V Krishnamurthy And Ors @APPELLANT@Hash Airport Director Jaipur

This misc. application has been filed by Director, Jaipur Airport, Airport Authority of India, Jaipur (for short-`AAI’) inter alia with the prayer for

recall/review of the order of this Court dated 8.9.2017.

This Court by the aforesaid order allowed the application filed by the original applicant-Mr. V. Krishnamurthy under Section 11 of the Arbitration and

Conciliation Act, 1996 praying for appointment of a sole arbitrator for adjudication of his disputes with the AAI. The Court while allowing the

application came to the conclusion that the disputed involved in the said application was “whether the respondents could have, having extended the

license period in favour of the petitioner from time to time in different phases up to 03.06.2014, unilaterally increased the license fee and if so, at what

rates.†and whether the original applicant has paid excess amount of Rs.19,59,377 upto February and March, 2016. The argument on behalf of AAI

resisting the application was that the outstanding amount demanded in terms of the modified award dated 04.07.2014 as well as dated 13.08.2015 was

Rs.3,97,89,439/-. It was denied that any excess payment was made by the original applicant to the AAI and that the AAI vide letter dated 12.10.2015

called upon the original applicant to deposit the outstanding dues amounting to Rs.1,44,00,608/-, which was calculated in terms of the modified award

dated 04.07.2014 as well as the award dated 13.08.2015. The total amount computed on that basis was Rs.3,97,89,439/-. This Court has held that so

far as earlier disputes between the parties are concerned, they have already been crystallized in the award passed earlier on 17.11.2011 and the

present dispute falls outside their scope.

Shri Sudhanshu Kasliwal, learned senior counsel appearing for the AAI submits that this Court has failed to appreciate that by appointing a sole

arbitrator to adjudicate the dispute related to license fee payable, this court has in effect appointed sole arbitrator to adjudicate a dispute which has

already been settled by a sole arbitrator vide his awards dated 04.07.2014 and 13.08.2015. Once the award earlier passed attained finality, the same

issue cannot be permitted to be adjudicated by any party by way of any second round of arbitration proceedings, the arbitration agreement having

seized to exist. It is argued that the appointment made ignoring objection raised that there was no dispute to be referred to arbitrator in view of full and

final settlement between the parties is unsustainable. The original application had raised the second dispute related to applicability of Escalation Clause

of 10% every year stipulated in the license agreement, which issue has already been decided by the sole arbitrator vide its order dated 13.08.2015.

Learned senior counsel referred to para 21 (ii) of the said award dated 13.08.2015 to argue that therein it is stipulated that AAI may levy 10%

escalation in license fee from 01.05.2010 i.e., from 1st May 2010, the license fee to be charged from the Contractor, which would be Rs.28,31,400/-

per month. The date for the next 10% increase (escalation) in the license fee would be 1st May 2011. The license Fee for the subsequent year would

be increased by 10% effective from 1st May of that year till the duration of the agreement between the parties. It is argued that the original applicant

disputed the very applicability of the terms and conditions of the original contract to the period of license agreement dated 25.10.2007 extended from

time to time by the respondent authority, also disputed the applicability of the escalation clause after December 2012, therefore he cannot by relying on

the arbitration clause contained in the same agreement seek reference to the Arbitrator afresh. A party cannot be permitted to approbate or

reprobate.

Shri Sudhanshu Kasliwal, learned senior counsel has submitted that the original applicant has tried to mislead this Court by stating that the dispute is

related to the applicability of escalation clause to the period which was unilaterally extended by the AAI and that there was no mutual

agreement/consensus on the applicability of the terms and conditions of the original contract. This cannot be accepted in view of the findings arrived at

by the learned Arbitrator in the award dated 13.08.2017 referred to above. The Court was not correctly apprised of the fact and was therefore led

into making observation that the original contract was upto June 2012, and further extended upto December 2012 and not thereafter, but the fact is

that the original contract itself was extended from time to time even after December 2012, which would be seen from the award dated 13.08.2015

itself where it was held that the escalation clause will be applicable till the duration of the agreement between these two parties. While adjudicating an

application filed under Section 11 of the Arbitration and Conciliation Act, 1996, this Court is required to foremost decide whether the dispute is a ""Live

Dispute"" or not and especially when a specific objection to this effect has been taken.

The finding that a new dispute has arisen to as to necessitate fresh reference to the arbitration on account of unilaterally increase in the license fee

upon the extension of the contract, is an error apparent on the face of record. It is settled law that whenever the original contract is extended, all

terms and conditions thereof would also apply to the extended period. As far as dispute relating to extra amount allegedly paid by the original

application towards licence fee upto period 2009-2010 is concerned, the same has been decided by the sole arbitrator vide its order dated 13.08.2015

and hence it cannot be made a subject matter of second round of arbitration. The claim of the original application for refund of the amount of Rs

19,59,377/- relating to the relaxation of escalation clause of 10% granted for the period of June 2009 to April 2010 had already been adjudicated by the

same arbitrator in award dated 13.08.2015, which amount as per the AAI was released pursuant to the said award. In any case, if the original

applicant holds otherwise, he can seek enforcement of the award before the executing court by filing an application under Section 36 of the Arbitration

and Conciliation Act, 1996. The demand of Rs.3,97,89,439 vide letter dated 20.04.2017, was computed only in pursuance of the award passed by

the sole arbitrator in the second arbitral proceedings and, therefore, did not raise any further dispute. The original applicant having not filed any

objection to the said award under Section 34 of the Act would be estopped from questioning the correctness of the findings recorded therein.

Shri Ravi Bhojak, learned counsel for the original applicant opposed the application and submitted that the original application submitted tender in

February, 2007 for award of licence for advertisement site (indoor and outdoor) at International Airport, Jaipur and the respondents granted him

licence for the said purpose on 4.6.2007 on the licence fee of Rs.23.40 lacs per month. There was also a provision of 10% increase every year in

addition to electricity and other charges for a period of five years. Half way in between, the AAI inaugurated a new terminal on 25.02.2009 and

decided to shift all the domestic airlines operations to the new terminal building. However, the International Airlines were to continue their operations

in the old terminal, whereof the original applicant was having advertising rights and consequently, due to bifurcations of the passenger traffic, the

original applicant’s business was affected adversely. He therefore made request for a rebate of 40% in the stipulated license fee, gestation period

and extension of contract period, because of shifting and re-erection of advertisements. AAI finally agreed for 22% rebate in the license fee and that

gestation period of 60 days was also allowed, however the request for extension in contract period was disallowed. The original applicant had to

therefore invoke the arbitration clause. The Chairman, AAI appointed a sole Arbitrator for adjudication of the dispute. The sole Arbitrator partly

allowed the claims of the original applicant and rejected the counter claim by his award dated 17.11.2011. The original applicant filed objection under

Section 34 of the Act thereagainst. During the pendency of the objection, the AAI invited applicant for negotiations and settlement of the remaining

disputes/claims, in which they agreed to give rebate of 34% in license fee, extra gestation period and also extension of contract period on the same

condition till finalization of a new party for the same at the rate of license fee lastly payable in the contract period. The objection Court therefore in

terms of the compromise passed modified award on 04.07.2014. During pendency of the aforesaid proceedings, another claim was raised by the

original applicant regarding waiver of application of annual escalation clause for the disturbance period of one year i.e. from 04.06.2009 to 03.06.2010.

The Chairman, AAI referred this dispute to the arbitration. The claim of the original applicant was allowed partly by the sole Arbitrator vide award

dated 13.08.2015. By this award, the sole Arbitrator granted relief in annual escalation for eleven months i.e. from June, 2009 to April, 2010 and

directed the AAI to recalculate the payable license fee accordingly and apply interest on extra payment made by the original applicant and vice versa.

The said award directed the AAI to recalculate the payable license fee within fifteen days as given in para 21(i) and (ii) of the award. The claimant

was also entitled for adjustment of the licence fee paid extra to the respondent. If some money was payable to the AAI, the contractor would pay

18% interest and if some money was payable to the contractor, he would also be entitled to 18% interest from AAI. However, it was directed that if

the transaction is completed within 15 days of the pronouncement of the award, no interest would be payable by either party.Â

Shri Ravi Bhojak, learned counsel submitted that the AAI was under an obligation to make payment in compliance of the said award within 15 days,

however nothing was done and rather notice for outstanding payment was sent to the original applicant with a statement of account in which

absolutely illegal amounts were mentioned totally ignoring the binding effect of the said award as well as out of Court settlement. As per the

recalculation made according to the arbitration award dated 13.08.2015, the petitioner made excess payment of Rs.6,02,687/- and he was thus entitled

to interest thereon. A statement of account, recalculated as per the award dated 13.08.2015, was sent to the AAI on 17.10.2015, but no credit note

was issued to the excess payment. A joint meeting was convened on 10.05.2012 in which both the parties agreed on several conditions including the

condition of extension of the contract. The AAI had expressly agreed to extend and to allow the original applicant to have advertising rights, till the

AAI finalized new tenders of the advertising rights for Jaipur Airport, on the last paid/payable license fee. Though the original contract was for five

years i.e. from 04.06.2007 to 03.06.2012 but in the out-of-court-settlement arrived at in the meeting held on 10.05.2012, it was agreed to be extended

till finalization of new tenders, on the license fee, last paid or payable in the original contract. In view of above, the AAI extended the license for

advertising rights initially upto 03.12.2012 and thereafter on three occasions for a period of six months each up to 03.06.2014 at the same rate of

license fee at the rate of Rs.22,61,156/- per month. The original applicant made a formal request to AAI on 06.05.2014 for extension of the license for

advertising rights at Jaipur Airport, but instead of giving a positive response, the respondent, vide letter dated 12.05.2014, refused to do so. A legal

notice was issued to him on 26.05.2014. The respondent, however, replied to that notice vide letter dated 26.06.2014 and conveyed that as per the

terms of out-of-court-settlement dated 22.05.2012, the license agreement dated 25.10.2007 was extended only for a period of six months.

Learned counsel for the original-applicant argued that subsequent extensions were made on mutual consents, which last expired on 04.06.2014 and

thereafter no contractual or statutory right vested in the original applicant to claim further extension of the said license agreement. Even then, the AAI

extended the license only for two months, but acting absolutely in an arbitrary manner, the AAI demanded enhanced monthly license fee, enhancing it

from Rs.22,61,156/- to Rs.26,39,009/-. It is submitted that the original applicant never accepted the said unilateral action of the respondent and all the

payments were made by the applicant under protest. Since no other party was coming forward to take contract of advertising rights of Jaipur Airport

and in view of the likely loss of revenue to the public exchequer, the extensions were granted to the original applicant, however, the AAI unilaterally

attempted to impose higher rate of license fee, for which the applicant never agreed and made all the payment of monthly license fee under protest

including the legal rights to challenge the same. The AAI vide letter dated 21.08.2014 granted last extension for six months from 04.08.2014 to

03.02.2015. The AAI originally made request to the original applicant for extension of licence fee, but no extension letter was given. Therefore, the

conditions mentioned in the original contract of 2007 relating to annual escalation is not applicable for the extended period of licence. No consent was

ever given by the original applicant for enhancement. In the out-ofcourt-settlement arrived at in the meeting held on 10.05.2012, it was agreed to

continue the licence till finalization of new contract on the license fee lastly paid. After completion of the original contract period as well as extended

period, the license for advertising rights was extended initially upto 03.12.2012 and thereafter on three times for a period of six months up to

03.06.2014 applying the same old rate of license fee at the rate of Rs.22,61,156/- per month.Â

Learned counsel for original applicant has argued that the applicant has paid extra amount of Rs.19,59,377/- to the AAI upto February and March,

2016. He therefore invoked the arbitration clause mentioned in clause 28 of the agreement and made a request to appoint sole Arbitrator. When the

Chairman, AAI failed to do so, he approached this Court by way of the original application. It is therefore prayed that the impugned order passed by

this Court dated 8.9.2017 appointing the sole Arbitrator in such a dispute does not suffer from any error much less any legal error so as to justify its

review and recall. Learned counsel in support of his arguments has relied on the judgement of Supreme Court in Duro Felguera, S.A. vs. Gangavaram

Port Ltd.-(2017) 9 SCC 729.

The case of the AAI, as appears from what has been contended by its counsel, is that after 3.10.2012, extension of the contract of advertising right

was not given under the agreed terms of out of Court settlement dated 22.05.2015, but it was by mutual consent, whereas the original applicant has

disputed having given such consent and has alleged that it was unilateral extension given by AAI. It is their case that annual escalation clause is

applicable only on extension of licence for one year or more, whereas in the extension for less than one year in a piece meal like two months, three

months and six months as in this case, the annual escalation clause would not be applicable. Thus the outstanding shown against the original applicant

applying the annual escalation clause is untenable.

Record would bear it out that the first award dated 17.11.2011 as modified on 4.7.2014 granted rebate in licence fee, gestation period and extension in

view of losses suffered by the original applicant due to shifting of the airport terminal and bifurcation of the passenger traffic during June, 2009 to

May, 2010. The scope of second award was based on the demand made by the original applicant claiming rebate on the annual escalation applicable

as on 4.6.2009 for the period of disturbance. The Arbitrator granted that relaxation only for 11 months. As per original applicant, however, the dispute

in the present case is as to what would be the licence fee during the extended period of contract and whether AAI could unilaterally increase the

licence fee and if so at what rate, particularly when the claim of the original applicant is that after completion of the original contract period as well as

extended period, the licence was unilaterally extended by the AAI upto 3.12.2012 and thereafter on three occasions, each for the period of six months,

upto 3.6.2014, applying the same old rate of licence fee of Rs.22,61,156. It is this amount, which has been later increased by the AAI to

Rs.26,39,009/-. This is being contested by the original applicant, which he claims to have paid under protest. According to original applicant, the

contract was thereafter extended by AAI in piece meal for a span of two months, on certain occasions, for four months and simultaneously the efforts

were made to float the tenders, but in view of higher rates, no one came forward to take the work and thus the original application continued by

default till 12.9.2016. Prima facie, the dispute raised by the original applicant is that their last notice dated 17.5.2016 has not been adjudicated in the

second award as they pertained to the period subsequent to 3rd December, 2012 when the contract was extended from time to time and the AAI

charged a unilateral licence fee, which the original applicant claims to have been paid under protest.

Though this Court allowed the application on the premise that the dispute as to the rate on which the licence fee should be increased beyond the

contractual period, which came to an end and whether such licence fee could have been unilaterally increased by the applicant, but the matter was not

examined from the perspective that arbitral award dated 04.07.2014 has provided for increase in such licence fee at the rate of 10% effective from

1.5.2010 and thereafter from 1.5.2011 till the duration of the agreement between the two parties and what is the effect of original-appellant not filing

any objection to second arbitral award. Whether computation, which the AAI made has not been correctly made, as claimed by the original applicant

and whether this issue could be resolved in the proceedings under Section 36 was also not examined as a question. Regardless of whether the

Arbitrator in the second award had the jurisdiction to decide that question, this indeed amounts to error apparent on the face of record warranting

review and recall of the order and rehearing of the application on merits.

The application is therefore allowed in the terms indicated above.

A copy of this order be sent to Hon’ble Mr. Justice Sunil Ambwani, former Chief Justice of this Court, R/o E-190, Ground Floor, Kalkaji, Opposite

Nehru Place, Police Station Road, New Delhi-110 019 (cellphone number 09415238954) for information.