Delhi District Court
Sapphire Diamond Exports Private ... vs M/S. Lilliput Kidswear Limited on 23 May, 2022
IN THE COURT OF MS. SHELLY ARORA
ADDITIONAL DISTRICT JUDGE01 (SOUTH EAST)
SAKET COURTS, NEW DELHI
CS - 11452/16
Sapphire Diamond Exports Private Limited
Having its registered office at :
D93, Okhla Industrial Area
PhaseI, New Delhi - 110020
Through its Director
Mr. Chand Bhalla
......Plaintiff
Versus
1. M/s. Lilliput Kidswear Limited
Having its registered office at
D95, Okhla Industrial Area, PhaseI
New Delhi - 110020.
2. Mr. Sanjeev Narain
Managing Director
D95, Okhla Industrial Area, Phase1
New Delhi - 110020.
Also at : E109, Greater Kailash Part2
New Delhi - 110048.
......Defendants
Date of Institution of suit : 03.08.2012
Date of Reserving of judgment : 12.05.2022
Date of Judgment : 23.05.2022
CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 1 of 46
JUDGMENT
1 By virtue of this judgment, the present suit for recovery of possession, recovery of rent and service tax deducted, damages / mesne profit filed by M/s. Sapphire Diamond Exports Private Limited (hereinafter referred as 'plaintiff') against M/s. Lilliput Kidswear Ltd. (hereinafter referred as defendant no.1) and its Managing Director Mr. Sanjeev Narula (hereinafter referred as defendant no.1), Mr. Kawaljit Singh Dhillon, Director (hereinafter referred as defendant no.2), Mr. Anurag Tiwari, Director ( hereinafter referred as defendant no.3) and Mr. Arun Jain, Director (hereinafter referred as defendant no.4) is being disposed of.
Plaintiff's case 2 Brief facts relevant to the disposal of the suit are summarized as under: 2.1 Plaintiff is the owner and landlord of the premises bearing number D93, Okhla Industrial Area, PhaseI, New Delhi - 110020 comprising of basement, ground floor, mezazanine floor, first floor with terrace, duly installed with three phase IndustrialCommercial power/light 93 K.W. as per BSES CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 2 of 46 CRN No. 2510096233& 52.97 K.W. Vide BSES CRN No. 2510096530 & Gensets (160 HP & 125 HP) (hereinafter referred as suit premises). The suit is filed through Mr. Niranjan Lal Garg who has been appointed as Attorney of the plaintiff in terms of Board Resolution dated 27th January 2012 as Authorised Representative. Defendant no. 1 is represented through its Authorised Representative Mr. Ravnish Kumar Advani, who also executed the Lease Deed dated 14.03.2011. Defendants approached the AR of the plaintiff company for taking the suit premises on lease and thus, a Registered Lease Deed dated 14.03.2011 was executed between the parties on a monthly rent of Rs. 7,25,000/ for a period of 9 years, Period of 36 months was meant to be lock in period out of total term of 9 years where in neither of the parties was allowed to terminate the Lease Deed except for the breach/default as mentioned in the said Deed. Post dated cheques for initial 3 years were handed over by the defendant number 1 to the plaintiff. The defendant no.1 deposited Rs. 43,50,000/ as security deposit, which was equivalent to 6 months lease rent, with the plaintiff as per Clause 3.4 of the Lease Deed. .Defendants assured the plaintiff to continue to make the timely payment of the lease rent in terms of Clause 3.5 of the Lease Deed. It was also agreed that the defendants shall deduct the CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 3 of 46 applicable tax at source from the rent and shall issue certificate for such deductions to the plaintiff.
2.2 It is further averred that the defendants made persistent defaults in making timely payment of the lease rental and also failed to make payment of service tax amount as agreed in the Lease Deed. It is further averred that the rental cheque for the month of December 2011, January, February and March 2012 were dishonoured. Accordingly, plaintiff served a notice dated 30th December 2011 in terms of Article 8.2 of the Lease Deed for termination of the Lease Deed and for peaceful and vacant possession of the suit premises in question and also to make arrears of both rent and service tax. No reply was given by the defendant to the said letter. The vacant possession despite receipt of notice was never handed over to the plaintiff and thus, the defendants are also liable to pay damages @ Rs. 50,000/ per day in terms of Article 8 of the Lease Deed. The Lease Deed was terminated vide notice dated 30th December 2012. It is stated that the plaintiff was constrained to issue another Legal Notice dated 15th March 2012 as the peaceful and vacant possession of the suit premises was not handed over in compliance of notice dated 30th December, 2012. It is stated that the defendants are in occupation of the premises with effect from CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 4 of 46 15th March 2012 and that despite receipt of the notice and 7 days clear period to handover possession of the premises. The defendants failed to handover peaceful and vacant possession of the premises by 22.03.2012 to the plaintiff. It is stated that the rental amount after deduction of the amount of the security deposit due against the defendant is Rs. 30,33,253/ till 31st July 2012. Damages/ Mesne Profit for the leased premises have been sought by the plaintiff since 1st August 2012. This suit accordingly has been filed by the plaintiff as the defendants failed to handover the vacant and peaceful possession of the premises in question despite the termination of the Lease Deed and failed to clear the arrears of rental service tax.
Defendants' case 3 In the Written Statement filed on behalf of defendants, defendants admitted having taken the suit premises on lease vide Lease Deed dated 14th March 2011 on the assurance of the plaintiff that a Completion Certificate will be provided by the plaintiff to the defendant with respect to the suit premises which was not provided till date. It is stated that the defendants had to incur huge expenses amounting to a sum of Rupees 4 crores in order to secure completion of suit premises and to avoid losses. It is further submitted that the suit premises was leased to CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 5 of 46 defendants on understanding that suit premises was free from encumbrances and liabilities but defendant had to suffer difficulties on multiple occasions on account of the lapse of the plaintiff to fulfill its obligation to MCD, Fire Department, DDA etc. with respect to completion of the suit premises /building as per the notified standards. It is further stated that Clause 7.8 of the Lease Deed burdened the plaintiff with the duty to carry out all necessary structural repairs in an expeditious manner but the suit premises was handed over to the defendants in an inhabitable condition and the requisite repairs or the maintenance works to make the suit premises habitable, were incurred by the defendants. It is submitted that the plaintiff has acted in material breach of understanding by way of Lease Deed as no cause of action subsists against the defendant. It is also submitted that any notice asking the defendant to vacate and handover the possession of the suit premises was not received.
Replication 4 Rejoinder to the Written Statement was filed by the plaintiff. 4.1 It is submitted that the defendants have consciously made false averments in the Written Statement which are liable to be rejected. It is further submitted that the defendants have been deliberately and blatantly continuing with the unauthorised possession of the premises since 15th March CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 6 of 46 2012. It is further submitted that the lessor at any point of time did not conceal any information regarding the suit premises to the lessee and that the status of the suit premises was duly apprised by the plaintiff to the defendant as also noted in various clauses reproduced in the Rejoinder in the Lease Deed. It is further submitted that the defendants were duty bound to take the necessary approvals and therefore cannot blame plaintiff for its own wrong. It is also submitted that the defendants have taken the suit premises on lease after satisfying themselves in all respects and that the suit premises was complete in all respects except for certain interiors which was also subsequently provided by the plaintiff. It is also submitted that any objection or complaint was never raised by the defendants with respect to any sort of hardship faced by the defendants with respect to the suit premises. It is further submitted that the defendants have been in continuous breach of the provisions, having persistently defaulted in making timely payment of rentals qua the leased property to the plaintiff.
4.2 It is further submitted that the defendants deliberately did not keep sufficient money in the bank account and later on blocked the same which led to dishonour of the cheques. It is further submitted that the defendants have been raising CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 7 of 46 false allegations against the plaintiff with the motive to avoid their well admitted liability and the plaintiff have at all times strictly complied with the terms and conditions of the Lease Deed and never deviated from the same. It is further submitted that the defendants, despite the receipt of termination notice dated 30th December 2012, avoided to comply with the same and failed to handover the peaceful and vacant possession of the suit premises. It is further submitted that the plaintiff also filed the original Speed Post receipt along with the plaint to substantiate the receipt of legal notice dated 15th December, 2012 by the defendants and further that despite receipt of notice dated 15th March 2012 whereby 7 days period was given to handover the peaceful possession of the premises, defendants refused to do so and thus, defendants continue to be in illegal occupation in the suit premises since 22nd March 2012.
Issues 5 Upon completion of pleadings, following issues were framed vide Order dated 31st March 2014 :
(I) Whether the plaintiff is entitled to possession of suit property bearing no. D95, Okhla Industrial Area, PhaseI, New Delhi - 110020, comprising of basement, ground floor, mezzanine floor, first floor with terrace? If so, to what CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 8 of 46 effect? OPP.
(II) Whether the plaintiff is entitled to damages @ Rs.
50,000/ per day w.e.f. 30.12.2011 till the date of handing over of the possession? If so, to what effect? OPP.
(III) Whether the plaintiff is entitled to an amount of Rs. 30,33.253/ being service tax recoverable from the rental amount w.e.f. December, 2011 till 31.07.2012? If so, to what effect? OPP.
(IV) Whether the plaintiff is entitled to interest @ 18% p.a.? If so, to what effect and for what period? OPP.
(V) Whether the suit of the plaintiff is liable to be rejected under Order VII R 11CPC ? OPD.
(VI) Whether the suit of the plaintiff is liable to be dismissed for suppression / concealment of the material facts? If so, to what effect? OPD.
(VII) Whether the plaintiff was in breach of any of the terms and conditions of the lease deed dated 14.03.2011? If so, to what effect? OPD.
(VIII) Relief.
Proceedings in the case 6 While Court was informed about liquidation status of defendant no.1 company, an opportunity was granted to Official Liquidator to file the Status Report of liquidation of the company vide Order dated 8th January 2018 passed by the Ld. Predecessor of the Court. Counsel for the Official Liquidator filed Status CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 9 of 46 Report supported with an affidavit on behalf of the Official Liquidator Shri Ravi Kumar Metta as noted in the Order dated 19th April 2018. It was conceded by counsel for the plaintiff as noted in the order dated 29th January 2019 that the plaintiff company has already received the possession of the suit property however arrears of rent / service tax etc. are yet to be recovered. Defendant no.2 was proceeded against exparte vide Order dated 23rd April 2019. Defendant no.3 and Defendant no. 5 were dropped from the array of the parties as per the submission made by counsel for the plaintiff as noted in the Order dated 29th January 2019 passed by Ld. Predecessor of the Court. Defendant no.4 was also deleted from the array of the parties vide Order dated 30th July 2019. Amended Memo of Parties was also filed on 19th September 2019. Now, thus, there are only 2 defendants, defendant no. 1 M/s. Lilliput Kidswear Limited and defendant no. 2 Sh. Sanjeev Narula, Managing Director, Lilliput Kidswear Ltd. In the suit to answer claim of plaintiff.
Evidence by the plaintiff 7 Plaintiff examined its Director Sh. Chand Bhalla as PW1 who tendered his evidence by way of affidavit Ex. PW1/ A and relied upon following documents :
CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 10 of 46 S. Ex. / Mark Description of document No. 1 Ex. PW1/1 Copy of Lease deed dated 14.03.2011 2 Ex. PW1/2 Copy of letter dated 16.05.2013 3 Mark A List of criminal complaints filed against (mentioned as the defendant before the Lower Courts Ex. PW1/3 in affidavit) 4 Ex. PW1/4 Copy of Termination Letter dated 30.12.2011 alongwith original postal receipt 5 Ex. PW1/5 Copy of Reminder Letter dated 15.12.2011 with original postal receipt 6 Ex. PW1/6 Copy of Reminder Letter dated 22.02.2012 with original postal receipt 7 Mark B (colly) Copy of Cheque dated 06.09.2011 (mentioned as alongwith returning memo Ex. PW1/7 in affidavit) 8 Ex. PW1/8 Certified Copy of Cheque dated 06.12.2011 alongwith returning memo 9 Ex. PW1/9 Copy of the Legal Notice dated 15.03.2012 alongwith original postal receipts 10 Mark C Copy of details of rent account alongwith (mentioned as interest till July 2012 Ex. PW1/10 in affidavit) CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 11 of 46 7.1 In cross examination by counsel for defendant no.1, PW1 submitted that he was aware that defendant no.1 company was under liquidation before the Hon'ble High Court of Delhi. He admitted that he did not file any claim before the Official Liquidator with respect to the company/defendant no.1. He admitted that the goods were shifted by the Official Liquidator from the suit premises vide Order dated 3 rd June 2016 and 12th June 2016 passed by the Hon'ble High Court of Delhi but he was not sure about the dates when and where the said goods were shifted. He further submitted that the suit premises were sealed by the MCD after the goods were shifted by the Official Liquidator and that he has not received the possession from MCD till date. He further submitted that he was not aware whether any Completion Certificate was issued by the authorities to the plaintiff company or that the same was filed by him with respect to suit premises or not.
He admitted that as per Clause 7.8 of Lease Deed, it was the duty of the plaintiff company to carry out the necessary structural repairs in an expeditious manner. He also admitted that it was the duty of the Lessor to attend all requisite major structural repairs to the demised premises at all times provided any such defects were not necessitated on account of negligence of the Lessee. He denied that the suit premises was handed over to the defendant in a less than habitable CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 12 of 46 condition or that any subsequent repairs or maintenance work were not carried out by the plaintiff. He denied that consequently defendant had to incur losses and expenses to carry out the necessary repairs and maintenance to make the suit premises habitable.
7.2 Plaintiff evidence was closed as per statement of counsel for the plaintiff vide order dated 28th February 2020.
Defendant's Evidence 8 No evidence sought to be led by the Official Liquidator on behalf of defendant no.1. Defendant no.2 was proceeded against exparte in this matter vide Order dated 23.04.2019. Other defendants were already ordered to be struck off. Matter was then listed for final arguments.
Court Proceedings 9 As per Status Report, the Official Liquidator was appointed vide Order dated 6th January 2014 with the direction to take over possession of all the assets and books of accounts of defendant company. Any action by Official Liquidator with regard to winding up of the company was stayed by Hon'ble Division Bench of Delhi High Court vide Order dated 17th April 2014.
CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 13 of 46 Defendant no. 1 company was permitted to be registered under Section 15(1) of SICA, 1985 as intimated vide letter dated 08.07.2015. The matter was adjourned sine die vide order dated 16th October 2015 with liberty to the parties to approach the court as and when the proceedings before BIFR are concluded. After the disposal of BIFR proceedings, the Official Liquidator was permitted vide Order dated 11th April 2017 to continue with the winding up proceedings in terms of Order dated 6 th January 2014.
10 The notice was issued to four ExDirectors including defendant no.2 in this case to handover assets, records and books of accounts of the company to Official Liquidator and file their respective statements of affairs and to get their Statement recorded under Rule 130 of the Companies (Court) Rules, 1959. Defendant no.2 ExCMD got his statement partially recorded under Rule 130. Subsequently, the Official Liquidator vide order dated 26th May 2017 and 11th December 2017 was directed to publish notice notifying claims from the creditors of the company. The fund position of the company under liquidation as on 28 February 2018 was Rs. 6,16,20,0842.2.
11 It is noted that an application under Order VII R 11 and Order IX R 7 CPC r/w Sec. 151 CPC was filed on behalf of defendant CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 14 of 46 no.2 seeking dismissal of suit qua him pleading that Directors cannot be held personally liable, towards the obligations of the company has been dismissed vide separate order dated 23.05.2022.
Arguments of plaintiff 12 Written Arguments were filed on behalf of the plaintiff wherein it is submitted that the defendants have not filed any document of any nature whatsoever to prove their defence as they are already exparte in the present suit.
12.1 It is further submitted that defendants have not filed any counterclaim or affidavit of admission/denial for cancellation / challenging the plaintiff's documents which were duly exhibited by the plaintiff during the cross examination of the Director of the plaintiff company. It is further submitted that the defendants have neither disputed the claims of the plaintiff company nor have filed any counter documents and that adverse inference is to be drawn against the defendant no.2 for not stepping into the witness box.
12.2 Counsel for plaintiff argued that the Lease Deed executed between plaintiff company and defendant no.1 company forms the basis of the present suit, which stands admitted in CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 15 of 46 the written statement filed on behalf of defendants. He has further argued that plaintiff have complied with all the legal requirements in terms of covenant of Lease Deed, however, defendant no.1 company persistently defaulted in payment of rent and thereafter payment of service tax. He further submitted that the suit premises has been sealed by SDMC on account of default of payment of service tax by defendant no.1 company.
Arguments of counsel representing Ld. Official Liquidator 13 Ld. Official Liquidator on behalf of defendant no.1, on the other hand, has submitted that he relies upon the written statement already filed on behalf of defendant no.1 company. He also submitted that the possession of the suit premises was duly handed over to the Director of plaintiff company. He has filed Local Commissioner's report in CA no. 2357/2016 filed on 23.07.2016 and copies of relevant orders dated 03.06.2016, 12.07.2016 passed by the Hon'ble Delhi High Court with respect to the appointment of Ld. Official Liquidator and the subsequent proceedings undertaken by him in compliance of the order of Hon'ble Delhi High Court.
Arguments of defendant no.2 (as mentioned in the application filed at the stage of final arguments) CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 16 of 46 14 It is pleaded that defendant no. 2 being Director is not liable in his personal capacity towards obligations of / on behalf of defendant no.1. It is stressed that no special role is attributed to Defendant no.2 that he actively participated or acted in collusion or connived to cause loss to the plaintiff, thus, case of the plaintiff ought to be dismissed qua defendant no.2.
Findings 15 My issuewise findings are as under : Issue nos. (V) and (VI) (V) Whether the suit of the plaintiff is liable to be rejected under Order VII R 11CPC ? OPD.
(VI) Whether the suit of the plaintiff is liable to be dismissed for suppression / concealment of the material facts? If so, to what effect? OPD.
15.1 Onus to prove both these issues was cast upon defendants.
Appearance was put on behalf of defendants initially upon service of summons of the suit, however subsequent to framing of issues, defendant no.2 was proceeded against ex parte. Defendant no.1 company subsequently, being under liquidation was represented by counsel for Official Liquidator Sh. Ravi Kumar Metta. No evidence has been led by the defendants to prove the aforementioned issues. Even the Written Statement filed on behalf of defendant no.1 do CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 17 of 46 not disclose any reason seeking rejection of plaint of the plaintiff for any statutory reason or that plaintiff can be held liable for concealment of any material fact whatsoever. Averments were made in the plaint well supported by documents which were subsequently affirmed and relied in evidence. No inference qua any concealment of material facts evidently can be drawn against plaintiff. Defendants have, thus, not been able to discharge burden to prove these issues, thus, issues no. (V) and (VI) are decided in favour of the plaintiff and against the defendants.
Issue No. (VII) (VII) Whether the plaintiff was in breach of any of the terms and conditions of the lease deed dated 14.03.2011? If so, to what effect? OPD.
15.2 Onus to prove this issue is also upon the defendants. It is pleaded in the Written Statement that defendants had to suffer difficulties on account of lapses on the part of plaintiff to fulfill its legal obligations with statutory agencies like MCD, Fire Department, DDA etc. with respect to completion of suit premises as per the notified standards. It was also alleged that suit premises were handed over to defendant in less than habitable condition and no maintenance works were carried out by plaintiff on account of which, in order to make CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 18 of 46 the suit premises habitable, huge expenses were incurred by defendant to carry out necessary repairs and maintenance work which was in breach of condition noted in the Lease Deed dated 14.03.2011.
15.3 Defendant has not led any evidence to show the lapses on the part of plaintiff with respect to obtaining necessary compliances as per the notified standards from various statutory authorities. No specifications have been provided by defendant for independent examination by the Court of any such mandates, which were obligatory on the part of plaintiff to fulfill. Further, there is nothing brought on record to decipher that the suit premises, in fact, was not in habitable condition and plaintiff was in breach of any express term of the Lease Deed for leasing out a property which required extensive structural repairs. PW1 affirmed in Evidentiary Affidavit Ex. PW1/1 that defendants have incorrectly contended about the suit premises having been handed over to them in less than habitable condition and that no subsequent repair work were carried out by plaintiff. PW 1 relied upon recital in Clause B of the Lease Deed Ex. PW1/1 that the lessee fully satisfied itself with respect to right, title, interest, design, specifications and quality of construction of the premises and assured the lessor of being CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 19 of 46 bound by the stipulations imposed by appropriate authorities and the terms and conditions of the agreement. PW1 also relied upon Clause 4.5 and Clause 5.4 of Lease Deed Ex. PW1/1 highlighting the obligation upon the lessee to obtain all the necessary approvals from the concerned authorities as might be required to carry out its activities in the demised premises and shall be solely responsible for any consequences arising out of breach. PW1 also took support of Clause 5.7 of Lease Deed in his evidentiary affidavit that the onus was on lessee for obtaining as well as keeping active any permissions / registrations require to run business activities in the suit premises and would solely be responsible to obtain those permissions requisite for commercial usage of the suit. PW1 also pointed out that Clause 7.8 of the Lease Deed only cast an obligation upon plaintiff to carry out major structural repairs, if necessitated during the subsistence of lease deed. PW1 affirmed that the losses on account of repairs / maintenance work as alleged by defendants was not on account of any damage requiring any major structural repairs, thus, the losses as contended on behalf of defendants was not a responsibility of the plaintiff under the terms of the lease deed.
15.4 During crossexamination of PW1 by Counsel appearing on CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 20 of 46 behalf of Liquidator for defendant no.1, PW1 admitted that it was the obligation of the plaintiff company to carry out the structural repairs in the suit premises as per mandate of Clause 7.8 of the Lease Deed dated 14.03.2011 Ex.PW1/1, however denied that the suit premises were handed over to the defendant in less than habitable condition or that extensive repairs were required in the suit premises, on account of which defendant had to incur huge expenses.
15.5 No evidence has been led on behalf of defendant to prove the condition of the suit premises when the same was handed over or that it required any repair or maintenance, which falls within the meaning of 'Structural Damage' to the property on account of which plaintiff stood in breach of the terms and conditions of the lease deed. Defendant has not refuted the affirmations made by PW1, in as much as that the responsibility for obtaining the necessary permissions or for keeping the permissions / registrations active during the subsistence of lease period was upon defendants. There is no contention about any dispute with respect to the land use of the subject property as Clause 4.5 clearly notes that the land use was industrial and any charges required or leviable by any statutory authority with respect to change in use would also be responsibility of the lessor. There is nothing CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 21 of 46 to decipher that plaintiff made any misrepresentation with respect to status of property or failed to fulfill the obligations cast upon it in terms of the covenants of Lease Deed. Clause 5.4 and Clause 5.7 clearly stipulates that defendants were to be responsible for obtaining necessary permissions to run the business or for using of the premises for commercial purpose.
15.6 There is no evidence to understand that the suit premises were handed over in less than habitable condition and that plaintiff deliberately failed to deliver on the promises made as per the terms of the Lease Deed. There is nothing to show that defendant had to incur expenses on account of lapse on the part of plaintiff having failed to carry out any major structural repair while it was so necessary and was requested for. As per Clause 4.3, lessor undertook to pay DDA Ground Rent and other DDA charges as the property was not freehold and also undertook complete responsibility to pay property tax, however, any charges leviable by any statutory authority with respect to usage of the premises was to be borne by the lessee. Defendant has not clarified that plaintiff has defaulted in making payment of any rental to DDA with respect to the premises, still not free hold or was in default of any property tax to MCD on account of which defendant had CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 22 of 46 to incur any losses or which can lead to any determination in favour of defendants that plaintiffs acted in breach of covenants of Lease Deed Ex. PW1/1.
15.7 Defendants have not been accordingly able to discharge burden to prove this issue, thus, issue no. (VII) is also decided in favour of the plaintiff and against the defendants.
Issue no. (I) (I) Whether the plaintiff is entitled to possession of suit property bearing no. D95, Okhla Industrial Area, Phase I, New Delhi - 110020, comprising of basement, ground floor, mezzanine floor, first floor with terrace? If so, to what effect? OPP.
15.8 Onus to prove this issue is upon the plaintiff. Sh. Chand Bhalla, one of the Directors of the plaintiff company, appeared as PW1 and affirmed the contents of the plaint vide his Evidentiary Affidavit Ex. PW1/A. The existence of Lease Deed Ex. PW1/1 and the relationship of plaintiff and defendants as lessor and lessee in terms of the said Lease Deed with respect to subject property is not in dispute. The Lease Deed dated 14.03.2011 granted rights to defendant no.1 to use and occupy the premises for a period of 9 years against payment of monthly rent of Rs. 7,25,000/ plus CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 23 of 46 service tax, out of which, period of 36 months was to be lockin period wherein neither party was allowed to terminate the Lease Deed except for the breach / default as mentioned in the Lease Deed. The vacant and peaceful possession of the demised premises was handed over by the lessee to the lessor simultaneously at the time of execution of the sale deed. The defendant no.1 deposited Rs. 43,50,000/ as Security Deposit in terms of Clause 3.4 of the Lease Deed. Post dated cheques for initial 3 years in terms of Clause 3.3 were also handed over by defendant no.1 to plaintiff.
15.9 PW1 affirmed in Affidavit Ex. PW1/1 that defendants made continuous and persistent defaults in timely payment of the lease rental, further, the rental cheque for the month of December 2011 and subsequently for the months of January to March were dishonoured for each one of which, separate legal notice was sent and complaint cases u/s. 138 of NI Act were instituted against the defendants.
15.10 On account of persistent defaults, plaintiff invoked Clause 8.2 of the Lease Deed Ex. PW1/1 which lays down the conditions granting right to lessor to terminate the Lease Deed. Clause 8.2.1 grants right to lessor to terminate the Lease Deed by giving a notice of 60 days to the lessee upon CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 24 of 46 failure on the part of lessee to pay rent for two consecutive months after falling due without reasonable cause. Consequently, on account of non receipt of lease rentals as well as for persistent defaults qua bouncing of post dated lease rental cheques as well as non payment of arrears of service tax, notice dated 30.12.2011 Ex. PW1/4, calling upon the defendants to vacate the leased premises was issued. Prior to the issuance of notice for termination, Reminder Letter dated 15.12.2011 Ex. PW1/5 was issued, calling upon defendants to clear the arrears of service tax alongwith interest. PW1 has placed copy of dishonoured rental cheque for the month of September and for the month of December, 2011 alongwith the respective Return Memos as Ex. PW1/7 and Ex. PW1/8 which are also subject matter of separate proceedings u/S. 138 NI Act. PW1 was crossexamined by counsel for Ld. Official Liquidator appointed by the Hon'ble Delhi High Court.
15.11 There is nothing brought on record to refute or to contradict the affirmations made by PW1 that defendant no.1 company persistently defaulted in timely payment of monthly rental as the post dated cheques issued against lease rentals bounced from time to time which compelled plaintiff company to invoke Clause 8.2.1 to terminate the Lease Deed, calling CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 25 of 46 upon defendant no.1 company to vacate the premises and handover the possession to the lessor within 2 months from receipt of notice dated 30.12.2011. There is nothing placed on record to show that there was any communication made or addressed to plaintiffs in any form justifying the default of payment of lease rental or disputing the liability of payment of service tax.
15.12 Clause 3.1 made payment of service tax as applicable on rent also payable by lessee to lessor. Plaintiff has affirmed that several reminders were issued to defendants for payment of arrears of service tax, however defendant failed to clear the arrears without any justification. Clause 8.2.2 also grants right to lessor to terminate the lease if the lessee omitted to perform or observe any condition requisite as per the Lease Deed and fails to remedy the breach within 30 days.
15.13 The above discussion, reflects that defendant no.1 defaulted in honouring the post dated cheques against lease rentals and also with respect to nonclearance of service tax without any justification on their part. Defendants have not brought on record any contrary evidence to infer otherwise. Parties, after necessary deliberation, voluntarily and consciously, binded themselves to the terms of the Lease Deed, defining CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 26 of 46 rights and obligations of lessor and lessee respectively. Lessee was presumably conscious intendening to abide by the terms of the Lease Deed when post dated cheques for 3 years against the lease rentals were handed over to the plaintiff. There is nothing to understand that defendants contested the claim made by plaintiff by way of repeated communications, reminding and requesting the lessee to fulfill the obligations on its part or that defendant disputed the claim made by plaintiff in asking for lease rentals or the clearance of service tax. The Return Memos dated 08.09.2011 and 12.12.2011 reflect the reason for dishonour of cheque as 'funds insufficient'. Thus, these also do not show that defendants contested the demand of payment by lessor in as much as the premises entailed extensive maintenance work or payments/permissions from the statutory authorities on account of any default on the part of plaintiff in fulfilling the obligations as per the terms of the Lease Deed.
15.14 PW1 has accordingly been able to prove that plaintiff company was well within its right to terminate the Lease Deed, invoking Clause 8.2.1 and Clause 8.2.2 of the Lease Deed. The notice terminating the Lease deed has been placed on record alongwith original postal receipt. There is CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 27 of 46 nothing to show or to understand that the said notice was not received by defendant. Article 14 of the Lease Deed clearly mentions the address for communication and notices, both in case of lessor and in case of lessee, service upon which shall be deemed to be validly served. In fact, a Reminder Letter dated 22.02.2012 which is Ex. PW1/6 on record and subsequently a legal notice which ix Ex. PW1/9 on record, was issued by plaintiff company to defendants asking for vacation of premises and clearance of rentals as well as service tax. With the original postal receipts having been placed on record qua all the communications including notice of termination enlisting the defaults on the part of defendant and the legal notice addressed as per the particulars mentioned in the Lease Deed, with no counter contention on record, the notices can be taken to be duly served upon defendants in ordinary course. Having held defendants in breach of essential terms of the Lease Deed Ex. PW1/1, plaintiff company is held entitled to receive the vacant and peaceful possession of the demised premises in terms of Clause 8.2.1 and 8.2.2 of the Lease Deed Ex. PW1/1.
15.15 Having so held, while defendant no.1 company was under
liquidation, plaintiffs herein approached the Hon'ble Delhi CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 28 of 46 High Court under Section 446 of the Companies Act, 1956 wherein plaintiff was permitted to pursue the present civil case, also issuing directions to the Ld. Official Liquidator appointed qua defendant no.1 company vide order dated 06.01.2014 passed in CP No. 66/12 to make arrangements for disposal of the assets of defendant company, lying in the leased premises and also to handover the possession of the property to the plaintiffs. Ld. Official Liquidator was directed to handover the peaceful and vacant possession of the suit premises to the plaintiffs vide order dated 03.06.2016 passed by Hon'ble Delhi High Court. Official Liquidator has filed order of Local Commissioner dated 17.07.2016 as per which the vacant and physical possession was handed over to plaintiff company through its Director Sh. Chand Bhalla, copy of Possession Letter in support thereof has also been filed.
15.16 In view of above deliberations, plaintiff is held entitled and has also received possession of suit property. Issue stands decided in favour of plaintiff and against defendants.
Issue no.(III) (III) Whether the plaintiff is entitled to an amount of Rs. 30,33.253/ being service tax recoverable from the rental amount w.e.f. December, 2011 till 31.07.2012? If so, to what effect? OPP.
CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 29 of 46 15.17 Issue no. 3 is reframed as under :
(III) Whether the plaintiff is entitled to an amount of Rs.
30.33.253/ being rental amount and service tax recoverable from the rental amount w.e.f. December, 2011 till 31.07.2012? If so, to what effect? OPP.
15.18 Onus to prove this issue is upon plaintiff. Plaintiff has been held entitled to recover possession of leased premises and so also factually recovered on 17.07.2016. A notice of termination of Lease Deed Ex. PW1/1 was issued on December 30, 2011 wherein defendants were asked to vacate the premises within 2 months from the date of notice. Subsequently, a Legal Notice Ex. PW1/9 dated 15.03.2012 was issued calling upon the defendants to immediately vacate the premises to pay a sum of Rs. 7,50,000/ towards damages besides paying the service tax and arrears of rent within 7 days of receipt of notice. It has already been held in the preceding issue that plaintiff reserved its right to terminate the contract upon breach of vital condition of non payment of rent as well as non deposit of the service tax as per recitals of Lease Deed.
15.19 Lease rentals have been claimed since 30.12.2011 till 31.07.2012 while the suit has been filed in August 2012. There is no dispute that the possession was not handed over CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 30 of 46 back to plaintiff till 31.07.2012 and there is no claim/contention that the lease rentals or the service tax was paid. Payment of lease rental as well as the service tax is an admitted obligation on the part of defendant in terms of Clause 3.1 of the Lease Deed Ex. PW1/1. It is affirmed that the service tax since the commencement of lease deed, even for the period when the payment of lease rental were made, was not deposited despite repeated reminders.
15.20 By way of this petition, plaintiff has claimed rent @ 7,25,000/ per month since December 2011 till July 2012 when the petition was filed, and service tax arrears @ 13% since June 2011 till July 2012. There is no counter contention with respect to liability on the part of defendants qua non receipt of payments of remaining rent as well as the service tax.
15.21 There is also no dispute that security deposit of Rs.
43,50,000/ was deposited in terms of Clause 3.4 of the lease deed Ex. PW1/1 which was supposed to be refunded upon surrendering vacant and peaceful possession of the demised premises after deducting arrears of lease rent and other charges due against the plaintiff in terms of Clause 8.1.2 of Lease Deed. The calculations for the period between CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 31 of 46 30.12.2011 and 31.07.2012 has been placed on record as Mark C which includes payment of interest @ 18% per annum added to the lease rentals. The calculation also takes into account the penalty upon non payment/ delayed payment / deposit of Service Tax for the above mentioned period.
15.22 Interest @ 18% p.a. compounded quarterly is leviable on the recoverable amount in terms of Clause 8.3.2 of Lease Deed which stands included in the calculation projected in Mark C. Same is reproduced hereunder for ready reference :
8.3.2 "The Lessor may at all times adjust all money including the security deposit of unadjusted advance Lease Rent deposited by the Lessee under this Lease Deed against all sums due from the Lessee including interest, damages, etc. however, if the arrears of Lease Rent and any other sum due and payable by the Lessee exceed the amount deposited as security, the the Lessor shall be entitled to recover such amounts from the Lessee alongwith interest @ 18% per annum compounded quarterly until the date of its payment / recovery and which right shall be without prejudice to any other remedy available to the Lessor under this Lease deed or otherwise."
15.23 Section 3 (1) of the Interest Act 1978 enables the court to award interest, in any proceeding for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made to the person entitled to the debt or damages or to the CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 32 of 46 person making such claim for the whole or for part of the following period (a) if the proceedings relates to a debt payable by virtue of a written instrument at a certain time, then from the date when the debt is payable from the date of institution of proceedings (b) if the proceedings does not relate to any debt, then from the date mentioned in this regard in a written notice given by the person entitle or the person making the claim to the person liable that interest will be claim, to the date of institution of the proceedings.
Section 3 (3) of Interest Act provides that nothing in this section shall apply in relation to (i) any debt or damages upon which interest is payable as of right, by virtue of any agreement or (ii) any debt or damages upon which payment of interest is barred by virtue of an express agreement. Section 5 provides that nothing in the Act shall affect the provisions of Section 34 of CPC.
15.24 In view of the deliberations made above, the calculation of rental alongwith the Service Tax including the penalty upon non payment thereof for the period starting from June 2011 till July 2012 as provided in Mark C is accepted. Security deposit of Rs. 43,50,000/ already stands deducted /adjusted in the said calculation. The payable amount till 31.07.2012 comes out to be Rs. 30,33,253/.
CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 33 of 46 15.25 With respect to remaining period starting from August 2012 till July 2016, where possession was handed over back to plaintiff, also the same analogy applies. There is nothing to show that any payment towards rental or service tax was subsequently paid by defendant to plaintiff. Clause 3.2 is instrumental in determining the amount of lease rental alongwith service taxes payable under the terms of Lease Deed Ex. PW1/1, same is reproduced hereunder for ready reference :
3.2 Lease Rent for the succeeding 3 year term shall be enhanced by at least minimum of 15% over and above the Lease Rent paid for the immediately preceding term which shall amount to Rs. 8,33,750/ (Rupees Eight Lacs Thirty Three thousand Seven Thousand Fifty only) plus service tax or any other statutory tax as applicable on rent for using the Demised Premises and in the event of further extension in accordance with clause 2.3 above the Lease rent for the final term of 3 years shall be enhanced by 20% over and above the Lease rent paid for the first 3 year term under this Lease deed which shall amount to Rs. 10,00,500/ (Rupees Ten Lacs Five Hundred Only) plus service tax or any other statutory tax as applicable on rent for using the Demised Premises.
It is expressly clarified and understood by the parties that any statutory tax or Lessor being owner of the said property shall be paid by the Lessor and any statutory tax i.e. like GST rollout as proposed or anything else (in future if imposed as per byelaws or any other law in force) attributable on account of the Demised premises being taken on rent by the Lessee for carrying out its business activities as per byelaws or any other CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 34 of 46 law in force, then the same shall be borne and paid by the Lessee.
15.26 The lease rental in terms of clause 3.2 is payable at following rates :
S. no. Period Amount description
1. June 2011 Rs. 7,25,000/ Per work plus service
June 2014 tax plus statutory tax
2. July 2014 - June Rs. 8,33,750/- Plus service tax plus
2017 statutory tax
So far the period subsequent to July 2012, the lease rental is calculated as under : S. no. Period Rate Amount
1. August 2012 June Rs. 7,25,000/x23 01,66,75,000/ 2014
2. July 2014 - July Rs. 8,33,750/- x25 02,08,43,750/-
201615.27 There is nothing mentioned about applicability of any statutory tax over and above Lease Rental or Service Tax by counsel for plaintiff even in evidentiary affidavit Ex. PW1/A led in the year 2019. Service Tax is stated to be payable at the rate of 13% in the plaint. There is no material to decipher any variance in the rate of Service Tax, other than what is mentioned in the plaint. Service Tax payable for July 2014 till July 2016 on the total payable amount of lease rental is CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 35 of 46 also calculated @ 13% as already calculated till July 2012. Counsel for plaintiff was asked to clarify however she could not offer any valuable insight on the calculation and applicability of rate of service tax post 2012. The service tax payable @ 13% per annum for the period August 2012 to July 2016 thus comes out to be Rs. 48,77,437.50/.
15.28 The total payable amount as per the discussion made above, comes out to be as under :
S. no. Period Rate Amount
1 June 2011 July 2012 As mentioned in 30, 33,253/
Mark C
2. August 2012 June Rs. 7,25,000/ 01,66,75,000/
2014 x23
3. July 2014 - July Rs. 8,33,750/- 02,08,43,750/-
2016 x25
4. Service Tax from @ 13% 48,77,437.50/-
August 2012 - July
2016
Total 4,54,29,440.50/-
As already mentioned, an application filed on behalf of defendant no.2 seeking dismissal of suit qua him, has already been dismissed. Defendant no.2 is Managing Director of defendant no.1 company and therefore enjoys a strategic position qua policy decisions as well as management and operations of defendant no.1 company. No evidence CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 36 of 46 has been led on behalf of defendant no.1 or defendant no.2 to deny the primary involvement of defendant no.2 with respect to undertaking contractual obligation towards plaintiff on behalf of defendant no.1. Accordingly, defendant no.2 in his capacity of Managing Director of defendant no.1 company as well as defendant no.1 company are both held liable to discharge the contractual obligations as determined by way of this judgment towards plaintiff. This issue accordingly stands decided in favour of plaintiff and against defendant.
Issue no. II (II) Whether the plaintiff is entitled to damages @ Rs. 50,000/ per day w.e.f. 30.12.2011 till the date of handing over of the possession? If so, to what effect? OPP.
15.29 Plaintiff has claimed damages in terms of Clause 8.1.2 of Lease deed Ex. PW1/1 which reads as under :
"8.1.2 Upon termination of this Lease Deed by the Lessee, the Lessor shall refund the IFRSD only upon the Lessee surrendering vacant and peaceful physical possession of the Demised Premises and after deducting the arrears of Lease Rent and other charges due and payable by the Lessee (if any). In the event of delay by the Lessee in handing over the vacant and peaceful physical possession of the Demised Premises, then, the Lessee shall be liable to pay Rs. 50,000/ (Rupees fifty thousand only) per day, over and above the then Lease Rent, for the period of such holding over of the Demised Premises alongwith interest, costs, damages etc., the same shall be without any prejudice to any other right and remedy available to the Lessor in this Lease Deed and under the CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 37 of 46 law."
15.30 This clause seeks to make lessee liable to pay Rs. 50,000/ per day over and above the lease rent for the period of holding over of the premises in the event of delay on account of lessee in handing over the vacant and peaceful physical possession upon termination of lease deed. As per the relief sought, damages have been claimed w.e.f. 30.12.2011 which is the date of issuance of notice seeking vacation of premises within 2 months from the date of service of notice. Default of non payment of lease rent for two consecutive months without reasonable cause gave right to the lesser to terminate the lease deed by giving a notice of 60 days to the lessee. First default happened for December 2011 as per the claims raised on behalf of plaintiff company as the post dated rental cheque for the month of December 2011 got dishonoured which was subsequently repeated for the months of February and March 2012 as per the affirmations made by PW1 in evidentiary affidavit Ex. PW1/A. Legal notice dated 15.03.2012 was accordingly issued calling upon the defendants to vacate the premises within 7 days from receipt of notice and pay for damages for illegal use and possession of the premises. It is mentioned in Para 17 of the plaint that defendants were illegal occupants and trespassers after 22.03.2012. There is nothing to decipher the actual date of CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 38 of 46 service of legal notice upon defendants, however, there is a presumption as per applicability of General Clauses Act that it must have been served in usual course of business, having been sent at the correct address as per the stipulation in the Lease Deed itself with no counter affirmation on record.
15.31 It is evident, as discussed and held in the preceding issues that the plaintiffs rightfully terminated the lease deed upon persistent breach of stipulations without paying heed to rectify the defaults. Accordingly, defendants are held to be in illegal use and possession of the demised premises w.e.f. 27.03.2012 (including the period of receipt of legal notice sent through speed post to the defendants).
15.32 Chapter VI of the Contract Act contains provisions relating to compensation in consequences for breach of contract . Section 73 of the Contract Act entitles the party who suffered by the breach of contract to receive compensation for loss or damage caused to him by the defaulting party, which naturally arose in usual course of things from such breach or which the parties knew when they made the contract, to be likely the result of the breach of contract. It is pertinent to note that plaintiff can only be compensated to the extent of actual loss of damage suffered by him and that he is required CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 39 of 46 to prove that he actually suffered loss or damage as a result of breach of contract by the defaulting party. Thus, it does not call for payment of compensation for any indirect loss or damage sustained by reason of breach. It is settled that the damage must be fairly attributed to the breach as a natural result and not merely a probable result. The underlined principle is that the plaintiff suffered legal injury on an actionable claim and ought to be put at the same position where he would have been, had he not sustained any wrong at the hands of defendant. Thus, gain of defendant is not the criteria for the court to assess damages, rather loss of plaintiff is primordial for the court to consider. It is to place the injured party in as good a situation as if the contract had been performed.
15.33 Section 74 of the Contract Act, entitles a party to claim only reasonable compensation from the opposite party. It emphasises upon due construction of the stipulations of the contract as to whether the amount of damages already mentioned as part of contract can be stated to be result of a genuine preestimate of damages or is a sum fixed in terrarium.
15.34 Hon'ble Supreme Court of India in the case of Union of India Vs. Raman Iron Foundry, AIR 1974 SC 1265 CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 40 of 46 observed as under :
"The Indian legislature has sought to cut across the web of rules and presumptions under the English common law, by enacting a uniform principle applicable to all stipulations naming mounts to be paid in case of breach, and stipulations by way of penalty, and accordingly to this principle, even if there is a stipulation by way of liquidated damages, a party complaining of breach of contract can recover only reasonable compensation for the injury sustained by him, the stipulated amount being merely the outside limit. 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 instanti incur any pecuniary obligation, nor does the party complaining of the breach becomes entitles 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."
15.35 Further, in the matter of ONGC Ltd. V. Saw Pipes Ltd., AIR 2003 SC 2629, Hon'ble Supreme Court of India observed as under :
"Under Section 73, when a contract has been broken, the party who suffers by such breach is entitled to receive compensation for any loss caused to him which the parties knew when they made the contract to be likely to result from the breach of it. This Section is to be read with Section 74, which deals with penalty stipulated in the contract, inter alia [relevant for the present case] provides that when a contract has been broken, if a sum CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 41 of 46 is named in the contract as the amount to be paid in case of such breach, the party complaining of breach is entitled, whether or not actual loss is proved to have been caused, thereby to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named. Section 74 emphasizes that in case of breach of contract, the party complaining of the breach is entitled to receive reasonable compensation whether or not actual loss is proved to have been caused by such breach. Therefore, the emphasis is on reasonable compensation. If the compensation named in the contract is by way of penalty, consideration would be different and the party is only entitled to reasonable compensation for the loss suffered. But if the compensation named in the contract for such breach is genuine preestimate of loss which the parties knew when they made the contract to be likely to result from the breach of it, there is no question of proving such loss or such party is not required to lead evidence to prove actual loss suffered by him. Burden is on the other party to lead evidence for proving that no loss is likely to occur by such breach..."
15.36 Defendants have been held to be in illegal occupation w.e.f.
27.03.2012 and the possession was handed over on 17.07.2016. Clause 8.1.2 lays down damages to the tune of Rs. 50,000/ per day over and above the lease rental on account of holding over to the possession of the premises despite the lease deed having been terminated. There is nothing to understand that this particular amount, specially being over and above the lease rental, reflects to be a genuine preestimate of damages, in contemplation of the parties at the time of entering into lease deed. There is no material placed on record on behalf of plaintiff to show that plaintiff CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 42 of 46 actually suffered damages to the tune as sought for or as stipulated in the lease deed. It is correct that plaintiff did not get possession of premises for a very long time and had to initiate legal proceedings on various forums to obtain the possession of the premises. There is nothing placed on record on behalf of defendant disputing the contentions made on behalf of plaintiff in this respect, however, it is still imperative for the plaintiff to prove that it acted diligently and worked to mitigate the losses wherever possible and still suffered loss on account of, having been deprived of the possession and enjoyment of the premises apart from having to fight a protracted legal battle to get access to the premises. It is also to be understood that plaintiff terminated the lease by involving termination clause upon reading the intent of default in just about 2 months and shortly thereafter filed this suit.
15.37 Lease Deed itself stipulates 15% appreciation in the lease rentals after every three years. The leased premises were leased for commercial usage. The rental amount alongwith service tax till the month of July 2016 has been separately awarded. Considering the principles expounded in various judgments in the backdrop of legal position laid down in the relevant provisions of law as discussed in the preceding CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 43 of 46 paragraphs, damages are assessed @ Rs. 3 lakh per month over and above lease rentals and service tax starting from April 2012 till 17.07.2016 when the possession was handed over by Ld. Local Commissioner to the Director of the plaintiff company. The amount payable towards damages w.e.f. April 2012 to July 2016 by both the defendants comes out to be Rs. 1,56,00,000/. Thus, this issue stands decided in favour of plaintiff and against the defendant.
Issue no.4 (IV) Whether the plaintiff is entitled to interest @ 18% p.a.? If so, to what effect and for what period? OPP.
15.38 The onus to prove this issue is upon pliantiff. Interest @ 18% per annum compounded quarterly has been claimed in terms of clause 8.3.2 of the lease deed. Section 34 of CPC deals with payment of interest upon the principle sum adjudged from the date of suit till the date of decree and subsequently from the date of decree till realisation. Interest with respect to payment till filing of suit has already been deliberated upon in issue no. (iii) and need not be delved with further.
15.39 Considering that the property was leased out for a CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 44 of 46 commercial undertaking, with contractual rate of interest fixed at 18% per annum, in view of settled proposition of law that contractual rate of interest can be varied from date of filing of suit on equitable grounds, balancing the scales of justice, this Court deems fit to grant payment of interest of 9% p.a. from the date of filing of the suit till the date of decree and future interest @ 3% p.a. from the date of decree till the date of realisation. This issue is decided in favour of the plaintiff and against the defendant.
Relief 16 In view of the decision of the issues as discussed above, the suit of the plaintiff stands decreed for a sum of Rs. 6,10,29,440.50/ (Rs. 4,54,29,440.50/ (towards lease rental coupled with applicable service tax) + Rs. 1,56,00,000/ (towards damages) in favour of the plaintiff and against defendant no.1 and defendant no.2 who shall be liable to pay the same jointly and severally. Interest @ 9% p.a. from the date of filing of the suit till the date of decree is granted. Further, future interest @ 3% p.a. is also awarded from the date of decree till the date of realisation.
17 Decree sheet be prepared accordingly. Costs of the suit also CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 45 of 46 allowed in favour of plaintiff.
Digitally signed
18 File be consigned to record room. by SHELLY
SHELLY ARORA
Date:
ARORA 2022.05.29
04:46:26
+0530
Announced in the open (SHELLY ARORA))
Court on 23.05.2022 Additional District Judge 01(SE),
Saket Courts, New Delhi. (sm)
CS - 11452/16 Saphire Diamond Exports Pvt. Ltd. Vs. Lilliput Kidswear Ltd. Pg. 46 of 46