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Case Reviews, The Law

Overnite Express Limited vs Delhi Metro Rail Corporation [2020]

The present petitions deal with Section 9 of the Arbitration and Conciliation Act, 1996 in lieu of seeking direction to the Respondent to handover the licensed area on ‘as is where is basis’, including relief seeking an injunction of the Respondent from raising invoices and restraining Respondent from taking any coercive steps under the 4 License Agreements all dated 04.02.2019.

By: Hanoon Vahab, 3rd Year, BBA LLB, Geeta Institute of Law.

Background

Despite the material alterations and damage in the Areas by removing fixtures, fittings from concourse level to the first floor, and several requests made by the Petitioner to rectify the defects and restore the premises, the Respondent, on 23.07.2019 and 25.07.2019 raised invoices for payment of License Fee w.e.f. 10.08.2019; which led to the filing of the present petitions.

Facts

  • On July 9, 2018, Respondent Corporation invited open bids by E-tender for Licensing of commercial space at New Delhi Metro Station of Delhi Airport Express Line of DMRC network on “as is where is basis” and provided the site visit of the areas for a pre-bid site inspection and survey.
  • At the time of the site visit, it was found that there were partly constructed 20 units and 5 halls at the Concourse level. Whereas, facilities including white false ceilings with an adequate number of functional LED lights, each unit having individual isolators and power cables along with separate water inlet, having chill water pipelines for Air conditioning with fresh air ducting for ventilation and smoke extraction system and having fire sprinklers, smoke detectors were found in good working condition.
  • Likewise, the area on the ground and the first floor was also found partly constructed but with power cables, isolators, etc.

On 8 August 2018, the petitioner submitted the bid for all 4 Scheduled Areas along with the Tender document fee and rupees 4,878,000/- towards refundable Security Deposit which was then declared successful.

  • On 22 October 2018, Separate Letters of Acceptance were issued by the Respondent with respect to the 4 areas and the petitioner deposited the advance rental for a period of 12 months for each of the scheduled areas totalling an amount of rupees 6,35,06,937/-.
  • On 4 February 2019, 4 license Agreements were executed and were registered on 26 April 2019 in the office of the Sub- Registrar.
  • On February 11, 2019, Respondent invited the Petitioner for joint measurements and handed over the areas to him to enable the Licensee to carry out the business activities in terms of Clause 6.2 of the License Agreement.

On the said date, the measurement for only Schedule 1 Area could be carried and possession was taken over while the other levels were in a severely damaged condition and in contrast with the one represented at the pre-bid stage. Thus, possession was not taken and the same was reported to the respondent to rectify various deficiencies.

  • On February 12, 2019, the Respondent informed the petitioner that there was a deemed handing over of the areas to the petitioner. Thereafter, on 3rd May 2019 request was also made to provide the necessary connection to carry out the finishing work in the areas and also deposited the requisite charges and there was no response from the respondent.
  • Despite the hurdles, the Petitioner submitted the layout plans and drawings on 30.05.2019 regarding the existing spaces and also sent several reminders thereafter to take necessary action to restore the premises for use by the Petitioner.
  •  Instead of heeding to the various demands of the Petitioner for rectification of the premises, the Respondent, on 23.07.2019 and 25.07.2019 raised invoices for payment of License Fee w.e.f. 10.08.2019.

Arguments Advanced

Petitioner

  • The Petitioner contended that it was obligatory upon the Respondent to hand over the commercial space as they were on the date of the pre-bid site visit i.e. 19th July 2018, without any change or alteration.

It was also argued that the Respondent should be restrained from terminating the Agreements and the subject matter in aid of the Arbitration be preserved and protected.

  • It was next argued that the petitioner should be protected from coercive actions by the Respondent and a direction be given not to raise any further invoices and to provide an injunction.
  • It was further contended that on account of the breach by the Respondent, a substantial loss is being caused to the Petitioner who has made substantial investments and has been negotiating with several prospective sub-licensees including Multinational Companies.

Respondent

The Respondent submitted that present petitions are not maintainable as none of the prayers sought therein can be granted in law as in:

  • It was argued that the License Agreements being determinable, cannot be enforced by this Court by way of mandatory injunction, and also Petitioner has an alternate remedy to claim damages or compensation for the alleged breach of the Agreements.
  • He further contended that Clause (D) is for an interim injunction restraining the Respondent from taking coercive steps against the Petitioner under the License Agreements and is clearly barred under Section 41(e).
  • It was next argued that the petition is otherwise liable to be rejected as the Petitioner has failed to make out any prima facie case in its favour.
  • Furthermore, the contention of the Petitioner that Respondent is in breach of the Agreement is neither borne out from the pleadings nor could the petitioner substantiate the breach during the arguments and on the contrary, non-payment of the license fee for the commercial space in question would cause serious loss to the Respondent who needs money for its various projects.
  • Moreover, it was for the Petitioner to have assessed the commercial viability on ‘as is where is basis’ as stated in the terms and conditions of the Tender and also in accordance with Clause 6.2 was also cited to inform the Petitioner that ‘rent-free fitment period’ was restricted only to 180 days from the date of handing over the licensed spaces. 

Precedents

  • RPS Educational Society (Regd.) vs. DDA, OMP 538/2008

Referring to the judgement of this case, it can be seen that an order under Section 9 of the Arbitration and Conciliation Act cannot be passed by the Court directing specific performance of the contract, the breach of which is alleged by the petitioner.

  • Excel Generators Pvt. Ltd. Vs. IJ M Corporation Berhad OMP No. 241/09 

In this judgement, the court had observed that where a contract is a terminable contract and it can be foreclosed, the interim relief under Section 9 of the Arbitration and Conciliation Act cannot be granted for specific performance of the contract.

  • Adhunik Steels Ltd vs Orissa Manganese And Minerals … on 10 July 2007

In reference to this judgement, the court observed that it would not be correct to say that the power under Section 9 of the Act is totally independent of the well-known principles governing the grant of an interim injunction that generally governs the courts in this connection. 

In the judgement, the court observed that once a contract is determinable in nature and has been terminated by one party to the contract, the same cannot be revived or restored by a Court and specific performance of the same cannot be sought by the defaulting party.

  • RPS Educational Society (Regd.) vs. DDA, OMP 538/2008

In this judgement, the court stated that an order under Section 9 of the Arbitration and Conciliation Act cannot be passed by the Court directing specific performance of the contract, the breach of which is alleged by the petitioner.

In reference to this judgement, the court observed that Sec. 37 specifically provides that temporary injunctions which have to continue until a specified time or until further order of the court are regulated by the Code of Civil Procedure.

In reference to this judgment, the court observed that the Court had powers under Section 9 of the Act, akin to the powers of a Civil Court under Order 39 Rules 1 & 2 CPC, for grant of interim injunction and that Section 41 of the Specific Relief Act was not applicable to proceedings under Section 9 of the Act.

In this judgment, it has been observed that if the petitioner is aggrieved by the letter of termination of the contract and is advised to challenge the validity thereof, the petitioner can always’ invoke the arbitration ‘clause to claim damages, if any, suffered by the petitioner.

Rules

  • Section 9 in The Specific Relief Act, 1963
  • Section 14 in The Specific Relief Act, 1963
  • Section 41 in The Specific Relief Act, 1963
  • Section 9 in The Arbitration Act, 1940

Decision

It is made clear that the Court has not expressed any opinion on the merits of the disputes, which will be dealt with the Arbitration Tribunal as and when constituted & the narration is only for non-entitlement of reliefs sought for, in lieu of interim order. Therefore, petitions are accordingly dismissed, and in the interim order dated 06.09.2019 is hereby vacated.

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