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PEP Hospitality And Services, Rep. by its Managing Partner Ranjitbijoor, Bengaluru v/s Bangalore Metro Rail Corporation Ltd., Rep. by its Managing Director, Bangalore & Another

    W.P. No. 20846 of 2019 (GM-RES)

    Decided On, 03 January 2020

    At, High Court of Karnataka

    By, THE HONOURABLE MR. JUSTICE N.S. SANJAY GOWDA

    For the Petitioner: Rakesh Bhatt, Advocate. For the Respondents: Basavaraj V. Sabarad, Advocate.



Judgment Text

(Prayer: This Petition is filed Under Articles 226 & 227 of the Constitution of India, praying to direct the respondents to grant approval to the petitioner to commence commercial operation of the restaurant cum party hall at Vijayanagara Metro Station, Bengaluru (Location Code R2/11/VJN/GL=N/11 vide letter dated 5.3.2019 Annexure-N.)

1. The petitioner is challenging the notice of termination of the license dated 05.03.2019 vide Annexure- N.

2. The undisputed facts are that the respondent - Bangalore Metro Rail Corporation Ltd., (hereinafter called as 'BMRCL') invited tenders for selection of licensee for operating retail outlets along Reach-1, 2 and 3 of Namma Metro Stations in the said tender, the petitioner had participated in the tender and he was the successful bidder in respect of the retail outlet at the Vijayanagar Metro station. The BMRCL has thereafter entered into a license agreement with the petitioner by which it agreed for the construction and for operating Restaurant cum party hall at Vijayanagar Metro Station. The said agreement stipulated that the petitioner was liable to pay a monthly license fee of Rs.1,26,000/-and a further sum of Rs.3000/- as common area maintenance fee.

3. After the license agreement had entered into between them, the notice as per Annexure-N has been issued which is titled as a to be notice for termination of the license. The relevant portion of Annexure N dated 5.3.2019 reads as follows:-

"As per Clause 14.1(d) of the contract, the license can be terminated for "Failure by the Licensee to commence commercial operations at the Retail Outlet even after expiry of the Grace Period or any extension thereof,"

On visit to the Metro Station, the Managing Director BMRCL has noticed the following:

i. The license holder has constructed permanent structures in violation of the article 4.1 of the license agreement.

ii. The area is abutting the busy main carriage way (Vijaynagar Bus Stand Road) itself with a narrow footpath.

iii. The entry from the service road has encroached more than half of the foot path itself as the entry steps have been constructed on the foot path.

Therefore, the place is not suitable for Establishing Restaurant Cum Party Hall at Vijayanagar Metro Station in the interest of public safety.

For the reasons stated above and as you have committed breach of contract, it is proposed to terminate the contract for Establishing Restaurant Cum Party Hall. If you have any reply, you may file the same, within 10 days from the date of receipt of this notice."

4. According to the petitioner, the notice of termination though states that it was open for the petitioner to give a reply to the notice of termination, it is in essence an order of termination of license and it cannot be construed as a show cause notice since it is clear for the tone and tenor of the notice that the authority had made up its mind to terminate the license and the last few lines asking for a reply is an attempt to create an impression of fair play. He contends that the notice which clearly stipulated that the place was not suitable for establishing restaurant cum party hall is by itself indicative of the clear intention of the respondent to terminate the licensee. He also contends that the petitioner has invested huge sums of money for construction of the restaurant and in purchasing equipments and if at this stage, BMRCL is permitted to terminate the license and that too after collecting license fee for several months, the petitioner would be severely prejudiced and the entire manner in which BMRCL has dealt with the matter clearly smacked of arbitrariness and perversity.

5. On the other hand, Sri Basavaraj V. Sabarad, standing counsel for respondents submitted that Annexure-N was only a show cause notice and the petitioner was entitled to give his reply, on receipt of which, the respondents would pass necessary orders. He also submitted that there is an arbitration clause in the license agreement providing for resolution of the disputes andhence the writ petition should not be entertained.

6. I have heard the learned counsel for both the parties and considered the material on record.

7. No doubt there is a clause in the license agreement which provides for resolving the disputes by way of arbitration. The said clause reads as follows:

"The parties shall attempt to resolve any disputes or differences amicably. In the event that the dispute is not resolved through discussions within 30(thirty) days of the dispute having arisen, the dispute shall be referred to Managing Director, BMRCL who shall provide his decision within a period of 30 (thirty) days. If either Party is dissatisfied with the decision, such party may request that the dispute be resolved through arbitration. The arbitration shall be referred to a panel of three (3) arbitrators. Each party shall appoint an arbitrator within fifteen (15) days of notice invoking arbitration, and the two arbitrators so appointed shall appoint the third arbitrator within fifteen (15) days thereafter. The arbitration shall be governed by the Indian Arbitration and Conciliation Act, 1996 as amended and the laws prevailing in India. The place of arbitration shall be Bengaluru and the arbitration shall be conducted in English language. The award of the arbitrators shall be final and binding on the parties."

8. As could be seen from the above clause, at the outset, the parties to the license agreement should explore the possibility of an amicable settlement and in the event of a failure to resolve the dispute amicably, the matter would be referred to the Managing Director who was required to take a decision in the matter and thereafter the party aggrieved could resort to arbitration.

9. In the instant case, the tone and tenor of Annexure - N (as extracted above) notice does not indicate any intention on the part of BMRCL to even explore the possibility of settling the matter amicably. A bare reading of Annexure N issued by BMRCL indicates that they do not want the license to continue. I am of the view that this approach of BMRCL is arbitrary and unfair.

10. Assuming the petitioner has committed breach of certain clauses of agreement which entitles BMRCL to terminate the license, the fact that BMRCL has indicated in its notice that the place is not suitable for running restaurant cum party hall in the interest of public safety by itself proves that BMRCL has already come to the conclusion that license in favor of the petitioner is required to be terminated. This approach of BMRCL is incorrect and smacks of arbitrariness, especially when the notice of termination was issued pursuant to the visit of the Managing Director of the BMRCL, who under the agreement is required to take a decision on the matter after an attempt to resolve the disputes amicably has failed.

11. In my view, this action of BMRCL in issuing a notice of termination without first making an attempt to settle the matter amicably, is unfair and contrary to all norms of fair play and also an infringement of the contractual obligation to endeavor for an amicable settlement.

12. I am therefore of the view that the respondent is first required to enter into discussions with the petitioner and explore the possibility of an amicable settlement before it takes any decision regarding termination of the license.

13. The BMRCL is required to take into consideration the investments made by the petitioner for starting operations and view the entire matter in a holistic and pragmatic manner.

14. It is made clear that it is not open for BMRCL to contend that the licensed premises is not suitable for establishing a restaurant after lapse of perio

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d of 1 years and it cannot urge this ground for termination of the license. 15. In view of the above, it is therefore necessary to direct BMRCL to act in terms of the Agreement and enter into discussions with the petitioner and explore the possibility of an amicable settlement. If there is any deficiencies on the part of the petitioner, BMRCL should consider the same in a fair and objective manner, and consider the reply (Annexure-O) submitted by the petitioner sympathetically having regard to the fact it has collected the license fee from the petitioner for more than one year as thereafter take an appropriate decision in accordance with law. 16. It is however made clear that BMRCL cannot terminate the license on the ground that the premises is not suitable for establishing restaurant cum party hall. Accordingly, this writ petition is disposed of.
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