Business Train Arbitration and Injunctive Order

Business Train Arbitration and Injunctive Order Arbitration Case Laws Civil Law Injunction Knowledge - Civil Law Litigation & Arbitration Restraint Order Solutions - Civil Law Supreme Court Transport & Logistics Mr. Justice Amir Hani Muslim in his judgment has decided the issue regarding business train arbitration and injunctive order in Civil Petitions No. 131 of 2015 etc.

1. These Petitions are directed against the judgment dated 2.12.2014, passed by the Lahore High Court, Lahore, whereby Civil Revision and FAO filed by the Petitioner were dismissed.

2. Facts necessary for the purpose of deciding these proceedings are that the Petitioner invited Expression of Interest from qualified parties by floating tender in the National Press, for plying Train between Lahore-Karachi-Lahore on public-private partnership basis. The Respondent being the highest bidder was declared successful and awarded the contract. The agreement between the Petitioner and Respondent No.1 was executed on 18.8.2011, which was subsequently amended on 26.12.2011. The term of the agreement was initially fixed for a period of five years, on the terms and conditions enumerated in the agreement, extendable for another term of five years with mutual consent of the parties. As per the terms of agreement the train started its operation by 4.2.2012. Under Article 6.1 of the agreement the Business Train was scheduled to run between Lahore and Karachi Cantt. as agreed upon, and the Respondent No.1 was obliged to pay to the Petitioner a sum of Rs.1.573 million per single train journey calculated at 88% capacity of luggage and passenger, normal business class fares for passengers and luggage. The journey fare was required to be deposited by the Respondent No.1 before commencement of the train journey. It was further stipulated that any delay in payment of the agreed fare would entail additional penalty of 5% of the amount in case no amount is deposited till the 6th day, the Petitioner would be entitled to suspend the operation of the Train without any notice.

3. It was further stipulated in the said article that the Respondent No.1 would invest a sum of Rs.225.786 million for value added services, which would be treated as performance guarantee/security and additional expenses incurred for value addition or uplifting in respect of the business train would be the sole responsibility and liability of the Respondent No. 1 which would, under no circumstances, be transferred to the Petitioner. Under Article 6.2 of the agreement, in case one or more passenger coaches are not available by the Petitioner, the Petitioner will not recover any amount equal to 88% of carrying capacity of the coaches and if additional coaches are provided then the Respondent No.1 shall pay to the Appellant equal to 88% of the amount of carrying capacity of coaches.

4. However, the Respondent No.1 inspite of depositing of Rs.225.736 million as performance guarantee, paid a sum of Rs.3.19 million before the commencement of the business, without justifiable reasons. The Respondent Company failed to own its commencement as per Article 6.1 of the agreement and on 10.2.2012, exactly after six days of commencement of business, approached the Ministry of Railways with the request to suspend operation of Article 6.1 of the agreement, undertaking to pay the outstanding amount within a period of six months. The Ministry of Railways through a summary dated 16.5.2012 referred the matter for change in the composition of business express to the Economic Coordination Committee [hereinafter referred to as “ECC”] in order to safeguard the interest of the Railways, which was stranger to the agreement. The ECC decided to determine the basis of award of contract and validity of personal agreement for sharing of revenue, by evaluation through a third party. The ECC appointed M/s Deloitte Pakistan as a consultant to make its recommendations, which submitted its following recommendations and the E.C.C in its meeting dated 1.1.2013 approved them:

i. “Minimum occupancy to be achieved at 65%;
ii. Share ratio of gross revenue can be set as 80.20 between Pakistan Railways and Joint Venture Partners up to occupancy of 75%; and
iii. For occupancy achieved above 75% the sharing ratio between PR and JV Partner can be set at 75.25.”

5. In the light of the recommendations of M/s Deloitte Pakistan on 3.7.2012 the ECC took the following decision:

“The Economic Coordination Committee of the Cabinet considered the Summary dated 16th May, 2012, submitted by Ministry of Railways on “Changes in the Composition of Business Express” and decided to constitute a Committee, comprising Minister for Information & Broadcasting (Convener), Chairman Board of Investment, Deputy Chairman, Planning Commission and Secretary Ministry of Railways for further examining the matter and suggesting a viable course of action for Pakistan Railways. Ministry of Railways will also act as secretariat of the Committee.”

6. On 17.12.2012, the Ministry of Railways floated another summary, proposing that the Respondent No.1 had defaulted to the extent of Rs.289.8 million and any dispensation granted to Respondent No.1 must be accompanied by a caveat with the understanding that the outstanding amount must be cleared within one year. This proposal contained in the summary was an interim arrangement, which was approved by the ECC and on 15.3.2013 was endorsed by the Federal Cabinet.

7. The Respondent No.1 failed to clear its outstanding dues in terms of the Cabinet decision. On 23.2.2013 the Respondent No. 1 undertook to clear the outstanding amount of Rs.236,247,808/- in equal installments starting from July 1st, 2013 and concluding the entire amount within the stipulated period. On 28.2.2013, the Ministry of Railways floated another summary to the ECC on which following decision was made, which was approved by the Government on 4.6.2013:

“The Economic Coordination Committee of the Cabinet considered the Summary dated 28th February 2013, submitted by the Ministry of Railways on “Charges in the Composition of Business Express” and decided that the additional services provided to the passengers by the JV partner should not be part of ticket/fare and revenue be shared accordingly, with the condition that there is no downward revision in the actual fare.”

8. On 17.9.2015, The Ministry of Railways moved yet another summary, stating that summary to review the earlier decisions, came under discussion of the ECC on 17.6.2015, in which it was stated that matter needs reconsideration of ECC to the Cabinet and that the decision of ECC to the Cabinet dated 1.1.2013 may be re-visited and re-called ab initio, and save Pakistan Railways from recurring losses. After consideration of the summary, the ECC took the following decision:

“The Economic Coordination Committee of the Cabinet considered the summary dated 11th September, 2015, submitted by the Ministry of Railways regarding “Change in the Composition of Business Express Train”, endorsed the opinion of Ministry of Law, Justice and Human Rights contained in para-9 of the summary and approved the proposal contained in para 11 of the summary.”

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