Cox & Kings Ltd. vs Indian Rly. Catering & Tourism Corporation Ltd.

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2012 Supreme(SC) 435

2012 (4) Supreme 418
SUPREME COURT OF INDIA
Altamas Kabir & J. Chelameswar, JJ.
Cox & Kings Ltd. — Petitioners
versus
Indian Rly. Catering & Tourism Corporation Ltd. & Anr. — Respondents
Special Leave Petition (Civil) Nos.965-967 of 2012 with Contempt Petition (Civil) Nos.41-43 of 2012 in Special Leave Petition (Civil) Nos.965-967 of 2012
Decided on 05-07-2012

Headnote:Arbitration and Conciliation Act, 1996- Section 9-Joint Venture Agreement - Luxury Transit Train Project- Expression of Interest floated by Respondent for a Joint Venture partner for Luxury Transit Train Project, to operate, manage and run said train- Petitioner came to be selected as Joint Venture shareholder for operation of Luxury Tourist Train Project-Disputes arose between shareholders regarding working of Joint Venture Agreement and Memorandum of Understanding, which ultimately resulted in termination of lease arrangement by Respondent, IRCTC-Initiation of proceedings by petitioner for staying termination of lease agreement and also for allowing arrangements to continue till month of April, 2012-Order passed by Single judge appointing a receiver directing that train would continue to be run under supervision of said Receiver till December, 2011, as per arrangement which was continuing during the earlier season-Challenge thereagainst by IRCTC Ltd-Allowed by Division Bench-Special leave Petitions- Although, it was the intention of parties by virtue of Joint Venture Agreement that luxury train, belonging to Respondent No.1, was to be operated by Joint Venture Company, at least for a minimum period of 15 years, what ultimately transpired was termination of Agreement by Respondent No.1 in favour of Joint Venture Company- Petitioner was not entitled to question such termination as by itself it had no existence as far as running of the train was concerned and it was not a party to the proceedings- Even though Petitioner had invested large sums of money in the project, but that could not entitle it to pray for and obtain a mandatory order of injunction to operate train once the lease agreement/arrangement had been terminated-Special Leave Petitions dismissed (Paras 22 to 24)
       Facts of the Case :
        An Expression of Interest was floated by Respondent herein in the instant case for a Joint Venture partner for Luxury Transit Train Project, to operate, manage and run the said train. Petitioner came to be selected as Joint Venture shareholder for operation of the Luxury Tourist Train Project.Disputes arose between shareholders regarding the working of the Joint Venture Agreement and the Memorandum of Understanding, which ultimately resulted in the termination of the lease arrangement by Respondent, IRCTC.
        B. Proceedings were initiated by petitioner for staying termination of lease agreement and also for allowing the arrangements to continue till month of April, 2012, subject to such terms and conditions as may be imposed by Court. An Order was passed by Single judge appointing a receiver directing that train would continue to be run under supervision of said Receiver till December, 2011, as per the arrangement which was continuing during the earlier season. Appeal thereagainst by IRCTC Ltd was allowed by Division Bench.
        C. Present Special Leave Petitions have been filed against said order of Division Bench.
       Findings of the Court :
        Although, it was the intention of parties by virtue of the Joint Venture Agreement that luxury train, belonging to Respondent No.1, was to be operated by Joint Venture Company, at least for a minimum period of 15 years, what ultimately transpired was termination of the Agreement by Respondent No.1 in favour of Joint Venture Company. Petitioner was not entitled to question such termination as by itself it had no existence as far as the running of the train was concerned and it was not a party to the proceedings. Even though Petitioner had invested large sums of money in the project, but that could not entitle it to pray for and obtain a mandatory order of injunction to operate train once the lease agreement/arrangement had been terminated. Special Leave Petitions were dismissed.

JUDGMENT

Altamas Kabir, J.-In June/July 2007, The Ministry of Railways (Rail Mantralaya), Railway Board, approved the proposal submitted by the Indian Railway Catering & Tourism Corporation Ltd., hereinafter referred to as “IRCTC”, for operating a Luxury Tourist Train on a Pan-India route within India. Such proposal was made in pursuance of an Expression of Interest floated by the Respondent for a Joint Venture partner for the said Luxury Transit Train Project, to operate, manage and run the said train. The proposal was approved subject to certain broad principles for running the said train, set out by the Indian Railways in its letter dated 29th November, 2007, addressed to the Respondent, namely,

“(a) The Respondent will own the rake;

(b) The Respondent will pay to the Indian Railways the cost of maintenance and periodical overhaul of the rake;

(d) The Respondent with their associate agencies will manage on board/off board services, marketing, booking, pricing, etc.”

2. The Petitioner came to be selected as the Joint Venture shareholder for the operation of the Luxury Tourist Train Project. On 11th January, 2008, the Respondent forwarded the draft Memorandum of Understanding, which was proposed to be executed between the Petitioner and the Respondent, to the Indian Railways. In terms of the said Memorandum of Understanding, the Petitioner and the Respondent would be equal shareholders of the Joint Venture Company and the project cost was estimated at Rs.37.5 crores, out of which an amount of Rs.7.5 was to be contributed by the Ministry of Tourism as a grant and an amount of Rs.15 crores was to be contributed as advance lease rental by the Petitioner as its share. In addition to the above, the Petitioner was to bring in the funding for the project and the Luxury Tourist Train was to be leased by the Respondent to the Joint Venture Company for a period of 15 years, which could be extended by another period of 10 years on conditions to be mutually agreed between the Petitioner and the Respondent. The Joint Venture Company was incorporated under the name and style of “Royale India Rail Tours Ltd.”.

3. Upon receiving the approval of the Indian Railways, the Respondent executed a Memorandum of Understanding with the Petitioner dated 10th July, 2008, wherein it was stated that the Ministry of Railways had given the permission to the Respondent to own and operate the Luxury Tourist Train for the exclusive use of the Joint Venture Company for a period of 15 years, which was renewable for a further period of 10 years. The said Memorandum of Understanding also contained the various terms and conditions on which the train was to be operated. In terms of the Joint Venture Agreement and the Memorandum of Understanding, a Service Agreement dated 5th March, 2010, was executed between the Joint Venture Company and the Ninth Dimension Hotel and Resorts Pvt. Ltd., hereinafter referred to as “MAPPLE Hotels”, for providing hospitality services on board and their respective roles and responsibilities were set out in the said agreement.

4. The Maharaja Express commenced operations on 20th March, 2010, and completed 4 journeys in the inaugural runs till 31st March, 2010, and 30 journeys between April, 2010, till April, 2011.

5. Whilst the Joint Venture operations were being conducted, certain disputes arose between the shareholders regarding the working of the Joint Venture Agreement and the Memorandum of Understanding, which ultimately resulted in the termination of the lease arrangement by the Respondent, IRCTC, by its letter dated 12th August, 2011, on the grounds indicated therein.

6. On account of such termination of the lease agreement, the Petitioner initiated a proceeding under Section 9 of the Arbitration and Conciliation Act, 1996, under the Arbitration Agreement contained in Article 30 of the Joint Venture Agreement, for staying the termination of the lease agreement and also to

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