Full Judgment Text
$~32
* IN THE HIGH COURT OF DELHI AT NEW DELHI
th
% Judgment delivered on: 30 June, 2023
+ O.M.P.(I) (COMM.) 204/2023
GHH BUMI MINING SERVICES PVT. LTD.
.....Petitioner
versus
HINDUSTAN ZINC LTD. ..... Respondent
Advocates who appeared in this case:
For the Petitioner: Mr. Sandeep Sethi, Sr. Advocate with Mr. Aayush Agarwala,
Mr. Anuj P. Agarwala, Mr. Siddham Nahata, Ms. Bhumika
Sharma and Mr. Auritro Mukherjee, Advocates.
For the Respondent: Mr. Krishnan Venugopal, Sr. Advocate, Mr. Uday N. Tiwary
with Mr. Akshat Tiwary, Advocates.
CORAM:-
HON'BLE MR. JUSTICE MANOJ JAIN
JUDGMENT
MANOJ JAIN, J (ORAL)
1. Present petition has been filed under Section 9 of the
Arbitration & Conciliation Act, 1996 (in short „said Act‟) seeking
urgent directions from this Court for staying operation of the
termination by the respondent of a project awarded to it.
2. Since pressing urgency in the matter has been expressed by Sh.
Sandeep Sethi, Ld. Senior Advocate, with the consent of both the
sides, the arguments have been heard for the purposes of final
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disposal.
3. According to the petitioner, the project in question was for
providing services including development of an underground approach
to ore body to produce mines at Zwarmala Mine in Udaipur District,
Rajasthan. This project was awarded on 30.12.2020 for 48 months i.e.
till 31.12.2024. This was an extremely capital-intensive project which
required huge investment of resources and creating of necessary
infrastructure by the petitioner. The job was being done, all along, by
the petitioner in the most earnest manner. However, by virtue of letter
dated 31.05.2023, the respondent has, arbitrarily and in complete
violation of the specific terms of the agreement between the parties,
has chosen to terminate the services of the petitioner with effect from
30.06.2023. According to the petitioner, it had invested huge money,
resources and manpower in the aforesaid project and the contract
could not have been terminated in unilateral manner, particularly when
it was not guilty of any breach, much less a material one.
4. The attention of the Court has also been drawn towards various
clauses of the contract as well as to the several communications
exchanged between the parties. It is claimed that it was obligatory for
the respondent to have adhered to the terms mentioned in the contract
and if at all the respondent was of the view that there were material
breaches, it should have given three breach notices, as contemplated
under the contract and only if the petitioner had not carried out the
requisite remedy, the contract could have been terminated. According
to the petitioner, there is nothing which may indicate that there was
any breach on the part of the petitioner. According to the petitioner, if
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one goes through the alleged breach notices, it would become clear
that these were, in fact, never the notices which could be termed as
„breach notices‟ and thus there is arbitrary and illegal termination of
the contract, without any cause and without any kind of lapse on the
part of the petitioner. It is prayed that if the interest of the petitioner is
not protected, it will be in complete defiance of the provisions of the
contract and would also cause irreversible and irreparable loss to the
petitioner, who has already made extensive investment of resources
and manpower and has employed as many as 430 personnel on the
aforesaid project. It is thus prayed that the termination letter dated
31.05.2023 be directed to be stayed and the respondent be restrained
from taking any coercive steps in furtherance thereto.
5. The application has been vehemently opposed. According to
Sh. Krishnan Venugopal, learned Senior Counsel for the respondent,
this Court cannot entertain the above request and stay the termination.
It is claimed that the contract in question was „determinable in nature‟
and when any such contract is determinable in nature and thus cannot
be specifically enforced, no injunction against termination and thereby
enforcement of contract can be issued.
6. The core issue is obviously plain and simple.
7. Whether the contract in question is determinable by nature or
not?
8. Sh. Sandeep Sethi, learned Senior Counsel for the petitioner has
relied upon the judgments of Coordinate Bench of this Court given in
Ascot Hotels and Resorts Pvt. Ltd. & Anr. vs. Connaught Plaza
Restaurants Pvt. Ltd. : 2018 SCC Online Del 7940 and Golden
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Tobacco Limited vs. Golden Toble Private Limited : 2021 SCC
Online Del 4506 . He has also drawn the attention of this Court to the
various clauses of the contract and the communication exchanged
between the parties. According to Sh. Sethi, the alleged
communications dated 26.10.2022, 16.01.2023 and 05.05.2023 cannot
be labelled as breach notices and, therefore, the contract could not
have been terminated. On the strength of Ascot Hotels and Resorts
Pvt. Ltd. (supra), it is argued that since the respondent did not adhere
to the contractual terms and did not send the breach notices as
envisaged in the contract, it was not lawful for the respondent to have
abruptly terminated the contract. Sh. Sethi, learned Senior Counsel
does admit that Ascot Hotels and Resorts Pvt. Ltd. (supra) was a case
in which rather the Arbitrator had decided an application under
Section 17 of the said Act, which was challenged by way of filing of
an appeal under Section 37(2) of the said Act but according to him, the
principle regarding grant of injunction remains virtually the same.
9. According to Sh. Sethi, the petitioner has been able to show a
prima facie case and even the balance of convenience is in his favour
and, therefore, the petitioner is entitled to immediate injunction,
supplementing that if no relief was granted, there would not be any
other manner in which the petitioner could be said to be appropriately
and adequately compensated. It is also contended that though the
termination clause was there in the contract but it was only if the
breach notices had been issued in the appropriate manner and,
therefore, in such a situation, the petitioner is very much entitled to
interim relief under Section 9 of the said Act. It is contended that as
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per various relevant clauses, the respondent has to, inter alia,
demonstrate as under:
i) That the Petitioner is guilty of lapse which constitutes a
breach of a specific term of the agreement;
ii) That such breach is a 'material' breach under the
agreement;
iii) That such material breach relates to obligations
concerning
provision of services or materials in respect of the project;
iv) That such material breach has not been cured within the
time granted; and
v) That there have been three or more such material breaches
which have not been cured by the Petitioner.
10. On the other hand, the respondent has relied upon Inter ADS
Exhibition Pvt. Ltd. vs. Busworld International Cooperative
Vennootschap Met BeperkteAnasprakelijkheid :2020 SCC Online Del
2485, National Highways Authority of India vs. Panipat Jalandhar
NH-I Tollway Pvt. Ltd. : 2021 SCC Online Del 2632, Roadway
Solutions Infra Limited vs. Highway Authority of India : 2023 SCC
Online Del 3082, C. Gopal Reddy and Company vs. National
Highways and Infrastructure Development Corporation Ltd. and
Another : 2023 SCC Online Del 2393, ABP Network Private Limited
vs. Malika Malhotra : 2021 SCC Online Del 4733, Rajasthan
Breweries Limited vs. the Stroh Brewery Company : 2000 (55) DRJ
(DB) and Lalit Kumar Bagla vs. Karam Chand Thapar & Bros. (CS)
Ltd. : 2013 SCC Online Del 3532.
11. I have carefully gone through the relevant documents, including
the contract and the alleged notices, perused the precedents cited at the
bar and given my anxious consideration to the rival contentions.
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12. The term „ determinable in nature’ has not been defined under
any Statute/Act. The word, "determinable", in legal parlance shall
indicate and suggest „liable to end upon the happening of a
contingency‟. Thus, any contract which provides for the termination at
the instance of either of the parties and/or at the occurrence or non-
occurrence of a certain event is determinable in nature. It cannot be
said that only that contract which was terminable without any cause
would be called determinable by nature. I may also, however, hasten
to add that agreements executed for indefinite durations, such as for
partnerships, employment, public leases, and perpetual licenses,
generally, contain no termination clause. However, still, in absence
thereof, in a given case, such indefinite or ad infinitum contracts,
without termination clauses, can also be declared as „inherently
determinable‟, while applying rule of reasonableness. Be that as may,
the import and scope of determinability of any agreement needs to be
understood and gathered after analysis of contractual terms and broad
intention of parties.
13. However, it is admittedly true that if the contract is eventually
found to be determinable, then the bar provided under Section 14 and
sec 41 of the Specific Relief Act, 1963 shall come into play, which
read as under:-
“Section 14. Contracts not specifically enforceable- The
following contracts cannot be specifically enforced, namely:-
(a) where a party to the contract has obtained substituted
performance of contract in accordance with the
provisions of section 20.
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(b) a contract, the performance of which involves the
performance of a continuous duty which the Court cannot
supervise;
(c) a contract which is so dependent on the personal
qualification of the parties that the court cannot enforce
specific performance of its material terms; and
(d) a contract which is in its nature determinable.”
Section 41.
Injunction when refused- An injunction cannot be
granted-
(a) to restrain any person from prosecuting a judicial
proceeding pending at the institution of the suit in which
the injunction is sought, unless such restraint is necessary
to prevent a multiplicity of proceedings;
(b) to restrain any person from instituting or
prosecuting any proceeding in a court not subordinate to
that from which the injunction is sought;
(c) to restrain any person from applying to any
legislative body;
(d) to restrain any person from instituting or
prosecuting any proceeding in a criminal matter;
(e) to prevent the breach of a contract the
performance of which would not be specifically enforced;
(f) to prevent, on the ground of nuisance, an act of
which it is not reasonably clear that it will be a nuisance;
(g) to prevent a continuing breach in which the
plaintiff has acquiesced;
(h) when equally efficacious relief can certainly be
obtained by any other usual mode of proceeding, except in
case of breach of trust;
[(ha) If it would impede or delay the progress of
completion of any infrastructure project or interfere with
the continued provision of relevant facility related thereto
or services being the subject matter of such project.]
(i) when the conduct of the plaintiff or his agents has
been such as to disentitle him to the assistance of the
court;
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(j) when the plaintiff has no personal interest in the
matter.”
(emphasis supplied)
14. It is contended by Sh. Krishnan Venugopal, Sr. Advocate that
the contract in question was determinable by its very nature and,
therefore, keeping in mind the provisions contained in Section14(d)
and Section 41of the Specific Relief Act, 1963, the petitioner is not
entitled to any injunction. It is also claimed that the notices given to
the petitioner were clearly „breach notices‟ and it does not lie in the
mouth of the petitioner to say that these were casual communication. It
is contended that there was poor performance and poor sight
management which badly impacted the production and development
and there was no visible sign of improvement and, therefore, the
petitioner was fully justified in, eventually, terminating the contract.
15. Copy of the contract dated 30.12.2020 executed between the
parties is on record. Clause 4 relates to „consequence of default‟ and
clause 12 talks about „termination and suspension‟. These read as
under:-
4. “Consequences of Default
4.1 If the Service Provider, breaches any of the warranties
or representation under the Contract; or breaches any other
provision of the Contract or any of the Materials or the
Services otherwise fail to comply with the provisions of the
Contract, the Owner shall notify the Service Provider of the
failure of the Materials or Services to comply with the
contract or the breach of warranty, as the case may be.
4.2 If the service provider fails to rectify any breach in
supply of the materials or services under this contract, which
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being capable of remedy are not remedied within 14 days of
notice of such default, the Owner may at its discretion and
without prejudice to other rights and remedies under the
Contract or otherwise, avail itself of any one or more of the
remedies as hereunder
4.2.1. give the Service Provider the opportunity at the
Service Provider's expense either to remedy any defect
in the Materials or Services or to supply replacement
Materials or Services or substitute Services and carry
out any other necessary work to ensure that the terms
of the Contract are fulfilled within a reasonable period
specified by the Owner
4.2.2. claim such direct actual damages foreseeable or
otherwise as may have been sustained as a result of
such breach or breaches of the Contract as per terms
and conditions of PO or under applicable Trade
Usage;
4.2.3. opt to use or consume the Materials or Services
in the event of non-availability of substitute Materials
or Services or to maintain operations of the plant or to
avoid plant shut down but without prejudice to its right
to claim damages arising due to off-spec Materials or
Services
4.2.4. only In the event Service Provider is unable to
meet its obligations under 4.2.1 to obtain substitute
Materials or Services or purchase substitute services
elsewhere solely at the risk and cost of the Service
Provider ("Risk Purchase") would Owner then be
entitled to obtain substitute Services and/or Materials
from a third party and to recover from the Service
Provider any expenditure reasonably incurred by the
Owner in excess of the price it would have paid under
this Contract in obtaining the Materials or Services in
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substitution from another Service Provider. The
additional cost and expenses so incurred by the Owner
in procuring the whole or part of Materials or Services
shall be liable to be recovered from the charges
payable to the Service Provider or the Security deposit
or Bank Guarantee so deposited by the Service
Provider.
4.3. If the Owner exercises its rights under clause 4.2.3
above in respect of Materials or Services which do not meet
the requirements specified in the Contract, the Service
Provider shall grant necessary right to the Owner to utilise
the relevant Materials or Services until such time as they
meet those requirements.
4.4. Notwithstanding anything to the contrary in this
Agreement, it is expressly agreed by the Parties that
acceptance of any defective or sub-standard quality Material/
Service, delayed delivery and/or performance by the Owner
in its sole discretion, shall not prejudice any right/claim of
the Owner to damages for supply of such defective or sub-
standard quality Material/Service, delayed delivery and/or
performance and/or for breach of the Agreement. In the
foregoing, the Owner shall reasonably determine the amount
of damages that shall be leviable upon/payable by the Service
Provider and provide detailed supporting documentation for
such determination. Any damages so determined by the
Owner shall be paid by the Service Provider within fifteen
(15) days provided that if the Service Provider disputes any
amount claimed by the Owner as due and payable, it will
notify the Owner, specifying the reasons for the dispute. The
Service Provider will then pay the undisputed amount and
withhold payment of any disputed amount, pending
resolution as provided herein. The levy of
damages/acceptance of performance, as above, shall not
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prejudice any rights of the Owner as per other terms of this
Agreement/Purchase order.
4.5. In the event of 3 or more material breaches by the
Service Provider of its obligations to provide Services or
Materials under the Contract, which have not been
reasonably remedied by Service Provider pursuant to clause
4.2.2 after having been given the opportunity (each time the
rectification period cannot be for more than a month) the
Owner may terminate the Contract in whole or in part or to
rescind the Purchase Order, in each case without any
liability to the Service Provider
4.6. Owner reserves the right to reject Materials in case it is
supplied prior to the scheduled delivery date until otherwise
specifically waived-off in writing by a representative from the
Owner's commercial department, prior to dispatch
(emphasis supplied)
12.TERMINATION & SUSPENSION
12.1. Either Party may immediately terminate all or part of
this Agreement/Purchase Order as under
12.1.1. by a written notice to the other Party, as
provided under Clause 4.5
12.1.2. if the if other party (i) ceases. or threatens to
cease, to function as a going concern or conduct its
operations in the normal course of business, (ii)
commences, or becomes the subject of, any bankruptcy,
insolvency, reorganization (other than in the course of a
corporate re-organization or to an affiliate),
administration, liquidation or similar proceedings, (iii)
makes, or plans to make, a general assignment for the
benefit of its creditors, or (iv) either party's creditors
attach or take possession of all or a substantial part of
said party's assets; the foregoing shall not apply to any
action or proceeding which is (a.) in the reasonable
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opinion of the party, frivolous or vexatious; or (b.)
discharged, stayed or dismissed within ninety (90) days
of commencement
12.1.3. if either party is unable to carry out its
obligations by reason of Force Majeure events and the
force majeure continues for a period more than 180
days, then either Party may, by giving notice in writing,
terminate this Agreement with immediate effect. Any
such termination shall be without prejudice to any of the
right of the Parties accrued prior to the date of such
termination
12.2. The Owner may terminate all or part of this Agreement
by THREE (3) months' written notice in case service provider
has, continuously materially breached HZL Safety protocols,
HZL Code of Conduct
Rules and Regulation of DGMS or if the Service Provider
fails to obtain any Approval required under the terms of this
Agreement
12.3. Upon termination of this Agreement, both Parties shall
be relieved of their respective rights and obligations under
this Agreement save such obligations and/or liabilities of the
Parties set forth herein which (a) that the Parties have
expressly agreed will survive any expiration or termination,
or (b) by their nature would be intended to be applicable
following any such expiration or termination, or (c) have
accrued before expiration or termination, as the case may be
12.4. In the event of Service Provider's breach of its material
obligations hereunder, no payment shall be due by Owner in
respect of such order/Owner order, or, in the case of
suspension, until the failure or breach has been remedied to
the reasonable satisfaction of Owner
12.5. Notwithstanding anything to the contrary in this
Agreement, Owner may, at its sole discretion, suspend this
Agreement / any Purchase Order, in whole or in part, upon
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Three (3) months written notice to Service Provider for 3 or
more repeated material breaches of safety protocols as per
HZL norms if Service Provider has failed to remedy such
breaches after written notice. The Owner shall promptly
notify the Service Provider in writing of the same.
12.6. In the event of written notice pursuant to Clause above
based on Service Provider's material breach of any of its
obligations under the Agreement, no payment shall be due by
Owner in respect of such order/Owner order, or, in the case
of suspension, until the failure or breach has been remedied
tothe reasonable satisfaction of Owner
12.7. Subject to Clause above, in the event of suspension of a
Purchase Order, the Material being supplied under such
Contract Agreement shall, at Owners discretion, either be
delivered to the delivery address or shall be securely and
separately stored at Service Provider's premises, at Owner's
sole cost and expense, and marked as the property of Owner
until either the manufacture and/or provision of such
Material is resumed or Owner terminates the Purchase
Order and instructs Service Provider with regard to the
disposal of the Material stored at Service Provider's
premises. The proceeds of the disposal shall be adjusted
against any compensation payable hereunder
12.8. Owner further reserves the right to Terminate the
Contract immediately in case of Service Provider sub-
contracting/assigning this Contract without prior approval
from the Owner”.
16. According to the respondent, three material breach notices were
sent to the petitioner and attention of this Court has been drawn
towards the aforesaid three notices dated 26.10.2022, 16.01.2023 and
05.05.2023.
17. In the first notice, it was apprised as under:-
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We have not seen any improvement at site in last 1 month Further the site
team is unable to resolve local issues which is aggravated and due to that
other OEM's are not ready to support GHHBUMI. Further there is huge
availability gap in spares parts, Tyres and RDT.
With such poor performance and poor site management the production and
development is badly hampered
We can not tolerate such non performance and is now forced to look for other
alternates
18. In Second notice, it was, broadly speaking, pointed out as
under:
The performance of whole GHH team is not improving.
There were equipments issues.
Both PMs were not performing from month start and causing delay in
commissioning of high-grade stope.
There were issues with Explosive carrier due to non-availability of spare and
scissor lift due to non-availability of axle.
With such type of equipment's availability, the target of this month was not
achieved.
19. In third notice, primarily, the statutory defaults were pointed out
by claiming that GSTR-l & GSTR-3B had not been filed as on date
and GST Non-compliance amount was around 2 Crore+ as on
29.04.23
20. It is thus contended and that all these were formal expression of
material breaches which were not taken seriously enough by the
petitioner and, therefore, he cannot be permitted to raise any kind of
grudge or grievance now.
21. As already noticed above, primarily, it is to be seen that whether
the contract in question is determinable in nature or not.
22. According to Sh. Sethi, learned Senior Counsel for the
petitioner, the contract would become determinable in nature only
when it can be terminated without giving any cause or reason.
According to him, in the present case, there was a pre-condition and it
was only when three or more material breaches had not been allegedly
reasonably remedied by the petitioner, the respondent could have
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terminated the contract in whole or in part and therefore, since the
termination was based on a specifically provided contingency, the
contract was not determinable by its very nature.
23. However, the aforesaid argument does not cut any ice.
24. The contract, manifestly, seems determinable in nature and once
three breach notices were sent pointing out the deficiencies and lapses
and if the service provider took those in a nonchalant manner and does
not bother to rectify the issues pointed out despite opportunity, there
was no choice left but to terminate the contract. These were not casual
communications albeit it is different story that these were taken
casually by the petitioner.
25. In ABP Network Private Limited ( supra), it has been
specifically observed that a contract can be regarded as determinable
by its nature where it stipulated any pre-termination formality. Para
47 of the judgment reads as under:-
“47. A contract which is determinable, whether by efflux of
time or at the option of either of, or both, the parties, and
whether preceded by the requirement of issuance of notice
or any other pre-termination formality, or not, is,
therefore, to be regarded as “in its nature determinable”,
within the meaning of Section 14(d) of the Specific Relief
Act.”
26. In Rajasthan Breweries Limited (supra), an application under
Section 9 of the said Act was moved seeking ad interim temporary
injunction restraining the operation of two notices of termination. The
learned Single Judge of this court rejected the application on the
ground that the contracts were determinable while relying upon
Section 41 read with the Section 14(1)(c), as it was then, of the
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Specific Relief Act, 1963. The learned Single Judge also held that the
two agreements contained clauses which permitted their termination at
the occurrence of any of the events envisaged thereby. Such order was
challenged in appeal before the Division Bench claiming that an
agreement which was determinable at the instance of either of the
parties was not “in its nature determinable”. The Division Bench
rejected the aforesaid submission and observed thus:-
“The facts of the present case are identical to those in
aforementioned decision of the Supreme Court in as much
as the agreements in the instant case are also terminable
by the respondent on happening of certain events.
In Indian Oil Corporation's case (supra) also agreement
was terminable on happening of certain events. Question
that whether termination is wrongful or not; the events
have happened or not; the respondent is or is not justified
in terminating the agreement are yet to be decided. There
is no manner of doubt that the contracts by their nature
determinable.”
……………..
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
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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. The
application being under the provisions of Section 9(ii)(e)
of the Arbitration and Conciliation Act, relief was not
granted in view of Section 14(i)(c) read with Section 41 of
the Specific Relief Act. It was rightly held that other
clauses of Section 9 of the Act shall not apply to the
contract, which is otherwise determinable in respect of
which the prayer is made specifically to enforce the same.
Consequently, there being no merit in the appeal, the same
is dismissed.”
27. It was thus held that the remedy, in the event of an illegal
termination, would only be to seek compensation for wrongful
termination and not to maintain a claim for specific performance of
the agreements. Observing that any injunction against specific
performance of the agreements was statutorily prohibited, as they were
determinable in nature. The order of the learned Single Judge was
upheld and the appeal was dismissed.
28. In Inter ADS Exhibition Pvt. Ltd. (supra), it has been observed
that whether the termination notice met the requirement of the contract
or not and thus whether the termination was a valid termination or not
would be the questions which were required to be examined and
adjudicated upon by the Arbitrator. It was also observed that since in
either events, the agreement was terminable, the specific performance
of the contract could not have been granted nor could any injunction
be issued restraining the respondent from giving effect to the notice of
termination as that would, in effect, amount to enforcement of the
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contract. Para 13 of the said judgment reads as under:-
“13. Whether the termination notice dated 15.03.2019, met
the requirements of Article 12.4 or not and thus, whether
the termination was a valid termination or not, would be
questions that have to be examined and adjudicated upon
by the learned Arbitrator, to be appointed by the parties to
resolve their disputes. It would also be for the learned
Arbitrator to reconcile Article 7.1 with the recitals in the
JVA-II dated 25.10.2011, as reproduced hereinabove,
limiting the agreement to four editions. Under Article 7,
termination can be either mutually agreed to under Article
7.2 or at the option of either party, on the occurrence of
certain events, as listed under Article 7.3, which
contemplates a termination with penalty. Again, the
question whether the respondent had given 30 days’ time
to the appellant to make good the default, duly specified in
reasonable detail in the communications exchanged
between the parties, is not for this court to inquire into.
Suffice it is to state that in either event, the agreement was
terminable and therefore, the conclusion arrived at by the
learned Single Judge that specific performance of the
contract could not be granted and nor could any injunction
be issued restraining the respondent from giving effect to
the notice dated 15.03.2019, as that would in effect amount
to enforcement of the contract beyond the said date i.e.
15.03.2019, cannot be faulted.”
29. In C. Gopal Reddy and Company (supra), it has also been
observed that when a contract is determinable and cannot be
specifically enforced, no injunction against termination and
enforcement of the contract can be issued. Therein, the petitioner was
awarded a contract. He sought for extension of time but his request
was not considered and without considering the reasons stated in the
extension letter and without giving any hearing to the petitioner, the
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respondent Authority terminated the contract which led to filing of
application under sec 9 of said Act. It was contended that the
extension request had not been considered as per the terms and
conditions of the contract. This court, in the final analysis, observed
that at said stage, it was not concerned with the merits/correctness of
the termination of the contract by respondent no. 1 and any remedies
arising therefrom and that such questions may be raised before the
parties in the course of arbitral proceedings and may be adjudicated
therein. It was observed as under:-
29. Section 41 vide clause (ha) states that an injunction cannot be
granted in cases where it would impede or delay the progress or
completion of any infrastructure project or interfere with the
continued provision of relevant facility related thereto.
30. Therefore, under Section 14(d) read with Section 41 of the
Specific Relief Act, when a contract is determinable, and cannot be
specifically enforced, no injunction against termination and
enforcement of the contract can be issued.
31. As held in a plethora of judgments including Rajasthan
Breweries Ltd. v. Stroh Brewery Co., 2000 SCC OnLine Del
481, Bharat Catering Corpn. v. IRCTC, 2009 SCC OnLine Del
3434 and Inter Ads Exhibition (P) Ltd. v. Busworld International
Cooperatieve Vennootschap Met Beperkte Anasprakelijkheid, 2020
SCC OnLine Del 351, and as recently held by a Coordinate bench
of this Court in the case of Shubham HP Security Force (P)
Ltd. v. Central Warehousing Corpn., (2022) 2 HCC (Del) 264 :
2022 SCC OnLine Del 739, it is a settled position in law that it is
not permissible for any party to seek an injunction on the
termination of an agreement in the case of a determinable contract.
Considering the nature and scope of the present proceedings, such
an exercise cannot be undertaken by this Court.
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32. Therefore, the petitioner's prayer restraining the Termination
of the Contract Agreement by Respondent No. 1, is not sustainable
in law. At this stage, granting a stay of termination would
necessarily entail this Court first forming an
opinion, albeit a prima facie one, that the termination effected by
the respondent was misconceived and contrary to the terms of the
agreement.
30. In Golden Tobacco Limited (supra) relied upon by the
petitioner, the position was little different as in that case it was
specifically observed that the agreement was in perpetuity and
therefore, it was not determinable in nature. Clearly, a contract of
such nature could not be considered as determinable in absence of any
agreement entitling the party to terminate the same without cause or
default on the part of the other party. More importantly, in said case,
it was also observed that whether an agreement is in its nature
determinable, is required to be understood in the context of the nature
of that agreement.
31. Of course, the petitioner has relied upon Ascot Hotels and
Resorts Pvt. Ltd. (supra) in which it has been observed that if the
agreement is not terminated in accordance with the clauses of the
agreement, the other party was entitled to a relief of injunction.
However, the situation in that case was different as those observations
were given when the matter had already reached the Arbitrator as the
disputes had arisen between the parties. During such period, the
contract was also terminated which resulted in filing of application
seeking status quo. Such application moved under Section 17 of said
Act was disposed of by the Arbitrator directing status quo to be
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maintained. It was observed by the Arbitrator that appellant had been
unable to show the three consecutive defaults in the payment of
license fee by the respondent as required in Clause 22.4 of the License
Agreement and even the notice of termination dated did not refer to
any such default. He further held that the respondent was not seeking
specific performance of the agreement and was only challenging the
wrongful termination of the same by the appellant. The Arbitrator
relying upon the judgment of this Court in Upma Khanna v. Tarun
Sawhney held that denial of the interim protection to the respondent
would, in fact, amount to allowing the party committing the wrong to
take advantage of its own neglect and default. Such order was
eventually upheld by this court. However, in the present case, the
termination, primarily, seems to be in synchronization with the
contractual terms. Moreover, evidently, the suspension of termination
herein would have automatic consequence of performance of contract,
which does not seem to be permissible. The decision given by an
Arbitrator under Section 17 of said Act in the peculiar facts of that
case cannot be robotically and mechanically applied here while
discussing an application under sec 9 of said Act, when even the
Arbitrator has yet not been appointed.
32. The Specific Relief Act, 1963 was amended in the year 2018
with the objective to give impetus to the legal regime governing
enforceability of contracts in India. The pre-2018 Amendment
position was that specific performance of an agreement was an
equitable and discretionary relief but after the 2018 Amendment, the
words “specific performance of any contract may, in the discretion of
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the court, be enforced” in Section 10 of the Act, have been substituted
with the words “specific performance of a contract shall be enforced
subject to [Sections 11(2), 14 and 16 of the Act]”. Thus, once the
factors mentioned in Sections 11(2), 14 and 16 of the Act are met, it is
obligatory upon the courts to order specific performance of a contract.
Fact, however, remains that Section 41(e) of the Act provides that an
injunction cannot be granted “to prevent the breach of a contract the
performance of which would not be specifically enforced”.
Furthermore, Section 14(d) of the amended Act provides that a
contract which is “in its nature determinable” cannot be specifically
enforced. Fact remains that a contract which is “in its nature
determinable” was incapable of specific performance by virtue of the
erstwhile Section 14 (1) (c) continues to remain so even by virtue of
the present Section 14 (d). Thus, there cannot be any gainsaying the
fact that there is no straight jacket formula as such and each case has
to understood in context of its peculiarity and after appreciating the
contractual terms and then it needs to be concluded whether the
underlying contract is “in its nature determinable” or not. Here the
contract seems determinable in nature as termination can take
place under certain conditions. The fact also remains that in such
a situation, if the termination order is stayed, it would have obvious
impact of granting specific performance of the contract.
33. Interestingly, this court in Royal Orchids v. Kulbir Singh
Kohli& Anr. 2022 SCC OnLine Del 2519, while dealing with a
Memorandum of Understanding (MoU) for redevelopment and
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construction of an immovable property, which did not even contain
any termination clause, after applying the Nature of Agreement
Approach , held that time was the essence of the MoU and that breach
of timelines as contemplated in the MoU amounted to material breach
and MoU, being a private commercial transaction, was determinable
in nature. The court had also relied upon Rajasthan Breweries
(supra) while arriving at such findings .
34. Be that as it may, the question as to whether the termination was
strictly in consonance with the contractual terms or not is not to be
looked into by this court, in elaborate and exhaustive manner. Suffice
it to say, prima facie, there are breach-notices herein. Even if it was to
be held that the termination was bad in law or contrary to the terms of
the agreement or of understanding between the parties, the remedy for
the petitioner would be to seek compensation for the wrongful
termination and, therefore, in the garb of interim relief under Section 9
of the said Act, the petitioner cannot claim for specific performance of
the Agreement. Such grant of injunction is rather expressly proscribed
in a case of contract like the present one.
35. Resultantly, the present petition is dismissed as the petitioner
has failed to make out any case for grant of any interim injunction or
protection.
36. Before parting, I need not lay emphasis that the observations
made herein above are prima faci e in nature and these should not be
construed as a reflection on the merits of the case and would not, in
any eventuality, prejudice any proceeding which may take place
before the Arbitral Tribunal. These would neither bind nor influence
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the Arbitrator while adjudicating, on merits, the disputes between the
parties.
MANOJ JAIN, J
(VACATION JUDGE)
1.
JUNE 30, 2023
st
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