COX & KINGS LTD. Vs INDIAN RLY.CATERING & TOURSM.COR.LD.&ANR
Bench: ALTAMAS KABIR,J. CHELAMESWAR
Case number: SLP(C) No.-000965-000967 / 2012
Diary number: 1212 / 2012
Advocates: E. C. AGRAWALA Vs
KAMLENDRA MISHRA
REPORTABL E
IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION
SPECIAL LEAVE PETITION (CIVIL) NOS.965-967 OF 2012
Cox & Kings Ltd. … Petitioner Vs.
Indian Rly. Catering & Tourism Corporation Ltd.& Anr. … Respondents
WITH CONTEMPT PETITION (CIVIL) NOS.41-43 OF 2012
IN S PECIAL LEAVE PETITION (CIVIL) NOS.965-967 OF 2012
J U D G M E N T
ALTAMAS KABIR, J.
1. In June/July 2007, The Ministry of Railways (Rail Mantralaya), Railway Board, approved the
proposal submitted by the Indian Railway Catering &
Tourism Corporation Ltd., hereinafter referred to
as “IRCTC”, for operating a Luxury Tourist Train on
a Pan-India route within India. Such proposal was
made in pursuance of an Expression of Interest
floated by the Respondent for a Joint Venture
partner for the said Luxury Transit Train Project,
to operate, manage and run the said train. The
proposal was approved subject to certain broad
principles for running the said train, set out by
the Indian Railways in its letter dated 29th
November, 2007, addressed to the Respondent,
namely,
“(a) The Respondent will own the rake; (b) The Respondent will pay to the
Indian Railways the cost of maintenance and periodical overhaul of the rake;
(c) Railways be entitled to recover the haulage cost;
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(d) The Respondent with their associate agencies will manage on board/off board services, marketing, booking, pricing, etc.”
2. The Petitioner came to be selected as the Joint
Venture shareholder for the operation of the Luxury
Tourist Train Project. On 11th January, 2008, the
Respondent forwarded the draft Memorandum of
Understanding, which was proposed to be executed
between the Petitioner and the Respondent, to the
Indian Railways. In terms of the said Memorandum
of Understanding, the Petitioner and the Respondent
would be equal shareholders of the Joint Venture
Company and the project cost was estimated at
Rs.37.5 crores, out of which an amount of Rs.7.5
was to be contributed by the Ministry of Tourism as
a grant and an amount of Rs.15 crores was to be
contributed as advance lease rental by the
Petitioner as its share. In addition to the above,
the Petitioner was to bring in the funding for the
project and the Luxury Tourist Train was to be
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leased by the Respondent to the Joint Venture
Company for a period of 15 years, which could be
extended by another period of 10 years on
conditions to be mutually agreed between the
Petitioner and the Respondent. The Joint Venture
Company was incorporated under the name and style
of “Royale India Rail Tours Ltd.”.
3. Upon receiving the approval of the Indian
Railways, the Respondent executed a Memorandum of
Understanding with the Petitioner dated 10th July,
2008, wherein it was stated that the Ministry of
Railways had given the permission to the Respondent
to own and operate the Luxury Tourist Train for the
exclusive use of the Joint Venture Company for a
period of 15 years, which was renewable for a
further period of 10 years. The said Memorandum of
Understanding also contained the various terms and
conditions on which the train was to be operated.
In terms of the Joint Venture Agreement and the
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Memorandum of Understanding, a Service Agreement
dated 5th March, 2010, was executed between the
Joint Venture Company and the Ninth Dimension Hotel
and Resorts Pvt. Ltd., hereinafter referred to as
“MAPPLE Hotels”, for providing hospitality services
on board and their respective roles and
responsibilities were set out in the said
agreement.
4. The Maharaja Express commenced operations on
20th March, 2010, and completed 4 journeys in the
inaugural runs till 31st March, 2010, and 30
journeys between April, 2010, till April, 2011.
5. Whilst the Joint Venture operations were being
conducted, certain disputes arose between the
shareholders regarding the working of the Joint
Venture Agreement and the Memorandum of
Understanding, which ultimately resulted in the
termination of the lease arrangement by the
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Respondent, IRCTC, by its letter dated 12th August,
2011, on the grounds indicated therein.
6. On account of such termination of the lease
agreement, the Petitioner initiated a proceeding
under Section 9 of the Arbitration and Conciliation
Act, 1996, under the Arbitration Agreement
contained in Article 30 of the Joint Venture
Agreement, for staying the termination of the lease
agreement and also to allow the arrangements to
continue till the month of April, 2012, subject to
such terms and conditions as may be imposed by the
Court.
7. As has been submitted by Mr. Mukul Rohatgi,
learned Senior Advocate, appearing for the
Petitioner, what was of utmost importance and
concern to the Petitioner was not only the huge
investment made by the Petitioner in the project,
but the loss of goodwill and reputation in the eyes
of its clients, who were mainly from foreign
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countries. Discontinuance of operation would also
besmirch the reputation of the Indian Government.
8. One of the other concerns of the Petitioner was
that it had been looking after the marketing and
the bookings internationally and within India and
such bookings had been made much in advance. It
was the case of the Petitioner that the Joint
Venture Company had received and was holding
approximately 400 bookings up to December, 2011 and
such bookings had been made by various
international travel companies.
9. The prayer for interim directions was contested
by the Respondent on several grounds. One of the
grounds taken was that by making relief on the
basis of the Joint Venture Agreement, the
Petitioner was trying to get a lease in favour of
the Joint Venture Company, which was neither a
party to the proceedings nor to the Agreement. It
was further contended that, in fact, the lease was
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never executed in favour of the Joint Venture
Company and the rights of the Petitioner could not
go beyond what had been laid down in the Articles
of Association of the Joint Venture Company. It
was also urged that since the relationship between
the Joint Venture Company and the Respondent had
been terminated, the Petitioner was trying to
create a right in its favour for operating the
train, which was never in its individual
possession. It was urged that such a prayer was
not maintainable and it was not open to the
Petitioner to claim any relief in relation to the
train, which was the subject matter of the
termination letters issued by the Respondent to the
Joint Venture Company, in its capacity as owner of
the train. Noting the interest of the parties and
keeping in mind the fact that advance bookings had
been made, the learned Single Judge of the Delhi
High Court, who heard the Application under Section
9 of the Arbitration and Conciliation Act, 1996,
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came to the conclusion that, although, in terms of
the Joint Venture Agreement in which there was a
separate provision for arbitration, the arbitral
dispute would have to be confined to the disputes
between the parties to the Agreement, under the
wider connotation of the Agreement between the
Respondent and the Joint Venture Company, certain
interim orders were required to be made. More so,
when the main grievance of the Respondent against
the Petitioner and the Joint Venture Company was in
respect of inflated bills raised by the Petitioner
and non-payment of the amounts payable in terms of
the Agreement. In such circumstances, the learned
Single Judge found it fit to appoint a Receiver, as
an interim measure, in the public interest, to
prevent discontinuation of the running of the train
for which bookings had already been made. The
learned Judge appointed one Shri Sudhir Nandrajog,
a Senior Advocate of the Delhi High Court, as
Receiver, and disposed of the Section 9
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application, inter alia, by directing that the
train would continue to be run under the
supervision of the learned Receiver for the period
commencing from 14th September, 2011, uptil 31st
December, 2011, which was the major period for
which the bookings had been effected, as per the
arrangement which was continuing during the earlier
season. Various other directions were given to
enable the learned Receiver to operate the Maharaja
Express and for maintenance of accounts. The
parties were also granted leave to approach the
Court or Arbitrator (if appointed) for modification
of the order in case such need arose.
10. In addition to the above, the parties were also
given liberty to take necessary steps to have their
disputes resolved by the appointment of an Arbitral
Tribunal which would be at liberty to decide the
disputes without being influenced by the order
passed on the application under Section 9 of the
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1996 Act. The rights and contentions of both sides
were also kept open for submission before the
Arbitral Tribunal, if appointed.
11. The order of the learned Single Judge was
challenged by IRCTC Ltd. by way of FAO(OS)Nos.433-
35 of 2011.
12. The submissions made before the learned Single
Judge were reiterated on behalf of both the parties
before the Division Bench, but a new dimension was
attempted to be added to the submissions advanced
on behalf of the Petitioner, M/s Cox & Kings India
Ltd. An attempt was made to make out a case that
the Joint Venture Company was akin to a partnership
and the train in question was partnership property.
The Division Bench took note of the fact that the
total cost of the train was Rs.49.5 crores, which
had been borne by IRCTC and was even recorded in
Article 6 of the Agreement. Apart from the above,
not only the shell train, but even the cost of the
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interior, fittings and furnishing was borne by
IRCTC. The Division Bench also noted that if the
train was to be regarded as a Joint Venture
property, there was no reason to provide for
leasing of the train by IRCTC to the Joint Venture
Company.
13. The Division Bench, however, was disinclined to
continue the arrangement, as directed by the
learned Single Judge, and accepted the submissions
made on behalf of the IRCTC that the mandatory
injunction which had been passed, would have the
effect of creating an Agreement between the Joint
Venture Company and IRCTC in relation to the train,
which would be influenced even though the Joint
Venture Company was not a party to the proceedings.
However, keeping in mind the prestige of the
country in regard to the running of the Maharaja
Express which had earned worldwide fame, the
Division Bench felt that since the Court was not in
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a position to restore the terminated arrangement
and direct the train to be managed and run by M/s.
Cox & Kings under the supervision of the Receiver,
the public interest could be subserved if the
Maharaja Express continued to be operated even by
the IRCTC. Also taking into account the factor
relating to the bookings which had already been
made in advance, the Division Bench accepted the
suggestions made by IRCTC to honour the bookings,
without prejudice to the rights and contentions of
the parties, as extracted hereinbelow :
“a) The train has to be run by the owner/respondent. All the facility material including crockery, furnish- ings etc. which are in custody of the petitioner should be handed over to respondent for executing this facility arrangement.
b) All revenues arising therefrom without any deductions earned either by the petitioner or respondent may be deposited in the separate account from which expenditure will be funded.
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c) All the bookings may be allowed to be transferred to the respondents for honouring.
d) All the on board or off board expenses and railway payments may be allowed to be charged to this account. In this way, the amount will be sufficient to cover the expenses and there will be no need for further loans.
e) The existing service providers may be retained.”
14. The Division Bench also directed that while
running the train, the IRCTC would remain bound by
the aforesaid suggestions. Whatever bookings had
been made till then could be transferred by M/s.
Cox & Kings to IRCTC. The Division Bench
accordingly set aside the arrangements made by the
learned Single and allowed the appeal preferred by
the Respondent herein.
15. It is against the said judgment and order
passed by the Division Bench of the Delhi High
Court on 6th January, 2012 in FAO(OS)Nos.433-35 of
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2011, that the present Special Leave Petitions have
been filed by M/s. Cox & Kings India Ltd.
16. Appearing for the Petitioner Company, Mr. Mukul
Rohatgi, learned Senior Advocate, submitted that
the primary reason for filing of the writ petition
was to protect and save the image and goodwill of
the Petitioner Company in the field of global
tourism. Mr. Rohtagi submitted that it is in that
context that a prayer had been made on behalf of
the Petitioner Company for stay of operation of the
termination of the Lease Arrangement by the
Respondent IRCTC by its letter dated 12th August,
2012. Mr. Rohatgi submitted that almost the entire
expenses for commencing operations in respect of
the Maharaja Express had been borne by the
Petitioner Company in different forms, and in view
of the promises contained in the Memorandum of
Understanding and the Agreement executed between
the Petitioner Company and the Joint Venture
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Company, the termination of the Lease Arrangement
was not warranted.
17. Mr. Rohatgi urged that it had been agreed by
both the parties in the said Memorandum of
Understanding and the Joint Venture Agreement and
other supporting documents that the lease of the
train by IRCTC to the Joint Venture Company was for
a minimum period of 15 years from the date of the
first commercial run of the train and in lieu
whereof 50% cost of the train had been paid by way
of advance lease charges which were to be adjusted
over a period of 15 years from the date of the
first commercial run of the train. Mr. Rohatgi
urged that the said amount had been paid by the
Petitioner to the IRCTC through the Joint Venture
Company. It was on account of the termination
letters dated 12th August, 2011, issued by IRCTC
that the Petitioner Company was compelled to
initiate proceedings before the High Court under
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Section 9 of the Arbitration and Conciliation Act,
1996. Mr. Rohatgi submitted that the relief claimed
in the said application was that the Maharaja
Express should be operated only through the Joint
Venture Company and that the Respondent IRCTC
should be restrained from using the train for any
purpose other than for the exclusive use of the
Joint Venture Company. Mr. Rohatgi also reiterated
the fact that in order to safeguard the interest of
the parties concerned, the learned Single Judge had
appointed a Receiver to oversee the function and
operations of the train and granted injunction to
preserve the existing status-quo till the final
hearing of the dispute.
18. The major thrust of Mr. Rohatgi’s submissions
was towards the aforesaid end and was indicative of
the fact that the running of the train was of
primary importance and should be allowed to
continue as per the earlier undertaking, without
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any disturbance, while the disputes before the
learned Arbitrator were finally disposed of.
19. On the other hand, on behalf of the Respondent
No.1 it was contended by the Learned Solicitor
General that the Special Leave Petitions had been
filed by M/s. Cox & Kings. Ltd. in respect of the
train, which was owned by the Respondent No.1,
IRCTC. The said train had been converted into a
luxury train and was being operated on a seasonal
basis between the months of September to April by
the Joint Venture Company. However, the IRCTC had
no option but to terminate the arrangement made
with the Joint Venture Company to operate the
luxury train on account of various reasons and, in
particular, on account of non-payment of the dues
of IRCTC. The learned Solicitor General submitted
that the letter terminating the Joint Venture
Agreement was the subject matter of the Section 9
Application before the learned Single Judge of the
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High Court, who, by his order dated 6th September,
2011, allowed the prayers made therein in part and
issued a mandatory injunction and also appointed a
Receiver for operation of train between the months
of September to December, 2011. However, the train
was never operated under the Receiver on account of
the interim orders passed in the appeal on 9th
September, 2011.
20. The learned Solicitor General reiterated the
fact that on 6th January, 2012, the Division Bench
set aside the order passed by the learned Single
Judge which was, in any event, to operate only till
31st December, 2011.
21. The learned Solicitor General urged that there
was no ambiguity regarding the ownership of the
train and it had been clearly understood by all
concerned that it was IRCTC which was to be the
owner of the train and that the Joint Venture
Company was to be formed for management and
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operation of the train. It had also been made clear
that IRCTC’s association with other agencies was
for the purpose of management of the train only.
22. 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 Petitioner 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 Petitioner 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
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fact, what the Petitioner 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 Petitioner to
operate the luxury train indefinitely, till a
decision was arrived at in Section 9 Application.
23. It is no doubt true that the Petitioner 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 Petitioner’s
remedy, if any, would lie in an action for damages
against IRCTC for breach of any of the terms and
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conditions of the Joint Venture Agreement and the
Memorandum of Understanding.
24. 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.
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25. Having regard to the nature of the facts of the
case, the parties shall bear their own costs.
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26. In view of the above, no order is required to
be passed on the Contempt Petitions and the same
are also dismissed.
………………………………………………………J. (ALTAMAS KABIR)
………………………………………………………J. (J. CHELAMESWAR)
New Delhi Dated : 5.7.2012
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