JUDGMENT
R.C. Chopra, J.
1. This petition under Section 9 of the Arbitration
and Conciliation Act, 1996 (hereinafter referred to as
‘the Act” only) has been filed with a prayer to restrain
the respondent from giving or parting with the
possession of the ground floor portion at A-3, Green
Park, New Delhi, in which the restaurant “Red Snapper”
had been running to anyone else and further restraining
the respondent from entering into any
agreement/arrangement with anyone regarding the
management of the said restaurant/outlet.
2. The petitioner and the respondent herein had
entered into the agreements dated 1.10.2001 and
26.11.2001 under which the respondent’s restaurant/bar
called “red Snapper” at respondent’s “Sartaj Hotel” at
Green Park, New Delhi was handed over to the petitioner
for its management and administration for a total rental
of Rs. 2,25,000/- per month. The respondent which owns
the aforesaid Hotel was already running the said
restaurant/bar but vide the two agreements mentioned
above, the restaurant/bar along with its furniture,
fixtures and fittings, kitchen equipments, manpower,
airconditioners etc. was entrusted to the petitioner
for a period of three years w.e.f. 1.10.2001. The
contract could be extended by three months’ notice in
advance and with mutual agreement failing which it was
to be treated as expired automatically on the expiry of
its period. The agreement also provided that it could
be determined in case of defaults upon giving 10 days’
notice to take remedial measures. It contained an
Arbitration Clause also.
3. According to the petitioner, the respondent was
not at all caring for the airconditioning in the
restaurant and since March, 2002, disputes arose between
them on account of improper functioning of the
airconditioners. According to the petitioner, by June,
2002, the sales of the restaurant/bar dipped on account
of poor airconditioning and the customers stopped
coming. The petitioner approached the respondent to do
the needful but the respondent started creating all
sorts of troubles and interfering with the running of
the restaurant by the petitioner. According to the
petitioner, it suffered major losses but still was
hopeful that it could carry on the business and earn
profits, if it was given free hand. The petitioner
stated that under the pressure of the respondent, it had
been signing various documents which gave the respondent
an upper hand in the matter of disputes. Around 10th
July, 2002 the respondent assured it that the
airconditioning system would be repaired and thereafter
the petitioner could commence its work. The respondent
suggested that in view of massive repairs and
installation of airconditioners, the petitioner should
suspend its business for three weeks and accordingly,
the petitioner suspended its business. However, after
taking possession of the restaurant/bar under the
pretext of repairing the airconditioning system the
respondent entered into a business relationship with
“Barista Chain of Restaurants” and started carrying out
renovation of the restaurant as per the requirements of
the said Chain. The respondent also started creating
false evidence and raising arbitrary demands against the
petitioner. On 3.8.2002 when some of the petitioner’s
employees were inside the restaurant, the respondent and
its workers along with some others came and threatened
them to leave immediately.On 5.8.2002, a complaint was
filed at the Police Station. The petitioner alleged
that the respondent had illegally ousted he petitioner
from the restaurant/bar and as such, disputes had arisen
between them which were to be referred to the
Arbitrator. In these premises, the aforesaid interim
reliefs were prayed under Section 9 of the Act.
4. The case of the respondent, on the other hand, is
that the agreement with the petitioner stood terminated
as the petitioner was not managing the restaurant
properly and was not clearing its liabilities according
to the schedule. The details of the petitioner’s
liabilities were given in para 7 of the reply and it was
stated that if petitioner’s liabilities to third parties
were taken note of, the security deposit of the
petitioner was not sufficient to discharge all the
liabilities. It was also stated that the cheques being
issued by the petitioner were getting bounced and the
petitioner was unable to run the restaurant. According
to the respondent, it had taken over the management and
the control of the restaurant with the concurrence of
the petitioner and started issuing its own bills in
respect of the sales at the restaurant. In July, 2002,
it entered into an agreement with “Barista Chain of
Restaurants” and handed over the premises to them for
running a restaurant. The details of the hostilities
between the parties and of Police reports were given and
it was pleaded that the petitioner was not entitled to
insist that he had a right to run the restaurant. It
was denied that there was any dispute in regard to the
airconditioning or that the petitioner had handed over
the possession of the restaurant to carry out the
repairs in the airconditioners as alleged. it was
stated that the respondent was always in actual and
physical possession of the restaurant/bar and now even
third party interest had been created as possession had
already been given to “Barista Chain of Restaurants” and
large scale changes had been made. It was stated that
the petitioner had filed these proceedings only to
pressurise and harass the respondent and there were no
good grounds for grant of relief of specific performance
of the agreement and injunction as prayed. It was added
that the petitioner could be compensated in terms of
money if it was established that the agreement was
wrongfully terminated.
5. I have heard Mr. Rakesh Tikku, learned counsel for
the petitioner and Mr. H.L. Tikku, learned Senior counsel
for the respondent. I have gone through the records.
The first and foremost question to be considered
in the present case is as to whether there was a
relationship of landlord and tenant between the parties
as asserted by the petitioner. Learned counsel for the
petitioner has referred to the agreement dated 1.10.2001
and 26.11.2001 in which the word “Rent” was repeatedly
used. He has submitted that in view of the fixed amount
of rent payable by the petitioner to the respondent a
relationship of landlord and tenant had come into
existence between the parties and as such, the
respondent had no right to disposes the petitioner or
induct a third party in the premises during the
subsistence of the Lease which is to expire in the year
2004. It is submitted that whatever may be the terms
and conditions in the agreement between the parties, the
ground reality was that the possession of the
restaurant/bar was handed over to the petitioner by the
respondent and as such, the petitioner had become a
tenant therein and could not be dispossessed as had been
done in the present case.
6. On the other hand, learned counsel for the
respondent submits that a plan perusal of the agreement
reveals hat no relationship of landlord and tenant had
come into existence and no lease was created by the
respondent in favor of the petitioner. It is stated
that the agreement were only for the administration and
management of the respondent’s restaurant, which was
already functional, through which the petitioner was
given a license only for managing the same. it is
submitted that the exclusive possession and control of
the restaurant as well as bar premises always remained
with the respondent. He refers to Clauses 5, 6, 7, 8 & 9
of the Agreement dated 1.10.2001 and corresponding
Clauses in the Agreement dated 26.11.2001 to submit that
only the management and administration of the
restaurant, room service and kitchen was given tot he
petitioner and not only the staff of the respondent
continued to work there, the respondent kept full
control over the quality of the food prepared at the
restaurant by incorporating a Clause that the raw
material and liquor was to be supplied by the respondent
to the petitioner. According to the agreement, in case
the petitioner wanted to bring in any raw material, he
could do so subject to approval and confirmation of its
quality by the respondent. The amount of sales in the
restaurant, room service and food supplied in the bar
was to be credited to the account of the petitioner to
be settled periodically and even electricity charges for
the kitchen as well as restaurant were to be charged by
the respondent from the petitioner. He points out
Clause 15 also of the agreement according to which the
petitioner could not make even decorations and
alterations in the restaurant and kitchen without the
permission of the respondent. According to Clause 9 of
the Agreement dated 26.11.2001, the keys of the premises
were to remain with the respondent and it was
specifically mentioned that the actual possession of the
premises will remain with the respondents only.
According to learned counsel for the respondent, all
these Clauses clearly show that the possession of the
restaurant/bar always remained with the respondent and
the petitioner was there as a licensee only to run,
supervise and control the restaurant without acquiring
any lease hold interest in the premises.
7. There is a plethora of judgments underlining the
distinction between a lease and license. It has been
repeatedly held by the Courts that the words used in the
Agreements are not to be taken on their face value for
holding as to whether a particular agreement creates a
lease or a license. The Court has to see the intention
of the parties and for ascertaining this intention, the
terms and conditions contained in the Agreement, the
surrounding circumstance sand the conduct of the parties
has to be considered. However, exclusive possession of
the premises in the hands of a party is always crucial
for ascertaining as to whether a lease has been created
or not. The possession and control retained over the
premises by a party giving license to the other for the
use of the premises indicates that it is not a case of
lease and merely an Agreement of leave and license only.
Even in the case of exclusive possession, sometimes, the
Court may upon consideration of the terms and conditions
of a documents and conduct of the parties, may hold that
the parties never intended to create a lease and only
leave and license was granted. The Apex Court in “Delta
International Ltd. v. Shyam Sundar Ganeriwalla &
Anr.” has highlighted the
principles to distinguish between a lease and a license.
In “Rajbir Kaur and Anr. v. M/s. S.Chokesiri & Company”
also, it was held by the
Apex Court that lease involves grant of exclusive
possession by transfer of interest in the property for a
rent and mere grant of right to use the premises without
being entitle to the exclusive possession thereof
operates merely as a license. In “Capt. B.V.D’souza
v. Antonio Fausto Fernandes” , the Apex Court held in no uncertain terms that
the intention of the parties has to be ascertained by
looking to the substance of the document and the test of
exclusive possession is applicable. In “Associated
Hotels of India Ltd. v. R.N. Kapoor” , it was held that the following
propositions are well established for consideration as
to whether a lease or a license had been created:
(1) To ascertain whether a document creates a
license or lease, the substance of the
documents must be preferred to the form;
(2) the real test is the intention of the parties
whether they intended to create a lease or
a license;
(3) if the document creates an interest in the
property, it is a lease; but, if it only
permits another to make use of the property,
of which the legal possession continues with
the owner, it is a license.
(4) if under the document is party gets exclusive
possession of the property, ‘prima facie’, he
is considered to be a tenant; but
circumstances may be established which
negative the intention to create a lease.
8. A perusal of the agreements, conduct of the
parties and the facts and circumstances brought on
record clearly show that in the present case, the
respondent never intended to create a lease in respect
of the premises in question in favor of the petitioner
and only a license was granted to him for the management
and administration of the respondent’s restaurant “Red
Snapper”. The actual and physical possession of the
premises always remained with the respondent and overall
control and supervision of the restaurant was with the
respondent. The keys of the premises were always with
the respondent, the staff earlier employed by the
respondent continued to work in the restaurant although
salaries were being paid by the petitioner, the raw
material for use in the restaurant was being supplied by
the respondent and the petitioner could bring in raw
material only with the approval of the respondent. The
electricity matters and airconditioner remained under the
control of the respondent, the licenses were in the name
of the respondent and even the sales being made in the
restaurant were not directly going to the pocket of the
petitioner but were being credited to its account.
Therefore, the arrangement between the parties was in
regard to the management and administration of the
respondent’s restaurant by the petitioner and it does
not appear that the parties ever intended that the
premises should be handed over to the petitioner and it
should be allowed to deal with those in whatever manner
it wanted. Therefore, it was an agreement to run the
restaurant only and not at all a lease agreement. The
mere use of word “rent” in the agreement between the
parties is meaningless and does not establish that a
lease had been created in favor of the petitioner.
9. It is also to be noticed that Clause (xiii) on
page 8 of the agreement dated 26.11.2001 provided that
in case of breach of any terms and conditions of the
management agreement the respondent could cancel the
agreement or impose any penalty upon the petitioner if
within 10 days of the service of the notice remedial
measures were not taken by the petitioner. Such a
condition could never be a part of a lease agreement and
could be only in a leave and license agreement. This
Court, therefore, has no hesitation in holding that
there was no lease in respect of the premises in
question in favor of the petitioner and the petitioner
had not become a tenant in respect of the premises in
question. The agreement between them created only a
leave and license in favor of the petitioner for the
management and administration of the respondent’s
restaurant “Red Shapper” and even this agreement was
terminable in terms of the clauses contained therein if
the petitioner was found in violation of the terms
thereof. The respondent always remained in physical
possession of the premises in question and had full
control not only over the premises but upon the staff
and stuff also as catering was to not only the
restaurant and the bar but to the respondent’s rooms
also in the Hotel. The plea of the petitioner that a
tenancy had been created in favor of the petitioner
cannot be upheld.
10. Even otherwise, this Court is of the considered
view that the prayer of the petitioner to restrain the
respondent from entering into any agreement for running
a restaurant with anyone else cannot be sustained for
the reason that prima facie, it appears that before
filing of this petition the respondent had already
entered into an agreement to run this restaurant with
‘Barista Chain of Restaurants”, vide a business
conducting agreement dated 9.7.2001, a copy of which has
been placed on record. It appears that large scale
renovations and changes to suit the “Barista Chain of
Restaurants” have already taken place and the respondent
has already reached an advanced stage in the matter of
running the restaurant through “Barista Chain of
Restaurants” in its premises. As already observed
earlier, it does not appeal to reason that the
petitioner left the management and control of the
respondent’s restaurant so that the respondent may carry
out repairs in the airconditioning plant, without
obtaining something in writing from the respondent when
there were so many misgivings and misunderstandings
between the petitioner and the respondent. It prima
facie appears that in view of losses and its inability
to run the restaurant smoothly the petitioner opted out
of the business and thereafter respondent started
running the restaurant and then entered into the
aforesaid agreement with “Barista Chain of Restaurants”.
There are various documents on record to show that the
petitioner was in default of payments and its
contractual obligations and the respondent was issuing
letters and notices even to fit for taking remedial
measures. Such notices are dated 17.4.2002, 8.5.2002,
21.5.2002 and 20.6.2002. In view of Clause (Xiii) of
part “B” of the Agreement dated 26.11.2001, it can be
safely held that the contract between the petitioner and
the respondent was terminable in case the terms thereof
were not being complied with. After the notice dated
8.5.2002 wherein the respondent had pointed out to the
petitioner that it was in default of payment of advance
rent in terms of the agreement and was also in settling
its accounts by 5th of every month the respondent became
entitled to determine the contract with the petitioner.
The question as to whether the contract between the
parties was validly determined or not would be
determined by the Arbitrator only to be appointed in
terms of the agreement between the parties but this
Court on prima facie basis, holds that the contract
stood determined and as such, the petitioner is not
entitled to interim relief as prayed.
11. In a judgment of this High Court in “Rajasthan
Breweries Ltd. v. Stroh Brewery Company” a Division Bench of this Court
relying upon “Indian Oil Corporation Limited v.
Amritsar Gas Service” in no uncertain terms that in case of terminable
agreements Section 14(1) of the Specific Relief Act
comes into play and it has to be held that such
contracts cannot be specifically enforced. It was also
held that even in the absence of a specific clause
enabling either party to terminate an agreement a
private commercial transaction could be determined by
serving a reasonable notice. It was held that at the
most, in case it is ultimately found that the
termination was bad in law or contrary to the terms of
the agreement or of any understanding between the
parties or for any other reason, the remedy of the
aggrieved party would be to seek compensation for
wrongful termination but no claim could be made for
specific performance of the Agreement.
12. In M/s. Classic Motors Limited v. “M/s. Maruti
Udyog Limited” reported in 1997 (65) DLT P-166 also, a
learned Single Judge of this Court and observed that in
private commercial transactions, the parties could
terminate a contract even without assigning any reason
with a reasonable period of notice in terms of such a
clause in the agreement. The submission that there
could be no termination of agreement even in the realm
of private law was held to be fallacious.
13. The plea of the petitioner, therefore, that by
invoking its powers under Section 9 of the Act this
Court should restrain the respondent from giving
possession of the premises to anyone else and respondent
should be restrained from entering into any agreement or
arrangement with any other party in regard to the
running of the restaurant cannot be sustained firstly
for the reason that the contract between the parties was
terminable in nature and appears to have been terminated
and secondly the contract between the parties is of such
a nature which can not be specifically enforced for the
reason that the Court would never be in a position to
supervise and enforce the obedience of its orders.
Moreover, the petitioner can be adequately compensated
in terms of money in case it is held that the agreement
in its favor was not terminated or was illegally
determined. Clauses (a), (b), (c) and (d) of Section
14(1) of Specific Relief Act stand in the way of
petitioner and disentitle him to interim injunctions as
prayed.
14. The question as to whether a valid Arbitration
agreement between the parties is subsisting or not and
as to whether the petitioner had forfeited his right to
invoke Arbitration Clause 21 contained in the Agreement
on account of not referring the disputes to Arbitrator
within 45 days would be a subject matter of adjudication
by the Arbitrator only. This Court prima facie finds
that an Arbitration Agreement was there and as such, it
cannot be said that the petition under Section 9 of the
Act is not maintainable. It is clarified that all the
observations made herein are tentative and on prima
facie basis only with a view to decide the petitioner’s
application under Section 9 of the Act and the
Arbitrator shall be free to adjudicate the controversies
between the parties without referring to this order.
15. In view of the forgoing discussions, this Court
is of the considered view that the petitioner has failed
to make out a prima facie case for grant of ad interim
injunction as prayed. It is also held that the balance
of convenience is more in favor of the respondent and
the petitioner would not suffer any irreparable
loss/injury if the interim relief is not issued in its
favor in terms of its prayers. The petitioner can
always be compensated in terms of money if the breach of
contract between the parties is established.
16. Accordingly, the petition stands dismissed. The
ex-parte ad interim injunction dated 14.8.2002 stands
revoked.