Time Broadband Services Pvt. Ltd. vs Colombian Software Solutions ...
2009 Latest Caselaw 3622 Del

*           IN THE HIGH COURT OF DELHI AT NEW DELHI


                                            Date of Reserve: September 01, 2009
                                              Date of Order: September 08, 2009


+OMP 180/2009
%                                                                  08.09.2009
    Time Broadband Services Pvt. Ltd.                              ...Petitioner
    Through: Mr. Sanjay Jain, Advocate

       Versus

       Colombian Software Solutions Pvt. Ltd.                  ...Respondent
       Through: Mr. Ravi Gupta, Sr. Adv. with Mr. Ankit Jain, Advocates for R-1
                Mr. Rishab Ran Jain, Advocate for R-2 to 4.

AND

+OMP 236/2009
%
    Colombian Software Solutions Pvt. Ltd.              ...Petitioner
    Through: Mr. Ravi Gupta, Sr. Adv. with Mr. Ankit Jain, Advocates

       Versus

       Time Broadband Services Pvt. Ltd.                     ...Respondent
       Through: Mr. Sanjay Jain, Advocate


       JUSTICE SHIV NARAYAN DHINGRA

1.     Whether reporters of local papers may be allowed to see the judgment? Yes.

2.     To be referred to the reporter or not?                                     Yes.

3.     Whether judgment should be reported in Digest?                             Yes.


       JUDGMENT

1. By this order, I shall dispose of these two petitions under Section 9 of

the Arbitration & Conciliation Act, 1996, one preferred by the petitioner and

one by respondent who had entered into a lease deed/ agreement dated 21 st

January 2008 in respect of premises bearing number 29, Okhla Industrial

Estate, Phase-III, New Delhi.

OMP Nos. 180/2009 & 236/2009 Page 1 Of 10

2. Time Broadband Services Pvt. Ltd., petitioner in OMP No.180 of 2009

shall hereinafter will be referred "the Lessee" and the petitioner in OMP 236

of 2009 Colombian Software Solutions Pvt. Ltd. shall hereinafter be referred

"the Lessor".

3. It is submitted by Lessee that the Lessee deposited a sum of

Rs.192,61,440/- equivalent to six months‟ rent and Rs.13,48,560/- equivalent

to six months maintenance charges with the Lessor at the time of taking this

premises on lease under the lease deed. The Lessee had taken on lease the

entire property consisting of basement, ground floor, first floor, second floor

and terrace with the understanding that the second floor shall be available for

occupation of Lessee on or about 15th February 2008 and the Lessee shall be

liable to pay rent for basement and second floor from 15 th February 2008. It is

stated by Lessee that despite follow up by the Lessee with the Lessor, the

construction of second floor was not completed so as to make it habitable for

use by the Lessee. However, with the onset of global meltdown and recession

in the market, the Lessee on 1st February 2009 wrote to the Lessor that it was

not able to pay the rent for the entire premises and in the circumstances it

was interested in retaining only two floors viz. ground floor and first floor of

the property, which it had been using since inception of the Lease. Pursuant

to this letter meetings took place between the parties for re-negotiation of

the existing rent structure. However, the Lessor was not prepared to melt-

down and threatened that in case the Lessee would retain only two floors of

the property, then Lessor shall forfeit the entire security amount lying with it

and a fresh lease deed would have to be entered requiring fresh security

deposit qua limited portion of the premises. The Lessee submitted that in

between MCD pasted a notice on the property stating therein that the

OMP Nos. 180/2009 & 236/2009 Page 2 Of 10 property was being used contrary to the authorized use and it required the

Lessor to change the usage of the premises. The notice specified that the

property was an „industrial unit block‟ and could not be converted to

commercial use or office use contrary to the existing development control

norms. MCD directed to comply with the notice within 15 days and asked to

stop usage of the property within that period. On this, the Lessee made

inquiries with MCD and learnt that the superior Lessor had given the property

on perpetual lease to the Lessor for the purpose of factory and for carrying on

manufacturing or for running an industry and these conditions were binding

on the Lessor. It is submitted that the Lessor had offered the property to the

Lessee for office use representing that the property could be legally used for

this purpose, despite being aware that the property cannot be used for office

purpose. The Lessor misrepresented to the Lessee and made it to enter into

the lease deed. The Lessee could ill-afford to continue to occupy the property

in view of the notice of MCD and threat of MCD, therefore, the Lessee

searched for alternative office accommodation to rehabilitate itself and after

identifying suitable premises shifted its office and operations there. The

Lessee terminated the lease deed and required the Lessor to refund to the

Lessee the amount lying with it as security deposit, after deducting rent for

the months of January, February and March 2009 from the said amount.

However, the Lessor did not pay heed to the request of Lessee in the notice/

letter dated 16th March 2009 with the result that the Lessee was compelled to

move this Court under Section 9 and to invoke the arbitration clause. The

Lessee has made a prayer that in view of the global meltdown and recession,

it was necessary and desirable that the Court should secure the balance

amount of security payable to the Lessee by the Lessor by attaching the bank

account of the Lessor. It is submitted that the Lessor did not take the keys of

OMP Nos. 180/2009 & 236/2009 Page 3 Of 10 the premises from the Lessee despite the Lessee having vacated the

premises and shifted to another premises and despite the Lessee having

terminated the lease deed. So a prayer was made that the Lessee should be

allowed to deposit the keys with this Court and the Lessor should be directed

to take the keys. The Lessor should also be restrained from entering into the

property without leave of the Court or deal with the property by making sale

or transferring, alienating the property, without first securing the amount in

dispute. The Lessee also made a request for attachment of specific bank

account of the Lessor with HDFC Bank, Vasant Vihar Branch.

4. In response to the petition, the Lessor also filed an application under

Section 9 of the Act being OMP 236 of 2009. The contention of the Lessor is

that the Lessee was in need of space to set up office in the beginning of

January 2008 and officials of the Lessee contacted the Lessor through an

Estate Agent M/s Sagar Estates and expressed desire to take the premises in

question on rent and after negotiation between the parties, the rent was

settled and the lease deed was executed between the parties. The Lessee,

before signing the lease, had gone through perpetual lease dated 5th February

1982 in favour of the predecessor of the Lessor executed by the Directorate

of Industries in favour of the original allottee and was aware of the nature of

usage allowed in the property. It is submitted that various other nearby

similarly situated buildings have been let out by their owners for being used

as an office.

5. It is submitted that as per the lease deed, the premises was to be

occupied by the Lessee for a period of nine years with effect from 21st

January, 2008 and there was an initial lock-in-period of 60 months during

OMP Nos. 180/2009 & 236/2009 Page 4 Of 10 which period the Lessee was not entitled to vacate the premises nor the

Lessor was entitled to terminate the tenancy. It was specifically agreed that

in case the Lessee vacates the premises before the lock-in-period of sixty

months, it shall pay to the Lessor rent for the balance outstanding period. It is

submitted that the second floor was agreed by the Lessee to be taken on rent

on as is where basis and the Lessee was to use the same as per his own

wishes and desire. All terms and conditions as agreed to between the parties

were reduced into writing. Thus, there was no issue which could be raised in

respect of the terms and conditions and no amount of oral submissions

contrary to the lease deed can be entertained. The Lessor further submitted

that after execution of the lease agreement, the Lessor had requested the

Lessee to obtain requisite stamp paper so that a formal lease deed could be

executed on the appropriate stamp papers and got registered. However, the

Lessee kept on delaying the matter on one pretext or the other, but the

Lessee was completely satisfied with the terms and conditions and had been

enjoying the premises without interference from anyone. The Lessee for the

first time defaulted on payment of maintenance charges in January, 2009. On

7th February, 2009, the Lessor received a letter dated 1 st February 2009 from

the Lessee wherein the Lessee had expressed his inability to keep the entire

premises on rent due to meltdown and recession and desired to keep only the

ground floor and first floor of the premises on rent and to vacate the rest of

the premises. Since there was a lock-in-period, the Lessee had no right to

alter the terms and conditions of agreement; therefore, the Lessor was not

agreeable to this offer. Two meeting had been taken place between the

parties without any result. The rent for the month of January and February

2009 was not paid by the Lessee. However, on 16th March 2009, the Lessor

received an e-mail from the Lessee stating therein that the agreement

OMP Nos. 180/2009 & 236/2009 Page 5 Of 10 between the parties shall stand terminated after expiry of 15 days from the

date of e-mail. In the said e-mail, the Lessee demanded various amounts from

the Lessor and it was also alleged that no maintenance services were being

provided to the Lessee so the Lessee was not liable to pay the charges for

maintenance services. The Lessor gave response to the e-mail dated 30th

March 2009 asking the Lessee to obtain necessary stamp paper to get the

lease deed executed and the Lessor to pay an amount of Rs.1,03,05,000/- as

arrears of rent and not to vacate the premises till expiry of the lock-in-period

of 60 months expiring on 29th December, 2013. The Lessor did not hear

anything from the Lessee, thereafter received a notice of the present petition.

6. During arguments, counsel for the Lessee brought it to the notice of

the Court that the Lessor was very well aware of the fact that the premises in

question could not be used for the office purpose and even earlier the Lessor

had given the same premises on rent to another party for office purpose and

the premises was sealed by MCD. Thus, the Lessor made deliberate

misrepresentation to the lessee. It is further argued that since the lease

agreement between the parties was not a registered lease agreement and

the Lease agreement was contrary to the terms of superior lease, the Lessee

was within its right to terminate the lease by giving 15 days‟ notice and

vacate the premises. The counsel for the Lessor per contra argued that there

was a lock-in-period of five years and the Lessor was entitled to recover rent

for the remaining period out of lock-in-period of 60 months from the Lessee

and the claim of the Lessor was much more than that raised by the Lessee

regarding security deposit and the Lessee was not entitled to any relief.

7. It is an undisputed fact that the so-called lease deed between the

OMP Nos. 180/2009 & 236/2009 Page 6 Of 10 parties is an unregistered document and it is not on stamp paper. It is only a

lease agreement between the parties and a registered lease deed was yet to

be executed between the parties. In view of this fact, the lease cannot be

considered to be for a fixed period of five years or of a period more than a

year and has to be considered as a month to month lease. Any lease which

creates a right in the property in favour of lessee for a period of more than a

year is required to be registered and it has to be made on an appropriate

stamp paper. The Lessee had entered into the premises in January 2008 and

till filing of the petition under Section 9, the Lessor had not taken any steps

for specific performance of the lease agreement and had not initiated any

action against the Lessee for execution of the lease deed. Thus, it is

presumed that the Lessor and the Lessee were quite happy with the month to

month lease between them. The lease agreement which has been placed on

record being an unregistered document, cannot be looked into by the Court

and has to be considered only as a piece of junk except that it can be seen for

collateral purposes. However, an arbitration agreement entered into between

the parties for resolution of disputes is a separable contract and is a valid

arbitration agreement and these petitions under Section 9 of the Act filed by

the parties would be maintainable.

8. In view of the fact that the lease was a month to month lease, the

contention of the Lessor that there was a lock-in-period and the Lessee was

bound to retain the premises for a minimum period of five years, prima facie

cannot be entertained. A month to month lease is terminable by 15 days‟

notice and it is admitted by the Lessor that 15 days‟ notice was received by

the Lessor through an e-mail which was duly accepted by the Lessor. Thus, I

prima facie find that the Lessee was not liable to pay rent after 31st March

OMP Nos. 180/2009 & 236/2009 Page 7 Of 10 2009 and the Lessor was liable to take the possession of the premises from

midnight on 31st March 2009 and was liable to refund the security after

adjusting the rent for January, February and March 2009.

9. It is also not in dispute that the Lessor had earlier entered into a lease

deed with a similar lease agreement with M/s Y.K.K. India Pvt. Ltd. for use of

the same premises for office purpose and even to Y.K.K. India Pvt. Ltd., a

representation was made that the premises could be used for office purpose

and the lease agreement was entered into for a period of four years. M/s.

Y.K.K. India Pvt. Ltd shifted to the premises and after shifting to the premises,

M/s Y.K.K. was yet to become fully operational in the premises when MCD

officials visited the premises and informed M/s Y.K.K. that the premises could

not be used for office purposes under the law and the same was required to

be sealed immediately. The premises was sealed by MCD officials on 20th

September 2007 despite M/s Y.K.K. India Pvt. Ltd. request of not sealing the

same. After sealing of this premises M/s Y.K.K. India Pvt. Ltd. had to vacate

the premises and it also initiated proceedings against the Lessor in this

respect. Keeping in view the fact that under similar circumstances, when the

premises was let out for office use, MCD had sealed the premises, it was

obligatory upon the Lessor to not to re-let the premises to any other tenant

for office purpose. This fact of sealing could not have been discovered by the

Lessee as it was within the special knowledge of the Lessor. This fact was

discovered by the Lessee during pendency of these proceedings and the

counsel for the Lessee has filed copies of the proceedings between M/s Y.K.K

and the Lessor.

10. In view of the fact that the premises could not be used for office

OMP Nos. 180/2009 & 236/2009 Page 8 Of 10 purposes and MCD had earlier also sealed the premises, I consider that the

lease agreement executed between the parties for use of the premises for

office purpose itself seems to be a result of fraud. Even otherwise, the Lessee

was within its rights to vacate the premises. I, therefore, find that there was a

good prima facie case in favour of the Lessee and there was no case in favour

of the Lessor. The OMP No.180 of 2009 made by the Lessee is allowed and

the petition being OMP No.236 of 2009 of the Lessor is hereby dismissed.

Keeping in view of the conduct of the Lessor of retaining the security even of

the earlier Lessee, I consider that it is appropriate that the remaining security

amount of the Lessee should be protected either by way of bank guarantee or

by way of deposit of the amount in the Court till disposal of disputes between

the parties by arbitration.

11. The possession qua property in question has already been handed over

by the Lessee to the Lessor during pendency of proceedings of present case

and the Lessor has been given liberty to rent out the premises.

12. In the result, the petition of the Lessee being OMP No.180 of 2009 is

hereby allowed to the following terms:

(i) The bank account number 0011232001636 of the Lessor with

HDFC Bank, Vasant Vihar, New Delhi to the tune of

approximately Rs.80 lac shall remain attached. This amount shall

not be withdrawn or transected by the Lessor and the Bank shall

not allow transactions of this amount by the Lessor.

(ii) The Lessor shall furnish a bank guarantee of the balance amount

of Rs.24 lac approximately (after deducting the amount lying in

OMP Nos. 180/2009 & 236/2009 Page 9 Of 10 the bank from Rs.1,03,05,000/-) which is the balance amount

after adjusting the rent for the month of January, February and

March, 2009 lying with the Lessor, within 30 days from passing

of this order. In case the Lessor furnishes a bank guarantee in

favour of the Lessee for entire amount of Rs.1,03,05,000/- within

30 days from today, the Lessor shall be entitled to operate its

bank account with HDFC Bank, Vasant Vihar, New Delhi. The

bank guarantee shall be kept valid by the Lessor during

pendency of the arbitral proceedings.

13. This interim order shall be operational till disposal of arbitral

proceedings between the parties and 30 days thereafter.

14. The petitions stand disposed of in above terms.

September 08, 2009                           SHIV NARAYAN DHINGRA J.
rd




OMP Nos. 180/2009 & 236/2009                                    Page 10 Of 10