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STORE ONE RETAIL INDIA LIMITED Versus ANNAPURNA INFRASTRUTURE PVT LTD

2016 (12) TMI 1675 - DELHI HIGH COURT

Payment of lease rent and fees for facility management - Held that: - In order to appreciate the contention that the notice dated 05.08.2008 issued by Store One was not vague, as held by the Arbitrator, it is necessary to refer to Clause 7.2 of the Lease Deed as well as to the notice issued by Store One - the complaint made by Store One was general in nature and did not specify any particular covenant of the Lease Deed that had been breached. The deficiencies pointed out also lacked the necessar .....

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.M.P. (COMM) 570/2016 - Dated:- 19-12-2016 - HON'BLE MR. JUSTICE VIBHU BAKHRU For the Petitioner : Mr Rajiv Nayar, Senior Advocate with Mr Sudhir Sharma, Mr Sanjeev Kumar Sharma, Mr Abhishek Swaroop, Mr Abhishek and Mr Ritesh Kumar, Advocates. & ORS. For the Respondent : Mr Manish Sharma, Ms Chandni Mehra, Mr Abhishek Agarwal, Advocate O R D E R VIBHU BAKHRU, J IA No.15671/2016 1. Allowed, subject to all just exceptions. CAV. No.1065/2016 2. The learned counsel for the respondent no.3/ca .....

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between the parties relate to the payment of lease rent and fees for facility management, in respect of the premises (hereafter 'the said premises'), which were taken on lease by Store One in a commercial complex known as Shop in Park (North) . The lease for the said premises was terminated by Store One prior to the expiry of the lock-in period and that had resulted in claims, inter alia, for rent/damages being made against Store One. 5. The Arbitrator considered the disputes and awarded .....

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rd in favour of M/s Pragya Products Pvt. Ltd. (hereafter Pragya ) for facility management services and electricity charges alongwith interest at the rate of 12% per annum. 6. Store One asserts that the impugned award is opposed to the Public Policy of India and, therefore, is liable to be set aside under Section 34(2)(b)(ii) of the Act; it, inter alia, claims that the Arbitrator has erred in holding that the termination of lease of the said premises was invalid and consequently awarding rentals .....

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gh, Delhi to be conducted by the Delhi Development Authority (DDA). Store One agreed that if Pragya was declared as a successful bidder, it would lease a covered area admeasuring approximately 70,000 square feet at a rent calculated at the rate of ₹ 55 per sq. ft. per month. 7.2 The said auction was conducted by the DDA on 26.03.2004; Pragya was declared as the successful bidder and a perpetual lease deed dated 08.10.2004 was executed in its favour. Thereafter, Pragya commenced constructio .....

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question. Thereafter, a lease deed (hereafter the Lease Deed ) was also executed between Pragya and Store One on 23.11.2005 whereby Store One agreed to lease approximately 52,000 square feet of space in the Shopping Mall Arcade, Shop in Park (North) - which at the relevant time was under construction -for an initial period of 10 years with an option for extension of two further terms of 10 years and five years respectively. 7.3 Store One also agreed to pay a sum of ₹ 1,43,00,000/- (One Cro .....

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e of the sale deeds, Annapurna and Paliwal became joint owners of the property in question including the said premises. Although, Annapurna and Paliwal became owners of the property in question, Pragya continued to be liable for providing facilities/services. 7.5 Store One claims that there were deficiencies in the services rendered and, therefore, Store One stopped the payment of Common Area Maintenance (CAM) charges from July, 2008. Thereafter, Store One issued a notice dated 05.08.2008 under .....

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se Deed, and terminating the lease for the said premises. 7.7 Thereafter, Store One also filed a petition (OMP No. 528/2008) under Section 9 of the Act before this Court. Annapurna and Paliwal filed applications (IA No.12982/2008 in OMP 528/2008) seeking impleadment in the Store One s petition under Section 9 of the Act. Subsequently, the said applications were withdrawn and Annapurna and Paliwal filed a suit (being CS (OS) 493/2009) in this Court for seeking recovery of the outstanding rent wit .....

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ection 11 of the Act (Arb.P.86/2012) for appointment of an Arbitrator. In those proceedings, this Court - with the consent of the parties - appointed Justice Dr Mukundakam Sharma (Retired) as a sole arbitrator to adjudicate the disputes between the parties. Whereas Annapurna and Paliwal filed a statement of claims, inter alia, claiming rent for the period from April, 2008 to September, 2012, Pragya filed a statement of claims, inter alia, claiming CAM charges from 08.08.2008 to 19.03.2012 from S .....

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itrator held that Annapurna and Paliwal were entitled to damages equivalent to rent for the unexpired period of the lock-in period but were also obligated to mitigate the damages by letting out the said premises; therefore, the Arbitrator limited the damages to rent equivalent to six months. 9. The operative part of the impugned award is set out below:- 10. CONCLUSIONS: 10.1 In the light of the discussion, analysis and conclusion abovestated, all the issues as framed stand answered. 10.2 Annapur .....

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t @ 12% per annum on the amounts, as calculated above, from the date of the Award till the date of realization. 10.3 Paliwal is entitled to the following amount from Store One: a. ₹ 2,67,52,283/- on account of rent from 01.04.2008 upto 22.03.2010 along with interest@ 12% per annum w.e.f. 23.03.2010 upto the date of the Award. Be it stated that the aforesaid sum is arrived at after deducting the security deposited by Store One and ordered to be paid back in terms of order contained herein. .....

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77; 28,08,000/- against Store One for Facility Management Services from 08.08.2008 upto 08.11.2008 along with interest @ 12% per annum w.e.f. 09.11.2008 upto the date of Award shall also be paid. c. Future interest @12% per annum on the amounts, as calculated above, from the date of the Award till the date of realization . Submissions 10. Mr Rajiv Nayar, learned senior counsel appearing for Store One advanced contentions to assail the impugned award on, broadly, three fronts. First, he contended .....

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invalid on the ground that the notice of termination had not been served on Annapurna and Paliwal, although they were owners of the property. He submitted that Paliwal and Annapurna were always aware of the notice of termination sent by Store One to Pragya and there was ample material on record to substantiate the same. He contended that this was also clear from the fact that Annapurna and Paliwal had sought impleadment in the petition filed by Store One under Section 9 of the Act (OMP 528/2008 .....

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One's contention that after issuance of the notice of termination, Annapurna and Paliwal were under an obligation to mitigate the loss by leasing out the premises to another tenant, the Arbitrator could not have assumed an arbitrary period for Annapurna and Paliwal to do so. Since Paliwal and Annapurna had not taken steps to mitigate their damages, they would not be entitled to claim the same from Store One. He also submitted that there was no reason to arbitrarily fix 22.03.2010 as the dat .....

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to terminate this LEASE DEED with a prior written notice of thirty (30) days on the occurrence of any of the following events: 7.2.1 The LESSEE is unable to run the operations of the STORE from the LEASED PREMISES due to LESSOR s default, act or omission to act. 7.2.2 Any material breach of representations, warranties and other obligations and covenants of the LESSOR, which are not rectified or remedied within a period of thirty (30) days of the receipt of the notice by the LESSEE to the LESSOR; .....

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y of the facilities and amenities so provided to the Demised Premises and Common Areas. However, no specific instance had been mentioned. Mr Nayar has referred to paragraph 5 of the said notice to contend that the specific deficiencies had been mentioned. Paragraph 5 of the said notice is set out below:- 5. As you may be aware that we have already planned for the coming season and will soon be commencing the stock takeover very shortly. We have already made our business plans for our customers. .....

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ral in nature and did not specify any particular covenant of the Lease Deed that had been breached. The deficiencies pointed out also lacked the necessary specifics. In view of the above, the Arbitrator s conclusion that the notice was vague and untenable cannot by any stretch be held to be perverse or patently illegal. The Arbitrator further held that the notice of termination dated 08.09.2008 was also untenable since the same had not been addressed to Annapurna and Paliwal. The Arbitrator had .....

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invalid, is also not amenable to judicial review under Section 34 of the Act since the same is neither patently illegal nor perverse. 18. The contention that Annapurna and Paliwal were always aware of the termination of the lease and therefore the termination of the Lease Deed ought to be held valid is also not sustainable. Indisputably, Annapurna and Paliwal had, to the knowledge of Store One, stepped into the lease of Pragya and were the lessors at the material time when the notice of terminat .....

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establish that any of the grounds as specified under Section 34 of the Act are met, the impugned award cannot be set aside. 20. Store One has sought to place its case within the scope of Section 34 (2) (b) (ii) of the Act, that is, the impugned award is opposed to the Public Policy of India. 21. It is relevant to observe that Explanation 1 to Section 34 (2) (b) (ii) of the Act further clarifies that an award would be in conflict with the Public Policy of India, only if, (i) the making of the awa .....

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ontravention with the fundamental policy of Indian Law. Clearly, the expression "Fundamental Policy of Indian Law" does not mean violation of any particular statute but the policy of law on which the edifice of Indian law is based. Thus unless the award is in contravention with any of the fundamental principles of Indian law, the impugned award cannot be held to be in conflict with the Public Policy of India. 22. It is also relevant to mention that by introduction of Explanation 2 to S .....

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