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2018 Supreme(Bom) 2690
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
G.S. Kulkarni, J.
Shahi Shipping Ltd - Appellant
Versus
Oil And Natural Gas Corporation Limited - Respondent
Arbitration Petition (L) No. 1443 of 2018
Decided On : 18-12-2018
Kevic Setalvad, Adv., Sahil Salvi, Adv., Pankaj Sawant, Adv., S.A. Bhalwal, Adv., Vyas & Bhalwal, Adv.
The main legal point established is that issues falling under non-arbitrable matters as per the Integrity Pact cannot be adjudicated through arbitration proceedings.
Headnote:
Arbitration - Termination of Contract - ACA 1996 - Section 9 - Clause 27.3(1) - Integrity Pact - Essential Commodities Act 1955 - Criminal Offence - Disqualification - Interim Reliefs
Fact of the Case:
The petitioner was awarded a contract for charter hire of a barge by the respondent. The barge was seized in connection with a criminal offence, leading to the respondent terminating the contract and initiating an inquiry to ban dealings with the petitioner. The petitioner filed a petition seeking interim reliefs pending arbitration proceedings.
Finding of the Court:
The court found that the termination of the contract by the respondent invoking the Integrity Pact was prima facie legal. The court dismissed the petition, stating that the issues fell under the non-arbitrable matters as per Clause 27.3(1) of the Integrity Pact. The court also noted the delay in approaching the court for reliefs and found no merit in the petition.
Issues: The issues revolved around the legality of the termination of the contract, the non-arbitrable matters as per the Integrity Pact, and the delay in seeking interim reliefs.
Ratio Decidendi: The court held that the issues fell under the non-arbitrable matters as per the Integrity Pact, and the delay in seeking reliefs also worked against the petitioner.
Final Decision: The petition was dismissed, and the court's findings were stated to be prima facie and only in the context of adjudication of the Section 9 application.
JUDGMENT
G.S. Kulkarni, J. - This is a petition under Section 9 of the Arbitration and Conciliation Act, 1996 (for short, "ACA") whereby the petitioner is seeking interim reliefs pending the arbitration proceedings.
2. Facts:-
It is the petitioner''s case that the respondent following an open bidding process awarded a contract (for short "the principal contract") dated 8 February 2018 to the petitioner, "for charter hire of self propelled barge M.V. Royal Sharavati" of minimum 2500 KL capacity for carrying out the respondent''s off shore operations conforming to the specifications as contained in the said contract.
3. There is a separate agreement titled as "Integrity Pact" executed between the parties and annexed to the principal agreement which provides for various obligations inter-alia, providing for disqualification of the bidder and for termination of the contract for matters falling under the Integrity Pact. Under the principal contract, in clause 27 the parties have agreed for reference of the disputes to arbitration in case disputes and differences arise between the parties, however there are excepted matters which are not arbitrable.
4. On 25 May 2018, the petitioner''s barge being subject matter of the contract, was seized and arrested by the Police (Crime Branch, Thane) in connection with a crime of theft of High Speed Diesel (HSD) transported by the said barge under the contract, from the ground to the rigs of the respondent, located in the sea. An application was moved by the petitioner before the Controller of Rationing and Director of Civil Supplies, Mumbai under Section 6A of the Essential Commodities Act, 1955 praying for release of the said barge. By an order dated 25 May 2018, the petitioner''s barge was conditionally released pending further investigation. The condition being that the petitioner would execute an indemnity bond and that the release shall be subject to the decision of the Criminal Court trying the offence and that the barge would be made available to the Criminal Court for its examination/inspection.
5. On the premise that the said barge of the petitioner was involved in a criminal offence, the respondent invoking the "Integrity Pact" and the relevant terms and conditions under the principal contract, by a notice dated 28 June 2018 terminated the said contract dated 8 February 2018. The termination notice categorically refers to the "Integrity Pact" being invoked as also contractual terms and conditions which would authorise the respondent to terminate the contract subject to the rights to recover losses and damages from the petitioner, in accordance with the principal contract.
6. Consequent to the termination of the contract the respondent has issued a notice dated 13 July 2018 to the petitioner informing the petitioner that an inquiry has been initiated to consider banning business dealings with the petitioner. It is stated that after completion of the inquiry, if it is found that the petitioner is at fault, in that event, the petitioner shall be put on a holiday i.e. neither any tender inquiry would be issued to the petitioner by the respondent against any type of tender nor its offer would be considered by the respondent against any ongoing tenders.
7. The petitioner being aggrieved by the respondent''s action of termination of the contract and the said notice dated 13 July 2018, has filed this petition under Section 9 of the ACA seeking the following reliefs, pending the arbitration proceedings:-
"a. that pending the hearing and final disposal of arbitration proceedings, this Hon''ble Court be pleased to stay the effect of termination notice dated 28th June 2018;
b. that pending the hearing and final disposal of arbitration proceedings, this Hon''ble Court be pleased to stay the effect of Notice dated 13th July 2018;
c. that pending the hearing and final disposal of the arbitration proceedings, this Hon''ble Court be pleased to direct the respondents to reinstate the performance bank gu
