INTERNATIONAL SEA PORTS (HALDIA) PVT. LTD. v. BOARD OF TRUSTEES FOR THE PORT OF KOLKATA
2011-09-30
KALYAN JYOTI SENGUPTA
body2011
DigiLaw.ai
Judgment K. J. Sengupta, J.: The aforesaid two applications have been taken out by plaintiff and first defendant. As far as the first mentioned application (G.A.1351 of 2009) is concerned it has been filed by the plaintiff, while second one (G.A.633 of 2010) has been filed by the defendant No.1 in the said suit which has been filed by the plaintiff for the following reliefs:- "(a) A decree for perpetual injunction restraining the defenaant No.1 and its men, servants, agents, officers, employees and/or assigns from relying upon Or enforcing or referring the disputes between the parties to the defendant No.2 in terms of Article 14.2 of the Licence Agreement as stated in the said letters dated 6th May, 2009 being annexures "R", "S", "T" and "U"; (b) A decree for perpetual injunction restraining the defendant No.2 from entering into any reference Or giving any decision in respect of the matters purported to have been referred to him by the said letters dated 6th May, 2009, being annexures "R", "S", "T" and "u" hereof; (c) A decree of perpetual injunction restraining the defendants and/or each of them, their men, servants, agents, officers, employees and/or assigns from in any way Or manner giving any effect Or further effect to or acting pursuant to the said letters dated 6th May, 2009 being annexures "R", "S", “T" and "u" hereof and/or otherwise; (d) A decree of perpetual injunction restraining the defendants and/or each of them, their men, servants, agents, officers, employees and/or assigns from in any way or manner referring any dispute between the parties for settlement by the defendant No.2; (e) A decree of perpetual injunction restraining the defendants and/or each of them, their men, servants, agents, officers, employees and/or assigns from in any way Or manner seeking replenishment, substitution or submission of a fresh performance bank guarantee for Rs.10 crores, as demanded by the said letters dated 9th April, 2009 and 21st April, 2009, being annexures "M" and "N" hereof and/or otherwise; (f) Delivery up and cancellation of the said letters dated 9th April, 2009, 21st April, 2009 and the said four letters dated 6th May, 2009 being annexures "M", "N", "R", "S", "T" and "U" hereof; (g) Injunction; (h) Receiver; (i) Attachment, (j) Costs and; (k) Such further and other reliefs as this Hon'ble Court may deem fit and proper." 2.
Pursuant to open tender followed by submission of bid by the plaintiff and followed by acceptance thereof an agreement in writing being a Licence Agreement dated 14th May, 2002 was executed by the first defendant and the plaintiff and/or its predecessor-in-interest for amongst others construction of operation, management and maintenance of multi purpose Berth No. 4A at Haldia Dock Complex and also to collect the revenue therefrom for a period of 30 years on various terms and conditions contained therein. In terms of the said Licence Agreement the plaintiff was obliged to make payment of the following to the defendants No.1:- (a) One time upfront fee of Rs. 10,75,32,000/-, (b) Monthly royalty on cargo and handling charges at an increasing rate subject to a maximum of61.04% as fixed by the defendant, (c) Monthly lease rent of Rs.22,40,250/- with annual escalation at the rate of 5.1 % of the rent payable in preceding year. The plaintiff was required to make payment of royalty charges, power and water charges to the defendant No.1. Pursuant to and in terms of the said agreement the plaintiff made payment of one time upfront fee of Rs.10, 75,32,000/• to the defendant No.1. (b) furnish a bond by way of bank guarantee dated 28th November, 2003 for a sum of Rs.10 crores in accordance with Clause 7.1 (cc) of the License Agreement, (c) furnished a bank guarantee dated 21st August, 2003 for a Bum of Rs.8,06.49,000/• in accordance with Clause 5.2 (v) of the License Agreement to secure payment of the lease rent. (d) built a fully mechanized cargo handling Berth No. 4A with a capacity of 3 millions tonnes per annum in accordance with the terms of the lease agreement. The said berth was completed within the stipulated time. The plaintiff also developed various other facilities in accordance with the terms and conditions of the licence agreement at expenditure in excess of Rs.1025 crores to the satisfaction of the defendant No.1, (e) made and continued to make payment of royalty on cargo handling charges at the stipulated rate and the said monthly lease rent in accordance with the terms of the License Agreement. Between the period 7th December 2002 and 31st March, 2009 the plaintiff has made payment of the sum in excess ofRs.21,50,98,045/- on account of the lease rent and a sum in excess of Rs.
Between the period 7th December 2002 and 31st March, 2009 the plaintiff has made payment of the sum in excess ofRs.21,50,98,045/- on account of the lease rent and a sum in excess of Rs. 74,33,8,307/- on account of royalty on the goodwill revenue earned from cargo handling charges as passed to the minimum guarantee royalty of Rs.33,45,450/-. The said royalty was based on 16.05 million metric tons of cargo handled at the said Berth during the said period, well in excess of 7.50 million metric tons of minimum guaranteed quantity of cargo required to be handled during the said period, (f) made all necessary payments within the stipulated time. Payments as aforesaid were duly received without any dispute or demur by the defendant No. 1. The calculation of the royalty and the payment of the said sum were duly certified by the independent Auditor nominated and/or selected by the defendant No.1 up to the period of May, 2007. The said Auditor also inter alia certified that no amount remained outstanding from the plaintiff to the defendant No.1 as on 13th May, 2007. Such report of the independent Auditors were also duly accepted by the defendant No.1 without demur or dispute. The plaintiff has since thereafter also made payments of the lease rental and royalty on the basis of License Agreement. Thereafter disputes arose between the first defendant and the plaintiff regarding date of commencement of the commercial operation and royalty payment as per the License Agreement. This disputes and claim of the applicant has already been referred to Arbitration and the Arbitral Tribunal has been constituted. 3. The first defendant thereafter from time to tome has raised various other bills and demands of the plaintiff for payment by several letters dated 20th January, 2009, 12th February 2009, 19th February 2009, 23rd February 2009.and 25th March 2009 on various heads namely as follows: (i) Special rate (ii) Double and Triple Banking charges (iii) Royalty on total revenue, (iv) Royalty on Berth Hire Charges (v) Royalty on Storage Charge/Demurrage (vi) Interest on the above. 4. These claims are seriously disputed and objected to by the plaintiff on the ground that the same are up justified and dehors the provisions of the licence agreement and the terms of the bid document. 5.
4. These claims are seriously disputed and objected to by the plaintiff on the ground that the same are up justified and dehors the provisions of the licence agreement and the terms of the bid document. 5. Challenging the aforesaid letters and further challenging the validity and enforceability of the alternative dispute mechanism the above reliefs are claimed in the suit. 6. The plaintiff filed the first mentioned application for interlocutory order of injunction primarily for temporary injunction restraining respondents each of their men, servants, agents, officers, employees and/or assigns from relying upon or enforcing or referring the dispute between the parties through the defendant No.2 in terms of Clause 14.2 of the License Agreement as stated in the said letter dated 6th May, 2009. That apart other interlocutory reliefs have been claimed and for the time being this Court is not concerned with other interlocutory prayers. The first defendant filed the aforesaid application appearing to be under section 8 of the Arbitration and Conciliation Act, 1996 for referring the disputes being the subject matter in the instant suit to arbitration in terms of Article 14.3 of the License Agreement and also stay of all further proceedings in the instant suit. 7. Thus, in order to consider the first prayer of the plaintiffs application and all the prayers of plaintiff of the first application the Court is concerned only one issue whether the said Arbitration clause relied on by the first defendant being Article 14.3 is valid, subsisting and enforceable Arbitration Agreement or not. 8. Therefore, both the applications were taken up for hearing analogously. The common arguments were advanced by the learned counsel for both the parties. Mr. P. Chatterjee, learned Senior Advocate appearing for the plaintiff submits that the said arbitration clause being Article 14.3 is not operative one in all cases. It provides that certain disputes may be referred to Arbitration; that is where the Chairman does not give decision or the licencee is not satisfied with his decision. He urges unless mechanism as provided in Articles 14.1 and 14.2 are exhausted, Article 14.3 has no application. If one reads Article 14.1 it will appear that the parties will make an attempt first for amicable settlement if they fail then the Article 14.2 would be operative in appropriate cases, not in all cases, where they may agree to refer the matter to the Chairman.
If one reads Article 14.1 it will appear that the parties will make an attempt first for amicable settlement if they fail then the Article 14.2 would be operative in appropriate cases, not in all cases, where they may agree to refer the matter to the Chairman. This Clause according to him can be resorted to only after recourse to Article 14.1. Article 14.3 does not appear to have general application the same can be pressed under the situation as mentioned therein. The language of Clause 14.2 with the words "may be referred to Chairman" and also when the parties agree to refer the matter to the Chairman. Thus a fresh agreement is contemplated under Article 14.2. Admittedly, in this case there has been no such agreement. On the contrary, the plaintiff has recorded by its letter dated 16th May, 2009 that it is not an appropriate case to refer the dispute to the Chairman. Hence Article 14.2 would not have been resorted to by the defendant No.1. Indeed in the past the parties had recourse to these clauses and arbitration may be resorted to without going through the above steps. The first defendant itself prevented the petitioner from seeking recourse to Clause 14.2 without adhering to Clause 14.1. 9. With the support of the Supreme Court decisions reported in (2000) 4 SCC 272 and (2007) 5 SCC 719 , Mr. Chatterjee says in a clause of this nature where word "may" used is not treated to be a mandatory one and is enabling on€':. Therefore this clause cannot be Ii conclusive and valid arbitration. 10. Hence the application filed by the first defendant should be dismissed. 11. Mr. Chatterjee, thereafter pressed his client's application for appropriate relief. He contends that when the Arbitration Agreement is non-existent the suit has to be heard automatically. Indeed by an order dated 20th of May, 2009 this Hon'ble High Court prima facie held that invocation of Article 14.2 was not as per the spirit and terms of the agreement and accordingly passed an order in terms of prayer (c) of the Notice of Motion. The Court while passing said interim order was pleased to observe that the term "in appropriate cases" has not been defined and what would constitute in appropriate cases appears to be shrouded in uncertainty. 12.
The Court while passing said interim order was pleased to observe that the term "in appropriate cases" has not been defined and what would constitute in appropriate cases appears to be shrouded in uncertainty. 12. Thereafter, there is no material change in the circumstances, which prevailed when the order was passed. The respondent in its affidavit-in-opposition has not contended that it is an appropriate case where the parties have agreed to refer the matter to the Chairman. It has also not been explained what is an appropriate case for decision by the Chairman. 13. Mr. Hirak Mitra, learned Senior Counsel for the first defendant submits pressing his client's application that the aforesaid dispute resolution mechanism as contained in the License Agreement under Clause 14 is very comprehensive and it clearly debar parties from approaching civil suit for adjudication of dispute in connection with the said License Agreement. Both the parties resorted to clause 14.1 however there has been disagreement. Clause 14.2 was not resorted to because of refusal of the plaintiff to refer the matter to the Chairman, as such it has become frustrated. Now the only option is Arbitration since Clause 14.3. 14. He submits that existence of dispute is not denied hy the plaintiff. Prayer (a) of the interlocutory application contemplates dispute arising out of License Agreement dated 14th May, 2002. In respect of such claim defendant No.1 has raised bills dated 19th February, 2009 and 23rd February, 2009. The said claim is on account of unrealized royalty payable under the agreement. The intention of the parties by agreeing to Clause 14 is absolutely clear that the parties intend interference by Court should be excluded by the amicable settlement. When the intention of the parties is clear and it has now become incumbent to ascertain whether there should be arbitration or not. His legal submission with reference to Supreme Court decision reported in 2007(5) SCC 28 is that intention of the parties can be gathered from word "Arbitration" itself. Even if absence of the word "Arbitration" there can be Arbitration. In support of this proposition he has also relied on the decisions reported in 1969(2) LLR 547, (1995) 1 LLR 617, 2009(2) SCC 55 , 2008(10) SCC 308 . 15. He further submits that Clause 14.3(a) is regarding Constitution of Arbitral Tribunal and number of arbitrators in a given situation.
In support of this proposition he has also relied on the decisions reported in 1969(2) LLR 547, (1995) 1 LLR 617, 2009(2) SCC 55 , 2008(10) SCC 308 . 15. He further submits that Clause 14.3(a) is regarding Constitution of Arbitral Tribunal and number of arbitrators in a given situation. The said Clause cannot override the true intention of the parties as contemplated in Clause 14.3 (a) which reads as Arbitration. In the event the appointment procedure in Clause 14.3(a) fails in respect of a claim of the defendant No.1, Court under section 11 of the Arbitration and Conciliation Act, 1996 can always constitute a Tribunal. This does not mean that the arbitration clause itself is contemplated under Clause 14.3 would be rendered nugatory particularly when interference by Courts is totally excluded under Article 14. 16. He further contends that impleadment of Chairman as defendant No.2 does not make any difference. The Chairman against whom bias is alleged has also retired in June 2009. Further, presence of the defendant No.2 is not required before the Arbitral Tribunal where dispute in the instant suit are liable to be referred under terms and conditions agreed between the plaintiff and the defendant No. 1. The role of the defendant No.2 was only with regard to Clause 14.2. This has already been frustrated by the act and conduct of the defendant No.2. The mere presence of the defendant No.2 in the instant suit would not prevent the Court from referring the dispute in the instant suit to Arbitration. The plaintiff merely by filing a plaint and impleading the Chairman as defendant No.2 cannot make the arbitration clause invalid or inoperative. He relying on the decision of the Supreme Court reported in (1994) 2 SCC 155 contends that the right to seek arbitration as envisaged in the dispute resolution clause is an indefeasible right to which the Court does not have any kind of discretion. The language of Section 8 is clearly mandatory and the Court has no option but to apply it once it is found there exist valid and lawful arbitration agreement. According to him his submission is supported by the decisions of the Court reported in 2009(1) ALR 378 (Delhi High Court), 2009(3) ALR 303 and also the text book of the Russel on Arbitration (23rd Edition). 17.
According to him his submission is supported by the decisions of the Court reported in 2009(1) ALR 378 (Delhi High Court), 2009(3) ALR 303 and also the text book of the Russel on Arbitration (23rd Edition). 17. He submits that allegation of bias and fraud are made against the defendant No.2 who has also retired. These allegations are no longer relevant. In any event, in order to wrongly wriggle out the Clause 14.2 of License Agreement the aforesaid allegations of fraud were made. In any event, if the allegations of fraud nowadays can be decided by the Arbitration under the present Act. 18. Under the circumstances all the disputes must be referred to arbitration clause as mentioned in Article 14.3 is to be dismissed. 19. After hearing the submission of the learned Counsels for the parties and considering the pleadings before me only issue involved in both the two interlocutory applications basically are whether the Clause 14.3 of the License Agreement under the heading Arbitration can be treated to be concluded, valid, enforceable arbitration agreement or not. I accordingly set out the said Clause. "Clause 14.3- If the Chairman, Kolkata Port Trust does not give any decision within 60 days, and/or if the Licensee is not satisfied with the decisions of the Chairman, Kolkata Port Trust, the dispute may be referred to Arbitration in the city of Kolkata within 90 days after the expiry of 60 days as referred to above to two (2) independent persons, one is to be appointed by Licensor and Licensee with the power to the Arbitrators to nominate an Umpire, before proceeding with such reference and this Agreement shall be deemed to be a submission within the meaning of the Arbitration and Conciliation Act, 1996 Or any statutory modifications thereof and the said arbitration proceedings shall be governed by the provisions contained in the said Act, or any statutory modifications thereof, and the decision of such Arbitrators and/or Umpire, as the case may be, shall be final and binding on both the parties." 20. On plain reading of the said Clause it would appear that the said Clause Will be applicable only when the Chairman does not give any decision within 60 days and further the licensee is not satisfied with the decision of the Chairman.
On plain reading of the said Clause it would appear that the said Clause Will be applicable only when the Chairman does not give any decision within 60 days and further the licensee is not satisfied with the decision of the Chairman. Therefore, it is clear that in this case licensor has no right to refer: While searching for the authority of the Chairman to take the decision A notice as urged by both the learned Counsels Clause 14.2 of the said License agreement empowers the Chairman to resolve the dispute in the situation as stated herein below:- "The parties shall, in appropriate cases agree to refer the matter to the Chairman, Kolkata Port Trust, who shall on receipt of the notice of any dispute give his decision within 60 days after receipt thereof by him." 21. Hence I think while accepting the argument of Mr. Chatterjee that the Chairman, Port Trust has no jurisdiction to decide any matter unless both the parties agree to refer the matter to him. Even he cannot decide all matters except the appropriate ones referred to him by the parties. 22. I have gone through the letters exchanged between the parties and I have noticed the statements and averments I find that no point of time the plaintiff had any intention to go to the Chairman for resolution of the dispute under Clause 14.2 by the Chairman. Rather it appears it has made serious allegations of bias against the Chairman expressing unwillingness to go to his decision. Under such circumstances no one can believe that a person alleging bias is agreeable or rather at any point of time has agreed to go to that person charged with biased. I, therefore, conclude that factually there has been no agreement between the parties for resolution of dispute canvassed in the present suit by the Chairman under Clause 14.2. 23. Rather it would appear from the statement and averment of the application under section 8 of the said Act and argument of Mr. Hirak Mitra that the plaintiff by its own act and conduct has really frustrated the said Clause 14.2. According to him because of frustration the Clause 14.3 being Arbitration clause will be operative.
23. Rather it would appear from the statement and averment of the application under section 8 of the said Act and argument of Mr. Hirak Mitra that the plaintiff by its own act and conduct has really frustrated the said Clause 14.2. According to him because of frustration the Clause 14.3 being Arbitration clause will be operative. I do not think so for the reason that Clause 14.3 will be applicable when both the parties will go to Chairman on agreement as above and the Chairman will decide the matter and the licensee will be dissatisfied with this decision. 24. I am of the view when the power given under this clause to the Chairman has become inoperative by way of frustration question of taking decision by the Chairman did not and could not arise. This frustration is not committed by the Chairman so that it can be termed to be a decision as urged by Mr. Mitra. Frustration has been caused to be done by the plaintiff so Arbitration clause being Clause 14.3 will not be operative. Moreover going by wordings of the Clause 14.3, only the plaintiff has choice to go to arbitration not of the defendant who has only right to participate when the plaintiff chooses to go. 25. Therefore I hold factually the aforesaid Arbitration clause is in no way operative at all in this case. 26. There are large number of decisions having been cited at the bar on the assumption that arbitration agreement contained in the said clause can be operative on other ground. Almost all the judicial pronouncements either by Supreme Court of our country and also of this Court are on the same line that in order to hold a valid arbitration agreement it depends upon the language, intention, act and conduct of the parties. 27. In case of Willington Associates Limited vs. Kirit Mehata, reported in 2000(4) SCC 272 Justice Rao sitting singly in Supreme Court while dealing with an application under section 11 of the Arbitration and Conciliation Act, 1996 in substance held that unless the clause itself contemplates by its language mandatory in nature it cannot be said that there has been valid arbitration agreement exists. In the Supreme Court decision after reading the words "may be referred" used in a particular clause it was held that the said arbitration agreement was not a mandatory in nature.
In the Supreme Court decision after reading the words "may be referred" used in a particular clause it was held that the said arbitration agreement was not a mandatory in nature. Moreover, it was also held that arbitration agreement was not concluded when such a language is used as it is used in this case also. 28. In case of Jagdish Chander vs. Ramesh Chander & Ors., reported in 2007(5) SCC 719 , the Supreme Court has restated after discussing good number of Supreme Court decisions rendered earlier that "the intention of the parties to enter into an arbitration agreement shall have to be gathered from the terms of the agreement. If the terms of the agreement clearly indicate an intention on the part of the parties to the agreement to refer their disputes to a private Tribunal for adjudication and an willingness to be bound by the decision of such Tribunal on such dispute, it is arbitration agreement. While there is no specific form of an arbitration agreement, the words used should disclose a determination and obligation to go to arbitration and not merely contemplate the possibility of going for arbitration. Where there is merely a possibility of going to arbitration in future, as contrasted from an obligation to refer to arbitration, there is no valid and binding arbitration agreement." 29. In this case, it would be found as discussed above the language mentioned in Clause 14.3 that only the licensee unilaterally can refer the dispute. The word 'may' used therein clearly indicate that it is enabling provision for the licensee. Therefore the language of the said clause suggests this Clause is not mandatory. 30. The Supreme Court decision in case of Punjab State & Ors. vs. Dinanath & Ors., reported in 2007(5) SCC 28 as referred to by Mr. Mitra does not appear to lend any assistance in this matter as in that case Supreme Court has found both the parties have conclusively agreed to refer the dispute for resolution by the mechanism of arbitration though word "Arbitration" was not used. Similarly, the other decisions cited by him are also in the same line and all those decisions factually the clauses were found upon gathering intention of the parties the agreement was concluded for referring the dispute for resolution by the mechanism of Arbitration. 31.
Similarly, the other decisions cited by him are also in the same line and all those decisions factually the clauses were found upon gathering intention of the parties the agreement was concluded for referring the dispute for resolution by the mechanism of Arbitration. 31. On reading of all those judgments I conclude that it is not necessary in order to hold a valid and subsisting arbitration agreement the word "Arbitration" must be mentioned. According to me both the parties either by exchange of correspondences or in a written document shall evince their intention unequivocally to refer the disputes between them to a person bring their chosen Judge outside the Court. The intention of the parties must be not to go to Court. If this element is to be found it can be said there exist valid arbitration agreement. On discussion as above I have already factually found for the reason as above, the said clause cannot be said to be an arbitration agreement. Hence I dismiss the application filed by the Port and uphold the contention of the plaintiff. The interim order passed by this Court stand affirmed. 32. It is true that this Court has held that there has been no valid arbitration agreement in this Court. However, having regard to the nature of the dispute between the parties the Court in exercise of power under section 89 of the Civil Procedure Code can make an endeavour to bring the parties for resolution thereof through the mechanism of arbitration agreement, particularly when some other dispute arising out of the said License Agreement are already being adjudicated by the learned Arbitrator not by the Court. Accordingly, I direct the parties to response to this Court's proposal as to whether this dispute canvassed by both the parties can be risolved by arbitration and if their response is unanimous to accept it then both of them mutually nominate two Arbitrators or single Arbitrator or if they cannot do so and shall they agree to the choice of the Court, the Court will pass appropriate order. For this purpose the matter is adjourned for fortnight to give response to the Court. If the Court does not find any response from either of the parties aforesaid order stand confirmed. The interim order already passed stands confirmed until further order of this Court. N.N.M.