Abg Shipyard Ltd vs The Shipping Corporation Of India ...
2013 Latest Caselaw 129 Bom

    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





     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.

                                                                                         2 of 8





     Shephali                                                                arbpl.1922.13.doc

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,

Page 152 of the Petition Paper Book

3 of 8

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

Page 124 of the Petition Paper Book

Reply, page 227

Pages 139 and 140 of the Petition Paper Book

4 of 8

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

In two instalments of US$ 1,690,000, on 16th March 2012 and 1st June 2012

Page 225 of the Petition paper book

Reply, Page 227

Reply, Page 229

Reply, Page 230

Petition, Page 211

5 of 8

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

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

Pages 39 and 48 of the Petitioners' additional compilation of documents.

UP 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,

(2007) 8 SCC 110

7 of 8

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