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2016 Supreme(Del) 3886
IN THE HIGH COURT OF DELHI AT NEW DELHI
VIBHU BAKHRU, J.
RAIL LAND DEVELOPMENT AUTHORITY - Petitioner
Versus
BHAGWATI RAIL INFRA PVT. LTD. - Respondent
O.M.P. (COMM.) 372/2016 & IA No.9484/2016
Decided On : 24-10-2016
For the Petitioner: Mr Amit Kumar and Mr Shaurya Sahay.
For the Respondent: Mr Arunav Patnaik and Ms Bhabna Das.
The Court upheld the Tribunal's decision, emphasizing the restricted scope of interference in arbitral proceedings and the Tribunal's authority to provide remedies for delays caused by RLDA.
Headnote:
The Rail Land Development Authority (RLDA) filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside an award passed by the Arbitral Tribunal. The dispute arose from a Development Agreement for a Multifunctional Complex (MFC) over Railway’s land at Jhansi railway station. The petitioner contended that the impugned award was in conflict with public policy and suffered from patent illegality. The Tribunal found that RLDA had failed to discharge its obligations under the contract by delaying the execution of the Development Agreement and the Lease Deed, delaying the handing over of the MFC site, and delaying approval of the plans. The Tribunal extended the timelines for payment of installments, interest-free period, and construction period due to delays attributed to RLDA. The Tribunal also set aside the termination of the Development Agreement and directed RLDA to pay a sum with interest. The Court held that the impugned award was not in conflict with public policy or in contravention of the fundamental policy of Indian law and dismissed the petition.
VIBHU BAKHRU, J.
1. The petitioner, Rail Land Development Authority (hereinafter ‘RLDA’), has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter 'the Act') for setting aside the award dated 30.04.2016 (hereafter ‘the impugned award’) passed by the Arbitral Tribunal (hereafter 'the Tribunal') constituted by Mr. Chander Parkash, Mr. M.R. Garg and Mr. S.P. Mehta (presiding). By the impugned award, the Tribunal has adjudicated the disputes raised by Bhagwati Rail Infra Pvt. Ltd (hereinafter ‘BRIPL’) – a company incorporated under the Companies Act, 1956 – in respect of a Development Agreement dated 06.02.2013 entered into between the parties for development of a Multifunctional Complex (MFC) over Railway’s land at Jhansi railway station.
2. RLDA is a statutory authority set-up to undertake development of vacant lands of the Railways for commercial use on behalf of the Ministry of Railways (hereinafter ‘Ministry’) to generate revenue through non-tariff measures. In the month of October, 2010, RLDA had invited bids by way of a Request For Proposal (RFP) document issued for development of MFC over the Railway's land at Jhansi Railway Station. Clause 18 of RFP provided that land area of the site for development of MFC shall be leased to the successful bidder for 45 years. The successful bidder was to be selected on the basis of the highest offer for upfront premium and subsequent annual lease rent. Further, the successful bidder was required to sign the Development Agreement and Lease Deed before the site was handed over to it. The RFP contained a schedule of payment of lease premium including a clause that the agreement shall be signed only after the selected bidder had paid the entire lease premium or paid the first installment of lease premium and furnished bank guarantees for subsequent installments.
3. BRIPL offered an upfront premium of Rs.7,83,00,000/-and an annual lease rent of Rs. 50,00,000/-per year. BRIPL’s bid was accepted and accordingly, RLDA issued a Letter of Acceptance (LOA) dated 20.01.2011 confirming its acceptance of the above offer.
4. After receiving the LOA, BRIPL deposited a sum of Rs. 2,34,90,000/-on 02.04.2011 as the first installment towards lease premium. According to the payment terms, the second and third installments were to be paid on 02.04.2013 and 02.04.2014 respectively.
5. On 27.05.2011, BRIPL submitted a Performance Bank Guarantee (PBG) and five Bank Guarantees (BGs) issued by the Bank of India for securing the payment of the second and third installments. However BRIPL did not furnish any BG for securing the payment of interest as it planned to market the site and generate funds in the interest free period of one year that is, from 02.04.2011 to 02.04.2012 -and to pay both the second and the third installments within the said period to avoid paying interest on the same.
6. Despite paying a part of the upfront premium and securing RLDA for the balance installments, RLDA failed to execute the Development Agreement and hand over the site to BRIPL. By its letters dated 07.09.2011, 14.09.2011, 19.09.2011 and 10.10.2011, BRIPL pointed out to RLDA that because of RLDA's failure to do the needful, it was losing out on the interest free period available and therefore, requested RLDA to execute the Development Agreement and Lease Deed and handover the MFC site, free of encumbrances.
7. On 11.10.2011, RLDA issued a communication to BRIPL stating its inability to proceed with the execution of the Development Agreement as it had received an advisory from the Ministry on 30.03.2011, which inter alia stated that “handing over the possession of land in all cases (including cases where developers have been fixed, but the possession of land has not been made and the signing of the Lease Agreement has not been made over) the signing of the Development Agreement thereof is to be undertaken by the RLDA only after the approval of the Cabinet for leasing of the land
