O.M.P.--1206/2012. Case: AIRPORTS AUTHORITY OF INDIA Vs. HOTEL LEELAVENTURE LTD.. High Court of Delhi (India)
| Case Number | O.M.P.--1206/2012 |
| Citation | NA |
| Judgement Date | July 15, 2016 |
| Court | High Court of Delhi (India) |
+ O.M.P. 1206/2012
% Date of Decision : 15th July, 2016
AIRPORTS AUTHORITY OF INDIA ..... Petitioner Through: Mr. Sandeep Sethi, Senior Advocate with Mr.Vaibhav Kalra and Ms. Jasbeer Bidhuri, Advocates.
versus
HOTEL LEELAVENTURE LTD. ..... Respondent Through: Mr. Abhimanyu Mahajan, Mr. Milan
Deep Singh and Ms. Ambha Goel,
Advocates.
CORAM :HON'BLE MR. JUSTICE J.R. MIDHA
JUDGMENT
1. The greatest challenge before the judiciary today is the frivolous litigation. The judicial system in the country is choked with false claims and such litigants are consuming Courts’ time for a wrong cause. False claims are a huge strain on the judicial system. In Subrata Roy Sahara v. Union of India, (2014) 8 SCC 470, J.S. Khehar, J. observed that the Indian judicial system is grossly afflicted with frivolous litigation and ways and means need to be evolved to deter litigants from their compulsive obsession towards senseless and ill-considered claims. Relevant portion of the said judgment is as under:
“191. The Indian judicial system is grossly afflicted, with frivolous litigation. Ways and means need to be evolved, to
senseless and ill-considered claims.
(Emphasis supplied)
2. In the present case, the respondent is a lessee in respect of 11,000 sq. mtrs. land near Mumbai International Airport for a period of 30 years from 1st April, 1994 to 30th March, 2024. On 13th August, 2008, i.e., after about 14 years of the commencement of the lease, the respondent invoked the arbitration and raised a claim to seek discharge from the liability to pay Royalty of Minimum Guaranteed Amount [hereinafter referred to as “Royalty (MGA)”] under the lease on the ground that it has become commercially unviable to construct the Hotel due to recession in the hotel industry and therefore, the clause with respect to payment of Royalty (MGA) has frustrated under Section 56 of the Contract Act.
3. The learned Arbitrator allowed the respondent’s claim and declared that the payment of Royalty (MGA) by the respondent has become impossible under Section 56 of the Contract Act w.e.f. 01st
June, 2008 and, therefore, the parties may enter into a new contract. As a result, the respondent is continuing the possession but is discharged from the liability of paying Royalty (MGA). According to the petitioner, the respondent’s liability as on 31st May, 2016 along with interest thereon has crossed Rs.258 crores.
4. The petitioner has challenged the award dated 29th August, 2012 under Section 34 of the Arbitration and Conciliation Act on various grounds inter alia:
4.1. The award is against the well settled law that the lessee’s liability to pay the amounts under the lease to the lessor is absolute and unconditional; and the learned Arbitrator had no power of
(MGA).
4.2. The impugned award is also against the well settled law that Section 56 of the Contract Act is not applicable to leases. If the payment of Royalty (MGA) had became unviable, the respondent had the option to surrender the lease but the respondent could not claim that the clause requiring the payment of Royalty (MGA) has frustrated.
4.3. The learned Arbitrator has re-written the contract which is not permissible in law. The learned Arbitrator was bound by the terms of the contract, but he has gone beyond the contract by discharging the respondent from the liability to pay the Royalty (MGA) and directing the parties to re-negotiate the contract.
4.4. The statement of claim instituted by respondent is gross abuse and misuse of process of law. The statement of claim was not even maintainable in law and the learned Arbitrator ought to have rejected the same at the outset.
5. Factual matrix
5.1. The petitioner licensed 11,000 sq. meters of land near Mumbai International Airport to the respondent in 1982. On respondent’s request, the license was converted into a lease and a lease deed dated 07th February, 1996 was executed by the parties for a period of 30 years w.e.f. 01st April, 1994 to 31st March, 2024. Under the lease deed, the respondent was required to pay the lease money as well as the Royalty (MGA). Relevant clauses of the lease deed are as under: -“WHEREAS the land, admeasuring approximately 11,000.00 Sq. Mtrs. shown in the sketch annexed hereto vests in the Authority.
using the said plot of land for a term of 30(thirty) years for the purpose of constructing and setting up of another wing to the existing Hotel Block consisting of 150 rooms as a new separate Hotel Block and after the expiry of the said terms of lease, the Hotel structures, fitting and fixtures, plants and machinery will become the property of the Authority automatically without paying any compensation to the Lessee by the Authority. And whereas the Authority is willing to grant lease to the Lessee as above on terms and conditions mutually agreed upon, this Indenture.
WITNESSETH:
1.(a) This lease shall commence on 01.04.1994 and shall be in force for a period of 30 (thirty) years from 01.04.1994 to 31.03.2024. The lease period of 30 (thirty) years shall be without prejudice to the rights of the Authority to determine the lease agreement for 18,000 Sqm. Plot of existing hotel with the party. The currency of this agreement shall not bind Authority to an automatic extension of the lease agreements for 18,000.00 Sqm. on which existing hotel is situated. xxx xxx xxx 2. The Lessee shall pay @ Rs.200.00 per Sq. mtr. per annum as lease money subject to 10% compound escalation per annum for use and occupation of the land per year in advance, in each year. The first of such payments to be made before taking over the land on lease. The rate of lease money payable by the Lessee shall be subject to revision by the Authority from time to time and the lessee agrees to pay such revised lease money without any protest.
3. In addition to the lease money mentioned hereinabove and as revised from time to time, the lessee shall pay to the Authority; Royalty as minimum guaranteed amount as mutually decided between the parties and, in absence of any decision, as decided by Chairman of Airport Authority of India. For this purpose gross turnover will be arrived at after excluding Govt. Taxes/levies on turnover.
3.(a) The amount on royalty shall become payable from the
3 years gestation period allowed for construction of the Hotel Block commencing from 01.06.1995, whichever is earlier. xxx xxx xxx 6. The lessee shall construct the building/structure/installations strictly in accordance with the plans and specifications with F.S.I. (Floor Space Index) as ONE to be approved by the Authority, in writing, and in conformity with such directions as the Authority may give, in this behalf, or in connection therewith. Sanction or approval of any other local authority to the constructions of the building/structure/ Installations whenever required shall also be obtained by the Lessee and the said building or structure shall be constructed by the lessee in accordance therewith. Progress of construction shall be reported to the Authority quarterly, after furnishing schedule of execution.
6(a) Construction on the allotted land will commence within a period of 36 months. In case it is delayed, an additional charge of 50% of the lease rent will be levied for the next year i.e. 4th year. The allotment of land made under this lease will be cancelled if construction is not started within five years. xxx xxx xxx
6(e) The licencee shall construct the Hotel Block consisting of 150 rooms as per approved plans. xxx xxx xxx
13. In the event of failure to pay the lease money and other amounts herein provided from on the respective due dates, simple interest at the rate of 18% (Eighteen percent) per annum shall be payable on all delayed payments without prejudice to the Authority’s other rights and remedies. Interest rate can be revised upwards if there is upward revision in the bank rate and such upward revision will be effected after giving 30 (thirty) days notice to the Lessee. xxx xxx xxx
or dispute all rules, regulations and directions issued from time to time by the Authority and/or by Director General of Civil Aviation and such other authorities having jurisdiction over the locality wherein the premises are situated which are intended to safeguard or facilitate the use of the locality by airport or for any other purpose. xxx xxx xxx 26. If the lessee shall desire to determine this agreement it shall give the authority 180 days clear notice in writing of such desire and shall upto the time of such determination pay the amounts due and perform and observe the covenants on his part hereinbefore contained, then immediately on the expiration of such notice this lease shall cease but without prejudice to the rights and remedies to which the Authority has become entitled in respect of any anticipated claim or breach of the covenant.”
(Emphasis supplied)
5.2. By a supplemental agreement dated 07th February, 1996, the parties agreed to Royalty (MGA) according to Schedule A or 7.5% of the gross turnover of the new hotel block, whichever was higher. A three years’ gestation period was allowed to the respondent from 01st
June, 1995 to 31st May, 1998 for construction of 150 rooms hotel block on the leased land. Relevant terms of the supplemental agreement are as under:
“1. In addition to the payment of the lease rental as provided in the said Agreement to Lease dated the 7th day of February, 1996, the Lessee shall also pay to the Authority Royalty as minimum guaranteed amount, as specified in schedule A annexed hereto or at the rate of 7.5% of the gross turnover of the new Hotel Block, whichever is high. For the purpose of determination of gross turnover, government taxes/levies on turnover will be excluded.
2. The amount of Royalty shall be payable from the date of the commencement of the Hotel or after the expiry of three
01.06.1995 whichever is earlier.
3. On account payment of the above Royalty amount proportionate to the gross turnover shall be made by the Lessee quarterly...
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