Delhi High Court
Silver Resort Hotel India Private Ltd vs Delhi International Airport Pvt Ltd on 8 May, 2018
Equivalent citations: AIRONLINE 2018 DEL 3325
Author: Yogesh Khanna
Bench: Yogesh Khanna
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on: 26th April, 2018
Pronounced on: 08th May, 2018
+ O.M.P. (COMM) 9/2018, IA No.350/2018
SILVER RESORT HOTEL INDIA PRIVATE LTD
..... Petitioner
Through : Mr.Akhil Sibal, Sr. Adv. with
Ms.Deepti Mohan, Mr.Aman
Varma, Ms.Anshula Grover,
Mr.Pradeep Chindra and Mr.Parth
Singh Chaudhari, Advs.
Dr.B.B.Parsoon, Sr. Adv. with
Mr.Divyajyoti Paul and Ms.Sonam
Priya, Advs.
versus
DELHI INTERNATIONAL AIRPORT PVT LTD
..... Respondent
Through : Mr.Raj Shekhar Rao, Mr.Rishi
Agrawala, Mr.Karan Luthra,
Mr.Sanyam Saxena and
Mr.Chaitanya Puri, Advs.
CORAM:
HON'BLE MR. JUSTICE YOGESH KHANNA
YOGESH KHANNA, J.
1. This petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred as 'the Act') has been filed by the O.M.P. (COMM.) 9/2018 Page 1 of 23 petitioner for quashing of the impugned arbitral tribunal award dated 27.06.2017 as also the order dated 08.09.2017 and further to restrain the respondent to create any third party interest in respect of the Asset Area 3 in the Hospitality District (hereinafter referred as 'the subject land') which are subject matter of the agreements between the parties.
2. The subject land in question viz Asset Area 3 belong to the Government of India which has been leased to the Air India, who in turn had licensed the same to the respondent for development, who in turn had given it to the petitioner for construction of Five Star Hotel. The term of the license was initially for 26 years and it was renewable for further period of 30 years. The petitioner and the respondent had entered into two agreements namely a) Agreement for Development and b) Infrastructure Development Service Agreement (in short IDSA), both dated 26.02.2010.
3. The learned senior counsel for the petitioner submitted both these agreements were terminated by the respondent on 16.07.2015 on the ground the petitioner had defaulted for three years in payment of the license fee and has also failed to pay the advance development cost amount.
4. Mr.Sandeep Sethi, the learned senior counsel appearing on behalf of the petitioner has primarily raised four grounds to challenge the impugned majority award passed by the learned arbitral tribunal as follows:-
a) The termination is not valid in view of the express finding of the learned arbitral tribunal that the respondent was holding O.M.P. (COMM.) 9/2018 Page 2 of 23 excess amount as security deposit which they were not entitled to collect from the petitioner;
b) the finding of the learned tribunal that the payment of annual license fee was an independent obligation despite there being a security deposit placed with the respondent for securing the payments of the annual license fee, is contrary to the terms of the Article 3.2 of the Development Agreement;
c) learned tribunal erred in grant of the balance development cost in favour of the respondent despite holding the advance development cost is not payable post termination and without the respondent proving the expenses to the extent of the advance development cost if ever incurred by the respondent; and lastly
d) the impugned award was beyond the statutory period of 12 months as prescribed under Section 29(A) (i) and beyond the permitted six months period provided under Section 29 (A) (iii) of the Act.
5. I now deal with the above contentions raised by the petitioner. Since the first two contentions are connected hence are being taken up together.
6. It is the case of the petitioner the impugned award holding the termination of the development agreement and IDSA on the ground of non-payment of the license fee and annual development cost is perverse in view of the specific finding by the learned tribunal that on the date of the termination the respondent was holding an excess amount as security deposit which they were not entitled to collect from the petitioner.
O.M.P. (COMM.) 9/2018 Page 3 of 237. It is submitted if the claims of the respondent on such accounts were to be taken together with interest of 34.62 Crores it would come to a total of 95,88,96,668/- as mentioned in the second cure notice dated 26.03.2015 and this amount was less than the excess security viz 128.97 Crores accepted by the respondent from the petitioner. Thus, even as on the date of the termination, the outstanding amount of 95 Crores could very well be adjusted against the excess security deposit, hence, the termination on the ground of non-payment / default in payment of the annual license fee and advance development cost was absurd and violative of the fundamental policy of India and is liable to the set aside.
8. It was also argued by the learned senior counsel for the petitioner the learned tribunal erred in holding the payment of the annual license fee was an independent obligation despite there being a security deposit placed with the respondent for securing the payment of the annual license fee and the said finding is contrary to the terms of article 3.2 of the Development Agreement and hence the impugned award is patently illegal as is in contravention of the express provisions of the contract and is liable to the set aside.
9. To substantiate his arguments, the learned senior counsel for the petitioner has taken me to the relevant provisions of the contract, pleadings as well as the impugned award. It would be apposite to set out the express terms of the contract in regard to the payment of the annual license fee and the security deposit. The said articles are as follows:
"DEVELOPMENT AGREEMENT"
2.1 Grant: of Development Rights O.M.P. (COMM.) 9/2018 Page 4 of 23 2.1.1 DIAL hereby grants to the Developer the exclusive right and authority during the Term to undertake and implement the Project upon Asset Area 3 and in furtherance of the same grants a license to the Developer in respect of the Asset Area 3, as per this Article 2, for the sole purpose of undertaking the Project and Developer hereby accepts such license and agrees to undertake the Project in accordance with the terms and conditions of this Agreement. In consideration of the Licence Fee, DIAL hereby grants a license to the Developer, for possession of the Asset Area 3 for the Term solely for the purpose of development of Assets. The Developer sha11 have the right to implement the Project, without interruption or interference, together with the full and free right and liberty of way and passage and other rights in relation thereto the rights granted herein above along with the license shall be referred to as the "Grant".
1.1.58 "Term" shall mean the Initial Term and if this Agreement has been extended, shall include the Extended Term;
3.1 In consideration of the Grant, the Developer hereby agrees to make payment of an annual License Fee, with effect from the effective date, as under:
(i) For the Initial Term1, the Developer shall pay an annual license fee in accordance with the agreed schedule detailed in Annexure B; and
(ii) For a Contract Year of the Extended Term, if any, the Developer shall pay an annual license fee equal to the license fee for the preceding Contract Year, escalated annually at a rate equal to the All India Consumer Price Index (Industrial Workers General) or in the absence of the All India Consumer Price Index (Industrial Workers-General), such other comparable index of inflation as decided by DIAL (collectively "License· Fee"), calculated one month prior to the commencement of such Contract Year using the following formula, except in the case of such preceding Contract Year being a slab year of less than 3 months, in which case the annual License Fee for the Contract Year shall increase by 0%:
Annual Licence Fee (CYn) =Annual license fee (CYn-1) x CPI (1W) for Feb of the current year/CPI (IW) for March of the preceding year License Fee (CYn) = License Fee for the Contract Year n of the Extended Term;
License Fee (CYn-1) = License Fee for the Contract Year n-1; CPI (IW) for Feb of the current year = All India Consumer Price Index: (Industrial Workers) - General for the month of February of the current calendar year;
CPI (IW) for March of the preceding year = All India Consumer Price Index Industrial Workers) - General for the month of March of the preceding calendar year;
The Developer shall be required to pay the License Fee in advance within Fifteen (15) days of commencement of each Contract Year. Provided however, that for the first Contract Year, the License Fee shall be calculated from the date of O.M.P. (COMM.) 9/2018 Page 5 of 23 issue of the letter of award to the successful Bidder. The License Fee shall be exclusive of all taxes (including service tax.), cesses, fees and other charges, which shall all be borne by the Developer, except income tax deductions at source if any, in accordance with Applicable Law.
In addition to this License fee and in order to secure the payment of the annual License Fee in accordance with this Agreement, and the performance of all other obligations under the Development Agreement. The Developer hereby agrees to pay to DIAL a sum equal to three times the average aggregate annual License fees for the Term (including the Extended Term) as a security deposit (the "Security Deposit"). The parties agree that for the purposes of as set forth in Annexure B and for the Extended Term the year on year escalation of the License fee shall be assumed to be 5.5%. The Security Deposit shall be paid by the Developer to DIAL in the manner set out hereunder.
6.1.10 The Developer shall be obliged to achieve commercial operations of all permissible Assets on Asset Area 3, within a period of 6(six) years from the Effective Date. Upon occurrence of a DIAL Event of Default which substantially prevents the developer from achieving commercial operations of all permissible Assets on Asset Area 3, within a period of 6 (six) years from the Effective Date, The Developer shall be entitled to a day for day extension beyond the aforesaid 6 (six) year period, equivalent to the time taken by the DIAL to complete its obligations hereunder. Further subject to the Developer having made timely applications for all applicable permits, in the event of a delay (as reasonably determined by DIAL) in the receipt of Applicable Permits, DIAL may permit a day for day extension beyond the aforesaid 6 (six) year period equivalent to the delay in receipt of such Applicable Permits.
13.1 (i) failure of the Developer to pay to DIAL the Licence Fee or any failure to pay any charges as required to be paid under the Infrastructure Development and Services Agreement, when the same become due and payable; 13.2 DIAL Event of Default Each of the following events or circumstances, to the extent not caused by a default of the Development for Force Majeure shall be considered for the purposes of this Agreement as event of default of DIAL („DIAL EVENT OF DEFAULT‟) which, shall provide the Developer the right to terminate this Agreement in accordance with Article 13.3
(i) Any material breach by DIAL of its obligations under this Agreement; or
(ii) A breach of any representation or warranty by DIAL which has a material adverse effect on the Developer's ability to perform its obligations under this Agreement.
O.M.P. (COMM.) 9/2018 Page 6 of 2313.3 Upon the occurrence of either a Developer Event of Default or a DIAL Event of Default, the defaulting party shall be liable for the breach caused and consequences thereof and, the non defaulting party shall have the right to issue a notice expressing its intention to terminate this Agreement to the other Party („Notice to Cure‟). Upon the issuance of a Notice to Cure, the defaulting Party shall have the right to rectify or cure the breach within 60 (sixty) days of receipt of such Notice to Cure ("Cure Period"). If the breach is not rectified by the defaulting Party within the Cure Period (if available), the non-defaulting Party shall have the right to terminate this Agreement by issuance of a termination notice ('Termination Notice‟), provided however that DIAL‟s right to terminate shall be subject to the exercise of rights of substitution by the Developer‟s Lenders in accordance with the Substitution Agreement provided however the Developer shall not be entitled to any Cure Period for a breach under Article 12.1(xvi) hereof.
Provided, that if the default is of the nature specified in Article 13.1 (i) and is cured within the Cure Period, then the payments to be made by the Developer to cure the said default shall attract interest at a rate per annum of 5% above prime lending rate of State Bank of India (or in the absence of State Bank of India's prime lending rate, the highest lending rate applicable to term lending).The default shall not be considered cured unless such interest is also paid within the Cure Period.
Provided further, upon the occurrence of any default after the second default, under Article 13.1(i), DIAL shall have the right to issue a Notice of Intent to Terminate. Upon the issuance of Notice of Intention to Terminate, the Developer shall have the right to rectify the breach within a restricted cure period of 15 (fifteen) days of issuance of such Notice of Intention to Terminate. 1n the event that the Developer fails to cure such event of default within the restricted Cure period of l5 (fifteen) days, DAIL shall have the right to terminate this Agreement, forthwith by issue of a Termination Notice." IDSA (Infrastructure Development Service Agreement) Article 2 Development of Infrastructure Facilities 2.1 DIAL hereby undertake to develop and maintain the Infrastructure Facilities .and provide the Infrastructure Services as common facilities and services, in accordance with this Article 2 and the Developer agrees to bear such costs for the Infrastructure Facilities and Infrastructure Services as are set out in Article J .
Article 3 DEVELOPMENT COST 3.1 Advance Development Costs 3.1.1 The Developer shall pay lo DIAL, a sum of Rs.1100/- (Rupees eleven hundred) per square foot of the Maximum GBA on Asset Area 3 in terms of the Development Agreement, O.M.P. (COMM.) 9/2018 Page 7 of 23 being Rs.80,30,00,000/- (Rupees eighty crores thirty Lacs) as an advance towards development cost (the "Advance Development Cost"). The Parties agree that DIA shall not have the right to escalate the Advance Development Cost for any reason whatsoever.
3.1.2 The Advance Development Cost shall be payable by the Developer to DIAL, in three tranches within one year from the date hereof. The Developer shall pay 50% of the Advance Development Cost to DIAL, concurrently with the execution of this Agreement ("First Tranche"), in the manner specified herein.
3.1.3 25% of the Advance Development Cost, shall be payable within 6 months from the date hereof. The remaining 25% of the Advance Development Cost shall be payable by the Developer to DIAL on or before the first anniversary of the date hereof.
3.1.4 Subject to Article 6.4 hereof, the Parties agree that any portion of the Advance Development Cost paid by the Developer to DIAL, as has not been utilized by DIAL towards development of any Infrastructure Facilities during the course of the Initial Term, as certified by the internal auditor of DIAL, shall be returned to the Developer upon the earlier of the expiry of the Initial Tem1 or upon termination of the Development Agreement in accordance with the terms thereof 6.4 Consequences of Termination 6.4.1 xxx xxx 6.4.2 In the event of termination of this Agreement for a Developer event of default- (whether under this Agreement or under the Development Agreement), the unspent Advance Development Cost shall only be repaid on the earlier of the 30th anniversary of the Effective Date of the OMDA or the termination of the OMDA in accordance with the terms thereof or earlier at the option of DIAL No interest shall be payable by DIAL to Developer in respect of the said unspent Advance Development Cost.
In the event of termination of this Agreement due to the termination of the Development Agreement for a DIAL Event of Default (as defined in the Development Agreement) or the OMDA for a DIAL event of default or an AAI event of default (as defined in the OMDA) the unspent Advance Development Cost (as on the date of termination) shall be returned to the Developer, free of any interest, on the Transfer Date simultaneously with transfer of Assets by the Developer to DAIL."
10. After going through the relevant articles, let me refer to the conduct of the petitioner herein. The annual license fee per Article 3.1 (supra) was payable on yearly basis in one tranche on 15th April every year. After the execution of the development agreement on 26.02.2010, O.M.P. (COMM.) 9/2018 Page 8 of 23 the annual license fee for the first year was paid in time. However the annual license fee for the second year was payable on 15.04.2011, but was paid in bits and pieces between 2011 to 2012 amounting to 25.48 Crores after several reminders of the respondent. Thereafter defaults continued and no payment was made towards the annual license fee after April 2013 i.e. for the year 2012-13, 2013-14 and 2014-15 despite repeated assurances by the petitioner that it would be paid as per letters dated 18.05.2012, 13.08.2012, 21.08.2012, 31.01.2013, 29.03.2013, 05.04.2013, 30.07.2013, 24.01.2014, 09.06.2014, and 25.05.2015 as recorded in the impugned award while recording the respondent's submissions. There is no challenge to these facts.
11. On account of the admitted defaults of the petitioner, the project agreements comprises of Development Agreement and IDSA were terminated on 16.07.2015. Even there was a default in securing the security deposit of 196 Crores payable in the following manner viz 50% on 26.02.2010 i.e. the date of the signing of the agreements; 25% within six months from 26.02.2010; and 25% on or before first one year from 26.02.2010. Though the first installment was paid in time, but the second and third installments were delayed and were paid much after the above period. The delay is admitted by the petitioner in its letters dated 19.08.2010, 22.10.2010, 27.10.2010 as recorded in the impugned award and there is no challenge to this fact too.
12. Further the cheques issued by the petitioner for the payment of annual license fee were dishonoured on 02.05.2014. The respondent issued a demand notice and the petitioner in response thereof once again O.M.P. (COMM.) 9/2018 Page 9 of 23 admitted its liability and undertook to pay all of its dues. Now as per article 6.1.10 of the Development Agreement the petitioner was to commence the commercial operations within six years of the effective date i.e. 25.05.2010, but till the date of termination of the agreements viz. 16.07.2010 only some excavation work and a meager construction was carried out by the petitioner whereas in the entire Hospitality District almost all the hotels are fully constructed, running and operational, barring the property of the petitioner.
13. Since the petitioner defaulted in initial payment of license fee, so the respondent issued the first cure notice in terms of Article 13.3 of the Development Agreement directing the petitioner to remedied the default, failing which the respondent was constrained to terminate the project agreement. The petitioner vide letter dated 13.08.2012 admitted its default and requested for some more time to clear its dues. Since the petitioner was in continuous default, the respondent issued yet another cure notice dated 26.03.2015 in terms of Article 13.3 of the Development Agreement requesting the petitioner to remedy the default but yet again the petitioner vide its letter dated 15.07.2015 though admitted its default but did not pay and requested for some more time.
14. The petitioner instead filed a petition under Section 9 of the Act wherein it was permitted to deposit 60 Crores towards the outstanding dues without prejudice to its rights and contentions but yet again the petitioner deposited only 5.5 Crores. The said amount was later released to the petitioner herein. The application under Section 17 of the Act filed by the petitioner was also dismissed vide order dated O.M.P. (COMM.) 9/2018 Page 10 of 23 24.07.2016 wherein the learned arbitral tribunal recorded the petitioner did not pay the annual license fee since 2012. Hence, in petition under Section 9 of the Act the Court found the petitioner to be in breach of the terms and conditions of the agreements.
15. Qua the contention the excess security deposit per Article 3.2 of the Development Agreement was liable to be adjusted, I may note the petitioner never made any such request to adjust the Licence fee amount during the tenure of the said agreement. No letter is filed by the petitioner which reveal it ever made such request for adjustments. Moreso neither there is any article in both the agreements which could entitle the parties to adjust the arrears of annual license fee against excess security deposit. In fact the security deposit was taken by the respondent as per the settled terms between the parties though later held to be void by the learned tribunal. It was only at later stage the petitioner started alleging the amount outstanding of licence fee ought to have been adjusted against excess security deposit. Admittedly, the parties had entered into a construction agreement and not a money lending agreement which may have allowed the parties to adjust the security deposit against dues. Admittedly the petitioner consistently made defaults and even its cheque for payment of annual license fee bounced and the petitioner even miserably failed to construct the Five Star Hotel, so the payment of additional/excess security deposit (assuming, if any) do not have any bearing upon the obligations of the petitioner, per terms of the project agreements. The learned arbitral tribunal held the termination was legal in view of consistent defaults of the petitioner and rightly so.
O.M.P. (COMM.) 9/2018 Page 11 of 2316. Rather the respondent acted per Article 3.2 of the development agreement. The petitioner was ad idem and paid 192 Crores pursuant to Article 3.2 of the development agreement. No objection/claim was raised qua excess payment of security deposit or for adjustment of arrears of the annual license fee or the advance development charges against such security deposit or the respondent ever extorted any excess security dehors the contract.
17. I may even note the observations of the learned arbitral tribunal in this context, as follows:-
"141. The Respondent, however, contends that clause 3.2.2 pertains to the payment of maintenance charges and is an independent obligation. So far as the Respondent's right to obtain Advance Development Cost is concerned, the same is covered by Articles 3.1.1 and 3.1.2.
142. Advance Development Cost is a part of the Project Agreements and is payable to the Respondent up front. In this view of the matter the question of the Respondent proving its entitlement thereto does not arise.
156. The Tribunal has noticed heretobefore that payment of Annual License Fees provides for a distinct obligation on the part of the Claimant Non-payment of such Annual License Fees from 2012 till the issuance of notice of termination must be held to be fundamental in nature. By reason of such breaches, the Respondent has been deprived of the principal benefits under the Contract. It cannot be characterized with a mere default in performance of Contract by a party thereto.
157. This Tribunal has furthermore noticed heretobefore that the Respondent has served upon the Claimant a Cure Notice in 2012 and only on the request of the Claimant not to act thereupon as it would arrange finances from the financial investors, the said cure notice was not given effect to and the second cure notice was issued only in 2015.
158. In this case, non-payment of Annual License Fees and the Advance Development Cost is admitted. On construction of the Contract as well as in terms of the aforementioned finding; this Tribunal is of the opinion that the Claimant has committed fundamental breach of the terms of the Contract.O.M.P. (COMM.) 9/2018 Page 12 of 23
161. Non Payment of consideration for a grant, in the opinion of the Tribunal, constitutes a fundamental/ material breach. Such breach being repudiatory in nature, the termination of the Contract cannot be held to be bad in law.
172. The Claimant admittedly accepted and acknowledged its 1iability to pay the Annual License Fees and Advance Development Costs to the Respondent without any demur whatsoever.
173. In terms of Section 58 of the Indian Evidence Act, any fact admitted need not be proved. Such admission on the part of a party to the lis may either be by way of pleadings or by way of document or by such conduct, as are apparent from the materials brought on record by the parties. The Claimant is, thus estopped or precluded from raising any issue contra.
174. Moreover, admittedly the Claimant had issued several cheques to the Respondent, which bounced.
175. In terms of Section 118 of the Negotiable Instruments Act, the presumptions set out therein can be raised to the effect that here a cheque being a negotiable instrument, issued the same raises a presumption of consideration
179. The Claimant either in its statement of claim or in its evidence did not deny or dispute the factum of issuance of cheques and dishonour thereof.
180. In view of the clear and ambiguous admission made on the part of the Claimant vide several emails and letters, as indicated heretobefore, as also by its conduct, the Tribunal is of the opinion that the Claimant is estopped and precluded from raising any plea that no ALF or ADC was payable to the Respondent. Such a stand taken by the Claimant at this stage must be held to be by way of an afterthought only.
181. In a case of this nature, the conduct of the Claimant is also very material. There is no contemporaneous document to show that (except in one letter being dated 29.03.2013), the Claimant has ever raised any protest. Even therein, no plea that the Claimant is not liable to pay ALF or ADC has been raised. It even did not raise such a plea when the first cure notice was issued in the year 2012.
182. In its application filed before the Hon'ble Delhi High Court, also not only the Claimant raised no such plea, it even agreed to deposit the entire arrears of ALF and other dues with interest.
185. The Tribunal noticed that Annual License Fees was payable. Clause 11.2.1 of the OMDA provides that the Respondent was under a corresponding obligation to make timely payment of Annual License Fees to AAI from its O.M.P. (COMM.) 9/2018 Page 13 of 23 revenues and thus the Respondent was obligated to comply with the terms of OMDA irrespective of the fact as to whether the Claimant and/or other Developers have been paying the Annual License Fees or not.
186. It is beyond any doubt or dispute that the Claimant did not pay ALF from 2012 onwards resulting in termination of the Contract.
187. No such case was made out at any point of time even after issuance of its letter 29.03.2013. Despite issuance of such a notice the Claimant did not repudiate the Contract nor did it issue any 'cure notice' against the Respondent. The Claimant did not invoke the 'dispute resolution clause' contained in the Contract. This aspect of the matter shall be dealt with a little later. It not only did not repeat its, allegations in any of its subsequent letters, but therein also accepted its liability to pay ALF.
188. In other words, the Claimant, save and except in aforementioned letter dated 29.03.20l3, never denied or disputed its liability to pay the Annual License Fees. On the other hand, it repeatedly requested for extension of time for payment of ALF.
195. This conduct on the part of the parties hereto, in the opinion of this Tribunal are sufficiently indicative of the fact that the parties were ad-idem that the Annual Licence Fees was payable by the Claimant to the Respondent.
614. Mr.Aggarwal would furthermore urge that Annual License Fees, even if payable, could have been adjusted by the Respondent from the security amount and on that ground too, the termination is illegal.
615. In the opinion of this Tribunal the question as to whether the Respondent could take recourse thereto was dependent on the option of the Respondent. Only because Security Deposit has been made for securing the Annual Licence Fees, the same by itself does not entitle the Claimant not to pay the Annual License Fees despite clear mandate contained in clause 3.1 of the DA and the IDSA, the effect whereof has been discussed hereto before."
18. Thus, all these issues raised have been dealt with by the learned tribunal, considering various terms of the contact and only then it came to a conclusion the annual license fee could never be adjusted against security deposit as was independent of any such adjustments. I see no O.M.P. (COMM.) 9/2018 Page 14 of 23 reason to disagree with the observations of the learned tribunal on these two issues.
19. Now, I come to the issue No.(c) viz the contention the learned tribunal erred in grant of balance development cost to the respondent despite holding it was payable post termination and without respondent's proving expenses incurred.
20. Here one may refer to Article 3.1.1, Article 3.1.2, Article 3.1.3, Article 3.1.4, Article 6.4.1 and Article 6.4.2 of the Infrastructure Development Service Agreement as quote above.
21. Such articles reveal the advance development charges of 80.30 Crores was payable by the petitioner in three tranches viz., 40.15 Crores on the date of the signing of the IDSA i.e. 26.02.2010; 20.07 Crores within six months from 26.02.2010; and 20.07 Crores on or before the expiry of one year from 26.02.2010. The first installment of 40.15 Crores was paid in time, but the second was paid after the expiry of six months of the time stipulated and the third was never paid.
22. The advance development charges were to be utilized over the entire life/extended duration of the project agreements. Per Articles 3.1.4 and 6.4.2 of ISDA the petitioner was to pay such advance development charges and the refund was only in an event of the advance development cost being unused and that too on 30th anniversary of the Operation, Management and Development Agreement (ODMA) dated 04.04.2006 i.e. in the year 2036 (which event had not occurred.) O.M.P. (COMM.) 9/2018 Page 15 of 23
23. Hence, the findings of learned tribunal viz. the petitioner is liable to pay the balance of the advance development cost of 20 Crores is strictly based upon the terms of the agreement as also upon admission of the petitioner that it is liable to pay the same per its own letter dated 25.05.2015. Further no relief in respect of advance development cost or its refund was ever claimed prior to termination of agreement or before the learned tribunal. It is duly recorded by learned tribunal in following paras of award :-
"152. It is pertinent to note that the Claimant in its Statement of Claim has also not sought any relief against the Respondent in respect of return of the purported excess developmental cost payable by the Respondent to the Developers in term of the Contract.
xxx xxx
214. The Claimant at all material times and even before the Tribunal was ready and willing to pay not only the Annual Licence Fees and Advance Development cost but also interest accruing thereon."
24. The learned senior counsel for the petitioner raised yet another contention viz. no interest was awarded on refund of security deposit. The respondent was bound to return the security deposit in July 2015 viz. upon termination of the contract, but it was returned only after the award was passed, hence the learned arbitral tribunal ought to have granted interest upon such deposit. It was argued such amount was retained illegally by the respondent and clause No.3.2 of the Contract was held to be void, hence on principles of restitution and unjustified enrichment, the learned arbitral tribunal ought to have ordered refund of such amount with interest thereon.
25. The learned senior counsel for the plaintiff relied upon paras No.593, 606 and 607 of the impugned award which note :-
O.M.P. (COMM.) 9/2018 Page 16 of 23"593. The question which now arises for consideration is as to whether the amount which has been paid to the Respondent by way of Security Deposit, in view of the findings recorded heretobefore, can be said to have been paid by mistake within the meaning of Section 72 of the Indian Contract Act or otherwise.
xxx xxx
606. The principle of 'restitution' has a direct interlink with the principles of 'unjust enrichment'. Both are complimentary to each other. In other words, when a person unjustly enriches himself at the cost of other party to the Contract, he must restitute that part to the other party.
607. In this case the principle of 'restitution' would apply upon proper interpretation of clause 3.2, if a part of clause 3.2 is found to be unenforceable in law and/or otherwise invalid. Even in such a case the principles analogues to Sections 65, 70 and 72 of the Contract Act shall apply apart from the general principles of restitution vis-a-vis unjust enrichment."
26. It was argued that no cogent reasoning was given for not awarding the interest upon the security amount which was held to be illegally retained by the respondent and yet the learned arbitral tribunal simply remarked "As far as security deposit amount is concerned, since the claimant has already paid in to the respondent a sum of `1,92,88,00,000/-as a security deposit, the same needs to be reimbursed in full and no interest thereon is awarded. (The claimant has not even issued any notice claiming interest under the Interest Act)".
27. The learned senior counsel for the petitioner relied upon South Eastern Coalfields Limited vs State of MP and Others (2003) 8 SCC 648, which notes:-
"29. Once the doctrine of restitution is attracted, the interest is often a normal relief given in restitution. Such interest is not controlled by the provisions of the Interest Act of 1839 or 1978."
28. And Union of India vs Tata Chemicals Limited (2014) 6 SCC 335, where the Supreme Court observed:-
"38. ....... The obligation to refund money received and retained without right implies and carries with it the right to interest. Whever O.M.P. (COMM.) 9/2018 Page 17 of 23 money has been received by a party which ex ae quo et bono ought to be refunded, the right to interest follows, as a matter of course."
29. And Gopesh Mehta vs Swift Initiative Private Limited 2017 SCC OnLine Del 8337, where this Court noted :-
"16. However in the facts and circumstances of the present case, denial of pre-suit interest to the plaintiff appears to be inequitable. It cannot be lost sight of that the defendant, inspite of showing the sum of Rs.50 lakhs as payable to the plaintiff in the balance sheet, took a false stand before the Court. I have explored, whether Interest Act could be said to be not exhaustive of the law relating to pre-suit interest.
17. xxx xxx
18. Earlier also, it was held by a Single Judge of this Court in Bank of India Vs. T.R. Arora 1999 SCC OnLine Del 668 that Section 3 or Section 4(2) of the Interest Act do not take away the power of the Court where interest is otherwise payable by virtue of any enactment or other rule of law or usage having force of law; other rule of law would include the power of the court to award interest on equitable grounds.
19. Yet earlier, in Union of India Vs. National Overseas and Grindlays Bank Ltd. 1976 SCC Online Del 6 also this Court held interest is recoverable both at law and in equity on money obtained by fraud or conversion and retained by a defendant and that the Interest Act is not exhaustive of all claims as to interest and it is open to the courts to award interest in cases not coming strictly within the purview of the said Act, on principles of equity, justice and good conscience."
30. Hence, it was argued no cogent reasoning is given by the learned arbitral tribunal as to why interest was not awarded. Heard.
31. The grant of interest is always discretionary. The exercise of discretion to award interest on the security deposit is purely a matter of restitution. Admittedly the petitioner failed to make any demand of interest and did not issue any notice thereof to claim interest. Since the petitioner failed to claim such relief it was not so granted. I may here refer to Section 31(7)(a) of the Arbitration and Conciliation Act which too makes the grant of interest discretionary and it reads :
"Section 31. Form and contents of arbitral award- 1 to 6 xxxx (7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award O.M.P. (COMM.) 9/2018 Page 18 of 23 is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made."
32. In Hyder Consulting (UK) Limited vs State of Orissa (2015) 2 SCC 189 the Court held:-
26. Furthermore, I take note of the fact that the aforementioned principle was applied by this Court in the S.L. Arora case (supra). It was explicitly stated that since the ONGC case (supra) and Three Circles case (supra) related to awards under the Arbitration Act, 1940, they can be of no assistance in interpreting subsection (7) of section 31 of the Act, 1996. I concur with the above reasoning to show the inapplicability of the ONGC case (supra) and the Three Circles case (supra) to the present case.
33. I may here also refer to Article III clause 3.24 of the agreement and it read as under :
Article III 3.2.1 xxx xxx.
3.2.2 xxx xxx.
3.2.3 xxx xxx 3.2.4 The Parties further agree that DIAL shall not be liable to pay any interest on the Security Deposit."
34. The learned senior counsel for the petitioner then argued the annual license fee has been awarded beyond the period of the termination. Indisputably, the date of the termination of the contract is 16.07.2015, but it is argued the learned arbitral tribunal awarded the annual license fee of 56.68 Crores from 15.04.2012 to 16.07.2015 and further the annual license fee of 56.68 Crores from 15.09.2015 to 24.07.2016; and the advance development cost is also awarded from 26.02.2011 till 16.07.2015 to the extent of Rs.20.07 Crores with interest on it from 20.02.2011 till 16.05.2017 and from 15.09.2015 till 24.07.2016.O.M.P. (COMM.) 9/2018 Page 19 of 23
35. The reasoning given by the learned arbitral tribunal is in paras No.708, 715, 716, 732, 733 and 735 which note:
"708. The Respondent itself having terminated the contract in terms of its letter date 16.07.15, the performance of the terms thereof came to an end and in that view of the matter the Respondent could not have enforced the Contract in so far as the same related to payment of Annual Licence Fees and Advance Development cost on and from the date when the contract comes to an end.
715. The matter relating to Annual Licence Fees and ADC pursuant to lease/license does not thus arise. In other words if there is no lease/licence there can be no question of payment of licence Fees in terms of the DA.
716. The Respondent, therefore, in terms of the Contract not entitled to the ALF post termination.
732. It may be difficult for the Tribunal to accept the submissions of Mr. Rajshekhar Rao that the Respondent is entitled to the same benefits under the Contract namely Annual Licence Fees and Advance Development Cost with interest thereon, which would mean that the Contract was continuing.
733.The Tribunal is of the opinion that even if the contention of the Respondent is accepted that because of the observations made by the Tribunal to the effect that the order refusing to grant injunction in favour of the Claimant shall be subject to the final Award had come on the way of the Respondent in floating fresh tender, the same by itself could not have entitled the Respondent to claim the entire amount of Annual License Fees and Advance Development Cost and other dues under the Contract, if any.
735. There is another aspect of the matter which cannot be lost sight of by the Tribunal that after the termination of the Contract, ADC was not payable."
36. Hence, it was argued that though in the main body of the impugned award, the learned arbitral tribunal did not accept the payment of annual license fee post termination, but yet awarded the same. Hence the reasoning given is against the findings.
37. A bare perusal of the award would reveal the annual license fee only till 16.07.2015 is allowed by the learned arbitral tribunal and the argument of the petitioner is against the record. Qua the annual development cost of 20.00 Crores, admittedly, the said cost was payable in a particular manner as set out by the terms of the contract.O.M.P. (COMM.) 9/2018 Page 20 of 23
Further a letter dated 25.05.2015 written by the petitioner to the respondent admits the petitioner would pay the annual license fee for the year 2014-15 and 2015-16 along with pending advance development cost of 20,07,50,000/- by 25.02.2017. Hence, at this stage it would be out of place for the petitioner to challenge the award on advance development cost.
38. Even the learned arbitral allowed interest only till July, 2016 (i.e., the date of order under Section 7 of the Act) because of the inability of the respondent to use the land due to the conduct of the petitioner herein. The learned arbitral tribunal rather reduced the interest after the date of the termination and rather acted on the equity. In this context the paras 180 and 182 to 188 of the award are material.
"180. In view of the clear and unambiguous admission made on the part of the Claimant vide several emails and letters, as indicated heretobefore, as also by its conduct, the Tribunal is of the opinion that the Claimant is estopped and precluded from raising any plea that no ALF or ADC was payable to the Respondent. Such a stand taken by the Claimant at this stage must be held to be by way of an afterthought only.
182. In its application filed before the Hon'ble Delhi High Court, also not only the Claimant raised no such plea, it even agreed to deposit the entire arrears of ALF and other dues with interest.
183. No such plea was also raised ever before this Tribunal in its application u/s 17 of the 1996 Act.
184. The Tribunal in its order passed under the aforementioned provision proceeded on the basis that ALF was payable and the Claimant infact has failed and/or neglected to do so.
185. The Tribunal noticed that Annual License Fees was payable. Clause 11.2.1 of the OMDA provides that the Respondent was under a corresponding obligation to make timely payment of Annual License Fees to AAI from its revenues and thus the Respondent was obligated to comply with the terms of OMDA irrespective of the fact as to whether the Claimant and/or other Developers have been paying the Annual License Fees or not.
186. It is beyond any doubt or dispute that the Claimant did not pay ALF from 2012 onwards resulting in termination of the Contract.
187. No such case was made out at any point of time even after issuance of its letter 29.03.2013. Despite issuance of such a notice the Claimant did not repudiate the Contract nor did it issue any 'cure notice' against the Respondent. The Claimant did not invoke the O.M.P. (COMM.) 9/2018 Page 21 of 23 'dispute resolution clause' contained in the Contract. This aspect of the matter shall be dealt with a little later. It not only did not repeat its allegations in any of its subsequent letters, but therein also accepted its liability to pay ALF.
188. In other words, the Claimant, save and except in aforementioned letter dated 29.03.20l3, never denied or disputed its liability to pay the Annual License Fees. On the other hand, it repeatedly requested for extension of time for payment of ALF.
It is pertinent to mention that the Claimant even in its original· statement of claim did not raise the aforementioned contention only in the amended statement of claim. These pleas have been raised only in the amended statement of claim.
For the reasons aforementioned it is held that the Claimant defaulted in payment of ALF and ADC"
39. Lastly, it was argued by the learned senior counsel for the petitioner the award was initially given on 21.06.2017, but yet again the tribunal gave another award on 08.09.2017 wherein it awarded the costs of `84.72 Lac and stated that this order shall form part of the earlier award and as such it was argued that since the award is beyond the statutory period, it needs to be set aside.
40. The arguments of the petitioner is totally misconceived since in the instant case the award both majority and minority were made on 27.06.2017 in the presence of all the parties after due notice to them. It was prior to the expiry of extended period of 06 months which rather came to end on 30.06.2017. Since the fee of learned tribunal was outstanding so vide order dated 27.06.2017 it exercised a lien on the award. Hence only the delivery of the award was withheld per Section 39(1) of the Act. In its order dated 08.09.2017, the learned tribunal did not adjudicate the interse rights of the parties in relation to the project agreements which were subject matter of the arbitration but merely vacated the lien on the award. Hence the petitioner cannot be allowed to O.M.P. (COMM.) 9/2018 Page 22 of 23 take advantage of its own wrong since the fee of learned tribunal was merely paid by the respondent.
41. A bare perusal of award would reveal the arbitral tribunal has examined all the documents placed on record, appreciated the evidence led by the parties and made a reasoned award. The jurisdiction of this Court is limited to see if the learned tribunal has transgressed beyond the contract or has not acted in accordance with law or if has applied wrong principles of law. The Court under Section 34 of the Act does not sit in appeal over the award and there is no scope of re-appreciation of the evidence or re-evaluation on merits or reinterpreting the terms of the contract. This position has been clarified by the Amending Act 2015 to the Act wherein Section 34(2A) has been inserted which provide an award shall not be set aside merely on the ground of erroneous application of law or by the re-appreciation of the evidence. This position has even been upheld by the Apex Court in Associate Builders vs. DDA (2015) 3 SCC 49.
42. The objections under Section 34 of the Act, thus, are dismissed. The pending applications, if any, are also dismissed.
43. No order as to costs.
YOGESH KHANNA, J MAY 08, 2018 DU/M O.M.P. (COMM.) 9/2018 Page 23 of 23