Municipal Corporation loses case in arbitration with advertiser

The Municipal Corporation (MC), Jalandhar, has lost a case in arbitration with an advertiser which was pending for nearly two decades. The case was decided by sole arbitrator Justice Rajiv Narain Raina, former judge, Punjab and Haryana High Court.

Outdoor advertisement company Shri Durga Publicity Services through its proprietor Jugal Kishore Joshi had staked a claim of pending payment of Rs 33.53 crore, but the arbitrator ordered the MC to pay Rs 21.65 crore to the company.

In 2005, the MC invited tenders on a build-own-operate-transfer (BOOT) basis for the construction of a railway overbridge (ROB) on the Jalandhar-Kapurthala railway line near DAV College on the GT road in Jalandhar.

The scheme envisaged that the cost of construction of the ROB would be substantially met from private investment, and that, in consideration of such investment, the selected investor would be granted advertisement rights in relation to the structure and within the municipal limits of Jalandhar.

The advertiser submitted a bid of Rs 18 crore as the amount it would provide to the MC towards the cost of the ROB project to be executed by a third party. The bid was accepted by the MC and also approved by the state government.

The company was granted advertisement rights within the municipal limits of Jalandhar for a specified period, including the right to install 199 unipoles, 50 sky signs and 1,500 lollipops. The overall contract period was 11 years. The advertisement rights granted to the company were exclusive/monopolistic for the entire contract period.

The agreements contained a clause whereby the MC was not to grant advertisement rights to any third party during the exclusivity period (of first five years) and was to remove unauthorised hoardings/boards from sites allotted to the company and not to permit other advertisements at those locations.

A payment schedule for the total amount of Rs18 crore was stipulated, with an initial payment at the time of execution of the agreement and successive instalments thereafter. The ROB was, thereafter, constructed by the MC through its contractor, M/s Gaman and Company, at an approximate cost of Rs 12 to 13 crore and was commissioned and inaugurated in June 2011.

The company asserts that the entire agreed amount of Rs 18 crore was ultimately paid/deposited with the MC as per the agreements. The MC officials, however, allege repeated delays and defaults in payment of instalments.

There was a material dispute as to the timeline, completeness and adequacy of such lists and approvals and on the number of sites handed over and made available to the company. The company had alleged that the MC failed to approve and handover the contracted number of sites within the stipulated time. The MC contended that all sites for which lists were submitted by the company were duly approved and that the civic body discharged its obligations in this regard.