Delhi High Court
M/S. Satya Narain Sharma (Huf) vs M/S. Ashwani Sarees Private ... on 6 April, 2009
Author: S.N. Aggarwal
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(OS) No. 1439/2008
% Date of Decision: April 06, 2009
# M/s Satya Narain Sharma-HUF.
..... Plaintiff
! Through: Mr. Hemant Chaudhri, Advocate
Versus
$ M/s Ashwani Sarees Pvt. Ltd.
.....Defendant
^ Through: Mr.R.P.Bansal, Sr. Advocate with
Mr.Atul Sharma, Mr.Ajay Saroya
and Mr.Abhishek Agarwal for the
defendant.
Mr.Girish Aggarwal with Ms.Mugdha
Pandey for the applicants.
CORAM:
HON'BLE MR. JUSTICE S.N. AGGARWAL
1. Whether reporters of Local paper may be allowed to see
the judgment? YES
2. To be referred to the reporter or not?YES
3. Whether the judgment should be reported in the
Digest?YES
S.N.AGGARWAL, J
The legality, validity and enforceability of a 'three years lock-
in-period Clause' contained in the agreement to lease between the
parties to the suit is the only question that needs consideration and
CS(OS)No.1439/2008 Page 1 of 32
an answer by the Court in the present suit.
2 The brief facts of the case giving rise to the above question
are as follows:-
The plaintiff is the owner and landlord of suit premises bearing
No. G-27 on the ground floor of MGF Metropolitan Mall, Saket, New
Delhi. The defendant is in the business of manufacturing and
dealing in garments for children under the name and style
'CATMOSS'. The defendant is a private limited company
incorporated under the Companies Act.
3 It is stated that the defendant had approached the plaintiff
with a letter of intent dated 05.09.2007 expressing a desire to take
the suit premises on lease. As per letter of intent issued by the
defendant to the plaintiff and signed by both the parties, the suit
premises were sought to be taken on lease by the defendant on a
monthly rent of Rs.3,00,000/- for a fixed period of three years with
an option to the lessee for the renewal of three years term each
with the stipulation to increase the rent @ 15% after a period of
every three years. It was specifically stipulated in the letter of
intent dated 05.09.2007 that the defendant can vacate the suit
property at any time but only after an initial period of three years. It
was stipulated that the initial three years of the lease shall be a
CS(OS)No.1439/2008 Page 2 of 32
'lock-in-period'. However, an option was given to the defendant to
terminate the lease by giving a 90 days notice after the lock-in-
period of initial three years of the lease.
4 In furtherance of letter of intent dated 05.09.2007, a
registered agreement to lease dated 27.09.2007 was executed
between the plaintiff and the defendant w.e.f. 15.11.2007 for a
fixed period of three years ending on 14.11.2010. Since a lock-in-
period of three years was provided in the agreement to lease dated
27.09.2007 executed between the parties, the plaintiff is alleged to
have planned to invest the monthly rent to be received by the
plaintiff from the defendant in his interior furnishing business and is
alleged to have made further commitments on the basis of fixed
period of three years.
5 It was further provided in Clause 4 of the agreement to lease
dated 27.09.2007 that the liability for payment of rent by the
defendant will stand deferred in case the Mall in which the suit
premise is situated does not become fully operational by
15.11.2007 till the date of operation of the Mall. The plaintiff has
stated in para 6 of the plaint that as the Mall became fully
operational, the defendant started making the payment of rent
w.e.f. 15.11.2007. As per the plaint, since the plaintiff did not
CS(OS)No.1439/2008 Page 3 of 32
receive rent for the months of April and May, 2008, the plaintiff got
served a legal notice dated 17.05.2008 upon the defendant calling
upon the defendant to pay a sum of Rs.6,74,160/- being the rent
and taxes for the months of April and May, 2008 along with interest
@ 36% per annum for the delayed period. The said legal notice
dated 17.05.2008 was duly served on the defendant and the
defendant gave reply dated 05.06.2008 to the said legal notice. In
the reply dated 05.06.2008, the defendant took a plea of the Mall
being allegedly not fully operational and there being allegedly low
foot fall in the Mall. Through the reply dated 05.06.2008, the
defendant sought to terminate the lease agreement dated
27.09.2007 w.e.f. 30.09.2008 and thus refused to pay the arrears of
rent. However, the defendant in the reply dated 05.06.2008 did not
deny its liability to pay a sum of Rs.6,74,160/- being the rent for the
months of April and May, 2008 along with interest @ 36% per
annum for the delayed period but called upon the plaintiff to adjust
the same from the security deposit of Rs.18 lacs lying deposited
with the plaintiff.
6 The plaintiff got served a rejoinder/rebuttal notice dated
10.06.2008 to the defendant through its counsel whereby the
plaintiff again drew attention of the defendant to the stipulation in
CS(OS)No.1439/2008 Page 4 of 32
the lease agreement of a lock-in-period up to 14.11.2010 and
brought to the notice of the defendant that in view of lock-in-period
of three years, the defendant is liable to pay a sum of
Rs.1,10,97,990/- to the plaintiff being the rent, maintenance
charges, taxes and interest on the delayed period of rent for the
period up to 14.11.2010. The plaintiff also informed the defendant
that the purported termination of the lease by the defendant w.e.f.
30.09.2008 is neither valid nor legal and does not alter the terms of
the lease agreement in any manner. By means of rebuttal/rejoinder
notice dated 10.06.2008, the plaintiff again called upon the
defendant to pay a sum of Rs.10,11,240/- being the rent for the
months of April, May and June, 2008 along with interest @ 36% per
annum for the delayed period. It is alleged that the defendant has
not paid any rent to the plaintiff after 01.04.2008.
7 The plaintiff, immediately after serving rebuttal/rejoinder
notice dated 10.06.2008 upon the defendant, filed the present suit
for declaration seeking a declaration that the termination of the
lease agreement dated 27.09.2007 by the defendant is invalid and
for further declaration to declare the lease to be subsisting and
continuing till 14.11.2010. The plaintiff has also prayed for a decree
of mandatory injunction directing the defendant to pay a sum of
CS(OS)No.1439/2008 Page 5 of 32
Rs.3,37,080/- every month w.e.f. 01.08.2008 till 14.11.2010 in
advance on or before 10th day of each English calender month. The
plaintiff has further prayed for a decree of Rs.14,02,320/- being the
arrears of rent and taxes and interest for the delayed period for the
months of April to July, 2008.
8 In response to summons of the suit, the defendant has filed its
written statement. In the written statement filed by the defendant,
execution of agreement to lease dated 27.09.2007 which is the
basis of the plaintiff's suit has not been denied. However, the
defendant has taken a plea that at the time of first settling the
terms of the proposed agreement to lease, there was no meeting of
minds or intention of the parties to incorporate or agree on a term
of lock-in-period for the termination of lease. The defendant has
denied its liability under the lock-in-period Clause contained in the
agreement to lease dated 27.09.2007. The defendant has taken an
alternative plea that a stipulation of lock-in-period for the defendant
with a right to the plaintiff to terminate the lease during the lock-in-
period, as set out in the Clause 10(e), is onerous, void and
unenforceable. The further stand of the defendant is that the
agreement to lease has become impossible to perform. The
defendant has stated that in terms of Clauses 9(f), 9(k) and 10 (g)
CS(OS)No.1439/2008 Page 6 of 32
of the agreement to lease, the suit premises can be used by the
defendant only for commercial purposes. It is stated that the
defendant though tried to use the premises for commercial
purposes but for the reasons beyond its control and due to world
wide economic meltdown in the economies, the defendant started
incurring losses in its business and was not able to pay hefty
monthly rent to the plaintiff for the premises from where it was
having no income. It is alleged that due to these reasons, the
agreement to lease executed between the parties became
impossible of performance as the defendant cannot use the
premises for commercial purposes as envisaged in the agreement
to lease. The defendant has denied ownership of the plaintiff in
respect of the suit premises and according to the defendant, MGF
Metropolitan Mall is the owner of the suit property. The defendant
has alleged that this suit is not maintainable for non-impleadment
of MGF Metropolitan Mall as party/ defendant in the said suit. The
defendant has prayed for dismissal of the present suit.
9 For deciding the present suit filed by the plaintiff against the
defendant, the only legal issue that arises from the pleadings of the
parties is whether 'three years lock-in-period Clause' contained in
the agreement to lease dated 27.09.2007 executed between the
CS(OS)No.1439/2008 Page 7 of 32
parties is binding on the parties. The other objection taken by the
defendant in its written statement to the grant of prayers made by
the plaintiff in the suit do not merit any consideration because the
defendant has admitted the execution of the agreement to lease
dated 27.09.2007 which is the foundation of the plaintiff's claim in
the said suit. The decision in the suit virtually depends on the
construction and interpretation of various clauses contained in the
agreement to lease in respect of the suit premises.
10 On 19.01.2009, counsel for both the parties had made a
statement at Bar that the case does not require admission/denial of
documents to be carried out as according to them also, the decision
in the present suit depends upon the interpretation of the lease
agreement between the parties which is made basis of the suit. On
this statement being made by the counsel for the parties before the
Court on 19.01.2009, case was adjourned for hearing for
30.01.2009. On 30.01.2009 arguments of counsel for both the
parties were heard in the matter and the case was reserved for
judgment. Before the judgment could be delivered, Mr. Ram Phal
Bansal, Senior Advocate came and appeared on behalf of the
defendant and mentioned to the Court on 02.02.2009 that the
Court should not hasten to pronounce the judgment because he
CS(OS)No.1439/2008 Page 8 of 32
wants to make certain submissions and satisfy the Court that the
case cannot be decided without framing of issues. On this request
being made by Mr. Ram Phal Bansal in presence of counsel for the
plaintiff on 02.02.2009, pronouncement of judgment was deferred
and on that day case was adjourned for further hearing for
13.02.2009. However, in the meanwhile, the defendant filed a
review application under Order 47 Rule 1 read with Section 151 CPC
(Review Application No. 57/2009) for review of order dated
19.01.2009 and this Court vide its order dated 06.02.2009 passed
on the review application of the defendant observed that the
parties will be given an opportunity for admission/denial of their
respective documents at appropriate stage of the suit. This
observation came to be made in the review application of the
defendant because of a stand taken on behalf of the defendant that
Mr. Abhishek Aggarwal, Advocate who made a statement before the
Court on 19.01.2009 that admission/denial of documents was not
required was not authorised to make such a statement. However,
the plea of the defendant that Mr. Abhishek Aggarwal was not
competent to make a statement to the court on 19.01.2009
appears to be an absolutely false, vexatious and an after-thought
plea. Mr. Abhishek Aggarwal who appeared in the matter on behalf
CS(OS)No.1439/2008 Page 9 of 32
of the defendant and made a statement on 19.01.2009 that
admission/denial of documents is not required, has in fact replied to
the legal notice of the plaintiff and has also filed his vakalatnama
on behalf of the defendant in the suit. Therefore, it cannot be said
that Mr. Abhishek Aggarwal acted without instructions on
19.01.2009.
11 I have heard the arguments of the counsel for the parties and
have also gone through the entire case file and the documents of
the parties available on record.
12 In view of the order dated 06.02.2009 in the review
application No. 57/2009, the first question that arise for
consideration is whether there is any document of either of the
parties on record which require admission/denial by them. Though I
have observed in my order dated 06.02.2009 in review application
No. 57/2009 that the parties will be given an opportunity for
admission/denial of documents at appropriate stage but upon
hearing the counsel for the parties and upon perusal of the record, I
find that there is no document on record which require
admission/denial by either of the parties. The agreement to lease
dated 27.09.2007 is the foundation of the plaintiff's claim in the
present suit. The execution and contents of the document
CS(OS)No.1439/2008 Page 10 of 32
described as 'agreement to lease' is not disputed by the defendant.
The decision of the suit depends upon the construction of various
clauses contained in the said document described as 'agreement to
lease' and also on the legal notice of the plaintiff dated 17.05.2008,
reply of the defendant dated 05.06.2008 and rejoinder/rebuttal
notice of the plaintiff dated 10.06.2008. None of these documents is
in dispute by either of the parties. I would like to mention that I had
repeatedly asked Mr. Ram Phal Bansal, learned senior counsel
appearing on behalf of the defendant whether there is any
document on record either filed by him or by the plaintiff which
require admission/denial by the parties. Mr. Bansal did not point out
any such document which require admission/denial by either of the
parties. In that view of the matter, I did not consider it necessary to
send the case for admission/denial of documents before the Joint
Registrar.
13 Mr. Ram Phal Bansal, learned senior counsel appearing on
behalf of the defendant had argued that the suit cannot be decided
by the Court without framing of issues notwithstanding whether
there is a dispute or no dispute between the parties on any factual
aspect. Mr. Bansal was repeatedly told that the only issue that arise
for decision in the present suit is a legal issue regarding the legality
CS(OS)No.1439/2008 Page 11 of 32
and validity of the 'lock-in-period clause' contained in the
agreement to lease between the parties and he was asked to
address the Court on this legal issue and show why and how the
said 'lock-in-period clause' contained in the lease agreement is not
binding on the parties. Though Mr. Bansal has addressed his
arguments on this legal issue but he has insisted for framing of
following issues. (Copy of proposed issues handed over by Mr.
Bansal to the Court)
1. Whether Court has pecuniary jurisdiction to try the
suit?
2. Whether the plaint is not liable to be rejected for
not disclosing any cause of action?
3. Whether the suit is not liable to be dismissed for
deficiency of court fee as the amount for which the
declaration is sought comes to Rs.1.8 crores but
the court fee affixed by the plaintiff is only
Rs.57000/-.
4. Whether any lease deed subsists between the
parties, as the document on which the plaintiff
relies for maintaining the suit is only agreement to
lease and not lease deed?
5. Whether there exists any lock in period regarding
the tenancy of the defendant in the suit premises
and if so whether the defendant has no right to
terminate the lease during the lock in period?
6. Whether the suit is maintainable in the present
form in the absence of any lease deed? Whether
the plaint is not liable to be rejected, as it does
not provide material Particulars regarding the
CS(OS)No.1439/2008 Page 12 of 32
ownership of the plaintiff over the suit premise.
7. Whether any cause of action arose in favour of the
plaintiff to file the present suit?
8. Whether the suit is maintainable as the plaintiff
has claimed in the suit future rent which has not
accrued in his favour so far?
14 Mr. Bansal has relied upon a Division Bench judgment of this
Court in S. Shandi (Mrs.) VS. D.A.V. College Managing
Committee 2006 III AD (DELHI) 598 and has laid emphasis on
para 7 of the said judgment which is extracted below:-
"We cannot appreciate the approach
adopted. It needs hardly be said that the
procedure laid down by law has to be followed
while deciding a civil suit. The Code of Civil
Procedure requires that after a written statement
is filed contesting the claim of the Plaintiff, issues
need to be framed and those issues are required
to be decided. A perusal of the Trial Court record
shows that issues were not framed in the case and
it was straightaway taken up for decision on its
maintainability. It is not clear why it was felt that
the suit was not maintainable. It is not as if the
right of the Appellant to approach a civil Court was
barred by any law nor could it be said that judicial
review was prohibited. Learned counsel for the
Respondent has also not been able to give us any
reason why the civil suit filed by the Appellant was
not maintainable."
15 Relying on the above judgment, particularly para 7 of the said
judgment extracted above, Mr. Bansal had argued that this suit
should not be finally disposed of unless issues as proposed above
are framed and an opportunity is given to the parties to adduce
their evidence on the said proposed issues. I do not agree with this
submission made on behalf of the defendant. The issues in this suit
may be issues of fact or issues of law or may be mixed issues of
fact and law. In case the suit raises only issues of law, then the
parties need not be sent for trial in every case as the case can be
conveniently disposed of on hearing being given on the issues of
law. However, in case the issues of fact arises in any suit then those
issues can be decided only after giving opportunity to both the
parties to produce their evidence on such issues. The judgment in
S. Shandi's case (Supra) relied upon by learned senior counsel
appearing on behalf of the defendant is not applicable to the facts
of this case. The trial court, in that suit, dismissed the suit as not
maintainable without framing of issues that arose from the
pleadings of the parties and it was in this context that the Division
Bench observed that the trial court should not have dismissed the
suit on the ground of its maintainability alone without framing of
issues. However, this is not the case here in the present suit.
16 The present suit can conveniently be decided on the basis of a
legal issue regarding legality and validity of 'lock-in-period Clause'
contained in the lease agreement. Notwithstanding that, I have
heard Mr. Bansal on the issues proposed by him extracted
hereinabove. Even the issues proposed by the counsel for the
defendant can be conveniently decided without evidence.
Therefore, in order to allay any confusion in the matter, I even
propose to deal with the issues proposed by learned senior counsel
for the defendant so that the case may be decided to the
satisfaction of both the parties.
17 The first issue raised on behalf of the defendant is regarding
the pecuniary jurisdiction of this Court to try the present suit.
Learned senior counsel appearing on behalf of the defendant has
not given any reason why this Court has no pecuniary jurisdiction to
try this suit. The objection of the defendant at best on the point of
pecuniary jurisdiction of this Court could have been that since the
plaintiff has prayed for a decree of mandatory injunction directing
the defendant to pay a sum of Rs.3,37,080/- every month w.e.f.
01.08.2008 till 14.11.2010 and for a decree of Rs.14,02,320/-
towards arrears of rent, taxes and interest for the delayed period till
the date of filing of this suit, he ought to have filed this suit before
the Court of lowest pecuniary jurisdiction competent to entertain
the said claim being the Court of District Judge. This objection, if
taken, would have no merit because the main relief claimed by the
plaintiff in this suit is a declaration declaring the termination of the
lease agreement dated 27.09.2007 by the defendant as invalid and
to direct the lease to be subsisting and continuing till the expiry of
lock-in-period of three years i.e. 14.11.2010. The plaintiff has
valued his suit for declaration @ Rs.36 lacs on which ad-valorem
Court fee has been paid. Since the main relief claimed by the
plaintiff in the suit exceeds the pecuniary jurisdiction of the District
Court, the plaintiff was well within its right to file the present suit in
this Court. Hence the issue proposed to be framed on the point of
pecuniary jurisdiction of this Court is not tenable. It may be noted
that the defendant has not taken any objection to the pecuniary
jurisdiction of this Court in its written statement and therefore issue
on this point even otherwise does not arise from the pleadings of
the parties.
18 The third issue proposed by the defendant is on the point of
Court fees. The pleadings regarding valuation of the suit are
contained in para 16 of the plaint. The defendant has vaguely
denied in reply to para 16 of the plaint that the valuation of the suit
has not been correctly done. The defendant has not explained as to
how the valuation of the suit has not been correctly done or that
deficit court fee has been paid on the plaint. However from the
proposed issue No. 3, the stand of the defendant appears to be that
the relief for declaration ought to have been valued at Rs.1.8 crores
but Court fee affixed by the plaintiff is only Rs.57,000/-. This plea is
not there in the written statement of the defendant. The relief of
declaration seems to have been correctly valued by the plaintiff at
Rs.36 lacs on the basis of rent in respect of the suit premises for
the preceding 12 months. Therefore, the issue proposed on the
point of court fee is not relevant.
19 Proposed issue No. 4 is not an issue of fact. The decision on
this issue depends upon the interpretation to be placed on various
clauses contained in the agreement to lease dated 27.09.2007
between the parties. Mr. Ram Phal Bansal, learned senior counsel
appearing on behalf of the defendant has referred to Clause 6
contained in the agreement to lease dated 27.09.2007 to contend
that the document on which the plaintiff relies for maintaining the
suit is only an agreement to lease and not the lease deed. Relying
on Clause 6, he has further submitted that since the lease deed in
terms of the said Clause was not executed, the lease in respect of
the suit premises between the parties does not subsist.
20 Per contra Mr. Hemant Chaudhri, learned counsel appearing
on behalf of the plaintiff has argued that the agreement to lease
dated 27.09.2007 is virtually a lease deed in respect of the suit
premises and was executed on a non-judicial stamp paper of
Rs.72,100/-. The contention of Mr. Chowdhary is that the agreement
to lease dated 27.09.2007 has all the trappings of a lease deed and
is a duly registered document and according to him, 'lock-in-period
Clause' contained in the said document is binding on the parties to
the suit. The rival stand taken by the parties on the question
whether the agreement to lease dated 27.09.2007 relied upon by
the plaintiff is an agreement simplicitor or can be treated as a lease
deed does not raise a dispute of fact. The same, therefore, does not
require any evidence. The agreement to lease relied upon by the
plaintiff is executed on a non-judicial stamp paper of Rs.72,100/-
and is a duly registered document. Having regard to the same, I am
of the view that the present suit filed by the plaintiff cannot be
dismissed as not maintainable on the ground that the said
document is only an agreement to lease and not the lease deed.
Therefore proposed issue No. 4 does not arise for adjudication.
21 Issue No. 6 proposed by the defendant is in relation to
ownership of the plaintiff in respect of the suit premises. According
to the defendant, the plaintiff is not the owner of the suit premises
as according to it, the suit premises is owned by MGF Metropolitan
Mall. The dispute regarding the ownership of the suit premises
raised by the defendant in the written statement appears to the
vexatious and false to the own knowledge of the defendant. The
defendant in its written statement has admitted the basic
document i.e. agreement to lease dated 27.09.2007 in which the
plaintiff is described as the owner of the suit premises. The
defendant does not dispute that it had taken the suit premises on
lease from the plaintiff. Not only that, the defendant has also acted
upon the terms and conditions contained in the said document in as
much as before filing of the present suit, the defendant has paid
rent in respect of the suit premises to the plaintiff for more than
four months up to March, 2008. Besides rent being paid up to
March, 2008, the defendant also deposited Rs.18 lacs with the
plaintiff towards security being six months rent to be returned at
the time of vacation of the suit premises. In case the defendant had
any doubt about the ownership of the plaintiff in respect of the suit
premises, then he ought not to have taken the suit premises on
lease from him or paid rent or deposited security. This clearly belies
the stand of the defendant that the plaintiff is not the owner of the
suit premises. Even otherwise, I am of the view that the defendant
being the lessee of the suit premises has no locus-standi to
challenge the ownership of the plaintiff. I am further of the view
that the parties need not be sent for trial for proving the ownership
of the plaintiff in view of what has been stated and discussed by me
above.
22 Issues No. 2, 5 & 7 proposed by the defendant are inter-linked.
In fact proposed issues No. 2 & 7 are overlapping and they are
linked with proposed issue No. 5. These are legal issues and
findings on the same can be returned on the basis of interpretation
to be placed on the various clauses contained in the agreement to
lease between the parties. Mr. Bansal, learned senior counsel
appearing on behalf of the defendant has not disputed Clause 10(a)
contained in the agreement to lease which provide for a lock-in-
period of three years before which the defendant cannot vacate the
suit premises. The argument of Mr. Bansal was that the 'lock-in-
period Clause' contained in the agreement to lease was not
intended to be incorporated in the lease deed to be executed
between the parties as per Clause 6 of the agreement to lease
dated 27.09.2007. Mr. Bansal had further argued that 'lock-in-
period Clause' contained in the agreement to lease is onerous, void
and unenforceable because according to him, the said Clause
restrict the right of the defendant to vacate the suit premises
before three years lock-in-period whereas Clause 10 (e) of the same
document described as agreement to lease gives a discretion to the
plaintiff to terminate the lease even before expiry of lock-in-period
of three years on happening of any of the contingencies provided in
sub-clause (e) of the said clause of the lease agreement. On the
other hand, Mr. Hemant Chaudhri, learned counsel appearing on
behalf of the plaintiff had argued that the parties had entered into
the agreement to lease and had expressly agreed to provide a lock-
in-period of three years for creating lease in respect of the suit
premises in favour of the defendant. The submissions of Mr.
Chowdhari was that since the parties had entered into lease
agreement with eyes wide open, the defendant cannot be
permitted to resile from the terms of the contract contained in the
lease agreement. It was further submitted on behalf of the plaintiff
that agreement to lease dated 27.09.2007 is binding on the parties
and the defendant cannot be permitted to come out of the 'lock-in-
period Clause' contained in the said agreement merely on the plea
that the said document is only an agreement and not a lease.
23 I have given my anxious consideration to the above rival
arguments advanced by the counsel for the parties. I am unable to
persuade myself to agree with the submissions made on behalf of
the defendant. I do not find any merit in the arguments advanced
on behalf of the defendant that the parties had entered into an oral
agreement while executing the agreement to lease on 27.09.2007
that the 'lock-in-period clause' contained in the said agreement will
be deleted while executing the lease deed as per Clause 6 of the
said document. The defendant is precluded from pleading oral
agreement in regard to the 'lock-in-period Clause' contained in the
lease agreement dated 27.09.2007 in view of provisions contained
in Section 91 & 92 of the Indian Evidence Act, 1872. It may be
noted that the lease agreement between the parties which is made
basis of the plaintiff's claim in the present suit is executed on non-
judicial stamp papers of Rs.72,100/- and is a duly registered
document. The lease agreement between the parties has all the
trappings of a lease deed. The lease agreement dated 27.09.2007
is accompanied by delivery of possession of the suit premises by
the plaintiff to the defendant. The defendant before arising of the
dispute emanating from the 'lock-in-period Clause' had been paying
the rent in respect of the suit premises to the plaintiff which stood
paid for the period upto 31.03.2008. This conduct of the defendant
will work as estoppel to plead an oral agreement contrary to his
own action in implementing the terms of the lease agreement.
24 The defendant in its attempt to find an escape route to come
out of the 'lock-in-period Clause' took a stand in its reply dated
05.06.2008 to the plaintiff's legal notice dated 17.05.2008 that as
the Mall is not fully operational because of which there has been
very low foot fall in the mall and resultantly there has been
negligent foot fall into the store of the defendant i.e. suit premises
in the Mall. The stand taken by the defendant in its reply dated
05.06.2008 to come out of the 'lock-in-period Clause' is relevant
and the same is extracted below:-
" At the out set all the allegations made in the
notice under reply are denied. Further, it is stated
that as the mall is not fully operational hence
there has been very low footfall into the mall and
resultantly there has been negligent footfall into
the store of our client. The closure of some of the
prominent branded stores has further resulted in
significant rather drastic drop in the footfall into
the mall and to the store of our client. In view of
above it has become commercially unviable for our
client to continue the business from the aforesaid
leased premises as our client is incurring huge loss
on account of rent of the leased premises and no
business thereof which is costing dear to our client
as the mode of recovery of the said loss
occasioned and due to be incurred by our client
has become practically impossible and this fact
was brought into the knowledge of your client.
For the reasons cited above, our client is left
with no other option but to shut down the said
shop as being discussed with your client for the
last three months though our client will be
incurring considerable loss because our client has
invested huge capital in the said shop for its
interiors, exterior, advertisement etc. of the said
shop but all in vain.
Therefore, take note that our client shall
close their leased premises w.e.f. 30.09.2008 and
consequently the agreement dated 27.09.2007
also stands terminated hereby. You are requested
to adjust the outstanding rents from the Security
deposit of Rs.18 lacs lying in your custody and the
balance dues, if any, shall be paid to you upon
confirmation from you in this regard."
25 It may further be noted that on 18.09.2008, the counsel
appearing on behalf of the defendant had given a statement to the
Court that the defendant has vacated the suit premises on
01.09.2008 and on that day, he brought the keys of the said
premises for being handed over to the counsel for the plaintiff.
However, the counsel for the plaintiff declined to take the keys
stating that he cannot accept the keys since the entire case of the
plaintiff against the defendant is that the defendant cannot be
allowed to terminate the lease during lock-in-period. The defendant
thereafter filed an application being IA No. 1698/2009 for
permission to deposit the keys of the suit premises with the Court.
This application was dismissed vide order passed by this Court on
06.02.2009.
26 In view of the above, the question that really calls for
determination is whether the termination of the lease agreement by
the defendant w.e.f. 30.09.2008 prior to the lock in period of three
years provided in the lease agreement is legal and valid or can such
a termination be sustained in law. The ancillary question that also
arises for consideration is the effect of the offer made by the
defendant before the Court to handover the keys of the suit
premises to the plaintiff. Obviously the decision on these questions
is dependent upon findings to be returned on the legal issue
whether the 'lock-in-period Clause' contained in the agreement to
lease is binding on the parties or not.
27 Mr. Bansal learned senior counsel appearing on behalf of the
defendant has argued that the liability of the defendant for
payment of rent in terms of the lease agreement does not arise
because according to him, in terms of Clause 4 of the said
agreement, the liability for payment of rent was deferred till the
Mall becomes fully operation. According to him, since the mall did
not become fully operational, the defendant was not liable to pay
rent in respect of the suit premises. He submitted that the point
that mall did not become operational require evidence for which an
opportunity to lead evidence should be given to the defendant. I am
afraid, I do not agree with this submission made on behalf of the
defendant. It may be noted that the defendant in reply to para 6 of
the plaint in its written statement has not denied that it had started
paying rent in respect of the suit premises to the plaintiff w.e.f.
15.11.2007 since the Mall had become operational on that day. It
does not lie in the mouth of the defendant to approbate and
reprobate and make inconsistent pleas on factual aspect.
28 Having heard the learned counsel for the parties and upon
giving my anxious consideration to their arguments, I am of the
view that the 'lock-in-period Clause' contained in the lease
agreement is binding on the parties and the defendant cannot be
permitted to come out of the said Clause before expiry of initial
lock-in-period provided in the lease agreement. The lease
agreement does not envisage any eventuality conferring a right or
an option to the lessee to terminate the lease de hors the lock in
period clause. It may be noted that the concept of providing a 'lock-
in-period Clause' in the lease agreement is recent in its origin and
the need for providing such a Clause is necessitated having regard
to the fact that more and more malls are coming all around not only
in Delhi but through out the country. The owner/landlord of the
spaces in the Malls also need some assurance from their
prospective tenants that the suit premises intended to be taken on
lease will be retained by their tenant for a certain specified period
so that the owner/landlord can accordingly plan for investment of
the rent to be realized by them.
29. I am of the view that the various clauses contained in the
lease agreement between the parties have to be read harmoniously
and on a close reading of the various terms and conditions
contained in the lease agreement, it appears to me that the parties
have voluntarily and with full sense of responsibility agreed to
incorporate a lock in period clause in the agreement to lease and
therefore the defendant cannot come out of the said clause on the
ground that it has become unprofitable for it to retain the suit
premises any more. The plea of the defendant that it is
commercially unviable for it to continue in the suit premises cannot
even otherwise be sustained because the plaintiff is not a partner in
the profits or losses in the defendant company. Once the defendant
company had entered into a contract, it must honour and fulfill its
obligations, irrespective of the consequences, as laid down in
Section 37 of the Indian Contract Act. The law is well settled that
the Court cannot modify, vary or substitute the intention of the
parties ascribed in the document. We are considering here a
contract between the parties contained in the lease agreement
dated 27.09.2007 in which they have consciously and with eyes
wide open provided for a 'lock-in-period Clause' giving a complete
protection to the lessee (the defendant herein) against eviction at
least for a lock-in-period of three years. Assuming the rental of the
suit property had gone high after creation of the tenancy, whether
the defendant being the lessee would have agreed to pay the
higher market rent or could the plaintiff in such a situation have
asked for eviction of the defendant. The answer to this is in simple
'No'. I am of the view that the agreement between the parties
contained in the lease agreement is binding on them. Since this
agreement contains three years lock-in-period clause, I am of the
view that the defendant cannot be allowed to terminate the lease
before expiry of the lock-in-period of three years provided in the
lease agreement. Hence the termination of the lease by the
defendant through its reply dated 05.06.2008 is invalid and the
same is not sustainable in law. In case the defendant wants to
vacate the suit premises before the expiry of the lock-in-period then
it is under a contractual obligation to pay the rental for the period
until the expiry of lock-in-period i.e. up to 14.11.2010. The
defendant, in my view, has rendered itself liable to pay rent in
respect of the suit premises to the plaintiff w.e.f. 15.11.2007 and in
fact the defendant has paid rent up to March 31, 2008. The
defendant, thereafter, stopped paying rent as it found unprofitable
to retain the suit premises for low intensity of clients attracted to its
store in the suit premises. This plea of unprofitability taken by the
defendant cannot stand in law. The Court would be reluctant to
mould and interpret a document taking into consideration the
profits and losses san the written contract between the parties
entered voluntarily and with full sense of responsibility. It will have
pernicious consequences in laying down a sound principle of law.
Then the decision of every case will not depend on law of contract
but on the pleas of the parties regarding profitability or non-
profitability. In my view, the plaintiff has acquired a right under the
lease agreement to insist the defendant that it must abide by the
'lock-in-period Clause' contained in the lease agreement. Since the
defendant admittedly did not pay any rent after March, 2008, it is
liable to pay rent at the agreed rate of Rs.3 lacs per month plus
taxes and interest for the delayed period as agreed in the lease
agreement till the expiry of the three years lock-in-period provided
in the lease agreement.
30 I do not find any merit in the plea taken by the defendant that
the 'lock-in-period Clause' contained in the lease agreement is
onerous, void and uneforceable in view of Clause 10 (e) contained
in the lease agreement giving an option to the plaintiff being the
landlord to terminate the lease even before expiry of three years
lock-in-period in the event of default or breach of terms and
conditions of the contract on the part of the defendant. It may be
noted that the right under the agreement to lease given to the
plaintiff for terminating the lease even before expiry of three years
lock-in-period is not absolute. This right given to the plaintiff is
given to him only in the eventuality of breach of the contract being
committed by the defendant being the lessee of the suit premises.
Hence it cannot be said that the 'lock-in-period Clause' contained in
the lease agreement is onerous, void and unenforceable. The
defendant cannot be permitted to take advantage of its own fault
and thereby compel the plaintiff to terminate the lease in terms of
Clause 10 (e) of the lease agreement. In terms of Clause 10 (e) of
the lease agreement it is optional to the plaintiff to terminate the
lease even before expiry of three years lock-in-period but it is up to
him whether to exercise such a discretion or not.
31 In case the plaintiff wants to enforce the 'lock-in-period
Clause' contained in the lease agreement, the defendant cannot
resist the same because what the plaintiff is asking is to enforce a
Clause contained in the registered lease agreement which is of
binding nature. Thus looking from any angle, I am of the considered
view that the 'three years lock-in-period Clause' contained in the
lease agreement is binding on the parties and termination of the
lease by the defendant is legally untenable and is therefore illegal.
32 For the foregoing reason, the suit of the plaintiff is decreed.
The termination of the lease agreement dated 27.09.2007 by the
defendant through its reply dated 05.06.2008 is declared as invalid
and it is directed that the lease in terms of the lease agreement
dated 27.09.2007 will be deemed to be subsisting and continuing
till the date of expiry of the lock-in-period i.e. 14.11.2010. A decree
of Rs.14,02,320/- towards arrears of rent and taxes and interest for
the delayed period for the months of April to July, 2008 is also
passed in favour of the plaintiff and against the defendant. The
defendant is further directed to continue to pay rent of the suit
premises at the agreed rate mentioned in the lease agreement
dated 27.09.2007 to the plaintiff every month w.e.f. 01.08.2008 till
14.11.2010 in advance on or before 10th day of each English
calender month. The defendant is directed to clear the arrears of
rent for the period from 01.08.2008 till 31.03.2009 within 8 weeks
from today subject to the plaintiff's paying Court Fee on the amount
of arrears within four weeks from today. The decree in terms
referred hereinabove be prepared.
April 06, 2009 S.N.AGGARWAL
a [JUDGE]
