-1- IN THE HIGH COURT OF BOMBAY AT GOA APPEAL FROM ORDER NO. 39 OF 2009 Government of Goa, represented by the Director of Tourism, with his office at Patto Plaza, Panaji – Goa. …... Appellant/ (Ori. Respondent) V e r s u s Jaisu Shipping Co. Pvt. Ltd., a Private Limited Company incorporated under the Companies Act, 1956, represented by its Executive Director, Mr. Vishin Kewalramani, and having its registered office at Kewalramani House, Near Customs and Port Building, New Kandla, Kutch District, Gujarat – 370 210 …... Respondent/ (Ori. Petitioner ) Mr. S. S. Kantak, Advocate General with Mr. Abhijeet Kamat, Additional Government Advocate for the Appellant. Mr. S. D. Lotlikar, Senior Advocate with Ms. Jimi John, Advocate for the Respondent. Coram :- A. S. OKA F. M. REIS, JJ. Judgment Reserved on : 26 th July, 2010. Judgment Pronounced on : 5 th August, 2010. JUDGMENT : (Per F. M. Reis, J.) The above Appeal filed under Section 37(1)(a) of the Arbitration and Conciliation Act, 1996, challenges the Judgment and Order dated 29th April, 2009, -2- passed by the learned Principal District Judge, South Goa, Margao, in Arbitration Application no. 7 of 2009 (New) filed by the Respondents under Section 9 of the Arbitration and Conciliation Act, 1996, came to be allowed whereby, inter alia, the Appellants were restrained from in any manner causing interference with or impediment to the work of the Respondents vis-a-vis the refloatation of the vessel undertaken by them under Agreement dated 5th January, 2007, and/or terminating the same; and from making any demand on Respondents and/or taking away by way of damages or otherwise, taking any action in furtherance of the show cause notice dated 5th June, 2008, and from adopting any measures or steps to award the work to any other person or entity until the refloatation of the vessel in question and pending the determination of the issues arising between the parties which are arbitrable before the Arbitral Tribunal. The Respondents are also secured by an order of mandatory injunction directing the Appellants to reimburse the amount of Rs.5,50,00,000/- having earlier come to a conclusion that the Performance Guarantee was wrongly appropriated by the Appellants in encashing the same. 2. The above Appeal has been placed for hearing before the Division Bench in view of the directions of the Hon'ble Chief Justice by intimation dated 16th July, 2010. 3. Briefly, the facts of the case are that the Respondents filed an application for interim orders under Section 9 of the Arbitration and Conciliation Act, 1996, (hereinafter referred to as 'the said Arbitration Act'), claiming that the Respondent is the contractor appointed under an Agreement dated 5th January, 2007, entered into between the Respondents and the Appellants for the removal of -3- the nuisance caused by the grounded/wrecked vessel 'M. V. River Princess' off Sinquerim beach, Candolim, Goa, on the terms and conditions mutually agreed upon and stipulated in the said Agreement. It is further their case that pursuant to a tender floated by the Appellants to remove the vessel, the Respondents on 27th February, 2006, submitted its bid no. 6/2(9)(River Princess)2006-DT/ dated 31st January, 2006, which was accepted by the Appellants with certain modifications, culminating in the parties entering into a formal Agreement dated 5th January, 2007, whereby the Respondent was to remove the said vessel at its own risk, liability, costs and consequences by refloatation and towing away wholly to an authorised Ship Breaking Yard. It is further their contention that the work allotted to the Respondents was to be carried out within a period of 180 days and the consideration payable to the Respondents was the ownership and title of the wrecked vessel and the sum of Rs.5,50,00,000/- assured to the Respondents through its bankers as a Performance Guarantee favouring the Appellants to be paid by the Appellants to the Respondents within 7 days of floatation and towing away of the remains of the vessel. It is further their contention that pursuant to the said Agreement and in accordance with the Clauses 1, 5, 7 and 9, they were carrying out and were in the process of completing the said work within the time stipulated therein or within such extended time as was mutually agreed between the parties. The Indian Registrar of Shipping was appointed as a Consultant to make and submit regular status reports on the progress of the work from time to time and the Respondents were supposed to carry out the work as per their directives. It is further their case that the Appellants had not provided them with the general arrangements and the particulars of the grounded vessel thereby admitting that the said vessel was embedded in the sand and consequently the Respondents -4- were facing innumerable difficulties in proceeding with the work assigned to them. It is further their contention that they had sought extension vide their letter dated 19th April, 2007 and the Appellants' Consultants had certified the situation at loco but the Appellants have not replied to the said letter and instead issued a notice dated 23rd July, 2007. The Respondents had incurred an expenditure of Rs.19,24,50,529/- in their endeavour to refloat the vessel and that there were regular meetings between the representatives of the Appellants including the Consultants, but, despite of repeated assurance, the Appellants did not respond in writing to permit them to carry out the work and had thereby tacitly agreed for the extension of time to complete the said work. A letter was addressed by the Appellants dated 6th February, 2008, to the Chairman of the Mormugao Port Trust, to allow the Respondents to transport the salvage related material via Berth no.7 to help them to complete with the ongoing salvage work. Due to bad weather during the monsoons, the work could not be carried out but, however, the Appellants failed to respond to their request to allow them to compete the work beyond 31st May, 2008. The letter also disclosed an alternative methodology to raise the vessel in keeping with the recommendations of the Consultant. The Respondents contend that they had continued with the salvage work on the basis of the oral assurances by the officers of the Appellants from time to time and no response was received to their request for extension till 31st December, 2008. Despite of the fact that the requests were pending for extension of time, the Respondents were informed by their Banker by letter dated 19th April, 2008 that the Appellants had invoked Performance Guarantee and accordingly they had issued demand draft for Rs.5,50,00,000/- in favour of the Appellants by debiting from their Cash Credit Account. It is further their contention that despite of acquiescence to the continued -5- work carried out by the Respondents, the Appellants called upon the Respondents vide notice dated 5th June, 2008, to show cause why an amount of Rs.30,00,000/- should not be recovered as liquidated damages and why the said Agreement should not be terminated. It is the contention of the Respondents that the said notice was misconceived, totally contrary to the letter and spirit and exfacie bad. In view of the Arbitration clause in the Agreement, the dispute had to be resolved by the Arbitration Tribunal constituted under the said Arbitration Act and, as such, it is the contention of the Respondents that they were entitled to seek the preservation and protection of the subject matter of the Arbitration pending its adjudication. It is further their contention that though time was made an essence of the contract, they were entitled for extension and, therefore, the conduct of the Appellants suggest that they had agreed for the extension of time. Accordingly, the said application under Section 9 was filed by the Respondents seeking reliefs to inter alia reimburse the amount collected from the Performance Guarantee as well as for temporary injunction to restrain the Appellants from interfering with the work being carried out under the Agreement or taking any action in furtherance of the show cause notice. 4. The Appellants filed their reply to the said application and stated that the reliefs were not available in law to the Respondents herein. It is further their case that the Agreement had been terminated as the Respondents had failed to remove the vessel within the stipulated period of 180 days time being the essence of the contract. It is further their contention that the said Agreement was not specifically enforceable as compensation was an adequate remedy and the same was running into such minute and numerous details dependent on personal -6- qualifications or expertise could not be enforced specifically. It is further their contention that the said vessel had to be removed at their own risk and liability as to costs and consequences therein and to tow it away wholly to any authorised Ship Breaking Yard and dispose it within 180 days from issuance of the letter time being the essence of the contract. The essential terms were violated by the Respondents as they failed to refloat and tow away the vessel and, accordingly, the Appellants were entitled for an amount of Rs.4,90,00,000/- on the date of the reply for the failure to perform the work assigned to the Respondents. The subsequent notice dated 5th June, 2008 was issued by the next incumbent of the Competent Authority which was superfluous and unnecessary. It is further their contention that the Appellants had never permitted the continuance of the work after the stipulated period and the Respondents having done so, it was at their own risk and liability as to costs and consequences thereof. Unilaterally, the Respondents had assured the Appellants to remove the vessel by 15th April, 2008, and the letter to Mormugao Port Trust Chairman dated 6th February, 2008, was to enable them to transport the salvaged materials. It is the contention of the Appellants that they were entitled to encash the Performance Guarantee in view of the failure on the part of the Respondents to remove the said vessel followed by the show cause notice dated 5th June, 2008. For other reasons stated in the said reply, it is the contention of the Respondents that the same deserves to be rejected. 5. The learned District Judge, after hearing the parties and perusing the records, allowed the application by Judgment and Order dated 29th April, 2009, filed by the Respondents under Section 9 of the Arbitration Act in terms as stated hereinabove. -7- 6. Being aggrieved by the said Judgment and Order, the Appellants have preferred the present appeal. 7. The learned Advocate General appearing for the Appellants has assailed the impugned Judgment and submitted that the learned District Judge has failed to advert itself to the real point in controversy and decided the matter on extraneous considerations which are not at all relevant for the disposal of the application filed by the Respondents under Section 9 of the Arbitration Act. He further submitted that the learned Judge has unnecessarily dwelt into an exercise to ascertain as to whether the time was the essence of the contract or not to come to the conclusion that as time was not the essence of contact, the reliefs of temporary injunction as prayed for by the Respondents, was to be granted. The learned Advocate General has submitted that what the learned Judge has lost sight of is even assuming the contentions of the Respondents are to be accepted, whether Specific Performance of the Agreement invoked by the Respondents can be granted. The learned Advocate General submitted that the Agreement entered into between the parties is essentially a job contract which cannot be specifically performed under the provisions of Section 14 of the Specific Relief Act, 1963. He further submitted that in such cases damage is an adequate relief and by no stretch of imagination can the Respondents be entitled for Specific Performance of the Agreement. He further submitted that, in any event, the Agreement is running into such minute and numeral details depending upon the personal qualifications and expertise which Court cannot supervise and, as such, such Agreements are not forcibly enforceable. He further submitted that the Respondents were unnecessarily -8- making excuses to delay the completion of the salvage operations which were causing irretrievable damage to the interest of the Appellants which forced them to terminate the Agreement in accordance with the terms of the contract. The learned Advocate General further submitted that the Agreement itself was determinable and, as such, the question of granting any Specific Performance of such contract, would not arise at all. The Learned Advocate General further submitted that the Appellants had never acceded to the request of the Respondents for extension of time but the Respondents arbitraly had assured that the work would be completed on or before 31st May, 2008, which was in fact not completed and, in any event, entitle the Appellants to terminate the said Agreement. The learned Advocate General took us through the clauses of the Agreement to demonstrate the obligations which were fixed on the Respondents which they had defaulted and, as such, entitle the Appellants to terminate the said Agreement. The learned Advocate General further submitted that the alternate methodology preponded by the Respondents was only a pretext to dillydally with the matter as such requests were not germane to the terms and conditions of the Agreements. He further submitted that there was no default committed by the Appellants and it was only on account of the defaults committed by the Respondents that the work was not completed. The learned Advocate General after going through the impugned Judgment, pointed out that the learned District Judge has not at all addressed to the said contentions raised by the Appellants and brushed them aside at para 55 of the impugned Judgment on the ground that the same were not available to the Appellants without giving any adequate reasons. The learned Advocate General has further pointed out that in view of the impugned Judgment the Appellants are not in a position to remove the wrecked vessel which is a nuisance to the -9- Appellants. The learned Advocate General as such submitted that the learned District Judge has exercised its discretion by disposing of the application under Section 9 of the Arbitration Act capriciously and with material irregularity which requires interference by this Court. 8. On the other hand, Shri S. D. Lotlikar, learned Senior Counsel appearing of the Respondents has supported the impugned Judgment. He, at the outset submitted that this Court should not interfere with the discretionary orders passed by the learned District Judge as the same have been passed after considering the material on record in its proper perspective applying the well settled principles of law which govern the grants of the application under Section 9 of the Arbitration Act. He further submitted that the restraint order is in operation for a long time and considering that the Arbitration Proceedings are already in progress, there is no reason for this Court at this stage to interfere with the impugned order which would allow a change in the status quo as is existing at the site. The learned Counsel further submitted that time was not the essence of the contract considering the fact that the Appellants had allowed the Respondents to continue with the job assigned to them in terms of the said Agreement without any objections and such conduct itself establishes that the Appellants had agreed to extend the time for completing the work assigned to the Respondents. The learned Senior Counsel has further submitted that the Respondents have already spent a sum of over Rs.19,24,50,529/- in carrying out the floatation of the vessel in terms of the said Agreement and nearly 70 % of the work had already been completed at the time when the Agreement was sought to be terminated by the Appellants. He as such submitted that his case comes within the proviso of Section 14(3)(c) of The Specific -10- Relief Act 1963 and, as such, the Respondents are entitled for the specific performance of the said Agreement. He further submitted that the delay in completion of the work was on account of the high handedness on the part of the Appellants in refusing to take a decision in the alternate methodology suggested by the Respondents which caused unnecessary delay in completing the work. He further submitted that though the Consultants appointed by the Appellants were satisfied with the operation carried out by the Respondents, the Appellants arbitraly and without any justification, sought to enforce the Performance Guarantee and thereby caused irreparable damage to the rights of the Respondents. The learned Senior Counsel further submitted that the delay is to be attributed solely to the Appellants for their recalcitrant attitude and there was no fault at all on the Respondents in taking necessary steps to complete their work. He further contented that the Respondents had procured air bags from China at considerable expenses for the purpose of carrying out the floatation of the vessel by alternate methods which itself shows the intention of the Respondents to complete the work expeditiously. The learned Senior Counsel further submitted that there are Public Interest Litigations filed by different citizens wherein they, inter alia, object to the manner in which the Appellants are seeking now to remove the vessel and, as such, in public interest the Respondents should be permitted to complete with the said job as such exercise will be completed within a short period of time. The learned Senior Counsel further submitted that the Appellants have acted arbitraly in trying to terminate the Agreement without any right or justification which forced the Respondents to file the application for interim relief under Section 9 of the Arbitration Act to safeguard their rights enshrined in the said Agreement. He further submitted that the learned District Judge has correctly appreciated the evidence on -11- record and come to the conclusion that as time was not essence of the contract, the Respondents were entitled to continue with the job of floatation of the said vessel. The learned Senior Counsel as such submitted that no interference is called for in the present appeal and the same deserves to be dismissed. 9. After considering the submissions advanced by both the Learned Counsel and on perusal of the record, we find that there is no dispute that as per the Agreement dated 5th January, 2007, the Respondents were appointed as contractors to perform a specific job assigned to them. The recitals of said Agreement contemplate that the competent authority invited on behalf of the Government, sealed bids for the work of removal of the vessel alongwith the contents by refloating and towing it away wholly to any authorised Ship Breaking Yard within a period of 180 days from 1st October, 2006 and, after the bid of Respondents was accepted by negotiations, the said formal Agreement was executed in terms of clause 6 of the conditions of the bid/contract. The said Agreement further contemplates that the contractor shall at his own risk and liability as to the cost and consequences thereof remove the vessel M. V. River Princess, grounded off Sinquerim Beach, Candolim, by refloating it and towing it away wholly to Ship Breaking Yard within a specified time and that time being the essence of the said contract. The Agreement further stipulates that the Respondents would furnish a Bank Guarantee through the State Bank of India for a sum of Rs.5,50,00,000/- as a security deposit in favour of the Director of Tourism for the due performance of the said work under the said Agreement and in fulfillment of the terms and conditions of the agreement. It further stipulates that the said guarantee would be valid during the subsistence of the said Agreement and that the Director -12- of Tourism/Competent Authority or the Government would be entitled to invoke/encash the said Bank Guarantee under Clauses 10, 11, 30, 35, 39, 40, 41 and 43 of the said Agreement. It further stipulates that upon completion of the execution of the said work, the Appellants would pay to the Respondents a sum of Rs.5,50,00,000/- within a period of 7 days from the date of refloating and towing away the said vessel wholly to the deep sea. Such removal will not be considered to be completed unless the vessel is removed by refloating and towing it away wholly to the deep seas and further brought and disposed off to any authorised Ship Breaking Yard. It further stipulates that only upon the said vessel being refloated in the manner stipulated in the said Agreement, the full ownership right and title of the said refloated vessel shall stand vested on the Respondents absolutely. The Agreement contemplates that in case of failure on the part of the Respondents to complete the said work within the stipulated period or mutually agreed extension, the Respondents shall pay to the Appellants a sum of Rs.1,00,000/- per day subject to a maximum period of 30 days. It further stipulates that on failure on the part of the Respondents to remove the said vessel and on abandonment of the said work midway, the Agreement shall be treated as terminated at the risk of the Respondents and the security deposit shall be forfeited in favour of the Government/Competent Authority and the Government/competent Authority shall be entitled to recover damages from the Respondents and the Government/Competent Authority shall make alternate arrangements for removal of the sea vessel. Clause 35, inter alia, of the said Agreement further contemplates that on the failure on the part of the Respondents to remove the said vessel in the manner and the time specified therein, the Bank Guarantee shall stand forfeited in favour of the Appellants and the Appellants shall be at liberty to carry out the said -13- work and no payment whatsoever on basis of the part performance of the Agreement shall be payable to the Respondents. In such circumstances, the principle of “no cure no pain”, which is universally accepted as a part of any salvage Agreement shall be applicable. The Agreement further contemplates at Clause 53 that, in the event of the Respondents during the course of the execution of the said work is of the opinion that refloatation of the vessel as per the plan given in his technical bid is not possible, the contractor shall inform the same to the Appellants and the Appellants after taking opinion from its consultants, shall decide whether to permit the Respondents to resort to an alternate plan and the conditions under which such permission, if any, is to be granted. 10. On perusal of said relevant Clauses of the said Agreement, we find that it is manifestly clear that the Respondents were appointed merely as a Contractor for the purpose of reflotation and towing away the wrecked vessel M. V. River Princess. The relationship of the parties disclose from the Agreement that the work to be undertaken by the Respondents is under the control and supervision of the Appellants in respect of the details of the work. The consideration stipulated in the said Agreement is inter alia the vesting of the title of the wrecked vessel unto the Respondent only after its refloatation and towing away towards the deep sea to an authorised Ship Breaking Yard besides the said payments. Such Agreements are essentially job contracts wherein a person is engaged to carry out some specific assignments. 11. Considering the nature of the said Agreement, we will now ascertain as to whether an Agreement of such a nature can be specifically enforced. -14- Section 14 of the Specific Relief Act, 1963 provides as under : “14. Contracts not specifically enforceable.- (1) The following contracts cannot be specifically enforced, namely:- (a) a contract for the non-performance of which compensation in money is an adequate relief; (b) a contract which runs into such minute or numerous details or which is so dependent on the personal qualifications or volition of the parties, or otherwise from its nature is such, that the court cannot enforce specific