Delhi District Court
Sanjay Relan vs Cosmetic Kitchen Pvt Ltd Through ... on 1 August, 2024
IN THE COURT OF MS SAVITA RAO, DISTRICT JUDGE
COMMERCIAL COURT-01, SOUTH ,
SAKET COURTS, DELHI
CS (Comm) No. 65/2021
CNR No. DLST01-001288-2021
In the matter of :
Sanjay Relan
S/o Late Sh. Madan Lal
R/o House no. 18, Ansal Villa
Khasra No. 1022, Village Satbari
New Delhi - 110074
................. Plaintiff
Versus
1. M/s Cosmic Kitchen Pvt. Ltd.
Through its Managing Director
Ms Vasudha Dinodia
B-108, Greater Kailash Part - I
New Delhi - 110048
2. Ms. Vasudha Dinodia
Managing Director
M/s Cosmic Kitchen Pvt. Ltd.
B-108, Greater Kailash Part-1
New Delhi - 110048
(Deleted vide order of even date)
................. Defendants
Date of Institution : 02.02.2021
Date of Arguments: 21.05.2024, 03.07.2024 & 23.07.2024
Date of Judgment : 01.08.2024
JUDGMENT
1. This is suit for recovery of Rs. 86,10,000/- alongwith recovery of outstanding dues of electricity bill and maintenance charges filed by plaintiff against the defendants on the facts that plaintiff is absolute owner of built up property on the ground CS (Comm) No. : 65/2021 1/43 floor of property bearing no. M-60, Greater Kailash, Part-II Market, New Delhi, which was leased out to defendant no.1, through its Authorized Representative/Manager Finance, for running food chain with the name of ' CHOCOLA' vide Lease Agreement dated 08.03.2019. The Lease Agreement was for period of nine years commencing from 07.05.2019 to 06.05.2028 at monthly rent of Rs. 4,10,000/- (Rupees Four Lacs and Ten Thousand only) plus GST if applicable. Lock-in-period was for three years with increase of rent @ 15 percent every three years.
2. In Accordance with the terms of the said agreement, defendant was allowed two months fit-out period i.e. from 07.03.2019 to 06.05.2019 without the payment of rent and the payment of rent was to become effective from 07.05.2019. In the month of March 2020, defendants jointly and severally planned to wriggle out from the understanding i.e. terms of the lease deed regarding Lock-in period, in violation of terms of payment of rent for the entire lock in period and sent an e-mail dated 20.03.2020 through its Authorized Representative intimating closure of their outlet ' Choco La' and their inability to pay rent during the closure of the outlet. Defendants also sought waiver of 75 percent of the rental for the period the sales dropped.
3. Plaintiff duly replied vide email dated 21.03.2020 to the said mail expressing his inability to comply with the unreasonable demand of the defendant. However, defendants without the knowledge of the plaintiff, shifted all the equipments and stock from the said premises to its factory and only informed the plaintiff vide email dated 24.03.2020 with regard to shutting down of the store, in violation of the term of lock-in-period contained in lease agreement. Meantime, pandemic of Covid-19 CS (Comm) No. : 65/2021 2/43 spread and defendants who were aware that they were legally bound to the understanding about the mandatorily payable rent for the entire period of lock in i.e. May 2022, conspired to take advantage of the spread of covid-19 Pandemic and wrongfully started claiming the waiver of rent and maintenance vide mail dated 25.5.2020. Strategically defendants alternatively kept on pushing the plaintiff to opt for some other arrangement to avoid their legal obligation to pay entire lock-in-period rent.
4. Despite pending rent for the period of April and May 2020 amounting to Rs. 8,20,000/-, defendant vide email communication dated 01.06.2020 sought 50% waiver in the said rent for the period of April and May 2020 and further 25% reduction in the agreed rent thereafter from June 2020 on wards, which was followed by another mail dated 02.06.2020 seeking modification of rent. Plaintiff vide mail dated 07.06.2020 offered 10 percent one time reduction in the monthly rent for a period of 12 months w.e.f. 1st June 2020 to 31st May 2021. Still defendant vide mail dated 07.06.2020 wrongfully terminated the lease agreement by seeking to invoke 'Force Majure' with malafide intention, which in any case was not applicable. The cheques tendered for the payment of rent for the months of April, May and June for sum of Rs. 4,10,000/- each were dishonoured for the reason "payment stopped by the Drawer".
5. Outstanding Electricity Bill amounting to Rs. 3,39,410/- was also not paid by defendants despite repeated requests and reminders vide emails dated 11.07.2020, 13.07.2020 and 16.07.2020 and plaintiff was constrained to pay the said electricity bill. Notice dated 03.07.2020 was sent by the plaintiff CS (Comm) No. : 65/2021 3/43 to defendant which though was replied by defendant vide notice dated 13.07.2020 but the payment was not made.
6. Further, plaintiff found that defendant had caused considerable damage on the roof of the said property while removing its generator set and other goods, which was brought to the notice of defendant vide mails dated 11.07.2020, 16.07.2020. Defendants despite being in possession of the said premises, did not carry out the repairs and plaintiff was compelled to carry out the repairs himself, for which sum of Rs. 1,50,000/- was spent. Defendants however kept on requesting the plaintiff to take the keys of the said premises while they actually retained the possession and handed over the keys of the premises through their lawyer to the plaintiff only on 17.07.2020 in the lawyer's office of the plaintiff. However, defendants failed to appear for physical inspection of the premises which was fixed for 18.07.2020 at 11 a.m.
7. Plaintiff initiated "Pre-Institution Mediation" proceedings and filed an application for Mediation before the competent authority under Rule 2 (c) of The Commercial Courts (Pre- Institution) Mediation and Settlement Rules, 2018 wherein Non- Starter Report dated 09.11.2020 was issued by the concerned authority.
8. Since defendants failed to make payment of unpaid rent for three months, rental towards remaining lock-in-period, outstanding electricity bill etc. , present suit has been filed by the plaintiff seeking recovery of unpaid rent alongwith rental for remaining lock-in-period after adjustment of security amount at Rs. 86,10,000/- , outstanding electricity bill at Rs. 3,42,804/- and maintenance and repair charges at Rs. 1,50,000/-.
CS (Comm) No. : 65/2021 4/439. In written statement filed on behalf of defendants no. 1 & 2, mis-joinder of parties was claimed due to inclusion of Defendant no.2 who was the Director of Defendant no.1. Further,it was stated that the lease agreement had been rendered void as per section 56 of the Indian Contract Act due to Force Majeure i.e. prevalence of Pandemic of Covid-19 which resulted in pre-mature termination of the lease agreement on account of imposition of lockdown. Defendant in such circumstances, as stated, was entitled to avoid the lease agreement including the lock-in period.
10. It was further stated that due to non co-operation on the part of plaintiff for waiver of rent and lack of his cooperation to allow the delayed payment of rent in installments, the business of the hospitality by defendant no.1 became unviable. Thereby Defendant was constrained to terminate the lease agreement . Plaintiff was informed to collect the keys and also to adjust rent of April and May from the interest free refundable security and was called upon to refund balance amount of security of Defendant no.1. Plaintiff maintained silence to the communication of defendant and also evaded to collect the store key and thereafter got issued the legal notice. Defendant through its counsel handed over the keys of suit premises to the plaintiff. Inspection of the suit premise was to be carried out in presence of representative of both the parties. However, the representative of plaintiff informed to the representative of defendant present at the premises that plaintiff will not be available for inspection and lateron it was falsely claimed that Defendant had not joined the joint inspection. After the vacation of the premises by Defendant, plaintiff opened his own restaurant and thereafter CS (Comm) No. : 65/2021 5/43 executed another lease agreement with Krishna Mart for the ground floor and basement.
11. Regarding the claim of plaintiff towards the payment of rent for the un-expired lock-in period, as stated, it is not payable in absence of evidence on the part of plaintiff to establish the loss incurred upon termination of the agreement . Outstanding electricity charges could be adjusted from the interest free refundable security as informed by defendants to plaintiff. It was further stated that defendant is not liable for any repairs as it had not caused any damage to the said premises and any damage to the pipelines was on the exterior side and that too after the termination of the agreement, therefore the repair was beyond the scope of defendant.
12. In replication, contents of written statement were denied and those of plaint were reiterated and reaffirmed.
13. Following issues were framed vide order dated 02.09.2022:
(1) Whether the defendant no.2 is a necessary party in the present suit? OPP (2) Whether the lease agreement dated 08.03.2019 was frustrated due to subsequent event of Covid-19 Pandemic (OPD) (3) Whether the plaintiff is entitled for recovery of the suit amount and from which of the defendants, as prayed for ?
OPP
(4) Whether the plaintiff is entitled to the interest? If so, at
what rate and for which period? OPP
(5) Relief
CS (Comm) No. : 65/2021 6/43
14. In support of its case plaintiff Sh. Sanjay Relan examined himself as PW1. He filed his evidence by way of affidavit Ex.PW1/X and relied upon following documents:-
1. Photocopy of Lease Deed dated 08.03.2019 as Ex. P-1.
2. Computer Printout of emails dated 20.03.2020 and 21.03.2020 as Ex. P-2.
3. Computer Printout of email dated 24.03.2020 as Ex. P-3.
4. Printout of email dated 25.05.2020 and 26.05.2020 as Ex.
P-4.
5. Computer Printout of email dated 01.06.2020 and 03.06.2020 as Ex. P-5.
6. Computer printout of emails (4 pages) as Ex. P-6.
7. Computer Printout of emails dated 11.07.2020, 13.07.2020 and 16.07.2020 as Ex. P-7.
8. Copy of reply dated 13.07.2020 as Ex. P-8.
9. Copy of letter dated 17.07.2020 as Ex. P-9.
10. Photocopy of Aadhar Card of plaintiff as Ex. PW1/A.
11. Office Copy of Legal Notice dated 03.07.2020 and Photocopy of Lease Deed Dated 08.03.2020 as Ex. PW1/I .
12. Copy of Bill payment receipt dated 30.07.2020 as Ex.
PW1/J.
15. In defence, Sh. Navin Kumar, AR/Manager (Finance and Accounts) of defendant was examined as DW1 who filed his evidence by way of affidavit Ex. DW1/X and relied upon following documents:-
1. Letter dated 04.03.2020 as Ex. D-1.
2. Photocopy of Board Resolution in favour of DW1 as Ex.
DW1/1 (OSR).
CS (Comm) No. : 65/2021 7/433. Computer Printout of email dated 17.07.2020 as Ex.
DW1/2.
4. Computer Printout of email dated 21.07.2020 as Ex.
DW1/3.
5. Computer Printout of email dated 12.08.2020 as Ex.
DW1/5.
6. Photocopy of Photograph as Mark DW1/6.
Issue-wise findings are as under:
16. Issue no.1: Defendant no.1 is Private Limited Company and Defendant no.2 as stated is the Managing Director of Defendant no.1 and responsible for day to day affairs and decision making of Defendant no.1. It was submitted on behalf of plaintiff that Defendant no.1 had been party to several negotiations with the plaintiff related to the execution of lease agreement and terms thereof from the beginning and has been actively involved in day to day affairs of Defendant no.1 as well as for the payment of rent.
17. On behalf of defendants, it was submitted that the suit filed by plaintiff suffers from mis-joinder of parties. Present suit has been filed against Defendant no.2 who is one of the Directors in Defendant no.1 company. All alleged claims of the plaintiff under the present suit, as stated, are against defendant no.1 company and there are no specific claims of the plaintiff against defendant no.2. Further, defendant no.1 is Private Limited Company having legal entity, separate from its Directors and any alleged claim against the defendant no.1 is attributable to the company alone and not its Directors unless there is specific claim against the Directors. It was submitted by Ld. Counsel for defendants that in the present suit, since there are no specific claims against CS (Comm) No. : 65/2021 8/43 defendant no.2, hence, present suit is not maintainable against defendant no.2 and suffers from the vice of mis-joinder of party and is liable to be dismissed.
18. Counsel for both the parties relied upon Sanuj Bathla and Anr. Vs. Manu Maheswhari & Anr. CRP 166/2018 and CM Appeal No. 32378/2018 and 10441/2021, wherein it was noted that :
" 17. ....11. The effect of the registration of a company under section 34 of the Companies Act is that it is a distinct and independent person in law and is endowed with special rights and privileges; a person distinct from its members. Consequently, the company is enabled to contract with its shareholders also, to use commons seal and acquire and hold property in its corporate name. The company is distinct from its shareholders and its directors. Neither the Shareholders nor the director can treat the companies assets as their own. Directors of Company are liable for misappropriation of company's funds and other misfeasance, but not for an ordinary contractual liability of the company. The liability of the members or the shareholders or the directors is limited to the capital invested by them. So long the liability is not unlimited under section 322 and 323 of the Companies Act and no special resolution of the limited company making liability of the directors or the managing directors unlimited is alleged. The doctrine of lifting of the corporate veil could be applied in cases of tax evasion, or to circumvent tax obligation or to perpetuate fraud or trading with an enemy are concerned........
19. It is well settled that fraud, if alleged, must be pleaded meticulously and it detail and proved to the hit. A mere assertion that fraud has been committed is neither here nor there. Precisely and in what manner fraud has been committed, is required to be delineated by the party alleging the same plea of fraud is to be made the basis of a decree against the other party. Bald assertions and vague allegations will not be countenanced by the Courts. Rule 4 of Order VI specifically lays down that the particulars of the fraud alleged (with dates and items, if necessary) shall be stated in the plaint".
19. In CM (M) 891/2012 M/s Zebra Gift Promotion Pvt. Ltd. & Anr. Vs. Pournavi Events Pvt. Ltd. and Shiv Ratna Paper (P) Ltd. Vs. Ridhi Petrochem Pvt. Ltd. CS (COMM) no. 178/2016, interalia it was observed that :
" There is no doubt about the fact that a company is a separate legal entity and has a distinct identity from Directors, but, this protection afforded to the Directors of the company is not ironclad or impenetrable . In reality, individuals/persons are the ones, who run the company in the hope of CS (Comm) No. : 65/2021 9/43 reaping benefits out of it. In a case where a court determines that a company's business was not conducted in accordance with the provisions of corporate legislation, it can pull up the ' corporate veil' and discover the true culprit. This lifting of ' corporate veil' is essential for the purpose of determining the persons who are liable for any fraudulent or unlawful practices done in the garb of running a corporate body".
20. Perusal of the record reveals that though Defendant no. 2 as Managing Director has been impleaded as separate party in the matter but there are no specific allegations of her being personal guarantor for any liability on behalf of the company or fraud or misfeasance on her part, necessitating her impleadment in the instant matter. As noted in judgments (supra), Directors of Company are liable for misappropriation of company's funds and other misfeasance, but not for an ordinary contractual liability of the company. Further, doctrine of lifting of the corporate veil could be applied in cases of tax evasion, or to circumvent tax obligation or to perpetuate fraud or trading with an enemy are concerned. In the instant matter, there are no allegation of fraud or misfeasance much less meticulous and detailed pleading and proof. Therefore, it is not even the case where this court needs to do exercise for lifting of veil. Consequently, it is held that defendant no.2 is not necessary party in the matter and defendant no. 2 is accordingly hereby deleted from the array of parties. This issue is decided in favour of defendants and against the plaintiff.
21. Issue No. 2 : Lease Agreement dated 08.03.2019 was executed between the parties, is an admitted fact on record. It is also admitted fact that the lease period vide above lease agreement dated 08.03.2019 was 9 years for the Ground Floor of Property Bearing No. M-60, Greater Kailash-II Market, New Delhi - 110048 at monthly rent of Rs. 4,10,000/- per month with CS (Comm) No. : 65/2021 10/43 lock-in period of three years. It is also admitted on record that defendant no.1 had paid regular rent upto March 2020. Defendant is also not disputing its liability for payment of rent for the months of April, May and June 2020. Controversy between the parties is pertaining to the date of vacation of premises and rental for the lock-in period.
22. Plaintiff has claimed that the lease agreement dated 08.03.2019 was not frustrated due to subsequent event of Covid- 19 Pandemic whereas the submission on behalf of defendant had been that defendant did not directly opt to terminate the lease deed but attempted to negotiate the rent with the plaintiff considering the Covid-19 Pandemic situation, however due to non co-operation from the plaintiff, defendant was left with no choice but to terminate the lease agreement. Besides that, defendant also stated about plaintiff, having not established on record any loss or damages suffered due to alleged pre-mature termination of the lease deed for the lock-in period.
23. Ld. Counsel for plaintiff made the following submissions:
a) That the lease agreement dated 08.03.2019 was not frustrated due to subsequent event of Covid-19 Pandemic.
b) That section 56 of Indian Contract Act is not applicable to lease agreements being concluded and executed contract .
Reliance was placed upon:
Ramanand and Others Vs. Dr. Girish Sony and Others, RC Rev. 447/2017, wherein it was observed that :
" 10. The relationship between the Landlord and Tenant, a Lessor and Lessee and the Licensor and Licensee can be in multifarious forms. These relations are primarily governed either by contracts or by law. In the realm of contracts, the respective rights and obligations of the parties would be determined by the terms and conditions of the contract itself.
15. In the absence of a contract or a contractual term which is a force majeure clause or a remission clause, the tenant may attempt to invoke the CS (Comm) No. : 65/2021 11/43 Doctrine of Frustration of contract or `impossibility of performance', which however would not be applicable in view of the settled legal position set out below. The said doctrine of `impossibility of performance' is encapsulated in Section 56 of the ICA, which reads as under:
"56. Agreement to do impossible act. -- An agreement to do an act impossible in itself is void. Contract to do an act afterwards becoming impossible or unlawful. -- A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.
Compensation for loss through non-
performance of act known to be impossible or unlawful. -- Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise."
Raja Dhruv Dev Chand Vs. Raja Harmohinder Singh & Ors. AIR 1968 SC 1024, wherein it was observed that :
10. By its express terms Section 56 of the Contract Act does not apply to cases in which there is a completed transfer. The second paragraph of Section 56 which is the only paragraph material to cases of this nature has a limited application to covenants under a lease. A covenant under a lease to do an act which after the contract is made becomes impossible or by reason of some event which the promisor could not prevent unlawful, becomes void when the act becomes impossible or unlawful. But on that account the transfer of property resulting from the lease granted by the lessor to the lessee is not declared void.
T. Lakshmipathi & Ors. Vs. P. Nithyanand Reddy and Ors. (2003) 5 SCC 150.
c) While relying upon Hotel Leela Venture Ltd. Vs. Airport Authority of India 2016 (160) DRJ 186, Ld. Counsel for plaintiff submitted that:
CS (Comm) No. : 65/2021 12/43* Doctrine of Frustration of Contract does not apply to Lease as executor contracts alone are capable of being frustrated and not executed contracts.
* In the absence of contracts or contractual obligations, the provisions of the Transfer of Property Act, 1882 (TPA) would govern tenancies.
* The Doctrine of force majure is recognized in Sec. 108 (B) (e) of the TPA. Sec. 108 (B1) also narrates rights and liabilities of the lessee.
* The Section describes occurrences of situations that would render the property substantially and permanently unfit to be used, lease would be void at the option of the lessee.
* Temporary non use by the tenant due to any factors would not entitle the tenant to invoke this section. * Where the property leased is not destroyed or substantially and permanently unfit, the lessee cannot avoid the lease because he does not or is unable to use the land for the purposes for which it is let to him.
* Section 108(B) (e) of the TPA cannot be invoked unless there is complete destruction of property.
* That temporary non use of the premises due to lockdown which was announced due to Covid-19 Pandemic cannot be construed as rendering the lease void u/s 108 (B) (e) of TPA
d) That Covid-19 situation only qualifies as commercial difficulties which has merely suspended the performance under the contract and which has equally impacted the Plaintiff, who had his own set of obligations dependent on the rent. The Defendants jointly and severally planned to wriggle out of the CS (Comm) No. : 65/2021 13/43 terms of the lease deed before 20 th March 2020, i.e even before the Lock Down starting date announced by the Government. The Defendants made various unreasonable demands for the reduction and waiver of the rent with malafide intent to come out of the lease agreement and later stopped the payment of the cheques towards rent in violation of the terms of the lease deed 08.03.2019. Thus the conduct of the Defendants does not justify non performance so as to invoke Force Majure event. It has been settled that the conduct of the parties prior to the outbreak and other circumstances like deadlines imposed and compliances required to be made need to be assessed by the courts to justify non performance.
24. Reliance was placed upon following:
Rashmi Cement Ltd. Vs. World Metals & Alloys (FZC) & Anr O.M.P.(1)(COMM) 117/2020 " 27. It is well settled that the question regarding applicability of a Force Majeure clause cannot be decided in the abstract and has to be decided after an examination of the facts and circumstances of each case.
Mere difficulty in performing the contractual obligations cannot be a ground for invoking a Force Majeure Clause. In the present case, the petitioner has claimed that as a result of COVID-19 and the consequent lockdown, the Force Majeure clause is squarely applicable. I am unable to agree with this contention. This question will be required to be determined in the arbitration proceedings after considering the stand of both sides, and keeping in view the well settled principle that a Force Majeure clause cannot be applied at the mere asking of a party.
M/s Halliburton Offshore Services Inc Vs. Vedanta Ltd. O.M.P(1) (CMM) No. 88/2020:
"62. The question as to whether COVID-19 would justify non- performance or breach of a contract has to be examined on the facts and circumstances of each case. Every breach or non- performance cannot be justified or excused merely on the invocation of COVID-19 as a Force Majeure condition. The Court would have to assess the conduct of the parties prior to the outbreak, the deadlines that were imposed in the contract, the steps that were to be taken, the various compliances that were CS (Comm) No. : 65/2021 14/43 required to be made and only then assess as to whether, genuinely, a party was prevented or is able to justify its non- performance due to the epidemic/pandemic.
63. It is the settled position in law that a Force Majeure clause is to be interpreted narrowly and not broadly. Parties ought to be compelled to adhere to contractual terms and conditions and excusing non-performance would be only in exceptional situations. As observed in Energy Watchdog (supra) it is not in the domain of Courts to absolve parties from performing their part of the contract. It is also not the duty of Courts to provide a shelter for justifying non-performance. There has to be a 'real reason' and a 'real justification' which the Court would consider in order to invoke a Force Majeure clause."
Energy Watchdog v. Central Electricity Regulatory Commission, (2017) 14 SCC 80.
a) Force Majeure would operate as part of a contract as a contingency under section 32 of the Indian Contract Act 1872.
(`ICA').
b) Independent of the contract sometimes, the doctrine of frustration could be invoked by a party as per Section 56, ICA.
c) The impossibility of performance under Section 56, ICA would include impracticability or uselessness keeping in mind the object of the contract.
d) If an untoward event or change of circumstance totally upsets the very foundation upon which the parties entered their agreement it can be said that the promisor finds it impossible to do the act which he had promised to do.
e) Express terms of a contract cannot be ignored on a vague plea of equity.
f) Risks associated with a contract would have to be borne by the parties.
CS (Comm) No. : 65/2021 15/43g) Performance is not discharged simply if it becomes onerous between the parties.
h) Alteration of circumstances does not lead to frustration of a contract.
i) Courts cannot generally absolve performance of a contract either because it has become onerous or due to an unforeseen turn of events. Doctrine of frustration has to be applied narrowly.
j) A mere rise in cost or expense does not lead to frustration.
k) If there is an alternative mode of performance, the Force Majeure clause will not apply.
l) The terms of the contract, its matrix or context, the knowledge, expectation, assumptions and the nature of the supervening events have to be considered.
m) If the Contract inherently has risk associated with it, the doctrine of frustration is not to be likely invoked.
n) Unless there was a break in identity between the contract as envisioned originally and its performance in the altered circumstances, doctrine of frustration would not apply".
25. Ld. counsel for defendant made the following submissions:
a) Defendant No.1 admittedly paid regular rent upto March 2020, i.e. before the onset of Covid-19 pandemic, despite the fact that cases of Corona Virus had started increasing in February 2020 itself, thereby severely affecting the business of Defendant No.1 being a restaurant.
b) That, despite the severe losses which the Defendant was incurring, defendant did not directly opt to terminate the Lease Deed but instead attempted to negotiate the rent with the Plaintiff through various emails (highlighted in List of Dates above), thereby showing its intent to continue the Lease Deed, however, owing to the non-cooperation of the Plaintiff, the Defendant was left with no choice but to terminate the Lease Agreement.CS (Comm) No. : 65/2021 16/43
c) That, even after terminating the Lease Deed on 07.06.2020 itself and attempting to handover the keys to the Plaintiff, which the Plaintiff refused to take, the Defendant itself offered the Plaintiff to deduct the rent for the months of April, May and June from the security deposit as well as to adjust the electricity bill from such security deposit, thereby showing its bona fide to pay rent till the time of termination of the Lease Deed. Therefore, it is evident that the Defendant was always ready and willing to continue with the Lease Agreement, however, was prevented from doing so owing to the unprecedented Covid-19 and lack of cooperation from the Plaintiff, who expected the Defendant to pay an enormous amount of Rs.4,10,000/- on monthly basis without any business.
26. Whether Covid-19 pandemic justifies non-performace or breach of rent agreement shall depend upon several factors including the specific terms of the lease, local laws and court interpretation. 'Force Majeure' Clause in contract can excuse non performance due to extraordinary events. If the Lease includes the 'force majure' clause that covers Pandemic, it may justify non performance. If the main purpose of lease is thwarted and it becomes impossible or impractical to fulfill the lease terms due to 'force majeure', this could be the defence for non performance. In the instant matter, 'force majeure' clause, admittedly is not part of the lease agreement between the parties. Doctrine of frustration of contract also does not apply to Lease as executor contracts alone are capable of being frustrated and not executed contracts as was noted in Hotel Leela Venture Ltd. Vs. Airport Authority of India 2016 (160) DRJ 186 . Further whether COVID -19 would justify non performance or breach of contract CS (Comm) No. : 65/2021 17/43 has to be examined in the facts and circumstances of each case and also depending upon the conduct of the parties prior to the outbreak of COVID-19. (Hallilliburton Offshore Services Inc Vs. Vedanta Ltd. O.M.P(1) (CMM) No. 88/2020).
27. Applicability of verdict in Ramanand & Ors. V. Dr. Girish Soni & Anr., (supra) differs on cases to case basis. Albeit, it was made clear in the judgment that the right to seek waiver, suspension or any remission in rental payment is not inherent right of the tenant. In cases where there is contract in place, then the contractual terms particularly the 'force majeure' clause or any other condition granting such protection or remission needs to be considered.
28. Defendant has based its entire defence pertaining to termination of the lease agreement due to onset of Pandemic and thereafter announcement of nationwide lockdown by Government whereby it was causing resistance to general public to go to restaruants and consume food from outside. It was submitted by Ld. Counsel for plaintiff that in entire pleadings, defence has pleaded that pandemic COVID-19 is a Force Majure event which has rendered the suit premises unfit for use for operating the Chokla oulet. The said pleading is in total contradiction of the admission by the DW1 in his cross examination whereby he admits that 7 oulets of the defendant were running at various places in 2019 & March 2020 except the outlet at GK-II which was closed w.e.f 25 th March due to nation wide lockdown, which makes it apparent that defendant with pre conceived planning to wriggle out of the rent agreement and to cause financial hardship to the Plaintiff, closed the outlet on the false pretext of COVID.
CS (Comm) No. : 65/2021 18/4329. DW1 admitted that vide letter Ex. P-2, defendant had expressed its intention to temporarily shut down the outlet and at that point of time, defendant had not decided to completely shut down the outlet. According to him, he was verbally communicated by COO that defendant wanted to temporarily shut down all the outlets in March 2020 and lessors of all the outlets were sent emails for temporarily shutting down the outlets. After the lock down was lifted, defendant had approached all the landlords for the waiver of rent in respect of lockdown period. Defendant got different waivers from the different landlords and expected the similar waiver from the plaintiff which was also negotiated with the plaintiff but no consensus was reached. According to DW1, since defendant did not get any support from plaintiff, it became difficult to operate the outlet at GK-II and decision was taken for termination of the lease deed. The notice for termination of lease deed was accordingly issued vide email dated 07.06.2020 Ex. PW1/H (colly) and defendant vacated the demised premised on 09.06.2020. However landlord refused to take the keys, therefore, they again sent the email on 26th June 2020 and finally the keys were handed over on 17th July 2020 through their advocate vide letter Ex. P-9. This witness admitted that in terms of the clause 15 & 16 of Lease Deed Ex. P-1, neither of the signatories of the lease deed could have issued notice for termination of lease deed during the lock-in- period. He denied that defendant company had decided to shut down the outlet being operated at demised premises on 27.02.2020 itself.
30. Perusal of communication between the parties in form of emails refers to the intention of the defendant to shut down the CS (Comm) No. : 65/2021 19/43 outlet temporarily vide email dated 20.03.2020 with mention that their sales had dropped by 80% for the last couple of weeks and thereby defendant sought waiver of rental of 75% for the period where sales dropped. This communication was followed by series of communication between the parties whereby defendant company cited unprecedented circumstances resulting in Force Majeure situation and sought waiver for the rent and maintenance for the entire lockdown period and after the lockdown was lifted, defendant sought minimum 50% waiver for the two months of April and May 2020 payable in installments and minimum 25% reduction from the existing rent and conveyed to plaintiff that in absence of such support , it will not be feasible for them to run this outlet. Defendant revised proposal and vide email dated June 2,2020 sought reduction of 15% in the current rent for 12 months starting from April 2020 and for the month of April and May 2020 and stated that rent shall be paid in maximum of five installments starting from November 2020 till March 2021.
31. Plaintiff informed to defendant that request of defendant for waiver/reduction of rent for lock-in period and reduction of rent was unjustified and against the agreement as he himself was not getting any relief during the lockdown period. He was also paying all his dues, taxes, bank installments as earlier. Nevertheless, plaintiff offered one time reduction of monthly rent upto 10% only for 12 months i.e. w.e.f. 1 st June 2020 till 31st May 2021. It was informed to defendant that in the event, defendant insisted for termination of contract, then they were to settle all the dues for the outstanding lock-in period. Defendant finally terminated the contract and sent the keys of the premises in CS (Comm) No. : 65/2021 20/43 question to the plaintiff through its lawyer on 17.07.2020. DW1 nevertheless admitted that in 2019, defendant was running seven outlets including the one in question. Three outlets were being run at Delhi Airport and others were being operated at Khan market, DLF Promimenade, at Galleria Market and one at G.K. (the outlet in question). He stated that all the said outlets were being run in March 2020. Outlet at G.K. II was closed w.e.f. 25.03.2020 besides the closure of all the other outlets due to imposition of nationwide lockdown. According to him, after the lockdown was lifted in July 2020, all the outlets except the one at G.K. II became operational. It was also stated by this witness that defendant had got waiver /reduction of rent from landlord of outher outlets and they expected the similar waiver/reduction of rent from plaintiff. As defendant did not get any support from plaintiff, decisiion was taken for termination of the lease deed. Apparently, it is not the case that the performance of the contract/continuation of lease deed had become impossible, at least post lifting of lockdown in July 2020 itself, yet the defendant decided to terminate the lease for refusal of plaintiff to accept the condition of defendant in seeking waiver/reduction of rent for continuation of lease.
32. Section 56 of the Contract Act deals with impossibility of performance which would apply in case where 'force majeure' event occurred outside the contract as was noted in Ramanand & Ors. V. Dr. Girish Soni & Anr., RC. REV. No.447/2017 that :
" 10. The relationship between the Landlord and Tenant, a Lessor and Lessee and the Licensor and Licensee can be in multifarious forms. These relations are primarily governed either by contracts or by law. In the realm of contracts, the respective rights and obligations of the parties would be determined by the terms and conditions of the contract itself.CS (Comm) No. : 65/2021 21/43
15. In the absence of a contract or a contractual term which is a force majeure clause or a remission clause, the tenant may attempt to invoke the Doctrine of Frustration of contract or `impossibility of performance', which however would not be applicable in view of the settled legal position set out below. The said doctrine of `impossibility of performance' is encapsulated in Section 56 of the ICA, which reads as under:
"56. Agreement to do impossible act. -- An agreement to do an act impossible in itself is void. Contract to do an act afterwards becoming impossible or unlawful. -- A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful".
33. For a lessee to seek protection u/s 108 (b) (e) of TPA, there has to be complete destruction of the property which is permanent in nature due to force majeure event. Until and unless there is complete destruction of the property, section 108 (b) (e) of the TPA cannot be invoked. In view of the above noted legal position, temporary non use of premises due to lockdown which was announced due to covid-19 outbreak, was not considered as rendering the lease void permitting the termination of the same as per section 108 (B) (e) of TPA and tenant cannot avoid payment of rent. Similar is the position in instant matter. Defendant cannot seek any protection for non payment of rent due to covid-19 outbreak, in view of discussion made herein. Accordingly, this issue is answered in favour of plaintiff and against the defendant.
34. Counsel for plaintiff also raised objection with regard to written statement not properly signed and verified by authorized representative. It was submitted that the written statement was filed through authorized representative Mr. Abhinav vide resolution dated 08.03.2021, however the evidence for and on behalf of defendant was led by Mr. Naveen vide fresh board resolution dated 28.3.2023 Ex. DW1/1. As submitted, written CS (Comm) No. : 65/2021 22/43 statement was not properly signed and verified by the authorized representative, thus, it cannot be read and looked into. Reliance was placed upon Ms. Sharma Enterprises Vs. M/s Hotel Leela Venture, CS (OS) No. 2254 of 1989 wherein the defendant had not deposed about his authorization to sign and verify the written statement. His affidavit also did not disclose as to who had signed and verified the written statement. It was held that he failed to establish that the written statement filed by defendant was signed, verified by the duly authorized person, hence, pleas taken in the written statement, as observed, could not be considered as the plea of the defendant company.
35. Per contra, it was submitted by Ld. Counsel for defendant that neither any objection to the authority of the Authorised representative was taken by the plaintiff in its pleadings, nor any evidence was led by the Plaintiff to prove that the Written Statement was not filed through an Authorised representative. It was only during the course of oral submissions that this objection regarding Board Resolution was taken by plaintiff. Further, original Board Resolution was already placed on record and hence, the question of proving such document does not arise. Moreover, once the Defendants moved the Application for substitution of Authorised Representative on 04.05.2023 to which no-objection was granted by the plaintiff, plaintiff waived his right to object to the authorization of the person filing the written statement.
36. Reliance was placed by Ld. Counsel for defendant upon following:
Pawan Kumar Dalmia v. HCL Infosystems Ltd. 2012 SCC Online Del 1508:CS (Comm) No. : 65/2021 23/43
" One of the arguments urged on behalf of the appellant is that the written statement was not signed by a duly authorized person and therefore the same could not have been looked into. This argument is a wholly frivolous argument because the legal position in this regard is well settled after the decision of the Supreme Court in the case of United Bank of India vs. Naresh Kumar & Ors. AIR 1997 SC 3 and which is that suits which are filed by companies should not be dismissed on technical grounds, once those suits are contested to the hilt, i.e. right till the end. The ratio of the judgment in the case of United Bank of India (supra) will also squarely apply even where a company is a defendant i.e. to the facts of the present case as the defences contained in the written statement of a company cannot be ignored on a mere technical plea of lack of authority in the person inasmuch as all the suits have been contested to the hilt, evidence led by both the parties, witnesses of both the parties have been extensively cross examined and thereafter the matter was argued in detail resulting in passing of the final judgments in these suits. I may for the sake of completeness state that there is an original power of attorney available in the file, and so also noted by the trial Court, which allows the contesting of the suits by one Mr. H. N .Mathur and the written statement bears the signature of said Mr. H. N. Mathur."
Uday Shankar Triyar v. Ram Kalewar Prasad Singh & Anr. (2006) 1 SCC 75, "Non-compliance with any procedural requirement relating to a pleading, memorandum of appeal or application or petition for relief should not entail automatic dismissal or rejection, unless the relevant statute or rule so mandates. Procedural defects and irregularities which are curable should not be allowed to defeat substantive rights or to cause injustice. Procedure, a hand-maiden to justice, should never be made a tool to deny justice or perpetuate injustice, by any oppressive or punitive use".
United Bank of India v. Naresh Kumar & Ors. (1996) 6 SCC 660, " 9...........Procedural defects which do not go to the root of the matter should not be permitted to defeat a just cause. There is sufficient power in the Courts, under the Code of Civil Procedure, to ensure that injustice is not done to any party who has a just case. As far as possible a substantive right should not be allowed to be defeated on account of a procedural irregularity which is curable."
"10.........Reading Order 6 Rule 14 together with Order 29 Rule 1 of the Code of Civil Procedure it would appear that even in the absence of any formal letter of authority or power of attorney having been executed a person referred to in Rule 1 of Order 29 can, by virtue of the office which he holds, sign and verify the pleadings on behalf of the corporation. In addition thereto and de hors Order 29 Rule 1 of the Code of Civil Procedure, as a company is a juristic entity, it can duly authorise any person to sign the plaint or the written statement on its behalf and this would be regarded as sufficient compliance with the provisions of Order 6 Rule 14 of the Code of Civil Procedure". ..............The Court can, on the basis of the evidence on CS (Comm) No. : 65/2021 24/43 record, and after taking all the circumstances of the case, specially with regard to the conduct of the trial, come to the conclusion that the corporation had ratified the act of signing of the pleading by it's officer".
Venus Home Appliance (P) Ltd. v. Sujit Kanoria, 2016 SCC Online Del 4469, "6. ..........
10....A person may be expressly authorised to sign the pleadings on behalf of the company, for example by the Board of Directors passing a resolution to that effect or by a power of attorney being executed in favour of any individual. In absence thereof and in cases where pleadings have been signed by one of its officers a Corporation can ratify the said action of its officer in signing the pleadings. Such ratification can be express or implied. The Court can. on the basis of the evidence on record, and after taking all the circumstances of the case, specially with regard to the conduct of the trial come to the conclusion that the corporation had ratified the act of signing of the pleading by its officer."
7. Hence, the legal position that would follow from above is where the pleadings are signed by one of the officers of the Corporation, the Corporation can rectify the said action of its officers and that such rectification can be expressed and implied. It is clear that the courts have taken a liberal view in regard to the issue of authority of the person signing the pleadings and instituting the suit".
37. In the instant matter, joint written statement had been filed on behalf of defendants no. 1 & 2 through Authorized Representative of defendant no.1 and defendant no.2 supported by their affidavits. AR of Defendant no.1 (now only defendant) was authorized vide Resolution dated 08.03.2021. No infirmity is found in the said authorization vide Board Resolution in signatures or in verification or otherwise. During the pendency of the proceedings, AR of defendant had changed and application had been moved on record seeking substitution of AR of defendant which was allowed. Substituted AR of defendant had also been authorized by defendant company vide board resolution dated 07.02.2023. No infirmity is found with regard to this authorization in favour of the newly appointed authorized CS (Comm) No. : 65/2021 25/43 representative. The objection taken by Ld. Counsel for plaintiff, therefore, stands discarded.
38. Issues no. 3 & 4:- For the first time, defendant had conveyed its intention to temporarily close the outlet due to reduction in sales and by also seeking waiver of the rent for the closure period on 20.03.2020. Lockdown was announced w.e.f. 25.03.2020. Defendant company informed plaintiff with regard to shutting down the outlet and again sought waiver of rent for lockdown period. Lastly, vide email dated June 7, 2020, defendant company terminated the lease deed due to 'force majeure' and informed plaintiff with regard to handing over of keys and further asked the plaintiff to return security amount after adjustment of rent of April and May 2020. Vide Legal Notice dated 03.07.2020 issued by plaintiff, defendant was informed that plaintiff would be adjusting the security amount towards the outstanding rent for the months of April, May and June 2020 and defendant shall pay the balance amount for the entire remaining lock-in period. Plaintiff also sought payment of electricity bill. Vide reply to legal notice dated 13.07.2020, plaintiff was informed that defendant no.1 was constrained to terminate the lease deed due to lack of cooperation on the part of plaintiff in reduction of rent and due to spread of Covid-19 and the announcement of lockdown . Vide email dated 15 July 2020, Defendant was asked to repair the water leakage with mention that plaintiff could not get the leakage repaired since he did not have keys of the premises. Pursuant to receipt of above communication by counsel for defendant no.1 to counsel for plaintiff, keys of the premises were handed over by defendant no.1 to plaintiff on 17.07.2020. Resultantly 17.07.2020 was the CS (Comm) No. : 65/2021 26/43 date when the possession of the suit premises was handed over to the plaintiff through his counsel. Plaintiff has claimed rent for the remaining lock-in period which as stated is genuine pre-estimate of losses suffered by the plaintiff.
39. It was submitted by Ld. Counsel for plaintiff that defendant was under obligation to pay entire rent for the entire lock-in period in terms of the contents of lease agreement executed between the parties. Since the defendants opted to terminate the tenancy during the lock-in period, defendants are liable to pay rent for the entire lock-in period. Ld. Counsel for plaintiff placed reliance upon Dag Pvt. Ltd. Vs. Ravi Shankar Institute for Music and Performing Arts O.M.P(COMM)274/2022 dated 29.03.2023 and referred to following paragraphs :
" 57. Qua these issues, it was observed by the Tribunal that since the respondent had already validly terminated the sub-lease deed, which had taken effect on June 27, 2020, the petitioner could not have invoked Clause 8(B) as the period of 90 days, with effect from March 25, 2020, which was a condition precedent for invoking Clause 8(B), had not been completed. It was further held that the period of 90 days was completed only on June 23, 2020, when the petitioner issued the Notice under Clause 8(B). However, by then, the sub-lease deed had already been terminated by respondent on June 12, 2020. Hence, the Tribunal concluded that the termination by petitioner was invalid and of no effect.
60. He contended that this Court in (Halliburton Offshore Services 2) has categorically held that COVID-19 would not justify non-performance. Even more crucially, this Court has also noted that the conduct of the party prior to the onset of the COVID-19 pandemic is also required to be considered.
61. So, it is his submission that if it is seen from the aforesaid perspective as well, the Tribunal has arrived at a completely correct conclusion inasmuch as the defaults that had arisen even prior to the onset of the COVID-19 pandemic would amply demonstrate that the petitioner could not seek to use the COVID-19 pandemic as a carte-blanche to justify its frequent and unrepentant breaches of the solemn contractual obligations".CS (Comm) No. : 65/2021 27/43
40. It was submitted by counsel for plaintiff that in the present suit also, defendant with malafide intent planned to wriggle out of the lease deed dated 08.09.2018 and locked the outlet and intimated the same vide email dated 20.03.2020 (Exhibit PW1/C) much prior to lockdown. It was further submitted that the 'balance rent' was not in nature of liquidated damages but was in the nature of debt for which reliance was placed upon Tower Vision India Private Limited, India Bulls Properties P. Ltd & Manju Bagai.
41. Per contra, it was submitted by Ld. Counsel for defendant that amount of damages stipulated in a lease agreement are 'unliquidated damages'. Such damages are required to be specifically pleaded and proved and cannot be granted in favour of the Party complaining of breach merely due to such stipulation in the agreement. Reference was made to :
Manju Bagai v. Magpie Retail Ltd.,
MANU/DE/2913/2010:
" damages is compensation for the wrong suffered by the claimant and the loss incurred by him but this is subject to the rule that claimant must take reasonable steps to avoid their avoidable accumulation" .
Kailash Nath Associates vs. Delhi Development Authority, MANU/SC/0019/2015:
" 43. ...........
1. Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre-estimate of damages fixed by both parties and found to be such by the Court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the court cannot grant reasonable compensation".CS (Comm) No. : 65/2021 28/43
L.R. Builders Pvt. Ltd. & Anr. Vs. Goldenera Leisure & Entertainment Pvt. Ltd., CS (COMM.) No. 1438/2016 Deepak Chopra vs. FLAKT (India) Pvt. Ltd., 2020 SCC Online Del 103:
" Rent of the lock-in period in a lease deed cannot be claimed without pleading loss from the date of vacation by tenant of the property prior to expiry of term of lease ".
Vivek Khanna vs. OYO Apartments Investments LLP, 2023 SCC Online Del 5792 :
" Liquidated damages are not payable merely as a penalty or breach of contract, if no loss is suffered. It is the quantification of loss that would require no further ascertainment by court which would quantify the same as per the pre-estimated loss or formula agreed to by the parties as liquidated damages in the contract".
Greenhills Export (P) Ltd. & Ors. Vs. Coffee Board, 2001 SC Online Kar 205:
" 12. The Supreme Court in Union of India v Raman Iron Foundry, reiterated the principle thus:
"It therefore makes no difference in the present case that the claim of the appellant is for liquidated damages. It stands on the same footing as a claim for unliquidated damages. "Now the law is well-settled that a claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a Court or other adjudicatory authority. When there is a breach of contract, the party who commits the breach does not eo instante incur any pecuniary obligation, nor does the party complaining of the breach becomes entitled to a debt due from the other party. The only right which the party aggrieved by the breach of the contract has is the right to sue for damages".
13. The position is the same whether the claim is for unliquidated damages under Section 73 of the Contract Act or for liquidated damages under Section 74 of the Contract Act. While there may be difference in regard to ascertainment of loss or the quantum of damages awardable under Sections 73 and 74, the basic requirement for both is a finding by a competent Court (or Arbitrator) that the person against whom the claim is made, has committed breach and has incurred a pecuniary liability".
42. It was submitted that plaintiff has neither pleaded nor proved any loss that may have been incurred to the Plaintiff CS (Comm) No. : 65/2021 29/43 owing to early vacation of the suit property by Defendant No.1, and hence, Plaintiff is not entitled to any damages for the alleged breach of Lease Agreement.
43. In Tower Vision India Private Limited Vs. Procall Private Limited 2012 SCC Online Del 4396 (supra), it was observed that the breach of a contract does not give rise to any debt and the only right that accrues to the person who complains of such breach has the right to file a suit for recovering damages. It was held that the law is well settled that a claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a Court, and such position has held to be the same for damages under Section 73 or 74 of the Indian Contract Act.
44. It was also submitted by Ld. Counsel for defendant that if plaintiff's interpretation is taken as correct that the liability arises as a 'debt', there is no requirement for the Plaintiff to approach this Court with a suit for recovery and no power of adjudication remains with this Court, which itself evidences the fault in such interpretation. Moreover, plaintiff himself claimed the recovery of outstanding rent in the form of damages and not in the form of 'debt'. Therefore, the incorporation of pre-estimated damages in a contract cannot be construed as 'debt'.
45. In 'Tower vision India' (supra) in answer to the reference "whether any contract for rendering of service/use of site, a stipulation to pay an amount for the lock-in period , is an admitted debt within the meaning of section 433 (e) of the Companies Act or whether the same is in the nature of damages", it was noted that :
CS (Comm) No. : 65/2021 30/43" the party who suffers by the breach of contract is entitled to receive from the defaulting party, compensation for any loss or damage caused to him by such breach, which naturally arose in usual course of things from such breach, or which the two parties knew when they make the contract to be likely the result of the breach of contract. This provision makes it clear that such compensation is not to be given for any remote or indirect loss or damage sustained by reasons of the breach. The underlying principle enshrined in this Section is that a mere breach of contract by a defaulting party would not entitle other side to claim damages unless the said party has in fact suffered damages because of such breach. Loss or damage which is actually suffered as a result of breach has to be proved and the plaintiff is to be compensated to the extent of actual loss or damage suffered. When there is a breach of contract, the party who commits the breach does not eo instant i.e. at the instant incur any pecuniary obligation, nor does the party complaining of the breach becomes entitled to a debt due from the other party. The only right which the party aggrieved by the breach of the contract has is the right to sue for damages. No pecuniary liability thus arises till the Court has determined that the party complaining of the breach is entitled to damages. The Court in the first place must decide that the defendant is liable and then it should proceed to assess what the liability is. But, till that determination, there is no liability at all upon the defendant. Courts will give damages for breach of contract only by way of compensation for loss suffered and not by way of punishment".
46. Ld. Counsel for plaintiff in written submissions filed on record seems to have referred to wrong pagination. Reference was made to page 61 para 118 of of Tower Vision India Private Limited, page 63 para 119 and 120 and different paras and pages of M/s Halliburton Offshore Services Inc Vs. Vedanta Ltd. O.M.P. (1) (CMM) No. 88/2020, which pagination and para numbers were not correct. However judgments have been perused.
47. In Tower Vision India, reference was made to E-City Media Private Limited a Private Limited Company Vs. Sadhrta Retail Limited a Public Limited Company, (2010) 153 Comp. Cas 326 (Bom.), wherein court observed the following:
" (i) A "Debt" is a sum of money which is now payable or will become payable in future by reason of a present obligation. The existing obligation to pay a sum of money is the sine qua non of a debt. "Damages"
is money claimed by, or ordered to be paid to; a person as compensation for CS (Comm) No. : 65/2021 31/43 loss or injury. It merely remains a claim till adjudication by a court and becomes a "debt" when a court awards it.
(ii) In regard to a claim for damages (whether liquidated or unliquidated), there is no "existing obligation" to pay any amount. No pecuniary liability in regard to a claim for damages, arises till a court adjudicates upon the claim for damages and holds that the defendant has committed breach and has incurred a liability to compensate the plaintiff for the loss and then assesses the quantum of such liability. An alleged default or breach gives rise only to a right to sue for damages and not to claim any "debt". A claim for damages becomes a "debt due", not when the loss is quantified by the party complaining of breach, but when a competent court holds on enquiry, that the person against whom the claim for damages is made, has committed breach and incurred a pecuniary liability towards the party complaining of breach and assesses the quantum of loss and awards damages. Damages are payable on account of a fiat of the court and not on account of quantification by the person alleging breach.
(iii) When the contract does not stipulate the quantum of damages, the court will assess and award compensation in accordance with the principles laid down in Section 73. Where the contract stipulates the quantum of damages or amounts to be recovered as damages, then the party complaining of breach can recover reasonable compensation, the stipulated amount being merely the outside limit.
(iv)...
(v) Even if the loss is ascertainable and the amount claimed as damages has been calculated and ascertained in the manner stipulated in the contract, by the party claiming damages, that will not convert a claim for damages into a claim for an ascertained sum due. Liability to pay damages arises only when a party is found to have committed breach. Ascertainment of the amount awardable as damages is only consequential."
48. In Manju Bagai Vs. Magpie Retail Ltd, MANU / DE / 2913/2010, it was observed that :
" Even otherwise the claim for liquidated damages is not sustainable. The distinction between liquidated and un-liquidated damages is well settled. Mere use of the term liquidated damages in a document cannot be the criteria to determine and decide whether the amount specified in the agreement is towards liquidated damages or un-liquidated damages. Amount specified in an agreement is liquidated damages; if the sum specified by the parties is a proper estimate of damages to be anticipated in the event of breach. It represents genuine covenanted pre-estimate of damages. On the other hand, un-liquidated damages or penalty is the amount stipulated in terrorem. The expression penalty is an elastic term but means a sum of money which is promised to be paid but is manifestly intended to be in excess of the amount which would fully compensate the other party for the loss sustained in consequence of the breach. Whether a clause is a penalty clause or a clause for payment of liquidated damages has to be judged in the facts of the each case and in the background of the relevant factors which are case specific."CS (Comm) No. : 65/2021 32/43
49. In no unambigious terms, it has been made clear by Hon'ble Courts in judgments (supra) that the defendants cannot be held liable to pay the loss which plaintiff could have avoided or which arises out of the neglect and failure of the plaintiff to take such steps and mitigate losses. Damages are compensation for the wrong suffered by the plaintiff and loss incurred by him but this is subject to the rule that plaintiff must take reasonable steps to avoid their avoidable accumulation. The onus in this regard is on the plaintiff to show that quantum of damages and losses which could not have been prevented. Thereby the duty is casted upon the plaintiff to take all reasonable steps to mitigate losses consequent on the breach and debars him from claiming any part of the damage which is due to his neglect to take such steps.
50. Dag Pvt. Ltd. Vs. Ravi Shankar Institute for Music and Performing Arts (supra) referred by Ld. Counsel for plaintiff is distinguishable . Ld. Counsel for defendant also sought to specify that the tenant in DAG started defaulting from the beginning of lease deed, there was 'force majeure' clause in the lease deed, tribunal in DAG considered rent free period of 12 months, landlord in DAG had proved its attempt to mitigate the losses. All these facts are distinguishable from the facts of instant case. Further, Hon'ble High Court while referring to scope of judicial review in context of section 34 of Act of 1996, dismissed the petition which, as rightly submitted by Ld. Counsel for defendant, is opposed to civil jurisdiction being exercised by this court. Judgment of Ramanand & Ors (Supra) is also distinguishable as specified by Ld. Counsel for defendant that the tenant was not allowed suspension of rent during the Covid-19 CS (Comm) No. : 65/2021 33/43 period, a decree for eviction had been passed against the tenant in 2017 itself, appeal wherefrom was dismissed, neither the parties had entered into a lease agreement nor the tenant was a tenant anymore since the passing of eviction decree. Further, the tenant chose to continue with the property without paying any rent which is contrary to the case in hand where the defendants had handed over the possession of the suit property.
51. In this matter, contract/lease was terminated by the defendants during the lock-in period. Keys of the demised premises were handed over to the plaintiff on 17.07.2020, thereby in absence of any concession or reduction in rent permitted by plaintiff, defendant was under obligation to pay rent for the said period i.e.till the vacation of the premises/handing over of the keys to the plaintiff. Subsequent thereto, it is for the plaintiff to establish on record that it had taken all reasonable steps to avoid the losses. Onus is upon the plaintiff to establish on record the quantum of damages suffered by him after discharging the onus with regard to its duty to take all reasonable steps to mitigate the losses consequent on the breach.
52. Plaintiff concentrated on claim of entire rental towards remaining lock-in period and did not plead about actual losses suffered during lock-in-period or its efforts to mitigate the losses during said period. However, in his cross-examination, defendant was able to extract the admission of PW1 with regard to rented premises having been put to use during the lock-in period. Plaintiff thereby shall not be entitled for unjust enrichment for the period when the property in question was put to use and plaintiff was earning and deriving the income/rental from the same.
CS (Comm) No. : 65/2021 34/4353. PW1 in cross-examination denied suggestion that he had not incurred any financial losses due to premature termination of lease agreement as the demised premises was given on rent after the same was vacated by the defendant. He stated that he had filed documents on record that he had suffered loss due to premature termination of the agreement, however was not able to trace any such documents filed on record. He admitted that after vacation of the demised premises by defendant, restaurant in name and style of 'Punjabi Gali' was opened. Albeit, he stated that the same was opened by him after 3/4 months. He also stated that lateron, the demised premises was rented out to a grocery shop/departmental store by the name of " Apna Bazar" and sought to clarify that he had incurred losses in running of restaurant " Punjabi Gali", therefore he rented out the same to the departmental store @ Rs. 4.75 lacs per month for the basement and the ground floor. There was no controversion to the assertion of plaintiff that the restaurant was opened by him after 3/4 months of vacation of the premises by defendant. Though it is correct that the damages which are actually suffered as a result of breach have to be proved and plaintiff is to be compensated to the extent of actual loss or damages suffered. The damages for breach of contract further are to be awarded only by way of compensation for loss suffered and not by way of punishment.
54. " The rule applicable for determining the amount of damages for the breach of contract to perform a specified work is that the damages are to be assessed at the pecuniary amount of difference between the state of the plaintiff upon the breach of the contract and what it would have been if the contract had been performed and not the sum which it would cost to perform the CS (Comm) No. : 65/2021 35/43 contract, though in particular cases the result of either mode of calculation may be the same. The measure of compensation depends upon the circumstances of the case. The complained loss or claimed damage must be fairly attributed to the breach as a natural result or consequence of the same. The loss must be a real loss or actual damage and not merely a probable or a possible one. When it is not possible to calculate accurately or in a reasonable manner, the actual amount of loss incurred or when the plaintiff has not been able to prove the actual loss suffered, he will be, all the same, entitled to recover nominal damages for breach of contract. Where nominal damages only are to be awarded, the extent of the same should be estimated with reference to the facts and circumstances involved. The general principle to be borne in mind is that the injured party may be put in the same position as that he would have been if he had not sustained the wrong". (Tower Vision India Private Limited Vs. Procall Private Limited 2012 SCC Online Del 4396).
55. Plaintiff though has not stipulated in categorical terms as to the quantum of loss or damages caused to the plaintiff because of premature termination of the contract by defendant during the lock-in period. Nevertheless in view of the uncontroveted testimony of PW1 that the restaurant was opened by him after 3/4 months, plaintiff is definitely entitled to claim damages for this period, considering the fact that upon vacation of the premises by the defendant which was also during the covid period, it would not have been possible for the plaintiff to lease out the premises again immediately. Therefore, plaintiff is entitled for the compensation for the intervening period.
CS (Comm) No. : 65/2021 36/4356. Period of 3/4 months, as stated by plaintiff to open another restaurant in the said premises, is the reasonable period which could or would have been taken by the plaintiff. Plaintiff has not clarified on record the date for closure of the said restaurant . Further, in cross-examination, plaintiff also stated about premises having been rented out @ Rs. 4.75 Lacs per month for the basement and ground floor. It was submitted by Ld. Counsel for plaintiff that the property let out to the defendant was only ground floor @ Rs. 4,10,000/-. Albeit, plaintiff did not specify the rental value for the basement nor clarified the quantum of losses suffered by him in the rental during the lock-in period.
57. Lease agreement executed between plaintiff and the subsequent lessee i.e. Sh. Yash Goyal and Rohan Wadhwani was brought on record in the evidence of PW1 as Ex. PW1/DA. Lease agreement was dated 12.03.2021 for basement and ground floor of the property with rent @ Rs. 4,75,000/- per month for first three years and thereafter @ Rs. 5,32,000/- per month for the next three years. Fit-out period for Ex. PW1/DA was w.e.f. 10.3.2021 to 30.04.2021, without payment of rent and the rent was payable w.e.f. 01.05.2021. Ground floor of the property itself was let out in sum of Rs. 4,10,000/- in the year 2019, therefore there is apparent decline in the rate of rent, however plaintiff has not separately pleaded or specified the rental value of the basement or the losses in renting out the ground floor and basement of the property at Rs. 4,75,000/-. Plaintiff has not brought on record the quantum of actual losses suffered and the actual period for suffering of damages/losses, therefore, it is not possible to calculate accurately or in a reasonable manner, the actual amount of loss incurred. Nevertheless, in terms of settled CS (Comm) No. : 65/2021 37/43 proposition of law, when the plaintiff has not been able to prove the actual loss suffered, he will be entitled to recover nominal damages for breach of contract extent of which would be estimated with reference to the facts and circumstances involved. None of the parties have brought on record the rental value for the basement or even the extent of construction/availability of space/ usage/purpose. In absence of any material/evidence available on record, the rental value of basement is assessed at Rs. 1,50,000/- per month considering the overall circumstances of the case. The ground floor and basement both were rented out at rent of Rs. 4,75,000/- per month. Ground floor was rented out to defendant @ Rs. 4,10,000/- . After deducting the above assessed rental value of basement in sum of Rs. 1,50,000/-, the rental for ground floor works out to Rs. 3,25,000/- . Thereby plaintiff suffered loss in sum of Rs. 85,000/- per month. Plaintiff is accordingly held entitled for losses/damages due to pre-mature termination by defendant M/s Cosmic Kitchen Pvt. Ltd. during the lock-in period, as following:
* Rental @ Rs. 4,10,000/- per month w.e.f. 7 th April 2020 to 17th July 2020 (date of handing over of possession).
* W.e.f. 18th July 2020 to 17th October 2020 - @ Rs. 4,10,000/- per month (The premises being lying vacant) *W.e.f. 18.10.2020 to 10.03.2021 - Nil (Restaurant in name of Punjabi Gali being operational and the date of closure not mentioned by plaintiff).
* W.e.f. 10.03.2021 to 30.4.2021 @ Rs. 4,10,000/- (fit- in period for next tenant which plaintiff would not have to grant but for termination of lease during CS (Comm) No. : 65/2021 38/43 lock-in period).
* W.e.f. 01.05.2021 to 07.05.2022 - @ Rs. 85,000/- per month (being the difference of rent till the end of lock- in period).
58. Plaintiff has further claimed electricity charges. Defendant was also informed with regard to pending electricity bill. Vide email dated 11 July 2020, defendant was called upon to make the payment for the electricity bill in sum of Rs. 3,26,500/- . Copy of electricity bill was placed on record as Ex. Mark-A. Ld. Counsel for defendant submitted that plaintiff had requested BSES to increase the load of electricity connection for which security amount of Rs. 2,11,500/- was added by BSES in the electricity bill. As the security amount shall be refunded to the plaintiff at later stage, therefore this amount cannot be claimed from the defendant. More so, load was increased only in March 2020 i.e. at the time of vacation of suit property by defendant, therefore defendant was not liable to pay the said amount.
59. Reply to said email communication was made vide email dated 12.08.2020 whereby plaintiff was conveyed to adjust the payment against the electricity bill upto June 2020 from the security amount. It was submitted that defendant had always been ready and willing to pay its share of the electricity amount, whereas plaintiff has not assigned any reason for increase of electricity bill from Rs. 3,26,000/- to 3,42,845/- which has been claimed now, therefore, defendant denied its liability to pay the unilateral increased amount.
60. DW1 admitted that they had demanded for enhancement of electricity load and stated that defendant had applied for enhanceent of electricity load, however, he did not know if it was CS (Comm) No. : 65/2021 39/43 demanded through landlord but admitted that BSES thereafter raised a demand of Rs. 2,11,500/- towards the enhancement of load vide bill dated 30.07.2020.
61. Contention of counsel for defendant with regard to security amount included in the bill amount in sum of Rs. 2,11,500/- is found correct. The amount of security shall be refundable to the plaintiff only, therefore plaintiff cannot claim the security amount for the enhanced load from the defendant. The electricity bill is in sum of Rs. 3,26,000/- and plaintiff has claimed the amount at Rs.
3,42,845/- including the penalty. Plaintiff had been informed to adjust the amount of electricity bill from the security amount. Plaintiff has also not placed on record the penalty amount, if any, imposed for delayed payment of electricity bill, if any. In these circumstances, plaintiff is held entitled for amount of Rs. 1,14,500/- after deducting Rs. 2,11,500/- from Rs. 3,26,000/-, towards electricity charges.
62. Plaintiff has further sought sum of Rs. 1,50,000/- towards repair of the water leakage pipeline as well as the charges for repair work for the alleged damage caused to the property by the defendant. As stated by Ld. Counsel for defendant, the said issue of water leakage was brought to light by the Plaintiff on 15.07.2020 for the first time, whereas Defendant had vacated the suit property in June 2020 itself and also offered to handover the keys on 07.06.2020 while terminating the Lease Deed, therefore, any damage that may have occurred in the suit property subsequent to vacation of suit property by the Defendant is not attributable to Defendant.
63. Plaintiff had conveyed to defendant vide email dated 15.07.2020 with regard to the water leakage problem as was CS (Comm) No. : 65/2021 40/43 informed to the plaintiff by neighbours. It is also correct that defendant had already offered to hand over the keys to the plaintiff and also already informed with regard to closure of its operations from the premises in question, though had handed over the actual physical possession of the property to plaintiff only on 17.07.2020.
64. PW1 stated that he did not know whether the premises was open or locked but these were the guards of the defendant who were guarding the premises. He denied that issue of leakage would not have arisen if he had accepted the offer of the defendant and had taken the keys of the demised premises when offered. He admitted that he had filed any bill of expenses incurred for the repair of water pipeline. The word "not" seems to be missing from the said statement as no such bill of expenses was filed on record and the answer of PW1 apparently could be that he had not filed any bills of expenses incurred for the repair of the water pipeline.
65. Nevertheless, the repair cost for the alleged water leakage has not been proved on record by the plaintiff. In absence of any document or substantial evidence in support of the assertion of plaintiff with regard to incurring cost for repair of the water leakage, no amount can be awarded in favour of plaintiff.
66. Plaintiff has further claimed the expenses towards repair work. Though there was reference of CD of work as mentioned in the documents of plaintiff and affidavit of evidence , however, as brought on record by Ld. LC, no such document or computer CD as mentioned in the affidavit was on record. DW1 stated that he was not aware if any damage was caused to the demised premises while uninstalling and removing the generator from the CS (Comm) No. : 65/2021 41/43 roof top. This witness was confronted with printout of pictures of uninstalling the generator which are 'Mark A (colly)'. Witness stated that the said pictures appear to be that of uninstalling of generator, however he was not sure about the ame. He was again confronted with the printout of other picture 'Mark B' showing some damage to the tiles etc. but this witness stated that he could not say if the said pictures were of the damages caused to the demised premises. DW1 also stated that all the belongings were removed from the demised premises just before the date when they first time approached for handing over the keys of the demised premises to the plaintiff. Defendant had not taken any photographs of the demised premises at the time of vacation . DW1 was not personally present at the time of vacation of premises and he had no idea as to which fitments were removed at the time of vacation of the demised premises. Questions were put to DW1 and suggestions were also given with regard to the damage caused to the property in question while uninstalling. Nevertheless, plaintiff himself did not state about the cost of repairs qua the alleged damage caused by the defendant to the demised premised. For the failure of the plaintiff to establish the expenses incurred for the abovesaid claim, no amount can be awarded in favour of plaintiff.
67. Plaintiff has claimed interest @ 24% p.a. from the date of filing of suit till realization. There was no agreement between the parties with regard to payment of interest at the rate as claimed by plaintiff or even otherwise. In the peculiar circumstances of the case, plaintiff is not awarded any interest, however, if defendant fails to clear the payment within one month, decreetal amount shall entail the payment of interest @ 9% p.a. after one month of the CS (Comm) No. : 65/2021 42/43 Judgment till realization. Both these issues are answered accordingly.
68. Relief (issue no.5):- Suit is accordingly decreed with proportionate cost in favour of the plaintiff and against defendant M/s Cosmic Kitchen Pvt. Ltd, for recovery of following amount after adjustment of security amount in sum of Rs. 16,40,000/-. * Rental @ Rs. 4,10,000/- per month w.e.f. 7th April 2020 to 17th July 2020 (date of handing over of possession).
* W.e.f. 18th July 2020 to 17th October 2020 - @ Rs. 4,10,000/- per month (The premises being lying vacant).
* W.e.f. 18.10.2020 to 10.03.2021 - Nil (Restaurant in name of Punjabi Gali being operational and the date of closure not mentioned by plaintiff).
* W.e.f. 10.03.2021 to 30.4.2021 @ Rs. 4,10,000/- (fit in period for next tenant which plaintiff would not have to grant but for termination of lease during lock-in period).
* W.e.f. 01.05.2021 to 07.05.2022 - @ Rs. 85,000/- per month (being the difference of rent till the end of lock- in period).
* Rs. 1,14,500/- towards electricity charges.
* If defendant fails to clear the payment within one month, decreetal amount shall entail the payment of interest @ 9% p.a. after one month of the Judgment till realization.
69. Decree sheet be prepared accordingly. After completion of formalities, file be consigned to record room.
Announced in the open (SAVITA RAO)
court on this 1st day DISTRICT JUDGE
of August 2024 (COMMERCIAL COURT)-01
(SOUTH) SAKET COURTS,DELHI
CS (Comm) No. : 65/2021 43/43