Saipem S. P. A. v. Jindal Drilling and Industries Ltd. & another
2003-02-21
H.L.GOKHALE, S.J.VAZIFDAR
body2003
DigiLaw.ai
Judgment H. L. GOKHALE, J. ( 1 ) THE first of these two appeals under the letters patent seeks to challenge the order of a learned Single Judge of this Court dated 10th December, 2002 declining the mandatory interim injunction sought by the plaintiff-appellant herein. The appellant in Appeal No. 1155 of 2002 is an Italian Company which claims to be in sole possession and control of a jack-up Rig capable of drilling exploratory/developmental off-shore wells for oil and gas. It has contracted with respondent No. 1 which is an Indian company to make the rig available to it for a certain duration as per the terms and conditions of the contract between the two. Respondent No. 1 has in turn entered into a contract with respondent No. 2 Oil and Natural Gas Commission to make that rig available to it and that contract also provides for the period of duration and the terms and conditions between two of them. It is the case of the appellant that when the two contracts are read together, the contracted period gets over on 12th January, 2003 and, therefore, it has filed the suit for the mandatory orders and therein prayed for mandatory interim injunction for redelivery of the rig. ( 2 ) TO put it shortly, the case of the appellant is that these two contracts are what are known as back to back contracts and on a joint reading thereof, the period of utilization gets over on 12th January, 2003. It is its case that breaches Of the contract, if any, on the part of the appellant are waived by the respondents by acceptance of the performance of the contract even after the alleged breaches were noted and that too without any demur and, therefore, the respondents, at the highest, would be eligible to claim damages, but cannot unilaterally extend the period for performance of the contract. They press into service the principle of estoppel by conduct and section 55 of The Indian contract Act, 1872 (for short, "the said Act" ). ( 3 ) AS against this, the case of the respondents is that these two contracts are inter-dependent yet independent contracts and when read that way the period of contract is not over and the rig has to be made available to cover the period when the rig was not available for utilization.
( 3 ) AS against this, the case of the respondents is that these two contracts are inter-dependent yet independent contracts and when read that way the period of contract is not over and the rig has to be made available to cover the period when the rig was not available for utilization. The respondents and particularly the 2nd respondent O. N. G. C. denies that there was any waiver of the breaches on its part. On the other hand, they allege that the appellant, apart from being totally dishonest, have not approached the Court with clean hands. It is the case of O. N. G. C. that it has already suffered an immense damage but it does not want to add to it by permitting the rig to move out of indian waters and in its view the respondents are entitled to insist on continuation of the contract. In their view, it is section 39 of the Contract Act which governs the dispute. That apart they submit that in the present matter damages cannot constitute an adequate relief since apart from other factors it is just not possible to calculate the likely loss to O. N. G. C. and, therefore, the compensation. ( 4 ) THE second out of these appeals is filed by Jindal Drilling and Industries ltd. Saipem S. P. A. and O. N. G. C. are joined as respondents to this appeal. This appeal is filed for a limited purpose to expunge some of the remarks of the learned Single Judge from the very order. Since both these appeals arise from the same order, they have been heard together and are being decided together. ( 5 ) AT the time when the Notice of Motion in the pending suit was heard before the learned Single Judge, the matter had been moved before him for ad interim orders. Affidavit-in-reply to the Notice of Motion was filed by both the respondents. The appellants herein had also filed their rejoinder. The matter was, in fact, heard at good length as recorded by the learned Judge in his order itself. The learned Judge, therefore, did not restrict himself to passing an ad interim order but preferred to dispose of the Motion itself, though as recorded by him the Counsel for the respondents submitted that they were addressing the Court only to oppose the ad interim order.
The learned Judge, therefore, did not restrict himself to passing an ad interim order but preferred to dispose of the Motion itself, though as recorded by him the Counsel for the respondents submitted that they were addressing the Court only to oppose the ad interim order. In this appeal also, a motion has been taken out for interim prayers. Apart from the affidavit in support, detailed affidavits in reply have been filed on behalf of both the respondents and rejoinders have also been filed thereto. Compilation of documents and short supporting propositions with facts and dates have been filed on behalf of the appellants as well as on behalf of the respondents. Their counsel have also been heard at length. All of them have made a statement that all the necessary material has been placed before the Court and now, with this order, the motion as well as the appeal therefrom should be deemed to have been fully considered. For the sake of convenience, we will refer the parties by their short names. Thus, the appellant herein in the first of the two appeals will be referred to as "saipem S. P. A. " respondent No. 1 as "jindal" and respondent No. 2 as "o. N. G. C. ". Similarly, out of the two principal agreements, the one dated 22/12/1999 between Jindal and Saipem S. P. A. will be referred to as the "jindal Agreement" and the agreement dated 10th november, 2000 between Jindal and O. N. G. C. will be referred to as the "o. N. G. C. agreement". Factual Background ( 6 ) TO begin with, we will refer to the factual background, O. N. G. C. had floated a tender for the mobilisation of an appropriate rig and Jindal was held to be eligible therefore and was issued the letter of acceptance on 12/11/1999. On 22/12/1999, Jindal entered into a contract with saipem S. P. A. of Italy for making available the requisite rig. Much prior theretoi. e. on 12/05/1999, Saipem Portugal, who are the owners of Jack-up Rig perro Negro 3, had authorised Saipem S. P. A. of Milan, Italy to bid in the commercial proposals either through themselves or a company of their choice. The contracts between O. N. G. C. and Jindal was executed on 10/11/2000.
Much prior theretoi. e. on 12/05/1999, Saipem Portugal, who are the owners of Jack-up Rig perro Negro 3, had authorised Saipem S. P. A. of Milan, Italy to bid in the commercial proposals either through themselves or a company of their choice. The contracts between O. N. G. C. and Jindal was executed on 10/11/2000. As stated earlier, the two contracts provided for the duration of the term of each of the contracts apart from containing various terms and conditions. We will refer to these agreements and some of their specific provisions later on. However, for the time being, it is relevant to note that the provision for the duration of the contract made in the two agreements are somewhat similar in certain respect and yet different in some material particulars which is why the interpretation of these agreement and their clauses would be quite relevant. ( 7 ) THE Jindal agreement provided that the rig was to be mobilised within 6 months and accordingly it was deployed by end of June 2000 in the Bombay high area. After the rig was utilized for sometime, it so happened that it met with an accident on 19th February, 2001. The bracings on all the three legs of the rig were revealed to have bent leading to what is known as punch through situation. On 20/02/2001, Jindal brought this accident to the notice of Saipem S. P. A. whereon Saipem S. P. A. immediately responded that repairs will be undertaken. Jindal brought this development to the notice of O. N. G. C. also. O. N. G. C. was also informed that for these repairs the rig will have to be moved out. By its letter dated 27/02/2001, Jindal informed O. N. G. C. that the repairs were such, for which facilities were not available in India and the rig will have to be taken to the shipyard at Sharjah for its repairs. Jindal also stated in that letter that the required repairs will need about two months time and that the rig was expected to be back to re-commence the operations by end of April 2001. Hence, for removing the rig outside Indian water and for custom clearances, O. N. G. C. gave the necessary certificate. The rig was taken to Sharjah/dubai by 25/03/2001.
Hence, for removing the rig outside Indian water and for custom clearances, O. N. G. C. gave the necessary certificate. The rig was taken to Sharjah/dubai by 25/03/2001. M/s. Noble Denton, which were entrusted with the repairs work, informed Jindal by its letter dated 7/04/2001 that the rig would be ready for final positioning only sometime after 20/05/2001. Jindal in turn wrote to O. N. G. C. by its letter dated 1 2/04/2001 that the repairs were expected to be completed by second week of may 2001 and the rig can arrive at in India only by first week of June 2001, by which time monsoon season will start on the West Coast. Saipem's subsequent recording letter dated 23rd October, 2002 is annexed at Exhibit "f" to the affidavit of Mr. Singhvi of Jindal dated 28th October, 2002 and in para 4 thereof it is stated that repair could be completed only by end of May 2001. It was, therefore, stated by it that the Rig could be deployed for O. N. G. C. operations only after the monsoon. O. N. G. C. wrote back to Jindal on 17th May, 2001. It recorded what was stated by Jindal in its letter dated 12/04/2001. It further recorded that in the earlier Jindal letter dated 27/02/2001 Jindal had intimated that the repairs will be over by end of April 2001 and then the operations will re-commence. This delay was affecting the scheduled programme of O. N. G. C. The letter of O. N. G. C. therefore stated that o. N. G. C. may add the time lost in repairs in the primary term of the contract. In the last part of the letter O. N. G. C. once again advised Jindal to see to it that the rig was deployed at the first available window during the monsoon or at-least immediately post monsoon without any loss of time. ( 8 ) THE rig did not return after the expected period of repairs. In its letter dated 21/08/2001, O. N. G. C. indicated its suspicion that perhaps the rig was deployed elsewhere. It sought information about its whereabouts from Jindal by stating "it is observed that you are not aware of any information regarding status of repair and its deployment after repair even during the validity of the existing firm contract signed by M/s. Jindal with O. N. G. C. ".
It sought information about its whereabouts from Jindal by stating "it is observed that you are not aware of any information regarding status of repair and its deployment after repair even during the validity of the existing firm contract signed by M/s. Jindal with O. N. G. C. ". A clear cut information was not made available by Jindal. O. N. G. C. on its own sources and from internet found that the rig was deployed in Persian Gulf of iran and was drilling for a company named "agip E and P". It recorded this in a letter addressed to Jindal on 7/09/2001. Jindal wrote back on 1 4/09/2001 that it had asked for information from Saipem but Jindal had not taken any contract for the rig outside India. Jindal thereafter wrote to o. N. G. C. on 24/09/2001 informing that rig was expected to be redeployed in India sometime around the end of October 2001 after necessary repairs. It stated that the period of break down/repairs shall be dealt with as per Clause 1. 3 (c) of its contract with O. N. G. C. Thereafter it wrote on 1 9/10/2001 that the rig will be available around third week of November, 2001. The rig finally arrived in India on 26/12/2001 and was deployed only on 5th January, 2002. O. N. G. C. thereafter extended the contract under Clause 1. 3 (a) of its contract with Jindal twice every time by three months, first from 13th June, 2002 and then from 13th September, 2002. By its letter dated 13th June, 2002, O. N. G. C. recorded that in the meanwhile the rig had been deployed in Iran though it was stated to have been taken for repairs. It, therefore, took the stand that Clause 1. 3 (c) was not applicable and it may extend the term of the contract for the period of absence of the rig in addition to exercising the option available under Clause 1. 3 (a), of the contract. ( 9 ) ACCORDING to Saipem, as per the agreement it had entered into with jindal on 22/12/1999 as read with the Jindal's agreement with o. N. G. C. the only extension permissible was by 3 months each at a time with 30 more days for repairs under Clause 1. 3 (c) of the O. N. G. C. agreement.
( 9 ) ACCORDING to Saipem, as per the agreement it had entered into with jindal on 22/12/1999 as read with the Jindal's agreement with o. N. G. C. the only extension permissible was by 3 months each at a time with 30 more days for repairs under Clause 1. 3 (c) of the O. N. G. C. agreement. Thus, according to it, the last date until which the rig could be deployed came to 12th January, 2003. As against that, O. N. G. C. took the stand that Clause 1. 3 (c) between O. N. G. C. and Jindal could not govern the situation. Jindal accepted this position and wrote to Saipem on 6th august, 2002 that it reserved the right of furtherextension of the term for the period of absence in terms of Clause 2. 1 of the Jindal Saipem agreement. O. N. G. C. while extending the term of contract on the second occasion, by its letter dated 28th August, 2002 once again made it clear that it was reserving the right to extend the contract for period of absence of rig for repairs. It accordingly gave a notice dated 9th December, 2002 to Jindal extending the contract by 9 months and 5 days from 13th December, 2002. Jindal accordingly gave a notice to Saipem on 11th December, 2002, which stated as follows:- ". . . . . ACCORDINGLY we hereby give notice to you under Clause 2. 1 of the above referred agreement read with the other applicable provisions of law that, we hereby exercise out option to add the unpaid time to the term of the agreement in Clause 1. 3 at the same rates, terms and conditions for period of 9 months and five days w. e. f. 13-12-2002 for the period of absence of rig Perro-Negro 3. " ( 10 ) ACCORDING to Saipem, the first extension, admittedly, was for three months from 13th June, 2002 and second from 13th September, 2002. Therefore, if the period of 30 days of repairs under the O. N. G. C. contract was added the contract should end on 12th January, 2003.
" ( 10 ) ACCORDING to Saipem, the first extension, admittedly, was for three months from 13th June, 2002 and second from 13th September, 2002. Therefore, if the period of 30 days of repairs under the O. N. G. C. contract was added the contract should end on 12th January, 2003. Jindal had, in the meanwhile, explained its stand by its letter dated 16th September, 2002 clearly stating that in the event O. N. G. C. seeks any extension for period of the absence of the rig, it will be duty bound to agree and that under the grounds of commercial expediency cannot lead itself to be in a position of committing any breach of law. In view of this stand being taken by Jindal, Saipem filed a suit in this Court bearing Suit No. 3389 of 2002 affirmed on 16th October, 2002 and took out a Notice of Motion for an interim mandatory order that the rig be re-delivered to Saipem. As stated earlier, the motion was opposed by filing the reply by both the respondents. Rejoinders were also filed thereto. In the suit, apart from clarifying its stand with respect to the two agreements, saipem submitted that detention of the rig was illegal beyond 12th January, 2003. It further submitted that Saipem entered into a contract with "agip E and p" for the subsequent period and it will be put to serious losses. It then submitted that under its contract with Jindal there was also an obligation for rendering personnel services and the same could not be forced on Saipem. The rigs were otherwise also available and, therefore, the respondents should make their appropriate arrangement for the same. It was submitted before the learned Single Judge that at the highest the plaintiffs would be liable to make up the difference between the contract rate and the market rate at the end of the year 2001, which they computed at U. S. $ 19,80,000/ -. They showed their readiness to secure that amount for release of the rig. The motion having been rejected, this appeal has been filed. The relevant provisions of Jindal Agreement with Saipem S. P. A. ( 11 ) IN this connection, it is necessary to refer to the relevant provisions of the two agreements. The agreement dated 22/12/1999 entered into between Jindal and Saipem refers to Jindal as "company" and "saipem" as "contractor".
The motion having been rejected, this appeal has been filed. The relevant provisions of Jindal Agreement with Saipem S. P. A. ( 11 ) IN this connection, it is necessary to refer to the relevant provisions of the two agreements. The agreement dated 22/12/1999 entered into between Jindal and Saipem refers to Jindal as "company" and "saipem" as "contractor". The agreement records that whereas the company has participated in the O. N. G. C. Tender for charter-hire of Jack-up Rig Perro Negro 3 and has been awarded the contract, and whereas the contractor is in possession and control of such a rig which is 300 ft. independent Leg Cantilever jackup Rig capable to drill to a depth of 25,000 feet, therefore the agreement was entered into between the parties. In the definitions clause of the agreement, the word "term" is defined to mean two years with option to O. N. G. C. for further two extensions of three months. Commencement date is defined as the point of time the Jack up Rig reaches the first drilling location nominated by O. N. G. C. and is pinned down. The term "contract" is defined to mean the contract awarded by O. N. G. C. to the company and subsequent agreement to be entered into by and between the company and O. N. G. C. in accordance with the O. N. G. C. tender documents. Duration of the contract is laid down in Clause 2, which is the most relevant clause and it reads as follows:- 2. Duration "2. 1 The Contractor and the company agree to utilize the Drilling Unit for an initial primary term of two years commencing from commencement date in Line with the contract. This agreement shall stand extended on same rates, terms and conditions in the event O. N. G. C. extends the term of its contract. The company will give 30 days advance notice before expiry of primary term and extension thereof, of its intention to do so. The term shall stand automatically extended under the same rates, terms and conditions, to cover the time necessary to complete or abandon, to the satisfaction of O. N. G. C. , the well in progress at the end of the primary term of contract or extensions, thereof, if any.
The term shall stand automatically extended under the same rates, terms and conditions, to cover the time necessary to complete or abandon, to the satisfaction of O. N. G. C. , the well in progress at the end of the primary term of contract or extensions, thereof, if any. In case the contract has not been extended by O. N. G. C. but O. N. G. C. and company opts for a new contract accepting the rates prevailing in India at that time for such operations, the contractor agrees to utilize the drilling Unit for such operations for such periods in case the rates are acceptable to the parties. The company shall have the option to terminate this agreement at any time during last 30 daysbefore the expiry of primary term of any extension thereof, if the last well being drilled is completed or abandoned prior to such expiry and in the option in the company another well cannot be drilled within the remaining term. "clauses 3, 4 and 5 are on mobilization, insurance and the responsibility for loss or damage to drilling unit. Clause 7 provides for termination in the event of force majeure conditions, lasting for more than 45 "days, such as for not limited to acts of God, War, Revolt, Riot, Fire, and Acts and Regulations of respective Governments. Clause 8 is on payment which provides that the company shall pay to the contractor the rates from the date of commencement for each day the company has been paid by O. N. G. C. except when the drilling unit is shut down due to requirement of rig certification/hull inspection/dry docking etc. for the rig and equipments. The rates are mentioned in exhibit A to the agreement. Clause 10 is on personnel, which provides that the contractor shall furnish at its cost adequately qualified and experienced, expert personnel. Clause 13 is on waiver, which provides that it is fully understood and agreed that none of the terms and conditions of this agreement shall be deemed waived by either party unless such waiver is executed in writing only by the authorized representative of such party. Clause 17 provides for arbitration if any dispute, difference or question shall arise between the parties concerning or arising out of this contract.
Clause 17 provides for arbitration if any dispute, difference or question shall arise between the parties concerning or arising out of this contract. At the end of this agreement, it is provided as follows:- "for other terms and conditions, not herein provided, the terms and conditions provided in the agreement to be entered into between company and O. N. G. C. for the utilization/of Jack-up rig "perro NEGRO 3" against Tender No. MRBC/dbg/mm/sp/rigs (GHJ/05/96 shall apply except for the commencement date which must place before 1/05/2000. "relevant provisions of O. N. G. C. agreement with Jindal ( 12 ) O. N. G. C. contract is much more detailed. In this contract, O. N. G. C. is described as company whereas Jindal is described as Contractor. Clause 1,3 of this contract provides for duration and it reads as follows:- "1. 3 DURATION ' (a) This agreement shall be initially for a period (Primary term) of two years from commencement date and the company shall have the right to extend the primary term of the agreement in two instalments not exceeding three months each, on the same rates, terms and conditions as set forth herein. (b) The agreement will be automatically extended under the same rates, terms and conditions to cover the time necessary to complete or abandon, to the satisfaction of company, the well in progress at the end of the term of the agreement. (c) Period of break down, dry dock time and hull inspection time of the drilling Unit unpaid by company may be added at the option of the company to the duration of the primary term or the extension thereof as the case may be which shall be limited to a period of 30 days from the contract period. (d) Company shall have the option to terminate this agreement at any time during last thirty (30) days before the expiry date if the last well being drilled is completed or abandoned prior to such expiry date and, in the opinion of the company, another well cannot be drilled within the remaining agreement period. "clause 3. 2 provides for mobilization. Clause 3. 6 is on deficiencies. Clause 3. 10 provides for performance and Clause 3. 11 is on performance bond. Clause 21. 1 makes a provision for conditions of force majeure and Clause 28 provides for arbitration. Clause 30.
"clause 3. 2 provides for mobilization. Clause 3. 6 is on deficiencies. Clause 3. 10 provides for performance and Clause 3. 11 is on performance bond. Clause 21. 1 makes a provision for conditions of force majeure and Clause 28 provides for arbitration. Clause 30. 1 contains a clause called as "entire Agreement" and it provides. that this agreement supersedes all prior agreements and commitments whether oral or in writing between the parties concerning the subject-matter. It further provides that the right of either party to require strict performance will not be affected by any previous waiver or course of dealing and neither this agreement nor any modification will be binding on a parry unless signed by an authorized representative of contractor and company. Submissions on behalf of Saipem S. P. A. : ( 13 ) TO begin with, Mr. Vahanvati, learned Senior Counsel appearing for saipem, raised three questions viz. (i) whether O. N. G. C. was entitled to insist on deployment of rig for a period of 9 months and 5 days with effect from 13th december, 2002 as per its letter 9th December, 2002? (ii) whether this action on its part was justified either under the contract or in law? (iii) Event if O. N. G. C. had any such right, was it entitled to exercise it in December, 2002 in the facts of the present case or was it prevented on the basis of estoppel by conduct? ( 14 ) MR. Vahanvati submitted that as far as the O. N. G. C. contract is concerned, it had only two clauses for extension and they were sub-clauses (a) and (c) of Clause 1. 3. Clause 1. 3 provided that the agreement shall be initially for a period of two years and O. N. G. C. will have a right to extend it by two instalments not exceeding three months each. This right had been exercised by O. N. G. C. initially on 7th June, 2002 and then on 28th August, 2002. Extending the period on the first occasion for 3 months from 13th June, 2002 and on the second occasion for 3 months from 13th September 2002. Under sub-clause (c) of Clause 1. 3, O. N. G. C. could ask for only an additional period of 30 days towards the period of break down, dry dock etc.
Extending the period on the first occasion for 3 months from 13th June, 2002 and on the second occasion for 3 months from 13th September 2002. Under sub-clause (c) of Clause 1. 3, O. N. G. C. could ask for only an additional period of 30 days towards the period of break down, dry dock etc. Thus, it could go only upto 12th January, 2003, and it could not insist upon Jindal that Jindal should extend its agreement with Saipem any time beyond. It was further submitted that it was impermissible for O. N. G. C. to extend its agreement with Jindal beyond this period of seven months. Therefore, Jindal could also not extend its contract with Saipem beyond that period. Clause 2. 1 of Jindal's agreement providing that it shall stand extended on the same rates, terms and conditions in the event O. N. G. C. extends the term of its contract will have to be construed as restricted to this extension of seven months only. The clause on unpaid time on account of break down being added as provided in the Jindal's agreement does not have any restricted period of 30 days as in the O. N. G. C. agreement. Such a period will have to be read into the Jindal agreement inasmuch as both of these were both back to back agreements. Mr. Vahanvati submitted that Jindal had no independent right to extend the contract with Saipem de hors O. N. G. C. In his submission, therefore, O. N. G. C. had no right in contract to enforce any such extension vis a vis through Jindal. ( 15 ) MR. Vahanvati secondly submitted that in any case there can not be any such unilateral extension of the contract by the respondents, particularly in the light of their conduct. He drew our attention to O. N. G. C's. letter dated 21/08/2001 which indicated that it suspected that the rig had been deployed elsewhere after repairs. By the time O. N. G. C. wrote its letter dated 7/09/2001 they clearly knew and recorded that the rig was deployed in Persian Gulf of Iran. O. N. G. C's. earlier letter dated 21/08/2001 had threatened to take remedial action in case satisfactory reply was not received, yet O. N. G. C. did not terminate the contract nor did it claim any damages from Jindal. Mr.
O. N. G. C's. earlier letter dated 21/08/2001 had threatened to take remedial action in case satisfactory reply was not received, yet O. N. G. C. did not terminate the contract nor did it claim any damages from Jindal. Mr. Vahanvati contended that Saipem brought back the rig to its prejudice since O. N. G. C. did not terminate the contract and affirmed it by its conduct inspite of the alleged breaches on the part of Saipem. Therefore, in his view, the respondents could not claim either extension of time or any damages. The respondents are estopped from doing so by their conduct. They ought to have elected at the earliest to repudiate the contract. Since that was not done, Saipem took it as waiver or its breaches, if any. Mr. Vahanvati relied upon a judgment of the English Court of Appeal in the case of (Panchaud Freres S. A. v. Establishments General Grain Company)', reported in 1970 (1) Lloyd's Law Reports page 53 wherein it has been held that waiver in legal sense takes place when a man with knowledge of a breach does an unequivocal act which shows that he has elected to affirm the contract as still existing instead of disaffirming it. In that matter, the Court held that it was a case of estoppel by conduct and observed as follows :- THE basis of it is that a man has so conducted himself that it would be unfair or unjust to allow him to depart from a particular state of affairs which another has taken to be settled or correct. "he referred to a subsequent judgment of Court of Appeal in the case of (Bremer handelsgesellschaft M. B. H, v. C. Machprang Jr.), reported in 1979 (1) Lloyd's law Reports page 221 wherein the propositions in the case of Panchaud Freres s. A. (supra) have been re-affirmed. ( 16 ) MR. Vahanvati then referred to two Indian judgments. First on the 1st part of section 55 of the Contract Act and second on the 3rd part thereof. The 1st part of section 55 reads as follows: - "effect of such failure when time is not essential.
( 16 ) MR. Vahanvati then referred to two Indian judgments. First on the 1st part of section 55 of the Contract Act and second on the 3rd part thereof. The 1st part of section 55 reads as follows: - "effect of such failure when time is not essential. If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure. "in the case (Anandram Mangturam and others v. Bholaram Tanumal), reported in A. I. R. 1946 Bombay page 1, a Division Bench of this Court held that under section 55, the promisee is given the option to avoid the contract where the promisor fails to perform the contract at the time fixed in the contract. It is open to the promisee not to exercise the option or to exercise the option at any time, but the promisee cannot by the mere fact of not exercising the option change or alter the date of performance fixed under the contract. The fact that the contract is not put an end to does not entail the further consequence that the time for the performance of the contract is automatically extended unilaterally. ( 17 ) THE 3rd part of section 55 of the Contract Act reads as follows: - "effect of acceptance of performance at time other than that agreed upon. If, in case of a contract voidable on account of the promisor's failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non- performance of the promise at the time agreed, unless at the time of such acceptance, he gives notice to the promisor of his intention to do so. "mr.
"mr. Vahanvati relied upon a judgment in the case of (Manni Lal Bishun Dayal v. Nihal Chand and another), reported in A. I. R. 1930 Oudh 417 wherein a division Bench held that where on failure on the part of the promisor to perform where the promisee does not avoid the contract but on the contrary, accepts its performance without giving proper notice at the time of accepting performance then the promisee cannot claim any damages for any loss sustained. Any belated assertion by him in this behalf is meaningless. Mr. Vahanvati, therefore, submitted that on the basis of the interpretation of the two agreements and on the basis of the law, as it stands, as also on the basis of the conduct of the respondents, they were not entitled to retain the rig beyond 12th January, 2003. As against that, Saipem was prepared to provide a security on an appropriate amount almost in the range of U. S. $ 19,80,000/- which should take care of the interest of the respondents. He further submitted that Saipem could not have brought back the rig during the monsoon period as that would have landed it into a risk. In the meanwhile, it utilized time available to it in avoiding any commercial loss for which it cannot be faulted. In his submission, in the present case, the appellant Saipem cannot be forced to run the rig by using its personnel. Thus, the respondents are getting a decree of specific performance without filing any suit. He, therefore, submitted that the interim mandatory injunction, as prayed, was just and necessary and the learned Single Judge has ignored this aspect but has decided the matter on the basis of conjectures and surmises. SUBMISSIONS ON BEHALF OF RESPONDENT NO. 1-JINDAL. ( 18 ) MR. Chidambaran, learned Senior Counsel, appearing for respondent no. 1-Jindal, firstly submitted that it is an established position in'law that unless there was an exceptionally strong prima facie case, normally no mandatory injunction is granted at an interlocutory stage. Besides, interim prayers in the present case were as good as the final prayers. He took us through the plaint filed by the appellant wherein prayer (a) seeks a declaration that the respondents herein are not entitled to retain the said rig beyond 12th January, 2002. Prayer (b) seeks an order to redeliver the said rig. Prayer (c) seeks certain documents.
He took us through the plaint filed by the appellant wherein prayer (a) seeks a declaration that the respondents herein are not entitled to retain the said rig beyond 12th January, 2002. Prayer (b) seeks an order to redeliver the said rig. Prayer (c) seeks certain documents. As far as the motion is concerned, prayer (a) (i) seeks the redelivery of the said rig with a view to saill away out of Indian territorial waters on and from 13th January, 2003 and prayer (a) (ii) seeks the documents as stated earlier. Mr. Chidambaran therefore submitted that granting these prayers would not leave anything for the final hearing. That apart, unless a prima facie case is made out, the courts do not normally grant any such mandatory order at an interlocutory stage. He referred to the leading judgment of the Apex Court in the case of (Dorab Cawasji Warden v. Coomi sorab Warden), 1990 (2) Bom. C. R. 614 : 1990 (2 ). S. C. C. 117. In para 16 of this judgment the Apex Court has laid down the following three tests while granting interlocutory mandatory injunction which are as follows:- " (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. " mr. Chidambaran referred to subsequent judgment of the Apex Court, wherein this proposition has been reiterated, namely (Hindustan Petroleum Corporation ltd. v. Sriman Narayan), 2002 (5) S. C. C. 760. He relied upon a judgment in the case of (Bank of Maharashtra v. Race Snipping and Transport Co. Put. Ltd.), 1995 (3) Bom. C. R. 612 : 1995 Bank. J. (S. C.)587 : 1995 (3) S. C. C. 257, wherein the Apex Court has deprecated the practice of granting main relief as the interim relief. ( 19 ) MR. Vahanvati had submitted that Saipem was ready to provide the security of US $ 19,80,000/- which should work as an adequate protection. Mr. Chidambaran submitted that in the instant case, the kind of rig that was mobilised was a scarce equipment. This has been clearly stated in the affidavit of Shri Sanghvi, Sr.
( 19 ) MR. Vahanvati had submitted that Saipem was ready to provide the security of US $ 19,80,000/- which should work as an adequate protection. Mr. Chidambaran submitted that in the instant case, the kind of rig that was mobilised was a scarce equipment. This has been clearly stated in the affidavit of Shri Sanghvi, Sr. Manager of Jindal dated 28th January, 2003 in paras 17 to 21. The mobilisation of the rig takes nearly 6 months. A 300 feet independent leg cantilever rig was required for the O. N. G. C. work. O. N. G. C. had also paid US $ 600,000 to Jindal for this mobilisation. This rig was having weight of 6500 tons. Apart from being scarce and heavy, it is an expensive equipment. Mr. Chidambaran pointed out that presently there are some 99 rigs of this type available world over, out of which 97 are already deployed. Thus it had a high rate of deployment at 98%. Although Jindal had its own explanation for whatever that had happened, it was exposed to a claim by o. N. G. C. on account of breaches committed by Saipem. Saipem was showing its willingness to provide a security of the aforesaid amount only by way of difference between the market rate of procruing such a rig and the rate at which the contract was entered into between the parties. This can work provided such other rigs were available, but according to Mr. Chidambaran, these rigs are not at all easily available. Besides, their mobilisation takes time. Presently this rig is engaged only in exploration. The loss suffered by O. N. G. C. would be much more because exploration work itself will go on for quite sometime. The exploration work has got postponed for a very long period because of the rig not becoming available. Extraction of oil depends on exploration and the oil and gas extraction would also therefore get postponed. All this is very difficult to compensate in terms of money. ( 20 ) IN continuation to the above submission, Mr. Chidambaran submitted that the balance of convenience was entirely in favour of the respondents. It was in public interest also that the rig continued to be deployed in Indian waters.
All this is very difficult to compensate in terms of money. ( 20 ) IN continuation to the above submission, Mr. Chidambaran submitted that the balance of convenience was entirely in favour of the respondents. It was in public interest also that the rig continued to be deployed in Indian waters. Once it went out of India, it would be difficult to find suitable replacement and the injury caused to the interest of O. N. G. C. and Jindal would be irreparable and cannot be compensated in terms of money. The drilling operations would get affected. He submitted that the learned Single Judge had given cogent reasons and as held by the Apex Court in (Wander Ltd. v. Antox india P. Ltd.), 1990 (Supp.) S. C. C. 727 in para 14 thereof, "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". ( 21 ) MR. Chidambaran then pointed out that the appellant-Saipem had not come to the Court with clean hands. It tried totake disadvantage of the accident suffered by the rig. Initially it attempted to plead force majeure. Then it attempted to amend the Jindal agreement. Then Saipem attempted to question the validity of the extension by pleading that the primary term had expired on 14th May, 2002. He submitted that the attempts on the part of sipem to wriggle out started in March 2001 itself as disclosed from the record when the repairs to the Rig were underway. In his submission, this conduct should disentitle them from any discretionary order. ( 22 ) WITH respect to the submission on waiver, Mr. Chidambaran pointed out that in both these two agreements, there were specific clauses providing as to how the waiver is to be arrived at. As far as Jindal agreement is concerned, clause 13 clearly stated that none of the terms and conditions of the agreement will be deemed to be waived by either party unless waiver is executed in writing.
Chidambaran pointed out that in both these two agreements, there were specific clauses providing as to how the waiver is to be arrived at. As far as Jindal agreement is concerned, clause 13 clearly stated that none of the terms and conditions of the agreement will be deemed to be waived by either party unless waiver is executed in writing. Similarly, there is an agreement clause in the O. N. G. C. agreement which in clear terms stated that no modification of the agreement will be binding on the parties unless signed by an authorised representative of both the parties, and that the right of other party of required strict performance will not be affected by any previous waiver or course of dealing. ( 23 ) WITH respect to the submission based on the third part of section 55 of the Contract Act, namely that the respondents had accepted performance of the contract at the time other than the agreed upon and therefore they would not be entitled to damages, Mr. Chidambaran submitted that there was no previty of contract between Sipem and ONGC. ONGC had not made any representation to Sipem condoning its breaches. This section would not therefore have any application. On the other hand, in the event of a breach of contract, a non-defaulting party had a choice, it can either sue for damages or treat the contract as still subsisting and require performance thereof. He relied upon a passage on "discharge at option or the injured party" from chapter 15 of Anson on Law of Contract, 27th Edition, wherein the celebrated author has commented that the breach does not, of itself, effect a discharge. An acceptance of a requdidation must be clear and unequivocal. Once option is exercised to either keep the contract on foot or terminate it, the decision is not revocable. He relied upon a judgment of Privy Council in (Florrie Edridge v. Rustomji Danjibhoy Sethna), A. I. R. 1933 P. C. 233, to the effect that repudiation by one party does not end obligation. Unless the other party elects to treat it as such, the other party is still entitled to insist on performance of the contract. He relied upon another judgment of a Division Bench of this Court in the case of (Ratanlalv. Brijmohan), A. I. R. 1931 Bombay 386.
Unless the other party elects to treat it as such, the other party is still entitled to insist on performance of the contract. He relied upon another judgment of a Division Bench of this Court in the case of (Ratanlalv. Brijmohan), A. I. R. 1931 Bombay 386. The Division bench held in that matter relying on section 39 of the Contract Act that where a broker was instructed to purchase a certain quantity of merchandise and the transaction was to remain open till a particular date and the purchaser repudiated the transaction before that date, it was open to the broker either to refuse to accept the repudiation and wait till the due date keeping the transaction open and sue for damages on the basis of difference in the price or to accept the repudiation and recover damages on the date of repudiation. In the submission of Mr. Chidambaran, section 39 of the Contract Act would govern this situation. Section 39 reads as follows: "39. Effect of refusal of party to perform promise wholly. When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance. "mr. Chidambaran submitted that in the present case, ONGC and Jindal have opted to treat the contract as still subsisting and called upon Sipem to perform the contract. Pursuant to that demand, Sipem had brought back the rig, redeployed it and the contract was being performed. When the contract was being performed, there was no question of interfering in its performance and allowing Sipem to take the rig back. ( 24 ) ON the interpretation of the two agreements, Mr. Chidambaran submitted that under the agreement between Jindal and Sipem, Jindal was entitled to add the unpaid time on account of break down. This was permissible to be added to the term of the agreement at the option of Jindal as the agreement specifically provides. There is no limitation of any period for this addition to be made. ONGC called upon Jindal to add the lost time. That was a matter between ONGC and Jindal.
This was permissible to be added to the term of the agreement at the option of Jindal as the agreement specifically provides. There is no limitation of any period for this addition to be made. ONGC called upon Jindal to add the lost time. That was a matter between ONGC and Jindal. The fact that under their agreement, only a period of 30 days was provided to be added for break down, does not dilute the responsibility of Jindal to provide the rig for the primary term of 2 years as per Clause 1. 3 (a) of the agreement between ONGC and Jindal. ONGC having made such demand of Jindal and Jindal having accepted the same, Jindal had called upon Sipem to add the unpaid time on account of break down. That was fully permissible under Clause 2. 1 of the Jindal-Saipem agreement. He submitted that these two clauses though inter-dependent, were separate clauses and they will have to be read as they were. The language of Clause 2. 1 was clear and must be given its effect. Mr. Chidambaran relied upon the decision of the Apex Court in the case of (Central Bank of India v. The Hardford fire Insurance Co. Ltd.), A. I. R. 1965 S. C. 1288, wherein the Court held in para 5 as follows: "now it is commonplace that it is the Court's duty to give effect to the bargain of the parties according to their intention and when that bargain is in writing the intention is to be looked for in the words used unless they are such that one may suspect that they do not convey the intention correctly. If those words are clear, there is very little that the Court has to do. The Court must give effect to the plain meaning of the words however, it may dislike the result. "as far as Jindal waiving the limitation of 30 days contained in Clause 1. 3 (c) of its contract with ONGC, Mr. Chidambaran submitted that it was fully permissible under section 63 of the Contract Act whereunder every promisee may dispense with or remit wholly or in part the performance of the promise made to him, or may extend the time for such performance. He submitted that Sipem cannot complain against such extension by Jindal. As far as Sipem is concerned, it was bound by Clause 2.
He submitted that Sipem cannot complain against such extension by Jindal. As far as Sipem is concerned, it was bound by Clause 2. 1 of its agreement with Jindal and under which the unpaid time was being added as permissible under that agreement. Converse however was not permissible. The 30 days limitation in clause 1. 3 (c) of the ONGC contract could not be read into Clause 2. 1 of the jindal contract. ( 25 ) MR. Vahanvati had submitted that the rig came back to India on 2 6/12/2001 without knowing that the time will be extended for the entire period lost. Mr. Chidambaran submitted that right from 17/05/2001 in its letter addressed by ONGC toJindal, ONGC had made it clear that ONGC may add the time lost in repair in the primary term of the contract which was as per Clause 1. 3 (a) of their contract. It was his case that this was brought to the notice of Saipem by Jindal though there is no document to support that. However, the knowledge of Saipem will be passed by leading evidence. Alternatively he submitted that if Jindal had a right to extend their contract for a longer period, it had no reason to inform Saipem. They must know what are their rights and obligations under the contract and it was not the duty of jindal to make Saipem aware of it. He therefore submitted that there was no case for any mandatory injunction as sought by Saipem. Submissions on behalf of ONGC ( 26 ) (A) It was submitted on behalf of ONGC, firstly, that the language of the two agreements was clear, ONGC and Jindal, at the instance of ONGC, were entitled to seek addition of unpaid time to complete the unutilized period of the contract. Mr. Desai, learned Senior Counsel appearing for ONGC, drew our attention to the Jindal agreement and submitted that Clause 2 on duration had three distinct provisions therein with respect to the agreed period of utilization viz. (i) the first part of Clause 2. 1 which provided for the initial primary term of two years. Thus, there was the primary term of utilization commencing from the date of commencement.
(i) the first part of Clause 2. 1 which provided for the initial primary term of two years. Thus, there was the primary term of utilization commencing from the date of commencement. Then there was a provision for extension of this term and it is provided therein that the agreement shall stand extended on the same rates, terms and condition in the event ongc extends the term of its contract. (ii) it is further provided that the term shall stand automatically extended under the same rates, terms ad conditions to cover the time necessary to complete of abandon to the satisfaction of ONGC the well in progress at the end of the primary term of contract or extension thereof, if any; (iii) there is a provision for addition of the unpaid time on account of break down, dry-docking and hull inspection. This added term was entirely at the company's (i. e. Jindal's) option which was to cover the unpaid time lost on account of break down, dry docking and hull inspection. (B) Thus, there is a provision of primary term of the contract of two years and for extension of the agreement itself. Then there'is an extended term to complete or abandon the well in progress and then the added term to cover the unpaid time. (C) Thus, the first part of the clause on duration provides for the primary term of the contract and the extension of the agreement itself. This extension of the agreement depends upon ONGC extending the term of its contract with jindal. Then there is an automatic extension of the term of contract to cover the time required either to complete or abandon the well in progress. This also depends upon ONGC. Further, there is the third part of this clause which provides that the unpaid time on account of three contingencies may be added and this is entirely at the option of the company i. e. Jindal. (D) Mr. Desai then drew our attention to the manner in which the language was utilized in the three parts of this clause. The first part stated that the contracted term shall stand extended, the second part stated that for completion of the work of particular well, the term shall stand automatically extended ad the third part stated that the unpaid time may be added at the option of the company.
The first part stated that the contracted term shall stand extended, the second part stated that for completion of the work of particular well, the term shall stand automatically extended ad the third part stated that the unpaid time may be added at the option of the company. In this clause, there was no period provided, upto which such addition could be done to cover these three contingencies. This is as against the limitation of 30 days which exist under Clause 1. 3 of the ONGC contract with Jindal. (E) Mr. Desai therefore submitted that if the two agreements had different language and different provisions, they have to be read as they were worded. Saipem cannot tell Jindal that because the time for addition for such contingencies such as break down is restricted to 30 days in the ONGC agreement that period should be read into the Jindal agreement. Jindal and Saipem had not provided any such restricted time and, therefore, there was no reason to read any such restriction therein. Mr. Desai submitted that this provision for addition of the unpaid time on account of break down was essential considering that the Rig was to be utilized for exploration and extraction of oil and natural gas. It was an admitted position that ONGC had paid an amount of u. S. $ 6,00,000/- to Jindal for mobilizing the said Rig, plus there was the daily rate which was to be paid for utilizing it. The Rig took almost six months to mobilize. It was a scale commodity as stated by Mr. Chidambaran. It contained heavy equipment of 6,500 tonnes. Surely, any time lost on account of break down had to be covered and if there was any such provision, it had to be impleaded and complied. There was no dispute that there was break down of the rig. If that was so, ONGC had to be compensated by adding time lost. The ONGC agreement provided for suspension of the relative obligations during force majeure conditions. The term "force majeure" is defined under Clause 21. 1 to include tempest also and it provides that if the time for performance of the relative obligation is suspended by the force majeure, it shall then stand extended by the period for which such cause lasts. Mr. Desai submitted that time can be added even under this clause of the ONGC agreement.
1 to include tempest also and it provides that if the time for performance of the relative obligation is suspended by the force majeure, it shall then stand extended by the period for which such cause lasts. Mr. Desai submitted that time can be added even under this clause of the ONGC agreement. This is somewhat different from Clause 7. 1 which contains "termination" in the Jindal agreement and it provides for termination on account of force majeure conditions lasting for more than 45 days. ( 27 ) MR. Desai submitted that apart from this, what is more interesting is that the independence of the two clauses i. e. Clause 2. 1 of the Jindal agreement and Clause 1. 3 of the ONGC agreement was known both to Jindal and saipem and which is reflected in their attempt to link the two clauses and to restrict the unpaid time under Clause 2. 1 to 30 days as sought by Saipem in an MOU. In the affidavit-in-rejoinder to the Notice of Motion filed by one Shri corrado Bottazzi, Constituted Attorney of Saipem, affirmed on 22nd November, 2002, it is clearly stated in Para 10 (iii) thereof that as recently as in november 2001, a meeting was held between Mr. Naresh Kumar of Jindal with Mr. Salandin Emill of Saipem in Milan, Italy. Subsequent to that meeting, saipem forwarded MOU dated 27/11/2001 to Jindal and ONGC responded with E-mails dated 6/12/2001 and 7/12/2001. The relevant clause in Saipem's proposed MOU reads as follows: "being the agreement dated 22/12/1999 and to the addendum dated 23/12/1999 construed as back to back of the Contract No. MRBC/dbg/mm/rigs (CH)/263 (41)/99/01-847/dy8df 146 between ongc and JINDAL, the third paragraph of Clause 2. 1 is interpreted by the PARTIES as follows; the unpaid time may be added to the term of the agreement at company option within the limit of ONGC option to extend the contract duration in accordance with the Contract No. MRB/ dbg/mm/rigs (CH)/263/ (41)/99/ot-847/dy8df 146. JINDAL will negotiate with ONGC the term of the Contract No. MRB/dbg/ mm/rigs/ (CH)/263 (41)/99/ot/847/dy8df 146 in order to possibly achieve the SAIPEM's goal to terminate its operations in Indian waters by October 2002. "thus, reading this particular Clause of MOU, it is clear that Jindal and Saipem thought it necessary to specifically interpret Clause 2.
JINDAL will negotiate with ONGC the term of the Contract No. MRB/dbg/ mm/rigs/ (CH)/263 (41)/99/ot/847/dy8df 146 in order to possibly achieve the SAIPEM's goal to terminate its operations in Indian waters by October 2002. "thus, reading this particular Clause of MOU, it is clear that Jindal and Saipem thought it necessary to specifically interpret Clause 2. 1 to mean that unpaid time may be added only within the limit of ONGC's option to extend its contract i. e. not beyond 30 days. It is another matter that the draft MOU was not signed by the parties, but it indicates that they thought it necessary to clarify the inter-relation of the two clauses and to provide the restrictive period of 30 days in Clause 2. 1. What is material is that this attempt was being made much after ONGC writing to Jindal on 17/05/2001 that it may add the tiime lost in repairs in the primary term of the contract. Mr. Desai, therefore, submitted that the conduct on the part of Jindal and Saipem also supports the interpretation placed by ONGC and now, accepted by Jindal that these two clauses were independent clauses and the restriction of 30 days period under Clause 1. 3 (c) of the ONGC agreement was not available under Clause 2. 1 of the Jindal agreement. ( 28 ) THE next submission of Mr. Desai was that Saipem was trying to take advantage of the accident and had not come to the Court with clean hands. Jindal had represented to ONGC that the rig was to be taken outside Indian waters only for the purposes of repairs and, therefore, ONGC issued necessary certificate to the customs authorities for removing it out for a period of two months. This was with a view to avoid double duty which would have been otherwise levied. However, whereas ONGC was helping out Jindal and saipem so that the rig is repaired at the earliest and brought back, both these parties and particularly Saipem had some other ideas. Thus, even when the rig was on way to the dry docks for repairs, Saipem wrote to Jindal on 2 1/03/2001 that the event (accident) which has been causing damage was outside the control of each party and it can reasonably be considered as force majeure condition.
Thus, even when the rig was on way to the dry docks for repairs, Saipem wrote to Jindal on 2 1/03/2001 that the event (accident) which has been causing damage was outside the control of each party and it can reasonably be considered as force majeure condition. It was suggested by them that in such circumstances the provision of Clause 7 providing for termination under Jindal agreement may be applicable. Jindal, however, wrote back on 27/03/2001 that the unfortunate incident could not be said to be a force majeure condition and enquired as to whether the rig will be sent back to India for resuming the operations. Now, what is material to note is that after exchange of these letters, a meeting is stated to have taken place in Delhi between the parties on 30/03/2001 and Saipem is stated to have decided to deploy the rig with agip Iran B. V. in Persian Gulf with the consent of Jindal. What is stated in para 21 of the plaint is quite instructive, which reads as follows:- "since this would result in the said rig lying idle until the end of the monsoon season, the plaintiffs decided with the jprior consent of Mr. Naresh Kumar of the 1st defendant to deploy the said rig with AGIP Iran B. V. in Persian gulf for drilling one well. In the course of the said meeting on 30-3-2001 mr. Naresh Kumar of the 1st defendant persuaded the plaintiffs not to record in writing what transpired thereat particularly the fact about the deployment of the said rig in Iran stating that in view of the peculiar problem with regard to the monsoon season being a supervening impossibility, the deployment of the said rig in Iran would not cause any problem with the ONGC contract. "one Mr. Singhvi, who filed a reply to the Notice of Motion, did not dispute that such a meeting was, in fact, held on 30/03/2001 and such correspondence also took place prior thereto. This is reflected in paragraph 10 (h) of the reply. It is, however, stated therein that there was no oral consent as alleged to the rig being deployed in Iran.
This is reflected in paragraph 10 (h) of the reply. It is, however, stated therein that there was no oral consent as alleged to the rig being deployed in Iran. On this background, one has to see that jindal continued to represent to ONGC that the rig will shortly come back to india and there is Jindal's letter dated 12/04/2001 on record that the rig will come back in June 2001. ( 29 ) NOW, what is material to note is that the repairs continued till end of may 2001 and ONGC had already written to Jindal by its letter dated 1 7/05/2001 advising them to make all efforts to ensure arrival of rig PN-III back in Indian waters after the said repair and deploy the rig on location at the first available window during monsoon and then the letter stated that this may be done at least immediately post monsoon 2001. Thus, an attempt should have been made to bring back the rig in window period during the monsoon and Mr. Desai submitted that the ships continued to ply during the arabian sea even in the month of May and in monsoon. But, in any case, the rig could have come during the window period, i. e. when the monsoon and sea are both silent and are at peace. As against that, the rig had gone to Iran in Jly itself, it continued to be there and came to Indiaonly on 26/12/2001 to become operational on 5th January, 2002. Thus, ONGC was kept completely in dark though it was enquiring and it had indicated its suspicion in its letter dated 21/08/2001. It is only when ONGC informed Jihdal by its letter of 7/09/2001 that the Rig had gone to Persian Gulf that jindal subsequently accepted that it was so and stated by its letter dated 2 4/09/2001 that the rig will coine back by end of October 2001. ( 30 ) THUS, as far as Saipem is concerned, firstly, in March 2001 itself, it tried to terminate the agreement with Jindal on the basis of force majeure clause. That having failed, it still diverted the rig to the Persian Gulf of Iran when the contract with Jindal was subsisting. It is the case of Saipem that this was done with the knowledge and consent of Jindal which is denied by it.
That having failed, it still diverted the rig to the Persian Gulf of Iran when the contract with Jindal was subsisting. It is the case of Saipem that this was done with the knowledge and consent of Jindal which is denied by it. Again, as recently as in November 2001, an attempt was made to reduce the period of unpaid time provided under Clause 2. 1 of the Jindal agreement and to reduce it to 30 days as per the Jindal agreement. It is material to note that in para 21 of the plaint, it is stated that the rig was taken to Persian Gulf with consent of Jindal since bringing it back during the monsoon season was a supervening impossibility. It is only when Jindal pointed out in its affidavit in reply that in March 2001, Saipem had tried to terminate the agreement by invoking force majeure clause that Saipem placed before the Court through its affidavit-in-rejoinder the further attempts to arrive at an MOU in November 2001. Thus, the information to the Court has also come step by step. ( 31 ) MR. Desai, therefore, submitted that it was clear that Saipem had not approached the Court with clean hands and, therefore, on this ground itself, it should be disentitled to any equitable relief. He relied upon the observations of Tek Chand, J. ; from a Division Bench judgment of Punjab High Court in the case of (Kamal Distillery Co. Ltd. and others v. Ladli Parshad Jaiswal and another), reported in A. I. R. 1958 Punjab 190, where the learned Judge succinctly observed in para 80 of the judgment as follows: 'the granting or refusing of injunctive relief rests within the Court's judicial discretion, guided by law and in harmony with the well-established principles of equity, after exercise of due care and caution. The claimant for such a relief must show that he has a superior equity in his favour entitling him to the injunction asked as against defendants. He has also to show that he has been acting towards the defendants in a fair and equitable manner, free from any taint of fraud, sharp practice, under influence or illegality. It is a cardinal principle of broad applicability that he who seeks equity must do equity.
He has also to show that he has been acting towards the defendants in a fair and equitable manner, free from any taint of fraud, sharp practice, under influence or illegality. It is a cardinal principle of broad applicability that he who seeks equity must do equity. The other maxim that he who comes in equity must come with clean hands, also embodies a principle of wide amplitude and expresses the basic concept of equity jurisprudence. According to this rule, equity declines to lend its aid to a person whose conduct has been inequitable in relation to the subject matter of the suit. The principle is that he who has done inequity shall not have equity. "the same equitable principles are reiterated by the Apex Court recently in the case of (A. C. Arulappan v. Ahalya Naik (Smt.), reported in 2001 (6) s. C. C. page 600. ( 32 ) MR. Desai submitted that the balance of convenience in the matter like the present one, will have to be related to public interest. He further submitted that the plaintiff had not been fair to the 2nd defendant ONGC which was kept completely in dark and committed breaches of contract. Now, the very plaintiff is saying that it may provide security for the price difference for arranging a second rig. Mr. Desai pointed out that the arranging of another Rig was not that easy as rightly emphasized by Mr. Chidambaran since the availability thereof itself was very difficult. Thus, on the one hand, the plaintiffsaipern was pressing for its commercial interest, obviously because it was expecting a better price else where, whefeas on the other hand, the entire exploratory programme of ONGC had already been delayed. This is in spite of the fact that payment of US $ 6,00,000/- initially for mobilization of the rig and paying contractual daily rate throughout the period of operation. Mr. Desai submitted that apart from law and equity, public interest is also an aspect which ought to be kept in mind. On the submission of waiver, he supported the submission of Mr. Chidambaran that there was no privity between saipem and ONGC and ONGC had not made any representation to saipem waiving any of its rights or giving it an impression that even if it brings the rig belatedly, the lost time would be condoned. The correspondence clearly shows to the contrary. Mr.
Chidambaran that there was no privity between saipem and ONGC and ONGC had not made any representation to saipem waiving any of its rights or giving it an impression that even if it brings the rig belatedly, the lost time would be condoned. The correspondence clearly shows to the contrary. Mr. Desai submitted that whereas in the ongc contract the right to extend the duration was with ONGC, under the jindal contract, it was with Jindal. That being the position when Jindal has extended time at the instance of ONGC as per the relevant clauses of the agreement, Saipem cannot make any grievance in that behalf and no mandatory injunction was called for to re-deliver the rig. Rejoinder: ( 33 ) MR. Vahanvati, learned Counsel appearing for the appellant, in the rejoinder, dealt with the submissions of Mr. Chidambaran and Mr. Desai and reiterated the submissions made earlier. He submitted that in the event the Court was against the appellant, it may consider reducing time to be added appropriately. Connected Appeal by Jindal: ( 34 ) THE connected appeal, bearing Appeal (Lodging) No. 87 of 2003 filed by jindal is not against the operative part of the order dismissing the appeal but it seeks to expunge some of the adverse findings, wrongful inferences, unwarranted conjecturesand observations not germane to the case from the order of the learned Single Judge. Mr. Thacker, learned Senior Counsel, addressed us on this appeal on behalf of Jindal and Mr. Vahanvati and Mr. Rajeev kumar represented Saipem and ONGC respectively. Mr. Thacker took us through the impugned order and drew our attention to the various sentences from the same. After taking us through the various passages, he finally confined his criticism to the following sentences appearing in paragraphs 11,12 ad 13 of the impugned order which read as follows: from para 11 "it is apparent from the record that the defendant No. 1 has colluded with the plaintiffs for the obvious reasons to allow them to keep the rig out of indian seas for more than the requisite period of repairs. " there is, therefore, no hesitation in my mind to record prima facie that the plaintiffs and the defendant No. 1 have, colluded to keep the rig out of the Indian waters to earn profit out of another contract with the Iranian party.
" there is, therefore, no hesitation in my mind to record prima facie that the plaintiffs and the defendant No. 1 have, colluded to keep the rig out of the Indian waters to earn profit out of another contract with the Iranian party. "from para 12 "i am also convinced that the defendant No. 1 was also a party to the said arrangement for the obvious reason of earning profits from that contract at the cost of delay in the work for the defendant No. 2. "from para 13 "it is a matter of shock that the plaintiffs and the defendant No. 1 merrily and lightly entered into a third party contract with some Iranian party and after earning huge profits from such contractors, they sailed for Mumbai and they want this Court to condone the delay on the ground of approaching monsoon and that it was risky to bring the rig from UAE to mumbai during the monsoon season when the monsoon was far away and the rig could have been brought to Indian waters within nine days. "mr. Thacker submitted that the first out of the four quotations above, alleges a collusion between defendant No. 1 and the plaintiff to allow the plaintiff to keep the rig outside the Indian waters. The second quotation states that this collusion was with a view to earn profit out of another contract with the iranian party. The third quotation states that this was for the obvious reason of earning profits at the costs of defendant No. 2. The fourth quotation states that the plaintiff and defendant No. 1 had lightly entered into the third party contract and after earning huge profits that they had sailed for Mumbai. Mr. Thacker submitted that there was no material to come to the conclusion that there was any such collusion or that defendant No. 1 Jindal had earned any profit in this behalf and the remarks be expunged. ( 35 ) MR. Vahanvati relied upon the judgment of a Full Bench of this Court in the case of (The State of Bombay v. Nilkanth Shripad Bhave and another}, reported in A. I. R. 1954 Bombay page 65. That is a decision on an application of the then State of Bombay to expunge certain remarks made by the Sessions court.
Vahanvati relied upon the judgment of a Full Bench of this Court in the case of (The State of Bombay v. Nilkanth Shripad Bhave and another}, reported in A. I. R. 1954 Bombay page 65. That is a decision on an application of the then State of Bombay to expunge certain remarks made by the Sessions court. It was submitted that there was an inherent jurisdiction in the superior court to remove such remarks. Chief Justice Chagla (as he then was) has observed as follows: "it would not be correct to say that expunging remarks from a judgment or deleting passages from a judgment constitutes the inherent power of any superior Court and therefore the inherent power of the High Court. In entertaining an application under sectioned 561 -A what the High court should do is not to expunge remarks but judicially to correct by its judgment the judgment of the lower Court. "in a matter which came up before the Madras High Court in the case of (G. Vasantha Pai), reported in A. I. R. 1960 Madras page 73, an Advocate had applied for expunging certain remarks from the judgment of a Single Judge of the High Court and a Division Bench of the Madras High Court has observed as follows: "in a proper case the High Court has power to expunge a part of a judgment of a Court subordinate to it. But a judgment of a Single Judge of the high Court whether it be on the Original Side or on the Appellate Side, in civil or criminal proceedings, is a judgment of the High Court and a division Bench or a Full Bench of the High Court has no power to delete passage from the judgment of High Court delivered by a Single Judge. The High Court is a Court of record and that is another reason why there is no power to direct any expunging from the judgment of a Single Judge which is a part of the record of the High Court. Case law referred. " ( 36 ) MR.
The High Court is a Court of record and that is another reason why there is no power to direct any expunging from the judgment of a Single Judge which is a part of the record of the High Court. Case law referred. " ( 36 ) MR. Thacker pointed out that the view taken by this Court in the case of the State of Bombay v. Nilkanth (supra) was held to be not the good law in the judgment rendered by the Apex Court in the case of (The State of Uttar Pradesh v. Mohammad Nairn), reported in A. I. R. 1964 S. C. 703, where after referring to the Bombay High Court judgment, the Apex Court in paragraph 9 of its judgment has observed as follows: "we think that the view taken in the High Courts other than the High Court of Bombay is correct and the High Court can in the exercise of its inherent jurisdiction expunge remarks made by it or by a lower Court if it be necessary to do so to prevent abuse of the process of the Court or otherwise to secure the ends of justice, the jurisdiction is however of an exceptional nature and has to be exercised in exceptional cases only. " mr. Thacker further drew our attention to a recent judgment of the Apex court in the case of (Manish Dixit and others v. State of Rqjasthan), reported in 2001 (1) S. C. C. page 596, wherein certain remarks had been made by the supreme Court against theappellants without providing them an opportunity of being heard. That was during the course of the criminal proceedings. The Apex Court held that those remarks were liable to be expunged due to the violation of the principles of natural justice. ( 37 ) MR. Rajeev Kumar appearing for ONGC submitted that the learned Single judge was entitled to his findings. This case clearly showed a collusion between Jindal and Saipem and there is no reason why the inference should be disturbed. It is, however, material to note that as far as the making of profit by Jindal in collusion with Saipem is concerned, Mr. Thacker pointed out that there was no material on record before the learned Single Judge in that behalf. He further pointed out that though the judgment in the case of mohm.
It is, however, material to note that as far as the making of profit by Jindal in collusion with Saipem is concerned, Mr. Thacker pointed out that there was no material on record before the learned Single Judge in that behalf. He further pointed out that though the judgment in the case of mohm. Nairn (supra) was arising in a criminal matter, the above-referred quotation of the Apex Court clearly shows that the High Court can, in exercise of its inherent jurisdiction, expunge the remarks made by it also to secure the ends of justice though the jurisdiction is of an exceptional nature and has to be exercised in exceptional cases only. Conclusions: ( 38 ) THE narration of the above facts points out that the two agreements, one between Jindal and Saipem dated 22/12/1999 (Jindal agreement) and the other between ONGC and Jindal dated 10/11/2000 (ONGC agreement), though inter-dependent and inter-related, are containing different clauses on various aspects and particularly the two clauses on duration i. e. Clause 2. 1 of Jindal agreement and Clause 1. 3 (c) of ONGC agreement have different provisions. What we are concerned with is as to how Clause 2. 1 of the Jindal agreement is to be read and whether the period of duration contemplated therein gets restricted by Clause 1. 3 (c) of the ONGC agreement. ( 39 ) THE material to be considered for deciding this aspect is voluminous and therefore before we deal with this aspect, it would be desirable to note the dates on which principal events have taken place. ( 40 ) THE first question to be considered is whether the period of duration contemplated in the Jindal Saipem agreement gets restricted to 30 days when it is read with Clause 1. 3 of the ONGC agreement. Now as seen earlier, though both these agreements are inter-related, the wording of the two clauses is different in certain relevant particulars. The parties have signed these agreements knowing fully well what they provided. It is a basic rule of interpretation that one is normally not expected to read anything more than what is provided in the agreement by the contracting parties. The question is as to why the unpaid time to be added on account of break down without any outer limit, as provided in Clause 2.
It is a basic rule of interpretation that one is normally not expected to read anything more than what is provided in the agreement by the contracting parties. The question is as to why the unpaid time to be added on account of break down without any outer limit, as provided in Clause 2. 1 in the Jindal agreement, should be restricted to 30 days as provided in the ONGC agreement with Jindal. Saipem knew as to what was the agreement entered into with Jindal. It did provide for making a rig available for mobilisation for the initial primary term of 2 years. It also provided for addition of unpaid time on account to break down etc. without providing any limit thereto. Thus, under this agreement, at the option of jindal, unpaid time on account of break down was permitted to be added without any restriction. As submitted by Mr. Chidambaran, mobilisation of such a heavy rig was not very easy. It was a scarce commodity. While entering into this agreement in December 1999, the rates were agreed between the parties and there was a daily rate provided. The agreement was to be worked for a period of 2 years and it was liable to be extended on the same terms and conditions in the event ONGC extended its term of contract with Jindal. If ongc made a complaint on Jindal that it did not make rig available for a considerable time and called upon it to extend the agreement for the unutilised period, and if the unutilisation was on account of a prima facie breach on the part of Saipem, Jindal would be entitled in insisting upon additional time. There were different provisions as far as this addition on account of break down is concerned in the two agreements. Knowing fully well the unlimited addition was agreed by Saipem in its contract with Jindal. This was necessary considering the scarcity of the equipment and for completing the exploration and extraction project. Mr. Chidambaran is therefore, correct in emphasising the dicta of the Apex Court in the case of Central Bank of India v. Hardford Fire Insurance Co. (supra), namely that the intention of the parties is to be looked for in the words used unless they are such that one may suspect that they do not convey the intention correctly.
Mr. Chidambaran is therefore, correct in emphasising the dicta of the Apex Court in the case of Central Bank of India v. Hardford Fire Insurance Co. (supra), namely that the intention of the parties is to be looked for in the words used unless they are such that one may suspect that they do not convey the intention correctly. Any other interpretation would mean that any such non-utilisation inspite of a written agreement and inspite of readiness to pay a heavy contracted mobilisation amount and daily rate would go scot-free. It would also lead to the owner of the rig to walk away the moment there is fluctuation of the price at international level and better price is received by the owner of the rig. This would jeopardise the program of ongc for the execution of whose work the contract was entered into between saipem and Jindal. The solemn agreement that the primary term of utilisation will be of 2 years will become ineffective without there being any utilisation during that period. It was submitted by Mr. Vahanvati that the period of 2 years will have to be read as 2 calender years. The agreement does not say that. Reading any such restriction into Clause 2. 1 would run counter to the purpose of the rig becoming available for utilisation for 2 years. Mr. Desai has very ably explained the language of the agreements and there is no reason to read anything more into it. ( 41 ) THE second question is to be considered as to whether in law, the respondents had any right to insist on continuation of the contract. Mr. Vahanvati relied upon the first and third parts of section 55 of the Contract Act and the judgments based thereon to submit that where there is a failure on the part of promisor to perform the option of the promisee is only to terminate the contract and to insist on compensation. He cannot extend the time unilaterally nor can he claim damages for any loss sustained. Now, it is material to note that the first part of section 55 applies where time is not essential part of the contract. In such a case the promisee is given the right to claim the compensation for any loss suffered on account of the failure on the part of the promisor.
Now, it is material to note that the first part of section 55 applies where time is not essential part of the contract. In such a case the promisee is given the right to claim the compensation for any loss suffered on account of the failure on the part of the promisor. It is in such a case that there cannot be unilateral extension of time. However, in the present case, what is material is that, according to the respondents, the time to perform the contract is yet not over and as stated above, on two interpretations of the two clauses, it is permissible for the respondents to contend that the contracted period is not over. If this is done, the first part of section 55 of the Contract Act would not have any application. Similarly, the third part of section 55 provides that where the promisee accepts the performance of the contract at a time other than the agreed upon, the promisee cannot claim compensation for any loss suffered by him unless at the time of such acceptance he gives a notice for that purpose. To this proposition also, answer will be the same that the contracted period is not over and the promisee is not accepting the performance at a time other than the agreed upon. The promisee is only insisting on completion of the incomplete period of the contract. Reliance on section 39 by Mr. Chidambaran in this behalf is, therefore, apt. The promisee can exercise the option under this section for continuance of the contract where the promisor has not performed his promise in its entirety. Hence, in law also, the respondents would be entitled to insist on completion of the contracted period. ( 42 ) THE third submission of Mr. Vahanvati was that the respondents had waived any such right that they had consequent upon breaches on the part of saipem and that the principles of estoppel by conduct would apply. On this aspect, Mr. Chidambaran and Mr. Desai have rightly pointed out that there was no privity or contract between Saipem and ONGC. ONGC, at no point of time, made any representation that it was waiving any of its rights. It all throughout insisted on the rig being brought back and, therefore, on facts, there is no question of waiving any rights by ONGC and, therefore, the authorities relied upon by Mr.
ONGC, at no point of time, made any representation that it was waiving any of its rights. It all throughout insisted on the rig being brought back and, therefore, on facts, there is no question of waiving any rights by ONGC and, therefore, the authorities relied upon by Mr. Vahanvati in this behalf are of no assistance. That apart, both these agreements clearly and squarely provided that waiver has to be in writing. That being the position, in the absence of there being anything in writing from either of the parties, no waiver could be inferred nor any estoppel by conduct. ( 43 ) BESIDES, as pointed out by Mr. Desai, Saipem has not approached the court with clean hands. It tried to wriggle out of the agreement even when the rig was undergoing the repairs. It tried to invoke the force majeure loss and terminate the agreement but Jindal did not agree to the same. That was in march 2001. Thereafter it deployed the rig at its own risk after the repairs in the Persian Gulf and did not bring it back to the Indian waters. Again in november 2001, it tried to enter into an MOU with Jindal to read the reduced period of 30 days into Clause 2. 1 of the Jindal Saipem agreement. Again, jindal did not agree to that. Thereafter it had tried to submit before this Court that the rig had suffered an accident and that it would have suffered a further financial loss and, therefore, the injunction was necessary. As stated earlier, many of the facts were not placed before the Court right at the outset and they have come on record because or the partial conflict between Jindal and saipem. These facts have come on record from time to time. It certainly amounts to utilizing clever tactics, if not suppression of the facts from the Court. ( 44 ) LAST but not the least, as rightly submitted by Mr. Chidambaran, a strong prima facie case is required to be made when the mandatory injunction is sought. As stated above, neither on the interpretation of contract nor in law nor in equity has Saipem been able to make out a case. In such a state of affairs, no mandatory injunction could have been granted.
Chidambaran, a strong prima facie case is required to be made when the mandatory injunction is sought. As stated above, neither on the interpretation of contract nor in law nor in equity has Saipem been able to make out a case. In such a state of affairs, no mandatory injunction could have been granted. That apart, as rightly pointed out by the respondents, the loss that would be suffered by ongc is not possible to compute in terms of money. This is because the entire exploration programme has got delayed. The extraction of oil will be much thereafter. A heavy rig is not easily available and, therefore, a mandatory interim order of the kind sought by the plaintiffs could not be granted. In our view, therefore, the learned Single Judge was right in declining the same. The last submission of Mr. Vahanvati for Saipem was that appropriate reduction, be made in the number of days to be added. As far as this submission is concerned, it is not possible for this Court to substitute its own reasoning for that of the contracting party. As a result of reading of the contract and the events that have taken place and if the respondents are of the view that a period of 9 months and 5 days is lost and according to them, they are entitled to the addition thereof, and when every day or exploration of oil and extraction thereof is relevant, it is not possible for this Court to interfere into this aspect and to reduce the period in any manner whatsoever. We had asked at the outset as to whether an understanding was possible amongst the parties and hoped for its. The matter was adjourning to facilitate it out without any success. The submission, therefore, cannot be accepted. Appeal No. 1155 of 2002, will, therefore, have to be dismissed and we accordingly dismiss the same. ( 45 ) THE connected appeal by Jindal is only for expunging the remarks as pointed out earlier. After the judgment of the Apex Court in State of U. P. v. Mohd. Nairn (supra), this power is available to this Court. However, in our view, the learned Single Judge was entitled to draw his inferences which are necessary to justify a prima facie finding in support of the interim order.
After the judgment of the Apex Court in State of U. P. v. Mohd. Nairn (supra), this power is available to this Court. However, in our view, the learned Single Judge was entitled to draw his inferences which are necessary to justify a prima facie finding in support of the interim order. It is a moot point as to whether he should have called the understanding or relationship between Jindal and Saipem as a collusive relationship. Yet, to the extent, he has observed that this was done by Jindal to earn profits, those observations were not justified by the material on record. Hence, to the extent, the learned Single Judge observed that Jindal had participated or colluded with Saipem to earn profits outside, we deem it necessary to expunge those observations. All other observations and inferences however would remain inasmuch as they were observations for the purposes of deciding the notice of Motion and should be read as required for an interlocutory determination. When the suit or any arbitration on claim for damages or other reliefs amongst the parties is heard, that would certainly be decided without being influenced by those observations. With this little modification, the connected appeal stands disposed of. ( 46 ) PARTIES will bear their own costs. ( 47 ) PER VAZIFDAR S. J. , J. : I have read the judgment of my learned brother. I agree that the appeal ought to be dismissed. ( 48 ) THE appellant (Saipem) filed the suit for a declaration that respondent nos. 1 (Jindal) and 2 (ONGC) are entitled to retain the rig and for an order directing the respondents to redeliver the rig to the appellant to enable it to send it away out of Indian territorial waters on or before 13th January, 2003. In the Notice of Motion, in which the impugned order was passed the appellant sought identical reliefs. Thus an order granting the interim reliefs sought would for all practical purposes decide the suit. That the dismissal of the notice of Motion would render the suit, as filed, infructuous is a result not of the reliefs that the appellant would be entitled to claim, but because of the reliefs it has chosen to claim.
Thus an order granting the interim reliefs sought would for all practical purposes decide the suit. That the dismissal of the notice of Motion would render the suit, as filed, infructuous is a result not of the reliefs that the appellant would be entitled to claim, but because of the reliefs it has chosen to claim. ( 49 ) WHILE considering an interlocutory application of this nature, it is necessary to keep in mind the judgment of the Supreme Court in Bank Maharashtra v. Race Shipping and Transport Company Pvt. Ltd. , 1995 (3) S. C. C. 257, deprecating the practice of granting interim orders which practically give the principal relief sought, for no better reason than that a prima facie case has been made out, without being concerned about the balance of convenience, public interest and a host of other considerations. ( 50 ) THE appellant however faces a major hurdle at the threshold. I have been unable to find myself in agreement with the interpretation placed by the learned Advocate General on behalf of the appellant on the relevant provisions of the contracts between the parties. He fairly did not dispute, as indeed he could not have, that if we did not accept his interpretation the further contentions would not entitle the appellant to succeed in obtaining the interlocutory reliefs. I propose therefore, firstly to deal with the learned Advocate general's submissions pertaining to the rights of the parties under the two contracts, I will therefore refer only to a few facts necessary for this purpose.