Delhi High Court
Indian Railway Catering & Tourism ... vs M/S Ambuj Hotel & Real Estate (P) ... on 12 October, 2018
SINDHU KRISHNAKUMAR
23.10.2018 10:08
$~20
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 12th October, 2018
+ O.M.P. 361/2008
INDIAN RAILWAY CATERING & TOURISM
CORP. LTD. ..... Petitioner
Through: Mr. Hitabhilash Mohanty and Mr.
Saurav Agrawal, Advocates.
(M:8448375846)
versus
M/S AMBUJ HOTEL & REAL ESTATE (P) LTD. ..... Respondent
Through: None.
CORAM:
JUSTICE PRATHIBA M. SINGH
Prathiba M. Singh, J. (oral)
1. The Indian Railway Catering & Tourism Corporation ('IRCTC') - the
Petitioner herein, floated a tender in August, 2005 for "operation and
management of catering and on board services nos.2429-30 H. Nizamuddin
- Bangalore City Rajdhani Express Train". The Respondent submitted its
bid for the same. By letter dated 18th October, 2005 it was communicated by
the Petitioner to the Respondent that the decision was taken to award the
license to the Respondent.
2. Immediately after the tender was awarded, the Petitioner started
receiving complaints as early as in January, 2006 against the Respondent.
The various complaints that were received over the period of January to
June, 2006, were:
• Non-service of dinner/breakfast and other meals on time;
• Non-maintenance of proper hygienic services;
• Non-deployment of adequate staff on the train for taking care and
O.M.P. 361/2008 Page 1 of 9
providing catering services
• Not providing food cooked with proper Agmark and other certified
products;
• Providing adulterated food;
• Misbehaviour of staff deputed by the Respondent;
• Inferior quality of food served to the passengers.
3. In view of all these complaints, the Petitioner took a decision to
terminate the catering services awarded to the Respondent on 9th June, 2006.
The termination letter has listed all the reasons for the said termination and
the termination was to take effect immediately.
4. The termination was challenged in a writ petition. On 20th June, 2006,
the Respondent sought refund of concession fee and security deposit and
also invoked the arbitration clause. On 28th June, 2006, the Petitioner
communicated to the Respondent that the security deposit and the
concession fee have been forfeited and cannot be refunded. The learned
Arbitrator was also appointed.
5. Before the learned Arbitrator various claims and counter claims were
raised, which are as under:
A. Claimant's Prayers and Claims:
S. Prayer and Claims Award
No.
1. The impugned cancellation be held to Treated as
be void, illegal and arbitrary Preliminary issue
and decide vide order
dated 19.7.2007 and
not challenged in any
forum,
Not accepted
2. Refund of concession fee of Rs.1,65,30868/-
O.M.P. 361/2008 Page 2 of 9
Rs.2,70,37,037
3. Security deposit of Rs.20,00,000/- Nil
4. License fee paid along with Interest @ Nil
24% from date of deposit
5. Loss of Profit of 49043994/- Nil
6. Investment in Infrastructure, Utensils, Nil
Equipment, Cost in establishing base
Kitchen to the tune of
Rs.1,00,00,000/=
7. Loss of Good Will to the extent of Nil
Rs.2,00,000/=
8. Loss of Opportunity (Rs.2,00,00,000) Nil
9. Compensation for mental torture and Nil
harassment (Rs.1,00,00,000/=)
10. Bar operating against the claimant Nil
from participating in future projects
be removed
11. Cost of litigation including costs Nil
incurred towards cost and legal
service charges.
B. Respondents Counter Claims:
S. No. Counter Claims Award
1. Loss of good will and reputation Nil
(3 crores)
2. Loss due to making alternative 40 lacs
arrangement and awarding license
temporarily (Rs.40 lacs)
3. Loss due to detention at Serum Nil
Station on 15.1.06 for 1 hr 15 mtd
(50 lakhs)
6. The learned Arbitrator awarded Rs.1,65,30,868/- in favour of the
Respondent. The learned Arbitrator also awarded Rs.40 Lakhs in favour of
the Petitioner towards counter claim no.2. The said award is under challenge
O.M.P. 361/2008 Page 3 of 9
before this Court.
7. Before going into the merits of the objections raised by the Petitioner,
it is necessary to set out the relevant clauses of the tender document. The
same are extracted herein as below:
"TENDER DOCUMENTS
GENERAL CONDITIONS OF LICENSE
SECTION - ONE
7.11 Unsatisfactory services etc.
In the event of unsatisfactory service, poor quality of
articles, persistent complaints from passengers, and
services below the standard or any failure or default at
any time on the part of the Licensee to carry out the
terms and provisions of the agreement to the satisfaction
of the IRCTC (who will be sole judge and whose decision
shall be final) it shall be optional to the IRCTC to make
any substitute arrangement it may deem necessary at the
cost and risk of the Licensee or to forthwith terminate
this agreement without any previous notice to the
Licensee and in case of such termination the Security
Deposit be forfeited by the IRCTC and the Licensee shall
have no claim what so ever against IRCTC or any of the
officials in consequence of such termination of the
agreement. No refund of proportionate Licence Fee
shall be admissible in case of Termination under this
clause. The Licensee agrees to make good all cost and
expenses, if any incurred by the IRCTC for making the
substitute arrangements referred to above. The License
shall be also be debarred from participating in the future
projects of IRCTC for a period of one year.
8.1 - Breach of any terms and conditions of the Licence
In the event of any breach of the said terms and
conditions of the Licence, the IRCTC shall be entitled to
forfeit the whole or the part of the Security
Deposit/Licence fee/Concession Fee besides terminating
or revoking the Licence and debarring the Licensee from
participating in the future projects of IRCTC.
O.M.P. 361/2008 Page 4 of 9
8.2 - Termination of Licence on other events of default
The Licensor shall also be entitled at any time forthwith
to terminate the Licence without notice in any of the
following events, that is to say (a) in the event of the
Licensee being convicted by a court of law under the
provisions of criminal procedure code or any other law
(b) in the event of the Licensee being a proprietor or, if a
firm, any partner in the Licensee firm being at any time
be adjudged insolvent or a receiving order or order for
administration of his estate made against him or shall
take any proceeding for liquidation or composition under
any insolvency Act for the time being in force or make
any conveyance or assignment of his interest or enter
into any agreement or composition with his creditors for
suspended payment, or if the firm be dissolved under the
partnership Act or,
in the event of Licensee being a company, if the company
shall pass any resolution to be wound up either
compulsorily or voluntarily (c) Repudiation of agreement
by Licensee or otherwise evidence of intention not to be
bound by the agreement, (d) Failure to adhere to any of
the due dates of payment specified in the terms and
conditions. Immediately on the determination of this
agreement the Licensee shall peacefully vacate the
premises & the pantry and hand over to the
licensor/railway administration all articles in the custody
or possession of the Licensee and shall remove all his
stores and effects from the said premises/pantry. In
default the licensor shall be entitled to enter and take
possession of the said premises/ pantry and-to lock up
the same or remove the furniture or other articles of the
Licensee that may be lying there and to dispose of the
same by sale or otherwise without being liable, for any
damage, and all expenses incurred in connection
therewith, shall be deducted by the licensor from the sale
proceeds or from the Security Deposit or pending bills of
the Licensee.
9.2 - Notice for termination
In case of any event of default mentioned in Clause 8
O.M.P. 361/2008 Page 5 of 9
having occurred, it shall be lawful for the IRCTC any
time thereafter to terminate the Licence agreement and
forfeit the Security Deposit, SUBJECT HOWEVER to the
IRCTC having given to the Licensee fifteen (15) days
prior notice in writing to remedy or make good such
breach and inspite of such notice the Licensee having
failed to remedy the breach. Upon termination of this
Licence agreement as aforesaid, the Licensee shall
deliver vacant and peaceful possession of the pantry car
to the IRCTC/Railways. The License shall be also be
debarred from participating in the future projects of
IRCTC for a period of one year.
GENERAL CONDITIONS OF LICENSE
SECTION - TWO
2.0 FINANCIAL TERMS AND CONDITIONS
2.1 - Payment of Licence fee
Licence fee @ 15% of running bills, submitted by the
Licensee, shall be charged on basis of occupancy of the
train certified by the Train Superintendent on duty.
2.2 Payment of Concession Fee
Bidders are required to offer consolidated Concession
Fee payable by the bidder to IRCTC for the 5 years
tenure of the Licence in the prescribed format. It will be
a lump sum amount payable in three equal installments
over a period of two years. First installment should be
paid at the time of award of licence, second installment
after one year of payment of the first installment and the
third installment before the end of the second year. The
Concession Fee will be in addition to the deduction of
Licence fee @ 15% on running bills.
............
2.4 - Refund of Concession Fee
In the event of permanent cancellation/withdrawal of
train service by the Railway Administration, the
agreement shall be terminated without any notice or
assigning any reasons. In such an event refund of
Concession Fee will be admissible in the following
manner:-
i) the proportionate Concession Fee will be refunded, if
the train is cancelled within a period of five years from
the date of operation of this agreement.
No claim for any consequential loss of business/damages
will be entertained by the IRCTC other than what is
specially provided for in this para. "
8. A perusal of the tender document clearly reveals that there are
separate amounts which were to be deposited by the Respondent at the time
of awarding of tender. Clause 2.2 of General Conditions of license, Section-
Two mentions the consolidated concession fee which was to be paid by the
Respondent. Clause 2.1 of the main General Conditions of License, Section-
One specifies the security deposit, which was to be paid by the Respondent.
As per clause No.7.11 of the General Conditions of License, Section-One,
the Petitioner has the right to forfeit the Security deposit in case of
unsatisfactory services. Further, clause no.8.1, of the same, also clearly
provides that if there is any breach of any terms and conditions of the
license, the security deposit, license fee and concession fee could be
forfeited, in whole or in part.
9. Learned Arbitrator has clearly come to the conclusion while
answering claim Nos.8 & 9 that the termination of the contract is valid.
Relevant portion of the award in respect of claim nos.8 & 9 is set out below:
"Claim No 8
Since the termination of agreement is valid in the given
circumstances under Clause 7.11, there is no ground to
award relief for loss of opportunity.
Claims No 9
As discussed above, the contract was terminated on
account of poor catering services and public
complaints in this regard. No one should be awarded
for his own lapses and thus no compensation can be
granted for mental torture and harassment, which
otherwise have not been substantiated with evidence.
Rather there is no rebuttal to the fact that the
respondent suffered due to conduct of claimant."
10. Thus, there is no dispute that the termination by the Petitioner of the
Respondent's license on account of poor catering service has been
completely upheld by the learned Arbitrator. However, it appears that in
claim No.2, the Arbitrator has committed an error. In claim No.2, the
Arbitrator has wrongly considered the license fee as the concession fee and
has deducted license fee from concession fee and has refunded a sum of
Rs.1.65 crores to the Respondent.
11. The Supreme Court in Oil & Natural Gas Coporation Ltd. v. Saw
Pipes Ltd. (2003) 5 SCC 705, on the question of damages, held as under:
"68. From the aforesaid discussions, it can be held
that:--
(1) Terms of the contract are required to be taken into
consideration before arriving at the conclusion
whether the party claiming damages is entitled to the
same;
(2) If the terms are clear and unambiguous stipulating
the liquidated damages in case of the breach of the
contract unless it is held that such estimate of
damages/compensation is unreasonable or is by way
of penalty, party who has committed the breach is
required to pay such compensation and that is what is
provided in Section 73 of the Contract Act.
(3) Section 74 is to be read along with Section 73 and,
therefore, in every case of breach of contract, the
person aggrieved by the breach is not required to
prove actual loss or damage suffered by him before he
can claim a decree. The Court is competent to award
reasonable compensation in case of breach even if no
actual damage is proved to have been suffered in
consequence of the breach of a contract.
(4) In some contracts, it would be impossible for the
Court to assess the compensation arising from breach
and if the compensation contemplated is not by way of
penalty or unreasonable, Court can award the same if
it is genuine pre-estimate by the parties as the
measure of reasonable compensation."
12. A perusal of the tender clearly reveals that the license fee is in
addition to the concession fee. This is clear from clause No.2.2 of General
Conditions of License. The learned Arbitrator has also erred in holding that
only the security deposit could have been forfeited and not the concession
fee. These are glaring errors and a complete misreading of the tender
conditions and general conditions of license. A perusal of the two clauses
shows that the Security Deposit and the Concession Fee are separate and
distinct components. One is not interlinked with the other. Clause 8.1
permitted the Petitioner to forfeit both amounts. Considering that the
termination was upheld due to the pathetic and abysmal quality of services
provided, the forfeiture cannot be held to be unreasonable. Award is, thus,
not sustainable. Thus, the Award in respect of claim No.2 is set aside.
13. Award of the counter claim of Rs.40 Lakhs as per counter claim no.2
is upheld. Petitioner is free to execute the award in the above terms.
14. OMP is disposed of.
PRATHIBA M. SINGH
JUDGE
OCTOBER 12, 2018/dk
