Delhi High Court
State Bank Of Hyderabad vs Nehru Place Hotels And Others on 28 January, 2010
Author: Rajiv Shakdher
* THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment Reserved on: 03.12.2009
Judgment delivered on: 28.01.2010
CS(OS) No. 2748/1993 & CC No. 2004/1994
STATE BANK OF HYDERABAD ..... Plaintiff
Vs
NEHRU PLACE HOTELS & ORS. ..... Defendants
Advocates who appeared in this case:
For the Plaintiff : Mr S.R. Yadav, Advocate.
For the Defendants : Mr Harish Malhotra, Sr. Advocate with Mr Vipul Gupta, Mr
Tanuj Khurana, Advocates
CORAM :-
HON'BLE MR JUSTICE RAJIV SHAKDHER
1.
Whether the Reporters of local papers may
be allowed to see the judgment ? No
2. To be referred to Reporters or not ? Yes
3. Whether the judgment should be reported
in the Digest ? Yes
RAJIV SHAKDHER, J
1. This is a suit filed by the plaintiff to seek specific performance of an agreement
to lease contained in letters dated 28.05.1992, 17.12.1992 and such other letters, along
with the consequent relief of possession of the suit property. In the alternate, refund of
Rs 35 lacs paid "on account" to the defendant is sought in the suit with interest at the
rate of 21% per annum in addition to damages to the tune of Rs 30 lacs. Reliefs have
also been sought by the plaintiff for permanent injunction against the defendant, its
agents and servants from interfering with the plaintiff carrying on its work in the suit
property; restraint is also sought on the defendant from alienating the suit property or
creating or inducting any third party in the suit property, and; lastly, mandatory
injunction is sought against the defendant to repair the damage caused to the strong
room.
2. The present suit was moved by the plaintiff on 10.12.1993. On that date the
summons were issued to the defendant, and in the interregnum defendant, its agents and
servants were restrained from entering into any arrangement with any other party in
respect of the suit property. The defendant entered appearance on 11.01.1994. After
the pleadings were complete in the interlocutory application filed under Order 39 Rules
1& 2 of the Code of Civil Procedure, 1908 (hereinafter referred to as the „CPC‟) -- by
an order dated 31.01.1996, the ad interim ex-parte order dated 10.12.1993 was vacated,
on the ground that the relief sought for by the plaintiff had become infructuous in view
of the fact that the defendant had executed a registered lease deed on 26.10.1993 in
respect of the said suit property, and consequent thereto had let out and handed over
possession of the suit property on the same day to Coca Cola (India) Inc (hereinafter
referred to as „Coca Cola‟).
2.1 Resultantly, proceedings in the suit continued without the plaintiff having
benefit of any interim order. The admission and denial of the plaintiff‟s documents was
conducted before the Jt. Registrar on 01.08.1996. The admitted documents were
marked as Exhibits P1 to P10. The defendant, it was noted, had not filed its original
documents nor assigned any reason for the same.
2.2 To be noted that some of the documents filed by the plaintiff bear exhibits marks
twice over: once when the admission and denial was carried out before the learned Joint
Registrar, and the second time when reference was made to them in the affidavit of
evidence of the plaintiff‟s witness PW1. In this case there is no dispute with respect to
receipt of documents, therefore in the judgment I have referred to the documents by the
Exhibit numbers as appearing in the affidavit of evidence filed by PW1.
3. Continuing with narration, on 29.11.1996 issues were framed by the court. The
court framed 12 issues. I shall extract the same in the later part of my judgment as and
when I deal with the issue(s). To complete this part of the narrative the matter was
fixed for trial. After several accommodations sought for by parties the evidence in the
matter could be completed only on 15.07.2009. Arguments in this matter were heard by
me on 28.10.2009, 10.11.2009, 11.11.2009 and finally judgment was reserved on
19.11.2009. However, on 19.11.2009, that is, the day when the judgment was reserved,
the counsel for the defendant was not present. Consequently, an application was moved
by the learned counsel for the defendant for being given an opportunity of making oral
submissions in the matter. After issuing notice on 26.11.2009; on 03.12.2009 the order
dated 19.11.2009 was recalled and, an opportunity was granted to the defendant to make
oral submissions on the same day, to which, the learned counsel for the defendant had
no objection. On hearing the learned counsel for the defendant in reply and the learned
counsel for the plaintiff in rejoinder, the judgment in the case was reserved on
03.12.2009.
4. In the suit even though nearly a dozen issues have been struck, the central issue
according to me is, as to whether there was a subsisting agreement to lease between the
parties, if so, whether the plaintiff is entitled to specific performance of the same. In
view of the circumstances noted above that the defendant had let out the premises and
handed over the possession to Coca Cola, prior to the plaintiff moving the court,
whether the plaintiff is entitled to the alternate relief sought for in the suit.
4.1. It may only be noted that both the plaintiff and the defendant have examined one
witness each, i.e., PW1 (Bhanu Singh) and DW1 (Vijay Singh) respectively. In this
context it may also be relevant to note that each of the said witnesses, who have
deposed for the plaintiff and the defendant, in their examination-in-chief have in sum
and substance repeated the averments made in the pleadings, that is, in the plaint and in
the written statement. I would, therefore, in order to avoid prolixity refer to their
respective stands as appearing in the plaint and in the affidavits filed by way of
evidence without distinction except where there are certain variations which require a
pointed reference.
5. With this preface let me first examine the stand taken by the plaintiff. The
plaintiff is, as title to the suit suggests, a bank. The plaintiff has traced its statutory
constitution to the State Bank Of India Subsidiary Bank Act (38) of 1959 with its head
office at Hyderabad, and branches at various places including one at Nehru Place, New
Delhi. It is the plaintiff‟s case that since the business of its branch at Nehru Place had
attained commercial success and prosperity, its continued presence in the area became a
necessity. However, the goal of achieving greater success was impeded on account of
the fact that its lease in respect of the existing premises was expiring in November,
1990. This resulted in the plaintiff taking steps for inviting offers from interested
lessors. The plaintiff received several offers including that of the defendant vide its
letter dated 30.03.1992 (Ex.P2). The said offer contained several conditions. But what
was significant was the error committed by the defendant in offering an area of 7000 sq.
ft. as against the plaintiff‟s requirement of 7500 sq. ft. Realising its mistake, the
defendant sent another communication dated 01.04.1992 (Ex.P3) clarifying thereby, that
it was offering an area of 7500 sq. ft. as against 7000 sq. ft. on the mezzanine floor.
The plaintiff in response to the defendant‟s letter dated 30.03.1992 (Ex.P2) and two
other letters dated 04.05.1992 and 21.05.1992 issued a communication dated
28.05.1992 (Ex. P4) advising the defendant that they had "in principle approved" the
lease with respect to the „intermediate floor‟ of the front block of the International
Trade Tower (hereinafter referred to as the „premises‟) admeasuring 7500 sq. ft.(super
area) at a rent of Rs 70 per sq. ft. Since the terms contained in this letter are crucial to
the suit of the plaintiff, the same are extracted hereinbelow:
S. Floor Area Rent Per Sft.
no.
1 Intermediate Floor 7500 Sft Rs. 70 Sft
of front Block of ITT Super Area
2 Maintenance & Rs. 12.50 Sft per month With an
other Charges increase of 8% Every year on the last
Paid charges.
3 Security Deposit 6 months rent as interest Free
4 Municipal Taxes Prevailing by Landlords and
subsequent increase to be paid by the
Bank.
5 Date of Possession Immediate
6 Airconditioning Central Airconditioning to be provided.
7 Period of Lease 6 Years with increase by
16% every two years whatever the last
paid rent.
8 Water Supply To be provided by the Landlords.
9 Registration of Lease Charges connected with Lease deed and
registration to be borne by us and
yourselves equally.
10 Strong Room/Locker Cost of construction to be borne by
Room Landlords. The Strong Room/Locker
Room door will be provided by the
Bank.
11 Loan Loan facility will be considered
amounting to one year rent at the
normal Bank rate of interest.
6. The plaintiff indicated that the defendant should confirm the acceptance by
acknowledging the duplicate copy of the letter. The defendant by a communiqué dated
09.12.1992 (Ex. P5) confirmed the proposal contained in the plaintiff's letter dated
28.05.1992 (Ex. P4) with a caveat that the rent with respect to the premises shall
commence from 15.12.1992 as the premises were, according to the defendant, "ready
for possession". The defendant promised to complete the necessary formalities with
respect to the agreements forthwith.
7. It appears that immediately thereafter on 15.12.1992 (Ex P4- marked as Exhibit
in the proceedings before the Joint Registrar vide order dated 01.08.1996) the plaintiff
wrote back to the defendant referring to the defendant‟s letter dated 09.12.1992 (Ex. P5)
pointing out clearly that in order to enable the plaintiff to shift to the premises offered
by the defendant it would be required to construct the strong room, (i.e., cash
vault/locker room) -- though the door to the strong room, as agreed, would be provided
by them. The letter further alluded to the fact that the defendant should advise the
plaintiff the date by which necessary arrangements would be made for the said purpose,
and also as a time frame by which it could depute its interior decorators to work on the
site. The letter ended by calling upon the defendant to send the plaintiff a copy of the
draft agreement which should mention other arrangements of which inclusion was
necessary from the defendant‟s point of view, as it had to seek approval of its Law
Officer. To be noted that this document has been admitted by the defendant. The
defendant, in response thereto, issued a letter dated 17.12.1992 (Ex. P6) virtually
repeating what it had said vide its letter dated 09.12.1992 (Ex. P5), that is, rent in
respect of the said premises would be payable by the plaintiff w.e.f. 15.12.1992. The
defendant, however, by this letter sought confirmation by calling upon the plaintiff to
remit a „token advance‟ in the sum of Rs 10 lacs, so as to enable them to take further
action in the matter. On the issue of provision of strong room the defendant stated in
the said letter, that it was part of interior decoration, which could be completed
simultaneously when the interior decoration work was in progress.
8. There is no dispute that the plaintiff paid the sum of Rs 10 lacs, though with a
condition that the rent would commence from 21.12.1992 as against 15.12.1992;
a condition which was accepted by the defendant. It is, however, important to
note that the plaintiff vide letter dated 08.02.1993 (Ex. P7) responded, formally
to the defendant‟s letter dated 17.12.1992 (Ex. P6) by reiterating the need for
construction of strong room as per the plaintiff‟s requirements. Accordingly,
alongwith the said letter the plaintiff enclosed a copy of the floor lay out plans,
the specifications and dimensions with respect to the strong room, and the
material to be used, as also the exact position at which, the strong room was
required to be constructed. Since no reply was received by the plaintiff to its
letter of 08.02.1993 (Ex. P7), the plaintiff wrote another letter dated 22.03.1993
(Ex. P8) wherein a reference was made to its earlier letter dated 02.03.1993. (To
be noted this letter is not on record). The said letter dated 22.03.1993 (Ex P8)
recorded the defendant‟s assurance to the plaintiff that it had initiated necessary
steps for construction of a strong room which would be completed within six
weeks. Furthermore, the plaintiff also advised the defendant that the draft lease
deed sent by it had since been approved by its head office with certain minor
modifications, and that the same would be sent to the defendant, shortly. As
regards the defendant‟s demand for payment of additional funds, the plaintiff
informed the defendant that an "on account" payment of rent could be effected
only after 31.03.1993 as was agreed, in a telephonic conversation perhaps with a
representative of the defendant. In response thereto, the defendant vide its reply
dated 27.03.1993 (Ex. P9) sought payment of a sum of Rs 39 lacs (after
adjusting Rs 10 lacs which had been paid by the plaintiff earlier) towards the
following:
Particulars Amount
(Rs. In lacs)
(i) Interest free security deposited equivalent to six
Month‟s rent - 31.50 lacs
(ii) Rent for the period 21.12.1992 to 31.12.. 1992, i.e.,
for ten days - 1.75 lacs
(iii)Rent for three months from January to March, 1993
@ Rs 5.25 lacs per month - 15.75 lacs
__________________________
TOTAL: 49.00 lacs
8.1 On adjusting the earlier "on account" payment of Rs 10 lacs against the sum
total of the three heads, that is, Rs 49 lacs; the balance sum of Rs 39 lacs, as noted
above, was demanded by the defendant. The ostensible reason given was, that the
defendant was in need of funds in view of the fact that it had to deposit municipal taxes
as well as advance income tax before 31.03.1993. A reference was also made to the fact
that the draft lease agreement, which was to be sent by the plaintiff, had not been
received to date. It appears that the plaintiff alongwith its letter dated 31.03.1993 (Ex.
P10) remitted an amount of Rs 25 lacs once again as an "on account" payment to the
defendant. The contents of the letter have been extensively extracted by the plaintiff
both in the plaint as well as in the affidavit of evidence filed by PW1, however, for
some reason the same is not on record. Only to be noted that the defendant has not
denied the contents or the extracts of the letter dated 31.03.1993(Ex. P10). Since the
contents are not denied, I may only point out that by the said letter it appears that the
plaintiff once again indicated to the defendant that they have already communicated the
dimensions of the strong room to be constructed by the defendant and, an assurance
with regard to its construction within a time frame of six weeks had been given, despite
which, it had not received any confirmation in respect of the said issue. The fact that
the letter dated 31.03.1993 (Ex. P10) is in existence is also borne out on a perusal of the
letter dated 02.04.1993 (Ex P7- marked as Exhibit in the proceedings before the Joint
Registrar vide order dated 01.08.1996), issued by the plaintiff to the defendant in which
there is a reference to the letter dated 31.03.1993 (Ex. P10). By a letter dated
02.04.1993 the defendant acknowledged the receipt of sum of Rs 25 lacs, as against the
total sum of Rs 39 lacs, sought for by the defendant. The letter dated 02.04.1993 is also
an admitted document. As regards construction of the strong room, the defendant
accepted that eventhough drawings had been received from the plaintiff on 03.03.1993,
the drawings could not be put to use since the defendant had encountered structural
problems in their implementation; and as advised by their structural consultant,
drawings with variations incorporated therein were enclosed for the plaintiff‟s
conformation in that regard. The defendant concluded the letter by seeking immediate
execution of the lease deed along with payment of arrears of rent, as well as
maintenance charges.
8.2 The plaintiff, on the other hand, on the issue of construction of the strong room
immediately responded through its letter dated 10.04.1993 (Ex. P11). The sum and
substance of this communication of the plaintiff was that: the specifications with regard
to the strong room were communicated to the defendant as far back as on 08.02.1993;
since the defendant‟s architect expressed difficulty, the location was revised in
consultation with him, which was communicated to the defendant vide letter dated
02.03.1993; that after a lapse of nearly one month, i.e., on 02.04.1993 they were being
told that the location was not structurally feasible; and therefore, in order to avoid any
further delay the relocated site was being approved. It was, however, stressed that the
area of the strong room which included walls would be 300 sq. ft. (approximately) and
the specifications thereof, as advised in its letter dated 02.03.1993 would remain
unaltered.
9. In the meanwhile, the plaintiff had appointed M/s Rajinder Diwan & Associates
as its Architect for carrying out interior decoration at the said premises. It appears that
the defendant informed the plaintiff‟s architect that the plaintiff will have to install the
ducting for the air-conditioning as also the air-handling unit machine. Since the
plaintiff was of the view that this was contrary to the terms stipulated in their letter
dated 28.05.1992 (Ex. P4) they sought confirmation of the position by virtue of its letter
dated 29.05.1993. To be noted once again that this letter i.e., 29.05.1993 even though
extracted in the plaint and referred to extensively in the affidavit of evidence filed by
the plaintiff, is not on record. There is, however, neither a denial of its existence nor are
its contents questioned in the written statement filed by the defendant. As a matter of
fact the defendant by a letter dated 30.06.1993 (Ex. P13) replied to the plaintiff's
letter dated 29.05.1993(Ex. P12). By this letter the defendant indicated that all that
they had agreed to was that they would make available a "chilled water line" for the
purposes of air-conditioning the said premises. The defendant denied that they were
responsible, as per the agreement, to provide air-handling units, false ceiling and
electrical wiring for the said purposes. What is of importance is, in the said letter, the
defendant claimed that the construction of the strong room was complete; the only
aspect which remained was plastering, which would be done immediately after the
"curing work is over". They demanded a payment of a sum of Rs 36,65,306/- towards
security deposit, rent, maintenance charges etc.
10. After a gap of nearly four months by a letter dated 04.10.1993 (Ex. P14) the
plaintiff forwarded a draft agreement for perusal of the defendant. This draft agreement
had changes, which, according to the defendant, had not been agreed to by them in the
first instance. The draft agreement was returned by the plaintiff to the defendant for
approval. By letter dated 09.10.1993 (Ex P16) the defendant responded to the
plaintiff‟s communication dated 04.10.1993 (Ex P14). The defendant stated therein that
the changes now proposed by the plaintiff were major in nature. The defendant went on
to say in the said letter that the draft lease agreement (Ex P15), which was sent to the
plaintiff, was a standard agreement which they had drawn up with other lessees. In the
concluding part of the letter, the defendant demanded a sum of Rs 71,88,428/- as per the
statement of account enclosed. They further sought execution of the lease deed in the
form sent by them except for some minor variations, with respect to which the
defendant had an open mind. In response thereto, the plaintiff vide its letter dated
20.10.1993 (Ex P17) refuted that it owed any arrears towards rent to the defendant. The
reasons set out therein were: since possession of the premises was not handed over to it,
the liability to pay rent did not arise; and secondly, the strong room was not complete,
and that on 18.10.1993 when the architect and the contractor of the plaintiff had met the
representatives of the defendant seeking possession of the premises to enable them to
work on the interiors, their request was declined on the ground that the lease deed and
other documents had not been executed. On the issue of the terms of the draft lease
agreement, the plaintiff pointed out that the draft lease agreement sent by the defendant
contained terms which were contrary to its letter dated 28.05.1992 (Ex. P4). By way of
an example, the plaintiff referred to the fact that it had been agreed that the lease tenure
would be for a period of six years with an increase in rent by 16% every two years --
the defendant had altered the term by incorporating therein a requirement of issuance of
six months‟ notice. Similarly, with regard to renewal of lease after the expiry of the
initial lease tenure of six years, the defendant, according to the plaintiff, sought to put in
a clause which provided that renewal would be granted only on enhancement in rent by
50%, which was in addition conditional upon an agreement in that regard. It was stated
that since the terms were contrary to what was agreed to on an earlier occasion, and
being onerous; they had to be re-examined by the plaintiff‟s Executive Committee. In
these circumstances, the plaintiff refuted its liability to pay any arrears towards rent or
any interest thereon, as there was no lease in existence. The plaintiff concluded the
aforementioned letter (Ex. P17) by firstly, placing on record the fact that the premises
had not been handed over to them on 18.10.1993; and secondly, that since the changes
now proposed are materially different from what had been agreed and hence further
progress in the matter would depend on the decision of it Executive Committee.
11. The defendant immediately thereafter vide letter dated 22.10.1993 (Ex. P18)
indicated that they had no alternative but to withdraw its „offer‟ for letting out the said
premises. Interestingly enough, the defendant referred to the subsisting understanding
obtaining between them as one premised on a "memorandum of understanding".
There was obviously nuanced shift from an agreement to a memorandum of
understanding. Furthermore, by this letter the defendant demanded a total sum of Rs
36,94,614 under the following heads, after adjusting a sum of Rs 35 lacs paid by the
plaintiff.
(i) Rs 52,61,290/- towards damages suffered equivalent to the rent for keeping the
premises vacant between 21.12.1992 to 20.10.1993.
(ii) Rs 10,70,641/- also towards damages on account of loss of maintenance charges
(@ Rs 12.50 per sq. ft. w.e.f. 21.12.1992 to 31.12.1992 and at the rate of Rs
14.35 per sq. ft. w.e.f. 01.01.1993 to 20.10.1993).
(iii) A sum of Rs 8,59,683/- being loss suffered on account of interest on the
aforesaid payment. The rate of interest, however, was not stipulated.
12. The plaintiff has thus taken a stand that they were at every given point in time
ready and willing to perform its part of the agreement, and that it was the defendant who
committed the breach. The plaintiff has averred that their readiness and willingness
would be seen from the fact that they had paid a sum of Rs 35 lacs to the defendant,
despite which, the defendant had failed to hand over the possession of the said premises
as it had inducted a third party into the premises contrary to the terms of the agreement
arrived at with the plaintiff. This the plaintiff says was despite the fact that it had got
the strong room door fixed in a partly constructed strong room.
13. The defendant, as well as its witness DW1, have taken the stand that there was
no concluded agreement which had come into existence, and hence, the plaintiff was not
entitled to the relief of specific performance. In the alternative it was pleaded that even
if the court came to the conclusion that a concluded agreement had come into existence,
the court could not in law grant specific performance since the agreement by its nature
was determinable. For this purpose, Section 14(1)(c) of the Specific Relief Act, 1963
(hereinafter referred to as the „Specific Relief Act‟) was invoked. The aforesaid
submission alluded to the aspect of determinability of the agreement on the ground that:
firstly, the intended lease was for a fixed tenure of six years; and secondly, on default of
payment of rent the lease would stand determined. The defendant has also averred that
the suit for specific performance and mandatory injunction has been rendered
infructuous for the reason that after the "withdrawal/termination" of the offer made by
the defendant to the plaintiff on 22.10.1993, the said premises had been let out by the
defendant to Coca Cola on 26.10.1993, that is, much prior to the institution of the
present suit. The defendant also averred that the plaintiff had concealed material facts
from the court, in as much as, it had not brought to notice of the court a letter dated
28.12.1992 whereby, it had agreed to pay rent in respect of the said premises to the
defendant w.e.f. 21.12.1992. It is thus the defendant‟s say that it was the plaintiff which
was in breach as it had not paid the security deposit alongwith monthly rent and the
maintenance charges despite the fact that a draft of the lease agreement was given to the
plaintiff in the first week of January 1993 which, the plaintiff had indicated was
approved vide its letter dated 22.03.1993. The defendant went on to aver that the
plaintiff neither executed the lease agreement nor paid the money towards rent, security
deposit and maintenance charges on the ground that substantial changes have been
made by the defendant in the draft lease; an aspect which was communicated to the
defendant after a gap of nearly 9 months. In these circumstances, the defendant averred
that since the plaintiff had failed to make payment of Rs 71,88,428/- despite the notice
dated 09.10.1993, it was not obliged to keep the premises vacant, and consequently, it
withdrew its offer vide its letter dated 22.10.1993 and demanded a balance sum of Rs
36,94,614/- after adjusting a sum of Rs 35 lacs paid by the plaintiff. Based on the
aforesaid averments the defendant also preferred a counter claim. The affidavit of
evidence filed by DW1 is on the same lines.
14. The plaintiff reiterated its stand in the replication, and refuted by way of a
written statement the claim of the defendant made in the counter claim; in particular, its
demand for a sum of Rs 36,94,614/-.
15. On behalf of the plaintiff Mr S.R. Yadav, Advocate has submitted as follows:
(i) The plaintiff had agreed in principle to execute a lease deed based on the terms
contained in their letter dated 28.05.1992 (Ex. P4).
(ii) The construction of the strong room was a fundamental term of the agreement
which was reiterated in subsequent correspondence of the plaintiff with the defendant,
in particular, in their letters dated 17.12.1992(Ex. P6), 08.02.1993(Ex. P7),
22.03.1993(Ex. P8), 31.03.1993(Ex. P10), 10.04.1993(Ex. P11), 25.09.1993.
(iii) The fact that defendant had accepted the terms and conditions, stipulated in the
plaintiff‟s letter of 28.05.1992 (Ex. P4), is clearly borne out from the defendant‟s letter
of confirmation dated 09.12.1992(Ex. P5).
(iv) The readiness and willingness of the plaintiff is demonstrable from the fact that
it had released a sum of Rs 35 lacs to the defendant despite which it was not handedover
possession of the premises, even after an explicit demand made in that regard as early as
on 18.10.1993.
(v) On the other hand, the lack of good faith on the part of the defendant is
demonstrable from the fact that the defendant‟s witness accepted in his deposition that
the defendant‟s lease of the very same premises with Coca Cola commenced from
01.09.1993.
(vi) The defendant breached not only its obligation to build a strong room in time,
which was fundamental to the plaintiff executing a lease deed with the defendant but
also resiled from its obligation to provide a Central Air-Conditioning in respect of the
said premises as agreed to, in the letter dated 28.05.1992 (Ex. P4).
16. In these circumstances, the learned counsel for the plaintiff submitted that the
plaintiff was entitled to, if not to a decree of specific performance (in view of the
intervening circumstances of the defendant having executed a lease in respect of the
premises with Coca Cola), at least, the alternate relief of refund of Rs 35 lacs alongwith
interest, in addition to damages of Rs 30 lacs. As regards the counter claim, lodged by
the defendant, Mr S.R. Yadav submitted that since the defendant was in breach it could
not claim any damages.
17. As against this, Mr Harish Malhotra, Senior Advocate appearing for the
defendant submitted as follows: Even though the initial offer of the defendant was of
Rs 80 per sq. ft. in order to accommodate the plaintiff it had agreed to let out its
premises at a sum of Rs 70 sq. ft. in addition to payment of maintenance charges, as per
the letter dated 28.05.1992 (Ex. P4). He submitted that even though the obligation to
construct the strong room was that of the defendant, the door to the strong room had to
be provided by the plaintiff. He further submitted that the plaintiff‟s agreement to pay
rent to the defendant w.e.f. 21.12.1992 is not in dispute. However, despite the fact that
the defendant had submitted a draft lease in January, 1993 to the plaintiff, which was
accepted subject to minor modifications by the plaintiff vide its letter dated 22.03.1993
(Ex. P8), for one reason or the other the plaintiff had deferred the execution of the lease
deed. Finally the defendant left with no choice in the matter decided to
"withdraw/terminate" its offer vide its letter dated 22.10.1993. As regards the issue of
construction of strong room the learned senior counsel submitted that the drawings were
approved by the plaintiff only on 10.04.1993 and consequent thereto by letter dated
30.06.1993 (Ex. P13) it was communicated that the construction of the strong room was
"complete". It was thus the contention of Mr Harish Malhotra that it was not the
defendant but the plaintiff who was in breach of the obligations undertaken by it. In
particular, reference was made to the fact that the major variations in the draft lease
agreement were made by the plaintiff; a fact which was communicated to the plaintiff
by the defendant vide its letter dated 04.10.1993 (Ex. P14). The learned counsel further
contended that the testimony of PW1 would clearly demonstrate following:
(i) The plaintiff had agreed to pay rent w.e.f. 21.12.1992.
(ii) The premises remained vacant between 21.12.1992 to 21.10.1993.
(iii) The strong room was built but could not be completed only because the door,
which had to be fixed to the strong room, had not been supplied by the plaintiff.
(iv) Even though in the letter dated 22.03.1993 (Ex. P8) the plaintiff communicated
that draft lease has been approved subject to minor modifications; the plaintiff carried
out the major changes in the draft lease agreement. The modified lease agreement was
sent to the defendant only under the cover of the plaintiff‟s letter dated 04.10.1993.
17.1 In these circumstances, Mr Malhotra contended that the plaintiff‟s suit deserves
to be dismissed, and as against that the defendant‟s counter claim ought to be decreed.
18. On examination of the evidence on record and after hearing the learned counsel
for the parties my opinion on the issues raised is as follows: For this purpose let me
first deal with issue nos. 3 & 4. For the sake of convenience the issues are extracted
hereinafter:
3. Whether there was any concluded agreement to lease between the
parties? OPP
4. If so, whether the plaintiff is entitled to the specific performance of
the contract as alleged? OPP
18.1 On an appreciation of the evidence placed before me, it is quite clear that the
defendant‟s offer of 30.03.1992 (Ex. P2) followed by a clarification dated 01.04.1992
(Ex. P3) was approved in principle by the plaintiff on the terms set out in its letter dated
28.05.1992 (Ex. P4). The letter dated 28.05.1992 (Ex. P4) clearly identified the
location as well as the measurements of the premises which were intended to be taken
on lease, the rent, the amount to be paid towards security deposit, the date of possession
and the tenure of lease. Apart from the said terms there was specific reference to, which
is important for the purpose of this case, the obligation of the defendant to construct a
"strong room/locker room" and make provision for air-conditioning. As per the terms
contained in the said letter (Ex P4) strong room was to be constructed by the defendant,
while the door to the strong room was to be provided by the plaintiff. With regard to
the air-conditioning it is simply stated that it is to be "provided"; which according to
me, in plain terms meant that the defendant was obliged to provide the same. As
indicated in the narrative above, the terms contained in the plaintiff‟s letter dated
28.05.1992 (Ex. P4) were unhesitatingly accepted by the defendant vide its
communication dated 09.12.1992 (Ex. P5) except for a caveat that the rent in respect of
the premises would commence from 15.12.1992. There was no caveat with regard to
any of the other conditions stipulated therein. As a matter of fact in the letter dated
15.12.1992 issued by the plaintiff there was again a pointed reference to the fact that the
plaintiff would not be able to shift its existing branch in Nehru Place to the premises of
the defendant till the strong room was constructed. The defendant by a letter dated
17.12.1992 (Ex. P6) while alluding to the plaintiff‟s letter dated 15.12.1992 once again
in no certain terms conveyed its consent to the conditions stipulated in plaintiff‟s letter
dated 28.05.1992 (Ex. P4) subject to the rent commencing from 15.12.1992 as a matter
of fact in confirmation it sought payment of Rs 10 lacs. On the issue of construction of
strong room the defendant merely stated that the construction of it being part of interior
decoration the same could progress simultaneously with the work on the interiors of the
premises. In my view, on a plain reading of the said letters, there is no doubt in my
mind that an enforceable agreement to enter into a lease got concluded.
18.2 A lease, as is well understood, is different from an agreement to lease. A lease
as defined under Section 105 of Transfer of Property Act, 1882 (hereinafter referred to
as „Transfer of Property Act‟) entails transfer of a right to enjoy such property in respect
of which a lease is made out for a defined time, which is express or implied or, even in
perpetuity, in consideration of price paid or promised to be paid, in cash or anything of
value which is to be rendered periodically or on specified occasions to the transferor by
the transferee. An agreement to lease on the other hand does not entail an interest in the
property. A document which gives to the lessee the right to exclusive possession,
either immediately or at a future date, entails an actual demise and hence, operates as a
lease. Therefore, a document which is merely executory in nature binding only persons
who are parties to the instrument, that is, one who is to grant the lease and the other who
is to accept lease at some point in time in future -- translates into only an agreement to
lease. In short, an agreement to lease merely creates a right to obtain a lease and no
right to enjoy the property until the lease is executed (See A. Swaminatha Mudaliar vs
S.V. Ramaswami Mudaliar AIR 1921 Mad 72). Whether the document in issue
operates as a lease or an agreement to lease is really a matter of construction and
intention of parties. In other words much would depend upon facts and circumstances
of each case. (See Brijnandan Singh vs Jamuna Prasad Sahu AIR 1958 Pat 589 at
page 593)
19. In my view even though the defendant in its correspondence all along had been
seeking rent it cannot but accept the fact that the possession of the premises had not
been handed over to the plaintiff. As a matter of fact Mr Harish Malhotra had, in his
submissions, contended that the possession could not have been given till the lease deed
was executed. Therefore, it is not anyone‟s case, as it cannot be, especially that of the
defendant, that the possession of the premises was granted to the defendant. Nor did the
conduct of the defendant suggest as to when it intended to handover possession. This
position obtained inspite of letter dated 28.05.1992 (Ex. P4), whereby the plaintiff
sought immediate possession of the premises from the defendant. The fact of the
matter is that the possession was neither given nor intended to be given at any future
date and hence, there was in my opinion, no actual demise of the premises. Thus, while
an agreement to enter into a lease was concluded it had not fructified into a lease
agreement. Accordingly, the plaintiff was entitled to seek specific performance of the
agreement, which is, contained in the letters dated 28.05.1992 (Ex. P4), 09.12.1992 (Ex.
P5) and 17.12.1992 (Ex. P6). In these circumstances, my answer to issue nos. 3 & 4 is
in the affirmative. There was in existence a concluded agreement to lease between the
parties, in respect of which, the plaintiff could seek specific performance.
20. This brings me to issue nos. 5 and 6, which are as follows:
5. If so, whether the plaintiff fulfilled his obligations under the
contract? OPP
6. Whether the defendant delayed the construction of the Strong Room
and created any other hindrance in the execution of the lease deed as
alleged? OPP
20.1 As noticed above, one of the fundamental conditions of the agreement was the
construction of the strong room. It is clear that the plaintiff had supplied the necessary
specifications with regard to the dimensions and the material to be used in constructing
the strong room vide its letter dated 08.02.1993 (Ex. P7). On the insistence of the
defendant that the location suggested would entail structural impediments, the issue
was revisited and, the plaintiff communicated its consent to the relocated site vide its
letter dated 02.03.1993. It appears that after nearly one month the defendant by a letter
dated 02.04.1993 again suggested changes to the location of the strong room. The
plaintiff, in order to, expedite the issue immediately by a letter of 10.04.1993 (Ex. P11)
once again gave its consent to the new location suggested by the defendant; even while
communicating to the defendant that the specifications with regard the construction
would remain the same, as indicated in its letter of 02.03.1993. For some reason the
defendant seemed less than forthcoming on the issue of construction of the strong
room. As early as, in its letter dated 22.03.1993 (Ex. P8), the plaintiff had recorded the
defendant‟s assurance that the strong room would be constructed within six months. In
between the correspondence, referred to hereinabove, on the location of the strong
room, had been exchanged between them. As a matter of fact the plaintiff in its letter
of 29.05.1993 (Ex. P12) recorded that it had not received any communication with
respect to completion of the strong room. What was distressing from the point of view
of the plaintiff was, that the defendant, had raised a new issue with regard to the
provision of air-conditioning in the premises and the supply of air-handling units. On
these two issues the defendant in rebuttal, has taken resort to its communication dated
30.06.1993 (Ex. P13). Based on the contents of this letter it was argued on behalf of
the defendant by Mr Harish Malhotra that the construction of the strong room was
complete and the delay, if any, was on account of the plaintiff‟s failure to fix the door
to the strong room. A careful perusal of the letter dated 30.06.1993 (Ex. P13) would
show that even according to this letter of the defendant while, it adverted to the fact that
the construction of the strong room was complete, it simultaneously accepted the fact
that the plastering remained to be done which it promised to do after the "curing work
was over". Therefore, according to the defendant, even on 30.06.1993 it remained in
breach of its obligation to handover to the plaintiff a premises with a fully constructed
strong room; except the door which undoubtedly was the obligation of the plaintiff.
Though there is some ambiguity as to whether the door of the strong room was fixed or
not as PW1 had not physically supervised the said premises, a position which emerged
from his cross-examination -- the fact remains that the defendant had not completed its
part of the bargain. This apart, the defendant was also quibbling about provisioning of
air-conditioning to the premises which was an obligation it had undertaken, as per the
terms and conditions set out in the letter of 28.05.1992 (Ex. P4). What was most
curious was that the defendant had evidently put in place, the false ceiling for the
premises even though parties were still at issue as regards who was to provide the air-
conditioning; a fact which is recorded in the plaintiff‟s letter of 29.05.1993 (Ex. P12);
the extracts of which are set out in the plaint and in the affidavit of evidence of PW1.
There was no cross-examination of the plaintiff‟s witness on this issue. It appears that
even prior to 30.06.1993 the plaintiff for some reason, which is exclusively within its
knowledge, was attempting to wriggle out of the agreement. My view in this regard is
fortified by the fact that after the terms of the agreement had been agreed to between
the parties by exchange of correspondence, i.e., letters dated 28.05.1992 (Ex. P4),
09.12.1992 (Ex. P5) and 17.12.1992 (Ex. P6) and lease agreement had to be drawn up
keeping in mind the aforesaid terms -- the fact that in January, 1993 the defendant
supplied a draft lease agreement to the plaintiff wherein, it had incorporated clauses
with variations not agreed to by the plaintiff constituted a breach of obligations
undertaken by the defendant. The two variations, to which reference has been made by
the plaintiff and not denied by the defendant, is: the insertion of a six months‟ notice
period to trigger a renewal of lease; and the further renewal of lease (after the expiry of
the initial tenure of six years) being made subject to increase of rent by 50% -- that too
subject to mutual agreement in that regard. While something could be said in defence
of the defendant in respect of the second amendment; certainly with respect to the first
amendment that the renewal of lease shall be subject to the lessee/plaintiff giving at
least six months clear notice in writing, was not a subject matter of the agreement
arrived at between the parties. In my view, it matters little that the variation is major or
minor -- because what would be a minor variation from the point of view of one party,
the same provision could be a major variation from the point of view of the other party.
Therefore, as long as a provision which is not agreed to by a party impacts its interest, it
would be justified in feeling aggrieved by such a change incorporated in the agreement.
Similarly, as regards payment of registration charges, while it was provided in the letter
of 28.05.1992 that both parties shall bear them equally was changed around to, lumping
the plaintiff with the liability. In this regard the plaintiff‟s letter of 22.03.1993 has to be
seen in the context of the following circumstances: since the defendant had made in the
first instance changes which were not consistent with the agreement arrived at by it
with the plaintiff (as encapsulated in their correspondence exchanged with each other)
and the plaintiff‟s keenness to secure the lease of a premises in the same area on
account of business expediency -- it indicated its approval subject to what it termed as
minor variations. This statement was obviously made to leave the scope for
negotiations open. The fact remained, however, that whether the modifications in the
draft agreement were minor or major they impacted the plaintiff -- the plaintiff was
thus entitled undoubtedly to have its say and seek relevant legal advice in the form of
input given by its law officer before accepting the changes. As indicated by the
plaintiff in its letter of 04.10.1993 (Ex. P14) the matter did get escalated to the
plaintiff‟s Executive Committee. Since the defendant had instigated the changes, in my
opinion, the plaintiff cannot be held responsible for the subsequent delay caused in
reverting back to the defendant with regard to the changes incorporated by the plaintiff
in the draft lease. Accordingly, in my view, issue no. 5 has to be answered in favour of
the plaintiff, that is, the plaintiff had fulfilled its obligation under the contract.
21. As regards the issue no. 6, in view of the discussions above it has also to be
answered in favour of plaintiff and against the defendant. It is quite clear, as discussed
above, that even as on 30.06.1993 the defendant had not completed construction of
strong room and as indicated above it had brought up unfairly a new issue of a provision
of air-conditioning the premises, which was clearly the obligation of the defendant.
What is explicitly brought out in the deposition of DW1, whereby the certified copies of
lease deed (Ex. DW1/2) dated 26.10.1993 executed between the defendant and the Coca
Cola were placed on record, that the actual demise of the premises in favour of Coca
Cola commenced from 01.09.1993. Therefore, the correspondence exchanged by the
defendant with the plaintiff at least after September, 1993 was a ploy employed the
defendant to keep the plaintiff guessing. The defendant had even prior to the issuance
of letter dated 22.10.1993, it appears come to an understanding with Coca Cola that the
premises would be let out to them. This is discernible from the following. Firstly, it
seems quite incredulous that Coca Cola was inducted into the premises the same day
when the lease was executed. Secondly, that the lessee would pay rent with
retrospective date without the actual or constructive possession of the premises.
Thirdly, the termination of its agreement with the plaintiff took place only on
22.10.1993; thus even according to the defendant if nothing else, upto that date the
premises alongwith the strong room were available to the plaintiff -- how is it that in a
matter of four days the premises were altered to the obvious needs of the new lessee,
i.e., Coca Cola. The evidence in relation to this aspect would be in the exclusive
knowledge and possession of the defendant; which it has chosen not to place on record.
The plaintiff on the other hand has to my mind discharged its onus. The defendant‟s
conduct shows that even prior to 22.10.1993 it had intended not to go through with its
agreement with the plaintiff. Therefore, in my view the evidence clearly suggests a
deliberate attempt on the part of the defendant to delay the construction of the strong
room despite keenness on the plaintiff to achieve its completion.
22. This brings me to issue no. 2 as to whether the suit is maintainable in view of the
provisions of Section 14(1)(c) of the Specific Relief Act. Issue No.2 is extracted for
convenience.
2. Whether the suit is maintainable in view of Section 14(1) (c) of the
Specific Relief Act? OPD
22.1 I must record that in his oral submissions Mr Harish Malhotra had not made any
submissions with regard to this issue. However, in view of the fact that this is a legal
submission raised in the written statement, I propose to deal with it. In my opinion the
submission is untenable for the following reason: Merely because the agreement is for
a fixed period of six years and that it can be terminated for non-payment of rent does
not bring an agreement to lease within the ambit of the provisions of Section 14(1)(c) of
the Specific Relief Act; that is, a contract which is not specifically enforceable. In order
to execute a legally binding lease agreement one of the essential elements is that it has a
defined period unless it is a lease in perpetuity. This characteristic of a lease is
embodied in Section 105 of the Transfer of Property Act. The other characteristic of the
lease would be that the transferor would hand over the possession of the demised
premises, which would continue to be in the possession of the transferee for a defined
period subject to periodic payment of consideration, that is, the lease rent. Thus subject
to contract or local usage to the contrary under the provisions of Section 108(c) of the
Transfer of Property Act, the lessee has the right to enjoy the demised premises during
the defined tenure without interruption subject to payment of rent reserved. There may
be myriad situations in which a tenant may refuse to pay the rent -- which, according to
the tenant, amounts to "wrongful acts" on the part of the land lord impeding "beneficial
enjoyment and use" of the demised premises. Such wrongful acts amount to
constructive eviction in law and hence, give immunity to the tenant from payment of
rent till quiet enjoyment is restored. (See Meenakshi Sundara Nachiar vs Sa. Rm. Ct.
Chidambaram Chetty & Ors (1912) 23 Mad. L.J. 119 at pages 125-126). Default in
payment of rent in such like situation will not affect the lessee‟s right to quiet
enjoyment. The lessor may perhaps take recourse to remedies available in law to
establish the contrary -- that by itself will not render the lease ipso facto
„determinable‟. Thus in situations as indicated above, the lessee fails to pay the rent or
fails to perform certain obligations undertaken by it then, the lessor may take recourse
to remedies provided in law. But that by itself does not affect the lessee‟s right to
enjoyment of the premises while he is in possession. Any other interpretation would
lead to a situation whereby the lessor would have a right of determination and
possession of the demised premises in the case of every breach by the lessee. When
looked at from this angle the defendant‟s plea that an agreement to lease is determinable
because a lease has a fixed tenure or that it can be terminated on default in payment of
rent is, untenable. In my view, the suit is maintainable. Therefore, issue no. 2 is found
in favour of the plaintiff and against the defendant.
23. This brings me to issue no. 7; which reads as follows
7. Whether the withdrawal of the defendant's offer to lease out the
premises is illegal and arbitrary as alleged? OPD
23.1 Having found that the plaintiff was entitled to seek specific performance of
the agreement to lease and having also found that the plaintiff had fulfilled its
obligation, the defendant could not have withdrawn its offer. In my opinion at that
stage there was already an enforceable agreement in position. The defendant could
not have unilaterally withdrawn its offer. The unilateral withdrawal of offer was
both illegal and arbitrary. The defendant was required to first lawfully terminate its
agreement with the plaintiff, and only then could it have entered into an agreement
with Coca-Cola. Accordingly, this issue is also found in favour of the plaintiff and
against the defendant.
24. This brings me to Issue no. 8. The said issue reads as follows:-
8. Whether the plaintiff made the payment on account of use &
occupation charges for the suit premises for the period December
21, 1992 to October 22, 1994, maintenance charges, security deposit
as alleged? OPP
24.1 As regards this issue, in my view, the payments which the plaintiff had made
were "on account", as indicated in its letters dated 17.12.1992 (Ex. P6) and
31.03.1993(Ex. P10). Since the possession of the premises had not been handed over to
the plaintiff the said payments cannot be attributed to use and occupation charges for
the period 21.12.1992 to 22.10.1993. It is not even the case of the defendant that the
plaintiff had taken over the possession of the premises. My opinion on the issue is
accordingly. The issue is found in favour of the plaintiff.
25. Issue Nos 9 and 11 reads as follows:-
9. Whether the defendant suffered any loss on account of keeping
the suit premises vacant from December 21, 1992 till October 23,
1992? If so, what is the quantum thereof? OPD
11. Whether the defendant is entitled to a decree as prayed for in
its counter claim? OPD
25.1 In so far as Issue no. 9 is concerned, having found that the defendant is guilty of
breach; the injury, if any, had been suffered by the plaintiff. The loss, if any, was self-
inflicted. The defendant, in my view, therefore, is not entitled to damages as claimed
in its counter claim for the period 21.12.1992 to 23.10.1993. Therefore, both issue nos.
9 & 11 are accordingly decided against the defendant and in favour of the plaintiff.
Consequently, it is to be held that defendant is not entitled to decree as prayed for in its
counter claim.
26. This brings me to issue no. 10 which is whether the plaintiff is entitled to refund
of Rs 35 lacs with interest @ 21% and/or in the alternative damages to the tune of Rs 30
lacs. The said issue reads as follows:-
10. Whether the plaintiff is entitled to the refund of Rs. 35 lakhs
with interest @ 21% per annum or in the alternative for damages to the
tune of Rs. 30 lakhs? OPP
26.1 In my opinion, on account of the intervening circumstances whereby the
defendant handed over the premises to Coca Cola, it would not be appropriate to direct
issuance of a decree for specific performance and handing over of possession to the
plaintiff. In any event the agreement to lease having been arrived at between the parties
as far back as in 1992 no purpose would be served by issuing a decree for specific
performance, at this stage. The Court, however, is not precluded from granting the
alternative relief sought for by the plaintiff. The plaintiff in the circumstances is
entitled to a refund of Rs 35 lacs; an amount that the defendant has admittedly received.
Even though Issue no.10 has been framed in the alternative a specific prayer for
damages has been made in the plaint with regard to both refund and damages.
However, I am not inclined to grant any damages to the plaintiff in view of the fact that
no proof of damage, actually suffered, has been placed before the court by the plaintiff.
Therefore, the claim for damages to the tune of Rs 30 lacs is rejected. The plaintiff
would, however, be entitled to interest on account of the fact that the sum of Rs 35 lacs
has been made use of by the defendant. It is to be noted that the plaintiff has not
claimed any interest prior to the institution of the suit. Therefore, bearing in mind that it
was a commercial contract the plaintiff is entitled to simple interest from the date of
institution of the suit till its realization at the rate of 12% per annum.
27. The only other issue which remains is Issue no. 1 which reads as follows:-
1. Whether the suit has been signed and verified by a duly
authorized person? OPP
27.1 This issue is also found in favour of the plaintiff in view of the fact that PW1 has
specifically deposed that Mr K.M. Mishra, who at the relevant time was the Principal
Assistant Manager of the plaintiff, was duly authorised to sign and verify the pleadings
as also to institute the suit based on the power conferred vide gazette notification (Ex.
P1) dated 08.05.1993. This aspect of the matter has not been challenged by the
defendant in the cross-examination. Accordingly, as indicated above, it is held that suit
has been signed and verified and also instituted by a duly authorized person. I am also
fortified in my view by the observations of the Supreme Court in the case of Union
Bank of India vs Naresh Kumar & Ors 1996 (7) Supreme 301, wherein the court,
while commenting on the interplay of the provisions of Order 6 Rule 14 of the CPC,
observed in paragraph 10 as follows:
"10. It cannot be disputed that a company like the appellant can sue and
be sued in its own name. Under Order 6 Rule 14 of the Code of Civil
Procedure a pleading is required to be signed by the party and its pleader,
if any. As a company is a juristic entity it is obvious that some person has
to sign the pleadings on behalf of the company. Order 29 Rule 1 of the
Code of Civil Procedure, therefore, provides that in a suit by or against a
corporation the Secretary or any Director or other Principal Officer of the
corporation who is able to depose to the facts of the case might sign and
verify on behalf of the company. Reading Order 6 Rule 14 together with
Order 29 Rule 1 of the Code of Civil Procedure it would appear that even in
the absence of any formal letter of authority or power of attorney having
been executed a person referred to in Rule 1 of Order 29 can, by virtue of
the office which he holds, sign and verify the pleadings on behalf of the
corporation. In addition thereto and de hors Order 29 Rule 1 of the Code of
Civil Procedure, as a company is a juristic entity, it can duly authorize any
person to sign the plaint or the written statement on its behalf and this would
be regarded as sufficient compliance with the provisions of Order 6 Rule 14
of the Code of Civil Procedure. A person may be expressly authorized to
sign the pleadings on behalf of the company, for example by the Board of
Directors passing a resolution to that effect or by a power of attorney being
executed in favour of any individual. In absence thereof and in cases
where pleadings have been signed by one of it's officers a Corporation can
ratify the said action of it's officer in signing the pleadings. Such
ratification can be express or implied. The Court can, on the basis of the
evidence on record, and after taking all the circumstances of the case,
specially with regard to the conduct of the trial, come to the conclusion
that the corporation had ratified the act of signing of the pleading by it's
officer."
27.2 Accordingly, this issue is found in favour of the plaintiff.
28. In view of the discussion hereinabove, it is directed that the decree be drawn
issued in favour of the plaintiff directing the defendant to pay a sum of Rs 35 lacs to the
plaintiff with simple interest at the rate of 12% per annum from the date of institution of
the suit till its realization alongwith costs.
RAJIV SHAKDHER, J
JANUARY 28, 2010
kk
