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2018 Supreme(Del) 2920
IN THE HIGH COURT OF DELHI AT NEW DELHI
JAYANT NATH, J.
Nelofar Currimbhoy - Petitioner
Versus
Perfalook International - Respondent
O.M.P. (COMM) 285 of 2017, IA No. 8762 of 2017 and 8734 of 2017
Decided On : 16-10-2018
For the Petitioner: Ms. Sumedha, Adv.
For the Respondent: Mr. Arjun Mitra and Ms. Jaskaran Kaur, Advs.
The court emphasized the importance of upholding the terms of the management contracts and relied on evidence to determine the validity of claims and counter-claims.
Headnote:
Arbitration and Conciliation Act - Dispute over Management Contracts - [FACT OF THE CASE] This case involves a dispute between a landlord and a tenant over the management of a property in Khan Market, New Delhi. The tenant, a well-known entrepreneur in the cosmetics business, entered into two management contracts with the respondent to run a health cafe/restaurant. Disputes arose between the parties, leading to arbitration proceedings. [FINDING OF THE COURT] The court found that the termination of the contracts by the petitioner was illegal and unjustified, and the respondent was entitled to various claims including loss of profit, renovation expenses, and litigation costs. [ISSUES] The issues included breach of management contracts, sub-letting, and unpaid minimum guaranteed commission. [RATIO DECIDENDI] The court relied on the terms of the management contracts, evidence of renovation expenses, and the absence of sub-letting to reach its decision. [FINAL DECISION] The court dismissed the petition and upheld the award in favor of the respondent.
JAYANT NATH, J.
1. This petition is filed under Section 34 of the Arbitration and Conciliation Act, 1996 seeking to impugn the Award dated 15.02.2017 passed by the learned Arbitrator.
2. The brief facts of the case are that the petitioner is said to be a well known entrepreneur in the business of making and selling cosmetics and is the proprietor of Shahnaz Green Herbal Door. She was a tenant of shop No. 7, Khan Market, New Delhi which had been taken on rent by a registered lease deed dated December 29, 2005. She was running a salon, namely, Shahnaz Hussain Herbal Door in the said suit property. After closing the said salon, the petitioner was desirous of starting a restaurant in the said suit property. All fixtures relating to the salon were dismantled and investments were made to upgrade the decor of the shop. The petitioner subsequently entered into a First Management Contract dated 18.05.2010 with the respondent. The respondent was appointed to run a health cafe/restaurant by the name and style Cafe Watermelon with the possession of the said property resting with the petitioner. According to First Management Contract the petitioner was to provide capital expenditure with respect to complete interiors, furniture, fixtures and flooring besides providing for an electric generator set. Running cost and the electricity charges were to be borne by both the parties in a stated ratio. The petitioner was required to procure health license for operating cafe/restaurant. As per the said contract the petitioner was entitled to minimum guarantee commission of Rs.2,50,0000/- each month or 25% of the total receipts whichever would be higher.
3. It is the case of the petitioner that she invested a sum of Rs.13,75,679/- for setting up the restaurant. The restaurant was inaugurated on 20.09.2010. It is the further contention of the petitioner that on account of the reputation of the petitioner, the cafe generated lot of revenue. The Cafe was doing well as it was serving hookah which unfortunately was discontinued due to a ban by the Government of NCT of Delhi in 2012. It is further stated by the petitioner that the respondent breached the terms of the contract and made changes in the permanent structure. Such changes were not contemplated by the First Management Contract as the respondents were only required to maintain the said property as stipulated under clause 2.6 of the contract. It is also stated that in the interregnum the sales and revenues of the restaurant dropped, due to which the respondents approached the petitioner to expand the business to the first floor of the property. Hence, it is in this background that the Second Management Agreement dated 28.09.2011 (hereinafter referred to as “the Second Management Contract”) was executed between the parties. As per the Second Management Contract, the business was expanded to the first floor of the property. As per the second agreement the petitioner was entitled to minimum guarantee commission of Rs.3 lacs for the first floor and second floor or 25% of the gross income whichever is higher.
4. Disputes arose between the parties. It is pleaded that sometimes in September 2012 the petitioner received an email dated 17.09.2012 from her landlord stating that there were outstanding dues of electricity and water of Rs.2,49,809/-, which was the liability of the respondent as stipulated under clause 2.11 and 2.13 of the two management contracts dated 18.05.2010 and 28.09.2011, which the respondent had failed to pay. As a consequence the petitioner paid the bill for the period of August 2012-September 2012 for a sum of Rs.2,44,019/- under goodwill on behalf of the respondent. Similarly, the respondent set up a dessert counter under the flagship of ‘Whipped’ and the sign board of ‘Whipped’ was put over the demised premises. The owner of the said brand had compensated the respondent for putting up the board and that the respondent illegally entered into this transaction in violation of the
