Castmaster Mobitec India Private Limited vs Delhi Transport Corporation

I.As. 2990-2991/2018

Allowed, subject to all just exceptions.

I.A. 2989/2018

By the present order, as the petition under Section 34 of the Arbitration & Conciliation Act, 1996 filed by the petitioner is being dismissed, the present

application filed by the petitioner is also dismissed as having become infructuous, leaving it open to the petitioner to seek such remedy available to it in

law.

O.M.P. (COMM) 102/2018

1.This is a petition under Section 34 of the Arbitration & Conciliation Act, 1996 challenging the Arbitral Award dated 20th November, 2017 as

corrected vide order dated 30th November, 2017 passed by the Sole Arbitrator in Arbitration Case No.SPM 012/2012 in the arbitration proceedings

between the parties.

2.The disputes between the parties arose in relation to the award of work for installation of LED based Route Display System (RDS) in Standard

Floor Buses on BOT basis in lieu of Advertising Rights in favour of the petitioner. The parties had entered into a Concession Agreement dated 12th

July, 2010 in this regard.

3.In terms of the Concession Agreement, the petitioner was to install the LED based Route Display System (hereinafter referred to as LED Boards)

on 1500 DTC buses within a period of four months from the date of issuance of Letter of Acceptance, which was issued on 2nd July, 2010. It is the

case of the petitioner that only 605 buses were handed by the respondent to the petitioner for the purposes of installing the LED Boards and in spite of

the demand, the other remaining buses were not handed over due to Common Wealth Games and phasing out of blue line buses. This was disputed by

the respondent who in fact claimed that it is the petitioner who has failed to install the LED Boards on the remaining buses and is in default of the

contractual terms.

4.The agreement between the parties was terminated by the petitioner vide its letter dated 3rd October, 2011. The petitioner had also paid the

Concession Fee to the respondent only till July, 2011.

5.The disputes between the parties were referred to the Sole Arbitrator and has resulted in the impugned Award whereby though the respondent

has been held to be in breach of the agreement inasmuch as it failed to handover the remaining buses for installation of LED Boards by the petitioner,

the claim of the respondent for the Concession Fee on 605 buses for the period from July, 2011 to the date of termination of the contract has been

allowed for a sum of Rs.10,62,652/- along with interest @ 14% per annum. The other claims of the respondent have been disallowed by the Arbitral

Tribunal. Equally the counter claims raised by the petitioner herein have been disallowed by the Arbitral Tribunal.

The learned senior counsel for the petitioner submits that once the Arbitral Tribunal had come to the conclusion that it is the respondent who was in

breach of the agreement, the Arbitral Tribunal committed an error in awarding the Concession Fee for the period between July, 2011 to the date of

termination in favour of the respondent. He further submits that in terms of Section 143 of the Delhi Municipal Corporation Act, 1957 (hereinafter

referred to as ‘DMC Act’), the Respondent was prohibited from displaying any advertisement on the buses without the prior permission of the

MCD. In fact, the MCD, had vide its letter dated 30th April, 2010, called upon the respondent not to process or allot any contract for display or

advertisement on the buses. He further submits that in terms of clause 21.2(b) of the Concession Agreement, the respondent had represented that it

had taken all necessary authorization for the execution, delivery and performance of the Concession Agreement, however, as the prior permission

from MCD had not been obtained, the respondent was clearly in breach of the Agreement and not entitled to any Concession Fee from the petitioner.

7.On the other hand, the learned counsel for the respondent submits that the issue whether the respondent was to take any permission from the MCD

in terms of Section 143 of the DMC Act, was contested by the respondent with the MCD. In this regard, she draws my attention to letter dated

28thJune, 2010 which had been written by the respondent in response to the letter dated 30th April, 2010 from the MCD. She further submits that the

petitioner had not raised the issue of permission from MCD till 4th April, 2011, when it wrote a letter to the respondent asking for such permission.

This letter was also immediately responded to by the respondent vide letter dated 3rd May, 2011 again pointing out that as per the respondent, no such

permission is required from the MCD. She further submits that in a meeting between the parties it had been agreed that the petitioner would start

paying the Concession Fee w.e.f. 25th January, 2011 and had indeed paid such Concession Fee till July, 2011, whereafter the petitioner arbitrarily and

in breach of the contract stopped paying the Concession Fee any further.

I have considered the submissions made by the counsels for the parties. The Arbitrator while dealing with the issue of payment of Concession Fee

by the petitioner has held as under:

“18(i) Claim no.1 Rs.5,73,890/- claimed as license fee for 605 buses for the month .of August and September, 2011 including .Service Tax along

with interest @ 18 p.a. as per the Agreement.

Article 6.1 of the Agreement says that

Subject to Clause 6.2 and other terms of the Concession Agreement and during the Concession Period, the Concessionaire shall pay to the DTC the

Concession Fee from the COD, as specified in ""Schedule 4: Concession Fee"", against the grant of Concession under the Concession Agreement"".

As per Article 1.1

Concession Period"" shall have meaning ascribed to the term in terms of Article 3 of the Concession Agreement.

Article 3.1 of Article 3 â€" Concession Period says that:

“The Concession hereby granted is for a period of two (02) years commencing from the date of signing of this Concession Agreement and it shall

end on the Expiry Date (“the Concession Periodâ€). The agreement is extendable, at the sole and absolute discretion of DTC, for an additional

period of one (01) year beyond the aforesaid two years. Provided that in the event of Termination of this Concession Agreement, the Concession

Period shall mean and be limited to the period commencing from the date of signing of Concession Agreement and ending with the Termination

Date.â€​

As per Article 1.1 “Termination Date†means the effective date of Termination as mentioned and contained in the Termination Notice in

accordance with the provisions of Clause 8.5 hereof. The termination notice dated 03.10.2011 termination is with immediate effect.

Accordingly, respondent is liable to pay concession fee up to the month of September, 2011. Moreover, Article 6.5 makes it clear that:

“6.5 The Concessionaire specifically agrees that the Concession Fee shall be paid notwithstanding any cause whatsoever and shall not be withheld

on any ground whatsoever.â€​

Concession Agreement was signed on July 12, 2010. COD for 605 buses on which boards had been installed by respondent was issued on 25.01.2011.

These buses were available to respondent for display of advertisements until it terminated the Contract vide its letter dated 03.10.2011. Thus, in terms

of the provisions of the Agreement as cited above, respondent is liable to pay concession fee until the termination date which is October 03, 2011.

Respondent, ungrudgingly, paid concession fee for these 605 buses up to July, 2011. There was no change in the circumstances during the further

period until respondent terminated the Contract. It has not cited any cogent reason for not paying licence fee for the month of August and September,

2011 as claimed. It has also not controverted computation of the amount of this claim as given in annexure CW-1/38. The claim is, therefore, held as

admitted. Claimant has claimed interest @ 18% per annum on this amount. However, considering the interest regime during the relevant period 14%

per annum is considered as reasonable rate of interest which claimant is entitled to get w.e.f. October, 2011 which comes to Rs.4,82,067/-.

The total amount admitted against this claim is, thus, Rs.10,62,652/-

9.The arbitrator has, therefore, after scrutinizing the terms of the Agreement, and the fact of payment of Concession Fee by

the petitioner till July, 2011 held that there was no cogent reason given by the petitioner for non-payment of Concession Fee for the months of

August and September, 2011 and has awarded such Concession Fee in favour of the respondent along with interest @ 14% per annum. The

justification of the stand of the respondent that it was not required to obtain any prior permission from the MCD, was an issue between the respondent

and the MCD. The petitioner could have relied upon the representation made by the respondent that it does not require any such permission from the

MCD. It is not the case of the petitioner that MCD had ever written to the petitioner prohibiting or stopping it from displaying

any advertisement on the DTC buses or from acting in terms of the Concession Agreement between the petitioner and the respondent. In any case,

the above being a finding of fact by the Arbitral Tribunal, this Court in exercise of its power under Section 34 of the Act cannot sit and appeal over the

same.

10.The learned senior counsel for the petitioner draws reference to the judgment of Supreme Court in Associate Builders vs. Delhi Development

Authority 2015 (3) SCC 49 and submits that one of the grounds of ‘public policy’ as mentioned in Section 34 of the Act would be the patent

illegality of the award inasmuch as it is based on an erroneous legal proposition. He submits that once the respondent had been held to be in breach of

the agreement, it could not, at the same time, have been held entitled to the Concession Fee and equally, the petitioner could not have been denied

damages for such breach. He further submits that as the arbitrator has ignored clause 21.2(b) of the Concession Agreement, he has acted in

contravention of Section 28(3) of the Act and the Award is liable to be set aside.

11.I am unable to agree with the above submissions of the learned senior counsel for the petitioner. The agreement between the parties had beenÂ

terminated by the petitioner vide its letter dated 3rd October, 2011. As the agreement continued till 3rd October, 2011, the petitioner would be liable to

pay Concession Fee till the date of the termination. As far as its claim of damages, the arbitrator has held as under : -

“19(i) Counter claim no. 1 Rs.10,24,87,000/- towards damages on account of cost of designing, manufacturing, supplying, installing and

commissioning LED Boards on 605 buses.

Respondent had exeuited Agreement dated 12.07.2010 with claimant after agreeing to its terms and conditions. Scope of work, as described in

Schedule 7.1 of the Agreement is design, manufacture, supply, installation, testing, commissioning and maintenance of LED based Route Display

System in DTC’s Standard Floor buses. It was done in 605 buses. Though the work was completed by October, 2010 and the buses were

available to respondent for display of advertisement, licence fee was not paid by it on the grounds that the requisite Completion Certificate/COD had

not been issued and MCD’s permission had also not been obtained by claimant. Accodingly, claimant started billing respondent only from

25.01.2011 when both these issues had been resolved, and respondent started paying licence fee. Respondent had the rights of gainful use of these

buses. The contract in question is a BOT Contract and upon expiry/termination of the Contract the LED boards, associated software, advertising

panels, handhold etc. installed on the buses are transferred to DTC, free of cost.

This counter claim is, therefore, held as not admitted.

19(iv) Counter claim no. 4 Rs. 30,84,00,000/- towards damages on account of total loss of revenue earnings by way of advertisements

There is no specific provision in the Contract for damages in the event of termination/rescission of the Contract. Respondent has based this claim on

the expected revenue from advertisements in case the Project had been successfully completed. It has estimated the total revenue from 1500 buses as

Rs.56,25,00,000/- i.e. Rs.3,75,000/- per bus. However, no basis for this estimate has been given. Respondent has not filed a single letter or quotation

from any exixting or prospective advertiser to sipport its estimates. Further, in a separate counter claim respondent is claiming damages on account of

losses by way of licence fee/concession fee paid to DTC, presumably because it could not earn any revenue from 605 buses on which it had installed

boards and which were available to it for display of advertisements. If that be so, it is not understood how respondent has anticipated that he would

have had remunerative earnings if all the 1500 buses were available to him. The claim is devoid of any justification.

The claim is, accordingly, held as not admitted.

12.The arbitrator has, therefore, rejected the claim of the petitioner on the ground that there was no evidence led by the petitioner in support of its

claim. This again being a question of fact involving appreciation of evidence, this Court in exercise of its power under Section 34 of the Act cannot re-

appreciate the same to arrive at a different conclusion. In any case, the petitioner has been unable to show any document in form of any offer of

agreement or otherwise received by it from a third party with respect to the 605 buses which were admittedly available with it in terms of the

Concession Agreement for the purpose of advertisement. Be as it may, as said above, this Court in exercise of its power under Section 34 of the Act

cannot re-appreciate the evidence or interference with the arbitral award merely on the ground that it could have arrived at a different conclusion

based on the evidence that had been produced before the arbitrator.

13.In Associate Builders (supra), Supreme Court has cautioned the Courts not to convert itself into a Court of appeal while exercising jurisdiction

under Section 34 of the Act, in the following words:

“33. It must clearly be understood that when a court is applying the “public policy†test to an arbitration award, it does not act as a court of

appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator

is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little

evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found

that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts. In P.R. Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H.

Securities (P) Ltd., this Court held: (SCC pp. 601-02, para 21)

“21. A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be

challenged only under the grounds mentioned in Section 34(2) of the Act. The Arbitral Tribunal has examined the facts and held that both the second

respondent and the appellant are liable. The case as put forward by the first respondent has been accepted. Even the minority view was that the

second respondent was liable as claimed by the first respondent, but the appellant was not liable only on the ground that the arbitrators appointed by

the Stock Exchange under Bye-law 248, in a claim against a non-member, had no jurisdiction to decide a claim against another member. The finding of

the majority is that the appellant did the transaction in the name of the second respondent and is therefore, liable along with the second respondent.

Therefore, in the absence of any ground under Section 34(2) of the Act, it is not possible to re-examine the facts to find out whether a different

decision can be arrived at.â€​

Here again, the Division Bench has interfered wrongly with the arbitral award on several counts. It had no business to enter into a pure question of

fact to set aside the arbitrator for having applied a formula of 20 months instead of 25 months. Though this would inure in favour of the appellant, it is

clear that the appellant did not file any cross-objection on this score. Also, it is extremely curious that the Division Bench found that an adjustment

would have to be made with claims awarded under Claims 2, 3 and 4 which are entirely separate and independent claims and have nothing to do with

Claims 12 and 13. The formula then applied by the Division Bench was that it would itself do

“rough and ready justiceâ€. We are at a complete loss to understand how this can be done by any court under the jurisdiction exercised under

Section 34 of the Arbitration Act. As has been held above, the expression “justice†when it comes to setting aside an award under the public

policy ground can only mean that an award shocks the conscience of the court. It cannot possibly include what the court thinks is unjust on the facts

of a case for which it then seeks to substitute its view for the arbitrator's view and does what it considers to be “justiceâ€. With great respect to

the Division

Bench, the whole approach to setting aside arbitral awards is incorrect. The Division Bench has lost sight of the fact that it is not a first appellate court

and cannot interfere with errors of fact.â€​

14.The learned senior counsel for the petitioner further draws reference to clause 4.1(f) of the Concession Agreement to contend that the petitioner

should at least have been held entitled to compensation on the LED Boards installed on 605 buses. Clause 4.1(f) of the Agreement is produced

herein below :-

“4.1(f) In case of Permanent Withdrawal of' Vehicle(s) covered under the Project from operation by DTC during the Concession Period, DTC

shall suitably compensate to the Concessionaire in terms of depreciated book value of LED based Route Display System after offsetting salvage value

at the end of Concession Period . For this purpose, only the basic cost or LED based Route Display System based on minimum supply rate of last

supply to any STU shall be taken into consideration by the DTC. Also in such event, the concessionaire will be exempted for the payment of the

Concession Fee from the date of permanent withdrawal of vehicle from operation on record of DTC; andâ€​

15.A reading of the above clause would show that it would be applicable only when the respondent withdraws the buses given to the petitioner

under the project. In the present case, there is no dispute that the 605 buses that had been handed over by the respondent to the petitioner and on

which the LED Boards had been installed were not withdrawn by the respondent at any stage. It was the petitioner who terminated the agreement

vide notice dated 3rd October, 2011. In view thereof the said clause would have no application to the facts of the present case. I have already quoted

the finding of the arbitrator in paragraph 19(i) of the award, on this issue I do not find any reason to disagree with the same.

16.The last contention of the petitioner is that the impugned award is a result of bias of the arbitrator. The learned senior counsel for the petitioner

submits that the arbitrator was on the panel of arbitrators appointed by the respondent. On coming to know of this fact through the disclosure made by

the arbitrator, the petitioner had also filed an application before the arbitrator calling upon him to withdraw from his position as an arbitrator. However,

the arbitrator refused to do so and continued with the proceedings.

17.The learned counsel for the respondent, on the other hand, draws my attention to the order dated 18th March, 2016 passed by the arbitrator

rejecting the application of the petitioner. This order is rather detailed. The arbitrator holds that as the reference of the disputes to him was prior to the

coming into force of the Arbitration and Conciliation (Amendment) Act, 2015, the same has to be governed by the provisions as existed prior to the

amendment. He further held that merely because he had been appointed by the respondent as an arbitrator in two more cases, it could not be held that

there was any reason that gives rise to justifiable doubts as to his independence or impartiality. I may note that the arbitrator has, in fact, rejected

substantial claims of the respondent in the impugned Award. In any case, as I have found no merit in the challenge to the award, I do not see any

merit in the ground of challenge on account of alleged bias of the arbitrator as well and the same is rejected.

In view of the above, I find no merit in the present petition and the same is, accordingly, dismissed with no order as to cost.