(JUDGEMENT):
The Arbitration Petition is filed under Section 9 of the Arbitration and Conciliation Act, 1996, inter alia for restraining the Respondent from selling/delivering Pulverized Fly Ash generated as a waste product in the Nashik Thermal Power Station managed and maintained by the Respondent to anyone except the Petitioner, pending the arbitration reference between the parties.
2. Pulverized Fly Ash, or PFA for short, is the fine particles of ash which rise/fly to the top of the boilers in a coal fired thermal power station. This PFA can be trapped by Electrostatic Precipitators (ESPs) installed along the boilers and then collected into hoppers. Of the total PFA generated in the plant, some quantity escapes into environment, whilst the remaining falls into hoppers and is available for collection. Any uncollected PFA is mixed with water and converted into a slurry and pumped into a lagoon. To avoid pumping PFA thus into lagoon the Respondent was looking for recycling of PFA.
3. The Petitioner is a part of Group of Companies based in the United Kingdom, carrying on business inter alia of recycling waste products such as PFA to manufacture cement replacement material under the brand name of “Pozzocrete”. The product inter alia contributes to a substantial reduction of carbon emissions into the environment, since it uses carbon emissions of a coal based thermal plant for manufacture of building material serving as a substitute for cement. The Petitioner claims to have come to India on the invitation of Government of Maharashtra with a view to use its special technology, manpower and expertise to set up a plant to handle/recycle PFA at the Nashik Thermal Power Station (NTPS).
4. On 4 October 2000, the Petitioner and the Respondent entered into an agreement for recycling of PFA from NTPS. This agreement envisaged that the Petitioner would establish a PFA Handling Plant (PFAH Plant) at the site offered by the Respondent to the Petitioner by way of a lease. The PFAH Plant was to manufacture and produce “Pozzocrete”. The agreement also envisaged construction of four hoppers for collection of PFA within the precincts of NTPS by the Petitioner. The agreement required the Respondent to provide PFA from Unit Nos. 1 to 5 (i.e stage I and II) of NTPS to the Petitioner by depositing the same in the hoppers constructed by the Petitioner within NTPS. The Petitioner was to take off a minimum quantity of 1000 MT/day of PFA upto a maximum period of 12 months from the commissioning date. The Petitioner was thereafter expected to take off a minimum quantity of 3000 MT/day of PFA during the entire remaining term of this agreement which was for a period of 30 years.
5. In pursuance of this agreement, the Respondent allotted a piece of land admeasuring 2500 sq. meters for installing and commissioning PFAH Plant adjacent to NTPS. The area of land allotted was subsequently increased to about 19,000 sq. meters. The Petitioner installed and commissioned the PFAH Plant at this site. According to the Petitioner, this plant was designed as a captive plant at NTPS and was based on exclusive sourcing of raw materials from NTPS under the agreement between the parties.
6. There were some issues concerning the locations, design, etc. of hoppers to be constructed by the Petitioner and the system of delivery to be adopted by the Respondent for delivering PFA into such hoppers. Pending determination of these issues, the Petitioner constructed one of the four proposed hoppers at NTPS location but instead at its own cost installed manual valves at the bottom of the ESP's Filters to remove PFA manually. According to the Petitioner, this was done purely as a temporary measure to mitigate its losses without prejudice to the Respondent's obligation to construct a delivery system and deliver the PFA to the Petitioner as per their obligation under the contract. According to the Petitioner, the process of manual collection was laborious, environmentally not desirable, slow and not capable of handling all fly ash collected at NTPS. The Petitioner, nevertheless, started collecting fly ash under the agreement between the parties and started manufacturing “Pozzocrete” with the use of the PFA so collected.
7. In or about 2006, the Respondent purported to bar the Petitioner from collecting PFA from Stage I (Units 1 and 2) of NTPS and started allowing other parties to collect PFA. By their letter dated 23 November 2006, the Respondent also purported to terminate the agreement between the parties, calling upon the Petitioner to remove its plant and machinery and handover vacant possession of the PFAH plant site. As a result of these developments, disputes arose between the parties. These disputes were covered by the arbitration agreement between the parties.
8. The Petitioner, in the premises, filed a petition in December 2006 under Section 9 of the Arbitration and Conciliation Act, 1996 for interim protection pending the arbitration reference. Under orders passed by this Court from time to time the Petitioner continued to lift PFA from NTPS. These orders inter alia permitted the Petitioner to collect PFA in the same manner as it was doing before the termination notice. The orders further provided for liberty to the Respondent to sell/deliver or otherwise dispose of the PFA not collected by the Petitioner to third parties. The interim orders of this Court operated from December 2006 until 19 March 2013. In the meantime, the parties contested the arbitration reference filed by the Petitioner for adjudication of disputes between the parties.
9. By an award dated 31 March 2011, the Arbitral Tribunal rejected the Petitioner's claim. The Petitioner challenged the award in a petition filed before this Court under Section 34 of the Act. The Petitioner also filed a petition under Section 9 of the Act for continuation of interim orders operating in the matter. The interim orders were continued by a learned Single Judge of this Court. The order of the learned Single Judge was carried in appeal. By an order dated 18/19 March 2013, a Division Bench of this Court allowed the Respondent's appeal, holding that since the Petitioner's reference was rejected by the Arbitral Tribunal and there was no executable award, no interim relief could be granted under Section 9 of the Act.
10. On and from 19 March 2013, based on the appellate order, the Respondent stopped the Petitioner from entering NTPS for collecting PFA.
11. The order of the Division Bench was challenged by the Petitioner in an SLP filed before the Supreme Court. Whilst the SLP was pending before the Supreme Court, the Petitioner's challenge to the award of the Arbitral Tribunal was allowed by this Court. By an order dated 24 July 2014, the impugned award was set aside.
12. On 3 September 2014, the Petitioner served a fresh notice on the Respondent, invoking the arbitration agreement between the parties and requiring a new arbitral tribunal to be constituted. Since there was no response from the Respondent, the Petitioner has filed an arbitration application under Section 11 of the Act for constitution of an arbitral tribunal.
13. Pending constitution of an arbitral tribunal, the Petitioner has filed the present petition seeking interim reliefs, which have, as noted above, operated throughout the pendancy of the earlier arbitration reference and till some time thereafter.
14. Considering the facts that (i) these interim reliefs were granted by this Court (the order of the Single Judge being confirmed in appeal by the Division Bench) after considering in detail the prima facie merits of the Petitioner's case and balance of convenience, (ii) these orders have operated between December 2006 and March 2013, thus implying that throughout between the years 2000 and 2013 the Petitioner had been consistently collecting PFA of upto an average of 1000 MTS per day, (iii) such collection was stopped only when the Division Bench set aside the interim orders only on the ground that the award had gone against the Petitioner and there was no executable award in enforcement of which the interim orders could continue, and (iv) now that the award has been set aside and the arbitration reference is now required to be taken up afresh, there is an imminent case for revival of the interim relief which has operated for so long. The relief was withdrawn only on the ground that there was an award against the Petitioner; that award having since been set aside and a fresh reference being pending, there is no reason per se why the interim relief should not be restored.
15. Learned Counsel for the Respondent, however, opposes the grant of interim relief on two grounds. Firstly, it is submitted that there has since been a change of circumstances and secondly, the balance of convenience now weighs in favour of the Respondent. Let us examine both these grounds.
16. Learned Counsel for the Respondent relies on three important events, which, according to the Respondent, have taken place since the grant of the first interim order in favour of the Petitioner. It is submitted that the Petitioner has now been manufacturing a product known as “Amubuja HiRise Cement”. This product is a blended cement. It is submitted that the agreement between the parties permits the Petitioner to produce only ‘Pozzocrete’ and nothing else; it was only for ‘Pozzocrete’ that the Respondent made available its land to the Petitioner; the Petitioner cannot make some other product using the Respondent's land and raw material. Reliance is placed in this behalf on clauses 2.1, 6.1 and 8.2 of the Articles of Agreement between the parties. On the other hand, the Petitioner has explained that this product, which is referred to by the Respondent as ‘blended cement’, is nothing but a variety of Pozzocrete. It is active Pozzocrete. The Petitioner submits that this was informed by the Petitioner to the Respondent as far back as in May 2012. The agreement between the parties was essentially on the footing that the Respondent was interested in disposal of PFA so as to protect the environment which is a national priority and the Petitioner was in the business of manufacture of cement substitute products including Pozzocrete, the raw material used for which was PFA. From the averments of the Petitioner and the material produced before the Court, it prima facie appears that the product manufactured by the Petitioner is a variety of Pozzocrete, a cement substitute. Far from being an altogether different product, it appears to be a better variety of Pozzocrete. Prima facie the Petitioner does not appear to have breached the provisions of the agreement referred to above. As for ‘Ambuja HiRise’, the Petitioner has since given up the idea of manufacturing ‘Ambuja HiRise’ and this is actually a closed issue.
17. Secondly, it is submitted by the Respondent that on 3 November 2009, the Central Government, by a notification, directed all thermal power stations to allot 20% of PFA to units manufacturing fly-ash bricks and blocks. This regime started since November 2009, i.e during the period during which the interim order in this matter operated. The chart produced by the Respondent itself shows that whilst over 20% of PFA was being collected by brick manufacturers, the Petitioner continued to collect a substantial portion of the balance 80% PFA throughout this new regime. There is, thus, no substance in this submission. Even after 20% PFA is allotted to brick manufacturers, the Petitioner's quantity of PFA of an average of 1000 MTS per day can always be made available by the Respondent.
18. Thirdly, it is submitted that after the interim orders in favour of the Petitioner were vacated by the Division Bench of this Court in March 2013, the Respondent had to make alternative arrangements to achieve the target of utilization of 100% PFA generated at NTPS. The Respondent has accordingly entered into agreements with third parties which are subsisting today. It is submitted that these third parties have been paying a sum of about Rs. 350/- pmt. for PFA collected. It is submitted that besides this financial aspect, disturbing these contracts would jeopardise the Respondent's position vis-a-vis these third parties. In the first place, the tender notices issued whilst awarding these contracts to third parties themselves make it clear that the tenders were to be without prejudice to the Respondent's right to cancel/amend/modify the terms of the contract based on orders that may be passed by the Court in this matter. The tenderers were, thus, expressly put to notice that award of contracts would be subject to orders passed by this Court in this matter. Secondly, considering the material placed by the Respondent itself before this Court, as explained below, it appears that about 600 MTS of PFA can be conveniently made available to the Petitioner as on this day, without disturbing the existing arrangements substantially.
19. At present Boiler Unit Nos. 3, 4 and 5 (Phase II) are operating at NTPS. Whereas all hoppers at Unit No. 3 appear to be fully allotted to third parties (albeit with a notice to the allottees that their allotment will be subject to the orders of this Court), hoppers in at least 3 passes yielding a quantity of about 450 MTS per day in Unit No. 4 are unallotted or under tender process. From the last affidavit of the Respondent (as of February 2015) and documents produced at the hearing by the Respondent, it is apparent that whereas only an LOA is issued to the contractor for two passes, B and C, of Unit No. 4 (Qty: 300 MTS/day), there is nothing to show acceptance of LOA or a formal contract as yet between the parties. Admittedly, the last pass, namely, Pass A, of Unit No. 4 (Qty: 150 MTS/day) is unallotted. As for Unit No. 5, admittedly allotment of Pass A (Qty: 150 MTS/day) to the existing contractor (M/S Adventure) is only under a temporary arrangement. Thus, a total quantity of about 600 MTS/day from out of Unit Nos. 4 and 5 can certainly be made available conveniently to the Petitioner without even disturbing the existing arrangements, which are, at any rate, as explained above, admittedly without prejudice and subject to orders that may be passed by this Court.
20. There is one more important consideration, which must weigh in favour of the Petitioner. Collection and disposal of PFA is a matter of great environmental concern. PFA is a highly hazardous and corrosive substance. Though it is avoidable to throw PFA into lagoon and instead recycle it for production of fly-ash products, there are strict norms of the Pollution Control Board for use of PFA for such use. In fact, in keeping with these norms, the Respondent has included conditions such as ‘requirement to be an ash product manufacturer or ash processing/ash packing industry’, ‘consumption of not less than 100 Mt/day of fly ash’ and ‘possession of licence from Pollution Control Board of their area’ as part of the tender conditions for contracting with third parties for collection of PFA in the instant case. PFA cannot simply be sold to traders on the basis of highest price offered. There is material produced by the Petitioner to show that some of the third party allottees, who pick up PFA from NTPS, actually store PFA on open plots and transport it by open lorries to faraway places. It was precisely to avoid such situations that the Respondent in the first place entered into the subject contract with the Petitioner. Collection and utilization of PFA on a captive basis in an adjacent PFAH plant under this contract are under strict standards approved by Maharashtra Pollution Control Board. The Board has issued an “orange” permission to the Petitioner in this behalf and certified that the entire handling of PFA in the PFAH plant is in pneumatically closed systems with separation of PFA in a scientific manner through the air classification plant. The product manufactured at the plant meets the BIS standard and is stamped with one. There is absolutely no reason why, on a principle, third party contractors who carry PFA to faraway locations and make bricks of PFA should be preferred over a captive plant operating at the site of NTPS under strict norms and standards. The Respondent's own documents show that the collection of PFA by the Petitioner has been more efficient than these third party contractors put together. In the premises, even balance of convenience is clearly in favour of interim relief to the Petitioner. Whereas the Petitioner is likely to suffer irretrievably if PFA is denied to it during the pendancy of the arbitration reference, the Respondent is unlikely to suffer any irremediable damage. On the one hand, it gets a competent disposal of PFA in keeping with the requirements of the Pollution Board and on the other, its monetary claim for difference between the rate offered by the third parties under the tenders issued from time to time and the contractual rate offered by the Petitioner can always be compensated in the arbitration reference, if the award is to be in its favour.
21. In the premises, there is a clear case for grant of interim reliefs. Whilst suitably framing such interim reliefs, as noted below, I have taken into account suggestions of both the parties. I must at once make it clear that though the following order is not passed by consent, it is nevertheless passed after taking into account operational aspects commonly suggested by the parties except where indicated otherwise.
22. Accordingly, the following order is passed:
1. With effect from 5th May 2015 at 9 a.m, the Petitioner will collect the Pulverized Fly Ash (PFA) available in the following Passes:-
Unit No. 4:Passes A, B and CUnit No. 5:Pass A
2. The Petitioner shall start collecting PFA from the other Passes except Passes C and D of Unit No. 5 as and when they become available on the expiry of the respective contracts which are in operation at present. The Petitioner shall start collecting on the expiry of 15 days after the respective present contracts expire, from these Passes. The dates of commencement of the two year contracts are as per pages 385/386 of the Paper Book.
3. The Petitioner shall collect on an average every month at least 450 Metric Tonnes per day from Unit 4 Pass A, B, and C and 150 Metric Tonnes per day from Unit No. 5 Pass A. In the event of the concerned Unit/Pass being shut down or PFA not being available for collection for any other reason, this obligation will be correspondingly reduced. The Manual Collection by the Petitioner will be by use of the valves attached to each ESP hopper. The collection will be permitted for all 24 hours. The Respondent will allow the Petitioner (i) use of the Internal Road between NTPS premises and DIPL Plant for their trucks/bulkers (ii) use of the sole DIPL silo within NTPS precincts. The Petitioner shall furnish the Respondent with the details of the RTO registration nos and names of Bulkers and Trucks used by them and also the capacity of the Bulkers and Trucks used by them.
4. The Respondent shall allow the Petitioner access to a site laboratory within NTPS premises from which the Petitioner can carry on mandatory preliminary test for ascertaining the fineness of PFA and loss of ignition as they had been doing prior to March 2013. This direction is granted despite the objections of the Respondent, since this had been a uniform practice throughout the operation of interim relief earlier and is conducive to overall efficiency of PFA disposal and recycling.
5. In the event of more PFA being available in any of the concerned Passes, the Petitioner shall make all possible efforts to collect the same.
6. Every month the Petitioner will furnish to the Respondent a statement showing:-
a) The total PFA collected during the month, and
b) The quantity of Pozzocrete manufactured during the month.
Respondent will have liberty to take inspection of the record maintained by the Petitioner with regard to disposal of residual PFA by them.
7. The Petitioner will not dispose of any residual PFA in the Lagoon/Ash Pond of the Respondent.
8. The Petitioner shall pay to the Respondent at the rate of Rs. 100/- per Metric Tonne of PFA collected by the Petitioner during the month. This amount shall be paid on or before the 10 of the following month.
9. It is clarified that the Respondent is at liberty to shut down the unit for repairs/overhaul/maintenance/decommissioning. In case of planned shut down they will give 7 days prior intimation to the Petitioner.
10. In future, in the event of the Petitioner finding itself in a position in which the Petitioner does not require PFA from any of the Passes, the Petitioner shall give immediate intimation to the Respondent. In that event the Respondent will be at liberty to make suitable alternative arrangements.
11. This order is without prejudice to the rights and contentions of the parties in the arbitration reference.
12. All issues on merits are kept open.
13. Liberty to parties to apply to the Arbitral Tribunal and/or to the Court.
14. The arbitration petition is disposed of accordingly.
23. This order shall be implemented with effect from 11 May 2015. In view of the fact that time has been granted for implementing the order, a separate stay application is refused.