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2024 DIGILAW 40 (HP)

State of Himachal Pradesh v. E. I. H. Limited

2024-01-05

SATYEN VAIDYA

body2024
JUDGMENT : SATYEN VAIDYA, J. 1. By way of instant application, applicant/State of Himachal Pradesh, has prayed for following reliefs:- a) Issue a warrant of possession for the possession of Wild Flower Hall Property including the land, building and structures and any other immovable assets which might have been raised by the Joint Venture Company on the Wild Flower Hall Estate; b) direct that EIH/MRL shall facilitate and co-operate fully to give immediate peaceful possession of the Wild Flower Hall Property as detailed above; c) direct EIH/MRL to facilitate and co-operate in giving full effect to the Resolutions of the Board of Directors and the Government decision taken on 07.03.2002 forthwith; d) direct EIH to facilitate transfer of shares held by EIH and/or its nominees in MRL in favour of the Applicant State forthwith as per the applicable law and accept amount payable to EIH on this account of Rs Nine crores and ten as per calculations in the termination letter dated 06.03.2002; e) direct EIH/MRL to facilitate vacation/resignation of office of the nominee directors of EIH including the Managing Director on the board of MRL forthwith as per the applicable law; f) direct EIH to facilitate withdrawal of all power of attorneys forthwith given by their nominee directors, if any; g) direct EIH to facilitate immediate change in authorization to operate bank accounts of MRL in favour of the Applicant State as per applicable procedure; h) direct that all sums deposited by the EIH/MRL with the Registrar General of this Hon'ble Court from the bank accounts of MRL be reverted/returned to MRL immediately; i) direct EIH/MRL to facilitate and co-operate in the takeover process of MRL as per law forthwith. 2. It is averred that since the EIH limited has failed to comply with the directions/conditions of the arbitral award dated 23.07.2005 (for short ‘the award’), the State of Himachal Pradesh has taken a decision to resume the “Wild Flower Hall” property and take its possession in terms of the award. 3. As per applicant/State of Himachal Pradesh, it has furnished its decision, by way of instant application, in compliance to direction issued vide para-38(i) of the order dated 17.11.2023, passed by this Court in Ext. Pet. Nos. 5 of 2023 and 19 of 2023. 4. Non-applicants have filed their short reply to the application. 3. As per applicant/State of Himachal Pradesh, it has furnished its decision, by way of instant application, in compliance to direction issued vide para-38(i) of the order dated 17.11.2023, passed by this Court in Ext. Pet. Nos. 5 of 2023 and 19 of 2023. 4. Non-applicants have filed their short reply to the application. It has been submitted that the application was not maintainable till the rights of the parties, arising out of the award dated 23.07.2005, were not finally adjudicated upon by this Court and attained finality thereafter. It has also been contended that as per the terms of the award, non-applicants have already exercised the first option awarded in their favour, by the Arbitrator. Reference has been made to communication dated 18.10.2022, made by EIH Limited to the Principal Secretary (Tourism and Civil Aviation) Government of H.P., whereby non-applicants purportedly had accepted the award and had written to the applicant/State of Himachal Pradesh about their intention to retain the possession of the property by EIH Limited on lease hold basis. The maintainability of application has also been challenged on the ground of pendency of Review Petition No. 130 of 2023, filed by non-applicants, seeking limited review of order dated 17.11.2023, passed by this Court. On aforesaid grounds, non-applicants have prayed for dismissal of the application. 5. Notice in the application was issued on 15.12.2023. Notice was accepted on behalf of the non-applicants by learned counsel representing them and time was sought to file reply. Another submission was made on behalf of the non-applicants that OMP No. 612 of 2023 be not decided before the decision on the review petition filed by non-applicants. The matter was adjourned to 29.12.2023 with the observation that the prayer so made with respect to withholding of adjudication on this application till pendency of Review Petition No. 130 of 2023 would be considered at appropriate stage. 6. Non-applicants, thereafter filed their reply with the averments as noticed above and the matter was taken up on 29.12.2023. Learned counsel(s) for the parties addressed detailed arguments in Review Petition No. 130 of 2023 as also the instant application. 7. 6. Non-applicants, thereafter filed their reply with the averments as noticed above and the matter was taken up on 29.12.2023. Learned counsel(s) for the parties addressed detailed arguments in Review Petition No. 130 of 2023 as also the instant application. 7. On 29.12.2023 after addressing the arguments, learned Senior Counsel for non-applicants had made a prayer that he intended to file a detailed reply to instant application, which was declined on the ground that the opportunity had already been afforded and detailed arguments had already been addressed on the aspect of OMP No. 612 of 2023. 8. This Court, while passing the order dated 17.11.2023 had observed as under: - “22. Noticeably, in the award, learned Arbitrator has fixed a period of three months for claimant No. 1 to perform its part of the obligation under the award, whereas no such period has been prescribed for claimant No. 2. This observation is being made only in the context of dissipating the doubts, if any, entertained by the parties regarding the sequence in which the parties were under direction to perform their respective obligations. 25. It is also clear term of the award that on failure of claimant No. 1 to perform its part of the obligation under award within stipulated period, the State shall have the right at its option to resume the property in question pending fulfilment of all other obligations under the award. It being so, it would always be in the interest of claimant No. 1 to get the necessary formality completed in order to continue with its lease hold rights unless the said claimant thinks otherwise. 35. Since, the award grants right to the State to resume and take possession of the property immediately on non-compliance of the obligation by claimant No. 1 within the stipulated period and such option has been reserved in favour of claimant No. 2, it is for claimant No. 2 to decide on its option and in case it so desires, it is free to resume and take possession of the property immediately. In case the State Government does not choose to avail such option, the claimant No. 1 is to take steps with respect to cancellation of conveyance deed dated 06.02.1997 and up-dation of revenue records of rights and thereafter to immediately take steps for execution of lease deed.” 9. In case the State Government does not choose to avail such option, the claimant No. 1 is to take steps with respect to cancellation of conveyance deed dated 06.02.1997 and up-dation of revenue records of rights and thereafter to immediately take steps for execution of lease deed.” 9. After disposing of the objection raised on behalf of the parties, this Court had sought further compliance in following terms:- “38. In the first instance, the parties to show their respective compliances as under:- (i) Claimant No.2 to reveal its option whether State of H.P. intends to resume the property by taking its possession in terms of the Award. (ii) Claimant No.1 to provide a time schedule for execution of cancellation deed for cancellation of conveyance deed dated 6.2.1997 and for further execution of lease deed in terms of the Award. (iii) Claimant No.1 and Claimant No.2 will provide their respective calculations in respect of the sum(s) payable under the Award by Claimant No.1 to Claimant No.2 alongwith simple interest @ 18% per annum thereon..” 10. In the aforesaid background, applicant/State of Himachal Pradesh has filed the instant application in compliance to directions contained in para-38(i) of order dated 17.11.2023. The non-applicants are opposing the prayers made in the application, primarily, on the ground that they have already complied with the directions of the award dated 23.07.2005. In support of their contention, reference had been made to communication dated 18.10.2022 made by EIH Limited to the Principal Secretary (Tourism and Civil Aviation) to the Government of H.P.. A copy of communication dated 18.10.2022 finds place at page 808 to 810 of Ext. Petition No. 5 of 2023. 11. Thus, the issue that arises for consideration is whether the non-applicants have complied with the terms of award within a stipulated period of 3 months? The answer to the above question will determine the further course of action in Exe. Petition Nos. 5 and 19 of 2023. 12. Petition No. 5 of 2023. 11. Thus, the issue that arises for consideration is whether the non-applicants have complied with the terms of award within a stipulated period of 3 months? The answer to the above question will determine the further course of action in Exe. Petition Nos. 5 and 19 of 2023. 12. In order to understand as to what was obligated upon the non-applicants under the award, it will be necessary to notice relevant extracts from the award dated 23.07.2005:- Issue No. 14: “…..In this view of the matter, I have come to this conclusion that after termination of the JVA, the Claimant No. 1 (EIH) be permitted to continue the MRL with all its rights and liabilities, the land being retained by it on the lease hold basis. I am further of the view that the State of Himachal Pradesh, Claimant No. 2 should facilitate transfer of all its shares to Claimant No. 1 on payment of a consolidated sum of Rs. 12 Crores which includes the cost of land being Rs. 7.5 Crores, the penalty amount agreed in terms of Clause 10.1(b) of the JVA reduced to Rs. 3.5 Crores and a sum of Rs. 1 Crore as consolidated amount for the user of the land from termination of the JVA with effect from 17-12-2003 till the date of this award. The lease shall be initially for a period of 40 years from the date of this award, renewable thereafter with the consent of the parties upon conditions mutually agreed for such periods and rent as may be agreed from time to time. In case of disagreement regarding the fixation of rent, the party in possession and running the business of the Hotel and the State of H.P. shall refer the matter to the Court as defined in Section 2(e) of the Arbitration and Conciliation Act, 1996, Upon reference, the Court after hearing the parties shall determine the rate of rent for the period agreed to be extended. Such determination shall be finalized by the Court within a period of one month. The lease rent for the first five years shall be Rs. 1.25 Crore annually; for sixth to tenth year Rs. 1.50 Crores annually, for eleventh to fifteenth year Rs. 1.75 Crores annually, for sixteenth to twentieth year Rs. 2 Crores annually; for twenty-first to twenty-fifth year Rs. The lease rent for the first five years shall be Rs. 1.25 Crore annually; for sixth to tenth year Rs. 1.50 Crores annually, for eleventh to fifteenth year Rs. 1.75 Crores annually, for sixteenth to twentieth year Rs. 2 Crores annually; for twenty-first to twenty-fifth year Rs. 2.30 Crores annually; for twenty-sixth to thirtieth year Rs. 2.75 Crores annually; for thirty-first to thirty-fifth year Rs. 3.40 Crores annually; for thirtysixth to fortieth year Rs. 4 Crores annually. The lease rent has been determined keeping in mind the offer of Claimant No.1 made to the State of Himachal Pradesh at the initial stage, which is on much lower side than the rate of lease rent offered by M/s. Holiday Inn Hotel Pvt. Ltd. From the date of the award and transfer of shares to Claimant No. 1, the Claimant No. 2 shall have no right and liability in the MRL, except to the extent of the right of a lessor in the land. Further, Claimant No. 1 shall be entitled to all the rights and subject to liabilities with respect to the MRL and the State shall provide all facilities for properly running the Hotel by Claimant No. 1 in accordance with law. In case Claimant No. 1 does not perform its part of duties under this award within a period of 3 months from the date of the award, the Resolution of the Board of Directors and the Government decision taken on 07-03-2002 shall stand revived at the option of Claimant No. 2 and be executed by it as if a fresh decision and action has been taken consequent upon the termination of the JVA. In such an eventuality the rights and liability of the parties shall be determined on the basis of inspection of the accounts of the MRL in light of the JVS and other agreements and this award by a reputed concern of Chartered Accountants to be nominated by the High Court. Pending determination and the settlement of accounts, the claimant NO. 2 shall be entitled to take possession and run the “Wildflower Hall Hotel.” 13. Pending determination and the settlement of accounts, the claimant NO. 2 shall be entitled to take possession and run the “Wildflower Hall Hotel.” 13. Thus, while deciding issue No. 14, learned Arbitrator had clearly postulated that in case claimant No. 1 i.e. non-applicants herein, did not perform its part of duties under the award within a period of 3 months from the date of award, the resolution of the Board of Directions and the Government decision taken on 07.03.2002 would stand revived at the option of claimant No. 2 i.e. the State of Himachal Pradesh and would be executed by it as if afresh decision and action had been taken consequent upon the termination of the JVA. 14. In light of aforesaid findings, learned Arbitrator proceeded to decided Issue No. 16 and for the purposes of adjudication of the question involved in the instant application, clauses 4, 6 and 9 of findings as rendered by learned Arbitrator on Issue No. 16 of the award gains relevance. The relevant clauses read as under: “(4) That the JVA is declared to have been terminated with effect from 17-12-2003. The termination of the JVA shall be subject to the directions given while deciding Issue No. 14 that the Claimant No.1 shall continue to hold and possess the property of the MRL upon executing a lease deed in favour of Claimant No. 2 on the terms and conditions as specified while deciding Issue No. 14. (6) That in case the lease deed is not executed as per award, the Resolution and orders passed by Claimant No. 2 on 07-03-2002 shall be deemed to have been revived and passed afresh in the discretion of Claimant No. 2 to be executable against Claimant No. 1 without any further delay. (9) That in case the Claimant No. 1 decides not to obey the conditions of this award, the Claimant No. 2 shall be entitled to take immediate possession and management of the Hotel. The disputed accounts of the MRL shall be settled by the reputed Chartered Accountants to be appointed by the High Court. Nonsettlement of accounts would not disentitle the Claimant No. 2 to take possession and management of the Hotel.” 15. The award dated 23.07.2005 was challenged by non-applicants by taking recourse to Section 34 of the Arbitration and Conciliation, Act. 1996. Having remained unsuccessful, non-applicants had filed Arb. Nonsettlement of accounts would not disentitle the Claimant No. 2 to take possession and management of the Hotel.” 15. The award dated 23.07.2005 was challenged by non-applicants by taking recourse to Section 34 of the Arbitration and Conciliation, Act. 1996. Having remained unsuccessful, non-applicants had filed Arb. Appeal No. 11 of 2016 under Section 37 of the Arbitration and Conciliation, Act, 1996. A Division Bench of this Court has dismissed the appeal of the non-applicants vide judgment dated 13.10.2022. The judgment passed by Hon’ble Division Bench in the Arbitration Appeal No. 11 of 2016 has attained finality. Thus, the period of 3 months allowed in favour of the non-applicants to comply with the terms of the award would commence w.e.f. 13.10.2022, on which date, Arbitration Appeal No. 11 of 2016 was decided. 16. Since, the non-applicants have come up with a specific plea regarding compliance shown by them in deference to the terms of the award by way of communication dated 18.10.2022 followed by reminders dated 03.12.2022, 22.12.2022 and 12.01.2023, the relevant extracts from communication dated 18.10.2022 is reproduced as under:- “6. Accordingly, in terms of the Award, we would like to continue in possession of the Hotel and therefore request a lease deed in terms of the award be shared with us for our comments so that necessary steps for execution of the lease can be taken by the relevant parties. 7. For the transfer of INR 12,00,00,000/- (Indian Rupees Twelve Crores Only) to the State Government, which includes Rs.7.5 Crores as cost of land, Rs.3.5 Crores as penalty amount, and a sum of Rs.1 Crore as amount for the use of land from termination of the JVA till the date of the Award, we request for the details of the bank account and/or payment method preferred by the State Government. 8. We look forward to receiving the details as requested above for an amicable closure of the dispute, in compliance to the directions of the Award. Please let us know if EIH may assist in any way by providing any further information, or if any additional compliance is required from our end. We are confident that you will appreciate our Intention in complying with the terms of the Award by signing a lease deed and look forward for a long. fruitful and healthy relationship.” 17. Please let us know if EIH may assist in any way by providing any further information, or if any additional compliance is required from our end. We are confident that you will appreciate our Intention in complying with the terms of the Award by signing a lease deed and look forward for a long. fruitful and healthy relationship.” 17. The text of communications dated 03.12.2022, 22.12.2022 and 12.1.2023 sent through e-Mail(s) read as under:- Dated 03.12.2022 “We refer to our letter dated 18th October, 2022 send through email and also forwarded through courier conveying our decision to accept the Arbitral Award dated 23 July, 2005 and requesting the State Government to implement the same. We regret that we have not heard from your office till date. We request you to forward us the copy of draft lease so that we can go through the same and confirm our acceptance to the terms of the lease deed for early implementation.” Dated 22.12.2022 “We wish to inform you that we have not heard from your office till date. We humbly request you to forward us the copy of draft lease so that we can confirm our acceptance to the terms of the lease deed for early implementation.” Dated 12.01.2023 “We refer to our letter dated 18th October, 2022 followed by our emails dated 3rd December and 22 December 2022 confirming our acceptance of Arbitral award and requesting for draft lease agreement. We humbly request you to forward the draft lease agreement so that the terms of the lease could be confirmed by us.” 18. The ancillary question next arises is whether the issuance of aforesaid communications by EIH limited to the State of Himachal Pradesh can be said to be sufficient compliance with the terms of the award? 19. The award dated 23.07.2005 had bound the non-applicants to comply with the terms of the award within a period of 3 months from the date of its passing. 19. The award dated 23.07.2005 had bound the non-applicants to comply with the terms of the award within a period of 3 months from the date of its passing. In case, the non-applicants complied with the terms stipulated in the award within the aforesaid period of 3 months, the EIH Limited was made entitled to hold and possess the property of the MRL upon executing a lease deed in favour of the claimant No. 2 i.e. the State of H.P on the terms and conditions as specified while deciding issue No. 14 Learned Arbitrator had made a clear reference that in case the claimant did not perform its part of the duties under this award within a period of 3 months from the date of award the consequences as noticed by the learned Arbitrator would follow, which included:- i) The automatic revival of resolution of Board of Directors and government decision dated 07.03.2002. ii) The rights and liability of the parties to be determined on the basis of inspection of the accounts of the MRL in light of the JVS and other agreements and the award by a reputed concern of Chartered Accountants to be nominated by this Court. iii) The right of claimant No. 2 i.e. the State of Himachal Pradesh to take decision and resume the ‘Wild Flower Hall Hotel’ pending determination and settlement of accounts. 20. Clause-6 of the findings recorded by learned Arbitrator while deciding issue No. 16 also clearly provided that in case the lease deed was not executed as per award, the resolution and orders passed by State of Himachal Pradesh on 07.03.2002 would be deemed to have revived and passed afresh in the discretion of Claimant No. 2 i.e. the State of H.P. to be executable against Claimant No. 1 i.e. non-applicants, without any further delay. 21. Further, Clause-9 of the findings of learned Arbitrator while deciding issue No. 16 categorically provided that in case claimant No.1 i.e. non-applicants decided not to obey the condition of this award, the claimant No. 2 i.e. the State of Himachal Pradesh would be entitled to take immediate possession and management of the Hotel. In such event, the disputed account of MRL would be settled by the reputed Chartered Accountants to be appointed by this Court. In such event, the disputed account of MRL would be settled by the reputed Chartered Accountants to be appointed by this Court. It was reiterated that non- settlement of the accounts would not disentitled the claimant No. 2 i.e. the State of Himachal Pradesh to take possession and management of the Hotel. 22. This Court, while exercising jurisdiction as Executing Court cannot deviate from the terms of the award as passed by the learned Arbitrator, which has been sought to be executed by both the sides. 23. In my considered view, the award under execution was categoric in so far as the directions to the non-applicants to execute the lease deed within a period of three months from the date of passing of award was concerned. No doubt, the above noted communications were sent by the non-applicants within a period of 3 months from the date of finality of award i.e. 13.10.2022, when the Arbitration Appeal No. 11 of 2016 of the non-applicants was dismissed by the Division Bench of this Court, however, what is evident from the communication dated 18.10.2022 and its follow up communications is that the non-applicants had shown their willingness to continue the holding of property ‘Wild Flower Hall Hotel’ on lease basis. The award, however, had not envisaged mere expression of willingness as sufficient compliance with its terms. The non-applicants were required to execute the lease deed within a period of 3 months from the date of award and from the aforesaid communication relied upon by the non-applicants it cannot be inferred that the non-applicants had taken any real, tangible and effective step for execution of lease deed. The award had placed explicit onus on non-applicants and that onus was required to be discharged by the non-applicants only. What was required to be done was execution of lease deed within a period of 3 months from the date of award and the non-applicants could be said to have made due compliance had they taken all possible effective steps for execution of lease deed. 24. There was nothing in the award which suggested that the terms of lease deed would be decided by the State of Himachal Pradesh. 24. There was nothing in the award which suggested that the terms of lease deed would be decided by the State of Himachal Pradesh. In fact, the award itself had fixed the terms of the lease and what was required from the non-applicants was to give formal and practical effect by execution of a formal lease deed encompassing the terms already settled by way of award. Learned Arbitrator had fixed the date of commencement of lease period. The period of 40 years had also been held to be the initial phase of lease life with stipulation for mechanism to extend the period beyond 40 years in case so required. The rates of rent payable by the non-applicants to the State of H.P. during different phases of first 40 years of the lease had already been fixed. All such aspects having attained finality, the non-applicants were under clear mandate to execute the lease deed within aforesaid period of 3 months in terms of the award. 25. It will not be out of place to notice that the award was passed as far back as on 13.10.2022. The finality to the award was deferred till lapse of period of about 17 years. The delay, indisputably, had occurred on account of rights exercised by non-applicants by taking recourse of Section 34 and 37 of the Arbitration and Conciliation, Act, 1996. As per award, non-applicants were required to take action within the stipulated period and not to show their willingness only. Learned Arbitrator had passed the award with an intent to close all the disputes between the parties at the earliest, which incidentally could not happen on account of aforesaid reasons. 26. Learned Arbitrator, in the award had fixed a period of 3 months for non-applicants to perform their part of obligation under the award, whereas no such period was prescribed for State of Himachal Pradesh. In this background, non-applicants could not justifiably interpret or see the terms of award in any other way but by way of execution of lease deed. 27. In light of above discussion, it is held that non-applicants have failed to comply with the terms of award within the period of 3 months from the date it attained finality i.e. 13.10.2022. Consequently, the Board of Directors resolution and Government decision dated 07.02.2002 have automatically revived. 27. In light of above discussion, it is held that non-applicants have failed to comply with the terms of award within the period of 3 months from the date it attained finality i.e. 13.10.2022. Consequently, the Board of Directors resolution and Government decision dated 07.02.2002 have automatically revived. The State of Himachal Pradesh has become entitled to take possession and management of the ‘Wild Flower Hall Hotel’ alongwith entire property that was subject matter of the JVA. 28. The non-applicants/execution petitioners in Ext. Pet. No. 05 of 2023, are directed to vacate the entire property that was subject matter of JVA and handover vacant and peaceful possession thereof to the State of Himachal Pradesh within a period of two months from the date of passing of this order. 29. Parties are further called upon to give their preferences for appointment of reputed chartered Accountants for settlement of disputed accounts of the MRL in terms of the award dated 23.07.2005, passed by learned Arbitrator. 30. The Exe. Petitions No. 5 and 19 of 2023 be listed for compliance on 15.03.2024. 31. A copy of this order be placed on the file of Exe. Pet. No. 05 of 2023.