46. On the basis of the pleadings, the Arbitral Tribunal framed
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6. Whether the Respondent is entitled for
eviction of the Claimant from the Leased
Premises?
7. Whether the Respondent proves that it is
entitled for payment of arrears towards rent/
occupation charges and maintenance amounts
along with corresponding GST from March 2021
till possession is handed over by the claimant to
the respondent?
8. Whether the Respondent proves that it is
entitled to payment of Rs.2,60,00,000/- (Rupees
Two Crore Sixty Lakhs only) towards one year's
rent along with corresponding GST of
Rs.46,80,000/- (Rupees Forty Six Lakh Eighty
Thousand only) in terms of Clauses 16.3A and
4.6 of the registered Lease deed dated
10.06.2020?
9. Whether the Respondent proves that it is
entitled to payment of damages for loss
occasioned on account of the Claimant's
continued possession and occupation of the
Leased Premises?
10. Whether the Respondent proves that it is
entitled to payment of Rs.19,13,623/- (Rupees
Nineteen Lakh Thirteen Thousand Six Hundred
Twenty Three only) as compensation towards
expenses incurred by the Respondent at the
behest of the Claimant?
11. Whether there should be any order for
interest and if so, what is the rate of interest to be
awarded, on which amount and for what period
and from whom it is recoverable?
12. Whether there should be any order for costs
and if so, what is the quantum of costs to be
awarded and from whom it is recoverable?
13. To what reliefs and award the parties are
entitled for?"
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47. The lessee examined Sri. Talib Hassan Darvesh, Financial
Advisor of the lessee and tendered his additional affidavit in
examination-in-chief. The lessor examined Sri. P.S. Kiran Kumar
as its witness. Both the witnesses produced documents and were
also cross-examined. The Arbitral Tribunal delivered the impugned
award on the basis of the pleadings, the material and the evidence
led by the parties.
48. As noted above, it was the lessee's case that the lessor had
failed to maintain the premises and, therefore, it was entitled to
withhold lease rentals. Consequently, the termination of the lease
on the ground that the lessee had failed to pay the lease rent, was
not sustainable.
49. The Arbitral Tribunal found that the termination of the Lease
Deed was in accordance with the terms as agreed. The Arbitral
Tribunal found that the lessor had terminated the lease and also
invited the lessee for discussion for settling all the disputes
amicably in terms of the dispute resolution term. Thus, the lessee's
contention that termination letter was merely an invitation for
settlement of disputes and could not be construed as termination of
the lease, was rejected. The Arbitral Tribunal noted that prior to
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the Termination Letter dated 30.07.2021, the lessor had issued a
notice calling upon the lessee to pay the lease rent.
50. The Arbitral Tribunal noted that the lessor's obligation for
maintenance was limited to the aspects mentioned in Appendix 3 to
the Lease Deed. Thus, the lessor could not be said to be in breach
of the Lease Deed on account of any failure to carry out any other
interior and exterior works. The Arbitral Tribunal observed the fact
that the lessor had carried out certain other works which did not
render the same as a part of its obligations under the Lease Deed.
51. The Arbitral Tribunal also found that the lessor had executed
almost all works, except
(a) changing of the colour of grill;
(b) deep cleaning and
(c) painting of the first floor and floor of the courtyard structure.
52. In view of the aforesaid findings, the Arbitral Tribunal
rejected the lessee's claim for damages. Additionally, the Arbitral
Tribunal found that the lessee had also failed to establish that it
had suffered the losses as claimed by it.
53. The Arbitral Tribunal also held that even if it is accepted that
certain maintenance works like sweeping of the floors, clearing of
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cob webs were pending, the same were only house keeping tasks
and the same would not entitle the lessee to claim damages as
claimed.
54. The Arbitral Tribunal also accepted the lessor's claim for
liquidated damages for Rs.2,60,00,000/- towards one year's rent as
stipulated in Clauses 16.3A and 4.6 of the Lease Deed.
55. The Arbitral Tribunal accepted the lessor's claim that it would
be entitled to claim rent for the period prior to termination of the
Lease Deed and occupation charges, that is till 30.10.2021 and
occupation charges from 01.11.2021 till the date of handing over of
possession.
56. The Arbitral Tribunal also accepted the lessor's claim for
interest and has awarded the interest at the rate of 18% per annum
on the amounts awarded. Additionally, the Arbitral Tribunal
examined the invoices produced by various legal firms engaged by
the lessor (aggregating to a sum of Rs.61,01,754/-) and taking the
facts on account, quantified the costs at Rs.50 lakhs.
IMPUGNED ORDER
57. The lessee's application under Section 34 of the A&C Act to
set aside the impugned award was rejected in terms of the
- 25 -
impugned order. It was contended on behalf of the lessee before
the Commercial Court that the Tribunal failed to refer to certain
documents (correspondence between the parties) produced and
thus, the impugned award was vitiated by patent illegality. It was
also contended that the Arbitral Tribunal had not considered the
lessee's contention that the Lease Deed contained reciprocal
promises and, therefore, the lessee could not be faulted for
withholding the rents on account of failure on the part of the lessor
in performing its obligations.
58. The learned Commercial Court rejected the said contentions
and found that the issues revolved around performance of the
obligations of the Lease Deed and the Arbitral Tribunal had
evaluated and considered the same. The learned Commercial
Court also referred to various decisions delivered by the Supreme
Court including the decisions in Ssangyong Engineering and
Construction Co. Ltd. v. NHAI: 2019 15 SCC 131, Dyna
Technologies v. Crompton Greaves Ltd.: (2020) 1 SCALE 121,
Associate Builders v. DDA: (2015) 3 SCC 49 and NHAI v.
M.Hakeem and Another: (2021) 9 SCC 1 and rejected the
application with costs.
- 26 -
REASONS AND DISCUSSIONS
59. The learned counsel who appeared for the lessee (appellant)
advanced contentions as were advanced before the learned
Commercial Court. He contended that the impugned award was
vitiated by patent illegality on the ground that the Arbitral Tribunal
had not examined various documents relied on by the lessee. He
submitted that the Arbitral Tribunal has not considered the
communications exhibited as Ex.P27 and Ex.P28, as the same
were not mentioned in the impugned award. He contended that the
lessee had requested the lessor to accept the rent at the rate of
Rs.10 lakh per month. But, there was no response from the lessor.
He contended that the Arbitral Tribunal had ignored the
correspondences (Ex.R16 and Ex.R17) with regard to the request
for reduction of rentals.
60. It was also contended that the premises in question had
been rendered unsafe and, therefore, until extensive structural
repairs were carried out, the lessee could not be called upon to pay
any rents.
61. He referred to the decision of the Delhi High Court in
Natwarlal Shamaldas & Co. v. Minerals & Metals Trading
Corporation of India Ltd: MANU/DE/0572/2002 as well as the
- 27 -
decision of the Supreme Court in Sikkim Subba Associates v.
State of Sikkim: (2001) 5 SCC 629.
62. The law regarding scope of interference in Arbitral Tribunal
under the A&C Act is now well settled. There is no dispute that if
an award is rendered based on no material or evidence and at all,
the same would be liable to be set aside on the ground of patent
illegality. In Natwarlal Shamldas (supra), the Court had observed
as under:
"... The sufficiency of the evidence and its
appreciation is exclusively within the province of the
Arbitrator. However, judicial review would be
justified, and in fact imperative, where there is a total
absence of evidence. If an Award is passed in
respect of a claim for which no evidence is available,
and which is hotly contested, that would place the
Award in the category of being perverse. It would
also amount to judicial misconduct if the Arbitrator
nonetheless grants damages. The Court would,
therefore, intervene and set aside the Award."
63. In Sikkim Subba Associates (supra), the Supreme Court
referred to various earlier decisions and held that "the error
apparent on the face of the award contemplated under Section
16(1)(c) and Section 30(c) of the Arbitration Act, 1940 was an error
of law apparent on the face of an award and not an error of fact."
- 28 -
64. In the facts of that case, the Court found that the award was
vitiated on account of several errors of law and the Arbitrator had
acted arbitrarily and irrationally on a perverse understanding or
misreading of the materials and had misdirected himself on vital
issues before him. The Court observed that the award in the case
disclosed non-application of mind to the actual, relevant and vital
aspects and issues in the proper perspective.
65. We are unable to accept that the impugned award suffers
from any of the flaws as had persuaded the Supreme Court to set
aside the arbitral award in Sikkim Subba Associates (supra). A
plain reading of the impugned award indicates that the Arbitral
Tribunal had evaluated the material placed before it. The
contention that it was necessary for the Arbitrator to refer to each
and every document or correspondence that was placed by the
parties, failing which the arbitral award would be vulnerable to
challenge under Section 34 to the A&C Act, is without basis.
66. In terms of Sub-section (3) of Section 31 of the A&C Act, an
arbitral award is required to state the reasons upon which it is
based, unless the parties have agreed otherwise or that the award
is passed on agreed terms under Section 30 of the Act. There is
no cavil that the arbitral award is required to be informed by
- 29 -
reasons. However, the contention that it must necessarily refer to
each document placed before the Arbitral Tribunal separately, is
erroneous. Since the award is required to be informed by reasons,
it is necessary for the Arbitral Tribunal to appreciate and evaluate
the materials placed before it. The Arbitral Tribunal must address
the disputes after considering the materials placed by the parties.
However, it is not necessary that every correspondence or
document be specifically referred in the arbitral award.
Considering the contents and noting gravamen of documents
placed would suffice.
67. In the present case, it is the lessee's contention that Exs.P27
and P28 had not been considered. Ex.P27 is a letter sent by the
lessee in response to the Termination Notice dated 30.07.2021.
68. Ex.P27 is the lessee's response to the termination notice. A
plain reading of Ex.P27 indicates that the lessee had denied the
contents and the allegations made in the Termination Notice. The
lessee's response essentially set out its allegation that the lessor
had not performed its obligations of carrying out the maintenance
work as required. However, it is material to note that the lessee had
accepted that it had taken over possession of the demised
premises on 'as is where is' condition. Since at the material time,
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Navratan was occupying a part of the demised premises, the
lessee accepted the said occupation and had entered into a
separate agreement with Navratan as its sub-lessee.
69. A plain reading of the impugned award indicates that the
Arbitral Tribunal had extensively dealt with the lessee's contention
that the lessor had failed to perform its obligations to maintain the
building in question. The Arbitral Tribunal had also noted the
lessee's stand that it was not obliged to pay rent on account of
failure on the part of the lessor to maintain the building in question.
This is precisely, the lessee's contention in its reply to the
Termination Notice.
70. Ex.P28 is a letter sent on 18.10.2021 by another law firm on
behalf of the lessee, inter alia, referring to the letter dated
10.08.2021 (Ex.P27) and invoking the arbitration clause. A plain
reading of the said letter also clearly indicates the lessee's stand as
noted by the Arbitral Tribunal in the impugned award.
71. The first three issues struck by the Arbitral Tribunal were to
the effect
(i) whether termination of the Lease Deed was valid;
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(ii) whether the lessee had established that the lessor had failed to
maintain the building in question; and
(iii) whether the lessee had established that it was entitled to
withhold payment of rents and maintenance charges as required to
be paid under the Lease Deed from 19.04.2021 until the conclusion
of the arbitral proceedings.
72. The Arbitral Tribunal had examined the Lease Deed and had
referred to clause 11.20 of the Lease Deed which reads as under:
"11.20 The Lessee, upon paying the rent and
observing and performing the several covenants
and conditions on the Lessee's part herein
contained, the Lessee shall be entitled to peaceful
possession and enjoyment of the entire Demised
Premises and all easements, rights and
advantages appurtenant thereto, including the
common areas such as entrance, passageways,
elevators, stairways, etc., during the period of this
lease without interruption by the Lessor or any
person/s claiming under or in trust for them."
73. In the present case, admittedly, the lessee had failed to pay
the rent for the demised premises. The Arbitral Tribunal thus,
reasoned that the lessee was not entitled to continue the
possession of the demised premises. Article 16 of the Lease Deed
contained covenants regarding termination of the lease. Clause
16.3A of the Lease Deed expressly entitled the lessor to terminate
- 32 -
the lease on failure on the part of the lessee to pay lease rent and
CAM charges for any three consecutive months. The said clause
is set out below:
"16.3 Termination by the Lessor:
A. The Lessor shall be entitled to terminate this
Lease Deed by giving prior written notice to the
Lessee of at least 3 (three) months ("Lessor
Notice Period"), only in the following events: (a)
failure on the part of the Lessee to pay the Lease
Rent and CAM Charges, for any 3 (Three)
consecutive months along with 12% delayed
interest on Lease Rent (b) failure on the part of the
Lessee to pay the increase in the Security Deposit
within a period of 90 (ninety) days from the date of
expiry of each 5 (five) year period (as provided in
Clause 7 herein); and (c) any act or omissions by
the Lessee resulting in any concerned government
authority/ies issuing an order for closure of the
entire Building affecting the occupancy of other
tenants in the Building and only if the other tenants
of the Lessor are required to stop and/ or there is
interruption in the business operations of the other
tenants in the Building during the Term of this
Deed. In case, the Lessee does not make good the
delayed rent or delayed deposit or rectify any
breach or default within the said Lessor Notice
Period, the lease will be deemed terminated and
the Lessee shall be obliged to pay the Lease Rent
of 1 (One) year, at the existing rate of Lease Rent
(taking into account any escalation if the same
occurs at any point during the said period of 1
(one) year).
The Lessor acknowledges, understands and agrees
that the Lessor does not have the right to terminate
this Lease Deed during the Lease Term save and
except as envisaged in Clause 16.3 (A)."
- 33 -
74. Admittedly, the lessee had failed to pay the rent and CAM
charges and the Arbitral Tribunal accepted that this would entitle
the lessor to terminate the lease.
75. The Arbitral Tribunal also noted the obligation of the lessor to
maintain the said premises, which according to the lessee had
been breached.
76. Clause 12.1(A)(iii) of the Lease Deed which provides for
payment of CAM charges and the lessor's obligation to maintain
the building in question is set out below:
"The Common Area Maintenance (CAM) Charges
shall be calculated at Rs. 4.00 (Rupees Four Only) per
square feet per month and shall be payable on 28,750
Square Feet, for the areas to be leased on Ground,
First and Fourth Floors, excluding the terrace area of
1,200 Square Feet and the open area of about 400
Square Feet on the northern side of the Ground Floor
The CAM Charges are being paid for the common
area maintenance services ('Maintenance Services')
as detailed in Appendix 3 hereto. It is explicitly
agreed by the Lessor that no CAM Charges is payable
for the terrace area of 1,200 square feet and for the
open area of about 400 square feet on the northern
side of the Ground Floor. The CAM Charges shall be
increased at the rate of 15% (fifteen percent) every
three (3) years on the last paid CAM Charges."
- 34 -
77. As noted above, the maintenance charges which the lessor
was required to affirm in Appendix 3 to the Lease Deed is
reproduced below:
"APPENDIX 3
[Common area maintenance charges]
1. Building Security
2. Lift maintenance
3. Common water pump and tank maintenance
4. Common area electricity
5. Housekeeping of common areas"
78. The Arbitral Tribunal examined the material on record and
found that the lessor had maintained the premises. It is also
important to note that the Arbitral Tribunal found that even in terms
of clause 25.4, the parties were obliged to continue to perform their
respective obligations so long as the lessee continued to occupy
the demised premises. However, the lessee had failed to pay the
rents even after the commencement of the arbitral proceedings.
79. Additionally, the Arbitral Tribunal noted that the lessee had
also demanded certain works to be conducted which were beyond
the scope of the Lease Deed. However, the lessor had made it
clear that it would not conduct any interior repairs. The lessor's
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email dated 15.12.2020 (Ex.P5) was also confronted to PW1 and
he had admitted the receipt of the same.
80. The lessor had also produced photographs to show that it
had carried on several works, including all that it was not required
to do so in terms of the Lease Deed.
81. A plain reading of the impugned award indicates that the
Arbitral Tribunal had evaluated the materials placed by the parties
in support of their rival contentions. Clearly, the findings of the
Arbitral Tribunal to the effect that the lessor had performed its
obligations, are findings on questions of fact, which are based on
material placed on record. The same cannot be re-adjudicated in
the proceedings under Section 34 of the A&C Act.
82. The conclusion that the lessee was not entitled to withhold
rent as long as it continued in occupation of the demised premises,
is a matter that falls squarely within the jurisdiction of the Arbitral
Tribunal, and the said decision is final. The view expressed by the
Arbitral Tribunal is based on evaluation of material as well as
consideration of the agreement between the parties. We are unable
to accept that the same suffers from any patent illegality.
- 36 -
83. The learned counsel appearing for the lessee had also
contested the impugned award to the extent it related to awarding
costs and interest. The Arbitral Tribunal had awarded costs
quantified at Rs.50 lakhs. It is contented on behalf of the lessee
that the same is without any basis. However, we find the said
contention is also unmerited.
84. A plain reading of the arbitral award indicates that the lessor
had placed material on record to establish that it had incurred legal
costs for a total sum of Rs.61,01,754/-. The Arbitral Tribunal
considered the same but had restricted the amount to Rs.50 lakhs.
Paragraphs 118 and 119 of the impugned award clearly establish
that the costs are awarded after evaluating the material produced.
The relevant extract of the impugned award is set out below:
"118. The respondent has, apart from defending
itself in the various cases filed by the claimant
herein before the different fora and filing many
cases against the claimant for the enforcement of
the rights conferred on it under Ex.P1, incurred
sufficient legal and miscellaneous expenses. In
paragraph 128 of written notes the respondent's
counsel has mentioned that the legal firm engaged
by the respondent has raised as many as 11
invoices on various dates commencing from
03.07.2021 upto 22.08.2023 for a total sum of
Rs.61,01,754/-. Hence, this amount is sought to be
recovered from the claimant. Apart from this, the
respondent has furnished invoices raised by M/s.
Keystone Partners to an extent of
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Rs. 18,91,064/- towards professional charges
which is paid to M/s. Keystone Partners.
119. Taking into consideration, the above facts and
the various miscellaneous expenses incurred by
the respondent, awarding a sum of Rs.50 lakhs
(Rupees fifty lakhs) towards legal expenses and
miscellaneous expenses to be recoverable by the
respondent from the claimant would be reasonable
and therefore the same is awarded.
Accordingly Issue No.12 is answered in the
affirmative in part holding that the respondent
is entitled to recover a sum of Rs.50 lakhs
(Fifty lakhs) from the claimant towards Legal
and Miscellaneous expenses. The respondent
is entitled to recover amount paid towards
Arbitrator's fee, administrative and
Miscellaneous expenses paid to the Centre, as
its share."
85. We may also note that there is no cavil that the lessor had
produced the invoices (11 in number) to establish the costs
incurred, as noted by the Arbitral Tribunal. It is well settled that cost
follows events. Since, the lessee had failed in its defence and
claims, the Arbitral Tribunal's decision to award costs cannot be
faulted. As noticed above, the quantification of the costs is less
than the amount for which invoices were produced by the lessor.
Thus, the award cannot be faulted on the ground of the measure of
such costs as well.
- 38 -
86. The next question to be examined is the award of 18%
interest per annum from the date on which the occupation charges,
maintenance charges and GST became due, till realisation. The
said interest has been awarded on the rent and occupation charges
for the pre-reference period, pendente lite as well as post award.
87. The Arbitral Tribunal, noted that the parties had already
agreed to the rate of interest for the period prior to passing of the
impugned award. However, the Arbitral Tribunal considered it
apposite to award interest at a higher rate of 18%. In terms of
clause 4.7 of the Lease Deed, the parties had agreed that any
delay in paying lease rent would attract interest at the rate of 12%
per annum. Notwithstanding the same, the Arbitral Tribunal had
awarded interest at the rate of 18% per annum from the date on
which the amounts of lease rentals and CAM charges that were
withheld became payable till the date of realisation. The Arbitral
Tribunal had reasoned that if the premises had been handed over
in time, the lessor would reap the benefits of higher rentals, which
had been denied to the lessor.
88. The aforesaid reasoning runs contrary to the plain language
of clause 4.7 of the Lease Deed. The parties had expressly agreed
that delay in payment of lease rent after the due dates would attract
- 39 -
interest at the rate of 12% per annum until the outstanding lease
rent is paid. Clause 4.7 of the Lease Deed is set out below:
"4.7 The Lessee agrees that any delay in payment
of the Lease Rent after the due date will attract
12% (twelve percent) interest per annum from the
date it is due to be paid to the Lessor, until the date
the outstanding Lease Rent is paid."
89. Thus, insofar as the lease rents payable prior to the
termination of the lease is concerned, the lessee cannot be called
upon to pay interest at the rate exceeding the rate of interest
agreed by the parties.
90. We may also note the lessor's claim for interest [counter
claim No.5]. The relevant extract of the Statement of Defence and
counter claims relating to the aforesaid counter claim is set out
below:
"It is submitted that the Respondent was forced to
bear losses as a result of the Claimant's failure to
pay rents/occupation charges and maintenance
amounts from March 2021. The Respondent is a
Limited Liability Partnership constituted of 57
Designated Partners. Majority of the Respondent's
Designated Partners as well as other partners are
senior citizens who are wholly dependent on the
rental income received by the Partnership. On
account of the Claimant's delay in payment of
rents/occupation charges and maintenance
- 40 -
amounts since March 2021, the Respondent is
entitled to claim interest on such sums at simple
interest rate of 12% per annum from the date on
which these rents/occupation charges and
maintenance amounts fell due until actual payment,
in accordance with Clause 4.7 of the Lease Deed."
91. In view of the above, the impugned award insofar as it
awards interest in excess of 12% per annum, is patently erroneous
and cannot be sustained.
92. In view of the above, the impugned award to the extent that it
includes award of interest in excess of the interest computed at the
rate of 12% per annum in respect of the arrears of occupation
charges, maintenance charges and the corresponding GST in
terms of clause (i) (c) of the impugned award, is set aside.
93. We also note that there is an element of interest included in
the award for liquidated damages and the delay in payment thereof
[counter claim 4]. We clarify that since there is no agreement as to
payment of the interest on the said amount, the Arbitral Tribunal's
discretion to award interest on such delayed payment need not be
interfered with.
- 41 -
94. The appeal is disposed of in the aforesaid terms.
95. The pending interlocutory applications also stand disposed
of.
Sd/-
(VIBHU BAKHRU)
CHIEF JUSTICE
Sd/-
(C M JOSHI)
JUDGE
KS/AHB/SD
