Full Judgment Text
2023:BHC-AS:33174
R Dilwale 909-AO-327-21 WITH IA-2888-21 judgment.odt
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
APPEAL FROM ORDER NO.327 OF 2021
WITH
INTERIM APPLICATION NO.2888 OF 2021
IN
APPEAL FROM ORDER NO. 327 OF 2021
Kavis Fashions Private Limited }
a private limited company having its }
registered office at Plot No. 87, Saki }
Vihar Road, Powai, Mumbai -400 072 }..Appellant /
Applicant
Versus
Rupani Spining Mills Private Limited, }
a private limited company }
having its registered office at 705, Maker }
Chambers -V, 7th Floor, Nariman Point }
Mumbai-400 021 } ...Respondent
WITH
INTERIM APPLICATION NO.3415 OF 2022
IN
APPEAL FROM ORDER NO.327 OF 2021
Rupani Spining Mills Private Limited, }
a private limited company }
having its registered office at 705, Maker }
Chambers -V, 7th Floor, Nariman Point }
Mumbai-400 021 }..Applicant
IN THE MATTER BETWEEN
Kavis Fashions Private Limited }
a private limited company having its }
registered office at Plot No. 87, Saki }
Vihar Road, Powai, Mumbai -400 072 }..Appellant
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R Dilwale 909-AO-327-21 WITH IA-2888-21 judgment.odt
Versus
Rupani Spining Mills Private Limited, }
a private limited company }
having its registered office at 705, Maker }
Chambers -V, 7th Floor, Nariman Point }
Mumbai-400 021 }..Respondent
...
Dr. Virendra V. Tulzapurkar, Senior Advocate a/w Mr.
Mandar Soman, Mr. Vachan Bodke, Mr. Tushad Kakalia, Mr.
Vaibhav Gaikwad, Mrs. Ankita Vishwakarma i/by V & M Legal
for the Appellant.
Ms. Dinyar Madon , Senior Advocate a/w Mr. Prantik
Majumdar, Mr. Abhineet Sharma Mr. Kandarp Trivedi i/by RHP
Partners, Advocates for the Respondent.
…
CORAM : SANDEEP V. MARNE, J.
RESERVED ON : 25 OCTOBER 2023
PRONOUNCED ON : 01 NOVEMBER 2023
JUDGMENT
1. In the present appeal, Appellant has challenged order
th
dated 4 January 2021 passed by Joint Civil Judge Senior Division,
Thane thereby allowing Plaintiff’s Application at Exhibit 5 and
rejecting Appellant/Defendant’s Application at Exhibit 16. By
allowing Plaintiff’s Application at Exhibit 5, the Trial Court has
directed the Appellant/Defendant to deposit/pay to the Plaintiff an
amount of Rs. 37,61,606/- per month towards license fees and
st
compensation from 1 September 2020 either till decision of the
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suit or till handing over possession of the suit premises, whichever
is earlier. The Trial Court has granted exemption for payment of
license fees for a period of 78 days during COVID with a further
direction to adjust the amount of security deposit paid by the
Defendants in the amount of arrears of license fees and
compensation. The Defendants are also restrained from subletting
or assigning the license premises till decision of the suit. The Trial
Court has also awarded interest @ 15% p.a. for delay in payment of
license fees. Appellants/Defendants are aggrieved by the order
dated 4th January 2021 passed by the Trial Court and have filed the
present appeal.
2 . Facts of the case are in a narrow compass. Plaintiff-
Rupani Spinning Mills Private Limited is a private limited company
engaged in the business of spinning, weaving and furnishing of
textiles. Appellant-Defendant-Kavis Fashions Private Limited is a
company engaged in the business of tanning, dressing of leather,
manufacture of luggage, hand bags, saddlery and harness. Plaintiff
is lessee in respect of Plot No. B-2, Mira Industrial Area, Mira
Taluka, Thane admeasuring 6254 square meters, in pursuance of
lease dated 18th August 1990 executed in its favour by
Maharashtra Industrial Development Corporation. Plaintiff has
constructed RCC shed admeasuring 35,500 square feet and
mezzanine floor admeasuring 5200 square feet on the said plot.
Plaintiff and Defendant entered into registered Leave and License
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Agreement dated 17th March 2015, by which Plaintiff granted
license to the Defendant in respect of ground floor premises at
license fees at Rs. 12,00,000/- per month and mezzanine floor by
similar leave and license agreement dated 19.03.2005 granted
license in respect of premises at Rs. 2,00,000/- per month. Both
agreements contained provision for enhancement of license fees at
compound rate of 4% for each subsequent years. By the year 2019-
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2020, which was a 5 year of tenure of license, the license fees in
respect of both the premises was collectively Rs. 19,32,606/-. It is
Plaintiff’s case that the Defendant started delaying payment of
license fees after December 2019 and the Plaintiff granted some
credit to the Defendant for payment of license fee for the months of
December 2019 in January 2020 without levy of interest. That, the
Defendant defaulted on paying license fees on account of outbreak
of COVID-19 pandemic. Lock-down was announced from 23rd
March 2020 on account of which, Defendant did not pay license
fees to Plaintiff. Some correspondence took place between the
Plaintiff and Defendant due to non-payment of license fees by
Defendant who sought waiver for period of three months and also
reduction of license fees for the remainder of the license period.
Plaintiff granted waiver of license fees for the months of April, May
and 15 days in the month of June on certain conditions, which
included payment of fixed costs to be paid to MIDC for subletting
the premises. Defendant paid an amount of Rs.10,00,000/- on
10.06.2020 and another sum of Rs.9,32,607/- on 30.07.2020. The
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Defendant demanded further reduction of license fees. Thereafter
several developments and correspondence occurred between the
Plaintiff and Defendant, details of which need not be narrated,
considering the limited controversy involved in the present appeal.
Suffice it to state that on 18th September 2022, Plaintiff lodged
Special Civil Suit No. 278 of 2020 against the Defendant in the
Court of Civil Judge Senior Division, Thane seeking following
reliefs:-
a. this Hon’ble Court be pleased to declare that the
Defendant is in breach of the Leave and License Agreements
executed between the Parties herein;
b. this Hon’ble Court be pleased to pass a decree and
order of eviction directing the Defendant to hand over quiet,
vacant and peaceful possession of the Licensed Premise in
good repair and condition after removing itself, its
employees, belonging, chattels, articles and effects from the
said Licensed Premises in terms of the said Leave and
License Agreements;
c. this Hon’ble Court be pleased to pass an order to
permanently restrain the Defendant, its agents and servants
from subletting, assigning, dealing with the Licensed Premise
or parting with possession of the said Premise or any part
thereof in any manner whatsoever;
d. this Hon’ble Court be pleased to pass an order for d
eposit of compensation and the payment of the same to the
Plaintiff, pending the hearing and final disposal of the Suit in
accordance with Order XVA of the Code of Civil Procedure;
e. Hon’ble Court be pleased to pass an order and direct
the Defendant to pay compensation for the period of
occupation beyond the license period i.e. 31.08.2020 as per
Article V of the Leave and License Agreements after
adjusting the balance security deposit, if any, from 1.9.2020
till the peaceful and quiet handing over of possession of the
Licensed Premise; as quantified at paras 57-60 of this plaint;
f. this Hon’ble Court be pleased to pass an order for
appointment of Court receiver for the Licensed Premise; or
some other person be appointed as a Receiver of the said
licensed premises with power to take custody thereof with all
powers under Order 40 Rule 1 of the Code of Civil Procedure,
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19088 with further directions to put the plaintiff in
possession thereof as against agent of this Court Receiver.
g. this Hon’ble Court be pleased to, after ordering enquiry
as to ascertain mesne profit under Order XX Rule 12 of Civil
Procedure Code, pass a decree and order for payment of
mesne profit from the date of expiry i.e. 31.08.2020 until
vacant and peaceful possession of the said Licensed Premise
is handed to the Plaintiff by the Defendant,
h. this Hon’ble Court be pleased to pass an order for
appointment of commissioners,
i. Ad-interim/interim relief in view of prayer clauses
above,
j. Costs of the present Suit, and
k. Any other relief as deemed just and necessary.
3. Along with the suit, Plaintiff filed application at Exhibit-
5 seeking various interim orders including an order for deposit of
license fees and compensation of Rs. 37,61,606/- per month under
provisions of Order XV-A of the Code of Civil Procedure (the Code)
and for restraining the Defendant from subletting, assigning or
dealing with the licensed premises.
4. The Application was resisted by the Defendant by filing
a reply. Additionally, Defendant filed Application at Exhibit-16
offering to deposit license fees of Rs.10,00,000/- per month. After
hearing both the sides, the Trial Court was pleased to allow
Plaintiff’s Application at Exhibit-5 and rejected Defendant’s
Application at Exhibit 16. The Trial Court has passed following
order on 4th January 2021.
1] Application of plaintiff at Exh.5 is partially allowed.
2] Application of defendant at Exh.16 is rejected.
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3] Defendants are hereby directed to deposit or pay to the
plaintiff of Rs.37,61,606/- per month as a licensee fees and
compensation from 01-09-2020 till the peaceful and vacant
possession of licensed premises handed over to the plaintiff
or till the decision of suit which is earlier.
4] Defendants are entitled for exemption of payment of
licensee fees due to the force majeure during the period from
23-03-2020 to 08-06-2020 for 78 days, which is at about
Rs.50,23,760/-.
5] Defendants are liable to pay the amount of licensee
fees for early March-2020, later part of June-2020, July-2020
and August -2020 of Rs.66,99,692/- to the plaintiff.
6] Defendants are entitled to adjust the amount of
security deposit deducted by plaintiff which is further
amount of arrears of amount as discussed in the body of
application.
7] Defendants are restrained from themselves or any
other person acting on behalf of them, to sublet or assigned
the licensed premises or any part of it, till the decision of
suit.
8] The Plaintiff is entitled to charge interest at the rate of
15% p.a. for delay payment, if any, find after adjustment of
payment and security for specified period which is required
to be calculated separately.
9] No order as to costs.
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5. Defendant is aggrieved by the order dated 4 January
2021 and has filed the present appeal. During the pendency of the
appeal, Defendant has vacated the license premises on 4th April
2022. When the Appeal came up for hearing before this Court
following order was passed on 29th November 2021:
1. The effect of impugned Order being a money decree,
the Appellant is directed to deposit 50% of the amount as
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has been directed by the impugned Order dated 4" January
2021 in the Registry of this Court
within a period of three weeks from today.
2. Stand over to 21st December 2021.
To be placed under the caption for ‘Reporting Compliance'.
6. In pursuance of order passed by this Court on 29th
November 2021, Appellant/Defendant deposited an amount of Rs.
2,17,01,603/- in the Registry of this Court. This Court, by its order
dated 1st March 2022, permitted withdrawal of amount of
Rs.2,17,00,000/- subject to furnishing security and/or undertaking
to the satisfaction of the Trial Court. Respondent/Plaintiff filed
Interim Application No.3415 of 2022 complaining failure on the
part of the Appellant to deposit 50% of the amount arising out of
the Trial Court’s order dated 4th January 2021. This Court disposed
of Interim Application No. 3415 of 2022 directing the Appellant to
deposit further amount of Rs. 65,00,000/- with a view to satisfy the
direction for deposit made by this Court vide order dated 29th
November 2021. Accordingly, the said amount of Rs. 65,00,000/-
has been deposited by the Appellant in this Court which the
Plaintiff/Respondent has been permitted to withdraw.
7. Dr. Tulzapurkar, the learned senior advocate appearing
for the Appellant-Defendant would raise the issue of maintainability
of the Suit filed by Plaintiff in the Court of Civil Judge Senior
Division, Thane on the ground of territorial jurisdiction by inviting
my attention to Article 28 of the License Agreement, under which
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Courts in Mumbai have jurisdiction in respect of any disputes
arising out of the agreement. He would submit that both the
Plaintiff and Defendant carry on their business in Mumbai and
therefore, the Court in Mumbai alone can have jurisdiction in view
of specific agreement between the parties. He would submit that
once it is proved that a particular Court, which is agreed by the
parties in a contract, has jurisdiction, proceedings must be filed in
that Court alone. That, the Defendant has proved that the Court in
Mumbai has jurisdiction to decide the dispute arising out of the
license agreement and in such a case, Article 28 of the license
agreement would prevail and only Court in Mumbai will have
jurisdiction to entertain the suit filed by Plaintiff. In support of his
contention, Dr. Tulzapurkar would rely upon the Judgment of the
Apex Court in A.B.C. Laminart Pvt. Ltd. & Another Vs. A.P.
1
Agencies, Salem and Swastik Gases Private Limited Vs.
2
Indian Oil Corporation Limited .
8. Dr. Tulzapurkar would further submit that the Trial
Court has erred in directing deposit / payment of double the license
fees towards compensation without appreciating the provisions of
Section 74 of the Indian Contact Act, 1872. That, Article 5.4 of the
license agreement providing for specific amount towards additional
compensation is only a genuine pre-estimate to compensate the
losses suffered by the Licensor and therefore, the Licensor must
1 (1989) 2 SCC 163
2 (2013) 9 SCC 32
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prove such loss. To the extent of proof of losses,
damages/compensation up to the maximum limit specified in Article
5.4 of the license agreement could be awarded, that too at the time
of final hearing of the suit. In support of his contention, Dr.
Tulzapurkar would rely upon the Judgment in Kailash Nath
3
Associates Vs. Delhi Development Authority & Another . He
further submit that the Judgment of Single Judge of this Court in
4
Ida Celene Mathias & Others Vs. Mobin Ahmed Khan
directing deposit of even the amount of compensation has not taken
into consideration the law expounded by the Apex Court in Kailash
Nath Associates (supra) and therefore judgment of this Court
would not constitute a binding precedent. Dr. Tulzapurkar would
further submit that even under Section 24 (2) of the Maharashtra
Rent Control Act, 1999 (the Rent Control Act) , the word
‘damages’ are used and therefore for recovery of such damages,
principle enunciated in Kailash Nath Associates would apply.
9. Dr. Tulzapurkar would further submit that couple of
factor which can be taken into consideration for establishing the
damages suffered by Plaintiff on account of non-vacation of
premises could be subsequent leave and license agreement
executed after vacation of the license premises by the Defendant
which has fetched cumulative license fees of Rs. 23,00,000/- per
month. That, as against amount of Rs.23,00,000/- per month
3 (2015) 4 SCC 136
4 (2018) SCC OnLine Bom 16391
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ultimately earned by Plaintiff by granting license to third parties,
the Trial Court has erroneously directed deposit / payment of
amount of Rs.37,61,606/-. That another factor was to make an
enquiry into the market rent payable in the vicinity. He would
submit that though ordinarily enquiry into the amount of
compensation payable needs to be conducted during the trial of the
suit, even if the Trial Court was to make an order for
deposit/payment of rent under Order XV-A of the Code, it ought to
have determined the amount for deposit/payment of compensation
by considering the said two factors.
10. Mr. Madon, the learned senior advocate appearing for
Respondent-Plaintiff would oppose the appeal and support the
order passed by the Trial Court. He would question the
maintainability of the present appeal by submitting that the
th
impugned order dated 4 January 2021 is passed by the Trial Court
under provisions of Order XV-A of the Code and against that Order
no appeal is provided under Order 43 Rule 1 of the Code. That,
even though the Trial Court has also granted temporary injunction
to restrain Defendant from subletting or assigning the licensed
premises, the said relief no longer survives in view of Defendant’s
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action in vacating the premises on 4 April 2022. That therefore,
the scope of the present appeal is essentially restricted to the
order passed by Trial Court directing deposit / payment of rent
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under Order XV-A of the Code, against which no appeal is
maintainable.
11. Mr. Madon would contend that both the points of
jurisdiction as well as compensation/damages being a genuine
preestimate were never raised by the Appellant before the Trial
Court and the Appellant is therefore precluded from raising them
directly in appeal before this Court. He would submit that in the
present appeal, this Court is essentially concerned with correctness
of findings recorded by the Trial Court and something which was
never argued and about which there was no occasion for the Trial
Court to records its finding, cannot be decided in the present
appeal.
12. So far as the issue of jurisdiction is concerned, Mr.
Madon would contend that the licensed premises are located at
Thane and therefore, the Court at Thane has jurisdiction to decide
the suit. Referring to the provisions of Section 41 of the Presidency
Small Cause Courts Act, 1882, Mr. Madon would submit that the
Court of Small Causes, Mumbai does not have any jurisdiction to
try any suit in respect of premises situated outside Greater
Mumbai. That therefore, if Plaintiff instituted a suit in Small Causes
Court at Mumbai, the same would be outside its jurisdiction. Since,
the licensed premises are situated outside Greater Mumbai,
referring to the provisions of Section 33 of the Rent Control Act,
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Mr. Madon would submit that the suit has rightly been instituted in
the Court having jurisdiction, in which the premises are situated.
13. Mr. Madon would then counter the submission
canvassed on behalf of the Appellant by relying on the Judgment in
Apex Court in Kailash Nath Associates. By referring to provisions
of Section 24 of the Rent Control Act he would contend that the
provision to pay double the license fees towards damages or the
charge fixed under the agreement is a statutory provision. That,
statutory payment of damages or charge provided for under Section
24 of the Rent Control Act would not be subject to principles
enunciated by the Apex Court in Kailash Nath Associates for
computation amount for compensation for breach of contract under
Section 74 of the Contract Act. That, the judgment of Kailash Nath
Associates relates to charge of liquidated damages in the form of
forfeiture of earnest money for non-payment of balance amount of
consideration payable for purchase of the plot in an auction. That,
therefore, the principle enunciated in Kailash Nath would have no
application to the present case where the amount of damages or
charge is determinable under the provisions of Section 24(2) of the
Rent Control Act. He would submit that knowing this is difficulty in
applicability of the judgment in Kailash Nath , the Appellant did not
rely upon that Judgment before the Trial Court. That, the amount of
‘charge’ fixed under the agreement of license is not liquidated
damages payable under provisions of Section 74 of the Contract
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Act. Mr. Madon would also place reliance of Judgment of Single
Judge of this Court in Ida Celene Mathias (supra) wherein this
Court has directed deposit of even the amount of compensation
during pendency of the suit. He would further submit that the
liability to pay liquidated damage/charge/compensation in any case
is a mixed question of law and fact and the same must be proved
and pleaded. That, there are no pleadings about requirement to
prove actual cause of loss. There is no specific ground to that effect
in the present appeal as well. He would pray for dismissal of the
appeal.
14. Rival contentions of the parties now fall for my
consideration.
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15. The Trial Court’s order dated 4 January 2021 passed
on Application at Exhibit-5 and Exhibit-16 is under challenge in the
present appeal. Dr. Tulzapurkar has submitted that challenge in the
present appeal is now restricted only to the Direction Nos .3 and 8
of operative portion of the order which directs deposit/payment of
amount of Rs. 37,61,606/- towards license fees/ compensation from
01.09.2020 till the date of vacation of the licensed premises and
interest @ 15% per annum for delayed payment. Direction No.4
grants solace to the Defendant for a period of 78 days from
payment of license fees and Direction No.5 computes the exact
amount payable for the months of March, June, July and August
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2020. Direction No.6 provides for adjustment of amount of security
deposit paid by the Defendant to Plaintiff. Though Direction No.7
had injuncted Defendant from subletting or assigning license
premises, the said direction would no longer survive in view of
admitted position that the licensed premises have been vacated on
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4 March 2022. Thus, in the present appeal, the correctness of the
direction issued in Direction Nos. 3 and 8 of the order is required to
be examined.
16. Mr. Madon has raised a preliminary issue of
maintainability of the appeal. According to him, Direction Nos. 3
and 8 are issued by the Trial Court under Order XV-A of the Code
which are not appealable under provisions of Order 43 Rule 1. Dr.
Tulzapurkar, on the other hand, has submitted that the Application
at Exhibit- 5 was filed by Plaintiff under provisions of Order 39
Rules 1 and 2 of the Code and that the Trial Court itself has stated
so in its Order. Dr. Tulzapurkar seems to be right in that regard as
the Trial Court itself has treated the Application as filed under
Order 39 Rules 1 and 2 of the Code which is clear from Para 1 of
the impugned order. True it is that the Plaintiff sought deposit /
payment of license fees and compensation under provisions of
Order XVA of the Code.
17. However, in the Application filed at Exhiit-5 Plaintiff had
sought following reliefs:-
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61. Therefore, under the present facts and
circumstances, the Applicant humbly prays that,
pending the hearing of Suit and disposal thereof, the
Hon'ble Court be pleased to:
a. grant urgent and expeditious hearing of the Suit
and the Application;
b. pass an order directing the Defendant to deposit
and/or pay to the Plaintiff Rs. 37,61,606/- per month as
License Fees for the period of possession beyond the
License period i.e. 31.08.2020 as per Article 5.4 of the
Leave and License Agreements from 1.9.2020 till the
peaceful and quiet handing over of possession of the
Licensed Premise;
c. pass an order directing the Defendant to deposit
and/or pay Rs. 32,44,832/- to the Plaintiff as unpaid
compensation for September 2020;
d. restrain the Defendant, its agents and servants from
subletting, assigning, dealing with the Licensed Premise
or parting with possession of the said Premise or any
part thereof in any manner whatsoever;
e. restrain the Defendant, its agents and servants from
removing, selling or any manner dealing with any plant
and machinery or piece of equipment installed by the
Defendant from the Licensed Premises without prior
permission from the Hon’ ble Court during the pendency
of the Suit;
f. pass an order for deposit of interim compensation
and the payment of the same to the Plaintiff, pending
the hearing and final disposal of the Suit in accordance
with Order XVA of the Code of Civil Procedure;
g. pass an order directing the Defendant to make and
continue to make payments of the fixed costs such as
electricity, water bills factory license fee etc. including
any penalty on account of delay during the pendency of
the Suit to any government authority or private party;
h. pass an order for appointment of Court receiver;
i. pass an order for enquiry to ascertain mesne profit
under Order XX Rule 12 of Civil Procedure Code;
j. pass an order for payment of mesne profit to the
Plaintiff from the date of termination i.e. 31.08.2020
until vacant and peaceful possession of the said
Licensed Premise is handed to the Plaintiff by the
Defendant;
k. this Hon'ble Court be pleased to pass an order for
appointment of commissioners;
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1. Ad-interim / interim relief in view of prayer clauses
above;
m. Costs of the present Application; and
n. Any other relief as deemed just and necessary.
18. Thus, the relief sought by Plaintiff in its Application at
Exhibit-5 were not restricted to deposit/payment of rent under
Order XV-A of the Code. Plaintiff also sought various other
injunctive reliefs against the Defendant. It is, therefore, difficult to
hold that the Application filed by the Plaintiff was only under Order
XV-A. Apart from seeking various other injunctive reliefs in addition
to the relief for payment of rent under Order XVA, the Trial Court
has also granted injunction against the Defendant from subletting
or assigning the license premises. That relief is undoubtedly
granted under provisions of Order 39 and Rules 1 and 2 of the
Code. Appellant, therefore, cannot be directed to bifurcate the
th
order dated 4 January 2021 into two parts and file two different
proceedings viz. an Appeal under Order 43 Rule 1 in respect of the
injunctive reliefs and Writ Petition in respect of direction to
deposit/pay rent under Order XV-A. Such a course of action would
lead to multiplicity of litigation, which is not desirable. In fact, as
rightly contended by Dr. Tulzapurkar, Plaintiff may seek relief under
various provisions of the Code, but so long as Application is filed
and decided under the provisions of Order 39 Rules 1 and 2 of the
Code, appeal against such order under Order 43 Rule 1 would be
maintainable. Therefore mere quotation of provisions Order XVA for
seeking deposit/payment of rent during pendency of the suit would
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not convert the Application filed by the Plaintiff as an application
filed purely under the provisions of Order XV-A. In my view,
therefore, appeal filed by the Appellant is maintainable.
19. The next issue strenuously contested between the
parties is about is the jurisdiction of the Civil Judge Senior Division,
Thane to try entertain the suit filed by the Plaintiff. It is admitted
position that the issue of jurisdiction has neither been raised nor
th
decided by the Trial Court while passing order dated 4 January
2021. The issue of jurisdiction of the Trial Court to try and
entertain the suit of Plaintiff therefore cannot be an issue in the
present appeal. The ambit of the present appeal is restricted to
grant of temporary injunction in favour of Plaintiff under Order 39
and Rules 1 and 2 of the Code. Dr. Tulzapurkar has submitted that
the issue of jurisdiction, being a point of law, can be raised at any
stage and in any proceeding. Though he may not be entirely wrong
in contending so, deciding the issue of jurisdiction in appeal filed
aginst order passed under Order 39 Rule 2, without the issue being
raised before the Trial Court is not desirable. Therefore, though
extensive submissions are canvassed by the learned counsel
appearing for the parties on the issue of jurisdiction, in my view,
the said issue need not be decided in the present appeal. The issue
of jurisdiction is accordingly left open to be agitated and decided by
the Trial Court if and when an application to that effect is moved by
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the Defendant. I am therfore not burdening this judgment with
discussion on case laws cited by both the parties.
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20. Coming to the merits of the order dated 4 January
2021, the Trial Court has directed deposit/payment of amount of
Rs.37,61,606/- towards license fees and compensation in
accordance with the Article 5.4 of the license agreement. As
observed above, two separate license agreements have been
executed in respect of the ground floor and mezzanine floor
premises. Article 5.4 in respect of ground floor premises reads
thus:
5.4 In the event the LICENSEE falls or neglects to deliver
the vacant and peaceful possession of the said Licensed
Premises to the LICENSOR despite the LICENSOR being
ready and willing to refund the Security Deposit to the
LICENSEE on the expiry or termination or sooner or earlier
determination of this License, hereinafter referred to as "the
expired term" the LICENSOR shall, without prejudice to the
other rights and remedies the LICENSOR may have under
this Agreement or in law, not be liable to refund the Security
Deposit till such time the LICENSEE delivers the vacant and
peaceful possession of the said Licensed Premises to the
LICENSOR. In addition thereto, the LICENSEE shall be liable
to pay to the LICENSOR additional compensation at the rate
of Rs.1,300,000/- (Rupees Thirteen Lacs) per month (over and
above monthly License Fees as provided herein) calculated
from the date of the expiry, or termination, or sooner or
earlier determination of the License til the vacant and
peaceful, possession of the said: Licensed Premises is
returned by the LICENSEE to the LICENSOR.
21 . There is similar Article 5.4 in respect of mezzanine
premises wherein the additional amount of compensation is @ Rs.
2,50,000/-. Thus under both the agreements, cumulative amount
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payable towards additional compensation is Rs. 15,50,000/-. By the
time disputes arose between the parties over non-payment of
license fees, the amount of license fees payable per month, by
operation of escalation clause, had risen to Rs. 19,32,606/-. After
adding the amount of GST, the Trial Court had arrived at the figure
of Rs.37,61,606/- as the amount payable under Article 5.4 of both
the License Agreements.
22. The question raised by the Appellant in the present
appeal is whether the Plaintiff would be entitled to the entire
amount specified under Article 5.4 towards compensation
/damages? According to the Appellants, the amount specified in
Article 5.4 is merely a genuine pre-estimate of damages resulting
out of breach of the contract. Reliance is placed on provisions of
Section 74 of the Contract Act which reads thus:-
"74. Compensation for breach of contract where penalty
stipulated for .- When a contract has been broken, if a sum
is named in the contract as the amount to be paid in case
of such breach, or if the contract contains any other
stipulation by way of penalty, the party complaining of the
breach is entitled, whether or not actual damage or 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 or, as
the case may be, the penalty stipulated for.
Explanation.—A stipulation for increased interest from the
date of default may be a stipulation by way of penalty.
Exception.— When any person enters into any bail-bond,
recognizance or other instrument of the same nature, or,
under the provisions of any law, or under the orders of the
Central Government or of any State Government, gives
any bond for the performance of any public duty or act in
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which the public are interested, he shall be liable, upon
breach of any condition of any such instrument, to pay the
whole sum mentioned therein.
Explanation.—A person who enters into a contract with
Government does not necessarily thereby undertake any
public duty, or promise to do an act in which the public are
interested."
23 . In Kailash Nath Associates (supra), t he Apex Court,
after considering various judgments delivered in the past on the
aspect of determination of amount of compensation for breach of
contract under Section 74, has summarized the principles in Para
43 as under:-
43. On a conspectus of the above authorities, the law on
compensation for breach of contract under Section 74 can be
stated to be as follows:
43.1. Where a sum is named in a contract as a liquidated
amount payable by way of damages, the party complaining of
a breach can receive as reasonable compensation such
liquidated amount only if it is a genuine pre-estimate of
damages fixed by both parties and found to be such by the the
court. In other cases, where a sum is named in a contract as a
liquidated amount payable by way of damages, only
reasonable compensation can be awarded not exceeding the
amount so stated. Similarly, in cases where the amount fixed
is in the nature of penalty, only reasonable compensation can
be awarded not exceeding the penalty so stated. In both
cases, the liquidated amount or penalty is the upper limit
beyond which the court cannot grant reasonable
compensation.
43.2. Reasonable compensation will be fixed on well-known
principles that are applicable to the law of contract, which are
to be found inter alia in Section 73 of the Contract Act.
43.3. Since Section 74 awards reasonable compensation for
damage or loss caused by a breach of contract, damage or
loss caused is a sine qua non for the applicability of the
section.
43.4. The section applies whether a person is a plaintiff or a
defendant in a suit.
43.5. The sum spoken of may already be paid or be payable in
future.
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43.6. The expression "whether or not actual damage or loss is
proved to have been caused thereby" means that where it is
possible to prove actual damage or loss, such proof is not
dispensed with. It is only in cases where damage or loss is
difficult or impossible to prove that the liquidated amount
named in the contract, if a genuine pre-estimate of damage or
loss, can be awarded.
24. It is relying on the Judgment of the Kailash Nath that
the Appellant contends that the Plaintiff must prove the actual
damages suffered by it on account of non-vacation of premises and
that, Plaintiff is not entitled to the entire amount specified in Article
5.4 of the license agreement. According to Appellant, Plaintiff has
granted license in respect of the suit premises to another entity
after vacation thereof at much lesser license fees of Rs. 23,00,000/-
per month and therefore, the Plaintiff cannot be awarded
exponentially high amount of Rs. 37,61,606/- that too by way of
deposit/payment during pendency of the suit under Order XV-A of
the Code.
25. On the other hand, Mr. Madon has relied upon
provisions of Section 24 of the Rent Control Act which provides
thus:-
24. Landlord entitled to recover possession of
premises given on licence on expiry
(1) Notwithstanding anything contained in this Act, a
licensee in possession or occupation of premises given to
him on licence for residence shall deliver possession of
such premises to the landlord on expiry of the period of
licence; and on the failure of the licensee to so deliver the
possession of the licensed premises, a landlord shall be
entitled to recover possession of such premises from a
licensee, on the expiry of the period of licence, by making
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an application to the Competent Authority, and, the
Competent Authority, on being satisfied that the period of
licence has expired, shall pass an order for eviction of a
licensee.
(2) Any licensee who does not deliver possession of
the premises to the landlord on expiry of the period of
licence and continues to be in possession of the licensed
premises till he is dispossessed by the Competent Authority
shall be liable to pay damages at double the rate of the
licence fee or charge of the premises fixed under the
agreement of licence.
(3) The Competent Authority shall not entertain any
claim of whatever nature from any other person who is not
a licensee according to the agreement of licence.
Explanation.— For the purposes of this section,—
(a) the expression "landlord" includes a successor-in-
interest who becomes the landlord of the premises as a
result of death of such landlord; but does not include a
tenant or a sub-tenant who has given premises on licence;
(b) an agreement of licence in writing shall be conclusive
evidence of the fact stated therein.
26. Thus, under sub section 2 of Section 24 of the Rent
Control Act, a licensee failing to deliver possession of the licensed
premises upon expiration of the license period is made liable to pay
damages at double the rate of license fee or charge fixed under the
agreement of license. Thus, under provisions of Section 24(2), the
damages are either double the amount of license fees or the charge
fixed under the agreement. In the present case, the Trial Court has
taken into consideration the ‘charge’ agreed upon between the
parties in the license agreement and has fixed the total amount
payable at Rs.37,61,606/-.
27. The issue is whether the damages or charge payable for
non-vacation of license premises statutorily fixed under Section
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24(2) of the Rent Control Act can be made subject to the principles
enunciated by the Apex Court for computation of damages for
breach of contract under Section 74 in Kailash Nath . In my view,
at present, this issue need not be decided finally as this is an
Appeal from Order directing interim deposit/payment of rent under
provisions of Order XVA of the Code. If the issue about the exact
liability of the Defendant to pay the quantum of damages is
determined in the present appeal, there will be nothing left to be
decided in the Suit by the Trial Court. In my view, therefore, this
issue needs to be decided by the Trial Court, against decision of
which a substantive appeal can be filed by the aggrieved parties.
28. In the present appeal, this Court is concerned with the
limited question of the exact amount which can be directed to be
deposited/paid by the Defendant during pendency of the suit filed
by the Plaintiff for recovery of possession as well as for recovery of
arrears of Rent. Under provisions of Order XVA Rule 1, the
Defendant is made liable to deposit ‘such amount’ towards the
arrears of rent and license fee and future mesne profit as the Court
may direct. Order XV-A provides thus:
"ORDER XV-A
STRIKING OFF DEFENCE IN A SUIT BY A LESSOR
(1) In any suit by a lessor or a licensor against a lessee or a
licensee, as the case may be, for his eviction with or without
the arrears of rent or licence fee and future mesne profits
from him, the defendant shall deposit such amount as the
Court may direct on account of arrears up to the date of the
order (within such time as the Court may fix) and thereafter
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continue to deposit in each succeeding month the rent or
licence fee claimed in the suit as the Court may direct. The
defendant shall, unless otherwise directed, continue to
deposit such amount till the decision of the suit.
In the event of any default in making the deposits, as
aforesaid, the Court may subject to the provisions of sub-
rule (2) strike off the defence.
(2) Before passing an order for striking off the defence, the
Court shall serve notice on the defendant or his Advocate to
show cause as to why the defence should not be struck off,
and the Court shall consider any such cause, if shown in
order to decide as to whether the defendant should be
relieved from an order striking off the defence.
(3) The amount deposited under this rule shall be paid to
the plaintiff lessor or licensor or his Advocate and the
receipt of such amount shall not have the effect of
prejudicing the claim of the plaintiff and it shall not also be
treated as a waiver of notice of termination.
Explanation. — The suit for eviction shall include suit for
mandatory injunction seeking removal of licensee from the
premises for the purpose of this rule.
29. Thus, discretion is vested in the Court to determine the
amount which Defendant can be made liable to pay towards arrears
of rent or license fees and future mense profit. Order XV-A does not
use the word ‘damages/compensation’ but restricts the deposit to
‘arrears of rent or license fees’. However, the Single Judge of this
Court in Ida Celene Mathias (supra) has held in paras 19 and 20
as under:-
19. In so far as the payment of compensation and/or
damages @ Rs.20,000/- per day is concerned, a perusal of
the order of the Appellate Court shows that Appellate Court
undoubtedly reproduced Section 74 of the Act. After
reproducing Section 74, it was observed in paragraph 25
thus,
" 25. The above facts indicates that the question of
awarding damages on the basis of breach of contract is
a mater of evidence and is to be appreciated in the
proceeding and the burden is on the party who claimed
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damages. So at this stage, the question of awarding
damages does not arise. The order passed by the
learned trial Court regarding awarding damages of Rs.
20,000/- per day from 1-5-2016 and liberty to the
plaintiffs to withdraw the same is not legal and proper
and deserves to be set aside. "
20. In my opinion, the approach of the Appellate Court
to say the east is perverse. After extracting Section 74, still,
the Appellate Court observed that the question of awarding
damages on the basis of breach of contract is a matter of
evidence and is to be appreciated in the proceeding and the
burden is on the party, who claimed damages. So at this
stage, the question of awarding damages does not arise. In
my opinion, the said finding is in the teeth of Section 74 of
the Act. This is more so when in paragraph 21, the
Appellate Court observed that "At this stage, we are bound
by the facts that the leave and licence agreement has been
registered by the parties to the proceedings. So parties to
the proceedings are bound by the leave and licence
agreement". In view thereof, the impugned order passed by
the Appellate Court deserves to be set aside thereby
allowing application exhibit-13 in the following terms:
(a) Pending the hearing and final disposal of L.E.&
C. Suit No. 16 of 2017, Mobin Khan shall deposit the
pre-estimated genuine quantified compensation
and/or liquidated damages @ Rs.
20,000/- per day from 01.05.2016 till disposal of the
Suit in the trial Court;
(b) The arrears of liquidated damages shall be
deposited for the period from 01.05.2016 till
31.10.2018, within 8 weeks from today, under
intimation in writing to the Advocate for Mathias;
(c) Upon deposit, the said amount shall be invested
in any Fixed Deposit, initially for a period of 3 years
and shall be renewed
during pendency of the Suit;
(d) Pending the hearing and final disposal of
L.E.&C. Suit No. 16 of 2017, Mobin Khan is
directed to deposit monthly licence fee of Rs.
2,00,000/- from 01.05.2016 till 31.08.2018 total
amounting to Rs. 56,00,000/- within 8 weeks
subject to adjustment of deposits/payments made to
Mathias;
(e) Pending the hearing and final disposal of
L.E.&C. Suit No. 16 of 2017, Mobin Khan shall
deposit monthly licence fee @ Rs. 2,00,000/- for the
period from 01.09.2018, on or before 10th day of
the succeeding month/s under intimation in writing
to the Advocate for Mathias;
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(f) Mathias are permitted to withdraw the amount
referred in clauses (d) and (e) hereinabove,
unconditionally.
30. Though, there is no elaborate discussion by this Court
in Ida Celene Mathias (supra) about liability to pay
compensation or damages during pendency of the suit, this Court
has directed that the entire amount of compensation and or
liquidated damages should be deposited till disposal of the suit.
This Court has treated the compensations/damages as ‘pre-estimate
genuine quantified compensation’ by referring to provisions of
Section 74 of the Contract Act. In view of extensive submissions
made by the learned counsel appearing for rival parties as to
whether the statutory damages/charge payable under Section 24(2)
of the Rent Control Act can be subjected to the principles for
determination of compensation under Section 74 for breach of
contract, this Court could have decided that issue. However,
considering the limited scope of enquiry in the present appeal and
with a view not to decide the entitlement of the Plaintiff in respect
of compensation/damages at interim stage, I have refrained myself
from deciding the said issue finally. In my view, therefore, the
Judgment of this Court in Ida Celene Mathias (supra) does not
throw any light on the issue of the liability of the Defendant failing
to deliver possession of license premises to deposits/pay the
amount of compensations/damages in addition to the arrears to
rent/license fees.
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31. As observed above, Order XV-A of the Code confers
some sort of discretions on the Court by using the expression ‘ such
amount as the Court may direct on account of arrears…. ’.
Furthermore, the ‘arrears’ are restricted to ‘rent’ or ‘license fees’.
Thus, it is difficult to hold that the Court is left with no other
alternative but to direct not just the arrears of rent/license fees but
also the agreed amount of compensation/damages in the license
agreement. In my view, therefore, the Court is vested with
necessary discretion to decide the amount which can be directed to
be deposited/paid by the Defendant under provisions of Order XV-A
of the Code. However, considering the language employed in Order
XV-A such amount shall ideally not be less than the amount of
arrears of rent or license fees.
32. In the present case, in pursuance of orders passed by
th
this Court on 29 November 2021 and 23rd October 2023,
Appellant has deposited amount of Rs.2,17,01,603/- + Rs.
65,00,000/-, total amount of Rs.2,82,01,603/-. Additionally, the
amount of security deposit of Rs.98,00,000/- is already with the
Plaintiff. Thus, Plaintiff has already recovered amount of Rs.
3,80,01,603/-. If the amount of license fee is payable by the
Defendant at the relevant time of Rs. 19,32,606/- is taken into
consideration, the amount due and payable by him till the date of
vacation of premises from 01.09.2020 till 04.04.2022 would
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approximately be Rs. 3,67,19,514/-. The Trial Court has already
determined the license fees payable for a period from March to
August 2020 as Rs. 66,99,692/-. Thus, the total amount due and
th
payable by Defendant to the Plaintiff till 4 April 2022 would be
approximately Rs.4,34,19,206/-. As pointed out above, Plaintiff has
already received amount of Rs. 3,80,01,603/-. Thus, the balance
amount payable towards arrears of license fees (ignoring amount of
damages/compensation) would approximately to the tune of Rs.
54,17,603/-. There is provision in the license agreement for 4%
compounded escalation, which is not factored in this calculations.
33 . The provisions of Order XV-A are stringent and drastic.
Failure to deposit/pay the arrears of rent/license fees results in
striking off defence of the Defendant. Therefore the Court needs
to exercise the discretion vested in it judiciously so as to balance
the interest of both the parties. Considering the facts and
circumstances of this case, the Trial Court has erred in directing
deposit/payment of entire amount of rent plus compensation under
Order XVA of the Code. Its direction to pay interest @ 15% at
interlocutory stage is also unsustainable.
34. Mr. Madon has submitted that the statutory intention
behind enacting provisions of Section 24(2) of the Rent Control Act
is to deter a licensee from unauthorizedly occupying on the licensed
premises. There can be no dispute about this proposition. However
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in the present case, the Trial Court will have to decide the issue
about the date from which the occupation of licensed premises by
the Defendant became unauthorized and the date from which the
Defendant would be liable to pay damages/compensation as
provided in the license agreement. It may also take into
consideration the liability to pay the amount of rent and
compensation during various periods of outbreaks of Covid-19. It
however, cannot be that the Defendant would be permitted to go
scot-free and not pay any amount towards damages/charge to the
Plaintiff for his failure to pay the license fees in time and for not
vacating the licensed premises . In my view, therefore, ends of
justice would meet if further amount of Rs 1,00,00,000 is directed
to be deposited by the Defendant in the Trial Court under the
provisions of Order XV-A of the Code.
35. I therefore proceed to pass the following order:
th
i) The order dated 4 January 2021 passed by the Joint
Civil Judge, Thane is modified to the extent that
Appellant/Defendant shall deposit in the Trial Court
further amount of Rs 1,00,00,000/- under provisions of
Order XV-A of the Code, within a period of 8 weeks from
today.
The Plaintiff/Respondent shall be entitled to withdraw
ii)
the deposited amount on furnishing a bank guarantee of
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National Bank equivalent to 75% of the deposited
amount and an undertaking equivalent to the remaining
25% of the deposited amount for bringing back the said
amount as and when directed by the Court.
iii) The Trial Court shall proceed to decide the suit without
influenced by the observations made in its order dated
th
4 January 2021 or in the present judgment.
36. With the above directions, the appeal is disposed of.
There shall be no order as to costs.
37. In view of disposal of Appeal, Interim Applications do
not survive and the same are also disposed of.
SANDEEP V. MARNE, J
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Signed by: Rameshwar L. Dilwale
Designation: PA To Honourable Judge
Date: 02/11/2023 15:47:03