IN THE HIGH COURT OF DELHI AT NEW DELHI
OMP No. 658 of 2011
Date of order: November 21, 2011
VF SERVICES (UK) LIMITED ..... Petitioner
Through: Mr. Neeraj Kishan Kaul, Senior
Advocate with Mr. Neeraj Malhotra, Mr. J.
Sivanandaraaj, Mr. Shourjyo Mukherjee and
Ms. Trishna Mohan, Advocates
versus
UNION OF INDIA & ANR ..... Respondents
Through: Mr. Ruchir Mishra, Advocate
CORAM: JUSTICE S. MURALIDHAR
1. Whether Reporters of local papers may be
allowed to see the judgment? No
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be reported in Digest? Yes
JUDGMENT
21.11.2011
1. This is a petition under Section 9 of the Arbitration & Conciliation
Act, 1996 („Act‟) by VF Services (UK) Limited having its office in
London seeking a stay of the operation of a letter dated 8th August
2011 issued by the Embassy of Government of India at Netherlands,
terminating the Visa Outsourcing Contract [„VOC‟] dated 26th
November 2010 entered into between the Embassy of India, The
Hague, Respondent No. 2 herein. 4. At the hearing on 3rd October
OMP No. 658/2011 Page 1 of 9
2011 learned counsel for the Respondent placed reliance on certain
additional documents which had not been placed along with the reply.
While adjourning the case to enable the Petitioner to respond to the
said documents, this Court ordered the termination notice would not
take effect till the next date.
2. The relevant facts are that in terms of the VOC dated 26th
November 2010 the Petitioner was to provide range of services at
three locations i.e., The Hague, Amsterdam and Rotterdam. These
included distribution of visa/OCI card/PIO card/passport application
forms, assistance to applicants, sending/ collection of Visa/OCI
card/passport, ensuring applications are complete, return of
documents to applicants, reporting of fraud, and provision of other
incidental internal facilities. In terms of the VOC, Visa/Consular
Service Centres were to be opened for the public by the Petitioner on
or before 90 days from the date of signing of the agreement. In the
request for proposal („RPF‟) issued by the Respondents inviting bids,
it was indicated that service providers would be required to start
operations within three months from the signing of the agreement and
full operations would have to commence within one month from the
start of operations. Further it was provided in the RPF that either party
could terminate the contract by giving two months‟ advance notice of
being unable to carry on the services any longer. Clause 11 of the
VOC provided for termination and read as under:
“11. Termination
a. Either party may terminate the contract by giving two
OMP No. 658/2011 Page 2 of 9
months‟ advance notice of being unable to carry on the services
any longer. In such circumstances, the process of smooth
takeover of services will deem to begin from the date of receipt
of the notice by the other party or from the date as stated in the
notice, whichever is later and the process of termination/smooth
takeover will be completed in a reasonable period of time or not
more than two months.
b. In the event of implementation of „Visa Free‟ regime agreed
to mutually between the Government of India and the
Government of the Netherlands, the Government of
India/Mission will not have any liability to compensate the
Service Provider.
c. In the unlikely event of break-up of diplomatic relations
between the Government of India and the Government of the
Netherlands the Government of India/Mission will terminate
this Agreement at one week‟s notice without any liability to the
Government of India/Mission.
3. Clause 14 of the VOC set out the term of agreement and read as
under:
14. Term of Agreement
14.1 This agreement, which commences on 26th November
2010, would be valid for a three year period expiring on 25th
November 2013 subject to performance based annual review
that could lead to its termination before the three year deadline.
14.2 The Government of India and/or the Mission shall have the
option to extend the operation of this Agreement for a period to
be mutually agreed upon on such terms and conditions as are
agreed to by giving the Service Provider notice of eight weeks
prior to the date on which it is due to expire”.
OMP No. 658/2011 Page 3 of 9
4. Clause 10 of the VOC provided that any dispute or difference
regarding the interpretation of the provisions of the VOC should be
resolved amicably between the parties. If the dispute was not resolved
through mutation consultations within a period of six months, either
party may refer the dispute to the arbitration in accordance with the
Act. There was to be a sole arbitrator and the place of arbitration was
New Delhi, India. The applicable law was the law of India.
5. Mr. Neeraj Kishan Kaul, learned Senior counsel appearing for the
Petitioner submitted that although by an interim order, particularly in
view of the legal bar under Section 14 (1) (c) read with Section 41 (e)
of the Specific Relief Act 1963 („SRA‟), the Court would normally
not be inclined to grant any interim stay of the order terminating the
contract which by its very nature was determinable, this Court had in
several decisions including Pioneer Publicity Corporation v. Delhi
Transport Corporation 2003 (2) Raj 132 (Del) and Atlas Interactive
(India) Private Limited v. Bharat Sanchar Nigam Limited 2005 (4)
Raj 585 (Del), explained that an entity of State could not be seen to
be acting arbitrarily or unreasonably even in the realm of contract and
that in appropriate cases this Court would grant such interim relief.
According to him, this was one such case. Referring to the
correspondence exchanged between the parties prior to the letter of
termination dated 8th August 2011 it was submitted by Mr.Kaul that
the reasons adduced by Respondent No. 2 did not justify the abrupt
termination of the contract. The Petitioner had always expressed its
willingness to cure any deficiencies. Some of the complaints were
OMP No. 658/2011 Page 4 of 9
anonymous and could have been engineered by the Petitioner‟s
competitors. In terms of the VOC an annual review was due. The
short-comings pointed out were far too few and in any event not
serious enough to warrant the disproportionate measure of termination
of the contract. The letter of termination gave no reasons whatsoever.
The facts contained in the additional affidavit filed by Respondent No.
2 pertained to events subsequent to the date of termination, i.e., 8 th
August 2011 and could not be acted upon to justify the termination. It
was further submitted that apart from the Petitioner having a prima
facie case, the balance of convenience in granting a stay of the
termination of the VOC was also in its favour. The term of the
contract was till 25th November 2013. On the question of irreparable
hardship, it is pointed out that the Petitioner is at present providing
visa services for the Government of India („GOI‟) at its embassies in
17 other countries as well as providing visa services on behalf 37
countries other than India. Given its excellent track record thus far,
the termination of the VOC would adversely affect the Petitioner‟s
reputation and would cause it severe prejudice in the matter of bidding
in the future for visa services not only for the embassies of India but
of other countries as well.
6. Mr. Ruchir Mishra, learned counsel for the Respondents on the
other hand submitted that Respondent No.2 the letter dated 8th August
2011 terminating the VOC clearly indicated that it was Clause 11 of
the VOC which had been invoked and therefore, the termination was
not stigmatic. Also, the termination was not effected all of a sudden.
OMP No. 658/2011 Page 5 of 9
A number of complaints had been received by Respondent No.2 from
visa seekers from The Hague and elsewhere in Netherlands about the
poor quality of services offered by the Petitioner. Despite several
warnings and opportunities, the Petitioner failed to improve the
quality of services. He referred to the correspondence exchanged
between the parties, copies of which were enclosed both with the
reply and the additional affidavit of the Respondents. The Indian
embassy abroad was the first point of contract for visitors to India
from the concerned country and it was important that the services
provided to such intending visitors were of the highest quality. Mr.
Mishra submitted that no interim relief that would result in the
continuation of a contract that stood terminated could be granted by
this Court in terms of Section 14 (1) (c) and Section 41 (e) SRA. He
pointed out that an arbitrator was likely to be appointed shortly to
adjudicate the disputes between the parties.
7. The VOC is a contract which by its very nature is determinable.
Although in exceptional facts of individual cases involving agencies
of the State, this Court has granted interim relief even against the
termination of a contract (for e.g., Pioneer Publicity Corporation v.
Delhi Transport Corporation), the settled law is that even where a
contract has been illegally terminated the aggrieved party would be
able to only claim damages and no interim relief against termination
of the contract. In Indian Oil Corporation v. Amritsar Gas Service
(1991) 1 SCC 533, the Supreme Court explained that even where one
of the contracting parties was an agency of state, the constitutional
OMP No. 658/2011 Page 6 of 9
limitations of Article 14 as explained in Dwarkadas Marfatia and
Sons v. Board of Trustees of the Port of Bombay(1989) 3 SCC 293,
Mahabir Auto Stores v. Indian Oil Corporation(1990) 3 SCC 752
and Shrilekha Vidyarthi v. State of U.P. (1991) 1 SCC 212 would not
apply since the case was based only on breach of contract and
remedies flowing therefrom. Therefore (SCC, p.541) “the further
questions of public law based on Article 14 of the Constitution do not
arise for decision in the present case and the matter must be decided
strictly in the realm of private law rights governed by the general law
relating to contracts with reference to the provisions of the Specific
Relief Act providing for non-enforceability of certain types of
contracts.” On the facts of that case it was held that (SCC, p.542)
“granting the relief of restoration of the distributorship even on the
finding that the breach was committed by the appellant-Corporation is
contrary to the mandate in Section 14(1) of the Specific Relief Act.”
8. Here the VOC dated 26th November 2010 is by its very nature
determinable. There appear prima facie to be no extenuating
circumstances that warrant a departure from the settled legal position
that the court will not grant an interim relief of continuing a contract
that is by its very nature determinable. In other words, this Court is
not persuaded to overlook the legal bar erected by Section 14 (1) (c)
read with Section 41 (e) of the SRA. Clause 11 of the VOC, which has
been invoked by Respondent No.2, envisages either party terminating
the contract by giving two months‟ advance notice “of being unable to
carry on the services any longer”. Respondent No. 2 did give two
OMP No. 658/2011 Page 7 of 9
months‟ advance notice to the Petitioner. There was correspondence
exchanged between the parties in relation to the complaints received
about the unsatisfactory quality of the services being provided by the
Petitioner to visa seekers. The documents along with the reply of the
Respondents are copies of some of the complaints received from visa
seekers about the quality of the services at the office of the Petitioner
at The Hague. It also appears that the Petitioner did give written
assurances about rectifying the deficiencies pointed out by
Respondent No. 2. One of the complaints received on 9th July 2011
mentions that “the waiting time is very-very long” as a result of which
“many clients were frustrated and some even decided to leave without
submitting their visa application.” The other complaint was “body and
communication language of staff is not good. They act and react very
rude.” Another complaint dated 26th July 2011 from a foreigner
visiting the Petitioner‟s office was that “everyone in the room is
complaining about the turn-around time of service delivery”. Of
course, the Petitioner on its part has placed on record the feedback
forms it has received from several customers who have expressed
their satisfaction with the services offered by the Petitioner.
9. For the purposes of the present petition this Court does not propose
to determine whether the complaints against the Petitioner were
justified. This Court is not expected at this stage to sit in appeal over
the decision taken by Respondent No. 2 in light of the complaints
received by it. It is not possible for this Court to whether the above
complaints were trivial or substantial. That is something the
OMP No. 658/2011 Page 8 of 9
Respondent No.2 has to take a call on given the nature of the contract.
All that can be said at this stage is that the quality of the services
offered by the Petitioner, and the impact it would have on the image
of the country in the eyes of a visitor to India are certainly relevant
considerations that would go into the process of Respondent No.2
arriving at a decision whether to continue the contract. The impugned
decision communicated to the Petitioner by Respondent No.2 by its
letter dated 8th August 2011 cannot be said to be an impulsive one
taken at the spur of the moment. It is difficult to prima facie conclude
that the decision was arbitrary or unreasonable or disproportionate. It
is however emphasised that this is a tentative conclusion for the
purposes of the present petition under Section 9 of the Act. It is not
intended to influence the final decision in the arbitration proceedings.
10. For the aforementioned reasons, this Court is not inclined to
continue the interim order passed by this Court on 3 rd October 2011 or
to grant any of the reliefs prayed for in this petition. The said interim
order is accordingly vacated. The petition is dismissed with no order
as to costs.
S. MURALIDHAR, J.
November 21, 2011
rk
OMP No. 658/2011 Page 9 of 9
