Court upheld termination of contractual agreement based on multiple breaches, reinforcing that government actions in commercial contracts require no special treatment unless clear arbitrariness is shown.

JUDGMENT

[VIA HYBRID MODE]

Sanjeev Narula, J. (Oral)--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:

(i) The scope of SAMA is defined in Article 2 whereby Shubham was awarded the contract for, inter alia, taking all steps for operation and maintenance of CFSs and to function under the overall control and supervision of CWC.

(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 provi