Gujarat High Court
Board Of Trustees Of Kandla Port vs Abg Kandla Container Terminal Limited & ... on 16 August, 2013
Bench: M.R. Shah, Sonia Gokani
C/CA/8592/2013 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CIVIL APPLICATION (FOR STAY) NO. 8592 of 2013
In
FIRST APPEAL NO. 2183 of 2013
For Approval and Signature:
HONOURABLE MR.JUSTICE M.R. SHAH
and
HONOURABLE MS JUSTICE SONIA GOKANI
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1. Whether Reporters of Local Papers may be allowed to see YES
the judgment ?
2. To be referred to the Reporter or not ? YES
3. Whether their Lordships wish to see the fair copy of the NO
judgment ?
4. Whether this case involves a substantial question of law as to NO
the interpretation of the constitution of India, 1950 or any
order made thereunder ?
5. Whether it is to be circulated to the civil judge ? NO
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BOARD OF TRUSTEES OF KANDLA PORT....Applicant(s)
Versus
ABG KANDLA CONTAINER TERMINAL LIMITED & 2....Respondent(s)
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Appearance:
MR KEVIC SETALVAD, SR. ADVOCATE with MR DHAVAL D VYAS, ADVOCATE for the Appellant
MR MEHUL SHAH, ADVOCATE with MR BHARAT BHAVSAR, ADVOCATE for the Respondent No. 1
MR MIHIR THAKORE, SR. ADVOCATE with MR TARAK DAMANI, ADVOCATE for Respondent No.23
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CORAM: HONOURABLE MR.JUSTICE M.R. SHAH
and
HONOURABLE MS JUSTICE SONIA GOKANI
Date : 16/08/2013
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE M.R. SHAH) Leave to amend as prayed for is granted by correcting the name of respondent No.1 as Kandla Container Terminal Private Limited consequent upon the change of name of "ABG Kandla Container Page 1 of 20 C/CA/8592/2013 JUDGMENT Terminal Limited" to "Kandla Container Terminal Private Limited" as per the fresh certificate of incorporation dated 19 th July 2013 issued by the Government of India - Ministry of Corporate Affairs - Registrar of Companies, Maharashtra, Mumbai.
RULE. Shri Mehul Shah, learned advocate waives service of notice of Rule on behalf of respondent No.1 and Shri Tarak Damani, learned advocate waives service of notice of Rule on behalf of respondent Nos.2 and 3. In the facts and circumstances of the case and with the consent of learned advocates appearing on behalf of the respective parties, present application is taken up for final hearing today.
[1.0] Present application has been preferred by the applicant herein - original appellant - original opponent No.1 for an appropriate interim relief during the pendency and final disposal of the main First Appeal and to stay the further implementation, operation and execution of the order dated 24.06.2013 passed by the learned Additional District Judge, Gandhidham below Exh.5 in Arbitration Petition No.14/2013 [submitted under section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "Arbitration Act")].
[2.0] Facts leading to the First Appeal and the present Civil Application therein in nutshell are as under:
[2.1] That the applicant herein - original opponent No.1 - Board of Trustees of Kandla Port [hereinafter referred to as "KPT"] floated a global tender on 20.01.2004 inviting applications for a project at Kandla Port, which involved the design, engineering, financing, procurement, installation and commissioning of container handling equipments at or in Berth Nos.11 and 12 along with associated assets and structures, the area earmarked for container stack yard and such other areas as would be handed over or provided from time to time. That the KPT vide its Page 2 of 20 C/CA/8592/2013 JUDGMENT letter of intent dated 14.04.2006 accepted the bid of M/s. ABG Heavy Industries Limited subsequently named as ABG Infralogistics Limited for the project. As per the terms of the letter of intent, M/s. ABG Infralogistics Limited formed and/or constituted the respondent No.1 herein - original applicant - M/s. ABG Kandla Container Terminal Limited [hereinafter referred to as "ABG"] as a special purpose company. That the KPT and the ABG entered into the License Agreement on 23.06.2006 for carrying out the aforesaid project. That the License Agreement constituted a valid agreement between the parties and the terms and conditions of the same are binding on the ABG and KPT as the named licensee and licensor respectively. That the said License Agreement provided the terms and conditions and the obligations to be performed by the respective parties to the agreement i.e. licensee and the licensor. That Axis Bank and the UCO Bank are the lenders who have provided financial assistance for the project. That according to the ABG, as of 04.03.2013, the total debt due to the said lenders is Rs.111.38 Crore [hereinafter referred to as "Debt Due"].
Article 8.2 of the License Agreement provides that the AGP shall be entitled to hypothecate, assign or otherwise charge from time to time all its rights, title and interest in the Licensee's Assets [permitted charge] in favour of the lenders - Axis Bank and UCO Bank for securing financial assistance from them. Thus, the lenders would have a subsisting charge over the licensee assets in the licensed premises. Article 13 provides for termination/expiry of license. As per article 13.1, the party entitled to terminate the agreement either on account of a Force Majeure Event or on account of a Event of Default shall do so by issue of a termination notice in writing to the other party, specify the date therein, which shall not be a date prior to 90 days after the date of issuance of termination notice, by which it intends/requires the licensee to comply with the provisions of Clause 14.1.9. Article 13.3 provides for Consequences of Termination. Article 13.4 provides for Deemed Termination and article Page 3 of 20 C/CA/8592/2013 JUDGMENT 13.5 provides for Consequences of Deemed Termination. Article 15 of the License Agreement is with respect to the terminal compensation and it provides that in the event of termination of License Agreement, the KPT shall pay the ABG terminal compensation as consideration for taking over the licensee assets brought in by ABG for operating out of the licensed premises [terminal compensation]. As per Article 15.1.1, if the termination is deemed to a Force Majeure Event, the terminal compensation payable to the licensee shall be the Fair Asset Value as reduced by amounts, if any, due to the licensor from the licensee under the agreement, provided that the terminal compensation payable under the said clause shall in no event include the value of operation of any asset affected by Force Majeure Event, to the extent of the insurance claim received or admitted to be received by the licensee. As per clause 15.1.2 if the termination is due to a Licensee Event of Default, the terminal compensation payable by the KPT to the ABG shall be the lower of the amounts specified in sub clauses (i) & (ii) of clause 15.1.2. As per clause 15.1.3, in case of Deemed Termination or Termination due to, a Licensor Event of Default, or exercise by the licensor of its Right of Early Determination, the Terminal Compensation payable by the licensor shall be the aggregate of (1) the Debt Due and 2) the Fair Equity Value, as reduced by amounts, if any, due to the licensor from the licensee under the provisions of the said agreement.
The said agreement also provides for a Substitution Agreement to be entered into between the ABG and KPT and the lenders in terms of Article 17.4.2 and in the form set forth in Appendix XV of the License Agreement. Pursuant thereby the ABG, KPT and the lenders i.e. Axis Bank and UCO Bank have entered into the Substitution Agreement dated 20.12.2007. The Substitution Agreement also provides that in case of termination of the License Agreement by the KPT, the KPT shall intimate the lenders prior to exercise of its decision to terminate the license and advise the lenders to ensure the cure of the event which otherwise can Page 4 of 20 C/CA/8592/2013 JUDGMENT result in termination of the license and the License Agreement. It also further provides that such a notice shall entitle the lenders to cure any financial or other default of the licensee within a period of two months from the date of notice received from the KPT failing which KPT without any further notice to either the licensee or the lenders agent/lenders, shall be entitled to terminate the License Agreement [Article 5.1.1 of the Substitution Agreement]. As per Article 6.1.1, in the case of termination of the License Agreement, the KPT shall pay to the lenders the Terminal Compensation, to be deposited into such bank account as may be specified by the lenders and the lenders shall be entitled to receive the same without any further reference to or consent of the licensee under and in accordance with the License Agreement towards the satisfaction of the lenders dues out of and limited to the sum of Terminal Compensation worked out under and in accordance with the License Agreement.
[2.2] In the present case and it so happened and according to the KPT, the KPT terminated the License Agreement vide its Termination Notice dated 03.11.2012. Simultaneously and/or subsequent thereto the ABG also issued a termination notice dated 09.11.2012 terminating the License Agreement [there is a serious dispute as to who terminated the License Agreement first]. That on termination of the License Agreement, the KPT was to take the possession of licensed premises under the Agreement dated 23.06.2006. That according to the KPT, approximately Rs.60 to 70 Crore were due and payable by ABG towards minimum guaranteed amount and Rs.11 to 12 Crore were due and payable to the KPT by ABG towards Royalty and other amount was also due and payable towards lease rental. That as such and as per article 16 of the License Agreement, the dispute between the KPT and ABG was required to be resolved through arbitration only.
Page 5 of 20C/CA/8592/2013 JUDGMENT At that stage and after the ABG served a terminal notice dated 09.11.2012 upon the KPT terminating the License Agreement, the original applicant - ABG submitted an application in the Court of learned Additional District Judge, Gandhidham under section 9 of the Arbitration Act being Arbitration Petition No.14/2013 and prayed for the following reliefs.
"a) Direct Respondent No 1 to comply with its contractual obligation under the License Agreement by making payment of a sum of Rs.310.67 Crores calculated in terms of paragraph 41 above, as Terminal Compensation in the manner provided for in the License Agreement read with the Substitution Agreement, upon simultaneously taking possession of the Licensed Premises together with the License Assets from the Petitioner on 1st April, 2013 or such other date as this Hon'ble Court may deem fit;
b) pass an order and injunction restraining Respondent No 1 by itself and/or by its officers, agents, servants and subordinates from in any manner taking possession of the Licensed Premises along with the License Assets or from preventing the Petitioner and its representatives from accessing the Licensed Premises, without first making the payment in terms of Prayer a) above and as envisaged and mandated under the License Agreement;
c) that pending the hearing and final disposal of this petition this Hon'ble Court be pleased to pass an order and injunction restraining Respondent No.1 by itself and/or by its officers, agents, servants and subordinates from in any manner taking possession of the Licensed Premises along with the Licensee Assets or from preventing the Petitioner and its representatives from accessing the Licensed Premises, without first making the payment in terms of Prayer a) above and as envisaged and mandated under the License Agreement;
d) grant adinterim relief in terms of prayer (c) above;
e) pass an order for costs; and
f) pass such further and other orders as this Hon'ble Court may deem fit and proper in the facts and Page 6 of 20 C/CA/8592/2013 JUDGMENT circumstances of the case."
It appears that the said application under section 9 of the Arbitration Act has been submitted on 21.03.2013. It appears that in the said application under section 9 of the Arbitration Act, ABG - original applicant submitted one another application Exh.5 and prayed the following relief "a) pending the hearing and final disposal of this petition this Hon'ble Court be pleased to pass an order and injunction restraining Respondent No.1 by itself and/or by its officers, agents, servants and subordinates from in any manner taking possession of the Licensed Premises along with the Licensee Assets or from preventing the Petitioner and its representatives from accessing the Licensed Premises, without first making the payment in terms of Prayer a) above and as envisaged and mandated under the License Agreement;"
[2.3] That the learned Judge issued the urgent showcause notice on the application below Exh.5 making it returnable on 26.03.2013.
It was the case on behalf of the ABG that they first terminated the License Agreement and therefore, they were entitled to the terminal compensation as per Article 15.1.3 of the License Agreement. It was also the case on behalf of the original applicant - ABG that the termination notice issued by the KPT was subsequent to the notice of termination of License Agreement by ABG and even while issuing the termination notice by KPT, there was non compliance of Article 13 of the License Agreement. It was also the case on behalf of the original applicant - ABG that unless and until the terminal compensation as provided under clause 15.1.3 which comes to Rs.320.35 Crore is paid first, the KPT cannot take possession of the licensed premises. It was further submitted that out of the aforesaid amount of Rs.320.35 Crore, Rs.111.38 Crore is "Debt Due" due and payable to the lenders - Axis Bank and UCO Bank. It was submitted on behalf of the original Page 7 of 20 C/CA/8592/2013 JUDGMENT applicant - ABG that unless and until the debt due i.e. Rs.111.38 Crore is paid by KPT to the said lenders, KPT cannot take the possession of the licensed premises. It was also the case on behalf of the original applicant - ABG that even the notice issued by the KPT was bad in law, as no notice as required under the Substitution Agreement as well as the License Agreement was served upon the lenders - Axis Bank and UCO Bank. Therefore, it was requested to grant the interim protection restraining the KPT from taking the possession of the licensed premises unless and until the terminal compensation and the "debt due" are paid to it as well as to the lenders.
[2.4] The aforesaid application was vehemently opposed by the applicant herein - KPT. It was submitted on behalf of the KPT that their termination notice was prior in time. It was also further submitted on behalf of the KPT that even otherwise the termination notice issued by ABG was bad in law and not in consonance with the License Agreement more particularly Article 13. It was also the case on behalf of the KPT that a huge amount is due and payable by ABG to KPT. The KPT also disputed the "debt due" due and payable to the lenders - Axis Bank and UCO Bank. It was also the case on behalf of the KPT that unless and until the dispute between the parties is adjudicated upon in the arbitration proceedings and the amount of terminal compensation is determined, there is no question of depositing / paying any amount either to the ABG or to the lenders - Axis Bank and UCO Bank - original opponent Nos.2 and 3. It was also submitted on behalf of the KPT that they cannot be restrained from taking the possession of the licensed premises. Therefore, it was submitted that the reliefs which are sought in the application under section 9 of the Arbitration Act as well as application below Exh.5 are beyond the scope and ambit of section 9 of the Arbitration Act. Number of decisions were cited requesting to apply the principles governing grant of injunction/interim order as provided under Order 39 Rules 1 & 2 of the Code of Civil Procedure, 1908.Page 8 of 20
C/CA/8592/2013 JUDGMENT [2.5] The original opponent Nos.1 and 2 - lenders submitted that as such they are entitled to the "debt due" from the terminal compensation payable by KPT under Article 15 of the License Agreement and therefore, to that extent they supported the case of the original applicant - ABG.
[2.6] After hearing the learned counsel appearing for the respective parties, the learned Additional District Judge, Gandhidham has passed the impugned order below Exh.5 and has partly allowed the said application Exh.5 and has restrained the KPT from taking the possession of the terminals (licensed premises) unless and until the KPT pays to the banks/lenders the amount of terminal compensation after deducting the amount towards royalty and license fee due and payable by the ABG - original applicant. The learned Additional District Judge has also passed a further order that till the possession of the terminals is retained by the original applicant - ABG, they shall pay the amount towards royalty and the license fee to the KPT regularly. The learned Judge has also further passed an order directing to initiate the arbitration proceedings by the respective parties.
Feeling aggrieved and dissatisfied with the impugned order dated 24.06.2013 passed below Exh.5 in Arbitration Petition No.14/2013 [application under section 9 of the Arbitration Act] by the learned 3 rd Additional District Judge, Gandhidham, Kutch, the applicant herein - KPT has preferred the First Appeal under Section 37 of the Arbitration Act, which has been admitted and has preferred the present application for the aforesaid interim relief during the pendency and final disposal of the main First Appeal.
[3.0] Shri Setalvad, learned Senior Advocate appearing on behalf of the applicant herein - KPT has vehemently submitted that the impugned order passed by the learned Judge cannot be sustained. It is submitted that as such the learned Judge has not properly appreciated the scope Page 9 of 20 C/CA/8592/2013 JUDGMENT and ambit under section 9 of the Arbitration Act. It is submitted that the relief which has been granted by the learned Judge in an application under section 9 of the Arbitration Act is beyond the scope and ambit of section 9 of the Arbitration Act.
[3.1] It is further submitted by Shri Setalvad, learned counsel appearing on behalf of the applicant herein - KPT that as such while passing the impugned order the learned Judge has given the findings that both the termination notices by KPT as well as ABG are illegal and bad in law, which is not permissible. It is submitted that while deciding the application under section 9 of the Arbitration Act and/or interim application, it was not open for the learned Judge to give specific finding with respect to the termination notices.
[3.2] It is further submitted by Shri Setalvad, learned counsel appearing on behalf of the applicant herein - KPT that the learned Judge has not appreciated the fact that as such the amount of terminal compensation is yet to be adjudicated upon by the arbitrator and in arbitration proceedings. It is submitted that even alleged "Debt Due" due and payable to the lenders - Axis Bank and UCO Bank was disputed by the KPT. It is submitted that therefore the learned Judge has materially erred in considering the "Debt Due" as Rs.111.38 Crore.
[3.3] It is further submitted by Shri Setalvad, learned counsel appearing on behalf of the applicant herein - KPT that as such by passing the impugned order the learned Judge has passed a decree in favour of the lenders - Axis Bank and UCO Bank which is not permissible. It is further submitted by Shri Setalvad, learned counsel appearing on behalf of the applicant herein - KPT that the learned Judge has not properly appreciated the fact that as such the lenders - Axis Bank and UCO Bank
- original opponent Nos.2 and 3 have never made any grievance and/or Page 10 of 20 C/CA/8592/2013 JUDGMENT even prayed to pay their "Debt Dues" from the terminal compensation and/or made any grievance with respect to noncompliance of the provisions of the Substitution Agreement and/or even the License Agreement.
[3.4] It is further submitted by Shri Setalvad, learned counsel appearing on behalf of the applicant herein - KPT that even a huge amount is due and payable by the ABG to the KPT towards minimum guaranteed amount; lease rental; royalty etc. It is further submitted that as such and in view of the termination of the License Agreement, the KPT is entitled to get back the possession of the terminals/licensed premises.
[3.5] It is further submitted by Shri Setalvad, learned counsel appearing on behalf of the applicant herein - KPT that while passing the impugned order the learned Judge has not dealt with and/or considered any of the decisions cited at the Bar on behalf of the KPT. It is further submitted that KPT may be permitted to take the possession of the terminals/licensed premises on any condition that may be imposed by this Court.
Making above submissions, it is requested to allow the present application.
[4.0] Present application is opposed by Shri Mehul Shah, learned advocate appearing on behalf of the original applicant - ABG. It is submitted that whatever the observations are made by the learned Judge while passing the impugned order and with respect to the termination notices are to be treated as prima facie finding while deciding the interim application below Exh.5. It is submitted that considering article 15.1.3 of the License Agreement and other articles and the articles of the Substitution Agreement, learned Judge has not committed any error Page 11 of 20 C/CA/8592/2013 JUDGMENT and/or illegality in passing the impugned order.
[4.1] It is further submitted by Shri Mehul Shah, learned advocate appearing on behalf of the original applicant - ABG that as such in the present case the termination notice by ABG was first in point of time and the termination was due to Licensor Event of Default [KPT] and therefore, the KPT was liable to pay the terminal compensation to ABG as per article 15.1.3 of the License Agreement inclusive of the "Debt Due" i.e. in all Rs.320.35 Crore. It is submitted that as per article 15.1.3 of the License Agreement read with Article 6.1.1 of the Substitution Agreement, the lenders - Axis Bank and UCO Bank were first entitled to "Debt Due" i.e. Rs.111.38 Crore, which was to be paid from the terminal compensation to be paid by the KPT to ABG and therefore, the learned Judge has not committed any error and/or illegality by directing the KPT to pay the "Debt Due" due and payable to the lenders - Axis Bank and UCO Bank first while taking the possession of the terminals / licensed premises. It is submitted that therefore, on payment of Rs.111.38 Crore to the lenders - Axis Bank and UCO Bank, there shall not be any liability of ABG to the lenders, meaning thereby thereafter nothing is further due and payable by ABG to the lenders - Axis Bank and UCO Bank.
[4.2] It is further submitted by Shri Mehul Shah, learned advocate appearing on behalf of the original applicant - ABG that considering Article 13.1 of the License Agreement read with Article 5.1.1 of the Substitution Agreement, the learned Judge has rightly held that a termination notice issued by KPT is invalid and bad in law and contrary to the aforesaid provisions. It is submitted that under Article 13.1 of the License Agreement, while issuing the termination notice, the date of termination is required to be specified, which shall not be a date prior to 90 days after date of issuance of termination notice. It is submitted that Page 12 of 20 C/CA/8592/2013 JUDGMENT in the present case the aforesaid has not been complied with. It is further submitted that even as per Article 5.1.1 of the Substitution Agreement while terminating the License Agreement, KPT was required to first serve the notice upon the lenders which has also not been complied with. It is submitted that therefore the learned Judge has not committed any error in declaring the termination notice issued by the KPT as invalid and/or bad in law. It is submitted that in that view of the matter the ABG - original applicant shall be entitled to the terminal compensation i.e. Rs.320.35 Crore [inclusive of "Debt Due" of Rs.111.38 Crore] and therefore, unless and until the lenders are paid the "Debt Due" first the KPT shall not be entitled to take back the possession of the terminals/licensed premises.
Making above submissions, it is requested to dismiss the present application and not to grant any interim relief as prayed for.
[5.0] Shri Mihir Thakore, learned Senior Advocate appearing on behalf of the lenders - Axis Bank and UCO Bank has stated at the Bar that on furnishing the Bank Guarantee of 50% of the "Debt Due" in favour of Registrar General, Gujarat High Court and on furnishing the security of the balance 50% of the "Debt Due" before the Registrar General, Gujarat High Court, if the KPT is permitted to take back the possession of the terminals/licensed premises and therefore, to that extent the interest of the lenders is protected, opponent Nos.2 and 3 - lenders - Axis Bank and UCO Bank has no objection. However, has requested to make suitable observation that by the aforesaid, the rights of the lenders to recover any amount due and payable by ABG to the lenders are not affected and it will be open for the lenders to initiate appropriate proceedings against the licensee - ABG.
At this stage, Shri Mehul Shah, learned advocate appearing on behalf of ABG - original applicant has also requested to make suitable Page 13 of 20 C/CA/8592/2013 JUDGMENT observations that the case on behalf of the original applicant - ABG that hereinafter there shall not be any further liability of interest on the "Debt Due" of ABG, the said question also be kept open to be agitated before the appropriate Forum in appropriate proceedings.
[6.0] Heard learned counsels appearing for respective parties at length.
At the outset it is required to be noted that on passing appropriate order in the present application and staying further implementation, execution and operation of the impugned order passed by the learned Judge and consequently permitting the KPT to take back the possession of the terminals/licensed premises on conditions stated hereinafter and for the reasons stated hereinafter and considering the fact that the present proceedings has arisen out of the proceedings under section 9 of the Arbitration Act, as such no further order is required to be passed in the First Appeal and as such it will tantamount to allowing the First Appeal and therefore, we suggested that the First Appeal itself be disposed of in terms of the present order. To that Shri Mehul Shah, learned advocate appearing on behalf of the original applicant has stated at the Bar that the original applicant is ready to take the risk and has not agreed to dispose of the main First Appeal in terms of the present order. Therefore, we are required to pass the order in the present application for interim relief only.
[6.1] At the outset it is required to be noted that the ABG - licensee - original applicant has submitted the application before the learned Judge for interim relief/interim measures reproduced hereinabove, under section 9 of the Arbitration Act. In the said application under section 9 of the Arbitration Act, ABG - original applicant submitted interim injunction application below Exh.5 as if the application under section 9 for interim measure is a suit. It is to be noted that the Page 14 of 20 C/CA/8592/2013 JUDGMENT application under section 9 of the Arbitration Act itself is for interim measure. It is to be noted that while passing the impugned order below Exh.5 the learned Judge has virtually allowed the application under section 9 of the Arbitration Act. It appears that the application for interim measure under section 9 of the Arbitration Act has been kept pending. It is to be noted that even while passing the impugned order, the learned Judge has specifically observed that parties to initiate the arbitration proceedings. Thus, it appears that while passing the impugned order below Exh.5, the learned Judge has passed the order as if he has passed the final order in the application under section 9 of the Arbitration Act. While passing the impugned order and partly allowing the application Exh.5 in application under section 9 of the Arbitration Act, as such the learned Judge has restrained the KPT from taking the possession of the terminals unless and until the "Debt Due" due and payable to the lenders - original opponent Nos.2 and 3 - Axis Bank and UCO Bank is first paid. Thus, it appears that the learned Judge has as such not appreciated the scope and ambit of section 9 of the Arbitration Act. It appears that the learned Judge has conducted the proceedings as if he is conducting the suit and the application for interim injunction below Exh.5.
[6.2] In the present case the original applicant - ABG - licensee submitted the application for interim measure under section 9 of the Arbitration Act, by submitting the arbitration petition before the learned Additional District Judge, to restrain the KPT from taking back the possession of the terminals/licensed premises submitting that unless and until the terminal compensation as provided under Article 15.1.3 is first deposited/paid by the KPT and/or the "Debt Due" due and payable to the lenders - original opponent Nos.2 and 3 - Axis Bank and UCO Bank to the extent of Rs.111.38 Crore is first paid to the lenders, the KPT Page 15 of 20 C/CA/8592/2013 JUDGMENT cannot take back the possession of the licensed premises. It is not in dispute that initially ABG - original applicant submitted that unless and until entire amount of terminal compensation i.e. Rs.320.35 Crore [inclusive of the "Debt Due" of Rs.111.38 Crore] is deposited by the KPT, KPT cannot be permitted to take back the possession of the licensed premises. However, subsequently, they restricted their prayers and submissions submitting that unless and until the amount of Rs.111.38 Crore ["Debt Due"] due and payable to the lenders - Axis Bank and UCO Bank is deposited and/or paid to the lenders, the KPT may be restrained from taking back possession of the licensed premises. The learned Judge has accepted the above and by impugned order has restrained the KPT from taking back the possession of the licensed premises unless and until the "Debt Due" is deposited/paid to the original opponent Nos.2 and 3 - lenders, which according to the original applicant - ABG would be Rs.111.38 Crore. At this stage, it is required to be noted that so far as the original opponent Nos.2 and 3 - Axis Bank and UCO Bank - lenders are concerned, they have never made any grievance with respect to breach of any of the provisions of the License Agreement and/or the Substitution Agreement. They have also never come forward and said that before the KPT takes back the possession of the licensed premises from the original applicant - ABG, they shall be first paid their "Debt Due". It is also required to be noted that even whether the "Debt Due"
would be Rs.111.38 Crore is also disputed by the KPT. Thus, there is a serious dispute with respect to even the "Debt Due" due and payable to the lenders. It is also required to be noted that as such the dispute between the licensor and licensee with respect to the termination notices and the terminal compensation and even the "Debt Due" are yet to adjudicated in arbitration proceedings. Whether the terminal notices are due to the reasons attributable to the licensor or licensee is also to be considered and determined in the arbitration proceedings. It is required Page 16 of 20 C/CA/8592/2013 JUDGMENT to be noted that in the present case while deciding the application for interim measure in a proceeding under section 9 of the Arbitration Act and by passing the impugned order the learned Judge has virtually given the finding that both the termination notices - the termination notice issued by KPT and even issued by ABG are invalid and bad in law. Such findings given by the learned Judge while passing the impugned order are beyond the scope and ambit of section 9 of the Arbitration Act. While passing the order for interim measures under section 9 of the Arbitration Act such a finding given by the learned Judge is not permissible. Thus, it prima facie appears that the learned Judge has exercised the jurisdiction not vested in it and/or has exceeded in its jurisdiction in passing the impugned order. At this stage it is required to be noted that so far as the original applicant is concerned, it has not preferred any appeal against the aforesaid findings and has not preferred the appeal against the impugned order.
[6.3] It is also required to be noted at this stage that in the present case both KPT as well as ABG are claiming that they have issued the termination notices. So far as the finding given by the learned Judge that the termination notice issued by ABG is invalid and bad in law [though not permissible at this stage] has been accepted by ABG and they have not preferred any appeal against the impugned order. As such ABG is satisfied with the impugned order by which the KPT is restrained from taking back the possession of the terminals/licensed premises from it unless and until the "Debt Due" are paid to the original opponent Nos.2 and 3 and as stated hereinabove so far as the original opponent Nos.2 and 3 - lenders are concerned, Shri Thakore, learned counsel appearing on behalf of opponent Nos.2 and 3 - lenders has stated at the Bar that they have no objection if the impugned order is modified and KPT is permitted to take back the possession of the terminals/licensed Page 17 of 20 C/CA/8592/2013 JUDGMENT premises from the ABG on furnishing the Bank Guarantee of 50% of the "Debt Due" in favour of Registrar General, Gujarat High Court and on furnishing the security of the balance 50% of the "Debt Due" before the Registrar General, Gujarat High Court.
[6.4] Now, so far as the impugned order passed by the learned Judge restraining the KPT from taking back the possession of the terminals/licensed premises from the original applicant - ABG unless and until the "Debt Due", which according to the original applicant would be Rs.111.38 Crore is paid by KPT to the lenders - original opponent Nos.2 and 3 after deducting the amount of royalty and the license fee due and payable by ABG to KPT is concerned, Shri Mihir Thakore, learned Senior Advocate appearing on behalf of the original opponent Nos.2 and 3 - Axis Bank and UCO Bank has stated at the Bar that instead of aforesaid order of depositing/paying the "Debt Due" to the original opponent Nos.2 and 3 as ordered by the learned Judge, if the KPT is directed to furnish the Bank Guarantee of Rs.55 Crore in the name of Registrar General, Gujarat High Court and is directed to furnish the security of the balance amount to the satisfaction of the Registrar General, Gujarat High Court and on that KPT is permitted to take back the possession of the licensed premises, the original opponent Nos.2 and 3 - lenders have no objection. However, has requested to make observation that the same shall be without prejudice to the rights of the lenders to initiate appropriate proceedings for recovery of the "Debt Due" and/or recovery of any amount/dues against the ABG. As stated hereinabove, so far as the original applicant is concerned, they have not preferred any appeal against the impugned order. Shri Setalvad, learned counsel appearing on behalf of the applicant herein - KPT has stated at the Bar that applicant is ready and willing to furnish the Bank Guarantee of Rs.55 Crore in the name of Registrar General, Gujarat High Court and Page 18 of 20 C/CA/8592/2013 JUDGMENT is also ready and willing to furnish the security with respect to the balance amount of Rs.55 Crore, security to the satisfaction of the Registrar General, Gujarat High Court, while staying the impugned order passed by the learned Judge and consequently permitting the applicant to take back the possession of the terminals/licensed premises. However, has stated that the same shall be without prejudice to the rights and contentions of the KPT disputing the "Debt Due" to the extent of Rs.111.38 Crore and by way of interim measure only and without prejudice to the rights and contentions in the arbitration proceedings that may be initiated.
[7.0] In view of the above and for the reasons stated above, present application succeeds. There shall be stay of further implementation, execution and operation of the impugned order dated 24.06.2013 passed by the learned 3rd Additional District Judge, Gandhidham below Exh.5 in Arbitration Petition No.14/2013 and the aforesaid order passed by the learned 3rd Additional District Judge, Gandhidham to the extent restraining the KPT from taking back the possession of terminals/licensed premises from original applicant - ABG unless and until the "Debt Due" are paid to the original opponent Nos.2 and 3, after deducting the amount of royalty and the license fee due and payable by the ABG to KPT is stayed and by way of interim measure it is directed that on furnishing the Bank Guarantee of Rs.55 Crore in the name of Registrar General, Gujarat High Court and furnishing the security to the satisfaction of the Registrar General, Gujarat High Court of the like amount i.e. Rs.55 Crore which shall be continued till the final disposal of the appeal and/or till the arbitration proceedings, if any instituted, are disposed of or whichever is later, to be furnished within a period of six weeks from today, KPT is permitted to take back the possession of the terminals/licensed premises from the ABG which is subsequently named Page 19 of 20 C/CA/8592/2013 JUDGMENT as "Kandla Container Terminal Private Limited" and/or whoever is found to be in possession of the licensed premises. However, the aforesaid shall be by way of interim measure and without prejudice to the rights and contentions of the respective parties in arbitration proceedings that may be initiated inclusive of without prejudice to the rights of the lenders - original opponent Nos.2 and 3 - Axis Bank and UCO Bank to initiate appropriate proceedings against the ABG which is subsequently renamed as "Kandla Container Terminal Private Limited". Even the contention on behalf of the ABG - original applicant that hereinafter there shall not be any further liability of interest on the amount due and payable to the lenders - Axis Bank and UCO Bank is also kept open and as and when such contentions are raised, the same be considered in accordance with law and on merits. Rule is made absolute to the aforesaid extent. No costs.
Before parting with the order, we are again observing that we are conscious of the fact that by passing the present order and granting the relief as stated hereinabove, no further order is required to be passed in the First Appeal now. In fact and as observed hereinabove, we proposed to disposed of the main First Appeal in terms of the present order, however, learned advocate appearing on behalf of the respondent No.1 herein - original applicant has requested us not to dispose of the appeal finally in terms of the present order and therefore, we have no other alternative but to keep the First Appeal pending and pass the present order.
sd/ (M.R. SHAH, J.) sd/ (MS SONIA GOKANI, J.) Ajay Page 20 of 20