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2022 Supreme(Del) 860
IN THE HIGH COURT OF DELHI AT NEW DELHI
Najmi Waziri, Vikas Mahajan, JJ.
India Tourism Development Corporation - Appellant
Versus
Bougainvillea Multiplex Entertainment - Respondent
FAO(OS) (Comm) 137 of 2022
Decided On : 27-05-2022
Mr. Ravi Sikri, Sr. Advocate, with Ms. Shweta Bharti, Mr. Manoj Kumar, Mr. Sukrit R. Kapoor, Mr. Deepank Yadav and, Mr. Nitesh Sachdeva, Advocates, for the Appellant; Mr. T.K. Ganju, Sr. Advocate, with, Mr. Prantik Hazarika, Mr. Deepak Chawla and, Mr. Aakash Khattar, Advocates, for the Respondent.
The duty of the grantor to disclose defects in the property affected by the license, as per Section 57 of the Indian Easements Act, 1882, and the implications of a fundamental breach of contract were the central legal principles established in the judgment.
Headnote:
Arbitration and Conciliation Act - Arbitral Award - Section 34(2-A) - Public Policy - Premises Licensing - Structural Soundness - Disclosure Duty - Indian Easements Act, 1882 - Section 57 - Fundamental Breach of Contract
Fact of the Case:
The appeal challenges the order dismissing the petition under Section 34 of the Arbitration and Conciliation Act, 1996, against an Arbitral Award. The disputes between the parties stem from water leakage from the licensed premises. The appellant contends that the Award is against public policy and that the responsibility to maintain the structure lay upon the licensee. The respondent conceded that some part of the Award was not justified and was set aside.
Finding of the Court:
The court found that the licensor's failure to maintain the premises was a fundamental breach of the Agreement, relieving the licensee from paying the Licence Fee. The court also emphasized the duty of the grantor to disclose defects in the property affected by the license, as per Section 57 of the Indian Easements Act, 1882. The court held that the non-disclosure of vital information about the temporary structure was unfair on the part of the licensor.
Issues: The issues revolved around the licensor's obligation to maintain the premises, the duty to disclose defects, and the fundamental breach of contract.
Ratio Decidendi: The court's decision was influenced by the interpretation of the Indian Easements Act, 1882, particularly Section 57, and the finding of a fundamental breach of contract by the licensor.
Final Decision: The appeal was dismissed as no merit was found, and the court emphasized the limits on re-appreciation of evidence and the public interest in fairness of procedure.
ORDER
Najmi Wazri, J. (Oral). - FAO(OS) (COMM) 137/2022, CM APPL. 25520/2022, CM APPL. 25521/2022 & CM APPL. 25522/2022
1. This appeal under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 ('Act') impugns the order dated 01.04.2022 in O.M.P. (COMM.) 402/2018, passed by the learned Single Judge of this court dismissing the appellant's petition under Section 34 of the Arbitration and Conciliation Act, 1996, against an Arbitral Award dated 11.05.2018. Primarily, the ground of challenging the order under Section 34(2-A) of the Act is patent illegality appearing on the face of the Award.
2. The learned Senior Advocate for the appellant submits that the Award is against the public policy; that the respondent had been awarded compensation, which is unjustified and is contrary to the admitted facts; that the responsibility to maintain the structure, in which the licensed premises were housed, lay upon the licensee; that the licensed premises were taken after inspection by the licensee on as is where is basis; the leakage in the roof of the structure was not to be repaired by the licensor; therefore damages, etc, as may have been caused to and claimed by the licensee, was entirely because the licensor failed in duly maintaining the structure or keeping it in good repair.
3. The aforesaid order of the learned Single Judge has dealt with the issue as under:
.
Reasons & Conclusions
25. The disputes between the parties essentially stem from the existence of water leakage from the roof of the Premises licenced by ITDC to BMEL. There is no dispute that in March, 2015, there was an incident of water leakage from the roof of the Premises. BMEL claimed that it had placed buckets at various places inside the Premises to collect the water from the leaking roof so as to protect the equipment, furniture and other fixtures. It was suggested by ITDC that the description was exaggerated; however, there is no serious dispute that there was water leakage in March, 2015. It is also not disputed that there were heavy rains during the period 10.07.2015 to 12.07.2015. BMEL claimed that the roof of the premises almost caved in and there was continuous water pouring from the roof. This completely destroyed the equipment as well as the decor of the Premises in question. There is ample material on record to show that water had leaked from the roof damaging the interiors and rendering the Premises unfit for being used for the purpose for which it was licenced. The Arbitral Tribunal had examined the material on record and had found that the assertions made by BMEL in this regard were correct.
26. It is seen that ITDC had not seriously contested that there was leakage of water in the Premises from 10.07.2015 to 12.07.2015. ITDC's defence largely rested on two assertions. First, that it had licenced the premises on an 'as is where is basis' and therefore, was not responsible for the upkeep or repairs of the Premises. And Second, that BMEL was required to carry out the repairs of the Premises for its purpose.
27. The Arbitral Tribunal rejected the aforesaid contentions. The Arbitral Tribunal accepted BMEL 's assertion that the roof of the Premises over the main area was a tin roof, which was covered by a thin layer of cement. The Arbitral Tribunal was of the view that handing over of the Premises on ass is where is basis ' did not absolve ITDC of its obligation to ensure that the Premises were fit for the purpose for which the same were licenced. There was no dispute that the Premises were licenced to run a high-end International Cuisine Restaurant cum Night Club; the Premises are within the precincts of a Five Star Hotel; and the Licence Fee payable to ITDC was substantial. The Arbitral Tribunal was of the view that considering these facts it was incumbent upon ITDC to at least ensure that the Premises were structurally sound for the purpose for which the same were licenced.
28. The Arbitral Tribunal also referred to the Agreement which expressly entitled or e
