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2025 Supreme(Bom) 1012
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
SOMASEKHAR SUNDARESAN, J.
Paperbox Company of India - Petitioner
Versus
Goldensource International Pvt. Ltd. - Respondent
Arbitration Petition No. 113 of 2024 Alongwith Comm. Arbitration Petition (L) No. 21730 of 2023
Decided on : 05-08-2025
Advocate Appeared:
For the Petitioner: Mr. Rohan Cama a/w Mr. Anish Karande i/b Ashish Amritlal Gatagat
For the Respondent: Mr. Anil D’souza a/w Mr. Mark Dbritto and Mr. Ernest Tuscano
The term 'vacant possession' in lease agreements does not require stripping premises bare; merely returning them in good condition suffices for deposit refunds.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 - Arbitration awards - Two awards challenged, holding Petitioner liable for security and electricity deposit refunds without conditions concerning 'vacant possession' - Parties had historical license agreements defining terms - Court clarified 'vacant possession' does not entail stripping premises bare; refund owed from June 2020. (Paras 20, 28, 48)
(B) Jurisdictional Challenge - Proper scope of arbitration determined; claims relate to security deposit refund, not possession issues, thus arbitrable despite Small Causes Court's jurisdiction claimed by Petitioner. (Paras 16, 19)
Facts of the case:
Dispute arose from two agreements, evidencing a history of landlord-tenant relationship terminating in 2020, disagreements regarding possession handover, and security deposit claims post-termination, amid related litigation and municipal orders. (Paras 4-10)
Findings of Court:
The tribunal correctly required the refund of deposits without undue conditions and interpreted 'vacant possession' within reasonable bounds of the agreements. (Paras 22, 46)
Issues: Key issues include the interpretation of 'vacant possession', jurisdiction over disputes regarding the agreements, and the obligations under the license agreement concerning security deposits. (Paras 5, 16, 24)
Ratio Decidendi: Court held that 'vacant possession' does not mean vacating all fixtures; agreements should be read to preserve their intended purpose and ensure continued usability of premises. Therefore, security deposits must be refunded immediately upon compliance with the original agreement terms. (Paras 22, 28, 46)
Result: Petitions dismissed; costs imposed on Petitioner, and deposits to be released to Respondent. (Paras 48, 52)
| Table of Content |
|---|
| 1. background of arbitration and relationship (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8) |
| 2. dispute over vacant possession and deposits (Para 9 , 10 , 11 , 12 , 13) |
| 3. jurisdictional challenges and claims (Para 14 , 15 , 16 , 17 , 18) |
| 4. court's analysis of jurisdiction and implications (Para 19 , 20 , 21 , 22) |
| 5. arbitral tribunal's examination of contract terms (Para 23 , 24 , 25 , 26) |
| 6. court's observations on reasonableness of claims (Para 27 , 28 , 29 , 30 , 31) |
| 7. interpretation of 'vacant possession' in context (Para 32 , 33 , 34 , 35 , 36) |
| 8. final considerations on the interpretation of agreements (Para 37 , 38 , 39 , 40) |
| 9. conclusions drawn by the tribunal and the court (Para 41 , 42 , 43 , 44) |
| 10. final judgment and reasoning for dismissal (Para 45 , 46 , 47) |
| 11. costs and release of deposits (Para 48 , 49 , 50 , 52) |
JUDGMENT :
SOMASEKHAR SUNDARESAN, J.
Context and Factual Background:
1. These Petitions are filed under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) challenging two arbitral awards dated May 15, 2023 (“Impugned Award”) by which the Petitioner, Paper Box Company of India (“Paperbox”) has been held liable to refund the security deposit and electricity deposit with interest at the rate of 10% from June 12, 2020 to the Respondent, GoldenSource International Pvt. Ltd. (“GoldenSource”).
2. The two arbitration proceedings relate to interpreting provisions of two identical Leave and License Agreements dated April 30, 2019 (collectively, “Agreement”) for the period from April 1, 2019 to March 31, 2020, for GoldenSource to use 10,262 square feet of super built-up area on the lower ground floor and 22,777 square feet of super built-up area on the first floor of the Paper Box House building, along with proportionate usage of identified common areas (“Licensed Premises”).
3. The parties also contracted an agreement for amenities in parallel for each floor and overall, the relationship between the parties is governed by four concurrent and contemporaneous Agreements. For all purposes of this Judgement, references are made to the proceedings and pleadings in Arbitration Petition No. 113 of 2024 (relating to the ground floor) since the determination of issues in that Petition would be dispositive of the issues involved in both proceedings.
4. The relationship between the parties first began in 2005 and license agreements were first executed on April 9, 2005. The agreements were kept renewed from time to time. These agreements entailed GoldenSource Page 2 of 29 providing a security deposit and a deposit for electricity connection. The relationship came to an end in 2020 on the scheduled expiry of the license period on March 31, 2020, bringing to an end a 15-year relationship. The parties did not have an amicable parting – they have been locked in a dispute about whether and when “vacant possession” was handed over by GoldenSource to Paperbox.
5. What the word “vacate” and all its derivatives mean, forms the core issue relevant for the dispute between the parties. Against GoldenSource vacating the Licensed Premises, the security deposit was to be refunded – Rs. ~1.51 crores for the first floor and Rs. ~68.24 lakhs for the ground floor. According to GoldenSource, vacant possession was handed over on June 12, 2020, while according to Paperbox, vacant possession can only be said to have been handed over on November 4, 2022.
6. A brief overview of the relevant facts would be necessary. As seen above, the Agreement was executed on April 30, 2019. On March 9, 2020, ahead of the expiry of the Agreement scheduled for March 31, 2020, GoldenSource wrote to Paperbox stating that it would hand over quiet, peaceful and vacant possession of the Licensed Premises by the date of expiry of the Agreement. The specific equipment that would be removed was listed (for example, diesel generator sets, air-conditioners, chairs, some woodwork, Page 3 of 29 gym equipment, fire extinguishers etc.) and it was stated that dismantlin
