IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
Ninala Jayasurya, J.
Steel Authority of India Limited - Appellant
Versus
Union of India - Respondent
Ia 2 & 3 of 2023
Decided On : 13-03-2024
Breach of Undertaking - Sale of Coal - Sec. 34 of the Arbitration and Conciliation Act - Contempt of Court - [Arbitration, Sale of Coal, Contempt of Court] - [Sec. 34 of the Arbitration and Conciliation Act]
Fact of the Case:
The petitioner, a Maharatna Company, entered into an agreement for the supply of coal with the respondent. Disputes arose regarding the quality of the coal, leading to arbitration proceedings and court orders restraining the removal and sale of the coal. The respondent later auctioned the coal, leading to the petitioner filing a petition seeking directions to furnish details of the auction and deposit the sale proceeds.
Finding of the Court:
The court considered whether the respondent's action constituted a breach of the undertaking not to auction the coal. It found that the undertaking was effective until the next hearing, and as the matter was heard on 29/3/2023, the undertaking was deemed to have been withdrawn. The court dismissed the petitioner's applications seeking directions, stating that appropriate proceedings under the law could be initiated, and the petitioner could realize amounts if successful in the arbitration or the writ petition.
Issues: The main issue was whether the respondent's auction of the coal constituted a breach of the undertaking given to the court.
Ratio Decidendi: The court held that the undertaking was effective until the next hearing, and as the matter was heard on 29/3/2023, the undertaking was deemed to have been withdrawn. The court also emphasized that appropriate proceedings under the law could be initiated, and the petitioner could realize amounts if successful in the arbitration or the writ petition.
Final Decision: The court dismissed the petitioner's applications seeking directions and closed any pending miscellaneous petitions.
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. 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. Durin
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