M/S. Mms Steel & Power Private ... vs M/S. Oil And Natural Gas ...
2009 Latest Caselaw 5338 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI

                                  OMP No. 337/2009

                                      Reserved on: December 08, 2009

                                  Pronounced on: December 22, 2009

M/s. MMS STEEL & POWER PRIVATE LIMITED        ...Petitioner
                   Through: Mr. Kodhanda Ram, Sr. Advocate with
                            Mr. Sunil Mathews, Advocate.
              VERSUS

M/s. OIL AND NATURAL GAS CORPORATION LIMITED ....Respondent

Through: Mr. Subhash Oberoi , Advocate.

CORAM:

HON'BLE MR. JUSTICE VALMIKI J.MEHTA

1. Whether the Reporters of local papers may be allowed to see the judgment?

     2. To be referred to the Reporter or not?        Yes

     3. Whether the judgment should be reported in the Digest?            Yes

 %                                JUDGMENT
VALMIKI J.MEHTA, J

1. By this petition under Section 9 of the Arbitration and Conciliation Act,

1996, the petitioner in effect, irrespective of the language of the prayer clauses,

seeks an extension of the contract of supply of "Sour Gas" (a variant of natural

gas) for another period of five years and which expires either on 31.3.2009 as

per the respondent or 31st December, 2009 as per the petitioner.

2. A relief of injunction, seeking the relief of stay of stoppage of supplies in

fact is in the nature of specific performance of a contract of continuing to supply

the gas. The basic issue to be addressed while disposing of this petition is as to OMP No. 337/2009 Page 1 whether the petitioner has an automatic right of extension of the contract for

another period of five years as asked for by it vide its the letter dated 10.12.2008

to the respondent or putting it differently is the respondent justified in stating

that the petitioner cannot force the respondent to enter into a contract which it

does not want to.

3. The facts of the case are that a contract dated 11.2.2005 was entered into

between the respondent and one M/s. S&S Power Limited for the supply of Sour

Gas for a period of five years and which company was engaged in generation

and sale of power from its power plants. The present petitioner is the assignee

of M/s. S&S Power Limited as the contract was assigned in its favour and for

which a Letter of Assignment dated 2.8.2005 was issued by the respondent,

therefore, a reference to the present petitioner will include a reference to M/s.

S&S. Power Limited or vice-versa.

4. It is not in dispute that the initial contract for the supply of Sour Gas was

for a period of five years. It is for this reason that in the letter dated 10.12.2008

which was written by the petitioner to the respondent, it was requested by the

petitioner to "extend" the contract for a period of five more years. This period

of five years as per the contention of the petitioner only comes to an end on

31.12.2009 and as per the respondent came to an end on 31.3.2009. Before

proceeding ahead I must state that an earlier petition being OMP 147/2009 was

filed by the present petitioner against the present respondent and which was

disposed of vide order dated 26.3.2009 and reliefs prayed for by the present

OMP No. 337/2009 Page 2 petitioner were declined. Though I will advert to this petition and this order

dated 26.3.2009 at a subsequent stage for the present I am referring to it for the

purpose that one of the contentions in that petition (OMP 147/2009) was that

the contract expired only on 31.12.2009 and an injunction was sought

preventing the dis-continuation of the supply of gas by the respondent at least

till 31.12.2009 and which relief was declined by this Court by its order dated

26.3.2009.

5. The counsel for the petitioner has urged the following contentions before

this Court:

(i) A reference to the brochures issued by the respondent and the

correspondence exchanged before the contract was entered into as also the

fact that the petitioner had made huge investments of crores of rupees,

entitles the petitioner to an automatic renewal of the contract for a period

of five years each till the gas reserves last at the Kovilkallapal field in the

State of Tamil Nadu, although the contract is for a period of five years

and was stated to be renewable by "mutual consent";

(ii) The petitioner was entitled to supply the Sour Gas at least till 31.12.2009

on the basis of definitions as per clauses 1.07 and 1.08 of the contract

dated 11.2.2005;

(iii) The decision dated 26.3.2009 in OMP 147/2009 does not operate to bar

the present petition and for seeking reliefs in the present petition

inasmuch as after the order dated 26.3.2009, subsequent events have

OMP No. 337/2009 Page 3 taken place viz. of the issuance of tender by the respondents for a new

buyer on 2.5.2009 and the letter dated 6.3.2009 was not considered while

deciding the OMP 147/2009.

6. In response to the above arguments, the counsel for the respondent urged

the following contentions:

(i) There is no law which can force the respondent to necessarily enter into a

contract of the supply of Sour Gas to the petitioner and there is no

automatic right of renewal as contended by the counsel for the petitioner;

(ii) The injunction which is prayed for by the petitioner is barred as per

Section 41(e) read with Sections 14 (a), (b)& (d) of the Specific Relief

Act, 1963;

(iii) The decision in OMP 147/2009 dated 26.3.2009 operates as res judicata

or as an estoppel in filing the present petition because a reference to the

earlier petition and the present petition shows that not only most of the

paras are same, the relief as prayed for in effect is also the same though

the same may be worded differently and that it makes no difference if

certain other paras were added because in substance, according to the

counsel for the respondent, the present petition is "old wine in new

bottle";

(iv) Since third party rights have come into existence inasmuch as a tender has

already been placed, this Court should not pass any discretionary orders

as prayed for by the petitioner. The petitioner himself is responsible for

OMP No. 337/2009 Page 4 bringing the issue to the present position because it deliberately failed to

negotiate for the price of gas in spite of the respondent asking the

petitioner to do so, and;

(v) Pricing of the Sour Gas is fixed by the Government of India as per its

policy and in case the respondent is forced to supply the Sour Gas to the

petitioner, there will be loss of public revenue because Sour Gas is a

scarce and precious national asset.

7. Before I proceed I must state that this case had come up for the first time

in the summer vacations of this year when this Court ordered that the tender

process regards the fresh contract which was to be opened on 30.6.2009, can

continue however the matter shall not be finalized. The present order will

therefore dispose of the present petition and whether the said order dated

22.6.2009 has to be continued or vacated.

8. Section 92 of the Evidence Act,1872 states that once a contract is entered

into in writing, no evidence to contradict or vary the terms of the written

contract is permissible. In Svenska Handelsbanken vs. M/s. Indian Charge

Chrome and Ors., (1994) 1 SCC 502, the Supreme Court has by reference to

Section 92 held that after a written contract has been executed, the Court is

prevented from looking into documents prior to the written contract in the form

of proposals, drafts etc. Once therefore there is a written contract, it is the terms

of the said written contract which will bind the parties. The contract in question

in the present case was for a period of five years and it is only for that reason

OMP No. 337/2009 Page 5 that the petitioner asked for an extension vide its letter dated 10.12.2008.

Therefore, it is not permissible for the petitioner to contend that by virtue of

various brochures and other documents as also issues regarding the investments

made by it to contend that the contract is not for five years but can be

perpetually renewed every five years till the gas reserves last at Kovilkallapal

field. This argument of the petitioner based on documents of the date prior to

the contract that there is an entitlement of a perpetual renewal is violative of

Section 92 of the Evidence Act and is rejected. This argument of the petitioner

is also not sustainable because of Clause 2.02 of the contract which reads as

under:-

"2.02 The CONTRACT shall continue for both Narimanam and Kovilkalappal fields as indicated in Clause 5.01 from the date of commencement of supplies. The period will be renewable with mutual consent with respect to availability of sour gas."

It is quite clear that this clause uses the expression "mutual consent". This

expression therefore makes it more than abundantly clear that it is not the

unilateral desire of one party which can necessarily result in a contract, which in

law is a bilateral act. There is no valid basis that the expression "mutual

consent" should be interpreted to mean an automatic extension of lease for

continuing periods of five years. Such an interpretation will do violence to the

categorical language of Clause 2.02 of the Agreement. It also legally makes no

difference that the petitioner has made huge investments. Accordingly, I am of

OMP No. 337/2009 Page 6 the opinion that the petition is wholly misconceived in that it seeks perpetual

renewal every five years till the Sour Gas reserves last.

9. There is another reason why I am inclined to reject the argument of an

automatic fresh renewal as argued by the petitioner. This is because in the facts

of the present case, it is quite clear that the petitioner failed to come for

negotiations with regard to the price of the future supplies of Sour Gas after the

expiry of the first period of supply. I must at this stage refer to a portion of

para 25 of the reply filed by the respondent and which is as under:

"It is emphatically denied that the petitioner has accepted all the conditions of the respondent's letter dated 6.3.2009. It is submitted that the petitioner has disputed the validity of Gas Supply Agreement and its readiness to pay the gas price settled through the tendering process w.e.f. 1.4.2009. It is further categorically denied that irrespective of whether or not the petitioner agreed to the terms and conditions of the respondent, the subject sour gas would be sold only to a new entity after the finalization of the tender as alleged. It is stated that the ONGC vide letter dated 31.3.2009 informed the petitioner that the Gas supply agreement for Kovilkallapal field is valid till 31.3.2009 and the submission of the petitioner's letter no. MMS/ONGC/2008-09 dated 10.12.2008 requesting extension of contract implies that the petitioner's interpretation regarding expiry of the agreement is also same i.e. 31.3.2009. Further, the petitioner was called upon to attend the meeting on 6.4.2009 for finalization of gas price for the period from 1.4.2009 till finalization of the tender as the petitioner has conditionally accepted the conditions of the gas supply of the respondent stated vide letter dated 6.3.2009. It is stated that during the said meeting, the petitioner's representative was requested to offer the new gas price applicable from 1.4.2009, however, the petitioner's representative had shown its unwillingness to discuss the matter concerning the gas price with a plea that it would not be possible for him to discuss and offer any gas price, meaning thereby that the petitioner is not coming forward to discuss the terms and conditions of the fresh agreement as are to be executed. It would not be out of place to mention here that the respondent is following the guidelines laid down by the Govt. of India with regard to the allocation and pricing of natural gas in order to settle the new price of the sour gas."

In the rejoinder the response of the present petitioner was as under:

OMP No. 337/2009                                                                      Page 7
       " (xviii)        As regards para 25, the contentions stated therein by the

Respondent are denied and it is false to state that the Contract will expire on 31.3.2009. The submissions in para 25 of the petition are reiterated in this regard. The Petitioner and the Respondent have mutually agreed and entered into the contract. The Respondent is only trying to wriggle out and breach the terms and conditions of the contract. The Respondent is put to strict proof of the so called guidelines it alludes to."

The stand of the petitioner in para 18 of the rejoinder in fact amounts to

admission of the contents of para 25 of the reply filed by the respondent.

10. Therefore, in the facts of the present case, it is quite clear that it is the

petitioner who was deliberately dillydallying because it was bound to have paid

much higher prices than was paid under the first contract. Of course, pricing of

the Sour Gas is not what the respondent fixes but what the respondent follows as

per the directives of the Ministry of Petroleum and Natural Gas, Government of

India and as stated by it in para 25 reproduced above.

11. Therefore, looking at it from this angle there is no automatic right of

renewal nor can there be stated to be any contract for perpetual renewal and

also it cannot be said that the petitioner has acted bonafidely or sought renewal

of the supply at the fresh rates. I am thus of the opinion that the petitioner is not

entitled to the relief as prayed for whereby the respondent can be forced to

supply the gas to the petitioner more so because as contended by the respondent

that there is another successful tenderer who has offered such higher prices as

the respondent is ready and willing to accept.

12. I would at this stage advert to the issue that the present petition is in fact a

gross abuse of the process of law because a similar petition claiming effectively OMP No. 337/2009 Page 8 the same reliefs was in fact filed earlier being OMP 147/2009 and admittedly in

which no relief whatsoever in this regard of continuous supply was granted to

the petitioner. The reliefs which were prayed for in the said petition are as

stated below:

"a) Grant an injunction restraining the Respondent from committing breach of Clause 2.02 of the Contract and/or acting in contravention of the Contract by discontinuing the supply of sour gas to the Petitioner at its Kovilkalappal plant in Tiruvarur District, Pondicherry, pending resolution of disputes between the Petitioner and the Respondent; and

b) Grant an injunction restraining the Respondent from giving effect to the impugned Letter dt. 6-3-2009, pending resolution of disputes through arbitration;

c) Grant ex-parte ad interim prayers in terms of prayers (a) and (b) above during the pendency of this petition;

d) Pass such other order or orders as this Hon'ble Court may deem fit and proper in the interest of justice and equity."

13. I am tempted to reproduce the paras of the earlier petition as also the

present petition to show that almost to the extent of 90% or thereabouts the

petitions are identical, but, if I would do so the present order, would become far

too bulky. Therefore, all that I state is that a cause of action was pleaded and a

relief was also asked for in the earlier petition whereby effectively continuous

supply was sought of the Sour Gas and automatic renewals of five years each

was sought till the gas supplies last, in the earlier petition and which has also

been done in the present petition which is being disposed of by the present

order. Some relevant portions of the earlier petition are its paras 8,10(e) and

prayer clause (a) of the earlier petition which shows that in the earlier petition

OMP No. 337/2009 Page 9 also the petitioner had asked for an absolute right of extension on mutually

agreed terms and had effectively sought extension of the supply contract for

further continuous period as per Clause 2.02 of the contract, that too in

perpetuity inasmuch as in the prayer (a) of the earlier petition it is not as if

supply is only sought for one extension of five years. Of course, in the earlier

petition also the averments with regard to investments having been made by the

petitioner entitling it to renewal was also stated in the first petition as has been

done in the present petition.

14. The earlier petition OMP 147/2009 was disposed of in terms of the

following order:

"This application has been made under section 9 of Arbitration and Conciliation Act seeking an order of restraint against the respondent from committing any breach of Clause 2.02 of the contract or acting in contravention of the contract and restraining respondent on giving effect to the letter dated 6th March, 2009.

A perusal of letter dated 6th March, 2009 would show that as per it, the respondent's term of the contract was expiring on 31 st March, 2009 and respondent was in process of inviting open bids for the subsequent period. In the same letter, the respondent had informed the petitioner that respondent would continue to supply gas to the petitioner, subject to acceptance of certain conditions. Conditions have been enumerated in the letter. One condition is that the petitioner shall bear the difference in the gas price as being paid under the present contract and as may be quoted by the new tenderor in the open bid. The second condition is of providing a bank guarantee and third condition is that the new price would be applicable for the period the gas is supplied under this arrangement from 1 st April, 2009 onward till the new contract is signed.

Counsel for the petitioner states that petitioner is willing to furnish the bank guarantee. However, petitioner's right would be affected if petitioner agrees to the new price of the gas. Petitioner's contention is that the contract entered with the petitioner was a continuing contract and it was a long term arrangement with ONGC and on the assurance of ONGC that the gas would be continuously, supplied on long term basis, the petitioner had invested money in the power plant and had undertaken this project. Petitioner intends to raise all these issues before the Arbitrator.

This Court while dealing with this application under Section 9 cannot pronounce whether the contract would come to an end on 31 st March, 2009

OMP No. 337/2009 Page 10 or it is a continuing contract since that would preempt any decision by the arbitration. The petitioner may agree to the terms and conditions as mentioned in letter dated 6th March, 2009 without prejudice to its rights to assail the contention of the respondent regarding contract coming to an end on 31st March, 2009. The petitioner can challenge this assertion of the respondent before the Arbitrator. The petitioner can raise the issue of the price of gas before the Arbitrator despite agreeing for the time being for paying the price difference without prejudice to his rights.

The application is disposed of observing that the petitioner is at liberty to agree to the conditions as mentioned in the letter dated 6 th March, 2009 without prejudice to his rights to enable it to raise the issues before the Arbitrator, Beyond that no relief can be given.

The petitioner is also at liberty to assert his rights vis-a -vis contract before other appropriate forums as well.

The application/petition stands disposed of. "

15. It is, therefore, quite clear that the present petition which was filed in the

summer vacations i.e June of this year, is clearly an abuse of the process of law

and whereby the fresh tendering process has been stalled for approximately six

months causing huge losses to the respondent and that too for a valuable

national asset. The present petition is barred by general principles of res-

judicata and estoppel and no new material facts of a fresh cause of action can be

have arisen so as to entitle the petitioner to file the present petition.

16. Section 14(1)(a) (b) and (d) of the Specific Relief Act and Section 41(e)

thereof are as under:

"14. Contracts not specifically enforceable--(1) The following contracts cannot be specifically enforced, namely:-

(a) a contract for the non-performance of which compensation is an adequate relief;

(b) a contract which runs into such minute or numerous details or which is so dependent on the personal qualifications or volition of the parties, or otherwise from its nature is such, that the court cannot enforce specific performance of its material terms;

             xxx             xxx                 xxx
      (d)    a contract the performance of which involves the performance of a

continuous duty which the court cannot supervise."

"41. Injunction when refused--An injunction cannot be granted--

OMP No. 337/2009                                                                            Page 11
              xxx                                 xxx                   xxx

      (e)    to prevent the breach of a contract the performance of which would not
      be specifically enforced:"\

17. It is not the contention of the petitioner that no other source of supply of

gas is available or that there is no other alternative source of supply which will

result in closure of the factory. The petitioner therefore can surely purchase gas

or the alternative thereof to run the factory. If the petitioner ultimately succeeds

he can be then compensated in terms of money. Consequently, by virtue of

Section 14(1)(a) of the Specific Relief Act no specific performance can be

granted and since no specific purpose can be granted therefore no injunction

can be granted by virtue of Section 41(e). Looking at the subject contract, also

shows that the contract runs into great and minute details and its nature requires

performance of various reciprocal aspects besides the same being continuous in

nature. There are provisions with respect to delivery and pressure of gas,

quantity of gas, the provision of shut down and stoppage of gas, a minimum

guarantee offtake, measurement and calibration and so on, each of which

obligation would require continuous supervision of the Court if the injunction is

granted because by the grant of injunction the contract is being specifically

performed. Therefore, by virtue of Section 14(1)(b) & (d) read with Section

41(e) no injunction can be granted as this Court cannot supervise the continuous

duty with its minute or numerous details and keep on resolving day to day issues

which one bound to crop up from the myriad clauses of the contract.

OMP No. 337/2009 Page 12 I may state that this, conclusion of the declining to grant injunction on the basis

of the provisions of the Specific Relief Act is independent and additional to the

above grounds given before of disentitlement of the petitioner to force the

respondent to enter into a contract and also that the present petition is barred by

virtue of the decision dated 26.3.2009 in OMP 147/2009.

18. I therefore do not find any prima facie case in favour of the petitioner.

The balance of convenience is in favour of the respondent who will be caused

grave and irreparable injury if the interim orders as prayed for in this petition

are granted. In fact the provisions of law bar the grant of relief as prayed for in

this petition and as already dilated upon earlier.

19. For the sake of completeness, I must add that the counsel for the

petitioner referred to judgments on the point of res-judicata and grant of

injunction, however in view of what I have discussed above none of these

judgments apply to the facts of the present case and nor can the ratio of these

judgments in any manner alter the aforesaid conclusions of this judgment. The

judgments cited were Pawan Kumar Gupta Vs. Rochiram Nagdeo (1999) 4

SCC 243, Adhunik Steels Ltd. Vs. Orissa Manganese and Minerals (P) Ltd.

(2007) 7SCC 125, Transmission Corporation of A.P Ltd. Vs. Lanco

Kondapalli Power (P) Ltd. (2006)1SCC 540, Sajjadanashin Sayed Vs. Musa

Dadabhai Ummer (2000)3SCC 350 and Inacio Martins Vs. Narayan Hari

Naik and Ors. (1993)3SCC 123.

OMP No. 337/2009 Page 13

20. In view of the aforesaid, the present petition is wholly misconceived and

is an abuse of the process of law. The same is therefore dismissed with costs of

Rs. 1 lakh. The interim orders dated 22.6.2009 are vacated.

DECEMBER 22, 2009                                  VALMIKI J.MEHTA, J
dkg




OMP No. 337/2009                                                         Page 14