Savan Godiawala, In His Capacity ... vs Steel Authority Of India Limited & ...
2018 Latest Caselaw 6902 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI

+                   OMP(I)(COMM) No.407/2018

%                                               20th November, 2018

SAVAN GODIAWALA, IN HIS CAPACITY OF
LIQUIDATOR AND ON BEHALF OF LANCO
INFRATECH LIMITED
                                                      ..... Petitioner
                           Through:   Mr. Sandeep Sethi, Senior
                                      Advocate with Mr. Vaijayant
                                      Paliwal, Advocate with Mr.
                                      Jasveen Kaur, Advocate and
                                      Ms. Srishti Khare, Advocate
                                      (M. No.8527696008)
                           versus

STEEL AUTHORITY OF INDIA LIMITED &
ANR.
                                                     ..... Respondents

Through: Mr. Parag P. Tripathi, Senior Advocate with Mr. Arun Kathpalia, Senior Advocate, Mr. Mandeep Singh Vinaik, Advocate, Ms. Anjali Sharma, Advocate, Mr. Deepak Bashta, Advocate and Mr. Lalltaksh Joshi, Advocate for respondent No.1(M. No.9810011235).

                                      Mr. Karan Khanna, Advocate
                                      with Mr. Mohit Taneja,
                                      Advocate     for      respondent
                                      No.2(M. No.7838971053).





 CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA

To be referred to the Reporter or not?


VALMIKI J. MEHTA, J (ORAL)

I.A. No.14596/2018(exemption)

1. Exemption allowed subject to just exceptions.

I.A. stands disposed of.

O.M.P.(I)(COMM) No. 407/2018 and I.A. Nos. 15751/2018 (under Section 151 CPC) & 17753/2018 (for condonation of delay)

2. This is a petition filed under Section 9 of the Arbitration

and Conciliation Act, 1996 whereby the petitioner seeks an injunction

order against the respondent no. 1 from in any manner acting upon the

impugned Termination Notice dated 24.09.2018. An injunction order

is also prayed by the petitioner to restrain the respondent no. 1 from

invoking the Performance Bank Guarantee dated 20.01.2014 (valid for

5 years) for a sum of Rs. 50 crores. Ad-interim ex parte orders are

also prayed qua the aforesaid two prayers.

3. On 26.10.2018, this Court passed the following order :

1. Counsel for the petitioner says that petitioner will file a detailed affidavit setting out exactly and how the proposed assignee of the contract to whom the contract is sought to be assigned fulfils all the necessary technical bid

requirements of the contract which was originally awarded to Lanco Infratech Limited.

2. The affidavit will be supported by the relevant documents and cross reference will be made in the affidavit to the relevant portions of the documents. The said affidavit be filed within four days from today.

3. Respondent no. 1 will file reply affidavit to the affidavit which is now to be filed by the petitioner within four days thereafter. Petitioner will file rejoinder affidavit if so required within a period of four days of filing of the affidavit by respondent no. 1.

4. Besides the fact that this order is without prejudice to the respective rights and contentions, however, it is noted that this Court prima facie feels that respondent no. 1 can take a holistic view of the matter that in case the proposed assignee satisfies the technical bid parameters, then there is no reason why the respondent no. 1 should not be interested in going through the contract as regards its performance and which performance, already started with the contracting company Lanco Infratech Limited, and which is presently in liquidation.

5. Re-notify on 20th November, 2018."

4. The petitioner has filed its affidavit as per Order dated

26.10.2018. The respondent no. 1 has filed its affidavit in response

thereto. The petitioner has in the meanwhile moved an application

being I.A. No. 15751/2018 for amendment of the petition whereby the

petitioner seeks to amend the petition to bring on record the facts that

the proposed assignee of the contract being, M/s Tasra Mining and

Energy Company Private Limited, was eligible to submit the original

bid as it was technically and financially competent to do so. This

amendment was prayed along with a prayer for taking on record an

additional affidavit dated 31.10.2018. Basically, the petitioner wants

to bring on record the fact that the proposed assignee M/s Tasra

Mining and Energy Company Private Limited was financially and

technically competent as the original contracting party M/s Lanco

Infratech Limited which was awarded the original contract being the

Coal Mining Services Agreement (hereinafter 'CMSA') dated

23.09.2013 by the respondent no. 1.

5. The respondent no. 1 has filed a reply to the amended

petition itself, and therefore really I.A. No. 15751/2018 is not

effectively opposed, of course, without prejudice to the rights of the

respondent no. 1 to contest the petition on merits by denying the

averments and prayers as made by the petitioner.

6. The facts of the case are that the respondent no. 1 has

entered into a CMSA on 23.09.2013 with M/s Lanco Infratech

Limited. The petitioner is acting through Mr. Savan Godiawala, who

is the Liquidator acting on behalf of M/s Lanco Infratech Limited. Mr.

Savan Godiawala is an insolvency professional, and so appointed by

the National Company Law Tribunal, Hyderabad Bench vide Order

dated 27.08.2017 for M/s Lanco Infratech Limited. Mr. Savan

Godiawala effectively is none other than, and acting for and on behalf

of M/s Lanco Infratech Limited. After the CMSA dated 23.09.2013

was entered into between petitioner and respondent no. 1, a part of the

contract was sub-contracted by M/s Lanco Infratech Limited to its

sub-contractor M/s Thriveni Ramka Mining Private Limited. This sub-

contracting was done with the approval of respondent no. 1 as per the

respondent no. 1‟s Letter dated 05.05.2017. As per clause 25 of the

CMSA dated 23.09.2013, if M/s Lanco Infratech Limited goes into

liquidation, then, the respondent no. 1 was entitled to terminate the

agreement after giving a 30-day notice. This 30-day notice has been

given by the respondent no. 1 in terms of respondent no.1‟s

Termination Notice dated 24.09.2018 and which was treated as the 30-

day notice required as per the order dated 27.09.2018 passed by the

learned single Judge of this Court in OMP(I) (COMM) No. 377/2018.

7. Therefore, it is seen that the undisputed position

emerging on record is that the parties are bound by the CMSA, and

this contract entitles the respondent no. 1 to terminate the same on the

petitioner going into the liquidation. Admittedly the petitioner is in

liquidation and the petition has been filed through Mr. Savan

Godiawala, in his capacity as a liquidator of M/s Lanco Infratech

Limited. Therefore, clearly respondent no. 1 was completely justified

in seeking termination of the contract on the basis of Clause 25 of the

CMSA which provided for termination of the contract in case M/s

Lanco Infratech Limited went into liquidation, and which it has.

8. On behalf of the petitioner, to seek the reliefs prayed,

reliance was placed upon a Letter dated 15.03.2018 issued by

respondent no. 1 as per which respondent no. 1 is said to have

permitted assignment of CMSA originally awarded to M/s Lanco

Infratech Limited in favour of M/s Tasra Mining and Energy

Company Private Limited, and this company is a wholly owned

subsidiary company of M/s Lanco Infratech Limited. It is argued on

behalf of the petitioner that respondent no. 1 after issuing its Letter

dated 15.03.2018, the respondent no. 1 could not now back-out of the

same, unilaterally, without giving reasons, much less valid reasons for

withdrawing the permission for the assignment.

9. In order to appreciate this argument urged on behalf of

the petitioner, reliance has been placed upon the Letter dated

15.03.2018 issued by the respondent no. 1. This letter is reproduced as

under :

"Ref. No.: ED(CD)/Tasra/17-18/406 Date : 15.03.2018

To Mr. Savan Godiawala The Resolution Professional (RP) of M/s Lanco Infratech Limited, Appointed by National Company Law Tribunal (NCLT)

Sub: Suggested Assignment of Coal Mining Service Agreement between SAIL and M/s Lanco Infratech Limited.

Dear Sir,

In pursuance to the request from the Resolution Professional of M/s Lanco Infratech Limited vide letter InLanco/560, dated 6 th Jan' 2018 and subsequent deliberation on 16.01.2018 by you as Resolution Professional of M/s Lanco Infratech Limited appointed by National Company Law Tribunal (NCLT) on advantages of assigning Coal Mining Service Agreement executed between SAIL and M/s Lanco Infratech Limited dated 23rd September, 2013 to M/s Tasra Mining & Energy Company Private Limited (TMECPL) a 100% subsidiary of M/s Lanco Infratech Limited and subsequent clarification vide your letter no. InLanco/564, dated 13th March, 2018.

The matter has been examined by SAIL in consultation with SAIL-Corporate Law. We under the provision of Coal Mining Service Agreement, Clause „31‟ hereby permit M/s Lanco Infratech Limited to assign the Coal Mining Service Agreement to M/s Tasra Mining & Energy Company Private Limited, a 100% subsidiary of M/s Lanco Infratech Limited.

Further, you are hereby requested to depute authorized person(s) for execution of agreement with SAIL on behalf of M/s Tasra Mining & Energy Company Private Limited.

Thanking you, sd/-

(S.K. Basak) ED, Collieries Division"

(Underlining Added)

10. In my opinion, this Letter dated 15.03.2018 cannot be

said to be finally binding upon respondent no. 1 that there has infact

taken place an actual assignment of the contract in favour of M/s Tasra

Mining and Energy Company Private Limited, inasmuch as, the last

line of this aforesaid letter makes it clear that assignment is only

complete on the execution of the agreement of the respondent no. 1

with M/s Tasra Mining and Energy Company Private Limited. Also,

this Court cannot permit the petitioner to take benefit of the Letter

dated 15.03.2018 because this Letter dated 15.03.2018 signed by one

Mr. S.K. Basak has not been validly issued as Mr. S.K. Basak is not

the competent/final/decision making authority in the respondent no. 1

to take the decision for assigning the CMSA of M/s Lanco Infratech

Limited to M/s Tasra Mining and Energy Company Private Limited.

In fact, the respondent no. 1 in its counter-affidavit to the main

petition has stated departmental proceedings were initiated against Mr.

S.K. Basak for illegally issuing the Letter dated 15.03.2018, and that

he has been visited with appropriate penalty for illegally issuing the

Letter dated 15.03.2018. Therefore, in my opinion, the petitioner

cannot place reliance upon the Letter dated 15.03.2018 that the same

had the final effect of causing an actual assignment of the CMSA

awarded to M/s Lanco Infratech Limited in favour of M/s Tasra

Mining and Energy Company Private Limited.

11. Though this argument is not raised on behalf of the

respondent no. 1, but in my opinion, the petition is liable to be

dismissed and is accordingly also dismissed in view of the provisions

of Section 14 and 41(e) of the Specific Relief Act, 1963. Section

14(1)(b) and (d) specifically prohibit grant of specific relief of a

contract because of which a court is required to go into many details

of a very detailed contract, and the court has to supervise the

implementation of a contract which contains too many details

requiring constant supervision. A huge, complicated and humongous

Coal Mining Services Agreement containing dozens of terms, and

requiring performance in hundreds of different ways, surely is a

contract which will fall under Section 14(1)(b) and/or (d) of the

Specific Relief Act. Once specific performance cannot be granted,

then, Section 41(e) of the Specific Relief Act provides that an

injunction cannot be granted because by grant of injunction staying the

cancellation of a contract, effectively the court will be ordering

specific performance of the contract, and which it cannot as per

Section 14 of the Specific Relief Act. Hence, for this additional reason

this Court cannot grant the relief prayed in this petition of staying of

the impugned Termination Notice dated 24.09.2018, and to this extent

the relief claimed, the petition is liable to be dismissed on account of

the provisions of Sections 14(1) and 41(e) of the Specific Relief Act.

Section 14(1) and Section 41(e) of the Specific Relief Act read as

under:

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

..... ...... ...... ......

(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;

..... ...... ...... ......

(d) a contract the performance of which involves the performance of a continuous duty which the court cannot supervise."

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

..... ...... ...... ......

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

12. Once the Termination Notice dated 24.09.2018 becomes

final, and the petitioner is not entitled to assign the contract to M/s.

Tasra Mining and Energy Company Private Limited, obviously, then

there does not arise the grant of injunction against invocation and

encashment of the bank guarantee, inasmuch as this relief is

predicated on the continuation of the CMSA with the assignee M/s

Tasra Mining and Energy Company Private Limited, and this

assignment has neither taken place, nor can the respondent no.1 be

otherwise forced to do so, as is already discussed above.

13. In view of the aforesaid discussion, I do not find any

merit in the petition and the same is therefore dismissed.

NOVEMBER 20, 2018                                VALMIKI J. MEHTA, J
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