Model Public School (MPS) is a very reputed school in Delhi having its branches across all the major cities in India. Praj is engaged in the business of providing transport services and carries on his business under the

CS Professional · Arbitration, Mediation and Conciliation · PYQS · June 2024
Model Public School (MPS) is a very reputed school in Delhi having its branches across all the major cities in India. Praj is engaged in the business of providing transport services and carries on his business under the name and style M/s. Triumphant Transports ('TT'), a proprietorship concern. MPS had floated a tender calling for quotes, for contracting services relating to driving, managing its buses and to provide additional transportation services, as and when needed. Praj had some contact in the senior management of MPS and was able to put in a good word about himself and his track record before the committee of the school. After a detailed evaluation, the management of the school approved TT's proposal and he was empaneled as the transport provider for the school. Accordingly, on April 1, 2018 the parties entered into an Agreement, whereby TT agreed to provide transport services to MPS. The school owned twenty-two buses, which TT agreed to operate and maintain. TT was required to provide conductors, drivers, supervisors, cleaners, full-time mechanics, and other personnel. In addition, TT also agreed to provide additional buses for the purposes of picking up and dropping off the students and the employees of MPS. The Agreement was for a term of eight years that is, from April 1, 2018 till March 31, 2026 with the first five years as a lock in period. Further, TT agreed to strictly abide by the obligations stipulated in the Agreement such as, adhering to the timing for transportation of students; regular maintenance of the buses, maintaining motorable conditions of the buses; complying with the safety guidelines issued by the Supreme Court of India; limiting the number of students transported in each bus to the permissible limit; and, in the event of breakdown of buses, providing alternate vehicles etc. For the initial year, the services were provided without any issues and the payments were also received by TT in a timely manner. However, after the first year, there was a considerable delay in payments made to TT and he was having challenges, as the working capital was getting struck. In September 2019, TT sent a communication to the Principal of the school to release the outstanding payments as per terms of the Agreement. He further stated that even though the school was collecting the transportation fee from the students well in advance, the school was making payments to him in small instalments after a substantial delay. The Principal of MPS responded by an e-mail, alleging deficiencies in the services provided by TT. He also informed that MPS would be compelled to take strict action against TT, if the said deficiencies were not rectified within a period of two weeks. In first week of November 2019, through a communication MPS terminated the Agreement with TT. Aggrieved by the termination of Agreement, TT invoked the arbitration clause in terms of Clause 36 of the Agreement. Subsequently, the Court, by an order dated April 6, 2020, directed the Delhi International Arbitration Centre (DIAC) to appoint an arbitrator to adjudicate the disputes between the parties. During the arbitration, MPS also produced evidences including the complaints filed by parents of the students against TT. In the background of above facts, answer the following: (b) In the background of a case law, examine whether MPS has any recourse, if there is a delay in filing counter claims.

Answer & Explanation:

The relevant facts given are similar to the case of Airone Charters Private Limited v. Jetsetgo Aviation Services Private Limited decided by High Court of Delhi on 12.10.2021. In this case the Petitioner's counterclaims were struck off before the Arbitral Tribunal (AT) on the ground of being filed at an extremely belated stage. Thereafter, after attempting several different courses of actions to agitate its counterclaims, the Petitioner finally filed the present Petition under Section 11 of the Arbitration & Conciliation Act, 1996, for referring its counterclaims to arbitration by the already constituted AT (presumably because they already knew the disputes very well). The Court observed as follows: The Claims of the Petitioner were prima facie appearing to be within limitation. In any case issues of limitation and res-judicata which were raised by the Respondent would be looked into by the Arbitrator once it was in seisin of the dispute. The right to legal redress is a fundamental right and cannot be obliterated altogether. Therefore the right of the Petitioner to raise its counterclaim could not be destroyed altogether, even though initially it had been dismissed by AT being delayed, and as the time period of the arbitration was almost about to expire. The Petitioner has the choice of either raising its disputes as a counterclaim or by serving fresh notice of dispute (State of Goa v. Praveen Enterprises). Simply because the counterclaims were alive at the inception of the first arbitral proceedings and were required to be raised then, it cannot be said that they could not be permitted to be raised later, unless the arbitration clause was specifically worded in that manner. In view of the above discussion, it can be said that MPS can take recourse in accordance with the observation of the Court in this case.

Topics: Arbitration Proceedings

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