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IN THE HIGH COURT OF DELHI AT NEW DELHI
Sanjeev Narula, J.
Shubham HP Security Force Private Limited and Anr. – Petitioners
Versus
Central Warehousing Corporation - Respondent
O.M.P.(I) (COMM.) 79 of 2022 & I.As. 3783-84 of 2022
Decided On : 11-03-2022
Constitution of India, 1950 - Article 14 - Specific Relief Act, 1963 - Section 14(d) r/w Section 41 - Arbitration and Conciliation Act, 1996 - Section 9 - Tender - Export and import of cargo - Activity of operating warehouses, Inland Container Depots – Agreement - Termination notice – Seeking an order restraining CWC from acting on the said termination notice - Central Warehousing Corporation [“CWC”] is a Public Sector Undertaking engaged in the activity of operating warehouses, Inland Container Depots [“ICD”], and Container Freight Stations [“CFS”] across country - Allegedly failed to adhere obligations which led to termination of SAMA vide Notice which was issued pursuant to a Show Cause Notice.
Finding of the court :
Granting such a relief would amount to granting the relief of restoration of SAMA which in other words would amount to enforcement of contract. The contract being prima facie determinable, grant of such a relief is impermissible in law. Besides, Court, at this stage, cannot go into justification of CWC’s action and same would have to be examined in ensuing arbitration proceedings that parties are likely to undertake - There is no merit in contentions of CWC that material breach of SAMA is only for non-furnishing of bank guarantee. CWC has not only contractual basis, but also substantial material on hand, to allege breach of contract on account of evident failure on part of Shubham to generate business. There is also prima facie merit in their allegation that such defaults have caused them loss of reputation and business prospects. These breaches have continued despite multiple opportunities granted by CWC - Termination of SAMA cannot be faulted with as there is no prima facie evidence to contrary. Nevertheless, as already observed above, this is a question which would have to be agitated in ensuing arbitration proceedings after appointment of a tribunal - As termination of contract has taken effect, and as per CWC, said decision cannot be revoked by way of pre-arbitration mechanism. The court finds no fault in its stance. Certainly, order of Division Bench cannot be interpreted to mean that Shubham’s request had to be necessarily accepted. Besides, it cannot be construed that CWC consented to revoke or suspend contract. Therefore, rejection of request for constitution of a joint committee, even if it is contrary to terms of contract, can undoubtedly not constitute a cogent ground to seek a stay of impugned Termination Notice.
Result : Petition dismissed
JUDGMENT :
SANJEEV NARULA, J.
VIA HYBRID MODE
1. Central Warehousing Corporation [“CWC”] is a Public Sector Undertaking engaged in the activity of operating warehouses, Inland Container Depots [“ICD”], and Container Freight Stations [“CFS”] across the country. For the purpose of handling and transporting containers, maintenance and operation of CFS Dronagiri Node, Navi Mumbai (one of the CFS owned by CWC), which caters to the export and import of cargo at the Jawaharlal Nehru Port [“JNPT”], a tender was issued and pursuant thereto, the proposal of Shubham HP Security Force Pvt. Ltd. [hereinafter “Shubham”] was accepted. A Strategic Alliance Management Agreement dated 18th April, 2020 was executed between the parties, for a term of fifteen years [hereinafter “SAMA”].
2. The aforesaid Agreement has now been terminated for the third time vide Notice dated 16th November, 2021 [hereinafter “Termination Notice #3”] by CWC. Aggrieved, Shubham has invoked Section 9 of the Arbitration and Conciliation Act, 1996 [hereinafter, “the Act’] and seeks an order restraining CWC from acting on the said termination notice.
Salient Terms and Conditions of SAMA
3. Before adverting to the previous litigation history between the parties, it would be apposite to briefly note some of the salient terms of SAMA, which are as under:-
(ii) Article 3.1 provides for the term of the contract as fifteen years.
(iii) Article 5 provides the rights and obligations of Shubham including the obligation to bear all costs and expenses during the operation of SAMA.
(iv) Article 6.1 stipulates that the consideration be paid on a revenue-sharing basis by Shubham to CWC. The consideration comprises, inter alia, of the following components (besides an addition to the cost and expenses which are required to be borne by Shubham):
a. Fixed amount of Rs. 4,00,05,001/- p.a.
b. A variable amount of Rs. 626 per container with Minimum Guaranteed Throughput [“MGT”] of 60,000 containers p.a. (i.e., 5,000 containers p.m.)
c. Revenue Share @ 2% of the Total Turnover.
(v) Clause 6.1(h) entails the mechanism of payments, receipts, and disbursals, whereby payments made by the customers availing services of this CFS shall be collected/received by CWC. After adjusting the amounts payable to CWC on a fortnightly pro-rata basis, the balance shall be remitted to Shubham.
(vi) Clause 6.1(h)(vi) provides for CWC to recover the short-fall towards Fixed Amount/Variable Amount from Shubham. If Shubham fails to pay the same, the amounts could be recovered through the encashment of Bank Guarantees.
(vii) Clause 6.2 stipulates the obligation of Shubham to maintain the Bank Guarantee equivalent to annual Fixed and Minimum Guaranteed Variable amounts, at all times.
(viii) Clauses 6.2(c) and (d) provide for CWC to recover the money from Shubham through encashment of Bank Guarantee in case Shubham fails to make the payments as per SAMA.
(ix) Article 10 contains the termination clause and Article 10.2, inter alia, envisages the termination of SAMA upon breach of the terms contained therein by the Shubham HP.
(x) Article 14 stipulates the dispute resolution mechanism and specifically, Article 14.2 provides the arbitration clause between the parties.
Termination Notice and Litigation History
4. Shubham allegedly failed to adhere to the afore-noted obligations which led to the termination of SAMA vide Notice dated 12th November, 2020 [hereinafter “Termination Notice #1”], which was issued pursuant to a Show Cause Notice dated 06th November, 2020. The said show cause and termination notices were assailed by Shubham before the High Court of Judicature at Bombay, W.P.(ST) No. 96013/2020 titled ‘Shubham HP Security Force (I) Pvt. Ltd. & Anr. v. Union of India and Ors.’ wherein they succeeded, on the short grou
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