Delhi High Court
Overnite Express Limited vs Delhi Metro Rail Corporation on 12 June, 2020
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on: 27.02.2020
Pronounced on: 12.06.2020
+ O.M.P. (I) (COMM) 254/2019, I.A. 15456/2019, 15460/2019
& 15481/2019
OVERNITE EXPRESS LIMITED ..... Petitioner
versus
DELHI METRO RAIL CORPORATION ..... Respondent
+ O.M.P. (I) (COMM) 255/2019, I.A. 15451/2019, 15479/2019
& 15483/2019
OVERNITE EXPRESS LIMITED ..... Petitioner
versus
DELHI METRO RAIL CORPORATION ..... Respondent
+ O.M.P. (I) (COMM) 256/2019, I.A. 15452/2019, 15480/2019 &
15484/2019, 2050/2020 & 2079/2020
OVERNITE EXPRESS LIMITED ..... Petitioner
versus
DELHI METRO RAIL CORPORATION ..... Respondent
+ O.M.P. (I) (COMM) 257/2019, I.A. 15453/2019, 15482/2019
& 15485/2019
OVERNITE EXPRESS LIMITED ..... Petitioner
versus
DELHI METRO RAIL CORPORATION ..... Respondent
OMP(I)(COMM) 254, 255, 256 & 257/2019 Page 1 of 61
Present: Mr. A.K. Singla, Sr. Advocate with Mr. Divyakant Lahoti,
Mr. Rohit Gandhi & Mr. Ashish Srivastava, Advocates for
Petitioners in all matters.
Mr. Meet Malhotra, Sr. Advocate with Ms. Vibha Mahajan
Seth, Advocate for Respondent in all matters.
CORAM:
HON'BLE MS. JUSTICE JYOTI SINGH
JUDGMENT
1. Present petitions have been filed under Section 9 of the Arbitration
and Conciliation Act, 1996 (hereinafter referred to as the 'Act') seeking
direction to the Respondent to handover the licensed area on 'as is where
is basis' i.e. restore the licensed Areas in Schedule-I to Schedule IV
respectively, to the pre-bid status including reinstallation of power, cables
etc. Relief is also sought for injuncting the Respondent from raising
invoices or any other amount towards the license fee upto 180 days after
handing over the licensed areas as well as to make the elevators,
escalators and other utilities functional. Petitioner also seeks restraint
against the Respondent from taking any coercive steps under the 4
License Agreements all dated 04.02.2019. Since, the petitions raise
common questions of fact and law, they are being decided by a common
judgment.
2. The brief facts as set out by the Petitioner are that the Respondent
Corporation on 09.07.2018 invited open bids by E-tender for licensing of
commercial space/area on different floors/levels at New Delhi Metro
Station of Delhi Airport Express Line of DMRC network (referred to as
'Areas' hereinafter) on 'as is where is basis'.
3. The Areas were sub-classified under the following four Schedules
with approximate proposed areas:-
S.No. Schedule Floor/Level Approx.
Proposed Area
1. Schedule-I First Floor/Level 624 sq. mtr.
2. Schedule-II Ground Floor/Level 868 sq. mtr.
3. Schedule-III Concourse 1535 sq. mtr.
Floor/Level
4. Schedule-IV Concourse 1522 sq.mtr.
Floor/Level
License for areas under Schedule-I and II was for a period of 21
years and for Schedule-III and IV was for 24 years. The Areas under the
open E-tender could be used by successful bidder to use, develop,
manage, promote, operate or sub-license the same for any commercial
usage, except those specifically prohibited.
4. In order to enable the prospective bidders to formulate their bid by
examining the Areas, the infrastructure and facilities available, the E-
tender provided for a pre-bid site inspection and survey. Respondent
provided the site visit of the Areas on 19.07.2018. During the visit, the
bidders including the representatives of the Petitioner requested for taking
photographs/videography of the floors/levels in order to record the
condition, status and facilities existing at the site, before formulating the
bids, but the same was not permitted by the Respondent citing security
reasons.
5. It is the case of the Petitioner that at the time of the site visit, it was
found that there were bare-shell/ partly constructed 20 units/outlets and
five halls at the Concourse level which could be used for retail outlets and
food court with common sitting areas or any other commercial purpose.
The following facilities, fixtures and fittings in good working condition
were found:-
―(i) White false ceiling in good condition with adequate
number of functional LED lights in the entire Concourse
Floor/Level as well as the common areas and the areas were
well lightened.
(ii) Each unit/ outlet was having individual isolators/MCCBs
and power cables for electricity to each unit/ outlet.
(iii) Each unit/ outlet was having separate water inlet.
(iv) Each unit/ outlet was having chill water pipelines/
tapping for air-conditioning along with ceiling suspended
AHU for air-conditioning in the sitting area except the
double heighted area in Schedule IV and the portion near
AFC Gates. The common areas were also duly air-
conditioned.
(v) Each unit/ outlet was having fresh air ducting for
ventilation and smoke extraction system.
(vi) Each unit/ outlet was having fire sprinklers and smoke/
fire detectors.‖
6. Petitioner states that likewise, the Area at the Ground Floor/Level
and the First Floor/Level was also inspected and it was found that some
units were constructed, while the other outlets were bare-shell/partly
constructed, but with power cables, isolators etc.
7. The bid was submitted by the Petitioner on 08.08.2018 for all four
Scheduled Areas along with the tender document fee and Rs. 48,78,000/-
towards refundable Security Deposit. Being the highest bidder, Petitioner
was declared successful for all the four Areas.
8. On 22.10.2018, separate Letters of Acceptance were issued by the
Respondent with respect to the four Areas and the Petitioner deposited
the advance rental for a period of 12 months for each of the Schedule
Areas, totaling to an amount of Rs. 6,35,06,937/-. On 04.02.2019, four
License Agreements were executed for each of the Areas respectively and
were Registered on 26.04.2019 in the office of the Sub-Registrar.
9. In terms of Clause 6.2 of the License Agreement, there was a 'rent
free fitment period' of 180 days from the date of handing over the areas,
to enable the Licensee to carry out fit-outs, finishing work and set up
business activities. Respondent invited the Petitioner for joint
measurements and handed over the Areas on 11.02.2019. On the said
date, measurement for only Schedule-I Area, First Floor/Level could be
carried out and possession was taken over. The other Levels were in
severely damaged condition and different from the one represented at the
pre-bid stage, thus, possession was not taken. On the same date, the
Petitioner wrote to the Respondent bringing to its notice, the damaged
conditions of the Levels and the possession not having been taken over.
Request was made to rectify various deficiencies including damaged
ceiling, water leakages etc. However, the Respondent vide letter dated
12.02.2019 informed the Petitioner that there was a deemed handing over
of the Areas to the Petitioner. Petitioner also noticed substantial
difference in the measurement of the Area in Schedule-II. As per the
Petitioner, correspondence was subsequently exchanged between the
parties and a meeting took place and the Respondent all through assured
that deficiencies would be rectified. Petitioner also wrote to the
Respondent on 03.05.2019 and requested for sanctioning the electric load
of 5 KW and provide the necessary connection to carry out the finishing
work in the Areas and also deposited the requisite charges. However,
there was no response from the Respondent. Despite the hurdles,
Petitioner submitted the layout plans and drawings on 30.05.2019
regarding the existing spaces and also sent several reminders thereafter to
take necessary action to restore the premises for use by the Petitioner.
10. Instead of heeding to the various demands of the Petitioner for
rectification of the premises, the Respondent, on 23.07.2019 and
25.07.2019 raised invoices for payment of License Fee w.e.f. 10.08.2019.
It is this action of the Respondent that triggered the filing of the present
petitions.
11. Mr. A.K. Singla, Learned Senior Counsel for the Petitioner
contends that pre-bid site inspection was provided to the bidders to enable
the prospective bidders to formulate their bid and assess the commercial
viability by examining the areas, infrastructure and facilities including
fixtures, fittings etc. in both common and specific areas. It was thus
obligatory upon the Respondent to hand over the commercial space as
they were on the date of pre-bid site visit i.e. 19.07.2018, without any
change or alteration. However, contrary to the tendered terms,
Respondent materially altered and damaged the Areas by removing the
cables, fixtures, damaging the ceiling and making the lifts and the
escalators from Concourse Level to First Floor, non-operational. It is
contended that several requests made by the Petitioner to rectify the
defects and restore the premises were of no avail. Officials of the
Respondent have admitted to the material alterations and large-scale
damage and even undertook to rectify the same, including reinstallation
of power cables. It is further submitted that Petitioner is completely
dependent on the Respondent for all utilities and facilities including
electricity and water. The material alteration from the pre-bid stage to the
present state has substantially affected the substratum of the License
Agreements and the agreed terms of providing the premises on 'as is
where is basis'. Reliance is placed on the judgment in Norwest Holdings
PTE Ltd. vs. Newport Mining Ltd. (2010) SGHC 144, wherein the
Singapore High Court has held as under:-
―In an ―as is, where is‖ sale, the buyer agrees to take the
subject matter ―as it is‖ or ―as seen‖, without warranty or
guarantee as to quality, character, condition, size, weight or
kind ...... The buyer cannot ask for the subject matter to be
better than it actually is, but, at the same time, and crucially
for this case, the buyer had not agreed to accept anything
less. Put in another way, it is against all commercial sense
to say that an interested buyer who offers to take in existing
condition thereby offers to take in any condition henceforth
- an agreement to take ―as is‖ does not operate as an entire
assumption of risk. Absent any contrary intention, the
condition which the offeror-buyer offers to take is, quite
naturally, the condition at the time the offer was made and
not the time of acceptance, which is by definition a complete
and unconditional agreement to the terms of the offer.‖
12. It is next argued that the License Agreements between the parties
are valid and subsisting and have not been terminated. The Agreements
are with respect to immovable property proposed to be sub-licensed for
commercial purposes. The Agreements are for more than a period of two
decades, with a lock in period of four to five years. There is no clause for
'no fault termination' or 'termination without cause' on the part of either
party, except by Respondent for breach of any term by the Petitioner,
after expiry of lock in period. Considering the nature of the Agreements,
being non-revocable for a substantial period, they are non-determinable in
nature. The Agreements create a substantial and vested interest in the
Petitioner and if not enforced, cannot be compensated in terms of money.
It is thus submitted that the Respondent should be restrained from
terminating the Agreements and the subject matter in aid of the
Arbitration be preserved and protected.
13. It is next argued that the power and jurisdiction of a Court under
Section 9 of the Act is unfettered and Court can pass any order as may
appear to the Court to be just and convenient to preserve the subject
matter, till the time, the Arbitral Tribunal is constituted and this is clear
from a bare reading of Section 9 (a), (d) and (e) of the Act. Till the time,
the Tribunal adjudicates on issues of the breach by the Respondent,
including non-providing of the Areas on an 'as is where is basis' and
inaction to rectify the damages, Petitioner be protected from coercive
actions by the Respondent and a direction be given not to raise any
further invoices. Reliance is placed on the judgments in the case of Atlas
Interactive (India) Pvt. Ltd. vs. Bharat Sanchar Nigam Limited & Anr.
2005 SCC OnLine Del 190; KSL & Industries Ltd. vs. National Textiles
Corporation Ltd. 2012 SCC OnLine Del 4189; Ascot Hotels & Resorts
Pvt. Ltd. vs. Connaught Plaza Restaurants Pvt. Ltd. 2018 SCC OnLine
Del 7940; and Old World Hospitality Pvt. Ltd. vs. India Habitat Centre
1996 SCC OnLine Del 580.
14. Learned Senior Counsel further argues that on account of the
breach by the Respondent, substantial loss is being caused to the
Petitioner who has made substantial investments and has been negotiating
with several prospective sub-licensees including Multinational
Companies. If interim orders as prayed, are not granted, negotiations
would fail as the said Companies are refusing to finalize the terms, unless
the Areas are rectified and restored and common facilities are made
available by the DMRC.
15. Mr. Meet Malhotra, Learned Senior Advocate, appearing on behalf
of the Respondent submits that present petitions are not maintainable as
none of the prayers sought therein can be granted in law. He further
submits that in prayer Clauses (A) to (B), Petitioner by seeking
mandatory injunction, is in principle seeking enforcement of certain
obligations or compelling the performance of certain acts by the
Respondent to prevent an alleged breach of the obligations under the
License Agreements dated 04.02.2019. This, in effect, is seeking specific
performance of the contracts. It is argued that the License Agreements
being determinable, cannot be enforced by this Court by way of
mandatory injunction and the Petitioner has an alternate remedy to claim
damages/compensation for the alleged breach of the Agreements. The
reliefs sought are barred under Section 14(1), 41(h) read with Section 10
of the Specific Relief Act, 1963.
16. Learned Senior Counsel argues that prayer Clause (D) is for an
interim injunction restraining the Respondent from taking coercive steps
against the Petitioner under the License Agreements and is clearly barred
under Section 41(e) of the Specific Relief Act, 1963 which categorically
provides that no injunction can be granted to prevent the breach of a
Contract, the performance of which cannot be specifically enforced.
17. Learned Senior Counsel next argues that the petition is otherwise
liable to be rejected as the Petitioner has failed to make out any prima
facie case in its favour. The contention of the Petitioner that Respondent
is in breach of the Agreement is neither borne out from the pleadings nor
could the petitioner substantiate the breach during the arguments. No
case of balance of convenience or irreparable loss has been set out by the
Petitioner. On the contrary, non-payment of license fee for the
commercial space in question would cause serious loss to the Respondent
who needs money for its various projects. DMRC, it is submitted, was
established in 1995 with the principle object of planning, designing,
constructing and maintaining a world class Mass Rapid Transport
System. The Metros are highly Capital Intensive Projects and therefore,
to ensure their financial stability and also to subsidize the charges for the
passengers without any Government subsidies, property development by
Metro Project has been allowed by Ministry of Urban Development. The
purpose is to augment the non-operational revenues i.e. from
Advertisement, retailing etc. at Metro Stations and outside and parking
lots.
18. Learned Senior Counsel submits that the terms and conditions of
the Tender categorically stated that the Scheduled spaces offered on
license basis were on 'as is where is basis'. Thus, a duty was cast upon
the bidders to satisfy themselves with regard to the status of the Areas in
question and the facilities available therein by during the inspection. It
was for the Petitioner to have assessed the commercial viability on the
basis of the existing facilities. Petitioner had conducted the site visit on
19.07.2018 and only after inspection and assessing the conditions at site
had submitted its bids. Letters of Acceptance were issued to the
Petitioner for all the commercial spaces on 22.10.2018 and without any
objection, the License Agreements were executed on 04.02.2019.
Subsequent thereto, Petitioner had taken over deemed possession of the
commercial spaces in terms of Clause 5.2 of the Agreement. When the
Petitioner did not come forward for three months to seek approvals from
the Respondent for starting the work, Respondent vide letter dated
30.05.2019 called upon the Petitioner to obtain necessary
clearances/sanctions from DMRC and other Statutory Authorities. Clause
6.2 was also cited to inform the Petitioner that 'rent free fitment period'
was restricted only to 180 days from the date of handing over the licensed
spaces. Clause 6.2 reads as under:
"6.2 For carrying out the fit-outs, finishing works etc., licensee
would be permitted a rent free fitment period of 180 (one
hundred eighty) days from the date of handing over of the
license space. Licensee shall have to complete in all respects
the development of the license space, within the period of 180
(one hundred eighty) days from the date of 'handing over' of the
space by DMRC under the License Agreement. For any delay in
completion of work, DMRC shall not be responsible. In any
case, the License fee shall become chargeable immediately
after fitment period of 180 (one hundred eighty) days.‖
19. It is only thereafter that the Petitioner communicated vide letter
dated 30.05.2019 seeking necessary approvals for electric layout and fire
fighting layout for the various Schedules, by furnishing drawings. For
the first time in June 2019, Petitioner started raising false and frivolous
objections alleging non-operation of elevators, washrooms, laying down
of electric cables etc., despite being well-aware of the existing position of
the site and the facilities thereon, since 19.07.2018.
20. Learned Senior Counsel, without prejudice to the above
contentions submits, that even on merits Petitioner has no case. Attention
of the Court is drawn to Annexure IV and the Clauses therein, being
1.1/1.4/1.6 for Schedule I, First Floor and Annexure IV-C to argue that
the responsibility for the entire cable work to tab off the supply from the
fixed points and to avail the same within the premises, was that of the
Petitioner and the Contract provided that the licensee shall not seek any
claim, damage, compensation on account of time and cost associated with
making provision of electricity. In fact, with respect to the First Floor,
Schedule I, no issue of cables was even raised earlier by the petitioner.
21. It is further submitted that with regard to the lifts and elevators
from inside the Ground Floor to the First Floor, Petitioner was well-aware
of their non-operation at the time of inspection. The accessibility to First
Floor had been made available from outside the Complex due to security
reasons and which is why the bid price for the First Floor was minimum
out of all the Schedules, keeping in mind the commercial viability.
Insofar as the facilities of removal of garbage, maintenance of common
areas etc. are concerned, there was adequate provision in the premises.
Public utilities had been provided at the Concourse level which were
sufficient for the commuters. However the Petitioner unnecessarily
insisted on provision of further facilities, which was beyond the terms of
the licenses. In any case, it is argued that these are matters which are
beyond the scope of examination by this Court in the present petitions
and as and when the Petitioner invokes arbitration, would be decided by
the Arbitrator.
22. It is next contended that the petitions have been filed only with a
view to seek extension of the 'rent free fitment period' and avoid
payment of the License Fee by blaming the Respondent and alleging
breaches. The 180 days 'rent free fitment period' has expired on
09.08.2019. License period has begun from 10.08.2019 and invoices for
the payment have been raised on the Petitioner. Since the licensee failed
to honour the invoices, Respondent in terms of Clause 7.1(j) of Chapter 7
of the License Agreement issued a Cure Notice on 13.08.2019, but the
Petitioner has failed to remit the License Fee.
23. In support of the proposition that prayers (A) and (C) are barred
under Section 14(1), 41(h) read with Section 10 of the Specific Relief
Act, 1963 and prayers (B) and (D) are barred under Section 41(e) of the
said Act, Learned Senior Counsel for the Respondent has relied on
judgments of the Supreme Court in Adhunik Steels Ltd. vs. Orissa
Manganese & Minerals Pvt. Ltd. 2007 (7) SCC 125; Jindal Steel &
Power Ltd. Vs. SAP India Pvt. Ltd. 2015 (4) Arb.L.R.24 (Del);
Anukampa Solutions Private Limited vs. Uttar Pradesh State Road
Transport Corporation & Ors. 2013 SCC Online Del 332; and Airport
Authority of India vs. Kanwar Singh Yadav 82 (1999) DLT 546.
24. Reliance is further placed on the judgment in O.M.P. 329/2001
titled D.R. Sondhi & Ors. vs. Hella KG Hueek and Co. & Ors., decided
on 29.11.2001, for the proposition that Court under Section 9 of the Act
cannot compel an employer to continue to work with a contractor, whose
work is unsatisfactory and that termination of a Contract is a facet of
commercial law and the remedy for an aggrieved party only lies in
claiming damages. Reliance is placed on the judgment in O.M.P.
186/2009 titled Sainath Enterprises Pvt. Ltd. vs. Union of India (UOI)
& Ors. decided on 17.09.2009, wherein it has been held that where the
Agreement is in its very nature determinable, even if one party commits
breach by prematurely cancelling the same, remedy of the other party is
to seek damages and no injunction can be sought.
25. Reliance is also placed on the judgment in Anukampa (supra) to
argue that balance of convenience and irreparable injury has to be seen
from the perspective of legal bar against grant of injunction in Sections
14(1) and 41 of the Specific Relief Act, 1963. Learned Senior Counsel
has also distinguished the judgments relied upon by the Petitioner.
26. Learned Senior Counsel for the Petitioner, in rejoinder, reiterated
that the Agreement between the parties herein is for a period of more than
two decades with a lock-in period of 4 to 5 years and there is no Clause
for 'No fault termination' or 'Termination without cause'. The
Agreements are by nature not determinable, and therefore, the judgments
cited by the Respondent would not apply. It is further argued that even
otherwise, whether the Agreements are determinable or not in their
nature, is an aspect which will be adjudicated by the Arbitral Tribunal
and cannot be decided in the present petitions. It is further argued that
the License Agreements create substantial rights and interest in the
Petitioner and cannot be compensated in terms of money. A party which
is admittedly in default cannot plead that the contracts cannot be enforced
by this Court.
27. It is next argued that Respondent has issued invoices and is
continuing to charge the License Fee without handing over the premises
in a condition where they can be put to use by the Petitioner as was
envisaged at the time of inspection and subsequently at the time of
entering into the License Agreements.
28. Learned Senior Counsel relies on paras 23 and 24 of the judgment
in Ascot Hotels (supra) and argues that there are exceptions to the Rule
in Section 14(1)(a) of the Specific Relief Act, 1963 and in the said case,
the Court, after prima facie observing that it did not appear that the
Agreement was terminated in accordance with Clause 22.4 of the
Agreement, granted a relief of injunction.
29. Learned Senior Counsel submits that a Coordinate Bench of this
Court in KSL (supra), after observing that there was no justification
offered by the Respondent for the sudden termination of the MOU, had
confirmed the order of the Tribunal granting status quo and held that the
Petitioners would suffer irreparable loss and injury if the Textile Mills
were not preserved during the pendency of the Arbitral proceedings, as
the alienation of the Mills and their assets would destroy the subject
matter of the Claim of the petitioners.
30. In sum and substance, the argument of the Petitioner is that the
License Agreements are valid and subsisting between the parties and have
not been terminated. Thus, the subject matter of the Arbitration
proceedings be preserved and Respondent be restrained from taking any
coercive actions against the Petitioner.
31. It is further argued that the Respondent cannot dispute that the
areas were to be handed over on 'as is where is basis' i.e. in the status and
condition as on 19.07.2018, the date of pre-bid site visit. Respondent has
admitted that the pre-bid site visit and existing facilities, fixtures, fittings
installed and available at the areas played a significant role in bidding and
assessing the commercial viability. It is thus not open to the Respondent
to argue that the Petitioner is bound to accept the Areas which have been
materially damaged and deficient in utility and lifts and escalators which
are not operational. The term 'as is where is basis' has to be interpreted
in a meaningful manner to give effect to the Tender conditions and not to
frustrate the same. It is settled principle of contra proferentem that
interpretation of an ambiguous Clause has to be read against the author of
the document which in the present case is DMRC. Reliance is placed on
the judgment in the case of Bank of India vs. K. Mohandas (2009) 5
SCC 313 on this aspect.
32. Learned Senior Counsel also points out that during the pendency of
the petitions, Petitioner has invoked the Arbitration Agreement through a
notice dated 02.11.2019. Thus, the requirement of Section 9(2) of the Act
has been complied with and the Court may pass an order protecting the
Petitioner till the Arbitral Tribunal considers the disputes between the
parties.
33. I have heard the learned Senior Counsels for the parties and
examined their rival contentions.
34. Before proceeding further, it is necessary to refer to some of the
Clauses which have been referred to and relied upon by the parties herein.
The relevant clauses are as under:
―Chapter: 2
Definitions
e. ―As is where is basis‖ means LICENSEE shall be
licensed the said commercial spaces, equipments and
installations, fittings and fixtures (if any) on ‗as is where is
basis' and the LICENSEE shall not make any additions or
alterations in the licensed space, installations including
electric installations and wiring without the prior
permission of DMRC in writing and when permitted by the
LICENSOR the said additions and alterations shall be
carried out by the LICENSEE at their own cost. They
shall not be entitled to any compensation for any additions
carried out by them in the licensed commercial space
rather LICENSEE shall be required to hand over the
licensed commercial space in original condition at the end
of license period.
q. ―License Period‖ means the period beginning from the
Commencement Date and ending on the Termination Date
by efflux of time or sooner determination in accordance
with the date of this Agreement.
v. ―Termination‖ means termination of this Agreement by
efflux of time or sooner determination in accordance with
the provisions of this License Agreement.
Chapter-5
Grant of License and Handing over of Space
5.2 The vacant commercial space, as mentioned in
Annexure-I shall be handed over for commercial activities
within 7 (seven) days from the signing of License
Agreement.
5.3 Area of scheduled commercial space specified in
Annexure-I is approximate. Actual area handed over
subsequent to issue of Letter of Acceptance shall be final.
If the handed over area varies from the area specified in
Annexure-I, the License Fees, Other Charges/GST shall be
chargeable on actual super area handed over. If the
handed over area further varies on account of subsequent
additions, the actual area shall be also got revised from
the effective date.
5.4 Licensee shall not claim any compensation on
account of any variation in handing over of occupied
space from that of the mentioned in the Annexure-I.
Chapter-6
Tenure of License Agreement
6.1 Tenure of the License Agreement shall be for a
period of 21 (twenty one) years, unless otherwise
terminated by DMRC or surrendered by Licensee, in term
of provisions of this agreement. The tenure of License
Agreement shall commence from the date of handing over
of the licensed space. Tenure of the License Period of any
space handed over subsequently shall be co-terminus with
above period irrespective of date of actual handing over.
6.2 For carrying out the fit-outs, finishing works etc.,
licensee would be permitted a rent free fitment period of
180 (one hundred eighty) days from the date of handing
over of the licensed space. Licensee shall have to complete
in all respects the development of the licensed space,
within the period of 180 (one hundred eighty) days from
the date of 'handing over' of the space by DMRC under the
License Agreement. For any delay in completion of work,
DMRC shall not be responsible. In any case, the License
Fee shall become chargeable immediately after the
specified fitment period of 180 (one hundred eighty) days.
6.3 There shall be a lock in period of 4 (four) years
from the date of commencement of the license agreement.
If the Licensee is desirous of terminating the license
hereby created before expiry of aforementioned lock-in
period of 4 (four) years, the License Agreement shall
deemed to be terminated on the date mentioned in
termination/ surrender notice, subject to confirmation by
DMRC. In such a case, the balance Interest Free Security
Deposit shall be forfeited in favour of DMRC after
adjustment of outstanding dues, if any, payable to DMRC.
No grace period shall be provided to Licensee in such a
case. DMRC may also recover the balance outstanding
dues, if are more than Interest Free Security Deposit, from
the other contracts of Licensee in DMRC. Balance
outstanding dues, if are more than Interest Free Security
Deposit, shall also be recoverable from the Licensee
before Licensee is permitted to remove their
establishment(s) or else DMRC will seize their property at
nil/zero value. DMRC shall be free to dispose-off the said
property/ goods in whatsoever manner as it deems fit.
License shall have no claim for compensation or
consideration/damages on this account.
6.4 There shall be a lock-in period of 4 (four) years
from the date of commencement of the license agreement.
The Licensee shall have option to exit from the License
Agreement immediately after completion of the above said
lock-in period of 4 (four) years. For it, the Licensee shall
have to issue 180 days prior notice to DMRC. Such prior
notice intimation can be given after 3½ (three and half)
years however option to exit will be available only after 4
(four) years of lock-in period. In this case, Balance
Interest Free Security Deposit of the Licensee shall be
refunded after adjusting the dues, if any, to be payable by
the Licensee. DMRC may also recover the balance
outstanding dues, if are more than Interest Free Security
Deposit, from the other contracts of Licensee in DMRC.
Balance outstanding dues, if are more than Interest Free
Security Deposit, shall also be recoverable from the
Licensee before Licensee is permitted to remove their
establishment(s) or else DMRC will seize their property at
nil zero value. DMRC shall be free to dispose-off the said
property / goods in whatsoever manner as it deems fit.
Licensee shall have no claim for compensation or
consideration/ damages on this account.
Chapter: 12
Breaches/Surrender/Termination of License Agreement
12.1 Surrender of License Agreement:
(i) No partial surrender of licensed space or part of the
licensed space which has been handed over to the
Licensee by DMRC shall be permissible during the
currency of the License Agreement.
(ii) The Licensee shall have option to surrender the
license agreement after 4 (four) years lock in period
provided -
a) The Licensee successfully completes initial
4 (four) years lock in period.
b) There is no arrear pending with the
Licensee on the date of issue of surrender
notice.
c) DMRC receives a 180 days advance notice,
in writing, from licensee for its intention to
surrender the license agreement. Such
notice of 180 days can be given as per the
provisions of Clause No. 6.3, 6.4 & 6.5 of
this license agreement and as per Clause
No. 12.1 (iii), (iv) & (v) as given below.
d) Licensee continues to pay all dues as per
schedule to DMRC till the date of pre-
mature closure of License Agreement.
e) Licensee hand over peaceful possession of
the all Licensed space to DMRC free from
all encumbrances within 30 (thirty) days
from the termination of License agreement.
If Licensee satisfies the above said conditions, DMRC
shall terminate the Agreement and refund interest free
Security Deposit/ Performance Security after adjusting any
outstanding amount on the part of Licensee.
(iii) There shall be a lock in period of 4 (four) years
from the date of commencement of the license
agreement. If the Licensee is desirous of terminating
the license hereby created before expiry of
aforementioned lock-in period of 4 (four) years, the
License Agreement shall deemed to be terminated
on the date mentioned in termination/ surrender
notice, subject to confirmation by DMRC. In such a
case, the balance Interest Free Security Deposit
shall be forfeited in favour of DMRC after
adjustment of outstanding dues, if any, payable to
DMRC. No grace period shall be provided to
Licensee in such a case. DMRC may also recover
the balance outstanding dues, if are more than
Interest Free Security Deposit, from the other
contracts of Licensee in DMRC. Balance
outstanding dues, if are, more than Interest Free
Security Deposit, shall also be recoverable from the
Licensee before Licensee is permitted to remove
their establishment(s) or else DMRC will seize their
property at nil/zero value. DMRC shall be free to
dispose-off the said property/goods in whatsoever
manner as it deems fit. Licensee shall have no claim
for compensation or consideration/damages on this
account.
(iv) The Licensee shall have option to exit from the
License Agreement immediately after completion of
the lock-in period as detailed in Clause No. 12.1
(iii) above. For it, the Licensee shall have to issue
180 days prior notice to DMRC. Such prior notice
intimation can be given after 3½ (three and half)
years however option to exit will be available only
after 4 (four) years. In this case, Balance Interest
Free Security Deposit of the Licensee shall be
refunded after adjusting the dues, if any, to be
payable by the Licensee. DMRC may also recover
the balance outstanding dues, if are more than
Interest Free Security Deposit, from the other
contracts of Licensee in DMRC. Balance
outstanding dues, if are more than Interest Free
Security Deposit, shall also be recoverable from the
Licensee before Licensee is permitted to remove
their establishment(s) or else DMRC will seize their
property at nil/ zero value. DMRC shall be free to
dispose-off the said property I goods in whatsoever
manner as it deems fit. Licensee shall have no claim
for compensation or consideration I damages on
this account.
(v) If the Licensee is desirous of terminating the license
after expiry of lock-in period, as detailed in Clause
No. 12.1 (iii) above without serving any prior
intimation period or shorter intimation period than
180 days, the agreement shall deemed to be
terminated on completion of such short I irregular
intimation period. In such cases, the Interest Free
Security Deposit shall be refunded to the Licensee
after adjustment of license fee for period shorter
than 180 days (notice period) and outstanding dues,
if any. DMRC may also recover the balance
outstanding dues, if are more than Interest Free
Security Deposit, from the other contracts of
Licensee in DMRC. Balance outstanding dues, if are
more than Interest Free Security Deposit, shall also
be recoverable from the licensee before Licensee is
permitted to remove their establishment (s) or else
DMRC will seize their property at nil/ zero value.
DMRC shall be free to dispose-off the said property
I goods in whatsoever manner as it deems fit.
Licensee shall have no claim for compensation or
consideration I damages on this account.
12.3 Termination of License Agreement by DMRC:
Provided that in the event of application of clauses
12.2(a), (b) and (p) above, DMRC shall give to the
Licensee 15 (fifteen) to 30 (thirty) days time as
applicable to cure the default prior to considering
the events specified therein as Licensee's events of
default and in the event the Licensee remedies the
default to the satisfaction of the DMRC within the
cure period, the event shall not be considered as a
Licensee's Event of Default. In case the licensee
fails to remedies the default to the satisfaction of the
DMRC within the cure period, then DMRC shall be
within its rights to disconnect the utility services &
terminate the License Agreement as per the
provisions of this license agreement along with
forfeiture of Interest Free Security Deposit after
adjustment of all dues payable. The Licensee
voluntarily agrees not to seek any claim,
compensation, damages or any other consideration
whatsoever on any ground in this regard. However,
in the event of Clause 12.2(d) to (o) DMRC may
terminate the License Agreement with immediate
effect.‖
35. The first and foremost question that arises for consideration in the
present petition is whether the reliefs sought by the Petitioner are barred
under Sections 14(1)(a), 14(1)(c), 14(1)(d), 41(h), 41(e) and Section 10 of
the Specific Relief Act, 1963. In order to answer this question, it is
important to examine the reliefs that have been sought and since all are
identical relief from one of the petitions is being extracted hereunder:
―A. Pass an ex-parte ad interim order and confirm the
same upon return of notice directing the Respondent
Corporation to hand over the schedule/license areas as
per its obligation of 'as is where is basis' i.e. restore the
licensed areas of Schedule III to the same condition as it
was on the date of pre-bid site visit and carry out all acts
and deeds including and not limited to re-installation of
power cables and isolators/MCCBs, repair of damaged
ceiling, repair of water leakages etc;
B. Pass an ex-parte ad interim order and confirm the same
upon return of notice injuncting the Respondent
Corporation from raising invoices or demanding any
amount towards license fees upto 180 days after handing
over of Schedule-III licensed areas on as is where is basis.
C. Pass an ex-parte ad interim order and confirm the same
upon return of notice directing the Respondent
Corporation to make functional and operational toilets,
lifts, elevators, escalators and other essential utilities in
working and functional condition;
D. Pass an ex-parte ad interim order and confirm the same
upon return of notice injuncting the Respondent
Corporation from taking any coercive steps against the
Petitioner or under license agreement dated 04.02.2019.
E. Pass any other or further order as this Hon'ble Court
may deem fit and proper.‖
36. Sections 14(1)(a) to (d) of the Specific Relief Act, 1963 are
extracted hereinunder:
―14. Contracts not specifically enforceable.--
(1) The following contracts cannot be specifically
enforced, namely:--
(a) a contract for the non-performance of which
compensation in money is an adequate relief;
(b) a contract which runs into such minute or numerous
details or which is so dependent on the personal
qualifications or volition of the parties, or otherwise from
its nature is such, that the court cannot enforce specific
performance of its material terms;
(c) a contract which is in its nature determinable;
(d) a contract the performance of which involves the
performance of a continuous duty which the court cannot
supervise.‖
37. In the case of Indian Oil Corporation Limited v. Amritsar Gas
Service 1991 1 SCC 533, Supreme Court considered exactly the same
issue that arises in the present case, that if the contract by its nature is
determinable, then granting relief of restoration of Distributorship, even if
there was a breach by the other party, was impermissible under Section
14(1) of the Specific Relief Act, 1963. Court held that in a determinable
contract granting such a relief would be contrary to the mandate in
Section 14(1) and held as under:
―12. The arbitrator recorded finding on Issue No. 1 that
termination of distributorship by the appellant-
Corporation was not validly made under clause 27.
Thereafter, he proceeded to record the finding on Issue No.
2 relating to grant of relief and held that the plaintiff-
respondent no. 1 was entitled to compensation flowing
from the breach of contract till the breach was remedied by
restoration of distributorship. Restoration of
distributorship was granted in view of the peculiar facts of
the case on the basis of which it was treated to be an
exceptional case for the reasons given. The reasons given
state that the Distributorship Agreement was for an
indefinite period till terminated in accordance with the
terms of the agreement and, therefore, the plaintiff-
respondent 1 was entitled to continuance of the
distributorship till it was terminated in accordance with
the agreed terms. The award further says as under:
―This award will, however, not fetter the right
of the defendant corporation to terminate the
distributorship of the plaintiff in accordance
with the terms of the agreement dated April 1,
1976, if and when an occasion arises.‖
This finding read along with the reasons given in the
award clearly accepts that the distributorship could be
terminated in accordance with the terms of the agreement
dated April 1, 1976, which contains the aforesaid clauses
27 and 28. Having said so in the award itself, it is obvious
that the arbitrator held the distributorship to be revokable
in accordance with clauses 27 and 28 of the agreement it is
in this sense that the award describes the Distributorship
Agreement as one for an indefinite period, that is, till
terminated in accordance with clauses 27 and 28. The
finding in the award being that the Distributorship
agreement was revokable and the same being admittedly
for rendering personal service, the relevant provisions of
the Specific Relief Act were automatically attracted. Sub
section (1) of Section 14 of the Specific Relief Act specifies
the contracts which cannot be specifically enforced, one of
which is in its nature determinable. In the present case, it
is not necessary to refer to the other clauses of sub section
(1) of section 14, which also may be attracted in the
present case since clause (c) clearly applies on the finding
read with reasons given in the award itself that the
contract by its nature is determinable. This being so
granting the relief of restoration of the distributorship even
on the finding that the breach was committed by the
appellant-Corporation is contrary to the mandate in
section 14(1) of the Specific Relief Act and there is an
error of law apparent on the face of the award which is
stated to be made according to ‗the law governing such
cases'. The grant of this relief in the award cannot,
therefore, be sustained.‖
38. Following this judgment, this Court in Rajasthan Breweries Ltd.
vs. The Stroh Brewery Company 2000 (55) DRJ (Division Bench), held
that if ultimately the termination was found to be illegal, the remedy of
the aggrieved party would be to seek damages for wrongful termination
and a claim for specific performance of the Agreement cannot be
entertained. Relevant para of the judgment reads thus:
―20. Even in the absence of specific clause authorising
and enabling either party to terminate the agreement in the
event of happening of the events specified therein, from the
very nature of the agreement, which is private commercial
transaction, the same could be terminated even without
assigning any reason by serving a reasonable notice. At
the most, in case ultimately it is found that termination was
bad in law or contrary to the terms of the agreement or of
any understanding between the parties or for any other
reason, the remedy of the appellants would be to seek
compensation for wrongful termination but not a claim for
specific performance of the agreements and for that view
of the matter learned Single Judge was justified in coming
to the conclusion that the appellant had sought for an
injunction seeking to specifically enforce the agreement.
Such an injunction is statutorily prohibited with respect of
a contract, which is determinable in nature. The
application being under the provisions of Section 9(ii)(e)
of the Arbitration and Conciliation Act, relief was not
granted in view of Section 14(i)(c) read with Section 41 of
the Specific Relief Act. It was rightly held that other
clauses of Section 9 of the Act shall not apply to the
contract, which is otherwise determinable in respect of
which the prayer is made specifically to enforce the same."
39. In the case of V.F. Services (UK) Ltd. vs. Union of India & Ors.
2011 XAD (Delhi) 268, a Coordinate Bench of this Court while dealing
with a petition under Section 9 of the Act wherein a direction was sought
to stay the operation of a letter issued by Embassy of Government of
India at Netherlands, terminating a Contract held that the contract by its
very nature was determinable. Facts and circumstances of the case were
not extenuating enough to warrant a departure from the settled law that a
Court cannot grant interim relief of enforcing a Contract which is
determinable. The legal bar erected by Section 14(1)(c) read with Section
41(e) of the Specific Relief Act, 1963, cannot be overlooked, is what the
Court observed. Relevant part of the judgment is as under:
―7. The VOC is a contract which by its very nature is
determinable. Although in exceptional facts of individual
cases involving agencies of the State, this Court has
granted interim relief even against the termination of a
contract (for e.g., Pioneer Publicity Corporation v. Delhi
Transport Corporation), the settled law is that even where
a contract has been illegally terminated the aggrieved
party would be able to only claim damages and no interim
relief against termination of the contract. In Indian Oil
Corporation v. Amritsar Gas Service, (1991) 1 SCC 533,
the Supreme Court explained that even where one of the
contracting parties was an agency of state, the
constitutional limitations of Article 14 as explained in
Dwarkadas Marfatia and Sons v. Board of Trustees of the
Port of Bombay (1989) 3 SCC 293, Mahabir Auto Stores v.
Indian Oil Corporation, (1990) 3 SCC 752 and Shrilekha
Vidyarthi v. State of U.P., (1991) 1 SCC 212 would not
apply since the case was based only on breach of contract
and remedies flowing therefrom. Therefore (SCC, p.541)
―the further questions of public law based on Article 14 of
the Constitution do not arise for decision in the present
case and the matter must be decided strictly in the realm of
private law rights governed by the general law relating to
contracts with reference to the provisions of the Specific
Relief Act providing for non-enforceability of certain types
of contracts.‖ On the facts of that case it was held that
(SCC, p.542 ―granting the relief of restoration of the
distributorship even on the finding that the breach was
committed by the appellant- Corporation is contrary to the
mandate in Section 14(1) of the Specific Relief Act.
8. Here the VOC dated 26th November 2010 is by its very
nature determinable. There appear prima facie to be no
extenuating circumstances that warrant a departure from
the settled legal position that the court will not grant an
interim relief of continuing a contract that is by its very
nature determinable. In other words, this Court is not
persuaded to overlook the legal bar erected by Section
14(1)(c) read with Section 41(e) of the SRA. Clause 11 of
the VOC, which has been invoked by Respondent No. 2,
envisages either party terminating the contract by giving
two months' advance notice ―of being unable to carry on
the services any longer‖. Respondent No. 2 did give two
months' advance notice to the Petitioner ....‖
40. In the case of Cox and Kings India Limited v. Indian Railways
Catering Tourism Corporation Limited (2012) 7 SCC 587, Supreme
Court was dealing with a case of restoration of a Lease Agreement, which
stood terminated. The aggrieved party had invoked Section 9 of the Act
and one of the pleas raised was that it had invested huge sums of money
in the Project. Mandatory injunction was sought by the party. Supreme
Court held as under:
―25. 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 Appellant
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 Appellant
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 Appellant 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 Appellant to operate the luxury train
indefinitely, till a decision was arrived at in Section 9
Application.
26. It is no doubt true that the Appellant 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 Appellant'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.
27. 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.‖
41. In this context the findings of the Division Bench in
Indian Railways Catering & Tourism Corp. Ltd. v. Cox & Kings
India Ltd. and Another, 2012 SCC OnLine Del 113, are very significant
and are as under :
―25. Based on the facts projected above, we come back to
the main issue, namely, whether direction in the nature
given, which are in the nature of mandatory injunction
amounting to specific performance or directing
continuation of the arrangement even when the agreement
had been terminated could be given or not. Once the Joint
Venture Agreement is terminated, prima facie we feel that
even in the main arbitration proceedings, it would be
difficult for M/s C&K to seek the final relief of specific
performance and for restoration of the agreement. There is
a huge possibility that in such a situation, normally M/s
C&K would be entitled to damages even if it is held that
Joint Venture Agreement was illegally terminated. After
all, Joint Venture Agreement was a contract between the
parties. It was only in the realm of contractual
arrangement with no statutory flavour and no element of
public law. While dealing with the contractual obligations
under the realm of contract in a private field without any
insignia of public element, it may be somewhat difficult for
M/s C&K to maintain the relief of specific performance.
The agreement was in commercial field to be governed by
contract law, as between two private parties. In Rajasthan
Breweries Ltd. v. The Stroh Brewery Company, AIR 2000
Delhi 450, the Court enunciated the principle on this
aspect in the following words:
―Even in the absence of specific clause
authorising and enabling either party to terminate
the agreement in the event of happening of the
events specified therein, from the very nature of
the agreement, which is private commercial
transaction, the same could be terminated even
without assigning any reason by serving a
reasonable notice. At the most, in case ultimately it
is found that termination was bad in law or
contrary to the terms of the agreement or of any
understanding between the parties or for any other
reason, the remedy of the appellants would be to
seek compensation for wrongful termination but
not a claim for specific performance of the
agreements and for that view of the matter learned
Single Judge was justified in coming to the
conclusion that the appellant had sought for an
injunction seeking to specifically enforce the
agreement. Such an injunction is statutorily
prohibited with respect of a contract, which is
determinable in nature. The application being
under the provisions of Section 9(ii)(e) of the
Arbitration and Conciliation Act, relief was not
granted in view of Section 14(i)(c) read with
Section 41 of the Specific Relief Act. It was rightly
held that other clauses of Section 9 of the Act shall
not apply to the contract, which is otherwise
determinable in respect of which the prayer is
made specifically to enforce the same.‖
26. We are unable to accept the contention of learned
counsel for the appellant that since IRCTC is
a corporation which is wholly owned by the Ministry
of Railways and is, thus, subjected to Article 12 of the
Constitution of India, the appellant can maintain the
prayer for mandatory injunction. This plea of the appellant
flows from the argument that the action of the State or
instrumentality of the State has to be fair, just and non-
arbitrary even in contractual matters and for this purpose,
the appellant has referred to the judgment of this Court
in Pioneer Publicity Corporation v. DTC, 103 (2003) DLT
442 and that of Supreme Court in Mahabir Auto
Sales (supra). While there is no denial of the legal
principle, per se, laid down in the aforesaid cases, we are
unable to accept the applicability of these judgments
insofar as the present case is concerned and that too, when
we are dealing with the question of interim
arrangement and not concerned with the final stage of the
proceedings. Specific performance would require day to
day supervision. In any event, M/s C&K can be
compensated in terms of money if they prove losses due to
alleged wrongful treatment. There is a serious dead lock
between IRCTC and M/s C&K in relation to the affairs of
Joint Venture company cannot be given a go-by.
27. Though our aforesaid observations are only prima
facie in nature and we are clear that in arbitration
proceedings, the Arbitral Tribunal would decide the same
on its own merits without being influenced by our tentative
observations, this exercise is undertaken for the purpose of
present proceedings under Section 9 of the Act. Once this
is the prima facie view we hold, it is difficult to make
interim arrangement and pass an order in the nature of
mandatory injunction directing continuation of the earlier
arrangement which has been terminated by IRCTC. After
all, it is to be borne in mind that IRCTC is the absolute
owner of the train in question and the said train belongs
exclusively to IRCTC. Can, in such circumstances, IRCTC
be forced to do what it is not willing to in a matter relating
to commercial contract, which has been terminated?
Somewhat similar situation had arisen in the case
of Country Development and Management Services
Pvt. Ltd. v. Brookside Resorts Pvt. Ltd., 2006 (Supp.)
Arb.LR 248 (Delhi). In this Single Bench judgment
rendered by one of us (A.K. Sikri, J.), the injunction was
refused. Para 14 of the said judgment takes note of the
facts which prevailed in that case and in the said para,
legal position is stated. In that case also, the Court was
dealing with application under Section 9 of the Act. We
reproduce herein para 14 and other relevant paragraphs
for our purpose:
14. I may state at the outset that the fundamental
aspect which is to be borne in mind is that we are
dealing with petition under Section 9 of the
Arbitration and Conciliation Act, 1996 and,
therefore, entire matter has to be looked into from
the angle as to what should be the interim
arrangement between the parties. The parties
entered into agreement dated 2nd June, 2001,
namely, TLA and now the disputes have arisen
between the parties arising out of the said TLA.
The matter will have to be gone into, in depth, in
those arbitration proceedings. The admitted
position which emerges is that the land in question
on which the hotel is built, belongs to the
respondent. It is also not disputed that the entire
financial arrangement for construction of the said
hotel is borne by the respondent either from its
own resources or by taking loan from financial
institution. Though the petitioner's case is that
financial institution has sanctioned the loan
because of the petitioner's association with the
respondent, fact remains that loan is sanctioned in
the name of the respondent and it is the sole
responsibility of the respondent to repay the said
loan. The construction cost of the project is,
according to the respondent, Rs. 11 crores.
Therefore, entire hotel property, namely, land as
well as construction thereon exclusively belongs to
the respondent. As per the petitioner's averments,
it has provided the technical knowhow in the form
of drawings, designs/consultancy etc. on the basis
of which hotel is built and the hotel which stands
now, gives an appearance of of a CIS hotel. This is
disputed by the respondent. It, however, cannot be
denied that some technical support is obviously
provided by the petitioner pursuant to the TLA.
However, only because of this reason can it be
said that the respondent should not be allowed to
run the hotel if the parties have otherwise fallen
apart. Case of the petitioner is that the respondent
has made structural, architectural and design
changes and, therefore, even according to the
petitioner the hotel is not made strictly in
conformity with the standard on which CIS hotels
are constructed. The respondent wants to run the
hotel itself. Even if there was no dispute and the
hotel was strictly built according to CIS
standards and hotel had run under the petitioner's
banner, the respondent could always terminate the
agreement at any time under the TLA and start
operating the hotel of its own. This is because the
agreement is determinable in nature. If that could
be the position even after the start of hotel as
Carlson hotel, I am of the view that if the
respondent wants to start the hotel, from the
beginning itself, without the association of the
petitioner, it can do so. The petitioner, for the
alleged services rendered and for the alleged
breach of contract on the part of the respondent,
can always sue for damages.
15. In view of Sections 14 and 34 of the Specific
Relief Act, injunction cannot be granted. These
provisions have come up for consideration before
the courts number of times. Some of these
judgments are taken note of hereinafter:
(i) Rajasthan Breweries Ltd. The Stroh Brewery
Co. (supra):
―13: As the application by the appellant was
filed under Section 9 of the Act prior to
commencement of the arbitration
proceedings, it is not disputed that the Court
is empowered to deal with the
same and exercise such power for making
orders as it has for the purposes of and in
relation to any proceedings before it. The
closing words of Section 9 of the Act
empowering the Court to deal with such
applications for interim measures have on the
face of it to be dealt with in accordance with
the law applicable to any proceedings taken
out before such a court. On the ratio of the
decision of the Supreme Court in Sumitomo
Heavy Industries Ltd. v. ONGC Ltd., AIR
1998 S.C. 825 the application will be
governed by the law of India and not by the
governing law. However, the principles of
equity governing specific performance are
almost same in Indian law and English law.
The discretion of the Courts of England while
enforcing the specific performance of a
contract is subject to the same constraints as
are applicable in the Courts in India. Under
the English law of specific performance of
contractual obligation is available only in
equity and is subject to various restrictions,
which have been explained by G.H. Treitel in
his work ―The Law of Contracts‖ 6th Edition
pages 764 to 775 as follows:
―(i) Specific performance will not be ordered
where damages are adequate remedy.
(ii) If the party applying for relief is guilty of
a breach of the contract or is guilty of
wrongful conduct.
(iii) If the Contract involves personal service.
(iv) If the contract requires constant
supervision.
(v) If the party against whom specific
performance is sought is entitled to terminate
the contract.‖
At page 775, it is stated in the aforementioned
work:-
―If the party against whom specific
performance is sought is entitled to terminate
the contract, the order will be refused as the
defendant could render it nugatory by
exercising his powers to terminate. This
principle applies whether the contract is
terminable under its express terms or on
account of the conduct of the party seeking
specific performance.‖
14. The effect of breach of a contract by a
party seeking to specifically enforce the
contract under the Indian law is enshrined in
Section (c) read with Section 41(e) of the
Specific Relief Act, 1963. Clause (e) of
Section 41 of the Specific Relief Act provides
that injunction cannot be granted to prevent
the breach of contract, the performance of
which would not be specifically enforced.
Clause (c) of Section 41 enumerates the
nature of contracts, which could not be
specifically enforced. Clause (c) to sub-
section (1) of Section 14 says that a contract
which is in its nature determinable cannot be
specifically enforced. Learned Single Judge
thus was justified in saying that if it is found
that a contract which by its very nature is
determinable, the same not only cannot be
enforced but in respect of such a contract no
injunction could also be granted and this is
mandate of law. This, however, is subject to
an exception, as provided in Section 42 that
where a contract comprises an affirmative
agreement to do a certain act, coupled with a
negative agreement, express or implied, not to
do a certain act, the circumstances that the
court is unable to compel specific
performance of the affirmative agreement
shall not preclude it from granting an
injunction to perform the negative agreement.
18. In Indian Oil Corporation Ltd. v. Amritsar
Gas Service, (1991) 1 SCC 533, the Supreme
Court had an occasion to consider the terms
of agreement of distributorship. The
agreement could be terminated in accordance
with the terms of the agreement as per clauses
27 and 28 thereof. The Arbitrator had also
held the distributorship to be revocable in
accordance with clauses 27 and 28 of the
agreement. The distributorship agreement
was held for indefinite period, namely, till the
time it was terminated in accordance with the
terms contained therein. It was the case of the
respondent therein that since the contract had
not been terminated in accordance with
clause 27 thereof, under which termination
had been made, the firm was entitled to
continuance of distributorship in the special
circumstances of the case, which contention
was upheld by the Arbitrator. Supreme Court
set aside the award of the arbitrator on the
ground that there is error of law apparent on
the face of the record and grant of relief in the
award cannot be sustained. It was held:-
―The arbitrator recorded finding on issue
No. 1 that termination of distributorship by
the appellant Corporation was not validly
made under clause 27. Thereafter, he
proceeded to record the finding on issue
No. 2 relating to grant of relief and held
that the plaintiff-respondent 1 was entitled
to compensation flowing from the breach
of contract till the breach was remedied by
restoration of distributorship. Restoration
of distributorship was granted in view of
the peculiar facts of the case on the basis
of which it was treated to be an
exceptional case for the reasons given. The
reasons given state that the
Distributorship Agreement was for an
indefinite period till terminated in
accordance with the terms of the
agreement and, therefore, the plaintiff-
respondent No. 1 was entitled to
continuance of the distributorship till it
was terminated in accordance with the
agreed terms. The award further says as
under:-
―This award will, however, not fetter
the right of the
defendant Corporation to terminate the
distributorship of the plaintiff in
accordance with the terms of the
agreement dated April 1, 1976,
if and when an occasion arises.‖
This finding read along with the reasons
given in the award clearly accepts that the
distributorship could be terminated in
accordance with the terms of the
agreement dated April 1, 1976, which
contains the aforesaid clauses 27 and 28.
Having aid so in the award itself, it is
obvious that the arbitrator held the
distributorship to be revokable in
accordance with clauses 27 and 28 of the
agreement. It is in this sense that the
award describes the Distributorship
Agreement as one for an indefinite period,
that is, till terminated in accordance with
clauses 27 and 28. The finding in the
award being that the Distributorship
Agreement was revokable and the same
being admittedly for rendering personal
service, the relevant provisions of the
Specific Relief Act were automatically
attracted. Sub-section (1) of Section 14 of
the Specific Relief Act specifies the
contracts which cannot be specifically
enforced, one of which is a contract which
is in its nature determinable. In the present
case, it is not necessary to refer to the
other clauses of subsection (1) of Section
14, which also may be attracted in the
present case since clause (c) clearly
applies on the finding read with reasons
given in the award itself that the contract
by its nature is determinable. This being so
granting the relief of restoration of the
distributorship even on the finding that the
breach was committed by the appellant-
Corporation is contrary to the mandate in
Section 14(1) of the Specific Relief
Act and there is no error of law apparent
on the face of the award which is stated to
be made according to the law governing
such cases. The grant of this relief in the
award cannot, therefore, be sustained.
The facts of the present case are identical
to those in aforementioned decision of the
Supreme Court in as much as the
agreements in the instant case are also
terminable by the respondent on
happening of certain events. In Indian Oil
Corporation's case (supra) also agreement
was terminable on happening of certain
events. Question that whether termination
is wrongful or not; the events have
happened or not; the respondent is or is
not justified in terminating the agreements
are yet to be decided. There is no manner
of doubt that the contracts by their nature
determinable.
In Classic Motors Ltd. v. Maruti Udyog
Ltd.,1997 I AD (DELHI) 190 : (1997) 65
D.L.T. 166 relying upon number of
decisions, learned Single Judge of this
court rightly observed:-
―In view of long catena of
decisions and consistent view of the
Supreme Court, I hold that in private
commercial transaction the parties
could terminate a contract even without
assigning any reasons with a reasonable
period of notice in terms of such a
Clause in the agreement. The
submission that there could be no
termination of an agreement even in the
realm of private law without there being
a cause or the said cause has to be valid
strong cause going to the root of the
matter, therefore, is apparently
fallacious and is accordingly, rejected.‖
(ii) Crompton Greaves Ltd. v. Hyundai
Electronics Industries Co. Limited, 76
(1998) DLT 733.
(iii) National Auto Impex v. Autocop
(India) Pvt. Ltd., 2001 VI AD (DELHI) 490
(iv) Indian Oil Corporation Ltd. v. Amritsa
r Gas Service, (1991) 1 SCC 533.
(v) Alfa Laval (India) Ltd. v. J.K.
Corp. Ltd., 2000 I AD (DELHI) 974.
16. The effect of the stay order would be that the
hotel is not allowed to start its operation. If
ultimately the respondent succeeds then the
respondent would be put to unnecessary
loss and the time gone by would be wasted without
putting the clock back. On the other hand, it is
ultimately held that the petitioner had right to run
the management of hotel for specified period such
an award can be passed in favour of the petitioner
or the petitioner can be compensated for depriving
it from doing so.
17. Learned senior counsel for the respondent, in
these circumstances, is right in his submission that
the petitioner cannot invoke the provisions of
Section 42 of the Specific Relief Act. There is a
dispute as to whether the contract is still in
existence or it has come to an end by efflux of time.
The respondents submission that once the opening
date is not extended by the petitioner under clause
1.5 of the agreement there is no obligation on the
part of the petitioner to comply with the
agreement. The circumstance of the case,
therefore, do not warrant exercise of any
discretionary jurisdiction in favour of the
petitioner. The principle laid down by the Supreme
Court in Gujrat Bottling Company Ltd. (supra) is
that relief by way of interlocutory injunction, is
granted to mitigate the risk or injustice to the
petitioner during the period before that uncertainty
could be resolved. The object of the interlocutory
injunction is to protect the plaintiff against injury
by violation of his right for which he could not be
adequately compensated in damages recoverable
in the action if the uncertainty were resolved in his
favour at the trial. The need for such protection
has, however, to be weighed against the
corresponding need to the defendant to be
protected against injury resulting from his having
been prevented from exercising his own legal
rights for which he could not be adequately
compensated.‖
28. In the present case, when the adhoc arrangement or
even the so-called lease has been terminated, we agree with
the learned Additional Solicitor General that passing of
mandatory injunction would amount to:
(i) First, create an agreement between Joint
Venture company and IRCTC in relation to the
train;
(ii) Second, enforce such agreement even though
JV company was not a petitioner; and
(iii) Third, allow M/s C&K to take advantage of
such agreement when, admittedly, even the ‗Lease
Agreement' as per the terms of the Joint Venture
Agreement was to be between JV
company and IRCTC.‖
42. In the case of Anukampa (supra), a Coordinate Bench of this
Court in a petition under Section 9 of the Act held as under:
―9. xxx xxx xxx
(iv) I am of the opinion that once a licensee, always a
licensee. This principle has been clearly laid down in a
Full Bench decision of this court reported as Chandu Lal
vs. MCD AIR 1978 Del 174. In fact, the Full Bench of this
Court in this judgment has laid down that a licensee after
his licence is terminated is not entitled to any interim
injunction and in fact the licensor is entitled to use
reasonable force to throw out the licensee from the
licenced premises. I may also note at this stage that a
Division Bench Judgement of this court in the judgment
reported as DTTDC Vs. D.R.Mehra & sons 62(1996) DLT
234 declined an injunction which was prayed for by a
licensee by stating that a licencee after termination of the
licence is not entitled to injunction and even if he is in
possession such a relief cannot be granted to him and the
Division Bench clearly stated that a licencee should not be
allowed to urge the argument of due process of law
because such issue will not arise if the licencee himself
acts fairly and vacates the premises.
10. The issue of balance of convenience and irreparable
injury in a case like this has necessarily to be seen from
the perspective of the legal bar with respect to the grant of
injunction because of Sections 14 (1),(a),(b) & (c) read
with Section 41(e) of the Specific Relief Act. If the law
itself disentitles any injunction, then equities cannot have
any say. That being the position and in view especially of
the law with relation to termination of license, the balance
of convenience is not in favour of the petitioner but in
favour of the respondents as the petitioner will be
compensated suitably by damages in case the respondent
is found guilty of committing breach of contract. I may
finally note that by looking at facts to arrive at a decision
on an application for injunction under Section 9, it cannot
be said that a Court conducts a mini trial. This Court is
mandated to see the strength of the cases of the respective
parties to arrive at a decision by virtue of Colgate
Palmolive vs. Hindustan Liver Ltd. (1999) 7 SCC 1. Mini
trial would only be when highly disputed questions of facts
are decided while deciding an application under Order
XXXIX CPC, and which is not so in the present case in
view of the basic facts as stated above being admitted or
become apparent from the record. The contention of the
petitioner of ―mini trial‖ is thus not well founded."
43. Reading of the judgments referred to above leads this Court to only
one conclusion that a Contract which in its nature is determinable, cannot
be specifically enforced in view of the clear legal bar under Section
14(1)(c) of the Specific Relief Act, 1963. Once a Contract is not
enforceable, Section 41(e) Specific Relief Act, 1963, occupies the field
and provides that an injunction cannot be granted to prevent the breach of
a Contract, the performance of which would not be specifically enforced.
Section 41(e) of the Specific Relief Act, 1963, is as under:
―41. Injunction when refused.--An injunction cannot be
granted--
xxx xxx xxx
(e) to prevent the breach of a contract the performance of
which would not be specifically enforced‖
44. The next question that arises is whether under Section 9 of the Act,
the principles of the Specific Relief Act, 1963 have to be applied or not.
This question also stands answered in the judgments referred to above.
However, another judgment needs to be alluded to in this regard. In the
case of RPS Educational Society (Regd.) vs. DDA, OMP 538/2008,
decided on 02.09.2009, the Court while dealing with the principles to be
followed by the Court under Section 9 of the Act held as under:
―5. It is apparent that in terms of license deed, the
respondent had authority to cancel the license. Under
Section 9 of the Arbitration and Conciliation Act, the Court
can pass an interim order to preserve such subject matter of
dispute which it considered was necessary to be preserved
for adjudication of the dispute. However, an order under
Section 9 of the Arbitration and Conciliation act cannot be
passed by the Court directing specific performance of the
contract, the breach of which is alleged by the petitioner.
This Court in Excel Generators Pvt. Ltd. Vs. IJ M
Corporation Berhad OMP No. 241/09 (decided on 13th
May, 2009) had observed that where a contract is
terminable contract and it can be foreclosed, the interim
relief under Section 9 of the Arbitration and Conciliation
Act cannot be granted for specific performance of the
contract. In all those cases where monetary damages can
compensate the breach of contract, the Court cannot insist
upon the parties that the contract should be specifically
performed.‖
45. In the case of Adhunik Steels (supra), the Supreme Court held as
under:
―10. It is true that Section 9 of the Act speaks of the court
by way of an interim measure passing an order for
protection, for the preservation, interim custody or sale of
any goods, which are the subject-matter of the arbitration
agreement and such interim measure of protection as may
appear to the court to be just and convenient. The grant of
an interim prohibitory injunction or an interim mandatory
injunction are governed by well-known rules and it is
difficult to imagine that the legislature while enacting
Section 9 of the Act intended to make a provision which
was dehors the accepted principles that governed the grant
of an interim injunction. Same is the position regarding the
appointment of a receiver since the section itself brings in
the concept of ―just and convenient‖ while speaking of
passing any interim measure of protection. The concluding
words of the section, ―and the court shall have the same
power for making orders as it has for the purpose and in
relation to any proceedings before it‖ also suggest that the
normal rules that govern the court in the grant of interim
orders is not sought to be jettisoned by the provision.
Moreover, when a party is given a right to approach an
ordinary court of the country without providing a special
procedure or a special set of rules in that behalf, the
ordinary rules followed by that court would govern the
exercise of power conferred by the Act. On that basis also,
it is not possible to keep out the concept of balance of
convenience, prima facie case, irreparable injury and the
concept of just and convenient while passing interim
measures under Section 9 of the Act.
xxx xxx xxx
13. Injunction is a form of specific relief. It is an order of a
court requiring a party either to do a specific act or acts
or to refrain from doing a specific act or acts either for a
limited period or without limit of time. In relation to a
breach of contract, the proper remedy against a defendant
who acts in breach of his obligations under a contract, is
either damages or specific relief. The two principal
varieties of specific relief are, decree of specific
performance and the injunction (See David Bean on
Injunctions). The Specific Relief Act, 1963 was intended to
be ―an Act to define and amend the law relating to certain
kinds of specific reliefs‖. Specific relief is relief in specie.
It is a remedy which aims at the exact fulfilment of an
obligation. According to Dr. Banerjee in his Tagore Law
Lectures on Specific Relief, the remedy for the non-
performance of a duty are (1) compensatory, (2) specific.
In the former, the court awards damages for breach of the
obligation. In the latter, it directs the party in default to do
or forbear from doing the very thing, which he is bound to
do or forbear from doing. The law of specific relief is said
to be, in its essence, a part of the law of procedure, for,
specific relief is a form of judicial redress. Thus, the
Specific Relief Act, 1963 purports to define and amend the
law relating to certain kinds of specific reliefs obtainable
in civil courts. It does not deal with the remedies
connected with compensatory reliefs except as incidental
and to a limited extent. The right to relief of injunctions is
contained in Part III of the Specific Relief Act. Section 36
provides that preventive relief may be granted at the
discretion of the court by injunction, temporary or
perpetual. Section 38 indicates when perpetual injunctions
are granted and Section 39 indicates when mandatory
injunctions are granted. Section 40 provides that damages
may be awarded either in lieu of or in addition to
injunctions. Section 41 provides for contingencies when an
injunction cannot be granted. Section 42 enables,
notwithstanding anything contained in Section 41,
particularly Clause (e) providing that no injunction can be
granted to prevent the breach of a contract the
performance of which would not be specifically enforced,
the granting of an injunction to perform a negative
covenant. Thus, the power to grant injunctions by way of
specific relief is covered by the Specific Relief Act, 1963.
xxx xxx xxx
18. It is true that the intention behind Section 9 of the Act
is the issuance of an order for preservation of the subject-
matter of an arbitration agreement. According to learned
counsel for Adhunik Steels, the subject-matter of the
arbitration agreement in the case on hand, is the mining
and lifting of ore by it from the mines leased to OMM
Private Limited for a period of 10 years and its attempted
abrupt termination by OMM Private Limited and the
dispute before the arbitrator would be the effect of the
agreement and the right of OMM Private Limited to
terminate it prematurely in the circumstances of the case.
So viewed, it was open to the court to pass an order by
way of an interim measure of protection that the existing
arrangement under the contract should be continued
pending the resolution of the dispute by the arbitrator.
May be, there is some force in this submission made on
behalf of Adhunik Steels. But, at the same time, whether an
interim measure permitting Adhunik Steels to carry on the
mining operations, an extraordinary measure in itself in
the face of the attempted termination of the contract by
OMM Private Limited or the termination of the contract by
OMM Private Limited, could be granted or not, would
again lead the court to a consideration of the classical
rules for the grant of such an interim measure. Whether an
interim mandatory injunction could be granted directing
the continuance of the working of the contract, had to be
considered in the light of the well-settled principles in that
behalf. Similarly, whether the attempted termination could
be restrained leaving the consequences thereof vague
would also be a question that might have to be considered
in the context of well-settled principles for the grant of an
injunction. Therefore, on the whole, we feel that it would
not be correct to say that the power under Section 9 of the
Act is totally independent of the well-known principles
governing the grant of an interim injunction that generally
govern the courts in this connection. So viewed, we have
necessarily to see whether the High Court was justified in
refusing the interim injunction on the facts and in the
circumstances of the case.‖
Having examined the nature of the Contract and the relief sought,
the Supreme Court finally observed as under:
―20. The question here is whether in the circumstances, an
order of injunction could be granted restraining OMM
Private Limited from interfering with Adhunik Steels'
working of the contract which OMM Private Limited has
sought to terminate. Whatever might be its reasons for
termination, it is clear that a notice had been issued by the
OMM Private Limited terminating the arrangement
entered into between itself and Adhunik Steels. In terms of
Order 39 Rule 2 of the Code of Civil Procedure, an interim
injunction could be granted restraining the breach of a
contract and to that extent Adhunik Steels may claim that it
has a prima facie case for restraining OMM Private
Limited from breaching the contract and from preventing
it from carrying on its work in terms of the contract. It is in
that context that the High Court has held that this was not
a case where the damages that may be suffered by Adhunik
Steels by the alleged breach of contract by OMM Private
Limited could not be quantified at a future point of time in
terms of money. There is only a mention of the minimum
quantity of ore that Adhunik Steels is to lift and there is
also uncertainty about the other minerals that may be
available for being lifted on the mining operations being
carried on. These are imponderables to some extent but at
the same time it cannot be said that at the end of it, it will
not be possible to assess the compensation that might be
payable to Adhunik Steels in case the claim of Adhunik
Steels is upheld by the arbitrator while passing the
award.‖
46. Recently this Court in M/s Inter Ads Exhibition Pvt. Ltd. v.
Busworld International Cooperatieve Vennootschap Met Beperkte
Anasprakelijkheid, being O.M.P. (I) (COMM.) 273/2019, decided on
13.01.2020, while dealing with a determinable contract had declined to
grant a relief under Section 9 of the Act as the same would have
amounted to granting Specific Performance of the Contract. Relevant
paras of the judgment are as follows:
―29. Once a contract is determinable in nature and has
been terminated by one party to the contract, the same
cannot be revived or restored by a Court and specific
performance of the same cannot be sought by the defaulting
party. This has been clearly held by the Court in the case of
RPS Educational Society (Regd.) vs. DDA, OMP 538/2008,
decided on 02.09.2009. In the case of RPS Educational
Society (Regd.) (supra), the Court was dealing with the
principle to be followed by the Court while dealing with a
matter under Section 9 of the Act. The Court held as under:
―5. It is apparent that in terms of license deed,
the respondent had authority to cancel the
license. Under Section 9 of the Arbitration and
Conciliation Act, the Court can pass an
interim order to preserve such subject matter
of dispute which it considered was necessary
to be preserved for adjudication of the dispute.
However, an order under Section 9 of the
Arbitration and Conciliation act cannot be
passed by the Court directing specific
performance of the contract, the breach of
which is alleged by the petitioner. This Court
in Excel Generators Pvt. Ltd. Vs. IJ M
Corporation Berhad OM P No. 241/09
(decided on 13th May, 2009) had observed
that where a contract is terminable contract
and it can be foreclosed, the interim relief
under Section 9 of the Arbitration and
Conciliation Act cannot be granted for specific
performance of the contract. In all those cases
where monetary damages can compensate the
breach of contract, the Court cannot insist
upon the parties that the contract should be
specifically performed.‖
30. In the case of Cotton Corporation Ltd. vs. United
Industrial Bank Ltd. and Ors., (1983) 4 SCC 625, the
Supreme Court discussed the relevance of Section 41(b) and
other provisions of Specific Relief Act with reference to
grant of interim injunction and observed as under :-
―9. Mr. Sen, learned counsel for the
respondent-Bank, contended that sec. 41(b) is
not at all attracted because it deals with
perpetual injunction and the temporary or
interim injunction is regulated by the Code of
Civil Procedure specially so provided in Sec.
37 of the Act. Expression 'injunction' in sec.
41(b) is not qualified by an adjective and
therefore, it would comprehend both interim
and perpetual injunction. It is, however, true
that Sec. 37 specifically provides that
temporary injunctions which have to continue
until a specified time or until further order of
the court are regulated by the Code of Civil
Procedure. But if a dichotomy is introduced by
confining Sec. 41 to perpetual injunction only
and Sec. 37 read with 0. 39 of the Code of
Civil Procedure being confined to temporary
injunction, an unnecessary grey area will
develop. It is indisputable that temporary
injunction is granted during the pendency of
the proceeding so that while granting final
relief the court is not faced with a situation
that the relief becomes infructuous or that
during the pendency of the proceeding an
unfair advantage is not taken by the party in
default or against whom temporary injunction
is sought. But power to grant temporary
injunction was conferred in aid or as auxiliary
to the final relief that may be granted. It the
final relief cannot be granted in terms as
prayed for, temporary relief in the same terms
can hardly if ever be granted.
xxx xxx xxx
35. In the case of Planet M. Retail Ltd. vs. Select
Infrastructure Pvt. Ltd., 2014 (145) DRJ 654, a Co-ordinate
Bench of this Court was examining the question as to
whether the petitioner therein could be allowed to run the
business in a shop under a license deed which stood
determined, in a petition filed under Section 9 of the Act. It
was argued by the petitioner therein that the Court had
powers under Section 9 of the Act, akin to the powers of a
Civil Court under Order 39 Rules 1 & 2 CPC, for grant of
interim injunction and that Section 41 of the Specific Relief
Act was not applicable to proceedings under Section 9 of the
Act. The Court after examining the various judgments on the
issue came to a conclusion as under:-
―26. ...the question whether the licence was by
its nature determinable or not is a question
which is a subject matter of arbitration
proceedings. However, it is an undisputed fact
that with effect from 31.05.2013, the licence
agreement between the parties to run a trade
in the said shop stands determined. Whether
such determination is contrary to the terms of
the agreement and thus illegal is again the
subject matter of arbitral proceedings. This
Court, at this stage, cannot enter into this
question. The consequences of such
determination are relevant factors to judge if
the relief claimed by petitioner can be granted
to him. Grant of relief to petitioner would
mean allowing him to run his trade in the
licensed premises without a licence...‖.
xxx xxx xxx
37. Reference is also required to be made to another
decision of a Division Bench of this Court in Bharat
Catering Corporation vs. Indian Railway Catering and
Tourism Corporation Ltd. (IRCTC) & Ors., 164 (2009) DLT
530 wherein the Division Bench was called upon to decide
the correctness of a judgment passed by a learned Single
Judge of this Court dismissing a petition under Section 9 of
the Act. A contract was entered into between the parties
which was ultimately cancelled due to certain disputes
between the parties and this led to the filing of the petition
under Section 9 of the Act wherein ex-parte order of
injunction was sought staying the operation of the letter
dated 06.05.2009 whereby the contract was cancelled. The
learned Single Judge while dismissing the petition held as
under:-
―5 .... the scope and ambit of Section 9 is not
to restore the contract which has already been
terminated. The contract between the
respondent and the petitioner created a
commercial relationship between the parties.
The termination of contract is one of the facets
of the contract and as per contract entered into
between the parties, the contract could be
terminated by respondent for various reasons
given therein. If the petitioner is aggrieved by
the act of the termination of the contract by
respondent and considers that the termination
was bad or illegal, the petitioner is at liberty to
invoke the arbitration clause and claim
damages, if any, suffered by the petitioner. The
contract cannot be restored by the Court under
Section 9 nor is it a case where the Court
should interfere. In my view prima facie there
is no case made out in favour of petitioners.
The petitioners' conduct, as reflected from the
impugned letter of termination justifies
termination of the contract.‖
38. Upholding the order of the learned Single Judge, the
Division Bench held as under:-
―17. Apart from merits, even otherwise, in our
view, the scope and ambit of Section 9 do not
envisage the restoration of a contract which
has been terminated. The learned Single
Judge, in our view, rightly held that if the
petitioner is aggrieved by the letter of
termination of the contract and is advised to
challenge the validity thereof, the petitioner
can always' invoke the arbitration 'clause to
claim damages, if any, suffered by the
petitioner. It is not open to this Court to
restore the contract under Section 9, which is
meant only for the sole purpose of preserving
and maintaining the property in dispute and
cannot be used to enforce specific performance
of a contract as such. A bare glance at the said
Section will suffice to show that pending
arbitration proceedings, the Court and the
Arbitral Tribunal have been vested with the
power to ensure that the subject matter of the
arbitration is not alienated or frittered
away...‖
47. In Appeal against the said judgement, in M/S Inter Ads (supra),
the Division Bench of this Court in FAO (OS) (COMM) 23/2020 decided
on 01.05.2020, held as under:
―14. The learned Single Judge has rightly relied on a
decision of this court in MIC Electronics Ltd. and Ors. vs.
Municipal Corporation of Delhi and Ors., 2011 II AD (DEL)
625, to hold that legality of the termination and the
justification of the appellant of not paying the balance due
to the respondent, would have to be examined by the learned
Arbitrator. Reliance was rightly placed on the following
observations made in the captioned case:-
―12....... Therefore, the licence stood
terminated, as correctly observed by the
learned Single Judge, in the impugned order,
and the legality or illegality of termination
would be a matter to be determined in
arbitration. Further, the justification given by
the Appellant for not paying the licence fee
will be examined in the arbitral proceedings.
The case of the Appellant that, owing to the
failure of the Respondent to perform
obligations under the agreement, and the
latter's refusal to decrease the number of 20 of
LED screens in terms of clause 6 of-the-
agreement, would also be considered by the
Arbitral Tribunal. In this behalf, we, therefore,
find considerable merit in the submission made
on behalf of the Respondent that if the
cancellation of the contract by the Respondent
constitutes a breach of contract on their part,
the Appellant would be entitled to damages. In
other words, the questions whether the
termination is wrongful or not or whether the
Respondent was not justified in terminating the
agreement, are yet to be decided. However,
from the facts of the case there is no manner of
doubt that the contract was by its very nature
terminable, in terms of the contract between
the parties themselves.‖ (emphasis added)
15. Since the contract in the present case was terminable
and as the issue of the legality of the action of termination
has yet to be determined and further, since wrongful
termination can be restituted by awarding of damages, in
the event the appellant is able to establish that the said
termination was illegal and invalid, the learned Single
Judge has rightly declined the reliefs prayed for by the
appellant in the Section 9 petition. We do not find any
reason to interfere with the view taken in the impugned
judgment.‖
48. The License Agreements between the parties in the present case, in
my opinion, are by their very nature determinable. Clause 12.1 of the
License Agreements gives a right to the Petitioner to surrender or
terminate the Agreement and Clause 12.3 gives the same right to the
Respondent. Thus, in view of Section 14(1)(c) read with Section 41(e) of
the Specific Relief Act, 1963 and the judgments on the subject, some of
which have been alluded to above, the grant of injunction as sought by
the Petitioner is statutorily prohibited.
49. One of the contentions raised by the Petitioner is that in the present
case, the Agreements are valid and subsisting and thus, the judgements in
cases where agreements stood terminated, would not apply to the present
petitions. In my opinion, this distinction is of no consequence and does
not help the petitioner. In the case of Adhunik Steels (supra) the contract
was subsisting and the relief sought was an injunction order against
termination of the contract. The argument raised by the Appellant therein
was that it had mobilized huge resources for carrying on the excavation
and extraction of minerals and termination would cause huge losses. The
Supreme Court, however, declined to grant the relief restraining the
respondent from terminating the contract and observed that in case the
claim of the appellant is upheld by the Arbitrator, it would be in a
position to assess the compensation. Relevant paras of the judgement
have been highlighted above. It would be significant to note that in the
present case, the petitioner has not even set up a case that
compensation/damages cannot be assessed if the License Agreements are
terminated or that money would not be an adequate measure of
compensation if the petitioner succeeds in Arbitration.
50. In the case of Jindal Steels (supra), a Co-ordinate Bench of this
Court, relying on the entire case law on the subject of determinable
contracts and their enforcement under Section 9 of the Act declined the
relief of Specific Performance and distinguished the judgement in KSL
(supra) which is being relied herein by the petitioner.
51. Another judgment which needs to be referred to is in the case of
Anukampa (supra). A petition under Section 9 was filed praying for a
relief that the respondents be restrained from interfering with the
operations of running a Food Plaza. After noting that the relationship
between the parties was of a Licensor and Licensee and that the contract
was determinable, the Court in paragraphs 9 and 10, as extracted in the
earlier part of this judgment, held that since the law itself disentitles any
injunction from being granted, equities cannot have any say and refused
to grant injunction.
52. The relief of injunction from raising invoices would also indirectly
amount to enforcement of the Agreements as well as grant of injunction
which cannot be granted for the reasons stated above. The judgements
relied upon by the petitioner cannot enure to its advantage. In Ascot
Hotels (supra) the Court under Section 37 of the Act, while examining an
interim order passed by the Arbitral Tribunal on an application under
Section 17 of the Act did not interfere at that stage in the discretion
exercised by the Tribunal, as observed in Para 18 of the judgement.
Secondly, the contract in question therein permitted termination only on
three consecutive defaults in payment of License Fee by the Licensee and
the Court in the facts of that case observed prima facie that the contract
was not by its nature determinable, which is not so in the present case.
53. Petitioner has also relied on the judgement in the case of Atlas
Interactive (supra). The facts and circumstances of the said case were
clearly different and the reasons which weighed with the Court cannot
even be remotely applied to the present case and are as under :
―15. It is not shown that the respondent No. 1 is in a
position to launch the project on its own very soon. If the
respondent No. 1 still needs time to start the project on its
own, why it cannot give some time to petitioner also for
completing the project. It is not at all alleged by respondent
No. 1 that the petitioner had committed any other breach or
default except delay in the commissioning of the project. It
is also not understandable as to why the respondent No. 1
should run the risk of paying damages to the petitioner for
breach of contract which the situation can be saved by
permitting the petitioner to continue with the project in
which petitioner has no exclusivity. Had the respondent No.
1 been a private party, it would have thought hundred times
before raising such a plea as the damages, if awarded, may
be enormous. The petitioner is pleading that it has already
spent over 22 million dollars on the project. In case the
Arbitrator holds that termination of contract was not
lawful, the respondent No. 1 may have to pay this amount
as damages. Since the respondent No. 1 is an
instrumentality of the State and the damages are not to go
from the pockets of its officers, a plea is easily raised that
the petitioner should seek damages. The respondent No. 1
and its officers dealing with the Franchisee Agreement
should appreciate that risk of paying such heavy damages
should not be taken lightly. Public money has to be
protected with utmost care and concern. Hazardous and
adventurous pleas should not be taken when public money
is at stake.
16. The plea of learned Counsel for respondent No. 1 that
Section 14 of the Specific Relief Act prohibits grant of
injunctions in respect of the contracts mentioned therein
and in this case all the clauses of Section 14 are attracted.
Learned Counsel for the petitioner has opposed this
submission by referring to Section 10(ii)(a) of the said Act
and submits that since the project under the agreement is
unique and the equipment created tailor made for
respondent No. 1 and since the respondent No. 1 is an
instrumentality of the State, it has no right to act arbitrarily
and unreasonably. It is submitted that Section 14 of the
Specific Relief Act does not stand in the way of petitioner.
17. After considering the submissions made by learned
Counsel for the parties and considering the facts and
circumstances of this case and as discussed hereinbefore
also, this Court is of the considered view that Section 14 of
the Specific Relief Act does not stand in the way of the
Court to grant the relief as prayed in as much as by the
impugned act of respondent No. 1 the petitioner may be
unreasonably ousted from Indian market and, therefore,
compensation in terms of money may not be adequate relief.
The contract may be determinable in nature but the
instrumentality of the State has to act in a fair and just
manner and not arbitrarily. This principle may hold good
between private parties but not in those cases where the
highhandedness appears to be on the part of the State or its
instrumentality. It also cannot be said that the contract
between the parties runs into minute details or the Court
cannot enforce specific performance of its material terms
nor it can be said that the contract involves performance of
continuous duty, which the Court cannot supervise. The
Franchisee Agreement between the parties is a detailed
agreement containing duties and obligations of both the
parties. Respondent No. 1 has to provide its cable network
and the rest of the performance is to be by the petitioner.
The agreement between the parties is non-exclusive and on
revenue sharing basis under which the respondent No. 1
has to gain only. The nonperformance or the failure of the
petitioner would not cause any financial loss to respondent
No. 1 inasmuch as under the agreement itself, the
respondent No. 1 can involve itself or others also for
providing the same services. The plea of respondent No. 1
that the petitioner may utilize its equipment in other areas
and through other service providers is also no answer to
the claim of the petitioner that it is being ousted arbitrarily
and without any good and sufficient cause.‖
54. In so far as reliance on the judgements in Pioneer Publicity (supra)
and Old World Hospitality (supra) is concerned, suffice would it be to
note that in the two cases, the issue of determinable contracts and the
Statutory bar under Section 14(1)(c) of the Specific Relief Act was
neither raised nor considered.
55. In the case of KSL (supra), relied upon by the petitioner
substratum of the dispute between the parties was such that the Court was
of the view that irreparable loss would be caused to the Petitioner as, with
the alienation of the Textile Mills, the Agreements would lose their
meaning. It also needs to be noticed that in this case the issue of bar of
Section 14(1)(c) was not an issue for consideration before the Court,
which is directly covered against the Petitioner in the various judgements
referred to above.
56. In view of the Statutory bar of the Specific Relief Act, 1963 and
the law as crystallized in several judgements, petitioner is not entitled to
the reliefs sought for.
57. The contentions of parties touching upon the merits of the claims
including alleged breaches and invoices towards License Fee, as well as
the interpretation of the Term 'as is where is basis' will be decided by the
Arbitral Tribunal as and when constituted.
58. It is made clear that the Court has not expressed any opinion on the
merits of the disputes and the narration is only for the purpose of deciding
the issue of interim relief.
59. Petitions are accordingly dismissed and interim order dated
06.09.2019 is hereby vacated. Pending applications also stand dismissed.
JYOTI SINGH, J.
th
JUNE 12 , 2020
yo/rd
