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2022 Supreme(Guj) 160
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
J.B. PARDIWALA, NIRAL R. MEHTA, JJ.
Essar Bulk Terminal Limited - Appellant
Versus
Arcelor Mittal Nippon Steel India Limited - Respondent
R/First Appeal No. 3040, 3055, 3506, 3507 of 2021 with Civil Application (For Interim Relief) No. 1 of 2021, Civil Application (For Production of Additional Evidences) No. 2 of 2021
Decided on : 03-02-2022
Mr. Mihir Joshi, M/S. Keyur Gandhi, Amita Katragadda, Raheel Patel And Kaustubh Rai, Mr. Darayus Khambhata, Sr.Advocate With Mr Mihir Thakore, Sr. Advocate With Mr Navin Pahwa, Sr.Advocate With M/S. Nirag Pathak, Aditya Pandya, Sairam Subramaniam, Juhi Gupta And Archismita Saha, Mr Darayus Khambhata, M/S. Nirag Pathak, Aditya Pandya, Sairam Subramaniam, Juhi Gupta And Archismita Saha, Advocates.
Headnote:
Arbitration and Conciliation Act, 1996 - Section 9, 11, 17, 9(1)(ii)(e), 17(1), (2), 9(3) - Companies Act, 2013 - Sections 230-232 - Constitution of India, 1950 - Article 227 - Specific Relief Act, 1963 - Section 20 - Arbitral Proceedings - Whether Commercial Court, in exercise of its power under Section 9 of Arbitration Act, could have directed EBTL to maintain a depth in channel of 10 meters below chart datum by way of an interim measure in favour of AMNS - Whether EBTL is obliged to maintain a minimum draft of 10 meters at terminal - Whether Commercial Court was justified in directing EBTL to continue to provide services without AMNS required to pay agreed "Dollar Tariff" - Whether an interim mandatory injunction could be granted directing continuance of working of contract, had to be considered in light of well-settled principles in that behalf – Held, This Court took view that once jurisdiction of court is invoked under Section 9 of Arbitration Act for interim measures either before or during pendency of arbitral proceedings and such remedy is exhausted, similar interim measures cannot be claimed before arbitral tribunal under sub-section (2) of Section 17 of Arbitration Act as same may give rise to a situation where there would be simultaneously two orders in existence in respect of same cause of action; one, that may be passed by court, and another, that may be passed by arbitral tribunal – Court is informed that as on date parties have filed their respective Section 17 applications before arbitral tribunal – Court do not intend to say anything further in this regard - It is for arbitral tribunal to look into such applications and decide same in accordance with law - In a given case, relief granted may be of such a type that court may be justified in saying that such relief shall operate for a particular period of time or till arbitral tribunal decides Section 17 application - However, once an exhaustive adjudication is undertaken by court on all aspects of matter, then it would be unreasonable, or rather, futile to restrict reliefs from their operations – Appeal allowed.
Based on the provided legal document, here are the key points:
- Case Details: The case is between Essar Bulk Terminal Limited (Appellant) and Arcelor Mittal Nippon Steel India Limited (Respondent), decided by the High Court of Gujarat on 03-02-2022, involving First Appeals against an order passed by the Commercial Court under Section 9 of the Arbitration and Conciliation Act, 1996 [judgement_act_referred] (!) (!) .
- Parties and Relationship: Essar Bulk Terminal Limited (EBTL) manages a captive jetty for ArcelorMittal Nippon Steel India Limited (AMNS), whose steel plant is owned by AMNS; EBTL was previously a group company of Essar Steel India Limited (ESIL), which was taken over by AMNS (!) (!) (!) .
- Contractual Framework: The parties executed a Principal Agreement (2011) relating to cargo handling charges, amended several times, including the Third Amendment Agreement (2013) and Fourth Amendment Agreement (2013) which introduced a "Dollar Tariff" payable at a specific base exchange rate (USD 1 = INR 54.2190) effective after EBTL drew its first tranche of dollar loans (!) (!) (!) .
- Dispute on Dollar Tariff: The EBTL drew the first tranche of dollar loans in December 2020 and demanded payment of the Dollar Tariff based on the 2013 exchange rate. The AMNS refused to pay, claiming the agreement was "onerous" and challenging the exchange rate, while the Commercial Court directed payment based on the December 2020 exchange rate (!) (!) (!) (!) .
- Dispute on Channel Depth: The AMNS sought an interim measure directing EBTL to maintain a channel depth of 10 meters below the chart datum at all times to facilitate vessel navigation. The EBTL argued it was only obligated to maintain a minimum terminal draft of 10 meters and that dredging to 10 meters below chart datum was not an express or implied obligation (!) (!) (!) .
- Commercial Court's Order: The Commercial Court passed an interim order directing AMNS to pay the Dollar Tariff (using the December 2020 exchange rate) and directing EBTL to maintain a channel depth of 10 meters below chart datum. The order was restricted to operate for three months or until the arbitral tribunal decided Section 17 applications, whichever was earlier (!) (!) (!) .
- EBTL's Appeals: EBTL appealed, arguing the Court exceeded its jurisdiction under Section 9 by mandating a specific channel depth (10 meters below chart datum) which was not an express obligation, and by modifying the agreed exchange rate in the contract, violating party autonomy (!) (!) (!) .
- AMNS's Appeals: AMNS appealed, arguing that the Court erred in directing payment of the Dollar Tariff as it amounts to specific performance of the contract, which should be left to the arbitral tribunal, and also contested the exchange rate used (!) (!) .
- Legal Principles on Section 9: The Court reiterated that Section 9 is for interim measures to protect rights pending arbitration and is subject to the Specific Relief Act; courts must exercise restraint and cannot usurp the jurisdiction of the arbitral tribunal under Section 17 once constituted (!) (!) (!) .
- Natural Hedge Concept: The Court analyzed the "natural hedge" intent behind the Dollar Tariff agreement, noting that it was meant to offset currency risk, not to create a windfall for one party, supporting the view that the arbitral tribunal should decide the final enforceability and rate (!) (!) .
- Channel Depth Relief Analysis: The Court held that directing EBTL to maintain a channel depth of 10 meters below chart datum by way of an interim measure overlooked the balance of convenience and imposed a continuous obligation not clearly established as an express term, thus exceeding the scope of Section 9 (!) (!) (!) .
- Exhaustion of Section 9 Remedy: The Court clarified that once the jurisdiction of the court is invoked under Section 9 and the remedy is exhausted, similar interim measures cannot be claimed before the arbitral tribunal under Section 17 to avoid simultaneous orders on the same cause of action (!) (!) (!) .
- Final Decision: The High Court allowed the First Appeal by EBTL (No. 3040 of 2021) to the extent it quashed the direction to maintain a channel depth of 10 meters at all times, while dismissing the other appeals, leaving the substantive dispute on the Dollar Tariff for the arbitral tribunal to decide (!) (!) .
JUDGMENT :
J.B. Pardiwala, J.
1. Since the issues raised in all the captioned Appeals are interrelated and the challenge is also to a common order passed by the Commercial Court at Surat, under Section 9 of the Arbitration and Conciliation Act, 1996 (for short, the 'Arbitration Act'), those were taken up for hearing analogously and are being disposed of by this common judgment and order.
2. There are two parties before us in this litigation : (i) Essar Bulk Terminal Limited ('EBTL', for short) and (ii) ArcelorMittal Nippon Steel India Limited ('AMNS', for short). The EBTL at one point of time was a group company of the Essar Steel India Limited ('ESIL', for short). The ESIL was taken over by the AMNS.
The ESIL set up a steel manufacturing plant at Hazira (Surat) along with a captive jetty. The steel plant is now owned by the AMNS and the captive jetty is run and managed by the EBTL.
3. On 21st February 2011, the AMNS and EBTL executed the Principal Agreement relating to the cargo handling charges (CHA). The Principal Agreement was amended vide Amendment Agreements dated 3rd March 2011, 1st April 2013, 17th May 2013 (Third Amendment Agreement), 15th October 2013 (Fourth Amendment Agreement"), 4th December 2014, 28th April 2016 and 4th December 2017. The Principal Agreement inter alia set out the cargo handling charges, i.e. the tariff at which the EBTL will handle the cargo of the AMNS at the Deep-Water Jetties. The specific rates are set out in the Principal Agreement.
4. On 28th August 2012, the Service Level Agreement was executed by and between the EBTL and the AMNS. The Service Level Agreement (SLA) was revised by the Amendment Agreement dated 1st April 2016.
5. On 17th May 2013, the EBTL and the AMNS executed the Third Amendment Agreement. The Third Amendment Agreement stated that the cargo handling charges shall be paid by the AMNS in the INR equivalent of USD denominated tariff, at the base exchange rate of USD 1 = INR 54.2190 (i.e. the base exchange rate prevailing on 30th April 2013). In essence, the parties agreed that from 1st May 2013, the cargo handling charges shall be paid at the USD 4.0309 per metric tonne of cargo (subject to 3% annual escalation) (this rate has been specifically set out in the Annexure I of the Third Amendment Agreement) (Dollar Tariff).
6. On 18th May 2013, the EBTL and the AMNS executed an amendment agreement to their cargo handling agreement in respect of the handling of AMNS cargo at the Paradip Port, Hazira. The said Amendment Agreement contained similar terms as the Third Amendment Agreement, including that the Dollar Tariff would be paid at the base exchange rate of the USD 1 = INR 54.2190 (i.e. the base exchange rate prevailing on 30th April 2013).
7. On 15th October 2013, the EBTL and the AMNS executed the Fourth Amendment Agreement, by which, the parties agreed that it will charge the Dollar Tariff from the AMNS once the EBTL draws its first tranche of dollar loans. The Fourth Amendment Agreement specifically stated that all other terms of the Third Amendment Agreement shall remain the same. On the same day, the EBTL and the AMNS also executed another amendment agreement to their cargo handling agreement, containing similar terms as the Fourth Amendment Agreement.
8. In the month of June 2017, the dollar loan was drawn down by the EBTL.
9. On 2nd August 2017, the AMNS was admitted into the CIRP in terms of the IBC.
10. On 8th March 2019, the National Company Law Tribunal, Ahmedabad Bench, approved the AMIPL Resolution Plan for the AMNS. The AMIPL Resolution Plan specifically required that all subsisting contracts with the EBTL continue on the same terms.
11. It is the case of the EBTL that the AMNS had agreed, in the month of June 2019, to pay the additional cargo handling charges @ Rs.21 per metric tonne as per the annual escalation, and in such circumstances, the depth of the channel was deepened to 12 meters below the chart datum. It is the case of the EBTL that it had been deepening the chan
