Delhi High Court
Shivani Textile Ltd. vs Sms Demag Pvt. Ltd. on 11 April, 2019
$~55 and 56
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 11th April, 2019
+ O.M.P. 599/2007
SHIVANI TEXTILE LTD. ..... Petitioner
Through Mr. Manish Kaushik, Mr. Samir
Sagar and Mr. Ankit, Advocates (M.
No.9818218885)
versus
SMS DEMAG PVT. LTD. ..... Respondent
Through None
And
+ O.M.P. 600/2007
PASHUPATI FINCAP LTD. .... Petitioner
Through Mr. Manish Kaushik, Mr. Samir
Sagar and Mr. Ankit, Advocates (M.
No.9818218885)
versus
SMS DEMAG PVT. LTD. ..... Respondent
Through None
CORAM:
JUSTICE PRATHIBA M. SINGH
Prathiba M. Singh, J.(Oral)
1. The present petitions have been filed challenging the impugned
awards dated 12th April, 2007. By the impugned award, the three-member
Arbitral Tribunal, awarded various claims in favour of the Respondent. The
background of the petition is that one M/s Ganga Automobiles had entered
into a lease agreement dated 14th October, 1994 with M/s Indomag Steel
Technology Pvt. Ltd., now known as SMS Demag Pvt. Ltd. (claimant in the
arbitration/respondent herein) (hereinafter „tenant‟) in respect of flats in
Ganga Plaza 81/1, Adchini, Sri Aurobindo Marg, New Delhi. The said lease
related to lower ground floor and ground floor. On 1st November, 1997, M/s
Pasupati Fincap Ltd. and M/s Shivani Textiles Limited (formerly M/s.
Pasupati New Tec Ltd.) (respondents in the arbitration/petitioners herein)
(hereinafter „Petitioners‟), informed the tenants that they had purchased
rights in the lower ground floor and ground floor of the property. The tenant
i.e. the claimant attorned to the new owners and started paying rent.
However, notice of termination was issued by the tenant on 20 th December,
2001 by which the tenant informed the petitioner that they would continue to
occupy the third floor and fourth floor. Disputes arose in respect of the said
termination as the security deposit which was originally paid by the tenant to
M/s Ganga Automobiles - the earlier landlord, was not refunded.
2. The three-member Tribunal which was constituted held in favour of
the tenant in the following terms: -
"To conclude, we hereby make the following award:
a) the respondent is directed to pay to the claimant a
sum of Rs.20,81,770/- against all the claims except the
claim of interest and cost.
b) The respondent is directed to pay to the claimant a
sum of Rs. 08,74,344/- on account of interest on the
above mentioned amount of Rs.20,81,770/-
c) The respondent is directed to pay to the claimant a
sum of Rs.2,25,000/- as cost of these proceedings.
d) The counter-claim raised on behalf of the
respondent is hereby rejected."
3. The grievances in the present petitions are two, namely: -
i) That the arbitration clause does not apply qua the new owners of the
property
ii) That the learned Tribunal has failed to consider some extremely
relevant and important facts.
4. Notice was issued in the petitions on 30th October, 2007. The
petitions were dismissed for non-prosecution on 08th November, 2016 but
were thereafter restored on 26th May, 2017. For the last two hearings, none
has appeared on behalf of the respondent/tenant. The learned counsel for the
Petitioners has made submissions on 10th April, 2019 and 11th April, 2019.
None has appeared for the respondent/tenant on both dates. The court is
accordingly proceeding to decide the matter.
5. The submission of Mr. Kaushik appearing for the Petitioners is that
the tenant never vacated the two floors but continued to enjoy possession
and occupation of the said floors. He supports his argument by relying upon
letter dated 20th December, 2001. He submits that the tenant by this letter
had only agreed to vacate w.e.f. 31st December, 2001. In fact, it did not
vacate. After the issuance of this letter, another letter dated 12th February,
2002 was issued, by which it was claimed by the tenant that it had vacated
the ground floor. The tenant had sought refund of the security deposit vide
these two letters in respect of the lower ground floor (upper basement) and
the ground floor.
6. On 3rd April, 2002, the Petitioners refunded Rs. 3.75 lakhs towards
part payment of the security deposit. Thereafter, however, the tenant
demanded the remaining security deposit. However, on 16th December,
2002, the tenant again entered into two agreements, taking on rent, two
portions of the property i.e. 523 sq. ft. on the ground floor of Ganga Plaza by
one agreement and 180 sq. ft. on the ground floor of Ganga Plaza by a
second agreement of the same date. In respect of these two agreements, the
tenant paid security deposit as contained in Clause 2 of the said two
agreements.
7. Mr. Kaushik's submission is that since further security deposit was
paid, it points to the fact that no other security deposit was due to be
refunded to it. It is further submitted that the arbitration proceedings were
invoked on 26th April, 2004 and the arbitrators were also nominated on 21st
May, 2004. However, on 23rd June, 2004, a further letter was written by the
tenant confirming that it would be vacating the suit property on or before
30th June, 2004. At that stage, some of the furniture and fixtures which were
lying in the property were also purchased by the Petitioners for a payment of
Rs. 1 lakh. Thus, it is his submission that in fact the tenant had not vacated
the property in 2001 when the first notice was issued. He further submits
that the Petitioners relied on these two letters in their reply to the claim
petition and the same also find reference in the rejoinder that was filed.
Despite the same, the ld. Tribunal failed to consider the 2004 letters.
According to Mr. Kaushik, the non-consideration of the 2004 letters led the
Arbitral Tribunal to the conclusion that the tenant had vacated the suit
property in 2001, which was factually incorrect. He also relied upon
photographs placed on record to show that until 2004 the property was in
fact being used for storing of various files/documents of the tenant and in
fact all the tables, chairs, fixtures etc. continued to remain there till 2004.
Thus, the award of refund of security deposit is not tenable and the award is
liable to be set aside.
8. This court has considered the award and the various correspondence
placed on record. The Arbitral Tribunal has proceeded on the ground that
the tenant vacated the property as of December, 2001. The finding of the
Tribunal in respect of the further lease entered into by the tenant is contained
in paragraph 21 which reads as under: -
"21. The fact that the claimant had handed over the
possession of flats to the claimant is further proved from
the facts that a small portion measuring built up area of
523 sq. feet on the ground floor was retained by the
claimant company and for that area a fresh lease deed
dated 16.12.2002, Exh.CW-1/54 & 55, was executed
between the parties and the said lease deed was for a
period of 5 years w.e f 01.01.2002. This also shows that
the claimant had handed over the possession of the flats
to the respondent on 31.12.2001. Accordingly, we hold
that the claimant had handed over the possession of the
demised premises to the respondent on 31.12.2001. As
stated in para 15 here-in-above, the balance amount of
security comes to Rs.27,93,808/-."
9. Thereafter, the Arbitral Tribunal notes at paragraph 23 of the award
that the furniture and fixtures were sold to the Petitioners on 12th July, 2004.
However, in the entire award, there is no reference to the letter dated 23rd
June, 2004. For the purpose of ready reference, the letters dated 20th
December, 2001 and 23rd June, 2004 are set out as under: -
LETTER DATED 20.12.2001
"Please refer to the Lease Agreement dated
October 14, 1994 and subsequent renewals dated
30.12.1997 and 16.01.2001 of Ganga Plaza
building situated at 81/1, Adchini, Sri Aurobindo
Marg, New Delhi - 110017. In this building you
own 4619 sq. ft, area in Ground Floor.
Ever since we occupied this building we have been
facing problems with regard to the electric
connection to the building, certificate from Delhi
fire Services, pollution, car parking etc. The matter
was discussed number of times with Adchini Flat
Owners Association but no result. Meanwhile, our
requirement for the number of floors have reduced.
After discussion with the Adchini Flat Ov/ner
Association and its President, Secretary etc. on
Sept. 26, 2001, we have decided to take only two
floors on rent i.e. 3rd &4th Floor w.e.f 01st January
2002. Accordingly, this may be please treated as
notice of termination of the lease agreement for
your floor/ space dated 14.10.1994. We will vacate
the floor with effect from December 31, 2001. This
was discussed and agreed upon in our meeting
dated Sept. 26, 2001 with your Association.
Our Company (Lessee) has paid you 6 months
security deposit of Rs. 2394489.60 in accordance
with Clause 1 (d) of the said Lease Agreement. You
are requested to refund back the amount by
31.01.2002.
In accordance with clause 2 of the aforesaid lease
agreement, we (Lessee) have made improvements
and additions in the interiors of the building. In
case you are willing to take over the possession of
your area of the floor along with the improvements/
additions in the interiors, kindly indicate to us
within 10 days of the receipt of this letter falling
with we will make arrangements to remove/sell the
improvements / additions we have made in the
building.
Thanking you."
LETTER DATED 23.06.2004
"Dear Sir,
In continuation to our letter dated April 23, 2004
this is to inform you that we shall be vacating your
premises on or before June 30, 2004. You are,
therefore, requested to come personally or to
depute your representative on June 30, 2004 at
11.00 A.M. to take over the possession of the space
leased to us. In case you or your representative
does not come by 5 p.m., we shall leave the key of
ground floor, which includes your space, with the
Security Guard. We are for the present leaving the
fixtures so that in case you wish to take them over,
you may do so but in case you do not come on June
30, 2004, we shall have these removed. The false
ceiling has also been done by us and is our
property but dismantling the same might damage
the ceiling and such we are not removing the same
except the lights fixtures, Smoke detectors, A.C.
grills but shall not charge you anything for this. If
however, you still insist that this should be
removed, please let us know and we shall, without
prejudice remove the same.
We will keep a Security guard for a period of one
month whereafter, you may please come to our new
office at R1 Nehru Enclave, New Delhi 110019 to
collect the keys.
In case you wish to have any further information or
clarification, please feel free to meet me or call me
on my phone No.51961673.
We take this opportunity to thank you for your
cooperation.
Thanking you.
Yours faithfully,
SMS DEMAG PVT. LTD."
10. A perusal of the above two letters read along with the fact that the
fixtures etc. were purchased by the Petitioners only in July, 2004 goes to
show that at least until 30th June, 2004, it clearly appeared that the tenant
had not handed over vacant and peaceful possession of the property. It is
nigh possible that after 2001 the premises was being kept empty by the
tenant and not being put to too much use. Until and unless vacant and
peaceful possession is handed over to the owner, it cannot be stated that the
property has actually been vacated. Further, in the reply to the claim
petition the Petitioners categorically asserted as under: -
"15. In reply to para 11 to 14: It is an admitted fact by
the claimant that its entire furniture, fixtures, equipment
etc. were lying at the premises even after the notice of
termination on 20.12.2001 till 12.7.2004. Therefore, the
claimant is liable to make payment of the entire lease rent
of the intervening period from the date of the notice of
termination till the equipment were physically removed
by the claimant. Accordingly, the claimant wrote to the
respondent on 13.10.2003 which may be treated as part
and parcel of the present reply. A copy of the letter dated
13.10.2003 of the respondent is annexed as Annexure-A.
A copy of the letter dated 23.6.2004 and 12.7.2004 are
annexed hereto and marked as ANNEXURE-B(COLLY)
11. In response thereto the tenant, in its rejoinder, pleaded as under:-
"15. (Our para 11). It is common case that the
furniture and fixtures were not removed when the
Claimant vacated the premises on 31 December
2001, and eventually were purchased by the
Respondent. However, that does not lead to the
conclusion that the Claimant was in occupation, as
alleged. The furnitures and fixtures left behind by
the Claimant were gainfully used by the Respondent
and/or the other tenants who occupied the premises,
which stands admitted by the Respondent. The
Claimant also denies the contents of the letter dated
13 October 2003. The Claimant craves leave to refer
to the true import of the letters dated 23 June 2004
and 12 July 2004 filed by the Respondent.
12. A perusal of the above two paragraphs shows that the tenant does not
deny the issuance of letter dated 23rd June, 2004 and reply dated 12th July,
2004. The letter dated 23rd June, 2004 is clear and categorical i.e. that the
tenant would be vacating the property on or before 30th June, 2004. This
letter, which is mentioned in the pleadings, having not been considered, the
award suffers from a patent illegality. In fact, the learned Tribunal notices
the fact that furniture and fixtures were purchased by the Petitioners in July,
2004. The tenant having not denied the letter dated 23rd June, 2004, it
cannot be stated very clearly that the tenant had in fact vacated the property
in 2001. There being ambiguity and lack of clarity as to the exact date of the
vacation of the suit property, further combined that the fact that the tenant
took two further portions of the property on lease through two further lease
deeds and also accepted part refund of the security deposit in April 2002, it
appears that the Arbitral Tribunal failed to consider a very crucial
document.
13. The evidence of the Petitioners also records the factum of issuance of
letter dated 23rd June, 2004 in the following terms: -
"9. I say that I am relying upon the enclosed
photographs which show that the claimant remained
in possession of the lower ground floor till
12.7.2004. These photographs were taken on
19.5.2004 which show the possession of the
claimant. The photos are annexed hereto as
Annexure-A. In fact the letter dated 23.6.2004
issued by the claimant itself clearly shows that the
claimant would be vacating the premises on or
before 30.6.2004. On 12.7.2004 the claimant has
even accepted the payment of Rs.50,000/- towards
the consideration for the transfer of all the furniture
and fixtures lying at the lower ground floor.
Therefore, under Clause 1 (d) of the lease, the
Claimant vacated the premises on 12.7.2004 and is
liable to pay the charges till then. I say that the
officers of the Claimant used to regularly visit the
lower Ground Floor for accessing their files and
other facilities, even after the alleged termination
letter. Since the Claimant was retaining the lease of
a part of the premises at the Ground Floor, it was in
no hurry to vacate the premises at the lower ground
floor and was effectively utilizing the said lower
ground floor till 12.7.2001.
14. Further despite repeated adjournments, no one has appeared on behalf
of the tenant in this matter for the last three hearings. The Arbitral Tribunal
having failed to consider the letter dated 23rd June, 2004, the award is not
sustainable and the same is accordingly set aside, leaving the parties to bear
their own costs. Both the petitions are allowed in the above terms.
15. Both the petitions are disposed of.
PRATHIBA M. SINGH
JUDGE
APRIL 11, 2019
b
O.M.P. 599/2007 & 600/ 2007 Page 10 of
