REPORTABLE | |
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
SPECIAL LEAVE PETITION (CIVIL) NOS.965-967 OF 2012
Cox & Kings Ltd. … Petitioner
Vs.
Indian Rly. Catering & Tourism
Corporation Ltd.& Anr. … Respondents
WITH
CONTEMPT PETITION (CIVIL) NOS.41-43 OF 2012
IN
SPECIAL LEAVE PETITION (CIVIL) NOS.965-967 OF 2012
J U D G M E N T
ALTAMAS KABIR, J.
1. 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;
(c) Railways be entitled to recover the haulage cost;
(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 allow the arrangements to continue till the month of April,
2012, subject to such terms and conditions as may be imposed by the Court.
7. As has been submitted by Mr. Mukul Rohatgi, learned Senior Advocate,
appearing for the Petitioner, what was of utmost importance and concern to
the Petitioner was not only the huge investment made by the Petitioner in
the project, but the loss of goodwill and reputation in the eyes of its
clients, who were mainly from foreign countries. Discontinuance of
operation would also besmirch the reputation of the Indian Government.
8. One of the other concerns of the Petitioner was that it had been
looking after the marketing and the bookings internationally and within
India and such bookings had been made much in advance. It was the case of
the Petitioner that the Joint Venture Company had received and was holding
approximately 400 bookings up to December, 2011 and such bookings had been
made by various international travel companies.
9. The prayer for interim directions was contested by the Respondent on
several grounds. One of the grounds taken was that by making relief on the
basis of the Joint Venture Agreement, the Petitioner was trying to get a
lease in favour of the Joint Venture Company, which was neither a party to
the proceedings nor to the Agreement. It was further contended that, in
fact, the lease was never executed in favour of the Joint Venture Company
and the rights of the Petitioner could not go beyond what had been laid
down in the Articles of Association of the Joint Venture Company. It was
also urged that since the relationship between the Joint Venture Company
and the Respondent had been terminated, the Petitioner was trying to create
a right in its favour for operating the train, which was never in its
individual possession. It was urged that such a prayer was not
maintainable and it was not open to the Petitioner to claim any relief in
relation to the train, which was the subject matter of the termination
letters issued by the Respondent to the Joint Venture Company, in its
capacity as owner of the train. Noting the interest of the parties and
keeping in mind the fact that advance bookings had been made, the learned
Single Judge of the Delhi High Court, who heard the Application under
Section 9 of the Arbitration and Conciliation Act, 1996, came to the
conclusion that, although, in terms of the Joint Venture Agreement in which
there was a separate provision for arbitration, the arbitral dispute would
have to be confined to the disputes between the parties to the Agreement,
under the wider connotation of the Agreement between the Respondent and the
Joint Venture Company, certain interim orders were required to be made.
More so, when the main grievance of the Respondent against the Petitioner
and the Joint Venture Company was in respect of inflated bills raised by
the Petitioner and non-payment of the amounts payable in terms of the
Agreement. In such circumstances, the learned Single Judge found it fit to
appoint a Receiver, as an interim measure, in the public interest, to
prevent discontinuation of the running of the train for which bookings had
already been made. The learned Judge appointed one Shri Sudhir Nandrajog,
a Senior Advocate of the Delhi High Court, as Receiver, and disposed of the
Section 9 application, inter alia, by directing that the train would
continue to be run under the supervision of the learned Receiver for the
period commencing from 14th September, 2011, uptil 31st December, 2011,
which was the major period for which the bookings had been effected, as per
the arrangement which was continuing during the earlier season. Various
other directions were given to enable the learned Receiver to operate the
Maharaja Express and for maintenance of accounts. The parties were also
granted leave to approach the Court or Arbitrator (if appointed) for
modification of the order in case such need arose.
10. In addition to the above, the parties were also given liberty to take
necessary steps to have their disputes resolved by the appointment of an
Arbitral Tribunal which would be at liberty to decide the disputes without
being influenced by the order passed on the application under Section 9 of
the 1996 Act. The rights and contentions of both sides were also kept open
for submission before the Arbitral Tribunal, if appointed.
11. The order of the learned Single Judge was challenged by IRCTC Ltd. by
way of FAO(OS)Nos.433-35 of 2011.
12. The submissions made before the learned Single Judge were reiterated
on behalf of both the parties before the Division Bench, but a new
dimension was attempted to be added to the submissions advanced on behalf
of the Petitioner, M/s Cox & Kings India Ltd. An attempt was made to make
out a case that the Joint Venture Company was akin to a partnership and the
train in question was partnership property. The Division Bench took note
of the fact that the total cost of the train was Rs.49.5 crores, which had
been borne by IRCTC and was even recorded in Article 6 of the Agreement.
Apart from the above, not only the shell train, but even the cost of the
interior, fittings and furnishing was borne by IRCTC. The Division Bench
also noted that if the train was to be regarded as a Joint Venture
property, there was no reason to provide for leasing of the train by IRCTC
to the Joint Venture Company.
13. The Division Bench, however, was disinclined to continue the
arrangement, as directed by the learned Single Judge, and accepted the
submissions made on behalf of the IRCTC that the mandatory injunction which
had been passed, would have the effect of creating an Agreement between the
Joint Venture Company and IRCTC in relation to the train, which would be
influenced even though the Joint Venture Company was not a party to the
proceedings. However, keeping in mind the prestige of the country in
regard to the running of the Maharaja Express which had earned worldwide
fame, the Division Bench felt that since the Court was not in a position to
restore the terminated arrangement and direct the train to be managed and
run by M/s. Cox & Kings under the supervision of the Receiver, the public
interest could be subserved if the Maharaja Express continued to be
operated even by the IRCTC. Also taking into account the factor relating
to the bookings which had already been made in advance, the Division Bench
accepted the suggestions made by IRCTC to honour the bookings, without
prejudice to the rights and contentions of the parties, as extracted
hereinbelow :
“a) The train has to be run by the owner/respondent. All the
facility material including crockery, furnish-ings etc. which
are in custody of the petitioner should be handed over 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 be transferred to the
respondents for honouring.
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.”
14. The Division Bench also directed that while running the train, the
IRCTC would remain bound by the aforesaid suggestions. Whatever bookings
had been made till then could be transferred by M/s. Cox & Kings to IRCTC.
The Division Bench accordingly set aside the arrangements made by the
learned Single and allowed the appeal preferred by the Respondent herein.
15. It is against the said judgment and order passed by the Division
Bench of the Delhi High Court on 6th January, 2012 in FAO(OS)Nos.433-35 of
2011, that the present Special Leave Petitions have been filed by M/s. Cox
& Kings India Ltd.
16. Appearing for the Petitioner Company, Mr. Mukul Rohatgi, learned
Senior Advocate, submitted that the primary reason for filing of the writ
petition was to protect and save the image and goodwill of the Petitioner
Company in the field of global tourism. Mr. Rohtagi submitted that it is
in that context that a prayer had been made on behalf of the Petitioner
Company for stay of operation of the termination of the Lease Arrangement
by the Respondent IRCTC by its letter dated 12th August, 2012. Mr. Rohatgi
submitted that almost the entire expenses for commencing operations in
respect of the Maharaja Express had been borne by the Petitioner Company in
different forms, and in view of the promises contained in the Memorandum of
Understanding and the Agreement executed between the Petitioner Company and
the Joint Venture Company, the termination of the Lease Arrangement was not
warranted.
17. Mr. Rohatgi urged that it had been agreed by both the parties in the
said Memorandum of Understanding and the Joint Venture Agreement and other
supporting documents that the lease of the train by IRCTC to the Joint
Venture Company was for a minimum period of 15 years from the date of the
first commercial run of the train and in lieu whereof 50% cost of the train
had been paid by way of advance lease charges which were to be adjusted
over a period of 15 years from the date of the first commercial run of the
train. Mr. Rohatgi urged that the said amount had been paid by the
Petitioner to the IRCTC through the Joint Venture Company. It was on
account of the termination letters dated 12th August, 2011, issued by IRCTC
that the Petitioner Company was compelled to initiate proceedings before
the High Court under Section 9 of the Arbitration and Conciliation Act,
1996. Mr. Rohatgi submitted that the relief claimed in the said application
was that the Maharaja Express should be operated only through the Joint
Venture Company and that the Respondent IRCTC should be restrained from
using the train for any purpose other than for the exclusive use of the
Joint Venture Company. Mr. Rohatgi also reiterated the fact that in order
to safeguard the interest of the parties concerned, the learned Single
Judge had appointed a Receiver to oversee the function and operations of
the train and granted injunction to preserve the existing status-quo till
the final hearing of the dispute.
18. The major thrust of Mr. Rohatgi’s submissions was towards the
aforesaid end and was indicative of the fact that the running of the train
was of primary importance and should be allowed to continue as per the
earlier undertaking, without any disturbance, while the disputes before the
learned Arbitrator were finally disposed of.
19. On the other hand, on behalf of the Respondent No.1 it was contended
by the Learned Solicitor General that the Special Leave Petitions had been
filed by M/s. Cox & Kings. Ltd. in respect of the train, which was owned by
the Respondent No.1, IRCTC. The said train had been converted into a
luxury train and was being operated on a seasonal basis between the months
of September to April by the Joint Venture Company. However, the IRCTC had
no option but to terminate the arrangement made with the Joint Venture
Company to operate the luxury train on account of various reasons and, in
particular, on account of non-payment of the dues of IRCTC. The learned
Solicitor General submitted that the letter terminating the Joint Venture
Agreement was the subject matter of the Section 9 Application before the
learned Single Judge of the High Court, who, by his order dated 6th
September, 2011, allowed the prayers made therein in part and issued a
mandatory injunction and also appointed a Receiver for operation of train
between the months of September to December, 2011. However, the train was
never operated under the Receiver on account of the interim orders passed
in the appeal on 9th September, 2011.
20. The learned Solicitor General reiterated the fact that on 6th
January, 2012, the Division Bench set aside the order passed by the learned
Single Judge which was, in any event, to operate only till 31st December,
2011.
21. The learned Solicitor General urged that there was no ambiguity
regarding the ownership of the train and it had been clearly understood by
all concerned that it was IRCTC which was to be the owner of the train and
that the Joint Venture Company was to be formed for management and
operation of the train. It had also been made clear that IRCTC’s
association with other agencies was for the purpose of management of the
train only.
22. It is evident from the submissions made on behalf of the respective
parties that the arrangement between the Respondent No.1, IRCTC, was with
the Petitioner Company and, although, it was the intention of the parties
by virtue of the Joint Venture Agreement that the luxury train, belonging
to the Respondent No.1, was to be operated by the Joint Venture Company, at
least for a minimum period of 15 years, what ultimately transpired was the
termination of the Agreement by the Respondent No.1 in favour of the Joint
Venture Company. As pointed out by the Division Bench of the High Court,
the 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. In fact, what the Petitioner has
attempted to do in these proceedings is to either restore the Lease
Agreement, which had been terminated, or to create a fresh Agreement to
enable the Petitioner to operate the luxury train indefinitely, till a
decision was arrived at in Section 9 Application.
23. It is no doubt true that the Petitioner has invested large sums of
money in the project, but that cannot entitle it to pray for and obtain a
mandatory order of injunction to operate the train once the lease
agreement/arrangement had been terminated. We are also unable to accept
Mr. Rohatgi’s submission that the Joint Venture Agreement was akin to a
partnership. Such submission had been rightly rejected by the Division
Bench. As rightly pointed out by the Division Bench of the High Court, the
Petitioner’s remedy, if any, would lie in an action for damages against
IRCTC for breach of any of the terms and conditions of the Joint Venture
Agreement and the Memorandum of Understanding.
24. Taking into consideration the totality of the circumstances, we are
inclined to agree with the suggestions which had been made by IRCTC before
the Division Bench of the High Court regarding the operation of the train
by IRCTC, with liberty to the parties to appoint an Arbitral Tribunal to
settle their disputes. We, therefore, dismiss the Special Leave Petitions,
but make it clear that if an Arbitral Tribunal is appointed, the aforesaid
arrangement will be subject to the decision of the Arbitral Tribunal. We
also make it clear that the observations made by the learned Single Judge,
the Division Bench of the High Court and by us, shall not, in any way,
influence the outcome of the arbitral proceedings, if resorted to by the
parties.
25. Having regard to the nature of the facts of the case, the parties
shall bear their own costs.
26. In view of the above, no order is required to be passed on the
Contempt Petitions and the same are also dismissed.
………………………………………………………J.
(ALTAMAS KABIR)
………………………………………………………J.
(J. CHELAMESWAR)
New Delhi
Dated : 5.7.2012
