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2024 DIGILAW 346 (AP)

Steel Authority of India Limited v. Union of India

2024-03-13

NINALA JAYASURYA

body2024
JUDGMENT 1. The brief facts which are relevant for adjudication of the above Miscellaneous Petitions may be stated as follows: 2. The petitioner, a Maharatna Company of the Government of India Enterprise, entered into an Agreement No.243/2017 dtd. 1/9/2017 with the respondent No.3 for supply of 'Red Ash Coking Coal' of US origin as an industrial trial shipment. 3. Clause No.1 of the Contract deals with Materials, Quantity, Quality and Delivery Period. On 21/11/2017, the respondent No.3 forwarded an e-mail received from Carter Resources LLC (the producer of the contracted coal) that shortly before loading of the final barges, some barges were mistakenly contaminated with coal meant for another client and due to contamination some barges did not meet the required specifications and therefore, would not meet SAIL's requirements. Thereafter, the vessel arrived at Visakhapatnam Port on 2/1/2018 and upon berthing of the vessel, joint sampling was carried out by the parties along with CSIR-Central Institute of Mining and Fuel Research ('CIMFR'), Dhanbad. The coal was discharged and stored at EQ-8 berth of respondent No.2 i.e., M/s.Vizag Sea Port Private Ltd., ('VSPL'). Likewise, the coal was discharged and stored at Haldia Dock Complex ('HDC') and stored at nominated area. In terms of the Test Report of CSIR-CIMFR dtd. 31/1/2018, the coal did not meet the technical specifications under the contract. The respondent No.3 vide its Letter/e-mails dtd. 23/2/2018 and 26/2/2018 had disputed the said report and demanded the payment for the supplies of coal. However, the petitioner vide Letter dtd. 6/3/2018 informed the respondent No.3 about loss and damages sustained by it to a tune of USD 1, 282, 740.79 i.e., Rs.23, 41, 29, 287.40 ps. As the respondent No.3 failed to pay the said amount, the petitioner invoked arbitration clause. It also filed a petition under Sec. 9 of the Arbitration and Conciliation Act against respondent No.3 before the Hon'ble Delhi High Court vide OMP (I) (COMM.) No.168/2018. In the said petition, the petitioner, inter alia, prayed that the respondent No.3 be restrained from removing the coal from the discharge ports at Visakhapatnam and Haldia unless the claims of the petitioner were secured. Alternatively, the petitioner sought permission to sell the coal to the third party and deposit the amount in Court in an interestbearing account, pending arbitration. Initially by an Order dtd. Alternatively, the petitioner sought permission to sell the coal to the third party and deposit the amount in Court in an interestbearing account, pending arbitration. Initially by an Order dtd. 18/4/2018, the Hon'ble Delhi High Court was pleased to restrain the respondent No.3 from removing the coal from the discharge ports at Vishakapatnam and Haldia. Subsequently, the High Court of Delhi on 10/8/2018 passed the following Order: "(i) Parties to have their own agencies to draw samples on 17/8/2018, at 11.00 a.m. and counter sign the samples drawn before shifting of the coal; (ii) Vizag Seaport Pvt. Ltd. Shall shift the coal to their identified site after samples have been drawn. Vizag Seaport Pvt. Ltd. Shall be entitled to receive all costs and other charges for storage, shifting, security etc., from the sale proceeds of the coal; (iii) Sale of coal to be decided by the arbitrator; (iv) Notwithstanding the present interim order under Sec. 9 having been passed, if any party, at any point in time, feels the necessity to seek modification of the same, they will be at liberty to approach the Ld.Sole Arbitrator under Sec. 17. (v) As far as Haldia Port is concerned, the Interim Order dtd. 18/4/2018, shall continue, however, the parties agree that they shall draw samples in the presence of each other on 24/8/2018, at 11.00 a.m. Such samples shall be countersigned by the parties and the representatives of the concerned agencies. (vi) Either party shall be at liberty to seek modification/variation of this order before the Arbitral Tribunal. In view of the above, the present petition is disposed of binding the parties to the above terms and conditions. All the pleas of either party shall remain open before the Arbitral Tribunal." 4. During the pendency of arbitration proceedings between the petitioner and respondent No.3, on an application filed by the respondent No.3, vide Order dtd. 4/5/2019, the learned Arbitrator permitted it to sell the stock of coal or part thereof stored at Haldia and Visakhapatnam ports rejected by the petitioner. However, the respondent No.3 did not conduct sale of coal, lying at the port of 2nd respondent even after passage of more than three years. 4/5/2019, the learned Arbitrator permitted it to sell the stock of coal or part thereof stored at Haldia and Visakhapatnam ports rejected by the petitioner. However, the respondent No.3 did not conduct sale of coal, lying at the port of 2nd respondent even after passage of more than three years. In those circumstances, the 2nd respondent filed an interlocutory application in I.A.No.5345 of 2020 in OMP (I) (COMM) 168 of 2018 before the Hon'ble High Court of Delhi inter alia seeking (i) a direction to the petitioner to inform the Final Award status of the Arbitral Proceedings. (ii) direction to the petitioner to provide a Bank Guarantee for Rs.23, 98, 48, 739.00 as security till the entire amount is paid by the petitioner before leaving from the cargo storage space. (iii) directions by modifying the order dtd. 10/8/2018 by clarifying that the respondent No.3 shall continue to have lien over the other cargo of the petitioner till full and final realization of the pending amount, in terms of statutory rights under Sec. 59 of the Major Ports Act, which is not affected by the order dtd. 10/8/2018. (iv) directions by modifying the order dtd. 10/8/2018 by clarifying that the applicant/respondent No.2 shall continue to have the right to dispose of the cargo of the petitioner/SAIL in terms of Ss. 61 and 62 of Major Ports Act, which empowers the Port for disposal of the cargo to realize the Port dues, which is not affected the order dtd. 10/8/2018. 5. The said application was disposed of by the Hon'ble High Court of Delhi vide Order dtd. 11/11/2020, the operative portion of which reads as follows. "5. The order dtd. 10/8/2018 is clear to the fact that Vizag Seaport Private Limited has to be paid for all costs and other charges for storage, shifting, security etc. The quantum of these charges was never a dispute before this Court. The same has to be therefore adjudicated upon in an appropriate proceeding. 6. In view of the above, no further clarification / modification of the order dtd. 10/8/2018 is required to be made. 7. The application disposed of." 6. Thereafter, the learned Arbitrator allowed the claims of the petitioner partly and passed an Award on 13/2/2020. The same has to be therefore adjudicated upon in an appropriate proceeding. 6. In view of the above, no further clarification / modification of the order dtd. 10/8/2018 is required to be made. 7. The application disposed of." 6. Thereafter, the learned Arbitrator allowed the claims of the petitioner partly and passed an Award on 13/2/2020. The learned Arbitrator disallowed the claim of the petitioner towards the Port and handling charges at Visakhapatnam as well as the ground rent and priority berthing charges at Haldia Port. Since the Arbitrator disallowed the claims of the petitioner towards Port Demurrage, Dead Freight, Port and Handling Charges in respect of respondent No.2, filed a petition under Sec. Arbitration and Conciliation Act seeking to set aside the Arbitral Award dtd. 13/2/2020 and the additional Award dtd. 13/7/2020 to the extent it is adverse to the petitioner vide OMP(COMM) 564 of 2020. The said petition is pending adjudication before the Hon'ble High Court of Delhi. In the said proceedings before the Hon'ble High Court of Delhi, the petitioner filed I.A.No.15135 of 2022 seeking permission to sell the coal, which is lying at the Ports. During the pendency of the said application, the 2nd respondent issued a Tender dtd. 27/10/2022 for sale of Coking Coal in bulk lying at Visakhapatnam Port. 7. When the said application came up for consideration before the Hon'ble High Court of Delhi on 28/11/2022, the Hon'ble High Court while noting that the disputes between the petitioner, respondents 2 and 3 is not the subject matter of the said petition, observed that the parties can take their respective remedies in accordance with the Law with respect to the tender issued by respondent No.2. Subsequently, the Hon'ble High Court of Delhi passed a detailed order dtd. 7/12/2022, inter alia, opining that it is appropriate to give the parties an opportunity to explore the possibility of arriving at a consensus as to the manner of sale of coal, as it is in the interest of all the three parties that the coal can be sold as expeditiously as possible. The Hon'ble High Court also made it clear that if the parties are unable to resolve the issues and the dispute remains as to the entitlement to Vizag Sea Port, the same will have to be decided in independent proceedings. The Hon'ble High Court also made it clear that if the parties are unable to resolve the issues and the dispute remains as to the entitlement to Vizag Sea Port, the same will have to be decided in independent proceedings. As the respondent No.2 made a categoric statement before the Hon'ble Delhi High Court on 7/12/2022 that it had no objection for depositing the sale proceeds before the said High Court and had retracted from the same and as the parties could not arrive at any consensus, the petitioner filed the present writ petition, challenging the Tender Notice dtd. 27/10/2022. 8. On 24/2/2023, the writ petition came up for admission before a learned Judge and the following order was passed: "Learned Deputy Solicitor General has taken notice for 1st respondent, Sri G.Ramachandra Rao, learned Advocate, who is the counsel for Caveat Petitioner / 2nd respondent, offer to file Vakalat for 2 nd respondent. Issue notice to 3rd respondent. For counter of 2nd respondent and for appearance of 3rd respondent, list the matter on 16/3/2023. Sri G.Ramachandra Rao, learned Advocate, who is the counsel for Caveat Petitioner, who is the 2nd respondent herein, would undertake not to auction the coal stored in the Vizag Sea Port of the 2nd respondent, till the next date of hearing." CONTENTIONS: 9. Mr.Sidharth Yadav, learned Senior Counsel appearing on behalf of the petitioner, inter alia, contended that the 2nd respondent in breach of the undertaking dtd. 24/2/2023 made before the Hon'ble Court auctioned the coal. In elaboration, he submits that after 24/2/2023, the matter was taken up on 29/3/2023 and time was sought to file reply to the counter of the respondent No.2 and on 5/7/2023, a reply was filed. He submits that thereafter due to paucity of time, the matter was not taken up for hearing and thus the undertaking recorded vide Order dtd. 24/2/2023 continued. He submits that while that being the position, on 27/9/2023, it was stated on behalf of the respondent No.2 that some part of the coal stored at Visakhapatnam Port was sold. He contends that the said action of respondent No.2 amounts to breach of the undertaking given to the Court. He submits that in the absence of withdrawal of the undertaking dtd. 24/2/2023 or modification of the same by the Court, the respondent No.2 is bound by the undertaking. He contends that the said action of respondent No.2 amounts to breach of the undertaking given to the Court. He submits that in the absence of withdrawal of the undertaking dtd. 24/2/2023 or modification of the same by the Court, the respondent No.2 is bound by the undertaking. He submits that the action of the 2nd respondent in auctioning the coal stored at Port is wilful breach of the undertaking, amounts to over reaching the orders of the Court and in those circumstances, the present Miscellaneous Applications are filed seeking the directions to furnish the details regarding to the auction [including details pertaining to purchase of coal and the amounts received] and to deposit the entire sale proceeds in respect of the same. 10. The learned Senior Counsel while contending that I.A.No.1 of 2023 wherein the undertaking was recorded is still alive, pending and the orders passed therein would continue till an effective hearing takes place and the order is varied, modified or vacated submits that as no hearing took place after 24/2/2023 and as the Court had no occasion to deal with I.A.No.1 of 2023, the Order dtd. 24/2/2023 shall be deemed to be in force and any interpretation contrary to the same is not tenable in Law. To buttress his contentions, the learned counsel placed reliance on the following decisions: 1. Noorali Babul Thanewala v. K.M.M.Shetty and Others, (1990) 1 SCC 259 . 2. Rama Narang v. Ramesh Narang and Another, (2009) 16 SCC 126 . 3. Mahadev Govind Gharge and Others v. Special Land Acquisition Officer, Upper Krishna Project, (2011) 6 SCC 321 . 4. Shambhoo Nath Singh Yadav v. State of U.P., 1993 SCC OnLine All 242. 11. Refuting the said contentions, Mr.J.Prabhakar, learned Senior Counsel appearing on behalf of the respondent No.2 elaborately argued the matter. He submits that admittedly the proceedings under Sec. 34 of the Arbitration and Conciliation Act filed by the writ petitioner is pending and the learned Arbitrator held that the petitioner is not the owner of the coal. 11. Refuting the said contentions, Mr.J.Prabhakar, learned Senior Counsel appearing on behalf of the respondent No.2 elaborately argued the matter. He submits that admittedly the proceedings under Sec. 34 of the Arbitration and Conciliation Act filed by the writ petitioner is pending and the learned Arbitrator held that the petitioner is not the owner of the coal. Referring to the averments made in the counter-affidavit filed in the above I.As., with regard to the quantities of coal and the sale proceeds in respect of the same on various dates, the learned counsel contends that the undertaking given by the respondent No.2 before this Court on 24/2/2023 was only till the date of next hearing i.e., upto 29/3/2023 and the same was not extended by the respondent No.2. He submits that on 24/2/2023, the Hon'ble Court did not pass any interim orders and the respondent No.2 on its own undertook not to proceed with the sale of the coal till the next date of hearing and therefore, the question of vacating or modifying the orders passed by the Hon'ble Court, would not arise and the contentions raised on behalf of the petitioner merits no appreciation. 12. Referring to the specific averments in Para Nos.7 and 8 of the counter-affidavit, the learned counsel would further contend that no reply is filed denying the statements made with reference to the factual aspects which transpired on 29/3/2023. He submits that as explained in Para No.8 of the counter-affidavit, the undertaking given by the respondent was effective till 29/3/2023 and thereafter it is deemed to have been withdrawn. While stating that there is no dispute with regard to the propositions / expressions of the Hon'ble Supreme Court in the decisions relied on the learned Senior Counsel for the petitioner and that the Majesty of the Court has to be upheld, the learned counsel contends that the said decisions are not applicable to the facts of the present case. He submits that the contention that the action of the 2nd respondent amounts to over reaching the orders of the Court is not tenable and as the undertaking is given till particular event is happened, and over by virtue of listing the matter on 29/3/2023. He submits that the respondent No.2 on advise, proceeded with the auction of the coal. He submits that the contention that the action of the 2nd respondent amounts to over reaching the orders of the Court is not tenable and as the undertaking is given till particular event is happened, and over by virtue of listing the matter on 29/3/2023. He submits that the respondent No.2 on advise, proceeded with the auction of the coal. The learned counsel also submits that about 13000 Metric Tonnes coal is still available, that the petitioner under the guise of violation of the undertaking is seeking to secure interim orders and only in the event of the petitioner succeeding in the writ petition, it would be entitled for the sale proceeds. The learned counsel while seeking dismissal of the miscellaneous petitions, urges for an early hearing of the writ petition. The learned counsel also placed reliance on Ashok Kumar & Other v. State of Haryana, 2007(3) SCC 470 . CONSIDERATION BY THE COURT: 13. On an appreciation of the rival contentions, the point that falls for adjudication by this Court is whether the action of the 2nd respondent amounts to breach of undertaking and if so, the petitioner is entitled for the interim directions as prayed for in the present applications. 14. It is the contention of the learned Senior Counsel for the writ petitioner, as noted earlier, that the order dtd. 24/2/2023 continues to be in force till the same is varied, modified or vacated after an effective hearing by application of the mind by the Court and in the present case neither an effective hearing has taken place nor the undertaking was modified and therefore the order dtd. 24/2/2023 is in operation / force and since the respondent No.2 proceeded with the auction of the coal, its action amounts to breach of undertaking. In support of his contentions, the learned Senior Counsel placed reliance on Noorali Babul Thanewala's case referred to supra. In the said case, the Hon'ble Supreme Court was dealing with a matter arising out of Rent Control Proceedings. The tenant before the Hon'ble Supreme Court sought time for vacating the premises and committed a breach of the undertaking given by him. In the facts and circumstances of the case, the Hon'ble Supreme Court at Para No.11 held as follows: "11. The tenant before the Hon'ble Supreme Court sought time for vacating the premises and committed a breach of the undertaking given by him. In the facts and circumstances of the case, the Hon'ble Supreme Court at Para No.11 held as follows: "11. When a court accepts an undertaking given by one of the parties and passes orders based on such undertaking, the order amounts in substance to an injunction restraining that party from acting in breach thereof. The breach of an undertaking given to the court by or on behalf of a party to a civil proceedings is, therefore, regarded as tantamount to a breach of injunction although the remedies were not always identical. For the purpose of enforcing an undertaking that undertaking is treated as an order so that an undertaking, if broken, would involve the same consequences on the persons breaking that undertaking as would their disobedience to an order for an injunction. It is settled law that breach of an injunction or breach of an undertaking given to a court by a person in a civil proceeding on the faith of which the court sanctions a particular course of action is misconduct amounting to contempt. The remedy in such circumstances may be in the form of a direction to the contemnor to purge the contempt or a sentence of imprisonment or fine or all of them...." 15. The Hon'ble Supreme Court while imposing a fine of Rs.500.00 and simple imprisonment for one month, if the same is not paid within a period of four weeks also directed the tenant to deliver vacant possession of the premises. 16. In Rama Narang's case referred to supra, the Hon'ble Supreme Court was dealing with contempt petitions. The Hon'ble Court was called upon to decide whether deliberate breach of undertaking given to Court attract Sec. 2(b) of the Contempt of Courts Act. Referring to Noorali Babul Thanewala and other decisions, the Hon'ble Supreme Court inter alia held that wilful breach of an undertaking given to the Court amounts to contempt of Court under Sec. 2(b) of the Act. The Hon'ble Apex Court while holding that majesty of the Court and Rule of Law can never be maintained unless the Court ensures meticulous compliance with its orders, passed an order of simple imprisonment for a period of two months against the contemnors. 17. The Hon'ble Apex Court while holding that majesty of the Court and Rule of Law can never be maintained unless the Court ensures meticulous compliance with its orders, passed an order of simple imprisonment for a period of two months against the contemnors. 17. In Mahadev Govind Gharge's case, the Hon'ble Supreme Court had an occasion to deal with the issue of date of hearing. At Para No.42, it was, inter alia, opined as follow: "42. The date of hearing must not be confused with the expression "step in the proceedings". These are two different concepts of procedural law and have different connotation and application. What may be a "step in the proceeding", essentially, may not mean a "hearing" by the court. Necessary ingredients of "hearing" thus are application of mind by the court and address by the party to the suits." 18. A learned Judge of Allahabad High Court in Shambhoo Nath Singh Yadav's case while dealing with a matter in the context of an order granting stay of proceedings in a criminal case till next date of listing, inter alia opined as follows: "4. The words "till the next date of listing" are, therefore, to be interpreted in a reasonable manner and not in a manner which may lead to absurdity or created confusion. Thus the words "till the date of listing" are quite clear and certain in their meaning that the stay order has to continue till any subsequent order is passed by the Court." 19. Per contra, the learned Senior Counsel for the respondent No.2 relied on the decision of the Hon'ble Supreme Court Ashok Kumar's case referred to above. The Hon'ble Apex Court considered the term / expression "in the meantime" and "till then" used in the orders. The Hon'ble Supreme Court at Para No.12 opined as follows: " 12. The term of the order of the learned Judge, in our opinion, does not leave any manner of doubt whatsoever that the interim order was only extended from time to time. The interim order having been extended till a particular date, the contention raised by the respondents herein that they were under a bona fide belief that the injunction order would continue till it was vacated cannot be accepted." 20. The interim order having been extended till a particular date, the contention raised by the respondents herein that they were under a bona fide belief that the injunction order would continue till it was vacated cannot be accepted." 20. While there can be no second opinion about the expressions of the Hon'ble Supreme Court, in the decisions referred to above, this Court is required to examine as to the applicability of the same to the facts of the present case. 21. At the outset, it may be noted that initially the writ petition came up for consideration on 24/2/2023 and the Hon'ble Court while directing the matter to be listed on 16/3/2023 recorded an undertaking on behalf of the 2nd respondent to the effect that it would undertake not to auction the coal stored in Vizag Sea Port of respondent No.2 till the next date of hearing. It is not in dispute that the matter was listed on 29/3/2023 and the same was adjourned to 26/4/2023 at the request made on behalf of the petitioner for filing reply-affidavit to the counter-affidavit of the 2nd respondent. However, with reference to the proceedings dtd. 29/3/2023, the respondent No.2 in Para Nos.8 & 9 of the counter-affidavit made specific assertions on oath and the same have not been traversed by way of reply and thus, they remained un-rebutted. From a reading of the averments made in the counter-affidavit, it appears that the learned Judge after hearing the counsel on both sides, granted time for filing reply-affidavit. Therefore, this Court is not inclined to delve into the aspect as to whether the same would not amount to an effective hearing in view of the undisputed version of the respondent No.2 that the matter was heard. In the light of the expression of the Hon'ble Supreme Court, in Ashok Kumar's case, this Court is also of the opinion that unless the order dtd. 24/2/2023 is extended, it cannot be said that it would continue till it was modified or varied. 22. In view of the above decision of the Hon'ble Supreme Court, the decision of the Allahabad High Court in Shambhoo Nath Singh Yadav's case, is of no aid to the petitioner. 24/2/2023 is extended, it cannot be said that it would continue till it was modified or varied. 22. In view of the above decision of the Hon'ble Supreme Court, the decision of the Allahabad High Court in Shambhoo Nath Singh Yadav's case, is of no aid to the petitioner. The other decisions relied by the learned Senior Counsel for the petitioner, in the opinion of this Court, are not applicable as the same are arising with reference to the provisions of the Contempt of Courts Act. Even accepting that the action of the 2nd respondent in auctioning the coal amounts to breach of undertaking, appropriate proceedings in accordance with the Law may have to be initiated and as seen from the affidavits of the petitioner, in the present I.As., the petitioner is contemplating to initiate proceedings under the Contempt of Courts Act. Further, in the event of the petitioner succeeding in the petition filed under Sec. 34 of the Arbitration and Conciliation Act or in the present writ petition, it can realize the amounts from the 2nd respondent. 23. For the aforegoing conclusions, the miscellaneous petitions I.As.2 and 3 of 2024 are dismissed. As a sequel, pending miscellaneous petitions, if any, shall stand closed.