Bombay High Court
Deluxe Caterers Pvt. Ltd vs M/S. Narayani Associates And Ors on 17 February, 2023
Bench: G. S. Kulkarni
Digitally
signed by
VIDYA
VIDYA SURESH
SURESH AMIN
Date:
AO944_2022 .DOC
AMIN 2023.02.17
21:57:29
+0530
Vidya Amin
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
APPEAL FROM ORDER NO. 944 OF 2022
IN
NOTICE OF MOTION NO.2577 OF 2022
IN
SUIT NO. 1644 OF 2022
Deluxe Caterers Pvt. Ltd. ... Appellant
Versus
1. M/s. Narayani Associates
2. Trade Wings Ltd.
3. Narayani Hospitality and Academic Institution
Pvt. Ltd. ...Respondents
WITH
INTERIM APPLICATION NO. 18715 OF 2022
IN
APPEAL FROM ORDER NO. 944 OF 2022
M/s. Narayani Associates ... Applicant
In the matter between
Deluxe Caterers Pvt. Ltd. ... Appellant
Versus
1. M/s. Narayani Associates
2. Trade Wings Ltd.
3. Narayani Hospitality and Academic Institution
Pvt. Ltd. ...Respondents
Mr. Ravi Kadam, Senior Advocate with Mr. Prateek Sakseria, Mr. Soham
Khinkhabwala, Mr. Priyam Amin and Mr. Kaushal Parsekar i/b. Desai
Desai Carrimjee and Mulla for Appellant.
Mr. S. U. Kamdar, Senior Advocate with Ajay Panicker i/b. Ajay Law
Assocaites, for Respondent No. 1.
Mr. Aseem Naphade with Mr. Arvind Tiwari i/b. Mr. Atal Dubey for
Respondent Nos. 2 and 3.
_______________________
CORAM: G. S. KULKARNI, J.
Reserved on 15 February, 2023
Pronounced on 17 February, 2023
Page 1 of 34
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JUDGMENT :
1. This Appeal from Order assails an order dated 27 September, 2022
passed by the City Civil Court at Mumbai whereby Notice of Motion No.
2577 of 2022 filed by the appellant(original plaintiff) in Suit No. 1644 of
2022 has been dismissed.
2. A short issue which arises for consideration in this appeal is as to
whether the term of the Conducting Agreement (for short "the Agreement")
dated 20 November, 2017 entered, between respondent no. 1 and the
appellant would stand extended by virtue of the appellant invoking the force
majeure clause.
3. The facts relevant for adjudication of this appeal are: Respondent nos. 2
and 3 (original defendant nos. 2 and 3) are owners of two units, bearing Unit
Nos. 4129 and 4130 situated on the ground floor (part) of the building known
as "Kalaghoda Buildings Bhadekaru Cooperative Premises Society Ltd."
situated at 30, K. Dubash Marg, Kalaghoda, Fort, Mumbai - 400 001(for short
"suit premises"). Respondent nos. 2 and 3 have let out the suit premises on
leave and licence to respondent no. 1 (original defendant no. 1) under a
registered Leave and Licence Agreement dated 18 October, 2017. In turn,
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respondent no. 1 with the consent, permission and authorization of respondent
nos. 2 and 3 has entered into the suit agreement dated 20 November, 2017
with the appellant whereunder respondent no. 1 has permitted and authorized
the appellant to use and occupy the suit premises for the purpose of running
and operating its restaurant known as "Copper Chimney", on terms and
conditions as agreed between the parties and as contained in the Agreement.
The agreement describes the appellant as "Conductor" and respondent no. 1 as
"Narayani". Under Article 6 of the agreement, the parties have agreed that the
appellant shall inter alia pay respondent no. 1 a fixed fee of Rs.6,00,000/- per
month and in addition to the Fixed Conducting Fee, the appellant was to pay
an additional fee equivalent to 18% of Net Annual Turnover above Rs.200
lakhs for the financial year 2017-2018 and with agreed increases as set out in
Article 6.2 thereof; under Article 7, it was agreed between the parties that
under the Leave and Licence Agreement entered between respondent nos. 2
and 3 and respondent no. 1, respondent no. 1 was entitled to use and occupy
the suit premises for a period of five years, effective from 1 October, 2017 and
expiring on 30 September, 2022, being the licencee of the suit premises. The
period of the Conducting Agreement as agreed between respondent no. 1 and
appellant as recorded in "Clause 16" was from 1 October, 2017 till 30
September, 2022. Article 19 of the Agreement is the " Force Majeure" Clause.
Article 32 of the agreement is a Clause in regard to "No Oral Change". These
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being the relevant clauses and subject matter of discussion at the bar, the same
are required to be noted hereunder:
"Article 19. FORCE MAJEURE
In the event either Party is unable to perform its obligations under this
Agreement for a period greater than 60 (sixty) days as a result of any failure or
delay where such failure or delay is due to any cause or causes beyond its control,
including but not limited to flood, damage by the elements, act of God, strike,
lock out or other labour disorders, act of foreign or domestic de jure or de facto
Government, whether by law, order, legislation, decree, rule, regulation or
otherwise revolution, civil distrubance, breach of the peace, declared or
undeclared war, act of interference or action by civil or military authorities,
terrorist acts, or due to any other cause beyond the Party's control
notwithstanding what is stated hereinabove, the other Party shall be entitled to
fortwith terminate this Agreement.
Article 32 NO ORAL CHANGE
This Agreement cannot be changed, modified or supplemented in any manner
except by an instrument in writing duly executed by the Parties. Any
amendment, addition or variation to this Agreement shall be valid and binding
only if the same are mutually agreed upon by the Parties and executed in writing
and signed by the Owners /Narayani and the Conductor."
4. The dispute between the parties has arisen on account of the fact that
during the five years term of the agreement, the nation was hit by the Covid-19
pandemic with effect from the month of March, 2020. Confronted by the
situation as created by the pandemic, the appellant addressed a letter dated 23
March, 2020 to respondent no. 1 invoking the force majeure clause recording
that the agreement will remain in 'suspended animation' until such time that
the existing event of force majeure continues. It was requested that the
appellant therefore be interalia exempted/excused from performing its
obligations of payments of conducting fees, CAM charges, utility costs, interest,
escalation and other monetary obligations pursuant to the agreement. The
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fulcrum of the dispute being the letter of the appellant dated 23 March, 2020
addressed to respondent no.1 the relevant extract of the said letter is required to
be noted, which reads thus:-
"In the given circumstances of us having validly invoked and declared Force
Majeure Event, we put you on notice that the Agreement will remain in suspended
amination until such time that the existing Force Majeure Event continues, and we
are also therefore inter alia be exempted/excused from performing our obligations
of payments of conducting fees, CAM charges, utility costs, interest, escalation and
other monetary obligations pursuant to the said Agreement.
Hence we reiterate, with immediate effect, there shall be waiver of all penal and/or
interest charges towards delay fee/charge/payments along with any foreseeable
escalation in our rentals / fees for a period of two (2) months from the date of this
letter.
Kindly note that we are issuing this notice without prejudice to our right to modify
our requests after evaluating the impact of the Force Majeure Event as detailed in
the Agreement referred above and also in case of any further developments which
may affect us directly or indirectly.
We therefore reiterate that you please treat this letter as our formal written notice
of Force Majeure Event as required to be provided under the said Agreement and
applicable with immediate effect."
5. On 25 March, 2020, respondent no. 1 addressed an email to the
appellant stating that respondent no. 1 was in receipt of appellant's mail dated
23 March, 2020 being the force majeure notice, and that respondent no. 1 by
its earlier email had informed and clarified that respondent no. 1 was not in a
position to suspend the appellant's obligation under the agreement for the
various reasons as mentioned in the said mail. It was stated that respondent
no. 1's emails dated 19 March, 2020 and 21 March, 2020 recorded that
Chairman Dr. Mittal and Mr. Sunil Kapur already had discussions in this
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regard, and that respondent no. 1 was confident that the appellant will
understand, agree and abide by the same.
6. By a further email of respondent no. 1 dated 9 April, 2020 addressed
to the appellant respondent no. 1 stated that it accepted the appellant's notice
dated 23 March, 2020, invoking force majeure and recorded that as per the
provisions of Article 19 of the agreement, the appellant should take note that
respondent no. 1 shall be entitled to forthwith terminate the agreement on the
61st day, i.e., 23 May, 2020, if the appellant continued to remain unable to
perform its obligations under the agreement. It was also recorded that the
notice of the appellant invoking force majeure is from 23 March, 2020.
Respondent no. 1 also requested the appellant to pay all dues towards
conducting fees, CAM charges and variable fees upto 22 March, 2020. The
relevant extract of the said reply of respondent no. 1 is required to be noted,
which reads thus:
"We accept your notice invoking Force Majeure dated 23 March 2020. As per
provisions of clause under Article 19 which is reproduced below, kindly note
that we shall be entitled to forthwith terminate this agreement on 61 st day i.e. on
23 May 2020, if you continue to remain unable to perform your obligations
under this Agreement.
Further your notice invoking Force Majeure is from 23rd March 2020.
We request you to pay all dues towards conducting fees, Cam charges and
variable fees upto 22nd March 2020. We will send you the calculations of the
same by a separate email.
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7. On 24 April 2020, Respondent no. 1 addressed a further email to the
appellant referring to the appellant's force majeure notice dated 23 March,
2020, as also referring to its reply dated 9 April 2020, interalia stating that the
appellant was already put to notice that as per Article 19, the agreement the
agreement will stand terminated on the 61 st day, i.e., on 23 May, 2020, if the
appellant failed to pay the conducting fees and other amounts. It was recorded
that if the appellant failed to pay conducting fees and CAM charges for the full
month of March 2020 and April 2020 and additional fees for the year 2019-
2020 on or before 22 May, 2020, the conducting agreement will stand
terminated forthwith from 23 May 2020 and all consequences of termination
will follow. The contents of the said email of respondent no. 1 are required to
be noted, which reads thus:
"Dear Ritesh
This refers to your Force Majeure Notice dated 23 rd March, 2020 wherein you
invoked Article 19 of the Conducting Agreement and sought exemption from
payment of conducting fees, Cam charges, interest, penalty and other monetary
obligations under the said conducting agreement.
We had in our multiple conversations with Mr. Sanju Arora and Mr. Sunil Kapur
given clarity to Article 19 of the Conducting Agreement. The clause very clearly
states that if one party fails to perform its obligation under this agreement, which in
this case is payment of conducting fees, cam charges, interest, penalty and other
monetary obligations, for more than 60 days then the other party (which is
Narayani Associates) can terminate this agreement forthwith.
In our reply dated 9 th April, 2020, we have accepted your notice under Article 19 of
the Conducting Agreement invoking force majeure and we have given you a notice
of termination under the same Article 19. The conducting agreement will stand
terminated on the 61st day, i.e., on 23rd May, 2020 if you fail to pay conducting fees
(both fixed and additional), cam charges, any other monetary obligations under this
agreement, which has become due and payable under the agreement, before 22 nd
May, 2020.
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To reiterate the above point, kindly note that if you fail to pay conducting fees and
cam charges for the full month of March 2020 and April 2020 and additional fees
for the year 2019-2020 on or before 22 May, 2020, the conducting agreement will
stand terminated forthwith from 23 May 2020 and all consequences of termination
will follow.
We also request you to clear all bills upto the date of your force majeure notice as
per the amounts mentioned in bills sent to you."
8. The above email of respondent no. 1 was replied by the appellant by its
letter dated 12 May, 2020 whereby the appellant stated that the interpretation
of respondent no. 1 of the force majeure clause was not correct and that the
force majeure clause in the agreement was to save the performing party from
the consequences of anything over which he has no control and hence the
appellant was not liable for payment of conducting fees and any additional
charges as per the agreement during the said period. It was recorded that the
invocation by respondent no. 1 of the termination right under Article 19 of the
agreement was not tenable. It was also stated that in the event of any
purported termination attempted by respondent no. 1, the appellant shall
rightfully claim the full value of all capital assets and investments along with
any monies expended by the appellant for the upkeep of the premises. It was
recorded that in the event of termination, the appellant shall have the right to
demand from respondent no. 1 an amount of Rs.25 crores as damages
including amounts due to loss of profit etc. The appellant accordingly called
upon respondent no. 1 to withdraw the said termination of the agreement as
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informed to the appellant by respondent no. 1's email dated 24 April, 2020
and 9 April, 2020.
9. Respondent no. 1 replied the appellant's letter dated 12 May, 2020 by its
email dated 13 May, 2020 thereby recording that there was no flawed
understanding of the force majeure clause by respondent no. 1 and that
respondent no. 1 fully understood as to what was agreed in the force majeure
clause. It was recorded that the parties had agreed that if either party is unable
to perform its obligations under the agreement, the other party is entitled to
forthwith terminate the agreement. It was also recorded that respondent no. 1
was demanding payment of conducting fees and CAM charges for the period
during which the appellant was operating from the premises and was not
claiming any amount for the period from which force majeure notice was
issued. It was hence stated that respondent no. 1 was withholding its rights
under the agreement to terminate the agreement, if the appellant failed to
honour its obligations under the agreement on or before 22 May, 2020, failing
which the Agreement shall stand terminated on 23 May, 2020.
10. On such backdrop it appears that the appellant continued to occupy and
also conduct its business. On 10 May, 2021, the appellant addressed an email
to respondent no. 1 inter alia stating that the appellant had started its
operations with optimism post government allowing restaurant bars to open at
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the end of 2020 and that the appellant was hopeful that one would see a
recovery to the pre-covid numbers by early to mid 2021. It was stated that
however, the new government restrictions and orders, were driven by the
second wave, by which the operations were required to be shut since April
2021. The appellant hence requested for waiver on rentals and other
occupational costs like CAM fees during the lockdown. However, the request
of the appellant by its email dated 10 May, 2021 was turned down by
respondent no. 1 by its email dated 11 May, 2021, wherein the appellant inter
alia recorded as under:
"It was very clearly agreed during the discussion that from April 2021, the
concession will not apply and Rs.6 Lacs + gst will be paid as per the conducting
agreement per month. We had also conveyed this to Mr. Reetesh Shukla recently in
response to his email dated 10th April 2021 wherein he requested to charge Rs 3
lacs instead of Rs 6 lacs as conducting fees for the months of April 21 to June 21.
After all the above discussions and interactions during the month of April 2021, you
are now sending request for waiver which is not acceptable to us. We also are going
through a very difficult phase and almost all our businesses are shut. The banks are
not waiving any of their interest or loan installments. They have compelled us to
deposit all receipts of conducting fees against their interest and installments and non
compliance of this condition will be treated as a default by them and appropriate
actions will be initiated by them.
Kindly note that your non payment of conducting fees and Cam charges for the
month of April 2021 has constituted a breach of the terms and conditions of various
clauses of Conducting Agreement. We call upon you to make the payment
immediately and rectify this breach, failing which we will be compelled to initiate
appropriate actions as per the terms of Conducting agreement."
11. There was further correspondence between the parties which was mostly
in regard to the demand by respondent no.1 on the amount of rentals and the
other charges from the appellants and the response of the appellant of its
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inability to pay the full amounts. It appears from the record that such
correspondence ultimately ended in respondent no.1 addressing a notice dated
31 May, 2022 by which respondent no.1 informed the appellant that
conducting agreement would expire by efflux of time on 30 September, 2022,
the appellant was hence put to a notice to vacate the premises on or before 30
September, 2022. Respondent no.1 also informed the appellant that it had no
intention of renewing the agreement after its expiry on 30 September, 2022
and that such intimation was being given in advance so as to enable the
appellant to make alternate arrangements so that the suit premises are vacated
on or before 30 September, 2022.
12. In the above circumstances the appellant approached the City Civil
Court by filing the suit in question inter alia praying for the following
substantive reliefs:
"(a) This Hon'ble Court be pleased to grant leave under Order II Rule 2 of Code of
Civil Procedure, 1908;
(b) This Hon'ble Court be pleased to quash and set-aside the Impugned Notice
dated 31 May, 2022;
(c) This Hon'ble Court, be pleased to pass an order for permanent injunction
restraining the Defendants, their servants, officers, agents from entering upon
and/or disturbing and/or interfering with the quiet and peaceful use, occupation and
possession by the Plaintiff of the suit premises;
(d) This Hon'ble Court be pleased to declare that the Term of the said Conducting
Agreement stood extended from 30 September 2022 upto 08 October 2024,
pursuant to the Covid-19 period and that the Plaintiff be allowed to peaceably use
and occupy the suit premises upto 08 October, with renewal thereafter for a further
period of 59 months;
(e) This Hon'ble Court, be pleased to pass an order for permanent injunction
restraining the Defendants, their servants, officers, agents from selling, alienating,
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transferring and/or inducting their party in to the suit premises;
(f) This Hon'ble Court, be pleased to pass an order for permanent injunction
restraining the Defendants, their servants, officers, agents from issuing any
further notices of termination/vacation to the Plaintiff;
13. In the appellant's suit the Notice of Motion in question came to be
moved by the appellant praying for a relief of temporary injunction to restrain
the respondents from disturbing and interfering with the appellant's quiet and
peaceful possession and occupation of the suit premises and for a further relief
to restrain the respondents from selling, eliminating, transferring and/or
inducting a third party into the suit premises, as also for a direction that status
quo in respect of the suit premises under the conducting agreement be ordered;
and further restrain the respondents from issuing any further notice of
termination / vacating of the suit premises by the appellants.
14. The respondents filed their independent replies to the appellant's Notice
of Motion, opposing the interim reliefs prayed by the appellant. The
respondents contended that the agreement had come to an end by efflux of
time on 30 September 2022 . It was contended that the appellants invoking
force majeure clause would not amount to any modification of the agreement,
so as to extend the term of the agreement beyond 30 September, 2022. There
are other contentions raised in regard to the rights vested in respondent No.1
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under the conducting agreement to terminate the conducting agreement,
however, the same need not be discussed in detail.
15. The learned trial Judge examined the rival contentions and dismissed
the notice of motion by the impugned order. The learned trial Judge in passing
the impugned order has observed that the bare reading of the force majeure
clause did not provide for the agreement to remain under suspended
animation until such time till the force majeure continued. The learned trial
Judge also observed that there is nothing on record to show that the parties had
mutually agreed to renew or extend the agreement. The relevant observations
in that regard are required to be noted which reads thus:-
"36. In view of my above discussion and in view of facts and circumstances of the
case, it reveals that conducting agreement is expiring on 30th September 2022.
There is nothing on record to show that parties have mutually agreed to renew or
extend of the agreement. Article-16 of the conducting agreement dealt with
renewal of agreement by mutual consent. Here further to be seen that neither
defendant No.l has agreed to get extend conducting agreement nor leave and
license was extended by defendant Nos.2 & 3 in favour of defendant no.1. As per
Article-21 of the conducting agreement no alteration or amendment to any such
obligation will be effective or enforceable unless made in writing and signed by all
parties to this Agreement. Therefore in the absence of any agreement or any
written amendment for extension or renewal of the same, prima facie the plaintiff
is not entitled for reliefs claim for extension of the agreement. So far as Force
Majeure plea is concerned, as contended in Article 19 of the conducting
agreement, it also does not give rise to any cause of action, as it provides, if either
parties unable to perform its obligations for period greater than 60 days, as a result
of any Force Majeure event, then either party shall be entitled to forthwith
terminate the agreement. Inspite of having this knowledge, the plaintiff chose not
to terminate the contract, but to continue in occupation of the suit premises. The
Force Majeure clause no where allowed the plaintiff to seek extension of
conducting agreement for the lock-down period of Covid-19, without consent of
the defendants.
37. The plaintiff being conductor of business of defendant No.1 does not have any
right, title and interest in the business premises except to conduct business from
suit premises till permission is withdrawn by the owner of the business or the
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agreed period has been elapsed. The plaintiff cannot claim any right which
defendant No.1 does not possess. The plaintiff/conductor not in possession of suit
premises cannot seek injunction to protect his possession after expiry of
conducting agreement on 30.09.2022. It is well settled that no injunction can be
granted against true owner of suit premises. Therefore considering overall facts and
circumstances of the case as well as ratio laid down in above authorities, in my view
the plaintiff failed to make out prima facie case in his favour, the needle of balance
of convenience is also not tilt in favour of the plaintiff and thus question of causing
any irreparable loss to the plaintiff, if injunction is refused, does not arise at all.
Hence I answer to point no.1 in negative."
16. The learned trial Judge having dismissed the Appellant's notice of
motion, the Appellant is before this Court in the present proceedings.
17. Mr. Ravi Kadam learned Senior Counsel for the appellant in assailing
the impugned order passed by the learned trial Judge has made the following
extensive submissions :-
i. The appellant having invoked the force majeure clause by its letter
dated 23 March, 2020, respondent No.1 was put to notice that the
conducting agreement will remain in suspended animation until such
time the force majeure event continues. The consequences of such
invocation being that the appellant was exempted/excused from
performing its obligations of payments of conducting fees stamp charges,
utility cost CAM charges, utility cost interest, escalation and other
monetary obligation under the said agreement and that with immediate
effect there was waiver of all penal and or interest charges towards delay
fees/charge payments along with any foreseeable escalation in the
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rental/fees for a period of two months from the date of the said invocation
of force majeure. It also had legal consequences implicit in such
invocation in regard to the extension of the term of the agreement.
ii. It is submitted that the force majeure notice was accepted by
respondent No.1 by its e-mail dated 9 April, 2020 addressed to the
appellant, once such notice was accepted the said two letters between the
appellant and respondent No.1, constitute modification of the terms and
conditions of the conducting agreement and/or a novatio that the term of
the conducting agreement of five years expiring on 30 September, 2022
stood extended by a further period of pandemic i.e. from March 2020 to
2022.
iii. By virtue of such novatio the appellant was within its rights and
entitled to an extension of the term of the agreement for a further period
of two years from 30 September, 2022, on the same terms and conditions
as originally agreed in the agreement.
iv. It is submitted that respondent No.1's reading of the force
majeure clause conferring a right in respondent No.1 to terminate the
conducting agreement is misconceived as the parties had changed their
position due to the event of force majeure and more particularly by virtue
of the the appellant invoking the force majeure clause, which was to
operate till the force majeure ceased in March, 2022.
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v. There is no consideration of the appellant's case in the impugned
order on exclusion of the period of force majeure from the agreed
contractual period of five years. There is no application of mind to the
consequence as brought about by the letter dated 23 March, 2020 of the
appellants invoking the force majeure clause and its acceptance by
respondent no.1 by its letter dated 9 April, 2020 as addressed to the
appellant namely the legal effect that the period of the contract stood
extended by exclusion of the force majeure period. Once a modified
contract of such nature as contained in the exchange of the said letters
between the parties is created the parties cannot go behind such modified
terms of the contract. It is well established that by correspondence
between the parties a written contract can be novated. This proposition is
supported by placing reliance on the decision in Perry Vs. Suffields,
Limited1.
vi. In rejecting the reliefs as prayed in the notice of motion by the
impugned order the trial Court has in fact non-suited the appellant at the
interim stage of the suit. In the facts of the case, certainly it was not a
situation, that the agreement had expired by efflux of time. The Appeal
on such submissions is required to be allowed.
1 1916. 2 CH 187
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18. On the other hand Mr. Kamdar learned Senior Counsel for the
Respondent No.1 has made the following submissions:-
i. At the outset, it is submitted that the response of respondent No.1
dated 9 April, 2020, to the appellant's letter dated 23 March, 2020
invoking the force majeure clause does not indicate any
exclusion/extension of the contract period by two years,with effect from
30 September, 2022. In fact such letter of Respondent No.1 not only
recognizes but reiterates respondent No.1's right under Article 19 to
terminate the agreement.
ii. There is no concluded contract between the parties as alleged by
the appellant for extension of the contract period by two years and/or by
exclusion of the alleged two years of the force majeure period.
iii. In fact the appellant was running business after a small initial
period of the pandemic and hence the appellant's contention that by
invoking article 19 the force majeure clause would bring an effect of
exclusion of the period of two years is not only contrary to the said
contractual clause but also not supported by the record.
iv. In any event even if some disturbance during the pandemic period
is to be presumed, the case of the appellant that agreement has remained
in a suspended animation for two years cannot be accepted in the
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absence of any prima faice material that the appellant was totally closed
for a period of two years. The correspondence in that regard is infact
contrary to such contention of the Appellant.
v. The record is replete with continuous assertion of respondent no.1
asserting its right to terminate the agreement, independent of the fact
that the appellant was not making payments under the conducting
agreement for the period the appellant was infact running the restaurant
after invoking the force majeure clause.
vi. The learned trial judge has examined the contentions as urged by
the parties and on an appropriate consideration of the terms of the
contract and the facts has passed an appropriate order which does not
deserve interference of this Court.
vii. The appellant had failed to make out any prima facie case for an
order to be passed on the notice of motion.
viii. In supporting such contentions reliance is placed on the decision
of the Hon'ble Supreme Court in the case of Energy Watchdog Vs.
Central ectricity Regulatory Commission and Others2.
19. Mr. Naphade learned counsel for the Respondent Nos.2 and 3 has
made the following submissions:
2 (2017) 14 SCC 80
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i. The contentions as urged on behalf of the appellant of any novatio
brought about by virtue of its letter dated 23 March, 2020 and the
response of respondent No.1 in its letter dated 9 April, 2020 is
untenable in view of Article 32 of the agreement specifically providing
that the agreement cannot be changed, modified or supplemented in any
manner except by an instrument in writing, duly executed by the parties,
and further, that any amendment, addition or variation to the agreement
shall be valid and binding only if the same are mutually agreed upon by
the parties and executed in writing and signed by the owners/namely
Respondent Nos.2 and 3 and Respondent No.1 and the Appellant.
ii. It is submitted that the exchange of the said letters between the
appellant and respondent no. 1 in no manner would amount to an
instrument in writing this more particularly that the very foundation of
the appellant's case in the plaint as seen from the prayers (prayer-D) of
the plaint is a relief of a declaration being sought that the term of the
conducting agreement has stood extended from 30 September, 2022
upto 8 October, 2024. The relief as prayed for plaint can never be
granted as respondent no.1 himself was a beneficiary of the leave and
license agreement dated 18 October, 2017 executed between respondent
Nos.2 and 3 the owners and respondent No.1 who is only the licensee.
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Thus no interference is called for in the Appeal which deserves to be
rejected.
20. Mr. Ravi Kadam has made submissions in rejoinder. He submits that
there is a concluded novatio, which is brought about in writing, by exchange of
the said two letters between the parties, namely, appellant's letter dated 23
March, 2020 and respondent No.1's reply to its dated 9 April, 2020. It is his
contention that once the force majeure clause is invoked, the time period as
agreed under the agreement would stand freezed and the appellant would be
released from his obligations under the conducting agreement. According to
him necessarily the force majeure amounted to suspension of the term of the
contract. According to him the reference to 60 days in the penultimate
paragraph of the appellant's letter dated 23 March, 2020 is only in the context
of the penal charges. It is hence submitted that the appeal deserves to be
allowed.
REASONS AND CONCLUSION
21. It would not require any emphasis that the entire controversy in the
present proceedings revolves around the force majeure clause being Article 19
of the Contract in question. At the outset, as to what is the concept under the
doctrine of force majeure, would be required to be examined.
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22. The Black's Law Dictionary ( 8th Edition) defines force majeure to mean
an event or effect that can be neither anticipated nor controlled which would
include both, the acts of nature and acts of people. It also defines force
majeure clause, being a contractual provision allocating risk performance
became impossible or impracticable. It would be relevant to note these
definitions which are as follows:-
"force majeure (fors ma-zhar). [Law French "a superior force"] An event or effect that
can be neither anticipated nor controlled. The term includes both acts of nature (e.g.
floods and hurricanes) and acts of people (e.g. riots, strikes, and wars) - Also termed
force majesture, viz majour; superior force. Cf. ACT OF GOD; vis MAJOR.
Force-majeure clause. A contractual provision allocating the risk if performance
becomes impossible or impracticable, esp. as a result of an event or effect that the
parties could not have anticipated or controlled. [Cases: Contracts - 309(1). C.J.S.
Contracts - 520-522, 524]"
23. Advanced Law Lexicon 'P Ramanatha Aiyar' describes "force majeure"
as under:
"Force majeure. Events outside the control of the parties and which prevent one or
both of the parties from performing their contractual obligations.
A contract provision that stipulates the unforeseen events-wars, Acts of God,
certain strikes- that will excuse a party from its duty to perform the contract.
Standard clause in a contract that absolves either of the parties of blame for non-
fulfillment of obligations caused by events beyond their control (such as
earthquakes, floods or acts of war).
Irresistible force or compulsion; circumstance beyond one's control. (See 48 Mad.
538: 87 IC 68 : AIR 1925 Mad 626 : 48 MLJ 374)
......
A contractual provision allocating the risk if performance becomes impossible or
impracticable as a result of an event or effect that the parties could not have
anticipated or controlled. (Black, 7th Edn., 1999)"
24. In Dhanrajamal Gobindram Vs. Shamji Kalidas and Co.3, the Supreme
Court considered as to what would be meant by force majeure. On analysis of
the rulings on the subject it was observed that where reference is made to
3 AIR 1961 SC 1285
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"force majeure", the intention is to save the performing party from the
consequences of anything over which he has no control. Mr. Justice M.
Hidayatullah speaking for the Bench observed thus:
"17. McCardie J. in Lebeaupin v. Crispin ([1920] 2 K.B. 714), has given an
account of what is meant by "force majeure" with reference to its history. The
expression "force majeure" is not a mere French version of the Latin expression "vis
major". It is undoubtedly a term of wider import. Difficulties have arisen in the past
as to what could legitimately be included in "force majeure". Judges have agreed that
strikes, breakdown of machinery, which, though normally not included in "vis major"
are included in "force majeure". An analysis of rulings on the subject into which it is
not necessary in this case to go, shows that where reference is made to "force
majeure", the intention is to save the performing party from the consequences of
anything over which he has no control. This is the widest meaning that can be given
to "force majeure", and even if this be the meaning, it is obvious that the condition
about "force majeure" in the agreement was not vague. The use of the word "usual"
makes all the difference, and the meaning of the condition may be made certain by
evidence about a force majeure clause, which was in contemplation of parties."
25. Having noted the jurisprudential concept of force majeure, the question
which has arisen in the present proceedings is whether the force majeure, even
assuming prevented the appellant from performing its contractual obligations
for some period, whether such invocation would take within its ambit an
automatic extension to the agreement/licence period which under the
agreement was to expire on 30 September, 2022.
26. To answer the issue the first and foremost endeavour would be to
examine as to what the parties have agreed under the force majeure clause
(Article 19). In the force majeure clause it was agreed between the parties that
in the event either party is unable to perform its obligation under the
agreement for a period greater than 60 days as a result of any failure or delay
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which is due to any cause or causes beyond its control, including but not
limited to flood, damages by the elements, act of God, strike, lock out or other
labour disorders, act of foreign or domestic de jure or de facto Government,
whether by law, order, legislation, decree, rule, regulation or otherwise
revolution, civil disturbance, breach of the peace, declared or undeclared war,
act of interference or action by civil or military authorities, terrorist acts, or due
to any other clause beyond the party's control, notwithstanding what is stated
in the prior clauses of the contract, the other party shall be entitled to forthwith
terminate the agreement. Thus, under the force majeure clause the clear
understanding between the parties is that if one of the parties is unable to
perform its obligation under the contract for a period greater than 60 days for
such reasons which are beyond the control of the party, then notwithstanding
as to what has been agreed between the parties in Articles 1 to 18, the other
party shall be entitled to forthwith terminate the agreement. Thus, the
consequence of such situation is the entitlement to terminate the agreement.
The period of non performance of the obligation being categorically agreed in
the said clause to be 60 days.
27. In the present case, the appellant due to outbreak of COVID-19
pandemic by its letter dated 23 March 2020 invoked the force majeure clause.
The invocation was not strictly in terms of what was provided for in the force
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majeure clause namely inability to perform for a period of 60 days as article 19
of the agreement would provide as the appellant apprehended an inability to
perform its obligation under the agreement. In the peculiar situation, it was
certainly an anticipatory inability which was canvassed by the appellant in its
notice dated 23 March 2020 addressed to respondent no.1 invoking the force
majeure clause. Be it so, there is no dispute that there was an outbreak of
pandemic and considering the situation as on 23 March 2020 it was felt by the
appellant that the appellant would be unable to perform its obligation under
the agreement. However, what is relevant is that a notice of force majeure
would at the most save the performance of the contractual obligations by a
party invoking the force majeure clause namely by the appellant so as to avoid
any liability of damages being faced/foiested. The performance of obligations
would take within its ambit various obligations that the parties have agreed in
the several performance clause of the agreement. This would inter alia include
obligations on the appellant for payment of compensation, fixed fees,
additional fee, as agreed in Article 6 and other amounts payable as agreed in
Article 6A and all other incidental obligations towards respondent No.1 and
the like which are ascertainable to be the obligations under the different clauses
of the agreement.
28. However, looking at the prayers in the plaint which are noted above, it
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is clear that assertion of the appellant is in relation to the extension of the five
year term of the agreement, according to the appellant, has stood extended
from 30 September 2022 upto 8 October 2024 by invoking of the force
majeure clause. This is the relief as prayed for in prayer clause (d) of the plaint
along with the incidental relief of a permanent injunction as prayed for. For
such relief to be granted, there can be no two opinions that the same would
amount to modification by the Court on what the appellant would term by
application of the principle of force majeure in substitution of what has been
expressly agreed between the parties in the terms of the contract. As set out in
Clause 16.1 of the agreement the parties have agreed that the agreement shall
be deemed to have been come into effect on 1 November 2017 and shall be
valid for a period of 59 months from 1 November 2017 and would expired 30
September 2022, unless terminated earlier as per the terms of the agreement
with further understanding that the agreement shall be extended with the
mutual consent of the parties on mutually agreed terms and conditions.
Further understanding being when the parties mutually agree to extend the
agreement, the terms of the Leave and Licence Agreement between respondent
Nos.2 & 3 and Respondent No.1 shall also be required to be extended
accordingly. In fact, the termination clause itself is an exhaustive clause
providing for variety of situations reserving rights of the parties to terminate
and it requires to be noted which reads thus:-
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"Article 16. TERM AND TERMINATION
16.1 This Agreement shall be deemed to have come into effect from 01
November 2017 and shall be valid for a period of 59 (fifty nine) months from 01
November 2017 and expiring on 30 September 2022, unless terminated earlier as
per the provisions hereof (the "Term").
This Agreement may be extended with the mutual consent of the parties on
mutually agreed terms and conditions; where the parties mutually agree to extend
this Agreement; the term of the L&L Agreement shall also be required to be
extended accordingly.
16.2 The Agreement can be terminated by either Party by mutual consent of
Parties on such terms and conditions as may be agreed upon by the parties in
writing. The Conductor shall have right to terminate this Agreement any time
during the Term by giving 3 (three) months written notice to Narayani for cause
or convenience.
For avoidance of doubt, it is clarified that save for any Material Breach
hereunder caused and not remedied by the Conductor after receipt of notice of
Cure (as mentioned hereinbelow), Narayani shall not terminate this Agreement
during the Term.
16.3 Notwithstanding anything to the contrary contained herein, either Party
('"Non-defaulting Party"), shall have the right to terminate this Agreement in the
event of breach of any of the terms and conditions of this Agreement by the other
Party ("Defaulting Party"). The Non-Defaulting Party shall give a 60 (sixty) days
written "notice of cure" to the Defaulting Party specifying the default / the breach.
If after the expiry of the said period of 60 (sixty) days, the breach / the default
remains to be rectified / remedied, this Agreement shall stand terminated.
Provided however, that, the Non-Defaulting Party may extend the said period of
60 (sixty) days by such number of days, on a written request received from the
Defaulting Party, as it may deem fit, if despite the Defaulting Party promptly
taking all necessary steps it is likely to take some more time for the breach to be
cured. Failure to get the breach cured within such extended notice period shall
entitle the Non-Defaulting Party to terminate this Agreement with immediate
effect.
16.4 At the end of the Term or earlier determination thereof, the
Conductor, subject to fifteen (15) days period, shall stop using and accessing the
Said Premises and remove all its articles and belongings from the Said Premises
against simultaneous refund of the Security Deposit to the Conductor subject to
deductions there from as provided in this Agreement. It is clarified that at no
point of time after termination or earlier determination of the Agreement, the
Conductor shall have or claim any right, title or interest in the Said Premises or
any part thereof.
16.5 In the event, Narayani fails to return the Security Deposit to the
Conductor simultaneously against receiving the vacant and peaceful possession of
the Said Premises, notwithstanding any clauses/articles mentioned herein above in
this Agreement, the Conductor shall be entitled to charge interest @ 18% per
annum on the Security Deposit till the same is returned to the Conductor. In
addition, the Conductor shall also be entitled to retain the permissive use and
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occupation of the Said Premises without paying any compensation or any other
charges and expenses. However, this is without prejudice to the other rights of the
Conductor, including recovery of Security Deposit, under the law. Whereas if the
Conductor fails to vacate the Said Premises on expiry of the Term, or termination
or earlier determination of Agreement, and inspite of readiness of Narayani to
refund the Security Deposit, the Conductor hereby unconditionally agrees to pay
not only the Fixed Conducting Fees and additional fees prevailing as on that date
along with LIQUIDATED DAMAGES mutually quantified at 2 (two) times of
the Fixed Conducting Fees prevailing as on that date as applicable at the time of
expiry or termination or earlier determination of Agreement.
16.6 On termination of this Agreement the Conductor shall be entitled to
remove all the movables, articles, equipment, furniture and fixtures which it may
have brought in for conducting the Business without causing any damage or
destruction to the Said Premises (reasonable wear and tear excepted) at the time of
removal.
16.7 On termination of this Agreement, the Conductor shall not have access to
any part of the Said Premises except to remove all the movables, articles and
fixtures which it may have brought in for conducting the Business, without
causing any damage or destruction to the Said Premises etc. at the time of removal
(reasonable wear and tear excepted)."
29. From the holistic reading of the said clauses of the agreement, it is clearly
seen that the termination clause stands independent of the force majeure
clause. In fact, it is implicit in the force majeure clause that it recognizes the
right of a party to terminate the agreement. Thus, it would be no argument as
canvassed by the appellant that merely because a force majeure notice dated
23 March 2020 was issued to respondent No.1, it would prima facie amount to
respondent No.1 agreeing to extend the term of the contract for a further
period of two years with effect from 30 September 2022. This would amount
to reading something into the contract which the parties have expressly not
agreed.
30. In any event, as agreed between the parties under the terms of the
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agreemnt, if the parties intended to have a modified agreement in relation to
what was agreed between the parties in Article 16 providing for 'Term and
Termination', in that event necessarily as agreed in Clause No.32, they were
required to alter/modify the agreement only by an instrument in writing. The
exchange of letters between the parties namely letter dated 23 March 2020 of
the appellant addressed to respondent No.1 and the response of respondent
No.1 dated 9 April 2020 even on the plain reading of the said letters would
neither amount to any modification of the term of the agreement as agreed in
Article 16 of the agreement nor can it be called to be an instrument in terms of
Article 32 of the agreement. If such meaning is attributed to the exchange of
letters as canvased by the appellant it would amount to doing violence to the
express terms of the agreement. Thus, the answer to the question would
obviously be that the invocation of force majeure clause namely Article 19 of
the agreement and the qualified acceptance of the same by respondent No.1 in
its letter dated 9 April 2020 would not amount to any modification or
alteration of Article 16 of the contract, whereunder the parties agreed to the
term of the agreement to come to an end by efflux of time on 30 September
2022. For these reasons Mr. Kadam's contentions assailing the impugned
order neither on the interpretation of the clauses of the agreement in question
nor on merits and even referring to the decision in Perry Vs. Suffields, Limited
are tenable.
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31. In the present context a useful reference can be made to the celebrated
commentary of Pollock & Mulla. In discussing the heading "Hardship", the
learned authors observed that in the performance of contract, hardship occurs
where the occurrence of events fundamentally alters the equilibrium of the
contract, either because the cost of the disadvantaged party's performance has
increased, or because the value of what it has to receive has decreased, provided
the events meet the following requirements:
(i) the events occur or become known to it after the conclusion of the
contract;
(ii) the events could not reasonably have been taken into account at the
time of the conclusion of the contract;
(iii) the events are beyond its control; and
(iv) the risk of the events were not assumed by it.
The learned authors observe that hardship entitles the disadvantaged
party to request the other side to enter into renegotiation of the original terms
of the contract with a view to adopting them to the changed circumstances. It
must make a request for renegotiations without undue delay, indicating the
grounds on which the request is sought. It is when one of the attributes of
hardship is an event beyond the parties control, it is the situation of force
majeure. The learned authors in the context of Section 56 describe the
consequences of "force majeure" as also what would be "Choice of the Party" as
under:
Force Majeure
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A party is excused of non-performance, if it proves that non-performance
was due to an impediment beyond its control, and it could not have
reasonably been foreseen by it at the time of making of the contract, nor
could it have avoided or overcome it or its consequences." If the impediment
is temporary, the excuse will be had for the reasonable period, during which
it has an effect on the performance of the contract. It is necessary that the
party failing to perform must give notice to the other party of the
impediment and its effect on its ability to perform, failing which, there may
be liability for damages for non-receipt of notice.
Choice of the Party
Where the factual situation can be considered as hardship and of force
majeure, the affected party may decide which remedy to pursue. The remedy
for hardship will enable it to renegotiate the contract and keep it alive, and
the remedy for the latter--to have its non-performance excused.
32. It is thus clear that even by applicability of Section 56 in a situation of
impossibility of performance, the contract changes its character to become a
void contract and the consequences under the law in relation to void contract
necessarily would follow. This is clear from the reading of Section 56, which is
extracted hereunder:
"56. Agreement to do impossible act.-An agreement to do an act
impossible in itself is void.
Contract to do act afterwards becoming impossible or unlawful. A contact to
do an act which, after the contract is made, becomes impossible, or, by reason
of some event which the promisor could not prevent, unlawful, becomes void
when the act becomes impossible or unlawful.
Compensation for loss through non-performance of act known to be
impossible or unlawful.-Where one person has promised to do something
which he knew, or, with reasonable diligence, might have known, and which
the promisee did not know, to be impossible or unlawful, such promisor must
make compensation to such promisee for any loss which such promisee
sustains through the non-performance of the promise.
33. Even otherwise, impossibility of performance is a situation which would
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fall under the provisions of the second part of Section 56 of the Indian
Contract Act,1872, which in the present context would be relevant. This
considering the appellant's case that after the agreement was entered between
the parties, the performance had become impossible by reason of outbreak of
Covid 19 pandemic. The second part of Section 56 ordains that the agreement
in this situation is impossibility of performance and is rendered void. In such
context, Mr.Kamdar's reliance on the decision in Energy Watchdog vs Central
Electricity Regulatory (supra) cannot be said to be misplaced, wherein the
Court has observed that in the circumstances when the Court finds that the
contract itself either impliedly or expressly contains a term, according to which
performance would stand discharged under certain circumstances, the
dissolution of the contract would take place under the terms of the contract
itself and such cases would be dealt with under Section 32 of the Act, if,
however, frustration would take place de hors the contract, it will be governed
by Section 56 which provides that a contract would become void when the act
itself becomes impossible of performance. The Supreme Court in this case
referring to the decisions in Satyabrata Ghose v. Mugneeram Bangur & Co.,
1954 SCR 310; M/s Alopi Parshad & Sons Ltd. v. Union of India, 1960 (2)
SCR 793 and Naihati Jute Mills Ltd. Vs. Khyaliram Jagannath AIR 1968 SC
522, in paragraphs 36 to 38 has observed thus:-
"36. The law in India has been laid down in the seminal decision of Satyabrata
Ghose v. Mugneeram Bangur & Co., 1954 SCR 310. The second paragraph of
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Section 56 has been adverted to, and it was stated that this is exhaustive of the law as
it stands in India. What was held was that the word "impossible" has not been used
in the Section in the sense of physical or literal impossibility. The performance of an
act may not be literally impossible but it may be impracticable and useless from the
point of view of the object and purpose of the parties. If an untoward event or
change of circumstance totally upsets the very foundation upon which the parties
entered their agreement, it can be said that the promisor finds it impossible to do the
act which he had promised to do. It was further held that where the Court finds that
the contract itself either impliedly or expressly contains a term, according to which
performance would stand discharged under certain circumstances, the dissolution of
the contract would take place under the terms of the contract itself and such cases
would be dealt with under Section 32 of the Act. If, however, frustration is to take
place de hors the contract, it will be governed by Section 56.
37. In M/s Alopi Parshad & Sons Ltd. v. Union of India, 1960 (2) SCR 793, this
Court, after setting out Section 56 of the Contract Act, held that the Act does not
enable a party to a contract to ignore the express covenants thereof and to claim
payment of consideration, for performance of the contract at rates different from the
stipulated rates, on a vague plea of equity. Parties to an executable contract are often
faced, in the course of carrying it out, with a turn of events which they did not at all
anticipate, for example, a wholly abnormal rise or fall in prices which is an
unexpected obstacle to execution. This does not in itself get rid of the bargain they
have made. It is only when a consideration of the terms of the contract, in the light
of the circumstances existing when it was made, showed that they never agreed to be
bound in a fundamentally different situation which had unexpectedly emerged, that
the contract ceases to bind. It was further held that the performance of a contract is
never discharged merely because it may become onerous to one of the parties.
38. Similarly, in Naihati Jute Mills Ltd. v. Khyaliram Jagannath, this Court wen
into the English law on frustration in some detail, and then cited the celebrated
judgment of Satyabrata Ghose V. Mugneeram Bangur & Co. Ultimately, this Court
concluded that a contract is not frustrated merely because the circumstances in
which it was made are altered. The courts have no general power to absolve a party
from the performance of its part of the contract merely because its performance has
become onerous on account of an unforeseen turn of events."
(emphasis added)
34. Thus, look from any angle firstly by virtue of what has been agreed
between the parties under the force majeure clause and even assuming that
there is an absence of any such clause in the agreement, it will be unacceptable
that the term of contract as sought to be canvassed by the appellant would
stand extended by such force majeure.
35. It is thus clear that the agreement having being expired by efflux of time,
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there was no legal right whatsoever in the appellant to seek a relief of
temporary injucntion, so as to continue to remain in possession and occupation
of the premises. The rights being espoused by the appellant strinctly are
contractual rights which itself stood extinguished after the period of the
contract had come to an end. Thus, to presume that there was any legal right
in the appellant by invoking the force majeure is certainly an untenable
proposition as discussed above. The appellant had miserably failed to make out
any prima facie case for temporary injunction. The balance of convenience was
also overwhelmingly in favour of the respondent, as also considering the
substantial price variation the prejudice was being caused to the respondents in
the appellant retaining the premises. Thus, the view taken by the learned Trial
Judge on all these counts cannot be faulted. It is in any event a possible view
and would not call for any interference of this Court applying the well settled
principle of law in exercise of the appellate jurisdiction.
36. The appellants thus have failed to make out any case for interference in
the impugned order pased by the City Civil Court. The Appeal accordingly
stands dismissed. No costs.
37. At this stage, learned counsel for the appellant would request that the
interim arrangement which operates under the order dated 30 September,
2022 and as modified by a further order dated 25 November, 2022 be
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continued for a reasonable period.
38. The request is opposed by Mr. Panicker, learned counsel for respondent
no. 1. He submits that in terms of the undertaking dated 22 November, 2022
of the appellant as placed on record of the present proceedings in pursuance of
the order dated 30 September, 2022, an additional amount of about Rs.12
lakhs per month is required to be paid by the appellant to respondent no. 1
with effect from October, 2022.
39. Having considered the orders dated 30 September, 2022 and 25
November, 2022 passed by the co-ordinate Bench of this Court, in my
opinion, it will be appropriate that subject to the said amounts being deposited
by the appellant with respondent No.1 as per the said undertaking furnished to
the Court on or before 20 February, 2023, the interim arrangement under the
order dated 30 September 2022 shall enure to the benefit of the appellant for a
period of two weeks from today.
40. In view of disposal of the appeal, pending Interim Application would
not survive, the same is disposed of.
G. S. KULKARNI, J
17 February, 2023
