Case Note & Summary
This commercial appeal before the Bombay High Court arose from the dismissal of an interim injunction application in a freight forwarding dispute. Appellant Schenker India Pvt. Ltd., a global logistics provider, and respondent SKAPS Industries Pvt. Ltd., a manufacturer of geosynthetic and technical textiles, executed a Transportation Services Agreement on 5 January 2022 for a three-year term from 1 May 2022 to 30 April 2025. Clause 4.5 of the TSA guaranteed a minimum volume of 10 containers of 40 feet high cube per calendar week for specified port pairs, and provided that if the respondent failed to supply the agreed cargo quantity, it would be liable to pay Compensatory Freight Charges for the weekly shortfall. Parties performed their obligations from May to December 2022. From December 2022, the respondent allegedly failed to supply the agreed volume, and the appellant raised invoices for Compensatory Freight Charges. The respondent invoked Clause 4.3 of the TSA on 8 April 2023, claiming force majeure because the Build America Buy America Act made shipment of geo-textiles to USA impossible. The appellant disputed this claim on 8 May 2023, and the respondent reiterated its position by notice dated 27 June 2023. The appellant then filed Commercial Suit (L.) No. 8875 of 2024 seeking specific performance of the TSA and recovery of Compensatory Freight Charges. In that suit, the appellant filed Interim Application (L.) No. 10415 of 2024 under Order XXXIX Rules 1 and 2 read with Section 151 of the Code of Civil Procedure, 1908, praying to restrain the respondent from exporting cargo through other carriers, to restrain breach of the TSA, and to direct the respondent to secure USD 3,445,470.00 as well as monthly Compensatory Freight Charges. The learned Single Judge dismissed the interim application by order dated 26 March 2025, holding that the suit is essentially for recovery of liquidated damages and that delay precluded grant of injunction. The appellant challenged this order under Section 13(1-A) of the Commercial Courts Act, 2015. Before the Division Bench, the appellant argued that the Single Judge had erroneously characterized the Compensatory Freight Charges claim as liquidated damages despite finding in paragraph 28 that Clause 4.5 is a take-or-pay clause and that a prima facie case existed on unjustified termination and absence of force majeure. The appellant contended that payment of Compensatory Freight Charges is an alternate method of performance, and that post-suit claims are for specific performance, not damages, so no delay bars relief for post-suit continuing obligations. The appellant relied on M. L. Devender Singh and others v. Syed Khaja, White and Carter (Councils) Ltd. v. McGregor, Amoco (U.K.) Exploration Company v. Teesside Gas Transportation Limited, and other authorities. The respondent argued that the plaint clearly shows the claim is for liquidated damages under Sections 73 and 74 of the Indian Contract Act, 1872, requiring proof of loss, and that specific performance cannot now be granted because the TSA term expired on 30 April 2025. The respondent relied on Kailash Nath Associates v. Delhi Development Authority and another. The available text records the Single Judge's findings and the parties' submissions but does not include the Division Bench's final reasoning or operative order. The appeal was reserved on 25 July 2025 and pronounced on 1 August 2025. The final decision is not provided in the extracted text.
Headnote
A) Contract Law - Take-or-Pay Clause - Compensatory Freight Charges - Transportation Services Agreement Clause 4.5; Indian Contract Act, 1872, Sections 73 and 74 - The appellant contended that clause 4.5 is a take-or-pay clause making compensatory freight charges an alternate mode of specific performance, not liquidated damages; the learned Single Judge in paragraph 28 recorded a prima facie case that termination was unjustified and force majeure defence was not accepted, but rejected injunction on the ground that the suit is essentially for recovery of liquidated damages (Paras 4-5). B) Civil Procedure - Temporary Injunction - Security for Performance - Code of Civil Procedure, 1908, Order XXXIX Rules 1 and 2 read with Section 151 - The appellant sought an order restraining the respondent from breaching the TSA and directing the respondent to secure USD 3,445,470.00 and monthly compensatory freight charges; the learned Single Judge dismissed the application on grounds of delay and because the claim was for liquidated damages, while the appellant argued that no delay exists for post-suit continuing obligation (Paras 1-3, 5-6). C) Contract Law - Specific Performance versus Liquidated Damages - Sections 73 and 74 of Indian Contract Act, 1872 - The respondent contended that compensatory freight charges are a genuine pre-estimate of damages under Section 74 and require proof of loss, while the appellant contended that pre-suit and post-suit periods must be distinguished and post-suit claim is for specific performance (Paras 6-7). D) Commercial Law - Appeal under Section 13(1-A) - Commercial Courts Act, 2015 - The appeal challenged the order dated 26 March 2025 passed in Interim Application (L.) No. 10415 of 2024 in Commercial Suit (L.) No. 8875 of 2024; the Division Bench heard arguments on the correctness of the Single Judge's refusal to grant temporary injunction (Paras 1-2). E) Contract Law - Force Majeure - Build America Buy America Act - Clause 4.3 of TSA - The respondent invoked force majeure on the ground that shipment to USA became impossible due to the Build America Buy America Act; the Single Judge did not accept the force majeure defence, but this did not automatically lead to grant of injunction (Paras 2-4).
Issue of Consideration
Whether clause 4.5 of the TSA providing for compensatory freight charges is a take-or-pay clause allowing specific performance or an alternate mode of performance rather than liquidated damages; whether temporary injunction under Order XXXIX Rules 1 and 2 CPC can be granted to restrain breach of contract and secure payment of compensatory freight charges; whether delay bars relief where continuing obligation exists; whether force majeure defence under Build America Buy America Act is available; whether expiry of TSA term on 30 April 2025 affects specific performance and security directions.
Law Points
- Specific performance versus liquidated damages
- take-or-pay clause under Transportation Services Agreement
- temporary injunction under Order XXXIX Rules 1 and 2 CPC
- security for contractual performance under Section 151 CPC
- force majeure under Clause 4.3 TSA
- proof of loss under Section 74 Indian Contract Act
- 1872
- delay in seeking injunction
- expiry of contract term
