M/S Arun Kumar Kamal Kumar . vs M/S Selected Marble Home .

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)

JUDGMENT

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 Signature Not Verified Digitally signed by

dated 24.07.2009 passed in C.S.(OS)NO(s).647­A/1998 and 715­ GEETA AHUJA Date: 2020.10.01 15:17:07 IST Reason:

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.

8

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.

13 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 post­

closure 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