Bangalore District Court
M/S Air Avenue Suites vs M/S Gdbh And R Pvt Ltd on 19 June, 2025
Com AP 190/2024
KABC170036002024
IN THE COURT OF LXXXV ADDL. CITY CIVIL &
SESSIONS JUDGE, AT BENGALURU (CCH-86)
(Commercial Court)
THIS THE 19th DAY OF JUNE 2025
PRESENT:
SRI.ARJUN. S. MALLUR. B.A.L.LL.B.,
LXXXV ADDL. CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.A.P.NO.190/2024
BETWEEN:
1. M/S Air Avenue Suites
Partnership Firm,
Natakkal House, Majbal Kasargod,
Kerala - 671323
Represented By Its Managing Partners
Place Of Business At:
Air Avenue Hotel,
A-17, A-18, 6th Main Road,
Kempegowda International Airport Road,
Near Viva Toyota Showroom,
Chandramouleshwara Nagar,
Hunsamaranahalli,
1
Com AP 190/2024
Bengaluru - 562157
2. Mr.Mohammed Hanifiddin Kunhi
Proprietor Of M/S Air Avenue Suits
Having Its Office At Natakkal House
Majbal Kasargod
Kerala - 671323
Place Of Business At:
Air Avenue Hotel,
A-17, A-18, 6th Main Road,
Kempegowda International Airport Road,
Near Viva Toyota Showroom,
Chandramouleshwara Nagar,
Hunsamaranahalli,
Bengaluru - 562157
3: Udyawar Khadar Azeez
M/S Air Avenue Suites
Natakkal House, Majbal
Kasargod, Kerala 671323
: PETITIONERS/APPLICANTS
(Represented by Sri. Kamaluddin Ahmad, Advocate)
AND
1. M/S GDBH And R Pvt Ltd
A company incorporated under the companies Act, 1956,
Represented by its Authorized Signatory,
Mr. Prabhakar Santhanam,
Having its corporate office At No.3,
Kumara Krupa Road, Madhavanagar,
Bengaluru - 560001
2
Com AP 190/2024
2:Sri. M K Sripathi,
Sole Arbitrator
Arbitration And Conciliation Centre
Bangalore (Domestic And International),
3rd Floor, East Wing
Khanija Bhavan, Race Course Road
Bangalore - 560001
Represented by its Director.
DEFENDANTS/CLAIMANTS
(Represented by Sri. A.K.Law Chambers, Advocate)
Date of Institution of 20.12.2024
the suit
Nature of the suit Arbitration Suit under Sec. 34 of
(suit on pronote, suit Arbitration & Conciliation Act,
for declaration & 1996
Possession, Suit for
injunction etc.)
Date of
commencement of ---
recording of evidence
Date on which 19.06.2025
judgment was
pronounced
Total Duration · Year/s Month/s Day/s
· 00 05 30
(ARJUN. S. MALLUR)
LXXXV Addl.City Civil & Sessions Judge,
Bengaluru.
3
Com AP 190/2024
JUDGMENT
Petition under Sec.34 of the Arbitration and Conciliation Act 1996 seeking setting aside of the award passed by the Learned Sole Arbitrator in A.C.NO.597/2022 dated 20.09.2024.
Parties are referred as per their rank before the Arbitral Tribunal.
2. Facts in brief is as under:-
The claimant being a private limited company had entered into an agreement with the respondents called as Hotel Operation Agreement dated 18.05.2020 under which the operation of the hotel in the schedule premises was handed over to the claimant. The claimant was described as the operator where as the respondents were described as owners under the said agreement. The agreement comprises of various terms and conditions and under the said agreement and after coming into force of the said agreement out of 48 rooms 13 rooms were handed over by the claimant back to the respondents on 25.11.2020 and a NOC was issued permitting the to utilize 4 Com AP 190/2024 the property as per their discretion. Further on 04.03.2021 the remaining 35 rooms were also handed over to the respondents. Subsequently due to non performance of the agreement by the claimant the respondents vide email dated 25.01.2021 terminated the said agreement. During the subsistence of the agreement on 21.05.2020 the claimant observed certain infrastructural shortcomings in the said property and called upon the respondents to rectify the lapses and shortcomings. However though the respondents vide email dated 09.09.2020 acknowledged the shortcomings no action taken by them. It is further submitted that even after the outbreak of covid-19 pandemic the claimant made its best efforts to run the hotel by maintaining the staff and by undertaking minimum maintenance. The respondents instead of co-operating with the claimant started raising issues regarding payments and stopped making payments to the claimant. The claimant issued a letter dated 20.08.2020 waving of the management fee and incentive management fee for the period July 2020 to December 2020. The respondents approached the claimant stating that they were finding it difficult to service all the 48 rooms and requested to handover 13 5 Com AP 190/2024 rooms to another party to which the claimant agreed and handed over all the 13 rooms. This was done through a Handover Certificate duly signed by the parties dated 25.11.2020. It is further contended that the schedule property was plagued with several deficiencies. These were brought to the notice of the respondents through emails dated 04.12.2020, 24.12.2020 and 29.12.2020 but the respondents did not take any steps for rectifying the deficiencies. However on 25.01.2021 the 1 st respondent issued an email stating that the agreement with the claimant has been terminated with effect from 01.03.2021 on the ground that respondents were facing several problems with the services offered by the claimant and the required was not being generated from the hotel. The said email terminating the agreement was contrary to article 23 of the agreement.
(b) It is submitted that the claimant had incurred huge expenses to the tune of Rs.3,00,000/- for operating the hotel which was well within the knowledge of the respondents. The illegal termination at the hands of the respondents resulted in the claimant suffering losses to an extent of Rs.3,29,91,096/- under various heads. The 6 Com AP 190/2024 claimant issued a legal notice dated 15.03.2021 calling upon the respondents to pay a sum of Rs.64,22,273/- within seven days to which an evasive reply came to be issued by the respondents. Hence the claim before the learned arbitrator.
3. In response the respondent filed its statement of defence denying all the allegations made in the complaint contending that the termination of the agreement was strictly in accordance with the terms of the agreement and that the alleged losses claimed by the claimant is without any basis and without proper assessment of accounts. It is submitted that the Hotel Operation Agreement in strict sense amounted to a lease agreement under which the possession was delivered to the claimant and as the agreement was more than 11 months it had to be compulsorily registered and duly stamped and having not done the agreement is unenforceable in law. It is submitted that the claimant was running the hotel in the name 'My Space' without obtaining proper license and also has not registered the same under the GST portal and was not paying the GST. It is submitted that article 23 of the agreement was not applicable between January and 7 Com AP 190/2024 February 2021 as the Covid 19 pandemic second wave persisted. It is submitted that due to the claimant in not properly running the hotel respondent was not getting the desired revenue which resulted in the respondent not being able to pay the loan installments and suffer huge losses for which the respondents had to spend money out of his own pocket and therefore the respondent was fully justified in terminating the said agreement. It is submitted that the management incurring loss of Rs.60 lakhs and suffering the expense of Rs.3 lakhs as claimed will not arise and on what basis the amounts are claimed is also not forthcoming and on these grounds the respondent sought for rejecting the claim.
4. The Learned Sole Arbitrator has raised in all six issues. Before the Learned Sole Arbitrator claimant examined himself as P.W.1 and got marked documents at Ex.P.1 to P.32. The respondents examined as R.W.1 and got marked documents at Ex.R1 to R.4. The Learned Sole Arbitrator after considering the oral and documentary evidence on record allowed the claim in part directing the respondents to pay a sum of Rs.37,46,809/- with interest 8 Com AP 190/2024 at 12%p.a. from the date of award till realization and also a sum of Rs.1,00,000/- as fees..
5. Aggrieved by the award the respondents have preferred this petition contending that the Learned Sole Arbitrator has wrongly interpreted return of the 13 rooms as per the agreement dated 25.11.2020 under Ex.P.3 and also has misinterpreted the NOC issued as per Ex.P.4 and further has not considered handing over of the remaining 35 rooms on 04.03.2021. The Learned Sole Arbitrator has not considered the fact that as per Sec.62 of the Indian Contract Act the agreement is deemed to have come to an end and further the Learned Sole Arbitrator has not taken into consideration that the performance of the contract has become impossible or impracticable as per Sec.56 of the Indian Contract Act and also the claimant having permitted the respondents to discontinue performance of the contract has been barred under Sec.39 of the Contract Act from insisting upon performance of the contract or claiming damages in view of non performance. It is further contended that the Learned Sole Arbitrator has not at all taken into consideration these aspects and without proper 9 Com AP 190/2024 appreciation of evidence has passed the award on imaginary basis and awarded the amounts which has no basis whatsoever. It is submitted that the award passed by the Learned Sole Arbitrator is contrary to law and facts and is perverse not based on evidence and on these grounds sought for setting aside the award.
6. On service of notice the respondent No.1 appeared through counsel. However in-spite of providing sufficient opportunity the respondent No.1 has not filed any objections.
7. The arbitral record from the arbitration centre, Bengaluru was summoned.
8. Heard the Learned Counsel appearing for the petitioners. No arguments have been advanced by the learned counsel for the respondent No.1. Respondent No.2 being the Sole Arbitrator is a formal party to whom notice is dispensed. Perused the entire material on record.
10Com AP 190/2024
9. The points that arise for my consideration are as under:
(1) Whether the petitioners substantiates that the award passed by the Learned Sole Arbitrator in A.C.No.597/2022 dated 20.09.2024 is perverse oppose to public policy suffering from patent illegality appearing on the face of it requiring it to be set aside?
(2) What order?
10. My finding on the above Points are: -
Point No.1: In the Negative.
Point No.2: As per final order for the following:
REASONS
11. POINT NO.1:- As it could be seen from the award the Learned Sole Arbitrator after considering the oral and documentary evidence on record and after hearing the arguments of both sides has made the award under following heads:
11Com AP 190/2024 Basic Management Fee Rs.23,03,896/-
Incentive Management Fee Rs.9,13,980/- Direct Marketing associated expenses Rs.2,61,400/- Direct Sales related expenses Rs.37,080/-
Acquisition costs Rs.0 Salary Due Rs.94,142/- Pending billed management Rs.1,36,311/-
Totaling to Rs.37,46,809/-. The only ground that has been urged by the respondents is that the Learned Sole Arbitrator has wrongly interpreted the agreement dated 25.11.2020 at Ex.P.3 and the NOC that has been issued at Ex.P.4 and has wrongly concluded that the claimant has suffered loss due to illegal termination of the agreement.
Ex.P.3 is a property handover document which is signed by both the claimant and the respondents. Under this document 13 rooms have been handed over back to the owner i.e., the respondent on temporary basis subject to the condition that the claimant can recall the property within one month with one month notice from the owner as per the management contract agreement at its discretion. Further the respondents were at liberty to use the rooms at their own discretion. Ex.P.4 is the NOC issued by the claimant stating that the schedule property is not under the management contract of My Space hotels and the owner of the property i.e., the respondents can 12 Com AP 190/2024 use the same at their own discretion. However the said NOC was conditional NOC. It is the specific ground that due to outbreak of Covid 19 pandemic the claimant did not manage the hotel properly which resulted in the respondents suffering huge losses being unable to pay the EMI under the loans because of which the respondent was constrained to terminate the contract. It is the contention of the respondent that the Learned Sole Arbitrator has not considered the fact that clause 23 of the agreement would not be applicable as the claimant himself had consented and conceded for termination as the contract had become non performable. Article 23 of the agreement provides for the terms of the agreement. The said agreement is to be valid for 10 years from the date of operating of the hotel and clause 4 of Article 23 of the agreement provides for termination which is permissible when the hotel is sustaining a gross operating loss for 12 consecutive month form the date of commencement of the operation then under such circumstances the owner i.e., the respondent would have the right to terminate the agreement given 3 month written notice to the claimant. Admittedly the same is not followed by the respondents. No evidence is led before the Learned Sole Arbitrator 13 Com AP 190/2024 regarding the three months prior notice being issued by the respondents prior to terminating the agreement. The handover document and the NOC at Ex.P.3 and P.4 are not absolute documents but being conditional.
12. It is the contention of the respondent that the agreement had become non-performable on account of the Covid 19 pandemic and the performance of the contract had become virtually impossible and impracticable. It is the specific contention of the respondents that the Learned Sole Arbitrator has not considered Sec.56 of the Indian Contract Act in the right manner and therefore the award is bad in law. Sec.56 deals with an agreement to do impossible act. It says that any agreement to do an impossible act is in itself a void agreement. Further any contract to do any act under an agreement which has become impossible would amount to an unlawful act and where any person has promised to do something which is impossible or unlawful then he is liable to pay compensation to the promisee for any loss sustained by the said promise. Sec.56 of the Indian Contract Act has no applicability to the prevailing facts and circumstances. Even after the Covid and even after 14 Com AP 190/2024 the second wave the claimant has been running the hotel which of got abruptly terminated by the respondent. There is no evidence of record before the Learned Sole Arbitrator to substantiate that the contract entered into had become impossible to be performed.
The respondents further contend that the Learned Sole Arbitrator also has not taken into consideration the provisions of Sec.39. Sec.39 of the Indian Contract Act is with respect to effect of refusal of party to perform the promise only. It provides that when a party to a contract refuses to perform or has been disabled from performing the terms of the contract the promisee can terminate the contract unless by his conduct or words has agreed for continuance of the said contract. No where in this case either the claimant or the respondents have refused to perform the obligations under the said agreement and also they were disabled in any manner for performing the obligations under the operation agreement. Before the Learned Sole Arbitrator no evidence is produced to substantiate that the respondents had refused to perform their obligations under the contract. Likewise no evidence is there to substantiate that the claimant had refused to 15 Com AP 190/2024 perform his obligations under the contract. Therefore considering the existing facts and circumstances Sec.39 of Indian Contract Act also has no applicability.
It is also the contention of the respondent that the Learned Sole Arbitrator has not properly interpreted Sec.62 of the Indian Contract Act which provides for effect of novation, recession and alteration of contract. It provides that where the parties are agreed to substitute a new contract or rescind or alter the earlier contract, the original contract need not be performed. The claimants issuing handover document at Ex.P.3 and the NOC at Ex.P.4 does not amount to substitution of a new contract or rescinding from the terms of the earlier contract. In no terms the documents at Ex.P.3 and P.4 which are conditional documents can amount to conduct on part of the claimant in substituting the contract for a new one or rescinding form the earlier contract. Therefore the provisions of Sec.62 of Indian Contract Act also has no applicability to the prevailing facts and circumstances.
13. Apart from the above grounds the respondent have not urged any other grounds to hold that the award is 16 Com AP 190/2024 vitiated, perverse and is not based on proper appreciation of evidence. Except merely stating that the award is contrary to law, facts and circumstances, is not based on evidence, is arbitrary and perverse by itself is not sufficient to hold that the award is not valid in law. The provisions of Sec.34 itself makes it amply clear the Court has no power either to undertake a review on merits of the case or re-appreciation of the evidence. The respondents have totally failed to bring out any circumstances which would indicate that the Learned Sole Arbitrator has not considered the evidence on record nor has misinterpreted the evidence or passed the award in gross violation any provisions of law. The Learned Sole Arbitrator has undertaken a detailed analysis of the evidence on record and as against the claim of more than Rs.3,29,91,096/- has awarded a sum of Rs.37,46,809/-. The interest at 12% is also in accordance with the terms of the operation agreement entered between the parties and it cannot be said to be arbitrary. No circumstances are brought out by the respondents to hold that the award is perverse or is oppose to public policy or breach of any Indian Law rendering it illegal and liable to be set aside.
17Com AP 190/2024 In the result for the aforesaid reasons I answer Point No.1 in the Negative.
14. POINT NO.2:- For the aforesaid reasons, I proceed to pass the following.
ORDER
Petition filed under Sec.34 of the
Arbitration and Conciliation Act 1996 for setting aside the arbitral award passed by the Learned Sole Arbitrator in A.C.No.597/2022 dated 20.09.2024 is rejected with costs.
Office to send back original records to the Arbitration and Conciliation Centre, Bengaluru under proper acknowledgment.
Send soft copy of the judgment to both the parties on their respective email ids if furnished.
(Dictated to the Stenographer Grade-III, transcribed by her, corrected and then pronounced by me in open court on this the 19th day of June, 2025) (ARJUN. S. MALLUR) LXXXV Addl.City Civil & Sessions Judge, Bengaluru.
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