Delhi High Court
Ushakant Buildwell (P) Limited vs Chinar Shipping And Infrastructure ... on 15 March, 2016
Author: Vipin Sanghi
Bench: Vipin Sanghi
$~20.
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ Date of Decision: 15.03.2016
% I.A. Nos.12223/2015 & 16304/2015 in CS(OS) 1745/2015
USHAKANT BUILDWELL (P) LIMITED
..... Plaintiff
Through: Joy Basu, Sr. Adv with Ekta Sikri,
Amit Kumar and Abhinav, Advocates
versus
CHINAR SHIPPING AND INFRASTRUCTURE (INDIA) P LTD &
ANR
..... Defendant
Through: Ravi Gupta, Sr. Adv. with Dhiraj
Jain, Sachin Jain and Bhoomija
Verma, Advocates
Raushan Kumari and Mohit Kumar
for DJB
CORAM:
HON'BLE MR. JUSTICE VIPIN SANGHI
VIPIN SANGHI, J. (OPEN COURT)
1. The first application has been filed by the plaintiff under Order 39
Rule 1&2 CPC to seek interim relief and the second application has been
filed by the defendant under Order XXXIX Rule 4 CPC to seek vacation of
the interim order passed by this court. The suit has been filed by the
plaintiff to seek specific performance of the agreement dated 14.11.2013 as
well as the supplementary agreement dated 06.02.2014 entered into between
I.A. Nos.12223/2015 & 16304/2015 in CS(OS) 1745/2015 Page 1 of 13
the plaintiff on the one hand, and the defendant nos.1 and 2 on the other
hand.
2. The defendants, acting as a consortium - whereunder defendant no.1
was the lead partner, entered into an agreement with the Delhi Jal Board
(DJB) for dredging in the river Yamuna. Under the said agreement,
defendant no.1 is the financial partner, whereas defendant no.2 is the
technical partner.
3. The defendants entered into the aforesaid agreement dated 14.11.2013
with the plaintiff for the purpose of sale of the dredged sand. The contract
provided that the plaintiff shall lift the sand from the site on its own. A
supplementary agreement was entered into between the parties on
06.02.2014, modifying some of the terms of the agreement. It appears that
the contract worked between the parties for some time. However, on
11.11.2014, defendant no.1 sought to terminate the plaintiffs contract on the
premise that it had failed to make payment of substantial amounts of money
which were outstanding. At the time when the contract was terminated, the
National Green Tribunal (NGT) had injuncted the lifting of sand from the
Yamuna river. The said injunction was vacated on 18.05.2015, whereafter
the plaintiff filed the present suit to seek specific performance of the
aforesaid agreement.
4. On 29.05.2015, this court passed an ex-parte ad-interim order of
injunction restraining the defendant not to award the contract in question to
any third party. Subsequently, vide order dated 23.11.2015, the said
injunction was clarified by observing that defendant nos.1 and 2 shall be at
I.A. Nos.12223/2015 & 16304/2015 in CS(OS) 1745/2015 Page 2 of 13
liberty to undertake dredging of the sand at the site on their own, without
engaging any third party for the said purpose.
5. The submission of Mr. Basu, learned senior counsel for the plaintiff is
that under the original contract, the plaintiff was granted the sole and
exclusive right to lift and buy the sand dredged by the defendants. The
further submission is that under the said contract, it was provided that the
contract shall be co-terminus with the contract entered into between the
defendants and the Delhi Jal Board. Mr. Basu submits that this being the
position, the contract could not have been terminated earlier, as it was not a
terminable contract.
6. Mr. Basu further submits that Yamuna sand is not an easily available
commodity and, therefore, the contract can be specifically enforced. He
further submits that when defendant no.1 sought to terminate the contract,
defendant no.2 was not ad-idem with defendant no.1, and defendant no.2, in
fact, protested the said cancellation. In this regard, he has referred to the
communication dated 19.11.2014 sent by defendant no.2 communicating its
disagreement with defendant no.1 on the said aspect. Another
communication was issued by defendant no.2 on 12.01.2015 to the plaintiff,
stating that they do not wish to terminate the agreement and defendant no.2
gave its consent to the plaintiff to file a suit for specific performance and
perpetual injunction against defendant no.1 to protect rights of the plaintiff
and defendant no.2.
7. Mr. Basu submits that under the modified agreement, the plaintiff was
obliged to make payment for the purchase of sand to the two defendants -
half and half. Thus, defendant no.2 had an economic interest and the
I.A. Nos.12223/2015 & 16304/2015 in CS(OS) 1745/2015 Page 3 of 13
termination could not have taken place to their prejudice, without their
consent.
8. On the other hand, the submission of Mr. Gupta, learned senior
counsel for the defendant no.1 is that merely because the contract between
the parties did not provide for termination on breach of the same by either
party, it did not mean that the contract was not terminable. He submits that
the nature of the contract, i.e. for the sale of sand is such that it is clearly
terminable.
9. In support of his submission, he has sought to place reliance on the
following decisions:
i) Rajasthan Breweries Ltd. v. The Stroh Brewery Company,
AIR 2000 Del 450;
ii) Planet M Retail Ltd. v. Select Infrastructure Pvt. Ltd., 2014
(4) Arb. LR 348 (Del);
iii) Designers Guild United v. Simplex Infrastructure Limited,
OMP No.66/2015 decided on 16.01.2015.
iv) Sai Nath Enterprises & Ors. v. North Delhi Municipal
Corporation & Ors., C.S. (Comm) No.11-12/2016 decided on
09.02.2016.
10. Mr. Gupta further submits that the contract between the parties is not
specifically enforceable, since the contract is determinable (see Section
14(1)(c)). He further submits that no injunction can be granted to prevent
the breach of an agreement which cannot be specifically enforced (see
Section 41(e)). Mr. Gupta submits that the only claim that the plaintiff
could make is for damages.
I.A. Nos.12223/2015 & 16304/2015 in CS(OS) 1745/2015 Page 4 of 13
11. Having heard learned counsels for the parties, I am of the view that
there is no merit in the plaintiff's application as the plaintiff has failed to
make out a prima facie case for grant of any injunction in the matter.
12. The present suit has been filed by the plaintiff to seek relief of
specific performance of the agreement dated 14.11.2013 and the
supplementary agreement dated 06.02.2014. The subject matter of the
agreement between the parties is the sand dredged by the defendants under
their contract with the DJB. Recital 'B' of the agreement, inter alia, reads:
"WHEREAS Chinar and ASR agrees to sell and Usha agrees to purchase
only dredged fine sand ... ... ... on Sole and Exclusive Basis subject to the
terms and conditions contained in this Agreement". I may note that Chinar
and ASR are defendants No.1 & 2, and Usha is the plaintiff.
13. Clause 2 of the agreement provides that 8 Lakh Cubic Metres of sand
would be sold by Chinar, i.e. defendant No.1 on sole and exclusive basis to
Usha, i.e. the plaintiff, and Usha was obliged to purchase and lift the same
by whatever mode of transportation/ equipment, as it may deploy. The
agreement fixes the upper cap price on fine sand at Rs.525/- per Cubic
Metre, which included all costs and taxes incurred by Chinar - defendant
No.1, and the same was fixed for the entire duration of the agreement or any
extension thereof. The duration of lifting was defined as: "As per work
order issued to Chinar by Delhi Jal Board (DJB) and any extension thereof
by DJB to Chinar". The agreement also provides: "The Parties to this
Agreement agree that to the extent permitted by applicable laws, the rights
and obligations of the Parties under this Agreement shall be subject to the
I.A. Nos.12223/2015 & 16304/2015 in CS(OS) 1745/2015 Page 5 of 13
right of specific performance and may be specifically enforced against a
defaulting Party".
14. Since, during the implementation of the agreement, certain issues and
concerns arose, the parties entered into the supplementary agreement, as
aforesaid, on 06.02.2014. A perusal of this supplementary agreement shows
that the supplementary agreement sought to clear certain issues with regard
to accessibility to the plaintiff to access the site and remove the dredged
sand. It also provided the methodology for the measurement of the lifted
sand. With regard to the right to seek enforcement of the agreement, the
supplementary agreement provided as follows:
"The Parties to this Agreement agree that, to the extent
permitted by applicable laws, the rights and obligations of the
Parties under this Agreement shall be subject to the right of
specific performance and may be specifically enforced against
a defaulting Party.
It is agreed by both the parties that, in case
transport/upliftment of SAND does not take place on account
of Chinar not receiving any of the permissions or by any other
reason and/or sand being not available at site as per terms of
this Agreement in that eventuality Chinar shall pay back to
Usha amount equivalent to two and half times of the amount
of the sale cum upliftment order @Rs.250/- per CUM to Usha
within 15 days. And there shall be penal interest @ 24% if
Chinar fails to pay back the aforesaid amount to Usha within
15 days."
(Emphasis supplied)
15. Thus, it would be seen that the agreement and the supplementary
agreement pertained to sale of movable asset, namely sand, which was to be
dredged by the defendants under their agreement with DJB.
I.A. Nos.12223/2015 & 16304/2015 in CS(OS) 1745/2015 Page 6 of 13
16. The specific performance of any contract in discretion of the Court
may be enforced when there exists no standard for ascertaining actual
damage caused by the non-performance of the act agreed to be done, or
when the act agreed to be done is such that compensation in money for its
non-performance would not afford adequate relief.
17. In the present case, the supplementary agreement between the parties
provides that in the event of the plaintiff not being able to lift and transport
sand, inter alia, for any reason, defendant No.1 shall pay back to the
plaintiff an amount equivalent to two and half times of the amount of the
sale/ upliftment order @ Rs.250/- per Cubic Metre within 15 days, and there
shall be penal interest @ 24% if Chinar, i.e. defendant No.1 fails to pay back
the said amount to Usha, i.e. plaintiff within 15 days. Thus, the parties
consciously substituted the original contractual term and provided for
liquidated damages in case of breach by the defendants. Consequently, it
appears, the contract cannot specifically enforced as the standard for
determination of damages has been set out in the agreement itself.
18. Sand is a commodity which is available in all parts of the country as it
is extensively used as one of the raw materials in the building industry.
Thus, it cannot be said that sand, agreed to be lifted by the plaintiff under the
contract in question, is such a unique commodity which the plaintiff cannot
secure from any other source. This also means that the market value of the
sand at any given point of time would be easily ascertainable, and the actual
damage caused by the termination of the contract by the non-performance of
the contract on account of its termination by defendant No.1 can be
ascertained. As the commodity itself is available in the market, it cannot be
I.A. Nos.12223/2015 & 16304/2015 in CS(OS) 1745/2015 Page 7 of 13
said that compensation in money for the non-performance of the contract
would not afford adequate relief to the plaintiff. After all, the plaintiff had
agreed to buy such large quantities of sand from the defendants for the
purpose of its trade.
19. On a plain reading of explanation to Section 10 of the Specific Relief
Act, it is clear that the breach of a contract to transfer movable property
cannot be specifically enforced, except where the property is not an ordinary
article of commerce, or is of such value or interest to the plaintiff, or
consists of goods which are not easily obtainable in the market or where the
property is held by the defendant as an agent or trustee of the plaintiff.
20. In the present case, none of the aforesaid exceptions exist. Though it
is claimed by the plaintiff that the contract between the parties and its nature
is not determinable, there is no basis for claiming so. In paragraph 22 of the
plaint, the plaintiff has, inter alia, stated that the agreement is not
determinable in nature. However, apart from making the said one line
assertion, the plaintiff has not made any averment to explain as to why and
how it is claimed that the contract by its nature is not determinable. The
nature of the agreement pertains to sale of sand - which, as noticed above, is
an easily available commodity; the contract provided for lifting of the sand
during its currency and for the payment to be made by the plaintiff for the
lifted sand from time to time - which shows that the consideration was to
pass only upon the sand being supplied. Thus, it cannot be said that entire
consideration under the contract had already been parted with by the
plaintiff to the defendants for the purchase of the sand. Moreover, the
contractual term regarding specific performance was also relaxed in the
I.A. Nos.12223/2015 & 16304/2015 in CS(OS) 1745/2015 Page 8 of 13
supplementary agreement by providing that "to the extent permitted by
applicable laws", the rights and obligations of the parties may be specifically
enforced.
21. In Rajasthan Breweries Ltd. (supra), a similar argument was raised as
raised by the plaintiff in the present case, namely that the contract in
question was not determinable in nature since there is no clause in the
agreement which permits its termination by one of the parties by giving a
notice of a few days. It was urged that the contract specifically stated and
recognized that the respondent had granted to the appellant an exclusive
license to purchase beer for a term of 7 years, which too was renewable successively for a period of 3 years at each time. The appellant had also argued that the grounds taken in the letter terminating the agreement are non-existent and false. The learned Single Judge had dismissed the application of the plaintiff/ appellant seeking interim relief by concluding that the agreement in question was not specifically enforceable as it was a determinable contract. The Division Bench, while dismissing the first appeal of the plaintiff, observed as follows:
"14. The effect of breach of a contract by a party seeking to specifically enforce the contract under the Indian law is enshrined in Section 16(c) read with Section41(e) of the Specific Relief Act, 1963. Clause (e) of Section 41 of the Specific Relief Act provides that injunction cannot be granted to prevent the breach of contract, the performance of which would not be specifically enforced. Clause (c) of Section 41 enumerates the nature of contracts, which could not be specifically enforced. Clause (c) to sub-section (1) of Section 14 says that a contract which is in its nature determinable cannot be specifically enforced. Learned Single Judge thus was justified in saying that if it is found that a I.A. Nos.12223/2015 & 16304/2015 in CS(OS) 1745/2015 Page 9 of 13 contract which by its very nature is determinable, the same not only cannot be enforced but in respect of such a contract no injunction could also be granted and this is mandate of law. This, however, is subject to an exception, as provided in Section 42 that where a contract comprises an affirmative agreement to do a certain act, coupled with a negative agreement, express or implied, not to do a certain act, the circumstances that the court is unable to compel specific performance of the affirmative agreement shall not preclude it from granting an injunction to perform the negative agreement."
22. The Division Bench eluded to the decision in Indian Oil Corporation Vs. Amritsar Gas Service & Others, (1991) 1 SCC 533, as well as the decision of this Court in M/s Classic Motors Ltd. Vs. Maruti Udyog Ltd., 65 (1997) DLT 166, and concluded as follows:
"Even in the absence of specific clause authorising and enabling either party to terminate the agreement in the event of happening of the events specified therein, from the very nature of the agreement, which is private commercial transaction, the same could be terminated even without assigning any reason by serving a reasonable notice. At the most, in case ultimately it is found that termination was bad in law or contrary to the terms of the agreement or of any understanding between the parties or for any other reason, the remedy of the appellants would be to seek compensation for wrongful termination but not a claim for specific performance of the agreements and for that view of the matter learned Single Judge was justified in coming to the conclusion that the appellant had sought for an injunction seeking to specifically enforce the agreement. Such an injunction is statutorily prohibited with respect of a contract, which is determinable in nature."
23. A similar argument raised before the Court in relation to the termination of an agreement granting license in respect of a shop in favour of the petitioner by the respondent was rejected by this Court in Planet M I.A. Nos.12223/2015 & 16304/2015 in CS(OS) 1745/2015 Page 10 of 13 Retail Ltd. (supra) after taking into consideration the aforesaid decisions. It is same effect in Designers Guild United (supra). In that case as well, the Court rejected the submission of the petitioner that in the absence of clause for termination, the respondent could not have terminated the contract by placing reliance on Rajasthan Breweries Ltd. (supra). In Sai Nath Enterprises (supra), once again this Court considered the aforesaid decisions, apart from several others, and declined interim relief by holding that the contract was determinable.
24. The submission of learned counsel for the plaintiff that the termination was effected only by defendant No.1 and not by defendant No.2, and that defendant No.2 expressly reinforced the contract between the parties, is also of no avail. This is for the reason that even, according to the plaintiff, defendant No.1 was a lead partner of the consortium and defendant No.2 was a technical partner. Thus, without the concurrence of the lead partner of the consortium, there was no way that the contract between the parties could have worked. No doubt, the stake of defendant No.2 in the dredged sand was equal to that of defendant No.1 - as it was agreed that the plaintiff shall make payment to the two defendants half and half in respect of the lifted sand. However, that does not mean that termination could not take place at the behest of defendant No.1 alone. The plaintiff could not have taken advantage of the inter se disputes between the two defendants on the aforesaid aspect. Whether, or not, termination of the contract is valid and justified, would be an issue to be determined in the suit. Even if the termination of the contract by the termination letter dated 11.11.2014 is held to be illegal, the claim of the plaintiff can only be in damages, and it does I.A. Nos.12223/2015 & 16304/2015 in CS(OS) 1745/2015 Page 11 of 13 not lie in specific performance. Though, the contract could not have been terminated without reason, defendant No.1 claimed that the termination was on account of non-payment of an amount of Rs.1,42,85,337/- by the plaintiff on or before 11.10.2014 and even till the date of issuance of the said notice.
25. The agreement being determinable cannot be specifically enforced. Since the same cannot be specifically enforced, no injunction can be granted to prevent the breach of the contract and to enforce its performance by virtue of Section 41 (e) of the Specific Relief Act.
26. There is another aspect to the matter. The termination letter was issued by defendant No.1 on 11.11.2014. The plaintiff did not take any action in respect of the said termination and the present suit was filed only on 28.05.2015, i.e. after the expiry of more than six months from the date of the termination. The explanation for the delay furnished by the plaintiff is that the NGT had, in the meantime, stayed the activity of dredging in the river Yamuna. Since the said stay was lifted, the plaintiff filed the suit.
27. In my view, the said explanation is not convincing. The plaintiff could not have sat on the fence and awaited the decision of the NGT as to whether, or not, dredging in river Yamuna should be permitted by the defendants under their contract with the DJB. Cause of action for filing the suit arose in favour of the plaintiff when the agreement was terminated by defendant No.1 on 11.11.2014. The plaintiff was obliged to take action with promptitude thereafter. Even though the filing of the suit may not be barred by limitation, the plaintiff is certainly guilty of delay and laches. Grant of injunction is a discretionary relief, and the Court would not exercise its I.A. Nos.12223/2015 & 16304/2015 in CS(OS) 1745/2015 Page 12 of 13 discretion in favour of a party which is found to be loathe in pursuing its legal remedies.
28. For all the aforesaid reasons, I am of the view that the plaintiff has failed to make a prima-facie case for grant of any interim relief in the matter in its favour. Accordingly, I.A. No.12223/2015 is dismissed and I.A. No.16304/2015 succeeds.
29. It is made clear that the observations made in this order have been made only for consideration of the present applications and shall not affect the rights of the parties at the stage of final determination of the issues after a trial. The parties are left to bear their respective costs.
30. The applications stand disposed of in the aforesaid terms.
VIPIN SANGHI, J MARCH 15, 2016 SR/B.S. Rohella I.A. Nos.12223/2015 & 16304/2015 in CS(OS) 1745/2015 Page 13 of 13