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IN THE HIGH COURT OF DELHI AT NEW DELHI
PRADEEP NANDRAJOG, PRATIBHA RANI, JJ.
HOTEL LEELA VENTURE LIMITED - Appellant
Versus
AIRPORTS AUTHORITY OF INDIA - Respondent
FAO (OS) (COMM) 64/2016
Decided On : 07-11-2016
Arbitration and Conciliation Act, 1996 - Section 34 - Indian Contract Act, 1872 - Section 56 - Transfer of Property Act, 1882 - Section 105, 108 - Contract - Lease - Use of property - Different documents - Effect of - Consideration for enjoyment of immovable property by the transferee could be a promise to pay a fixed price - Money or a share in the monetary benefit which may accrue to the transferee by use of the property - A series of documents may form the contract between the parties - Terms of a contract may be found lying scattered in different documents - That does not mean that the documents have separate legal entities - A contract is a single entity and de-jure is one albeit, de-facto can exist in different documents - If terms of an agreement lie scattered in different documents, all documents constitute one entity.
Arbitration and Conciliation Act, 1996 - Section 34 - Indian Contract Act, 1872 - Section 56 - Transfer of Property Act, 1882 - Section 105, 108 - Lease - Rent - Payment of Royalty - Scope of - Arbitration resulting in an award which was accepted by LEELA - It agreed to pay not only the lease rent but even the minimum Royalty contemplated by the supplemental agreement - Lease-deed formed the consideration payable by the transferee to the transferor and are tied by the umbilical cord to each other - Neither can be severed from each other for the reason the two clauses jointly embody LEELA's obligation to pay the consideration contemplated by the lease-deed to enjoy the immovable property belonging to AAI - Royalty agreed to was a part of the consideration
- In addition to the lease rental the lessee shall also pay royalty as minimum guaranteed amount.
Arbitration and Conciliation Act, 1996 - Section 34 - Indian Contract Act, 1872 - Section 56 - Transfer of Property Act, 1882 - Section 105, 108 - Contract for lease - Possession - Scope of - Lessee obtains possession from the lessor - It is a term of the agreement that consideration shall be rendered periodically - Agreed consideration has to be paid - It hardly matters that rents have fallen in the meanwhile - Result of a lease is the creation of a privity of estate inasmuch as lease is the transfer of an interest in immovable property within the meaning of Section 5 of TPA - A contract is not discharged merely because it turns out to be difficult or onerous for one party to perform and none can resile from a contract for said reason - LEELA claimed that on account of 13 years having lapsed - It not being in a position to construct a building - There was hardly any remainder time left for it to recoup its capital investment - Land had been utilized for construction of additional floors in the existing hotel building in the year 2002 - Local laws permitted such a transfer - LEELA could not claim that it had not taken the benefit of the permissible construction - Award has rested that it cannot be said that the claimant has no FSI left to construct the hotel as contemplated by the lease-deed - Held, Award is premised on a reasoning which in law is patently illegal - There are no competing views - Arbitrator ignores the definition of lease and the rights and obligations - Award is set aside - View of single judge is affirmed.
PRADEEP NANDRAJOG, J.
1. Airports Authority of India (hereinafter referred to as AAI) was the owner of 29000 square meter land near Mumbai International Airport, out of which 2 parcels ad-measuring 9000 square meters each were leased to Leela Scottish Lace Ltd. and Leela Venture Limited, (hereinafter referred to as LEELA) leaving behind 11000 square meters land, which initially was given on a license to LEELA.
2. Dispute concerns said 11000 square meters land which, vide lease-deed dated February 07, 1996, was demised in favour of LEELA for a period of 30 years on the terms and conditions contemplated therein. A supplemental agreement of even date was also executed, and the reason thereof was that clause 3 of the lease-deed had to be given effect to.
3. The lease-deed mandated LEELA to construct a wing to the existing hotel building housing therein 150 rooms and for which entire cost to render the building fit to be used for lodging had to be spent by LEELA. At the expiry of the period of lease, the structure, fittings, fixtures, plant and machinery were to vest with AAI without payment of any compensation. The lease was to commence on April 01, 1994 and duration being 30 years, by afflux of time would expire on March 31, 2024. Clauses 2, 3 and 3(a) of the lease-deed being relevant are noted. They are as under:-
“2. The lessee shall pay @ Rs.200.00 per sq. mtr. per annum as lease money subject to 10% compound escalation per annum for use and occupation of the land per year in advance, in each year. The first of such payments to be made before taking over the land on lease. The rate of lease money payable by the lessee shall be subject to revision by the authority from time to time and the lessee agrees to pay such revise lease money without any protest.
3. In addition to the lease money mentioned hereinabove and as revised from time to time, the lessee shall pay to the Authority; Royalty as minimum guaranteed amount as mutually decided between the parties and in absence of any decision, as decided by Chairman of Airports Authority of India. For this purpose gross turnover will be arrived at after excluding Government taxes/levies on turnover.
3(a). The amount on royalty shall become payable from the date of commencement of the hotel or after the expiry of 3 years gestation period allowed for construction of the hotel block commencing from 1.6.1995 whichever is earlier.”
4. It is apparent that the term of the grant was that LEELA would possess 11000 square meters land as lessee for a period of 30 years and in consideration would pay the amount stipulated in clause 2 of the lease-deed and clause 3 thereof. Whereas the amount as per clause 2 was determined at Rs.200/- per square meter per annum escalation by 10% (compounded) each year, the amount as per clause 3 (which was titled ‘Royalty’) was to be mutually agreed by the parties and in the absence of an agreement by a decision taken by the Chairperson of the AAI. The supplemental agreement of even date recorded the royalty mutually decided between the parties to be paid by LEELA to AAI. Clauses 1 and 2 of the supplemental agreement record the agreement between the parties and have to be read in conjunction with Schedule A to the supplemental agreement. The two clauses and Schedule A of the supplemental agreement read:-
“1. In addition to the payment of lease rental as provided in the said agreement to lease dated the 7th day of February, 1996, the lessee shall also pay to the authority royalty as minimum guaranteed amount, as specified in Schedule A annexed hereto or at the rate of 7.5% of the gross turnover of the new Hotel Block, whichever is higher. For the purpose of determination of gross turnover, government taxes/levies on turnover will be excluded.
2. The amount of royalty shall be payable from the date of the commencement of the hotel or after the expiry of thre
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