Delhi High Court
Ram Chander vs Union Of India & Another on 28 August, 2017
Author: Jayant Nath
Bench: Jayant Nath
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 28.08.2017
+ O.M.P. (COMM) 5/2015 and IA No. 20103/2015
RAM CHANDER ..... Petitioner
Through Mr. Anil Goel, Adv.
versus
UNION OF INDIA & ANOTHER ..... Respondents
Through Mr. Jagjit Singh, Mrs.Shipra Shukla
and Mr.Preet Singh, Advs.
CORAM:
HON'BLE MR. JUSTICE JAYANT NATH
JAYANT NATH, J. (ORAL)
1. Present petition is filed under section 34 of the Arbitration and Conciliation Act, 1996 seeking to impugn the Award dated 26.5.2015 passed by the Sole Arbitrator. Some of the relevant facts are that the petitioner entered into a lease agreement on 9.6.2008 with the respondent for leasing of Parcel Space in Brake vans in Train No.2280-R Ex.HNZM to JHS. The lease agreement was for a period of three years i.e. 3.4.2008 to 2.4.2011 with a clause for extension of lease for a further period of two years. The lease rate was Rs.5,114/- per day. Clause 18.1 of the Agreement provided for extension of the lease by two years at a lease rate of 25% more than the lumpsum lease freight rate. It is the case of the petitioner that on 17.1.2011 it OMP (COMM.) 5/2015 Page 1 sent a request for extension for a further period of two years and offered to pay 25% extra freight. The lease rate after the 25% increase would be Rs.6392.50. Despite several reminders it is the case of the petitioner that the respondent did not extend the lease agreement. The petitioner was constrained to file a petition under Section 9 of the Act in this court being OMP No.246/2011. This court on 25.4.2011allowed the petitioner to operate the lease at the highest bid amount i.e. Rs.9654 plus 2% development charge as the space had been put up for bidding. Subsequently, on 4.8.2011 this court allowed the petitioner to operate the lease for a period of two years with enhancement of 25% on earlier paid rent plus 2% development charges subject to invocation of the arbitration agreement within six weeks. The petitioner invoked the arbitration clause on 10.8.2011. The respondent appointed the Arbitrator. The learned Arbitrator has now given his Award dated 26.5.2015.
2. A perusal of the Award would show that the stand of the respondent before the learned Arbitrator was that the petitioner has violated the terms of the agreement by indulging in overloading on 8.9.2010 to the extent of 354 kg over/ above the sanctioned load and hence on account of this overloading the claim of the petitioner for extension of contract for two years was refused. It was urged by the respondent that the extension of contract for two years was the prerogative of the respondent and the petitioner could not claim it as a matter of right. The learned Arbitrator accepted the said plea of the respondents noting that under the relevant clause, namely, clause 18.1 of the lease the right of extension is subject to satisfactory performance. Hence, on account of default on 8.9.2010 by the petitioner he forfeited his right for extension. Accordingly, the claim for refund of the petitioner for Rs.5,54,079 OMP (COMM.) 5/2015 Page 2 was rejected. Claimant was directed to pay difference in freight paid by the petitioner and the higher freight received by the respondent. Hence, a direction was made to the petitioner to pay Rs.17,16,732/- to the respondents with interest. The plea of the petitioner relying upon various judgments of this court in similar contracts which had granted extension to the petitioners therein at the lower rate were rejected.
3. I have heard learned counsel for the parties. Learned counsel for the petitioner has strenuously relied upon judgment of the Division Bench in FAO(OS)121/2015 titled Union of India vs. Inland Road Transport Pvt. Ltd. dated 22.5.2017 to contend that the Division Bench while dealing with an identical clause had approved the order of the learned Single Judge quashing a similar Award and upholding that the petitioner therein was entitled to extension of two years at an enhanced tariff of 25% over and above the original agreed tariff. He submits that even in that case there were instances of overloading and the order was still passed in those facts.
4. Learned counsel for the respondent reiterates that the judgment of the Division Bench is distinguishable.
5. I may first refer to the extension clause of the Agreement between the parties, namely, clause 18.1 which reads as follows:-
"18.0: Extension to lease contract:
18.1. Extension of lease is permissible only in case of long term lease of 3 years wherein the same can be extended only once, by 2 more years at a lease rate of 25% more than the lumpsum leased freight rate subject to satisfactory performance by the leaseholder, without any penalty for overloading or violation of any provision of the contract."
OMP (COMM.) 5/2015 Page 3
6. Hence, as per the clause on expiry of 3 years the lease is to be renewed by two years at a lease rate of 25% more than the lumpsum leased freight rate subject to satisfactory performance without any penalty of overloading or violation.
7. As noted above, the petitioner had filed petition under section 9 of the Act being OMP No.246/2011. This court on 25.04.2011 permitted the petitioner to continue with the contract on payment of lease rental at the same rate at which the highest bid had been received by the respondent as the bidding process had already taken place. Subsequently, on 4.8.2011 the petition was disposed of. This court noted the orders passed in a different petition being OMP 754/2010 on the same date and disposed of the petition on the same terms with a direction that the petitioner shall be entitled to operate the lease for a period of two years on expiry of the earlier lease of three years with enhanced rate of 25% over the earlier paid rent plus 2% development charges. The excess payment made pursuant to order dated 25.4.2011 was to be adjusted in future. The order was subject to the petitioner invoking the arbitration agreement and taking effective steps for constitution of the Tribunal. It is quite clear that it is pursuant to interim orders of the court that the petitioner has been allowed to continue to operate the lease for additional period of two years at the enhanced rate of 25%.
8. It is also important to refer to the judgment of this Court in OMP 754/2010 dated 4.8.2011 which is the basis of the order passed by this court in OMP 246/2011 on the same date i.e. 4.8.2011. Relevant portion of the order reads as follows:-
"My attention has been drawn to the judgments passed in W.P.(C.)No. 7289/2010 and various other writ petitions OMP (COMM.) 5/2015 Page 4 decided on 02.06.2011; in W.P. (C.) No. 4781/2011 decided on 15.07.2011; and in W.P.(C.) No. 4799/2011 also decided on 15.07.2011. By the first decision this court had ruled that the respondent- Railways is bound to grant a two-year extension of the lease in terms of the conditions of the lease with increase in the rental by 25% apart from 2% development charges. It has been ruled that the respondent cannot grant extension only till the finalization of the new tender and that too, with increase in the rental which more than 25%. In the later two decisions, this court has held that a solitary case of overloading would not entitle the respondent to deny the right of the lessee to seek renewal of the lease, as the respondent has been granting renewal even in cases where there are 23 to 25 cases of overloading during the initial tenure of the lease. In the present case, admittedly, there is only one instance of overloading reported against the petitioner. The respondent did not even take the ground of overloading as the reason for not granting extension of the lease to the petitioners."
9. In FAO(OS) 121/2016 Union of India vs. Inland Road Transport Private Limited the concerned extension clause was identical to the clause in question here. The Division Bench upheld the judgment of the Single Judge quashing the Award and had upheld the extension of the contract by two years with an enhanced rate of 25% above the leased freight rate.
10. Hence, it is manifest from the above orders that in several judgments this court has on identical facts as the present case granted extension of two years in the lease with the increase in rental at 25%. In fact as noted above in the order in OMP 754/2010 dated 4.8.2011 the court has rejected the plea of the respondent that on account of overloading the respondent was within its right not to grant extension of the lease. In fact this court noted that the OMP (COMM.) 5/2015 Page 5 respondents even granted renewal in cases where there are 23-25 cases of overloading during the initial tenure of lease.
11. In the present case I may note that there is only one factual claim of overloading which is alleged to have taken place on 8.9.2010. Apart from making a bald averment the respondent has not in any manner been able to prove its alleged overloading of 8.9.2010. The award accepts the averment of the respondent without giving reasons on this fact. In any case a solitary incidence in a period of three years can hardly justify the rigid and unreasonable stand of the respondent in declining to the petitioner the renewal of the lease.
12. The act of the learned Arbitrator in ignoring the judgment of this court in OMP 754/2010 dated 4.8.2011, the judgment in W.P.(C) No.7289/2010 Kishan Freight Forwarders vs. Union of India & Ors. and several other judgments directing renewal of lease under similar facts at a enhanced rate of 25% of the leased amount is patently illegal. Accordingly, it is manifest that the impugned order ignores judgments of the Division Bench and Single Judge of this court and is in contravention of the fundamental policy of Indian law and is in conflict with basic notions of justice.
13. The Supreme Court in the case of Associate Builders vs. DDA, AIR 2015 SC 620 held as follows:
"24. In DDA v. R.S. Sharma and Co., MANU/SC/3624/2008 :
(2008) 13 SCC 80, the Court summarized the law thus:
"21. From the above decisions, the following principles emerge:
(a) An award, which is
(i) contrary to substantive provisions of law; or OMP (COMM.) 5/2015 Page 6
(ii) the provisions of the Arbitration and Conciliation Act, 1996; or
(iii) against the terms of the respective contract; or
(iv) patently illegal; or
(v) prejudicial to the rights of the parties;
is open to interference by the court under Section 34(2) of the Act.
(b) The award could be set aside if it is contrary to:
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality.
(c) The award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court.
(d) It is open to the court to consider whether the award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India.
..............."
14. The arbitral tribunal was bound by the judgments of this court interpreting the relevant clause of the contract. The award is patently illegal. Hence, the present petition is allowed and the Award dated 26.5.2015 is quashed.
(JAYANT NATH)
JUDGE
AUGUST 28, 2017/n
OMP (COMM.) 5/2015 Page 7