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2019 Supreme(Del) 52
IN THE HIGH COURT OF DELHI AT NEW DELHI
NAVIN CHAWLA, J.
Fitness First India Private Limited ('FFIPL'') - Petitioner
Versus
Ambience Developers and Infrastructure Private Limited - Respondent
O.M.P. (COMM.) 202 of 2016
Decided On : 16-01-2019
For the Petitioners: Mr. Darpan Wadhwa, Sr. Adv. with Mr. Akshaya Dhaundiyal, Mr. Suveer Dhyani & Mr. Toyesh Tewari, Advs.
For the Respondents: Mr.P.K.Agrawal, Ms.Mercy Hussain, Ms.Tannya Sharma, Advs.
The main legal point established in the judgment is the enforceability of the Arbitration Agreement and the consequences of failure to hand over possession of the premises as per the terms of the Agreement.
Headnote:
Arbitration and Conciliation Act - Agreement For Taking Possession for Fit Outs - Section 34
Fact of the Case:
The petitioner filed a petition challenging the Arbitral Award passed by the Sole Arbitrator adjudicating the disputes that have arisen between the parties in relation to the 'Agreement For Taking Possession for Fit Outs' dated 22.12.2007. The parties had entered into the Agreement, but did not execute a formal Lease/Licence Agreement with respect to the premises as contemplated in the Agreement. The petitioner terminated the Agreement and called upon the respondent to accept the handing over of the possession of the premises, subject to refund of the balance security deposit. The respondent contended that an amount would remain due and payable by the respondent to the petitioner. The petitioner denied the claim of the respondent and stated that it was the respondent who had failed to take over the vacant physical possession of the premises from the petitioner and refund the security amount to the petitioner. The respondent invoked the Arbitration Agreement between the parties as contained in the Agreement. The petitioner refuted the existence of the Arbitration Agreement.
Finding of the Court:
The Arbitrator considered the enforceability of the Arbitration Agreement and held that the Agreement did not require registration as it merely created a right to obtain another document. The Arbitrator also considered the plea of the petitioner on the enforceability of the Arbitration Agreement and held that the dispute raised by the respondent, insofar as it sought enforcement of the purported oral understanding between the parties, could be made the subject matter of arbitration proceedings. The Arbitrator awarded damages in favor of the respondent for the period beyond the termination of the lease agreement. The Arbitrator also awarded interest at the rate of 12% per annum in favor of the respondent.
Issues: The main issues in the case were the enforceability of the Arbitration Agreement, the termination of the lease agreement, the claim for damages, and the award of interest.
Ratio Decidendi: The court found that the Arbitration Agreement did not require registration and could be enforced. The court also found that the petitioner had failed to hand over the possession of the premises to the respondent, leading to the award of damages and interest in favor of the respondent.
Final Decision: The petition was partly allowed, setting aside the award of damages for a specific period and the direction for payment of double the amount of agreed license fee in case of failure to hand over the possession of the premises. The court also upheld the award of interest at the rate of 12% per annum and rejected the challenge to the award of CAM charges and interest on CAM charges.
NAVIN CHAWLA, J.
1. This petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘Act’) has been filed by the petitioner challenging the Arbitral Award dated 03.02.2015 passed by the Sole Arbitrator adjudicating the disputes that have arisen between the parties in relation to the “Agreement For Taking Possession for Fit Outs” dated 22.12.2007 (hereinafter referred to as the ‘Agreement’) executed between the parties.
2. The Arbitrator by the Impugned Award has passed the following directions:-
“Accordingly, I allow the statement of claim and proceed to pass the following award
(a) For recovery of licence fee, interest and CAM from September 2013 to January, 2015 total Rs.14,49,15,237.21 (Licence fees and interest Rs.10,03,34,438/31/- and CAM Rs.4,45,80,799/-) in favour of the claimant and against the respondent.
(b) Within 30 days from the date of the award, the respondent shall hand over physical, vacant and peaceful possession of the space/premises by removing all its goods and on failure to handover physical and vacant possession of the space in question within 30 days from the date of passing the award, the respondent is held liable to pay double the amount of agreed licence fee at the rate of Rs.50,77,960.53/- per month and CAM charges of Rs.22,01,576/- besides the other charges, every month from the date of passing of award till possession is retained by the respondent.
(c) The respondent is also directed to make payment of the amount of the licence fee due and payable within 30 days from the date of passing award including licensee fees and CAM charges for the Month of February, 2015 failing which the respondent will be liable to pay interest at the rate of 12% per annum on the principal amount of the licence fee and CAM charges.
(d) The respondent shall pay an amount of 4 Lakh towards the costs of the arbitration.”
3. The parties had entered into the Agreement dated 22.12.2007, some of the relevant Clauses whereof are reproduced herein below:-
“F. Fitness First is engaged in the business of running Health Club and Fitness Centre under the brand name of "FITNESS
FIRST" which has acquired considerable goodwill in the international market and is a well known brand.
G. Fitness First has approached Ambience for the purpose of taking on lease/license Commercial Space No. Nil on Fifth Floor at Ambience Mall, Ambience Island, NH-8, Gurgaon.
H. Fitness First has agreed and represented that it shall enter into a mutually agreed agreement to lease or license, as the case may be, as and when called upon by Ambience. Provided however that the lease/license agreement, whichever is decided to be executed by Ambience, shall not affect the rights of Fitness First under this Agreement in any manner.
I. Fitness First has carried out due diligence and has fully satisfied itself with regard to the competence of Ambience to lease/license the premises in question, approvals granted and plans approved by the competent authorities and the quality and the extent of the construction made by Ambience.
J. Fitness First has entered into this agreement with Ambience for the purpose of taking on lease/license Commercial Space No. Nil on Fifth Floor admeasuring 4234.88 sq.mtrs. (45567.32 square feet) of super area at Ambience Mall, Ambience Island, NH-8, Gurgaon and as earmarked in Annexure ‘A’ hereto, hereinafter referred to the ‘Demised Premises’.
K. Fitness First shall enter into a Lease deed/License Agreement on the terms and conditions as may be agreed to between the parties including but not limited to terms and conditions stated herein.
L. In the present case lease/licence would be deemed to have commenced with effect from date of handover of the Demised Premises to Fitness First, i.e. 28th December 2007 or such other date as may be mutually decided by the parties hereto (such date is hereinafter referred to as the "Handover Date").
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“3. On and from the Rent Commencement Date which has been defined h
