IRCTC Being A State Under A. 12 Is Bound By Its Affidavit Before Any Court Of Law, Cannot File A Contrary Affidavit To Defeat A Claim In Arbitration: Delhi High Court

The High Court of Delhi has held that IRCTC is a State under Article 12 of the Constitution of India and is bound by its affidavit before any court of law and it cannot file contrary affidavit before the arbitral tribunal to defeat a claim of the other party in arbitration.

The bench of Justice Neena Bansal Krishna also held that an arbitration award cannot be challenged on the grounds of lack of evidence for award of damages when the parties agreed to not lead any evidence at all at the beginning of the arbitration. Moreover, it reiterated that a plea of fact or law not taken before the tribunal cannot be permitted to be raised for the first time before the Court under Section 34 of the Act.

The Court also held that when the terms of reference to arbitration required the tribunal to determine the validity of the termination of the agreement and its effect, the tribunal would be well within its competence to award damages for the illegal termination and the terms of reference cannot be held to be confined to mere determination of the validity of termination.

Facts

The parties entered into a Licence Agreement dated 20.03.2008 by which the subject premises were given to the respondent for catering services. Clause 6.3 of the agreement provided for sub-licensing of the premises. Clause 12.5 provided for assignment of licence. These clauses made sub-licencing and assignment subject to the prior permission of the petitioner.

A dispute arose between the parties when a third party named M/s B. Rajasaheb illegally took possession of the 25% of the Food Plaza/Subject premises on 30.12.2012. The respondent wrote to the petitioner the very next day informing it about the illegal occupation by the third party and sought its help to remove the unauthorized occupants. It also filed a complaint with the Railway Police Force and Government Railway Police.

However. On 05.01.2013, M/s B. Rajasaheb filed a Civil Suit before the Small Causes Court of Bombay alleging that the respondent vide its two partners entered into a MoU dated 04.01.2012 with it and it has been granted sub-lease for a period of 7 years to operate and manage the 25% occupied area and pursuant to the MoU it has deposited a sum of Rs. 43 Lakhs in the respondent’s bank account.

Before the Small Causes Court, the respondent as well as petitioner denied the existence of any such MoU and the respondent contented that the MoU is a forged document. However, the petitioner issued a show cause notice (SCN) to the respondent for alleged breach of Clause 6.3 and 12.5 of the Agreement. In response to the SCN, the respondent again asserted that the MoU is a forged document.

Thereafter, the petitioner sent a letter to the respondent requiring it to declare on affidavit that it did not enter into any such agreement in contravention of the agreement and sought details of the actions taken by it against the third party occupant. However, on 04.08.2014, the petitioner terminated the agreement under Clause 8.1 for alleged violation of the terms of the agreement.

Aggrieved by the termination of the agreement, the respondent invoked the arbitration clause and the parties were referred to the arbitration. The arbitral tribunal was asked to determine the validity of the termination and any consequent effect of it.

Before the tribunal the respondent as its primary relief claimed the restoration of the agreement and in alternative claimed damages for the illegal termination. The tribunal held that the agreement was illegally terminated as it was not proved by the petitioner that the respondent entered into any MoU without its permission and accordingly it awarded damages to the respondent.

Grounds of Challenge

The petitioner challenged the award on the following grounds:

• The tribunal erred to not appreciate that the agreement was validly terminated by the petitioner under Clause 8.1 of the Agreement as the respondent had violated Clause 6.3 and 12.5 of the agreement by entering into a sub-lease without the prior permission of the petitioner.
• The respondent in its letter dated 05.08.2014 admitted having executed the MoU with the third party and it also failed to deny having received an amount of Rs. 43 Lakhs in consideration of the MoU.
• The respondent also failed to lodge any FIR against the third party for their illegal occupation which shows that it certainly entered into the MoU with that third party.
• The award is patently illegal as having been passed against the terms of the contract and the provisions of the Partnership Act.
• The award of damages is beyond the terms of the agreement as the only question posed for the tribunal for its consideration was the determination of the validity of the termination and no reference was made regarding the damages.
• The tribunal has passed the award of damages without any actual proof of loss or any proof at all.
• The tribunal in the main body of the award rejected the respondent’s claim for interest, however, in the concluding paragraph, contrary to its earlier stand, allowed the interest on claims.

Analysis by the Court

Firstly, the Court reiterated the scope of interference under Section 34 of the Act. It held that the Court is not empowered to give finding of facts or to reappreciate the evidence or to supplant its view with that of the tribunal if two views are possible. It also held that the ground of patent illegality permits interference only when the award is contrary to any substantive law and not otherwise.

Next, the Court examined the argument regarding the validity of the termination of the agreement on account of sub-letting without prior consent. The Court observed that respondent had specifically denied having entered into any agreement with any third party and stated that the MoU was a forged agreement. The Court held that when the alleged agreement was specifically denied by the respondent, it was required to be proved by the petitioner as the onus of proof was on it after its existence was denied by the respondent. It held that the petitioner did not produce any document/evidence to prove the existence of the agreement on the basis of which it had terminated the agreement. Thus, the Court held that the tribunal rightly held that there was not breach of the terms of the agreement and the termination was illegal.

The Court also observed that the alleged MoU was entered into on 04.01.2012, however, the third party took possession only on 30.12.2012. It held that it is quite unnatural that the possession would be handed over after a period of 12 months. This also lends credibility to the claim of the respondent that B. Rajasaheb had forcibly entered possession.

Next, the Court examined the objection regarding the non-registration of the FIR. The Court observed that the respondent acted very promptly against the illegal occupation by the third party by informing the petitioner on the very same day and requesting its assistance to remove the occupant. It also filed complaints with the RPF and GRP against the third party occupant. It held that mere non-filing of FIR cannot be deemed to mean that the respondent actually executed the MoU when its actions apart from non-registration of FIR were all against the third party.

Next, the Court upheld the finding of the tribunal regarding the contrary stand being taken by the petitioner before two forums. The Court observed that the petitioner in its affidavit before the Small Causes Court stated that the respondent did not enter into any such MoU and that B. Rajasaheb illegally entered the premises. However, it took a contrary stand before the tribunal and asserted that the respondent indeed entered into such MoU without its permission.

The Court held that the petitioner cannot be allowed to approbate and reprobate at the same time. It held that the petitioner was bound by its affidavit before the Small Causes Court. It held that IRCTC (petitioner) is a State under Article 12 of the Constitution of India and is bound by its affidavit before any court of law and it cannot file contrary affidavit before the arbitral tribunal to defeat a claim of the other party in arbitration.

Next, the Court held that an arbitration award cannot be challenged on the grounds of lack of evidence for award of damages when the parties agreed to not lead any evidence at all at the beginning of the arbitration. Moreover, it reiterated that a plea of fact or law not taken before the tribunal cannot be permitted to be raised for the first time before the Court under Section 34 of the Act.

The Court also held that when the terms of reference to arbitration required the tribunal to determine the validity of the termination of the agreement and its effect, the tribunal would be well within its competence to award damages for the illegal termination and the terms of reference cannot be held to be confined to mere determination of the validity of termination.

Lastly, the Court observed that the tribunal in its main finding on the issue of interest held that respondent not entitled to interest, however, in the concluding paragraph of the award made a contrary finding and allowed interest. The Court held that the tribunal made an error in the concluding paragraph as the finding given under the main head was conclusive. Thus, the Court held that the respondent is not entitled to any pendente lite interest.

Accordingly, the Court dismissed the petition and upheld the award with a clarification regarding the award of interest.

Case Title: Indian Railway Catering & Tourism Corp. Ltd. v. M/s Goel & Goel, OMP(COMM) 299 of 2021

Citation: 2023 LiveLaw (Del) 500

Counsel for the Petitioner: Mr. Saurav Agrawal, Ms. Divya Hirawatz, Mr. Anshuman Chowdhary, Advocate.

Counsel for the Respondent: Mr. S. Ravi Shankar, Ms. Meghna Mukherjee, Ms. Yamunah Nachiar, Advocates.

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