General Manager Northern Railway v. Pioneer Publicity Corporation

4. The exclusive Advertisement for Railway Stations/Platforms Concourse Halls/Circulating Area will vest with the licensee. All advertisers, recognized agents or otherwise, wishing to advertise will have to deal directly with the licensee and will have no dealing with the railways or stake any claim on the Railways for any commission etc.

5. The ownership of the existing contracts will pass on to the contractor for display of commercial advertisement only after the expiry of the term of the contract. The contractor will have no locus-standi on the advertisement displayed by existing contractor until the expiry of the contract. The list of the contract in the order of their expiry is enclosed along with the terms and conditions of the contract. Period of contract

6. The contract will be for a period of Five years i.e. from 20/09/2007 to 19/09/2012. ***** Reserving 10% area for Railways Slogan

15. Railway will reserve 10% of the area free of cost, for display of commercial/safety posters, or/and other advertisements to promote socially relevant messages and railway services at the bottom/side of the display. The licensee will not have any claim over these displays. The matter for such displays shall be provided by Railways which the contractor shall arrange to print, erect, display at his cost. This will also be displayed on same pattern as remaining 90% area. Pro-Rata Allotment

16. The amount quoted by the tenderer in Packet „B‟ of this tender, will be applicable for total advertising area (P) assessed by the Railway or part thereof (including 10% free area as per para 15 above). Total assessed area (P) is, as indicated in Section V of these tender documents. The contractor will be allotted extra sites over and above the assessed area on his request, only after getting the technical and aesthetical feasibility of the sites from the Railway Administration. However, for this purpose the contractor will have to pay to Railway pro-rata extra amount that will be calculated for the relevant year and subsequent years based on total amount quoted for first year and worked out for the subsequent years as per formula given in Packet „B‟ in the Tender Documents. **** Security Deposit

25. The licensee will have to deposit the security deposit equivalent to 10% of license fee for the relevant year before start of each year in the form of FDR or irrevocable Bank Guarantee issued by a Scheduled Commercial Bank for a period of two years, within 15 days from issuing date of acceptance letter. The security deposit will be refunded on satisfactory completion of the contract period taking into consideration that all Railway dues are cleared. **** Payment Schedule for license fees

31. The licensee will have to pay the license fee for a period of five years, subject to an enhancement of 10% for second year, 15% for third year, 20% for fourth year & 25% for fifth year and the previous year‟s license fee respectively.

32. The licensee will have to pay the 1st six months rent in advance after adjusting the earnest money deposit within 15 days of the receipt of accepting letter sent by this office.

33. Further payments for adjustments three months period shall be made on completion of three months from award of contract and so on every quarter. **** Commencement of contract

37. The date of commencement of contract will be 120 days from the date of issue of the allotment letter or first display of any advertisement anywhere in this contract, whichever is earlier. **** Arbitration

41. In the event of any dispute or difference of opinion arising out of this Agreement or any special condition of contract or in connection with this agreement, the same shall be referred to the sole arbitration of a Gazetted Railway officer appointed by the General Manager/NR. The Gazetted officer appointed as arbitrator, however will not be one of those who had an opportunity to deal with the matter to which the contract relates or who in the course of their duties as Railway servants have expressed view on all or any of the aspects of the matter under dispute or difference. The award of the arbitrator shall be final and binding on the parties to this contract subject to aforesaid, the Arbitration & Conciliation Act, 1996 and the rules made thereunder or any statutory modification thereof for the times being in force shall be deemed to apply to the arbitration proceeding under this clause. The venue of arbitration shall be the place from which the acceptance note is issued. ****

48. For the purpose of this agreement, the competent authority is Divisional Railway Manager/New Delhi.”

7. Disputes having arisen between PPC and the Railways with respect to execution of the aforesaid Agreement, PPC, after following the protocol prescribed in that regard in the Arbitration and Conciliation Act, 1996 (“the 1996 Act”) moved this Court, under Section 11 thereof, by way of Arb. Appl. 30/2009. The Railways disputed the existence of an Arbitration Agreement, whereupon the petitioner filed CS (OS) 659/2009 (Pioneer Publicity Corpn Pvt. Ltd. v. UOI & Anr.). Ultimately, with consent of parties, this Court, vide order dated 26th May, 2009, referred the dispute to the learned Arbitrator, who came to pass the aforesaid Interim Awards.

8. Claim petition was filed, by PPC, before the learned Arbitrator, on 18th August, 2009. On one ground or the other, the grievance of PPC, against the Railways, was that the contractually stipulated number of workable sites had not been provided by the Railways within the time stipulated in the agreement read with the tender documents. PPC raised, essentially, four claims against the Railways, resulting in nine reliefs claimed from the learned Arbitrator. Claim 1 was predicated on PPC‟s asserted entitlement to be provided 213147 sq. ft. of area of advertising space from the commencement of the contract till its conclusion, i.e. for the entire period of the contract. In the event of non-availability of any particular advertising site, PPC asserted that the agreement obligated the Railways to provide equivalent area to PPC at no extra cost. Failure, on the part of the Railways, to comply with both these alternative requirements, contended PPC, entitled it to be refunded the license fee paid by it in respect of the non-available advertising sites. Claim 2 sought adjustment, by the Railways, of the advance license fee paid by PPC. Claim 3 sought fixation of the date of commencement of the contract as the date when display was put up, by PPC, on at least 50% of the contracted advertising sites. Claim 4 envisaged merger of preexisting contracts for commercial publicity/advertising, between PPC and the Railways, with the sole rights contract forming subject matter of the present controversy. Claim 4, asserted PPC, was in the event of the learned Arbitrator holding Claim 1 (iii), claiming refund of the license fee in respect of the unavailable advertisement sites, to be inadmissible.

9. Predicated on these claims, PPC prayed, in its claim petition, for (a) a declaration that the Railways was liable to make available to PPC 2,13,147 sq. ft. of area of advertisement space from the commencement of the contract and for its full term, (b) a declaration that in case the Railways was unable to provide the advertisement space enlisted in the contract, then the Railways was liable to make available to PPC 'equivalent' or 'alternate‟ advertisement space in lieu of the non-available enlisted advertisement space, without any additional cost, (c) a declaration that demands raised by the Railways for license fee vide its letters dated 27th December, 2007, 8th May, 2008, 4th June, 2008, 3rd March, 2009, 25th March, 2009 and 6th August, 2009 were null and void abinitio, being contrary to the terms of the contract, (d) a declaration in favour of PPC and against the Railways declaring Clause 37 of the Agreement, regarding the “commencement date of contract” unconscionable, oppressive and unenforceable and therefore null and void and severable from the Agreement, (e) a declaration that the contract was deemed to have commenced from on or around 23rd March, 2008 or such other date as the learned Arbitrator determined, (f) a direction to the Railways to pay the claimant a sum of ₹ 11,32,36,050 being the principal sum of the excess license fee paid to the Railways during the first year of the contract, reckoned by the Railways from 20th September, 2007 to 19th September, 2008. (g) a direction to the Railways to pay, to PPC, a sum of ₹ 5,21,73,780.64/- being the sum of the excess license fee paid to the respondents (from 20th September, 2008 to 31st September, 2009) during the second year of contract, reckoned by the Railways from 20.9.2008 to 19.9.2008 and any other claim for such further periods, as may have arisen during the pendency of these proceedings, (h) a direction to the Railways to pay PPC interest @ 2% per month towards past, pendente lite, and for future on the sums found due and payable by the Railways to PPC, (i) in the alternative to prayers (f), (g) and (h), a declaration in favour of PPC and against the Railways, extending the period of contract for a period equivalent to the days as would be assessed against the excess amount of license fee paid by PPC to the Railways.

10. The learned Arbitrator notes, in para 19 of the impugned Award, that the total 213147 sq. ft. of area which, according to Section V of the tender documents, was to be made available to PPC, was divided into Parts A and B, consisting of 63 and 45 items/sites respectively. The 63 sites/items comprising Part A (covering 167923 sq. ft.) were already in occupation by other contractors, consequent to pre-existing advertising contracts executed by the Railways which were still in operation. They would, therefore, become available to PPC only after expiry of the said contracts, on the dates stipulated in Part A of Section V. Part B consisted of 45 items/sites (covering 45224 sq. ft.), which were vacant and were, therefore, to be made immediately available for possession by PPC. The total area of 213147 sq. ft. was denoted in Section V as the „P‟ area.

11. In order to avoid confusion amongst the various categories of sites, a systematic procedure was followed by the learned Arbitrator. Initially, he called upon the parties to assign numbers to the various sites, with which we need not, in this case be particularly concerned. Thereafter, on 31st December, 2009, a joint signed chart was prepared for all the 108 tendered items/sites.

12. Thereafter, 10 Joint Lists of items were prepared by consent of both the parties in the arbitral proceedings, i.e. Joint Lists A, A-1, A-2, B, B-1, C, D, E, F and G. Joint Lists A, A-1 and A-2, which were jointly signed on 10th February, 2010, 5th April, 2010 and 28th April, 2010, respectively covered 39, 15 and 13 sites which the Railways admitted, for various reasons, not to have been able to make available to PPC. Joint Lists B and B-1, which were signed on 10th February, 2010 and 5th April, 2010 covered new sites, or sites of which the area was increased by the Railways on PPC‟s request. Joint List F covered 13 sites on which display was disrupted due to interference by various local or governmental agencies, who were third parties, and in respect of which the interruption was admitted by the Railways. The remaining disputed sites were, therefore, covered by Joint Lists C, D, E and G.

13. Interim Award-I dated 19th May, 2010 and Interim Award-II dated 1st November, 2010 were passed, by the learned Arbitrator, in respect of the admitted sites covered by Joint Lists A, A-1, A-2, B, B- 1 and F, for the periods 20th September, 2007 (the date of commencement of the contract) to 31st December, 2009. The learned Arbitrator held PPC to be entitled, for the aforesaid periods, to ₹ 1,35,54,035/- and ₹ 1,06,48,631/- respectively.

14. These Interim Awards, i.e. Interim Award-I dated 19th May, 2010 and Interim Award-II dated 1st November, 2010, have not been challenged by the Railways.

15. Interim Award-III, which forms subject matter of challenge in OMP (Comm) 154/2020, dealt with the sites/items covered by Joint Lists C, D, E and G. The particulars of these lists may be provided thus:

(i) Joint list C covered sites reflected in Part A of Section V of the tender documents (which dealt with sites which would not be immediately made available to PPC as they were already being worked under pre-existing contracts with other contractors), in respect of which no future dates on which the sites would become available were stipulated in the tender documents. There were 4 items in the said Joint List C, of which one item was shifted to Joint List A and 3 items were shifted to Joint List G which dealt with the relief that PPC was seeking in respect of such sites.

(ii) Joint List D contained 17 items in respect of which refund was sought, by PPC, owing to delay in sanctioning approval, by the Railways, of the site plans submitted by PPC, as a result of which PPC was unable, during the period for which the site plans remained unapproved, to display on the said sites. There were initially 17 items in Joint List D, of which 8 were shifted to joint list A-1 and 9 remained to be adjudicated by the learned Arbitrator.

(iii) Joint List E comprised items in respect of which PPC alleged that the sites were not feasible for advertising. There were 25 items in Joint List E of which, by consent, 21 items were shifted to Joint List A-1 and A-2 and 4 items remained to be adjudicated by the learned Arbitrator. To these four, one additional item, i.e. Item 169 (Gurgaon Level Crossing) was added, after shifting it from Joint List A-2. There were, therefore, 5 items for adjudication by the learned Arbitrator in Joint List E.

(iv) Joint List G comprised the 41 items, which under Part (A) of Section V of the tender documents, and would not be available to PPC at the commencement of the contract, but would be made available on future dates, specified or unspecified. In respect of these sites, PPC claimed refund of license fee deposited by it, as the Railways had neither made the said sites available at the time of commencement of the contract, nor had provided equivalent alternative sites. Re-prayer regarding fixation of date of commencement of contract

16. As already noted in para 9 supra, one of the prayers of PPC, in its claim petition, was that the date of commencement of the contract be fixed as the date when PPC was able to display on at least 50% of the contractually envisaged advertising sites. The learned Arbitrator did not agree, and fixed the date of commencement of the contract as 20th September, 2007, being the date stipulated in the tender documents as well as in the agreement executed between the parties.

17. This finding, of the learned Arbitrator, is not in challenge. Accordingly, the date of commencement of the contract stands at 20th September, 2007. Findings, grounds of challenge and analysis thereof

18. The stage having thus been set, one may proceed to the findings of the learned Arbitrator, insofar as they are under challenge at the instance of the Railways, in OMP (Comm) 154/2020. Re. Joint List D

19. The learned Arbitrator proceeded, first, to deal with the items covered by Joint List D, which comprised the sites in respect of which refund of license fee deposited by it was claimed by PPC on the ground of delay, by the Railways, in approving the site plans submitted by PPC.

20. This covered tendered items

┌──────────────────────────────────────────────────────────────┐
│

┌───────────────────────────────────────────────────────────────────┐
│  Serial No.   Item                                  Amount (Rs)   │
├───────────────────────────────────────────────────────────────────┤
│  60           Protection Screen Zone-III                          │
│               (a) Paharganj Bridge                  2,44,221      │
│               (b) Zakhira Bridge                    7,74,253      │
│  63           Electronic Display                                  │
│               (a) Pankha Road Flyover               5,04,546      │
│               (b) School Lane Flyover               NIL           │
│  69           Gurgaon Level Crossing                3,83,947/-    │
└───────────────────────────────────────────────────────────────────┘

37. The learned arbitrator has correctly held that this stipulation cannot be treated as derogating, in any fashion, from the obligation, expressly envisaged in the opening recitals of the Agreement between the PPC and the Railways as well as in the tender documents, that PPC would be entitled, ab initio, to 213417 sq. ft. of advertising area. The fact that certain sites would, per contract, become available to PPC only in future would not detract from the requirement of providing, to PPC, 213147 sq ft of advertising area throughout the contract. Any other interpretation would render the express stipulation, in the Agreement as well as in the Tender Documents, that the area made available to PPC for advertising, during the period of contract i.e. 20th September, 2012, was 213147 sq ft, redundant. It is not permissible, while interpreting the covenants in a contract, so accord, to one clause, an interpretation which would render another redundant or otiose.

38. I, therefore, find no reason whatsoever to interfere with the findings of the learned arbitrator, that 213417 sq. ft of advertising area was required to be made available to PPC during the entire period of contract. Was PPC entitled to be provided „equivalent area‟ at no extra cost?

39. The second aspect is regarding whether PPC would be entitled, in the event of any part of the said 213417 sq. ft of advertising area not being available, to be provided equivalent area, at no extract cost. The learned arbitrator interpreted the Note in Section V to mean as requiring advertising area, equivalent to the area in Part A of Section V, which was not immediately available to PPC, as being required to be provided by the Railways at no extra cost.

40. On the interpretation of the Note in Section V, to this limited extent, I do not find myself entirely in agreement with the findings of the learned arbitrator. The learned arbitrator has adopted the view that the Note in Section V of the tender documents entitled PPC to equivalent area, to compensate for the area which was not immediately available for advertising, at no extra cost. I am unable to read the Note in such a fashion.

41. The Note in Section V consists of two sentences. The first sentence states that the exact locations indicated in Part A of Section V would be made over to PPC w.e.f. the date reflected against such location. This, as I have already held, merely indicates that in respect of locations/sites, which were being operated by contractors with whom pre-existing contracts were still continuing, the right of PPC is emerged only after the said contracts came to an end. That did not derogate, from the obligation, of the Railways, to provide, to PPC, ab initio and during the entire term of the contract, 213417 sq. ft. of advertising area.

42. The second sentence of the Note of Section V, however, in my view, has not been correctly interpreted by the learned arbitrator and, in fact, the interpretation placed by the learned arbitrator on the said sentence flies directly in the face only of the said sentence but also of Clause 4.[9] of Section II of the tender documents. What is stated, in the second sentence in the Note in Section V, is that “the contractor (i.e. PPC) would be at liberty to display equivalent/more area at adjoining locations in accordance with para 4.[9] of Section II of the tender documents”. Clearly, therefore, the entitlement of the contractor to additional/more area, under the second sentence in the Note in Section V was only in accordance with Clause 4.[9] of Section II of the tender documents, and could not be understood de hors the said clause. Clause 4.[9] of Section II of the tender documents permits grant of additional area to a contractor only on payment of additional fee and not free of charge. In holding that PPC would be entitled, by virtue of the Note in Section V, to advertising area, equivalent to the area, which was covered by pre-existing contracts, at no extra cost, therefore, in my view, the learned arbitrator held contrary to the expressed terms of Clause 4.[9] of Section II of the tender documents, which have been incorporated by reference in the Note in Section V.

43. Where the provisions of a clause are incorporated by reference into another, they are to be treated as bodily incorporated into the latter, as held in, inter alia, M. R. Engineers and Contractors Pvt. Ltd. v. Som Datt Builders Ltd.[6]

44. I cannot, therefore, agree with the findings of the learned arbitrator, that PPC was entitled to be provided advertising area, equivalent to the area which was covered by the sites enumerated in Part A of Section V and which could not be provided to PPC owing to the continuance of pre-existing contracts covering the said sites. No such right to be provided equivalent area free of cost, in my view, can be gleaned from the tender documents.

Was PPC entitled to be refunded advance licence fee deposited by it, proportionate to the advertising area not made available?

45. That, however, does not detract from the entitlement, of PPC, to be refunded the advance license fee deposited by it, proportionate to the area which was not made available to PPC. In view of my concurring, with the learned arbitrator, that the stipulation in the tender documents as well as the contract required the Railways to provide, during the entire period of contract, 213417 sq. ft of advertising area, to PPC, I can find no fault with the learned arbitrator, in his decision that, to the extent that the said area was not provided to PPC, PPC would be entitled to a refund. The Railways cannot be permitted to continue to retain the entire advance licence fee deposited by PPC, even while breaching the contractual obligation to make available, to PPC, the entire area of 213417 sq ft of advertising area. That, as the learned Arbitrator correctly holds, would amount to unjust enrichment.

46. I, therefore, approve and concur with the decision of the learned Arbitrator that PPC is entitled to refund of Rs 8,43,66,430/-.

47. The Railways have also challenged the award, by the learned arbitrator, of interest in favour of PPC. The learned arbitrator has granted interest, on the amounts awarded by Interim Awards- I, II and III, pre-reference and pendente lite @ 2% per month and post award @ 1.[5] % per month. In doing so, the learned arbitrator has relied on the judgments of the Supreme Court in Central Bank of India v. Ravindra[7], Bhagwati Oxygen Ltd. v. Hindustan Copper Ltd.[8] and State of Rajasthan v. Nav Bharat Construction Co.9.

48. No separate arguments were advanced by Dr. Sharma in respect of the award of interest. Nor do the written submissions filed by the Railways contest the award of interest by the learned arbitrator. However, in O.M.P. (COMM) 154/2020, the Railways have sought to contend that the agreement and tender conditions did not envisage grant of interest to PPC.

49. The provision relating to grant of interest on delayed payment by PPC has, contends the Railways, been erroneously applied, by the learned arbitrator to award interest to PPC, at an exorbitant rate.

50. Both arguments stand covered against the Railways by authoritative pronouncementS of the Supreme Court. The judgment in Bhagwati Oxygen[8] clearly holds that, in the absence of any proscription, in the agreement between the parties, against award of interest by the arbitrator, the arbitrator was within his jurisdiction to award interest pre-reference, pendente lite as well as post-award. Insofar as the rate of interest is concerned, the learned arbitrator has noted that, in Bhagwati Oxygen[8], the Supreme Court upheld the award of interest, by the arbitrator, at 18% p.a. – incidentally, the same rate of interest at which the learned arbitrator has awarded interest in the

2002 (1) SCC 659 present case, observing that, in this regard, the rate of interest charged by Hindustan Cooper Ltd. (the respondent in that case), to Bhagwati Oxygen was a relevant and germane factor. Applying this principle, the learned arbitrator has awarded interest, on the claims decided in favour of the PPC, at the rates at which the PPC was liable to pay interest in the event of delayed payments made to the Railways.

51. No interference is, therefore, justified, with the said decision. Conclusion

52. In view thereof, the challenge, by the Railways, to the impugned award dated 29th October, 2012 of the learned arbitrator, fails.

53. The petition of the Railways is, accordingly, dismissed, with no order as to costs. OMP (ENF.) (COMM.) 120/2018

54. This petition seeks enforcement of the Interim Award-I dated 19th May, 2010, Interim Award-II dated 1st November, 2010 and Interim Award-III dated 29th October, 2012, passed by the learned Arbitrator, and, therefore, seeks a direction to the Railways, to pay, to PPC, the amount awarded by the learned arbitrator.

55. No separate submissions were advanced, by Dr. Sharma, assailing this petition. The reply filed by the Railways in response to this petition merely seeks to contend that, having allowed adjustment of the amounts awarded by Interim Awards-I and II, without claiming interest, the PPC was estopped from claiming interest now.

56. As PPC has correctly contended in its rejoinder, this submission of the Railways is misconceived. Interim Awards-I and II expressly resolve the decision on the issue of interest payable on the amounts awarded under the said Interim Awards to be decided while adjudicating on Interim Award-III. As such, there was no waiver or abandonment, by PPC, of its right to interest on the amounts awarded; the issue of payment of interest was only deferred till the passing of the impugned Interim Award-III.

57. In that view of the matter, Interim Award-III having been upheld in its entirety, the Railways become liable to pay, to the petitioner, the principal amount as well as interest.

58. OMP (COMM.) 154/2020 having been decided by the judgment passed today, for the present, in OMP (ENF.) (COMM.) 120/2018, the Railways are directed to deposit, with the Registrar General of this Court, the entire amount awarded by the learned arbitrator, including principal and interest by way of a crossed cheque/demand draft within a period of four weeks from the date of uploading of this judgement on the website of this Court.

59. List OMP (ENF.) (COMM.) 120/2018 before the concerned Bench, as per roster, on 15th July, 2022 to proceed further with the said enforcement petition and pass appropriate orders thereon.

C. HARI SHANKAR, J.