{"id":84143,"date":"2002-11-26T00:00:00","date_gmt":"2002-11-25T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/vidya-securities-ltd-vs-comfort-living-hotels-pvt-ltd-on-26-november-2002"},"modified":"2015-07-07T20:57:46","modified_gmt":"2015-07-07T15:27:46","slug":"vidya-securities-ltd-vs-comfort-living-hotels-pvt-ltd-on-26-november-2002","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/vidya-securities-ltd-vs-comfort-living-hotels-pvt-ltd-on-26-november-2002","title":{"rendered":"Vidya Securities Ltd. vs Comfort Living Hotels Pvt. Ltd. on 26 November, 2002"},"content":{"rendered":"
Delhi High Court<\/div>\n
Vidya Securities Ltd. vs Comfort Living Hotels Pvt. Ltd. on 26 November, 2002<\/div>\n
Equivalent citations: AIR 2003 Delhi 214, 2003 (1) ARBLR 482 Delhi, 102 (2003) DLT 797, 2003 (67) DRJ 154<\/div>\n
Author: R Chopra<\/div>\n
Bench: R Chopra<\/div>\n<\/p>\n
<\/pre>\n
JUDGMENT<\/p>\n
  R.C. Chopra, J.   <\/p>\n
 1. This petition under Section 9 of the Arbitration
\nand Conciliation Act, 1996 (hereinafter referred to as
\n‘the Act” only) has been filed with a prayer to restrain
\nthe respondent from giving or parting with the
\npossession of the ground floor portion at A-3, Green
\nPark, New Delhi, in which the restaurant “Red Snapper”
\nhad been running to anyone else and further restraining
\nthe respondent from entering into any
\nagreement\/arrangement with anyone regarding the
\nmanagement of the said restaurant\/outlet.\n<\/p>\n
 2. The petitioner and the respondent herein had
\nentered into the agreements dated 1.10.2001 and
\n26.11.2001  under which the respondent’s restaurant\/bar
\ncalled “red Snapper” at respondent’s “Sartaj Hotel” at
\nGreen Park, New Delhi was handed over to the petitioner
\nfor its management and administration for a total rental
\nof Rs. 2,25,000\/- per month. The respondent which owns
\nthe aforesaid Hotel was already running the said
\nrestaurant\/bar but vide the two agreements mentioned
\nabove, the restaurant\/bar along with its furniture,
\nfixtures and fittings, kitchen equipments, manpower,
\nairconditioners etc. was entrusted to the petitioner
\nfor a period of three years w.e.f. 1.10.2001. The
\ncontract could be extended by three months’ notice in
\nadvance and with mutual agreement failing which it was
\nto be treated as expired automatically on the expiry of
\nits period. The agreement also provided that it could
\nbe determined in case of defaults upon giving 10 days’
\nnotice to take remedial measures. It contained an
\nArbitration Clause also.\n<\/p>\n
 3. According to the petitioner, the respondent was
\nnot at all caring for the airconditioning in the
\nrestaurant and since March, 2002, disputes arose between
\nthem on account of improper functioning of the
\nairconditioners. According to the petitioner, by June,
\n2002, the sales of the restaurant\/bar dipped on account
\nof poor airconditioning and the customers stopped
\ncoming. The petitioner approached the respondent to do
\nthe needful but the respondent started creating all
\nsorts of troubles and interfering with the running of
\nthe restaurant by the petitioner. According to the
\npetitioner, it suffered major losses but still was
\nhopeful that it could carry on the business and earn
\nprofits, if it was given free hand. The petitioner
\nstated that under the pressure of the respondent, it had
\nbeen signing various documents which gave the respondent
\nan upper hand in the matter of disputes. Around 10th
\nJuly, 2002 the respondent assured it that the
\nairconditioning system would be repaired and thereafter
\nthe petitioner could commence its work. The respondent
\nsuggested that in view of massive repairs and
\ninstallation of airconditioners, the petitioner should
\nsuspend its business for three weeks and accordingly,
\nthe petitioner suspended its business. However, after
\ntaking possession of the restaurant\/bar under the
\npretext of repairing the airconditioning system the
\nrespondent entered into a business relationship with
\n“Barista Chain of Restaurants” and started carrying out
\nrenovation of the restaurant as per the requirements of
\nthe said Chain. The respondent also started creating
\nfalse evidence and raising arbitrary demands against the
\npetitioner. On 3.8.2002 when some of the petitioner’s
\nemployees were inside the restaurant, the respondent and
\nits workers along with some others came and threatened
\nthem to leave immediately.On 5.8.2002, a complaint was
\nfiled at the Police Station. The petitioner alleged
\nthat the respondent had illegally ousted he petitioner
\nfrom the restaurant\/bar and as such, disputes had arisen
\nbetween them which were to be referred to the
\nArbitrator. In these premises, the aforesaid interim
\nreliefs were prayed under Section 9 of the Act.\n<\/p>\n
 4. The case of the respondent, on the other hand, is
\nthat the agreement with the petitioner stood terminated
\nas the petitioner was not managing the restaurant
\nproperly and was not clearing its liabilities according
\nto the schedule. The details of the petitioner’s
\nliabilities were given in para 7 of the reply and it was
\nstated that if petitioner’s liabilities to third parties
\nwere taken note of, the security deposit of the
\npetitioner was not sufficient to discharge all the
\nliabilities. It was also stated that the cheques being
\nissued by the petitioner were getting bounced and the
\npetitioner was unable to run the restaurant. According
\nto the respondent, it had taken over the management and
\nthe control of the restaurant with the concurrence of
\nthe petitioner and started issuing its own bills in
\nrespect of the sales at the restaurant. In July, 2002,
\nit entered into an agreement with “Barista Chain of
\nRestaurants” and handed over the premises to them for
\nrunning a restaurant. The details of the hostilities
\nbetween the parties and of Police reports were given and
\nit was pleaded that the petitioner was  not entitled to
\ninsist that he had a right to run the restaurant. It
\nwas denied that there was any dispute in regard to the
\nairconditioning or that the petitioner had handed over
\nthe possession of the restaurant to carry out the
\nrepairs in the airconditioners as alleged. it was
\nstated that the respondent was always in actual and
\nphysical possession of the restaurant\/bar and now even
\nthird party interest had been created as possession had
\nalready been given to “Barista Chain of Restaurants” and
\nlarge scale changes had been made. It was stated that
\nthe petitioner had filed these proceedings only to
\npressurise and harass the respondent and there were no
\ngood grounds for grant of relief of specific performance
\nof the agreement and injunction as prayed. It was added
\nthat the petitioner could be compensated in terms of
\nmoney if it was established that the agreement was
\nwrongfully terminated.\n<\/p>\n
 5. I have heard Mr. Rakesh Tikku, learned counsel for
\nthe petitioner and Mr. H.L. Tikku, learned Senior counsel
\nfor the respondent. I have gone through the records.\n<\/p>\n
 The first and foremost question to be considered
\nin the present case is as to whether there was a
\nrelationship of landlord and tenant between the parties
\nas asserted by the petitioner. Learned counsel for the
\npetitioner has referred to the agreement dated 1.10.2001
\nand 26.11.2001 in which the word “Rent” was repeatedly
\nused. He has submitted that in view of the fixed amount
\nof rent payable by the petitioner to the respondent a
\nrelationship of landlord and tenant had come into
\nexistence between the parties and as such, the
\nrespondent had no right to disposes the petitioner or
\ninduct a third party in the premises during the
\nsubsistence of the Lease which is to expire in the year
\n2004. It is submitted that whatever may be the terms
\nand conditions in the agreement between the parties, the
\nground reality was that the possession of the
\nrestaurant\/bar was handed over to the petitioner by the
\nrespondent and as such, the petitioner had become a
\ntenant therein and could not be dispossessed as had been
\ndone in the present case.\n<\/p>\n
 6. On the other hand, learned counsel for the
\nrespondent submits that a plan perusal of the agreement
\nreveals hat no relationship of landlord and tenant had
\ncome into existence and no lease was created by the
\nrespondent in favor of the petitioner. It is stated
\nthat the agreement were only for the administration and
\nmanagement of the respondent’s restaurant, which was
\nalready functional, through which the petitioner was
\ngiven a license only for managing the same. it is
\nsubmitted that the exclusive possession and control of
\nthe restaurant as well as bar premises always remained
\nwith the respondent. He refers to Clauses 5, 6, 7, 8 & 9
\nof the Agreement dated 1.10.2001 and corresponding
\nClauses in the Agreement dated 26.11.2001 to submit that
\nonly the management and administration of the
\nrestaurant, room service and kitchen was given tot he
\npetitioner and not only the staff of the respondent
\ncontinued to work there, the respondent kept full
\ncontrol over the quality of the food prepared at the
\nrestaurant by incorporating a Clause that the raw
\nmaterial and liquor was to be supplied by the respondent
\nto the petitioner. According to the agreement, in case
\nthe petitioner wanted to bring in any raw material, he
\ncould do so subject to approval and confirmation of its
\nquality by the respondent. The amount of sales in the
\nrestaurant, room service and food supplied in the bar
\nwas to be credited to the account of the petitioner to
\nbe settled periodically and even electricity charges for
\nthe kitchen as well as restaurant were to be charged by
\nthe respondent from the petitioner. He points out
\nClause 15 also of the agreement according to which the
\npetitioner could not make even decorations and
\nalterations in the restaurant and kitchen without the
\npermission of the respondent. According to Clause 9 of
\nthe Agreement dated 26.11.2001, the keys of the premises
\nwere to remain with the respondent and it was
\nspecifically mentioned that the actual possession of the
\npremises will remain with the respondents only.
\nAccording to learned counsel for the respondent, all
\nthese Clauses clearly show that the possession of the
\nrestaurant\/bar always remained with the respondent and
\nthe petitioner was there as a licensee only to run,
\nsupervise and control the restaurant without acquiring
\nany lease hold interest in the premises.\n<\/p>\n
 7. There is a plethora of judgments underlining the
\ndistinction between a lease and license. It has been
\nrepeatedly held by the Courts that the words used in the
\nAgreements are not to be taken on their face value for
\nholding as to whether a particular agreement creates a
\nlease or a license. The Court has to see the intention
\nof the parties and for ascertaining this intention, the
\nterms and conditions contained in the Agreement, the
\nsurrounding circumstance sand the conduct of the parties
\nhas to be considered. However, exclusive possession of
\nthe premises in the hands of a party is always crucial
\nfor ascertaining as to whether a lease has been created
\nor not. The possession and control retained over the
\npremises by a party giving license to the other for the
\nuse of the premises indicates that it is not a case of
\nlease and merely an Agreement of leave and license only.
\nEven in the case of exclusive possession, sometimes, the
\nCourt may upon consideration of the terms and conditions
\nof a documents and conduct of the parties, may hold that
\nthe parties never intended to create a lease and only
\nleave and license was granted. The Apex Court in “Delta
\nInternational Ltd. v. Shyam Sundar Ganeriwalla &
\nAnr.<\/a>”  has highlighted the
\nprinciples to distinguish between a lease and a license.
\nIn “Rajbir Kaur and Anr. v. M\/s. S.Chokesiri & Company<\/a>”
\n also, it was held by the
\nApex Court that lease involves grant of exclusive
\npossession by transfer of interest in the property for a
\nrent and mere grant of right to use the premises without
\nbeing entitle to the exclusive possession thereof
\noperates merely as a license. In “Capt. B.V.D’souza
\nv. Antonio Fausto Fernandes<\/a>” , the Apex Court held in no uncertain terms that
\nthe intention of the parties has to be ascertained by
\nlooking to the substance of the document and the test of
\nexclusive possession is applicable. In “Associated
\nHotels of India Ltd. v. R.N. Kapoor<\/a>” , it was held that the following
\npropositions are well established for consideration as
\nto whether a lease or a license had been created:\n<\/p>\n
 (1) To ascertain whether a document creates a
\nlicense or lease, the substance of the
\ndocuments must be preferred to the form;\n<\/p>\n
 (2) the real test is the intention of the parties
\nwhether they intended to create a lease or
\na license;\n<\/p>\n
 (3) if the document creates an interest in the
\nproperty, it is a lease; but, if it only
\npermits another to make use of the property,
\nof which the legal possession continues with
\nthe owner, it is a license.\n<\/p>\n
 (4) if under the document is party gets exclusive
\npossession of the property, ‘prima facie’, he
\nis considered to be a tenant; but
\ncircumstances may be established which
\nnegative the intention to create a lease.\n<\/p>\n
 8. A perusal of the agreements, conduct of the
\nparties and the facts and circumstances brought on
\nrecord clearly show that in the present case, the
\nrespondent never intended to create a lease in respect
\nof the premises in question in favor of the petitioner
\nand only a license was granted to him for the management
\nand administration of the respondent’s restaurant “Red
\nSnapper”. The actual and physical possession of the
\npremises always remained with the respondent and overall
\ncontrol and supervision of the restaurant was with the
\nrespondent. The keys of the premises were always with
\nthe respondent, the staff earlier employed by the
\nrespondent continued to work in the restaurant although
\nsalaries were being paid by the petitioner, the raw
\nmaterial for use in the restaurant was being supplied by
\nthe respondent and the petitioner could bring in raw
\nmaterial only with the approval of the respondent. The
\nelectricity matters and airconditioner remained under the
\ncontrol of the respondent, the licenses were in the name
\nof the respondent and even the sales being made in the
\nrestaurant were not directly going to the pocket of the
\npetitioner but were being credited to its account.
\nTherefore, the arrangement between the parties was in
\nregard to the management and administration of the
\nrespondent’s restaurant by the petitioner and it does
\nnot appear that the parties ever intended that the
\npremises should be handed over to the petitioner and it
\nshould be allowed to deal with  those in whatever manner
\nit wanted. Therefore, it was an agreement to run the
\nrestaurant only and not at all a lease agreement. The
\nmere use of word “rent” in the agreement between the
\nparties is meaningless and does not establish that a
\nlease had been created in favor of the petitioner.\n<\/p>\n
 9. It is also to be noticed that Clause (xiii) on
\npage 8 of the agreement dated 26.11.2001 provided that
\nin case of breach of any terms and conditions of the
\nmanagement agreement the respondent could cancel the
\nagreement or impose any penalty upon the petitioner if
\nwithin 10 days of the service of the notice remedial
\nmeasures were not taken by the petitioner. Such a
\ncondition could never be a part of  a lease agreement and
\ncould be only in a leave and license agreement. This
\nCourt, therefore, has no hesitation in holding that
\nthere was no lease in respect of the premises in
\nquestion in favor of the petitioner and the petitioner
\nhad not become a tenant in respect of the premises in
\nquestion. The agreement between them created only a
\nleave and license in favor of the petitioner for the
\nmanagement and administration of the respondent’s
\nrestaurant “Red Shapper” and even this agreement was
\nterminable in terms of the clauses contained  therein if
\nthe petitioner was found in violation of the terms
\nthereof. The respondent always remained in physical
\npossession of the premises in question and had full
\ncontrol not only over the premises but upon the staff
\nand stuff also as catering was to not only the
\nrestaurant and the bar but to the respondent’s rooms
\nalso in the Hotel. The plea of the petitioner that a
\ntenancy had been created in favor of the petitioner
\ncannot be upheld.\n<\/p>\n
 10. Even otherwise, this Court is of the considered
\nview that the prayer of the petitioner to restrain the
\nrespondent from entering into any agreement for running
\na restaurant with anyone else cannot be sustained for
\nthe reason that prima facie, it appears that before
\nfiling of this petition the respondent had already
\nentered into an agreement to run this restaurant with
\n‘Barista  Chain of Restaurants”, vide a business
\nconducting agreement dated 9.7.2001, a copy of which has
\nbeen placed on record. It appears that large scale
\nrenovations and changes to suit the “Barista Chain of
\nRestaurants” have already taken place and the respondent
\nhas already reached an advanced stage in the matter of
\nrunning the restaurant through “Barista Chain of
\nRestaurants” in its premises. As already observed
\nearlier, it does not appeal to reason that the
\npetitioner left the management and control of the
\nrespondent’s restaurant so that the respondent may carry
\nout repairs in the airconditioning plant, without
\nobtaining something in writing from the respondent when
\nthere were so many misgivings and misunderstandings
\nbetween the petitioner and the respondent. It prima
\nfacie appears that in view of losses and its inability
\nto run the restaurant smoothly the petitioner opted out
\nof the business and thereafter respondent started
\nrunning the restaurant and then entered into the
\naforesaid agreement with “Barista Chain of Restaurants”.
\nThere are various documents on record to show that the
\npetitioner was in default of payments and its
\ncontractual obligations and the respondent was issuing
\nletters and notices even to fit for taking remedial
\nmeasures. Such notices are dated 17.4.2002, 8.5.2002,
\n21.5.2002 and 20.6.2002. In view of Clause (Xiii) of
\npart “B” of the Agreement dated 26.11.2001, it can be
\nsafely held that the contract between the petitioner and
\nthe respondent was terminable in case the terms thereof
\nwere not being complied with. After the notice dated
\n8.5.2002 wherein the respondent had pointed out to the
\npetitioner that it was in default of payment of advance
\nrent in terms of the agreement and was also in settling
\nits accounts by 5th of every month the respondent became
\nentitled to determine the contract with the petitioner.
\nThe question as to whether the contract between the
\nparties was validly determined or not would be
\ndetermined by the Arbitrator only to be appointed in
\nterms of the agreement between the parties but this
\nCourt on prima facie basis, holds that the contract
\nstood determined and as such, the petitioner is not
\nentitled to interim relief as prayed.\n<\/p>\n
 11. In a judgment of this High Court in “Rajasthan
\nBreweries Ltd. v. Stroh Brewery Company”  a Division Bench of this Court
\nrelying upon “Indian Oil Corporation Limited v.
\nAmritsar Gas Service<\/a>”  in no uncertain terms that in case of terminable
\nagreements Section 14(1) of the Specific Relief Act
\ncomes into play and it has to be held that such
\ncontracts cannot be specifically enforced. It was also
\nheld that even in the absence of a specific clause
\nenabling either party to terminate an agreement a
\nprivate commercial transaction could be determined by
\nserving a reasonable notice. It was held that at the
\nmost, in case it is ultimately found that the
\ntermination was bad in law or contrary to the terms of
\nthe agreement or of any understanding between the
\nparties or for any other reason, the remedy of the
\naggrieved party would be to seek compensation for
\nwrongful termination but no claim could be made for
\nspecific performance of the Agreement.\n<\/p>\n
 12. In M\/s. Classic Motors Limited v. “M\/s. Maruti
\nUdyog Limited” reported in 1997 (65) DLT P-166 also, a
\nlearned Single Judge of this Court and observed that in
\nprivate commercial transactions, the parties could
\nterminate a contract even without assigning any reason
\nwith a reasonable period of notice in terms of such a
\nclause in the agreement. The submission that there
\ncould be no termination of agreement even in the realm
\nof private law was held to be fallacious.\n<\/p>\n
 13. The plea of the petitioner, therefore, that by
\ninvoking its powers under Section 9 of the Act this
\nCourt should restrain the respondent from giving
\npossession of the premises to anyone else and respondent
\nshould be restrained from entering into any agreement or
\narrangement with any other party in regard to the
\nrunning of the restaurant cannot be sustained firstly
\nfor the reason that the contract between the parties was
\nterminable in nature and appears to have been terminated
\nand secondly the contract between the parties is of such
\na nature which can not be specifically enforced for the
\nreason that the Court would never be in a position to
\nsupervise and enforce the obedience of its orders.
\nMoreover, the petitioner can be adequately compensated
\nin terms of money in case it is held that the agreement
\nin its favor was not terminated or was illegally
\ndetermined. Clauses (a), (b), (c) and (d) of Section
\n14(1) of Specific Relief Act stand in the way of
\npetitioner and disentitle him to interim injunctions as
\nprayed.\n<\/p>\n
 14. The question as to whether a valid Arbitration
\nagreement between the parties is subsisting or not and
\nas to whether the petitioner had forfeited his right to
\ninvoke Arbitration Clause 21 contained in the Agreement
\non account of not referring the disputes to Arbitrator
\nwithin 45 days would be a subject matter of adjudication
\nby the Arbitrator only. This Court prima facie finds
\nthat an Arbitration Agreement was there and as such, it
\ncannot be said that the petition under Section 9 of the
\nAct is not maintainable. It is clarified that all the
\nobservations made herein are tentative and on prima
\nfacie basis only with a view to decide the petitioner’s
\napplication under Section 9 of the Act and the
\nArbitrator shall be free to adjudicate the controversies
\nbetween the parties without referring to this order.\n<\/p>\n
 15. In view of the forgoing discussions, this Court
\nis of the considered view that the petitioner has failed
\nto make out a prima facie case for grant of ad interim
\ninjunction as prayed. It is also held that the balance
\nof convenience is more in favor of the respondent and
\nthe petitioner would not suffer any irreparable
\nloss\/injury if the interim relief is not issued in its
\nfavor in terms of its prayers. The petitioner can
\nalways be compensated in terms of money if the breach of
\ncontract between the parties is established.\n<\/p>\n
 16. Accordingly, the petition stands dismissed. The
\nex-parte ad interim injunction dated 14.8.2002 stands
\nrevoked.<\/p>\n","protected":false},"excerpt":{"rendered":"
Delhi High Court Vidya Securities Ltd. vs Comfort Living Hotels Pvt. Ltd. on 26 November, 2002 Equivalent citations: AIR 2003 Delhi 214, 2003 (1) ARBLR 482 Delhi, 102 (2003) DLT 797, 2003 (67) DRJ 154 Author: R Chopra Bench: R Chopra JUDGMENT R.C. Chopra, J. 1. This petition under Section 9 of the Arbitration and […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[14,8],"tags":[],"class_list":["post-84143","post","type-post","status-publish","format-standard","hentry","category-delhi-high-court","category-high-court"],"yoast_head":"\nVidya Securities Ltd. vs Comfort Living Hotels Pvt. 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