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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