Delhi High Court
Today Homes & Infrastructure Pvt. ... vs Jds Apparels Ltd. & Anr. on 16 October, 2018
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. (COMM) 67/2017
Reserved on: 27.09.2018
Date of decision : 16.10.2018
TODAY HOMES & INFRASTRUCTURE PVT. LTD.
..... Petitioner
Through: Mr.Rahul Sharma & Mr.Jitender
Rath, Advs.
versus
JDS APPARELS LTD. & ANR. ..... Respondents
Through: Mr.Pulkit Deora, Adv. for Official
Liquidator.
Mr.Ajay Kohli & Ms.Bhumika
Kapur, Advs. for R-1.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
1. This petition has been filed under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the 'Act') challenging
the Arbitral Award dated 03.06.2015 passed by the Sole Arbitrator
adjudicating the disputes that have arisen between the parties in relation
to the Lease Agreement dated 08.04.2009 executed between the parties
for leasing out certain portion/area in the commercial complex and
entertainment centre named as 'North-Orbit Plaza' as also the
Memorandum of Understanding (MoU) dated 08.04.2009 executed
between the parties with respect to extension of a loan of Rs. 1.50 crores
by the petitioner to respondent no. 1.
OMP (Comm.) No.67/2017 Page 1
2. The Petitioner, M/s. Today Homes and Infrastructure Private Ltd.
had entered into a Development Agreement dated 27.03.2006 with
respondent no. 2, M/s. M.N Securities Private Limited, the original lessee
and owner of the land which was used to develop the abovementioned
commercial complex.
3. The respondent no. 1 being interested in taking certain portion/area
on lease in the said commercial complex, entered into the
abovementioned Lease Agreement with respondent no. 2 as the 'lessor',
respondent no. 1 as the 'lessee' and the petitioner as the 'confirming
party'. The tenure of the lease was for a period of nine years commencing
from 08.04.2009 and expiring on 08.04.2018, with the option given to the
lessee to renew it for further two periods of nine years each. The area
being given on lease had been sold to various allottees who had
authorized the petitioner to lease out their respective unit to any
retail/brand.
4. A Memorandum of Understanding dated 08.04.2009 was also
entered into between the parties stating that the respondent no.1 had
approached the petitioner for a loan of Rs. 1,50,00,000/- for carrying out
'fit-outs' in the leased premises and that the petitioner had agreed to
extend the said loan on the terms contained in the MoU.
5. The MoU was followed by an Addendum dated 31.03.2010
recording that the petitioner had completed its scope of work as per
Clauses 9 and 10 of the Agreement, which involved providing amenities
like parking, landscaping, common area operations, security systems,
etc., as also laid down the revised manner and mode of release of loan
OMP (Comm.) No.67/2017 Page 2
amount. The Addendum also extended the Rent Commencement Date to
01.07.2010 from 01.10.2009 as had been stipulated in the Lease Deed.
6. Dispute arose between the parties with the Respondent no. 1
terminating the Lease Deed vide its notice dated 16.11.2011 and
demanding the refund of the security deposit as also the damages, while
the petitioner claimed that the termination of the Lease Deed was illegal
and for extraneous reasons and therefore, the petitioner was entitled to
refund of the loan amount as also damages from the respondent no.1.
7. The Sole Arbitrator by the Impugned Award dated 03.06.2015 has
held the termination of the Lease Deed to be valid and has allowed
certain claims of the respondent no. 1, while rejecting the counter claims
of the petitioner. The operative portion of the Award with respect to the
claims and counter claims is reproduced hereinunder:
"Claim No.1- In respect of refund of security deposit
Claimant is awarded a sum of Rs. 10,46,400/- (Rupees Ten
Lakhs Forty six thousand four hundred only) against
respondent no. 2 together with interest @12% from
16.11.2011 till realization.
Claim no. 2-
Claimant is awarded a sum of Rs. 24,30,072/- (Rupees
Twenty Four Lakhs Thirty Thousand and Seventy Two only)
spent by it on the fit outs etc. for the show room against the
respondent no. 1 with interest @ 12% from the date of
award till realization.
Claim no. 3-
Claim is rejected for the reasons set out in the award.
Claim no. 4-
Claim no.4 for loss of goodwill is rejected for the reasons set
out in the award.
Claim no. 5-
OMP (Comm.) No.67/2017 Page 3
Claim is partly allowed for a sum of Rs. 3,65,350/- (Rupees
Three Lakhs Sixty Five Thousand Three Hundred Fifty) in
favour of claimant and against the respondents for the
reasons recorded.
Claimant to be entitled to interest @ 12 %per annum from
the date of award till realization in respect of claim no's 2
and 5.
Counter Claims no. 1-5 for the reasons stated in the award
are rejected.
Claimant's share of arbitral fee of Rs.12.5 lakhs and
litigation costs assessed at Rs. 1.50 lakhs in these
proceedings are awarded in favour of Claimant and against
Respondents."
8. Learned counsel for the petitioner submits that that the finding of
the Arbitrator holding that the termination of the Lease Deed was valid is
incorrect and contrary to the terms of the Lease Deed. He submits that
Clause 5(i) of the Lease Deed provides for a lock-in period of 24 months.
As by way of the Addendum dated 31.03.2010, the „Rent
Commencement Date‟ had been extended to 01.07.2010, the respondent
no.1 could not have terminated the Lease Deed vide its notice
16.11.2011, being within the lock-in period.
9. I have considered this submission of the learned counsel for the
petitioner, however, find no force in the same.
10. Clause 5(i) of the Lease Deed is reproduced hereinbelow:
"5. Lock-in period:
(i)Both the parties shall treat the first 24 months from the
date of commencement of the present lease, as lock-in
period during which neither of the parties can terminate the
Agreement except as provided in clause 5(ii). In case, the
OMP (Comm.) No.67/2017 Page 4
Lessee terminates the Lease before the expiry of said lock-in
period, for reasons other than as provided in clause 5 (ii)
and 5(iii), hereinafter, the Lessee shall be liable to pay only
the monthly rent for the remaining lock-in period. It is made
clear that in the event of such termination, before the expiry
of the lock-in-period, except for the monthly rent payable
for the remaining lock-in-period, no other charges whatever
including maintenance charges (CAM) etc. shall be payable
by the lessee to the lessor."
11. A reading of the above clause would clearly show that the lock-in
period was to be 24 months "from the date of commencement of the
present lease". Clause 2 of the Agreement gives the date of
commencement of the Lease Deed as 08.04.2009. The lock-in period,
therefore, had expired when the notice of termination was issued by the
respondent no.1. The lock-in period has no relation with the „Rent
Commencement Date‟ as defined in Clause 9 of the Lease Deed and as
extended by Clause 4 of the Addendum dated 31.03.2010.
12. The Arbitrator has also considered the above submission and has
held as under:
"36. A careful perusal of clause 5 of the lease under the
heading "Lock in period" shows there is no absolute
prohibition for termination under the clause. Exceptions are
carved out for termination on grounds given in clause 5 (II)
and 5(III) during the lockin period. Even if termination is
done during the lock in period, the only liability of the
Lessee is to pay the monthly rent for the remaining lock in
period. The validity of termination is not affected thereby.
Moreover, in this case even though the lease commencement
date was 08.04.2009, parties had fixed the rent
commencement date as 01.10.2009 initially. There has also
been failure and breach of other obligations regarding
provisions of amenities and availability of sanctions and
OMP (Comm.) No.67/2017 Page 5
permissions to make the mall operational. In these
circumstances, it cannot be said lock in period could be
counted from the date by which parties had agreed to defer
the rent commencement earlier."
13. In view of the above, I find no merit in the submission made by the
counsel for the petitioner.
14. Learned counsel for the petitioner, relying upon Section 108(e) of
the Transfer of Property Act, 1882 submits that even assuming that the
leased property could not be used by the respondent no.1 due to the act of
sealing by the Municipal Corporation of Delhi (MCD), the same being
only temporary in nature would not make the lease void or liable for
termination, and the respondent no.1 could at best claim suspension of
rent for the period during which the leased premises remained sealed.
15. I do not find any merit in the above submission of the counsel for
the petitioner. The Arbitrator has held that the notice terminating the
lease was premised on various breaches of the contract by the petitioner.
The Mall in question had been booked for unauthorized construction on
20.08.2008 and demolition order was also issued by the MCD.
Thereafter, sealing order dated 18.12.2009 was also passed and property
was sealed on 23.12.2009. Though, it was de-sealed on 02.02.2010, it
was resealed on 01.06.2010. It was again de-sealed on 16.06.2010 but
subject to the condition that it would not be occupied. It was resealed on
28.12.2010, culminating in the stay on demolition by the Appellate
Tribunal, MCD on 28.01.2011. The Completion Certificate was also
rejected on 25.05.2010 and the regularization was finally accepted only
OMP (Comm.) No.67/2017 Page 6
on 09.03.2012, whereafter the petitioner paid the regularization charges.
The Arbitrator also summarized these facts and has held as under:
"33. From the evidence on record and the admissions as
recorded, the factum of proceedings for initiation for
unauthorized constructions against the Respondents as far
back in 20.08.2008 and later is established. Claimant has
also proved on record the sealing and de-sealing of the
property and the fetters on occupation. The public notice
put up by the MCD following the Tribunal's direction
notifying that the application for regularization of
unauthorized construction and excess coverage was pending
and anybody dealing or purchasing any shop therein would
do so at his own risk is placed on record.
Lack of permission, absence of completion certificate and of
occupancy certificate as also sealing and de-sealing of the
Mall on 18.12.2009, 01.06.2010 and 20.12.2010.
Regularization admittedly being allowed only on 09.03.2012
and completed with payment of regularization charges on
17.04.2012 i.e. more than a year and half later, after the
sealing on 18.12.2009 & 01.06.2010.
34. Lease Deed dated 08.04.2009, provided initial rent
commencement date as 01.10.2009, it was extended by the
Addendum dated 31.03.2010, to 01.06.2010. The Mall itself
was sealed on 01.06.2010. In these facts and circumstances,
Claimant terminating the lease vide its notice dated
16.11.2011, cannot be said to have acted in haste or without
the Respondents getting reasonable time and opportunity to
remedy their breach and/or to fulfill their obligation by
corrective action. It is accordingly held that the Claimant
has succeeded in establishing the breach on the part of
Respondent to justify the termination of Lease.
xxxx
38. That perusal of the Ex. C-13 i.e. notice of termination
dated 16.11.2011, shows that the grounds taken for
termination are Respondents representations enumerated
therein being found false, failure to complete and
OMP (Comm.) No.67/2017 Page 7
operationalize the Mall and the same being sealed for
unauthorized construction and the inordinate delay in
regularization of the Mall. Regularization plans were
accepted only on 09.03.2012, with charges being paid on
17.04.2012. The Claimant accordingly terminated the Lease
under Clause 5 (iii) r/w Clause 24. Alternatively and
without prejudice notice to be treated as one under clause
16 (i) of the Lease. The facts as proved on record and noted
in preceding paras clearly fall within the ambit of the
numerous grounds that are provided under clause 5 r/w
Clause 24. There is no merit in the contention that the
termination under clause 5 r/w Clause 24 is not legally
sustainable or valid and is rejected."
16. The above finding of the Arbitrator cannot be faulted. The
termination of the Lease Deed having been done by the respondent no.1
in terms of the Lease Deed, reliance of the petitioner on Section 108(e) of
the Transfer of Property Act, 1882 cannot be accepted.
17. Learned counsel for the petitioner further submits that even if it is
assumed that the Lease Deed had been properly terminated, the
respondent no.1 having not utilized the loan amount for the purpose of
"fit-outs", was liable to be directed to refund the said amount alongwith
interest as provided in the MoU.
18. I do not find any merit in the submission made by the counsel for
the petitioner. The loan amount is governed by Clauses 5 (ii) and 5(iii) of
the Lease Deed, which are reproduced hereinbelow:
"(ii). In consideration of the lessee agreeing to take the
demised premises on lease, the confirming party has also
agreed to advance certain monetary facilities to the lessee
OMP (Comm.) No.67/2017 Page 8
for carrying out the fit out in the demised premises as per
terms of a duly executed Memorandum Of Understanding
of the even date. Hereinafter called "MOU". It is clearly
understood between the parties herein that in case the
confirming party herein, fails to pay the same to the lessee,
in terms thereof, the lessee, in addition to its claims under
the said Memorandum of Understanding, shall be at
liberty to terminate the present lease immediately forthwith
and in that eventuality the lessee shall be entitled to refund
of the entire security deposit, as stated in clause 4 herein,
and shall be further not liable to pay any amount to the
lessor and or the "Confirming party", whatsoever, under the
terms of this agreement and the "MOU" including but not
limited to monthly rent, maintenance charges etc.
(iii). It is also understood that in the event of the Lessor not
being able to provide the amenities, as stated in clause 10
hereinafter, even for a period till 31.03.2010, and the
Lessee has spent all the loan amount after the fitout then in
that case, the lessee shall be at liberty to terminate the
present lease immediately forthwith and in that eventuality
the lessee shall be entitled to refund of the entire security
deposit, as stated in clause 4 herein, and shall be further not
liable to pay any amount to the lessor and or the
"Confirming party", whatsoever, under the terms of this
agreement and the "MOU". In case Lessee has not spent the
full loan amount for fitout on the demised premises in that
case Lessee has to refund the balance amount to the
confirming party herein immediately."
19. The Arbitrator on consideration of the evidence led before him has
held that the respondent no.1 has been able to prove that in addition to the
loan amount of Rs.1.50 crore it has spent a further sum of Rs.25,25,616/-
making a total of Rs.1,75,25,616/- towards the fit-outs. In fact, the
Arbitrator holds that the expenditure of this excess amount demonstrates
OMP (Comm.) No.67/2017 Page 9
the commitment of the respondent no.1 to the project and improvisation
of the outlet by bona fide incurring expenses of its own in addition to the
loan amount.
20. The respondent no.1 before the Arbitrator had also filed bills raised
by the concerned vendors/professionals for such work and the payment
proof thereof. The respondent no.1 had also examined Mr.Nitin Mitra, its
Finance Head to produce on record Statement of Account maintained by
the respondent no.1 with the UCO Bank, ING Vysya Bank and HDFC
Bank Limited to demonstrate the payment to the vendors pertaining to the
showroom.
21. The Arbitrator in light of the above finding has held as under:
"(vii) This aspect has been considered and examined in
detail on the basis of evidence on record while considering
claim no. 2. For reasons set out there, it has been held that
M/s JDS Apparels had duly expended total amount of
Rs.1,75,25,616/- including Rs.1.50 Crores as loan on the fit
outs etc., in the show rooms. Accordingly, the basis on
which the counter claim is founded i.e that the loan amount
has not been spent for the purpose it was given and is
therefore liable to be returned, no longer exists. The
respondent no. 1 in the counter claim has placed reliance
on Clause no. 5 of the lease deed providing that the part of
loan which is not spent when the lease is terminated is
liable to be returned. In the instant case, the entire amount
has been expended. It has also been held that the lease
agreement has been validly terminated due to the breaches
of the respondents. In the normal course, the loan was
repayable under the lease agreement, MoU and the
addendum in 51 installments upon Mall becoming
operational. However, after the termination of the lease,
M/s JDS Apparels have withdrawn from the premises,
OMP (Comm.) No.67/2017 Page 10
leaving interior fit outs etc., i.e. the building with whatever
value additions done by expending of the loan amount of
Rs.1.50 crores in possession of the respondent to enure to
its benefit. In view of the foregoing discussions, the claim is
held to be not admissible and rejected."
22. I do not find any infirmity in the above finding of the Arbitrator.
In any case, the above being a finding of fact arrived at by the Arbitrator
on appreciation of evidence led by the parties before him, cannot be
interfered with or re-appreciated by this Court as if it is sitting as a Court
of Appeal.
23. In Associate Builders v. DDA (2015) 3 SCC 49, the Supreme
Court, after analyzing the provisions of Section 34 of the Act, has held as
under:-
"33. It must clearly be understood that when a court is
applying the "public policy" test to an arbitration award,
it does not act as a court of appeal and consequently
errors of fact cannot be corrected. A possible view by the
arbitrator on facts has necessarily to pass muster as the
arbitrator is the ultimate master of the quantity and
quality of evidence to be relied upon when he delivers his
arbitral award. Thus an award based on little evidence or
on evidence which does not measure up in quality to a
trained legal mind would not be held to be invalid on this
score [ Very often an arbitrator is a lay person not
necessarily trained in law. Lord Mansfield, a famous
English Judge, once advised a high military officer in
Jamaica who needed to act as a Judge as follows:
"General, you have a sound head, and a good heart; take
courage and you will do very well, in your occupation, in
a court of equity. My advice is, to make your decrees as
OMP (Comm.) No.67/2017 Page 11
your head and your heart dictate, to hear both sides
patiently, to decide with firmness in the best manner you
can; but be careful not to assign your reasons, since your
determination may be substantially right, although your
reasons may be very bad, or essentially wrong".
It is very important to bear this in mind when awards of
lay arbitrators are challenged.] . Once it is found that the
arbitrators approach is not arbitrary or capricious, then
he is the last word on facts. In P.R. Shah, Shares & Stock
Brokers (P) Ltd. v. B.H.H. Securities (P) Ltd. [(2012) 1
SCC 594 : (2012) 1 SCC (Civ) 342] , this Court held:
(SCC pp. 601-02, para 21)
"21. A court does not sit in appeal over the award
of an Arbitral Tribunal by reassessing or
reappreciating the evidence. An award can be
challenged only under the grounds mentioned in
Section 34(2) of the Act. The Arbitral Tribunal has
examined the facts and held that both the second
respondent and the appellant are liable. The case as
put forward by the first respondent has been
accepted. Even the minority view was that the
second respondent was liable as claimed by the first
respondent, but the appellant was not liable only on
the ground that the arbitrators appointed by the
Stock Exchange under Bye-law 248, in a claim
against a non-member, had no jurisdiction to
decide a claim against another member. The finding
of the majority is that the appellant did the
transaction in the name of the second respondent
and is therefore, liable along with the second
respondent. Therefore, in the absence of any ground
under Section 34(2) of the Act, it is not possible to
OMP (Comm.) No.67/2017 Page 12
re-examine the facts to find out whether a different
decision can be arrived at."
34. It is with this very important caveat that the two
fundamental principles which form part of the
fundamental policy of Indian law (that the arbitrator must
have a judicial approach and that he must not act
perversely) are to be understood."
24. I therefore find no merit in the present petition and the same is
dismissed with costs quantified at Rs.25,000/-.
NAVIN CHAWLA, J
OCTOBER 16, 2018/Arya
OMP (Comm.) No.67/2017 Page 13
