M/s Jimmy Travels v. Punjab Tourism Development Corporation Chandigarh & Ors.

The Corporation challenged the award of the Arbitrator by way of Objections under Section 34 of the Arbitration and Conciliation Act, 1996 (for short `the Act') which has been partly allowed by the District Judge, Chandigarh vide order dated 19.11.2005 by which award of an amount of Rs.20 lacs on account of illegal termination was set aside but award qua amount of Rs.2,30,592/- and Rs.1,52,130/- as interest was upheld. Aggrieved against the aforesaid order, the Travelling Company has filed FAO No.560 of 2008 challenging the order of District Judge, Chandigarh dated 19.11.2005 in respect of the amount of Rs.20 lacs awarded by the Arbitrator and the Corporation has filed FAO No.4755 of 2008 challenging the award of the Arbitrator and District Judge with regard to Rs.2,30,592/- with interest of Rs.1,52,130/- upto 31.7.1998 on the ground that claim petition before the Arbitrator was time barred and could not have been decided at all in favour of Travelling Company whereas the Civil Revision bearing No.5461 of 2007 was filed by the Corporation seeking to set aside order dated 1.9.2007 passed by the District Judge in execution application filed by the Travelling Company whereby the Corporation was called upon to make payment of further interest and the amount awarded by the District Judge vide his order dated 19.11.2005. Since all the three aforesaid cases are found to be inter-related, therefore, these are being disposed of by this common order with the FAO No.560 of 2008 (O&M) -3- consent of the counsel for the parties. In brief, facts of the case are that an agreement was entered into between the Travelling Company and Corporation dated 4.12.1995 according to which the tickets were to be issued by the Travelling Company after signing it and the Corporation was to provide booking space at all places except at Manali and was to receive 12% commission. The Travelling Company made payment on behalf of the Corporation for the booking counter at Indira Gandhi Air Port, New Delhi. They claimed that Corporation had, without any fault on their part, entered into fresh agreement with Indo-Canadian Transport Company on 22.1.1996. The Travelling Company filed application before the Arbitrator on 2.2.1999 against which some objection was raised by the Corporation that the agreement was terminated on 4.12.1995, therefore, the claim set up by the Arbitrator was beyond limitation. The Arbitrator, vide his award dated

29.10.2001, allowed the claim to the Travelling Company on the ground that the agreement dated 4.12.1995 was for three years which was to remain in force till 9.5.1998 and since the limitation would start from that day, therefore, the damages could not have been ascertained earlier. It was thus, held that as the Corporation had entered into agreement with M/s Indo Canadian Transport Company on 12.10.1998 for seven AC Deluxe buses after receipt of Rs.1,48,215/- per month per bus in advance and had earned Rs.40 lacs, therefore, Travelling Company was held to be entitled to a sum of Rs.20 lacs on equity for illegal termination of the agreement along with other amount of Rs.2,30,592/- which was deposited by the Travelling Company on behalf of the Corporation along with interest upto 31.7.1998. The Corporation filed Objections under Section 34 of the Act in which it FAO No.560 of 2008 (O&M) -4- was, inter alia, alleged that not only the award of Rs.20 lacs is illegal but also the application before the Arbitrator, itself is barred by limitation having been filed after a period of three years in view of Article 137 of the Limitation Act, 1963. The learned District Judge while disposing of Objections under Section 34 of the Act had held that the agreement between the parties was executed on 10.5.1995. It was for a duration of three years, which was to expire on 10.5.1998 but the said agreement was terminated on 4.12.1995 whereas the agreement between the Corporation and M/s Indo Canadian Transport Company was executed on 12.10.1998, therefore, the earning of the Corporation after 10.5.1998 from any source , would have no nexus with the claim of the Travelling Company because of the termination of the agreement dated 4.12.1995 or after the expiry of the contractual period on

10.5.1998. In this background amount of Rs.20 lacs awarded as damages was set aside but simultaneously, it was held that the claim petition filed before the Arbitrator was within limitation. In the present appeal bearing FAO No.560 of 2008, learned counsel for the appellants has argued that the Corporation had no competence or jurisdiction to terminate the agreement prior to expiry of three years, therefore, termination of the agreement on the part of the Corporation on 4.12.1995 was illegal and as such, the appellant has been rightly awarded Rs.20 lacs by the Arbitrator as damages on equitable grounds. On the other hand, counsel for the respondents has argued that as per clause 16 of the agreement, there is a provision of termination of agreement by giving one month's notice. It is submitted that vide letter dated FAO No.560 of 2008 (O&M) -5-

26.10.1995, a show cause notice was issued to the respondent Travelling Company to which a reply was filed by them which is on record of the Arbitrator and thereafter, agreement was terminated on 4.12.1995. I have heard both the learned counsel for the parties in this regard and I am of the view that there is no error in the order of the District Judge, Chandigarh as Clause 16 of the agreement specifically provides that the agreement could be terminated before the expiry of period of three years by giving one month's notice. Show cause notice was issued and reply has also been given and thereafter, agreement has been terminated, Therefore, there is no error in the action taken by the Corporation. It is also worthwhile to mention that if the agreement could not have been terminated before the expiry of three months' as suggested by the Travelling Company, there was no use to provide a right to terminate their agreement by giving one month's notice because in that situation, the said provision in the agreement would be a futile exercise. Moreover, the learned Court below has rightly observed that the agreement with Travelling Company was executed on 10.5.1995 which was to expire on 10.5.1998 though it was terminated on 4.12.1995 but the agreement with Company by the Corporation is of 12.10.1998 which is five months after the actual date of expiry of the agreement with the Travelling Company, therefore, earning of the Corporation after 10.5.1998 from any source is having no nexus with the claim of the Travelling Company because said earnings are not of the period of the agreement between the Travelling Company and the Corporation. In view of this reasoning, the order of the learned Court below for declining the award of Rs.20 lacs to Travelling Company is upheld. FAO No.560 of 2008 (O&M) -6- Insofar as the objection of the Corporation in their appeal bearing FAO No.4755 of 2008 is concerned that arbitration proceedings were beyond limitation, I concur the findings recorded by the learned Court below which have been recorded as under : “The contentions of the learned counsel for the corporation would have carried weight in case the order terminating the agreement had been produced on record. Mere acknowledgment dated 7.12.1995 of a letter by Manjit Singh will not ipso-facto raise a presumption that it was the letter terminating the agreement which was received by Manjit Singh. When termination is to be established, it has to be established by producing the document so that it could be scrutinized as to when it was terminated or it has to be determined as to who had passed this order or to find out when the agreement had been terminated. The fact that the arbitration agreement stood terminated stands established but the date of termination has to be proved by producing the record. In case it was sent by registered post and was received on 7.12.1995. A copy of the termination order along with acknowledgment letter indicating the receipt of termination order required to be produced before the arbitrator. In view of the above said reasons, it cannot be held that the award has been passed after the period of limitation. I do not agree with the contention of the learned counsel for the respondent or the findings of the arbitrator that the agreement dated 10.5.1995 could not be terminated prior to the expiry of three years i.e. before 9.5.1998. As per clause 16 of the agreement, there is a provision of termination of the agreement by giving one month notice. In case the agreement could not be terminated before three years then this provision of right to terminate the agreement and one month notice would have become redundant. It would have highly unreasonable in case the parties are bound to stick to the agreement despite the fact that a number of violations of the agreement are being FAO No.560 of 2008 (O&M) -7- committed by the other party. The termination of the agreement stands proved but the claim of the respondent for arbitration is not held to be barred by time.” Adverting to Civil Revision No.5461 of 2007 which has arisen because of the order passed by the Executing Court on 1.9.2007 in which it has been ordered that the Judgment debtor has paid a total sum of Rs.3,87,722/- only to the decree holder through draft but has not paid further interest of the amount till 29.10.2001 nor further interest after

29.10.2001 as per the award of the Arbitrator. Learned counsel for the revision petitioner submitted that learned Court below vide its order dated 19.11.2005 has only upheld the amount of Rs.2,30,592/- with interest of Rs.1,52,130/- upto 31.7.1998 and not the remaining part of the award by which the Travelling company was held entitled to a total sum with interest @ 12% per annum from the filing of the claim till the date of the award. After the award the applicant would be entitled to interest at the rate provided by law to the date of payment. Therefore, it is submitted that said interest cannot be allowed to be awarded by the Executing Court. In this regard, counsel for Travelling Company has submitted that learned Court below has also not rejected the said claim while upholding the amount of Rs.2,30,592/- and a sum of Rs.1,52,130/- as interest upto 31.7.1998. In this regard, it is worthwhile to mention that the amount of Rs.3,87,722/- has already been paid by the Corporation to the Travelling Company in terms of the order of the District Judge, Chandigarh. In my view, the respondent/Corporation is not liable to pay interest on the total sum @ 12% per annum because the total sum would include the amount of Rs.20 lacs which has been declined by the Court below as well as FAO No.560 of 2008 (O&M) -8- by this Court but it is liable to pay interest @ 6% per annum on the amount of Rs.3,87,722/- from the date of the claim petition till the date of payment. The net result of the aforesaid discussion is that appeal filed by the Travelling Company bearing FAO No.560 of 2008 claiming amount of Rs.20 lacs which has been declined by the District Judge is dismissed. The appeal filed by the Corporation bearing FAO No.4755 of 2008 against the award of the amount of Rs.2,30,592/- and a sum of Rs.1,52,130/- as interest etc. on the ground that claim petition was time barred, is also dismissed and Civil Revision No.5461 of 2007 filed by the Corporation against the order of the learned District Judge, Chandigarh dated 1.9.2007 is modified to the extent that Travelling Company shall be entitled to interest on the amount of Rs.3,87,722/- from the date of claim @ 6% per annum from the date of the order of Arbitrator till the date of its payment.

21.5.2010 Meenu (Rakesh Kumar Jain) Judge