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2016 DIGILAW 1139 (BOM)

V. Krishnamurthy v. Union of India

2016-07-05

ANOOP V.MOHTA, G.S.KULKARNI

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JUDGMENT : G.S. KULKARNI, J. 1. This appeal under section 37 of the Arbitration and Conciliation Act, 1996 (for short the 'Act') is directed against the order dated 8th June 2016 passed by the learned Single Judge whereby the appellant/claimant's petition under section 34 of the Act has been dismissed upholding the award passed by the learned sole Arbitrator. 2. The appellant was the beneficiary of a three year contract of “bulk advertising rights” awarded by the respondents namely General Manager, Western Railways, Churchgate, Mumbai for the Andheri, Jogeshwari and Goregaon Railway Stations in Mumbai. Disputes had arisen between the parties in relation to the said contract. 3. The appellant inter-alia had raised a claim for Rs.51,88,135/- along with interest against the respondents. The prayer clauses in the statement of claim, read thus:- “The claimant therefore prays:- (a) that this Hon'ble Tribunal be pleased to grant an award in terms of the Particulars of Claim annexed at Exhibit N hereto amounting to Rs.51,88,135/- (Rupees Fifty One Lakh Eighty Eight Thousand One hundred thirty five only) that this Hon'ble Tribunal be pleased to direct the respondent to pay interest and/or compensation and also loss of reputation by invoking bank guarantee on the amount to be awarded under the Statement of Claim from the date of Award till payment and/or realization at an exemplary rate to be fixed and/or decided by the Hon'ble Tribunal being not less than 18% per annum simple rate of interest; (b) that this Hon'ble Tribunal be pleased to award costs of this Arbitration Reference and of all the proceedings precedent thereto by directing the respondent to pay the same to the claimant; (c) this Hon'ble Tribunal may be pleased to pass further necessary orders as this Hon'ble Tribunal may deem fit and proper.” 4. The dispute underlying the above claim of the appellant was on the basis of an interim contract awarded by the respondents for the said advertisement work for a period of three months till finalization of the main contract under the tender issued by the respondents. In this regard the appellant by its letter dated 5 September 2006 offered to take up advertisement rights from the respondents-railways at the above stations on interim basis. In this regard the appellant by its letter dated 5 September 2006 offered to take up advertisement rights from the respondents-railways at the above stations on interim basis. This was at the same rate as for the main three year contract, namely at Rs.1,32,00,000/- which came to Rs.11,00,000/- per month as stated by the appellant in the said letter. In this letter, the appellant requested the respondents to provide 15 days gestation period from the date of the contract for business arrangement to be undertaken at these three stations. The appellant also stated that the interim award period be fixed till a final award letter in respect of the main tender is issued in favour of the appellant. 5. The respondents by their letter dated 13 September 2006 accepted the above offer of the appellant. It would be useful to refer to the contents of the said letter, as the controversy between the parties in the arbitration proceedings revolve around the “gestation period” as agreed between the parties. This letter of the respondents reads thus:- “The competent authority has sanctioned the awarding of contract for Bulk Advertising Rights of Andheri station alongwith Goregaon and Jogeshwari as one whole cluster for an interim period on month to month basis till finalization of tender or maximum of 03 months at the same rate as bidded in the above referred tender and offered by you i.e. Rs.11,00,000/- per month. The administration has agreed your request for granting 15 days as gestation period for putting up displays subject to condition that after finalization of tender, the contract period will start from the date of letter of acceptance and no gestation/grace period would be given.” (Emphasis supplied) 6. It is clear from the above letter of acceptance that the respondents had agreed to the request of the appellant for granting 15 days as gestation period for installation of the advertisement subject to the condition that after finalization of the main three year tender, the contract period would start from the date of letter of acceptance and no gestation/grace period would be given. As can be seen, this letter of the respondents reiterated that the interim contract would commence after 15 days of the receipt of the above letter or date of display whichever is earlier on the same tender terms and conditions. As can be seen, this letter of the respondents reiterated that the interim contract would commence after 15 days of the receipt of the above letter or date of display whichever is earlier on the same tender terms and conditions. There is no dispute on the fact that for the interim contract the appellant had made payment of Rs.11,00,000/- to the respondents for the first month, in pursuance of the respondents' above letter dated 13 September, 2016 (supra). 7. Under this interim contract, the appellants were accordingly granted a gestation period from 9 October 2006 till 28 October 2006. Thereafter, on 12 December 2006 another contract came to be awarded to the appellant under which the gestation period up to 28 December 2006 was granted and thereafter the appellant removed its display on 28 December 2006. 8. On 19 January 2007 the appellant was informed by the respondents about the acceptance of the appellants offer under the main tender and was called upon to make payment under the same. On 27 January 2007 the appellant paid an amount of Rs.66,00,000/- to the respondents. 9. As regards the main tender which was for three years, an agreement dated 13 April 2007 came to be executed between the parties. This agreement in clause 5.2 provided for commencement period which provided as under:- “5.2 Commencement period D: Day of issue of Letter of Acceptance D+10 days: (1) Payment of full annual licence fee in case of the annual licence fee quoted is less than Rs. One crore/annum. (2) In case annual Licence fee quoted is more than Rs. One crore per annum payment of 50% of annual Licence fee D+15: Issue of Authority letter D+30: Submission of Bank guarantee D+40: Signing of the Agreement with Railway Administration. D+45: Commencement of the contract (maximum).” (Emphasis supplied) 10. The contention on behalf of the appellant before the learned Arbitrator was that the appellant had not utilized gestation period of 15 days under the interim Award and that the appellants by their letter dated 14 September 2006 had intimated respondent that the appellant would not be utilizing 15 days gestation period under the said interim award of the contract. The appellant therefore, asserted that under the main award of the contract the appellant was entitled to gestation period of 30 days as per condition 5.1, D+45 (supra) and accordingly raised a claim. 11. The appellant therefore, asserted that under the main award of the contract the appellant was entitled to gestation period of 30 days as per condition 5.1, D+45 (supra) and accordingly raised a claim. 11. On the other hand, it was the respondent's case before the learned Arbitrator that the appellant had accepted the contract on interim basis based on the gestation period of 15 days as informed to the appellant in the respondent's letter dated 13 September 2006 (supra) which was nothing but the appellant's offer as accepted by the respondents. The appellant thus would not be entitled to any gestation in the main contract awarded by the respondents. As the appellant did not make payment of the contractual amount and within the time prescribed thus the respondent nos. 1 and 2 also demanded compensation in terms of the contract and in that regard raised a counter claim before the learned Arbitrator. 12. The learned Arbitrator however, did not find any merit in the claim as made by the appellants on the basis of the gestation period and rejected the appellant's claim. However, the respondent's counter claim in regard to the outstanding licence fees at Rs.97,73,030/- was awarded. The learned Arbitrator in awarding the counter claim in favour of the respondents has observed as under:- “The claimant in his affidavit did not opted to contest the statement submitted by the respondent which stipulates the period of contract amount due, amount paid, delayed days, period of delayed days, interest on late payment tabulated for the entire contract which amounts to Rs.97,73,030.” 13. On a challenge being raised by the appellant to the award of the learned Arbitrator, the learned single Judge having examined the issues rejected the appellants' Section 34 petition, upholding the award of the learned Arbitrator. 14. Mr.Shah learned senior counsel for the appellant in support of the appellants plea, would submit that the learned arbitrator as also the learned single Judge have failed to appreciate that by the appellant's letter dated 14th September 2006, the appellant had informed the respondents of not utilizing 15 days gestation period in respect of the interim award and that the appellant would be utilizing the gestation period as per the terms and conditions of the regular award of the tender. It is therefore, submitted that clause 5.2 of the main tender which provides for commencement period to be D+45 was required to be considered and benefit of 30 days gestation period ought to have been entitled to the appellant. It is submitted that the learned Arbitrator therefore, ought to have allowed the appellant's claim. No other issue was raised on behalf of the appellant in assailing the impugned orders passed by the learned Single Judge. 15. We are not persuaded to accept the submissions as urged on behalf of the appellant. From the facts which we have noted above, it is clear that the appellant was a beneficiary of an interim award which was on the appellant's own offer as made under its letter dated 5 September 2006. In this letter, the appellant had categorically offered that the respondents should provide 15 days gestation period from the date of interim contract for business arrangements to be made at these three railway stations. The respondents by their letter dated 13 September 2006 accepted the offer of the appellant for the interim award, of the said advertisement contract, for three months at the same rate as per the bid in the main tender and accepted the offer of the appellant for granting 15 days gestation period for putting up the display. However, this was subject to a condition that after finalization of the main tender the contract period would start from the date of the letter of acceptance and no gestation/grace period would be given. It is therefore, clear that the award of the main contract was subject to this condition of the appellant availing 15 days gestation period under the interim contract and that the main contract would start from the date of letter of acceptance and no gestation/grace period would be given. This was the manner and/or method in which the parties agreed to treat the gestation period in regard to the final contract. The contention of the appellant that after award of the final contract the letter of acceptance dated 13 September 2006 of the respondents for the interim award should be discarded and as regards gestation period full benefit under clause 5.2 of the main agreement dated 13 April 2007 (supra) be granted to the appellant cannot be accepted. The contention of the appellant that after award of the final contract the letter of acceptance dated 13 September 2006 of the respondents for the interim award should be discarded and as regards gestation period full benefit under clause 5.2 of the main agreement dated 13 April 2007 (supra) be granted to the appellant cannot be accepted. The interim award of the contract was interlinked to the main contract in relation to the gestation period as we have discussed above. This was the agreement between the parties. Before the learned arbitrator the appellant was not permitted to take a position reverse and/or contrary to what it had agreed namely that the main contract would start from the letter of acceptance and no gestation period would be availed, in asserting its claim. 16. We also cannot accept the submission as made on behalf of the learned counsel for the appellant on the basis of the appellants' letter dated 14 September 2006 for the reason that the letter dated 5 September 2006 was the offer of the appellant for the interim award which came to be accepted by the respondents-railways by their letter dated 13 September 2006 (supra). 17. The appellants' letter dated 14 September 2006 was post-acceptance of the appellant's offer by the respondent, and contained conditions in deviation from what was accepted by the respondents in the acceptance letter dated 13 September 2006. Significantly, the conditions as put by the appellant in this letter dated 14 September 2006 were never accepted by the respondents. This being the position the appellant would not be correct in contending that the counter condition as asserted on behalf of the appellant in letter dated 14 September 2006 be enforced against the respondents. The learned Arbitrator has appropriately recorded findings of fact in regard to the gestation period and declined to accept the claim as made by the appellant as also confirmed by the learned Single Judge. 18. In view of the above discussion, we are of the clear opinion that the appeal is devoid of any merit and it is accordingly rejected. No order as to costs. 19. In view of the order passed in the appeal, notice of motion (L) No.1829 of 2016 does not survive and is accordingly disposed of.