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2025 Supreme(Online)(Mad) 60441
IN THE HIGH COURT OF JUDICATURE AT MADRAS
N.ANAND VENKATESH, J
M/s.Prime Store, Rep. by its Partner Mr.S.Kaarthi – Appellant
Versus
Sugam Vanijya Holdings Private Limited – Respondent
Arbitration O.P.(Com.Div.) Nos.257 of 2021 & 209 of 2022 & A.No.3306 of 2025
For the Appellants/Petitioners: Mr.Anirudh Krishnan for Mr.Adarsh Subramaniam
For the Respondents: Mr.P.S.Raman, SC for Mr.P.J.Rishikesh
An arbitral award can be modified if it is found to contain elements that are illegal or punitive, as in the case of excessive interest or conflicting provisions on damages.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 - Lease agreement - Dispute arising from the termination of a lease deed for demised premises - The lessee unilaterally terminated the lease during the lock-in period, claiming frustration due to lack of approvals and amenities, while the claimant established that all statutory approvals had been obtained and that the contract was not frustrated. The Arbitrator awarded damages under Clause 4.3 of the lease deed for the lock-in period while forfeiting the security deposit for breach of contract, which the Court found excessively punitive and against principles of reasonable compensation. The interest awarded was modified from 24% to 12%. (Paras 11, 12, 54, 61, 75, 79)
(B) Arbitral awards - Grounds for interference - The court emphasized the limited scope of intervention under Section 34, affirming that the Arbitrator's findings cannot be overturned unless they are perverse or illegal. A mere plausible alternate view is insufficient for interference. (Paras 13, 14, 64)
| Table of Content |
|---|
| 1. initial filing of arbitration petitions. (Para 1 , 2 , 3) |
| 2. factual basis of the lease agreement. (Para 5) |
| 3. arguments by petitioners. (Para 6 , 7) |
| 4. consideration of previous court order. (Para 8 , 9) |
| 5. court's analysis and evidence review. (Para 10 , 12 , 15 , 20 , 21) |
| 6. clarification on damages and liabilities. (Para 27 , 34) |
| 7. assessment of liquidated damages. (Para 36 , 50) |
| 8. final decision and modification of interest. (Para 79 , 81) |
COMMON ORDER
Arbitration O.P.(Com.Div.)No.257 of 2021 has been filed by respondent Nos.1, 2, 4 and 5 in the claim petition as against the award passed by the learned Arbitrator dated 22.3.2021.
2. Arbitration O.P.(Com.Div.)No.209 of 2022 has been filed by respondent Nos.3 and 6 in the claim petition as against the same award.
3. The first respondent in both the above original petitions was the claimant before the learned Arbitrator.
4. Heard the respective learned counsel on either side.
5. The facts leading to filing of the above original petitions are as follows:
(a) The first respondent/claimant is engaged in the business of developing and operating commercial projects and malls. During the course of business, they decided to develop a mall in Chennai and accordingly developed a mall at Anna Nagar known as VR Chennai The mall was built and developed with a built up area of 9.88 lakh sq.ft., including a multiplex cinema theatre, departmental stores, retail stores, etc. The construction of the mall was completed on 20.4.2018.
(b) The petitioners are engaged in the business of operating and running retail outlets (textiles) in Tamil Nadu. They approached the first respondent/claimant to take on lease a large space in the mall with the carpet area of nearly 34,434 sq.ft. (hereinafter called as the demised premises). After negotiation, the parties entered into a lease deed dated 12.9.2018, which was registered as doc.No.3779 of 2018 on the file of the Sub-Registrar, Anna Nagar.
(c) The lease deed contained various clauses relating to the commencement date, common areas, fit out manual, lock-in period, possession date, rent, security deposit, etc. Under Clause 4.1 of the lease deed, the petitioners agreed to take on lease the demised premises for a period of 9 years from the commencement date unless terminated earlier in accordance with the provisions set out in the lease deed.
(d) Clause 4.3 of the lease deed related to lock-in period and the first 36 months from the commencement date should be considered as the lock-in period. It was also made clear that if the lessee wanted to terminate the lease during the lock-in period for any reason whatsoever as per Article 14.4, the lessee should pay to the lessor an admitted liability (and not by way of penalty), 100% of the rent for the balance term of the lock-in period.
(e) The lessee should also pay Rs.1,51,50,960/-, which was equivalent to six months' rent as interest free refundable security deposit for the due performance and observance by the lessee of each of the terms and conditions of the lease deed. The lessee was also given the right to terminate the lease deed dated 12.9.2018 after expiry of the lock-in period by serving six months’ advance written notice and if such termination was effected before the expiry of the lock-in period, a prior written notice of six months to the lessor should be given and 100% of the rent for the balance term of the lock-in period must also be paid by the lessee.
(f) Even though the lease deed was signed on 12.9.2018, the demised premises was handed over to the petitioners as early as on 02.8.2018. The commencement date was defined as 120 days from the date of signing the lease deed dated 12.9.2018 and the commencement date was fixed as 09.1.2019. During the said 120 days, the petitioners, who were requested to take over possession of the demised premises, should commence their interior works in accordance with the fit out manual issued by the first respondent/ claimant. All the interior works must ha
