Case: Cox &amp; Kings Ltd Vs. Indian Rly.Catering &amp; Toursm.Cor.Ld.&amp;Anr

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;(d) The Respondent with their associate agencies will manage on board/off board services, marketing, booking, pricing, etc2. 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 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 ofRoyale India Rail Tours Ltd3. 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 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 agreement4. 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, 20115. 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 Respondent, IRCTC, by its letter dated 12th August, 2011, on the grounds indicated therein6. 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 CourtIn 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;(d) The Respondent with their associate agencies will manage on board/off board services, marketing, booking, pricing, etc2. 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 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 ofRoyale India Rail Tours Ltd3. 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 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 agreement4. 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, 20115. 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 Respondent, IRCTC, by its letter dated 12th August, 2011, on the grounds indicated therein6. 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

Reasoning:
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 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 Application23. 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. Rohatgis 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 Petitioners remedy, if any, would lie in an action for damages against IRCTC for breach of any of the terms and conditions of the Joint Venture Agreement and the Memorandum of Understanding24. 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 partiesIt 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 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 Application23. 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. Rohatgis 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 Petitioners remedy, if any, would lie in an action for damages against IRCTC for breach of any of the terms and conditions of the Joint Venture Agreement and the Memorandum of Understanding24. 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