AI Structured Summary
Not yet generated for this judgment
Judgment
Sanjib Banerjee, J.—This Order, in whatever form it attains finality, would mark the end of the first chapter of a sordid saga that was the association of these two parties. The two petitions u/s 9 of the Arbitration and Conciliation Act, 1996 have been filed for similar reliefs. Both parties have approached the Court for the contractor''s machinery and equipment to be removed from the Haldia Dock Complex as urgently as practicable. Now that the glare of the are lights have moved from the acrimonious parting of ways of these parties, the nitty-gritty''s remain to be worked out to put a temporary seal on the divorce as the more protracted battle following the severance moves to the arbitral forum. The tribunal has been constituted and, as the parties inform, the pleadings are in the process of being filed. At the ad interim stage of these petitions, the Port''s prayer for an Order in the nature of attachment before judgment was declined. However, two special officers were appointed for the purpose of ensuring the removal of all machinery, equipment and material belonging to the contractor from berth Nos. 2 and 8 of the Haldia Dock Complex as expeditiously as possible. The machinery and equipment include six mobile harbour cranes - those over-sized metal chairs that stand out in modern ports and seem to be waiting for some gigantic Gulliver to occupy them -- which have taken considerable time to be dismantled and relocated at the berths or elsewhere in the Haldia Dock Complex. The ad interim Order permitted the contractor to remove all its machinery, equipment and material without there being any fetters as to the use thereof and the special officers were only to supervise the dismantling of the cranes and the removal of all machinery, equipment and material of the contractor from the Dock Complex. On appeals preferred from the common Order of December 13, 2012 passed at the ad interim stage of these matters, the time for complying with the ad interim Order was extended till January 31, 2013, a third special officer was appointed to work with the two others and, more importantly, the ad interim Order was modified by permitting the contractor to use its machines freely within the country upon notice to the special officers with a copy endorsed to the Port but with the special officers remaining in symbolic possession thereof. The appellate Order of December 19, 2012 made it clear that the merits of the matter had not been gone into in great detail and left the petitions to be decided upon affidavits being filed before the arbitration Court.
The contractor carried the Order of December 19, 2012 by way of special leave petitions to the Supreme Court. Those petitions were disposed of on January 31, 2013 with the operative part of the Order being as follows:
In view of the above, we do not consider it proper to express any opinion on the merits and demerits of the claim of the parties because that is likely to prejudice their cause and feel that ends of justice will be served by requesting the learned Single Judge of the High Court to hear the parties and pass final Order on the interlocutory applications filed by them, as early as possible, but latest within a period of four weeks from the receipt of copy of this Order in the Registry of the High Court without being influenced by the observations contained in orders dated 13.12.2012 and 19.12.2012 and the fact that one of the parties has travelled to this Court. Ordered accordingly.
The special leave petitions are disposed of in the manner indicated above.
The Registry is directed to send a copy of this Order to the Registrar (Judicial) of the Calcutta High Court, who shall immediately place the same before the concerned Bench and seek direction for listing of the case.
By the time the department of this Court brought the Supreme Court Order of January 31, 2013 to the notice of this Court on or about February 21, 2013, both matters had appeared in the list and were ready to be taken up for hearing in the usual course. Indeed, the Supreme Court Order of January 31, 2013 was placed by the parties in course of another petition u/s 9 of the said Act. That latest petition has since been disposed of with the parties agreeing to several suggestions made by the Court and amicably arranging for the contractor''s machinery, equipment and material to be relocated within the Haldia Dock Complex so that the two berths were available for use by the Port. The two berths are now functional, though the mechanised services are no longer available with the big chairs having been folded up by the contractor and made ready to be carried away by ships. In the euphoria of the sudden camaraderie between the parties in their hour of physical separation, these matters remained adjourned for a couple of weeks for the parties to suggest an amicable solution. But the parties could not be afforded any more time in view of the time-frame chalked out for these matters. A couple of days of lawyers'' cease-work in the midst of the hearing and another day wasted by the Port have, regrettably, carried the judgment to two days beyond the deadline.
Following a global tender for the supply, operation and maintenance of cargo-handling equipment at berth Nos. 2 and 8 of the Haldia Dock Complex, a letter of intent was issued by the Port to the contractor on April 29, 2009. An agreement was executed between the parties on October 16, 2009. The agreement required the contractor to handle a minimum of 20,000 MT of cargo per day and entitled the Port to levy a penalty for the contractor''s failure to meet such minimum level of performance. The morning showed the day and the initial glitches included the contractor having to obtain orders from this Court in proceedings under Article 226 of the Constitution to commence its operations at the Haldia Dock Complex and the Port imposing a penalty in the early days for the contractor not being able to discharge the minimum level of work. For a brief period, things settled down and the contractor demonstrated that it was more than adept at the cargo-handling operations before it complained that the Port was guided by extraneous considerations in not allotting more work to it. The contractor suggested that it was capable of doing much more than it had been asked to; and the Port stood to gain if cargo-laden vessels were directed to the mechanised berths that it operated than the other berths which were manually worked. The agreement, however, did not envisage any guaranteed tonnage of work for the contractor, save the minimum level of performance of 20,000 MT per day. The contractor makes out that the Port took refuge under the agreement to advocate that the Port was not called upon to allot any fixed quantity of work to the contractor; though in terms of efficiency and revenue, the Port ought to have exploited the mechanised berths to the hilt.
By a letter of August 23, 2012, the contractor threatened to suspend work at the two berths, complaining of lack of support by the Port. The contractor alleged that the Port "through various acts and omissions" had made it difficult for the contractor to function because of "the various obstacles and road-blocks put up by KoPT." It lamented that despite the Port''s "constant attempts to sabotage" the project, the contractor had deployed sophisticated equipment and trained manpower to function at much higher levels of tonnage that what was being made available at its berths. It said that it was suffering a loss of Rs. 2 crore per month for the Port''s "failure in allocating adequate cargo to the said berths" and it perceived the Port''s conduct to be "baffling, irrational and against public interest." The contractor asserted that if additional cargo was directed to its berths, the Port would stand to gain Rs. 2.5 crore per month by way of revenue. The letter threatened that the contractor would suspend the operations from September 8, 2012 if the Port did not address the issues raised by the contractor.
The Port carried a petition u/s 9 of the said Act to this Court which was disposed of upon an agreement being arrived at between the parties as recorded in a consent Order of September 12, 2012. The Port conceded to have all dry bulk cargo to be allotted to the two mechanised berths, if such berths were free. The contractor agreed that the additional work promised would help it recover its cost of investment and ensure more efficient functioning at the port.
The first sign that the agreement as recorded in the consent Order would not be permitted to be implemented was in the form of another contractor at the Haldia Port seeking to prefer an appeal from the Order of September 12, 2012. Though such other contractor''s legal misadventure met with the obvious fate of rejection, it was evident that the additional work would not be permitted to be allocated to berth Nos. 2 and 8 in view of the opposition by the other contractors functioning at the port. The Port''s apparent helplessness in the matter - or, as the contractor insists, the Port''s unwillingness to take any steps against the trouble-making contractors - is evident from its letters of September 15 and September 19, 2012 addressed to the district and the state administration. The contractor perceives the Port to have feigned helplessness and alleges that the Port sided with the other contractors and the administration turned a Nelson''s eye to the rampaging activities of the other contractors, with whom the administration sympathised. The contractor refers to the Port bowing to the interference in Port matters by politicians who had no apparent business therein. The Port retorts that things were brought to a pass by the contractor retrenching about a half of its workforce within a fortnight of the Order of September 12, 2012 and without waiting for the additional work embodied in the agreement recorded in the Order to flow into the two mechanised berths.
For a month thereafter, there was a huge law and Order problem at the Haldia Dock Complex and thereabouts. The correspondence on record reveals that even as the contractor appealed to the Port to ensure an affable atmosphere for the contractor to operate at the port, the Port distanced itself from the law and Order problems and insisted only on the contractor''s obligations under the agreement. Parleys between these parties and others interested came to naught and the contractor was constrained to bring a further petition under Article 226 of the Constitution to this Court, complaining of inaction on the part of the administration and the police authorities in resolving the law and Order problems in Haldia. On October 19, 2012 directions were issued by this Court on such petition for the district administration and the police authorities to ensure the smooth operation of work at the two mechanised berths and the safety and security of all concerned. The Court found, upon referring to, inter alia, letters issued to various authorities by the Port, that workers at the Haldia Port with political support had disrupted activities thereat, that there was "utter apathy of the local administration to respond to any of the complaints lodged by the petitioner (the contractor herein) by apprising them" of any probe into the matters complained of. The Order dated September 19, 2012 recorded that neither the District Magistrate nor the Superintendent of Police had taken any initiative to control the lawlessness that prevailed at or around the Haldia Dock Complex. The Court concluded on the basis of the material before it as follows:
It is not disputed that the extent of cargo handled at berths 2 and 8 by the mechanized cranes is double the extent of cargo handled at the berths which are manually operated. Disruption in cargo handling operations at the said berths by persons with interest of their own to derail the petitioners (the contractor herein) and thereby forcing a situation to abandon the operations at the HDC cannot be totally ruled out.
The contractor declares that it put in the several lakhs of rupees for the police bandobast to be made, but to no avail. It says that some of its officers were abducted from Haldia, made to come to Calcutta and board Mumbai-bound trains by persons acting at the behest of those who wanted the mechanised operations at the port to be scuttled so as to perpetuate their hegemony over the cargo-handling operations at Haldia. The Port, the contractor bemoans, was lacking in its effort and intent, despite such goings-on, to facilitate a contractor engaged by it to continue the operations contracted for.
The contractor terminated the agreement by its letter of October 31, 2012. It alleged that "vested interests within HDC were ... opposed to the implementation of the ... Order" dated September 12, 2012 and the Port should have anticipated such situation and taken effective steps to ensure its implementation. The contractor suggested that the conduct of the Port "was clearly designed to allow vested interests to prevail in their attempts to frustrate the implementation of the said Order" as the Port took no steps to provide security to the employees and the property of the contractor. The contractor referred to its employees and officers being "intimidated, threatened, assaulted and subjected to harassment" and the Port''s failure to redress the situation despite being made aware thereof. It alleged that the Port did little to quell the "uncontrolled and untrammeled violence and unrest at HDC", accused the Port of frustrating the contractor in carrying out the work under the agreement and complained of the Port''s insensitivity and duplicity in "making a charade of placing a larger volume of cargo without any real intention of permitting HBT to handle any higher volume of cargo." The contractor also requested the Port to facilitate the removal of the contractor''s equipment and machinery from the port. The Port replied by its letter of the same day and contended that the disputes between the contractor and the men engaged by it resulted in the contractor failing to continue the cargo-handling operations from September 22, 2012. It denied the allegations levelled by the contractor and asserted that the question of removal of the contractor''s machinery would arise only after the Port had been compensated by the contractor for the contractor''s failure in performing its obligations under the agreement.
The Port pleads a three-fold case for an Order in the nature of attachment before judgment. It asserts that it has a lien on all machinery and equipment carried to the Haldia Dock Complex by the contractor and cannot concede to the contractor removing the same without the Port''s claim being satisfied; that contrary to the picture painted by the contractor, it has abandoned the work upon realising that the profit margin for operating at Haldia was much lower than what it had estimated; and, notwithstanding the Port''s claim being in damages, the contractor had quantified it and it is such amount that the contractor should be required to secure since it has no known assets beyond the machinery and equipment now relocated at the Haldia Dock Complex and the company was incorporated as a single purpose vehicle for conducting the cargo handling operations at Haldia.
The Port founds its case of lien on several clauses of the primary agreement and the special and the general conditions appended thereto, though there is only a solitary clause in the general conditions that uses the word "lien". The Port refers to clause 1.12 of the primary agreement embodied in the tender documents that provides that the contractor shall not remove or replace any equipment installed without the previous permission of the Port; clause 1.24 that gives the Port the right to inspect all equipment supplied by the contractor and obliges the contractor to take such action with regard thereto as directed by the Port; clause 1.28 that records the Port''s obligation to provide general security in the Dock area but mandates the contractor to provide localised security for its equipment and other infrastructure; clause 1.34 that permits the contractor to remove its equipment from the port premises on the expiry of the period of the contract or the early termination thereof; and, clause 1.39 that specifically records that the Port would not guarantee any minimum quantum of cargo to be handled by the contractor. Several clauses have also been placed from the special conditions of contract appended to the tender documents, including clause 7.5 that stipulates the period of the contract to be 10 years from the date of the letter of intent; clause 7.9 that obliges the contractor to ensure that the equipment required to be supplied and installed by the contractor are in commission; clause 7.10 which is the liquidated damages clause that covers the delay in the initial commissioning of the mobile harbour cranes; clause 7.11 that details events of default on the part of the contractor; and, clause 7.12 that provides for the early termination of the contract.
On the Port''s perceived right to not allow the contractor to remove its machinery and equipment from the site, the Port refers to clause 4.19 of the general conditions appended to the tender documents and forming a part of the agreement between the parties:
4.19 All constructional plants, temporary work and materials when brought to the site by the contractor, shall be deemed to be the property of the Trustees who will have a lien on the same until the satisfactory completion of the work and shall only be removed from the site in part or in full with the written permission of the Engineer or his Representative.
The expression, "constructional plant", is defined at clause 1.12 of the general conditions. The definition refers to the word "work" which is also defined in the general conditions. The definition of "work" refers to the expressions "extra work" and "temporary work". It is necessary that the meanings of the relevant words and expressions be seen from the general conditions:
1.12 "Constructional Plant" means all appliances or things of whatsoever nature required in or about the execution, completion or maintenance of the work or temporary work and includes (without thereby limiting the foregoing definition) all machinery and tools but does not include materials or other things intended to form or forming part of the permanent work.
1.6 "Work" means the Work to be executed in accordance with the Contract and includes authorised "Extra Work", "Excess Work" and ''Temporary Work".
1.7 "Temporary Work" means all temporary work of every kind required in or about the execution, completion, operation or maintenance of the work and includes (without thereby limiting the foregoing definitions) all temporary erections, scaffolding, ladders, timbering, soaking vats, site offices, cement and other godowns, platforms and bins for stacking building materials, gantries, temporary tracks and roads, temporary culverts and mixing platforms.
1.8 "Extra Work" means those work required by the Engineer for completion of the Contract which were not specifically and separately included in the scope of work of the tender. "Excess Work" means the required quantities of work in excess of the provision made in the scope of work.
The case of lien that is now asserted by the Port was not made out at the ad interim stage before the Trial Court, though the Port says that it was urged in course of the appeal. The word "lien", significant as it is, is not used in the Port''s immediate response to the October 31, 2012 notice of termination issued by the contractor and the contractor''s request therein for its machinery and equipment to be taken out from the Haldia Dock Complex. Indeed, the Port has not been able to cite any letter issued by it to the contractor asserting any lien over the contractor''s machinery or equipment or even claiming to be in possession thereof. It is the Port''s understanding that since the contractor had sought its permission to remove the machinery and equipment and has now petitioned to Court for an Order to such effect, there is implicit recognition of the Port''s dominion over the contractor''s machinery and equipment; it is so obvious that it did not require any express pleading in the Port''s petition or affidavits filed in these proceedings.
On the question of lien, the contractor submits that clause 4.19 of the general conditions would not apply to this contract. It suggests that such clause, on a bare reading of it, would imply that it would cover a building contract and not a contract for the supply, operation and maintenance of cargo-handling equipment. The contractor refers to clause 6 of the primary agreement that makes the general conditions applicable to the agreement between the parties, but subject to the general conditions not being repugnant to or at variance with any of the provisions of the special conditions of contract. It is the contractor''s assertion that clause 4.19 of the general conditions is repugnant to the primary agreement and the special conditions in the nature of work covered by the agreement not being any civil or other construction. The contractor also suggests that even if clause 4.19 of the general conditions were to apply in this case, the lien recognised therein would be for "the satisfactory completion of the work" and not for any debt due to the Port or any claim made by it against the contractor. The contractor refers to the subsequent notice inviting tender issued by the Port seeking offers for similar work to be carried out at the Haldia Dock Complex and says that since the termination of the agreement between the parties has been accepted by the Port, albeit without prejudice to the Port''s right to claim against the contractor, there is no scope for the completion of the work under the agreement any more. In any event, the contractor asserts that the Port has obtained its pound of flesh by encashing the bank guarantees that had been furnished by the contractor in lieu of performance. It is not denied by the Port that bank guarantees of a total value of about Rs. 4 crore have been encashed by the Port.
The second limb of the contractor''s submission on the issue of lien is that all its machinery and equipment are hypothecated to its bankers. Copy documents appended to the contractor''s affidavit reveal the hypothecation to be of July, 2009 and the application for registration of the charge to be of August, 2009. A copy of a certificate dated September 3, 2009, evidencing registration of the charge u/s 125 of the Companies Act, 1956, has been made over by the contractor and not taken exception to by the Port. The contractor says that since the hypothecation was created prior to the agreement of October 16, 2009 between the parties herein and since, in view of the deeming provision in section 126 of the Companies Act, the Port had due notice of the bank''s prior charge over all movables, machinery and equipment of the contractor, the lien that the Port now asserts cannot, in any event, be exercised.
Based on the Port''s new-found understanding of its right to exercise its perceived lien over the contractor''s machinery and equipment, the Port has expounded on the law in such regard and has carried several authorities to bear on such aspect of its claim. In the exercise of a lien or a charge over movables, the Port insists that a bona fide incumbrancer without notice of any previous encumbrance and in possession has the right to retain the movables in fulfillment of the purpose of the lien or the charge. Towards such end, the Port has referred to a judgment reported at (1974) 1 All ER 900 (George Barker (Transport) Limited vs. Eynon) for the proposition that it is the crystallisation of a charge that is of paramount importance and if such crystallisation takes place when the movables are in the possession of a subsequent incumbrancer, it is such person who is entitled to exercise the right as conferred to it in preference to the right of any other. In that case, the plaintiffs were transport contractors and enjoyed a general lien against the owner of any goods for any monies due from such owner to the plaintiffs. The defendant was a receiver appointed over a company whose goods the plaintiffs had been regularly carrying for delivery to the company''s customers. By a mortgage-debenture, the company charged all its property to a bank as a continuing security for all sums which at any time became due to the bank. It was a floating security which, however, stipulated that the company would not be at liberty to create any mortgage or charge in priority to or pari passu with the charge created in favour of the bank. During the course of the plaintiffs executing an Order placed by the company for transporting its goods, the bank appointed a receiver over the company which the transporters were not immediately made aware of. When the transporters were in the process of collecting the last lot of goods for effecting delivery thereof, they were informed of the defendant having been appointed receiver. The transporters collected the goods and retained the same at their depot. They then claimed against the receiver, relying on their lien for the amount due from the company to the transporters for services rendered. Since the goods were perishable, the receiver required the transporter to deliver the same and undertook to pay the transporters if the lien asserted by the transporters was found to be valid. An action by the transporters for the amount claimed was dismissed on the ground that prior to the transporters coming into possession of the last lot of goods, the receiver had already been appointed and the general lien of the transporters stood obliterated thereby. The Court of Appeal reversed the judgment on the ground that the relevant Order for transportation had been placed by the company prior to the receiver being appointed and the receiver''s rights were no higher than the company''s rights and were subject to the charge in favour of the transporters that crystallised upon the Order being placed on the transporters by the company, a debt being due from the company to the transporters and the transporters being in possession of the goods.
A judgment reported AIR 1914 LB 265 (Manackjee Pallanjee vs. S.A. Meyappa Chetty) has been placed by the Port for the proposition that the subsequent incumbrancer in possession would be entitled to exercise its lien unless it was proved that it had notice of the previous encumbrance. A decision reported at AIR 1931 201 (Rangoon) is cited for the same proposition. Two pronouncements of this Court reported at Kanhaiyalal Jhanwar Vs. Pandit Shirali and Co. and Others, and Co-operative Hindusthan Bank Ltd. and Another Vs. Surendra Nath Dey and Others, ) have been relied on by the Port on the question of priority between competing incumbrances. A recent judgment reported at Indian Oil Corporation Vs. NEPC India Ltd. and Others, has been brought by the Port on the law relating to a floating charge and the authority of the incumbrancer to exercise the right by converting the hypothecation into a pledge by taking possession of the goods at any point of time.
Without prejudice to its contention that there is no lien that the Port enjoys over the contractor''s machinery and equipment, the contractor has carried a couple of judgments to show the law on such score. A decision reported at G. Bhar and Co. Vs. United Bank of India Ltd. and Others, has been placed for the proposition that a floating charge is a present charge, though it does not finally crystallise upon any specific property until the happening of some event which puts an end to the right of the borrower to deal with the property in course of its business; but the fact that the charge crystallises at a later date would not imply that the charge would by enforceable only with effect from the date of the crystallisation. Another judgment, reported at Syndicate Bank Vs. National Wire Products and Others, , has been relied upon for the principle that an Order of attachment before judgment is subject to a charge over the property under attachment on the ground of hypothecation. Apropos the Port''s contention that the lien in favour of the Port was created upon the issuance of the letter of intent on April 29, 2009 and the immediate acceptance thereof by the contractor, a judgment reported at Rajasthan Co-operative Dairy Federation Ltd. Vs. Shri Mahal Laxmi Mingrate Marketing Service Pvt. Ltd. and Others, has been placed by the contractor for the view expressed therein that a letter of intent is not a contract but it merely expresses an intention to enter into a contract and does not create any binding relationship between the parties.
Clause 6 of the primary agreement makes the general conditions applicable to the agreement between the parties, subject to the provisions thereof not being repugnant to or at variance with the terms of the primary agreement. The definition of "constructional plant" in the general conditions, within the fold of which the Port seeks to include the contractor''s machinery and equipment at the site, appears to cover a building or civil construction. The definition of "constructional plant" cannot be read in isolation and has to be understood with reference to the definitions of "work", "temporary work", "extra work" and "excess work" in clauses 1.6, 1.7 and 1.8 of the general conditions. It is true that if the words of a contract imply something, the Court has little authority to read it down or infer what the plain words do not suggest. Yet, common sense and logic cannot be given a complete go-by in the interpretation of the terms of a contract, particularly when the window for another implication is available upon the provisions being made applicable subject to their relevance to the primary agreement. It is not for nothing that the Port did not assert any lien over the contractor''s machinery and equipment, though it refused to release the same without the compensation claimed by it being made good. Again, too much need not be read into the Port''s response to the pre-bid query relating to lien which appears at page 200 of the Port''s petition since the answer was vague and, though the Port did not specifically refer to clause 4.19 of the general conditions which it ought to have in the context, it directed the querist to the tender documents which included the general conditions. The lien that the Port seeks to assert on the basis of the clause 4.19 of the general conditions appears, on a meaningful reading of the entire agreement between the parties, not to cover the machinery and equipment of the contractor. Clause 4.19 of the general conditions refers to a written permission of the engineer or his representative. Both an "engineer" and the "engineer''s representative" are defined in the general conditions. The Port has not referred to any engineer having been appointed for the purpose of the agreement between the parties. The duties of the engineer and his representative are detailed at clauses 2.3, 2.4, 2.5 and 2.6 of the general conditions and the nature of the duties indicates that the work to be supervised by an engineer or his representative would be of construction or the like.
Even if the Port were entitled to exercise the lien in terms of clause 4.19 of the general conditions, such right would have to be restricted to the stated purpose therefor as the clause does not grant a general lien in favour of the Port. The purpose of the lien, if at all applicable in the present case, was to ensure the satisfactory completion of the work. Apart from the expression "satisfactory completion of the work" implying, in the context, that the work had to be some kind of construction, it is evident that upon the termination of the agreement and the acceptance thereof by the Port, there is no work to be completed. On facts, therefore, there is no lien or charge that the Port enjoys over the machinery and equipment of the contractor for the satisfaction of the Port''s claim against the contractor. As a consequence, the law that the parties have brought to bear on such aspect calls for no further discussion.
The several other clauses of the agreement that the Port has referred to for the purpose of retaining the machinery and equipment of the contractor, do not so entitle the Port. That the contractor shall not remove or replace any equipment installed without the permission of the Port, as recognised in clause 1.12 of the primary agreement, does not confer on the Port any authority to retain the machinery and equipment of the contractor to satisfy the Port''s claim in damages. Similarly, the Port''s right to inspect all equipment supplied by the contractor and the contractor''s obligation to take such action with regard thereto as directed by the Port, under clause 1.24 of the primary agreement, cannot be read to allow the Port any modicum of authority to retain the machinery and equipment of the contractor till its claim in damages is discharged. Indeed, clause 1.34 of the primary agreement permits the contractor to remove its equipment from the port premises on the expiry of the period of the contract or the early termination thereof; that would mean that the contractor has the right to remove its machinery and equipment from the premises upon the termination of the agreement. Clause 7.9 of the special conditions obliges the contractor to ensure that the equipment required to be supplied and installed for the work are in commission; but upon there being no further work to be undertaken when the agreement has been terminated and the termination accepted, such obligation of the contractor is no longer relevant. There is no doubt that the termination of the agreement has been accepted by the Port, though the Port may be entitled to claim damages for the perceived wrongful termination of the agreement by the contractor. In the Port having floated a subsequent tender and having invited offers for the same work as contemplated in the agreement between the parties to be undertaken at the Haldia Dock Complex, there is evidence of the Port''s acceptance of the termination of the agreement. In the agreement, on its proper construction, not conferring any right on the Port to exercise any lien over, or otherwise retain, the contractor''s machinery and equipment at the site, the first limb of the Port''s case fails.
There is a further facet to the issue which may be of little practical consequence but is legally relevant. The fact that the employer in this case is the Port which discharges a special kind of function and the fact that the entry and the exit of any material or person at a port is subject to restrictions would not necessarily imply, in strict legal terms, that the Port is in possession of the material at its premises notwithstanding the Port having an element of control over the material by reason of its special status.
At any rate, even if it were accepted that the Port had a lien over the contractor''s machinery and equipment at the site, in view of the prior charge of the contractor''s bankers and the Port''s constructive notice thereof by virtue of section 126 of the Companies Act, the Port''s right would be subservient to the bank''s since the Port''s perceived lien can, at the highest, be said to have been created by the agreement of October 16, 2009 and cannot be said to date back to April 29, 2009 when the letter of intent was issued.
On the Port''s second contention that the contractor willy-nilly abandoned the work on commercial considerations, there is not much that the Port has been able to demonstrate. The contractor''s response to such argument is that the Port fell prey to the resourcefulness of certain vested interests and set up the contractor as the lamb to the slaughter. The contractor insists that its willingness to perform the work under the contract would be evident from the undisputed documents on record and the letters issued by the Port to third parties bear testimony to the prejudice and hardship that the contractor had to endure to do no more than discharge its obligations under the agreement and help increase the efficiency of operations at the Haldia Port.
The contractor has referred to the correspondence disclosed in the petitions and affidavits to emphasise that vested interests were at work even before the contractor got a toe in at the Port premises. In particular, the contractor places the communication between the Port and other authorities and how the Port''s letters depicted the state of affairs at the Haldia Dock Complex in the month and a half leading up to the termination of the agreement by the contractor. In the Port''s letter of September 18, 2012 to the officer-in-charge of the Haldia Police Station, it spoke of "a group of about 200-250 workers" employed by other contractors at the Haldia Dock Complex having gathered in front of an office of a port manager and "shouting slogans against KoPT & Haldia Bulk Terminals Pvt. Ltd." The letter referred to a political leader as the officer-bearer of a trade union who joined in with another sizable number of agitators, "protesting against KoPTs decision to take vessels at Berth No. 2 and 8 on priority..." The agitators were aggrieved since "their employers are apprehending reduction in their business volume for which they have already given indication of terminating them from the service." The complaint of the Port to the police was that "officers and staff of HDC are therefore stuck in the office premises." In an email of September 20, 2012 by a port manager to the chairman, the official referred to a member of Parliament having called him and demanding an explanation for berthing a vessel at berth No. 8. The letter referred to the politician stating "that he will not tolerate such action of HDC and will take action to put a lock at Jawahar Tower Office and ... not allow a single truck of cargo to move out of the Port." A letter of September 20, 2012 addressed by the Port to the District Magistrate sought imposition of restrictions u/s 144 of the Criminal Procedure Code to arrest the agitation of "the workers of various private handling agents working at Haldia Dock Complex..." The chairman of the Port wrote to the chief secretary of the State on September 24, 2012 that "the smooth functioning of HDC has come across severe impediments created by some vested interests group" and even Port employees were "getting regular threats and intimidation by some musclemen." The chairman appealed for the administration''s intervention to maintain law and Order inside and outside the Dock Complex. The chairman wrote again to the chief secretary on September 28, 2012 for help.
On the Port''s suggestion that the contractor dug its own grave by retrenching 275 of its workers on September 25, 2012, the contractor draws attention to the Port chairman''s letter to the principal secretary, Department of Home of the State Government, of September 19, 2012 that the contractor had to incur "high cost of redundant manpower which they had to engage due to local political pressure" for which the contractor had come "under financial strain." The chairman quoted the contractor as having reported "a loss of about Rs. 2 crores per month at the present level of business being done by them considering their high cost of manpower ..." The chairman then referred to the Order of September 12, 2012 passed by this Court and the agitation that followed at the Port by "workers of various private handling agents working at Haldia." The chairman said that "such a situation was anticipated by the port after the Court Order for taking more vessels at Berth Nos. 2 and 8 was passed" and the Port had kept the local "police and civil administration informed ... (of the) possible labour unrest affecting the law and Order situation" at Haldia.
The contractor maintains that it would be a travesty of justice to infer from the admitted documents that the contractor abandoned the work for commercial reasons. The contractor emphasises that it had to give in to the unreasonable demands of the influential locals and the Port gave little support to its contractor to deal with a situation that was extraneous to the work contemplated under the agreement and which was not conducive to ensure the efficient functioning of the Port.
On the basis of the material now available, it cannot be accepted that merely commercial reasons prompted the contractor to abandon the agreement. To begin with, a prima facie finding on such question would, in any event, not further the Port''s claim for retaining the contractor''s machinery and equipment before its claim in damages is satisfied. But even if the Port''s argument on such score is taken to be merely to suggest a basis to the Port''s claim for damages, the Port has failed to establish the same. While there is no evidence of the Port''s complicity with the vested interests at the Haldia Dock Complex, it is equally unfair of the Port to foist the blame on the contractor and charge it with abandoning the work, unmindful of the impediments in the way of the contractor that the Port admitted in its letters to third parties. If the second issue raised by the Port is relevant at all for the present purpose, it seems that the contractor was hounded out of Haldia and, given the law and Order situation and the apathy of the administration to address the same, it was left with no alternative but to terminate the agreement. The matter has to be assessed from another angle. There can be no doubt that this contractor may not have recovered even the cost of its investment in the first three years of the 10-year contract. Its exposure to its bankers appears to be in the region of Rs. 100 crore on the basis of the documents disclosed. It would defy logic then to accept the Port''s case that the contractor chose to leave Haldia; there must have been grievous reasons for a commercial organisation to incur huge expenses to set up base and abandon the work midstream. The reasons may be found in the several letters addressed by the Port to the administration that appear to have gone unheeded.
The final question that arises is whether the Port is entitled, nonetheless, to an Order in the nature of attachment before judgment on the ground that there is a possibility of it being awarded substantial damages but the special purpose vehicle that is the contractor would have folded up by then and its machinery and equipment sold in its attempt to cut its losses, long before the award in the reference is made in the Port''s favour. The Port says that there is no law that prohibits a claim in damages to be secured by an Order of Court. The Port argues that the conditions in Order 38 Rule 5 of the Code have been made out in this case for an Order of attachment to be passed. Legally speaking, the Port may be selling itself short by subjecting itself to the rigours of Order 38 Rule 5 of the Code in course of a matter u/s 9 of the 1996 Act. Though it may be academic in the present context - and despite there being authoritative judicial pronouncements on such legal question - strict compliance with Order 38 Rule 5 of the Code may not be necessary in course of a prayer for attachment in a petition u/s 9 of the 1996 Act. The principle embodied in Order 38 Rule 5 of the Code has to be recognised as a statement of public policy in its sound adherence to the Rules of natural justice that are fundamental to any judicial process. But it is only the principle of Order 38 Rule 5 of the Code that has to be imported in a similar situation u/s 9 of the 1996 Act; for there is no other statement of the underlying public policy for such purpose in the general law of the land. Notwithstanding such legal concession, it must be appreciated that Order 38 of the Code is the prescription that is necessary u/s 94(b) of the Code for the exercise of such authority by a civil Court in seisin of a suit. The opening words of section 94 of the Code mandates the Rules under the Code to prescribe as such if the powers under its several limbs are to be exercised in course of a civil suit. Section 9 of the 1996 Act, however, empowers a Court to grant an interim measure for securing the amount in dispute in the arbitration and also grant such interim measure of protection not covered by clauses (a), (b), (c) and (d) of section 9(ii) of the Act. The closing words of section 9 of the Act, that the Court shall have the same power for making orders as in any proceedings before it, would oblige the Court to respect the underlying principle of Order 38 Rule 5 of the Code in dealing with a prayer for attachment before judgment; but it will not subject the latitude of the Court exercising authority u/s 9 of the Act to the strict rigours of the comparable provision in the Code.
What is undeniable, however, is that an Order in the nature of attachment before judgment or requiring the respondent to secure a claim would not be ordinarily made and would require an almost infallible claim to be presented before the considerations arise as to whether security or attachment ought to be directed. The contractor has referred to a recent judgment reported at (2010) 4 CHN (Cal) 87 (Jai Balaji Industries Ltd. vs. Hyquip Systems Pvt. Ltd.) in its enunciation of the legal principle that unless a near unimpeachable claim in money is apparent, there is no need to proceed to the second stage of the prayer for security or attachment for assessing the conduct or financial capability of the respondent.
In the present case the Port''s claim is for damages of an unliquidated sum upon the perceived abandonment of the agreement by the contractor. Though the Port has referred to the contractor''s letter of August 23, 2012, where the contractor claimed that the suspension of operation by the contractor "would result in depravation of revenue of about Rs. 11 crores per month to KoPT", it cannot be seriously urged that the damages that the Port seeks has already been quantified and the Port is entitled to recover such sum from the contractor. A claim in damages ordinarily does not excite a Court to consider a prayer for security or attachment though there may not be any express law to prohibit an Order of such nature. Unlike several other causes of action where a prima facie assessment may be more easily made, a claim in damages is rather more difficult to assess on mere affidavit evidence. The Port has first to establish that it is entitled to damages and then have the quantum thereof ascertained. It is possible that there could come a case where the claimant''s entitlement to damages is apparent. The Port''s claim in the present, case is not of such exalted quality. On the evidence now presented by the parties, it can safely be said that both the Port and the contractor have suffered upon the agreement having been terminated. But the fact that the Port has suffered loss does not imply that it is entitled to recover it from the contractor. If such is the prima facie assessment on the basis of the material now brought by the parties, the Port falls well short of the quality of claim that it has to demonstrate to be entitled to the high Order that it seeks. Further, the balance of convenience does not warrant that the contractor''s machinery and equipment be either left to rot and wither in value or be directed to be sold in distress.
The contractor is entitled to remove its machinery and equipment from the Haldia Dock Complex, subject, however, to any customs or like claim in respect thereof. The Port will have no authority to stop the removal of the contractor''s machinery, equipment and material from the Haldia Dock Complex. The three joint special officers appointed by the Order of December 13, 2012 and the appellate Order of December 19, 2012 will oversee the removal of the mobile harbour cranes and all other machinery, equipment and material of the contractor from the Haldia Dock Complex, subject to any valid claim of the customs made through a competent authority. The joint special officers will seek and obtain requisite assistance from the police authorities and the local and state administration for the purpose of ensuring the removal of the contractor''s machinery, equipment and material from the Haldia Dock Complex for the same to be made available at the disposal of the contractor, subject to the valid rights of any other over the same.
The joint special officers should ensure that the exercise is completed within four weeks from date and that there is no further machinery or equipment or material of the contractor at the Haldia Dock Complex thereafter. The joint special officers will be entitled to a remuneration of 3,000 GM each to be borne by the contractor.
AP No. 972 of 2012 fails and AP No. 984 of 2012 succeeds as above. For the Port having needlessly protracted the matter over the avoidable bogey of its perceived lien, it will pay costs, assessed conservatively at Rs. 4 lakh since the Port is a statutory body, to the contractor and to the State Legal Services Authority in equal measure. Urgent certified photocopies of this judgment, if applied for, be supplied to the parties subject to compliance with all requisite formalities.
Later:
The Port seeks a stay of the operation of the Order which is declined.