Harpal Singh vs Union Of India
2009 Latest Caselaw 1288 Del

           * IN THE HIGH COURT OF DELHI AT NEW DELHI

                                            Date of Reserve: April 08, 2009
                                            Date of Order: April 09, 2009
OMP 177/2009
%                                                                    09.04.2009

        Harpal Singh                                 ... Petitioner
             Through:       Mr. S.K. Sharma with Mr. Mayank Bansal
                            & Mr. Anoop Sharma, Advs.

               Versus

        Union of India                                       ... Respondent
             Through:       None

JUSTICE SHIV NARAYAN DHINGRA

1. Whether reporters of local papers may be allowed to see the judgment?

2. To be referred to the reporter or not?

3. Whether judgment should be reported in Digest?


ORDER

1. The petitioner was having a lease contract with the

respondent in respect of space in the parcel wagons in several trains. This

leasing contract in respect the space was cancelled by the respondent

vide letter dated 24th February, 2009. The relevant portion of the letter

reads as under:

"Your existing leasing contracts in train no.2015 (AGC), 2190 (FSLR II), 2304/82 (AGC), 2708 (FSLR), 2722 (AGC), 2461 (AGC) & 2461 (FSLR I) were terminated including cancellation of Registration, Forfeiture of Registration fee & debarred from fresh registration for 5 years vide this office termination notice no.CHD/AGC/TN/2722/08. On appeal, you were allowed to continue for three months w.e.f. 15/02/2008 to 14/05/2008 & performance was kept under watch upto 14.05.2008.

The following incidents have been come to notice during watch period.

1. Overloading detected in train no.2304 by E.Rly./ Vig. on 31.3.2008

2. Detention due to non-stacking/ adjusting the packages in AGC of train no.2304 on 29.03.08.

In view of above it has been decided by the competent authority to initiate action as under:-

1. Termination of existing contracts operated by you.

2. Cancellation of registration.

3. Forfeiture of Registration fee.

4. Debarred from for 5 years.

Accordingly your existing leasing contract of 01/04 tons space of AGC/FSLR listed below have been terminated w.e.f. 25/03/2009 and security money forfeited listed below.

         S.No.       Train   Compartment          S.No.     Train     Compartment
                     No.                                    No.
         A           9264    AGC                  E         2190      FSLR II
         B           2015    AGC                  F         2304/82   AGC
         C           2122    FSLR-I               G         2438      AGC
         D           2122    FSLR-II              H         2461      FSLR-I

2. The contract contained an Arbitration Clause which has been

re-produced by the petitioner in this application under Section 9. The

petitioner by this application under Section 9 has made a prayer that the

Court should stay the operation of the order/ letter dated 24th February,

2009 till finalization of proceedings before the Arbitrator. The contention of

the petitioner is that the cancelation of the contract by the respondent

was on trivial grounds and the violations of the agreement as stated by

the respondent were so minor that the contract should not have been

cancelled and only a penalty could have been imposed. It is submitted by

counsel for the petitioner that on the basis of lease of the parcel space

under the contract, the petitioner had in turn further done bookings from

different clients and the petitioner shall suffer irreparable loss due to this

cancellation of the contract. The contract was illegally cancelled and the

petitioner had a good prima facie case that the cancellation was not as per

law. He prays that this Court should issue an injunction against

cancellation of contract by order dated 24th February, 2009.

3. A perusal of the terms of lease agreement would show that

the respondent had reserved a right of cancellation of lease in case of

overloading where 4th default takes place. This cancellation of lease is in

addition to the penalty which may be imposed by the respondent.

4. Clause II(16) [13.8] provides that in cancellation of lease

agreement on account of overloading for 2 separate contracts (minimum

of 8 violations) registration of the leaseholder would also be cancelled.

5. Clause K-16 provides that in case of cancellation of

registration as a punitive measure, the petitioner had a right to appeal to

CCM.

6. Whenever a contract is unlawfully cancelled by one of the

parties to contract, the other party has a right to claim damages if the

contract is ultimately found to have been cancelled unlawfully or contrary

to the terms of contract or with malafide intention. Damages in such

cases can be quantified with ease since the party can always calculate and

present the losses suffered by it due to cancelation of the contract.

7. Section 9 under the Arbitration Act can be resorted to by a

party for interim relief on following counts:

"9(ii)(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 authorizing for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorizing 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;

(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."

8. No doubt the Court under Section 9 has same power for

making orders as it has for the purpose of, and in relation to, any other

proceedings before it, however the order passed by the Court for interim

protection must be such as falls under one of the above categories. In a

case where contract is cancelled, the Court under Section 9 cannot give

directions to restore the contract. In order to give this direction, the Court

will have to come to conclusion that the contract was cancelled illegally.

In fact that would amount to preempt the entire issue. The Court, under

Section 9 cannot give a finding whether the contract was cancelled

illegally or otherwise. If the Court under Section 9 gives such a finding, not

much is left to be decided by the Arbitrator and the proceedings before

the Arbitrator would in fact be ineffective. The Court can only give orders

to preserve a property which is involved in the dispute or can pass orders

in respect of those properties which are of perishable nature and if no

order is passed, the property shall get wasted or can allow inspection of

the property or things, appoint receiver etc. But the Court cannot under

Section 9 direct the parties to revert back to the situation before

cancellation of the contract. Either of the two parties to a contract have a

right to cancel the contract. Whether the cancellation of the contract was

lawful or wrong can be subject matter of the Arbitration. The only relief

which the party can claim before the Arbitrator, is damages suffered due

to cancellation of the contract. One party cannot force the other party to

continue the contract against its wishes. No interim in such cases can be

issued under Section 9 of the Act for continuing the contract. I take

support from the judgment of Hon'ble Supreme Court in the matter of

Adhunik Steel Ltd. vs. Orissa Manganese & Minerals Pvt. Ltd.

2007 Vol.(7) SCC 125.

9. I therefore find no force in the application. The application is

hereby dismissed.

April 09, 2009                                SHIV NARAYAN DHINGRA, J.
ak