Jai Balaji Industries Limited & ... vs Union Of India & Ors.
2015 Latest Caselaw 4470 Del

*                 HIGH COURT OF DELHI AT NEW DELHI

+                     W.P.(C) 5124/2014 & W.P.(C) 5127/2014


                                         Decided on : 29th June, 2015

W.P.(C) 5124/2014

MADHU TRANSPORT COMPANY PVT LTD & ANR.
                                                               ..... Petitioners
                      Through:         Mr. Prateek Jalan,
                                       Mr. Surendra Dube,
                                       Mr. Ankit Yadav,
                                       Ms. Sonia Dube,
                                       Mr. Shatadru Chakraborty,
                                       Ms. Kanchan Yadav &
                                       Mr. Anurag Singh, Advocates.

                              versus

UNION OF INDIA & ORS.                                   ..... Respondents
              Through:                 Mr. Jagjit Singh,
                                       Ms. Manita Verma,
                                       Ms. Nisha &
                                       Mr. Shivanshu Bajpai, Advs.

W.P.(C) 5127/2014

JAI BALAJI INDUSTRIES LIMITED & ANR.                    ..... Petitioners

                      Through:         Mr. Prateek Jalan,
                                       Mr. Surendra Dube,
                                       Mr. Ankit Yadav,
                                       Ms. Sonia Dube,
                                       Mr. Shatadru Chakraborty,


WP(C) Nos.5124/2014 & 5127/2014                                      Page 1 of 34
                                        Ms. Kanchan Yadav &
                                       Mr. Anurag Singh, Advocates.

                              versus

UNION OF INDIA & ORS.                                   ..... Respondents
              Through:                 Mr. Jagjit Singh,
                                       Ms. Manita Verma,
                                       Ms. Nisha &
                                       Mr. Shivanshu Bajpai, Advs.

CORAM:
HON'BLE MR. JUSTICE V.K. SHALI

V.K. SHALI, J.

1. In both these writ petitions, the challenge has been laid to orders

dated 13.06.2014 & 18.06.2014 respectively passed by Respondent

No.3, Member Traffic, Railway Board rejecting the request of the

petitioners terminating the contract entered into by them with the

respondents on the ground that there is no addition or alteration in the

agreement arrived at between the parties and consequently, there was no

occasion for giving rise to cause of action in favour of the petitioners to

terminate the agreements on various dates entered between the parties

under Wagon Investment Scheme ('WIS Scheme' for short) and also

seeking a direction to the respondents to purchase the wagons at the

agreed terms and conditions.

2. Though the orders in the two writ petitions which are assailed are

of different dates, but essentially they are on the same lines and the

agreements entered between the parties are also containing the same

terms and conditions and, therefore, for facility of reference, the facts of

WP(C) No.5124/2014 only are being referred to and the reasoning and

the conclusion which is arrived at on the basis of the said facts will be

equally applicable mutatis mutandis to the facts of WP(C)

No.5127/2014.

3. Coming back to the facts of WP(C) No.5124/2014 titled Madhu

Transport Company Pvt. Ltd & Anr. Vs. Union of India & Ors., it may

be pertinent here to mention that this is a third round of litigation

initiated by Madhu Transport Company Pvt. Ltd against UOI on the

basis of the agreement dated 18.07.2006 under the WIS Scheme.

4. In the first round of litigation, the petitioners filed WP(C)

No.123/2014 which was disposed of with the consent of the parties

directing respondent No.2 to consider the representation dated

11.09.2013 submitted by the petitioners for the purpose of arriving at a

settlement, if possible, so far as the termination of the agreement dated

18.07.2006 and the consequent purchase of wagons by the respondents

is concerned.

5. In the second round of litigation initiated by the petitioners

{WP(C) No.2446/2014} it was again prayed that the respondents be

directed to purchase the wagons at a price offered by them being the

depreciated value thereof under the Indian Railway Financial Code or on

any other mutually agreed price or rates offered to similarly placed WIS

Investors. The said writ petition was disposed of on 22.04.2014 with

directions to respondent Nos.1 & 2 to take a decision on the

representation of the petitioners by a reasoned order and communicate

the same to the petitioner within 10 days. The petitioners were also

permitted to make oral submissions before the concerned officer in this

regard.

6. As a consequence of this order passed by the Court on 22.04.2014

that the Member Traffic, Railway Board has passed the impugned order

dated 13.06.2014 rejecting the request of the petitioners for termination

of the agreement dated 18.07.2006 between the parties and further

observing that the Railways is not bound to purchase wagons of the

petitioners. It is this order dated 13.06.2014 passed by the respondents

that has been challenged in the present writ petition.

7. The Central Government had published Wagon Investment

Scheme (WIS) in the year 2005 with the objective to encourage public

private partnership in procurement of wagons to meet with the

anticipated incremental freight traffic in the coming years. The

petitioners in order to avail of the benefit of the said Scheme known as

WIS applied for four rakes and accordingly four agreements dated

18.07.2006 were executed between petitioners and Railways/R-2 & R-3

although there are seven respondents. The important terms and

conditions of the agreement which provided certain preferential rights to

the petitioners are contained in clauses 7.3, 7.10, 10.1 & 12 & 13 of the

said agreement.

8. It may be pertinent to reproduce the contents of the said clauses

for facility of reference.

7.3 CATEGORY II - BOX'N WAGONS1

Freight rebate of 10% shall be granted for 10 years and guaranteed supply of wagons at the

Contained in Clause 2.5, 2.6, 5.2 nd 5.4 of the agreement dated 18.07.2006.

rate of 6 rakes per month. In addition, a guaranteed supply of two bonus rakes will be made without freight concession. (For customers opting for EOL Scheme 2 further additional bonus rakes will be supplied without freight concession).

7.10 OWNERSHIP OF WAGONS2 Ownership of wagons procured under Wagon Investment Scheme (WIS) shall get transferred to Indian Railways after 10 years for BOXN rakes, 15 years for BCN rakes, 9 years for BTPN rakes, 15 years for BRNA rakes, 7 years for BOST and 7 years for BOBRN rakes.

10 FAILURE TO MAINTAN/CONSUME GUARANTEED SUPPLY OF WAGONS3

10.1 The guaranteed supply of wagons will be monitored on a monthly basis.

12. TERMINATION OF AGREEMENT In the event of termination of the arrangement by the Investor on account of liquidation/merger with other company or due to any alteration/deletion in the scheme, the ownership of wagons would remain with the Investor. However, the Investor shall have the option to sell the wagons to Indian Railways at a mutually agreed price.

Contained in clause 5.6 of the agreement.

Contained in clause 7.1 of agreement.

13. CHANGES IN THE SCHEME

Terms of the scheme (WIS) may be altered by mutual consent of both parties."

9. Thus, a perusal of the aforesaid clauses of the agreement would

show that following salient rights were provided in favour of the

petitioners.

a. The investor guaranteed 6 rakes per month with freight rebate and 2 additional rakes were also guaranteed EOL without freight rebate.

b. Ownership of the wagons would remain with the investor for 10 years and would thereafter be transferred to the Railways.

c. The guaranteed supply of wagons will be monitored on monthly basis.

d. In the event of termination of the agreement by the investor on account of merger/liquidation or due to any alteration/deletion in the scheme, the ownership of the wagons would remain with the investor who shall have the option to sell the wagons to the Indian Railways at a mutually agreed price.

e. That terms of the WIS may be altered with mutual consent only.

10. All the four agreements were identical in nature and were

providing for supply of six rakes to the petitioners. The system worked

well for some time, however, the petitioners allege that the respondents

started issuing circulars unilaterally and arbitrarily which in fact had

changed the terms and conditions of the agreement entered into between

the petitioners and the respondents. These terms and conditions were

following in nature.

a) The original WIS in terms of para 7.3 of the WIS provided for

eligibility of 8 rakes per month and monitoring on monthly basis while

as the respondents issued a circular dated 26.09.2008 by virtue of which

it modified monthly quota of guaranteed rakes to a fortnightly quota.

Thus, the period for which the respondents were to supervise the

availability of rakes made to the petitioners on monthly basis was

reduced to fortnightly basis. It was specifically made clear in the circular

that in case fortnightly indent was not placed in time, it would result in

forfeiture of the said quota and in no case it would be permitted to carry

forward to ensuing fortnight.

b). It is alleged that a further circular was issued on 03.02.2011 by

virtue of which instead of guaranteed four rakes per month, the

respondents arbitrarily and unilaterally reduced the quota or rather

converted the quota of monthly rakes to one rake after every five days

thereby the monitoring which was done on monthly basis firstly got

reduced to fortnightly basis and then to almost five days or so to say

weekly basis.

c). Vide a circular dated 27.07.2012, the respondents are alleged to

have unilaterally withdrawn the Terminal Incentive Cum Engine on

Load Scheme (TIELS) and consequently, the petitioners' monthly

entitlement was unilaterally reduced by two rakes.

d). It was alleged that earlier practice of permitting changes of

loading station to the petitioners by the respondents was stopped by

issuance of a circular dated 01.08.2013 which imposed various

restrictions in the event of loading and unloading station being changed.

11. It has been alleged by the petitioners that the respondents on

account of this unilateral and arbitrary action on their part changed the

terms and conditions of the WIS Scheme and consequently the

agreement which necessitated issuance of letter dated 11.09.2013 by the

petitioners terminating the agreement. It has also been alleged that

despite the agreement having been terminated, the Railway Authorities

neither handed over the wagons to the petitioners nor did they offer to

purchase the same in terms of WIS.

12. It has been stated that in terms of WIS Scheme, the investment in

the wagons has been made by the petitioners and the agreement

envisages that for all practical purposes, the petitioners will continue to

own the wagons and by retaining the wagons illegally, the respondents

have indulged in unlawful and illegal action. It has been alleged that

since there was no response to the communication sent by the petitioner

to the respondents, they were constrained to file WP(C) No.123/2014

which was disposed of by this court vide order dated 16.01.2014 with

the consent of the parties, directing the respondent No.2 to consider the

representation dated 11.09.2013 submitted by the petitioners for the

purpose of arriving at a settlement, if possible. The court further

directed the petitioners to appear before Director (Freight), Railway

Board for making oral submissions in support of the representation on

20.01.2014 at 4 P.M.

13. It has been alleged since the respondents did not take the decision

despite the aforesaid order of the court and the oral submissions having

been made by them on 20.01.2014, they were constrained to file another

WP(C) No.2446/2014 which was disposed of on 22.04.2014 directing

the respondent Nos.1 & 2 to pass a reasoned order and communicate to

the petitioners within a period of 10 days with liberty to the petitioners

to seek such remedy in accordance with law as may be permissible.

14. It has been alleged that it is in consequence of the disposal of

WP(C) No.2446/2014 vide order dated 22.04.2014 that the respondents

have passed the impugned order rejecting the request of the petitioners

to treat the agreement between the parties as having been terminated and

also refused to purchase the wagons at an agreed price. Hence, the

petitioners were constrained to file the present writ petition.

15. The respondents have filed their counter affidavit in response to

the show cause notice and have taken the plea that the writ petition is

not maintainable. It has been alleged by them that clause 15 of the

agreement between the parties contained an arbitration clause and,

therefore, the petitioners ought to have invoked the arbitration clause

rather than filing the present writ petition.

16. Secondly, it has been alleged by the respondents that the

termination letter purported to have been issued by the petitioners to the

respondents is totally illegal and uncalled for. It has been stated that a

close perusal of the Circulars dated 26.09.2006, 29.10.2007, 26.09.2008,

03.02.2011, 27.07.2012 and 01.08.2013 make it abundantly clear that

there had been no change in WIS Scheme and these circulars are

purported to have been issued by respondents in terms of clause 6.1 (c)

and clause 14 of the agreement between the parties and they are alleged

to be clarficatory in nature.

17. It has been alleged by the respondents there is no

liquidation/merger with other company or any alteration/deletion in WIS

which as per clause 12 of the agreement would give rise to an occasion

in favour of the petitioners to terminate the agreement.

18. It has also been contended by the respondents that in a similar

case titled Aviral Minerals Pvt.Ltd v.UOI which is sub judice before the

Apex Court, a committee was constituted to look into the whole issue. It

has been stated that the said committee concluded that para 12 of the

agreement is not attracted in the said case of similarly placed person as

the petitioners. It has been stated that the said case is still pending in the

Supreme Court and, therefore, this case may either be clubbed with the

said case or decision in the said case be awaited.

19. It has also been contended that the allegation made by the

petitioners that they entered into a loan-cum-hypothecation agreement

with M/s SREI Equipment Finance Private Limited with respect to the

wagons purported to be owned by them was without the consent of the

respondents and, therefore, the same cannot be binding on the

respondents. It has been contended that the writ petition of the

petitioners is totally misconceived and accordingly the same deserves to

be dismissed.

20. I have heard the learned counsel for the parties. I have also

thoughtfully considered the submissions made by the respective sides

and have also gone through the record.

21. The question which arises in the instant case is as to whether in

the first instance the writ petition is entertainable or not. In this regard,

it may be pertinent here to mention that the respondents have taken a

preliminary objection regarding maintainability of the writ petition on

the ground that there is an arbitration clause contained in the WIS

Scheme and, therefore, the writ petition would not be maintainable.

22. This contention of the respondents that the High Court would not

be competent to entertain the writ petition on account of arbitration

clause has been contested by the petitioners. It has been contended by

them that merely because there is an arbitration clause, it would not be a

ground for not entertaining the writ petition.

23. The learned counsel for the petitioners has placed reliance on

Union of India v. Tantia Construction Pvt.Ltd: (2011) 5 SCC 697, ABL

International v. Export Credit Guarantee Corporation of India Ltd.;

(2004) 3 SCC 553, Chandana Kedia Sole Proprietor, M/s. Adinath

Industries v. Union of India; 2010 II AD (Delhi) 757 and Kishan Freight

Forwarders v.Union of India; 181 (2011) DLT 547 to contend that

despite there being an arbitration clause and hence an alternative remedy

being available in case the action of the state authority is arbitrary,

illegal and violative of right of a party, it can be challenged under

Article 226 of the writ jurisdiction..

24. The clause 15 of the WIS Scheme reads as under:

15.0 Arbitration

15.1 In the event of question, dispute or difference between the parties hereto relating to any matter arising out of or quoted 'with this' agreement, such dispute or difference shall be referred for the award of three arbitrators. One arbitrator is to be nominated by the Investor, the other by the Railways and the third arbitrator to be

nominated by mutual agreement between the parties and, in the event of non agreement, the third arbitrator shall be appointed in accordance with the provisions of the Arbitration and Conciliation Act, 1996."

25. There is no dispute about the fact that there is an arbitration

clause between the parties as contained in WIS agreement dated

18.07.2006 and, therefore, there is an alternative remedy available to the

petitioners. It is also not in dispute that before filing of the present writ

petition, there were two rounds of litigations between the parties which

were summarily disposed of by this court directing the respondents to

take a informed decision and pass a reasoned order. It has not been

shown to the court by the respondents as to whether in these two earlier

writ petitions they had taken any such plea regarding existence an

arbitration clause in the agreement between the parties and therefore

seeking reference of disputes between the parties to arbitration. Even if

it is assumed that such a plea was taken by the respondents in the

counter affidavit, still, at least in the orders, it is clearly shown that this

plea of the respondents that there being an arbitration clause between the

parties and in view thereof writ petition was not entertainable, was not

accepted by the court and, therefore, prima facie, I feel that to relegate

the parties now to arbitration despite this court having entertained two

sets of writ petitions earlier between the parties with regard to the

grievance raised by the petitioners, would only be an exercise of tossing

around the ball and it would only delay the adjudication of the dispute

between the parties. Therefore, I do not accept this contention of the

learned counsel for the respondents.

26. In addition to this, merely because there is an arbitration clause

between the parties is no ground per se not to entertain the writ

jurisdiction. Each and every case where such a clause exists between the

parties they should be relegated to arbitration must be able to show and

convince the courts that this is the best course available under the

circumstances.

27. There have been cases where one of the parties has taken a plea

with regard to availability of arbitration clause, yet the court in the

interest of justice has entertained the writ petition and passed

appropriate orders. Reliance in this regard can be placed on the

judgments in Tantia Construction Pvt.Ltd's case (supra), ABL

International's case (supra), Chandana Kedia's case (supra) and iv)

Kishan Freight Forwarders's case (supra).

28. In Union of India and Ors. v. Tantia Construction Private

Limited; (2011) 5 SCC 697, the question which had arisen for

adjudication before the apex court was with regard to the contractual

obligation and specific relief on account of termination and discharge of

contract between UOI and Tantia Construction Private Limited. This

case also involved an agreement between the Railways and private

parties. One of the arguments which was taken up before the Apex

Court was that the agreement between the parties provided for

adjudication through arbitration in respect of all the disputes and

differences of any kind arising between the parties out of or in

connection with the contract whether during the progress of work or

after its completion and whether before or after the termination of the

contract, the same could be adjudicated by the arbitrator. Nullifying this

submission, the Apex Court observed in para 33 and 34 as under:

33. Apart from the above, even on the question of maintainability of the writ petition on account of the Arbitration Clause included in the agreement between the parties, it is now well- established that an alternative remedy is not an absolute bar to the invocation of the writ jurisdiction of the High Court or the Supreme Court and that without exhausting such

alternative remedy, a writ petition would not be maintainable. The various decisions cited by Mr. Chakraborty would clearly indicate that the constitutional powers vested in the High Court or the Supreme Court cannot be fettered by any alternative remedy available to the authorities. Injustice, whenever and wherever it takes place, has to be struck down as an anathema to the rule of law and the provisions of the Constitution.

34 We endorse the view of the High Court that notwithstanding the provisions relating to the Arbitration Clause contained in the agreement, the High Court was fully within its competence to entertain and dispose of the Writ Petition filed on behalf of the Respondent Company. We, therefore, see no reason to interfere with the views expressed by the High Court on the maintainability of the Writ Petition and also on its merits.

29. In ABL International Ltd.'s case (supra), one of the questions

which had arisen before the Apex Court was whether the contractual

obligations between a private party and State or its instrumentality can

be subject matter of a writ petition or not.

30. The Hon'ble Apex Court observed that the aforesaid question is

no more res integra and despite there being an alternative remedy by

way of an arbitration clause available to a party, still the court can in

exercise its powers under Article 226 of the Constitution of India,

examine the matter and give the aggrieved party requisite relief. It was

held in para 27 of the said judgment as under:

"27. From the above discussion of ours, following legal principles emerge as to the maintainability of a writ petition :-

(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable.

(b) Merely because some disputed questions of facts arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule.

(c) A writ petition involving a consequential relief of monetary claim is also maintainable."

31. Reliance in this regard was placed on the observations of the

Apex Court in Gujarat State Financial Corporation v. Lotus Hotels (P)

Limited; (1983) 3 SCC 379 which in turn had placed reliance on an

earlier oft-quoted judgment in Ramana Dayaram Shetty v. International

Airport Authority of India; (1979) 3 SCC 489.

32. Similarly, a learned single Judge of this court in Kishan Freight

forwarders's case (supra) in a matter pertaining to Railways and its

contract where a somewhat similar question with regard to termination

and extension of lease contract was involved, it was held that the writ

petition was entertainable and maintainable notwithstanding the fact that

there was an arbitration clauses and while arriving at such a conclusion,

it had copiously referred to the judgment of the Apex Court in ABL

International Ltd.'s case (supra) and Sanjana M.Wig v. Hindustan

Petroleum Corporation Limited; 2005 (8) SCC 242 to conclude that

where there is a question of public duty being performed by the

respondents, a writ petition will be entertained.

33. Similarly, the learned single Judge in another judgment Chandana

Kedia Sole Proprietor, M/s. Adinath Industries v. Union of India; 2010

II AD (Delhi) 757 has also expressed the same view that merely because

there is an arbitration clause between the parties would not be a ground

for the court to conclude that existence of an alternative remedy by way

of an arbitration shall prevent the court from entertaining the writ

petition and it observed that in appropriate cases, the court may exercise

its discretionary jurisdiction in case there is a violation of any

fundamental right or the party in question has been dealt with unfairly

and it is a party which is placed at an disadvantageous position.

34. From the aforesaid discussion, it is clear that merely because there

is an arbitration clause between the parties would not be a ground to

oust the jurisdiction of this court and dismiss the writ petition on the

ground of alternative remedy being available.

35. So far as the present case is concerned, the earlier two rounds of

writ petitions have been entertained by the court without any credence to

the objection of arbitration clause would show that the existence of

arbitration clause between the parties is not a ground not to entertain the

petition. Therefore, it will not be just and proper to reject the present

petition on the ground of existence of arbitration clause between the

parties.

36. Moreover, in addition to this, the contention of the learned

counsel for the respondents that the cases involves disputes question of

fact as to the interpretation of the various clauses which are relied upon

by the petitioners is as a matter of fact mirage. It is only what the

respondents are contending that there is a disputed question of fact. As

a matter of fact, this question of interpretation as to whether the

conditions existed which warranted invocation of termination of contract

by the petitioners on account of the alleged unilateral and arbitrary

change of terms and conditions of the agreement or whether the

circulars which are purported to have been issued by the respondents are

more in the nature of interpretation of various clauses of the agreement

rather than raising a disputed question of fact. Further in ABL

International Ltd.'s case (supra), the apex Court has observed that

merely because the respondent or for that matter one of the party raises a

plea of the matter involving a disputed question of fact does not mean

that it involves one and therefore the court will not have the jurisdiction.

It is for the court to be convinced that the matter actually and really

involves disputed question of fact and therefore the court should not

invoke the writ jurisdiction. In my considered view, the submissions

raised by the petitioners do not raise any disputed question of fact. It

only raises a question as to whether the issuance of circular by the

respondents tantamounts to changing the nature of the WIS Scheme.

Therefore, the same can be gone into by this court under Article 226 of

the Constitution of India.

37. The second submission made by the learned counsel for the

respondents is to keep the present proceedings of the writ petitions in

abeyance or alternatively direct the petitioners to move the hon'ble

Supreme Court for clubbing of the present writ petition before the

Hon'ble Supreme Court to be heard along with SLP Nos.39097-

39099/2012.

38. It may be pertinent here to mention that the parties had

approached the Hon'ble Apex Court for the purpose of withdrawing the

writ petition to be heard along with the matter pending before the apex

court. The said request was disallowed and it was observed by the

Hon'ble Apex Court that the High Court may decide the writ petition at

an early date. Therefore, in the light of the direction passed by the

Hon'ble Supreme Court, this contention of the learned counsel for the

respondents to keep the proceedings of the present writ petition in

abeyance till the decision of the apex court does not have any merit.

39. The next question and which is the core of the matter is as to

whether the issuance of circulars from time to time by the respondents

whereby the period of monitoring the wagons has been changed from

month to fortnight and then to days and whether the forfeiture of the

right of the petitioners to get a preferential treatment for a specified

period on account of non booking is clarificatory in nature or is a

unilateral action on the part of the respondents to change the terms of

the agreement? Whether the restriction imposed on the petitioners from

doing loading and unloading at stations other than specified is similarly

tantamounting to clarifying the general terms and conditions of booking

or is it in violation of the agreement?

40. There is no dispute about the fact that the respondents have issued

circulars from time to time. One of the circulars which has been issued

by the respondents is with respect to modifying monthly quota of

guaranteed rakes to a fortnightly quota. It has been further observed in

the said circular that in case the rakes in question which are falling in a

particular slot of fortnight are not availed of by the petitioners in that

particular slot, then it will result in forfeiture of that facility for the

ensuing fortnight meaning thereby that if out of four or six rakes to be

availed of by the petitioners on preferential basis two each for the first

fortnight and second fortnight are not availed of, the first two rakes

cannot be carried forward to the second fortnight meaning thereby that

in the second fortnight, they will be permitted to avail of only

preferential quota of only two rakes and not four rakes as envisaged in

the agreement.

41. This arrangement has been further reduced from fortnight basis to

one rake each in five days meaning thereby five working days which

would constitute one week with Saturday and Sunday either being

prefixed or suffixed and since month is having four weeks, therefore,

every week a rake must be booked by the petitioners on preferential

basis in terms of the agreement failing which the default cannot be

carried forward for the following and the subsequent weeks. The

language used in these circulars is both negative as well as positive to

bring home the question of sanction by way of forfeiture of this

unavailed quota. Therefore, in my opinion, this fundamentally

tantamounts to changing the terms and conditions of the WIS Scheme

and is, therefore, in violation of clause 12 of the agreement.

42. These changes in the WIS Scheme could by no stretch of

imagination be said to be a clarificatory in nature as they go to the root

of the WIS Scheme itself. No doubt, the respondents have taken a stand

that there is no liquidation or merger in the case of the petitioners but the

petitioners are not claiming the termination of the agreement on the

basis of liquidation or merger. Their case is hinged on the fact that there

is an alteration in the terms and conditions of the WIS agreement itself

by the circulars issued by the respondents.

43. I have illustrated hereinabove that the change of rakes from

monthly monitoring to fortnight and then to days with a sanction of

forfeiture for the said benefit for the ensuring week or month is

fundamentally tantamounting to alteration of the terms and conditions of

the agreement between the parties and, therefore, it gives rise to an

occasion to the petitioners to avail of the termination of the WIS

agreement in terms of clause 12.

44. The said alteration to the WIS agreement could have been done

only in accordance with clause 15 which envisaged that the respondents

could by a mutual consent by taking the petitioners into confidence that

on account of certain exigencies of service or exigencies of public

interest, it was necessary to change the terms and conditions of the

agreement. Since this has not been done, therefore, admittedly, not only

the aforesaid circulars are in violation of clause 12 of the agreement

there being lack of consent on the part of parties especially the

petitioners which is in violation of clause 15 of the agreement and,

therefore, cannot be sustained.

45. The argument which has been set up by the respondents that

under clause 6.1 (c) and clause 14 the agreement stands saved because

clause 6.1 lays down that the guaranteed rakes of traffic shall be subject

to following :

a} Rationalization of scheme.

b} Preferential traffic schedule.

c} Conditions of booking of goods traffic.

d} Central Government State bans and restriction and

e) Force majeure such as natural calamities like breaches, floods, etc.

over which Railways has no control.

46. So far as clauses (b), (d) and (e) are concerned, they on the face of

it do not apply to the facts of the present case. So far as clause (c) is

concerned, it deals with a condition of booking of goods traffic and if

read in the light of clause (14) which lays down the applicability of rules

and procedures of Indian Railways and envisages that this agreement

will be subject to all the rules and regulations of Indian Railways in

force made in pursuance to the Railways Act, 1989 then this

modification of the terms and conditions or alteration in the agreement

cannot be considered as saved by these two clauses. The reason for this

is that clause 6.1 (c) deals with the general conditions applicable to the

customers/clients across the board and does not impinge upon specific

incentives granted to the petitioners under the agreement. These

conditions which are envisaged under clause 6.1.(c) would be conditions

like the timings for booking of the rakes, the days on which the booking

is to be done, the schedule for the purpose of loading and unloading of

goods. Therefore, meaning thereby that section 6.1(c) which deals with

the conditions of booking of goods traffic are of such a nature which are

general and which do not go to the root of the agreement itself, so as to

knock off one of the parties prejudicially as has been done in the instant

case.

47. Similar would be the logic which would be applicable to the

circulars/conditions which are envisaged under clause 14 of the

agreement to all the customers across the board. Therefore, the

aforesaid analysis of the terms and conditions of the agreement clearly,

in my considered opinion, tantamount to respondents altering the basic

structure of the agreement between the parties by modifying the

essential terms and conditions of the incentives which are granted to the

petitioners and same gives rise to a cause of action in favour of the

petitioners to terminate the agreement which, they have, in my

considered opinion, validly done.

48. One of the arguments advanced on behalf of the respondents was

that the apex court had constituted a committee to look into this very

aspect as to whether the issuance of circulars by the respondents resulted

in any change in the WIS Scheme or the agreement. The said committee

had given its report that it does not result in any change.

49. My attention has not been drawn to any such committee report

consequently I did not have the advantage of going through the

reasoning for returning such a finding. I do not agree with the views of

the expressed by the committee that the aforesaid issuance of circulars

do not tantamount to alteration of basic structure of the agreement

between the parties. The reason for holding so is that the circulars have

changed the very monitoring pattern of the rakes from monthly to daily

basis with a sanction of forfeiture of the said preferential rakes.

Therefore, I feel that the petitioners were well within their rights to

terminate the agreement.

50. Having held so, the only question which arises is with regard to

sanction which is imposed under the agreement. It has been envisaged

that the respondents on account of the valid termination of the

agreement by the petitioners would either return the wagons to the

petitioners because the property in the wagons is still vested with the

petitioners as the period of contract is still subsisting and the period of

10 years from the date of the agreement has not elapsed. The

respondents were under an obligation to have returned the wagon on

account of the termination of the agreement by the petitioners on

13.09.2013. Since it was not done, therefore, the petitioners were well

within their rights to ask the respondents to purchase the wagons or the

property in the said wagons at an agreed price which it had refused to

do.

51. One of the arguments raised by the respondents is that with

respect to issuance of these circulars, there has been no discrimination

between the petitioners and other persons who are using the facilities of

booking of rakes or wagons. In my considered opinion, this argument is

of no consequence for the reason that the case of the petitioners is not

based on the ground of discrimination.

52. One of the arguments which has been given by the respondents

while rejecting the representation dated 11.09.2013 is that for the last

two years Government of India and the State Governments have

imposed various restrictions to discourage iron-ore export and to stop

illegal mining activities. Consequently, the quantum of iron ore mined

and transported through Railways has substantially dwindled. This has

affected most of the WIS and non-WIS customers except the established

steel plants. Since the WIS agreement is subject to various Government

restrictions as per clause 6.1(d) and business loss arising out of change

in the Economic Policy of Government cannot be masked as loss out of

alleged changes in terms. It was contended that issuance of circulars did

not tantamount to altering the terms and conditions of the WIS Scheme.

This submission made by the respondents is fallacious. If ban has

been imposed by the Central or the Statement Governments on the

export of iron ore with a view to stop illegal mining activities and it has

resulted in quantum of iron ore being mined and transported through

Railways substantially, then there was absolutely no ground for

rescheduling the availability of rakes to the petitioner from monthly

basis to fortnightly and then 5-day basis with two rakes and one rake

each respectively. This is on account of the fact that the question of

rationalization of making available preferential rakes to the petitioners

would arise only when there is an increased volume of goods to be

transported and not when the volume has got reduced as is admitted by

the respondents themselves. Therefore, this reasoning which has been

given by the respondents does not fit in with the change in nature of the

WIS Scheme by the respondents as there is no nexus between the

reasoning given by the Member Traffic, Railway Board and the change

in the WIS agreement which affects the rights of the petitioners

prejudicially. Accordingly, this argument also has no merit.

53. For the reasons mentioned above, I feel that the order dated

13.06.2014 rejecting the representation of the petitioners terminating the

agreement dated 18.07.2006 is totally unsustainable in the eyes of law. I

feel that since there was a change/alteration in the terms and conditions

of the WIS Scheme and consequently in the agreement dated 18.07.2006

unilaterally and arbitrarily without the consent of the petitioners which

fundamentally changed the nature of WIS Scheme, so far as the

preferential right of the petitioners is concerned, the petitioners were

well within their right to terminate the agreement. The agreement

having been terminated, the respondents were under an obligation to

purchase the wagons from the petitioners at a fixed price in the event of

non returning the same to the petitioners as the property in wagons

continued to vest with the petitioners. I accordingly hold that the order

dated 13.06.2014 of the Member Traffic, Railway Board is

unsustainable in the eyes of law and the same is liable to be set aside

and a writ of mandamus is issued to the respondents to either return the

wagons to the petitioners within a period of one month from today or

alternatively to purchase the wagons at an agreed price. However, so far

as the question of purchase of wagons by the respondents is concerned,

the price has to be agreed between the parties and certainly what will be

the price of the wagons will be a disputed question. Since this is a

disputed question of fact as to what would be the price unless it is

mutually agreed, it deserves to be adjudicated, it will be not proper to

permit the parties to fix either of the price unilaterally so as to cause

further delay in the final disposal of the matter and in such a

contingency since there is an arbitration clause, I feel that this aspect of

the matter deserves to be settled through arbitration.

54 It may be further pertinent here to mention that since the present

order is disposing of two writ petitions, the reasoning and holding which

has been arrived at in WP(C) No.5124/2014 shall be equally applicable

mutatis mutandis to the WP(C) No.5127/2014 and accordingly the

impugned order dated 18.06.2014 of Member Traffic, Railway Board in

the said writ petition is also set aside and as for the directions passed

with respect to appointment of an arbitrator in WP(C) No.5124/2014,

the same would also be equally applicable to WP(C) No.5127/2014.

55. For the determination of the price of the wagons, I appoint

Mr.R.C.Chopra (Mobile: 9818097777), a retired Judge of this court, as

an arbitrator to adjudicate the dispute within a period of four months

from today. The learned arbitrator shall be governed by the rules and

regulations as well as the payment of fees by the terms and conditions

governing the arbitration by the Delhi International Arbitration Centre.

56. Accordingly the writ petitions stand allowed in the aforesaid

terms.

V.K. SHALI, J.

JUNE 29, 2015 dm