“Whether the claimants are entitled to any damages? If so, for what period and to what amount.”
On account of the appellants’ nonpayment of commission and failure to handover the vacant possession of the premises to the respondents, the respondents filed Suit NO.3708A/1991 before the Delhi High Court under Section 20 of the Arbitration Act, 1940 (for short, ‘the Act’). Vide Order dated 18.09.1995, the High Court appointed the Arbitrator to adjudicate upon the dispute between the parties. 5. During the pendency of the arbitration proceedings, the business was restarted from November 1995 and continued in operation till March 2000 when possession of the same was handed over by the appellants to the respondents.
1
NONREPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 8980 OF 2017
M/S ARUN KUMAR KAMAL KUMAR & ORS. … APPELLANT(S)
VERSUS
M/S SELECTED MARBLE HOME & ORS. … RESPONDENT(S)
J U D G M E N T
S. ABDUL NAZEER, J.
1. In this appeal, the appellants have questioned the legality and
correctness of the final judgment and order dated 11.02.2010
passed by the High Court of Delhi in FAO(OS)No.450/2009 whereby
the Division Bench of the High Court dismissed the appeal filed
against the judgment of the Learned Single Judge of the High Court
dated 24.07.2009 passed in C.S.(OS)NO(s).647A/1998 and 715
A/1998 whereby the Learned Single Judge had rejected the
2
objections of the appellants and made the Award dated 16.03.1998
the rule of the court. However, vide the impugned judgment the
Division Bench reduced the rate of interest from 16% per annum to
9% per annum as applicable to future interest i.e. from the date of
the Award, 16.03.1998, till the date of the judgment. This reduction
was made subject to the appellants paying the complete decretal
amount to the respondents on or before 30.06.2010, failing which
the Award along with interest would stand as it is.
2. The appellants are in the business of running of
restaurants/eateries and manufacture & sale of sweets and other
food items. The appellants are running their business under the
brand name “Nathu’s Sweets”. In the year 1990, the appellants
entered into two separate licence agreements with the respondents
whereunder it was agreed that the appellants will operate and run a
restaurant cum sweets shop at the respondents’ premises and
make payment to the respondents on commission basis. The first
licence agreement dated 27.08.1990 was executed between
appellant no. 1M/s. Arun Kumar Kamal Kumar through appellant
no.2Arun Kumar Gupta and respondent no.1 M/s. Selected Marble
3
Home through respondent no.2Anil Kumar Jain and two other
partners of the said respondent no. 1 firm and the second
agreement of the same date was executed between appellant no. 1
M/s. Arun Kumar Kamal Kumar through appellant No.2Arun
Kumar Gupta and respondent no.3Bhim Sain Jain.
3. According to the appellants, the respondents started violating
the terms of the agreements after commencement of the business
and raised obstacles in the smooth running of the business. The
premises which were handed over to the appellants had only two
electricity connections – one meter of 1 KV and the other of 0.25 KV
respectively. Since the sanctioned capacity of the said connections
was less than required, the appellants allege that the respondents
had agreed to apply and obtain electricity connection with a
sanction to load of 2.5 KV. However, in order to harass the
appellants, the respondents did not make arrangements for
sufficient electricity supply. On the other hand, it was due to their
acts of omission and commission that the then Delhi Electricity
Supply Undertaking (DESU) disconnected electricity supply to the
entire building on 22.10.1990. The business could not be operated
4
and the same was stopped in February 1991. The shop thereafter
remained closed from March 1991 to October 1995.
4. On account of the appellants’ nonpayment of commission and
failure to handover the vacant possession of the premises to the
respondents, the respondents filed Suit NO.3708A/1991 before the
Delhi High Court under Section 20 of the Arbitration Act, 1940 (for
short, ‘the Act’). Vide Order dated 18.09.1995, the High Court
appointed the Arbitrator to adjudicate upon the dispute between
the parties.
5. During the pendency of the arbitration proceedings, the
business was restarted from November 1995 and continued in
operation till March 2000 when possession of the same was handed
over by the appellants to the respondents.
6. In the arbitration proceedings, learned Arbitrator framed as
many as 16 issues. The parties agreed to file their respective
affidavits which were read as examinationinchief, after which
crossexamination took place. After the conclusion of the
arguments of the appellants and during the arguments of the
5
respondents, learned Arbitrator framed an additional issue No.15A
which reads as under:
“Whether the claimants are entitled to any damages?
If so, for what period and to what amount.”
7. After the arguments were concluded, the respondents filed a
statement of account calculating the commission that became
payable to the appellants after restarting of the business, as
directed by learned Arbitrator. This statement was not objected to
by the respondents and was then taken by the Learned Arbitrator
as the basis for calculating damages for the period during which the
business was closed but the appellants had retained possession of
the respondents’ premises. It is the case of the appellants that in
this statement of accounts submitted before the Learned Arbitrator,
inadvertent errors had crept in. Firstly, the appellants argue that
the sales tax paid on the sales was inadvertently not deducted to
arrive at the commission payable. Secondly, the expenses incurred
on electricity and water bills were inadvertently deducted from the
sales instead of deducting the same from the amount of commission
payable to the respondents, as the same were their liability as per
6
Clause 14 in both of the Agreements entered into between the
parties. Learned Arbitrator published his award on 16.03.1998.
8. The appellants challenged the said award before the High
Court. The Learned Single Judge vide judgment and order dated
04.11.2004 rejected the objections and made the award of the
Arbitrator rule of the court. As noticed above, the Division Bench of
the High Court has confirmed the judgment of learned Single
Judge, apart from allowing a reduction in the rate of interest
applicable to postaward interest.
9. We have heard learned counsel for the parties. Appearing for
the appellants Mr. Rakesh K. Khanna, learned senior counsel, has
submitted that the appellants were not liable to pay any rent. He
argued that the parties had only agreed to pay commission on the
gross sales and that there was no clause in the Agreement which
contemplated payment of damages for the use and occupation of
the premises. Therefore, the Arbitrator was not justified in
declaring the Agreements as Licence Agreements and awarding
damages on the basis of commission paid prior to the closure of the
premises before March 1991 and the commission payable after re
7
starting of the business after 1995. He has further argued that
learned Single Judge erred in holding that the appellants were
liable to pay damages and further holding that even if the
appellants’ argument is accepted and they are deemed to be
tenants, even then would have been liable to pay rent even if the
shop remained closed and there were no sales. It was further
argued that the Agreements did not contain any clause for
damages. Therefore, the awarding of damages is not justified.
Secondly, it was argued that in the statement of accounts
submitted by the appellants, the errors had crept in inadvertently.
The salestax paid on the sales was not deducted to arrive at the
commission payable. Further, the expenses incurred on electricity
and water were deducted from the sales instead of deducting the
same from the commission of the respondents as the same was
their liability. Thus, it was argued that the courts below have failed
to consider this aspect. These were mathematical errors and
apparent on the face of the record. Had these corrections been
carried out, the compensation payable would have been
considerably lesser.
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10. Learned counsel for the respondents submits that there were
no mistakes in the statement of accounts and these contentions
have now been urged as an afterthought. The appellants have not
only themselves filed the statement with which they are bound but
have also deducted at source and paid taxes on the commission
shown to be due in the aforesaid statement. On the question of
damages, learned counsel submits that by taking into account the
plea of the appellants, learned Single Judge has concluded that
they are liable to pay damages for use and occupation of the
premises for the period during which the business was not running
and no commission payments were made. Thus, it was argued that
the findings of fact recorded by the courts below do not call for
interference in this appeal.
11. We have carefully considered the submissions of the learned
counsel made at the Bar and perused the materials placed on
record.
12. As per Clause 10 of both the Agreements, in case of any
dispute, it was incumbent on the appellants to handover vacant
possession of the premises to the respondents. On this issue, it is
9
clear that disputes had arisen between the parties. However, it is an
admitted position that possession of the premises was not handed
over to the respondents by the appellants until the arbitration
proceedings had commenced and has, in fact, only been handed
over on 13 March 2000. Therefore, the Arbitrator framed Issue No.
15A regarding damages payable to the respondents. The Learned
Arbitrator has rejected the plea of the appellants that they had to
close the business because of the obstructionist tactics adopted by
the respondents and for that reason the business activities
remained closed from April, 1991 to November, 1995. On a detailed
consideration of the materials on record, the Learned Arbitrator had
come to the conclusion that the appellants are liable to pay the
damages.
13. This question was again considered by the learned Single
Judge. The learned Single Judge noticed the plea of the appellants
that the transaction between the parties was of tenancy and not
licence. After dealing with this plea, the learned Single Judge
upheld the award of damages by the Learned Arbitrator. The
10
finding of the learned Single Judge in this regard is in paragraph 20
which reads as under:
“I find it has been the case of the respondents that
the transaction between the parties was of tenancy
and not of a licence. It is so pleaded in the objections
also. Even if the respondents consider themselves to
be tenants at the rent equivalent to commission @
11% per month, the respondents would under
Section 108 of the Transfer of Property Act have
continued to remain liable for payment of rent,
notwithstanding not carrying on business in the
premises. It has been held by the Division Bench of
this Court in State Bank of Patiala v.
Chandermohan – 1996 RLR 404 held that a tenant
continues to be liable for rent/damages even if the
premises are destroyed and the only option of the
tenant if desirous to stop the running of rent is to
surrender the premises. Thus as per the
respondents own understanding of the relationship
also, the respondents were liable for payment of rent.
“
14. We do not find any error in the said finding of the learned
Single Judge.
15. After finding the appellants liable to pay damages, the Learned
Arbitrator has arrived at the quantum of damages as per the
statement of accounts, furnished by the appellants based on their
audited accounts, that too after deduction of TDS for a period of
11
preclosure i.e. 15.08.1990 to 22.02.1991 and postclosure i.e.
November 1995 to November 1997. The payment of damages for
the closure period i.e. March 1991 to October 1995 has been
arrived at as an average of commission actually paid preclosure
and the commission payable postclosure as per the statement of
accounts of the appellants, after deducting TDS.
16. There is also no merit in the contention of the learned senior
counsel for the appellants that the appellants’ statement of
accounts erroneously deducted expenses incurred on electricity and
water from the sales instead of deducting the same from
commission of the respondents. The admitted position is that there
was no electricity supply and the appellants used generator set for
electricity. The contention of the appellants is that the expenses
incurred towards generator ought to have been deducted from the
gross commission payable and not from the gross sale amount and
then the commission should have been calculated at the
contractually stipulated rates of 6% and 5%. This plea has been
dealt with by learned Single Judge as under:
“The other mistake pointed out of deduction of
expenses on diesel generator set from sales rather
12
than from commission payable, even if made out,
also cannot be permitted to be withdrawn at this
stage especially when the respondents have already
deducted and paid taxes on the basis of said
statement. Under the agreement the electricity and
water charges of the premises were to be borne by
the petitioners. Admittedly, the premises/shop on
reopening were without electricity and diesel
generator set arranged. There is no dispute that the
expenses therefor were to be borne by the petitioners.
The respondents while furnishing the statement to
arbitrator, did direct the same. The objections now
that such deduction was wrongly done is not
tenable?”
This contention has been raised on the ground that the statement
filed by the appellants was not correct since the appellants were
only liable to pay commission at 6% and 5% under two agreements
on the gross sales and the responsibility to provide electricity was
on the respondents. We are of the view that the appellants cannot
be permitted to withdraw their own statement made before the
Learned Arbitrator which is predicated to on a mode of calculation,
the same not being disputed by the respondents and accepted by
the Arbitrator as correct. We are also of the view that the
appellants are not justified in raising a contrary plea other than
what was their defence and statement of counter claim in the
arbitral proceedings.
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17. We are also of the view that the Learned Arbitrator has rightly
relied on the appellants’ statement of accounts for awarding
commission for the period when the business was restarted postclosure between November 1995 and November 1997. The formula
adopted by the Learned Arbitrator for arriving at this commission
amount as well as the damages has been accepted by learned Single
Judge as also the Division Bench of the High Court.
18. In view of above, we do not find any merit in this appeal which
is accordingly dismissed. There shall be no order as to costs.
19. The Division Bench of the High Court while dismissing the
appeal has reduced the rate of interest from 16% per annum to 9%
per annum from the date of the Award till the date of its judgment,
subject to the appellants paying the decretal amount to the
respondents on or before 30.06.2010. We are inclined to give a
similar benefit to the appellants herein. Accordingly, the rate of
interest is reduced from 16% per annum to 9% per annum from the
date of the Award till this date, subject to the appellants paying the
complete decretal amount to the respondents on or before
14
31.12.2020 failing which the Award along with interest would stand
as it is.
…….……………………………J.
(N.V. RAMANA)
…….……………………………J.
(S. ABDUL NAZEER)
…….……………………………J.
(SURYA KANT)
New Delhi;
October 01, 2020
