Gujarat High Court
Lite Bite Foods Pvt. Ltd vs Airports Authority Of India on 8 June, 2022
Bench: Ashutosh J. Shastri
C/IAAP/36/2021 ORDER DATED: 08/06/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/PETN. UNDER ARBITRATION ACT NO. 36 of 2021
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LITE BITE FOODS PVT. LTD.
Versus
AIRPORTS AUTHORITY OF INDIA
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Appearance:
MR NAVIN PAHWA SR. ADVOCATE with MR NACHIKET A DAVE(5308)
for the Petitioner(s) No. 1
MS HARSHAL N PANDYA(3141) for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE ASHUTOSH J. SHASTRI
Date : 08/06/2022
ORAL ORDER
1. By way of present petition under Section 11 of the Arbitration
and Conciliation Act, 1996, petitioner has prayed for the following
reliefs:-
(a) Appoint an independent Arbitrator for Resolution of dispute
arising out of License Agreement annexed at Annexure-C to
the Petition;
(b) Any other and further relief deemed just and proper be
granted in the interest of justice.
2. The background of facts which has given rise to present
petition is that petitioner company is incorporated under the
provisions of the Companies Act, 2013 as a Private Limited company.
The respondent, which is a body corporate, created under the Airport
Authority of India, 1994 has floated tenders for food court facility in
Domestic Terminal at S.V.P.I. Airport, Ahmedabad and in response
thereto, petitioner's bid found to be eligible was accepted by the
authority. On 20.3.2018, respondent issued an award of license for
food court facility in Terminal-1 at S.V.P.I, Airport and executed a
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license agreement on 9.4.2018. Initial period of license was fixed as
one year from 19.5.2018 to 18.5.2019 and then by virtue of
amendments, extended upto 30.6.2020 on the terms and conditions
which are fixed.
3. By virtue of said terms of license agreement, petitioner had to
pay monthly license fee of Rs.20,07,000/- + GST and other applicable
taxes and had to deposit a sum of Rs.47,36,520/-, equal to two
months license fee as a security deposit in the form of Demand Draft/
Pay Order/ Bank Guarantee in favour of the respondent payable at
Ahmedabad.
4. It is the case of the petitioner that pursuant to the said
execution of the license agreement dated 20.3.2018, on 27.3.2018,
bank guarantee was issued of Rs.47,36,520/- and expiry date of bank
guarantee was made upto 30.6.2020 in view of extension. Due to
certain layouts and orientation of outlet, the authority said to have
revised the layout vide email dated 19.4.2018 and respondent
changed the location and handed over new location to the petitioner
on 18.5.2018. According to the petitioner, there was a delay of 60
days in handing over the site by respondent. On account of multiple
differences, as stated in the petition, opening of outlet got delayed by
a further period of more than 45 days and as such, petitioner made a
request for refund of the license fee charged with respect to that
period, but said request was rejected by email communication dated
10.9.2020. Then the license agreement tenure by efflux of time got
terminated on 30.6.2020.
5. It is the case of the petitioner that after such termination by
efflux of time, petitioner forthwith delivered the possession and since
there was no means of access the premises, assets and material of
the petitioner lying in such premises, an attempt was made to
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explore the possibility of extension of terms of license agreement and
as such, petitioner did not remove its assets of more than rupees one
crore lying at the Airport premises at the time of handing over the
possession and then extension in the form of email exchanged
between the parties and by that time, pandemic effect of Covid-19
prevailed. As a result of this, petitioner was unable to remove its
goods and other material. Even respondent on account of limited
operational activities at the Airport due to Covid-19 pandemic and in
view of various Government guidelines, did not consider it necessary
to request the petitioner to remove its assets lying at the Airport.
6. Surprisingly, according to the petitioner, on 18.9.2020,
respondent raised invoice for the month of April to June 2020 and
due to payments have also been prescribed, same was shared vide
email dated 22.9.2020 and then according to petitioner, respondent
authority had wrongly raised invoices for the period beyond the
license period and on the contrary, petitioner is entitled to seek
adjustment of an amount to the extent of Rs.13,54,454.84 and by
giving details in the petition, it has been mentioned by petitioner that
only an amount of Rs.1,01,895.56 remained to be paid to the
respondent. Payment of such amount was processed by petitioner on
26.9.2020. But, then, in view of this conflict, an attempt was made to
reconcile or resolve the issue. However, it appears that same has not
attained any result and by raising the issues related to the amount
payable by petitioner, when an attempt was made to encash the bank
guarantee by respondent, petitioner filed Civil Misc. Application
No.265 of 2020 before learned City Civil Court, Ahmedabad under
Section 9 of the Arbitration and Conciliation Act, 1996 seeking
interim relief basically against encashment of bank guarantee. On
appreciation of evidence of facts, learned City Civil Court, vide order
dated 30.9.2020, granted an interim relief in favour of the petitioner
and said order has been extended from time to time. According to the
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petitioner, respondent had been in breach of various obligations
under the license agreement, whereas respondent is having a stand
contrary and in that situation, petitioner was constrained to invoke
clause 18 of the license agreement on 29.12.2020, so as to see that
differences/ disputes to be resolved between the parties through
arbitration and for that purpose, name was also proposed of Hon'ble
Mr. Justice K.M. Thaker (retired former Judge of Gujarat High Court)
to act as a sole Arbitrator but, then upon receipt of said notice,
according to petitioner, said request was not acceded to vide
communication dated 16.2.2021 and in turn, respondent authority
requested the petitioner to give acceptance to clause 18(a), (b) and
(c) and to deposit the disputed amount for constitution of the
Dispute Resolution Committee.
7. It is the case of the petitioner that on 17.2.2021, an email was
sent by the petitioner disputing the contents of the letter dated
16.2.2021 and insisted for arbitration, has contended that it is a
settled position of law that clauses deterring a party from invoking
arbitration and requiring it to pre-deposit certain sums before
initiation of arbitration proceedings are arbitrary and
unconstitutional and have got effect of discouraging the arbitration
and as such, setting up of the Dispute Resolution Committee at the
Airports is not a mandatory condition and as such, clause 18 which
has been tried to be pressed into service by respondent and insisting
for pre-deposit of disputed claimed is absolutely arbitrary and
unconstitutional. As a result of this, for seeking an appointment of an
independent Arbitrator for resolution of the dispute arising out of the
license agreement, present petition under Section 11 of the
Arbitration and Conciliation Act, 1996 is brought before the Court.
8. When petition came up for consideration on initial hearing on
5.3.2021, Coordinate Bench of this Court was pleased to issue notice
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upon respondent and after completion of the pleadings, lastly, the
matter was heard by the Court upon request of both learned
advocates and arguments were concluded.
9. Learned senior advocate Mr. Navin Pahwa appearing with
learned advocate Mr. Nachiket A. Dave has vehemently contended
that the stand of the authority is absolutely arbitrary, irrational and
smacks with malafides and as such, the relief prayed for deserves to
be granted.
10. Learned senior advocate Mr. Pahwa has submitted that though
there was a serious dispute with regard to change of location and
belated handing over of possession of the site in question, petitioner
had to suffer a lot and by referring to the contents of the petition, has
submitted that unauthorirzedly and arbitrarily, a huge amount is
claimed by the respondent which in no circumstance is liable to be
paid by petitioner. According to Mr. Pahwa, the only amount which is
payable is Rs.1,01,895.56 and nothing beyond but as against the
huge amount is claimed by the authority. In fact, while demanding
amount through email communication in the month of September
2020, several amounts which were required to be adjusted as noted
down in para 2.15, have not at all been considered and instead, in an
arbitrary manner, insisted for recovery.
11. Learned senior advocate Mr. Pahwa has submitted that in fact,
looking to the chronology of events, as stated in the body of the
petition, stand of the authority of insisting for pre-deposit of the
disputed amount and to insist for approaching the Dispute Resolution
Committee is absolutely impermissible and clause contained therein
itself is unconstitutional and arbitrary and as such, it is not open for
respondent authority even to refuse to refer the dispute to
arbitration independently as suggested by the petitioner. The
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authority has acted as a power charged authority by refusing the
request for appointment of Hon'ble former Judge of Gujarat High
Court and has dragged on the issue which has got effect of
frustrating the very object for creation of arbitration forum. That
being so, by discarding the stand of the authority, the relief prayed
for may be considered. Mr. Pahwa has vehemently contended that
there are series of decisions in which a view is taken on
interpretation of these very clauses and relying upon the same, has
requested the Court to appoint an independent Arbitrator to resolve
the grievance of the petitioner. Following are the decisions pressed
into service by learned senior counsel Mr. Pahwa for seeking
appointment of an independent arbitrator:-
(1) DURO FELGUERA, S.A Versus GANGAVARAM PORT
LIMITED [2017)9 SCC 729];
(2) MAYAVATI TRADING PVT. LTD Versus PRADYUAT DEB
BURMAN [(2019) 8 SCC 714]
(3) UTTARAKHAND PURV SAINIK KALYAN NIGAM
LIMITED Versus NORTHERN COAL FIELD LTD. [(2020)
2 SCC 455]
(4) VIDYA DROLIA & Ors. Versus DURGA TRADING
CORPORATION [(2021)2 SCC 1]
(5) SANJIV PRAKASH Versus SEEMA KUKREJA & Ors [2021
SCC OnLine SC 282]
(6) ICOMM TELE LTD. Versus PUNJAB STATE WATER
SUPPLY & SEWERAGE BOARD & Ors. [Decision dated
11.3.2019 in Civil Appeal No.2713 of 2009]
(7) PERKINS EASTMAN ARCHITECTS DPC & Ors. Versus
HSCC (INDIA) LIMITED.[Decision dated 26.11.2019 in
Arbitration Application Nos.32, 34 & 35 of 2019]
(8) LITE BITE FOODS PVT. LTD Versus AIRPORTS
AUTHORITY OF INDIA (HIGH COURT OF KERELA)
[Decision dated 28.10.2020 in A.R. No.103 of 2019]
C/IAAP/36/2021 ORDER DATED: 08/06/2022
(9) LITE BITE FOODS PVT. LTD Versus AIRPORTS
AUTHORITY OF INDIA (HIGH COURT OF BOMBAY)
[Decision dated 4.12.2019 in Comm. Arbitration
Application (L) No.495 of 2019]
(10) DATAR SWITCHGEARS LTD. Versus TATA FINANCE
LIMITED & ANOTHER [(2000) 8 SCC 151]
(11) DHARTI MADRID COUNTY LLP Versus CHAITAL
RASMIKANT & 6 Ors. [Decision dated 13.12.2019 in
R/Petition Under Arbitration Act No.132 of 2018]
(12) M/S P AND T TEX FAB Versus THE NEW INDIA
INSURANCE CO. LTD [Decision dated 13.12.2019 in
R/Petition Under Arbitration Act Nos.43 to 48 of 2019]
(13) LIQUIDATOR, THE KARAMSAD URBAN COOPERATIVE
BANK LTD. Versus THE SUPERINTENDENT OF POST
OFFICES ANAND [Decision dated 29.10.2020 in
R/Petition Under Arbitration Act No.30 of 2020]
(14) Bharat Sanchar Nigam Ltd. And Another Vs. Nortel
Networks India Private Limited (2021) 5 SCC 738;
(15) Decision of High Court of Calcutta in the case of
Bholanath Rajpati Shukla Vs. Airport Authority of India
and Another, dated 20.2.2019 in A.P. No.837 of 2018.
12. By referring to the aforesaid decisions, learned senior counsel
Mr. Pahwa has reiterated to grant the relief as prayed for in the
petition.
13. As against this stand of the petitioner, learned advocate Ms.
Harshal Pandya appearing on behalf of respondent Airport Authority
has vehemently opposed the petition by contending that with open
eyes, petitioner has filled in the tender which was accepted by the
authority and from that initial movement itself, petitioner was aware
about the terms and conditions of the agreement and also with open
eyes, executed not only the license agreement, but even on its own
C/IAAP/36/2021 ORDER DATED: 08/06/2022
volition executed the extension agreement and document about
reading the terms as well and as such now it is not open for the
petitioner to raise any grievance which is nothing but an
afterthought theory.
14. Learned advocate Mr. Pandya has contended that one sided
version which has been tried to be canvassed by petitioner is far
from truth. In fact, there is no unilateral change of location at any
point of time. On the contrary, after receipt of the award letter,
officials of the petitioner company visited the site on 2.4.2018 and
submitted that there should be a decent gap between the food court
and the executive lounge and the plans related to it have also been
exchanged and then request of acceptance was materialized and as
such, revised layout of 'L' shape, was not a unilateral decision of
respondent authority. On the contrary, upon personal visit by officers
of the company, time and again, design was requested to be
submitted for approval of Airport Authority of India (AAP) and as
such, when details were shared about layout indicating the location
etc., subsequently, petitioner did not provide in time its design of
food court for approval and as such, it is absolutely incorrect to say
that respondent authority had changed the location on their own.
Said fact is seriously in dispute.
15. Learned advocate Ms. Pandya submitted that so far as delay,
as alleged in the petition is concerned, same is also not correct in
view of the fact that date of handing over the side is specifically
mentioned as 18.5.2018 with necessary notes and details and as
such, question of delay gestation period does not arise at all.
16. Learned advocate Ms. Pandya on instructions has further
seriously commented that petitioner after termination of license
agreement by efflux of time on 30.6.2020 did not remove material
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deliberately from the Airport premises and on the contrary, the
premises were locked by petitioner and, keys were not handed over
to respondent and peaceful possession had also not been given,
which had constrained the respondent to make a request vide letter
dated 9.9.2020 to handover quiet and peaceful possession and as
such, the claim which has been generated by respondent authority is
just and proper. Petitioner was aware about non-extension and
termination of contract by efflux of time in their own communication
dated 3.7.2020. But, with a view to see that authority did not remove
articles and allowed the license to be run by new operators and that
was the conduct which has been considered by the authority while
raising invoices which are just and proper.
17. Learned advocate Ms. Pandya submitted that petitioner had
not cleared the outstanding amount nor even extended the bank
guarantee nor vacated the premises and as such, the authority was
left with no other option but to raise demand upto the month of
September 2020, i.e. from July to September. It has been
emphatically submitted that interim order which has been passed by
the Court below, i.e. learned City Civil Court, against encashment of
bank guarantee was an ex-parte ad-interim relief and as such,
petitioner cannot create an impression that even the Court has found
favour with petitioner. In fact, with open eyes, when petitioner has
entered into an agreement without any demur, even extension was
also sought and when payment issue comes up, all these niceties are
projected by petitioner which conduct itself speaks volumes about
the intent of petitioner.
18. According to Ms. Pandya, in the agreement itself, there is a
specific mechanism contained which relates to the resolution of
dispute amongst the parties and said clause 29 as a part of General
Conditions which has been accepted by the petitioner cannot be
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deviated, and as such, when the authority has provided clearly the
dispute resolution mechanism, it is hardly open for petitioner to seek
an independent arbitration forum de hors the terms of the
agreement.
19. Learned advocate Ms. Pandya has submitted that
said clause and precondition contained in the terms have to be
scrupulously observed by petitioner and during contract period nor
even till date, said clause has been challenged in the petition and
simple relief is sought to appoint an independent arbitrator and as
such, in view of the fact, that Court cannot travel beyond the relief,
the petition under Section 11 does not deserve to be entertained in
view of this peculiar background of fact.
20. According to learned advocate Ms. Pandya, specific mechanism
which has been provided cannot be bypassed by petitioner but even
if stand of the petitioner to be accepted then also, looking to the
limited scope of Section 11, petitioner cannot insist for appointment
of an independent arbitrator. However, at last, Ms. Pandya has
submitted that if the Court is not inclined to accept the stand of the
Airport Authority, then in that case, alternatively instead of name
which has been suggested by petitioner, anyone out of following
names may be appointed nominated as arbitrator and for that
purpose, suggested to appoint Hon'ble Mr. Justice K.S. Jhaveri,
Hon'ble Mr. Justice M.D. Shah and Hon'ble Mr. Justice J.C.
Upadhayay, former Judges of this High Court, but has submitted that
this is in alternative to the stand which has been taken by her in the
present proceedings and has left to the discretion of the Court.
21. Having heard learned advocates appearing for the parties and
having gone through the position prevailing on record, before
dealing with the request of the petitioner, the law on the issue for
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appointment of arbitrator deserves consideration. The object of the
Arbitration and Conciliation Act, 1996 is to see that the grievance
can be resolved at the earliest point of time. While framing the
enactment, it was felt that the economic reforms taking place in the
Country may not become fully effective if the laws dealing with the
settlement of both domestic and international commercial dispute
remains out of tune with such reforms. Considering conciliation like
arbitration was also getting worldwide recognition as an instrument
for settlement of disputes and as such, with the main object to make
provisions for an arbitral procedure which may be fair, efficient and
capable of meeting the needs of specific arbitration and to minimize
the supervisory role of courts for the arbitral process and to permit
the Arbitral Tribunal to use the mediation, conciliation and/or other
proceedings during the arbitral proceedings in the settlement of
disputes, the Act has been enacted.
22. Amongst various provisions under the Scheme of Arbitration
and Conciliation Act, 1996, and amended thereafter, since we are
concerned with an issue related to appointment of an independent
arbitrator under Section 11 of the Arbitration and Conciliation Act,
1996, the proposition relates to that is the central issue.
23. While dealing with the question which crop up for
consideration before the Hon'ble Apex Court in the year 2017 as to
whether the Chief Justice or any other person designated by him is
bound to nominate arbitrator as specified in the agreement for
arbitration while exercising power under Section 11(6) of the
Arbitration and Conciliation Act, 1996. It was observed that Chief
Justice or designated Judge of the High Court, if circumstances so
warrant is free to appoint an independent arbitrator having due
regard to qualification and other aspects as required under the
C/IAAP/36/2021 ORDER DATED: 08/06/2022
provisions. While coming to this conclusion, the Hon'ble Apex Court
in the case of Union of India v. Besco Limited reported in (2017)
14 SCC 187 has dealt with several decisions delivered in past by the
Hon'ble Apex Court and after considering this, the aforesaid
conclusion is derived, which the Court deems it proper to reproduce
hereunder:-
"8. On the facts of the present case, one wonders whether the
issue actually arose or not. Clause 2900 of the Standard
Conditions of Contract no doubt provides that the sole
arbitrator shall be Gazetted Railway Officer but in Clause 19.0
of the agreement dated 16.01.2012 executed between the
parties, it is clearly stipulated that the contract shall be
governed by the General Conditions and Special Conditions of
Contract. Clause 19.0 specifically provides that "..... the
contract shall be governed by the General Conditions and
Special Conditions of Contract....."
24. Further, when the arbitration clause contained under the
agreement is enforceable or not is also to be looked into to the
limited extent while exercising jurisdiction under Section 11 of the
Act. Here, on the case on hand, the relevant clause which is
contained in the License Agreement is Clause 18 which reads as
under :-
"Clause-18: All disputes and differences arising out of or in any
way touching or concerning this Agreement (except those the
decision whereof is otherwise herein before expressly provided
for or to which the Airports Authority of India, 1994 as
amended by Act, 2003 and the rules framed thereunder
(Chapter VIA - Eviction of Unauthorized Occupants etc. of
Airport Premises) which are now enforced or which may
hereafter come into force are applicable, shall be in the first
instance, be referred to a Dispute Resolution Committee (DRC)
setup at the airports, for which a written application should be
submitted by the party and the points clearly spelt out. In case
the dispute is not resolved within 45 days of reference, then
the case shall be referred to the sole arbitration of a person, to
be appointed by the Tender Accepting Authority under
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delegation of power. The award of the arbitrator so appointed
shall be final and binding on the parties. The Arbitration and
Conciliation Act, 1996 shall be applicable. Once the arbitration
clause has been invoked, the DRC process will cease to be
operative.
It will be no bar that the Arbitrator appointed as aforesaid is or
has been an employee of the Authority and the Award of the
Arbitrator will not be challenged or be open to question in any
Court of Law, on this account. The Venue of Arbitration shall
be RHQ, WR Mumbai.
(a) The case shall be referred to the Sole Arbitrator by the
Chairman/Member of the Authority subject to the condition
that the license shall have to deposit the disputed amount
with AAI as condition precedent before making reference to
the Arbitrator for adjudication of dispute.
(b) Similarly before making a reference to the Dispute
Resolution Committee, the licensee will have to first deposit
the disputed amount with AAI and the consent shall have to
be obtained from the licensee for acceptance of the
recommendations of the Dispute Resolution Committee.
(c)During the arbitral and Dispute Resolution proceedings the
licensee(s) shall continue to pay the full amount of license
fees/dues regularly as per the award/ agreement and
perform all covenants of the agreements.
(d) The licensee(s) undertake to pay the full amount of
license fee/dues regularly as per the award/agreement and
perform all the covenants of the agreement even he/they
have requested for appointment of Arbitrator and/or during
the course of arbitral proceedings."
25. By virtue of aforesaid clause what has been narrated is that at
the first instance, the dispute or difference is to be referred to a
Dispute Resolution Committee (DRC) set up at the Airports in the
manner which is stipulated in this clause and then if the said dispute
is not resolved within 45 days then there shall be an appointment of
a sole arbitrator of a person to be appointed by Tender Accepting
Authority and there is no bar that the arbitrator so appointed is or
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has been an employee of the authority and as such, the award of the
arbitrator will not be challenged. So by virtue of this clause, the first
approach is to DRC then to be referred to the sole arbitrator who
may be an employee and would be appointed by the Tender
Accepting Authority only. This clause also contained the same view,
same condition precedent by virtue of which before approaching the
Dispute Resolution Committee, the licensee shall have to first deposit
the disputed amount with AAI and later on the process will be
undertaken. Further, by virtue of Clause 22 of the License
Agreement, the authority and the licensee are bound to by General
Terms and Conditions stipulated in Annexure-III. The said Annexure-
III attached to the License Agreement is also referring to similar
terms as that of Clause 18 and since the said terms contained in
Clause 22 is almost similar, the same is not being reproduced
hereunder, but the process which has been indicated is very same
process.
26. It appears from the record that moment the dispute arose
between the present parties to the agreement, protest appears to
have been made by the petitioner specifically indicating that this
clause is not having any sound legal force and is arbitrary and
unconstitutional and as such, on 29.12.2020, the petitioner wrote a
letter to the authority to appoint one retired Hon'ble High Court
Judge as a sole arbitrator to adjudicate the dispute which arose
between the petitioner and the respondent, but then, in a
communication dated 16.02.2021, the respondent authority has
specifically refused to agree to such suggestion made by the
petitioner on the terms that the said mode is impermissible by virtue
of Clause 18 (a)(b) & (c ) of the License Agreement and as such,
before processing the same, the petitioner has to approach DRC on
stipulated conditions, the same appears to have been promptly
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resisted by the petitioner vide communication dated 17.02.2021 on
the premise that the said clause and the conditions contained therein
is absolutely arbitrary and unconstitutional and as such, the same
would not be thrust upon and reiterated to give consent to
appointment of sole arbitrator.
27. So in the aforesaid terms, a short controversy cropped up in
the proceedings is that on one hand, a specific process is stipulated
by the Tender Inviting Authority i.e. the respondent and on the other
hand, upon dispute being raised a request is made to appoint an
independent arbitrator by virtue of exercise of power under Section
11 of the Act and such course whether permissible or not, is the
question for consideration before the Court. In light of the aforesaid
object of Arbitration and Conciliation Act, as stated herein-before,
and in view of the stand of the authority that with attached
conditions of pre-depositing, the first approach should be before DRC
to resolve the dispute and then in case of failure, to be referred to an
arbitrator who may be an employee of the authority and the same
can be appointed by the authority only whether this circumstance is
valid or not is an issue for consideration. Hence, in this context, yet
again it would be profiteering for the Court to have an assistance
from few proposition propounded by Hon'ble Apex Court which
deserves to be considered.
28. First of all a perusal of the relevant clause contained in the
petition is to appoint an independent Arbitrator for resolution of the
dispute arising out of License Agreement at Annexure-C. The said
License Agreement contains several stipulations which stipulations
are not requested and prayed to be declared as arbitrary or no
request is made to set aside the said conditions. In the context of
this, a perusal of License Agreement clearly indicates that the same
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has been specifically signed in the presence of witness and executed
on 09.04.2018. The terms of the said License Agreement are in
addition to Condition no. 18 as further stipulated in Clause 22 that
the conditions which are reflecting even in Annexure-III are also
binding on the parties. The said Clause 22 reads as under :
"Clause 22- The Authority and the Licensee further agree that
they are bound by the General Terms and Conditions found in
Annexure-III annexed hereto, Special Terms and Conditions
found in Annexure-IV and Award letter dated 20.03.2018
Annexure-X annexed hereto."
29. Correspondingly, if Annexure-III which consists of general
Terms and Conditions is also very specific and in the form of
condition no. 29, similar terms as that of Clause 18 of License
Agreement is incorporated. Anneure-IV is the Special Terms and
Conditions which also with open eyes agreed upon by the petitioner.
As a part of the tender acceptance conditions, the petitioner is also
required to give acceptance letter in the form of Annexure-VI, which
is attached to the petition compilation at page 46. The said
acceptance letter about tender conditions appears to have been
executed by the petitioner and reading of second condition out of
others would make it clear that the petitioner has unconditionally
accepted the tender conditions and the same has been clearly
understood by the petitioner. Condition no. 2 of 4 also deserves to be
quoted hereunder :-
"2. I/We hereby unconditionally accept the tender conditions of
AAI's tender documents in its entirety for the above facility.
4. I/We have carefully read and understood the terms and
conditions of the license as contained in Tender Documents
issued by the Airports Authority of India (AAI) including the
following
a) Earnest Money Deposit of Rs.2,50,000/- (Rupees Two
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lakhs and fifty thousand only) liable to be forfeited by
AAI, if on award of license, I/We do not accept the award
or do not fulfill any of the conditions stipulated in tender
documents, within prescribed time.
b) On account of non-acceptance of award or on account
of non-completion of tender conditions with the
prescribed time, I/We shall be debarred by AAI for a
period of one (1) year.
c) In case the documents submitted by my/our firm along
with tender are false/incorrect, the tender of my/our firm
will be liable to be rejected without assigning any
reasons. In addition, AAI reserves its right to forfeit the
EMD of my/our firm and debar my/our firm from
participation in the further tender of AAI."
30. In the background of aforesaid situation which the petitioner
has bound himself and the same is not disputed, it appears that the
said conditions are to be observed by the petitioner.
31. It is a trite law that it is the domain of Tender Inviting
Authority to impose condition according to their requirement and in
that sphere, there is hardly any scope of judicial review unless it is
challenged before the Court and it is also quite well propounded that
it is not open for the Court to rewrite the terms and conditions of the
contract which the authority has executed. In the very recent past,
the Hon'ble Apex Court while dealing with the judicial review in
contractual matters has clearly propounded the scope of
interference. On analysis of various decisions of past, the Hon'ble
Apex Court in M/s. N.G. Projects Limited v. M/s. Vinod Kumar
Jain & Ors., delivered in Civil Appeal No. 1846 of 2022 decided
on 21.03.2022 has clearly propounded that interference in contract is
illegal, unwarranted, unless it is manifestly arbitrary or unjust and
has conveyed in no uncertain terms that there are inheritance
limitations in exercising power of judicial review since the
Government is a guardian of finances of the State and it is expected
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to protect the financial interest of the State and the duty of the Court
is just to confine itself to few parameters. While opining this, the
Hon'ble Apex Court has also relied upon the decision delivered by
the three Judges Bench of the Hon'ble Apex Court in the case of
Galaxy Transport Agencies v. New J.K. Roadways reported in
2020 SCC Online SC 1035 which Bench reiterated that the
authority which authors the tender document is the best person to
understand and appreciate its requirements and even its
interpretation should not be second-guessed by a court in judicial
review proceedings and while observing this, the Hon'ble Apex Court
has made certain observations in paragraph 22 contained in
paragraph 16 of the said decision since relevant the Court would like
to reproduce hereunder:-
"22. Judicial review of administrative action is intended
to prevent arbitrariness, irrationality, unreasonableness,
bias and mala fides. Its purpose is to check whether
choice or decision is made "lawfully" and not to check
whether choice or decision is "sound". When the power
of judicial review is invoked in matters relating to
tenders or award of contracts, certain special features
should be borne in mind. A contract is a commercial
transaction. Evaluating tenders and awarding contracts
are essentially commercial functions. Principles of equity
and natural justice stay at a distance. If the decision
relating to award of contract is bona fide and is in public
interest, courts will not, in exercise of power of judicial
review, interfere even if a procedural aberration or error
in assessment or prejudice to a tenderer is made out.
The power of judicial review will not be permitted to be
invoked to protect private interest at the cost of public
interest, or to decide contractual disputes. The tenderer
or contractor with a grievance can always seek damages
in a civil court. Attempts by unsuccessful tenderer with
imaginary grievances, wounded pride and business
rivalry, to make mountains out of molehills of some
technical/procedural violation or some prejudice to self,
and persuade courts to interfere by exercising power of
judicial review, should be resisted. Such interference,
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either interim or final, may hold up public works for
years, or delay relief and succor to thousands and
millions and may increase the project cost manifold.
Therefore, a court before interfering in tender, or
contractual matters in exercise of power of judicial
review, should pose it itself the following questions:
(i) Whether the process adopted or decision
made by the authority is mala fide or
intended to favour someone;
or
Whether the process adopted or decision made is
so arbitrary and irrational that the court can say:"
the decision is such that no responsible authority
acting reasonably and in accordance with relevant
law could have reached";
(ii) Whether public interest is affected.
If the answers are in the negative, there should be no
interference under Article 226. Cases involving
blacklisting or imposition of penal consequences on a
tender/contractor or distribution of State largesse
(allotment of sites/shops, grant of licenses, dealerships
and franchises) stand on a different footing as they may
require a higher degree of fairness in action."
xxx xxx xxx"
32. And after analysis of series of decisions, the Hon'ble Apex
Court has observed an interference of writ Court in what
circumstances.
"23. In view of the above judgments of this Court, the Writ
Court should refrain itself from imposing its decision over the
decision of the employer as to whether or not to accept the bid
of a tenderer. The Court does not have the expertise to
examine the terms and conditions of the present day economic
activities of the State and this limitation should be kept in
view. Courts should be even more reluctant in interfering with
contracts involving technical issues as there is a requirement
of the necessary expertise to adjudicate upon such issues. The
approach of the Court should be not to find fault with
magnifying glass in its hands, rather the Court should examine
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as to whether the decision-making process is after complying
with the procedure contemplated by the tender conditions. If
the Court finds that there is total arbitrariness or that the
tender has been granted in a mala fide manner, still the Court
should refrain from interfering in the grant of tender but
instead relegate the parties to seek damages for the wrongful
exclusion rather than to injunct the execution of the contract.
The injunction or interference in the tender leads to additional
costs on the State and is also against public interest.
Therefore, the State and its citizens suffer twice, firstly by
paying escalation costs and secondly, by being deprived of the
infrastructure for which the present-day Governments are
expected to work.
25. In view thereof, we find that the action of the respondent in
setting aside the letter of acceptance granted to the appellant
suffers from manifest illegality and cannot be sustained.
Consequently, the appeal is disposed of with a direction to the
respondent State to allow the appellant to resume and
complete the work by excluding the period spent in the stay of
execution of the contract.
26. A word of caution ought to be mentioned herein that any
contract of public service should not be interfered with lightly
and in any case, there should not be any interim order
derailing the entire process of the services meant for larger
public good. The grant of interim injunction by the learned
Single Bench of the High Court has helped no-one except a
contractor who lost a contract bid and has only caused loss to
the State with no corresponding gain to anyone."
33. In view of this recent pronouncements also, in absence of any
prayer in respect of terms and conditions being arbitrary or
irrational, the Court sitting in jurisdiction under Section 11 of the
Arbitration and Conciliation Act cannot examine the validity of the
terms which are unequivocally with open eyes have been accepted
and here in the case on hand, not only the terms at the initial stage
after thorough understanding have been accepted but even extension
was also sought for and granted on the very basic terms and the
same have been accepted without any demur at any point of time in
past.
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34. As said earlier, the scope of Section 11 of the Arbitration and
Conciliation Act is very limited in which the Court has to examine the
acceptance of arbitration clause itself and nothing more or nothing
less.
35. Yet in another decision of the recent past of Hon'ble Apex
Court in the case of Oriental Insurance Company Limited v.
Narbheram Power And Steel Private Limited reported in (2018)
6 SCC 534, wherein the Hon'ble Apex Court has clearly propounded
that it is not open for the Court to rewrite the terms of the contract
and the related observations contained in paragraph 9.1, 9.2, 9.3 and
10 are reproduced hereunder :
"9.1. In General Assurance Society Ltd., the Constitution
Bench, while dealing with the contract of Insurance, has
opined that such a contract is entered into on the basis of
commercial transactions and while interpreting the documents
relating to a contract of insurance, the duty of the court is to
interpret the words in which the contract is expressed by the
parties because it is not for the court to make a new contract,
howsoever reasonable.
9.2. In Oriental Insurance Co. Ltd., a two-Judge Bench has
opined that insurance policy has to be construed having
reference only to the stipulations contained in it and no
artificial far-fetched meaning could be given to the words
appearing in it.
9.3. In United India Insurance Co. Ltd., the Court has ruled
that the terms of the policy shall govern the contract between
the parties and they are bound to abide by the definitions
given therein. That apart, the expression appearing in the
policy should be given interpretation with reference to the
terms of the policy and with reference to the definitions given
in any other law because the parties have entered into the
contract with eyes wide open.
10. The aforesaid principles are in the realm of settled position
of law. The natural corollary of the said propositions is that the
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parties are bound by the clauses enumerated in the policy and
the court does not transplant any equity to the same by
rewriting a clause. The court can interpret such stipulations in
the agreement. It is because they relate to commercial
transactions and the principle of unconscionability of the terms
and conditions because of the lack of bargaining power does
not arise. The said principle comes into play in a different
sphere."
36. In this very decision, the relevant observation contained in
paragraph 23 and 25 are also worth to be taken note of hence
reproduced hereunder :-
"23. It does not need special emphasis that an arbitration
clause is required to be strictly construed. Any expression in
the clause must unequivocally express the intent of arbitration.
It can also lay the postulate in which situations the arbitration
clause cannot be given effect to. If a clause stipulates that
under certain circumstances there can be no arbitration, and
they are demonstrably clear then the controversy pertaining to
the appointment of arbitrator has to be put to rest.
25. The aforesaid communication, submits the learned senior
counsel for the respondent, does not amount to denial of
liability under or in respect of the policy. On a reading of the
communication, we think, the disputation squarely comes
within Part II of Clause 13. The said Part of the Clause clearly
spells out that the parties have agreed and understood that no
differences and disputes shall be referable to arbitration if the
company has disputed or not accepted the liability. The
communication ascribes reasons for not accepting the claim at
all. It is nothing else but denial of liability by the insurer in
toto. It is not a disputation pertaining to quantum. In the
present case, we are not concerned with regard to whether the
policy was void or not as the same was not raised by the
insurer. The insurance-company has, on facts, repudiated the
claim by denying to accept the liability on the basis of the
aforesaid reasons. No inference can be drawn that there is
some kind of dispute with regard to quantification. It is a
denial to indemnify the loss as claimed by the respondent.
Such a situation, according to us, falls on all fours within the
concept of denial of disputes and non-acceptance of liability. It
is not one of the arbitration clauses which can be interpreted
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in a way that denial of a claim would itself amount to dispute
and, therefore, it has to be referred to arbitration. The parties
are bound by the terms and conditions agreed under the policy
and the arbitration clause contained in it. It is not a case
where mere allegation of fraud is leaned upon to avoid the
arbitration. It is not a situation where a stand is taken that
certain claims pertain to excepted matters and are, hence, not
arbitrable. The language used in the second part is absolutely
categorical and unequivocal inasmuch as it stipulates that it is
clearly agreed and understood that no difference or disputes
shall be referable to arbitration if the company has disputed or
not accepted the liability. The High Court has fallen into grave
error by expressing the opinion that there is incongruity
between Part II and Part III. The said analysis runs counter to
the principles laid down in the three-Judge Bench decision in
The Vulcan Insurance Co. Ltd (supra). Therefore, the only
remedy which the respondent can take recourse to is to
institute a civil suit for mitigation of the grievances. If a civil
suit is filed within two months hence, the benefit of Section 14
of the Limitation Act, 1963 will ensure to its benefit."
37. Further, it is also a clear proposition that principle of waiver
cannot be applied when the question of public interest comes into.
Now. In the backdrop of aforesaid principles even it is well
propounded that the scope of exercising jurisdiction under Section
11 of the Arbitration and Conciliation Act and the scope of extra
ordinary jurisdiction under Article 226 of the Constitution are
altogether different and Section 11 of the Arbitration and
Conciliation Act is requiring the Court only to look into the existence
of arbitration clause. Had there been a petition under Article 226 of
the Constitution of India, the Court would have probably examine the
arbitrariness as alleged in the terms of contract, but here is a
petition smartly placed simply under Section 11 of the Arbitration
and Conciliation Act to appoint an independent arbitrator to resolve
the grievance without there being process through the Specific
Terms and Conditions contained in clause 18 of the License
Agreement.
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38. A close perusal of condition no. 18 which is unequivocally
accepted for which the petitioner is bound to follow is firstly
requiring the petitioner to approach the Dispute Resolution
Committee (DRC) setup at Airports with written application and then
if the dispute is not resolved within 45 days then the question would
come up for referring the matter to the sole arbitrator to be
appointed by the Tender Inviting Authority. So the question of
appointment of arbitrator would come at a later stage and not before
approaching DRC. Now for approaching DRC, terms are clearly set
up and certain steps to be taken by the petitioner and this condition
was very much prevailing right from day one when the petitioner
entered into contract and as such, without complying the
requirement of approaching DRC, the petitioner cannot avoid the
steps and directly request for appointment of an independent
arbitrator and if this be entertained it would be allowing the
petitioner to circumvent the process of terms which are clearly
deduced in writing and well accepted by the petitioner. The Court in
absence of challenge to this terms being arbitrary or unconstitutional
cannot allow the parties to circumvent the terms which are well
accepted and emphaized and as such, the Court is of the considered
opinion that the question of appointing independent arbitrator in this
background fact would not be safely to be answered and if the same
would tantamount to allow the parties to go and flout the terms
which are specifically understood to be complied with, the Court
cannot be a party to such kind of strategic move of the petitioner in
the absence of any challenge.
39. In almost similar circumstance while dealing with the issue
related to arbitration clause in the case of Punjab State Water
Supply and Sewerage Board in Civil Appeal No. 2713 of 2019
decided on 11.03.2019 initially the concerned appellant had
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requested for appointment of arbitrator and sought waiver of ten
percent deposit fee which was condition precedent and after having
received no response, the appellant had filed Civil Writ Petition no.
18917 of 2016 before the High Court of Punjab & Haryana and the
said writ petition was dismissed vide judgment and order dated
14.09.2016 inter alia stating that such tender conditions can in no
way said to be arbitrary or unreasonable and then a substantive writ
petition appears to have been filed for challenging the validity of that
part of the condition which was numbered as Civil Writ Petition No.
4882 of 2017 and in that context the Hon'ble Apex Court then has
examined the issue and struck down clause 25(viii) of the notice
inviting tender and observed that clause being severable from the
rest of Clause 25 will not affect the remaining parts of Clause 25. The
relevant extract of the part contained in paragraph 3, 4 and 28 are
reproduced hereunder :
"3. The Appellant had entered into similar contracts with
Respondent No.2 which contained the same arbitration clause.
It had therefore addressed letters to Respondent No. 2 with
regard to appointment of arbitrator in those matters and
sought for waiving the 10% deposit fee. After having received
no response, the Appellant had filed a writ petition, being Civil
Writ Petition No. 18917 of 2016, before the High Court of
Punjab and Haryana. This writ petition was dismissed by a
judgment dated 14.09.2016 stating that such tender condition
can in no way be said to be arbitrary or unreasonable.
4. On 08.03.2017, the Appellant approached the High Court of
Punjab and Haryana challenging the validity of this part of the
arbitration Clause by filing Civil Writ Petition No. 4882 of
2017. The High Court in the impugned judgment merely
followed the earlier judgment and dismissed this writ petition
as well.
28. For all these reasons, we strike down Clause 25(viii) of the
notice inviting tender. This Clause being severable from the
rest of Clause of 25 will not affect the remaining parts of
Clause 25. The judgment of the High Court is set aside the
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appeal allowed."
40. So the entire observations in the said judgment have been in
the context of later part of challenge in a substantive petition
assailing the validity and the part of the arbitration clause, whereas
here on the case on hand, a simple prayer is made to appoint an
independent arbitrator. Neither this prayer till date of the final
arguments have been requested to be amended nor the terms of the
contract have questioned about its validity and as such, the Court
cannot travel beyond the relief which has been sought in the petition
and this petition being simply a petition under Section 11 of the
Arbitration and Conciliation Act, and not under Article 226 of the
Constitution of India, the Court is not inclined to even mould the
relief and set aside or declare the conditions of the contract as
invalid in absence of any relief. Accordingly, in the considered
opinion of this Court, the petitioner is bound to observe the terms
and the conditions of the contract and then the question would arise
for referring the matter to arbitrator. Had there been petition under
Article 226 of the Constitution of India, the Court would have
examine probably the grievance which is voiced out in the oral
submissions about the validity of the conditions, but in the peculiar
background of this fact, the Court would not like to exercise such
jurisdiction which otherwise is not called for to be exercised.
41. At this stage, the assertions which have been made in the
petition by the petitioner are also seriously disputed version which
the Court may not dwell into for its adjudication. For example the
petitioner has stated on oath in paragraph 2.9 that it has handed
over the possession of the premises forthwith upon the License
Agreement being terminated by efflux of time on 30.06.2020, but the
assets are lying in such premises. Now this assertion has been
stoutly controverted by the authority in paragraph 10 of the affidavit-
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in-reply on page 144 clearly pointing out that not only the petitioner
has not cleared the outstanding dues nor even extended the bank
guarantee, but has also not vacated the premises and has submitted
in paragraph 7 of the said affidavit that not only the possession was
not delivered back to the authority after termination of contract, but
even did not remove the material lying in the Airport premises and
has locked the premises and keys have not been handed over to the
authority and as such, has clearly flouted one of the conditions of the
License Agreement as well and despite the fact that specific request
was made by the respondent vide communication dated 09.09.2020
requesting to hand quiet and peaceful possession, same has not been
done and as such, the authority was constrained to ask for dues even
for subsequent period i.e. upto September, 2020 on account of
possession having not been handed over. So in this context it is the
assertion of the authority that the petitioner is liable to pay dues to
the extent of 2,09,01,768/- but instead keeping all circumstances in
mind, including Covid pandemic effect has raised invoice only to the
extent of Rs.51,95,505/- and as such, the conduct of the petitioner is
also appearing to be not trustworthy even as per the respondent
authority and as such, all these issues about the conduct of the
petitioner and the circumstances related to it are not to be examined
in simple petition under Section 11 of the Arbitration and
Conciliation Act and hence, conjoint effect of records of case and the
submissions made by the learned counsel appearing for both the
sides, it appears that the question of appointment of independent
authority at this stage. The question of appointment of arbitrator
would come into effect when all other terms precede to such are
being observed by the petitioner and that having not done, at this
stage the Court would not like to allow the petitioner to circumvent
the process unless.
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42. Further, learned counsel appearing for the petitioner has
submitted that the discretion is left with the authority to appoint an
arbitrator of its own choice may be an employee as well, but that
stage having not reached; it is not open for the petitioner to agitate
at this stage. The Court would like to quote certain observations
contained in the decision delivered by the Hon'ble Apex Court in the
case of Press Council of India v. Union of India and Anr.,
reported in (2012) 12 SCC 329, where the Court cannot travelled
beyond the relief and the said observation contained in paragraph 6
would with full emphasis apply here when this petition is basically
under Section 11 of the Arbitration and Conciliation Act and not
under Article 226 of the Constitution of India. The said paragraph 6
reads thus:
"6. Having gone through the prayers in the writ petition and
the orders passed by the High Court, we are of the opinion that
the High Court ought not to have issued the aforesaid direction
for the sole and simple reason that the prayers int eh writ
petition were entirely different from the order passed by the
High Court and the order passed by the High Court as
aforesaid is also not in consonance with the prayers so made.
On this short ground alone, the appeals are required to be
allowed and they are allowed accordingly and the order passed
by the High Court is set aside. We clarify that we have not
gone into other issues raised by the appellants in these
appeals. Ordered accordingly."
43. In view of the aforesaid discussion and in view of the peculiar
background of facts and the conduct of the petitioner, this is not a fit
case in which the Court can allow the petitioner to simply
circumvent the process of resolution of dispute which has been
specifically agreed upon and signed by him.
44. In this background of fact and having gone through the
decisions which have been cited by the learned counsel appearing for
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the petitioner the circumstances prevailing on record are altogether
different and peculiar in nature. The object and purpose of bringing
this petition of the petitioner is also self-explanatory to avoid
compliance of his obligation and as discussed above, those decisions
which have been referred to and relied upon are in different
contextual facts situation, same are not assisting the petitioner to
claim relief as prayed for in the petition. Hence, having gone
through the said decisions which have been cited by the learned
counsel appearing for the petitioner, the Court is of the opinion that
the same are not coming to the rescue of the petitioner from
achieving the object for which the petitioner has brought petition at
this stage without approaching DRC. On the contrary, from the
pleadings and the annexures, the petitioner has not approached or
made any attempt at first instance to approach DRC which would
clearly indicate that the intention of the petitioner is to avoid the
terms of the contract and to keep him away from its obligation to
observe. Hence, this being a different background of facts, the
judgments which have been pointed out no doubt reflecting salutary
principle, but the Court is unable to apply the same to extend the
relief to the petitioner.
45. No doubt the object of Arbitration Act to encourage a speedy
resolution dispute amongst the parties and to see that minimum
intervention of judicial forum would take place in dispute resolution,
but under the guise of such object of the act and the parameters of
jurisdiction under Section 11 of the Arbitration and Conciliation Act,
the Court would not like to encourage such kind of litigant who are
out to circumvent the process of dispute resolution once having
agreed upon in a specific terms with open eyes and then turn around
to contend that such terms are arbitrary or unconstitutional without
praying also and thereto in a proceedings which are not in extra
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ordinary jurisdiction. Hence, despite the aforesaid object, this is not
a fit case in which the petitioner can take undue advantage of the
object of the Act. Hence, the Court would like to refrain from
exercising jurisdiction in this specific background of facts under
Section 11 of Arbitration and Conciliation Act. Accordingly the
petition being devoid of merit stands dismissed. Notice is discharged
with no order as to costs.
(ASHUTOSH J. SHASTRI, J)
phalguni/omkar
