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2023 Supreme(Online)(Del) 17650
IN THE HIGH COURT OF DELHI AT NEW DELHI
Neena Bansal Krishna, J
INDIAN RAILWAY CATERING & TOURISM CORP. LTD. – Appellant
Versus
M/S GOEL & GOEL – Respondent
O.M.P. (COMM.) 229/2021
For the Appellants/Petitioners: Mr. Saurav Agrawal, Ms.Divya Hirawatz, Mr. Anshuman Chowdhary
For the Respondents: Mr. S. Ravi Shankar, Ms.Meghna Mukherjee, Ms. Yamunah Nachiar
The court upheld the arbitral award, confirming termination of the contract was illegal and arbitrary due to breach of prior consent for sub-letting and failure to issue a cure notice.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 - Setting aside an arbitral award - The court addressed claims of unauthorized sub-letting under General Conditions of License and determined the legality of termination by the petitioner. The Sole Arbitrator’s ruling that termination was illegal stands affirmed due to procedural failures - Initial non-disclosure of the sub-licensing agreement by respondent led to the termination being found arbitrary. The claims for damages were partially awarded based on claimants' losses. (Paras 1, 15, 22, 63, 81)
(B) Grounds of Challenge - Grounds for setting aside awards under Section 34 were addressed, and it was emphasized that factual errors or alternate interpretations cannot constitute a basis for interference, thus upholding the Arbitrator's award as not patently illegal. (Paras 40, 42, 68)
(C) Public Policy - Any award must align with the 'fundamental policy of Indian law' and should not be arbitrary, unreasonable, or unsupported by evidence. The court clarified that arbitrary awards are subject to challenge. (Paras 42, 68)
(D) Result - The challenges to the arbitral award were dismissed with a clarification on interest. (Paras 80, 81)
| Table of Content |
|---|
| 1. petitioner filed for setting aside arbitration award. (Para 1 , 2 , 3 , 4 , 5 , 6) |
| 2. details of arbitration initiation and claims. (Para 7 , 8 , 9 , 10) |
| 3. claims made during arbitration process. (Para 11 , 12 , 13 , 14) |
| 4. determination of claims by the arbitrator. (Para 15 , 22 , 23) |
| 5. petitioner's arguments against the arbitration award. (Para 24 , 25 , 26 , 27 , 28) |
| 6. legal grounds for challenge discussed. (Para 29 , 30 , 31 , 32 , 33 , 34) |
| 7. counter-arguments and defense by the respondent. (Para 35 , 36 , 37 , 38) |
| 8. hearing and submissions concluded. (Para 39 , 40) |
| 9. analysis of challenges on substantive grounds. (Para 41 , 42 , 44 , 46 , 48 , 49 , 50) |
| 10. deliberation on the alleged lease document validity. (Para 51 , 52 , 53 , 54 , 55) |
| 11. discussion of the notice of termination and its legality. (Para 56 , 57 , 58 , 59 , 60 , 61) |
| 12. assessment of clause 9.2 regarding termination protocols. (Para 62 , 63 , 64) |
| 13. argument on awards for loss of profits. (Para 68 , 69 , 70 , 71 , 72) |
| 14. discussion on evidence related to damages. (Para 73 , 74 , 75 , 76 , 77) |
| 15. interest claims evaluated and misinterpretation noted. (Para 78 , 79) |
| 16. final conclusion and dismissal of objections. (Para 80 , 81) |
JUDGMENT
NEENA BANSAL KRISHNA, J
1. The present Petition has been filed by the petitioner under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as „A&C Act‟) for setting aside the Award dated 08.03.2019 passed by the Sole Arbitrator vide which the claim of the respondent for damages has been allowed.
2. The facts in brief are that the petitioner, a Public Sector Undertaking working under the aegis of the Ministry of Railways,(which was the respondent before the Arbitrator) issued a Tender Notice dated 11.09.2006for allocating license to operate Food Plazas at the CST (Main and Sub-urban) Station in Mumbai. The Respondent herein (who was the claimant before the ld. Arbitrator) being the highest bidder, was awarded the license for the Food Plazas for a license fee of Rs.31,31,313/- and Rs.44,00,000/-,which was operational for a period of 9 years as provided in the General Conditions of License, vide letter of Award dated 23.11.2006 and 24.11.2006 respectively. Following the same, the parties entered into an Agreement dated 20.03.2008 which came into effect on the commencement of operation in the respective units on 01.10.2008 and 28.02.2009.
3. The respondent vide its letter dated 27.10.2012 sought permission of the petitioner to sub-license 75% the designated premises i.e. the Food Plaza, to M/s Kishore H Caterers which was duly countenanced by the petitioner vide letter dated 07.11.2012.
4. The respondent vide letters dated 30.12.2012 followed by letter dated 30.01.2013informed the petitioner that M/s B. Rajasaheb, an unauthorized third party, had forcibly taken possession of the remaining 25% of the Food Plaza at CST (Sub-Main) and sought the aid of the petitioner to obviate such unauthorized occupation. Pursuant thereto, the petitioner promptly took action by filing a complaint to the Railway Police Force (RPF) vide letter dated 30.12.2012 and to GRP vide letter dated 01.04.2013.
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5. However, M/s B. Rajasaheb filed a Civil Suit No. 4 of 2013 on 05.01.2013 in the Small Causes Court of Bombay against the petitioner and the respondent herein, claiming that vide an MoU dated 04.01.2012 signed by two partners of the respondent Firm, it had been granted a sub- lease for a period of 7 years to operate and manage the remaining 25% of the premises for which it deposited a sum of Rs. 43,00,000/-in the respondent’s current account in ICICI Bank. It sought a declaration that the MoU dated 04.01.2012 was legal, valid, and binding and that it may be declared as the licensee in respect of disputed premises.
6. The petitioner on becoming au courant about the subletting of the premises by the respondent without its permission vide Agreement dated 04.01.2012 through the suit filed before the Small Causes C
