Delhi High Court
Indian Railways Catering & Tourism ... vs Cox & Kings India Ltd. & Anr. on 6 January, 2012
Author: Siddharth Mridul
Bench: Siddharth Mridul
* THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 28.11.2011
% Judgment delivered on:06.01.2012
+ FAO(OS) 433-35 OF 2011
INDIAN RAILWAYS CATERING & TOURISM
CORP. LTD. ... APPELLANT
Through: Mr. Goolam E. Vahanvati, AG, Mr.
A.S. Chandhiok, ASG with Mr.
Abhijeet Sinha, Mr. Saurav
Agrawal, Mr. Bhagat Singh,
Ms.Vidit Gupta, Mr. Yash
Wardhan Tewari, Ms. Titash,
Advocates
VERSUS
COX & KINGS INDIA LTD. & ANR. ...RESPONDENTS
Through: Mr. Ashok Desai, Mr. Rajiv
Nayyar, Sr. Advs. with Mr. Rishi
Agarwala, Mr. Peter Lobo, Mr.
Akshay Ringe, Ms. Misha Rohtagi,
Advs. for Respondent No.1
Mr. Sandeep Sethi, Sr. Adv. with
Mr.Abhimanyu Mahajan, Adv. for
Respondent No.2
Mr. C.A. Sundaram, Sr. Adv. with
Mr. Rishi Kapoor, Ms. Ekta Kapil,
Advs. for applicant in CM
No.18815/2011 in FAO(OS)
No.433-35/2011
FAO(OS) No.433-35/2011 Page 1 of 58
+ CONT.CAS(C) No.770 of 2011
INDIAN RAILWAYS CATERING & TOURISM
CORP. LTD. ... APPELLANT
Through: Mr. Goolam E. Vahanvati, AG, Mr.
A.S. Chandhiok, ASG with Mr.
Abhijeet Sinha, Mr. Saurav
Agrawal, Mr. Bhagat Singh,
Ms.Vidit Gupta, Mr. Yash
Wardhan Tewari, Ms. Titash,
Advocates
VERSUS
ARUP SEN & ANR. ...RESPONDENTS
Through: None
CORAM:-
HON'BLE THE ACTING CHIEF JUSTICE
HON'BLE MR. JUSTICE SIDDHARTH MRIDUL
A.K. SIKRI, ACTING CHIEF JUSTICE:
The Indian Railway Catering and Tourism Corporation Limited
(hereinafter referred to as „IRCTC‟) is the appellant in this appeal which
has impugned orders dated 6th September, 2011 passed by the learned
Single Judge in OMP No.609/2011 that was filed by M/s Cox & Kings
India Limited (hereinafter referred to as „C&K‟). Vide the aforesaid
order, various directions are given by the learned Single Judge. To put it
in nutshell, the bone of contention is running of train famously known as
„Maharaja Express‟ which is in the ownership of IRCTC and was to be
run as Joint Venture (JV) of IRCTC & C&K. This JV Agreement has
been terminated by the IRCTC. The learned Single Judge has directed
FAO(OS) No.433-35/2011 Page 2 of 58
that train shall continue to run for the period commencing from 14 th
September, 2011 up till 31st December, 2011 as per the arrangement
which was agreed to between the parties for the earlier season on certain
conditions stipulated therein. The appellant is not happy with these
directions as according to the appellant, Joint Venture Agreement has
been terminated by it and since the appellant owns the Maharaja Express,
it has right to operate the said train in any manner it likes as after the
termination of the Joint Venture Agreement, such an arrangement cannot
be foisted upon the appellant forcing it to continue the same arrangement.
M/s C&K, on the other hand, maintains that even in case of disputes
which have arisen pursuant to the termination of the arrangement, it is
within its right to seek such an arrangement for preservation of the
property (i.e. train) in question on the facts and circumstances of the
present case. Before we take note of the respective arguments of the
parties in detail, we deem it apposite to narrate the factual background
which led to the dispute.
2. Maharaja Express is a luxury tourist train owned by IRCTC.
IRCTC was in need of a partner with adequate experience who could form
joint venture with it for operating the said luxury train on an en-India
route within India. Accordingly, in August, 2006, it floated an
„Expression of Interest‟ for a joint venture partner to operate, manage and
run the said train. In view of the Government of India / Ministry of
Railway‟s policy of not permitting a private party to own a rake / train in
India, IRCTC commissioned CRISIL to make a report on the private
sector participation in Luxury Trains in India. Accordingly, CRISIL
FAO(OS) No.433-35/2011 Page 3 of 58
submitted its report whereby it structured a model under the Build, Lease,
Operate and Transfer (BLOT) Scheme so as to ensure private sector
participation in the sector of Luxury Trains. The BLOT model proposed
by CRISIL envisaged that IRCTC and the Joint Venture private sector
partner would form a Joint Venture Company which would have equal
share holding between both partners. IRCTC would own the train as per
the Government of India policy and would lease the train to the Joint
Venture Company for a lease period of 15 years from the date of the first
commercial run of the luxury train and this lease period was to be further
renewed for a period of 10 years. The Joint Venture private sector partner
would contribute an amount equivalent to 50% of the cost of the luxury
train and this amount would be paid and fully funded by the Joint Venture
private sector partner to the Joint Venture Company and this Joint
Venture Company would, in turn, give this entire amount which was
equivalent to 50% of the cost of the luxury train to the IRCTC in order to
enable the IRCTC to defray 50% of the cost of building the luxury train
and this amount so paid by the Joint Venture Company and funded by the
Joint Venture private sector partner would be used as advance lease rental
to be adjusted over a period of 15 years. The IRCTC adopted this BLOT
model proposed by CRISIL report of April, 2007 so as to ensure the
private sector partnership / participation in luxury trains.
3. After undergoing the tender / selection process pursuant to the
aforesaid Expression of Interest (EOI), M/s C&K was selected to be the
Joint Venture Partner. Accordingly, Joint Venture Company in the name
and style of M/s Royale India Rail Tours Limited (hereinafter referred to
FAO(OS) No.433-35/2011 Page 4 of 58
as the JV Company) was incorporated with IRCTC and M/s C&K holding
50% shares each. It was preceded by MOU dated 10th July, 2008 between
the Joint Venture partners and subsequently on 27th November, 2008,
Joint Venture Company was floated. Memorandum and Articles of
Association were also signed on 27th November, 2008. Thereafter the
MOU of 10th July, 2008 was reduced into a Joint Venture Agreement
dated 10th December, 2008 in order to provide the structure for
management of the luxury train and the Joint Venture Company. Some of
the material clauses of the said agreement are as under:
(a) A luxury train shall be used an integral part, not only as the
principal mode of transportation but also as special facet and
attraction.
(b) The JV Company was to acquire, furnish, maintain and manage the
luxury train, with a view to market and sell holiday packages with
the luxury train as an integral part.
(c) IRCTC who has been given the permission by the Ministry of
Railways to own and operate a luxury tourist train will lease the
rake, consisting of approximately 23 coaches, for exclusive use by
the company for the period of this agreement. The company will
manage onboard / off board services, marketing, booking, pricing,
etc.. The operation of the train, on Indian Railways, will be
coordinated by IRCTC.
The features of the Joint Venture Agreement are pari materia with
the MOU with certain minor modifications. Some of the relevant clauses
are as follows:
FAO(OS) No.433-35/2011 Page 5 of 58
(i) Article 2 describes the business objective of the JVC. Article 2.2
deals with the Memorandum & Articles of the Company and the
main object of the company is the business of acquiring, furnishing,
maintaining, managing and operating luxury train with a view to
market and sell holiday packages with such luxury train being the
principle mode of transportation.
(ii) Article 3 specifies the term of the agreement and states as follows:
"This agreement shall take effect upon its execution
and shall continue to bind the parties initially for a
period of 15 (fifteen) years from the date of first
commercial run of the train and thereafter renewable
for a further period of 10 (ten) years, on mutually
acceptable terms and conditions."
It has been clearly stated that agreement shall continue to bind the
parties for a period of 15 years from the date of first commercial
run of the train and thereafter renewable for a further period of 10
years.
(iii) Article 5 deals with the provision of luxury train. This clause
specifies that IRCTC has agreed to lease the train for the exclusive
use of the Joint Venture Company. The IRCTC would acquire the
coaches / rake from the Indian Railways. The Joint Venture
Company shall design the interior concept at its cost and provide it
to IRCTC. The Joint Venture Company would coordinate to ensure
whether the train is manufactured as per the specification and
design.
(iv) Article 6 deals with the lease of the luxury train. IRCTC was to
bear the cost of the train and lease it to the Joint Venture Company
FAO(OS) No.433-35/2011 Page 6 of 58
for a period of 15 years from the date of its first commercial run,
renewable for a further period of 10 years. The Joint Venture
Company has paid IRCTC an advance payment of 50% of the (total
cost of the train minus capital subsidy) towards lease charges
(Advance Lease Charges) of the luxury train. M/s C&K shall
provide unsecured loan to the tune of 50% of the (cost of the train
capital subsidy) to the JV company and the proceeds shall be
utilized by the Joint Venture Company towards payment of
Advance Lease Charges to IRCTC for partially meeting the cost of
the luxury train. The payment of advance lease charges is paid to
IRCTC as per Article 6. The advance lease charges shall be
adjusted against the annual lease charges payable to IRCTC in
equal installments over a period of 15 years. This Article deals
with the period of the lease, date of commencement of lease and the
calculations of annual lease rentals and also provides that the
amount of 50% of the cost of the train funded by the JV private
sector partner, namely, Cox & Kings and paid to IRCTC would be
treated by IRCTC as advance lease rentals to be adjusted over the
lease period of 15 years.
(v) As per Article 15, the Joint Venture Company was to have nine
Directors on its Board, three Directors from IRCTC, three Directors
from M/s C&K and three independent Directors, one each to be
appointed by IRCTC and M/s C&K and the third independent
Director to be jointly by IRCTC and M/s C&K. Article 15.3
provided that the Chairman shall be the nominee of IRCTC.
FAO(OS) No.433-35/2011 Page 7 of 58
(vi) Article 17 pertains to the management of the Joint Venture
Company. As per Article 17.2, the management of the Joint
Venture Company was to be supervised by the Director (Finance)
nominated by IRCTC and the Director (Operations) nominated by
M/s C&K. As per Article 17.6, certain agreements were required to
be executed by and between the company and IRCTC or M/s C&K
as the case may be. None of these agreements have been executed
save and except the agreement at Article 17.6(B), i.e. the agreement
for providing onboard services has been executed by the Joint
Venture company with MAPPLE.
(vii) Article 24.2 provided that lock-in period for holding shares was 15
years from the date of commencement of lease.
(viii) Disputes resolution, mutual negotiation and arbitration was to be
carried out as per Article 30.
4. There was Maharaja Express curtain raiser at ITB, Berlin
(International tourism industry‟s prime trade exhibition) between 11 th -
15th March, 2009. The train as envisaged was constructed, built and
interiors done by February, 2010. The Maharaja Express came into
existence in its present Avtar and its first commercial run started on 6th
March, 2010. The Joint Venture Company entered into Agreement dated
5th March, 2010 with MAPPLE for providing onboard services on the said
train. This is the date of the commencement of 15 years lease by IRCTC
to Joint Venture Company as per Joint Venture Agreement of December,
2008.
FAO(OS) No.433-35/2011 Page 8 of 58
5. Upto April, 2011, Maharaja Express completed 34 journeys.
Thereafter, it seems that some differences and disputes had started
cropping up between IRCTC and M/s C&K during this period over
certain matters which need not be elaborated. Suffice it is to say that as
per M/s C&K, IRCTC sought to change the agreement between the parties
by seeking to enter into an MOU between itself and the Indian Railways
without M/s C&K being a party to the same. The agreement to be
entered into between IRCTC as per the Joint Venture Agreement was
purely meant for the approval of itineraries, technical operations and
maintenance as well as revenue sharing and haulage. This draft MOU
proposed to change all the terms that were agreed upon by and between
both the parties in the MOU dated 10th July, 2008 and Joint Venture
Agreement dated 10th December, 2008. The said MOU suggested certain
entitlements to the Indian Railways and their officers which were totally
outside the understanding between the parties. IRCTC emphasized that
this draft MOU which they proposed to enter into with the Indian
Railways would override all agreements between both parties and this
MOU shall be binding on both parties. This was not accepted by M/s
C&K which, over a period of time, became the bone of contention. Some
correspondence was exchanged between the parties and there were
attempts to drown the flames of differences even through mediation.
However, things instead of improving became bad to worse and
ultimately, the IRCTC vide letter dated 12th August, 2011, terminated the
Joint Venture Agreement on the basis of some purported fraud or
misrepresentation by M/s C&K at the time of Expression of Interest.
FAO(OS) No.433-35/2011 Page 9 of 58
6. Within few days, i.e. on 16th August, 2011, M/s C&K filed the
petition under Section 9 of the Arbitration and Conciliation Act, 1996
(hereinafter referred to as „the Act‟) inter alia praying for interim reliefs /
measures to safeguard the subject matter of arbitration (being the luxury
train and the Joint Venture company) during the proposed arbitration
proceedings which M/s C&K was contemplating to initiate. Status quo
order was passed qua the said train by the learned Single Judge on 16 th
August, 2011. The case set up by M/s C&K in the said OMP was that
IRCTC and M/s C&K came together to form the Joint Venture Company
which was set up specifically for the purpose of acquiring, furnishing,
maintaining, managing and operating luxury tourist train with a view to
market and sell holiday packages. The terms were recorded in MOU of
July, 2008 and Joint Venture Agreement of December, 2008. M/s C&K
had invested a sum of over Rs.45 Crores in the said Joint Venture
company. It was clear intention of the parties that luxury train was to be
operated by the Joint Venture company for a period of 15 years though
the train was to be leased to Joint Venture company in a sense that Joint
Venture company was to own the same for a period of 15 years. It was
also the case of M/s C&K that IRCTC thereafter wanted to vary the terms
understood and agreed between the parties when it enclosed draft MOU
along with letter sent sometime in January, 2011 to be entered into which
was rightly objected to by M/s C&K. It was projected by M/s C&K that
not only IRCTC was to be blamed for this fiasco, it could not terminate
such a lease arrangement which termination was on the face of it
arbitrary, illegal, void and bad in law. It was also contended that the
termination would put the huge investment made by M/s C&K into
FAO(OS) No.433-35/2011 Page 10 of 58
jeopardy and even goodwill and reputation of the train and, in turn, the
country was at stake inasmuch as M/s C&K had been marketing the
booking internationally and within India. Season of this train is between
the months of September to April. The train is mainly booked for foreign
tourists and bookings are made much in advance. It was stated that as
many as 400 bookings (approximately) had been received for the current
year upto December, 2011 which were made by various international
travel companies. M/s C&K contended that it was entitled to specific
performance of the Joint Venture Agreement which had no termination
clause and even when there was no formal lease agreement, conduct of
the parties as well as documents executed and correspondence exchanged
between the parties earlier would show that there was an effective and
subsisting lease between the parties, by implication.
7. The IRCTC contested the petition on various grounds which are
taken note of by the learned Single Judge in the impugned order, in the
following manner:
(a) The petition is not maintainable as the same was filed on the basis
of two letters on 12.08.2011 (termination letter) issued by the
respondent by which the respondent for the reasons stated in the
said letters terminated the Joint Venture Agreement entered
between the petitioner and the respondent on 10.12.2008.
(b) The Joint Venture Agreement is void as the consent of the
respondent was obtained by fraud and misrepresentation and cannot
be given effect to and is also unenforceable and therefore, the
petition would not be maintainable.
FAO(OS) No.433-35/2011 Page 11 of 58
(c) The petitioner in the matter in fact is seeking the stay the operation
of one letter dated 12.08.2011 issued by the respondent to Joint
Venture Company. The said Joint Venture Company is not a party
to the proceedings and also not party to any arbitration agreement.
Therefore, granting of any relief would be amounting to grant of a
mandatory injunction and in any event, if losses are suffered by the
petitioner it could be compensated in terms of money as the
contract has been terminated between the parties on account of
various breaches committed by the petitioner of the Joint Venture
Agreement. In fact, the train was never operated in the manner as
contemplated in the Joint Venture Agreement by the Joint Venture
Company. Nor the petitioner had agreed to pass on the booking
revenues to the Joint Venture Company and instead raised inflated
debit notes.
(d) It is stated by the respondent that by seeking the relief on the basis
of the Joint Venture Agreement, the petitioner is trying to get a
lease in favour of the Joint Venture Company, a third party who is
not even a party to the present case and the agreement.
(e) The lease was never executed in favour of the said company. The
rights of the petitioner cannot be beyond than what has been laid
down in the Articles of Association of the Joint Venture Company.
(f) The relation between the Joint Venture Company and the
respondent has already come to an end and has been terminated.
Therefore, now the petitioner is attempting to create a right for use
of the train which was never in the possession of the petitioner and
FAO(OS) No.433-35/2011 Page 12 of 58
the petitioner is not entitled to use the same in future as the
respondent is the owner of the train.
(g) The Joint Venture Company was allowed to run the train on an ad-
hoc arrangement, otherwise no terms and conditions of any lease
arrangement were finalized, therefore, now the respondent is not
inclined to continue with the said arrangement for the reasons
stated in the said letter.
(h) The petitioner has suppressed the material fact from this court when
it is stated that the Joint Venture Company was incorporated after
entering into the Joint Venture Agreement, though the said Joint
Agreement Company was incorporated on 27.11.2008 prior to the
date of Joint Venture Agreement dated 10.12.2008.
(i) The respondents also alleged various breaches and misconducts on
the part of M/s C&K which included retention of all revenues and
not giving anything to IRCTC; C&K trying to take over the
complete control of the operations of the train; inflating bills
towards „off board services‟; charging the Joint Venture company
commission @ 30% on the total booking revenues of Joint Venture
company which was much higher; non-payment of haulage charges,
etc.
(j) It was also argued that argument of public interest was only a bogie
and on the contrary, the public interest lay in terminating the
agreement as up to now the operations had suffered only losses.
8. The learned Single Judge after considering the arguments of both
the sides, returned the following findings:
FAO(OS) No.433-35/2011 Page 13 of 58
(i) While considering the application under Section 9 of the Act which
deals with interim measures, the Court could not go into the
validity of termination of Joint Venture agreement as it was for the
arbitral tribunal to decide whether the termination was valid or not.
At this stage of interim measure, its validity is only for the limited
purpose as to whether any prima facie case is made out or not.
(ii) It was not within the scope of Section 9 to restore the Joint Venture
agreement as doing this would mean nullifying the termination.
(iii) On the maintainability of petition under Section 9 of the Act, the
learned Single Judge held that as Articles of Association is an
agreement between the shareholders and the Joint Venture
company which contained an arbitration clause and Joint Venture
Agreement has a separate arbitration agreement, prima facie it
could not be said that there was no arbitration agreement between
the Joint Venture company and the parties, more so when only
shareholders and parties in the management of Joint Venture
company were M/s C&K and IRCTC.
(iv) Examining the scope of Section 9 of the Act, the learned Single
Judge held that the Court had jurisdiction to preserve the subject
matter of disputes in many forms depending upon the facts of each
case and as per the order sought for. It was observed that
proceedings in a Court, as distinct from those before an arbitrator,
are also between the parties to an agreement / transaction only, still
the practice of issuing interim orders / directions qua third parties
exist. Further, Joint Venture company was not completely a third
party as it was the upshot of IRCTC and M/s C&K, who were the
FAO(OS) No.433-35/2011 Page 14 of 58
co-sharers of the Joint Venture company. The Joint Venture
company was thus added as respondent No.2 allowing the
application of the Joint Venture company.
(v) The learned Single Judge thereafter came to the conclusion that any
interim measure even for enforcing the earlier arrangement to
continue could be passed under Section 9 of the Act and by doing
so, the Court was not attempting to re-write the agreement or to
confer any leasehold rights in favour of M/s C&K and Joint
Venture company, but rather in larger public interest which would
otherwise be affected by virtue of sudden stopping of train,
bookings of which are already undertaken by the petitioner.
Another reason for continuing this arrangement given by the
learned Single Judge is that bookings for this season commenced
from 8th May, 2011 and, therefore, IRCTC cannot deny that they
were not aware about the said bookings and the agreement was
terminated only in November, 2010. Referring to the Supreme
Court judgment in Mahabir Auto Stores vs. Indian Oil
Corporation, (1990) 3 SCC 752, the learned Single Judge took the
view that having regard to the conduct of the parties and the present
situation, if some interim arrangement is not made, there may be
some serious repercussions as it was not merely a question of
goodwill and reputation of M/s C&K which was at stake, but that of
IRCTC as well.
(vi) According to the learned Single Judge, though mandatory
injunction is not to be given normally but the Court had the power
to grant such injunction if the case of greater risk of injustice is
FAO(OS) No.433-35/2011 Page 15 of 58
made out for temporary period in order to preserve the status quo
ante.
(vii) In the opinion of the learned Single Judge, it was a fit case to
appoint a receiver as a matter of interim measure, else irreparable
loss would ensue to M/s C&K and to the public at large by
discontinuation of the running of the train, bookings of which had
already been made. A senior advocate of this Court was appointed
as the receiver.
(viii) Following directions have been given for running of the train in the
interregnum:
"a) For the period commencing from 14th September
2011 uptil 31st December 2011 which is the major
period for which the bookings are effected by the
petitioner and their agents in overseas countries, the
train namely "Maharaja Express" Train shall continue
to run for the said period under the supervision of the
learned receiver as per the arrangement which was
continuing at the earlier season.
b) The petitioner shall deposit 50% of the total receipt of
the sum against the bookings made upto 31.12.2011
without any deduction within four days in separate
account to be opened in the Nationalized Bank in the
name of the respondent. The petitioner shall not
withdraw any amount from the said account without
the prior permission of the court or the arbitral
tribunal. The said account will be maintained by the
Receiver who will sign the cheques and make the
payment to the respondent as per the direction (f)
issued by this Court.
c) The petitioner shall also deposit 50 % of the amount
in the separate account maintained for the future
FAO(OS) No.433-35/2011 Page 16 of 58
bookings to be conducted by it uptill the December
2011 in the said account as stated in (b).
d) The petitioner and the Joint Venture Company shall
maintain the proper and true accounts pertaining to
booking amounts, expenses incurred or to be incurred
in future by them. The statement of accounts shall be
filed before the Receiver every fortnightly for the
purposes of the records.
e) Subject to agreeing to the aforementioned directions,
the respondent shall, after repair if any or
maintenance, allow to run the train as per previous
manner. The JV Company is also allowed to make the
furnishing and other arrangements consequent upon
the receiving the permission of the said train from
respondent from 9th September 2011 onwards.
f) The respondent/ Indian railways would be entitled to
recover the haulage charges, on board expenses (only
for the current period), operational and maintenance/
repairing expenses against the train which is going to
run for the said interim period and the same can be
paid by the Receiver after due consideration of the
same from the deposit made in the separate account. If
any shortfall is occurred, the respondent shall
maintain the accounts and give the detail to the
Receiver. The said amount shall be subject to the
discussion and adjustment of the final award to be
passed by the Arbitral Tribunal.
g) As regards the remaining 50% booking amount
retained by the petitioner, the same shall be subject to
the maintenance of the accounts of the petitioner and
JV Company which shall be filed before learned
Receiver. The said booking amount shall also be
adjusted towards the expenses incurred or to be
incurred in running the said train. Any shortfall of
FAO(OS) No.433-35/2011 Page 17 of 58
revenue beyond the said 50% amount shall form the
subject matter of the claim before the Arbitral
tribunal.
h) Parties are granted liberty to approach the Court or the
Arbitrator (if appointed) for modification of order in
case the circumstances do arise.
i) Authorized representatives of all concerned parties are
allowed to co-operate with the Receiver in order to
smooth running of train in question and can have joint
meeting, if necessary. If the presence of Receiver is
required at the site, he may exercise his discretion in
this regard.
j) The petitioner or any of his agents shall make not any
further bookings for the next season which is,
September, 2012 to April, 2013.
k) The above said arrangement shall be treated as
tentative in nature."
9. We may point out at the outset that the line of arguments of counsel
for both the sides was largely the same though with much force as counsel
for the parties not only referred to the material on record but supported
their arguments with plethora of case law. These arguments have led to
various issues which need to be answered by us. We would, therefore,
like to formulate these issues first and while dealing with these issues,
respective submissions of the parties would be noted.
FAO(OS) No.433-35/2011 Page 18 of 58
Issue No.1: Whether petition under Section 9 of the Arbitration and
Conciliation Act, 1996, filed by C&K is maintainable? The different
aspects of this maintainability would be as under:
a. Is there any arbitration clause between IRTCT and C&K?
b. Could C&K, instead of Joint Venture company, seek reliefs in
respect of the train?
c. Could the train owned by IRCTC be the subject matter of
proceedings under Section 9?
Issue No.2: Whether relief of specific performance could be granted
under Section 9 of the Act, in the given circumstances?
Issue No.3: Whether there was any valid and binding lease between the
parties, and if so, whether the lease between the Joint Venture and IRTCT
was subsisting?
Issue No.4: Could there be a mandatory injunction of the nature passed by
the learned Single Judge?
Issue No.5: After holding that the Court could not restore the terminated
agreement, whether the Court could still pass an order which had the
effect of continuing the agreement/arrangement? Connected with this
issue will be the cross-objections of the C&K questioning this finding of
the learned Single Judge.
FAO(OS) No.433-35/2011 Page 19 of 58
Issue No.6: Whether „public interest‟ could be a justifiable reason for
continuing the arrangement? If so, whether there was any such public
interest in the present case?
Issue No.1: Maintainability of petition under Section 9 of the Act at the
instance of M/s C&K
10. In order to answer this issue, it would be necessary to take into
account certain provisions of Joint Venture Agreement, the MOU between
IRCTC and M/s C&K, the averments made in the OMP filed by M/s
C&K and the governing law. The facts narrated above bring forth the
factual position, namely, IRCTC and M/s C&K entered into MOU which
was later on substituted by Joint Venture Agreement. Vide these
instruments, the two parties agreed to form a Joint Venture Company for
the running of the Maharaja Express. Article 30 of the Joint Venture
Agreement contains arbitration clause, relevant portion whereof is
extracted below:
"Article 30 - Dispute Resolution
30.1 Reference to an Arbitrator
IRCTC and C&K will endeavour to resolve by mutual
negotiation any dispute, differences, controversy or
claims arising out of or in relation to, this Agreement,
including the scope, validity, existence and the
interpretation thereof, the activities performed
hereunder, or for the breach thereof, arising between
them in connection with this Agreement.
FAO(OS) No.433-35/2011 Page 20 of 58
In the event that the dispute between the parties
remains unresolved even after the reference to the
Shareholders Committee, the same shall be referred to
arbitration.
30.2 Any and all disputes differences, controversy or
claims arising out of or in relation to, this Agreement,
including the scope, validity, existence and the
interpretation thereof, the activities performed
hereunder, or for the breach thereof, which cannot be
satisfactorily resolved by mutual negotiation within
Ninety (90) days of issue of a notice by a party, shall
be finally settled by arbitration, in accordance with the
rules of Arbitration of Indian Council of Arbitration
(ICA) under the Arbitration and Conciliation Act,
1996, including any statutory modifications,
amendments, re-enactments thereof from time to time,
by reference to a single arbitrator where claim, if any,
does not exceed Rs.1.00 crore. In other cases, if the
parties so agree, the dispute shall be referred to single
arbitrator or in absence of such agreement to three
arbitrators, one to be appointed by each party within
such period as prescribed under ICA Rules after the
expiry of said ninety (90) days, and the presiding
arbitrator shall be appointed in accordance with the
provisions of ICA Rules.
xx xx xx xx"
It thus refers to disputes, differences, controversy or claims arising
out of or in relation to the said Joint Venture agreement.
11. Thereafter, the Joint Venture company was got incorporated with
50% stakes of both the parties. As per the Joint Venture Agreement, the
Maharaja Express was to be leased out to the said Joint Venture company
FAO(OS) No.433-35/2011 Page 21 of 58
by IRCTC. The Joint Venture Agreement also contemplated execution of
separate agreement (lease agreement) between IRCTC and Joint Venture
company for this purpose. However, no such document could see the
light of the day.
12. Insofar as Joint Venture company is concerned, it has its Articles of
Association. Article 200 of this Articles of Association of the Joint
Venture company contains an arbitration clause which reads as under:
"200. Reference to an Arbitrator
IRCTC and C&K will endeavour to resolve by mutual
negotiation any dispute, differences, controversy or
claims arising out of or in relation to, this Agreement,
including the scope, validity, existence and the
interpretation thereof, the activities performed
hereunder, or for the breach thereof, arising between
them in connection with this Agreement. (a) Any and
all disputes differences, controversy or claims arising
out of or in relation to, this Agreement, including the
scope, validity, existence and the interpretation
thereof, the activities performed hereunder, or for the
breach thereof, which cannot be satisfactorily resolved
by mutual negotiation within ninety (90) days of issue
of a notice by a party, shall be finally settled by
arbitration, in accordance with the rules of Arbitration
of Indian council of Arbitration (ICA) under...."
13. As per M/s C&K, this arbitration agreement which is an agreement
between the shareholders and the Joint Venture company is to be treated
as agreement between M/s C&K and IRCTC. It is their submission that
the definition of „Party‟ includes M/s C&K and IRCTC and „Parties‟ in
FAO(OS) No.433-35/2011 Page 22 of 58
relation to this Joint Venture company would include M/s C&K and
IRCTC. Thus, there is an arbitration clause in the Joint Venture
Agreement, namely, Article 30 and this agreement is between M/s C&K
and IRCTC. Likewise, there is an arbitration clause in the Articles of
Association of the Joint Venture company, which is an agreement
between the shareholders and Joint Venture company. The question is as
to whether with the aid of these arbitration clauses, M/s C&K can
maintain petition under Section 9 of the Act and bring within its ambit the
scope of reliefs claims by it in the said OMP. We may point out at this
stage that in the OMP filed by M/s C&K, it has relied upon Article 30 of
the Joint Venture Agreement only to sustain the said petition and not on
Article 200 of the Articles of Association. However, since this Article of
Association is discussed and inter alia made the basis of maintainability of
the petition in the impugned order, we have referred thereto as well.
Otherwise, insofar as averment in the OMP is concerned, it reads as
follows:
"59. It is stated that on account of the deliberate act
of the Respondent of executing an MOU with the
Indian Railways, which is contrary to the provisions of
the Joint Venture Agreement dated 10.12.2008 and
understanding between the parties and further failure
of Respondent to execute a lease agreement in respect
of the train with which the Joint Venture company and
further wrongful termination of Joint Venture
Agreement by letter dated 12.8.2011, disputes and
differences have arisen between. The parties which
are referable to the arbitration in terms of clause 30 of
the Joint Venture Agreement.
FAO(OS) No.433-35/2011 Page 23 of 58
The prayers which are made in the OMP may also be noted at this
stage which are as under:
"A. that pending the hearing and final disposal of
the arbitration proceedings:
(a) stay the operation of the Respondents letters dated
August 12, 2011 annexed as Annexure A & B
hereto and restrain the Respondents from in any
manner acting in furtherance to the aforesaid letters
and the Respondent be restrained from using the
train for any purpose other than the Joint Venture
company (RIRTL).
(b) The Respondent, its servants and agents be
restrained by an order of injunction of this Hon‟ble
Court from:
(i) from interfering or preventing the petitioner and
the JV Company from operation of the Luxury
Tourist Train (Maharaja Express)
(ii) from obstructing the petitioner in operation of
the JV Company and as a consequence form
operating the bank accounts dealing with
vendors, suppliers, and any third parties for
smooth functioning of the luxury Tourist Train.
B. That exparte interim and ad interim reliefs in
prayer clause (A) above be granted to the Petitioner.
C. Cost of the Petition be provided for.
D. Any such oterh and further reliefs as this
Hon‟ble Court may deem fit and proper looking to the
circumstances of case."
FAO(OS) No.433-35/2011 Page 24 of 58
14. No doubt, Joint Venture Agreement is between IRCTC and M/s
C&K. It also contains arbitration clause, namely, Article 30 which would
constitute arbitration agreement between the parties. Therefore, on the
strength of this agreement, M/s C&K can file petition under Section 9 of
the Act. However, next relevant aspect would be the scope of disputes
which can be raised invoking this arbitration agreement. As is clear from
Article 30, the dispute which can be raised are "any and all disputes,
differences, controversy or claims arising out of or in relation to, this
Agreement, including the scope, validity, existence and the interpretation
thereof, the activities performed hereunder, or for the breach thereof...".
It is the submission of the appellants that on the basis of this arbitration
agreement, M/s C&K could file the petition raising disputes, differences,
etc. "arising out of or in relation to this agreement", i.e. Joint Venture
Agreement only. It was contended that Joint Venture Agreement dealt
with rights and obligations of the two shareholders of the Joint Venture
company. It was strenuously argued by Mr. Vahanvati, learned Attorney
General who initially appeared for the appellant as well as Mr.Chandhiok,
learned Additional Solicitor General who made elaborate submissions in
this behalf, that the disputes in question raised were outside the scope of
Article 30. As per the appellant, the disputes are in relation to the train.
This train is owned by IRCTC which was to be leased to the Joint Venture
company and it was even recognized in the Joint Venture agreement that
separate agreement was to be entered into between IRCTC and Joint
Venture company (refer Articles 5, 6 and 17.6). It was further argued that
when no such agreement was entered into between IRCTC and the Joint
Venture company, the train was never leased to Joint Venture company
FAO(OS) No.433-35/2011 Page 25 of 58
which was only permitted to use the train for limited period of time under
an adhoc arrangement which was brought to an end by letter dated 12th
August, 2011. This letter was issued by IRCTC to Joint Venture
company and till date, Joint Venture company had not filed any
proceedings questioning the validity, propriety and justification of this
termination. It was argued, thus, that on termination of this adhoc
arrangement, it is only Joint Venture company which could raise the
dispute and had it been raised by the Joint Venture company, even the
Joint Venture company could not file any arbitration proceedings as there
was no arbitration agreement between IRTCT and Joint Venture
company. In no case, M/s C&K could claim such a relief, that too of
specific performance in respect of the so called arrangement of purported
leasing out of the train by IRCTC to Joint Venture company in the garb of
performance of Joint Venture Agreement.
15. Mr. Ashok Desai, learned senior counsel appearing for M/s C&K,
countered the aforesaid submissions with all vehemence. His argument
proceeded on the premise that there were four players in the fray, namely,
Ministry of Railways which was holding 100% shares in IRCTC; IRCTC;
M/s C&K which is specialized in super luxury travel; and the Joint
Venture company. He stressed the fact that IRCTC entered into an MOU
/ Joint Venture Agreement with M/s C&K after the approval and blessings
from the Ministry of Railways. The main purpose and objective of
entering into MOU and Joint Venture Agreement between IRCTC and
M/s C&K was to run the luxury train in question. Clause 15 of MOU
dated 10th July, 2008 deals with leasing of the train. Likewise, Joint
FAO(OS) No.433-35/2011 Page 26 of 58
Venture Agreement dated 10th December, 2008 echoes the same
arrangement to be entered into. It was with this understanding and for this
very reason, namely, running of the train by the two partners, i.e. IRCTC
and M/s C&K that Joint Venture company was formed. He was emphatic
in maintaining that agreement, by conduct, was entered into in favour of
the Joint Venture company for leasing of the train even if no written
agreement could be executed for want of certain differences which
erupted later. In such a scenario, when the Joint Venture Agreement has
been terminated by IRCTC, contended the learned senior counsel, M/s
C&K could challenge this agreement by raising arbitration dispute in view
of the arbitration clause contained in Article 30 of the Joint Venture
Agreement. According to him, during the pendency of these arbitration
proceedings, it was permissible for M/s C&K to protect the property in
dispute by seeking interim measure and for this, M/s C&K was very well
within its power to file Section 9 petition. Justifying the nature of relief
sought, his submission was that the property in question which needed to
be protected was Maharaja Express itself and, therefore, prayer of the
kind made could very well be made in proceedings under Section 9 of the
Act, which is a preservative proceeding rather than based strictly upon
rights of the parties under the contract. He argued that Section 9
proceedings were not akin to Order XXXIX Rule 1 and 2 which is a
provision empowering Court to pass interim injunction / orders pending
main Suit before the Court inasmuch as in those proceedings, ultimately it
is the Court which finally decides the lis between the parties. On the
other hand, under Section 9, the Court only passes interim measures and
main disputes are left for arbitral tribunal to decide. On the scope of
FAO(OS) No.433-35/2011 Page 27 of 58
Section 9, Mr.Desai referred to the following dicta in the Apex Court
judgment in the case of Firm Ashok Traders v. Gurumukh Das Saluja,
(2004) 3 SCC 155:
"A little later we will revert again to this topic. For the
moment suffice it to say that the right conferred by
Section 9 cannot be said to be one arising out of a
contract.
xxx
xxx
xxx
The arbitration clause constitutes an agreement by
itself. In short, filing of an application by a party by
virtue of its being a party to an arbitration agreement is
for securing a relief which the Court has power to
grant before, during or after arbitral proceedings by
virtue of Section 9 of the A & C Act. The relief sought
for in an application under Section 9 of A & C Act is
neither in a suit nor a right arising from a contract. The
right arising from the partnership deed or conferred by
the Partnership Act is being enforced in the arbitral
tribunal; the Court under Section 9 is only formulating
interim measures so as to protect the right under
adjudication before the arbitral tribunal from being
frustrated. Section 69 of the Partnership Act has no
bearing on the right of a party to an arbitration clause
to file an application under Section 9 of A & C Act."
xxx
xxx
xxx
The High Court in spite of having formed an opinion
in favour of directing the appointment of receiver has
rightly observed that retail liquor trade is an intricate
and tricky trade and hence cannot be entrusted to a
FAO(OS) No.433-35/2011 Page 28 of 58
third party. If that be so, we fail to appreciate the
justification behind turning out the persons in actual
management of business and passing on the reins in
the hands of those who were not holding the same for
nine months out of the twelve. We do not say that such
a course has any prohibition in law on being followed.
But we do not think a case of oppression of minority
by majority - the sense in which the term is understood
in law - having been made out on the material
available in the present case. A better course would
have been to allow the conduct of the business
continuing in the hands of persons who were doing so
till now but at the same time issuing such directions
and/or devising such arrangement as would protect and
take care of the interest of those who are not actually
running the business and that is what we propose to
do."
Other decisions of the Supreme Court on which reliance was placed
in support of this submission are as under:
In the judgment of Transmission Corporation of AP Ltd. v. Lanco
Kondapalli Power Ltd., (2006) 1 SCC 540, it has been held as follows:
"We have referred to Firm Ashok Traders (supra) not
because we agree with the principle laid down therein
but only to suggest that Section 9 of the 1996 Act
should be applied so that status quo may be directed to
be maintained having regard to the fact that the parties
understood the workability of the agreement in a
particular manner.
xxx
xxx
xxx
FAO(OS) No.433-35/2011 Page 29 of 58
Conduct of the parties is also a relevant factor. If the
parties had been acting in a particular manner for a
long time upon interpreting the terms and conditions of
the contract, if pending determination of the lis, an
order is passed that the parties would continue to do
so, the same would not render the decision as an
arbitrary one, as was contended by Mr. Rao. Even the
Appellant had prayed for adjudication at the hands of
the Commission in the same manner. Thus, it itself
thought that the final relief would be granted only by
the Arbitrator.
In Prabhjot Singh Mand v. Bhagwant Singh, (2009) 9 SCC 435,
the Apex Court held thus:
"...But it is beyond any cavil of doubt that before
passing an interim order, the courts should not only
consider prima facie case, balance of convenience, and
irreparable injury but also its effect on public
interest.."
16. Mr. Desai also submitted that the learned Single Judge was justified
in referring to Article 200 of the Articles of Association inasmuch as the
Joint Venture company was a necessary party and was rightly impleaded
in the OMP. In this behalf, he submitted that admittedly, there is an
arbitration clause in the Articles of Association of JV company being
Article 200. This Article refers to "Parties". The Parties are defined in
the Articles of Association to include the "Company". The signatories to
the Memorandum of Association and the Articles are the IRCTC and M/s
C&K. Thus, there is an arbitration clause amongst the three parties. He
FAO(OS) No.433-35/2011 Page 30 of 58
referred to the judgment in the case of VB Rangaraj v. VB
Gopalakrishnan, (1992) 1 SCC 160, wherein it has been held that Article
of Association is an agreement amongst the members of a Company and
the Company itself. He also argued that in the case of Hickman v. Kent
of Romney Marsh Sheepbreeders Association, (1915) 1 Ch. 881, it has
been held that an arbitration agreement in the Articles of Association of a
Company is a binding contract amongst the members and the Company
itself. His submission was that on the application of this judgment, it
cannot be asserted that there is no arbitration agreement with the JV
company. The particular part of the judgment on which he laid stress is as
follows:
"....To reconcile those decision with the other
expressions of judicial opinion above mentioned, some
such view should, I think, be adopted and general
articles dealing with the rights of members "as such"
treated as a statutory agreement between them and the
company as well as between themselves inter se, and,
in my judgment, article 49 in the present case does
constitute a submission to arbitration within the true
meaning and intent of the Arbitration Act."
17. Mr. Desai also argued that in respect of joinder of causes in respect
of an arbitration, the Supreme Court in the judgment of PR Shah Shares
and Stock Brokers P. Ltd. v. BHH Securities P. Ltd., CA No. 9238 of
2003 on 14.10.2011 has held as follows:
"14. If A had a claim against B and C, and there was
an arbitration agreement between A and B but there
was no arbitration agreement between A and C, it
might not be possible to have a joint arbitration against
B and C. A cannot make a claim against C in an
FAO(OS) No.433-35/2011 Page 31 of 58
arbitration against B, on the ground that the claim was
being made jointly against B and C, as C was not a
party to the arbitration agreement. But if A had a
claim against B and C and if A had an arbitration
agreement with B and A also had a separate arbitration
agreement with C, there is no reason why A cannot
have a joint arbitration against B & C. Obviously,
having an arbitration between A and B and another
arbitration between A and C in regard to the same
claim would lead to conflicting decisions. In such a
case, to deny the benefit of a single arbitration against
B and C on the ground that the arbitration agreements
against B and C are different, would lead to
multiplicity of proceedings, conflicting decisions and
cause injustice. It would be proper and just to say that
when A has a claim jointly against B and C, and when
there are provisions for arbitration in respect of both B
and C, there can be a single arbitration. In this case
though the arbitration in respect of a non-member is
under Bye-law 248 and arbitration in respect of the
member is under By Law 282, as the Exchange has
permitted a single arbitration against both, there could
be no impediment for a single arbitration. It is this
principle that has been applied by the learned Single
Judge, and affirmed by the division bench. As first
respondent had a single claim against second
respondent and appellant and as there was provision
for arbitration in regard to both of them, and as the
Exchange had permitted a common arbitration, it is not
possible to accept the contention of the appellant that
there could not be a common arbitration against
appellant and second respondent."
18. According to Mr. Desai, if a common arbitration can be allowed to
be conducted then a common Section 9 application under the Act can also
be filed. This notwithstanding, under Section 9, orders can also be passed
FAO(OS) No.433-35/2011 Page 32 of 58
against third parties as held in Heritage Lifestyle & Developers Pvt. Ltd.
v. Amarvilla Co-operative Housing Society Ltd., 2011 (3) Mh.LJ 865 and
Value Advisory Services v. ZTE Corporation, (2009) 3 Arb.LR 331.
19. We have already pointed out above that M/s C&K could maintain
Section 9 petition predicated on Article 30 of the Joint Venture
Agreement. The entire dispute is about the nature of relief sought. Two
kinds of reliefs are sought. First relates to stay of the operation of
termination of Joint Venture Agreement vide letter dated 12 th August,
2011. This Joint Venture Agreement was between IRCTC and M/s C&K
and, therefore, would clearly fall within the ambit of Article 30. Petition
qua this relief would be maintainable though it is a different case that on
merits this relief is denied by the learned Single Judge and rightly so, as
discussed by us at a subsequent stage. Second relief pertains to the
Maharaja Train. M/s C&K sought restraint order against the IRCTC from
using the train for any other purpose other than Joint Venture company
and further allowing M/s C&K and Joint Venture Company to operate the
said luxury train. According to IRCTC, this dispute would not come
within the scope of Article 30 as it does not arise out of or in relation to
the Joint Venture Agreement including its scope, validity, existence,
interpretation, etc. Prima facie, we feel that this may not be correct. The
facts noted above would demonstrate that the Joint Venture Agreement
was entered into between IRCTC and M/s C&K solely for the purpose of
running the luxury tourist train, namely, Maharaja Express and for that
purpose, the two had agreed to form a Joint Venture Company. In the
Joint Venture Company also, both these parties have equal shareholding
FAO(OS) No.433-35/2011 Page 33 of 58
and there is no other shareholder. Thus, when the matter is looked into
from this angle, we feel that the said luxury train becomes the subject
matter of Joint Venture Agreement and, therefore, when the disputes have
arisen in respect thereto, prima facie they would be covered by Article 30
and petition under Section 9 would be maintainable though it would be a
different question as to whether M/s C&K is entitled to such a relief on
merits or not. We may clarify at this stage that it is only a prima facie
view taken by us for the purpose of entertaining the petition under Section
9 of the Act. Ultimately, in the arbitration proceedings, it would be open
to the IRCTC to raise such an issue and it would be for the arbitral
tribunal to take final view touching the scope and jurisdiction of the
arbitration clause with reference to the nature of disputes raised.
Issue No.2 to 6:
20. Issues No.2 to 6 are the various facets of the centre of controversy,
namely, whether direction in the nature given, which are in the nature of
mandatory injunction, amounted to specific performance or directing
continuation of the arrangement even when the agreement had been
terminated could be given or not. Further, whether there is a public
interest in continuing the arrangement and this public interest could be a
reason to justify the running of the Maharaja train. We shall take up
cumulative discussion on these aspects.
21. For answering this issue, we proceed on the premise that from the
very beginning, the parties envisaged an arrangement for running the train
in question for a period of 15 years. We also proceed on the premise that
FAO(OS) No.433-35/2011 Page 34 of 58
Joint Venture company was set up by the two Joint Venture partners
specifically and exclusively for this purpose alone, namely, to run the said
super luxury train, viz. Maharaja Express. We also proceed on the
premise that for this purpose, IRCTC was supposed to give the train on
lease to the Joint Venture company for a period of 15 years. It is also a
fact that even before such an agreement could be entered into, the Joint
Venture company was allowed to run the train which had completed one
season, namely, September, 2010 to April, 2011. Whether it was on the
basis of adhoc arrangement as contended by the IRCTC or it was in
furtherance of the 15 years lease arrangement contemplated between the
parties, according to us, would not make any material difference. The fact
is that whatever was the nature of this arrangement, the same has been
terminated by IRCTC. We have also to bear in mind at this stage that it is
the IRCTC which is the owner of the train having borne the entire cost of
the train, less capital subsidy.
22. We may mention that a faint attempt was made for the first time
before us by the learned senior counsel for M/s C&K to make out a case
that train had become a partnership property, i.e. property of Joint Venture
but it is not possible to accept such a plea which was not taken up to now
in any of these proceedings. Not only it seems to be belated and an
afterthought, it is contrary to record as well. As pointed out above,
admittedly total cost of the train was Rs.49.5 Crores which was borne by
IRCTC. This is so recorded in Article 6 of the agreement. Not only the
shell train, even the cost of interior, fittings and furnishing was borne by
IRCTC. If it was to be a Joint Venture property, there was no question of
FAO(OS) No.433-35/2011 Page 35 of 58
providing for leasing of this train by IRCTC to Joint Venture company.
These clauses are anathema and alien to the plea of partnership property.
Therefore, IRCTC was and remains the exclusive owner of the train. We
would like to mention that Mr. Desai, learned senior counsel, had cited
certain judgments on the supposition that Maharaja Express had become
the partnership property and since it was a 50:50 partnership venture,
there could not have been premature termination thereof without there
being a termination clause. Since we do not find this train to be a
partnership property, those judgments would be of no avail to M/s C&K.
23. The position that prevails today is that the Joint Venture Agreement
stands terminated insofar as M/s C&K and IRCTC are concerned.
Likewise, the arrangement between IRCTC and Joint Venture company,
whether adhoc or otherwise, stands terminated. Whether termination of
Joint Venture Agreement is bad in law or it was justified can be resolved
by means of arbitration to be decided by the arbitral tribunal. Whether
arrangement for running the train which was between IRCTC and Joint
Venture company is terminated validly or not is again an issue which can
be decided by the arbitral tribunal in the arbitration proceedings whether
between IRCTC and Joint Venture company or in tripartite arbitration, if
such tripartite arbitration is permissible in law. (We may clarify that we
are not suggesting as to which proceedings would be appropriate). At this
stage, we only commend that learned Single Judge is right in observing
that the Court, while dealing with application under Section 9 of the Act,
would not go into the contentions of the parties and decide as to whether
termination of agreement is valid or not. That is the issue which has to be
FAO(OS) No.433-35/2011 Page 36 of 58
settled in the main arbitral proceedings. The learned Single Judge is also
right in observing that in these proceedings, Court cannot restore the Joint
Venture Agreement which has been terminated/rescinded. No doubt, Mr.
Desai, learned senior counsel for M/s C&K has filed the counter
objections to the impugned judgment assailing the aforesaid part of the
judgment. The appellants had objected to the maintainability of such
objections. However, it is not necessary to go into the same inasmuch as
on merits, we feel that the learned Single Judge has rightly held that it is
not within the scope of Section 9 to deal with these contentions which
would be the subject matter of main arbitration proceedings and the
jurisdiction lies entirely with the arbitral tribunal to decide these
substantial issues touching the merits of the dispute. Para 17 of the
Division Bench judgment of this Court in the case of Bharat Catering
Corporation v. Indian Railway Catering and Tourism Corporation, 164
(2009) DLT 530 (DB) is a complete answer wherein it was held:
"17. Apart from merits, even otherwise, in our view,
the scope and ambit of Section 9 do not envisage the
restoration of a contract which has been terminated.
The learned Single Judge, in our view, rightly held that
if the petitioner is aggrieved by the letter of
termination of the contract and is advised to challenge
the validity thereof, the petitioner can always invoke
the arbitration clause to claim damages, if any,
suffered by the petitioner. It is not open to this Court to
restore the contract under Section 9, which is meant
only for the sole purpose of preserving and
maintaining the property in dispute and cannot be used
to enforce specific performance of a contract as such.
A bare glance at the said Section will suffice to show
that pending arbitration proceedings, the Court and the
FAO(OS) No.433-35/2011 Page 37 of 58
Arbitral Tribunal have been vested with the power to
ensure that the subject matter of the arbitration is not
alienated or frittered away. The provisions of Section
9, for the sake of convenience, are FAO(OS) 226/2009
Page No. 15 of 20 extracted below:-
"9. Interim measures, etc. by Court.- A party may,
before or during arbitral proceedings or at any time
after the making of the arbitral award but before it is
enforced in accordance with section 36, apply to a
court-
(i) for the appointment of a guardian for a minor or a
person of unsound mind for the purposes of arbitral
proceedings; or
(ii) for an interim measure of protection in respect of
any of the following matters, namely:-
(a) the preservation, interim custody or sale of any
goods which are the subject-matter of the arbitration
agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any
property or thing which is the subject-matter of the
dispute in arbitration, or as to which any question may
arise therein and authorising for any of the aforesaid
purposes any person to enter upon any land or building
in the possession of any party, or authorising any
samples to be taken or any observation to be made, or
experiment to be tried, which may be necessary or
expedient for the purpose of obtaining full information
or evidence;
(d) interim injunction or the appointment of a receiver;
FAO(OS) No.433-35/2011 Page 38 of 58
(e) such other interim measure of protection as may
appear to the court to be just and convenient, and the
Court shall have the same power for making orders as
it has for the purpose of, and in relation to, any
proceedings before it."
24. It is for this reason that that we refrain from dealing with various
other arguments raised by both the parties accusing each other. Insofar as
the appellant IRCTC is concerned, its allegation is that financial
projections made by M/s C&K at the time of Expression of Interest were
false and misguided which created confusion in the mind of IRCTC and
which led to the impugned termination. It was also argued that M/s C&K
had wrongly deducted higher rate of commission of 30% on the bookings
made. It was also contended that Joint Venture company was not paying
haulage charges as per the terms of arrangement. Likewise, M/s C&K has
levelled accusation against the appellant which include that no amount is
payable by M/s C&K or Joint Venture to the IRCTC, train operations are
likely to result in profits in the near future, it was the fault of IRCTC to
terminate the Joint Venture Agreement which was "a bolt from the blue",
M/s C&K were right in charging the commission and it had made
substantial investments in the Joint Venture and, therefore, there was no
valid or justifiable reason on the part of IRCTC to terminate the
agreement. We are eschewing the discussion on these aspects for the
aforesaid reasons.
25. Based on the facts projected above, we come back to the main
issue, namely, whether direction in the nature given, which are in the
nature of mandatory injunction amounting to specific performance or
FAO(OS) No.433-35/2011 Page 39 of 58
directing continuation of the arrangement even when the agreement had
been terminated could be given or not. Once the Joint Venture
Agreement is terminated, prima facie we feel that even in the main
arbitration proceedings, it would be difficult for M/s C&K to seek the
final relief of specific performance and for restoration of the agreement.
There is a huge possibility that in such a situation, normally M/s C&K
would be entitled to damages even if it is held that Joint Venture
Agreement was illegally terminated. After all, Joint Venture Agreement
was a contract between the parties. It was only in the realm of contractual
arrangement with no statutory flavour and no element of public law.
While dealing with the contractual obligations under the realm of contract
in a private field without any insignia of public element, it may be
somewhat difficult for M/s C&K to maintain the relief of specific
performance. The agreement was in commercial field to be governed by
contract law, as between two private parties. In Rajasthan Breweries Ltd.
v. The Stroh Brewery Company, AIR 2000 Delhi 450, the Court
enunciated the principle on this aspect in the following words:
"Even in the absence of specific clause authorising and
enabling either party to terminate the agreement in the
event of happening of the events specified therein,
from the very nature of the agreement, which is private
commercial transaction, the same could be terminated
even without assigning any reason by serving a
reasonable notice. At the most, in case ultimately it is
found that termination was bad in law or contrary to
the terms of the agreement or of any understanding
between the parties or for any other reason, the remedy
of the appellants would be to seek compensation for
wrongful termination but not a claim for specific
FAO(OS) No.433-35/2011 Page 40 of 58
performance of the agreements and for that view of the
matter learned Single Judge was justified in coming to
the conclusion that the appellant had sought for an
injunction seeking to specifically enforce the
agreement. Such an injunction is statutorily prohibited
with respect of a contract, which is determinable in
nature. The application being under the provisions of
Section 9(ii)(e) of the Arbitration and Conciliation
Act, relief was not granted in view of Section 14(i)(c)
read with Section 41 of the Specific Relief Act. It was
rightly held that other clauses of Section 9 of the Act
shall not apply to the contract, which is otherwise
determinable in respect of which the prayer is made
specifically to enforce the same."
26. We are unable to accept the contention of learned counsel for the
appellant that since IRCTC is a corporation which is wholly owned by the
Ministry of Railways and is, thus, subjected to Article 12 of the
Constitution of India, the appellant can maintain the prayer for mandatory
injunction. This plea of the appellant flows from the argument that the
action of the State or instrumentality of the State has to be fair, just and
non-arbitrary even in contractual matters and for this purpose, the
appellant has referred to the judgment of this Court in Pioneer Publicity
Corporation v. DTC, 103 (2003) DLT 442 and that of Supreme Court in
Mahabir Auto Sales (supra). While there is no denial of the legal
principle, per se, laid down in the aforesaid cases, we are unable to accept
the applicability of these judgments insofar as the present case is
concerned and that too, when we are dealing with the question of interim
arrangement and not concerned with the final stage of the proceedings.
Specific performance would require day to day supervision. In any event,
FAO(OS) No.433-35/2011 Page 41 of 58
M/s C&K can be compensated in terms of money if they prove losses due
to alleged wrongful treatment. There is a serious dead lock between
IRCTC and M/s C&K in relation to the affairs of Joint Venture company
cannot be given a go-by.
27. Though our aforesaid observations are only prima facie in nature
and we are clear that in arbitration proceedings, the Arbitral Tribunal
would decide the same on its own merits without being influenced by our
tentative observations, this exercise is undertaken for the purpose of
present proceedings under Section 9 of the Act. Once this is the prima
facie view we hold, it is difficult to make interim arrangement and pass an
order in the nature of mandatory injunction directing continuation of the
earlier arrangement which has been terminated by IRCTC. After all, it is
to be borne in mind that IRCTC is the absolute owner of the train in
question and the said train belongs exclusively to IRCTC. Can, in such
circumstances, IRCTC be forced to do what it is not willing to in a matter
relating to commercial contract, which has been terminated? Somewhat
similar situation had arisen in the case of Country Development and
Management Services Pvt. Ltd. v. Brookside Resorts Pvt. Ltd., 2006
(Supp.) Arb.LR 248 (Delhi). In this Single Bench judgment rendered by
one of us (A.K. Sikri, J.), the injunction was refused. Para 14 of the said
judgment takes note of the facts which prevailed in that case and in the
said para, legal position is stated. In that case also, the Court was dealing
with application under Section 9 of the Act. We reproduce herein para 14
and other relevant paragraphs for our purpose:
FAO(OS) No.433-35/2011 Page 42 of 58
14. I may state at the outset that the fundamental
aspect which is to be borne in mind is that we are
dealing with petition under Section 9 of the Arbitration
and Conciliation Act, 1996 and, therefore, entire
matter has to be looked into from the angle as to what
should be the interim arrangement between the parties.
The parties entered into agreement dated 2nd June,
2001, namely, TLA and now the disputes have arisen
between the parties arising out of the said TLA. The
matter will have to be gone into, in depth, in those
arbitration proceedings. The admitted position which
emerges is that the land in question on which the hotel
is built, belongs to the respondent. It is also not
disputed that the entire financial arrangement for
construction of the said hotel is borne by the
respondent either from its own resources or by taking
loan from financial institution. Though the petitioner's
case is that financial institution has sanctioned the loan
because of the petitioner's association with the
respondent, fact remains that loan is sanctioned in the
name of the respondent and it is the sole responsibility
of the respondent to repay the said loan. The
construction cost of the project is, according to the
respondent, Rs.11 crores. Therefore, entire hotel
property, namely, land as well as construction thereon
exclusively belongs to the respondent. As per the
petitioner's averments, it has provided the technical
knowhow in the form of drawings,
designs/consultancy etc. on the basis of which hotel is
built and the hotel which stands now, gives an
appearance of of a CIS hotel. This is disputed by the
respondent. It , however, cannot be denied that some
technical support is obviously provided by the
petitioner pursuant to the TLA. However, only
because of this reason can it be said that the
respondent should not be allowed to run the hotel if the
parties have otherwise fallen apart. Case of the
petitioner is that the respondent has made structural,
FAO(OS) No.433-35/2011 Page 43 of 58
architectural and design changes and, therefore, even
according to the petitioner the hotel is not made
strictly in conformity with the standard on which CIS
hotels are constructed. The respondent wants to run
the hotel itself. Even if there was no dispute and the
hotel was strictly built according to CIS standards and
hotel had run under the petitioner's banner, the
respondent could always terminate the agreement at
any time under the TLA and start operating the hotel
of its own. This is because the agreement is
determinable in nature. If that could be the position
even after the start of hotel as Carlson hotel, I am of
the view that if the respondent wants to start the hotel,
from the beginning itself, without the association of
the petitioner, it can do so. The petitioner, for the
alleged services rendered and for the alleged breach of
contract on the part of the respondent, can always sue
for damages.
15. In view of Sections 14 and 34 of the Specific
Relief Act, injunction cannot be granted. These
provisions have come up for consideration before the
courts number of times. Some of these judgments are
taken note of hereinafter:
(i) Rajasthan Breweries Ltd. The Stroh
Brewery Co. (supra):
"13: As the application by the appellant was filed
under Section 9 of the Act prior to
commencement of the arbitration proceedings, it
is not disputed that the Court is empowered to
deal with the same and exercise such power for
making orders as it has for the purposes of and in
relation to any proceedings before it. The closing
words of Section 9 of the Act empowering the
Court to deal with such applications for interim
measures have on the face of it to be dealt with in
accordance with the law applicable to any
FAO(OS) No.433-35/2011 Page 44 of 58
proceedings taken out before such a court. On the
ratio of the decision of the Supreme Court in
Sumitomo Heavy Industries Ltd. Vs. ONGC Ltd.
AIR 1998 S.C.825 the application will be
governed by the law of India and not by the
governing law. However, the principles of equity
governing specific performance are almost same
in Indian law and English law. The discretion of
the Courts of England while enforcing the
specific performance of a contract is subject to the
same constraints as are applicable in the Courts
in India. Under the English law of specific
performance of contractual obligation is available
only in equity and is subject to various
restrictions, which have been explained by
G.H.Treitel in his work "The Law of Contracts"
6th Edition pages 764 to 775 as follows:
"(i) Specific performance will not be ordered
where damages are adequate remedy.
(ii) If the party applying for relief is guilty of a
breach of the contract or is guilty of wrongful
conduct.
(iii) If the Contract involves personal service.
(iv) If the contract requires constant supervision.
(v) If the party against whom specific
performance is sought is entitled to terminate the
contract."
At page 775, it is stated in the aforementioned
work:-
"If the party against whom specific performance
is sought is entitled to terminate the contract, the
FAO(OS) No.433-35/2011 Page 45 of 58
order will be refused as the defendant could
render it nugatory by exercising his powers to
terminate. This principle applies whether the
contract is terminable under its express terms or
on account of the conduct of the party seeking
specific performance."
14. The effect of breach of a contract by a party
seeking to specifically enforce the contract under
the Indian law is enshrined in Section (c)read with
Section 41 (e) of the Specific Relief Act, 1963.
Clause (e) of Section 41 of the Specific Relief Act
provides that injunction cannot be granted to
prevent the breach of contract, the performance of
which would not be specifically enforced. Clause
(c) of Section 41 enumerates the nature of
contracts, which could not be specifically
enforced. Clause (c)to sub-section (1) of Section
14 says that a contract which is in its nature
determinable cannot be specifically enforced.
Learned Single Judge thus was justified in saying
that if it is found that a contract which by its very
nature is determinable, the same not only cannot
be enforced but in respect of such a contract no
injunction could also be granted and this is
mandate of law. This, however, is subject to an
exception, as provided in Section 42 that where a
contract comprises an affirmative agreement to do
a certain act, coupled with a negative agreement,
express or implied, not to do a certain act, the
circumstances that the court is unable to compel
specific performance of the affirmative agreement
shall not preclude it from granting an injunction
to perform the negative agreement.
18. In Indian Oil Corporation Ltd. Vs. Amritsar
Gas Service and others, 1991 (1) S.C.C.533, the
Supreme Court had an occasion to consider the
FAO(OS) No.433-35/2011 Page 46 of 58
terms of agreement of distributorship. The
agreement could be terminated in accordance with
the terms of the agreement as per clauses 27 and
28 thereof. The Arbitrator had also held the
distributorship to be revocable in accordance with
clauses 27 and 28 of the agreement. The
distributorship agreement was held for indefinite
period, namely, till the time it was terminated in
accordance with the terms contained therein. It
was the case of the respondent therein that since
the contract had not been terminated in
accordance with clause 27 thereof, under which
termination had been made, the firm was entitled
to continuance of distributorship in the special
circumstances of the case, which contention was
upheld by the Arbitrator. Supreme Court set
aside the award of the arbitrator on the ground
that there is error of law apparent on the face of
the record and grant of relief in the award cannot
be sustained. It was held:-
"The arbitrator recorded finding on issue No.1
that termination of distributorship by the appellant
Corporation was not validly made under clause
27. Thereafter, he proceeded to record the finding
on issue No.2 relating to grant of relief and held
that the plaintiff-respondent 1 was entitled to
compensation flowing from the breach of contract
till the breach was remedied by restoration of
distributorship. Restoration of distributorship was
granted in view of the peculiar facts of the case on
the basis of which it was treated to be an
exceptional case for the reasons given. The
reasons given state that the Distributorship
Agreement was for an indefinite period till
terminated in accordance with the terms of the
agreement and, therefore, the plaintiff-respondent
No.1 was entitled to continuance of the
FAO(OS) No.433-35/2011 Page 47 of 58
distributorship till it was terminated in accordance
with the agreed terms. The award further says as
under:-
"This award will, however, not fetter the right of
the defendant Corporation to terminate the
distributorship of the plaintiff in accordance with
the terms of the agreement dated April 1, 1976, if
and when an occasion arises."
This finding read along with the reasons given in
the award clearly accepts that the distributorship
could be terminated in accordance with the terms
of the agreement dated April 1,1976, which
contains the aforesaid clauses 27 and 28. Having
aid so in the award itself, it is obvious that the
arbitrator held the distributorship to be revokable
in accordance with clauses 27 and 28 of the
agreement. It is in this sense that the award
describes the Distributorship Agreement as one
for an indefinite period, that is, till terminated in
accordance with clauses 27 and 28. The finding
in the award being that the Distributorship
Agreement was revokable and the same being
admittedly for rendering personal service, the
relevant provisions of the Specific Relief Act
were automatically attracted. Sub-section (1) of
Section 14 of the Specific Relief Act specifies the
contracts which cannot be specifically enforced,
one of which is a contract which is in its nature
determinable. In the present case, it is not
necessary to refer to the other clauses of sub-
section (1) of Section 14, which also may be
attracted in the present case since clause (c)
clearly applies on the finding read with reasons
given in the award itself that the contract by its
nature is determinable. This being so granting the
relief of restoration of the distributorship even on
FAO(OS) No.433-35/2011 Page 48 of 58
the finding that the breach was committed by the
appellant-Corporation is contrary to the mandate
in Section 14 (1) of the Specific Relief Act and
there is no error of law apparent on the face of the
award which is stated to be made according to the
law governing such cases. The grant of this relief
in the award cannot, therefore, be sustained.
The facts of the present case are identical to those
in aforementioned decision of the Supreme Court
in as much as the agreements in the instant case
are also terminable by the respondent on
happening of certain events. In Indian Oil
Corporation's case (supra) also agreement was
terminable on happening of certain events.
Question that whether termination is wrongful or
not; the events have happened or not; the
respondent is or is not justified in terminating the
agreements are yet to be decided. There is no
manner of doubt that the contracts by their nature
determinable.
In M/s Classic Motors Ltd. Vs. M/s Maruti Udyog
Ltd., 1997 I AD (DELHI) 190 = (1997) 65
D.L.T.166 relying upon number of decisions,
learned Single Judge of this court rightly
observed:-
"In view of long catena of decisions and
consistent view of the Supreme Court, I hold that
in private commercial transaction the parties
could terminate a contract even without assigning
any reasons with a reasonable period of notice in
terms of such a Clause in the agreement. The
submission that there could be no termination of
an agreement even in the realm of private law
without there being a cause or the said cause has
to be valid strong cause going to the root of the
FAO(OS) No.433-35/2011 Page 49 of 58
matter, therefore, is apparently fallacious and is
accordingly, rejected."
(ii) Crompton Greaves Ltd. Vs. Hyundai
Electronics Industries Co. Limited and others 76
(1998) DLT 733
(iii) National Auto Impex Vs. M/s Autocop
(India) Pvt.Ltd. & Ors., 2001 VI AD (DELHI)
490
(iv) Indian Oil Corporation Ltd. Vs. Amritsar Gas
Service and others (1991) 1 SCC 533
(v) Alfa Laval (India) Ltd. Vs. J.K.Corp.Ltd.&
Anr. 2000 I AD (DELHI) 974.
16. The effect of the stay order would be that the
hotel is not allowed to start its operation. If ultimately
the respondent succeeds then the respondent would be
put to unnecessary loss and the time gone by would be
wasted without putting the clock back. On the other
hand, it is ultimately held that the petitioner had right
to run the management of hotel for specified period
such an award can be passed in favour of the petitioner
or the petitioner can be compensated for depriving it
from doing so.
17. Learned senior counsel for the respondent, in
these circumstances, is right in his submission that the
petitioner cannot invoke the provisions of Section 42
of the Specific Relief Act. There is a dispute as to
whether the contract is still in existence or it has come
to an end by efflux of time. The respondents
submission that once the opening date is not extended
by the petitioner under clause 1.5 of the agreement
there is no obligation on the part of the petitioner to
comply with the agreement. The circumstance of the
FAO(OS) No.433-35/2011 Page 50 of 58
case, therefore, do not warrant exercise of any
discretionary jurisdiction in favour of the petitioner.
The principle laid down by the Supreme Court in
Gujrat Bottling Company Ltd. (supra) is that relief by
way of interlocutory injunction, is granted to mitigate
the risk or injustice to the petitioner during the period
before that uncertainty could be resolved. The object
of the interlocutory injunction is to protect the plaintiff
against injury by violation of his right for which he
could not be adequately compensated in damages
recoverable in the action if the uncertainty were
resolved in his favour at the trial. The need for such
protection has, however, to be weighed against the
corresponding need to the defendant to be protected
against injury resulting from his having been
prevented from exercising his own legal rights for
which he could not be adequately compensated."
28. In the present case, when the adhoc arrangement or even the so-
called lease has been terminated, we agree with the learned Additional
Solicitor General that passing of mandatory injunction would amount to:
(i) First, create an agreement between Joint Venture company and
IRCTC in relation to the train;
(ii) Second, enforce such agreement even though JV company was not
a petitioner; and
(iii) Third, allow M/s C&K to take advantage of such agreement when,
admittedly, even the „Lease Agreement‟ as per the terms of the
Joint Venture Agreement was to be between JV company and
IRCTC.
FAO(OS) No.433-35/2011 Page 51 of 58
29. At this stage, we would like to deal with the argument of „public
interest‟. Main reason with which the learned Single Judge has been
swayed is that it would not be in public interest to discontinue the running
of the train, bookings of which have already been made. It is also
observed that if the arrangement, as existed earlier, is not preserved and
status quo not restored, M/s C&K shall also suffer irreparable loss. On
this aspect, the learned Single Judge inter alia observed:
"This submission of the respondent is devoid of merit
as by doing the interim measures this Court is not
attempting to rewrite the agreement or to confer any
leasehold rights in favour of the petitioner or JV
company but rather in the larger public interest which
is going to effected by virtue of sudden stopping of the
train, booking of which are already undertaken by the
petitioner, there is no harm in continuing the said
arrangement for some more period of time and more
so when the parties have already earlier operated the
said arrangement without the execution of the said
lease deed. Accordingly, the said continuation of the
arrangement which was previously operated upon does
not confer any further rights in favour of any of parties
as this court is aware that it is claim to be adjudicated
upon by the arbitral tribunal."
30. Mr. Desai, learned senior advocate supported the aforesaid reason
by submitting that it was the expertise of M/s C&K in running such
luxury train that yielded the results and because of the efforts of M/s
C&K, it could build up brand name of the train in question, namely,
"Maharaja Express". The result was that within one and a half years time,
with sole efforts of M/s C&K, it became one of the most prestigious
FAO(OS) No.433-35/2011 Page 52 of 58
luxury train in the world. The tourism industry at global level knew that
M/s C&K was associated with this train. Therefore, sudden halt of this
train would put a severe jolt to the reputation of not only M/s C&K but
the country at large. Further, because of bookings, interest of third parties
were involved and in case these bookings are cancelled, it may entail
series of claims against the Joint Venture company. It was also submitted
that high level of expertise was required to run this train which IRCTC
did not have. He further submitted that for the current season, i.e. up to
April, 2012, bookings have been done which needed to be protected and
the IRCTC was adopting destructive approach which was neither in the
interest of any of the parties nor in the interest of the tourists who had
made bookings nor in national interest. On this basis, the claim of „public
interest‟ was sought to be taken to a high pedestal. It was also submitted
that under Section 9 of the Act, protection sought was of „subject matter‟
which was permissible and it was not limited to the train but business
itself as the sole business of the Joint Venture was to run this train. It was
argued that Arbitral Tribunal had the power to enforce the contract and
bind the parties to their contract on which the business relation establishes
in the beginning, namely, conducting of business of running the train
jointly for a period of 15 years. He also argued that IRCTC could not
raise the bogie of deadlock as it was to meet this situation; that the learned
Single Judge had appointed a receiver. His last submission was that once
the learned Single Judge has exercised his discretion, the appellate court
should not intermeddle with the same as per the well established principle
of law laid down by the Supreme Court in series of judgments.
FAO(OS) No.433-35/2011 Page 53 of 58
31. We are afraid that M/s C&K cannot sail itself through on the basis
of this argument predicated on "public interest". At the cost of repetition
we say that the train in question belongs to IRCTC which has invested
entire amount therein. The arrangement between the parties, which was
purely of commercial nature, has been terminated. In the light of these
facts, the plea of larger public interest is to be examined. At the outset,
prima facie it would be difficult to accept the plea of public interest in a
pure commercial matter. That apart, it is also to be kept in mind that the
running of this train had so far incurred losses only and profits are not in
sight in near future. Can the appellant be bound to continue with this
arrangement and to continue to suffer losses? Would such a situation be
against public interest when the appellant is a public sector enterprise?
When there is a reasonable apprehension in the mind of the appellant that
the joint venture is not viable, could there be an interim arrangement
forced upon the appellant? Can the purported prestige of M/s C&K,
allegedly at stake, be the foundation of "public interest"? Answer to all
these questions has to be in the negative. It has to be borne in mind that
running of this train was not a welfare measure of the State. In an era of
globalized economy, such ventures are influenced by economic
considerations. Precisely for this reason as well, the venture was
conceived as public-private partnership whereby the Government decided
to take in the Joint Venture a party from private sector. If such an
arrangement, for whatever reasons, has not worked out, economics of this
arrangement have to be kept in mind and analyzed. When we examine the
matter keeping in view the economic logic and its effects including the
normative aspects of economic analysis, we would reach the conclusion
FAO(OS) No.433-35/2011 Page 54 of 58
that M/s C&K are not able to establish that "public interest would be sub-
served only when C&K allowed to run the train". M/s C&K had agreed
to become the partner in Joint Venture with primary objective of earning
profits. If it is ultimately found that the Joint Venture Agreement is
illegally terminated, M/s C&K can always be compensated in terms of
money.
32. What remains is the prestige of the country as Maharaja Express
has earned worldwide name and is one of the premier luxury trains in the
world tourism. No doubt, that is true. However, that would not mean that
M/s C&K has acquired indefeasible right to run this train. Purpose can be
served if the train runs as usual but by the IRCTC on its own or with the
aid and addition of some other party as the IRCTC does not want M/s
C&K to be its counterpart in the running of this train. We have to keep in
mind that there have been serious differences and disputes between the
parties in respect of payment of haulage charges, the amount of
commission payable on bookings, the manner in which the train was
operated in the previous season, etc. We cannot comment as to who is at
fault. Blame game goes on and it is for the arbitral tribunal to decide.
What we emphasise is that no public interest can be sub-served in
continuing this arrangement which has not only run in rough weather but
does not appear to be conducive for the health of joint venture. We find
some substance in the arguments of learned Additional Solicitor General
that it was not a "blow out of blue". Rather the differences were growing
for quite some time and there is a correspondence on record which
indicates that the IRCTC had asked the respondents to stop making
FAO(OS) No.433-35/2011 Page 55 of 58
bookings and, therefore, it does not appear to be a case of sudden
stoppage of arrangement though there is a possibility that M/s C&K may
have nurtured an impression that things would be sorted out and train will
continue to run smoothly.
33. M/s C&K also cannot ride on its reputation and expertise in the
field. That may be so. However, in case the IRCTC has decided to
terminate the arrangement and, as discussed above, M/s C&K may prima
facie only claim damages, even in the event of its success in the
arbitration proceedings. The Court cannot restore the terminated
arrangement and direct that the train would be managed and run by M/s
C&K under the supervision of a receiver. The public interest in the form
of so-called national interest can be sub-served when the Maharaja
Express continue to operate even by IRCTC. We find that before the
learned Single Judge, IRCTC had made the following suggestions in order
to honour the bookings as stated by M/s C&K without prejudice to the
rights and contentions of the parties:
"a) The train has to be run by the owner/
respondent. All the facility material including
crockery, furnishings etc which are in custody of the
petitioner should be handover to respondent for
executing this facility arrangement.
b) All revenues arising therefrom without any
deductions earned either by the petitioner or
respondent may be deposited in the separate account
from which expenditure will be funded.
c) All the bookings may be allowed to the
transferred to the respondents for honouring.
FAO(OS) No.433-35/2011 Page 56 of 58
d) All the on board or off board expenses and
railway payments may be allowed to be charged to
this account. In this way, the amount will be sufficient
to cover the expenses and there will be no need for
further loans.
e) The existing service providers may be
retained."
The IRCTC shall remain bound by the aforesaid suggestions and
would run the train. Whatever bookings have been made up to now can
also be transferred by M/s C&K to IRCTC.
34. In any case, it is not necessary to discuss this aspect in further
detail. By the order of the learned Single Judge as well, the arrangement
was to continue till December, 2011. By virtue of the interim orders, that
arrangement continued till December, 2011. M/s C&K have, thus,
already got the benefit of the order of the learned Single Judge. Though
M/s C&K continued to do the bookings even beyond December, 2011,
statement was made at the Bar by learned Additional Solicitor General
that IRCTC will take over those bookings from M/s C&K and will ensure
that the train would complete the season, albeit under the supervision of
IRCTC. Therefore, third party interest is also not going to suffer. For all
these reasons, we are of the opinion that the interim arrangement as
directed by the learned Single Judge is not justified and legally
sustainable. In that view of the matter, it is not necessary to go into the
issue as to whether the appointment of receiver by the learned Single
Judge was valid in law or not. It is also not necessary to go into the
FAO(OS) No.433-35/2011 Page 57 of 58
question of maintainability of the cross objections as even on merits they
are found to be unsustainable.
35. At this stage, we would like to put on record that MAPPLE had
intervened. They have filed application seeking certain directions. Since
the arrangement as directed by the learned Single Judge is not to continue,
it is not necessary to deal with the same. Suffice it to state that whatever
rights have accrued in favour of MAPPLE either under the arrangement
with IRCTC / Joint Venture or as a result of the directions given in these
proceedings, MAPPLE would be at liberty to enforce the same in
appropriate proceedings in accordance with law.
36. Subject to the observations made in this order, we allow the present
appeal and set aside the impugned order passed by the learned Single
Judge. The appellant shall also be entitled to costs.
ACTING CHIEF JUSTICE
SIDDHARTH MRIDUL, J.
JANUARY 06, 2012 pk FAO(OS) No.433-35/2011 Page 58 of 58