Delhi High Court
M/S Trinity Consultants vs M/S Redefine Online Express (Opc) ... on 29 July, 2024
Author: Vibhu Bakhru
Bench: Vibhu Bakhru
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgement delivered on: 29.07.2024
+ RFA(COMM) 291/2023 and CM APPL. 64249/2023
M/S TRINITY CONSULTANTS ..... APPELLANT
versus
M/S REDEFINE ONLINE EXPRESS
(OPC) PRIVATE LIMITED ..... RESPONDENT
Advocates who appeared in this case
For the Appellant : Mr.Aman Avinav, Advocate.
For the Respondent : Mr.Kshitiz Mahipal, Mr.Parvesh Kaushik,
Ms.Khairun Nisa and Ms.Shirin Raza,
Advocates.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
HON'BLE MS. JUSTICE TARA VITASTA GANJU
JUDGMENT
VIBHU BAKHRU, J.
1. The appellant - M/s. Trinity Consultants (hereafter Trinity) has filed
the present appeal impugning the judgment and decree dated 27.09.2023
(hereafter the impugned judgment) passed by the learned Commercial Court
in CS (COMM) No.3/2022 captioned M/s. Redefine Online Express (OPC)
Pvt. Ltd. v. M/s. Trinity Consultants and the counter claim filed by Trinity
and registered as CS(COMM) No.424/2022 captioned M/s. Trinity
Consultants v. M/s. Redefine Online Express (OPC) Private Limited.
2. In terms of the impugned judgment, the learned Commercial Court
had dismissed the counter claim and decreed the suit filed by the M/s.
Redefine Online Express (OPC) Private Limited (hereafter Redefine) for a
sum of ₹22,13,618/- along with interest at the rate of 12% per annum with
effect from 28.02.2021 till its realisation.
3. Trinity claims to be a partnership firm under the Indian Partnership
Act, 1932 bearing Registration No.1808/2002. It is, inter alia, engaged in
the business of licensing/letting and sub-licensing/sub-letting commercial
spaces.
4. On 16.12.2019, the parties entered into a registered Leave and
License Agreement (hereafter the Agreement) for a hotel property bearing
the address No.E-147, Saket, New Delhi -110017 along with fixtures,
fittings and other movable assets (hereafter the scheduled property). The
scheduled property comprised of 15 (fifteen) fully furnished guest rooms
and 2 (two) fully furnished guest suites, which included televisions, air
conditioners, heaters, geysers, ward robes and other fittings and fixtures.
The Agreement indicates that Trinity was carrying on the business of
running a hotel business under the name and style of 'TRINITY ART
HOTEL', from the premises in question, prior to licensing the scheduled
property to Redefine.
5. The term of the license was for a period of five years commencing
from the date of execution of the Agreement, that is, from 01.12.2019 to
01.12.2024. The parties had agreed that Redefine would pay license
fee/monthly compensation of ₹6,00,000/- (Rupees Six Lacs) per month for
occupying the scheduled property, in advance, on or before 7th day of each
calendar month.
6. Redefine also furnished the interest free security deposit of
₹24,00,000/-, which was required to be refunded to Redefine at the time of
vacation of the scheduled property in accordance with the terms of the
Agreement. Nation-wide lock down was imposed on 25.03.2020 on account
of outbreak of COVID-19 pandemic. Admittedly, the parties negotiated the
settlement whereby, Trinity agreed to reduce the license fee for a certain
period and to not dispute that Redefine paid the reduced licence fee for the
given period.
7. Redefine sent the termination notice dated 06.02.2021 terminating the
Agreement with effect from 28.02.2021 and offered to hand over the
possession of the scheduled property. Redefine also called upon Trinity to
refund interest free security deposit of ₹24,00,000/-.
8. Trinity responded to the said legal notice by a letter dated 10.02.2021
and claimed that the termination notice was contrary to the express terms of
the Agreement and, thus, was illegal and arbitrary. Trinity referred to
Clause 6.4 of the Agreement, which stipulated that in case the Agreement
was terminated prior to the expiry of the lock-in period of eighteen months,
Redefine would pay the license fee/monthly compensation for the remaining
lock-in period along with any encumbrances.
9. Since the Agreement was terminated within the said lock-in period,
Trinity demanded license fee/monthly compensation for the remaining
period of 108 days along with other sums.
10. Redefine handed over the possession of the scheduled property to
Trinity on 28.02.2021. The possession was accepted by Trinity on
01.03.2021. This was acknowledged by Trinity in its undated letter (Ex. P5)
whereby Trinity also claimed that a sum of ₹34,51,482/- was due on the
termination of the Agreement. Trinity also annexed a tabular statement
setting out the details of said claimed sum. It claimed that after adjusting
the security deposit of ₹24,00,000/- from the aforesaid sum, a sum of
₹10,51,482/- was due and payable by Redefine.
11. Since the dispute between the parties remained unresolved, Redefine
instituted CS(COMM) No.3/2022 before the learned Commercial Court
claiming a sum of ₹22,13,618/- along with interest at the rate of 24% per
annum for the period of nine months till the date of filing of the suit which
was quantified at ₹3,98,451/- and further interest at the rate of 24% per
annum till the date of payment.
12. In its plaint, Redefine acknowledged the liability to pay a sum of
₹5,01,500/- for the month of January, 2021 and a sum of ₹5,90,000/- for the
month of February, 2021. It also acknowledged the liability to pay the
electricity charges of ₹97,482/- and water charges of ₹22,500/-, which were
additionally due and payable. It claimed that against the aforesaid amounts,
Redefine had paid a sum of ₹3,58,000/- and thus, acknowledged that a sum
of ₹8,53,482/- was due and payable. However, Redefine also claimed that
it was entitled to deduct a sum of ₹6,67,100/- on account of office furniture,
laptops, televisions and other appliances, which it claimed were not returned
to Redefine at the time of handing over the scheduled property. Redefine
claimed that after adjustment, a sum ₹1,86,382/- was payable by it to
Trinity. After adjusting, the said amount from the security deposit, Redefine
claimed that a sum of ₹22,13,618/- was recoverable from Trinity.
13. The suit and counter claim were clubbed and tried together.
14. Based on the rival contentions, the learned Commercial Court framed
the following issues: -
"1) Whether the plaintiff was entitled for premature
termination of the Leave and License Agreement dated
16.12.2019? (OPP)
2) Whether the defendant is entitled to the complete
payment of the license fee as agreed between the parties
for a lock-in period of Leave and License Agreement
dated 16.12.2019? (OPD)
3) Whether the defendant is entitled for any damages on
account of termination of the agreement by the plaintiff?
(OPD)
4) Whether the plaintiff is entitled for recovery of the suit
amount of Rs.26,12,069/- from the defendant, as prayed
for? (OPP)
5) Whether the parties are entitled for any interest? If so,
at what rate and for which period? (OPP)
6) Relief."
15. Both parties led their evidence. Mr. Rakesh Kumar, director of
Redefine filed his affidavit by way of evidence (Ex.PW-1/A). He was cross
examined by the learned counsel for Trinity. Mr. M.S. Juneja, partner of
Trinity filed his affidavit by way of evidence (Ex.DW1/A). The said
witness was also cross examined on behalf of Redefine.
16. The learned Commercial Court decided all the issues in favour of
Redefine and against Trinity, and also awarded the cost of litigation assessed
at ₹50,000/- in favour of Redefine.
17. The learned Commercial Court held that Section 32 of the Indian
Contract Act, 1872 was applicable as there was clear stipulation in the
Agreement regarding force majeure. The learned Commercial Court referred
to Clause 13 of the Agreement and concluded that the outbreak of COVID-
19 constituted a force majeure as referred to in the said Clause as such an
event was outside the control of the parties. Consequently, Redefine was
entitled for pre-mature termination of the Agreement.
18. The learned Commercial Court also rejected Trinity's claim for
payment of license fee charges from the months of March, 2021 to May,
2021. The learned Commercial Court held that mere entitlement to forfeit
the interest free security deposit was not enough and it was necessary for
Trinity to prove the losses and damages for the breach of the Agreement.
19. The learned Commercial Court also rejected Trinity's claim on the
ground that it was an unregistered partnership firm as deposed by DW-1 in
his cross examination. The learned Commercial Court did not accept
Trinity's claim that the scheduled property was let out to health care workers
from the nearby hospital during lock down period, as no such witnesses
from the hospital were ever examined.
20. The learned Commercial Court also noted that PW-1 had admitted
that it had not deposited TDS on the amount paid by him to Trinity after
March, 2020, therefore, Trinity would be at liberty to deduct the amount of
TDS from the amount of ₹22,13,618/-.
REASONS AND CONCLUSIONS
21. At the outset, it is material to note that there is no real dispute as to
the documentary evidence produced by the parties. There is no dispute that
the parties had entered into a Leave and License Agreement. In terms of the
Agreement, the possession of the scheduled property was handed over to
Redefine for monthly license fee/compensation of ₹6,00,000/-. The recitals
of the Agreement also indicate that a hotel under the name and style of
TRINITY ART HOTEL was being operated from the premises in question.
The scheduled property also included plant and machinery, including lifts,
generator sets, air conditioners, furniture and fixtures etc. Admittedly, the
scheduled property comprised of fifteen rooms and two guest suites which
were equipped and fully furnished.
22. In terms of the Agreement, Redefine was obliged to pay ₹6,00,000/-
per month, as a license fee/compensation for use and occupation of the
scheduled property. There is no dispute that Trinity had agreed to reduce
the licence fee payable in the wake of the COVID-19 pandemic. There is
also no serious dispute that Redefine had agreed to pay the reduced amount
till December, 2020.
23. In its plaint, Redefine had admitted its liability to pay the invoices for
the months of January, 2021 and February, 2021 (₹5,01,500/- for the month
of January, 2021 and ₹5,90,000/- for the month of February, 2021). The
invoices for the said amounts were produced by Redefine (Ex.P-2) and the
same were admitted.
24. In addition, Redefine also admitted its liability for a sum of ₹97,482/-
as electricity charges and a sum of ₹22,500/- as water charges. Thus,
Redefine accepted that it was liable to pay a sum of ₹8,53,482/- till the date
of handing over the possession of the scheduled property on 28.02.2021.
There is also no dispute that against the aforesaid admitted amount,
Redefine had paid an amount of ₹3,58,000/- on 15.01.2021 as stated in its
plaint. Thus, Redefine acknowledged in its plaint that a sum of ₹8,53,482/-
was payable to Trinity as on 28.02.2021. As noted above, Redefine claimed
that it was entitled to adjust the sum of ₹6,67,100/- from the said sum on
account of furniture, laptops, television and other appliances belonging to it
which were lying in the premises. However, there is no averment in the
plaint that Redefine was prevented or in any manner obstructed from
removing any of its assets or belongings from the premises in question.
25. The only averment made in the plaint in regard to the claim of
adjustment of ₹6,67,100/- is set out in Paragraph 10 of the plaint. The same
is reproduced as under: -
"10. That the plaintiff had clear the all the dues up
to the month of December 2020 and also made a
payment of Rs.3,58,000/ on 15.01.2021 against
the demand of Rs.50,1500/- for the month of
January 2021 and for the month of Feb 2021, the
defendant had raised a demand of Rs.5,90,000/-
but the plaintiff had handed over the possession to
defendant on 28.02.2021. Further the Electricity
charges of Rs. 97482/- and water charges of
Rs.22500/- were additional dues and whereas
plaintiff's office furniture, laptops, T.V. & other
appliances of about Rs.6,67,100/- were not
returned to plaintiff at the time of handover and
the same are still lying within the suit property. It
is also pertinent to mention here that the plaintiff
had spent an amount of Rs.10,00,000/- on
Kitchenware and office renovation which are
permanent fixtures on the suit property."
26. It is clear from the above that there is no allegation that Trinity had
usurped the said assets or prevented Redefine from removing the same.
There is also no explanation as to why said assets (furniture, laptops,
television and other appliances) were not removed by Redefine before
handing over the scheduled property to Trinity.
27. It is also relevant to refer to Clause 6.2 of the Agreement, which is set
out below:-
"6.2 The Licensee shall use and keep the
Scheduled Property in good condition at their own
cost during the subsistence of this agreement and
shall deliver back the same in good condition, as
it was at the time of their occupation, to the
Licensors on the determination or earlier
termination of the permission to use the Scheduled
Property, as granted through this agreement."
28. In terms of the said Clause, Redefine was obliged to return the
scheduled property in a good condition (as it was during its occupation), at
the time of determination or earlier termination of the Agreement. Thus,
Redefine was obliged to remove all its belongings prior to handing over the
scheduled property to Trinity.
29. It is admitted that Redefine had not issued any letter of
communication calling upon Trinity to hand over the assets, which it
claimed were lying at the premises in question. This was expressly admitted
by DW-1 in his cross examination in response to Question no.14. It is also
material to note that neither the letter of handing over possession (Ex.P-4)
issued by Redefine nor the letter issued by Trinity acknowledging handing
over of the possession of the scheduled property (Ex.P-5 Colly) contained
any reference to the assets of Redefine. In addition, there is no material on
record to indicate the details of such assets or to establish their valuation.
30. In the aforesaid circumstances, we are unable to accept that Redefine
had established that it was entitled to recover a sum of ₹6,67,100/- from
Trinity. First of all, Redefine had failed to establish that it owned the assets
as described or that the same were in existence at the material time. There
are no details as to the said assets. Redefine has also not produced any
evidence of purchase of the said assets. Second, Redefine has failed to
establish that any such assets were left in the premises. Third, there is no
averment that Trinity had obstructed the removal of the said assets. It is
merely averred that Trinity had not returned the said assets. But there is no
evidence that Trinity had taken over possession of the same or borrowed it at
any point of time.
31. The learned Commercial Court gravely erred in proceeding that
Redefine had proved its claim to the said extent.
32. In view of the above, Redefine had clearly admitted its liability to pay
₹8,53,482/- till handing over the possession of the scheduled property on
28.02.2021. The same is also not in dispute.
33. Thus, the principal dispute is regarding the counter claim filed by
Trinity. The averments regarding its claim of a sum of ₹34,51,482/- is
sketchy and the counter claim does not specifically mention the details of
such amount. However, the break up of the said amount is reflected in the
letter acknowledging the acceptance of the possession of the scheduled
property pursuant to the termination notice (Ex.PW-5 Colly). Trinity had
demanded a sum of ₹34,51,482/- in the said letter and a statement setting out
the breakup of said amount is annexed in the said letter. The tabular
statement as set out in the annexure to the said letter is set out as under:-
"No. Description Amount
1 Bill for License Charges for the Month of ₹5,01,500.00
January 2021
2 Bill for License Charges for the Month of ₹5,90,000.00
February 2021
3 Penalty for Early Exit for Month of March, ₹21,24,000.00
April and May 2021
4 Repair/Service Charges to Generator ₹35,000.00
5 Repair/Service Charges to Passenger Lift ₹31,700.00
6 BSES Bill Pending as on 28th February ₹97,482.00
7 Water Bill Pending for Feb 2021@22500 ₹22,500.00
pm
8 Repairs to the Rooms (Lump Sum) ₹1,00,000.00
9 Repairs to the Reception & Steps (Lump ₹2,00,000.00
Sum)
10 Income Tax Deducted but not deposited ₹1,47,300.00
Less Payment Received 15th January 2021 ₹3,98,000.00
₹34,51,482.00"
34. As noted above, there is no dispute that Redefine had acknowledged
the liability in regard to the bill for the months of January and February
2021(amount mentioned at serial nos. 1 & 2 of the tabular statement).
Redefine also acknowledges its liability to pay the electricity charges of
₹97,482/- and water charges of ₹22,500/- (amount mentioned at serial
numbers 6 & 7 of the tabular statement).
35. As is apparent from the above, Trinity also claimed an amount of
₹35,000/- for repair and service charges for generator set; ₹31,700/- for
repair and service charges for passenger lift; ₹1,00,000/- for repairs of rooms
(Lump Sum); and ₹2,00,000/- for repair of reception and steps. These claims
are set out at serial numbers 4,5,8 & 9 of the tabular statement.
36. Trinity has not produced any credible evidence to establish its claim
in regards to such repairs/service charges. It is also material to note that the
said statement was annexed to the letter accepting taking over of the
possession of the scheduled property. Therefore, it is unlikely that at the
material time, any such expenditures were incurred. In absence of any
evidence produced by Trinity regarding incurring any expenditure on
repairs, Trinity's claim for the same is required to be rejected.
37. In so far as Trinity's claim for TDS is concerned, PW-1 admitted that
the same was not deposited after March, 2020. The learned Commercial
Court also decreed that Trinity would be entitled to deduct the said amount
from any sum payable to Redefine. Since, there is no dispute that Redefine
had not deposited the TDS, which it had deducted, it is necessary for
Redefine to account for the same. Trinity's claim in this regard is required
to be accepted. Since, we find that there is no dispute as to the quantum of
the TDS, we accept that Trinity would be entitled to a sum of ₹1,47,300/- as
claimed by it on account of income tax deducted at source, but not deposited
by Redefine.
38. The only contentious issue that requires to be addressed is, whether
Trinity's claim for monthly charges/compensation for the months from
March, 2021 to May, 2021 is established.
39. The Agreement expressly provided that the same was not
determinable at the instance of either parties during the lock-in period, save
and except as provided for in the Agreement.
40. Clause 6.4 of the Agreement also specifically provided that if
Redefine vacated the scheduled property prior to the expiry of the lock-in
period, it would be liable to pay compensation for the entire remaining
period of the lock-in period, along with agreed increments. Clause 6.4 of the
Agreement is set out below:
"6.4 The Licensee covenants that in such
circumstances wherein the Licensee vacates the
Scheduled Property/hand-over the occupation of
the Scheduled Property in favour of the Licensor,
prior to the expiry of the Lock-in period, it shall
be liable to make complete payment of Licence
Fee/ Monthly Compensation for the entire
remaining period of the "Lock-in Period"
alongwith agreed increments thereto in favour of
the Licensor."
41. Thus, in terms of the Clause 6.4 of the Agreement, Redefine is
obliged to pay a monthly license fee/compensation for the period from
March, 2021 to May, 2021.
42. The learned Commercial Court rejected the claim made by Trinity
essentially on three grounds. First, it held that Redefine was entitled to
terminate the Agreement on account of a force majeure event. Second, that
Trinity could not maintain the claim because it was an unregistered firm.
And third, that Trinity had not established any loss or damages.
43. We find that none of the three reasons are sustainable. Redefine
claimed that the Agreement was terminated on account of force majeure and
relied upon Clause 13 of the Agreement in support of its contention. Clause
13 of the Agreement is set out below: -
"13. FORCE MAJEURE/ACT OF GOD
13.1 "Force Majeure" shall mean any such event
beyond the control of the affected party, which
could not be anticipated upon formation of the
contract, and the effects of which are compelling
and unforeseeable. A Force Majeure event may
make it temporarily or permanently impossible to
perform all or any part of a party's obligations.
13.2 If at any time during the term of the Leave &
License agreement, the Scheduled Property is
damaged or destroyed on account of war, riots,
fire, earthquake or any other eventuality/act of
god or for any reason whatsoever, so as to render
the Scheduled Property (or part thereof) unfit for
the use of the LICENSEE then, and in such event,
the Licensors shall not be responsible for any
Force Majeure or the situation beyond the control
of Licensor and in such case this agreement shall
be deemed to have come to an end. The parties
shall not be held liable for any breach of the terms
and conditions of this agreement when such
breach results from a Force Majeure event.
13.3 The party affected by a Force Majeure event
shall inform the other party as soon as it has
become aware of such event. The party shall
describe such event in detail and inform the other
party of any relevant element capable of allowing
its precise identification, and to determine its
effects as to performance of its contractual
obligations. The party invoking a Force Majeure
event shall then inform the other party in writing
of its delayed performance/inability to honour the
terms of this agreement due to the occurrence of
the Force Majeure within a reasonable period.
13.4 A party failing to fulfill its obligation to
inform in compliance with the procedure
described in the above paragraph may not invoke
a force Majeure exemption.
13.5 The obligations of the party invoking "Force
Majeure" shall be suspended as long as they
cannot be performed due to a "Force Majeure"
event. Nevertheless, such party shall, as far as it is
possible, remedy the situation with due diligence.
A "Force Majeure" event shall not give rise to any
legal right or claim for damages by the affected
party."
44. It is Redefine's case that it had invoked the aforementioned clause.
PW-1 was specifically cross examined on the question whether Redefine
had ever invoked the force majeure clause. The relevant questions put to
him and his responses are extracted below: -
"Q6. Did you ever invoke force majeure clause as
per the Leave and License Agreement?
I state that the Leave and License
Agreement was terminated on account of
force majeure.
Q7. How did you invoke the force majeure clause
under the Leave and License Agreement?
I had given the notice dated 6 February
2021 mentioning the fact of suffering the
huge loss during the lockdown period."
45. It is at once clear from the above that Redefine had not invoked the
force majeure clause (Clause 13) for avoiding the Agreement. In terms of
Clause 13.3 of the Agreement, Redefine was obliged to inform Trinity
immediately on becoming aware of any force majeure event which
prevented it from performing its obligation. In terms of Clause 13.5 of the
Agreement, the obligation of the party invoking the force majeure would be
suspended so as long as the same cannot be performed due to the force
majeure event. Thus, any force majeure did not absolve Redefine from
carrying on its obligation; it merely stood suspended so long as the same
could not be performed due to force majeure.
46. A plain reading of Clause 13.4 of the Agreement also indicates that a
party failing to inform the other party, would not be entitled to exemption on
account of force majeure.
47. In the present case, it is admitted that in view of the outbreak of
COVID-19 and the nationwide lock down, the parties entered into
negotiations and Trinity had agreed to reduce the license fee/monthly
compensation to enable Redefine to tide over the situation resulting from the
pandemic. Redefine's obligation to pay the license fee/monthly
compensation was partly waived on account of the outbreak of COVID-19.
In this view of the matter, even if it is accepted that COVID-19 could be
considered a force majeure, it would not absolve Redefine of its obligation
to pay the license fee, the same stood addressed.
48. The termination notice also clearly indicates that Redefine had
terminated the Agreement on account of a commercial difficulty faced by it
and not on the ground that it was impossible to perform its obligation. It is
necessary to refer to Paragraph numbers 3 and 4 of the termination notice
(Ex.A-5), which sets out the reasons for terminating the Agreement. The
same are set out as below: -
"3. That my client had suffered a huge loss during
the Lockdown due to non running/use of the
above said premises in question for period of 6
months and my client was also not received any
payments from the Fab Hotels since March 2020
and agreement with them was also terminated
with effect from 31.08.2020 and the my client is
in Arbitration proceedings with Fab Hotels also.
4. That my client is not in position to continue to
suffer huge loss and to make payment of the
license fee for the above mentioned property as
the same was not in use due to commercial
hardship faced by my client due to Corona
Epidemic and Lockdown, therefore in such
circumstances my client is left with no option but
to terminate the Lease and License Agreement
dated 16.12.2019 with effect from 28.02.2021."
49. It is apparent from the above that Redefine had terminated the
Agreement not on account of any impossibility to perform but because it did
not find it commercially expedient to continue operating the hotel.
50. The nationwide lock-down - which is the basis of the learned
Commercial Court's decision that it was impossible to perform the
Agreement on account of force majeure - was imposed by the Notification
No.40-3/2020-DM-1(A) issued by the Ministry of Home Affairs dated
24.03.2020. The relevant extract of the said Notification is set out below: -
"Whereas in exercise of the powers under section
6(2)(i) of the Disaster Management Act. 2005, the
National Disaster Management Authority
(NOMA). has Issued an Order no. 1-29/2020-PP
(Pt.II) dated 24.03.2020 (Copy enclosed) directing
the Ministries Departments of Government of
India, State/Union Territory Governments and
State/ Union Territory Authorities to take
effective measures so as to prevent the spread of
COVID-19 in the country, Whereas under
directions of the aforesaid Order of NOMA, and
in exercise of the powers, conferred under Section
10(2)(1) of the Disaster Management Act. The
undersigned, in his capacity as Chairperson,
National Executive Committee, hereby issues
guidelines, as per the Annexure, to Ministries
Departments Government of India, State/Union
Territory Governments and State/ Union Territory
Authorities with the directions for their strict
implementation. This Order shall remain in force,
in all parts of the country for a period of 21 days
with effect from 25.03.2020.
*** *** ***
7. Hospitality Services to remain suspended
Exceptions:
a. Hotels, homestays, lodges and motels,
which are accommodating tourists and persons
stranded due to lockdown, medical and
emergency staff, air and sea crew."
51. The aforesaid restrictions were significantly relaxed after 31.05.2020.
However, even during the initial period of the lock down Redefine was not
precluded from using the hotel although, for the limited purpose of
accommodating the tourists and persons stranded due to lockdown, medical
and emergency staff, air, and sea crew.
52. Undeniably, the outbreak of COVID-19 adversely affected businesses
including the hospitality business. However, we are unable to accept that the
same rendered it impossible for Redefine to perform its obligation.
Redefine's obligations were not contingent upon how its hotel business
performed. The outbreak of COVID-19 did not render it impossible for
Redefine to perform its payment obligation.
53. In any view of the matter, the aforesaid issue is not of much relevance
because Redefine continued to occupy the premises till February, 2021.
Even if it is assumed that the force majeure event had rendered the
scheduled property inaccessible for a brief period of time; the same had
abated and there was no obstruction or impediment for Redefine to continue
its business of operating the hotel from the scheduled property in February
2021.
54. A plain reading of the termination notice indicates that Redefine had
terminated the Agreement on account of alleged loss suffered and thus, had
taken a commercial decision not to carry on business from the scheduled
property. The termination is contrary to the terms of the Agreement and it
cannot be justified on account of the outbreak of COVID-19.
55. The learned Commercial Court erred in concluding that Redefine was
entitled to terminate the Agreement on account of the Pandemic.
56. The next aspect to be examined is whether Trinity is entitled to claim
the license fee/monthly compensation for the remaining period as claimed.
There is no ambiguity in the terms of the Agreement and the parties had
specifically agreed that in the event Redefine vacates the occupation of the
scheduled property within the initial period of eighteen months, it would pay
the license fee/monthly compensation for the remaining period.
57. Trinity had also established that the scheduled property was not let
out till 01.04.2022. DW-1 has testified that the scheduled property was let
out to ASKJ Hospitality from 01.04.2022 onwards. He denied the
suggestion that the scheduled property was leased prior to April, 2022.
58. In the given circumstances, we are unable to accept that Redefine has
no obligation to pay the license fee/monthly compensation for the remaining
three months. Even if it is accepted that notwithstanding any express
stipulation in the Agreement, only reasonable damages could be awarded for
wrongful termination of the Agreement; the period of three months to locate
another tenant, cannot be considered as unreasonable. Further, it is
established from the testimony of DW-1 that the scheduled property was not
been leased or licensed till 01.04.2022.
59. Third question to be examined is whether Trinity's claim could be
rejected on the ground that it is an unregistered firm. First, no such objection
has been taken in the reply to the counter claim filed by Redefine. No issue
in this regard was struck. In the present appeal Trinity has asserted that it is
a registered firm. Trinity has also produced the acknowledgment of
Registration of Firm and has placed the same on record. Redefine has not
disputed the same. Even during the course of the arguments, the learned
counsel for Redefine did not advance any submission to question the status
of Trinity as a registered firm. In this view, Trinity's counter claim could
not have been rejected on this ground.
60. In view of the above, the impugned judgment passed by the learned
Commercial Court is set aside. We hold that Trinity is entitled to a sum of
₹18,00,000/- as license fee/monthly compensation for the months of March
to May, 2021. In addition, Trinity is also entitled for the sum of ₹1,47,300/-
admittedly deducted by Redefine and not deposited with the Income Tax
Authorities as well as the sum of ₹8,53,482/- admittedly payable by
Redefine for the period prior to 28.02.2021. Trinity would also be entitled
to adjust the aforesaid amounts from the interest free security deposit of
₹24,00,000/-. After the adjustment of the aforesaid amount, Redefine is
liable to pay an amount of ₹4,00,782/- to Trinity. Trinity is also entitled to
interest at the rate of 12% per annum from the date of filing of the counter
claim [CS(COMM) No.424/2022], till the date of payment.
61. The parties shall bear their own costs.
62. A decree sheet be drawn.
63. The amounts deposited by Trinity in the Registry of this Court, if any,
are directed to be remitted to Trinity along with accrued interest, if any.
64. The appeal is allowed in the above terms.
65. Pending application(s) also stand disposed of.
VIBHU BAKHRU, J
TARA VITASTA GANJU, J
JULY 29, 2024
M
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