Delhi High Court - Orders
Sunflag Iron And Steel Company Limited vs Tamil Nadu Coke And Power Private ... on 6 November, 2023
Author: Sachin Datta
Bench: Sachin Datta
$~47
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P.(I) (COMM.) 351/2023
SUNFLAG IRON AND STEEL COMPANY LIMITED..... Petitioner
Through: Mr. Rajshekhar Rao, Sr. Adv.
alongwith Mr. Gaurav Dudeja, Mr.
Rahul Tyagi and Mr. Dhruval Singh,
Advs.
versus
TAMIL NADU COKE AND POWER PRIVATE LIMITED
..... Respondent
Through: Mr. Arvind Nayar, Sr. Adv. alongwith
Mr. Atul Kumar Gupta, Mr. Vipul
Agrawal, Mr. Sooraj Sharma, Mr.
Jatin Kochhar, Mr. Arjun Kant, Mr.
Akshay Joshi, Mr. Shaurya
Dhoundiyal, Ms. Tanya Mittal, Ms.
Disha Nanda and Ms. Anindya Bhan,
Advs.
CORAM:
HON'BLE MR. JUSTICE SACHIN DATTA
ORDER
% 06.11.2023
1. Issue notice.
2. Learned counsel as aforesaid accepts notice on behalf of the respondent.
3. Respective senior counsel on behalf of the parties have been heard at substantial length.
4. The present petition under Section 9 of the Arbitration and Conciliation Act, 1996 („A&C Act‟) has been filed seeking the following reliefs:-
"(a) Direct the Respondent to deliver the Petitioner's goods i.e. O.M.P.(I) (COMM.) 351/2023 Page 1 of 9 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 08/11/2023 at 00:28:25 coking coal and LAM Coke, lying at Respondent's plant;
(b) Direct the appointment of a Local Commissioner to ensure the safe preservation of the Petitioner's goods to maintain its quality till the Petitioner takes possession of the goods in terms of prayer (a) or otherwise;
( c) Restrain, in the meanwhile, the Respondent from using, selling, disposing of or creating third party rights on the coal supplied by the Petitioner as well as the coke produced from it;
(d) Restrain the Respondent from removing the Petitioner's representatives present at the Respondent's plant for administrative and security purposes;"
5. The disputes between the parties have arisen in context of a Conversion Agreement dated 14.10.2020 (as amended by agreements dated 10.10.2022 and 18.11.2022) for conversion of coking coal (provided by the petitioner to the respondent), into LAM Coke.
6. Some of the relevant clauses of the Conversion Agreement are as under :-
"1.10 The ownership of coal supplied by SJSCL for conversion and converted into Coke shall be of SISCL subject to dues being cleared as per the agreement. However, the TCPPL shall exercise its lien on the coal and coke unless its dues in respect thereof are cleared in full. TCPPL shall be responsible for any damage/loss in the coal/ converted coke belonging to SJSCL, beyond the extent of shortages and handling losses mentioned in the agreement.
xxx xxx xxx 4.1 Throughout the term of this agreement, TCP PL shall allow SISCL to have complete control over the weighbridge, TCPPL laboratory, loading/ unloading ports, security personnel and gates of the TCP PL Plant at all times. SISCL may depute its personnel or nominees at such areas of the TCP PL Plant on a permanent basis and make any other security measures or arrangements as SISCL considers fit at SIICL cost and responsibility. SISCL shall also have unhindered access to the remaining coke plant areas only of the TCP PL Plant at O.M.P.(I) (COMM.) 351/2023 Page 2 of 9 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 08/11/2023 at 00:28:25 all times. At all times SISCL shall not have access to power plant and other areas which are not required and outside purview of coke conversion.
xxx xxx xxx 8.2 Production quantity as per standard formula and weighment, sampling and analysis agreed under this agreement shall form the basis for billing.
xxx xxx xxx
13. Compensation
13.1 If there is an early termination of this Agreement from SISCL and which is not due to breach of contract by TCP PL then TCP PL shall be entitled to:
(a) Forfeit the balance amount of security advance lying with TCPPL and SISCL shall additionally remit the applicable taxes thereon, in any.
(b) The forfeiture shall be in addition to the damages to be paid by SISCL in lieu of early termination which shall be calculated @ Rs.
1000/ T for 7500 MT per month plus applicable taxes for the remaining period for agreement. Thus the damages calculation formula for early breach/termination of agreement by SISCL for remaining period of 2 years lock in period shall be as:
Damages = No. of remaining months of lock in period X 1000 X 7500"
7. The terms of the Conversion Agreement were amended vide amendment agreement dated 10.10.2022 (" First Amendment"), wherein, the Parties agreed to extend the term of the Conversion Agreement for two years from 01.02.2023. It was further agreed that the conversion charges were to be revised to INR 2475/- per MT+ GST + applicable taxes.
8. The terms of the Conversion Agreement were further amended by the Amendment Agreement dated 18.11.2022 ("Second Amendment"), wherein the Parties agreed to revise the security deposit to INR 5,00,00,000/- payable O.M.P.(I) (COMM.) 351/2023 Page 3 of 9 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 08/11/2023 at 00:28:26 by petitioner. This was further reduced by the Parties to INR 2,50,00,000/- (Rupees Two Crores Fifty Lacs only), which was duly paid by the petitioner on 24.11.2022 as is reflected in petitioner's email dated 25.11.2022.
9. It is the case of the petitioner that in view of the volatility in the international coal market, the parties mutually novated the Conversion Agreement. It is contended that the parties agreed to the revised production plan and commercial terms were agreed on 17.06.2023 for a period of June, 2023 to August, 2023.
10. It is contended that revised terms were also set out in an email dated 17.06.2023 exchanged between the parties. It is further contended that the meeting was held between the parties on 29.08.2023 wherein the parties agreed to continue with the revised terms till a mutually acceptable solution was found so that the petitioner‟s landed cost of LAM Coke under the Conversion Agreement is commensurate with the current market price of the LAM Coke.
11. Certain other revised terms are stated to have been agreed between the parties with regard to which minutes of meeting dated 29.08.2023 were circulated by the petitioner vide email dated 31.08.2023.
12. It is the case of the petitioner that the parties acted as per the revised terms and the respondent issued four invoices dated 08.09.2023, 16.09.2023, 25.09.2023 and 03.10.2023 towards conversion carried out during the month of September 2023 with conversion charges @ INR 1475/- per MT, in consonance with the revised terms. As opposed to this, the conversion charges as per the Conversion Agreement were to be to the tune of INR 2475/- per MT.
13. It is submitted by the petitioner that despite having acted upon the O.M.P.(I) (COMM.) 351/2023 Page 4 of 9 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 08/11/2023 at 00:28:26 revised terms for four months, the respondent on 04.10.2023, unilaterally and as an afterthought to make unlawful gains, took a contradictory stand by demanding conversion charges @ INR 2475/- per MT instead of INR 1475/- per MT as per the revised terms. Further, it is stated that with an ulterior motive of arm-twisting the petitioner to agree with the respondent‟s illegal demand, the respondent stopped the supply of LAM Coke to the petitioner with effect from 04.10.2023. This is stated to have completely debilitated the manufacturing plant of the petitioner.
14. Confronted with a situation where the respondent has stopped the supply of LAM Coke to the petitioner, despite a huge stock of coal supplied by the petitioner lying at the respondent‟s plant as also a stock of the converted LAM Coke (from the raw material supplied by the petitioner), the petitioner sought to terminate the Conversion Agreement vide its email dated 10.10.2023.
15. In response, the respondent vide its email dated 12.10.2023 alleged that the petitioner is in breach of the Conversion Agreement and reserved its right to claim damages due to termination of the said Conversion Agreement by the petitioner. Further, the respondent stated that it has reserved its right to "exercise its right to forfeit the security deposited amount" and "exercise lien on the raw material/finished goods of SISCL lying with TCPPL".
16. In the above circumstances, there exists a stalemate between the petitioner and the respondent.
17. The respondent has stockpiles of the raw material supplied by the petitioner as also stockpiles of the converted LAM Coke. However, in view of the dispute between the parties as regard to the applicability of the alleged revised terms and on account of the purported termination of the Conversion O.M.P.(I) (COMM.) 351/2023 Page 5 of 9 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 08/11/2023 at 00:28:26 Agreement, the respondent is unwilling to the supply the LAM Coke to the petitioner, even though the petitioner contends that its plant is on the verge of complete standstill due to non-supply of the LAM Coke.
18. It has been submitted that in the month of October, 2023 only an ad- hoc quantity of 816 MT of LAM Coke has been supplied by the respondent to the petitioner despite a substantial amount of converted LAM Coke (converted from the raw material supplied by the petitioner) being available with the respondent.
19. Learned senior counsel for the respondent confirms that as of 31.10.2023, approximately 5000 MT of the converted LAM Coke is available with the respondent. It is further submitted by the respondent that an amount of approximately Rs. 5.3 Crores is payable by the petitioner to the respondent in respect of the conversion charges up to 10.11.2023.
20. This above amount is in addition to the amount claimed by the respondent on account of compensation payable under Clause 13 of the Conversion Agreement and on an account of "Minimum Take or Pay"
amount stipulation contained in the Clause 14 of the Conversion Agreement dated 14.10.2020.
21. After some hearing, with a view to arrive at a minimal understanding and break the stalemate (without prejudice to the respective contentions of the parties), it has been agreed as under :-
(i) The petitioner would pay an amount of INR 5.3 Crores to the respondent which is in respect of conversion charges up to the period of 10.11.2023 (reckoned @ of Rs. 2475/- per MT) without prejudice to the petitioner‟s contention that the amount actually payable to the respondent is @ Rs.1475/- per MT and O.M.P.(I) (COMM.) 351/2023 Page 6 of 9 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 08/11/2023 at 00:28:26 subject to the right of the petitioner to seek recovery of differential amount in arbitration proceedings. Further on such payment being made to the respondent, the respondent shall immediately supply the converted LAM Coke lying at its plant for which the aforesaid conversion charges up to the period 10.11.2023 has been charged by the respondent.
(ii) The petitioner would furnish an unconditional bank guarantee of INR 11 Crores, subject to the satisfaction of the Registrar General of this Court to secure the amounts sought to be claimed by the respondent towards damages and/or under Clause 13 and/or Clause 14 of the Conversion Agreement. The same shall be subject to further orders by this Court or by a duly constituted arbitral tribunal. Upon furnishing of such bank guarantee, the respondent will convert the raw material of the petitioner lying at its plant into LAM Coke and supply the same to the petitioner. For the said converted LAM Coke, the petitioner shall pay conversion charges @ INR 1475/- per MT to the respondent and shall deposit a sum of INR 1000/- per MT in the Registry of this Court, which also shall be subject to further orders of this Court or a duly constituted arbitral tribunal.
22. At this stage, it is jointly requested by the respective senior counsel for the parties, on instructions, that the parties be referred to arbitration by an independent sole arbitrator, in these proceedings itself. The arbitration clause in the Conversion Agreement is in the following terms:-
"17. Dispute Resolution/ Governing laws 17.1 Any dispute arising out of or in connection with this agreement shall be resolved by the parties amicably.O.M.P.(I) (COMM.) 351/2023 Page 7 of 9
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 08/11/2023 at 00:28:26 17.2 In case, if the dispute is not resolved amicably then the same shall be referred to and finally resolved through arbitration by a sole arbitrator mutually appointed by the parties in accordance with the provisions of Arbitration and Conciliation Act, 1996 as amended thereto. The venue of the arbitration shall be at Delhi and the language of the arbitral proceedings shall be English. The decision of the arbitrator shall be final and binding upon the parties. 17.3 The agreement shall be governed by Indian Laws. The Parties agree that courts at Delhi shall have exclusive jurisdiction for the matters arising hereunder and submit to the jurisdiction accordingly."
23. Accordingly, Mr. Justice (Retd.) A.M. Khanwilkar, Former Judge, Supreme Court of India (Mobile - 9967437111) is appointed as the sole arbitrator to adjudicate the disputes between the parties.
24. The learned Sole Arbitrator may proceed with the arbitration proceedings subject to furnishing to the parties requisite disclosures as required under Section 12 of the A&C Act, prior to entering upon reference.
25. The learned arbitrator shall fix his fees in consultation with the parties.
26. It is further agreed that the present petition will be treated as an application under Section 17 of the A&C Act to be considered by the learned arbitrator. The learned arbitrator shall be at liberty to suitably modify the aforesaid directions after hearing the parties, and/or pass further directions as may be appropriate.
27. Parties shall share the arbitrator‟s fee and arbitral costs, equally.
28. All rights and contentions of the parties in relation to the claims/counter-claims are kept open, to be decided by the learned Arbitrator on their merits, in accordance with law.
29. Needless to say, nothing in this order shall be construed as an expression of this court on the merits of the contentions of the parties.
O.M.P.(I) (COMM.) 351/2023 Page 8 of 9This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 08/11/2023 at 00:28:26
30. The present petition stands disposed of in terms of the above directions.
SACHIN DATTA, J NOVEMBER 6, 2023/AT O.M.P.(I) (COMM.) 351/2023 Page 9 of 9 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 08/11/2023 at 00:28:27