IRCTC Being A State Under A. 12 Is Bound By Its Affidavit Before Any Court Of Law, Cannot File A Contrary Affidavit To Defeat A Claim In Arbitration: Delhi High Court

The High Court of Delhi has held that IRCTC is a State under Article 12 of the Constitution of India and is bound by its affidavit before any court of law and it cannot file contrary affidavit before the arbitral tribunal to defeat a claim of the other party in arbitration. The bench of Justice Neena Bansal Krishna also held that an arbitration award cannot be challenged on the grounds of lack of evidence for award of damages when the parties agreed to not lead any evidence at all at the beginning of the arbitration. Moreover, it reiterated that a plea of fact or law not taken before the tribunal cannot be permitted to be raised for the first time before the Court under Section 34 of the Act. The Court also held that when the terms of reference to arbitration required the tribunal to determine the validity of the termination of the agreement and its effect, the tribunal would be well within its competence to award damages for the illegal termination and the terms of reference cannot be held to be confined to mere determination of the validity of termination.FactsThe parties entered into a Licence Agreement dated 20.03.2008 by which the subject premises were given to the respondent for catering services. Clause 6.3 of the agreement provided for sub-licensing of the premises. Clause 12.5 provided for assignment of licence. These clauses made sub-licencing and assignment subject to the prior permission of the petitioner. A dispute arose between the parties when a third party named M/s B. Rajasaheb illegally took possession of the 25% of the Food Plaza/Subject premises on 30.12.2012. The respondent wrote to the petitioner the very next day informing it about the illegal occupation by the third party and sought its help to remove the unauthorized occupants. It also filed a complaint with the Railway Police Force and Government Railway Police. However. On 05.01.2013, M/s B. Rajasaheb filed a Civil Suit before the Small Causes Court of Bombay alleging that the respondent vide its two partners entered into a MoU dated 04.01.2012 with it and it has been granted sub-lease for a period of 7 years to operate and manage the 25% occupied area and pursuant to the MoU it has deposited a sum of Rs. 43 Lakhs in the respondent’s bank account. Before the Small Causes Court, the respondent as well as petitioner denied the existence of any such MoU and the respondent contented that the MoU is a forged document. However, the petitioner issued a show cause notice (SCN) to the respondent for alleged breach of Clause 6.3 and 12.5 of the Agreement. In response to the SCN, the respondent again asserted that the MoU is a forged document. Thereafter, the petitioner sent a letter to the respondent requiring it to declare on affidavit that it did not enter into any such agreement in contravention of the agreement and sought details of the actions taken by it against the third party occupant. However, on 04.08.2014, the petitioner terminated the agreement under Clause 8.1 for alleged violation of the terms of the agreement. Aggrieved by the termination of the agreement, the respondent invoked the arbitration clause and the parties were referred to the arbitration. The arbitral tribunal was asked to determine the validity of the termination and any consequent effect of it. Before the tribunal the respondent as its primary relief claimed the restoration of the agreement and in alternative claimed damages for the illegal termination. The tribunal held that the agreement was illegally terminated as it was not proved by the petitioner that the respondent entered into any MoU without its permission and accordingly it awarded damages to the respondent. Grounds of ChallengeThe petitioner challenged the award on the following grounds:The tribunal erred to not appreciate that the agreement was validly terminated by the petitioner under Clause 8.1 of the Agreement as the respondent had violated Clause 6.3 and 12.5 of the agreement by entering into a sub-lease without the prior permission of the petitioner. The respondent in its letter dated 05.08.2014 admitted having executed the MoU with the third party and it also failed to deny having received an amount of Rs. 43 Lakhs in consideration of the MoU.The respondent also failed to lodge any FIR against the third party for their illegal occupation which shows that it certainly entered into the MoU with that third party.The award is patently illegal as having been passed against the terms of the contract and the provisions of the Partnership Act.The award of damages is beyond the terms of the agreement as the only question posed for the tribunal for its consideration was the determination of the validity of the termination and no reference was made regarding the damages. The tribunal has passed the award of damages without any actual proof of loss or any proof at all.The tribunal in the main body of the award rejected the respondent’s claim for interest, however, in the concluding paragraph, contrary to...

IRCTC Being A State Under A. 12 Is Bound By Its Affidavit Before Any Court Of Law, Cannot File A Contrary Affidavit To Defeat A Claim In Arbitration: Delhi High Court

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