Allahabad High Court
Hba Offshore Pte. Ltd. vs Samsung Heavy Industries India Private ... on 14 November, 2022
Bench: Manoj Kumar Gupta, Jayant Banerji
HIGH COURT OF JUDICATURE AT ALLAHABAD A.F.R. RESERVED Court No. - 21 Case :- APPEAL UNDER SECTION 37 OF ARBITRATION AND CONCILIATION ACT 1996 No. - 94 of 2022 Appellant :- Hba Offshore Pte. Ltd. Respondent :- Samsung Heavy Industries India Private Limited Counsel for Appellant :- Vinayak Mithal Counsel for Respondent :- Kartikeya Saran Hon'ble Manoj Kumar Gupta,J.
Hon'ble Jayant Banerji,J.
(Per : Hon'ble Jayant Banerji, J.)
1. This appeal under Section 37 of the Arbitration and Conciliation Act, 1996 arises out of the order dated 26.8.2022 passed by a learned Judge on an application filed by the appellant under Section 9 of the Arbitration and Conciliation Act, 19961 (Arbitration & Conciliation Application u/s 11(4) No.- 98 of 2022, HBA Offshore Pte. Ltd. Vs. Samsung Heavy Industries Limited India), whereby that application was dismissed.
BACKGROUND:
2. As it appears in the appellant's affidavit, the respondent floated a tender/RFQ (request for quote) for their project-provision of Accommodation Work Barge2, with associate services required during the Hook-up and commissioning of RUBY FPSO for Reliance Industries Limited at MJ Field, in the block KG-DWN-98/3 (KG-D6), in the Bay of Bengal, East Coast of India on 23.2.2022. At the bidding stage, the appellant, inter alia, offered a Floatel Vessel called ''Nor Goliath'3 to the respondent and also submitted all technical documents and certificates pertaining to the said vessel to the respondent. Telford Marine DMCC4 is the disponent owner of ''Nor Goliath' which was to provide the said vessel to the respondent through the appellant. Based on the request of the respondent, the appellant also obtained a confirmation letter from Telford pertaining to the said vessel and also provided the preliminary mobilization plan of the said vessel from Walvisbay, Namibia to UAE and from UAE to Kakinada, India. The respondent issued a Letter of Intent5 on 28.4.2022 to the appellant regarding the work of AWB on the terms and conditions set out in the LOI. The LOI authorized the appellant to commence the work including the detailed design pedestal and gangway foundation, including procurement of material, fabrication of pedestal and gangway foundation and installation of gangway pedestal6. The LOI was valid and binding till 14.5.2022 and was to be superseded by a full-fledged contract, that is, the General Conditions of the Contract and all exhibits thereto7, under which the appellant was required to continue to perform the work at the date of execution of GCC, upon the parties reaching an agreement on the outstanding terms and conditions.
3. Under the LOI, the appellant was to make provision for AWB (Nor Goliath) retrofitted with electric-hydraulic telescopic personnel transfer gangway from another vessel namely, Telford 25 to Nor Goliath. This installation activity was required to be carried out at UAE. After the installation of gangway, the respondent was required to inspect Nor Goliath and any observation and comments during the inspection were to be satisfactorily resolved by the appellant to make the said vessel ''fit for purpose' before it departed from UAE to Kakinada, India.
4. The appellant submitted to the respondent a contracting commitment letter dated 9.5.2022 from Telford. By this letter, Telford acknowledged that it was committed to provide Nor Goliath for the duration of the project and operate jointly in India with the appellant to support the respondent for AWB with associated services during hook-up and commissioning of RUBY FPSO at MJ Field, in the block KG-DWN-98/3 (KG-D6), in the Bay of Bengal, East Coast of India, subject to the terms of the LOI.
5. The appellant, by an e-mail dated 11.5.2022 sought extension from the respondent of the timeline/LOI till 20.5.2022. The appellant was granted the extension and the binding of the LOI was extended from 14.5.2022 to 20.5.2022 by means of a letter dated 13.5.2022 sent by the respondent. The letter of the respondents recorded that all other terms and conditions of the LOI would remain unchanged. A second extension of the LOI/timeline was sought by the appellant from the respondent till 31.5.2022. The respondent issued a letter to the appellant granting the extension and extending the binding of the LOI uptil 31.5.2022. This letter of the respondent also recorded that all other terms and conditions of the LOI would remain unchanged.
6. By a letter dated 22.5.2022, the appellant requested the respondent to issue a revised LOI duly incorporating the critical open items as was requested by Telford. In response, the respondent by a letter of 25.5.2022 acknowledged the list of critical open items and offered meeting the appellant at its Noida office on 26.5.2022 to discuss and conclude the open item and finalize the contract.
7. The aforesaid meeting took place on 25.5.2022 and 26.5.2022 at Noida office of the respondent and various activities/items in furtherance of the work and GCC to be executed were discussed between the appellant and the respondent including the scheduled mobilization of Nor Goliath at Kakinada. As per the revised plan, Nor Goliath was to be mobilized from Cape Town to Batam, Indonesia, where vessel modification works to be carried out, and, thereafter to arrive at Kakinada for the project. This schedule was revised due to change in the schedule of gangway donor vessel T-25. It is stated in the application that as per the revised plan, Nor Goliath was to reach Kakinada around 22.8.2022. The minutes of the meeting held on 26.5.2022 were exchanged between the parties which were on the basis of the discussion held between them on 25.5.2022 and 26.5.2022. It is stated that a detailed and productive meeting was again held on 30.5.2022 between the appellant and the respondent at Noida office of the respondent in which majority of the terms were amicably resolved, that is to say, out of 18 items activities which was open, the appellant and the respondent mutually agreed and closed 15 items. It is further stated that at the end of the meeting, the only open/pending items were (a) increase in mobilization fee (b) Covid cost and (c) IGST refund.
8. It is stated that neither during the joint meeting held on 30.5.2022 nor in the letter dated 31.5.2022 issued by the respondent was there any discussion or reference with respect to the validity of the LOI expiring on 31.5.2022.
9. The appellant, by letter dated 2.6.2022 did not agree to the proposal communicated by the respondent regarding the aforesaid three open/pending items and submitted, on the request of the respondents, a break down of additional mobilization cost of USD 1 million. In response thereto, the respondent issued a letter on 3.6.2022, expressing its difficulty to the proposal of the appellant with respect to the mobilization payment schedule for mobilization fee. The respondent offered a corporate guarantee as against the appellant's proposal for offering Stand by Letter of Credit8. By its letter, the respondent conveyed its commitment on payment of mobilization fee and again asked the appellant to review and confirm its acceptance on the proposal set out by the respondent in the said letter for taking steps towards execution of the GCC in furtherance of the LOI.
10. The appellant and the respondent had a virtual meeting on 6.6.2022 to discuss the draft SBLC circulated by the appellant in furtherance to closing the issue pertaining to mobilization fee. The respondent by e-mail on 6.6.2022 sent the draft SBLC with its comment on the basis of the discussion held at the virtual meeting. By e-mail dated 7.6.2022, the respondent also sought details of the swift code of the bank concerned, details of beneficiaries etc. It is stated that detailed meetings were held on 8.6.2022 and 9.6.2022 between the representatives of the appellant and the respondent at Noida office of the respondent. The appellant sent e-mails to the respondents on 12.6.2022 and 14.6.2022 and since no response was forthcoming from the respondents a reminder e-mail was sent on 16.6.2022.
11. The appellant received an e-mail from the respondents on 19.6.2022 stating that as the validity of the LOI had expired without any agreement on GCC and all the exhibits, the LOI stood null and void. Being aggrieved by the action of the respondent and declaring LOI null and void the aforesaid application under Section 9 of the Act of 1996 was filed seeking the following reliefs:-
"It is, therefore, MOST RESPECTFULLY PRAYED that pending the commencement and completion of the Arbitral proceedings between the Petitioner and the Respondent under the Letter of Intent dated 28 April 2022, as extended from time to time (either expressly or by implication and conduct of parties) and for a period of 90 days thereafter, the Hon'ble Court may be pleased to:
I. Issue an appropriate order or direction of granting an injunction exercising the powers conferred upon it under Section 9 of the Arbitration and Conciliation Act, 1996 restraining the Respondent by itself or through its group, parent, subsidiary, holding, affiliate companies, servants and/or agents from entering into, awarding/executing, implementing the contract for provision of Accommodation Work Barge (AWB), with associate services required during the Hook-up and Commissioning of RUBY FPSO for Reliance Industries Limited at MJ Field, in the block KG-DWN 98/3 (KG-D6), in the Bay of Bengal, East Coast of India, with a third party, for which the LOI was awarded in favour of the Applicant, and/or pass such order and further order as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case, otherwise, the applicants will suffer an irreparable loss and injury.
II. Issue an appropriate order or direction granting an ad interim relief ex parte and/or otherwise in terms of Prayer (1) above;
III. Award the costs of the present petition in favour of the Applicant and against the Respondent; and IV. Issue such further appropriate orders or direction which this Hon'ble Court may deem fit in the facts and circumstances of the present case in the best interest of justice, equity and good conscience."
12. In its counter affidavit, the respondent stated that under the terms of LOI the award of final contract was subject to agreement of GCC and had to be discussed and closed before 14.5.2022. In the meeting of 26.5.2022, the appellant proposed a total 18 deviations from the originally agreed terms. The parties tried to conclude and reach agreement on the deviations proposed but despite efforts and substantial opportunities granted to the appellant, the parties were not able to reach consensus on all the proposed deviations. After lapse of extended timeline, the respondent finally informed the appellant on 19.6.2022 that LOI has expired without an agreement on GCC and LOI stands null and void. The respondent has already awarded a contract to a third party, namely, Bhambani Shipping Limited, on 27.6.2022. The aforesaid application under Section 9 of the Act of 1996 is infructuous and the remedy for the appellant, if any, lies in invoking arbitration. No steps have been taken by the appellant to initiate arbitration which shows their malafide intent. It is stated that LOI expired by efflux of time upon non-fulfillment of the condition precedent which provided that the LOI to award work would be binding on the parties only upon fulfillment of the condition precedent on or before 14.5.2022 by a formal confirmation letter which was admittedly never fulfilled. The contract being determinable in nature, no injunction can be granted. No injunction can be granted to prevent breach of a contract, the performance of which cannot be specifically enforced and the contract being determinable cannot be specifically enforced. It is stated that the LOI was not a concluded contract and thus no rights arise therefrom and, therefore, no injunction can be sought consequent to its termination. It is submitted that the appellant belatedly raised 18 fresh demands/deviations post issuance of LOI out of which, the respondent was, bonafide, negotiating to agree on some, even though they were substantially different and the main reasons which were attributed to the non-agreement on the terms of the GCC were, inter alia, as follows:
"(a) Increase in the mobilization fee by USD $ 1,000,000 beyond the agreed mobilization fee in LOI.
(b) Payment in foreign currency at Singapore account, which the respondent could not have made in view of Reserve Bank of India guidelines.
(c) Issue of SBLC (Stand by letter of credit) in favour of appellant's bank instead of the appellant itself so that appellant can secure loan from his banker and in case of non-payment by the appellant of the loan amount, respondent's SBLC shall be invoked.
(d) Covid cost shall be paid in addition to contract value with 15% mark-up.
(e) Cost for refund of Duty Draw back of the IGST paid on the AWB importation shall be paid in addition to contract value with 15% mark-up.
(f) Issue of contract in favour of new entity, (HBC RUBY PTE LTD. Singapore, special purpose vehicle) and parent company guarantee was not from the financially sound parent."
13. While considering the application under Section 9 of the Act of 1996, the learned Judge, after considering the record and the arguments raised on behalf of the parties, observed that there were number of contentious issues which remained unresolved between the parties in meetings held during the extended period, that is, on 26.05.2022 and 30.05.2022. The Court held that the LOI was not a concluded agreement, and that under a contract which is determinable at any event provided in the LOI, the action of the parties cannot be enforced through the Court and the same is barred by provisions of Section 14(d) of the Specific Relief Act, 19639. The learned Judge further held that after the LOI was held to be null and void on 19.06.2022, the respondents had entered into a contract with third party on 27.06.2022 which is before the filing of the application under Section 9 of the Act of 1996 and, therefore, the application is not maintainable and the only remedy available to the applicant-company is for invocation of the arbitration clause. It was further held that the applicant (the appellant) cannnot claim any relief due to the contract having been made and entered on 27.06.2022 executed on a stamp paper dated 06.04.2022.
SUBMISSIONS OF THE LEARNED COUNSEL
14. On behalf of the appellant, it has been urged that where there is a case of fraud, injunction can be granted. Learned counsel has drawn attention of the Court to e-mails of 7.6.2022 (enclosed with the supplementary affidavit) sent on behalf of the appellant to the officials of the respondent alongwith drawings to demonstrate that the additional information regarding AWB was being supplied to the respondent even after 31.5.2022. Learned counsel has also referred to a report of 11.6.2022 made by a representative of the respondent in respect of survey done on 10.6.2022 of AWB, in which the overall condition of vessel of Nor Goliath was found to be good. Learned counsel has further referred to e-mails dated 3.6.2022 and, 11.6.2022, a letter of 11.6.2022 and, another e-mail of 12.6.2022 in an attempt to demonstrate that outstanding matters were attempted to be resolved with all earnestness.
15. It is stated that malafide conduct of the respondent and fraud played by it would vitiate all the acts done by the respondent towards awarding the contract dated 27.6.2022 to a third party, Bhambhani Shipping Limited, thereby making the said contract null and void. It is stated that LOI was declared as null and void on 19.6.2022 arbitrarily, unilaterally and wrongfully given the fact that the appellant and respondent were on the verge of finalizing and executing the GCC in furtherance of the LOI. Within a week from declaring the LOI to be null and void, the respondent discussed, negotiated, finalized and even executed a full-fledged contract with Bhambhani Shipping on 27.6.2022. The RFQ was floated by the respondent in March 2022 and the discussion between appellant and the respondent extended for a period over a month before LOI was executed on 28.4.2022. Post execution of LOI and commencement of works as provided under LOI, the respondent and the appellant discussed and negotiated other terms for a month and a half before they could execute the GCC and all exhibits. It was submitted that for a contract of such nature and quantum, it was practically impossible for the respondent and Bhambhani Shipping to negotiate, finalize and execute the contract in such a short span of time. The fraud on part of the respondent is sought to be demonstrated as follows:-
(i) The contract entered into between the respondent and Bhambhani Shipping on 27.6.2022 was on e-stamp paper issued on 6.4.2022 which hinges towards the fact that the respondent was negotiating 'parallelly' with Bhambhani Shipping and in order to give contract to Bhambhani Shipping circumvented the appellant by wrongfully and without any basis declaring the LOI null and void. Telford, which was engaged by and introduced to the respondent by the appellant, colluded with the respondent to provide their services and vessel, Nor Goliath, for the purposes of project, whereas, the bid of Bhambhani Shipping for the tender floated by the respondent at the relevant time was with regard to a vessel that was non-compliant as it did not meet the requirements as was desired for the purposes of performing the works for the project.
(ii) If the respondent genuinely wanted to award contract to a third party after declaring the LOI null and void, the respondent could have floated a fresh tender and invited fresh bids which was not done.
(iii) The appellant was continuing with its discussion with the respondent even after 31.5.2022 in good faith, and conduct of the respondent at that point of time did not give the appellant any reason for doubting its intentions. Several actions were taken by the appellant and the respondent even after 31.5.2022 in furtherance of their obligations under the LOI to achieve closure and execution of GCC.
16. It is contended that place of installing the gangway on the AWB was changed from UAE to Batam, Indonesia. Reference was made to letter issued by Telford on 29.3.2022 (Annexure-1 to the affidavit) to show that detailed engineering was needed to be done on the AWB after issuance of LOI and preliminary mobilization plan was attached giving a timeline. Further reference is made to the letter dated 9.5.2022 issued by Telford in favour of the appellant, committing to provide the vessel for the duration of project and operate jointly in India with the appellant-HBA Offshore Pte. Ltd. to support the client, the respondent-Samsung Heavy Industries Pvt. Ltd. To support his contention that fraud is a ground to grant injunction, learned counsel has referred the judgement of the Supreme Court in Bhaurao Dagdu Paralkar Vs. State of Maharashtra and others10. To buttress his argument that LOI was a concluded contract, learned counsel referred to judgement of Supreme Court in Dresser Rand S.A.Vs. Bindal Agro Chem Ltd and K.G.11. It has further been urged that LOI was not determinable in nature.
17. Learned counsel for the appellant in support of his contention that injunctive relief would be available where fraud is present, has referred to an article on injunction under the heading of 'Fraud and Deceit' appearing in Volume 37 of the Second Edition of American Jurisprudence, wherein it is stated that equity can enjoin the enforcement of all obligations fraudulently procured, and that equity will intervene in a proper case to restrain proceedings at law where, by reason of fraud, complete and adequate relief would be had at law. Further, the learned counsel has referred the Chapter on injunction (Volume-42, Second Edition of American Jurisprudence) to contend that equitable remedy of specific performance, and that by injunction against breach of a contract have much in common - the jurisdiction exercised is in substance the same, and the same general rule apply in one case as in the other. Moreover, reference has been to pages 49 and 51 of a book titled 'Estoppel by Conduct and Election' published by Thomson / Sweet & Maxwell ( South Asian Edition 2013) to contend that, firstly, silence or inaction conveys a representation if it involves the breach of a legal duty to make some disclosure or take some action, and, secondly, there was a duty cast on the respondent under the LOI and the ongoing negotiations to inform the appellant of any parallel negotiations. It was a case of misrepresentation and negligence on part of the respondent in its failure to inform the appellant about parallel negotiations with a third party while it was continuing to negotiate with the appellant under the LOI, and therefore, the respondent is estopped from proceeding with the contract entered into between it and a third party. Under the circumstances misrepresentation itself would amount to fraud entitling the appellant to temporary injunction.
18. It is contended by learned counsel for the respondent, that firm positions of both the parties were at complete variance with each other and also at ''deviance post LOI' as recorded in the minutes of meeting dated 26.5.2022. Since, there was no final consensus on all the issues, some being critical to the finalization of the contract, the LOI could not be treated as a completed contract and no injunction could be granted. The aforesaid newly incorporated company had no relationship with the appellant in favour of whom the LOI was awarded and commitment letter was issued by the vessel owner. It is stated that the inspection of vessel held on 10.6.2022 was an initial inspection before departure of AWB. As regard the additional deviation raised by the appellant to issue SBLC by the respondent in banker's name instead of appellant's name, the respondent tried to fulfill this deviation but failed as the respondent's bank had refused to issue SBLC in the name of the appellant's banker.
19. The learned counsel for the respondent has stated that the LOI was declared null and void by the communication dated 19.06.2022 and the application under Section 9 of the Act of 1996 was filed on 28.06.2022 to injunct the respondent from entering into another contract with a third party. It was on 27.06.2022 that a new contract was entered into between the respondent and Bhambani Shipping and, therefore, it is contended that the maintainability of the application under Section 9 of the Act of 1996 is itself questionable. The learned counsel has contended that the scheme of the Act of 1996 itself dictates a proximity in point time between filing of application under Section 9 and initiation of arbitration proceedings. It is contended that despite being well aware of the LOI being declared null and void on 19.06.2022 and that a new contract being entered into by the respondent with the third party on 27.06.2022, the appellant has chosen only to seek a relief from this Court under Section 9 of the Act 1996, rather than initiate arbitration proceedings as provided in the LOI itself. It is contended that, admittedly, though the binding of LOI was extended twice, all other terms and conditions as originally contained in the LOI remained unchanged. The learned counsel has referred to the judgments of the Supreme Court in the cases of Sundaram Finance Ltd. vs. NEPC India Ltd.12 and Firm Ashok Traders & Ors. vs. Gurumukh Das Saluja & Ors.13 to contend that when an application under Section 9 is filed before the commencement of the arbitration proceedings, there has to be a manifest intention on part of the applicant to take recourse to arbitral proceedings. Viewed in this light, it is contended, there is no manifest intention on part of the appellant to initiate arbitral proceedings. It is stated that the relief sought in the application filed under Section 9 is exhausted. It is further stated that the third party concerned namely, Bhambani Shipping has acted upon the contract executed between it and the respondent; and, after installation of the gangway at Batam, Indonesia, the vessel has arrived at Kakinada on 16.09.2022. The learned counsel has referred in detail to the provisions of the LOI and the 'condition precedent' contained therein which provides that the LOI shall be binding on the parties only on fulfilment of the condition precedent of the GCC being agreeable on or before 14.05.2022 by a formal confirmation letter. While referring to Annexure-12 of the affidavit filed in support of the stay application, the learned counsel has contended that it is a letter dated 22.05.2022 sent by the appellant to the respondent whereby the respondent was required to issue a revised LOI incorporating the 'Open Items'. A categorical statement was made by the appellant in the letter of 22.05.2022 that pending receipt of the revised LOI incorporating the 'Open Items', the appellant regretted that they were unable to proceed based on the respondent's current binding offer dated 20.05.2022. It was also mentioned in the said letter that time is of essence. The learned counsel has referred to minutes of the meeting dated 26.05.2022 (that is enclosed as Annexure-14 to the affidavit) between the appellant and the respondent which disclosed the firm position of the respondent.
20. Further reference was made to the minutes of the meeting dated 30.05.2022 (Annexure-16 to the affidavit) between the appellant and the respondent to contend that the issue of increase in mobilization of fee by which the appellant had demanded one million US dollars by reason of change in schedule/route/hike in bunker etc. was open. It is stated that the dispute arose due to no agreement regarding the mobilization fees and the appellant did not seek any further extension. It is stated that breach of the terms of the LOI was made by the appellant and as such the LOI expired. The contention is that though the letter of 19.06.2022 issued by the respondent declared the LOI null and void, the validity of the arbitration clause therein continues to exist. It is stated that the so-called inspection report that is being referred to by the appellant is not a report after installation of the gangway as envisaged in the LOI, but is a preliminary report regarding the condition of the AWB.
ANALYSIS:
21. The sole point for determination is whether the appellant is entitled to an injunction under Section 9 of the Act of 1996 in view of the facts and circumstances of the present case.
22. Section 9 of the Arbitration and Conciliation Act, as amended by Act No.3 of 2016, reads as follows:-
"9. Interim measures, etc. by Court. [1] A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court-
(i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the following matters, namely:
(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.
(2) Where, before the commencement of the arbitral proceedings, a Court passes an order for any interim measure of protection under sub-section (1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine.
(3) Once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-section (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious."
23. The principles for grant of an injunction, as provided under the Act of 1963, would apply to the present case. Sections 9 to 25 fall under Chapter II of the Act of 1963. Section 10 of the Act of 1963 deals with cases in which specific performance of contract would be enforceable and it reads as follows:-
"10. Specific performance in respect of contracts.- The specific performance of a contract shall be enforced by the court subject to the provisions contained in sub-section (2) of section 11, section 14 and section 16."
Section 11 of the Act of 1963 pertains to specific performance of contract connected with trusts. Section 16 pertains to personal bars to relief, which, in the present case is not material. Sections 14 reads as follows:-
"14. Contracts not specifically enforceable.- The following contracts cannot be specifically enforced, namely:-
(a) where a party to the contract has obtained substituted performance of contract in accordance with the provisions of section 20;
(b) a contract, the performance of which involves the performance of a continuous duty which the court cannot supervise;
(c) a contract which is so dependent on the personal qualifications of the parties that the court cannot enforce specific performance of its material terms; and
(d) a contract which is in its nature determinable."
It is pertinent to refer to the provisions of Section 17 of the Act of 1963 which are as follows:-
17. Contract to sell or let property by one who has no title, not specifically enforceable.--(1) A contract to sell or let any immovable property cannot be specifically enforced in favour of a vendor or lessor--
(a) who, knowing himself not to have any title to the property, has contracted to sell or let the property;
(b) who, though he entered into the contract believing that he had a good title to the property, cannot at the time fixed by the parties or by the court for the completion of the sale or letting, give the purchaser or lessee a title free from reasonable doubt.
(2) The provisions of sub-section (1) shall also apply, as far as may be, to contracts for the sale or hire of movable property.
Sections 38 and 41 of the Act of 1963 read as follows:-
"38. Perpetual injunction when granted.-(1) Subject to the other provisions contained in or referred to by this Chapter, a perpetual injunction may be granted to the plaintiff to prevent the breach of an obligation existing in his favour, whether expressly or by implication.
(2) When any such obligation arises from contract, the court shall be guided by the rules and provisions contained in Chapter II.
(3) When the defendant invades or threatens to invade the plaintiff's right to, or enjoyment of, property, the court may grant a perpetual injunction in the following cases, namely:
(a) where the defendant is trustee of the property for the plaintiff,
(b) where there exists no standard for ascertaining the actual damage caused, or likely to be caused, by the invasion;
(c) where the invasion is such that compensation in money would not afford adequate relief;
(d) where the injunction is necessary to prevent a multiplicity of judicial proceedings.
.....
41. Injunction when refused.--An injunction cannot be granted--
(a) to restrain any person from prosecuting a judicial proceeding pending at the institution of the suit in which the injunction is sought, unless such restraint is necessary to prevent a multiplicity of proceedings;
(b) to restrain any person from instituting or prosecuting any proceeding in a court not sub-ordinate to that from which the injunction is sought;
(c) to restrain any person from applying to any legislative body;
(d) to restrain any person from instituting or prosecuting any proceeding in a criminal matter;
(e) to prevent the breach of a contract the performance of which would not be specifically enforced;
(f) to prevent, on the ground of nuisance, an act of which it is not reasonably clear that it will be a nuisance;
(g) to prevent a continuing breach in which the plaintiff has acquiesced;
(h) when equally efficacious relief can certainly be obtained by any other usual mode of proceeding except in case of breach of trust;
(ha) if it would impede or delay the progress or completion of any infrastructure project or interfere with the continued provision of relevant facility related thereto or services being the subject matter of such project.
(i) when the conduct of the plaintiff or his agents has been such as to disentitle him to the assistance of the court;
(j) when the plaintiff has no personal interest in the matter."
Clause (a) of the proviso (Uttar Pradesh Amendment) to sub-rule (2) of Rule 2 of Order 39 of the Code of Civil Procedure, 190814 prohibits the grant of temporary injunction where no perpetual injunction could be granted in view of the provisions of Sections 38 and 41 of the Act of 1963.
24. It is admitted to the parties that by a communication dated 19.06.2022, the respondent informed the appellant that the LOI had expired without an agreement of GCC and the LOI stands null and void. The LOI dated 28.04.2022 reads as follows:-
"To : HBA Offshore Pte. Ltd. (Singapore) Attn. : Mr. Hasan Basma Date : 28th April 2022 Subject: Letter of Intent to Award the Work Dear Sir, Intent By this Letter of Intent (LOI), Samsung Heavy Industries India Pvt. Ltd., a company registered under the Companies Act, 1956 of the Republic of India and having its registered office at Logix Cyber Park, Wing-B, 1st Floor, C-28 & 29, Sector 62, Noida 201301, Uttar Pradesh, India (hereinafter called the "Contractor") expresses its firm intention to award the following Work of Accommodation Work Barge (AWB) to:
HBA Offshore Pte. Ltd. (UEN No. 201502262C), a company incorporated under the laws of the Singapore and having its registered office at 77 Science Park Drive, #02-03 Cintech III Building, 118256 Singapore (hereinafter referred to as "Subcontractor").
Contractor and Subcontractor are hereinafter referred to individually as a "Party" and collectively as the "Parties."
Work The Subcontractor's scope of work ("Work") includes, but is not limited to the following:
(a) Provision of Accommodation Work Barge (AWB), namely "Nor Goliath" retrofitted (IMO 9396933) with electric-hydraulic telescopic personnel transfer gangway;
(b) Accommodation Work Barge shall be a minimum DP-3. The AWB will normally remain stationed along-side RUBY FPSO at MJ Field, east coast offshore India.
(c) AWB shall have minimum capacity to provide accommodation for 250 Contractor's personnel apart from Marine crew and Catering & Housekeeping crew.
(d) The AWB shall also be equipped with suitable hardware and software for working in "Reference follow target mode system" in tandem with the Turret moored weather vanning FPSO, without disconnecting.
(e) Subcontractor shall provide retractable with 36 Meter electric-hydraulic telescopic (Marine Aluminium) personnel transfer gangway with the AWB for safe and easy transfer of personnel to FPSO.
(f) Subcontractor shall be responsible for maintaining 90% gangway connection throughout the offshore campaign.
Purpose of this LOI While Contractor and Subcontractor are negotiating the outstanding terms and conditions of the Work, this LOI authorizes Subcontractor to immediately commence the Work to avoid any delay to the schedule of Work including Detailed Design Pedestal & Gangway Foundation, including Procurement of Material, Fabrication of Pedestal & Gangway Foundation and Install Gangway Pedestal. This LOI shall be superseded by a full-fledged contract under which the Subcontractor shall continue to perform the Work ("Contract") at the date of execution of such Contract upon the Parties reaching an agreement on the outstanding terms and conditions.
Reference Documents
(a) General Conditions of Contract and the Exhibits provided by Contractor to Subcontractor at the time of floating the Request for Quote (RFQ) currently under negotiation.
(b) Subcontractor's Quotation reference number: HBA-11000-77-10-BID-006-R6 received via e-mail dated 21 April, 2022 and subsequent email dated 26th April, 2022 (timing 18:45).
Offer Price Subcontractor has submitted a quotation for completion of the Work (the "Offer") as per below:
S No Description UOM Total Rate in US$ including WHT (A) WHT @ 4.368% IN US$(B) Cost US$ (C=A-B)
1.
Mobilization Cost including fuel LS 6,971,516 304,516 6,667,000
2. Demobilization Cost including fuel LS 1,634,556 71,397 1,563,159
3. ODR rates Per day 172,014 7,514 164,500
4. Standby rates Per day 137,611 6,011 131,600 Notes:
1. The above rates are inclusive of WHT @ 4.368%. In case of any change in the WHT rate from 4.368%, the above rates shall be adjusted accordingly.
2. The following deduction will apply, in case the following services are not available on accommodation work barge:
a. Internet @ 4MBPS - $500/day.
b. Helideck-10% of operating day rate.
3. Accommodation work barge shall depart from Walvisbay, Namibia and Subcontractor shall install retractable 36 Meter electric-hydraulic telescopic gangway from other vessel namely Telford 25 to "Nor Goliath". This installation activity shall be carried out at UAE.
Post Installation of gangway, Company / Contractor shall inspect the accommodation barge. Any observation and comments during the inspection are to be satisfactorily resolved by the Subcontractor to make the accommodation work barge "fit for purpose", before departure of vessel from UAE to Kakinada.
4. Subcontractor shall refund demobilization fees to Contractor if accommodation work barge is remobilized and deployed by Subcontractor Group at any location within Indian territorial waters, Indian contagious zone or Indian exclusive economic zone or for any other operator within 90 days after demobilization under the Contract.
Contractor intends to accept such offer subject to condition precedent and formal signing of contract agreement by Contractor and Subcontractor.
Firm Charter period with extensions 120-days Firm Period with an option to extend the period by 2X30 days plus 4X15 days.
Acceptance and Performance of Work
1. Subcontractor is to confirm its acceptance of this LOI by signing in duplicate by a duly authorized officer, retaining one copy and returning the other copy to Contractor within COB of the 28th day April 2022.
2. Subcontractor to confirm and commit the vessel "NOR Goliath" availability for the duration of "Firm Charter Period with Extension" as indicated above, with commitment letter from vessel owner.
Condition precedent
1. General Condition of Contract and all the exhibits shall be agreeable as circulated at the time of floating of RFQ dated 22nd March 2022, read together with Exception and deviation as discussed during bid clarification meetings till 27th April 2022.
This Letter of Intent to Award the Work shall be binding on the parties only upon the fulfillment of the above condition precedent on or before 14th May 2022 by a formal confirmation letter.
Governing Law and Dispute Resolution This LOI shall be interpreted and in all respects shall be governed and construed in accordance with the laws of India. Any claims, disputes or differences arising out of or in connection with this LOL shall be finally settled by arbitration in accordance with the then-current Arbitration Rules of Singapore International Arbitration Centre. The seat of arbitration shall be Singapore.
Upon such acceptance of this LOI, Subcontractor shall commence the Work immediately on the 28th day of April 2022, including Detailed Design of Pedestal & Gangway Foundation. Contractor shall start sharing its documents for performance of Work by Subcontractor."
25. Given the scope of the work of the Sub-contractor, that is, the appellant, the LOI authorised the appellant to immediately commence the work to avoid any delay to the schedule of work. Under the heading of "Purpose of this LOI", it is mentioned that the LOI shall be superseded by a full-fledged contract under which the appellant shall continue to perform the work at the date of execution of such contract upon the parties reaching an agreement on the outstanding terms and conditions. The LOI refers to the offer price of the appellant submitted through a quotation for completion of the work. In the "Notes" appended thereto, it is agreed that the Contractor, that is, the respondent, "intends" to accept the "offer" subject to condition precedent and formal signing of contract agreement by the appellant and the respondent. The 'condition precedent' provides that the GCC shall be agreeable as circulated at the time of floating of RFQ dated 22.03.2022 read together with exception and deviation as discussed during bid clarification meetings till 27.04.2022 and that LOI to award the work shall be binding on the parties only upon the fulfilment of the above condition precedent on or before 14.05.2022 by a formal confirmation letter. Under the heading of Governing Law and Dispute Resolution, it is provided that the LOI would be interpreted and, in all respects, shall be governed and construed in accordance with laws of India. Any claims, disputes or differences arising out of or in connection with the LOI shall be finally settled by arbitration in accordance with the then-current Arbitration Rules of Singapore International Arbitration Centre and the seat of arbitration shall be at Singapore.
26. It is an admitted fact that under the LOI the appellant had to make provision of AWB, namely "Nor Goliath" that required retrofitting with electric-hydraulic telescopic personnel transfer gangway. The fact that the AWB was a vessel of which a third party, namely, Telford, was the disponent owner, is also admitted. The entire scope of work of the appellant was related to this AWB which fact is reflected in the LOI. Though the minutes of the meetings dated 11.05.2022 and 17.05.2022 (Annexure 4 and 8 respectively) refer to the appellant and Telford as 'sub-contractor', there is no signature of Telford on the minutes. Telford has also not been referred to in the LOI at all. Telford is admittedly the disponent owner of the AWB. In Sara International Ltd. v. Arab Shipping Co. (P) Ltd.15 the court referred to 'disponent owner' as a term which, according to the Maritime dictionary, means a person or company which has commercial control over a vessel's operation without owning the ship. The respondent has been referred to as the Contractor in the LOI and the appellant as the Sub-contractor. A bare reading of the LOI evinces that under the contract (GCC) contemplated thereunder, respondent was primarily to hire the AWB from the appellant. A contract to hire movable property cannot be specifically enforced in favour of a vendor or lessor who, knowing himself not to have any title to the property, has contracted to sell or let the property. This is the mandate of Section 17 of the Act of 1963. Therefore, the appellant is not entitled to specific performance of the LOI.
27. For considering the submission raised by the learned counsel for the appellant that the LOI is a concluded contract, reference needs to be made to the following terms of the LOI :
(i) As stated above, under the heading of 'Purpose of this LOI' the LOI was to be superseded by a full-fledged contract under which the respondent (sub-contractor) was to continue to perform the work at the date of execution of such contract upon the parties reaching an agreement on the outstanding terms and conditions.
(ii) Under the heading of 'Offer Price', after noting the price quotation submitted by the appellant, four points are mentioned under the sub-head of notes, whereafter a categorical condition has been provided as follows:-
"Contractor intends to accept such offer subject to condition precedent and formal signing of contract agreement by Contractor and Sub-contractor".
(iii) Under the heading of 'Condition precedent', it is mentioned that GCC shall be agreeable as circulated at the time of floating of RFQ dated 22.03.2022, read together with exception and deviation as discussed during bid clarification meetings till 27.04.2022. It is further stated that the LOI to Award the Work shall be binding on the parties only upon the fulfillment of the above condition precedent on or before 14.05.2022 by a formal confirmation letter.
Thus, it is clear from the aforementioned provisions of the LOI that the LOI was to be superseded by the GCC and the LOI was further subject to the condition precedent as mentioned above. It is important to mention here that the GCC was circulated at the time of floating of RFQ dated 22.02.2022, but the same has not been brought on record or produced by the appellant.
28. The learned counsel has made reference to the case of Dresser Rand to urge that the LOI was a concluded contract and has drawn attention of this Court specifically to paragraph nos. 39 and 40 thereof which reads as follows:-
"39. It is now well settled that a letter of intent merely indicates a party's intention to enter into a contract with the other party in future. A letter of intent is not intended to bind either party ultimately to enter into any contract. This Court while considering the nature of a letter of intent, observed thus in Rajasthan Coop. Dairy Federation Ltd. v. Maha Laxmi Mingrate Marketing Service (P) Ltd. [(1996) 10 SCC 405] : (SCC p. 408, para 7) "The letter of intent merely expressed an intention to enter into a contract. ... There was no binding legal relationship between the appellant and Respondent 1 at this stage and the appellant was entitled to look at the totality of circumstances in deciding whether to enter into a binding contract with Respondent 1 or not."
40. It is no doubt true that a letter of intent may be construed as a letter of acceptance if such intention is evident from its terms. It is not uncommon in contracts involving detailed procedure, in order to save time, to issue a letter of intent communicating the acceptance of the offer and asking the contractor to start the work with a stipulation that the detailed contract would be drawn up later. If such a letter is issued to the contractor, though it may be termed as a letter of intent, it may amount to acceptance of the offer resulting in a concluded contract between the parties. But the question whether the letter of intent is merely an expression of an intention to place an order in future or whether it is a final acceptance of the offer thereby leading to a contract, is a matter that has to be decided with reference to the terms of the letter. Chitty on Contracts (para 2.115 in Vol. 1, 28th Edn.) observes that where parties to a transaction exchanged letters of intent, the terms of such letters may, of course, negative contractual intention; but, on the other hand, where the language does not negative contractual intention, it is open to the courts to hold that the parties are bound by the document; and the courts will, in particular, be inclined to do so where the parties have acted on the document for a long period of time or have expended considerable sums of money in reliance on it. Be that as it may."
29. Therefore, the terms of the LOI have to be looked into to ascertain whether the LOI is merely an expression of an intention to place an order in future or whether it is a final acceptance of the offer thereby leading to a contract. The court observed that the terms of a LOI may negative contractual intention; but, on the other hand, where the language does not negative contractual intention, it is open to the courts to hold that the parties are bound by the document; and the courts will, in particular, be inclined to do so where the parties have acted on the document for a long period of time or have expended considerable sums of money in reliance on it. However, it is pertinent to note, the Supreme court did not treat the letters of intent to be a concluded contract.
30. It is pertinent to mention here that in the case of Dresser Rand, the Supreme Court was considering two letters of intent issued on a letter head of a company other than the purchaser company in respect of a contract that was to be entered into between the parties which was referred to as ''General Conditions of Purchase'. The aforesaid observation of the Supreme Court was made during its consideration of the question ''Whether Letters of Intent dated 12.6.1991 contain an Arbitration Agreement'. In paragraphs nos. 42 and 43 of the judgement, the court held as follows:-
"42. When all the terms of the letter of intent are harmoniously read, what is clear is that letters of intent merely required the supplier to keep the offer open till 31-8-1991 with reference to the price and delivery schedule. They also made it clear that if the purchase orders were not placed and letter of credit was not opened by 31-8-1991, dr was at liberty to alter the price and the delivery schedule. In other words, the effect of letters of intent was that if the purchase orders were placed and LCs were opened by 31-8-1991, dr would be bound to effect supply within 15½ months, at the prices stated in the letter of intent. Therefore, it may not be possible to treat the letters of intent as purchase orders.
43. Even if we assume that the letters of intent were intended to contracts for supply of machinery in accordance with the terms contained therein, it may only enable dr to sue for damages or sue for the expenses incurred in anticipation of the order and opening of LC. But that will not be of any assistance to contend that there was an arbitration agreement between the parties."
(emphasis supplied)
31. In the case of South Eastern Coalfields Limited and others Vs. S. Kumar's Associates AKM (JV)16, a letter of intent was issued awarding the contract for a total work of Rs 387.40 Lacs. The letter of intent directed the respondents to mobilise equipment for executing the work to handle minimum allotted cu.m. per day and directed to ''commence the work immediately'. The respondent was called upon to deposit performance security deposit for a sum total to 5 % of annualized contract amount within 28 days. The letter of intent provided that the work order would be issued and the agreement would be issued at the area office and that agreement may be concluded within 28 days as per provisions of the tender document. In pursuance of the letter of intent, the respondent mobilised resources at site but due to machinery breakdown the work had to be suspended for reasons beyond the control of the respondent. After issuance of show cause notice the work awarded to the respondent was terminated and the work was got executed by another contractor. The Supreme Court noted the terms of the letter of intent as well as the Notice inviting Tender. While referring to the judgement in Dresser Rand, the Court observed that there is little doubt over the proposition that an LOI merely indicates a party's intention to enter into a contract with the other party in future. The court held that no binding relationship between the parties at this stage emerges and the totality of the circumstances have to be considered in each case. The Court also observed that in the case of Dresser Rand, on a holistic analysis it was held that the LOI could not be interpreted as a work order.
32. In the present case, there has been exchange of numerous correspondence and meetings, some of which were in respect of technical aspects of the AWB. There is no material on record to conclusively demonstrate what all work was actually done on the AWB by the appellant which was to be provided to it by Telford. Admittedly, the gangway was not installed on the AWB during the currency of the LOI. To show that substantial costs has been incurred by the appellant, the learned counsel has placed for our perusal a single page document enclosed as Annexure No. 33 to the affidavit (page 166) reflecting certain figures in US dollars that is, purportedly, a quantification of expenses incurred by the appellant. Pertinently, it has not been pointed out whether this document was part of the record before the learned Judge whose order is under challenge in the present appeal. In any view of the matter, this document does not bear any title or date, nor is it stamped nor signed. Reference of this document is in paragraph no. 47 of the affidavit in which it is stated as follows:-
"That the Appellant has incurred substantial costs for the work done after the issuance of the LOI for the Project. A true copy of the List of Expenses is being filed herewith and marked as ANNEXURE No. 33 to this affidavit."
33. The averments regarding expenses are vague and the document of the so called expenses also cannot be given credibility for the reason that it is undated, unstamped, unsigned and without any title. It is pertinent to mention here that in paragraph no. 56 of the affidavit filed in support of the application under Section 9 of the Act of 1996 filed before the learned Judge, merely a vague statement had been made that :
"the applicant had diligently work hard since the LOI was signed and accepted in April, 2020. The applicant has also already incurred substantial costs towards the said project. The applicant has already incurred actual costs to the tune of about USD 2,500,000. The effect of the respondent contracting out by declaring the LOI null and void will cause grave prejudice, irreparable injury and severe further monetary losses and damages to the applicant.'"
No corresponding enclosures were shown to have been filed. Thus, even in the affidavit filed in support of the application u/s 9 of the Act of 1996 before the learned Judge, the averments regarding expenditure are vague and unsubstantiated.
34. It would be pertinent to refer to the contents of paragraph no. 57 of the affidavit filed by the appellants before the learned Judge which reads as under:-
"57. That the LOI dated 28.04.2022 was a partial contract executed between the Applicant and the Respondent, as it authorised the Applicant to immediately commence the work to avoid any delay to the schedule of the work including Detailed Design Pedestal & Gangway Foundation, including Procurement of material, Fabrication of Pedestal & Gangway Foundation and Install Gangway Pedestal (Work). The Respondent, upon execution and acceptance of the LOI, was also required to commence sharing its documents for performance of the Work by the Applicant. The LOI was to be subsequently superseded by a full-fledged contract i.e. the GCC and all exhibits thereto, under which, the Applicant was required to continue to perform the Work at the date of execution of GCC, upon the Applicant and the Respondent reaching finalizing the final details of the outstanding terms and conditions. Therefore, the Applicant has a right to enforce its rights under the LOI dated 28.04.2022, as extended from time to time (either expressly or by implication and conduct of parties)."
(emphasis supplied)
35. Thus, the observations made by the Supreme Court in the case of Dresser Rand are of no help to the appellant in the facts and circumstances of the instant case. Therefore, it has been correctly held by the learned Judge that the LOI is not a concluded contract between the parties, and that it is determinable. This, however, has no bearing on the current validity of the arbitration clause mentioned therein.
36. Another submission raised by the learned counsel for the appellant requires consideration, that the correspondence between the parties after 31.05.2022 reflects that the terms of the GCC were being discussed which were in the process of being finalised, and therefore, contract came into existence between them through correspondence as well as in view of the meetings that had taken place between the representatives of the parties.
37. As reflected in the aforementioned statements and submissions made on behalf of the appellant, the binding of the LOI was extended twice, the second one being till 31.5.2022, but it was provided in the letters communicating the extensions that all other terms and conditions originally contained in the LOI would remain unchanged. That is to say, the respondent's intention to accept the 'offer' of the appellant being subject to 'condition precedent' and formal signing of contract agreement by the appellant and respondent, remained unchanged and intact.
38. It was by the letter dated 22.05.2022 of the appellant (Annexure No.12), which was in response to an email of the respondent dated 20.05.2022 extending the binding of the LOI till 31.05.2022, that the appellant asked the respondent to issue a revised LOI duly incorporating the 'Open Items', the list of which was attached to that letter of 22.05.2022. The appellant made a categorical statement in that letter that pending receipt of the revised LOI incorporating the 'Open Items', it regretted that it was unable to proceed based on the appellant's current binding offer dated 20.05.2022. It would be pertinent to quote the letter dated 22.05.2022 sent by the appellant to the respondent alongwith an Appendix-1 enclosed thereto.
"Our Ref : HBA-21015-LTR-SHI-0002 Date : 22 May 2022 Samsung Heavy Industries India Pvt. Ltd.
Logix Cyber Park, Wing-B, 1st floor, C-28 & 29, Sector-62, NOIDA-201301 (U.P.) INDIA Dear Sir/Madam, SUBJECT: RESPONSE TO CONTRACTOR LETTER SN2333-SHI-HBA-SE-LTR-0003 Thank you for your letter (email dated 20th May 2022, reference SN2333-SHI-HBA-SE-LTR-0003) offering to extend the validity of your Letter of Intent (LoI) to award the work till 31st May 2022.
We note that whilst you acknowledge our letter dated 20 May 2022 and our critical open items list therein, your "binding" offer of extension is on the same terms and conditions as per your original letter of intent (LOI) dated 28th April 2022. We request you to issue a revised LOI duly incorporating the open items, the list of which is attached herewith as Appendix 1 - Open Items.
Owners' insistence on incorporating the said open items in the revised LOI is imperative and critical to manage project risk, satisfy mandatory financier's requirements and maintain vessel availability. Further delays to the issuance of the revised LOI, only aggravate this risk and increase the exposure and financial liabilities in a volatile and unpredictable market.
We urge contractor to address our critical point list in the LOI and commit to negotiate the remaining open legal and commercial items in good faith As time is of essence, we respectfully and humbly attach a draft extension letter for your consideration. A face-to-face meeting should then be held asap to facilitate the finalisation of the contract. We are on standby for face-to-face meeting starting 23rd May (Monday).
Meanwhile, pending receipt of the revised LOI, incorporating the open items, we regret that we are unable to proceed based on your current binding offer dated 20 May 2022. A face-to-face meeting at your Noida Office will be constructive and fruitful after all the critical and open items of the LOI are duly addressed, accepted in principle and revised letter of extension is issued not later than 23rd May 2022 close of business (COB) in India.
Thank you Yours Faithfully, for HBA OFFSHORE PTE. LIMITED/HBA RUBY PTE. LTD Name : Hassan Basma Position: Chief Executive Officer APPENDIX 1-CRITICAL OPEN CONTRACTUAL / COMMERCIAL ITEMS as requested by Owners
1. FIRM CHARTER PERIOD: We have discussed with the Owners and the firm charter period of 120 days which was flatly rejected by the Owners as they have an option for longer term projects. Owners will accept a firm charter period of 150 days subject to agreement on the below open items.
2. EXTENSION NOTICE: Kindly appreciate that the marine vessel of such high-end configuration as of Nor Goliath are high in demand worldwide. For better planning the charters, an advance notice of 30 days prior to execution of extension would be desirable. We propose that in addition to 30 days' notice. However, Contractor can reconfirm the extension on 14th day or later prior to expiry of the charter period.
3. PAYMENT GUARANTEE: For a seamless service with commercial comfort, security of payment is necessary. Request for Corporate Guarantee was towards that objective. However, to close this matter amicably with Contractor, we propose commitment letter in any other form and manner to be discussed and agreed such as side letter jointly agree on the contract working mechanism.
5. MOBILISATION FEE: Mobilization of Vessel requires immediate funds. The mobilization fee milestone proposed are as follows :
US$3.5m - upon signing of the Contract, against Bank Guarantee of an equivalent amount, US$3.5m.
Further, HBA shall raise an invoice of US$2.75m upon departure of vessel from Cape Town which shall be payable immediately upon (1st working day) vessel arrival in Kakinada, India.
The remaining mobilization fee shall be payable within three working days upon the vessel custom clearance in Kakinada, India.
6 OVERALL LIMITATION OF LIABILITY - Whilst our original offer was 20% overall cap to liability, we however as to conclude the contract matters, are agreeable to 25% of the Contract value as overall cap.
7 LIQUIDATED DAMAGES: Subcontractor originally requested or 1% per day to the max of 5% of the mobilization fees. We may be agreeable to 4% per day to max of 20% of mobilization fees subject to a grace period to be discussed & agreed.
OTHER ITEMS : Other outstanding / additional issues related to payment, invoicing, COVID, force majeure, reduced rates, suspension etc are to be discussed and agreed after closure of critical open items as listed above, to maintain this offer."
39. In reply to the aforesaid, the respondent wrote a letter dated 25.05.2022, which is as follows:-
"To, HBA Offshore Pte. Ltd.
Attn. Mr. Hassan Basma Date 25th May 2022 Your Ref.: Nil dated 11 May 2022 Total Page 1 Our Ref.: SN2333-SHI-HBA-SE-LTR-0004 Title KG D6 RUBY FPSO Subject : Letter of Intent to Award the Work Dear Sir,
Contractor writes with reference to Subcontractor's letter : HBA-21015-LTR-SHI-0002 dated 22 May 2022 which is in response to Contractor's letter: SN2333-SHI-HBA-SE-LTR-0003 dated 20 May 2022.
Contractor has noted 'Appendix 1- Critical open contractual / commercial items as requested by owners' as attached in Subcontractor's referred letter and wishes to inform that there are some other pending items like a) Invoicing / Taxes, b) Catering / Laundry Services, c) Change in Contract Entity d) Window Mechanism etc. as indicated via Contractor's email dated 19th May 2022 (Refer to Attachment #1).
Contractor reiterates that change in the 'Firm Charter period with extensions' mentioned in the LOI (i.e. "120-days Firm Period with an option to extend the period by 2 x 30 days plus 4 x 15 days") shall not be considered and requests Subcontractor to maintain the same in line with earlier acknowledgement and agreement of LOI dated 28 April 2022. Other pending/open items including contract document, can be discussed towards signing of Contract.
Subcontractor may visit Contractor's Noida office on Thursday the 26th May 2022 for face to face meeting to discuss and conclude open items and to finalize the Contract accordingly.
Sincerely yours, Joonho Min Managing Director Samsung Heavy Industries India Pvt. Ltd."
40. Thereafter, two meetings were held on 26.05.2022 and 30.05.2022 and the recorded minutes therein are as follows:-
Meeting: Nor Goliath-Post LOI meeting Date: 26 May 2022, Time: 10:00AM-4:30PM (IST) MOM Ref no.: SN2333-SHI-HBA-SE-MOM-001
1. Minutes of the Meeting Parties have discussed the following and expressed their firm positions as below S.No Deviation post LOI HBA's Firm Position SHI's Firm Position 1.1 Firm Period of 150 Days 150 Days + extension 120 Days + extension as per Signed LOI 1.2 Schedule Mobilization of AWB at Kakinada HBA has submitted their Mobilisation Plan to reach Kakinada around 22 Aug-22.
Window Mechanism from 5-Aug 2022 to 25-Aug-2022 1.3 Increase in Mobilization Fee USD 1(One) Million in the Mobilization Fee by reason of change in schedule/ route/hike in bunker cost etc. Mobilization Fee to be maintained as per Signed LOI 1.4 Window Mechanism Mutually agreed. Control of call down mechanism with HBA Window Mechanism shared to be followed and it shall be regulated by Contractor only.
1.5 Zero Rate Zero Rate will be applicable in the event that the ongoing work have come to standstill and the personnel/ equipment etc are removed from the vessel for the reasons attributable to HBA Reduced Rate Mechanism: 75% of ODR Zero Rate Condition shall be as follows as agreed by the parties earlier:
1. Loss of DP (Function lower than DP2) 2 Gangway is not connected to FPSO for reasons attributable to subcontractor
3. AWB not meeting minimum safe manning on board as per the AWB minimum safe manning certificate.
4. Accommodation facilities on AWB are not habitable
5. During inspection of AWB or equipment provided by Subcontractor on AWB by Government Authority. Zero rate shall only be applicable in the event, government authority inspection leads to disconnection of the gangway due to fault or noncompliance of the Subcontractor.
6. In case of confiscation of AWB by government authority due to fault or non-compliance of Subcontractor.
1.6 Contract Entity change
- HBA Ruby Pte. Ltd. shall be contracting entity
- HBA will share the organization structure.
- HBA will provide PCG from HBA International Pte Ltd.
Contractor will analyse the entity change matter on receipt of complete organogram, rationally between companies and the following:
- HBA to provide HBA Holding Pte. Ltd.
- Tri Party agreement regularize the change in contracting entity.
- Financial documents of the PCG Company 1.7 Extension Notice HBA proposed 30 days' notice with reconfirmation on 14 days. To be mutually agreed.
14 days notice period to be retained in line with earlier agreement.
1.8 Overall Limit of Liability HBA increase limit from 20% to 25% of contract value HBA to maintain at least 50% of the contract value 1.9 Liquidated damages HBA increased to 4% per day of Mob fees to maximum to 20% of the Mob fees in good faith HBA is however proposing a grace period of 5 days before imposing LD No grace period is permissible.
1.10 Suspension/ Termination Payment Period: 30 days from Invoice submission.
Grace period: 12 days from the payment period Suspension Period: Rights to HBA to suspend the work post 42 days (Payment period + Grace Period) for 5 days. ODR shall be payable during suspension period of 5 days.
Termination: Right to terminate the contract by HBA post suspension of 5 days.
No right to HBA for Suspension.
Termination rights after 30 days post expiry of Payment period of 30 days as agreed by the parties earlier.
1.11 Mutual Indemnity Agreement HBA will propose a format for mutual indemnity to be signed by SHI, HBA, Telford (operator), Goliath (bond holders) Telford and Goliath has no direct relationship with SHI, hence cannot sign with mutual indemnity.
1.12 Invoice Noted. To be verified with Tax Consultant GST Tax Invoice from project office in USD and payment to FCNR account in USD.
1.13 Payment Schedule Mobilization Fee USD 3.5 Million upon signing of Contract immediately subject to submission of Bank Guarantee of equivalent amount and GST invoice from the HBA Project office.
USD 2.75 Million upon departure from Cape Town and payment will be within 1st working day upon arrival in India.
Balance Payment after Custom clearance of AWB.
Payment terms as agreed by the parties earlier as below:
USD 1 Million upon AWB departure from Africa.
USD 1 Million upon arrival at UAE.
USD 4 Million upon arrival at Kakinada.
Balance after Custom Clearance.
1.14 Payment Guarantee HBA propose for Parent Company Guarantee OR payment of two months Charter duration OR side letter (Format shared by HBA) to be signed by HBA/SHI/Telford and Goliath Will check and revert on the same.
1.15 Force Majeure Provided that the ongoing work have come to standstill and the personnel/ equipment etc are removed from the vessel Payment during Force Majeure as agreed earlier by the parties as below:
1. First 15 days of Force Majeure - Zero rate
2. From 16th day till 45th day of Force Majeure-80% of ODR
3. From 46th day of Force Majeure-80% of ODR 1.16 COVID cost Our proposal is based on the cost towards Covid-19 related protocols required as per prevailing Gol guidelines. HBA's position on covid:
i. current prevailing conditions there are no covid restrictions/ requirements to comply.
ii. in the event of any future regulations on covid, any cost implications shall be borne by SHI on a cost plus basis. HBA's responsibility for covid shall be for their personnel only.
Included in ODR 1.17 Catering Service HBA agree to have a contract with Sodexo (as suggested by contractor) at the rate negotiated by Contractor on cost plus basis. GST on Sodexo invoice shall be considered as cost to subcontractor and will be back charged to Contractor. Contractor will be indemnifying HBA about the food quality and their services. SHI will provide a separate written indemnity undertaking to HBA to undertake the catering contract. Mark-up-15% (HBA to check for mark-up %) Agreed except the mark up rate.
1.18 IGST refund Will Assist in getting refund to the best of its ability. HBA will engage their consultant to assist the tax refund on behalf of SHI. HBA shall not be contractually obliged to obtain the tax refund for SHI.
Part of Contractual obligation.
Meeting: Nor Goliath -Post LOI meeting Date: 30 May 2022, Time: 11:00AM-5:30PM (IST) MOM Ref no.: SN2333-SHI-HBA-SE-MOM-002
1. Minutes of the Meeting Parties have discussed the following and expressed their firm positions as below:
S No Deviation post LOI HBA's Firm Position SHI's Firm Position Status 1.1 Firm Period of 150 Days 120 Days + extension 120 Days + extension as per Signed LOI Closed 1.2 Schedule Mobilization of AWB at Kakinada HBA agrees to SHI Window Mechanism from 12-Aug-2022 to 25-Aug-2022 Window Mechanism from 12-Aug-2022 to 25-Aug-2022 Closed 1.3 Increase in Mobilization Fee USD 1(One) Million in the Mobilization Fee by reason of change in schedule/ route/hike in bunker etc. Mobilization Fee to be maintained as per Signed LOI Open 1.4 Window Mechanism Control of call down of mechanism with SHI.
Modified Window Mechanism is as given below with concept of arriving on any time between 72 hours.
Closed Window Mechanism agreed between SHI & HBA:
Window No. When Window By
1.
Contract Award 12 August 2022 - 25 August 2022 Contractor
2. 45 days prior to the first date of the Window #1(i.e. 27 June 2022) 10 days inside above widow #1 Contractor
3. 30 days prior to the first date of the Window #2 7 days inside above widow #2 Contractor
4. 15 days prior to the first date of the Window #3 5 days inside above widow #3 Contractor 7 days prior to the first date of the Window #4 3 days inside above widow #4 Contractor 1.5 Zero Rate Zero Rate will be applicable in the event that the ongoing work have come to standstill and the personnel/equipment etc. are removed from the vessel or the reasons attributable to HBA Reduced Rate Mechanism: 75% of ODR Zero Rate Condition shall be as follows as agreed by the parties earlier:
1. Loss of DP (Function lower than DP2) 2 Gangway is not connected to FPSO for reasons attributable to subcontractor
3. AWB not meeting minimum safe manning on-board as per the AWB minimum safe manning certificate.
4.Accommodation facilities on AWB are not habitable
5. During inspection of AWB or equipment provided by Subcontractor on AWB by Government Authority. Zero rate shall only be applicable in the event, government authority inspection leads to disconnection of the gangway due to fault or noncompliance of the Subcontractor.
6. In case of confiscation of AWB by government authority due to fault or non-compliance of Subcontractor.
Closed.
SHI agrees on HBA's position.
1.6 Contract Entity change
- HBA Ruby Pte. Ltd. shall be contracting entity
- HBA will share the organization structure.
- HBA will provide PCG from HBA International Pte Ltd.
Contractor will analyse the entity change matter on receipt of complete organogram, rationally between companies and the following:
- HBA to provide HBA Holding Pte. Ltd.
- Tri Party agreement regularize the change in contracting entity.
- Financial documents of the PCG Company Closed.
SHI agrees on HBA's position.
SHI recommend tri-party agreement.
1.7 Extension Notice HBA proposed 30 days' notice for first extension of 30 days. And rest all extension will be by 14 days' notice.
14 days notice period to be retained in line with earlier agreement.
Closed.
SHI agrees on HBA's position.
1.8 Overall Limit of Liability HBA increase limit from 20% to 25% of contract value HBA to maintain at least 50% of the contract value.
Closed.
SHI agrees on HBA's position.
1.9 Liquidated damages HBA increased to 4% per day of Mob fees to maximum to 20% of the Mob fees in good faith.
Agreed. LD to be 4% per day of Mob fees to maximum to 20% of the Mob fees.
Closed.
SHI agrees on HBA's position.
1.10 Suspension/ Termination Payment Period: 30 days from Invoice submission.
Grace period: 12 days from the payment period Suspension Period: Rights to HBA to suspend the work post 42 days (Payment period + Grace Period) for 5 days. ODR shall be payable during suspension period of 5 days.
Termination: Right to terminate the contract by HBA post suspension of 5 days.
No right to HBA for Suspension.
Termination rights after 30 days post expiry of Payment period of 30 days as agreed by the parties earlier.
Closed.
SHI agrees on HBA's position.
1.11 Mutual Indemnity Agreement HBA will propose a format for mutual indemnity to be signed by SHI & HBA.
SHI to check with HQ legal team for proper alignment.
Agreed in principal and to be checked with HQ legal.
1.12 Invoice Noted and HBA agree for payment in project office's FCNR account in USD.
GST Tax Invoice from project office in USD and payment to FCNR account in USD.
Closed 1.13 Payment Schedule Mobilization Fee USD 3.5 Million upon signing of Contract immediately subject to submission of Bank guarantee of equivalent amount and GST invoice from the HBA Project office.
USD 2.75 Million upon departure from Cape Town and payment will be within 1st working day upon arrival in India.
Balance Payment after Custom clearance.
SHI agreed on the payment schedule for Mobilization Fee Closed 1.14 Payment Guarantee HBA propose for Parent Company Guarantee or 2 months Charter duration OR side letter (Format shared by HBA) to be signed by HBA/SHI/Telford and Goliath. It is linked with 1.11, if indemnity is provided then payment guarantee is not required.
SHI to check with HQ legal team for proper alignment.
Closed.
It is linked with 1.11, if indemnity is provided then payment guarantee is not required.
1.15 Force Majeure Provided that the ongoing work have come to standstill and the personnel/ equipment etc. are removed from the vessel.
Payment during Force Majeure as agreed earlier by the parties as below:
1. First 15 days of Force Majeure - Zero rate
2. From 16th day till 45th day of Force Majeure-80% of ODR
3. From 46th day of Force Majeure-80% of ODR Closed SHI agrees on HBA's position.
1.16 COVID cost Our proposal is based on the cost towards Covid-19 related protocols required as per prevailing GOI guidelines. HBA's position on COVID:
1. current prevailing conditions there are no COVID restrictions/ requirements to comply.
2. in the event of any future regulations on COVID, any cost implications shall be borne by SHI on a cost plus 15% basis.
3. HBA's responsibility for COVID shall be for their personnel only.
Included in ODR Open 1.17 Catering Service HBA agree to have contract with Sodexo (as suggested by contractor) @ negotiated by Contractor on cost plus basis.
GST on Sodexo invoice shall be considered as cost to subcontractor and will be back charged to Contractor. Contractor will indemnifying about the food quality and their services.
SHI will provide a separate return indemnity undertaking to HBA to undertake the catering contract.
Mark-up-15% Agreed except the mark up rate.
Closed.
SHI agrees on HBA's position.
1.18 IGST refund HBA will assist in getting refund to the best of its ability. HBA will engage their consultant to assist the tax refund on behalf of SHI. HBA shall not be contractually obliged to obtain the tax refund to SHI. HBA shall charge the same to SHI on cost plus 15% basis.
Part of Contractual obligation.
Open
41. Thereafter, while referring to the letter dated 31.05.2022 sent by the respondent to the appellant under the subject "the Letter of Intent to Award the Work", the appellant, by a letter dated 02.06.2022, wrote as follows:-
"Date : 02/06/2022 Our Ref: HBA-21015-LTR-SHI-0002 Samung Heavy Industries India Pvt. Ltd.
Logix Cyber Park, Wing-B, 1st floor, C - 28 & 29, Sector-62, NOIDA-201301 (U.P.) INDIA SUBJECT: SUBCONTRACTOR'S RESPONSE TO CONTRACTOR'S LETTER UNDER SUBJECT "THE LETTER OF INTENT TO AWARD THE WORK" DATED 31st MAY 2022 We wish to thank by Samsung Heavy Industries India Pvt. Ltd. (the "Contractor") for the letter of Intent to Award (LOI) dated 31st May 2022, in favor of HBA Offshore Pte Ltd or nominee (the "Subcontractor"), (letter reference number SN2333-SHI-HBA-SE-LTR-0005) and the Minutes of meeting dated 30th May 2022 (Ref: SN2333-SHI-HBA-SE-MOM-002) Subcontractor rejects Contractor's letter as follows:
1. Mobilization Fees - The requirement for additional USD 1 (one) million is due to the delay in award of the contract in a fast changing and rising inflation market. As a prudent Subcontractor and to assist Contractor and Company maintain the now critical schedule, Subcontractor has had to rearrange the delivery plans to suit these changes and pay additional reservation fees. Meanwhile the Gangway donor vessel has been redeployed for new charter and hence vessel owners are forced to dismantle the gangway immediately and store ashore at Batam. The vessel "Nor Goliath" is now required to relocate from Cape Town to Batam in order to install the gangway on board. The breakdown associated cost has been provided vide our email dated "31st May 94052022" as attached.
2. Payment Schedule-As per the guidance received from our tax lawyers Nangia Andersen, the time frame for setting up Project Office (PO) in India including GST registration, PAN, bank accounts etc., is likely to be in excess of 4 to 6 weeks after contract signing hence, payment of proposed initial part mobilization fees via Project Office (PO) is unlikely to be completed prior required mobilization of the Nor Goliath. The Subcontractor would like to highlight that the total cost for mobilization of the vessel to Kakinada is in excess of USD 7 Million.
3. Refund of Duty drawback - The Subcontractor reiterates that the cost and the responsibility for such activities are outside the scope of the services offered by the Subcontractor. This activity shall be undertaken by the Contractor.
4. COVID-Currently the Government of India/Competent Authority does not call for any COVID related restrictions for marine crew arriving in India. However additional COVID related preventive measures, specifically instructed by the Company or the Contractor or any future COVID related requirements shall be implemented by the Subcontractor on Cost plus basis.
The Subcontractor proposes as follows:
a. The Subcontractor urges Contractor to accept the additional mobilization (USD 1 Million) towards cost due to reasons beyond our control. Failure to do so promptly will escalate the mobilization cost further.
b. The Subcontractor proposes to receive Stand by Letter of Credit (SBLC) equivalent to full mobilization value from Contractor's bank as per the mutually agreed format, valid until arrival of vessel in Kakinada Port, India. The Subcontractor is willing to cooperate for mobilization and must have an non revocable Stand by Letter of Credit (SBLC) in order to make necessary arrangement through internal financing to facilitate payment of the mobilization cost incurred for Contractor's Project. In such case no advance payment will be required from the Contractor until the vessel is physically available in Indian waters.
The Subcontractor urges the acceptance of above open items by the contractors as soon as possible and not later than COB 2nd June 2022 followed by formal mutually agreed SBLC format by COB 3rd June 2022. The proposed Vessel inspection at Cape Town on 4-6th June 2022 is subject to agreement being reached on the open items. Any delays in Vessel's inspection will adversely impact the arrival schedule at Kakinada port.
Attachment 1: Email dated "31st May 2022"; Subject: Additional mob cost breakdown.
Should you need any further assistance, please do not hesitate to contact us.
Thank you.
Yours Faithfully, for HBA OFFSHORE PTE. LTD. / HBA RUBY PTE. LTD.
Name : Hasan Basma Position : Chief Executive Officer"
42. By the letter dated 03.06.2022, the respondent replied to the appellant's letter dated 02.06.2022 as follows:-
"To, HBA Offshore Pte. Ltd.
Attn. Mr. Hassan Basma Date 25th May 2022 Your Ref.: HBA-21015-LTR-SHI-0002 Total Page 1 Our Ref.: SN2333-SHI-HBA SE-LTR-0006 Title KG D6 RUBY FPSO Subject Letter of Intent to Award the Work Dear Sir,
Contractor writes with reference to Subcontractor's letter : HBA-21015-LTR-SHI-0002 and HBA-21015 LTR-SHI-0002 REV dated 02nd June 2022, which was in response to Contractor's letter: SN2333-SHI HBA-SE-LTR-0005 dated 31st May 2022.
Contractor wishes to highlight that Contractor has accepted and closed most of the deviation items raised by Subcontractor post signing of LOI (e.g. Zero Rate, Mobilization Window, Extension Notice, Mutual Indemnity, Contract Entity Change, Overall Liability. LD etc.) and via referred letter, Contractor has identified only 4 (four) items for Subcontractor's acceptance.
However, Subcontractor has almost maintained its position for all these 4 (four) Items. Contractor is hereby clarifying his difficulties in accepting these items:
1. Mobilization Fee: This additional Mobilization Fee of 1M USD is introduced by Subcontractor due to change in gangway installation location after finalization of overall price and acceptance of LOI. Hence, it is not acceptable to such sudden change of increase in Mobilization Fee as it has been already approved previously by the relevant project stakeholders including Company.
However, considering project benefit and assistance to Subcontractor's request, Contractor is willing to discuss further with Subcontractor and Contractor is under discussion with Company for an amicable resolution.
2. Payment Schedule for Mobilization Fee: Contractor has already clarified that based on Subcontractor's demand, Contractor is ready to pay 3.5M USD against Mobilization Fee anytime, upon receipt of tax invoice with BG from Subcontractor's Project Office.
However, in case, Subcontractor still proposes to receive Mobilization Fee together on arrival of AWB to Kakinada, Subcontractor may kindly note that Subcontractor's demand of SBLC from Contractor in lieu of any advance is difficult, as it is not a process normally allowed by Contractor.
Under the above restriction and compliance issue, in order to provide Contractor's commitment that Contractor will pay to Subcontractor immediately on successful arrival of AWB to India, Contractor will provide a corporate guarantee with his full commitment.
Based on the above, Subcontractor is requested to understand the same and manage it either by expediting Project Office opening OR by proceeding with Contractor's corporate guarantee.
3. COVID Cost : Contractor appreciates Subcontractor's understanding and decision to absorb such cost associated with COVID in the Mobilization Fee.
4. Refund of Duty Drawback: The activities for refund of duty drawback amount is completely related to the re-exportation process and usually managed by the CHA and tax consultant. As Subcontractor is performing the duties of importation and exportation of AWB on Contractor's behalf, Subcontractor shall undertake this refund of duty drawback application to ensure timely refund, as a part of its work scope. However, Subcontractor will not be anyway responsible for the amount of refund, as it is based on the actual days of AWB's stay in India. Hence, Subcontractor is requested to facilitate duty drawback refund process and arrange the refund as a part of its contractual obligation absorbing associated cost if any.
Hope the above convey Contractor's full commitment on payment and Subcontractor is requested to review and confirm its acceptance on the above for further necessary action for award of contract.
Sincerely yours, Joonho Min Managing Director Samsung Heavy Industries India Pvt. Ltd."
43. On page 130 of the paper-book of the appellant is an email dated 07.06.2022 sent on behalf of the respondent to the appellant, which reads as follows:-
"Dear Mr. Vinayak, As requested by phone call, please reply below 2 questions urgently so as to move forward from our end.
1. Swift Code of Oversea-Chinese Banking Corporation limited.
2. Please let us know SBLC from surety Company from our side is OK to your side.
Best regards Yong Seob, Kim Reliance PM(IC)_Deputy IC Project Manager Mob: 01033992096 E-Mail: [email protected]"
44. An email dated 08.06.2022 (page 133 of the paper-book) has been sent on behalf of the respondent to the appellant regarding issuance of SBLC which reads as follows:-
"Mr. Sudha, As discussed, please note that we are considering issuance of SBLC from the following bank:
SBLC Issuance bank: Credit Agricole Corporate & Investment Bank Bank Branch: Credit Agricole CIB, Seoul Branch Swift Code: CRLYKRSE Issuance of SBLC from Bank to Bank is not physically possible as per the issuing bank and SBLC can be issued only to HBA as per the commented format.
Hope you can manage your fund requirement using such SBLC from us.
Please review and provide your acceptance urgently to proceed.
Regards, Palas Majumder Jt. General Manager/Project Control Manager (IC) Samsung Heavy Industries India Pvt. Ltd."
45. Further, another email of 08.06.2022 was subsequently sent to the various recipients of both the parties sending a link for a meeting for discussion on SBLC. Another email of 11.06.2022 (page 139) was sent on behalf of the appellant to the respondent attaching a letter with advance bank guarantee provided by the appellant to the respondent in order to urgently resolve the outstanding matter of mobilization payment.
46. It is reflected from the aforesaid that in the last meeting that took place on 30.05.2022, all the deviations post LOI were considered and the status of most of the deviations proposed were "closed" as the respondent agreed on the appellant's position. However, in respect of three material issues/deviations, the matter was still "open", namely increase in mobilization fee, COVID cost and IGST refund. The deviation suggested regarding mutual indemnity agreement was agreed in principal by the respondent which was to be checked with the legal department of its Headquarters. With regard to the deviation in respect of payment guarantee, though the issue was closed, it was stated that it is linked with mutual indemnity agreement deviation, and if the said indemnity is provided, then payment guarantee is not required.
47. By means of email/letter dated 02.06.2022, in response to the respondent's letter dated 31.05.2022, the appellant raised its objections with regard to the issues of mobilization fee, payment schedule, refund of duty draw-back and Covid cost. Further, the appellant proposed as follows :-
"a. The Subcontractor urges Contractor to accept the additional mobilization (USD 1 Million) towards cost due to reasons beyond our control. Failure to do so promptly will escalate the mobilization cost further.
b. The Subcontractor proposes to receive Stand by Letter of Credit (SBLC) equivalent to full mobilization value from Contractor's bank as per the mutually agreed format, valid until arrival of vessel in Kakinada Port, India. The Subcontractor is willing to cooperate for mobilization and must have an non revocable Stand by Letter of Credit (SBLC) in order to make necessary arrangement through internal financing to facilitate payment of the mobilization cost incurred for Contractor's Project. In such case no advance payment will be required from the Contractor until the vessel is physically available in Indian waters."
48. The aforesaid letter was replied by the respondent on 03.06.2022. With regard to the mobilization cost, the respondent expressed its willingness to discuss the issue further for an amicable resolution. In respect of the payment schedule for mobilization fee, an alternative solution was proposed by the respondent. With regard to the Covid cost, the decision of the appellant to absorb such cost in the mobilization fee was appreciated by the respondent. With regard to refund of duty draw-back, the onus was put on the appellant to facilitate duty draw-back refund process and arrange the refund as a part of its contractual obligations absorbing associate cost, if any.
49. Even as reflected in the email of 11.06.2022 sent by the appellant to urgently resolve the outstanding matter of mobilization payment, it is evident that the issue of mobilization payment had not been closed by the parties. Under the facts and circumstances. narrated above, it cannot be said that there was full and complete meeting of minds between the parties that could assume the character of agreement having come into existence between them through correspondence. The issues of mobilization payment and other "open" issues were undoubtedly material terms on which there was evidently no meeting of minds between the parties. In the case of Rickmers Verwaltung GMBH vs. Indian Oil Corporation17, it was held as follows:-
"13. In this connection the cardinal principle to remember is that it is the duty of the court to construe correspondence with a view to arrive at a conclusion whether there was any meeting of mind between the parties, which could create a binding contract between them but the court is not empowered to create a contract for the parties by going outside the clear language used in the correspondence, except insofar as there are some appropriate implications of law to be drawn. Unless from the correspondence, it can unequivocally and clearly emerge that the parties were ad idem to the terms, it cannot be said that an agreement had come into existence between them through correspondence. The court is required to review what the parties wrote and how they acted and from that material to infer whether the intention as expressed in the correspondence was to bring into existence a mutually binding contract. The intention of the parties is to be gathered only from the expressions used in the correspondence and the meaning it conveys and in case it shows that there had been meeting of mind between the parties and they had actually reached an agreement upon all material terms, then and then alone can it be said that a binding contract was capable of being spelt out from the correspondence.
14. From a careful perusal of the entire correspondence on the record, we are of the opinion that no concluded bargain had been reached between the parties as the terms of the standby letter of credit and performance guarantee were not accepted by the respective parties. In the absence of acceptance of the standby letter of credit and performance guarantee by the parties, no enforceable agreement could be said to have come into existence. The correspondence exchanged between the parties shows that there is nothing expressly agreed between the parties and no concluded enforceable and binding agreement came into existence between them. Apart from the correspondence relied upon by the learned Single Judge of the High Court, the fax messages exchanged between the parties, referred to above, go to show that the parties were only negotiating and had not arrived at any agreement. There is a vast difference between negotiating a bargain and entering into a binding contract. After negotiation of bargain in the present case, the stage never reached when the negotiations were completed giving rise to a binding contract. The learned Single Judge of the High Court was, therefore, perfectly justified in holding that clause 53 of the charter party relating to arbitration had no existence in the eye of law because no concluded and binding contract ever came into existence between the parties. The finding recorded by the learned Single Judge is based on proper appreciation of evidence on the record and a correct application of the legal principles. We find no merit in this appeal. It fails and is dismissed with costs."
(emphasis supplied)
50. Therefore, it is held that the correspondence and meetings between the parties after 31.5.2022 do not create a binding and concluded contract between them that would entitle the appellant to an injunction.
51. On record (page no.147 of the paper-book) is an email of 12.06.2022 sent on behalf of the appellant to the respondent informing that MWS inspection onboard Nor Goliath was successfully completed on 10.06.2022 at Cape Town. It is pertinent to mention here that this inspection was not the inspection contemplated in the LOI which was to take place after installation of the gangway.
Thereafter, by the communication dated 19.06.2022 sent by the respondent to the appellant, it was informed that as validity of the LOI has expired without any agreement of GCC and all the exhibits, LOI stands null and void.
52. As far as the aspect raised by the appellant that fraud is a ground to grant injunction, it is pertinent to mention here that admittedly, time was the essence of the LOI which is reflected in the aforequoted letter dated 22.05.2022 of the appellant. The "condition precedent" was required to be fulfilled on or before 14.5.2022 by a formal confirmation letter. As reflected above, the negotiation and exchange of correspondence between the parties extended beyond 14.5.2022. The binding of LOI was extended twice by the respondent, second one making the binding of LOI valid till 31.5.2022. In each of the aforesaid two extensions, to the binding of LOI granted by the respondent, it was categorically mentioned that other term and condition of LOI remained intact.
53. The quotation for completion of work submitted by the appellant was intended to be accepted by the respondent subject to "condition precedent" and formal signing of contract agreement between the appellant and the respondent. As reflected above, till 11.6.2022 the parties had failed to reach an agreement on all materials terms of deviation that were suggested by the appellant.
54. Evident it is from the minutes of the meeting dated 30.5.2022, from the letter dated 2.6.2022 sent by the appellant, and the letter dated 3.6.2022 sent by the respondent in response, and even the subsequent correspondence, that bonafide effort was made by the respondent to accommodate the deviations proposed by the appellant but on the issues of mobilization fee, payment schedule for mobilization fee and, refund of Duty Drawback, the respondent had clearly conveyed its reservations and hence, accommodation on part of appellant was requested. The last paragraph of the letter dated 3.6.2022 sent by the respondent is again being quoted below which is as follows:
"Hope the above convey Contractor's full commitment on payment and Subcontractor is requested to review and confirm its acceptance on the above for further necessary action for award of contract."
55. Further, the aforementioned e-mails dated 7.6.2022 and 8.6.2022 sent on behalf of the respondent to the appellant pertain to issuance of Stand by Letter of Credit (SBLC) to be issued on behalf of the respondent which, apparently pertains to the contentious issue of payment schedule of mobilization fee appearing in the aforementioned letters dated 2.6.2022 and 3.6.2022.
56. As regards the contention that the contract entered into between the respondent and Bhambhani Shipping on 27.6.2022 was on e-stamp paper issued on 6.4.2022 which 'hinges' towards the fact that the respondent was negotiating 'parallelly' with Bhambhani Shipping, the same has no substance. A copy of the contract made on 27.06.2022 was filed alongwith the counter affidavit of the respondent before the learned Judge. Neither was that contract challenged nor was the third party made a party in the proceedings before the learned Judge. There appear to be two e-stamp papers both dated 06.04.2022 which were purchased by the respondent, one for Rs. 500/= and the other for Rs. 100/=. The name of the third party does not appear in the columnar form in either of them. It is not an unknown practice for persons to procure stamp papers in advance for purpose of various deeds and conveyances likely to be executed by them. No malafide can be attributed to the respondent merely due to the prior date of purchase of the e-stamp papers.
57. Moreover, there is no material on record to conclude that the respondent was undertaking any parallel negotiations with the third party. Further, there is nothing on record to support the appellant's contention that the third party, Bhambani Shipping, had offered in its bid, pursuant to the tender floated by the appellant, a vessel that was 'non-compliant'. The respondent itself is a contractor, having secured a contract from Reliance Industries Limited for provision of AWB with associated services during Hook-up and Commissioning of RUBY FPSO, and, it can be presumed, it had its own time constraint. On failure of parties herein to reach an agreement on GCC, the respondent was well within its rights to look for and pursue options for fulfillment of its contract with Reliance Industries Limited. Merely because the negotiation continued beyond 31.5.2022 between the parties would not amount to extension of the binding of the LOI or extending the time period for fulfillment of "condition precedent", indefinitely.
58. Under the facts and circumstances noted above, there is no doubt that both parties were trying to reach an agreement in bonafide manner and trying to negotiate and resolve the deviations suggested by the appellant which were standing in the way of a concluded contract i.e. GCC, which was "condition precedent" mentioned in the LOI. The fact that the parties failed to arrive at a consensus during business negotiations with regard to deviation suggested by the appellant does not, prima facie, lead to a conclusion that fraud had been committed by the respondent.
59. For any interim injunction to be granted in favour of the appellant, the pleadings and material on record should be able to demonstrate that there exist tenable grounds for interference by the Court on each of the grounds of prima facie case, balance of convenience and irreparable loss. The appellant has failed to demonstrate a prima facie case in its favour for grant of interim injunction. Admittedly, the LOI stands nullified and voided in view of the communication dated 19.6.2022 and the contract having already been awarded to a third party, namely, Bhambhani Shipping Limited, on 27.6.2022, which third party is not a party in the present proceedings, the balance of convenience also does not exist in favour of the appellant. Further, the appellant has failed to demonstrate what irreparable injury or loss would be caused to it which cannot be compensated in terms of money if an interim injunction is not granted. Clause (b) and (c) of sub-section (3) of Section 38 of the Act of 1963 grants discretion to the Court to grant an injunction where there exists no standard for ascertaining the actual damage caused or likely to be caused by the invasion on part of the defendant of the plaintiff's right to, or enjoyment of property and/or where the invasion is such that compensation in money would not afford adequate relief. As referred hereinabove, enclosed as Annexure-33 to the affidavit filed by the appellant is a quantification of expenses stated to have been incurred by the appellant in furtherance of the LOI. Therefore, the appellant can be compensated in terms of money. An efficacious remedy of arbitration is already provided in the LOI itself. The LOI cannot be specifically enforced, as has been held hereinabove.
60. It may, however, be mentioned here that an application under Section 9(1) of the Act of 1996 would be maintainable before or during arbitral proceedings or at any time after making of the arbitral award but before it is enforced in accordance with Section 36 unless, in view of the provisions of Section 9(3) once the arbitral tribunal has been constituted, the Court finds that circumstances exist which may not render the remedy provided under Section 17 of the Act of 1996 efficacious. Therefore, though such an application would accordingly be maintainable at any of the three stages mentioned in Section 9(1), however, an applicant would not be entitled to relief where the breach of an obligation arises from a contract, the performance of which cannot be specifically enforced. This issue has been considered only to explain the aspect of maintainability that was dealt with by the learned Judge.
61. It is pertinent to consider the argument raised by the learned counsel for the respondent that when an application under Section 9(1) is filed before the commencement of the arbitration proceedings, there has to be a manifest intention on part of the applicant to take recourse to arbitral proceedings. The judgments of Sundaram Finance Ltd. and Firm Ashok Traders (supra), that have been referred to by the learned counsel for the respondent, were in respect of proceedings initiated prior to insertion of sub-sections (2) and (3) of Section 9 of the Act of 1996 by means of Act No.3 of 2016. As quoted above, sub-section (2) of Section 9 provides that where, before the commencement of the arbitral proceedings, a Court passes an order for any interim measure of protection under sub-section (1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine. In light of sub-section (2) of Section 9 of the Act of 1996, there is a mandate for commencement of arbitral proceedings within a period of ninety days from the date of an order under sub-section (1) of Section 9. However, the period of ninety days provided by the provision may be extended by the Court for such further time as it may determine under the facts and circumstances of that case. Be that as it may, a party invoking Section 9 of the Act of 1996 must be ready and willing to go to arbitration as held in Arcelor Mittal Nippon Steel India Ltd. vs. Essar Bulk Terminal Ltd.18
62. In view of the facts and circumstances of the case, it is open for the appellant to raise any claim, dispute or differences between it and the respondent by resorting to arbitration as provided in the LOI itself. In that event, the arbitral tribunal shall decide the dispute and differences between the parties, uninfluenced by any observation made in this judgment. All pleas and contentions are left open for being raised before the arbitral tribunal. However, the appellant has failed to demonstrate any plausible ground for grant of an interim injunction as envisaged in Section 9 of the Act, 1996. This appeal lacks merit and is, accordingly, dismissed.
Date :14.11.2022
A.V. Singh/sfa/SK
(Jayant Banerji, J.) (Manoj Kumar Gupta, J.)