Ast 1 arbpl528.11.sxw IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION (L) NO.528 OF 2011 M/s.Topway Multitrade. ....Petitioner Vs. Brihan Mumbai Electric Supply & Transport(BEST). ....Respondent. Mr. Bharat Mehta a/w. Rathore Sunilkumar i/b. Global Juris Consuts, advocate for petitioner. Mr. S.U.Kamdar, Sr. Advocate a/w. H. Toor, S.K.Chari, Dipankar Das i/b. M.V.Kini & Co., advocate for respondent. CORAM:- M.N.GILANI, J (Vacation Court) RESERVED ON :- MAY 31, 2011 PRONOUNCED ON: JUNE 3, 2011. M.N.GILANI,J : 1. This Petition has been filed under Section 9 of the Arbitration and Conciliation Act, 1996(in short “the Act, 1996) for the following reliefs: “(a) this Hon’ble Court may be pleased to pass an Order and Injunction restraining the Respondents from awarding contract to any other person pertaining to the 270 A/c buses as listed in Exh. “G”, for which the Petitioner was awarded contract on 9/10/2010 for the purpose of installation of Glass Protection system, displaying advertisements on left and right side panels and full wrap of the said 270 A/c buses: (b) that pending the hearing and final disposal of the above petitioner, this Hon’ble Court may be pleased to pass an interim Order restraining the Respondents from Ast 2 arbpl528.11.sxw awarding contract to any other person pertaining to the 270 A/c buses, as mentioned in the Exhibit “G” for which the Petitioner was awarded contract on 9/10/2010 for the purpose of installation of Glass Protection system, displaying advertisements on left and right side panels and full wrap of the said 270 A/c buses;” 2. The Petitioner is a registered partnership firm engaged in the business of display of advertisements in the city of Mumbai and its suburban districts. The Respondent is Undertaking of Municipal Corporation of Greater Mumbai engaged in plying entire public transport in the city of Mumbai. In the year 2009-2010, the Respondent entered into negotiation with the Petitioner for installation of glass protection system for 270 A/c buses, to display advertisement on both sides of panels of these buses and for full wrap advertisement on these buses. The agreement was signed on 9/1/2010 for a period of 10 years. On 11/2/2010 the Respondent issued certificate to the Petitioner certifying that the Petitioner had been awarded the sole contract for displaying the advertisements on the panels and full wrap on 270 A/c buses in lieu of providing glass protection system under the First Finder Scheme and had further certified that the period of contract would be till 8/1/2020. The Petitioner deposited necessary charges with Road Transport Office(RTO). In turn, the RTO permitted the Petitioner for displaying advertisement on the panels of the A/c buses. After completing this formalities, the Petitioner incurred huge expenses for installation of glass protection system and also entered into contract with foreign based companies for annual maintenance of the system. The Petitioner was also required to engage highly qualified professionals to market ideas of advertisement by way of full wrap on Ast 3 arbpl528.11.sxw the A/c buses. The Petitioner executed the work of displaying advertisement on the buses to the satisfaction of the Respondent. The RTO was informed about the contract between the Petitioner and the Respondent and also about the exemption which was granted under section 100(2) of the Central Motor Vehicle Rules by the Government of India, Ministry of Shipping Road Transport and Highways. 3. It is the case of the Petitioner that they had adhered to all the norms and conditions required to be adhered as per the existing law and as per the terms of contract. The RTO was apprised about how safe and secure was the glass protection system inducted by the Petitioner and further confirmed that the visibility from inside to outside was 100% and also confirmed that during night because of illumination inside the bus, the visibility from inside to outside is good. 4. The Petitioner further avers that instead of recognizing the successful implementation of new innovative advertisement scheme, the Respondent on or about 19/7/2010 demanded increase in the revenue by stating that the earlier quantum fixed was not adequate. Despite the terms in the contract that any variation has to be with the mutual consent of both the parties, the Respondent unilaterally called upon the Petitioner to enhance the minimum guaranteed revenue to Rs.15,000/- per bus per month, to which the Petitioner did not agree. In this regard, there was exchange of letters as stated in paragraphs-20 and 21 of the Petition. The Petitioner further states that the Respondents were never serious about honouring the terms of the contract, but always went upon harassing the Petitioner. They conceived dubious and malicious plan in Ast 4 arbpl528.11.sxw connivance with the RTO, so as to bring an end, by hook and crook, to the contract dated 9/1/2010. The Petitioner then made a mention of some confidential letter written by the General Manager of the Respondent to the Secretary, Urban Development Department (II) Government of Maharashtra, wherein it was stated that the compensation amount that the Petitioner was paying per bus per month is highly inadequate. On 25/1/2011, the RTO issued show cause notice to the Respondent calling upon the Respondent to show cause as to why action be not initiated for violation of rule under section 100(2) of Central Motor Vehicle Rule 1989. According to the Petitioner, this was done just to harass the Petitioner and in total collusion and connivance with the Respondent. On 8/3/2011, the Respondent made available only one A/c bus bearing registration No.MH-46 J 20 to the RTO Mumbai Central for inspection. The RTO conducted visibility test and prepared the panchanama. This resulted in RTO passing an order dated 10/3/2011 and thereby holding that all 270 A/c buses have violated provisions of Rule 100(2) of the Central Motor Vehicle Rules, 1989. The Respondent was directed by the RTO to remove all the advertisement affixed on the glasses of 270 A/c buses within 15 days, although the time for preferring an appeal as provided in law is 30 days. On 17/3/2011, the Respondent issued show cause notice to the Petitioner and also suspended the contract. The Petitioner was directed to remove the advertisement displayed on the buses on or before 31/3/2011 and restore the buses to its original condition. On 25/3/2011, the Petitioner sent reply to the Respondent questioning power of suspension of contract and raised other issues of vital importance. It is alleged that the Respondent without applying mind and without going Ast 5 arbpl528.11.sxw through the contentions of the Petitioner, on 11/4/2011 terminated the contract. This was replied by the Petitioner on 15/4/2011, 18/4/2011 and on 26/4/2011. Unfortunately, all remained unheeded. 5. Being aggrieved by the order of termination of the contract as well as the order passed by the RTO, the Petitioner filed Civil Writ Petition before this court, which came to be dismissed on 5/5/2011 mainly on the ground that alternative remedy of initiating arbitral proceedings are available to the Petitioner. A special leave petition preferred to the Supreme Court being SLP No.1435 of 2011 came to be dismissed on 16/5/2011. 6. Now, the Petitioner wants to resort to remedy of initiating arbitral proceedings and in the meantime, to preserve status quo and prevent the Respondent from finalising the process of inviting tenders and awarding contract pertaining to 270 A/c buses, by invoking jurisdiction of this court under section 9 of the Act, 1996. It is the case of the Petitioner that if the Respondents are allowed to complete the process of awarding the contract the entire arbitration petition, which is going to be filed by the Petitioner within a short time, would become infructuous. 7. The Respondent on 30/5/2011 filed affidavit in reply denying all avernments in the Petition. It is submitted that the Petition is not maintainable in view of the provisions of section 41(e) read with Section 14(1)(a) of the Specific Relief Act. The Petitioner has already quantified the damages to the tune of Rs.25 Crores. If the arbitral proceedings terminate in favour of the Petitioner, it can very well be Ast 6 arbpl528.11.sxw compensated in terms of money. In this view of the matter, the Petitioner is not entitled for the interim relief under section 9 of the Act of 1996. On merits, it is the case of the Respondent that the termination of the contract is justified in the facts and circumstances of the case. It was the duty of the Petitioner to observe the provisions of the Motor Vehicle Rules. The breach of the same resulted in passing the adverse order by the RTO. Clause-5 of the Agreement has imposed a duty upon the Petitioner to comply with the provisions of the Motor Vehicle Rules. The exemption granted by the Government of India, Ministry of Shipping Road Transport and Highways vide letter dated 29/7/2008 was in respect of Volvo buses which the Respondent wanted to ply in the city of Mumbai. It has no connection with the fleet of 270 A/c buses covered under agreement dated 9/1/2010. It is further submitted that the Petitioner did not challenge the order passed by the RTO. Only after the Petitioner failed to comply with the directions, the Respondents were required to take up the job of rectifying the shortcomings by removing advertisement displayed on the buses. The allegation of Respondent entering into a conspiracy with the RTO is denied. In a nut shell, it is the case of the Respondent that the show cause notice dated 17/3/2011 and subsequent termination notice are legal and binding on the Petitioner. The balance of convenience lies in favour of the Respondent. The Respondent would suffer irreparable loss if they are prevented from proceeding to award contract of displaying advertisement to suitable person. This would cause huge losses to the Respondent which is a public undertaking. Therefore, they claim dismissal of the Petition. 8. The Petitioner filed affidavit in rejoinder reiterating the Ast 7 arbpl528.11.sxw avernments made in the Petition. It is submitted that the Respondent has deliberately omitted to deal with the merits of the case namely termination of the contract and how it is within the ambit of the agreement dated 9/1/2010. 9. Heard learned Counsel for the parties at length. 10 The point for my consideration is whether the Respondent be restrained from awarding contract to any other person pertaining to 270 A/c buses as listed in Exh.G. for purpose mentioned in the contract dated 9/1/2010. 11. Agreement dated 9/1/2010 consists of arbitration clause which reads as under: “29) Arbitration : Any dispute or difference arising out of this agreement shall within 14 days of the occurrence of such dispute or difference be referred to the General Manager who shall give his decision within a period of 90 days. The General Managers decision shall be final & binding on the contractor.” By ignoring the Arbitration Clause, the Petitioner filed Writ Petition(L) No.942 of 2011 invoking jurisdiction of this court under Article 226. The Division Bench of this court in their judgment dated 5th May, 2011 noticed arbitration clause and observed that alternative remedy is available to the Petitioner. Despite this, the Petitioner filed SLP being SLP (st.)No.14345 of 2011 before the Supreme Court. This was dismissed on 16/5/2011 giving liberty to the Petitioner to agitate legally Ast 8 arbpl528.11.sxw permissible grounds before the arbitrator. It may be seen that the dispute between the Petitioner and the Respondent had arisen for the first time in October, 2010 when the additional revenue per bus was demanded to which the Petitioner disagreed. It again arose when the Respondent suspended the contract awarded vide letter dated 17th March, 2011 and thereafter on 11th April, 2011 when the contract was terminated. The arbitration clause provides that within 14 days of the occurrence of the dispute or differences it shall be referred to the General Manager, who shall give decision within a period of 90 days. It is therefore, obvious that had the Petitioner chosen a right path, lot of public time and its own time would have been saved. After undergoing ordeals of approaching the forums having no jurisdiction, the Petitioner is required to begin de novo. Be that as it may. 12 Before touching to the merits of the case, I shall in brief deal with the scope of Section 9 of the Act. Under Section 9 of the Act of 1996, in addition to the interim measures or protection given in clause (a) to (d) any other interim measures or protections can be granted which the Court considers just and convenient in the totality of the circumstances. Section 9(e) amplifies the position that the power of the court in making order is as wide as the court’s power to make order for the purpose of and in relation to any proceedings before it. 13 The Supreme Court in the case of Adhunik Steels Ltd. V/s. Orissa Manganese and Minerals (P) Ltd.[(2007) 7 SCC 125] explained the scope of section 9 of the Act. Interestingly, the learned Counsel for both the parties relied upon this decision. It would be suffice to quote Ast 9 arbpl528.11.sxw relevant excerpts from paragraphs-11, 16 and 21 of the Judgment, which read thus: “The grant of an interim prohibitory injunction or an interim mandatory injunction are governed by well known rules and it is difficult to imagine that the legislature while enacting Section 9 of the Act intended to make a provision which was de hors the accepted principles that governed the grant of an interim injunction. (Para 11) In relation to a breach of contract, the proper remedy against a defendant who acts in breach of his obligations under a contract, is either damages or specific relief. The two principal varieties of specific relief are, decree of specific performance and the injunction (See David Bean on Injunctions). The Specific Relief Act, 1963 was intended to be "An Act to define and amend the law relating to certain kinds of specific reliefs." Specific Relief is relief in specie. It is a remedy which aims at the exact fulfilment of an obligation. According to Dr. Banerjee in his Tagor Law Lectures on Specific Relief, the remedy for the non performance of a duty are (1) compensatory, (2) specific. In the former, the court awards damages for breach of the obligation. In the latter, it directs the party in default to do or forbear from doing the very thing, which he is bound to do or forbear from doing. (Para 16 ) Whether an interim mandatory injunction could be granted directing the continuance of the working of the contract, had to be considered in the light of the well- settled principles in that behalf. Similarly, whether the attempted termination could be restrained leaving the consequences thereof vague would also be a question that might have to be considered in the context of well settled principles for the grant of an injunction. Therefore, on the whole, we feel 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 govern the courts in this connection.” (para 21) Ast 10 arbpl528.11.sxw 14 It is the case of the Petitioner that the Respondent connived and conspired with the RTO to condemn the petitioner. It is further averred that the order of RTO should have been assailed by the Respondent. In my view, the record speaks otherwise. On 9/2/11 the Respondent addressed a letter to the Deputy Regional Transport Officer, Andheri informing of entering into contract of displaying advertisement of 270 numbers of A/c buses with the Petitioner. In this letter they quoted the exemption granted under Rule 100(2) of the Central Motor Vehicle Rules, 1989 by the Ministry of Shipping and Road Transport vide letter dated 29/7/2008. After inspecting vehicles and considering aforesaid letter, RTO on 10.3.2011 passed following order: “B. The BEST Undertaking has vide its letter dated 09.02.2011 informed exemption granted under Rule 100(2) of Central Motor Vehicles Rules, 1989. However, on reading of the no-objection letter of Central Government dated 29.07.2008 it is seen that the exemption for display on the rear and side glasses of BEST Airconditioned Buses is given if there is 100% visibility from inside. 6. The advertisement is displayed on 270 buses of BEST undertaking. Therefore, there is violation of Rule 100(2) of Central Motor Vehicles Rules, 1989. Similarly there is violation of the letter dated 29.07.2008 issued by Central Government Road Transport and Highway Department.” This clearly shows that the Respondent wanted to plead the case of the Petitioner by stating that requirements of Rule 100(2) of the Central Motor Vehicle Rules, 1989 were already exempted. The inspection Ast 11 arbpl528.11.sxw report dated 8.3.2011 (Exh. M) points out that one Mr. Tushar Gogri, the partner of Petitioner was present when the bus was inspected. Consequently , the allegation of the Petitioner that the Respondent conspired and connived with the RTO to harass the Petitioner appear ill-founded. 15. Incidentally, it may be noted that in the reply filed by the Respondent the belated attempt was made to show that the exemption granted by the Ministry of Shipping, Road Transport and Highways vide letter dated 29th July, 2008 was in respect of Volvo buses and has nothing to do with the 270 A/c buses covered under contract dated 9/1/2010. This is unfair on the part of the Respondent. Had it been so, there was no reason for them to inform the RTO about such exemption in their communication dt.9/2/2011 – which in fact, was in relation to the contract dated 9/1/2010. 16 Now, I shall advert to the termination clause in the agreement. It provides that if during the period contract remains in force, the General Manager has reasons to be dissatisfied with the execution of this contract and/or performance of the contractor, he or any officer on his behalf may by notice call upon the contractor to remove cause of such dissatisfaction. The contractor has to rectify the defect within 15 days after receipt of such notice. The General Manager or the Officer concerned has to be satisfied about the rectification carried out by the contractor. If the authorities are not satisfied about rectification the termination clause provides for further notice of 7 days. Despite this, if the contractor fails to remedy the cause of dissatisfaction, the General Ast 12 arbpl528.11.sxw Manager has been clothed with the power to terminate the contract. However, this is to be done by giving final 48 hours notice in writing. Only after service of such final 48 hours notice, the contract stand terminated. 17. It is the grievance of the Petitioner that all the stages laid down in the clause 24 have not been followed. On 17th March, 2011, first notice was issued directing the Petitioner to rectify the defect before 31st March, 2011 despite the fact that the RTO had permitted them to rectify the defect till 30th April, 2011. It is contended that the mode of suspending the contract adopted by the Respondent is unknown to the terms of the agreement. Although this communication was suitably replied, it remained unheeded. On 11/4/2011 the last notice came to be issued. 18. Chronology of aforesaid events point out that all the stages mentioned in clause 24 have not been followed before finally terminating the contract. Although, the Respondent could point out that the Petitioner violated terms of agreement particularly by not complying with statutory rules and not rectifying the defects promptly, the manner in which agreement was brought to an end shows that termination clause was substantially breached by the Respondent. 19 Now the question that arises before the Court is whether the interim reliefs in clauses (a) and (b) or any other relief can be granted to the Petitioner pending decision of the dispute by the Arbitral Tribunal. Learned Senior Counsel appearing for the Respondent relied upon the Ast 13 arbpl528.11.sxw decision in Rajasthan Breweries Ltd. v/s. Stroh Brewery Company[AIR 2000 Delhi 450]. While explaining scope of section 9 of the Act visa vis provisions of Specific Reliefs Act, Single Judge of the Delhi High Court held that : “The effect of breach of a contract by a party seeking to specifically enforce the contract under the Indian law is enshrined in Section 16(c) read with Section 41(e) of the Specific Relief Act, 1963. Clause (e) of Section 41 of the Specific Relief Act provides that injunction cannot be granted to prevent the breach of contract, the performance of which would not be specifically enforced. Clause (c) of Section 41 enumerates the nature of contracts, which could not be specifically enforced. Clause (c) to sub- section (1) of Section 14 says that a contract which is in its nature determinable cannot be specifically enforced. 20. Learned Counsel contends that the Court can grant relief under section 9 of the Act of 1996, only if an irreparable loss or injury is going to be caused to the parties. In the present case, there is no question of irreparable loss or injury. The Petitioner has already quantified the damages to the tune of Rs.25 Crores. The Respondent is a public undertaking capable enough to honour the award of any quantum, which may be passed by the Arbitral Tribunal. He further contends that if the cancellation of contract by the Respondent constitutes a breach of contract on their part, the Petitioner would be entitled to damages. The question whether the termination was wrongful or not or whether the Respondent was not justified in terminating the agreement are the issues to be decided by the Arbitrator. In case ultimately it is found that termination was bad in law or contrary to the terms of the agreement, remedy of the Petitioner is to seek compensation for wrongful termination and not a claim for specific performance of the agreement. Ast 14 arbpl528.11.sxw 21. Mr. Mehta, learned Counsel for the Petitioner relied upon the decision in Hindustan Petroleum Corporation Ltd. & ors. v/s. Super Highway Services & Anr. reported in (2010) 3 SCC 321. In that case, despite the arbitration clause the jurisdiction of the High Court under Article 226 was invoked. Therefore, belated plea of availability of alternative remedy was not entertained by the Supreme Court. In that case, it was held that the termination of oil dealership agreement without prior notice was contrary to the guidelines by which the parties were governed. The facts of the present case are totally different. The petitioner has founded his case on the ground that the Respondent and the RTO authorities connived, which resulted in passing of order dated 10/3/2011 and which was ultimately made basis of the termination of the contract. As has been pointed out earlier, representative of the Petitioner was very much present when panchanama was made. The RTO in his order informed the parties that they had right of appeal. This was not availed of by the Petitioner. Of-course, this was challenged before the Division Bench of this Court. The Division Bench dealing with the contentions of the Petitioner in paragraphs-12 and 13 observed that even the Petitioner could have challenged the order of the RTO. In my considered view, the ratio in Hindustan Petroleum Corporation (supra) does not advance the case of the Petitioner. 22. Mr. Mehta further relied upon the decision of Single Judge of this court in BLA Industries Pvt.Ltd. Vs. Foundry Fuel Products Ltd. [2007(4) Bom. C.R.682]. The issue involved in that case was whether the remedy under section 9 can be resorted to even when the validity of Ast 15 arbpl528.11.sxw arbitration clause is under challenge. It was a case of non-payment of the loan amount, which was advanced by creating charge over immovable and movable properties. The Respondent was restrained from creating a further charge over these properties. In no way, this decision supports the case of the Petitioner. 23. Further the decision in Pioneer Publicity Corporation V/s. Delhi Transport Corporation & anr. [103(2003) Delhi Law Times 442 is relied upon