Allowed

Ennore Port Ltd. v. M/S. Chettinad International

Madras HC1 Aug 2011OSA/196/2011

Case brief

AI extract

What is this about?

An appeal challenging an order that directed the appellant to allow respondent's vessel berthing without demanding revenue share. The High Court held the application was premature as the agreement mandated referring disputes to an expert committee before approaching arbitration or court. The appeal was allowed, setting aside the lower order.

What did the court decide?

Appeal allowed, order dated 02-03-2011 passed by the learned Judge setting aside the order dated 02-03-2011 passed by the learned Judge in O.A. No. 181 of 2011.

Ennore Port Ltd. Vs M/S. Chettinad International — Company and Corporate | Madras HC (2011)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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DATED : 01-08-2011

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Coram

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THE HONOURABLE MRS. JUSTICE R. BANUMATHI and THE HONOURABLE MR. JUSTICE B. RAJENDRAN

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O.S.A. No. 196 of 2011 and

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M.P. No. 1 of 2011

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Ennore Port Limited P.T. Lee Chengalvaraya Naicker Maligai No.23, First Floor, Rajaji Salai Chennai – 600 001 .. Appellant Versus M/s. Chettinad International Coal Terminal Private Limited 5^th Floor, Rani Seethai Hall 603, Anna Salai Chennai – 600 006 .. Respondent

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Appeal filed under Order XXXVI Rule 1 of Original Side Rules read with Clause 15 of Letters Patent against the order dated 02-032011 in O.A. No. 181 of 2011 on the file of this Court.

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For Appellant : Mr. M. Ravindran, Senior Counsel and Addl. Solicitor General for Mr. Krishna Ravindran For Respondent : Mr. AL. Somayaji, Senior Counsel for Mr. Satish Parasaran

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JUDGMENT

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B. RAJENDRAN, J

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The Appellant/Ennore Port is aggrieved by the order dated 02.03.2011 in O.A. No. 181 of 2011 by which the learned Judge issued a direction to them to forthwith permit the respondent herein for berthing of M.V. SPAR HYDRA and other ships bringing in coal at the appellant's terminal at Ennore Port in order to discharge cargo without insisting upon payment of revenue share till such time it complies with its principal obligations of providing draft depth of -15 M CD and road connectivity, as provided for in Drawing Nos. 3 and 5 of part 2 of Licence Agreement on the Northern side of the Port premises.

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https://hcservices.ecourts.gov.in/hcservices/ 2. The contention of the respondent herein in the application in O.A.No. 181 of 2011 was that they have emerged as successful bidder in respect of development of multi-user coal terminal through

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Build, Operate and Transfer (BOT) basis and quoted to give higher revenue share of 52.524% to the appellant. The contract was signed in September 2006. The grievance of the respondent was that the appellant failed to comply with their obligations in providing road access to them in relation to the transportation infrastructure. Further, the appellant failed to provide the alongside depth of -15 meters and because of the lapses on the part of the appellant, they were unable to operate at the designated capacity and they were operating only at 20% of the designed capacity. Therefore, without complying with the obligations on the part of the respondent, the question of revenue sharing will not arise. When the appellant refused to entertain their ship M.V. SPAR HYDRA without payment of their revenue share, they have filed the present application before this Court and obtained an order, including a direction to the appellant that in future, in respect of other ships also to discharge the cargo, the appellant has to permit them without insisting upon the payment of revenue share.

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The appellant contended before the learned Judge that in the contract, there is no clause which would disentitle them from claiming their revenue share, even if there is any shortfall on their part . The appellant further contended that even before the arbitration clause could be invoked, there is an in-built mechanism in the agreement itself to refer the dispute, if any, to an expert committee. Only after failure to have a consensus before the expert committee, the matter can be referred to an arbitrator. Therefore, the prayer sought for in the application is premature and the respondent had appproached this Court hastily by filing an application under Section 9 of the Arbitration and Conciliation Act.

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The learned Judge, on finding that the appellant failed to fulfil the obligations on their part in not having provided access to the road and for not providing the required depth for anchoring the ships, as agreed, came to the conclusion that due to the failure on the part of the appellant, the respondent is unable to operate upto the maximum level. Accordingly, the learned Judge, accepting the prayer sought for, allowed the application filed by the respondent herein.

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The learned Senior Counsel appearing for the appellant contends that as far as the two deficiencies pointed out by the respondent namely the provisions for road and creation of depth of 15 meters, the second defect was already complied with and it was also accepted by the respondent herein. Therefore, on that ground, the respondent is not entitled for a direction as sought for in the application. As far as the other defect namely access to road, according to the learned senior counsel, there is an alternative road already available. Relying upon clause 10 (2) (i) of the agreement between the parties, the learned senior counsel for the appellant submitted that in the event of a failure to perform their part of the contract, the respondent can only insist upon extension of the contractual period but they are not entitled to stop making payment. Therefore, the application filed by the respondent under Section 9 of https://hcservices.ecourts.gov.in/hcservices/ the Arbitration and Conciliation Act, 1996 ought not to have been entertained by the learned Judge and he prayed for allowing this appeal.

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At the outset, the learned Senior counsel appearing for the respondent submitted that as far as the second deficiency namely providing alongside depth of 15 meters CD is concerned, the same was provided by the appellant during the month of May 2011 and there is no quarrel. However, at the time of filing the application before the learned Judge, such a provision was not made by the appellant and therefore, the respondent was right in not making the revenue share to the appellant. As far as clause 10 of the agreement is concerned, a specific provision is made that road access upto the boundary limit of the licensed premises has to be made on or before the commencement of commercial operation, but till date it was not provided by the appellant. The appelant has only given alternative road without complying with the requirement to provide the road on the northern side. The appellant has also called upon the respondent to utilise the TNEB pipeline road for the movement of even heavy fabricated structures, concrete mixtures and heavy equipments and such an access to a site was made available only from 15.12.2010 and this led to the considerable delay in the respondents efforts to complete and commission their project. Further, the respondent was always ready and willing to perform their part of the obligation, but it is the appellant, without complying with their obligation, is acting detrimental to the interest of the respondent. Therefore, the question of payment of revenue share will arise only when the appellant comply with their obligation. Due to the exigency of arrival of ship, they have moved the application under Section 9 of the Arbitration and Conciliation Act and obtained a direction. The learned Judge also, after considering the submissions of both sides and on perusal of the materials on record, rightly allowed the application filed by the respondent and therefore he prayed for dismissal of the appeal.

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We have heard the learned senior counsel appearing for both sides. By consent of counsel for both sides, the main appeal itself is taken up for final disposal.

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The appellant would mainly contend that the respondent was a successful bidder for setting up multiuser terminal on "BOT" basis. The respondent entered into an agreement and also promised to pay 52.524% of the revenue share to the appellant, however, the respondent pointed out two discrepancies or deficiencies and on that reason they failed to pay the revenue share to the appellant.

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Both sides now agree that the provision of alongside depth of 15 meters CD was made available by the appellant and it was also admitted by the respondent by their letter dated 27.05.2011 and 18.06.2011. A perusal of the letters would make it clear that even as per the sounding chart survey on 13.03.2011, the requisite dredged depth of -15m CD was available along the coal jetty. In fact, the letter dated 27.05.2011 was written by the appellant as a reply to the letter dated 04.05.2011 of the respondent. In any event, as far as the second defect pointed out by the respondent is concerned, now both sides submits that the dispute was resolved by reason of the https://hcservices.ecourts.gov.in/hcservices/ appellant providing the -15m CD depth and it no longer survives for consideration in this appeal before us.

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In so far as the other defeciency pointed out by the respondent is concerned, even as per the letter dated 01.11.2010, the appellant has categorically stated that the road connectivity from existing NCTPS Road to stock yard South end has been completed and opened for heavy traffic and presently M/s. CICTPL is evacuating the coal consignment using heavy trucks through this road only. It was also stated in that letter that the road under bridge height clearance is 3.5m which is sufficient for movement for coal evacuation. Further, the appellant has also given extension of time to enable the respondent to complete their project upto 04.11.2010. The letter also indicate that extension was given by the appellant twice.

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When we consider the agreement entered into between the parties, clause 10.2 refers to road infrastructure, which is extracted as follows:-

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10.2 Road Infrastructure 10.2.1 Upto boundary limits I. The Licensor shall provide or cause to provide a road access upto the boundary limits of the Licensed Premises on or before the Date of Commercial Operations

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II. In case of delay upto 180 days in provision of the road access upto boundary limits, the Licensor shall grant day-to-day extension in the Licence period. The delay ofmore than 180 days can be treated as a Licensor Event of Default.

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I. The Licensor shall not be responsible for provisioning of any road infrastructure within the boundary limits of the Licensed Premises.

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II. The Licensee is permitted to construct, operate and maintain road infrastructure within the boundary limits of the Licensed Premises and is allowed to charge tariffs, fees or levies for the same, as per applicable regulations.

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III. The Licensee shall be responsible for relevant permits and approvals for construction, operations and maintenance of road facilities within boundary limits.

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A perusal of clause 10.2 of the agreement would make it clear that in case of delay, the licensee can grant extension of the license period and the delay of more than 180 days can be treated as licensor event of default. Though it is stated that the respondent was given access to the road, the grievance of the respondent is that https://hcservices.ecourts.gov.in/hcservices/ such road is also used by others namely TNEB and the loading point is situate in the North and therefore, it takes a longer distance. In our considered view, these are all points to be decided not by this

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Court in an application under Section 9 of the Arbitration and Conciliation Act. Moreover, there is an in-built provision in the very agreement itself that in case of dispute, the matter shall be referred to an expert committee prior to taking recourse to Arbitration and Conciliation Act. Clause 24 relates to dispute resolution which provides as follows:-

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"24. Dispute resolution

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Save where expressly stated otherwise in this agreement, any dispute, difference or controversy of whatever nature howsoever arising under, out of or in relation to this agreement between the parties and so notified in writing by either party to the other (the "dispute") in the first instance shall be attempted to be amicably resolved by the "Expert Committee" in accordance with theprocedure set forth in Section 24.1

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A reading of Clause 24 of the agreement would make it clear that if there is any dispute, difference or controversy of whatever nature howsoever arising under, out of or in relation to this agreement between the parties in the first instance shall be attempted to be amicably resolved by the "Expert Committee" in accordance with the procedure set forth in Clause 24.1 of the agreement. Even in that clause, it was stated that pending the submission or and/or decision on a dispute, difference or claim by the expert committee, the parties shall continue to perform all their obligations under this agreement without prejudice to a final adjustment in accordance with such decision. In fact, clause 24.2 provides for Arbitration only if the dispute has not been resolved by the expert committee.

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In this case, if we read the affidavit filed by the respondent in support of O.A. No. 181 of 2011, no where it was stated that a reference was made to the expert committee and there was a failure to resolve the dispute and thereafter they have approached this Court by filing the application under Section 9 of the Arbitration and Conciliation Act, 1996. Therefore, without approaching the expert committee, as provided in the agreement, the respondent ought not to have invoked the jurisdiction of this Court under Section 9 of the Arbitration and Conciliation Act. Even assuming there was a breach of contract by the appellant, clause 11.4.2 of the agreement provides for extension of the licence period or for compensation. Clause 11.4.2 of the agreement reads as follows:-

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"11.4.2 Breach of Licensor's obligations:-

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In the event of the Licensor's failure/breach in meeting oblivations in Section 11.4.1, the Licensee shall, without prejudice to any other right or remedy available to it, be compensated by the Licensor for direct cost https://hcservices.ecourts.gov.in/hcservices/ incured to rectify the failure, if any, suffered by the Licensee on account of such failure/breach and substantiated by appropriate bills and proof

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of payment.

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Clause 11.4.2 of the agreement makes it clear that when there is a breach on the part of the licensor in performing their part of the obligation, without prejudice to any other right or remedy, the licensee will be compensated by the licensor for the direct costs incurred by them to rectify the failure, if any suffered by them on account of such failure. Therefore, it is clear that even if there is any breach, either the contract period will be extended or compensation will be made in terms of money. In this case, inasmuch as the respondent alleges breach on the part of the appellant, as per the clauses contained in the agreement, the respondent is only entitled for extension of contract or for compensation or the respondent ought to have approached the expert committee for redressal of their grievance without rushing to this Court within the application under Section 9 of the Arbitration and Conciliation Act, 1996. Therefore, we are of the considered view that the application filed by the respondent is pre-mature.

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The dispute has to be adjudicated only before the expert committee and not by filing an application under Section 9 of the Arbitration and Conciliation Act, 1996, as contained in Clause 24 of the agreement between the parties. We also find that when there are in-builts made in the agreement itself, while so, the respondent ought not to have approached this Court under Section 9 of the Arbitration and Conciliation Act, 1996. In fact, the appellant was able to prove through a chart the number of ships which were brought from 10.09.2010 upto 10.06.2011. Relying on the chart, the learned Senior Counsel for the appellant would point out that ships carrying coals with more than 50000 Metric Tonnes were able to be anchored in the appellant Port Trust which would indicate that the appellant had made provisions for the depth of the berth to accommodate the ships. Further, more than 16 ships have berthed in the bay upto June 2011, but the share of the appellant has not been paid.

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The learned Senior counsel for the appellant contends that there are amount due towards the revenue share of the appellant amounting to Rs.3 crores and therefore the respondent cannot be allowed to continue to have the berthing facility without payment of the revenue share to the appellant. The learned Senior Counsel for the respondent fairly submits that during the pendency of the proceedings before this Court, the respondent paid a sum of Rs.1,35,75,106/- to the appellant out of the Rs.3 crores due.

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It is always open to the respondent to approach the expert committee to ventilate their grievance as provided in the agreement in so far as provision of road is concerned. At the same time, the respondent cannot stop payment to the appellant, even assuming if there is any breach or violation on the part of the appellant. We also find from the contents of the agreement that the rights of the respondent is substantially safeguarded, particularly in case of breach. As rightly pointed out by the learned Senior Counsel for the appellant, even though there is specific clause in the event of nonhttps://hcservices.ecourts.gov.in/hcservices/ payment of the revenue share, they are entitled to terminate the contract, but they have not done so as the appellant wishes to give leverage to the respondent.

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The purpose of Section 9 is to provide an interim measure of protection to the parties to prevent the ends of justice from being defeated. When the contract between the parties is governed by the terms with in-built safeguards, the equitable discretion under Sec.9 cannot be exercised.

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Having regard to the facts and circumstances of the case, we hold that the respondent will be at liberty to approach the expert committee for redressal of their grievance, if any, as contemplated under Clause 24.1 of the agreement and consequently the application filed by the respondent under Section 9 of the Arbitration and Conciliation Act, 1996 is to be dismissed as premature.

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In the result, the appeal is allowed setting aside the order dated 02.03.2011 passed by the learned Judge in O.A. No. 181 of 2011. However, there shall be no order as to costs. Consequently, connected miscellaneous petition is closed.

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Sd/Asst. Registrar //true copy//

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Sub Asst.Registrar

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rsh To

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The Sub Assistant Registrar, Original Side, High Court, Madras

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2 cc to Mr.Krishna Ravindran, Advocate, Sr.No.46721, 47018

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2 cc to M/s.Satish Parasaran, Advocate, Sr.No.46827

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Judgment in OSA No. 196 of 2011

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KJ {CO} TP/2.8.2011.

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https://hcservices.ecourts.gov.in/hcservices/

Ennore Port Ltd. v. M/S. Chettinad International

Case brief

What is this about?

What did the court decide?

Ennore Port Ltd. v. M/S. Chettinad International

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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