Prakash Roadlines Corporation ... vs Ntpc Limited
2022 Latest Caselaw 1635 Cal/2

                     IN THE HIGH COURT AT CALCUTTA
                        Ordinary Original Civil Jurisdiction
                                  Original Side
                              (Commercial Division)


Present:

The Hon'ble Justice Shekhar B. Saraf

                             A.P. NO. 292 of 2022
               PRAKASH ROADLINES CORPORATION LIMITED
                              Versus
                           NTPC LIMITED


For the Petitioner                         : Mr. Dhruba Ghosh, Senior Advocate
                                             Mr. Sourav Mukherjee, Advocate
                                             Ms. Anjana Banerjee, Advocate
                                             Mr. Rohit Das, Advocate


For the Respondent                         : Mr. Probal Kumar Mukherjee,

Senior Advocate Mr. Uttam Kumar Mandal, Advocate Ms. Maitree Roy, Advocate

Heard on : May 19, 2022

Judgment dictated in open Court on : May 19, 2022

Shekhar B. Saraf, J.:

1. Supplementary affidavit filed be taken on record.

2. The present Section 9 application has arisen from a termination effected

by the respondent against the petitioner in a contract for loading,

unloading and transportation of coal in a contract entered between the

parties. It appears from the contract that the contract commenced on

27th April, 2022 and the petitioner was required to commence work

within 15 days from that date. The petitioner commenced work on 10th

May, 2022 which is within the 15 days, according to the petitioner. The

documents in the petition indicate that work was carried out on 10th, 11th

and 12th May, 2022. However, in between on May 11, 2022, due to

certain disruptions caused by anti-social elements, the work was stopped

for a period of time and the petitioner filed an FIR against certain

hoodlums and informed the respondent of the said incident. The

respondent authorities issued a letter on 12th May, 2022 wherein the

respondent noted that the work had not been started by the petitioner

within 15 days and directed the petitioner to commence work within 24

hours. The letter further stated that in the event the petitioner did not

commence work, the respondent shall be compelled to take action in

terms of Clause 10 of the scope of work with regard to suspension and

termination of work. On the same date, reply was given by the petitioner

to the respondent submitting the factum of work having been carried out

on 10th, 11th and 12th May, 2022. Surprisingly, on the same date, the

respondent authorities issued a letter of termination with immediate

effect. It is to be noted that this letter neither complied with the 24-hour

notice issued on May 12, 2022 by the respondent itself nor Clause 10 of

the scope of work that required a notice to be given for a period of 7 days

before termination.

3. Counsel on behalf of the respondent authorities has submitted that this

Section 9 application is filed in the Court of wrong jurisdiction and the

Calcutta High Court has no jurisdiction to entertain this matter as the

special terms of contract specifically indicate in Clauses 10 and 12 that

the Courts of Ranchi shall have jurisdiction and the place of arbitration

shall be Ranchi. Counsel on behalf of the respondent further submits on

the merits of the case that the petitioner did not inform the respondent

with details of the mobilization that was required to be done within 15

days. He submits that this is the reason for having terminated the

contract as without the said mobilization, the scope of work could not be

carried out in its entirety. Mr. Mukherjee further submits that the delay

in transfer of coal to the generation plants has resulted in great loss to

the respondent already and, accordingly, the respondent had to take the

decision of termination of the contract of the petitioner. He submitted

that, for the sake of argument, even if it is accepted that the termination

is not as per the contract, the only remedy available to the petitioner at

this stage is that of damages and there is no question of reinstatement of

the petitioner or of stay of the letters issued by the respondent authorities

with regard to termination. Mr. Mukherjee has further submitted that the

contract has now been awarded temporarily to another party and work

has already commenced. He submits that granting a stay on the

termination would result in irreparable loss and injury as the petitioner

has failed to carry out the task given to it as per the contract of

transportation of the coal to the generation plants and any further delay

in the same would result in further losses to the respondent company.

4. Mr. Ghosh, Senior Advocate appearing on behalf of the petitioner,

submits that the Calcutta High Court has jurisdiction in this matter as

letters have been received by the petitioner at its office in Kolkata. He

further submits that the jurisdiction clause provided for Ranchi would

not prevent the Calcutta High Court to exercise its jurisdiction in this

matter as part of cause of action has arisen in Kolkata. With regard to the

merits of the case, he submits that the termination is prima facie illegal

and contrary not just to the contract and terms and conditions therein

but also to the respondent's own first letter issued on May 12, 2022. He

submits that after having granted 24 hours time to the petitioner, the

respondent illegally terminated the contract within 12 hours and such

action by a State-owned Corporation is patently illegal and barred under

law.

5. At the very outset it is to be noted that the present reliefs are sought in a

Section 9 application under the Arbitration and Conciliation Act, 1996

and not under the writ jurisdiction of this High Court. It is to be noted

that the transaction is a commercial transaction between two

independent parties and there is no element of fundamental rights

involved under Article 12 and 14 of the Constitution of India. The

contract being a non-statutory transaction between the parties, the reliefs

that can be granted by this Court shall have to be limited to as per the

Arbitration and Conciliation Act, 1996 and no further.

6. With regard to the jurisdictional point, the Supreme Court in BGS SGS

SOMA JV -v- NHPC Ltd. reported in Supreme Court Cases 2020 Volume

4 Page 234 has also held that where the seat of arbitration is defined,

that place would be the place where all arbitration proceedings would

have to be conducted including an application under section 9 of

Arbitration and Conciliation Act, 1996. Relevant paragraphs are

delineated below.

"59. Equally incorrect is the finding in Antrix Corporation Ltd. (supra) that Section 42 of the Arbitration Act, 1996 would be rendered ineffective and useless. Section 42 is meant to avoid conflicts in jurisdiction of Courts by placing the supervisory jurisdiction over all arbitral proceedings in connection with the arbitration in one Court exclusively. This is why the Section begins with a non-obstante clause, and then goes on to state "...where with respect to an arbitration agreement any application under this Part has been made in a Court..." It is obvious that the application made under this part to a Court must be a Court which has jurisdiction to decide such application. The subsequent holdings of this Court, that where a seat is designated in an agreement, the Courts of the seat alone have jurisdiction, would require that all applications under Part I be made only in the Court where the seat is located, and that Court alone then has jurisdiction over the arbitral proceedings and all subsequent applications arising out of the arbitral agreement. So read, Section 42 is not rendered ineffective or useless. Also, where it is found on the facts of a particular case that either no "seat" is designated by agreement, or the so-called "seat" is only a convenient "venue", then there may be several Courts where a part of the cause of action arises that may have jurisdiction. Again, an application Under Section 9 of the Arbitration Act, 1996 may be preferred before a court in which part of the cause of action arises in a case where parties have not agreed on the "seat" of arbitration, and before such "seat" may have been determined, on the facts of a particular case, by the Arbitral Tribunal Under Section 20(2) of the Arbitration Act, 1996. In both these situations, the earliest application having been made to a Court in which a part of the cause of action arises would then be the exclusive Court Under Section 42, which would have control over the arbitral proceedings. For all these reasons, the law stated by the Bombay and Delhi High Courts in this regard is incorrect and is overruled.

[emphasis added]

81. Most recently, in Brahmani River Pellets (supra), this Court in a domestic arbitration considered Clause 18-which was the arbitration agreement between the parties-and which stated that arbitration

shall be under Indian Arbitration and Conciliation Act, 1996, and the venue of arbitration shall be Bhubaneswar. After citing several judgments of this Court and then referring to Indus Mobile Distribution (supra), the Court held:

"18. Where the contract specifies the jurisdiction of the court at a particular place, only such court will have the jurisdiction to deal with the matter and parties intended to exclude all other courts. In the present case, the parties have agreed that the "venue" of arbitration shall be at Bhubaneswar. Considering the agreement of the parties having Bhubaneswar as the venue of arbitration, the intention of the parties is to exclude all other courts. As held in Swastik, non-use of words like "exclusive jurisdiction", "only", "exclusive", "alone" is not decisive and does not make any material difference.

19. When the parties have agreed to the have the "venue" of arbitration at Bhubaneshwar, the Madras High Court erred in assuming the jurisdiction Under Section 11(6) of the Act. Since only the Orissa High Court will have the jurisdiction to entertain the petition filed Under Section 11(6) of the Act, the impugned order is liable to be set aside."

82. On a conspectus of the aforesaid judgments, it may be concluded that whenever there is the designation of a place of arbitration in an arbitration Clause as being the "venue" of the arbitration proceedings, the expression "arbitration proceedings" would make it clear that the "venue" is really the "seat" of the arbitral proceedings, as the aforesaid expression does not include just one or more individual or particular hearing, but the arbitration proceedings as a whole, including the making of an award at that place. This language has to be contrasted with language such as "tribunals are to meet or have witnesses, experts or the parties" where only hearings are to take place in the "venue", which may lead to the conclusion, other things being equal, that the venue so stated is not the "seat" of arbitral proceedings, but only a convenient place of meeting. Further, the fact that the arbitral proceedings "shall be held" at a particular venue would also indicate that the parties intended to anchor arbitral proceedings to a particular place, signifying thereby, that that place is the seat of the arbitral proceedings. This, coupled with there being no other significant contrary indicia that the stated venue is merely a "venue" and not the "seat" of the arbitral proceedings, would then conclusively show that such a Clause designates a "seat" of the arbitral proceedings. In an International context, if a supranational body of Rules is to govern the arbitration, this would further be an indicia that "the venue", so stated, would be the seat of the arbitral proceedings. In a national context, this would be replaced by the Arbitration Act, 1996 as applying to the "stated venue", which then becomes the "seat" for the purposes of arbitration."

Keeping the above ratio in mind one would have to come to the prima

facie finding that in the present fact situation since the jurisdiction and

the seat are provided in the special terms of contract, clauses 10 and 12,

as being Ranchi, jurisdiction would lie at Ranchi and no other place.

7. With regard to the merits of the present case, from a reading of the

petition and submissions made on behalf of the Counsel, it is clear from

the documents that the termination is ex facie contrary to the contract

entered into between the parties and the first letter issued by the

respondent authority on May 12, 2022. However, it is to be noted that the

petitioner can only claim damages for such illegal termination and cannot

have the right of reinstatement of the contract. The law as held by

umpteen judgments of the Supreme Court and our High Court is patently

clear that for a wrongful termination of a contract in a commercial

transaction, one cannot claim specific performance by way of annulment

of the wrongful termination but only claim damages for such wrongful

termination of the contract. Furthermore, the prayers sought by the

petitioner are in the nature of final relief and would lead to a disruption

in the entire process of transfer of coal from the designated area to the

generation plants. Accordingly, I am of the view that even though the

letter of termination is prima facie illegal, an order of status quo of the

said letter cannot be granted by this Court at this stage. The balance of

convenience and inconvenience and requirement of prevention of

irreparable loss and injury is also in favour of the respondent, and

accordingly, ad-interim protection sought by the petitioner is rejected.

8. Parties are directed to file their affidavits in this matter. Let affidavit-in-

opposition be filed within three weeks from date; reply thereto, if any,

within one week thereafter. Point of maintainability of this application is

kept open. Liberty is granted to the parties to mention for inclusion in the

list.

9. It is to be noted that I have already held that prima facie the notice of

termination has been issued illegally. Furthermore, the petitioner has

clearly carried out work on 10th, 11th and 12th May, 2022 and has stated

on affidavit (supplementary affidavit) that they are willing to continue

with the work, if so allowed. The manner in which the termination has

taken place indicates that the action taken for termination was prima

facie arbitrary and mala fide. However, this Court has refrained from

striking the same down on the ground that this matter is not before the

writ jurisdiction of this Court. Mr. Mukherjee, Senior Advocate appearing

on behalf of the respondent authorities is directed to use his good offices

with his client to bring this fact to the notice of the client and make an

attempt to resolve the present dispute between the parties. Termination

of a contract in the manner done in the present case does not bode well

for commercial transactions in the country. This fact should be taken

into account and Mr. Mukherjee is requested to try and sort out the

dispute, if possible.

10. Urgent Photostat certified copy of this order, if applied for, should be

made available to the parties upon compliance with the requisite

formalities.

(Shekhar B. Saraf, J.)