Madras High Court
M/S. Entex Private Limited vs M/S. Jain Jubilant Cards Pvt. Ltd on 25 September, 2023
Author: P.T. Asha
Bench: P.T. Asha
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 25.09.2023
CORAM
THE HONOURABLE Ms. JUSTICE P.T. ASHA
C.S.No.270 of 2018
&
A.No. 3746 of 2018
M/s. Entex Private Limited,
rep. by its Managing Director,
B.C.B. Reddy,
T/54, 2nd Floor, III Avenue,
Anna Nagar, Chennai 600 040. ... Plaintiff
Vs.
M/s. Jain Jubilant Cards Pvt. Ltd.,
rep. by its Managing Director,
Sushil Mehta,
No.157, North Usman Road,
T. Nagar, Chennai 600 017. ... Defendant
Prayer: Plaint filed under Order IV Rule 1 of O.S Rules and Order
VII, Rule 1 of the C.P.C read with Commercial Court Act, for
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directing the Defendant to pay to the Plaintiff a sum of
Rs.7,98,01,000/- together with future interest at the rate of 18% per
annum on the principal sum of Rs.6,59,73,000/- from the date of
plaint till date of realization, the transaction being one commercial in
nature.
For Plaintiff : Ms. Vasudha thiagarajan
For Defendant : Mr. A.K.Mylsamy
for M/s. A.K.Mylsamy Associates
JUDGEMENT
The suit is filed for directing the Defendant to pay to the Plaintiff a sum of Rs.7,98,01,000/- together with future interest at the rate of 18% per annum on the principal sum of Rs.6,59,73,000/- from the date of plaint till date of realization, the transaction being a commercial one.
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2. It is the case of the plaintiff that they are the owners of the suit schedule property. Under a lease deed dated 10.04.2011, the defendant was given a lease of the premises measuring 39,400 sq.ft., on a monthly rental of a sum of Rs.6,75,000/- and a sum of Rs.1,00,000/- for the terrace portion measuring 12600 sq.ft.
3. The plaintiff would submit that the defendant had paid an interest free deposit of Rs.50,00,000/- and as per terms of the agreement the total lease rental payable was a sum of Rs.7,75,000/-, which was to be paid on or before the 10th of every succeeding English calender month. The lease was for a period of 15 years with a lock-in period of 10 years commencing from 10.04.2011. There was also a clause that in case either of the party wished to bring the lease agreement to an end, the person so desiring shall pay damages at the rate of the rental for 2 years. That apart, it is also the contention of the plaintiff that the lease deed provided for enhancement of rent as 3/24 https://www.mhc.tn.gov.in/judis also the fact that the defendant / lessee had to pay service tax on the rentals.
4. The plaintiff would contend that with effect from October 2014, the defendant had stopped paying rents as also the amounts towards the service tax and ultimately on 03.07.2017 surrendered the premises, without clearing the arrears. The defendant thereafter issued a legal notice dated 16.10.2015 putting across false allegations that the plaintiff was resorting to extra – judicial methods to evict them from the premises and therefore seeking an injunction to protect their possession.
5. The plaintiff would submit that the said statement is absolute falsehood and on the contrary it was the plaintiff who was facing backlash from the defendant and fearing for his life, the Managing Director of the plaintiff had lodged a police complaint dated 20.10.2015. The plaintiff would submit that the defendant refused to 4/24 https://www.mhc.tn.gov.in/judis pay service tax contending that he is not liable to pay the same. When confronted with the legal implications, the defendant sought time to get opinion of his lawyer. Though the defendant had obtained an opinion stating that he should pay the tax, he has failed to pay the same.
6. As the arrears rents continued to mount, the plaintiff had issued a legal notice dated 15.06.2016 calling upon the defendant to pay a sum of Rs.1,58,83,625/- being the arrears of rent and a sum of Rs.26,27,216/- towards interest at the rate of 18% per annum from 10.11.2014 till the date of payment, Rs.56,56,082/- being arrears of service tax and Rs.17,02,337/- being interest of arrears of service tax and in all claiming a sum of Rs.2,58,69,260/-.
7. The plaintiff had also reserved their right to terminate the lease on account of breach. Since the lease agreement between the parties had envisaged settlement of dispute through arbitration, the 5/24 https://www.mhc.tn.gov.in/judis plaintiff had nominated one M.Soundarapandian, Retired District Judge as a sole arbitrator.
8. Though the defendant received the said notice, they did not come forward to clear the outstanding and on the contrary refused to concur with the nomination of the sole arbitrator. Thereafter, the plaintiff after obtaining legal opinion had met with the defendant to appraise with him of the implications of tax structure and the liability of the lessee to make such payment to the lessor for the services offered and rendered by it to the lessee. As on 31.07.2016, the outstanding was a sum of Rs.3,20,44,893/-.
9. The plaintiff thereafter filed an application under Section 9 of the Arbitration and Conciliation Act, to direct the defendant to furnish security and the same was also ordered. The defendant filed an application in A.No.2476 of 2017 to set aside the ex parte order and to deal with the application on merits. Though the parties had agreed to 6/24 https://www.mhc.tn.gov.in/judis refer their dispute to arbitration, however since the plaintiff has not registered the lease deed as provided under Section 17 of the Stamp Act and Section 47 of the Registration Act, the learned Judge had held that the proceedings before the Court under Section 9 was misconceived and dismissed the application. Similarly, O.P.No.593 of 2017 filed by the plaintiff under Section 11 of the Arbitration and Conciliation Act to refer the matter to Arbitrator was also not proceeded with since the lease deed was not properly stamped nor registered. Ultimately, the plaintiff has come forward with the above suit in question.
10. The plaintiff would submit that the defendant is deliberately, wantonly and intentionally not paying arrears of the rent and the service tax. The plaintiff would further submit that there has been an exchange of letters between the plaintiff and defendant, wherein the defendant themselves admitted to their occupying the plaintiff's premises and having failed to pay rentals. The plaintiff therefore 7/24 https://www.mhc.tn.gov.in/judis claimed a sum of Rs.7,98,01,000/- as detailed below:
S.No. Description Amount
1 Arrears of Rent from 01.11.2014 with Rs. 2,92,52,000/-
15% rental increase from 3rd year
completion till 30.06.2017
2 Interest on delayed rental at the rate of Rs. 1,38,28,000/-
18% p.a. till 03.01.2017
3 Service Tax due with department's Rs. 1,32,72,000/-
Interest till 30.06.2017
4 2 Years lock in period's penalty pre- Rs. 2,13,90,000/-
estimated compensation
5 Refurbishing of damages in property + Rs. 20,00,000/-
Unmaintained generator set
6 Non-payment of E.B. & Reconnection Rs. 59,000/-
charges
Total Rs. 7,98,01,000/-
11. The defendant on entering appearance has filed a written statement inter alia contending that the plaintiff cannot seek to assert any right under the lease deed since the lease deed is unregistered and unstamped document. The lease being for a period of 15 years, same is compulsorily registrable under Section 17 of the Registration Act and therefore under Section 49 of the Registration Act the document 8/24 https://www.mhc.tn.gov.in/judis cannot be received in evidence.
12. The defendant further submitted that they had been manipulated into taking the property on lease without the property being provided with necessary infrastructure to run the car dealership and services. In fact, the defendant at the time of signing the lease agreement had pointed out these discrepancies. Believing the “Sugar Coated words” of the plaintiff, the defendant had proceeded to sign the document. The defendant would further submit that they had not agreed to the 10 years lock in period at that juncture. The plaintiff had then stated that they would not insist upon this lock in period. However, this undertaking has now been observed in the breach.
13. The defendant would submit that they have spent excessive amounts to provide infrastructure facilities, like generator for power backup, power pumps etc., Though the plaintiff had undertaken to provide 125 KVA Gen Set, however, what was provided was only 55 9/24 https://www.mhc.tn.gov.in/judis KVA Gen Set. This anamoly was pointed out by defendant. However, the plaintiff had pleaded insufficient funds for installing 125 KVA Gen Set. Though the plaintiff had promised to provide two goods lift at the time of entering into the lease deed, the same was not provided and it was only one lift that was provided that too after a year. Fire and Safety facilities was only provided only after a year that too after several mail correspondence between the parties.
14. The defendant had informed the plaintiff about the importance of Car Water Wash Bay, which was also promised to be installed. However, the same was not provided for. Therefore, the defendant had invested a sum of Rs.2,50,000/- in the month of June 2014 to meet out their business requirements. The defendant would submit that they have spent over a sum of Rs.17,00,000/- towards infrastructure cost which is purely for the facelift of the premises. These expenses were also brought to the notice of the plaintiff. 10/24 https://www.mhc.tn.gov.in/judis
15. The defendant denied the arrears claimed by the plaintiff and submitted that they had taken the premise on a rental of Rs.75,000/- per month. The defendant would deny the allegations with reference to the payment of service tax on the rentals. The defendant submitted that although the agreement contained a clause that service tax would be provided by the defendant, however at the time of signing the agreement, the plaintiff assured the defendant that they would not be insisted upon. The defendant would reiterate the contention that the plaintiff's suit is liable to be dismissed since the claim is made on the basis of the unregistered lease deed which cannot be looked into for any reason. Therefore, they sought to have the suit dismissed.
16. It appears that this Court attempted to bring about settlement between the parties. However, the same was not successful. 11/24 https://www.mhc.tn.gov.in/judis
17. By order dated 20.06.2019, this Court had framed the following issues and the parties were directed to proceed to Trial:
“1.Whether the defendant is due and liable to pay R.7,98,01,000/- with interest to the plaintiff?
2.Whether the defendant is liable to pay interest at 18% p.a., on the principal sum of Rs.6,59,73,000/- from the date of the plaint till its realisation?
3.Whether the plaintiff is entitled to claim the sum of Rs.7,98,01,000/- on the basis of an unregistered lease deed dated 10.04.2011?
4.Whether the lease deed dated 10.04.2011 is a non est factum in the eyes of law since the defendant did not intend to execute it?12/24
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5.Whether the plaintiff is entitled to costs?
6.To what reliefs are the parties entitled to.”
18. Meanwhile, the defendant had objected to the marking of the lease deed dated 10.04.2011 (Ex.P.1). Therefore, the matter was posted before this Court. The lease agreement was forwarded to the Collector's Office in Chennai in the month of February 2020, for calculating stamp duty and penalty. Though the same was signed in February 2020 and reminder letters have been sent, there has been no response from the Collector's Office. Meanwhile, the plaintiff and the defendant had completed their oral evidence and had also filed their written arguments.
19. Ms. Vasudha Thiyagarajan, learned counsel appearing for the plaintiff would submit that the plaintiff has not based its case only upon the lease agreement but that they have also placed reliance on the correspondence between the parties, which would go to show that 13/24 https://www.mhc.tn.gov.in/judis the defendant has not only accepted that he had been inducted as a tenant but have also accepted monthly lease rentals. The learned counsel for the plaintiff would draw the attention of this Court to the correspondence and e-mails between the parties which has been marked as Ex.P.10 (letter dated 13.08.2014). The plaintiff under a letter dated 13.08.2014 has called upon the defendant to pay the rental dues effective from 10.04.2014 when the rental increase at the rate of 15% fell due.
20. The learned counsel would submit that to this letter the defendant had sent a reply e-mail dated 25.08.2014, wherein the defendant has accepted the lease deed. The learned counsel would submit that the defendant has admitted the rate of lease rental by virtue of this document and even without considering the lease agreement, the exchange of correspondence would prove the plaintiff's claim. The learned counsel would further submit that since there is a delay in the payment of lease rentals, the defendant is liable 14/24 https://www.mhc.tn.gov.in/judis to pay interest.
21. The learned counsel would fairly concede that they have not filed any document to show payment of service tax by the plaintiff nor the payment for any amounts towards the repair to the damages caused by the defendant. The learned counsel would submit that the plaintiff has filed Ex.P.13 to show the amount that they had paid to the electricity board for re-connecting electricity service, which has been disconnected. The learned counsel would therefore submit that the suit has to be decreed as prayed for.
22. Mr. A.K.Mylsamy, learned counsel appearing on behalf of the defendant would submit that the suit itself is not maintainable and no relief can be granted to the plaintiff as the entire cause of action is based upon the lease agreement and this lease agreement is an unregistered one. To date the plaintiff has not paid the stamp duty or penalty and therefore no reliance can be based only on the lease 15/24 https://www.mhc.tn.gov.in/judis agreement. The learned counsel would submit that the plaintiff as P.W.1 has in answer to question nos.2, 9 and 14 clearly admitted the fact that the lease agreement is unregistered and that they are claiming a right only on the basis of this lease agreement. Therefore, the learned counsel seeks to have the suit dismissed.
23. Heard the learned counsels on the either side and perused the records.
24. The plaintiff's case is that they had let out the suit schedule property to the defendant under a lease agreement dated 10.04.2011. No doubt, the lease agreement has not been marked and the same has been impounded for calculating the stamp duty as well as penalty, however, the plaintiff has proved the tenancy and the rate of rent by marking Ex.P.10, which is the correspondence series between the plaintiff and the defendant. In this exhibit under letter dated 13.08.2014, the plaintiff has sent a letter to the defendant calling upon 16/24 https://www.mhc.tn.gov.in/judis them to pay the dues as per the revised rate of rental effective from 10.04.2011. A perusal of the same would indicate that till 10.04.2014, the rent was at the rate of Rs.4,50,000/- and with effect from that day onwards, i.e., 10.04.2014 there is a 15% enhancement in the rentals. The plaintiff in the said letter has also sought for an enhancement in the rental in respect of the terrace portion. However, while responding to the said letter dated 13.08.2014, the defendant has admitted enhancement with reference to the demised premises at the rate of 15% but however refuted enhancement with reference to the terrace portion. The defendant had only sought time to make payments on the enhanced rate as it is their contention that they were going through difficult phase.
25. A perusal of the various correspondence which forms part of Ex.P.10, clearly proves the following facts:
(a)The defendant was a tenant in respect of the suit schedule property 17/24 https://www.mhc.tn.gov.in/judis
(b)The rent till 10.04.2014 was at the rate of Rs.4,50,000/- and with effect from 10.04.2014 there is an enhancement of 15% and therefore from 10.04.2014 the rent payable was a sum of Rs.5,51,250/-.
(c)There has been a default in the payment of the said rents.
26. In the light of the above, the arguments of the defendant that the plaintiff has not proved the tenancy and the rate of rent since they have not marked rental agreement dated 10.04.2011 pales into insignificance. Though the lease deed is not admissible in evidence, its execution has neither been denied by the defendant nor has the defendant come forward with a case that he has not taken the premises on lease. Therefore, the lease deed is not non est in the eye of law and the same can be received in evidence once the stamp duty and penalty are paid. As already stated the document is now pending before the Collector Office, Chennai. However, de hors the lease deed the 18/24 https://www.mhc.tn.gov.in/judis tenancy and rate of rent has been proved through Ex.P.10.
27. The plaintiff has claimed a sum of Rs.7,98,01,000/- under the following heads:
S.No. Description Amount
1 Arrears of Rent from 01.11.2014 with Rs. 2,92,52,000/-
15% rental increase from 3rd year
completion till 30.06.2017
2 Interest on delayed rental at the rate of Rs. 1,38,28,000/-
18% p.a. till 03.01.2017
3 Service Tax due with department's Interest Rs. 1,32,72,000/-
till 30.06.2017
4 2 Years lock in period's penalty pre- Rs. 2,13,90,000/-
estimated compensation
5 Refurbishing of damages in property + Rs. 20,00,000/-
Unmaintained generator set
6 Non-payment of E.B. & Reconnection Rs. 59,000/-
charges
Total Rs. 7,98,01,000/-
28. However since the suit is filed in the year 2018, the plaintiff would be entitled to claim arrears of rent only from 10.04.2014 till 03.07.2017, the date on which admittedly the defendant vacated and 19/24 https://www.mhc.tn.gov.in/judis handed over the vacant possession of the property.
29. Therefore, the plaintiff would be entitled to a sum of Rs.2,03,22,750/- towards arrears of rent from 10.04.2014 to 03.07.2017 ( 36 months and 26 days) at the rate of Rs.5,51,250/- per month. There is no agreement of payment of interest. Therefore, the claim of interest is denied. Likewise, the plaintiff has not been able to prove that they have paid service tax, therefore, the amount claimed under this head is also denied. The plaintiff have themselves given up their claim with reference to the lock in period. The expense for repairing the damages has also not been proved. The plaintiff has marked Ex.P.12 to show the payment of a sum of Rs.58,900/- towards arrears of electricity charges and re-connected charges. Therefore, the plaintiff is entitled to a sum of Rs.58,900/-. However, without interest. Therefore, part of issue no.1 is held in favour of the plaintiff. Part of issue no.1 and issue no.2 is held in favour of the defendant. 20/24 https://www.mhc.tn.gov.in/judis
30. The suit is therefore partly decreed, the plaintiff is entitled to a sum of Rs.2,03,22,750/- towards rental arrears and a sum of Rs.58,900/- towards refund of the arrears of electricity charges and penalty together with costs.
25.09.2023
Internet : Yes/No
Index :Yes/No
Speaking / Non-Speaking
kan
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List of witness on the side of the Plaintiff:
P.W.1 - Mr. B.C.B.Reddy
List of Exhibits marked on the plaintiff's side:
Ex.P.1 - copy of the Complaint dated 20.10.2015 by the plaintiff to the Inspector General of Police, Central Crime Branch, against Sushil Mehta of Jain Jubilant Cars Pvt.Ltd.
Ex.P.2 - office copy of the Lawyer's Notice dated 15.06.2016 by Plaintiff's advocate to Defendant(marked subject to objection).
Ex.P.3 - copy of the reply notice dated 21.06.2016(marked subject to objection)(seperate affidavit filed in common) Ex.P.4 - copy of the Affidavit in Application No.6791 of 2016 under Section 9 of the Arbitration Conciliation Act, High Court, Madras dated 08.08.2016(seperate affidavit filed in common).
Ex.P.5 - copy of the Judge's Summons in Appln.No.6791/2016, High Court, Madras dated 08.08.2017 (seperate affidavit filed in common).
Ex.P.6 - copy of the Order passed in Appin.No.6791/2016 directing the Defendant to furnish security dated 02.02.2017(seperate affidavit filed in common).
Ex.P.7 - copy of the Affidavit in Appln.No.2476 of 2017. in Appln.No.6791/2016 filed by Defendant, High Court, 22/24 https://www.mhc.tn.gov.in/judis Madras dated 15.04.2017(seperate affidavit filed in common).
Ex.P.8 - copy of the O.P.No.593/2017 filed by the Plaintiff against the Defendant under Section 11(4) of the Arbitration & Conciliation Act, 1996, High Court, Madras dated 27.07.2017(seperate affidavit filed in common).
Ex.P.9 - copy of the Common Order passed in Appin.No.2476/2017 and Applin.No.6791/2016 High Court, Madras dated 22.08.2017(seperate affidavit filed in common). Ex.P.10 - series of copy of the Letters and E-mails exchanged between the plaintiff & Defendant(Certificate under Sec.65B is filed)(marked subject to objection) Ex.P.11 - printout of the Statement of Accounts showing Head-wise amounts due and payable by the Defendant to the plaintiff (Certificate under Sec.65B is filed)(marked subject to objection).
Ex.P.12 - copy of the Estimation of Chartered Engineer (seperate affidavit filed in common)(marked subject to objection).
Ex.P.13 - copy of the EB bill receipt bearing No.1951546 (marked subject to objection)(separate affidavit filed). 23/24 https://www.mhc.tn.gov.in/judis P.T. ASHA. J, kan C.S.No.270 of 2018 25.09.2023 24/24 https://www.mhc.tn.gov.in/judis