the jurisdiction of the Commercial
Court to remove the bad part from the good part of the Award. It is his
contention that the DCI had not raised any objection with regard to power of
the Court to partially sever an Award. He submits that the Award is severable
and separable and therefore, the contention that the Commercial Court
committed an error in modifying the Awards, deserves no appreciation. While
distinguishing the decision of the Hon'ble Supreme Court in M.Hakeem
referred to supra and referring to the decisions mentioned in the written
submissions i.e., Larsen Air Conditioning and Refrigeration Company v.
Union of India 5 , Manish v. Godawari Marathawada Irrigation
Development Corporation6, Kanpur Jal Sansthan and another v. Bapu
Constructions7, Balmer Lawrie & Co.Ltd., v. Shilpi Engineering Pvt. Ltd.,8
and Power Mech Projects Ltd., v. Sepco Electric Power Construction
Corporation9, the learned counsel submits that the interim relief sought for
may be considered, only on the condition of depositing 100% of the decretal
2023 SCC OnLine SC 982
2018 SCC OnLine SC 3863
(2015) 5 SCC 267
2024 SCC OnLine Bombay 758
2020 SCC OnLine Delhi 2049
amounts and urges for withdrawal of the amounts so deposited, without any
conditions.
19. This Court has considered the submissions made, perused the material
on record and gone through the decisions relied on by the counsel for both
sides.
20. At the outset, it may be appropriate to mention that the matters require
thorough examination in the light of the various grounds urged and the legal
aspect with reference to power of the Court under Section 34 of the Act as to
modification of an award and whether it is only a severance of the part of the
Award and the same is permissible. Therefore, this Court without going into a
detailed examination of the matters, at this stage, deems it appropriate to
confine the issue with regard to the interim reliefs sought for, pending
adjudication of the appeals finally.
21. On a thoughtful consideration of the matter, though the learned counsel
for the petitioner / appellant had urged for granting of stay on deposit of 50%
of the decretal amount, in the light of the decisions relied on by the learned
counsel for the respondents, this Court is not inclined to grant stay on such
condition in respect of the appeals arising out of the Judgments and Decrees
in CAOP Nos.17 and 18 of 2020. As noted earlier, the Commercial Court was
not inclined to interfere with the Award of the Arbitral Tribunal and dismissed
the said Original Petitions. Further, the status of the appellant / Corporation, a
Government of India Undertaking would not enure to its benefit in the light of
the decision in Kanpur Jal Sansthan relied on by the learned counsel for the
respondents. In the said decision, the Hon'ble Supreme Court inter alia held
that the appellant before it is only an extended wing or agency of the State,
not Government. In the facts of the said case, the Hon'ble Supreme Court was
dealing with an interim order passed by the Allahabad High Court, wherein, in
the appeal filed against the dismissal of application under Section 34 of the
Act, stay was granted on condition of deposit of entire amount awarded by the
Arbitrators and withdrawal of 50% of the same without furnishing security and
remaining half, after furnishing security was permitted. The Hon'ble Supreme
Court while opining that the High Court has not given justifiable reasons for
permitting such withdrawal, modified the order that the respondents shall
furnish security for the entire amount to the satisfaction of the concerned
District Judge.
22. In Manish's case referred to supra, the High Court of Bombay granted
interim stay pending disposal of an Appeal under Section 37 of the Act on
condition of depositing 60% of the awarded amount. The Hon'ble Supreme
Court interfered with the stay order and while stating that since these are
money decrees, there should be 100% deposit, permitted the respondents
therein to withdraw the amount deposited by furnishing solvent security to the
satisfaction of the High Court.
23. In the decision of Toyo Engineering Corporation referred to supra, the
Hon'ble Supreme Court while considering an Order of conditional stay passed
by the High Court and opined that 100% awarded amount is required to be
deposited for stay of the Award.
24. Similar view was expressed by the learned Single Judges of Bombay
and Delhi High Courts in the decisions of Balmer Lawrie and Power Mech
referred to supra. Thus, the consistent view of the Courts appears to be that
for granting stay of the execution of the Award, pending disposal of Appeal
under Section 37 of the Act, 100% decretal amount is required to be deposited
and the claimant may be permitted to withdraw the amount subject to
imposition of reasonable conditions.
25. In the present case, it is specifically asserted that the financial position
of DCI is not sound and that the respondent "Shoft" is a solvent company with
a net profit of about Rs.30.80 Crores. Therefore, in the light of the above legal
position, this Court is inclined to grant interim stay insofar as the Commercial
Court Appeal Nos.13 and 14 of 2024, subject to the condition of the appellant
depositing the entire decretal amount to the credit of CAOP Nos.17 and 18 of
2020, within a period of eight weeks from the from the date of receipt of a
copy of this Order. On such deposit, the respondent-Shoft is permitted to
withdraw the same, on furnishing the solvent security to the satisfaction of the
Commercial Court, Visakhapatnam.
26. Insofar as granting of interim reliefs in the other two Commercial Court
Appeals Nos.15 and 16 of 2024 arising out of the orders in CAOP Nos.8 and 9
of 2021, whether the said orders amounts to modification of the Award which
is not permissible while examining an application under Section 34 of the Act
or it is only separation of the severable part of the Award as contended by the
learned counsel for the respondent requires detailed examination. Further,
the decision in M.Hakeem is referred to a Larger Bench and the matter is
pending before the Hon'ble Supreme Court. Taking into consideration the said
aspect and the contention based on the decision in Union Territory of
Ladakh referred to supra, this Court is of the considered view that the interim
relief of stay of execution of the decrees in CAOP Nos.8 and 9 of 2021 before
the Commercial Court can be granted, however subject to certain conditions.
27. Accordingly, there shall be stay insofar as the orders in CAOP Nos.8
and 9 of 2021, subject to the condition of the appellant depositing half of the
decretal amount to the credit of the CAOPS, within a period of eight weeks
from the date of receipt of a copy of this order. On such deposit, the
respondent "Shoft" is permitted to withdraw the same by furnishing the solvent
security to the Commercial Court, Visakhapatnam.
____________________
NINALA JAYASURYA, J
____________________
SUMATHI JAGADAM, J
Date .10.2024
BLV
THE HONOURABLE SRI JUSTICE NINALA JAYASURYA
AND
THE HONOURABLE SMT JUSTICE SUMATHI JAGADAM
I.A.No.1 of 2014 in Commercial Court Appeal No.13 of 2024;
I.A.No.1 of 2014 in Commercial Court Appeal No.14 of 2024;
I.A.No.1 of 2014 in Commercial Court Appeal No.15 of 2024;
&
I.A.No.1 of 2014 in Commercial Court Appeal No.16 of 2024;
Date: .10.2024
BLV
