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2015 SCC OnLine Del 10220 : (2015) 4 Arb LR 335

In the High Court of Delhi

(BEFORE S. MURALIDHAR, J.)

O.M.P. 1264/2013
Air India Ltd. .…. Petitioner
Mr. R.S. Suri, Senior Advocate with Mr. Manoj Arora, Mr. Siddharth
Shanker and Ms. Pallavi Tayal Chadda, Advocates.
Versus
Gati Ltd. .…. Respondent
Mr. P.V. Kapur, Senior Advocate with Mr. Vijay Nair, Mr. Ravi Gandhi,
Mr. Puneet Damodar and Mr. Ritesh Sharma, Advocates.
And
O.M.P. 1082/2014
Gati Ltd. .…. Petitioner
Mr. P.V. Kapur, Senior Advocate with Mr. Vijay Nair, Mr. Ravi Gandhi,
Mr. Puneet Damodar and Mr. Ritesh Sharma, Advocates
Versus
Air India Ltd. .…. Respondent
Mr. R.S. Suri, Senior Advocate with Mr. Manoj Arora, Mr. Siddharth
Shanker and Ms. Pallavi Tayal Chadda, Advocates.
O.M.P. 1264/2013 and O.M.P. 1082/2014
Decided on July 7, 2015
JUDGEMENT
1. These are two petitions under Section 34 of the Arbitration and
Conciliation Act, 1996 (‘Act’) challenging the unanimous Award dated
17th September 2013 of a three member Arbitral Tribunal (‘AT’) in the
disputes between the parties.
2. A wet lease freighter agreement (‘WLA’) was entered into between
GATI Ltd. (‘GATI’) and Indian Airlines Ltd. (‘IAL’) for lease of five
freighter Boeing 737-200 aircrafts. As a result of the merger of IAL with
Air India Ltd. (‘Air India’), all the rights, interest, duties, liabilities and
obligations of IAL and Air India have been vested in the National
Aviation Company of India Ltd. (‘NACIL’).
3. Air India owned old Boeing 737-200 aircrafts which were operated
by its passenger flight service called Alliance Air. Since the aircrafts
were not in good shape from the point of view of safety and security,
Air India decided to convert them into cargo freighters. Proposals were
invited by Air India from interested parties to block space in the said
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cargo freighters which were to be operated under the ‘hub and spoke’
pattern. An offer was submitted by GATI on 9th April 2007, and its
acceptance resulted in the WLA being entered into between the parties
th
on 16 May 2007.
Relevant clauses of the WLA
4. In terms of the WLA, Air India agreed to lease five freighter
Boeing 737-200 aircrafts to GATI for a period of five years commencing
th th
from 15 July 2007 till 14 July 2012 on the terms and conditions
contained in the agreement. The aircrafts were to be provided with
cockpit crew and with complete maintenance, operations and full
insurance.
5. In terms of Clause 3.1 of the WLA, the leased aircrafts were to
offer payload of approximately 15 tons on each of them “on committed
basis for agreed freighter flights for the hours mentioned in Clause
5.1”. For the rest of the duration, Air India had discretion to use the
leased aircrafts. Air India was to ensure that the leased aircraft was in
compliance with the minimum ICAO requirements relating to their
airworthiness standards. Air India was to comply with the specific
requirements of the Directorate General of Civil Aviation (‘DGCA’) of
India; it was to obtain all Government clearances including clearances
of crew to operate the leased aircraft. In terms of Clause 3.4, the
operations and the maintenance of the aircraft were to be in accordance
with the rules and standards applicable in India and the approved
maintenance and flight manuals of Air India as per the
recommendations of the manufacturer of the aircraft. Under Clause 3.6,
it was provided that Air India assumed no responsibility for loss of
available payload due to any load restrictions or penalties imposed on
the sectors of operations that may arise based on the performance of
the aircraft.
6. Under Clause 4.1, it was stated that the aircrafts were scheduled
to be inducted as per Clause 5.6 which set out a table of the dates of
such schedule. The five aircrafts were numbered as A1 to A5. The
scheduled date of the operation of the aircraft with reference to the in-
date and out-date for conversion at the vendor's location were as
under:
Aircraft Aircraft Aircraft out Aircraft
proposed in Date from Schedule date
date at Vendors Vendors for Operation
Location for Location after
Conversion Conversion
A1 25th Mar'2007 30 Jun'2007 15 Jul'2007
A2 15 May'2007 15 Aug'2007 01 Sep'2007
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A3 01 Jul'2007 30 Sep'2007 15 Oct'2007

A4 15 Aug'2007 15 Nov'2007 30 Nov'2007
A5 01 Oct’ 2007 30 Dec’ 2007 15 Jan'2008

7. Clause 4.1 further provided that in case of any delay in the

induction of the aircrafts, Air India “shall not be liable” for such delay.
Beyond the initial term of the lease, the WLA was extendable for a
further period “by mutual consent”. GATI was not to sub-lease the
leased aircrafts to other parties. However, GATI was to have a
preference in chartering the aircraft subject to the payment of actual
charter rate before the same was offered to the third party.
8. Clause 5 dealt with the rental. Under Clause 5.1, GATI was to pay
Air India the rental payment - per block hour flown (‘lease rental’).
GATI gave Air India ‘a minimum guarantee utilization of aircraft's to
operate 25 days in a month with minimum seventeen hours per day on
five aircrafts operation i.e. 425 per month subject to the reasons of
force majeure and ‘availability of the freighter aircrafts’. Initially, GATI
th
was to pay Air India on actual flown hours till the induction of 5
aircraft in operation. The block hours would be as per the actual block
time recorded in the aircraft technical logbook. Air India was to raise an
invoice, duly supported by copies of the certified logbook for actual
number of block hours by the 5th day of the consecutive next month
and if that was a holiday, the next working day. The payment of lease
rental was to be free of any deductions, other than the applicable taxes
and disputed amounts or set offs as agreed between the parties. Clause
5.8 stated that notwithstanding the Clauses 5.1 to 5.7, Air India “does
not in any manner warrant or commit to the dates of
induction/operation of the Aircraft as set forth in this Agreement. Any
delay in the induction/operation of the Aircraft shall not be held against
the Lessor and the Lessor shall not be liable in any manner whatsoever
towards the Lessee”.
9. Clause 6 dealt with space utilization. GATI was to produce and
offer, at its will, the cargo as per space made available for each sector.
If for any reason the space on any sector remained unutilized, GATI at
its sole discretion was to share the unutilized space with Air India to fill
up unutilized payload. Air India was to offer such cargo to be carried as
per the market rates for each sector. As per Clause 6.1A, if GATI was
unable to utilize the entire space allocated aboard the aircraft due to
inability to provide space/equipment by Air India, GATI was not to pay
Air India such charges calculated on pro-rata basis towards
‘remunerable space allocated’. However, if GATI was unable to utilize
the entire space due to deficiencies/lack of booking etc. on the part of
the GATI, then the entire lease charges were payable to Air India.
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10. GATI was to provide an irrecoverable bank guarantee (‘BG’) in

favour of Air India's bank equivalent to three months estimated billing
(Clause 8.1). Upon GATI's failure to make payment of the undisputed
amounts within the stipulated period, Air India had the right to invoke
the BG after giving due notice. The BG which was valid for a period of
three years was to remain valid for six months after expiry of the lease.
11. Clause 12.1 provided that either party could terminate the WLA
giving 120 days' reasoned notice in writing to the other, and upon
expiry of the notice period, the WLA “shall stand terminated”. The other
circumstances under which the parties could terminate the WLA
forthwith were set out in Clause 12.2.
12. Annexure 1-A of the WLA provided for the freighter operation
schedule giving the dates of induction for operation of the aircrafts and
total flying hours for number of aircrafts. By 15th January 2008, five
aircrafts were expected to fly altogether 16.50 hours per day. In terms
of Clause 8.1 of the WLA, GATI furnished two BGs of 15 crores each.
This amount was arrived at after estimation of lease rent to be billed for
four freighters for a period of three months since, after entering into the
WLA, Air India informed GATI that it would be in a position to provide
GATI with only four freighters.
Events triggering the arbitration
13. Both the BGs were invoked by Air India on 24th March 2009
against part satisfaction of the demand of Rs. 53.35 crores which it
th
claimed was due and payable to it by GATI. By a letter dated 17
March 2009, GATI terminated the WLA. Air India by its letter dated 23rd
March 2009 protested and termed the termination as illegal.
14. GATI invoked the arbitration clause by its letter dated 19th March
2009 and thereby the AT came to be constituted. Apart from cost of the
arbitral proceedings, GATI preferred eight distinct claims and Air India
preferred eight counter claims. On the basis of the pleadings, there
were as many as twenty issues framed by AT. There were 13 witnesses
examined on behalf of the GATI (CW-1 to CW-13) and 12 witnesses on
behalf of Air India (RW-1 to RW-12). GATI filed forty one volumes of
documents and Air India filed three volumes of documents. Then there
were affidavits and interrogatories also filed.
Issue No. 1
15. Issue No. 1 was whether there was a diversion of an aircraft by
the Air India as claimed by GATI in para 18 of the statement of claim
(‘SOC’). The case of GATI was that Air India delivered the first two of
the five proposed aircrafts beyond the stipulated date. While the first
two aircrafts, were as per Clause 5.6 of the WLA, to be delivered on 15th
st
July and 1 September 2007 respectively, they were in fact delivered
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only on 17th October and 27th October 2007 respectively.

16. According to GATI, it learnt much later that in breach of the
WLA, Air India had in fact delivered the first aircraft, after it was
converted for use, to a competitor of GATI, viz., INDIAPOST. Further,
the third aircraft which was to be delivered on 15th October 2007 was in
th
fact delivered only on 7 May 2008. Moreover, within twenty four days
of delivery, Air India informed GATI that the said aircraft would have to
undergo engineering checks and would have to be withdrawn. Despite
the protest of GATI, the third aircraft was withdrawn on 31st May 2008.
GATI claimed that the withdrawal of the third aircraft was made on a
false pretext, that it was withdrawn for being provided as a standby
aircraft to INDIAPOST and that it came to its knowledge when by
inadvertence a bill raised by Air India for operation of the third aircraft
which was meant for INDIAPOST was delivered to GATI. The third
th
aircraft was again offered by email dated 11 July 2008 and fourth by
nd
email dated 22 July 2008. GATI's case was that on account of the non
-adherence to the delivery schedule, it could not plan its business in
advance, nor it could enter into contracts with customers, thereby
incurring heavy business losses. The case of GATI was that Air India's
non-adherence to the delivery schedule and the diversion of the
freighter aircrafts to other parties in violation of the WLA amounted to a
‘repudiatory’ breach by Air India.
17. The AT found that as far as the statement of defence (‘SOD’) of
Air India was concerned, it did not deal with para 18 of the SOC where
GATI had pleaded about the diversion of the aircraft. The case of Air
India emerged in para 17 of the affidavit of Mr. S.K. Sharma (RW-8)
where it was stated that the operations under the WLA were ‘charter
operations’ and no aircrafts was to be delivered to GATI. In para 18 of
its affidavit, RW-8 stated that no freighter was deployed in the services
of INDIAPOST in contravention of the WLA.
18. From the answers to the interrogatories furnished to the
witnesses of Air India, the AT noted that according to Mr. Anil Shakdher
(RW-2), aircraft bearing registration VT-EHH was operated under
charter to INDIAPOST with effect from 24th August 2007. He stated
that there was no delivery to be made of aircraft and no specific
registration number was promised in the WLA. He confirmed that the
th
aircraft VT-EHH was sent to Miami for conversion on 18 March 2007
th
and received back on 6 July 2007.
19. The AT referred to the 93rd meeting of the Board of Directors
th
(‘BOD’) of IAL held on 11 July 2007, which recorded that the first
converted aircraft would be given to INDIAPOST for operation in the
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north-eastern sector and that GATI's operation would commence from

1st September 2007 in place of 15th July 2007, which had been agreed
to in the WLA. The first freighter was resolved to be painted with logos
of Air India cargo and Department of Post (‘DOP’). A sum of Rs. 12
crores had been deposited by DOP as advance which was resolved to be
adjusted in the billing amount for operation of the freighter aircrafts in
the north-east sector.
20. The Board also noted that the first converted aircraft was to be
operated in the north-east sector and therefore “the operations of
Nagpur Hub pattern would be delayed”. The agreement between Air
rd
India and INDIAPOST was dated 23 August 2007, which was more
than three months after the date of the WLA entered into between GATI
and Air India. The registration number of the aircraft was also
mentioned in the agreement with the INDIAPOST as VT-EHH.
21. The argument advanced by Mr. R.S. Suri, learned senior counsel
for Air India before this Court was the same as advanced before the AT
which was to the effect that no specific aircraft was agreed to be given
to GATI. It was urged by Mr. Suri that the agreement was in fact in the
nature of a charter agreement and was not to be considered as a WLA.
According to Mr. Suri, GATI was in the know of the fact that the first
freighter aircraft was given on lease to INDIAPOST and had never
raised any objection during the entire operation or even in its
th
termination notice dated 17 March 2009. The agreement itself did not
indicate any aircraft registration number which was in fact the
identification mark assigned to it by the DGCA. There was no exclusivity
provided in the WLA to the effect that Air India was bound to use only
the converted freighters for operations under the WLA.
22. Mr. Suri also referred to the minutes of meeting (‘MOM’) dated
th
5 September 2007, which stated that GATI was expecting the second
freighter to arrive after conversion. The entire case of GATI in this
regard was an afterthought. He further pointed out that the contentions
of Air India as stated in Note 4 of its final submissions before the AT
were not even discussed by the AT. In it, it was stressed that the usage
of the term ‘wet lease’ was a misnomer as the operations were in the
nature of ‘charter flight’. The invoices raised on GATI and accepted by it
and paid for were only for such charter flights. The BG also stated that
it was a charter flight.
23. In reply, Mr. P.V. Kapur, learned senior counsel appearing for
GATI, pointed out that there was correspondence between the parties
on the proposal to change the title of the WLA to a charter agreement.
However, no such was carried out. The WLA itself envisages that the
aircrafts to be given to GATI were to be painted with the logo of GATI.
Therefore whether the agreement was incorporated as a charter or wet
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lease, the fact was that specific identified aircrafts were to be provided
to GATI. He reiterated that the minutes of the BOD meeting dated 11th
July 2007 itself recorded that the first aircraft was meant to be given to
INDIAPOST. There was no denial of this fact in the SOD filed by Air
India before the AT.
24. The Court has been shown the minutes of the meeting held
between the parties on 5th September 2007. Part-1 of the said meeting
nd
states “The 2 Aircraft to GATI is arriving on 16.09.2007 duly
converted and it would take 15 days for completing the formalities and
painting”. Admittedly, there was no aircraft delivered to GATI prior to
September 2007. It is not possible to read the minutes of the meeting
dated 5th September 2007 as an admission by GATI that it
acknowledged that the first aircraft has already been given to
INDIAPOST by Air India. On the other hand, as rightly noted by AT, the
rd th
minutes of the 93 meeting of the BOD held on 11 July 2007 notes
that five aircrafts were already at Miami for conversion and it had been
decided to convert a sixth aircraft on the same basis as well. The
minutes clearly recorded “The first converted aircraft to be given to DOP
for operations in NE stations as per the schedule and GATI operation to
commence from 01.09.2007.” The above minutes therefore
acknowledge that despite the agreement with GATI, the BOD had
unilaterally decided to postpone the commencement of the operations
to 1st September 2007 without the knowledge of GATI. When read with
these minutes the reference to the ‘second freighter’ in the minutes
th
dated 5 September 2007 could only refer to the second freighter
aircraft which was then given to GATI as the first aircraft under the
WLA.
25. The Court is unable to agree with the submissions of Mr. Suri
that the AT has misread and misinterpreted the WLA. The
correspondence between the parties shows that there was no
agreement between the parties to rephrase the WLA as a charter
agreement. The conclusion of the AT that the aircraft VT-EHH was
definitely the subject matter of WLA and that its allotment to
INDIAPOST was in breach of the WLA appear to be a perfectly possible
conclusion on the reading of the entire evidence. Clearly the minutes of
th
the BOD meeting of 11 July 2007 reveals that IAL was fully aware of
the consequences of the breach it was committing of the WLA in
diverting the first freighter aircraft to INDIAPOST. The Court therefore
finds no error having been committed by the AT in deciding the Issue
No. 1 in favour of GATI.
Issue No. 2
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26. Two questions were addressed under Issue No. 2. The first was
whether there was a delayed and deficient delivery of aircrafts [2(a)]
and whether the dates mentioned in Clause 5.8 of the agreement were
promised dates or tentative dates [2(b)]. As far as the first freighter
th
aircraft was concerned since it was delivered only on 17 October 2007,
th
instead of 15 July 2007, clearly there was a delay of more than three
th
months. Likewise, the second aircraft was offered on 27 December
2007 after a delay of more than four months. The third, which was
initially offered on 7th May 2008, and then withdrawn, reoffered on 11th
July 2008, was with a delay of seven months and the fourth aircraft was
th
offered on 27 July 2008 with a delay of more than eight months. As
regards the fifth freighter, the finding of the AT was that there was no
documentary evidence to support the plea that it was at all offered to
GATI but not taken delivery of. The AT accordingly concluded that the
fifth freighter was in fact never offered. Both the issues were
accordingly answered in favour of GATI by the AT.
27. Mr. Suri submitted that the AT erroneously interpreted Clause
5.8 of the WLA which only provided for tentative dates. The delay
attributable to the agencies in Miami, USA in converting the aircrafts
could not be fastened on Air India. This aspect had been dealt with in a
supplement to Note-3 which was submitted to the AT by Air India. The
air operator licence which had been filed during the arbitral proceedings
proved that Air India converted six aircrafts and not five. Both the
Clauses 4.1 and 5.8, according to Mr. Suri, clearly provided that any
delay on the part of the agencies entrusted with the conversion of the
aircrafts, would not make Air India liable. Apart from not proving that it
suffered any loss of business, GATI did not lead any evidence to show
that it had any problems with the postponement of the commencement
th
of the operations w.e.f. 18 October 2007. This only showed that GATI
had prior knowledge that it was to start operations from October 2007
and not from 15th July 2007 as proposed in the WLA.
28. Mr. Kapur, in reply, pointed out that once the WLA itself had
settled the schedule for induction of the aircraft, it was obvious that
any delay would adversely affect the business of GATI. He submitted
that the interpretation placed by the AT on Clauses 4.1 and 5.8 that
they cannot offer protection against unreasonable delay was a plausible
interpretation. He pointed out that detailed reasons have been given by
the AT in the impugned Award for its conclusions. He further submitted
that what Air India was inviting the Court to do was to re-appreciate
the evidence. At no point of time the Air India proved before the AT
that it had a fifth aircraft ready to be offered to GATI. It was submitted
that if the findings of the AT were plausible, this Court should not
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interfere with the findings.

29. The Court finds that the AT has discussed Clause 5.8 of the
agreement threadbare. It has also made note of Clause 4.1 when
setting out the various clauses in the agreement. It must be noticed
here that Clause 4.1 makes a reference to Clause 5.6 and states that
“in case of any delays in the induction of the Aircrafts, Lessor shall not
be liable for such delay”. This is virtually repeated in Clause 5.8, which
says that the delay in induction/operation of the aircraft shall not be
held against the lessor and that the lessor “shall not be liable in any
manner whatsoever towards the lessee.”
30. The AT has in detail explained how it came to the conclusion that
“the protection against delay provided by Clause 5.6 of the agreement
can at best be extended to ‘reasonable delay’ and not to an
unreasonable one.” It is not possible to find any error having been
committed by the AT, much less any patent illegality, when it says that
the delay of “14 months for the delivery of fourth freighter from the
date of commencement of the Agreement as against the originally
scheduled period of six months cannot in any circumstances be held to
be reasonable”.
31. The AT also took note of the fact of the withdrawal of the third
aircraft on the false pretext of engineering check and making the same
aircraft available to INDIAPOST in the North-Eastern sector by keeping
GATI entirely in the dark about this. Clearly, as a result of the
uncertainty over the delay for delivery of the aircraft to it, GATI could
not plan its business. The AT accepted the plea that the sudden
withdrawal of the third aircraft disrupted its commercial engagements
and that these breaches were serious and caused damage to the
business of GATI.
32. The Court also finds plausible the view taken by AT that
“commercial propriety also required disclosure from time to time and
contemporaneously, by the Respondent to the Claimant, of the delay
and reasons there for, as and when the delay was taking place”. The
interpretation placed on Clause 5.8 read with Clauses 5.6 and 4.1 of the
agreement cannot be said to be unreasonable. Consequently, as
regards Issue No. 2(a) and 2(b), the Court holds that these were
rightly answered by the AT in favour of GATI.
33. The AT then took up together Issue Nos. 3, 8 and 9. The
questions addressed by the AT were whether there was no obligation of
Air India to offer payload capacity of 15 MT since what the contract
required was that it should provide ‘approximately 15 MT’, and whether
as pleaded by Air India, GATI was unable to generate the cargo of 15
MT in most cases and therefore Air India in any event was absolved of
any such obligation.
34. Mr. Suri submitted that the AT wholly misinterpreted and
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misread the relevant clauses in the agreement and in particular Clauses

3.1 and 3.6 as regards what was meant by ‘payload’. The AT, according
to Mr. Suri, also overlooked the basic premise of ‘space utilization’ as
set out in Clauses 6.1 and 6.1(A), which clearly indicated that it was
the ‘space’ on the freighters which was the subject matter of the
agreement and this ought not to be equated with ‘weight’. He further
submitted that the entire burden of showing the failure by Air India to
offer the promised payload to GATI, was on GATI and barring three
documents which again were wrongly interpreted by the AT, GATI
produced no evidence to show that it utilized the space offered at any
point of time or that it suffered any loss as a result of non-availability of
any such space.
35. Mr. Suri submitted that AT ignored completely the written notes
of arguments apart from the numerous voluminous documents placed
by Air India in the form of challans, airway bills (‘AWB’), cargo
manifests and trim sheets. He submitted that the AT erroneously held
the letter dated 3rd March 2008 as an evidence against Air India,
whereas what was being spoken to in the letter was ‘available payload’
and not ‘payload of the freighter’.
36. Mr. Suri submitted that the AT also wrongly interpreted the
deposition of Mr. Anil Shakdher (RW-2) as against Fuel on Board
Requirement (‘FOBR’) which was a varying figure which depended on
several factors such as weather, length of sector, refueling facilities. He
submitted that the decision as regards the availability of payload was a
technical one which was to be taken by the pilot prior to every take off
with weight of ATF in aircraft reducing available cargo weight.
37. Mr. Suri also discussed at length the three instances referred to
in the impugned Award, which were referred to by GATI to substantiate
its plea that the payload capacity actually offered by Air India was
st
deficient. According to him, in the first instance on 31 December
2007, the total cargo offered by GATI was 8.741 tonnes and the no-
show consignments were 2.513 tonnes. Therefore, GATI had not booked
14 tonnes on that particular flight as claimed by it. The trim sheet
shows that there was under load of 4.201 tonnes. This meant that the
freighter could have carried more cargo had it been offered. As regards
the second instance of 9th January 2008 the actual cargo tendered was
only 12.866 tons instead of 15 tonnes as alleged by GATI. The third
th
instance was of 27 February 2008 where the tendered load was
11.058 tonnes and accepted in entirety. Any cargo that had been
offloaded, if at all, could have been offered to be carried on the next
available flight.
38. Mr. Suri emphasized that the agreement was a ‘block space
arrangement’ between the parties and it would be erroneous to go only
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by the simplistic concept of ‘payload capacity’ whereas what had to be

appreciated was ‘available pay load’ on the freighter which was arrived
at after taking into account several factors including the dry operating
weight, the operating empty weight, the maximum take-off weight,
maximum landing weight and maximum zero fuel weight.
39. According to Mr. Suri the evidence of Mr. Suresh Newatia (CW-1)
reveals that in the entire operations, GATI only carried 7882 tonnes of
cargo on the freighters which on an average works out to about 6.5
tonnes on two freighters. All these shows that the GATI was unable to
generate business to utilize the entire space offered in the aircraft and
miserably failed to prove any loss suffered by it. Mr. Suri submitted
that the entire evidence was misread by the AT.
40. Mr. Kapur, learned senior Counsel appearing for GATI, submitted
that Mr. Suri was again inviting the Court to re-appreciate the evidence.
The three instances pointed out by GATI before the AT clearly showed
that there was a shortfall in the payload capacity offered on the aircraft.
The evidence led by the parties was appreciated by the AT and the view
was taken thereon. The records produced by Air India which included
Air India's own internal notes, more than adequately established that
none of the aircrafts could offer the promised capacity. The fact that
none of the aircrafts had a capacity of even approximately 15 MT could
not be denied even by Air India. It was charging a fixed amount on that
basis and therefore was obliged to make available aircrafts with that
approximate capacity. If it failed to provide that capacity it could not
recover the full amount fixed under the contract.
41. Mr. Kapur submitted that how much cargo GATI carried was
irrelevant for that purpose. In any event, once it became plain to GATI
that it was never going to get an aircraft with a capacity of even
approximately 15MT, it could not obviously take on bookings to that
level. Its scale of operations therefore had to be changed. The
corresponding losses suffered by GATI were obvious. The fact that Air
India offered 15 MT capacity with the start of hub and spoke patterns
showed that Air India could in fact estimate the fuel requirement and
therefore offered the MT capacity. The interpretation of the relevant
clauses of the WLA by the AT was, according to Mr. Kapur, perfectly
plausible and did not call for any interference.
42. The Court finds that the AT has in fact extensively discussed the
Clauses 3.1, 3.6 and 6.1 in dealing with the above issues. It has
rd
discussed the evidence in sufficient detail. The internal note dated 3
March 2008 written by Mr. Avadesh Kumar, Dy. General Manager which
states that IAL was offering payload of 12.5 tonnes per flight to GATI
“which is in contradiction with the Agreement signed between India
Airlines and GATI. The matter was referred to Director Engineering for
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enhancing the payload. However, it has been confirmed by him that the
same cannot be increased”. The note concluded “Therefore, the
available payload could be 12.5 tonnes only”.
th
43. The minutes of the meeting dated 15 July 2008 also recorded
that the DGM(Finance) has suggested that the agreement itself to be
amended to ensure ‘correct billing and settlement’ on the issue of
‘payload capacity’ The correspondence between the parties which has
been discussed by the AT showed that the case of Air India was that
the full load would become available only when the ‘hub and spoke
operations’ with the fourth freighter would commence.
44. The AT also discussed the evidence of six of the witnesses of Air
India who were posted at various airports. They deposed instances
“directly within their knowledge where 15 MT payload or payload more
than 12.5 MT was tendered on behalf of the Claimant, but it was
refused to be accepted for carriage by the freighter operating with the
Claimant by the Respondent”.
45. Nothing has been shown to the Court to persuade it to hold that
the above conclusion of the AT on the reading of the depositions of the
aforementioned witnesses i.e. CWs 3 to 8 was erroneous. The AT also
appears to have been persuaded by the fact that cargo in excess of 12
to 12.5 MT was carried by Air India by next available commercial flight
without charging GATI for it, thereby admitting to its failure. The AT
has also discussed the evidence of Mr. Anil Shakdher (RW-2) as regards
the availability of payload after accounting for the fuel requirement. In
particular it has even set out the entire evidence in this regard. In para
7.3.33 it has dwelled on the expression ‘approximate’ and concluded
that the expression ‘approximately 15MT’ may at the most permit a
variation between the range of 14 to 16 and not a reduction to 12.5 MT
which would be really a variation of 37.5% over 15 MT.
46. The Court is not persuaded to hold that the above detailed
discussion of the evidence by the AT and its analysis suffers from any
material irregularity much less any patent illegality. On the evidence
before it, it was for the AT to take a call on what was the inference to
be drawn as any reasonable person would in the facts and
circumstances of the case. None of the findings of the AT is improbable
or contrary to the evidence on record. The award in respect of the
aforementioned three issues cannot said to be erroneous warranting
any interference by this Court.
Issue No. 4
47. Issue No. 4 was whether the Nagpur airport was not ready for
operations as a hub and spoke center and whether the Claimants were
not ready to implement the hub and spoke operations from Nagpur [4
(a) and 4(b)]. The AT concluded after extensively dealing with the
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th
evidence that there were at least three letters namely letters dated 8
August, 19th August and 8th October 2008, whereby GATI indicated its
readiness and willingness to commence hub and spoke operations but
Air India did not respond, much less give any fixed date for such
commencement.
48. Further, the internal reports dated 19th May, 11th August, 2nd
th
September and 8 September 2008 of Air India clearly showed the
acceptance of readiness on the part of Air India to commence hub and
spoke operations at Nagpur. In para 7.4.29, the AT recorded the
contention of Mr. Suri that hub and spoke operations were to start only
after four freighters were to be inducted. In the petition under Section
34 of the Act, there is no averment that the above contention recorded
in para 7.4.29 was not made by Mr. Suri. He, however, urged that the
AT failed to look at the matter from the operational and technical
aspects of the industry's norms and practices. According to him, the
internal reports and discussions between the officers of Air India have
been misunderstood by the AT as revealing an absence of readiness to
commence the hub and spoke operations at Nagpur.
49. On the other hand, Mr. Suri again took the Court through the
entire correspondence to show that the Respondent was never prepared
to avail of the fourth freighter even after it was offered by Air India. He
submitted that at no point of time, did GATI inform the Air India that it
was unable to start operations at Nagpur because the hub and spoke
operations had not commenced. Even on 6th August 2008, GATI
informed Air India that they would operate only three freighters from
th
Nagpur as a hub and spoke pattern from 9 September 2008 and the
fourth would be a standby. Mr. Suri accordingly submitted that no
evidence had been produced by GATI to show that the Nagpur airport
was not ready for the hub and spoke operations.
50. The Court does not propose to re-appreciate the entire evidence
on this aspect. This has been exhaustively discussed by the AT in paras
7.4.1 to 7.4.30. The inferences drawn by the AT from three letters
whereby GATI had expressed its readiness to commence the hub and
spoke operations has not been countered by Air India. The inferences
drawn by the AT from the internal reports and communications have
not been shown to be erroneous.
51. The contents of the said internal notes do reveal that the
infrastructure at Nagpur was not ready for the hub and spoke
operations during the dates of these notes i.e. between May and
September 2008. The Court is not expected to re-appreciate the
evidence and to interfere with the impugned Award only because a
different view is possible. In any event, this Court is not persuaded to
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come to any different view in the matter.

Issues 5 (a) and (b)
52. On the issue of repudiation i.e. Issues 5(a) and 5(b), the AT
concluded that Air India had repudiated the contract and the
repudiation was accepted by GATI. It was also held that there was no
waiver by GATI of the repudiation by the Air India nor did the GATI
acquiesce in the breach by the Air India. It was held that “in view of
the repudiatory breach of contract by the Respondent, the Claimant
was justified in terminating the contract by Notice dated 17.03.2009”
since it was not under Clause 12.1 of the agreement, it was not vitiated
for want of 120 days' notice.
53. According to Mr. Suri, the AT failed to discuss the essence of
repudiation under the Indian Law. According to him, the AT based its
findings only on English Law and therefore came to an erroneous
conclusion. It was submitted that right from the induction of the first
freighter, GATI was in the knowhow that the operations were delayed
and that the freighter from the very first flight was not able to carry a
payload of more than 12.5 tons, yet the operations carried on for the
next 18 months. It was only when the minimum guarantee clause was
to be implemented with the 5th freighter, that GATI, as an afterthought,
came up with the idea of repudiatory breach and without giving the 120
days' mandatory notice illegality terminated the agreement. The fact
that GATI did not protest against the postponement of the dates of
induction led to a situation where both the parties accepted the realities
and acquiesced in the changed situation. There was no justification to
excuse GATI from complying with the requirement of Clause 12.1 which
is reinforced in Clause 20 of the agreement.
54. Mr. Kapur, learned senior counsel for GATI, referred to an extract
from Pollock and Mulla's The Indian Contract and Specific Relief Acts,
th
(14 Edition, 2012) as regards repudiatory breach and submitted that
since GATI had accepted the repudiation by Air India, GATI's failure to
perform would not amount to a breach at all and that Air India's breach
gave GATI the right to terminate the contract. Once it was found on
fact that Air India had wrongly diverted the aircrafts and had failed to
deliver the aircrafts on time, or the aircrafts with the promised payload
capacity, its unilateral increase in ATF prices and encashment of the BG
added to the repudiatory breaches committed by Air India.
55. Indeed the Court finds that the conclusions by the AT on the
issue of repudiation are a natural corollary of its findings of fact that
there were repudiatory breaches by Air India. The AT rightly accepted
the submissions of GATI that there could not be any implied waiver or
acquiescence. It had to be pleaded as a fact. Such a plea has been
raised for the first time by Air India during oral submissions.
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56. The Court has already upheld the findings of the AT on the
failures of the Air India to fulfill its obligations under the WLA. The AT
has discussed Section 39 of the Indian Contract Act, 1872. It gives the
right to the promisee to put an end to the contract if the promisor, in
this case Air India, “has refused to perform, or disabled itself from
performing, its promise in its entirety.” In these circumstances the
conclusion of the AT that Section 39 permits GATI to terminate the
contract without having to comply with the requirement of Clause 12.1,
which was not attracted to a case of repudiatory breach of contract is a
perfectly plausible conclusion and cannot be faulted with.
57. The Court notes that as regards the actual claim for damages
what has been awarded by the AT is not the entire amount claimed. As
regards the amount wrongly charged on account of deficient payload
capacity, as against the claim of Rs. 1741.97 lakhs, the AT has awarded
only 50% as a corollary to the conclusion that the promised payload
capacity was not made available.
Other issues
58. The other amount awarded is Rs. 429.58 lakhs being
overcharged on account of unilateral increase in the ATF prices. This
has been discussed threadbare under Issue No. 12 in the Award with
reference to the correspondence between the parties and the minutes
of the meetings. If there was any change which was contemplated, it
had to be incorporated in the agreement. The minutes of the meeting
shows that there was no such amendment to the agreement to permit
any unilateral increase in the ATF rates. On the question of excess
amount recovered by encashing the BG, the AT has allowed the claim of
Rs. 59,64,535. This also is based on the evidence produced before the
AT.
Damages
59. However, the Court finds that in para 7.14.8 the AT found
substance in the criticism of Air India and concluded “The least which
the Claimant could have done was to file before the Tribunal its annual
accounts indicating the trends of profits wherefrom some reasonable
inference as to the likely loss suffered by the Claimant could have been
drawn”. Nevertheless, the Tribunal appears to have gone by the
principle that “the Claimant cannot be left high and dry”. While
observing in para 7.14.10 that “we would not like to speculate”, the AT
has proceeded to make an assessment of “just and reasonable profits”
and awarded a sum of Rs. 497 lakhs by way of damages.
60. This was not a case where Air India had wrongfully terminated
the contract. This was a case where GATI had terminated the contract
on account of repudiatory breaches by Air India. Therefore, the decision
relied upon by the AT viz., A.T. Brij Paul Singh v. State of Gujarat
(1984) 4 SCC 59 was not strictly applicable. On the other hand, Air
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India was justified in its plea that it was incumbent upon GATI to
provide at least some basis as to the likely loss it may have suffered by
producing its annual accounts or any other evidence. This clearly GATI
failed to do. Consequently, the Court finds no basis for the AT to award
GATI Rs. 497 lakhs by way of damages. The award to that extent is
hereby set aside.
Costs
61. However, as regards awarding the cost of arbitration the Court is
unable to find any error having been committed by the AT and
therefore, it is not considered necessary to interfere with the Award in
that regard.
62. As regards counter claims of Air India, which was essentially by
way of damages and would have resulted only if GATI was found to be
in breach of the agreement, since the Court has upheld the findings of
the AT that it was Air India who committed breach of several
obligations and thereby repudiated the contract its rejection of the
counter claims of Air India is accordingly upheld.
63. O.M.P. No. 1082 of 2014 by GATI is a petition under Section 9 of
the Act, seeking directions to Air India to deposit the awarded amount
or create a charge on an immoveable property or provide a bank
guarantee. The Court is not at this stage inclined to grant such relief.
The remedy under Section 36 of the Act would, in any event, be
available to GATI at the appropriate stage.
Conclusion
64. O.M.P. No. 1264 of 2013 by Air India is disposed of by setting
aside the award of Rs. 497 lakhs in favour of GATI and upholding the
impugned Award dated 17th September 2013 in all other respects.
O.M.P. No. 1082 of 2014 is dismissed. There shall be no order as to
costs.
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