Gujarat High Court
Essar Bulk Terminal Limited vs Arcelor Mittal Nippon Steel India ... on 3 February, 2022
Bench: J.B.Pardiwala
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 3040 of 2021
With
CIVIL APPLICATION (FOR INTERIM RELIEF) NO. 1 of 2021
In R/FIRST APPEAL NO. 3040 of 2021
With
CIVIL APPLICATION (FOR PRODUCTION OF ADDITIONAL EVIDENCES)
NO. 2 of 2021
In R/FIRST APPEAL NO. 3040 of 2021
With
R/FIRST APPEAL NO. 3055 of 2021
With
CIVIL APPLICATION (FOR INTERIM RELIEF) NO. 1 of 2021
In R/FIRST APPEAL NO. 3055 of 2021
With
CIVIL APPLICATION (FOR PRODUCTION OF ADDITIONAL EVIDENCES)
NO. 2 of 2021
In R/FIRST APPEAL NO. 3055 of 2021
With
R/FIRST APPEAL NO. 3506 of 2021
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2021
In R/FIRST APPEAL NO. 3506 of 2021
With
CIVIL APPLICATION (FOR PRODUCTION OF ADDITIONAL EVIDENCES)
NO. 2 of 2021
In R/FIRST APPEAL NO. 3506 of 2021
With
R/FIRST APPEAL NO. 3507 of 2021
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2021
In R/FIRST APPEAL NO. 3507 of 2021
With
CIVIL APPLICATION (FOR PRODUCTION OF ADDITIONAL EVIDENCES)
NO. 2 of 2021
In R/FIRST APPEAL NO. 3507 of 2021
Page 1 of 92
Downloaded on : Thu Feb 03 21:01:37 IST 2022
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE J.B.PARDIWALA Sd/-
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA Sd/-
================================================================
1 Whether Reporters of Local Papers may be allowed YES
to see the judgment ?
2 To be referred to the Reporter or not ? YES
3 Whether their Lordships wish to see the fair copy NO
of the judgment ?
4 Whether this case involves a substantial question NO
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
================================================================
ESSAR BULK TERMINAL LIMITED
Versus
ARCELOR MITTAL NIPPON STEEL INDIA LIMITED
================================================================
Appearance:
FIRST APPEAL NOS.3040 OF 2021:
MR MIHIR JOSHI, SR.ADVOCATE with M/S. KEYUR GANDHI, AMITA
KATRAGADDA, RAHEEL PATEL and KAUSTUBH RAI, ADVOCATES for
NANAVATI ASSOCIATES for the Appellant.
MR DARAYUS KHAMBHATA, SR.ADVOCATE with MR MIHIR THAKORE,
SR.ADVOCATE with MR NAVIN PAHWA, SR.ADVOCATE with M/S. NIRAG
PATHAK, ADITYA PANDYA, SAIRAM SUBRAMANIAM, JUHI GUPTA and
ARCHISMITA SAHA, ADVOCATES for the Respondent.
FIRST APPEAL NO.3055 OF 2021:
MR SAURABH SOPARKAR, SR.ADVOCATE with M/S. KEYUR GANDHI,
AMITA KATRAGADDA, RAHEEL PATEL and KAUSTUBH RAI, ADVOCATES
for NANAVATI ASSOCIATES for the Appellant.
MR DARAYUS KHAMBHATA, SR.ADVOCATE with MR MIHIR THAKORE,
SR.ADVOCATE with MR NAVIN PAHWA, SR.ADVOCATE with M/S. NIRAG
PATHAK, ADITYA PANDYA, SAIRAM SUBRAMANIAM, JUHI GUPTA and
ARCHISMITA SAHA, ADVOCATES for the Respondent.
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
FIRST APPEAL NOS.3506 OF 2021:
MR DARAYUS KHAMBHATA, SR.ADVOCATE with MR MIHIR THAKORE,
SR.ADVOCATE with MR NAVIN PAHWA, SR.ADVOCATE with M/S. NIRAG
PATHAK, ADITYA PANDYA, SAIRAM SUBRAMANIAM, JUHI GUPTA and
ARCHISMITA SAHA, ADVOCATES for the Appellant.
MR MIHIR JOSHI, SR.ADVOCATE with M/S. KEYUR GANDHI and RAHEEL
PATEL, ADVOCATES for NANAVATI ASSOCIATES for the Respondent.
FIRST APPEAL NO.3507 OF 2021:
MR DARAYUS KHAMBHATA, SR.ADVOCATE with MR MIHIR THAKORE,
SR.ADVOCATE with MR NAVIN PAHWA, SR.ADVOCATE with M/S. NIRAG
PATHAK, ADITYA PANDYA, SAIRAM SUBRAMANIAM, JUHI GUPTA and
ARCHISMITA SAHA, ADVOCATES for the Appellant.
MR SAURABH SOPARKAR, SR.ADVOCATE with M/S. KEYUR GANDHI and
RAHEEL PATEL, ADVOCATES for NANAVATI ASSOCIATES for the
Respondent.
================================================================
CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
Date : 03/02/2022
(PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA)
1. Since the issues raised in all the captioned Appeals are
interrelated and the challenge is also to a common order passed
by the Commercial Court at Surat, under Section 9 of the
Arbitration and Conciliation Act, 1996 (for short, the 'Arbitration
Act'), those were taken up for hearing analogously and are being
disposed of by this common judgment and order.
2. There are two parties before us in this litigation : (i) Essar
Bulk Terminal Limited ('EBTL', for short) and (ii) ArcelorMittal
Nippon Steel India Limited ('AMNS', for short). The EBTL at one
point of time was a group company of the Essar Steel India
Limited ('ESIL', for short). The ESIL was taken over by the AMNS.
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
The ESIL set up a steel manufacturing plant at Hazira (Surat)
along with a captive jetty. The steel plant is now owned by the
AMNS and the captive jetty is run and managed by the EBTL.
3. On 21st February 2011, the AMNS and EBTL executed the
Principal Agreement relating to the cargo handling charges (CHA). The
Principal Agreement was amended vide Amendment Agreements dated
3rd March 2011, 1st April 2013, 17th May 2013 (Third Amendment
Agreement), 15th October 2013 (Fourth Amendment Agreement"), 4 th
December 2014, 28th April 2016 and 4th December 2017. The Principal
Agreement inter alia set out the cargo handling charges, i.e. the tariff
at which the EBTL will handle the cargo of the AMNS at the Deep-
Water Jetties. The specific rates are set out in the Principal
Agreement.
4. On 28th August 2012, the Service Level Agreement was executed
by and between the EBTL and the AMNS. The Service Level Agreement
(SLA) was revised by the Amendment Agreement dated 1st April 2016.
5. On 17th May 2013, the EBTL and the AMNS executed the Third
Amendment Agreement. The Third Amendment Agreement stated that
the cargo handling charges shall be paid by the AMNS in the INR
equivalent of USD denominated tariff, at the base exchange rate of
USD 1 = INR 54.2190 (i.e. the base exchange rate prevailing on 30 th
April 2013). In essence, the parties agreed that from 1 st May 2013, the
cargo handling charges shall be paid at the USD 4.0309 per metric
tonne of cargo (subject to 3% annual escalation) (this rate has been
specifically set out in the Annexure I of the Third Amendment
Agreement) (Dollar Tariff).
6. On 18th May 2013, the EBTL and the AMNS executed an
amendment agreement to their cargo handling agreement in respect of
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
the handling of AMNS cargo at the Paradip Port, Hazira. The said
Amendment Agreement contained similar terms as the Third
Amendment Agreement, including that the Dollar Tariff would be paid
at the base exchange rate of the USD 1 = INR 54.2190 (i.e. the base
exchange rate prevailing on 30th April 2013).
7. On 15th October 2013, the EBTL and the AMNS executed the
Fourth Amendment Agreement, by which, the parties agreed that it
will charge the Dollar Tariff from the AMNS once the EBTL draws its
first tranche of dollar loans. The Fourth Amendment Agreement
specifically stated that all other terms of the Third Amendment
Agreement shall remain the same. On the same day, the EBTL and
the AMNS also executed another amendment agreement to their cargo
handling agreement, containing similar terms as the Fourth
Amendment Agreement.
8. In the month of June 2017, the dollar loan was drawn down by
the EBTL.
9. On 2nd August 2017, the AMNS was admitted into the CIRP in
terms of the IBC.
10. On 8th March 2019, the National Company Law Tribunal,
Ahmedabad Bench, approved the AMIPL Resolution Plan for the
AMNS. The AMIPL Resolution Plan specifically required that all
subsisting contracts with the EBTL continue on the same terms.
11. It is the case of the EBTL that the AMNS had agreed, in the
month of June 2019, to pay the additional cargo handling charges @
Rs.21 per metric tonne as per the annual escalation, and in such
circumstances, the depth of the channel was deepened to 12 meters
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
below the chart datum. It is the case of the EBTL that it had been
deepening the channel over a period of few years. The EBTL was able
to achieve the channel depth of 12 meters below the chart datum in
June 2019.
12. On 13th June 2019, the EBTL informed the AMNS that the
channel depth of 12 meters below the chart datum has been achieved,
and called upon the AMNS to pay the additional cargo handling
charges contemplated in Annexure I of the CHA 2011.
13. On 20th June 2019, the AMNS addressed an email to the EBTL
that it would advise its charterers to load the vessels upto 14 meters
draft, since the EBTL has increased the depth of the channel to 12
meters
14. On 7th August 2019, at the insistence of the AMNS, the EBTL
provided the requisite evidence of the increased channel depth to the
EBTL, including a Bathymetry Chart from the Chief Hydrographic
Officer, and a letter from the the GMB certifying that the depth of the
channel is 12 meters or more. The Bathymetry Chart also showed that
the depth at the terminal (Berth Pockets) is 14-15 meters and the
depth in the channel is 12 meters However, the AMNS declined to pay
the additional cargo handling charges as per Annexure I of the CHA
2011.
15. On 15th November 2019, the Supreme Court approved the
AMIPL Resolution Plan for the AMNS. Thereafter, on 16 th December
2019, the AMIPL took over the management of the AMNS.
16. On 28th February 2020, the NSPC, a statutory body responsible
for the safety of the ports in India, issued the NSPC Certificate to the
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
EBTL in respect of the Deep-Water Jetties, inter alia, stating that the
permissible draft at the Deep-Water Jetties is '10 meters + tide'. The
NSPC Certificate also stated that in case of any reduction of depth, the
corresponding reduction in draft has to be enforced.
17. On 15th April 2020, the Memorandum of Understanding was
entered into between the AMNS and the EBTL, wherein the AMNS
agreed to pay the Dollar Tariff to the EBTL on the basis of the base
exchange rate prevailing on 30th April 2013 (i.e. USD 1 = INR
54.2190). Thereafter, the AMNS made the payment in December 2020.
18. On 5th May 2020, the EBTL informed the AMNS that it would
declare the terminal draft at 10 meters due to non-payment of the
additional cargo handling charges in terms of the Annexure I of the
CHA 2011.
19. On 27th June 2020, the EBTL informed the AMNS that it was
unable to afford the maintenance dredging to maintain the channel
depth at 12 meters and again provided the advance notice to the
AMNS of its intention to declare the terminal draft at 10 meters
20. On 22nd November 2020, the AMNS issued a letter to the EBTL
invoking the arbitration under Clause 15 of CHA 2011 (purported
"Notice of Arbitration").
21. On 4th December 2020, the EBTL addressed an email to the
AMNS, inter alia, informing the AMNS that the purported notice of
arbitration was an attempt to frustrate the statutory rights of the
EBTL (which is an unsecured creditor of the AMNS) in respect of the
consolidated scheme of arrangement proposed between the AMNS and
the two group companies under Sections 230-232 respectively of the
Companies Act, 2013.
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
22. On 24th December 2020, the AMNS filed an application under
Section 11 of the Arbitration Act, being the IAAP No.05 of 2021,
seeking appointment of the arbitrator in terms of the CHA 2011.
Pertinently, the EBTL did not come to know about the same till 11 th
January 2021.
23. On 30th December 2020, the EBTL issued a detailed response to
the purported Notice of Arbitration. On the next day, the EBTL drew
the first tranche of borrowings in US Dollars.
24. On 3rd January 2021, the EBTL issued notice to the AMNS
informing the AMNS of its drawal of dollar loans and intimating that
Clauses 2.1 and Clause 2.2 of the Third Amendment Agreement have
become effective. The EBTL also annexed a certificate from a
Chartered Accountants, i.e. Manish Rathi & Co., dated 1 st January
2021, certifying that the EBTL has drawn dollar loans on 31 st
December 2020.
25. On 11th January 2021, the AMNS issued a letter denying
payment pursuant to the notice dated 3 rd January 2021 issued by the
EBTL, inter alia, on the ground that that the dollarization provision is
'onerous'.
26. On 12th January 2021, the EBTL realized that due to absence of
maintenance dredging, the depth of the channel has reduced to the
extent that it is not safe for the vessels carrying a draft of more than
10 meters to navigate the channel. Accordingly, the EBTL declared the
terminal draft at 10 meters.
27. On the same day, the AMNS wrote to the GMB stating that since
a writ petition filed by the AMNS is pending before this High Court,
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
the GMB should abstain from issuing no-objection certificates to the
EBTL for availing loans. The AMNS addressed similar letters on 29 th
January 2021 and 9th February 2021 to the GMB.
28. On 15th January 2021, the EBTL responded to and dismissed
the contents of the letter of the AMNS dated 11th January 2021.
SECTION 9 APPLICATIONS :
29. On 15th January 2021, the AMNS filed an application
under Section 9 of the Arbitration Act against the EBTL seeking
inter alia the following reliefs :
"a. Pass an order directing the Respondent to immediately
discharge the vessels waiting at anchorage as on the date
of filing of the present petition and continue to service
vessels of the Petitioner without any disruption;
b. Pass an order of injunction restraining the Respondent
from implementing the measures indicated in the email of
12 January 2021 including declaring the terminal draft at
10 meters, or in any manner modifying the arrangement
between the parties;
c. Pass an order directing the Respondent to maintain the
terminal draft and channel depth at the same level as on
10 January 2021;
d. Pass an order appointing an independent surveyor to
conduct a Hydrographic Survey to assess the depth of the
channel and terminal draft;
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
e. Pass an order of injunction restraining the Respondent
from giving any effect to the measures contemplated in
letter dated 3 January 2021 with regard to the Third
Amendment Agreement and Fourth Amendment
Agreement;
f. Pass an order of injunction restraining the Respondent
from determining the cargo handling charges payable by
the Petitioner in US Dollar denominated tariff as
contemplated in the letter dated 3 January 2021 and
reflecting such claims as receivables in its accounts;
g. Pass an order of injunction restraining the Respondent
from raising any debt pursuant to the Third Amendment
Agreement and Fourth Amendment Agreement;
h. Pass an order of status quo directing the Respondent to
continue providing services to the Petitioner in the same
manner as was being provided as on 10 January 2021 on
the basis of payments being made by the Petitioner in in
the same manner as on 10 January 2021."
30. On 22nd January 2021, the court below issued an ad-
interim order directing the NSPC to conduct a survey to
determine the available depth and draft at the EBTL Jetties.
Pertinently, the order dated 22nd January 2021 also recorded
that the EBTL is under no obligation to dredge the channel and
provide a draft of more than 10 meters to the AMNS. The order
was modified vide order dated 12th February 2021, wherein the
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
Fugro Survey (India) Limited was directed to determine the
available depth and draft at the EBTL Jetties. The report
submitted on 17th March 2021 ('Fugro Report') was challenged as
technically incorrect by the EBTL and such challenge was
confirmed by the NSPC. Accordingly, the Fugro Report was
disregarded in the Section 9 proceedings.
31. On 15th February 2021, the EBTL addressed a letter to the
AMNS and provided detailed submissions in respect of the payment of
the Dollar Tariff.
32. On 23rd February 2021, the AMNS issued a letter to the Foreign
Exchange Department of the RBI challenging the dollar loans availed
by the EBTL. In the same letter, the AMNS stated that if the AMNS
were to not pay the Dollar Tariffs as per the CHA 2011, the EBTL's
financial condition may become precarious and there is a likelihood of
debt recovery/security enforcement/insolvency proceedings being
initiated against the EBTL.
33. On 9th March 2021, the EBTL addressed another letter to the
AMNS inter alia seeking payment of the Dollar Tariff.
34. On 15th March 2021, the EBTL also filed an application
under Section 9 before the court below.
35. On 16th March 2021, the EBTL also filed an application
under Section 9 of the Arbitration Act against the AMNS seeking
inter alia the following reliefs :
"(a) Pass an order directing ArcelorMittal Nippon Steel
India Limited (Defendant) to immediately pay the
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
defaulted amount of Rs. 40.89 crore for the month of
January 2021 and February 2021 along with interest on
delayed payment of Rs. 0.20 crore, aggregating to Rs.
41.09 crore being the applicable Cargo Handling
Charges payable under the Cargo Handling Agreement
dated February 21, 2011 (as amended by the Third
Amendment Agreement dated May 17, 2013 and Fourth
Amendment Agreement dated October 15, 2013) to Essar
Bulk Terminal Limited (Applicant) and to make and
continue to make payment of charges as per the INR
equivalent rates of the USD denominated tariff in terms
of the Cargo Handling Agreement dated February 21,
2011 (as amended by the Third Amendment Agreement
dated May 17, 2013 and Fourth Amendment Agreement
dated October 15, 2013) to Essar Bulk Terminal Limited
(Applicant);
(d) Pass an order clarifying that Essar Bulk Terminal
Limited (Applicant) is not obliged to continue to provide
any services under the Cargo Handling Agreement dated
February 21, 2011 (as amended from time to time) till
such time ArcelorMittal Nippon Steel India Limited
(Defendant) does not make payment of the Cargo
Handling Charges including the Minimum Monthly Cargo
Handling Charges as per the terms of the Cargo
Handling Agreement (as amended by the Third
Amendment Agreement dated May 17, 2013 and the
Fourth Amendment Agreement dated October 15, 2013);
(e) Pass an order restraining ArcelorMittal Nippon Steel
India Limited (Defendant) from utilizing the services
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
under the Cargo Handling Agreement dated February
21, 2011 (as amended from time to time) without making
payments of the outstanding amounts as on the date of
the order of this Hon'ble Court, and further without
providing an undertaking that it will make and continue
to make payment of charges as per the INR equivalent
rates of the USD denominated tariff in terms of the Cargo
Handling Agreement dated February 21, 2011 (as
amended from time to time);"
36. On 4th June 2021, the NSPC filed an affidavit in the application,
stating that :
a. The declaration of terminal draft is the sole prerogative of the
port operator;
b. Vessels can navigate the channel only during the slack
period (either high tide or low tide).
c. The requisite channel depth for navigation of vessels is
available only during high tide.
37. On 7th June 2021, the court below reserved the application for
orders. On 9th July 2021, the arbitral tribunal was constituted by a
consent order passed in the application filed under Section 11 of the
Arbitration Act.
38. On 16th July 2021, the AMNS filed an application before the
court below seeking to refer the subject matter of the disputes to the
arbitration. The AMNS submitted that the scheme of the Arbitration
Act requires all disputes to be adjudicated by the arbitral tribunal
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
once constituted. The AMNS accused the EBTL of making attempts to
delay the formation of the arbitral tribunal. The application was
rejected by the court below.
39. The AMNS therefore preferred a petition under Article 227 of the
Constitution against the order dated 16th July 2021, again raising the
same issues before this High Court. By judgment and order dated 17 th
August 2021, this Court rejected the petition.
40. On 14th September 2021, the AMNS preferred a Special Leave
Petition before the Supreme Court against the judgment of this Court.
The Supreme Court partly allowed the SLP (in favour of the EBTL)
and:
a. Directed the Court at Surat to pronounce the order on merits in
the Section 9 Applications;
b. Held that there is no evidence of the EBTL attempting to delay
the formation of the arbitral tribunal;
c. Held that the intention behind Section 9 of the Arbitration Act is
not to turn the clock back and have the same issues re-agitated
before a different forum.
41. On 20th September 2021, the impugned order was pronounced
by the court below. The impugned order directed the following:
a. The AMNS shall pay the Dollar Tariff at the base exchange rate
of December 30, 2020 to the EBTL;
b. The AMNS shall pay the minimum monthly cargo handling
charges as per the CHA 2011 to the EBTL;
c. The AMNS shall provide Standby Letter of Credit as per the CHA
2011 to the EBTL;
d. The EBTL shall determine and declare the terminal draft every
month; and
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
e. The EBTL shall maintain a channel depth of 10 meters at all
times.
42. The impugned order further stated that the order shall be
operative for a period of three months or till the arbitral tribunal
decides the same issues under Section 17 of the Arbitration Act,
whichever is earlier.
43. On 28th September 2021, in compliance with the Impugned
Order, the EBTL declared the terminal draft at 10.02 meters till 27 th
October 2021.
44. On 1st October 2021, the AMNS addressed a letter to the EBTL
demanding that the terminal draft of 11.3 meters be provided and the
vessels carrying a draft of 13.6 meters be berthed.
45. On 3rd October 2021, the EBTL responded to the above
letter dated 1st October 2021, stating that the only vessels
carrying draft of 10.02 meters can be brought into the channel.
46. Insofar as the Section 9 application filed by the AMNS is
concerned, more particularly, seeking relief as regards the
terminal draft and channel depth, the court passed the following
order :
"18.1 AMNS has prayed that EBTl shall keep the terminal
draft and channel depth at 10 Meter. I have already
interpreted the contract to see what is provided under the
Agreement. What is provided under the agreement has to be
adhered to by EBTL. The agreement specifically provides
that minimum draft should be 10 meter at the terminal and
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
maximum shall be permissible draft (i.e. 10 meter + tide). To
provide such draft as available is the reciprocal obligation of
EBTL against it charging MGT and Dollarization to AMNS.
EBTL cannot contend that though it will charge MGT and
Dollarization to AMNS but it will not honor its obligation
under the Agreement and will not provide requisite available
permissible draft.
18.2 I have already held for AMNS that one cannot ignore
the express terms of the contract under garb of dispute. The
same principle will apply for EBTL. What is good for the
goose is also good for the gander. Hence EBTL is obliged to
provide the draft as available at the terminal and it cannot
restrain the terminal draft at ceiling of 10 meter in
aberration to the terms of the Contract till the final dispute
and liability is adjudicated by Arbitral Tribunal.
18.3 CHA specifically provides declaration of terminal draft.
Such declaration of terminal draft has to be based on tidal
forecast and other weather conditions. Hence it is required
that EBTL shall, based upon the tidal forecast as published
by GMB, determine and declare the available terminal draft
for every month and accordingly shall service the vessels of
the AMNS as per the CHA. EBTL shall also be obliged to
maintain the Channel Depth at 10 meter CD."
"......By way of Interim Measure under Section 9(1)(ii)(e) of
the Arbitration & Conciliation Act, 1996 EBTL is hereby
directed to declare the terminal Draft and maintain the
Channel Depth as per Paragraph 18.3 of this Order and
shall continue to service the vessels of AMNS."
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
47. So far as the application filed by the EBTL under Section 9
of the Arbitration Act with respect to the cargo handling charges
in the INR equivalent of USD is concerned, the court passed the
following order :
"In the present case, AMNS is the only customer of EBTL.
The only source of income for EBTL is the services provided
by it to AMNS. The liability to pay is contractual. Contract is
in existence and not terminated. Services are availed by
AMNS from EBTL. The objection of AMNS to dishonor its
obligation is required to be adjudicated by Arbitral Tribunal,
however pending such adjudication if AMNS do not honor its
admitted obligation under the CHA then it will be a issue of
survival for EBTL, especially in light of its obligation under
the CHA.
Under the circumstances interim measure as provided under
Section 9(1)(ii)(e) are required to be passed, directing AMNS
to continue to pay MGT and dollarized cargo handling
charges from January 2021 onwards, with clarification that
dollar rate shall be as on 30.12.2020."
48. The operative part of the order passed by the Commercial
Court reads thus :
"OPERATIVE ORDER
A. By way of Interim Measure under Section 9(1)(ii)(e) of the
Arbitration & Conciliation Act, 1996 EBTL is hereby directed
to declare the terminal Draft and maintain the Channel
Depth as per Paragraph 18.3 of this Order and shall
continue to service the vessels of AMNS;
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
B. By way of Interim Measures under Section 9(1)(ii)(e) of the
Arbitration & Conciliation Act, 1996 AMNS is hereby
directed to Pay and Continue to pay Invoices raised by EBTL
from January 2021 onwards as per Paragraph 17.11 of this
Order;
C. It is clarified that services rendered by EBTL and
payments made by AMNS under this Agreement shall be
subject to final outcome of Arbitration Proceedings;
D. This Interim Measure shall continue for a period of [3]
three month from the date of this Order, or until the Ld.
Arbitral Tribunal decides Section 17 application of the
parties which ever date is earlier;
E. In view of the above terms, both the Applications i.e.
Commercial C.M.A. No. 2 of 2021 and Commercial C.M.A.
No. 99 of 2021 are hereby PARTLY ALLOWED;
F. The prayers not granted hereinabove stands REJECTED;
G. It is clarified that views expressed in this Order are only
tentative in nature, only with a view to adjudicate the
prayer made in this applications and are not aimed to
finally adjudicate the issues which are required to be
adjudicated by the Ld. Arbitral Tribunal.
H. No order as to costs."
49. So far as the EBTL is concerned, it has filed two appeals,
i.e. First Appeal Nos.3040 of 2021 and 3055 of 2021
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
respectively. So far as the AMNS is concerned, it has also filed
two appeals, i.e. First Appeal Nos.3506 of 2021 and 3507 of
2021 respectively.
EBTL's APPEALS :
50. We shall first take up the two First Appeals filed by the
EBTL. The EBTL has raised two issues before this Court : (i)
whether the Commercial Court, in exercise of its power under
Section 9 of the Arbitration Act, could have directed the EBTL to
maintain a depth in the channel of 10 meters below the chart
datum by way of an interim measure in favour of the AMNS ? In
other words, whether the EBTL is obliged to : (a) maintain a
minimum draft of 10 meters at the terminal and (b) also
maintain a minimum depth of 10 meters below the chart datum
in the channel, and (ii) whether the Commercial Court was
justified in directing the EBTL to continue to provide services
without the AMNS required to pay the agreed "Dollar Tariff" ? In
other words, whether the AMNS should have been directed to
perform its continuing obligation to pay in accordance with the
terms of the contract, more particularly, when it continues to
avail the services under the contract pending the arbitration. To
put it more succinctly, the case put up on behalf of the EBTL is
that although the court below accepted that the AMNS is obliged
to pay the dollarized tariff, yet it should not have granted the
relief to the AMNS by way of an interim measure saying that the
dollarized tariff shall be paid using the USD exchange rate
prevailing on 30th December 2020, as the base rate. The EBTL
says that the USD exchange rate as on 31 st April 2013 should
have been taken as the base rate.
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
AMNS's APPEALS :
51. So far as the two First Appeals filed by the AMNS is
concerned, it focuses only on the issue of USD denominated
tariff. According to the AMNS, the court below should have
allowed its application filed under Section 9 of the Arbitration
Act, seeking an injunction against the EBTL from implementing
the Dollar Tariff. In other words, it is the case of the AMNS that
in the application filed by the EBTL under Section 9 of the
Arbitration Act, the court below ought not to have passed an
order by way of an interim measure directing the AMNS to
continue to pay the Dollar Tariff as it amounts to granting of
specific performance of an agreement. One appeal by the AMNS
is against that part of the order by which the court declined to
grant the injunction by way of an interim measure against the
EBTL from implementing the Dollar Tariff and the another is
against the relief granted to the EBTL as regards the USD
exchange rate as on 30th December 2020.
GIST OF THE AFORESAID :
52. The AMNS has a huge steel manufacturing plant at Hazira
(Surat). It requires huge quantity of iron ore for its steel
manufacturing plant. The iron ore in huge quantity is being
imported from other countries. Everyday, hundreds of vessels
reach at the Magdalla Port. The EBTL has constructed two Deep-
Water jetties at the Magdalla Port. The EBTL manages the two
Deep-Water jetties. The cargo imported by the AMNS is being
unloaded at these jetties. The EBTL says that the only obligation
on their part is to maintain a minimum draft of 10 meters at the
terminal and a minimum depth of 10 meters below the chart
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
datum in the channel. The AMNS says that it is the obligation of
the EBTL to maintain a channel depth of 10 meters at all times.
If the EBTL fails to maintain a channel depth of 10 meters at all
times, then hundreds of vessels carrying the cargo may have to
wait outside till the high tide as it is only during the high tide
that the vessels may be in a position to reach the jetties. If the
EBTL maintains a channel depth of 10 meters at all times, then
irrespective of the tide, the vessels can safely and freely get into
the jetties and the cargo can be unloaded. It is the case of the
AMNS that the delay that may be caused for any vessel to reach
the jetty on account of the lapse on the part of the EBTL to
maintain a channel depth of 10 meters at all times would prove
very costly to the AMNS. On the other hand, the EBTL says that
the only obligation on their part is to maintain a minimum draft
of 10 meters at the terminal.
53. On the issue of dollarization of tariff, it appears that in
2011 the parties had agreed that the cargo handling charges
would be in accordance with the INR tariff. By way of the
principal agreement, the parties had initially agreed with respect
to the rates at which the EBTL would handle the cargo of the
AMNS, i.e. 'the cargo handling charges' would be in accordance
with the agreed INR denominated tariff. In 2013, the parties
agreed to move to a USD denominated tariff. This was pursuant
to the request by the AMNS to the EBTL to amend the principal
agreement and benchmarked the cargo handling charges in the
USD at a specifically agreed exchange rate. The Dollar Tariff was
effective from 1st May 2013. The parties had agreed to suspend
the Dollar Tariff till the EBTL would draw loans in dollars. In
December 2020, the EBTL drew the first tranche of dollar loans.
The AMNS took the stance that it would not pay the Dollar Tariff
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
as the Third Amendment Agreement was quite 'onerous'. The
court below took the view that the AMNS is obliged to pay the
Dollar Tariff at the base exchange rate prevailing on 30 th
December 2020 instead of the exchange rate of 30 th April 2013
as provided in the contract.
SUBMISSIONS ON BEHALF OF THE EBTL IN THE FIRST
APPEALS NOS.3040 AND 3055 OF 2021 RESPECTIVELY:
54. Mr.Mihir Joshi, the learned senior counsel for Nanavati
Associates appearing for the appellant-EBTL, vehemently
submitted that the Commercial Court could be said to have
travelled far beyond the scope of Section 9 of the Arbitration Act
while directing the EBTL to maintain a channel depth of 10
meters at all times. Mr.Joshi would submit that the only
obligation on the part of his client is to maintain a minimum
depth of 10 meters at the terminal and a minimum depth of 10
meters below the chart datum in the channel. The former is an
express obligation, which is indisputably being continuously
performed by the EBTL and not in controversy. Mr.Joshi would
submit that the latter is purportedly an implied covenant, which
is sought to be enforced by way of a mandatory direction in the
form of an interim measure at the stage of Section 9 of the
Arbitration Act. Mr.Joshi would submit that his client has no
obligation, express or implied, to maintain any specific depth in
the channel.
55. Mr.Joshi would submit that his client, after putting in lot
of efforts and incurring lot of expenses, was able to reach a
depth of 12 meters below the chart datum in the channel. The
AMNS was informed about the same and was also requested to
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
pay the additional cargo handling charges of Rs.21=00 per MT
escalated annually. According to Mr.Joshi, the AMNS doubted
such claim put forward by his client as regards reaching the
depth of 12 meters below chart datum in the channel. The AMNS
declined to pay the additional cargo handling charges of
Rs.21=00 per MT escalated annually.
56. Mr.Joshi would submit that his client ensures the AMNS
the depth in the channel as would allow the safe navigation of
the vessels with a 10 meters draft in furtherance of its clear and
undisputed obligation to provide a minimum draft of 10 meters
at the terminal. Mr.Joshi would submit that even the court
below in its impugned order in para 9.2 has observed that,
"...when we peruse the CHA and SLA, then prima facie, I do not
find any such express clause imposing liability upon the EBTL to
maintain channel depth at 10 meter and also provide 24 x 7
access."
57. Mr.Joshi would submit that the impugned order also
records in para 21.3 that, "...there are no quantifiable data
available on record to show that vessels of even 10 meter draft of
AMNS has not been serviced or that any of the vessels have
grounded or any other incident has happened."
58. According to Mr.Joshi, in view of the aforesaid, the
mandatory direction issued by the court below to his client to dig
the channel to a depth of 10 meters is erroneous in law and
more particularly without recording any finding on the issue of
balance of convenience.
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
59. Mr.Joshi would submit that the Deep-Water Jetties are in
the Tapi river estuary where the natural depth of the channel is
0 (zero) meter. The channel as it stands today has been dredged
continuously by the EBTL to facilitate the safe navigation of the
vessels. Dredging the channel requires huge costs on a
continuing basis given the continuous siltation patterns. In such
circumstances, the parties had agreed that the EBTL shall
provide a minimum draft of 10 meters to the vessels of the
AMNS. If the AMNS submission that minimum draft of 10 meters
is required to be read as an obligation on the EBTL to provide a
draft of more than 10 meters, then the obligation on the AMNS
to provide 'minimum' monthly cargo handling charges of 2.08
million metric tonne set out in the Annexure I of the CHA 2011
ought to be read as an obligation on the AMNS to provide more
than just 25 million metric tonne of cargo per annum. This is
clearly not what the parties intended under the contract. It is
neither necessary nor reasonable under the CHA 2011 to imply a
covenant on the EBTL to provide depth of 10 meters below chart
datum in the channel.
60. Mr.Joshi would further submit that in the absence of any
benefits or identified prejudice to the AMNS (since all the vessels
of 10 meters draft have anyway been continuously handled by
the EBTL), such an order to dredge to 10 meters below the chart
datum in the channel is wasteful, causes unnecessary
environment degradation, and requires irrecoverable cost to be
incurred by the EBTL. He would submit that the mandatory
direction to maintain the channel depth at 10 meters below the
chart datum is prohibited by Sections 14(1)(b) and 39
respectively of the Specific Relief Act, 1963 (since the depth of
the channel reduces constantly, any such order imposes a
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
continuous obligation on the EBTL and would require constant
monitoring by the court) Thus, the EBTL ought not to have been
directed to maintain a depth of 10 meters below the chart datum
in the channel.
61. On the issue of the agreed 'Dollar Tariff', we heard
Mr.S.N.Soparkar, the learned senior counsel appearing for the
EBTL. Mr.Soparkar would submit that the court below
committed a serious error in modifying the express terms of the
contract by directing the payment of the Dollar Tariff at different
rates. Mr.Soparkar would submit that the court below arbitrarily
directed that the rate of USD 3.6792 per tonne (in F.Y. 2020-21)
must be paid by the AMNS, which is altogether a different rate
from the expressly agreed rate of USD 4.9575 per tonne (in F.Y.
2020-21) recorded in the contract.
62. Mr.Soparkar would submit that the case on hand is one
wherein the EBTL and the AMNS have an express and
unambiguous agreement on the tariff of USD 4.9575 per tonne
payable as the cargo handling charges by the AMNS upon the
first tranche of the dollar loans being drawn by the EBTL (Dollar
Tariff). The first tranche of the dollar loans was drawn in
December 2020 and the EBTL intimated the AMNS that the
agreed revised rate is now payable. The learned senior counsel
would submit that the AMNS defaulted in making the payment
and instead went to the extent of filing an application under
Section 9 of the Arbitration Act claiming that the agreed revised
tariff is 'onerous' and sought protection from the court below in
that regard.
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
63. Mr.Soparkar would submit that the Commercial Court
rightly rejected the claim of the AMNS by holding that the
agreement was binding and the AMNS cannot be permitted to
resile from its liability to honour the terms thereof. However,
saying so, the court re-wrote the fundamental and most material
term of the contract by changing the rate.
64. Mr.Soparkar would submit that the court below, under the
garb of 'interpreting the contract', directed the tariff conversion
date to be December 30, 2020 (which was USD 1 = INR 73),
which interpretation is different from the common
understanding and interpretation of both the AMNS and the
EBTL. It is submitted that neither the pleadings nor the
contemporaneous correspondence between the contracting
parties contemplates the interpretation of the agreed contractual
terms as directed by the court below.
65. Mr.Soparkar would submit, relying on the decision of the
Supreme Court in the case of Union of India vs. Kishorilal
Gupta, reported in AIR 1959 SC 1362, that when the words in
the agreement are clear and unambiguous, there is no scope for
drawing hypothetical consideration or the supposed intention of
the parties. The parties to the agreement are ad idem on the
tariff payable pursuant to the Third Amendment Agreement. The
parties are also ad idem that upon the effectiveness of the Third
Amendment Agreement the AMNS is liable to pay the additional
tariff of Rs.300 crore per annum.
66. Mr.Soparkar invited the attention of this Court to one letter
dated 11th January 2021, wherein the following has been stated :
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
"Further, implementation of the Third Amendment would
increase the financial obligations of AM/NS India to the tune
of approximately Rs. 300 crores per annum without there
being any change in the scope of services being provided by
EBTL. ..."
67. Mr.Soparkar pointed out that similar position has been
reiterated in the Statement of Claims dated 8 th October 2020
filed by the AMNS in the arbitration.
68. Mr.Soparkar would submit that the supposed intention of
the parties declared by the court below is contrary to the
documents and admissions on record. The same has not been
asserted by either of the parties in the pleadings or arguments.
The same is irrational and contrary to the commercial prudence
and reasonableness, and completely unsupported by the factual
conspectus in the present case. Such an interpretation would
mean that the AMNS had relinquished all control on the tariff to
the whims of the EBTL, since the EBTL could have drawn down
a small dollar loan on an opportunistic date (say when the
exchange rate was at USD 1 = INR 45) and change the tariff
payable by its unilateral action
69. Mr.Soparkar would further submit that if the parties had
intended to have the Dollar Tariff payable at an exchange rate
different from the one set out in the Third Amendment
Agreement, the same would be material and would have been
reflected in the Fourth Amendment Agreement. In the absence of
any agreement between the parties to be bound by a future
exchange rate and where the written contract provides a specific
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
exchange rate, the court below erred in rewriting the terms of the
contract to apply a subsequent exchange rate
70. Mr.Soparkar submitted that the court below, without any
basis or supported by any pleadings whatsoever, held that the
"intention of the parties was very specific to take the rate that
was prevailing on the date of coming into force the agreement."
Accordingly, the court below directed payment of the Dollar
Tariff at the base exchange rate of December 30, 2020, resulting
in the payment of approximately Rs.3 crore to the EBTL (as
opposed to Rs.300 crore which the AMNS would have paid under
the contract). It is settled law that the Courts cannot grant reliefs
which have neither been pleaded nor prayed.
71. Mr.Soparkar would submit that the court below committed
a serious error while holding that even if the Third Amendment
Agreement would not have been suspended and was still in
operation, even in such a scenario there would be a revision of
such RBI reference rate at regular intervals. According to the
learned senior counsel, such an assumption is irrational,
without basis and contrary to the marked norms.
72. Mr.Soparkar would submit that the court below erred in
holding that the entire exercise of enforcing the exchange rate of
2013 in the year 2020 de hors the object of the agreement and is
something absurdity. Mr.Soparkar would submit that the test for
implying a term in a contract is not of absurdity but of the
'penta-principle' as laid down by the Supreme Court in the case
of Nabha Power Ltd. (NPL) vs. Punjab State Power Corporation
and another, reported in 2018 11 SCC 508.
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
73. In Nabha Power Ltd. (supra), the Supreme Court held that
a term cannot be implied to improve upon a contract.
Mr.Soparkar laid much emphasis on the following observations
of the Supreme Court in the case of Nabha Power Ltd. (supra) :
"45. Once again, Lord Hoffmann, now sitting on the Privy
Council, in Attorney General of Belize v. Belize Telecom Ltd.
[Attorney General of Belize v. Belize Telecom Ltd., (2009) 1
WLR 1988 (PC)] , dealt with the implied terms of the contract
in the context of the articles of association of a company. It
has been observed as under: (WLR pg.1993-95, paras 16-
27)
"16. Before discussing in greater detail the reasoning
of the Court of Appeal, the Board will make some
general observations about the process of implication.
The court has no power to improve upon the
instrument which it is called upon to construe,
whether it be a contract, a statute or articles of
association. It cannot introduce terms to make it fairer
or more reasonable. It is concerned only to discover
what the instrument means. However, that meaning is
not necessarily or always what the authors or parties
to the document would have intended. It is the
meaning which the instrument would convey to a
reasonable person having all the background
knowledge which would reasonably be available to
the audience to whom the instrument is addressed:
see Investors Compensation Scheme Ltd. v. West
Bromwich Building Society [Investors Compensation
Scheme Ltd. v. West Bromwich Building Society,
(1998) 1 WLR 896 : (1998) 1 All ER 98 (HL)] , WLR
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
pg.912-13. It is this objective meaning which is
conventionally called the intention of the parties, or the
intention of Parliament, or the intention of whatever
person or body was or is deemed to have been the
author of the instrument.
17. The question of implication arises when the
instrument does not expressly provide for what is to
happen when some event occurs. The most usual
inference in such a case is that nothing is to happen. If
the parties had intended something to happen, the
instrument would have said so. Otherwise, the
express provisions of the instrument are to continue to
operate undisturbed. If the event has caused loss to
one or other of the parties, the loss lies where it falls."
(emphasis supplied)
74. In such circumstances referred to above, Mr.Soparkar
prays that the impugned order passed by the court below
directing the AMNS to pay at the rate of USD 3.6792 per tonne
instead of the expressly agreed rate of USD 4.9575 per tonne
deserves to be quashed and set-aside.
75. Mr.Soparkar would submit that the application filed by his
client under Section 9 in that regard may be allowed.
SUBMISSIONS ON BEHALF OF THE AMNS :
76. We heard Mr.Mihir Thakore, the learned senior counsel
assisted by Mr.Nirag Pathak, the learned advocate appearing for
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the AMNS on the first issue, i.e. on the issue of the channel
depth.
77. Mr.Thakore would submit that no error, much less an
error of law, could be said to have been committed by the court
below in granting such relief by way of an interim measure in
favour of his client. He submitted that the EBTL is obliged under
the CHA to maintain a channel depth of 10 meters at all times.
Mr.Thakore took us through various provisions of the Indian
Ports Act, 1908 (for short, the 'Ports Act') to establish that the
term 'port' would include the jetty, channel and berth. He took
us through the following definitions :
Section 3(4) - "'port' includes also any part of a river or
channel in which this Act is for the time being in force."
Section 4(1)(a) - "The Government may, by notification in the
Official Gazette, - (a) extend this Act to any port in which
this Act is not in force or to any part of any navigable river
or channel which leads to a port and in which this Act is not
in force."
Section 5 - "Alteration of limits of ports - (1) The Government
may, subject to any rights of private property, alter the limits
of any port in which this Act is in force."
Section 6(1)(a) and (b) - (1) The Government may, in addition
to any rules which it may make under any other enactment
for the time being in force, make such rules, consistent with
this Act, as it thinks necessary for any of the following
purposes, namely :-
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(a) for regulating the time and hours at and during which,
the speed at which, and the manner and conditions in and
on which, vessels generally or vessels of any class defined
in the rules, may enter, leave or be moved in any port
subject to this Act;
(b) for regulating the berths, stations and anchorages to be
occupied by vessels in any such port;"
78. Similarly, the term 'port', 'minor port' and 'port approaches'
in the Gujarat Maritime Board Act, 1981 are defined as follows :
Section 2(r) - "'port' means any minor port to which this Act
applies within such limits as may from time to time be
defined by the State Government under the Indian Ports
Act."
Section 2(o) - "'minor port' means a port other than a major
port declared as such by the Central Government under any
law."
Section 2(s) - "'port approaches' in relation to a port means
those parts of the navigable rivers and channels leading to
the port in which the Indian Ports Act is in force."
79. He submitted that the term 'port' includes channel, jetty
and berth is evident from the ESIL's own letter to the GMB (letter
dated 3rd August 2007) which states as follows :
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"To copy with these special requirements, ESSAR have
proposed to undertake development of new captive port
facility, which would include the following :
1. Extension of the jetty by 550 meters;
2. Create a deep water berthing facility;
3. Dredge a new approach channel for direct berthing of
bigger ships."
80. Thus, according to Mr.Thakore, any reference to the port in
the contractual arrangement between the EBTL and the AMNS
should include references to the jetty, channel as well as the
berth.
81. Annexure-I of the CHA provides as follows :
"EBTL is increasing the depth of the channel from existing
10 meter below chart datum (CD) to 12 meter. After
increasing the depth of channel to 12 meter the cargo
handling charges for Raw Material will increase by Rs.21/-
per MT."
82. According to Mr.Thakore, the Annexure I of the CHA clearly
establishes that when the CHA was entered into, there was an
assurance to maintain a depth of 10 meters at the channel at all
times. Annexure I provides that if the EBTL increases the depth
from existing 10 meters to 12 meters below the chart datum,
only then the cargo handling charges will increase by Rs.21/-
per MT. Thus, it is clear that the CHA was entered into on the
premise that a minimum channel depth of 10 meters is available
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
and will be maintained by the EBTL at all times. In fact, the
cargo handling charges were fixed on the premise that the
channel depth would be 10 meters below the chart datum at all
times.
83. In addition, under the SLA, the EBTL is required to bear
the costs of any lighterage of vessels upto 14 meters draft. This
also implies that the parties understood that the vessels of upto
14 meters draft can normally navigate through the channel (with
a 10 meters depth) without any lighterage.
84. Article 4 of the CHA provides as follows :
"ARTICLE 4 - FACILITIES AND SERVICES
EBTL shall hereby agree to provide ESTL all the facilities
required for :-
a) Loading of steel cargo like various types of steel products
for export and coastal movement purpose; and
b) Unloading of :
i) raw materials
ii) iron ore
iii) iron ore pellets
iv) coke I coal
v) limestone
vi) dolomite
vii) Any other goods which may be mutually agreed by
and between the parties hereto;
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The facilities provided by the EBTL shall collectively be
referred to as 'Cargo Handling Facilities'.
c) In addition to the article 5.1, EBTL shall provide ESTL the
Port related facilities to the vessels of ESTL calling at the
Port for loading and unloading of cargo are mentioned
below:
i) Berth
ii) Tugs
iii) Pilotage for the vessel
iv) Minimum draft of 10 meters
v) Mechanical loading and unloading facilities
vi) Cargo Handling and Storage etc.
vii) EBTL shall ensure the discharge rate per Weather
Working Day as enumerated in Annexure III."
85. The Annexure III of the CHA (including the note provided
therein) provides for the discharge rate in MT of various cargo at
Hazira Port per weather working day. This annexure
contemplates the coming in of cape sized and mini cape sized
vessels. The draft of a cape size vessel is around 17 meters and
that of a mini cape size vessel is below 17 meters but above 13
meters.
86. Thus, according to Mr.Thakore, as per the CHA, there is an
obligation on the EBTL to maintain a minimum terminal draft of
10 meters at all times. However, this does not mean that the
EBTL cannot provide a draft higher than 10 meters. The
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maximum permissible draft at the Deep Water Berth shall be
subject to the approved depth by the NSPC. This is evident from
the Recital 2 of the Service Level Agreement which is as follows :
"EBTL has guaranteed a minimum draft of 10 M. at its Deep
Draft Berth. The maximum permissible draft at Deep Water
Berth is subject to approved depth by Navigational Safety at
Ports Committee (NSPC) of the Govt. of India from time to
time."
87. The NSPC Certificate dated 28th February 2020 states that
the permissible draft is "10 m. + tide".
88. Mr.Thakore submitted that if the provisions of the CHA,
SLA and the NSPC Certificate are read together, it is evident that
the EBTL has undertaken that the minimum 10 meters terminal
draft will be available at all times (including at low tide) and a
higher draft will be made available as per tidal variations. This is
supported by Annexure III to the CHA, which contemplates the
discharge of cape sized and mini cape sized vessels with a
minimum cargo load of 80,000 MT discharge rate per weather
working day on board. These vessels have a draft of much more
than 10 meters. The benefit of tide must necessarily be given,
which is also supported by the stipulation in the SLA requiring
the EBTL to declare the projected draft for every month - these
projections take tidal variations into account.
89. The berthing capacity is at 10 m + tide. Therefore, a vessel
having a terminal draft of minimum 10 m + tide can come in. In
order for a vessel to reach the berth, it will have to pass through
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the channel. So even a vessel with a higher draft than 10 meters
should be able to navigate through the channel and reach the
berth. If the depth is kept at 7 meters, the navigation through
the channel will not be possible. Only a vessel of 10 meters draft
can pass through the navigation channel and that too only
during the high tide. It will not be possible for a vessel above 10
meters draft to navigate through the channel. Hence, given that
the term 'port' includes jetty, channel and berth, the obligation
to maintain minimum draft of 10 meters should be throughout
the port and not just at the berth.
90. Mr.Thakore submitted that the contract must be read as a
whole. To say that the EBTL shall provide minimum draft of 10
meters would mean that a draft of 10 meters shall be available at
the terminal at all times. The obligation is to provide 10 m. + tide
draft. But a draft of 10 meters should be the minimum that is
provided to the AMNS.
91. In the impugned order, the Commercial Court passed the
following directions :
"(18.1) AMNS has prayed that EBTl shall keep the terminal
draft and channel depth at 10 Meter. I have already
interpreted the contract to see what is provided under the
Agreement. What is provided under the agreement has to be
adhered to by EBTL. The agreement specifically provides
that minimum draft should be 10 meter at the terminal and
maximum shall be permissible draft (I.e. 10 meter + tide). To
provide such draft as available is the reciprocal obligation of
EBTL against it charging MGT and Dollarization to AMNS.
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
EBTL cannot contend that though it will charge MGT and
Dollarization to AMNS but it will not honor its obligation
under the Agreement and will not provide requisite available
permissible draft.
(18.2) I have already held for AMNS that one cannot ignore
the express terms of the contract under garb of dispute. The
same principle will apply for EBTL. What is good for the
goose is also good for the gander. Hence EBTL is obliged to
provide the draft as available at the terminal and it cannot
restrain the terminal draft at ceiling of 10 meter in
aberration to the terms of the Contract till the final dispute
and liability is adjudicated by Arbitral Tribunal.
(18.3) CHA specifically provides declaration of terminal
draft. Such declaration of terminal draft has to be based on
tidal forecast and other weather conditions. Hence it is
required that EBTL shall, based upon the tidal forecast as
published by GMB, determine and declare the available
terminal draft for every month and accordingly shall service
the vessels of the AMNS as per the CHA. EBTL shall also be
obliged to maintain the Channel Depth at 10 meter CD.
*** ***
A. By way of Interim Measure under Section 9(1)(ii)(e) of the
Arbitration & Conciliation Act, 1996 EBTL is hereby directed
to declare the terminal Draft and maintain the Channel
Depth as per Paragraph 18.3 of this Order and shall
continue to service the vessels of AMNS;"
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
92. Mr.Thakore would submit that the court below cannot be
said to have issued any mandatory order or injunction, but
rather, could be said to have only directed the parties to comply
with the terms of the contract. He would submit that the
impugned order needs no interference in an appeal filed under
Section 37 of the Arbitration Act, more particularly, when the
Section 17 application is very much pending before the arbitral
tribunal.
93. Mr.Thakore would submit that the court below has
judiciously exercised its discretion and granted the interim
reliefs till the time the arbitral tribunal decides the issues under
Section 17. This indicates that the court below was conscious of
the fact that the arbitral tribunal, having been constituted, is the
right forum to get those issues adjudicated. The court below was
conscious that the power of the arbitral tribunal is the same as
that of a civil court and an order passed by the arbitral tribunal
under Section 17 is enforceable as an order passed by a civil
court. It is further submitted that the court below cannot be
faulted for choosing one of the two options available to it. The
discretion exercised by the court below is not prohibited under
Section 9 or under any of the provisions of the Arbitration Act.
94. In view of the aforesaid, Mr.Thakore prays that there being
no merit in the Appeals filed by the EBTL, the same may be
dismissed.
DOLLAR TARIFF :
95. On the second issue, i.e. the Dollar Tariff, we had the
benefit of hearing very persuasive and erudite arguments of
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Mr.Darayus Khambhata, the learned senior counsel appearing
for the AMNS. Mr.Khambhata concentrated more on the scope of
Section 37 of the Arbitration Act. He would submit that the
scope of interference at the end of the court sitting in appeal
under Section 37 against an order passed under Section 9 of the
Arbitration Act is very circumscribed compared to the scope of
interference by a court sitting in appeal under Order 43 of the
Code of Civil Procedure against an interim order passed in a
suit.
96. In the aforesaid context, Mr.Khambhata placed strong
reliance on a judgment of the Delhi High Court in the case of
CRSC Research and Design Institute Group Co. Ltd. vs.
Dedicated Freight Corridor Corporation of India Limited and
others, reported in 2020 SCC Online Del 1526, wherein it was
observed that :
"Since the time of the observations quoted above of the
Supreme Court, there has been another vital development.
The law relating to arbitration has been overhauled and the
Commercial Courts Act, 2015 has been enacted, both to
expedite adjudication of commercial disputes. The
Commercial Division of this Court, in this case, was
approached by way of a petition under Section 9 of the
Arbitration Act, for interim measures. In exercise of the said
jurisdiction, the Commercial Division of this Court is not
seized with adjudication of the substantive dispute between
the appellant, at whose instance the BGs were furnished,
and the respondent no.1, in whose favour the BGs were
furnished. The said substantive dispute is to be decided in
arbitration. This vital difference is to be kept in mind while
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exercising jurisdiction under Section 9 inasmuch as any
interpretation given by this Court to the terms of the
contract, even though may be said to be on a prima facie
view of the matter, has a potential of influencing the Arbitral
Tribunal. Not only so, the grant/non-grant of interim
measures under Section 9 is essentially discretionary and
the scope of interference in appeal under Section 37 is much
more limited than in an appeal arising from an interim order
in a suit."
"Even in an appeal against an interim order in a suit, the
scope of interference, as per the dicta in Wander Ltd. Vs.
Antox India P. Ltd. 1990 (Supp) SCC 727 is confined to
cases where the Single Judge has exercise the discretion
vested in him arbitrarily or capriciously or perversely or
where the Single Judge has ignored settled principle of law
regulating grant or refusal of interlocutory injunctions and
does not extend to substituting own discretion for the
discretion exercised by the Single Judge."
97. Mr.Khambhata thereafter relied upon the decision of the
Supreme Court in the case of Wander Ltd. and another vs. Antox
India P. Ltd., reported in 1990 Supp SCC 727, wherein the
Supreme Court has laid down the permissible scope of
interference in an appeal against an interim order passed in a
suit, as under :
"In such appeals, the Appellate Court will not interfere with
the exercise of discretion of the court of first instance and
substitute its own discretion except where the discretion has
been shown to have been exercised arbitrarily, or
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capriciously or perversely or where the court had ignored
the settled principles of law regulating grant or refusal of
interlocutory injunctions. An appeal against exercise of
discretion is said to be an appeal on principle. Appellate
Court will not reassess the material and seek to reach a
conclusion different from the one reached by the court below
if the one reached by the court was reasonably possible on
the material. The appellate court would normally not be
justified in interfering with the exercise of discretion under
appeal solely on the ground that if it had considered the
matter at the trial stage it would have come to a contrary
conclusion."
98. According to Mr.Khambhata, if this High Court is inclined
to interfere with the impugned order passed by the Commercial
Court in exercise of its powers under Section 9 of the Arbitration
Act, then it will have to arrive at the conclusion that the findings
recorded therein are erroneous or perverse. According to
Mr.Khambhata, the impugned order may not be set-aside merely
because this Court may not be in agreement with some of the
findings recorded by the court below.
99. Mr.Khambhata would submit that even otherwise the court
below has restricted the operation of its order for a period of
three months or till the Section 17 application is decided. In
such circumstances also, this Court may not disturb the order.
100. Mr.Khambhata thereafter gave us more than a fair idea as
regards the doctrines of 'party autonomy' and 'kompetenz -
competence'. By explaining the two doctrines, Mr.Khambhata
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would submit that the object and purport of the Arbitration Act
is to uphold the 'party autonomy' and to avoid judicial
intervention, or to minimize it, more particularly, when the
parties have opted for arbitration as their dispute resolution
process. It statutorily incorporates the doctrine of positive and
negative 'kompetenz-competence'.
101. Mr.Khambhata thereafter proceeded to make his
submissions on merits on the issue of dollarization.
102. Mr.Khambhata submitted that the Third Amendment
Agreement and the Fourth Amendment Agreement are not
enforceable, and in such circumstances, the AMNS is not obliged
to pay the cargo handling charges in accordance with the USD
denominated tariff. Mr.Khambhata, with his usual fairness,
submitted that this issue however may be decided by the arbitral
tribunal. He would submit, without prejudice to his main
contention as regards the enforceability of the Third and the
Fourth Amendment Agreement, that if at all a dollarized tariff is
to be paid, it should be calculated using the USD exchange rate
prevailing on 30th December 2020 as the base rate. The claim of
the EBTL that the USD exchange rate as on 30 th April 2013
should be taken as the base rate is untenable in law. This,
according to Mr.Khambhata, is a matter of interpretation of
contract to subserve the explicit purpose and intent, i.e. to have
a natural hedge.
103. Mr.Khambhata would submit that pursuant to the 4 th
Amendment Agreement, the amendment effective date came to
be shifted to the date on which the EBTL drew its first tranche of
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borrowings in the USD. In such circumstances, the date 30 th
April 2013 could be said to have lost its significance. Since the
EBTL drew its first tranche of the borrowings in the USD only on
31st December 2020, the amendment effective date, if any,
should be 30th December 2020. Therefore, according to
Mr.Khambhata, even if the AMNS is obliged to pay the dollarized
tariff, which it denies, but in any case it should be calculated
using the USD exchange rate as on 30 th December 2020.
According to Mr.Khambhata, if it is not calculated using the USD
exchange rate as on 30th December 2020, then the Third
Amendment Agreement would cease to operate as a natural
hedge and would result in a windfall profit for one of the parties
based on the changing exchange rate.
104. The learned senior counsel would submit that the
Commercial Court adopted a balanced approach by directing the
AMNS to pay the dollarized tariff in accordance with the RBI
exchange rate prevailing on 30th April 2013. The Commercial
Court rightly took such a view considering that the object of the
Third Amendment Agreement was to provide a natural hedge.
105. The learned senior counsel submitted that the Commercial
Court is also right in observing that if the rate of 30 th April 2013
is to be considered for calculating the dollarized tariff, the same
would be a bonanza of INR 300 crore per year for the EBTL at
the cost of the AMNS, which would run contrary to the very
concept of hedging.
106. Mr.Khambhata thereafter made us understand the concept
of natural hedge - explicit intention underlying the Third
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Amendment Agreement. Mr.Khambhata also took us through the
observations made by the Supreme Court in the case of Nabha
Power Ltd. (supra), more particularly, paragraph 44 therein.
107. Mr.Khambhata, the learned senior counsel pointed out
that his client, i.e. the AMNS, has also preferred two First
Appeals being First Appeals Nos.3506 of 2021 and 3507 of 2021
respectively. Both these appeals are directed against that part of
the order of the Commercial Court, where the Commercial Court
directed his client to pay the disputed dollarized minimum
monthly charges.
108. Mr.Khambhata would submit that in doing the aforesaid,
the Commercial Court has in effect could be said to have granted
specific performance of the contract in the Section 9
proceedings. He would submit that the court, exercising powers
under Section 9 of the Arbitration Act, is not to enforce the
contract since the proceedings under Section 9 are neither the
proceedings arising out of a contract nor a suit. Section 9
empowers the court only to issue orders to preserve the subject
matter of arbitration till the arbitral tribunal has an occasion to
adjudicate the matter; and that if the courts, in exercise of
powers under Section 9, start enforcing the terms of the
contract, it would frustrate the very concept of arbitration, where
the parties choose to have their disputes adjudicated, instead of
by the courts, by arbitrators of their choice.
109. Mr.Khambhata would submit that the AMNS disputes its
liability to pay the minimum monthly charges and the dollarized
cargo handling charges.
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110. In such circumstances referred to above, Mr.Khambhata
prays that both the First Appeals filed by his client may be
allowed and the order passed by the Commercial Court to the
extent it has caused serious prejudice to his client may be
quashed and set-aside.
ANALYSIS :
111. Having heard the learned counsel appearing for the parties
and having gone through the materials on record, the only
question that falls for the consideration of this Court is, whether
the Commercial Court committed any error in passing the
impugned order.
SCOPE OF SECTION 9 OF THE ARBITRATION ACT :
112. Section 9 of the Arbitration Act contemplates 'interim
measures, etc.', by the court. The expression 'etc.', used at the
end of a definition clause has been held, in several decisions, to
be required to be interpreted noscitur a sociis and ejusdem
generis (the latter principle applying where the words, preceding
the word 'etc.', constituted a genus, and the former principle
applying more universally, in all cases), the words preceding it.
The measures put in place by the court, in exercise of the
jurisdiction vested by Section 9 has, therefore, to be in the
nature of 'interim measures'. The 'interim reliefs', as held by the
Bombay High Court in the Bank of Maharashtra vs. M.V.River
Oghese, 1990 AIR (Bom) 107, 'are granted to serve the temporary
purpose of protecting the plaintiff's interest so that the suit is
not frustrated'.
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113. The court, while exercising its power under Section 9 of the
Arbitration Act, has to be fully conscious of the power, vested in
the arbitrator/arbitral tribunal, by Section 17 of the same Act. A
reading of Sections 9 and 17 respectively of the Arbitration Act,
reveals that they are identically worded. The 'interim measures',
which can be ordered by the arbitral tribunal under Section 17
are the very same as those which can be ordered by the court
under Section 9. It is for this reason that sub-section (3) of
Section 9 prescribes grant of interim measures, by the court,
consequent on constitution of the arbitral tribunal, save and
except where the court finds that the circumstances exist, which
may not render the remedy, under Section 17, to be efficacious.
The court, while exercising jurisdiction under Section 9, even at
a pre-arbitration stage, cannot, therefore, usurp the jurisdiction
which would, otherwise, be vested in the arbitrator, or the
arbitral tribunal, yet to be constituted. The court is also required
to ensure that Section 9 is not employed, by litigants, who feel
that it is easier to obtain interim relief from a court, rather than
from an arbitrator or arbitral tribunal, to forum shop. If left
unchecked, Section 9 is easily amenable to such misuse. While,
in an appropriate case, the court must not hesitate in ordering
'interim measures', under Section 9, in judging whether a
particular case is 'appropriate' or not, the court is required to do
some tightrope walking. The principles, to be borne in mind,
while examining whether a case has been made out for the grant
of interim measures, under Section 9, are the existence of a
prima facie case, the balance of convenience and the possibility
of irreparable loss or prejudice, if the interim relief was to be
declined, apart from the consideration of public interest. [see
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Ramniklal N. Bhutta vs. State of Maharashtra, (1997) 1 SCC 134
and Raunaq International Ltd. vs. I.V.R. Construction Ltd.,
(1999) 1 SCC 492]
114. However, it is important to state that the mere satisfaction
of these criteria does not, ipso facto, make out a case for ordering
interim measures under Section 9. Additionally, the court is also
required to satisfy itself that the relief, being sought under
Section 9, cannot await the constitution of the arbitral tribunal,
or the appointment of the arbitrator, and the invocation, before
such arbitrator or arbitral tribunal, of Section 17. Emergent
necessity, of ordering interim measures is, therefore, an
additional sine qua non, to be satisfied before the court proceeds
to grant relief under Section 9 of the Arbitration Act. While
passing orders under Section 9, therefore, the court is required
to satisfy itself that (i) the applicant, before it, manifestly intends
to initiate arbitral proceedings, Sundaram Finance Ltd vs. NEPC
India Ltd, 1999 2 SCC 479, (ii) the criteria for grant of interim
injunction, which apply to Order 39 of the CPC, stands satisfied,
and (iii) circumstances also exist, which renders the requirement
of ordering interim measures an emergent necessity, which
cannot await a Section 17 proceeding, before the arbitrator, or
arbitral tribunal. In assessing whether such an emergent
necessity exists, or not, the court would, essentially, have to
satisfy itself that failure to order interim measures, under
Section 9, would frustrate, or would render the recourse, to
arbitration - which is yet to take place - a futility.
115. In Adhunik Steels Ltd vs. Orissa Manganese and Minerals
(P) Ltd, (2007) 7 SCC 125, the Supreme Court examined, in
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detail, the scope of Section 9 of the Arbitration Act. Paras 11, 14,
15 and 21 respectively of the report may be reproduced, thus:
"9. Learned counsel also relied on International Commercial
Arbitration in UNCITRAL Model Law Jurisdictions by Dr.
Peter Binder, wherein it is stated:
"It is not incompatible with an arbitration agreement
for a party to request, before or during arbitral
proceedings, from a court an interim measure of
protection and for a court to grant such measure ?
It is further stated:
"In certain circumstances, especially where the
Arbitral Tribunal has not yet been established, the
issuance of interim measures by the court is the only
way assets can be saved for a future arbitration.
Otherwise, the claimant could end up with a worthless
arbitral award due to the fact that the losing party has
moved his attachable assets to a =safe' jurisdiction
where they are out of reach of the claimant's seizure.
The importance of such a provision in an arbitration
law is therefore evident, and a comparison of the
adopting jurisdictions shows that all jurisdictions
include some kind of provision on the issue, all
granting the parties permission to seek court-ordered
interim measures."
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14. Professor Lew in his Commentary on Interim and
Conservatory Measures in ICC Arbitration Cases, has
indicated:
"The demonstration of irreparable or perhaps
substantial harm is also necessary for the grant of a
measure. This is because it is not appropriate to grant
a measure where no irreparable or substantial harm
comes to the movant in the event the measure is not
granted. The final award offers the means of
remedying any harm, reparable or otherwise, once
determined."
15. The question was considered in Channel Tunnel Group
Ltd. v. Balfour Beatty Construction Ltd., 1993 AC 334 :
(1993) 2 WLR 262 : (1993) 1 All ER 664 (HL)] The trial Judge
in that case took the view that he had the power to grant an
interim mandatory injunction directing the continuance of
the working of the contract pending the arbitration. The
Court of Appeal thought that it was an appropriate case for
an injunction but that it had no power to grant injunction
because of the arbitration. In further appeal, the House of
Lords held that it did have the power to grant injunction but
on facts thought it inappropriate to grant one. In formulating
its view, the House of Lords highlighted the problem to
which an application for interim relief like the one made in
that case may give rise. The House of Lords stated at AC p.
367: (All ER p. 690g-h)
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"It is true that mandatory interlocutory relief may be
granted even where it substantially overlaps the final
relief claimed in the action; and I also accept that it is
possible for the court at the pre-trial stage of a dispute
arising under a construction contract to order the
defendant to continue with a performance of the
works. But the court should approach the making of
such an order with the utmost caution, and should be
prepared to act only when the balance of advantage
plainly favours the grant of relief. In the combination of
circumstances which we find in the present case I
would have hesitated long before proposing that such
an order should be made, even if the action had been
destined to remain in the High Court."
21. It is true that the intention behind Section 9 of the Act is
the issuance of an order for preservation of the subject-
matter of an arbitration agreement. According to learned
counsel for Adhunik Steels, the subject-matter of the
arbitration agreement in the case on hand, is the mining and
lifting of ore by it from the mines leased to OMM Private
Limited for a period of 10 years and its attempted abrupt
termination by OMM Private Limited and the dispute before
the arbitrator would be the effect of the agreement and the
right of OMM Private Limited to terminate it prematurely in
the circumstances of the case. So viewed, it was open to the
court to pass an order by way of an interim measure of
protection that the existing arrangement under the contract
should be continued pending the resolution of the dispute by
the arbitrator. May be, there is some force in this submission
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made on behalf of Adhunik Steels. But, at the same time,
whether an interim measure permitting Adhunik Steels to
carry on the mining operations, an extraordinary measure in
itself in the face of the attempted termination of the contract
by OMM Private Limited or the termination of the contract by
OMM Private Limited, could be granted or not, would again
lead the court to a consideration of the classical rules for the
grant of such an interim measure. Whether an interim
mandatory injunction could be granted directing the
continuance of the working of the contract, had to be
considered in the light of the well-settled principles in that
behalf. Similarly, whether the attempted termination could
be restrained leaving the consequences thereof vague would
also be a question that might have to be considered in the
context of well-settled principles for the grant of an
injunction. Therefore, on the whole, we feel that it would not
be correct to say that the power under Section 9 of the Act is
totally independent of the well-known principles governing
the grant of an interim injunction that generally govern the
courts in this connection. So viewed, we have necessarily to
see whether the High Court was justified in refusing the
interim injunction on the facts and in the circumstances of
the case."
116. In Arvind Constructions Ltd vs. Kalinga Mining
Corporation, (2007) 6 SCC 798, the Supreme Court reiterated
the principle that the exercise of jurisdiction, under Section 9 of
the Arbitration Act, is subject to the restrictions and limitations
contained in the Specific Relief Act, while Firm Ashok Traders vs.
Gurmukh Das Saluja, (2004) 3 SCC 155, also holds - as did
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Adhunik Steels Ltd, (1997) 1 SCC 134, two years later - that "the
Court under Section 9 is only formulating interim measures so
as to protect the right under adjudication before the Arbitral
Tribunal from being frustrated".
117. The need for restraint, while exercising jurisdiction under
Section 9 of the Arbitration Act, was also emphasised by the
Delhi High Court, through Dalveer Bhandari, J. (as he then was)
in Olex Facas Pvt Ltd vs. Skoda Export Co. Ltd, 2000 AIR (Del)
161 thus:
"In my view, though the Court is vested with the power to
grant interim relief, but the Court's discretion must be
exercised sparingly and only in appropriate cases. The
Courts should be extremely cautious in granting interim
relief in cases of this nature. The Court's discretion ought to
be exercised in those exceptional cases where there is
adequate material on record, leading to a definite conclusion
that the respondent is likely to render the entire arbitration
proceedings infructuous, by frittering away the properties of
funds either before or during the pendency of arbitration
proceedings or even during the interregnum period from the
date of award and its execution. In those cases, the Courts
would be justified in granting interim relief."
118. The categories of 'interim measures', which could be
directed under Section 9, stand specifically delineated in the
provision itself. The court can, under Section 9, (i) appoint a
guardian for the purposes of arbitral proceedings, (ii) direct
preservation, interim custody or sale of the goods which are
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subject matter of the arbitration agreement, (iii) secure the
amount in dispute in the arbitration, (iv) direct detention,
preservation or inspection of any property or thing which is the
subject matter of dispute in arbitration, or as to a breach any
question may arise therein, (v) grant interim injunction or
appoint a receiver and (vi) grant such other interim measure of
protection as may appear to the court to be just and convenient.
The ambit of sub-clause (ii)(e) of sub-section (1) of Section 9,
which empowers the court to grant 'such other interim measure
of protection as may appear to the court to be just and
convenient' - specifically the ambit of the expression 'just and
convenient' - constitutes subject matter of the following
enunciation of the law, by Banumathi, J. (as Her Ladyship then
was), speaking for the High Court of Madras, in V.Sekar vs.
Akash Housing, 2011 AIR (Mad) 110 : (2011) 3 Arb LR 327 (DB):
"The purpose of Section 9 is to provide an interim measure
of protection to the parties to prevent the ends of justice from
being defeated. Section 9(2)(e) vests the Court with the
power to grant such interim measures of protection as may
be just and convenient. The jurisdiction under the "just and
convenient" clause is quite while in amplitude, but must be
exercised with restraint. Interim measures are to be granted
by the Court so as to protect the rights in adjudication before
the arbitral tribunal from being frustrated. It does not allow
the Coach the discretion to exercise on restrained powers
and frustrate the very object of arbitration."
"Under Section 9 of the 1996 Act, for the Court to grant
interim injunction, the Court must be satisfied (i) existence of
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prima facie case, (ii) balance of convenience and (iii)
potential for irreparable loss or injury. The power under
Section 9 has been considered as essential for strengthening
and establishing the effectiveness of the arbitration
proceedings. Even if a prima facie case existed in favour of a
party, the Court will grant "no injunction", where the Court
feels that the grant of injunction would frustrate the object of
the arbitration."
The Arbitration Act - Doctrines of Party Autonomy and
Kompetenz:
119. The object and purport of the Arbitration Act is to uphold
the party autonomy and to avoid judicial intervention or to
minimize it in disputes, where the parties have opted for
arbitration as their dispute resolution process. It statutorily
incorporates the doctrines of positive and negative Kompetenz.
I. Positive Kompetenz :
120. Positive Kompetenz, i.e. the power of the arbitral tribunal
to decide its own jurisdiction is statutorily recognized under
Section 16(1) of the Arbitration Act, which reads as under :
"16. Competence of arbitral tribunal to rule on its
jurisdiction.- (1) The arbitral tribunal may rule on its own
jurisdiction, including ruling on any objections with respect
to the existence or validity of the arbitration agreement, and
for that purpose.-
(a) an arbitration clause which forms part of a contract shall
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be treated as an agreement independent of the other terms
of the contract; and
(b) a decision by the arbitral tribunal that the contract is null
and void shall not entail ipso jure the invalidity of the
arbitration clause."
121. If the arbitral tribunal rejects the application under Section
16, the applicant has no option but to proceed with the
arbitration and thereafter challenge the award on the ground of
lack of jurisdiction under Section 34 of the Arbitration Act. It is
only when a Section 16 application is allowed, does the aggrieved
party have an option to challenge the order of the arbitral
tribunal under Section 37(2) of the Arbitration Act. Thus, the
intent of the Parliament is to have all the disputes first
adjudicated by the arbitral tribunal for as long as possible.
II. Negative Kompetenz :
122. Negative Kompetenz is the other side of the coin. The
negative effect doctrine refers to the circumstances under which
the court, before which a case is pending, will refrain from a full
review of whether an alleged arbitration agreement, exists as
between the parties, is valid, and covers the dispute - in
deference to allowing the arbitrators to decide those issues in the
first instance. Interference, by and large, is to be in the manner
of entertaining challenges to the award rather than at stages
prior to the award, unless absolutely necessary and unavoidable.
Thus, the arbitral tribunal is permitted to decide first.
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123. The concept of Negative Kompetenz has also been
explained by the Supreme Court in ArcelorMittal Nippon Steel
India Limited vs. Essar Bulk Terminal Limited : 2021 SCC
OnLine SC 718 as under :
"103. Negative Kompetenz-Kompetenz is a sequel to the rule
of priority in favour of the Arbitrators, that is, the
requirement for parties to an arbitration agreement to
honour their undertaking to submit any dispute covered by
such an agreement to arbitration. This entails the
consequence that the Courts are prohibited from hearing
such disputes."
124. Section 5 of the Arbitration Act emphasizes the doctrine of
negative Kompetenz :
"5. Extent of judicial intervention.- Notwithstanding anything
contained in any other law for the time being in force, in
matters governed by this Part, no judicial authority shall
intervene except where so provided in this Part."
125. Section 9 of the Arbitration Act (after its amendment in
2015) provides as follows :
"9. Interim measures, etc., by Court.-
[(1)] A party may, before, or during arbitral proceedings or at
any time after the making of the arbitral award but before it
is enforced in accordance with section 36, apply to a Court-
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(i) for the appointment of a guardian for a minor or
person of unsound mind for the purposes of arbitral
proceedings; or
(ii) for an interim measure of protection in respect of
any of the following matters, namely :-
(a) the preservation, interim custody or sale of any goods
which are the subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property
or thing which is the subject matter of the dispute in
arbitration, or as to which any question may arise therein
and authorising for any of the aforesaid purposes any
person to enter upon any land or building in the possession
of any party or authorising any samples, to be taken or any
observation to be made, or experiment to be tried, which
may be necessary or expedient for the purpose of obtaining
full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear
to the Court to be just and convenient, and the Court shall
have the same power for making orders as it has for the
purpose of, and in relation to, any proceedings before it.
[(2) Where, before the commencement of the arbitral
proceedings, a Court passes an order for any interim
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measure of protection under sub-section (1), the arbitral
proceedings shall be commenced within a period of ninety
days from the date of such order or within such further time
as the Court may determine.
(3) Once the arbitral tribunal has been constituted, the Court
shall not entertain an application under sub-section (1),
unless the Court finds that circumstances exist which may
not render the remedy provided under section 17
efficacious.]"
126. Section 9(3) has been introduced as a measure of Negative
Kompetenz and also to reduce the burden on the courts. Section
9(3) must be construed purposively and any attempt to thwart
the mandate of Section 9(3) of the Act must be discouraged.
127. The fact that Section 9(3) of the Act has been introduced as
a measure of Negative Kompetenz is further substantiated by :
i. Section 17(1) now corresponds to Section 9(1) of the
Arbitration Act in terms of the scope and nature of interim
orders that can be passed by a Tribunal.
ii. the corresponding introduction of Section 17(2) of the
Act, which by way of the deeming fiction introduced therein
permits direct enforcement of the orders of the arbitral
tribunal passed under Section 17 of the Act, treating it as
an order of the court for all purposes. Recourse to Section
9 is no longer necessary to enforce the interim orders of an
arbitral tribunal.
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128. Section 17, as is stands now, reads as under :
"17. Interim measures ordered by arbitral tribunal.- (1) A
party may, during the arbitral proceedings or at any time
after making of the arbitral award but before it is enforced
in accordance with section 36, apply to the arbitral tribunal-
(i) for the appointment of a guardian for a minor or
person of unsound mind for the purposes of arbitral
proceedings; or
(ii) for an interim measure of protection in respect of
any of the following matters, namely:-
(a) the preservation, interim custody or sale of any goods
which are the subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property
or thing which is the subject matter of the dispute in
arbitration, or as to which any question may arise therein
and authorising for any of the aforesaid purposes any
person to enter upon any land or building in the possession
of any party, or authorising any samples to be taken, or any
observation to be made, or experiment to be tried, which
may be necessary or expedient for the purpose of obtaining
full information or evidence;
(d) interim injunction or the appointment of a receiver;
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(e) such other interim measure of protection as may appear
to the arbitral tribunal to be just and convenient, andthe
arbitral tribunal shall have the same power for making
orders, as the court has for the purpose of, and in relation
to, any proceedings before it.
(2) Subject to any orders passed in an appeal under section
37, any order issued by the arbitral tribunal under this
section shall be deemed to be an order of the Court for all
purposes and shall be enforceable under the Code of Civil
Procedure, 1908, in the same manner as if it were an order
of the Court.]"
129. Thus, the clear object and purpose of the Arbitration Act
and more specifically the amendments to Sections 9 and 17
introduced vide the 2015 Amendment to the Arbitration Act is :
(i) To enable expeditious resolution of the disputes; and
(ii) To ease the burden of the courts.
130. The Supreme Court in the case of Amazon.com NV
Investment Holdings LLC vs. Future Retail Limited and others,
reported in 2021 SCC OnLine SC 557, in paras 57, 59, 60, 61
and 62 respectively observed as follows :
"57. It is relevant to note that the 246 th Law Commission
Report also recommended the insertion of Sections 9(2) and
9(3) as follows:
"Amendment of Section 9
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6. In Section 9,
(i) before the words "A party may, before" add sub-section
"(1)"
(ii) after the words "any proceedings before it" add sub-
section "(2) Where, before the arbitral proceedings, a Court
grants any interim measure of protection under sub-section
(1), the arbitral proceedings shall be commenced within 60
days from the date of such grant or within such shorter or
further time as indicated by the Court, failing which the
interim measure of protection shall cease to operate.
[NOTE: This amendment is to ensure the timely initiation of
arbitration proceedings by a party who is granted an interim
measure of protection.]
(iii) Add sub-section "(3) Once the Arbitral Tribunal has been
constituted, the Court shall, ordinarily, not entertain an
Application under this provision unless circumstances exist
owing to which the remedy under section 17 is not
efficacious."
[NOTE: This amendment seeks to reduce the role of the
Court in relation to grant of interim measures once the
Arbitral Tribunal has been constituted. After all, once the
Tribunal is seized of the matter it is most appropriate for the
Tribunal to hear all interim applications. This also appears
to be the spirit of the UNCITRAL Model Law as amended in
2006.
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
Accordingly, section 17 has been amended to provide the
Arbitral Tribunal the same powers as a Court would have
under section 9]"
59. In essence, what is provided by the SIAC Rules and the
other institutional rules, is reflected in Sections 9(2) and 9(3)
so far as interim orders passed by courts are concerned. The
introduction of Sections 9(2) and 9(3) would show that the
objective was to avoid courts being flooded with Section 9
petitions when an arbitral tribunal is constituted for two
good reasons - (i) that the clogged court system ought to be
decongested, and (ii) that an arbitral tribunal, once
constituted, would be able to grant interim relief in a timely
and efficacious manner.
60. Similarly, the 246th Law Commission Report
recommended the amendment of Section 17 as follows:
"Amendment of Section 17
11. In Section 17
*****
(vi) In sub-section (1), after sub-clause "(d)", insert sub-
clause "(e) such other interim measure of protection as may
appear to the Arbitral Tribunal to be just and convenient,
and the arbitral tribunal shall have the same power for
making orders as the Court has for the purpose of, and in
relation to, any proceedings before it."
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[NOTE: This is to provide the arbitral tribunal the same
powers as a civil court in relation to grant of interim
measures. When this provision is read in conjunction with
section 9(2), parties will by default be forced to approach the
Arbitral Tribunal for interim relief once the Tribunal has
been constituted. The Arbitral Tribunal would continue to
have powers to grant interim relief post-award. This regime
would decrease the burden on Courts. Further, this would
also be in tune with the spirit of the UNCITRAL Model Law
as amended in 2006.]
(vii) delete words in sub-section (2) and add the words "(2)
Subject to any orders passed in appeal under section 37,
any order issued by the arbitral tribunal under this section
shall be deemed to be an Order of the Court for all purposes
and shall be enforceable under the Code of Civil Procedure,
1908 in the same manner as if it were an Order of the
Court."
[NOTE: This is to ensure the effective enforcement of interim
measures that may be ordered by an arbitral tribunal.]"
61. Section 17 was then amended by the very same 2015
Amendment Act (which brought in sub-sections (2) and (3) to
Section 9) to substitute Section 17 so that Section 17(1)
would be a mirror image of Section 9(1), making it clear that
an arbitral tribunal is fully clothed with the same power as
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a court to provide for interim relief. Also, Section 17(2) was
added so as to provide for enforceability of such orders,
again, as if they were orders passed by a court, thereby
bringing Section 17 on par with Section 9.
62. An Emergency Arbitrator's "award", i.e., order, would
undoubtedly be an order which furthers these very
objectives, i.e., to decongest the court system and to give the
parties urgent interim relief in cases which deserve such
relief."
131. The Supreme Court, in ArcelorMittal's case (supra), in
paras 67, 68, 93, 95, 96, 101 and 102 respectively held that :
"67. To discourage the filing of applications for interim
measures in Courts under Section 9(1) of the Arbitration Act,
Section 17 has also been amended to clothe the Arbitral
Tribunal with the same powers to grant interim measures,
as the Court under Section 9(1). The 2015 Amendment also
introduces a deeming fiction, whereby an order passed by
the Arbitral Tribunal under Section 17 is deemed to be an
order of Court for all purposes and is enforceable as an
order of Court.
68. With the law as it stands today, the Arbitral Tribunal
has the same power to grant interim relief as the Court and
the remedy under Section 17 is as efficacious as the remedy
under Section 9(1). There is, therefore, no reason why the
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Court should continue to take up applications for interim
relief, once the Arbitral Tribunal is constituted and is in
seisin of the dispute between the parties, unless there is
some impediment in approaching the Arbitral Tribunal, or
the interim relief sought cannot expeditiously be obtained
from the Arbitral Tribunal.
93. It is now well settled that the expression "entertain"
means to consider by application of mind to the issues
raised. The Court entertains a case when it takes a matter
up for consideration. The process of consideration could
continue till the pronouncement of judgment as argued by
Khambata. Once an Arbitral Tribunal is constituted the
Court cannot take up an application under Section 9 for
consideration, unless the remedy under Section 17 is
inefficacious. However, once an application is entertained in
the sense it is taken up for consideration, and the Court has
applied its mind to the Court can certainly proceed to
adjudicate the application.
95. On a combined reading of Section 9 with Section 17 of
the Arbitration Act, once an Arbitral Tribunal is constituted,
the Court would not entertain and/or in other words take up
for consideration and apply its mind to an application for
interim measure, unless the remedy under Section 17 is
inefficacious, even though the application may have been
filed before the constitution of the Arbitral Tribunal. The bar
of Section 9(3) would not operate, once an application has
been entertained and taken up for consideration, as in the
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instant case, where hearing has been concluded and
judgment has been reserved...
96. Even after an Arbitral Tribunal is constituted, there may
be myriads of reasons why the Arbitral Tribunal may not be
an efficacious alternative to Section 9(1). This could even be
by reason of temporary unavailability of any one of the
Arbitrators of an Arbitral Tribunal by reason of illness, travel
etc.
101. As pointed out by Mr. Khambata, the 246 th Report of
the Law Commission, submitted in August 2014 states that
Section 9(3) seeks to reduce the role of the Court in relation
to grant of interim measure, once the Arbitral Tribunal has
been constituted. This is also in keeping with the UNCITRAL
Model Law which discourages Court proceedings in relation
to disputes arising out of an agreement which contains a
clause for arbitration.
102. As held by this Court in Amazon.com NV Investment
Holdings LLC (supra), the object of introducing Section 9(3)
was to avoid Courts being flooded with applications under
Section 9 of the Arbitration Act."
132. As observed by the Supreme Court in ArcelorMittal's case
(supra), Section 9(3) imposes a bar on a court from ousting the
jurisdiction of an arbitral tribunal under Section 17 of the Act,
unless it is established to the satisfaction of the court, that the
remedy under Section 17 of the Act is inefficacious.
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
Natural hedge - intention underlying the Third Amendment
Agreement:
133. It is the case of the AMNS that the explicit intent and
business sense underlying the Third Amendment Agreement was
to create a 'natural hedge' for the parties. Clause (c) provides as
under :
"(c) The prices of raw materials and finished goods produced
by ESTL is determined by international markets and these
prices are benchmarked in US Dollars. Further, majority of
the input costs of ESTL will continue to be benchmarked in
US Dollars. In order to have a natural hedge, ESTL proposes
that majority of its expenses be converted into US Dollar
denominated expenses."
A natural hedge, by definition :
"Is a risk mitigation technique that involves investing in
asset pairings that are negatively correlated. Natural
hedges also occur through the normal course of business; for
example, a company that conducts operations in another
country will have minimal currency risk, because cash
inflows and outflows are in the same currency. This means
that a firm might set up supply chains within the country in
which it produces and sells goods, so that currency risk is
largely avoided. Otherwise, if it only sold into that country
but had operations elsewhere, then it would be exposed to
currency risk when repatriating the cash back to corporate
headquarters."
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
134. Further, "(a) natural hedge can also be implemented when
institutions exploit their normal operating procedures. For
example, if they incur expenses in the same currency that their
revenues are generated they will actually reduce their exchange
rate risk exposure, naturally".
135. Mr.Khambhata is right in a way that being a risk
mitigating mechanism, a natural hedge can never be an
arrangement where one party earns a bonanza at the cost of
another party. A natural hedge under which the EBTL received
payments as per the USD denominated tariff would nullify its
exposure to repay the loan at an additional amount owing to the
fluctuation in the USD to INR rate.
136. The above has been confirmed by the Reserve Bank of
India, which defines a natural hedge as :
"Natural hedge, in lieu of financial hedge, will be considered
only to the extent of offsetting projected cash
flows/revenues in matching currency, net of all other
projected outflows. For this purpose, an ECB may be
considered naturally hedged if the offsetting exposure has
the maturity/cash flow within the same accounting year.
Any other arrangements/structures, where revenues are
indexed to foreign currency will not be considered as natural
hedge."
137. The Reserve Bank of India's definition and its emphasis on
the 'same accounting year' confirms that, a natural hedge cannot
be interpreted to mean that, it would enable a party to gain a
bonanza owing to the foreign exchange fluctuations.
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
SUBMISSIONS ON BEHALF OF THE AMNS IN THE FIRST
APPEALS NOS.3506 AND 3506 OF 2021 RESPECTIVELY :
138. The submissions by and large stand covered as recorded
from para 54 onwards, i.e. the submissions on behalf of the
EBTL in their appeals. We need not specifically reiterate the very
same submissions.
FINAL ANALYSIS :
139. We propose to deal with the issue of Dollar Tariff first as
much is not required to be said at our end in this regard. On
plain reading of the impugned judgment and order, it appears to
us that the Commercial Court, while granting the relief in favour
of the parties, has indeed decided the entire dispute by himself
and nothing is left for the decision to be taken by the arbitral
tribunal that has already been constituted. It is true that at
times it may not be impermissible for the court to come to the
prima facie finding for granting relief which may result in the
final decision in arbitration or suit or substantive proceeding.
However, the substantive dispute between the parties is to be
decided in arbitration.
140. On 21st February 2011, the EBTL and the ESIL entered
into a cargo handling agreement. The CHA provides, inter alia,
for the obligations in respect of the handling, loading and
unloading of cargo related to the operations of the steel plant
operated by the ESIL and the port related services/facilities to be
provided by the EBTL. The record reveals that the CHA was
thereafter amended for seven times. Subsequently, on 7 th May
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2013, the CHA was amended by way of the Third Amendment
Agreement. By way of this amendment, the cargo handling
charges payable to the EBTL under clause 5.2 of the CHA was
agreed to be determined as per USD denominated tariff of USD 1
= INR 54.2190 (i.e. the RBI Reference Closing Rate as on 30 th
April 2013). The objective of the Third Amendment Agreement
has been provided in the Recital (c) read with Recital (d) which
provide as under :
"(c) The prices of raw materials and finished goods produced
by ESTL is determined by international markets and these
prices are benchmarked in US Dollars. Further, majority of
the input costs of ESTL will continue to be benchmarked in
US Dollars. In order to have a natural hedge, ESTL proposes
that majority of its expenses be converted into US Dollar
denominated expenses.
(d) Accordingly, it would be commercially prudent for the
parties to have the charges relating to port handling and
other charges to be dominated in US Dollars and an
equivalent amount of INR be payable...."
141. Further, Article 5.2A was inserted which obliged the ESIL
to provide the EBTL a Letter of Credit for a value equivalent to
one month's billing.
142. On 15th October 2013, the CHA was further amended by
way of the Fourth Amendment Agreement. This amendment
clarified the applicability of the Third Amendment Agreement. It
was agreed that the Third Amendment Agreement shall be
effective only after the EBTL draws its first tranche of borrowings
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in the USD. Until such time, the cargo handling charges payable
to the EBTL shall be determined in Indian rupees.
143. On 16th December 2019, the AMNS took over the
operations of the ESIL whereby the ESIL and the EBTL ceased to
be a part of the same group of companies, i.e. the ESSAR Group.
144. The stance of the AMNS before the Commercial Court was
that the Third Amendment Agreement and the Fourth
Amendment Agreement are not enforceable, and in such
circumstances, the AMNS is not required to pay the cargo
handling charges as per the USD denominated rates.
145. It appears that the Commercial Court, in para 11.5 of the
impugned order, made a passing observation that there is some
weight in the challenge made by the AMNS to the Third and the
Fourth Amendment Agreements. The Commercial Court appears
to have taken a balanced view in this regard. It declined to grant
the relief as prayed for by the AMNS in their Section 9
application as regards the very enforceability of the Third and
the Fourth Amendment Agreements, and at the same time,
directed the AMNS to pay the cargo handling charges as per the
USD denominated rates prevailing on 30 th December 2020 as the
base rate.
146. The EBTL is aggrieved by such relief granted in favour of
the AMNS as the EBTL asserts that the AMNS should have been
asked to make the payment as per the USD exchange rate as on
30th April 2013 and also the payment towards the defaulted
amount of Rs.40.89 crore along with interest being the
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applicable cargo handling charges payable under the CHA as
amended by the Third and the Fourth Amendment Agreements.
147. If the Commercial Court would have straightway said that
the Third and the Fourth Amendment Agreements are not
enforceable being onerous, the same would have rendered its
order vulnerable as it would amount to granting a substantive
relief and not as an interim measure.
148. In exercise of the powers under Section 9 of the Arbitration
Act, the court concerned is not empowered to adjudicate the
substantive dispute between the parties. The said substantive
dispute is to be decided in arbitration. This vital difference is to
be kept in mind while exercising the jurisdiction under Section 9
inasmuch as, as rightly pointed out by the Delhi High court in
the case of CRSC Research and Design Institute Group Co. Ltd.
(supra) that any interpretation given by the court to the terms of
the contract, even though may be said to be on a prima facie
view of the matter, may have a potential of influencing the
arbitral tribunal.
149. In the aforesaid context, the only short point for our
consideration is, whether we should interfere with the relief
granted by the Commercial Court in favour of the AMNS so far
as the USD exchange rate prevailing on a particular date is
concerned. Obviously, if the AMNS has been asked to make the
payment as per the USD exchange rate as on 30 th December
2020, it would suffer a financial loss. However, is this loss which
the EBTL may have to suffer would be in the form of an
irreparable injury which cannot be compensated in terms of
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money at any point of time ? Is it something which the arbitral
tribunal would not be in a position to look into and grant an
appropriate relief ?
150. It is rather elementary that in the matters of grant of
interim relief, the satisfaction of the court only about the
existence of prima facie case in favour of the suitor is not
enough. The other elements, i.e. balance of convenience and
likelihood of irreparable injury, are not of empty formality and
carry their own relevance; and while exercising its discretion in
the matter of interim relief and adopting a particular course, the
court needs to weigh the risk of injustice, if ultimately the
decision of the main matter runs counter to the course being
adopted at the time of granting or refusing the interim relief. We
may usefully refer to the relevant principle stated in the decision
of Chancery Division in Films Rover International Ltd. and
others vs. Cannon Film Sales Ltd., (1986) 3 All ER 772 as under:
"....The principal dilemma about the grant of interlocutory
injunctions, whether prohibitory or mandatory, is that there
is by definition a risk that the court may make the "wrong"
decision, in the sense of granting an injunction to a party
who fails to establish his right at the trial (or would fail if
there was a trial) or alternatively, in failing to grant an
injunction to a party who succeeds (or would succeed) at
trial. A fundamental principle is therefore that the
court should take whichever course appears to carry
the lower risk of injustice if it should turn out to have
been "wrong" in the sense I have described. The guidelines
for the grant of both kinds of interlocutory injunctions are
derived from this principle."
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
151. While referring to various expositions in the said decision,
the Supreme Court, in the case of Dorab Cawasji Warden vs.
Coomi Sorab Warden and others, (1990) 2 SCC 117, observed as
under :
"16. The relief of interlocutory mandatory injunctions are
thus granted generally to preserve or restore the status quo
of the last non-contested status which preceded the pending
controversy until the final hearing when full relief may be
granted or to compel the undoing of those acts that have
been illegally done or the restoration of that which was
wrongfully taken from the party complaining. But since the
granting of such an injunction to a party who fails or
would fail to establish his right at the trial may cause
great injustice or irreparable harm to the party
against whom it was granted or alternatively not
granting of it to a party who succeeds or would
succeed may equally cause great injustice or
irreparable harm, courts have evolved certain
guidelines. Generally stated these guidelines are:
(1) The plaintiff has a strong case for trial. That is, it
shall be of a higher standard than a prima facie case
that is normally required for a prohibitory injunction.
(2) It is necessary to prevent irreparable or serious
injury which normally cannot be compensated in terms
of money.(3) The balance of convenience is in favour of
the one seeking such relief.
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17. Being essentially an equitable relief the grant or refusal
of an interlocutory mandatory injunction shall ultimately rest
in the sound judicial discretion of the court to be exercised in
the light of the facts and circumstances in each case.
Though the above guidelines are neither exhaustive nor
complete or absolute rules, and there may be exceptional
circumstances needing action, applying them as prerequisite
for the grant or refusal of such injunctions would be a sound
exercise of a judicial discretion."
152. At this stage, we must refer to a Division Bench decision of
the Calcutta High Court in the case of Bikash Chandra Deb vs.
Vijaya Minerals Pvt Ltd., reported in (2005) 1 CalHN 582. In the
litigation before the Calcutta High Court, there was an
agreement between the parties and on the basis thereof the
appellant therein had agreed and declared that he would not sell
or otherwise part with or dispose of any manganese and iron ore
from the mine and the buyer being the respondent therein and
the plaintiff in the suit, would be the sole and the only buyer of
all the manganese and iron ore from the mine during the
continuance of the agreement. The learned counsel appearing for
the defendant drew the attention of the court to the factum of
the rates as mentioned in the agreement and submitted that the
rates were so inexplicably low that those cannot termed to be an
unconscionable bargain which the Law Court ought not to have
enforced and the parties cannot possibly be ad idem on that
score and the agreement thus cannot be declared to be valid. It
was further argued that there was a negative covenant, which
otherwise was unenforceable and the question of directing the
specific performance of the contract would not arise. It was
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argued that the grant of the interim order of injunction by the
learned Single Judge would unmistakably lead to the conclusion
that the agreement had been given effect to without the suit
being decreed.
153. The Division Bench proceeded in its order that the
submission canvassed on behalf of the defendant had some
force, but on a closure scrutiny, the same failed to withstand in
the test of being substantive. The court took notice of the fact
that there was written agreement between the parties and as a
matter one of the clauses of the agreement it envisaged grant of
a mining lease in favour of the respondent therein. The Division
Bench was looking into the legality and validity of the order
passed by a learned Single Judge of the High Court granting the
injunction. While dismissing the application for stay of the order
passed by the learned Single Judge, the Division Bench observed
as under :
"12. It is true that the learned Trial Judge has passed an ad
interim order of injunction and there is some amount of
sufferance so far as the appellant is concerned, but does
that negate an agreement in writing? We are afraid that at
this interlocutory stage of the proceedings, we are not in a
position to go into the same.
13. In any event, as regards the onerous term, Explanation
to Section 20 of the Specific Relief Act, makes the position
clear. Explanation I, categorically records that mere
inadequacy of consideration or the mere fact that the
contract is onerous to the defendant or improvident in its
nature shall not he deemed to constitute an unfair
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
advantage within the meaning of Clause (a) or hardship
within the meaning of Clause (b) of Section 20.
14. Be it recorded that we are not expressing any opinion at
this stage of the proceedings and the matter is left to be
decided by the Learned Trial Judge, at the time of final
disposal of the suit and at this interlocutory stage of the
proceedings question of interventions of this Appellate Court
or to entertain an appeal or grant an interim order on the
basis of submission of the appellant that the agreement is
onerous does not and cannot arise.
15. In this context the observation of the House of Lords in
the case of White and Carter (Councils) Ltd. v. McGregor,
1962 AC 413, seems to be very apposite. The House of
Lords observed : "it may be unfortunate that the appellants
have saddled themselves with an unwanted contract
causing an apparent waste of time and money. No doubt
this aspect impressed the Court of Session, but there is no
equity which can assist the appellant. It is trite that equity
will not rewrite an improvident contract where there is no
disability on either side."
16. Admittedly there is no disability in the facts of this
matter under consideration, neither there is any pleading or
submission to that effect.
17. Turning attention on to Mr. Mitter's further contention
viz. issue of balance of convenience, it is to be noted that the
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Court shall lean in favour of introduction of the concept of
balance of convenience, but does not mean and imply that
the balance would be on one side and not in favour of the
other. There must be proper balance between the parties
and the balance cannot be an one-sided affair.
18. On the factual score as above, can it be said that the
agreement between the parties unmistakably depicts an
unfair advantage in favour of the respondent? The answer,
on the basis of the observations of the House of Lords,
cannot but be in the negative. A sum of 15 lacs has been
paid on account of the consideration money and as such,
question of reduction in price cannot be stated that to be
that onerous so as to prompt the Appellate Court to
intervene at the interlocutory stage of the proceedings.
19. Insofar as their issue of negative covenant is concerned,
the same cannot, in our view, be decided at this stage of the
proceedings.
20. As regards the forum convenience clause, be it noted
here that the agreement specifically provides the same and
as such it is too early to record our views in that regard."
154. In keeping with the above referred principles, one of the
simple questions to be adverted to at the threshold in the
present litigation is, whether the EBTL is likely to suffer
irreparable injury in case they are paid as per the USD exchange
rate prevailing on 30th December 2020.
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
155. The answer, in our view, has to be in the negative. The
arbitral tribunal, in the course of the arbitral proceedings, will be
looking into the issue as regards the enforceability of the Third
and the Fourth Amendment Agreements. The arbitral tribunal
would also be looking into the core issue, whether the AMNS
should continue to pay the USD exchange rate prevailing on 30 th
December 2020 on the principle of natural hedge. All larger
issues in this regard will have to be gone into by the arbitral
tribunal and the parties would ultimately be governed by the
final award that may be passed having regard to the nature of
the evidence that may be led by the parties before the arbitral
tribunal.
156. In such circumstances, we are of the view that the appeals
of both, the EBTL as well as the AMNS, on the issue of the Dollar
Tariff should fail.
157. We now proceed to consider the issue with respect to the
terminal draft and the channel depth. We propose to look into
this issue by posing a question to be answered by us, whether
there is anything to indicate that till the point of time the AMNS
filed the Section 9 application the EBTL was maintaining a
channel depth of 10 meters below the chart datum ? Is it the
case that all of a sudden the EBTL stopped maintaining the
channel depth, which put the AMNS in difficulty so far as the
berthing of the cape sized and mini cape sized vessels are
concerned ? Although a faint attempt was made by Mr.Thakore
to indicate that the EBTL was maintaining a channel depth of 10
meters below the chart datum based on some data available on
record, yet it is difficult for this Court to say anything in this
regard.
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158. We are of the view that the relief granted by the
Commercial Court by way of an interim measure in favour of the
AMNS directing the EBTL to provide and maintain a channel
depth of 10 meters below the chart datum for all times overlooks
the concept of balance of convenience. Whether there is an
obligation, express or implied, to maintain any specific depth in
the channel, would be a substantive issue that will have to be
looked into by the arbitral tribunal. However, by way of an
interim measure to direct the EBTL to keep dredging the channel
continuously is something which could not have been granted by
way of an interim measure. This relief in favour of the AMNS
may be to its benefit, but at the same time, the court should also
have considered the hardships that the EBTL may have to face
in complying with such interim measures. The Commercial
Court should have looked into this particular issue having
regard to the balance of convenience. It appears that the
Commercial Court got persuaded by some prima facie case made
out by the AMNS, but mere prima facie case by itself is not
sufficient to grant any relief by way of an interim measure in
exercise of power under Section 9 of the Arbitration Act. The
court must be satisfied that the comparative mischief, hardships
or the inconvenience which is likely to be caused to the applicant
by refusing the relief prayed for will be greater than that which is
likely to be caused to the opposite party by granting it. The court
owed a duty to consider the convenience of the EBTL as against
the convenience of the AMNS.
159. The remarkable observations of Lord Diplock in the case of
American Cyanamid Co. vs. Ethicon Ltd., 1975 AC 396: (1975) 2
WLR 316 : The object of the interlocutory injunction is to protect
the plaintiff against injury by violation of his right for which he
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
could not be adequately compensated in damages recoverable in
the action if the uncertainty were resolved in his favour at the
trial; but the plaintiff's need for such protection must be weighed
against the need of the defendant to be protected against injury
resulting from his having been prevented from exercising his
own legal rights for which he could not be adequately
compensated under the plaintiff's undertaking in damages if the
uncertainty were resolved in the defendant's favour at the trial.
The court must weigh one need against another and determine
where 'the balance of convenience lies'.
160. The relief which has been granted by the court below in
favour of the AMNS prima facie runs contrary to the finding
recorded by the court that 10 meters draft vessels are being
serviced. The relevant extract of the impugned order in this
regard reads thus :
"...With respect I am not able to concur with the arguments
of Ld. Sr. Counsel Mr. Khambata. First of all there cannot be
theoretical enforcement of a Contract. The obligation to
provide minimum 10 Meter draft at the berth 24X7 cannot
be interpreted to mean that even if for one minute the draft
is not 10 meter that would constitute breach of agreement.
Secondly, in absence of quantifiable data to show that
vessels of AMNS were not serviced by EBTL, especially in
light of data showing that over 140 ships of AMNS were
services by EBTL over couple of months, the argument of Ld.
Sr.Counsel sans merits. Thirdly as rightly argued and
pointed out by Ld. Sr. Counsel Mr. SIBAL no notice of breach
has been served by AMNS upon EBTL in this regards
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
alleging that EBTL has not been servicing the vessels of
AMNS...."
161. It may not be out of place to state at this stage that the
AMNS wants the EBTL to maintain a channel depth of 10 meters
at all times, but when the EBTL called upon the AMNS to pay
the additional cargo handling charges @ Rs.21/- per MT, it
doubted the intimation of the EBTL made to the AMNS that it
has increased the depth of the channel from the existing 10
meters below the chart datum to 12 meters. Prima facie, it
appears from the CHA, SLA and the NSP Certificate that the
EBTL undertook to maintain a minimum 10 meters terminal
draft at all times (including at low tide) and a higher draft
subject to the tidal variations.
162. Mr.Thakore is not right in his submission that the court
below has not issued any mandatory direction but has only
directed the parties to comply with the terms of the contract. On
what basis the AMNS says that the court below has only directed
the parties to comply with the terms of the contract ? It says so
on the basis of the Annexure-I of the CHA which provides as
follows:
"EBTL is increasing the depth of the channel from existing
10 meter below chart datum (CD) to 12 meter. After
increasing the depth of channel to 12 meter the cargo
handling charges for Raw Material will increase by Rs.21/-
per MT."
163. On the basis of the above, the AMNS asserts that when the
CHA was entered into, there was an assurance to maintain a
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
depth of 10 meters in the channel at all times. The AMNS
assumes that the CHA was entered into on the premise that a
minimum channel depth of 10 meters would be available and
maintained by the EBTL at all times. We are of the view that all
these issues will have to be gone into by the arbitral tribunal,
but at the same time, we are sure of one thing that the court
below should not have directed the EBTL to maintain a channel
depth of 10 meters below the chart datum at all times by way of
an interim measure so as to facilitate the cape sized and the
mini cape sized vessels to berth safely.
164. Mr.Joshi is right in his submission that all that the AMNS
prayed in their Section 9 application was that the channel depth
be maintained on the same level as on 10 th January 2021.
Mr.Joshi pointed out that the depth in the navigation channel as
on 10th January 2021 was not 10 meters below the chart datum.
In such circumstances, the Commercial Court could be said to
have exceeded its jurisdiction by directing the EBTL to maintain
a channel depth of 10 meters at all times.
165. The source of power of the court to make orders by way of
an interim measure is only in Section 9 of the Arbitration Act
and there is no independent power de hors that provision. The
power under Section 9, however, is not unbridled. It is subject to
certain limitations and restrictions, such as, first, it can be
exercised by the court to some extent and in the same manner
as it could for the purpose of in relation to any proceeding before
it, and secondly, the exercise of the power to make interim
arrangements should not militate against any power which
might be vested in an arbitral tribunal. The interim measures
which a court may be requested by a party to take are detailed in
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sub-clauses (a) to (e) of clause (ii) of Section 9. Similar measures
were given in paragraphs 1 to 4 of the Second Schedule of the
Repealed Act. The only change now is that an omnibus provision
in the shape of sub-clause (e) has now been added providing that
an application may be made to the court for such other interim
measures of protection as may appear to the court to be just and
convenient. The interim measures of protection which would also
include interim injunction should not be passed for the mere
asking. There are well-settled and well-defined principles and
norms as discussed above governing the grant of temporary
injunctions. Suffice it to say that the power conferred under
Section 9 of the Arbitration Act is to be exercised by the court
only in sparing circumstances. The interim directions can be
issued under Section 9 only for the purpose of arbitration
proceedings and with a view to protect the interest of the parties
which otherwise cannot be protected or safeguarded by the
arbitral tribunal. The power contemplated under Section 9 is not
intended to frustrate the arbitral proceedings.
166. In the aforesaid context, we may refer to a decision of the
Karnataka High Court in the case of Deccan Asian Infrastructure
(Mauritius) Inc. vs. BPL Communications Limited and others,
reported in (2005) 3 KarLJ 143, as contained in para 14 :
"14. As could be seen from the above provision of Section 9
which empowers the Court to grant interim measures for
preservation and several custody of the properties involved
in the arbitration proceedings the power of the Court under
Section 9 of the Act is not unbridled but it is subject to the
limitations and restrictions and the Court can exercise the
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discretion to the same extent and in the same manner as it
can for the purpose or in relation to any other proceedings
before it. Under Section 9 the Court has to exercise the
discretion in the interest of justice and take interim
measures to preserve the properties involved in the
arbitration proceedings. The interim measures are to protect
the properties and it must appear to the Court to be just and
convenient. That the words used 'just and convenient' do not
mean that the Court can pass any Order simply because the
Court thinks it convenient. Such Order should be passed
only to protect the properties involved in the matter. It
cannot be disputed that as an interim measure the Court
can also grant an Order of temporary injunction. But can an
Order be issued preventing the parties to an arbitration from
appearing before the Arbitral Tribunal? Further even in a
case where an Order of injunction is to be granted the
parties seeking the injunction should satisfy the Court that it
has got a prima facie case and that if the Order is refused it
would result in irreparable injury to the party and further
the applicant should show that the balance of convenience
lie in favour of granting the Order rather than refusing it.
Even though the powers to grant an interim measure under
the Section is wide it has to be exercised in the spirit of the
underlying principles enunciated in the section."
167. We are of the view that we should refrain from discussing
the various issues at length any further as any discussion in
details may cause prejudice to either of the parties before the
arbitral tribunal.
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168. One more issue was debated before us as regards
restricting the operation of the order passed by the Commercial
Court providing interim measures in exercise of powers under
Section 9 of the Arbitration Act.
169. In the case on hand, the Commercial Court thought fit to
discuss all the issues threadbare, but at the end of it, restricted
the relief granted in favour of the parties from its operation for a
period of three months or until the arbitral tribunal would pass
an appropriate order under Section 17 of the Act, whichever is
earlier.
170. Mr.Joshi, the learned senior counsel appearing for the
EBTL, submitted that having regard to the legislative intent, the
endeavour on the part of the court should be to ensure that the
process under the Arbitration Act is more user friendly, cost
effective and lead to its judicious disposal of the cases. This is
apparent from the Statement of Object and Reasons of the 2015
Amendment to the Arbitration Act and the decision of the
Supreme Court in Union of India vs. U.P. State Bridge
Corporation Limited, (2015) 2 SCC 52. Mr.Joshi appears to be
right in his submission that the intent behind Section 9 of the
Arbitration Act is not to turn back the clock and require a matter
already agitated before the court under Section 9 once again at
the end of the arbitral tribunal under Section 17 of the Act. This
has been expressly held by the Supreme Court in its judgment
dated 14th September 2021 arising out of this very litigation
between the parties (ArcelorMittal Nippon Steel India Limited vs.
Essar Bulk Terminal Limited, 2021 SCC OnLine SC 718).
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
171. We are also of the view that if the Commercial Court
thought fit to look into the issues raised by the parties
threadbare and has delivered an exhaustive judgment going to
the extent of even determining the rights of the parties in
accordance with the terms of the agreement on record, it should
not have restricted the operation of its order.
172. In the aforesaid context, we may refer to a Division Bench
decision of this High Court in the case of Kiritkumar Futarmal
Jain vs. Valencia Corporation, reported in (2019) 3 GLH 667,
wherein the court observed as under :
"61. It, however, may be noted that section 9 of the
Arbitration Act does not limit the operation of any order
passed by the court granting any relief thereunder by way
of an interim measure till the constitution of the arbitral
tribunal. The order passed by a court under section 9 of the
Arbitration Act would continue to remain in force till the
arbitral proceedings come to an end. In this regard it may be
apposite to cite with agreement the decision of the Andhra
Pradesh High Court in the case of Velugubanti Hari Babu v.
Parvathini Narasinmha Rao (supra), the relevant part
whereof has been extracted hereunder :
"34. As regards the submission that the interim order
granted by the Civil Court would automatically come
to an end once an arbitrator is appointed and
thereafter the party has to seek interim relief before
the arbitrator, we find the same without any merit. In
Sundaram Finance Ltd., (1999) 2 SCC 479, the
Supreme Court held at para-13 as under:
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"Under the 1996 Act the Court can pass interim
orders under Section 9. Arbitral proceedings, as
we have seen, commence only when the request
to refer the dispute is received by the respondent
as per Section 21 of the Act. The material words
occurring in Section 9 are "before or during the
arbitral proceedings". This clearly contemplates
two stages when the Court can pass interim
orders, i.e., during the arbitral proceedings or
before the arbitral proceeedings...."
35. The language of Section 9(2) of the Act does not
limit the operation of interim measure till appointment
of arbitrator only. On the contrary, a party can seek
interim measure at three stages, viz., before, during
the pendency of arbitral proceedings and after passing
of the award, but before it is enforced under Section
36 of the Act. The fact that a party can approach the
Court even during the pendency of the arbitral
proceedings and seek interim measure, clearly shows
that the legislature clearly intended to empower the
court to grant interim measure to last till the arbitral
proceedings conclude and an award is passed. As
noted above, the Court is empowered to grant such
measures even after an award is passed, but before it
is enforced.""
173. In the above referred judgment, this Court proceeded to
observe further in para 64 as under :
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"64. In the considered opinion of this court, once the
jurisdiction of the court is invoked under section 9 of the
Arbitration Act for interim measures as contemplated
therein, either before or during the pendency of arbitral
proceedings or at any time after the making of arbitral
award but before it is enforced in accordance with section
36 of that Act and such remedy is exhausted, similar interim
measures cannot be claimed before the arbitral tribunal
under sub-section (2) of section 17 of the Arbitration Act,
inasmuch as, it would give rise to a situation where there
would simultaneously be two orders in existence in respect
of the same cause of action, one passed by the court and the
other passed by the arbitral tribunal, which order is also
required to be treated as an order of the court for all
purposes, which could not have been the intention of the
legislature. The second question, therefore, is also required
to be answered in favour of the respondents and against the
petitioner."
174. Thus, this Court took the view that once the jurisdiction of
the court is invoked under Section 9 of the Arbitration Act for
interim measures either before or during the pendency of the
arbitral proceedings and such remedy is exhausted, similar
interim measures cannot be claimed before the arbitral tribunal
under sub-section (2) of Section 17 of the Arbitration Act as the
same may give rise to a situation where there would be
simultaneously two orders in existence in respect of the same
cause of action; one, that may be passed by the court, and
another, that may be passed by the arbitral tribunal. We are
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informed that as on date the parties have filed their respective
Section 17 applications before the arbitral tribunal. We do not
intend to say anything further in this regard. It is for the arbitral
tribunal to look into such applications and decide the same in
accordance with law.
175. We should not be understood to have laid down as an
absolute proposition of law that in any circumstances the relief
that may be granted by the court under Section 9 of the
Arbitration Act cannot be limited from its operation. What we are
trying to convey is that it would all depend upon the nature of
the relief granted by the court. In a given case, the relief granted
may be of such a type that the court may be justified in saying
that such relief shall operate for a particular period of time or till
the arbitral tribunal decides the Section 17 application. However,
once an exhaustive adjudication is undertaken by the court on
all aspects of the matter, then it would be unreasonable, or
rather, futile to restrict the reliefs from their operations.
176. In the result, the First Appeal No.3040 of 2021 is partly
allowed. The order passed by the Commercial Court directing the
appellant - EBTL to maintain a channel depth of 10 meters at all
times is hereby quashed and set aside. The other three appeals
should fail and are hereby dismissed. The connected Civil
Applications stand disposed of.
(J. B. PARDIWALA, J.)
(NIRAL R. MEHTA, J.)
/MOINUDDIN
C/FA/3040/2021 CAV JUDGMENT DATED: 03/02/2022
After the judgment was pronounced, Mr.Pahwa, the
learned senior counsel appearing for the AMNS, made a fervent
request that the EBTL may be asked to continue to abide by the
direction issued by the Commercial Court of maintaining a
minimum depth of 10 meters in the channel for 24x7, as the
AMNS would like to carry the matter further before the higher
forum.
For the reasons recorded in the judgment, we decline the
above request.
(J. B. PARDIWALA, J.)
(NIRAL R. MEHTA, J.)
/MOINUDDIN
