M/S R. K. ASSOCIATES AND HOTELIERS PVT. LTD v. INDIAN RAILWAY CATERING AND TOURISM CORPORATION LTD.

15. Lastly, he submits that the petitioner has made substantial investment on making base kitchen and in case the license is terminated, the huge investment made by the petitioner keeping in view a 7-year license period, would go waste.

16. He relies on the judgment of High Court of Delhi in the matter of Ascot Hotels and Resorts Pvt. Ltd. & Anr. v. Cannaught Plaza Restaurants Pvt. Ltd., 2018 SCC OnLine Del 7940 and more particularly, paragraph Nos. 11,16, 17, 21, 22 23, 24 and 25, which read as under:

the contract was not determinable unilaterally at the instance of the appellant, but only for specific defaults. He further holds that grant of interim relief would, in the present case be a “Just” exercise of the power of the Tribunal under Section 17(1)(e) of the Arbitration and Conciliation Act, 1996. He further holds that in the present case the respondent is not seeking specific performance of the agreement and is only challenging the wrongful termination of the same by the appellant. The Arbitrator relying upon the judgment of this Court in Upma Khanna v. Tarun Sawhney held that in the present case denial of the interim protection to the respondent would in fact, amount to allowing the party committing the wrong to take advantage of its own neglect and default.

16. In the present case, as observed above, the Arbitrator has held that the respondent has been able to make out a strong prima facie case in its favour based on Clause 22.[4] of the License Agreement which restricted the right of the appellant to terminate the License Agreement only in the event of three consecutive defaults by the respondent to pay the license fee. Even before me, it is not contended by the counsel for the appellant that there was any default committed by the respondent in the payment of the license fee.

17. It is the contention of the counsel for the appellant that the license fee payable under Clause 6.[1] of the License Agreement is on a revenue share basis and provides for a “minimum guarantee” amount, whichever is higher. He submits that as the respondent had failed to install the Diesel Generator set as obligated on it under Clause 9.[1] of the License Agreement, there was a loss of revenue earned by the respondent, which resultantly leads to a loss of license fee in favour of the appellant. He therefore submits that this itself would mean that the respondent has not paid the license fee in accordance with Clause 6.[1] of the License Agreement.

21. It is further contended by the counsel for the appellant that even assuming that the termination of the agreement by the appellant is illegal, as the respondent can be compensated in terms of money, respondent would not be entitled to grant of injunction in its favour. On the other hand, the learned senior counsel for the respondent submits that the respondent had made huge investment in the property based on the assurance of the long period of license as provided in the License Agreement. He further submits that the property was being used for commercial purposes and the respondent has acquired a goodwill in the same. He submits that the respondent, therefore, cannot be compensated in terms of money.

22. In Old World Hospitality Pvt. Ltd. (Supra) this Court had rejected a similar contention as raised by the appellant, observing as under:—

judicial test asks the question: is it just in all the circumstances that the plaintiff should be confined to his remedy in damages?” This test squarely raises the issue of describing the circumstances which induce a Court to find the award of the remedy of specific performance more just than damages. The key to the law of compulsory performance lies in recognizing that such a remedy is not designed to compensate the injured party for the losses, but to force performance of the contract. Normally a Court declines to order performance because damages provide a sufficient incentive to complete most contracts except where the defendant hopes to achieve unusual economic benefits from breach, in which case to compel performance would only serve to discourage contracts and to reduce the combined wealth of the contracting parties. A remedy of compulsory performance, therefore, deliberately overrides these normal considerations concerning remedies in order to serve different policies. Courts use orders of compulsory performance to resist exploitation of relations of domination and to prevent unfair outcomes arising from break of contract. In amplifying further, the learned Author has pointed out the question of fairness would also arise. Again the Author has said: “A concern for fairness has also motivated the use of compulsory performance in a few cases. We saw considerations of distributive justice influence the Court in Beswik v. Beswick, to prevent the nephew from being unjustly enriched at his widowed aunt's expense. The order for specific performance of the payment of an annuity prevented the nephew from obtaining the business without having to pay for it. The most common kind of case where compulsory performance is ordered for distributive purposes involves transactions for the transfer of an asset which will provide an opportunity to earn an uncertain income. If the injured party cannot prove his losses with sufficient certainty to satisfy the compensatory principle, a Court may order specific performance. For example, an injured party may be able to enforce a sale of shares which would give him control over a Corporation, because damages for his loss of the right to control the Corporation arc too speculate to be compensatable. Similarly, the loss of the right to be an exclusive distributor of a product may lead to the loss of goodwill and trade reputation, items which are hard to quantify under the compensatory principle, but which can be protected by an injunction. The fundamental problem here is not that damages are inadequate to cover these kinds of losses but that the losses cannot be proven, and in order to overcome these evidentiary difficulties, the Courts are prepared to order compulsory performance where this will lead to a fair distributive consequence. These examples of oppression through bilateral monopoly and dependence, and injustice in the outcome of awards of damages, do not exhaust the occasions when an order for specific performance may achieve what the Court perceives to be more complete justice between the parties. The Courts reserve a discretion to award compulsory performance whenever it seems appropriate to do justice in the case.”

115. In Halsbury's Laws of England Vol. 44 4th Edn., the statement of law is in the following terms: “In certain circumstances the Court may even grant a mandatory injunction directly requiring a party to the contract to perform his contractual obligations either on an interlocutory application or at the trial of the action.” The footnote given in this Volume there is considerable law on the point and the same is in the following terms: “Smith v. Peters, (875) Lr 20 Eq 511, where a vendor was ordered to give a valuer access to premises; Sky Petroleum Ltd. v. Vip Petroleum Ltd., (1974) I All Er 954, (1974) I WLR 567, where the defendants were ordered not to withhold supplies of motor fuel from the plaintiffs; filling stations, no alternative sources of supply being available; Astro Exito Navegacion S.A. v. Southland Enterprise Co. Ltd. (Chase Manhattan Bank N. Aintervening). The Messinikai Tolmi (1982) 3 All ER 335, (1982) 3 WLR 296, Ca (cited in Practice And Procedure, Vol. 37, para 361), where the buyers of a ship were ordered to sign a notice of readiness in order to enable money secured by a confirmed letter of credit to be paid out before the expiration of the letter. See also Acrow (Automation) Ltd. Rex Chainbelt Inc (1971) 3 All Er 1175, (1971) I WLR 1676, CA. Puddephat v. Leith (1916) I Ch 200, where a shareholder was ordered to exercise voting rights in accordance with a contractual undertaking (Greenwell v. Porter (1902) I Ch 530, where an injunction was granted restraining shareholders from voting contrary to their undertakings): Bourne v. Me Donald, (1950) 2 Kb 422, (1950) 2 All Er 183, Ca, where the defendant was ordered to carry out his contractual undertaking to build a fence in an action commenced in a country Court but not within the Court's statutory jurisdiction relating to specific performance.”

116. In Chave v. Breamer, 1976 Q.B. 76, Rosekill learned Judges said “In principle contracts are made to be performed and not to be avoided according to whims of the market fluctuations where there is a free choice between the two possible constructions of a contract, I think the Court should tend to prefer the construction which will infer performance and not encourage avoidance of contractual obligations.”

23. In the present case, the respondent has clearly made out a case which falls in the exception to the rule as provided in Section 14(1)(a) of the Specific Relief Act, 1963.

24. Similarly, reliance of the appellant on Section 14(1)(c) of the Specific Relief Act, 1963 is also ill-founded. In the License Agreement, there is a specific prohibition on the appellant from terminating the agreement “except” in the case of three consecutive defaults in the payment of the license fee by the respondent. In view of the prohibition, it cannot be said that the agreement is determinable by its very nature. This Court in Upma Khanna (Supra) after analyzing Section 14(1)(c) of the Act has held as under:—

17. But, the argument overlooks the concept of a fault liability and a fault effect and a no fault liability and a no fault effect. It overlooks the point that one should not rush to conclusions. Clause (c) uses the expression “in its nature determinable” and does not throw any light whether the determination contemplated embraces a fault effect determination.

18. If a defence by a contracting party that the sufferance of the default and hence the determination of the contract is to be accepted, it would amount to allowing the party committing the wrong to take advance of its own neglect and this would ex-facie not be acceptable to a court of equity.”

25. In fact, Clause 22.[4] of the License Agreement would also amount to a negative covenant, which can be enforced under Section 42 of the Specific Relief Act, 1963. In Gujarat Bottling Co. Ltd. v. Coca Cola Company (1995) 5 SCC 545, Supreme Court has held as under:—

party invoking the jurisdiction of the court, and may refuse to interfere unless his conduct was free from blame. Since the relief is wholly equitable in nature, the party invoking the jurisdiction of the Court has to show that he himself was not at fault and that he himself was not responsible for bringing about the state of things complained of and that he was not unfair or inequitable in his dealings with the party against whom he was seeking relief. His conduct should be fair and honest. These considerations will arise not only in respect of the person who seeks an order of injunction under Order 39 Rule 1 or Rule 2 of the CPC, but also in respect of the party approaching the Court for vacating the ad-interim or temporary injunction order already granted in the pending suit or proceedings.

48. Analyzing the conduct of the GBC in the light of the above principles, it will be seen that GBC, who was a party to the 1993 Agreement, has not acted in conformity with the terms set out in the said agreement. It was itself, prima facie, responsible for the breach of the agreement, as would be evident from the facts set out earlier. Neither the consent of Coca Cola was obtained for transfer of shares of GBC nor was Coca Cola informed of the names of persons to whom the shares were proposed to be transferred. Coca Cola, therefore, had the right to terminate the agreement but it did not do so. On the contrary, GBC itself issued the notice for terminating the agreements by giving three months notice.

49. It is contended by Shri Nariman and in our opinion, rightly, that the GBC, having itself acted in violation of the terms of agreement and having breached the contract, cannot legally claim that the order of injunction be vacated particularly as the GBC itself is primarily responsible for having brought about the state of things complained of by it. Since GBC has acted in an unfair and inequitable manner in its dealings with Coca Cola, there was hardly any occasion to vacate the injunction order and the order passed by the Bombay High Court cannot be interfered with not even on the ground of closure of factory, as the party responsible, prima facie, for breach of contract cannot be permitted to raise this grievance.”

17. Mr. Malhotra, learned counsel relies on his relies on his reply and states that while the respondent has objection in going for arbitration, but the status-quo dated 05.05.2015 needs to be vacated.

18. He states that under Clause No. 6.10, the clause is standalone and it is exclusively within the domain of the respondent to take decision regarding the quality of the food supply.

19. He further states that assuming without admitting, that mandate of Clause No. 8.[2] includes within itself the Clause Nos. 6.[7] and 7.[1] (meaning that a 15 day cure notice is required before invoking clause

6.10 and 7.1), the same has also been done by the respondent.

20. I have heard learned counsels for the parties.

21. To my mind, Clause No.6.10 is a standalone clause. The very fact that Clause No. 8 only refers to Clause No. 7 shows that Clause No. 6.10 is not covered under Clause No. 8.

22. The same is also evident from reading of Clause No. 6.10, which permits the respondent to take a decision regarding the quality of food supply and if the respondent is of the view that the same is of substandard quality, the contract could be terminated without any previous notice to the licensee.

23. If the submission of Mr. Sethi, learned senior counsel is to be accepted, then the words “to forthwith terminate the license without any previous notice to the licensee” occurring in Clause 6.10 becomes otiose and meaningless.

24. Additionally, even assuming for the sake of arguments, that the respondent before terminating the clause was required to give 15 day cure notice to the petitioner is concerned, to my mind, the same has also been done.

25. Annexure R[2] shows that more than 321 complaints regarding the Train No.12801-02 received by the respondent. The complaints vary from overcharging, quality of food being unhygienic, cold and tasteless.

26. The respondent from 24.12.2024 has repeatedly being giving notices to the petitioner to bringing the complaints to their notice and additionally, calling upon them to “improve the catering services and ensure substantial decrease in number of complaints in the forthcoming months”. The said notices from 22.12.2024 are issued almost every month and it is only in May, 2025 that the contract has been terminated.

27. To my mind, the said notices are substantial compliance of Clause No. 8 of the said Agreement.

28. Additionally, the respondent also issued 2 separate showcause notices dated 03.04.2025 and 08.04.2025 and after a month thereof, has taken the extreme step of terminating the license.

29. I am of the view that the petitioner provides food to the passengers of the train and the quality of food, its hygiene levels, taste and quality are of utmost importance.

30. If the passengers are of the view and register complaints regarding the food being unhygienic, tasteless, cold, overcharged, the respondent is very much within its rights to terminate the contract and replace the petitioner.

31. Consequently, petition under Section 9 of the Arbitration and Conciliation Act, 1996 is dismissed and the order dated 05.05.2025 stands vacated.

32. The judgment of Ascot Hotels and Resorts Pvt. Ltd.(supra) is not applicable to the facts of the case as the in the said judgment the party was able to make a prima facie case against the termination of the Agreement. In the present case the respondent gave sufficient chances to the petitioner to cure the defects before terminating the Agreement between the parties. Moreover, the hygiene levels, taste and quality are of utmost importance and goes to root of the Agreement. Therefore the above judgment stands distinguished.

33. The petitioner requests and is granted one week from the date of release of the Order to handover the train in question to the respondents.