- (1.) The petitioner, which was till recently operating berth Nos. 2 and 8 after having mechanised the operations thereat in the Haldia Dock Complex, complains in this petition under section 9 of the Arbitration and Conciliation Act, 1996 of the arbitrary action of the respondent Port in taking steps to blacklist the petitioner and thus render the petitioner ineligible to obtain other contracts, whether under this Port or elsewhere. The petitioner assails a notice dated November 28, 2012 by which the Port asked it to show cause as to why the petitioner should not be blacklisted. The notice refers to the perceived illegal act on the part of the petitioner to terminate the contract for operating the two berths nearly seven years before the end of the agreed tenure. The substance of the petitioner's grievance is that since the disputes between the parties--and, consequently, the assessment of whether the termination was warranted in the circumstances--are to be adjudicated upon in an arbitral reference, it would be unfair for it to be blacklisted on the ground of its alleged illegal conduct before the arbitral reference is concluded. The petitioner says that though it has issued a reply to the Port's notice, it apprehends that the Port has offered it a chance to respond to the charges only to ensure formal compliance with the principles of natural justice; the decision to blacklist the petitioner appears already to have been taken. The petitioner says that the show cause notice is mala fide and has been issued to unfairly prejudice the petitioner.
(2.) The petitioner refers to a judgment (Rashtriya Ispat Nigam Limited v. Verma Transport Co, 2006 7 SCC 275) for the proposition that a notice to show cause as to why a contractor should not be blacklisted would be covered by the arbitration agreement, if there is one, in the relevant contract. It is necessary to dwell awhile on the facts of that case to appreciate the principle enunciated therein. The appellant in that case engaged the contractor for handling and storage of the appellant's material in Ludhiana. One of the charges brought against the contractor was that the principal person in control of the contractor firm had constituted various other firms and companies and obtained several consignment agency contracts from the appellant pertaining to Delhi, Faridabad, Chandigarh, Ludhiana and elsewhere; that such person conspired with certain officials of the appellant and obtained payment at a much higher rate than permissible on a false pretext; that following an investigation by the Central Bureau of Investigation, criminal proceedings were launched against the relevant person in control of the contractor and the concerned officials of the appellant; and, with a view to avoid the imminent termination of the Ludhiana contract, such person had ostensibly resigned from the contractor firm and the associate concerns. The Ludhiana contract was terminated by the appellant and a notice was issued to the principal person formerly in control of the contractor as to why his concerns should not be blacklisted. The contractor firm lodged a civil suit for grant of permanent injunction restraining the appellant from blacklisting such firm or terminating the consignment agency contract. On an interlocutory application in the suit, an order was passed directing the parties to maintain status quo on both counts: pertaining to the termination of the contract and to blacklisting. The appellant applied under section 8 of the 1996 Act, citing the arbitration clause in the contract. Such application was rejected by the Trial Court; the order was upheld on a technical ground by the High Court in revision; and, a review sought before the High Court was not entertained. It was in such context that the Supreme Court observed, at paragraph 50 of the report, "that the application filed by the appellants under section 8 of the 1996 Act was maintainable." The judgments impugned before the Supreme Court were set aside. The legal principle summarised by the Supreme Court is evident from paragraph 43 of the report: 43. The submission of the learned counsel for the respondents that the two different causes of action having been raised, namely, illegal termination of contract and blacklisting of the firm, section 8 of the 1996 Act was not attracted is devoid of merit; in as much as according to the respondents themselves, both the causes of action arose out of the terms of the contract. What was necessary was to consider the substance of the dispute. Once it is found that the dispute between the parties arose out of the contract, section 8 of the 1996 Act would be attracted.
(3.) The Port raises several questions as to the maintainability of the petition. It suggests that the arbitration clause in the subject contract requires an attempt at an amicable resolution of the disputes before resorting to arbitration. The Port also submits that blacklisting, if done, may affect the petitioner in its future prospects and it has nothing to do with the contract covered by the arbitration agreement. The Port insists that the Supreme Court judgment did not find that the matter pertaining to blacklisting was covered by the arbitration agreement in that case, but the Supreme Court only found that the application under section 8 of the 1996 Act was maintainable. The Port points out that the petitioner company's objects clause in its memorandum of association indicates that the petitioner was incorporated for the purpose of operating the two relevant terminals at the Haldia Dock Complex; and, as such, since the petitioner is a single venture company it would not prejudice the petitioner if it were to be blacklisted and debarred from participation in future similar tenders floated by the Port. The Port also asserts that a show cause notice pertaining to blacklisting can hardly be challenged and the petition is premature. The Port suggests that the perceived arbitrariness on its part as a statutory body would not be a matter that can be assessed in course of an arbitral reference, where only the contractual disputes between the parties can be adjudicated upon. The substance of the Port's objection to any ad interim order being passed is that there are serious issues as to the arbitrability of a show cause notice issued for blacklisting, as to whether the disputes pertaining to blacklisting are covered by the arbitration agreement and as to whether such disputes have been referred to arbitration. The Port maintains that a decision by an employer to blacklist a contractor relates to the employer's assessment as to the desirability of the contractor to be engaged in future works by the employer based on the employer's perception as to the performance of a contractor; and such matter is de hors the contract and, as such, beyond the pale of the arbitration agreement governing the contract.;