Arbitration - Injunction - Petitioners/ABG sought for an order of injunction restraining 1st Respondent /SCI from invoking and encashing two Bank Guarantees as subsequently extended - Hence, this Application - Held, Petitioners sought an extension of delivery dates - However SCI made it clear that SCI in terms rejected ABG's application for an extended delivery date - There were also disagreements between ABG and ZF Marine in regard to financial matters - SCI was in no way concerned with these - SCI made it clear that it was not agreeable to revised delivery dates proposed by ABG and that any delay in delivery over and contractual delivery dates would be dealt in line with terms and conditions of Ship Building Contract - SCI had consistently maintained that it was not agreeable to any extension(s) of contractual delivery date - ABG had to deliver vessel, and a further grace period of 150 days - ABG sought extensions of this delivery schedule - Extensions were refused and there was contemporaneous documentary evidence of this refusal - SCI could be said to have accepted an alternative vendor or supplier but not an extension or modification of delivery schedule - There were no special equities that arise in ABG's favour - Certainly there could be no equitable estoppel of kind claimed for an estoppel must at very least be unambiguous - Extended or renewed bank guarantees in question were unconditional - There was only a limited class of cases in which such an injunction could be granted, viz., where there was (i) fraud or (ii) irretrievable harm and injury likely to be caused to Applicant and where special equities could be said to arise - There could not be said to be any special equities in favour of ABG - There was no question of any irretrievable harm and injury to ABG either - All ABG's remedies in arbitration including if it succeeds in damages were open to it - Application dismissed
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION (L) NO. 1922 OF 2013
ABG Shipyard Ltd.
Versus
The Shipping Corporation of India Ltd.
CORAM: G. S. PATEL, J.
DATED : NOVEMBER 7, 2013.
Citation: 2013(6)ABR1148, 2014(3)ALLMR131, iv(2014)BC33(Bom.), 2014(1)BomCR350, 2014(3)MhLj670
1. This is a Petition under Section 9 of the Arbitration and
Conciliation Act, 1996. The Petitioners, ABG Shipyard Ltd
(“ABG”) seek an order of injunction restraining the 1st
Respondent, the Shipping Corporation of India (“SCI”), from
invoking and encashing the two Bank Guarantees dated 17th
February 2012 and 25th April 2012, as subsequently extended.
2. As Mr. Majumdar, Learned Counsel for SCI, had no
instructions to make any statement that would permit the matter to
be held over till the High Court re-opens on Monday, 11th
November 2013, I have heard Mr. Rajiv Kumar, Learned Senior
Counsel for ABG and Mr. Majumdar at some length.
3. On 31st January 2012, ABG and SCI entered into a shipbuilding
contract for the construction, sale and delivery by ABG to
SCI of an 80-ton Anchor Handling Tug cum Supply Vessel Hull
No.412. That contract contained various terms and conditions
including, inter alia, specifications of various components of the
vessel. Appended to the contract is a list of alternative
manufacturers of these components. This list was proposed by
ABG itself and was approved by SCI. There is no dispute that this
list forms part of the contract in question.
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4. ABG entered into a sub-contract (as permitted by the
principal agreement) with one ZF Marine for the supply of the
required propulsion system for the vessel in question. For a variety
of reasons, which, according to Mr. Kumar, were not in the control
of his clients, that contract with ZF Marine came to be terminated.
As a result, ABG was unable to meet the contractual delivery date
of 22nd May 2013 plus a further 150 days’ grace. It proposed
alternative suppliers for this propulsion system. It is Mr. Kumar’s
case that SCI accepted one such alternative supplier, viz., M/s.
Kamome Propeller Company, in substitution of the original
supplier M/s. ZF Marine. Mr. Kumar submits that this substitution
amounts to a change in the specifications of the contract between
ABG and SCI and that ABG is, therefore, entitled to an extension
of time and an extended delivery date under the express terms of
the contract itself. He drew my attention to an email dated 14th
September 2013 by which SCI is supposed to have accepted not
only the nomination of M/s. Kamome Propeller Company as
supplier but, by necessary implication, an extended delivery date of
the propulsion system.1 Mr. Kumar’s submission regarding this
deemed extension of the contract is based on the argument that the
manufacture and supply of the propulsion system could not
possibly take less than 9 to 11 months, and that both parties knew
this. Therefore, he submits, by accepting the substitution of the
supplier, SCI ipso facto accepted an extended date of delivery, and
the contract stood modified accordingly. There is, therefore, in Mr.
Kumar’s submission an equitable estoppel that arises against SCI,
1 Page 152 of the Petition Paper Book
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for, at the time when it could have terminated the contract, it chose
instead to reaffirm it.
5. Although I have been taken through several clauses of the
contract in support of these arguments, as also in reply thereto, it is
in my view, not necessary to consider these in detail for the present
purposes, having regard to the nature of the reliefs sought. Did SCI
at any point accept an extended date of delivery sufficient to raise
the equitable estoppel that Mr. Kumar pleads, which in turn would
give rise to special equities in favour of ABG warranting the grant of
the injunction sought? The answer must be in the negative. My
attention was drawn to a letter dated 13th June 2013 from ABG to
SCI.2 By this letter the Petitioners sought an extension of the
delivery dates. However, the reply dated 18th June 2013 from SCI
makes it clear that SCI in terms rejected ABG’s application for an
extended delivery date.3 Mr. Majumdar also drew my attention to a
revised delivery schedule proposed by the Petitioners sometime in
March 2013.4 This revision proposed a delivery date within the
extended time contractually permissible, i.e., 150 days from the
scheduled date of delivery of 22nd May 2013. That, too, was not
expressly accepted. Mr. Majumdar also pointed out that the
troubles between ABG and M/s. ZF Marine were essentially of
ABG’s making. It had initially placed an order or indent for a
propulsion system with air cooled thrusters rather than required
water cooled thrusters. This delayed delivery. In addition, there
2 Page 124 of the Petition Paper Book
3 Reply, page 227
4 Pages 139 and 140 of the Petition Paper Book
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were also disagreements between ABG and ZF Marine in regard to
financial matters. SCI was in no way concerned with these. It had,
on the contrary, made a 20% payment of the contract price to
ABG;5 if ABG failed to make adequate financial arrangements with
ZF Marine, that was entirely to ABG’s account. At a meeting on
22nd March 2013 these problems were noted.6 On 18th June 2013
SCI made it clear that it was not agreeable to revised delivery dates
proposed by ABG and that any “delay in delivery over and above
contractual delivery dates will be dealt in line with terms and
conditions of Ship Building Contract”.7 This was reiterated as late
as 11th September 2013 in the minutes of a meeting held on that
date,8 and reaffirmed in an email exchange on 22nd October 2013.9
By its Advocates’ notice dated 22nd October 2013, SCI rescinded
the ship-building contract.10 It recalled the amount already
advanced to ABG, the rupee equivalent of US$ 3,380,000, with
interest, under Article XIII, of the ship-building contract. That
clause allows 15 days for compliance, and that period ends today.
6. The result of this seems to be contrary to ABG’s
contentions. SCI has consistently maintained that it is not agreeable
to any extension(s) of contractual delivery date. ABG had till 22nd
May 2013 to deliver the vessel, and a further grace period of 150
5 In two instalments of US$ 1,690,000, on 16th March 2012 and 1st
June 2012
6 Page 225 of the Petition paper book
7 Reply, Page 227
8 Reply, Page 229
9 Reply, Page 230
10 Petition, Page 211
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days, i.e., till 19th October 2013. ABG sought extensions of this
delivery schedule. The extensions were refused, and there is
contemporaneous documentary evidence of this refusal. If ABG has
not been able to adhere to the contract schedule, prima-facie, it
seems to be of ABG’s own making; certainly there is nothing before
me to indicate that SCI was in any way at fault. It is not possible to
accept Mr. Kumar’s argument that merely because in its email of
13th September 2013 SCI accepted an alternative vendor, it must,
therefore and by necessary implication, be deemed to have agreed
to an extension of the delivery schedule. That is in the teeth of the
considerable documentation to the contrary. At best, SCI could be
said to have accepted an alternative vendor or supplier, but not an
extension or modification of the delivery schedule. There is no
ambiguity about SCI’s refusals at all. In addition, the contract has
stringent requirements regarding amendment and modification.
These cannot be bypassed by implication or imputation. It is not, in
my view, possible or even permissible to read into the contract an
implicit extension of a contractual term of delivery when there is on
record an explicit and unambiguous negation of it.
7. In my view there are no special equities that arise in ABG’s
favour. Certainly there can be no equitable estoppel of the kind
claimed by Mr. Kumar, for an estoppel must at the very least be
unambiguous.
8. ABG’s has its remedies in arbitration. It is difficult to see
how those remedies would be prejudiced if the present injunctive
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reliefs are refused. The extended or renewed bank guarantees in
question are unconditional.11 The law relating to bank guarantees is
too well-settled to warrant further discussion.12 Mr. Majumdar
relies on the Supreme Court decision in Himadri Chemical
Industries Ltd v Coal Tar Refining Co13 to emphasise that there is
only a limited class of cases in which such an injunction can be
granted, viz., where there is (i) fraud or (ii) irretrievable harm and
injury likely to be caused to the applicant, and where special
equities can be said to arise. As I have already noted, in the facts of
this case, I do not see how there can be said to be any special
equities in favour of ABG. There is no question of any irretrievable
harm and injury to ABG either. The only such harm is financial,
and here, too, the law is well-settled, that mere financial hardship is
not “irretrievable harm or injury”. All ABG’s remedies in
arbitration, including, if it succeeds, in damages, are open to it. As
to the question of fraud, Mr. Kumar stated in fairness that although
there is some pleading to that effect, the present application is not
based on any such please.
9. It is not, in my view, possible to grant the reliefs sought by
the Petitioners. The application is rejected. Mr. Kumar submits
that the petition itself be made simply returnable. I regret that
11 Pages 39 and 48 of the Petitioners’ additional compilation of
documents.
12 UP State Sugar Corporation v Sumac International Ltd, (1997) 1 SCC
568; Svenska Handelsbanken v M/s Indian Charge Chrome, (1994) 1
SCC 502; BSES Ltd (now Reliance Energy Ltd) v Fenner India Ltd,
(2006) 2 SCC 728; Federal Bank Ltd v V.M. Jog Engineering Ltd,
(2001) 1 SCC 663;
13 (2007) 8 SCC 110
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is now not possible as I have heard parties at length. Nothing
survives in the petition and it is, accordingly, dismissed. There will
be no order as to costs.
(G. S. PATEL, J.)
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