Bombay High Court
Afcons Infrastructure Ltd vs Halani International Ltd And 2 Ors on 22 December, 2018
Author: G.S. Kulkarni
Bench: G.S. Kulkarni
pvr 1 carbpl1593-18=1594-18
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMMERCIAL ARBITRATION PETITION (LODG)NO.1593 OF 2018
Afcons Infrastructure Limited. ...Petitioner
Versus
1.Halani International Limited & Ors. ...Respondents
AND
COMMERCIAL ARBITRATION PETITION (LODG)NO.1594 OF 2018
Afcons Infrastructure Limited. ...Petitioner
Versus
1.Halani International Limited & Ors. ...Respondents
----
Mr.Rahul Narichania, Senior Counsel With Santosh Mishra & Abhishek
B. I/b. Kochar & Co., for the Petitioner in CARBPL 1593/18.
Mr.Aspi Chinoy, Senior Counsel with Santosh Mishra, Abhishek B. I/b.
Kochar & Co., for the Petitioner in CARBPL 1594/18.
Mr.Dinyar Madon, Senior Counsel with Raj Panchmatia, Peshwan
Jehangir, Pranav Sampat, C.Nageshwaran & Varun Mansinghkar I/b.
Khaitan & Co., for the Respondent no.1 in CARBPL 1593/18 & 1594/18.
-----
CORAM : G.S. KULKARNI, J.
DATE : 22th DECEMBER, 2018
---
ORDER:
1. This is an application under Section 9 of the Arbitration and Conciliation Act,1996 (for short the "ACA") whereby the petitioner Afcons Infrastructure Limited is praying for reliefs which are in the nature of interim measures pending the arbitration proceedings. ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 :::
pvr 2 carbpl1593-18=1594-18
2. The factual antecedents can be noted below:
3. The Oil and Natural Gas Commission (ONGC) invited tenders in August,2015 for the work of "Life Extension of Well Platform Project (LEWPP)-1" for revamping of topside of 20 ageing well platforms. The work was a offshore work. To participate in the said tender, the petitioner entered into a MOU dated 29 October 2015 with respondent no.1-Halani International Limited (for short 'Halani') which is a foreign company based in UAE and one Triune Energy Services Pvt.Ltd. Respondent no.2 (for short "Triune").
4. The petitioner alongwith Halani and Triune formed a consortium and by submitting its bid participated in the said tender. The petitioner is the leader of the consortium. On 29 January 2016 the ONGC accepted the petitioner's consortium bid in respect of two contracts namely LEWPP-1 and LEWPP-2 and awarded the said contracts on 'lumpsum turnkey basis'. Formal contracts were entered between the ONGC and the consortium (for short 'the principal contract') on 26 February 2016. The principal contract stipulated the overall completion date of the work to be 30 April 2018. It is informed that this date has now been extended to 31 January 2019.
::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 :::
pvr 3 carbpl1593-18=1594-18
5. The case of the petitioner is that under the principal contract the scope of the work of each of the consortium partner was specifically defined, wherein the petitioner was responsible for project management, procurement, fabrication, installation, pre-commissioning and commissioning. It is stated that Halani was responsible for mobilizing the marine spread (barges and vessels) for transportation and off-shore works. The other partner Triune was responsible for the design and detail engineering of the project. Further on 1 September 2017 another partner Nauvata Engineering Pvt.Ltd. (Respondent no.3) was added as a consortium member and an agreement to that effect was executed on 2 September 2017 (for short 'the Consortium Agreement'). The petitioner states that even the consortium agreement dated 2 September 2017 executed between the petitioner and the respondents/ members of the consortium defines the scope of work of each of consortium member as also enables the consortium members to receive payment in regard to their part of the work directly from the ONGC. The consortium agreement in clause 11.2 contains a arbitration clause in regard to any disputes and differences which may arise between the members, under the said agreement.
6. The case of the petitioner is that Halani failed to deploy the required number of barges during the period 2016-17 and that as ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 ::: pvr 4 carbpl1593-18=1594-18 against the requirement of six barges (3 for each contract), Halani deployed only one barge for the contract LEWPP-1 and none for LEWPP- 2, which according to the petitioner was clearly reflected in the letter of the ONGC dated 22 February 2017 which called upon the consortium to submit a catch up plan. Accordingly a meeting dated 1 May 2017 was held in which Halani agreed to mobilize nine barges instead of the originally planned six barges for the working season 2017-18, so as to expedite the works. Consequent thereto a catch up plan was submitted to ONGC by a communication dated 12 June 2017 the consortium confirmed to the ONGC and it will deployed nine barges and also undertook to submit the charter party agreements.
7. The petitioner contends that however Halani could not deploy the nine barges and the details of only two barges were submitted by Halani. This was recorded by the ONGC by its letters dated 9 August 2017 and 23 August 2017. The petitioner thus contends that right from the inception there has been gross non fulfillment of the barge requirement by Halani which was seriously affecting the contractual work awarded to the consortium.
8. The petitioner contends that on 15 September 2017 a meeting was held, wherein Halani expressed that it was facing a financial crunch ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 ::: pvr 5 carbpl1593-18=1594-18 and requested the petitioner for making available funds for mobilizing marine spread and as also insisted for a "cap on the barge deployment days" for each platform.
9. Considering that the contractual project would get adversely affected and that it was necessary for Halani to mobilize the requisite barges, the petitioner executed a 'short term advance agreement' with Halani dated 3 November 2017. This agreement was amended on 10 November 2017 by an amending agreement (for short collectively referred as 'the advance agreement'). Under this agreement the petitioner granted Halani advances of Rs.3.6 million USD.
10. The petitioner contends that despite Halani receiving such large financial advances which were granted solely in the interest of the project in question, Halani failed to deploy the required marine spread at site. The petitioner has referred to a letter dated 5 January 2018 of the ONGC addressed to the petitioner recording that "till date" not a single barge has been deployed in the field, committed during the meeting held on 8 December 2017.
11. The petitioner therefore on 8 February 2018 issued a notice of default to Halani pointing out that Halani had failed to fulfill its ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 ::: pvr 6 carbpl1593-18=1594-18 commitment to deploy 6 barges/9 vessels as per the Short Term Advance Agreement and thus was in default. Halani was called upon to rectify the defaults by deployment of marine spreads failing which the petitioner would be constrained to take steps under Clause 7 of the advance agreement. However, as Halani did not remedy the default the petitioner by its letter dated 13 April 2018 addressed to Halani recorded that considering the financial crunch faced by Halani, it appeared to be not possible for Halani to mobilize the requisite marine spread even in the forthcoming season. The petitioner thus recorded that the contract between the ONGC and the consortium be amended to transfer Halani's balance work and payments to be received thereon from ONGC to the petitioner. The petitioner contends that thereafter the petitioner by its letter dated 9 May 2018 addressed to ONGC informed that Halani's failure to moblize the requisite marine spread read with clause 7 of the short term advance agreement should be treated as Halani's consent for transfer of the balance work and payment.
12. The petitioner contends that Halani by its letter dated 24 May 2018 informed the petitioner that it has five in-house accommodation barges and that it planned to make available its barges from October,2018. However, Halani informed the petitioner that Halani's finances are affected by increase in number of 'barge days per platform', ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 ::: pvr 7 carbpl1593-18=1594-18 than what was estimated at the time of entering into the consortium agreement and the principal contract with the ONGC. The petitioner disputed this assertion of Halani by its letter dated 4 June 2018 whereby the petitioner informed Halani that the contract was a lumpsum key contract and thus such a grievance on the number of barge days to be fixed, was not acceptable. Petitioner also recorded that Halani was in breach of its obligation despite having received a short term advance of 3.6 million USD. The petitioner recorded that the petitioner was accordingly entitled to take over the balance work from Halani and as also the entitlement to receive payment in that regard from ONGC.
13. The petitioner avers that Halani by its letter dated 5 June 2018 raised a contention that it had paid off the principal amount under the short term advance agreement and only a small amount towards interest was balance and thus there was no breach of clause 7 of the short term agreement. It is contended that this letter was totally silent that Halani had mobilized nine required vessels.
14. The dispute between the parties persisted which can be seen from the letter dated 9 June 2018 addressed by Halani to the petitioner calling upon the petitioner to cap the barge deployment days and for a fund to the tune of 15 million USD for mobilization of the marine spread ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 ::: pvr 8 carbpl1593-18=1594-18 as necessary at this stage of the contract. This was not accepted by the petitioner and Halani was informed that it was not possible to fund Halani any more as per the Reserve Bank's condition. The request of the petitioner to Halani to consider the petitioner's proposal for transfer of Halani's balance work to the petitioner under the consortium and principal agreement was not accepted by Halani.
15. Thereafter, again the petitioner by its letter dated 18 June 2018 informed Halani of its default in deploying vessels for the period 2016- 17 and 2017-18. The petitioner's inability to accept the capping barge days per platform was informed to be not acceptable and it was informed that Halani was under an obligation to provide marine spread on lumpsum basis. Halani however by its letter dated 16 July 2018 informed the ONGC that the situation for non deployment of barges had occurred by increase in the number of barge days which was beyond the anticipation of Halani at the time of entering into the contract. Halani stated that it would be able to perform its obligations only subject to the conditions of capping of number of barge days and advance of 10% contract price without bank guarantee and repayment with original contract schedule.
16. A meeting was held between the representatives of ONGC, ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 ::: pvr 9 carbpl1593-18=1594-18 petitioner and Halani on 27 July 2018, in which Halani reiterated the requirement of capping of number of barge days per platform and grant of advance by ONGC without bank guarantee and relaxation of repayment schedule. This was not accepted by ONGC. The issue of capping of barge days also was not accepted by the petitioner. Thereafter, between August to October of 2018 correspondence ensued between the parties wherein the petitioner insisted that as Halani was not in a position to discharge its obligations under the scope of the work entrusted to Halani under the contract, the same be transferred to the petitioner. The petitioner contends that an impasse between the parties on these issues continued seriously affecting the execution of the public contract.
17. The petitioner contends that on 31 October 2018 there was a management review meeting wherein again the assertions of Halani on capping of the barge days and demand for advances were not accepted. Moreover, the ONGC by its letter dated 15 November 2018 addressed to the petitioner interalia recorded as under:-
"As the projects are inordinately delayed and current offshore working season is sleeping away without any progress on offshore work front, ONGC is highly concerned that any further delay in deployment of barges will severely disturb the completion schedule and avoidable losses to ONGC.
In view of above, please note that due to failure of Halani for non mobilization of Marine spreads, ONGC shall be looking into other options including acceptance of its performance from other consortium members who are jointly and severally liable to ONGC. In that event, ONGC shall not be liable for any consequential damages, cost and other legal action that may be suffered by Halani."::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 :::
pvr 10 carbpl1593-18=1594-18
18. The petitioner contends that the ONGC considering the consortium agreement would not thus release the payment even on the work of marine spreads unless there are joint instructions which are not possible to be issued due to the disputes between the petitioner and Halani.
19. The petitioner thus contends that the consortium has fallen in a seriously obscure position that it has become impossible for the consortium to progress and discharge its obligations under the principal agreement entered by the consortium with the ONGC, unless the reliefs as prayed for in the present petition are granted. The petitioner has accordingly filed this petition under Section 9 seeking the following reliefs:
"a) Pending the hearing of this petition and the Arbitration proceedings, Respondent No.1 be restrained by an interim order and injunction of this Hon'ble Court from in any manner interfering with, objecting to, or obstructing the performance of its balance obligations under the Consortium Agreement dated 02.09.2017 by the Petitioner and further restraining Respondent no.1 from requiring ONGC to make payment to it for such balance works.
b) For ad interim orders in terms of prayer (a) above."
20. Halani has appeared and has opposed the above reliefs, as also has filed an affidavit in opposition to the ad-interim reliefs. The principal contention as urged on behalf of Halani is that the petition is ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 ::: pvr 11 carbpl1593-18=1594-18 misconceived inasmuch as there is no arbitration agreement between the parties under the advance agreement. It is contended that the petitioner cannot take recourse to the consortium agreement to maintain this petition. It is contended that in any case as the petitioner is not capping the number of barge days, which had resulted in the vessels of Halani lying rendered idle resulting in Halani suffering severe financial losses. Referring to the various clauses of the consortium agreement as also the principal agreement with the ONGC, it is contended that it is the petitioner who is in breach of the terms and conditions of the contract and now cannot blame Halani to be in default by not supplying the marine spreads/barges. It is next contended that there is a dispute resolution process as agreed between the parties whereby the dispute is required to be referred to steering committee and thereafter to the Executive Management, representative management designated by the parties. It is contended that without taking recourse to the said agreed procedure of resolution of disputes the present petition in any event is not maintainable.
21. Having broadly noted the principal contentions of Halani, the submissions of Mr.Aspi Chinoy, learned Senior Counsel for the petitioner are required to be noted.
::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 :::
pvr 12 carbpl1593-18=1594-18
22. Mr.Chinoy in support of the ad-interim reliefs as prayed in the above petitions would submit that the correspondence on record goes to show beyond a pale of doubt that Halani is in breach of its obligations under the consortium agreement. Mr.Chinoy submits that Halani is facing a deep financial crunch which is evident, firstly from Halani demanding financial assistance of 3.6 million USD under the advance agreement, and thereafter in the several meetings held demanding further advances from the ONGC and that too without furnishing any security/bank guarantee. It is submitted that the petitioner had made advances taking approvals of Reserve Bank of India and now it is not possible either for the ONGC or for the petitioner to accept the said financial demand of Halani. It is submitted that Halani has brought about a situation whereby the performance of the contractual obligations towards the ONGC by the consortium are being frustrated and which may lead to serious consequences if appropriate compliances are not undertaken by the petitioner who is jointly and severally liable to complete the contractual work entrusted to the consortium by the ONGC.
23. Mr.Chinoy submits that the disputes between the petitioner and Halani are required to be referred to arbitration, however, in the intervening period till appropriate rights and claims of the parties are ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 ::: pvr 13 carbpl1593-18=1594-18 adjudicated in the arbitration proceedings, the impasse as created by the peculiar stand as taken by Halani cannot be permitted to operate affecting the contractual work. It is submitted that the advance agreement is an integral part of the consortium agreement, as is clear from the various clauses of the advance agreement and thus the obligation of Halani under the advance agreement is necessarily an obligation under the consortium agreement. Mr.Chinoy submits that both these agreements are interlinked and thus the petitioner is entitled to the ad-interim reliefs as prayed in the above petitions. Mr.Chinoy in supporting his submission has placed reliance on the decision of the Supreme Court in "Amit Lalchand Shah & Ors. Vs. Rishabh Enterprises & Anr."1
24. On the other hand Mr.Madon, learned Senior Counsel for Halani has vehemently opposed the above petitions and the ad-interim reliefs as prayed by the petitioner. In supporting his submissions, Mr.Madon has placed reliance on the reply affidavits as filed on behalf of Halani.
25. Mr.Madon at the outset would submit that the prayer of the petitioner is for enforcement of clause 7 of the advance agreement. It is submitted that the advance agreement which is a money lending agreement is an independent agreement and can have no relation to the 1 2018 SCC Online SC 487 ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 ::: pvr 14 carbpl1593-18=1594-18 consortium agreement or even the principal agreement entered by the consortium with the ONGC and thus, the petitioner cannot maintain this petition as there is no arbitration clause in the advance agreement. To support this proposition Mr.Madon refers to the decision of the Supreme Court in M.R.Engineers and Contractor Pvt. Ltd. Vs. Som Datt Builders Ltd.2 It is then submitted that in any case the pre-arbitral procedure as contemplated in the agreement of referring the issue to steering committee and to Executive Management is not resorted by the petitioner and thus the petitioner is not entitled for any relief even on this count.
26. Mr.Madon would then contend that the principal objection of Halani is to the non-capping of the barge days on each of the platforms which has caused severe financial losses in the past period of the contract. It is submitted that due to non capping of the barge days, the barges/vessels of the respondent had remained idle resulting into a financial crunch. In short the argument of Mr.Madon is that it is not possible for Halani to proceed under the present situation of non capping of the barge days.
27. The next submission of Mr.Madon is that clause 3 and clause 7 of the advance agreement would in fact amount to an amendment of the 2 (2009)7SCC 696 ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 ::: pvr 15 carbpl1593-18=1594-18 consortium agreement which can take place only after it is agreed by the other members of the consortium and thus in any case Clause 3 and clause 7 cannot form part of the consortium agreement and cannot be enforced by seeking a specific performance.
28. Mr.Madon submits that Halani is willing to provide the barges only on the condition of the petitioner being agreeable to cap the number of barge days. Mr.Madon submits that the relief as sought in the prayer clause (a) cannot be granted as the prayer would exclude the Halani's obligations.
29. Having heard the learned Senior Counsel for the parties and having perused the record, it appears to me to be quite clear that there was a clear obligation on Halani under the principal agreement entered by Consortium with the ONGC as also the consortium agreement to provide the marine spread/barges. This is not disputed by Halani. It is also quite clear that Halani had a complete pre-estimate of the work to be performed under the principal agreement and as attributed to its share/participation of Halani. The correspondence between the ONGC and the consortium as also the correspondence between the petitioner and Halani is writ large of the fact that Halani had defaulted in making available the adequate number of barges in execution of the contractual ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 ::: pvr 16 carbpl1593-18=1594-18 work.
30. It is not in dispute that under the agreements in question it is a joint and several liability of the parties to comply their obligations and complete the contractual work entrusted to the consortium by the ONGC. Even Halani does not dispute that it was Halani's obligation and none others to deploy the requisite number of barges. Halani however appears to have had serious financial difficulties and for which the petitioner had provided a financial assistance under the advance agreement and the amended advance agreement only for the purpose of the project in question. The funds were utilized however the obligations to supply the requisite number of barges by Halani was not complied.
31. It would be necessary to see some of the clauses in the agreement which would clearly demonstrate the respective obligations in this regard.
Consortium Agreement 2.0 PRINCIPLES OF CO-OPERATION FOR THIS PROJECT:
2.1 The original Consortium of AFCONS - HALANI - TES had entered into the Contract accepting joint and several liabilities for the execution of this Contract. Such joint and several liabilities will transfer to the new Consortium under the amended Contract. Notwithstanding such joint & several liabilities of the members to the client under the contract, the members agree as follows:= * Each Member shall be individually and solely responsible for providing all resources and for the due performance of its portion of the scope of work in accordance with Article 3 ("Scope of Work").
............
3.0 SCOPE OF WORK:::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 :::
pvr 17 carbpl1593-18=1594-18
3.1 The CONSORTIUM will execute the CONTRACT on lumpsum
turnkey basis.
The Members hereby agree that the Split Scope of Work for the Project between the Members as described in Appendix 1 hereto corresponds to 57.09%: 39.44%: 0.31%: 3.16% (AFCONS :HALANI :TES:NAUVATA).
3.2 The broad scope of work for each Member is indicated below:-
3.2.1 AFCONS Notwithstanding AFCONS's obligations for the performance of its Scope of Work (as per Appendix 1) under the project, AFCONS undertakes to carry out the following specific obligations for the smooth execution of the Project:
a) AFCONS will submit the documents generated by the consortium Members promptly to client for their approval/confirmation.
b) AFCONS will be responsible for resolving any dispute/misunderstanding, if any, between the Consortium partners;
c) AFCONS will provide sufficient number of suitably qualified personnel and all such materials and/or facilities as may be necessary for the proper completion of its scope of work and any additional costs on this account shall be to the account of AFCONS.
3.2.2 HALANI Notwithstanding the HALANI's obligations for the performance of its Scope of Work (Appendix 1) under the Project, HALANI undertakes to carry out the following specific obligations for the smooth execution of the Project:
a) Mobilizing the marine spread as per the mutually agreed plans and schedules of the Project. If for any reason HALANI is not able to mobilize its pre-agreed vessel then it shall make alternate arrangement at its sole risk and cost and ensure that there is no slippage or delay in the mobilization of the marine spread as per the mutually agreed schedule.
b) All the barges/vessels to be deployed by HALANI should be safety audited by ONGC/MWS. HALANI shall comply with the audit findings/comments before mobilizing the barges/vessels.
c) All the barges/vessels deployed by HALANI shall be as per the technical requirement of ONGC/MWS." (emphasis supplied) 31A. The relevant contents of the advance agreement read as under:-
Amendment Agreement No.1 to Short Term Advance Agreement.
"WHEREAS, the Parties are members to the Consortium for the execution of Life Extension of Well Platforms Tender 1 and Tender 2 (hereinafter referred to as 'Projects') awarded by Oil & Natural Gas ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 ::: pvr 18 carbpl1593-18=1594-18 Corporation Limited (hereinafter, "ONGC" or "Client") and have executed Consortium Agreement dated 2nd September 2017 ("Consortium Agreement") wherein each member to the Consortium has agreed to provide its resource and finance for the performance of its respective scope of work in the Consortium.
WHEREAS HALANI is facing liquidity issues and has constrains in mobilizing the vessels required for the Project.
WHEREAS to ease the current financial burden, HALANI has requested AFCONS to provide a temporary short term advance up to an aggregate amount of USD 3.6 million (United State Dollar Three Million and Six Hundred Thousand only) against the security of postdated cheques of equivalent amount and repayable immediately upon receipt of payment from ONGC against its milestones.
WHEREAS the parties have executed Short Term Advance Agreement dated 3rd November 2017 ("Advance Agreement") whereby AFCONS have, subject to regulatory approval, agreed to provide a temporary short term advance up to an aggregate amount of USD 3.6 Million (United State Dollar Three Million and Six Hundred Thousand only) to HALANI to tide over the liquidity constrains faced by it and to enable HALANI to mobilize the vessels required for the Project.
WHEREAS the Reserve Bank of India has vide its letter no.FE.CO.Trade (IMD/4203/05.43.000/2017-18 dated 10th November 2017 granted its approval to AFCONS to make temporary short term advance up to an aggregate amount of USD 3.6 Million (United State Dollar Three Million and Six Hundred Thousand only) to HALANI.
WHEREAS HALANI has requested ONGC to directly make payment to AFCONS from its invoices for the repayment of the advance given by AFCONS to HALANI. ONGC has vide its letter MR/OW/LEWPP/OW/224/17-18 dated 20th October 2017 accepted the said request of HALANI.
WHEREAS the Parties vide this Agreement agree to amend and elaborate further the terms and conditions of Advance Agreement for release of USD 3.6 Million (United State Dollar Three Million and Six Hundred Thousand only) by AFCONS to HALANI and also set forth herein this Agreement HALANI's obligations and commitments in connection with the Projects.
NOW THEREFORE in furtherance of the Advance Agreement and in consideration of the foregoing, the Parties hereto agrees, as under:
1. AFCONS, having received approval of Reserve Bank of India vide letter no.FE.CO.Trade(IMD)/4203/05.43.000/2017-18 dated 10th November 2017, agrees to give temporary short term advance up to an aggregate amount of USD 3.6 million (United State Dollar Three Million and Six Hundred Thousand only) to HALANI against the security of ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 ::: pvr 19 carbpl1593-18=1594-18 postdated cheque of equivalent amount issued by HALANI to AFCONS.
2. AFCONS agrees to release the above said sum either directly to the vendors/agencies of HALANI or to HALANI, for fulfillment of the following obligations:
A. USD 0.45 million towards IGST obligation of vessel GERIMAL. B. USD 0.45 million to IGOPL (Vendor of Halani) towards obligation of vessel GERIMAL.
C. USD 0.95 million towards mobilization of 2 barges from Singapore (i.e. SS-3 and Trinity Nissi) including their towage. D. USD 0.85 million towards repayment of past dues of Halani to its Vendor to enable mobilization of 3 barges (i.e. Venture, Kissama, Halani-
1) from Africa.
E. USD 0.7 million towards mobilization of Work Boat Goodman and Work Boat Topman.
F. balance sum of USD 0.2 million towards other obligation of Halani for mobilizing barges (eg. Ocean 303) for adhering to the schedules for the Projects.
3. HALANI represents and warrants as under:
a. to utilize the aforesaid sum advance by AFCONS to it solely for the payment of obligation for mobilization of vessels/barges for the Projects and to provide AFCONS with the relevant evidences of payment to said vendor/agencies.
b. to mobilise at Mumbai Offshore, exclusively for the Projects, the vessels and barges (i.e. Gerimal, SS-3, Trinity Nissi Venture, Kissama, Halani-1) as per the following timeline.
Sr Barge Date of mobilization on
.n field
o.
1 Gerimal 25/11/2017
2 SS-3 15/12/2017
3 Trinity Nissi 15/12/2017
4 HALANI-1 10/01/18
5 Venture 10/01/18
6 Kissama 10/01/18
7 Work Boat Goodman 15/12/2017
8 Work Boat Topman 15/12/2017
9 Ocean 303 ( provided release order is Post release order
received)
c. to ensure availability of the pre-committed vessels and barges
exclusively for the Projects till the obligation of the Consortium to the Client are fulfilled under the Contract.::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 :::
pvr 20 carbpl1593-18=1594-18
4. HALANI shall repay the above advance amount of USD 3.6 million (United State Dollar Three Million and Six Hundred Thousand only ) to AFCONS from the receivables from ONGC against their milestones payment from the Project.
In this connection, HALANI shall vide letter to ONGC (as per the template provided by AFCONS), give an irrevocable standing instruction to the Client to make direct payment to AFCONS of USD 3.6 million (United State Dollar Three Million and Six Hundred Thousand only) in 3 installments from their milestone payments for the month fo December 2017, January 2018 and February 2018.
In the event the Client doe not make to making direct payment to AFCONS, then HALANI shall receive the payment from ONGC in an Escrow Account with an Escrow Bank to be mutually agreed between AFCONS and HALANI. In such case, the Parties shall execute an Escros Agreement with the Escrow Bank for the receipt of payment from the ONGC and re-distribution among AFCONS and HALANI as per the terms agreed therein.
5. The complete advance amount along with interest shall be repaid before 28th February 2018.
AFCONS shall charge Interest @ USD LIBOR plus 400 basis points compounded monthly from the date of release of advance till the repayment of entire advances together with interest. Interest will be calculated for the actual number of days of advance outstanding.
6. In the event HALANI defaults in repayment of advance alongwith interest (as stated above) on or before 28 th February 2018, HALANI shall pay by way of penalty additional interest (over and above the interest indicated above in clause 4) of 200 basis points per annum with monthly compounding or as AFCONS may notify in writing from time to time, from the date of default (28th February 2018) till the date of actual payment.
7. In case HALANI defaults in the repayment of the Advance amount of USD 3.6 million (United State Dollar Three Million and Six Hundred Thousand only ) along with the interest and penalty as stated in clause 5 and 6 above, then AFCONS shall be entitled to encash the cheques given to it by HALANI.
In the event HALANI breaches the commitment made in this Agreement then in such case (i) HALANI shall be deemed to be in default as per this Agreement and as per clause 10 of the Consortium Agreement (ii) HALANI agrees and accepts that AFCONS in its capacity as a Leader of the Consortium would have the right to take over its scope of work (in part or full ) to fulfillment of the obligation to the Client at the risk and cost to HALANI. (ii) AFCONS shall have the right to claim payment directly from ONGC for the scope of work taken over from HALANI (iii) HALANI shall bear all the cost and provide all the vessels and other resource to the Project and also bear all the cost connected with the fulfillment of its obligations by AFCONS. (emphasis supplied) ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 ::: pvr 21 carbpl1593-18=1594-18
32. A perusal of the above advance agreement clearly reflects that it concerns issues which are inextricably linked to the obligations of Halani under the consortium agreement. In fact the object behind the advance agreement is for no purpose other than to bring about smooth execution of the ONGC's contractual work. There can be no other meaning and reading of the advance agreement and the clauses contained therein. Mr.Madon's submission that the advance agreement should be read as a merely money lending agreement, is in fact in the teeth of clause 3 and clause 7 of the advance agreement. If the purpose of the advance agreement was merely money lending then the parties would not have provided for such intricate interlinking details and compliances which are in fact compliances under the consortium agreement. It is not Halani's case that the advance agreement has stood extinguished. If that be the case and certain obligations are still at large under the consortium agreement read with advance agreement, then it is difficult to accept Halani's case that it has no obligation to comply its obligation under clause 3 and clause 7 of the advance agreement.
33. Apparently it is Halani who is in breach of its obligations not only under the consortium agreement but also under the advance agreement. In this context it would be necessary to refer to the letter ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 ::: pvr 22 carbpl1593-18=1594-18 dated 5 January 2018 of the ONGC to the petitioner which reads thus:-
Sub: Life Extension of Well Platform Project- Delay in Marine Spread deployment.
This has reference to the meeting held in the office of Head of Works on 08/12/2017 wherein, consortium had committed the deployment of barges of LEWPP. Till date not a single Barge has been deployed in the field, committed during the meeting. This is alarming and matter of serious concern.
It is learnt that the Barges and work boats, which were to be deployed from South Africa and Dubai respectively have not sailed out from their respective locations till date.
Consortium has already delayed the project considerably. The deployment of Barges have also been abnormally delayed by the Consortium, reason of which are solely attributable to the Consortium itself.
Leader of the consortium is advised to immediately mobilize the Barges and complete the activities.
Consortium should also ensure that LEWPP, Tender-3 activities are not affected in any way as has been highlighted by the company from time to time.
Copy for information to:
(H.S.Ratra)
1.GM(E)-PM PC-LEWPP-1 (emphasis supplied)
34. Thus prima facie Mr.Madon's submission that Halani would provide the barges/marine spread only on the petitioner/consortium agreeing for a cap on the barge days per platform, appears to be an untenable insistence considering the contractual terms. It cannot be accepted that a expert player in the field of such activities would turn around and say that the basic terms and conditions of the contract be now altered to suit Halani's convenience and requirement in ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 ::: pvr 23 carbpl1593-18=1594-18 performance of its obligation. It is not disputed that the contract is a turn key contract, and therefore, Halani was required to have an estimate of its obligations. It however appears that Halani has landed into financial difficulties. Whether the financial difficulties are attributable to present contract or the overall business dealings of Halani which is a UAE based company are matters which would be tested on evidence in the arbitral proceedings. If Halani is able to prove that the other members of the consortium have wronged Halani, in that event Halani can certainly claim damages.
35. At this stage of the proceedings the hard stand of Halani that it will refuse to perform its obligation by insisting for a capping on number of barge days and that it should be provided with more funds either by ONGC or by consortium would lead to the irretrievable failure of the performance of the consortium obligations towards the ONGC.
36. Mr.Madon's contention relying on the decision in the case of M.R.Engineers and Contractor Pvt. Ltd. Vs. Som Datt Builders Ltd. (supra), that there is no arbitration agreement in the advance agreement cannot be accepted. In this case the Supreme Court was construing a sub-contract awarded to the appellant by the respondent therein by issuing a work order. The appellant claimed certain payment ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 ::: pvr 24 carbpl1593-18=1594-18 of extra work and contended that the work order incorporates the provisions of main contract. It is in this context the Court examined whether such an incorporation can be read into the work order and can lie within the scope of Section 7(5) of the Act. The Court considered as to whether such general reference of the main contract would incorporate the arbitration clause. Thus, in the facts of the present case in my opinion, the decision in M.R.Engineers would not be applicable inasmuch as the present case is not a case where there is a general reference to consortium agreement in the advance agreement. In fact there is inextricable interlinking of the performance under the consortium agreement as incorporated under the advance agreement. Moreover, Mr.Chinoy would be correct in relying on a recent decision of the Supreme Court in Amit Lalchand Shah (supra) where the Supreme Court has accepted that when clauses in different contracts show interconnection and linking of the issues, then in that situation there would be no impediment for the matters to be referred for arbitration if an arbitration agreement is provided in the principal agreement.
37. As regards the contention of Mr.Madon that the petitioner has not adhered to the pre-arbitral mechanism of referring the issue to Steering Committee and to the representative of the Executive Management, and in the absence such steps the petitioner approaching this Court under ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 ::: pvr 25 carbpl1593-18=1594-18 Section 9 would not be permissible. In my opinion, this submission is untenable. It can be clearly seen from the correspondence exchanged between the parties that there were repeated attempts on the part of the parties to resolve the issue. Even before this Court, the attempts were made to resolve the issues. However, considering the stand as taken by Halani it is quite clear that there is no scope for settlement and thus, considering the settled position in law, there cannot be any impediment for the petitioner to approach this Court to seek interim reliefs when an arbitration agreement is entered between the parties under the consortium agreement. The pre-arbitral mechanism as agreed is for an amicable resolution of the disputes and that litigation is avoided. However, when it is apparent that there is no scope for such settlement, then the petitioner is not ill-advised in invoking Section 9 of ACA to seek interim reliefs. In this context it would be profitable to refer to the observations of the Supreme Court in Visa International Ltd. Vs. Continental Resources (USA) Ltd. 3. The Supreme Court in paragraph 36, 38 & 41 has observed thus:-
"36. It was contended that the pre-condition for amicable settlement of the dispute between the parties has not been exhausted and therefore the application seeking appointment of arbitrator is premature. From the correspondence exchanged between the parties at pages 54-77 of the Paper-book, it is clear that there was no scope for amicable settlement, for both the parties have taken rigid stand making allegations against each other. ... ....
....The exchange of letters between the parties undoubtedly discloses that attempts were made for an amicable settlement but without any result leaving no option but to invoke arbitration clause.
3 AIR 2009 SC 1366
::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 :::
pvr 26 carbpl1593-18=1594-18
38. In the present case, in this sense there is a dispute and live issue between both the parties. It is not a stale claim or a claim barred by any limitation. However, it is required to note that this finding as to the existence of dispute is confined only for the purpose of finding out whether the arbitral procedure has to be started for resolving the live issue in between the parties.
.........
41. In the light of foregoing discussion I am of clear the opinion that a clear case is made out for appointment of an arbitrator to decide the dispute between the parties.
38. Apart from the above discussion, the Court cannot be oblivious to the nature of the principal agreement. The ONGC which is a public company has awarded the contract in question to consortium. Halani has clearly indicated that it would not deploy the barges unless the condition as insisted and noted above are complied by the consortium members and/or ONGC. These conditions are neither acceptable to ONGC nor to the members of consortium. By such an approach, Halani cannot bring the execution of the contract of consortium and fulfillment of its obligations to ONGC to a grinding halt and/or by its action jeopardize the very execution of the contract. In such a situation considering the issues even on first principles, if the consortium member comes forward and intends to take over the obligation of Halani, in my opinion, it cannot be said that such a course of action is not available to the consortium member. Halani as a member of consortium certainly cannot be oblivious to the contractual obligations in their entirety. It cannot take a position which would destroy the very foundation of the consortium. If it has grievances/issues against the consortium members ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 ::: pvr 27 carbpl1593-18=1594-18 on the contractual terms, it has a remedy in law to make an appropriate claim for any financial loss which Halani may suffer in the execution of the contract. However, as a responsible member of consortium, if it is unable to perform its obligation, Halani ought to have resolved the issues and permitted the other members of the consortium to mitigate the situation and/or make the execution of the contract feasible at the hands of remaining members of consortium. This more so when it is the joint responsibility of the members to fulfill their obligations towards the ONGC. The other members of the consortium are ready and willing to perform their obligations and there appears to be no serious grievance in that regard even by the ONGC. The imminent hurdle is the continued non performance by Halani.
39. As noted above one member of the consortium cannot paralyze the performance and execution of the contract by the consortium. It cannot be said that legally the consortium in such a situation becomes helpless and silently becomes a victim for all the liabilities and consequences for non performance of the contract awarded by the ONGC. Halani cannot adopt an approach to render the consortium to be left in a position that it would face a claim for damages and compensation, from the party who has awarded the contract to consortium.
::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 :::
pvr 28 carbpl1593-18=1594-18
40. For the above reasons, in my clear opinion, there are certain and clear circumstances for the court to grant of ad-interim reliefs as prayed by the petitioner. If the relief of a nature as prayed for is not granted, it would result in non-fulfillment of the contract by the consortium and only for the actions of Halani. In a situation of this kind, it is now a settled principle of law that to prevent the parties from suffering an irremediable injury which may possibly suffer at the hands of the ONGC, such reliefs are necessary to be granted. The court is required to take into consideration not only the basic principles for grant of an injunction namely of a prima facie case, balance of convenience and irreparable injury but also the conduct of the parties. In the facts of the present case, refusal of relief would have serious consequences. Thus, the endeavour of the court would be not only to protect the interest of the parties but to objectively examine their contentions.
41. The above principles are clearly laid down in the decision of the Supreme Court in "Mandali Ranganna & Ors. Etc. Vs. T.Ramachandra & Ors."4 wherein the Mr.Justice S.B.Sinha speaking for the Bench in paragraph 18 has observed thus:-
"18. While considering an application for grant of injunction, the Court will not only take into consideration the basic elements in relation thereto, viz. Existence of a prima facie case, balance of convenience and irreparable injury, it must also take into 4 AIR 2008 SC 2291 ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 ::: pvr 29 carbpl1593-18=1594-18 consideration the conduct of the parties." .... .... ... ... We are not however, oblivious of the fact that grant or refusal of injunction has serious consequence depending upon the nature thereof. The Courts dealing with such matters must make all endeavours to protect the interest of the parties. For the said purpose, application of mind on the part of the Courts is imperative. Contentions raised by the parties must be determined objectively."
42. Lastly the contention of Mr.Madon that the relief as prayed would be in the nature of final reliefs, cannot be accepted. These are the disputes between the members of the consortium and as clear from the contention as urged by Halani, the contentions are of a financial loss in execution of the contract. The relief as prayed is for workability of the consortium contract.
43 In the light of the above discussion, I am certain, in my opinion, that a strong prima facie case has been made out by the petitioner for grant of ad-interim relief. Accordingly, the following order:
ORDER Pending the hearing and final disposal of the above petition, there shall be ad-interim relief in terms of prayer clause (a) of the petitions. Ordered accordingly.
44. The above observations are prima facie and only in the context of the present application filed under Section 9 of ACA. All contentions of the parties as and when raised before the arbitral tribunal are expressly open.
::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 :::
pvr 30 carbpl1593-18=1594-18
45. Needless to observe that the above order would not preclude Halani from making a claim in respect of the work which has already been undertaken by Halani.
46. At this stage Mr.Madon, learned Senior Counsel for Halani prays for stay of this order. In view of the observations as made above, the prayer for stay is rejected.
[G.S. KULKARNI, J.] ::: Uploaded on - 22/12/2018 ::: Downloaded on - 25/12/2018 23:40:35 :::