LUXE PASSION PRIVATE LIMITED  Vs FREEDOM ROOST

FAO(OS) (COMM) 183/2020 Page 1 o f 12
* IN THE HIGH COURT OF DELHI AT NEW DELHI

% Date of decision: 12 th January, 2021.

+ FAO(OS) (COMM) 183/2020 & CM APPL. 35085/2020 (for
placing on record additional facts and for filing a dditional
documents along with the appeal).

LUXE PASSION PRIVATE LIMITED ….. Appellant
Through: Mr. Sameer Jain, and Mr. Himesh
Thakur, Advs.
versus
FREEDOM ROOST ….. Respondent
Through: Mr. Tarun Rana, Adv.
CORAM:
HON’BLE MR. JUSTICE RAJIV SAHAI ENDLAW
HON’BLE MR. JUSTICE SANJEEV NARULA

[VIA VIDEO CONFERENCING]
RAJIV SAHAI ENDLAW, J .
1. This appeal, under Section 37 of the Arbitration and Conciliation
Act, 1996 read with Section 13 of the Commercial Co urts Act, 2015, inter
alia impugns the order dated 29 th December, 2020 of the Commercial
Court/Additional District Judge-04 (ADJ) (West), Ti s Hazari Courts, Delhi,
of dismissal of OMP(I)(COMM) No.195/2020 under Sect ion 9 of the
Arbitration Act preferred by the appellant seeking interim measure of
restraining the respondent from accessing the premi ses of the appellant at
A-16, 29 & 30, Mayapuri Industrial Area, Phase-I, N ew Delhi and of
directing the respondent not to use the licenses/ap provals obtained by the
respondent in the name of the appellant and further , of directing the
respondent to vacate the subject premises in view o f termination of the
lease and the agreement, on or before 31 st December, 2020.
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2. The appeal came up first before the Vacation Ben ch of this Court on
31 st December, 2020, when notice thereof was ordered to be issued. The
appeal thereafter was adjourned from time to time a nd came up last before
us on 7 th January, 2021, when though we heard the counsels b ut being of
the prima facie opinion that the impugned order of the Commercial
Court/ADJ of dismissal of the Section 9 application of the appellant was
liable to be set aside, the matter was adjourned to today to enable the parties
to explore the possibility of amicable settlement.
3. However no settlement has been possible and we h ave today again
given opportunity to the counsel for the respondent to address us on why
the appeal should not be allowed.
4. The appellant filed the petition aforesaid under Section 9, seeking
interim measures, pleading (i) that the appellant i s engaged in the business
of sale, maintenance and repair of motorcycles alon g with other ancillary
services relating to parts and accessories; (ii) th at the appellant, in or around
2018 was interested in opening a cafe/bar/lounge to compliment it’s Harley
Davidson dealership and showroom in the subject pre mises, in the name
and style of “Red Fort Harley Davidson”; (iii) that accordingly, the
appellant entered into an Operations & Maintenance Agreement dated 1 st
September, 2018 (O&M Agreement) with the respondent , granting rights to
the respondent to run and operate a cafeteria in a portion of the subject
premises at A-16, 29 & 30, Mayapuri Industrial Area , Phase-I, New Delhi
and for complimenting the business being carried on by the appellant
therein; (iv) that the appellant had taken the afor esaid premises on rent
under a Lease Deed dated 16 th May, 2016, from Universal Engineering
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Corporation; (v) that the O&M Agreement entered int o by the appellant
with the respondent, was made co-terminus with the lease of the appellant
of the said premises; (vi) that the respondent was in breach of the various
terms and conditions of the O&M Agreement (however the need to herein
elaborate the pleas with respect thereto is not fel t); (vii) that the appellant,
due to breaches by the respondent of the O&M Agreem ent, vide Notice
dated 10 th December, 2020 terminated the O&M Agreement with t he
respondent; (viii) that the appellant, due to disru ption of its business of
Harley Davidson dealership and showroom, has also a greed to vacate the
said premises and had got sent a Notice dated 1 st July, 2020 to the landlord
Universal Engineering Corporation, of the intent of the appellant to vacate
the premises; (ix) that the appellant has deposited a sum of Rs.75 lakh as
security with its landlord Universal Engineering Co rporation and as per the
terms of the lease deed, on failure of the appellan t to vacate the premises by
31 st December, 2020, i.e the date on which the appellan t had noticed the
landlord Universal Engineering Corporation of its i ntent to vacate the
premises, the said security deposit of Rs.75 lakh shall be forfeited; and, (x)
that the O&M Agreement between the appellant and th e respondent
contains an arbitration clause.
5. Notice of the aforesaid application/petition und er Section 9 of the
Act was issued by the Commercial Court/ADJ to the r espondent, which
filed a reply thereto. However again, the need go t o into the same is not felt
for the reasons as would appear hereinafter.
6. The Commercial Court/ADJ dismissed the petition/ application of the
appellant under Section 9 of the Act, finding/obser ving/holding, (i) that in
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Section 9 proceedings, it could not be adjudicated whether the termination
by the appellant of the O&M Agreement with the resp ondent, was valid or
not; (ii) that the appellant had also not filed on record any legal notice sent
to the respondent, complaining of any breaches/viol ations of the O&M
Agreement; (iii) that there were various other disp uted facts which could
not be decided in a Section 9 proceeding; and, (iv) that thus the appellant
was not entitled to the reliefs claimed.
7. We are afraid, the impugned order of the Commerc ial Court/ADJ
cannot stand the scrutiny of law. Merely because th e Section 9 proceedings
entails disputed facts does not lead to dismissal o f a Section 9
application/petition. In fact in the Section 9 proc eedings, there are bound to
be disputed facts and which are to be adjudicated i n arbitration, by the
Arbitral Tribunal agreed upon by the parties. We ma y mention, that there is
no dispute between the parties with respect to the existence and/or validity
of the Arbitration Agreement and/or of the disputes as highlighted in the
Section 9 application being subject of the arbitrat ion agreement and to be
adjudicated by the Arbitral Tribunal. The Court, in a Section 9 proceeding,
is merely required to consider the grant/non-grant of interim measures
claimed, applying the same principles as applicable to disposal of
applications under Order XXXIX Rules 1&2 of the Cod e of Civil
Procedure, 1908 (CPC). Reference in this regard may be made to Adhunik
Steels Ltd. v. Orissa Manganese and Minerals (P) Lt d. (2007) 7 SCC 125
and Arvind Constructions Co. (P) Ltd. v. Kalinga Mining Corporation
(2007) 6 SCC 798. The Commercial Court/ADJ, in the present case, has
clearly erred in law in dismissing the Section 9 ap plication merely
reasoning that the same entailed disputed questions of fact and which were
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to be adjudicated in arbitration. This reasoning ma kes Section 9 otiose in as
much as there would rarely be a case of all facts b eing undisputed in a
Section 9 proceeding.
8. Be that as it may, the arguments of the counsel for the respondent
before us are, (i) that the O&M Agreement of the re spondent with the
appellant was co-terminus with the lease of the pre mises between the
appellant and its landlord Universal Engineering Co rporation; (ii) that the
said lease was/is valid till the year 2025; (iii) t hat the claim of the appellant
is of having terminated the said lease but the appe llant has not placed on
record the notice vide which it claims to have term inated the lease with its
landlord Universal Engineering Corporation; (iv) th at the respondent had
taken the said objection before the Commercial Cour t/ADJ, but inspite
thereof notice was not produced, neither before the Commercial Court/ADJ
nor has been produced along with the appeal; (v) th at it is not the case of
the appellant that the appellant has received any r esponse from the landlord
Universal Engineering Corporation to the notice of termination or that the
landlord Universal Engineering Corporation is willi ng to take back the
possession of the premises from the appellant; (vi) that from the documents
produced by the appellant it appears that there is a Addendum dated 1 st
July, 2019 of the Lease Deed dated 16 th May, 2016 of the appellant with its
landlord Universal Engineering Corporation but the said Addendum dated
1st July, 2019 also has not been produced; and, (vii) that the appellant as
Annexure A-10 to this appeal has only produced the letter dated 28 th
September, 2020 claimed by the appellant to have be en addressed to its
landlord Universal Engineering Corporation and in w hich reference is made
to the Addendum Lease Deed dated 1 st July, 2019 and to the Notice dated
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1st July, 2020.
9. We have however enquired from the counsel for th e respondent, the
right, if any of the respondent to continue to oper ate and manage the
cafeteria from a part of the premises of the appell ant under lease from
Universal Engineering Corporation. It is not as if the respondent is a sub-
lessee or in any other capacity has any interest in the land or immovable
property forming part of the premises of the appell ant under lease from
Universal Engineering Corporation. Under the O&M Ag reement, the
respondent merely agreed to operate and manage the cafeteria set up or
desired to be set up by the appellant in its Harley -Davidson showroom.
Even if the appellant has illegally or wrongfully t erminated the said O&M
Agreement, the said agreement, by its very nature i s not capable of specific
performance and the only remedy of the respondent f or illegal termination
of the O&M Agreement would be for recovery of damag es and which claim
has to be made before the Arbitral Tribunal.
10. No answer has been forthcoming from the counsel for the respondent
on the aforesaid aspect. No claim even of the respo ndent, in law being
entitled to specific performance of the O&M Agreeme nt, is made.
11. As far as the argument of the counsel for the r espondent, of the
appellant having not placed the notice of terminati on of lease or Addendum
Lease Deed on record, are concerned, the same do no t in our view change
the legal right and status of the respondent to the premises. If the appellant,
in the arbitration proceedings fails to justify the termination of the O&M
Agreement, the remedy of the respondent therefor wo uld be to claim
damages from the appellant for the same.
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12. We may in this context however notice that duri ng the hearing on 7 th
January, 2021, we had indicated that as per the law laid down in Delhi
Automobiles Ltd. v. Economy Sales (1994) 55 DLT 39 [SLP(C) No.
011893/1994 preferred whereagainst was dismissed on 5 th August, 1994]
and followed in K.L. Sethi v. S. Kishan Singh (2009) 159 DLT 464 [FAO
(OS) No.216/2009 preferred whereagaainst was dismis sed on 25 th May,
2009], ATV Projects India Limited v. Bharat Heavy Electric als Ltd.
MANU/DE/0440/2009, Mehrasons Jewellers Pvt. Ltd. v. Municipal
Corporation of Delhi MANU/DE/2678/2010, Nirupa Berry v. Goel Estate
& Promoters Pvt. Ltd. MANU/DE/1847/2013 [FAO(OS) 379/2013 &
FAO(OS) 404/2013 preferred whereagainst were dismi ssed on 30 th
October, 2013] and Tekla Corporation v. Survo Ghosh (2014) 210 DLT
666, the Court, while granting an interim order in favour of the plaintiff and
against the defendant, can always impose conditions on the plaintiff.
Following the said law, we had during the hearing o n 7 th January, 2021
proposed that while granting the interim measures s ought by the appellant,
the appellant can be bound to surrender possession of the entire leased
premises in its possession to the landlord Universa l Engineering
Corporation and/or from using the ground of wanting to surrender
possession of the entire leased premises to the lan dlord, for terminating the
O&M Agreement with the respondent and/or from abusi ng the process of
this Court and counsel for the appellant had readil y agreed to the Court
imposing any such conditions on the appellant and/o r binding the appellant
in any manner whatsoever.
13. Rather, the counsel for the appellant, on 7 th January, 2021 informed
that Harley Davidson Motorcycles, whose dealership/ showroom the
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appellant was operating from the premises and infac t for which purpose
alone, the subject premises were taken on rent by t he appellant, has not
extended the dealership of the appellant and the ap pellant, without the
dealership of Harley Davidson Motorcycles, is not i nterested in retaining
the premises and paying exorbitant rent therefor.
14. Though the counsel for the respondent has not a rgued, but we may
state that it is not as if in exercise of powers un der Section 9, no mandatory
relief can be granted, though the relief sought in the present case is also of
restraining the respondent and its agents from ente ring the premises. As
aforesaid, the principles applicable are of Order X XXIX Rules 1&2 of the
CPC and in which context as far back as in Dorab Cawasji Warden v.
Coomi Sorab Warden (1990) 2 SCC 117 it was held that in appropriate
facts, interim mandatory injunction can also be gra nted, though in that case
the same was of restoration of status quo. Be that as it may, the Courts
subsequently in Tanusree Basu v. Ishani Prasad Basu (2008) 4 SCC 791,
Mohd. Mehtab Khan v. Khushnuma Ibrahim Khan (2013) 9 SCC 221,
Hammad Ahmed v. Abdul Majeed (2019) 14 SCC 1, Amit Sinha v. Sumit
Mittal 2011 SCC OnLine Del 591 (DB) and Simplex Infrastructures Ltd.
v. National Highways Authority of India (2011) 177 DLT 248 (DB) have
also granted mandatory injunctions/directions at th e interim stage.
15. In the facts of the present case it is felt tha t if the interim relief sought
is not granted, the liability of the appellant to p ay the rent for the entire
premises (we reiterate that the O&M Agreement of th e appellant with the
respondent is only for a small part of the larger l eased premises in
occupation of the appellant and which was being use d for Harley Davidson
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Motorcycles dealership/showroom) and the appellant will also run the risk
of having its security deposited of Rs.75 lakhs for feited. Even if the lease
deed of the appellant with its landlord Universal E ngineering Corporation is
a registered lease deed and valid till the year 202 5 and even if the landlord
is not willing to premature termination thereof by the appellant, the
appellant if not interested in continuing as a less ee, as represented by the
appellant to the Court, the appellant to not remain liable for rent, can
always surrender/offer possession to the landlord p rior to the term of expiry
of the registered lease deed and then the claim if any of the landlord against
the appellant will only be of damages for premature termination of the lease
and which damages, the landlord to be able to recov er from the appellant,
will have to prove. The appellant however cannot in law, offer possession
of or surrender of the lease to the landlord, witho ut vacating the entire
leased premises and in portion whereof the responde nt, under the O&M
Agreement with the appellant, is running a cafeteri a. Thus unless the
interim measures as sought by the appellant are gra nted, the appellant will
remain liable to its landlord Universal Engineering Corporation for entire
rent and may also incur the risk of forfeiting the security deposit.
16. We have thus enquired from the counsel for the respondent, whether
the respondent, if desires to continue operating th e cafeteria till adjudication
of disputes by the Arbitral Tribunal, is willing to , without prejudice to its
rights and contentions, deposit Rs.75 lakhs as well as the monthly rent for
the entire premises, in the Court, so that the appe llant does not remain liable
to its landlord Universal Engineering Corporation. This offer was in fact
communicated the counsel for the respondent on 7 th January, 2021 also.
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17. The counsel for the respondent states that th e respondent is willing
to pay to the appellant in terms of the O&M Agreeme nt only and nothing
more.
18. We thus find the appellant to satisfy the ingre dients of, (A) having a
prima facie case inasmuch as the O&M Agreement betw een the appellant
and the respondent is not specifically enforceable and the remedy if any of
the respondent for illegal termination of the O&M A greement by the
appellant is of recovering damages only and the res pondent has no right to
remain in occupation of the premises and in fact ha s no right to the
premises and the appellant can always restrain entr y of the respondent; (B)
suffering irreparable injury as aforesaid of being forced to pay rent of the
entire premises and forfeiting its security deposit and of litigation with the
landlord, if the interim measures are not granted; on the contrary, the
respondent, when it agreed to operate and manage th e cafeteria in the
showroom of the appellant, did not choose to acquir e any right in the
premises which could have been enforced by the resp ondent and the
remedy of the respondent against the illegal termin ation, if any of the O&M
Agreement is only for damages; reference in this re gard can be made to
Indian Oil Corporation Limited Vs. Amritsar Gas Ser vice (1991) 1 SCC
533 and Kashyap’s Vs. Bata Indian Limited MANU/DE/1887/2013; and,
(C) the balance of convenience is thus also in favo ur of the appellant and
against the respondent.
19. We have not felt the need hereinabove to go int o the question of
breaches by the respondent of the O&M Agreement, as pleaded by the
appellant, because the counsel for the appellant di d not argue a case of
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breach.
20. The appeal is thus allowed.
21. The order dated 29 th December, 2020 of the Commercial Court/ADJ,
of dismissal of the application/petition under Sect ion 9 of the Arbitration
Act preferred by the appellant is set aside. The ap plication/petition of the
appellant under Section 9 of the Arbitration Act is allowed and the
respondent is restrained, (a) with effect from 31 st January, 2021, as sought
by the counsel for the respondent, to stop operatin g and managing the
cafeteria from the subject premises; (b) from, afte r 31 st January, 2021,
entering the premises at A-16, 29 & 30, Mayapuri In dustrial Area, Phase-I,
New Delhi; and, (c) from after 31 st January, 2021 using the licenses for
operating the cafeteria in the name of the appellan t, for any purpose
whatsoever.
22. We make it clear that the respondent shall be e ntitled to remove its
belongings from the premises aforesaid and the appe llant shall not interfere
with the same and whatever belongings, fittings/fix tures of the respondent
are left in the premises after 31 st January, 2021, the respondent shall only be
entitled to, in the arbitration proceedings, either claim the same from the
appellant or claim the monetary value thereof.
23. We also bind the appellant with its statement, to, on or before 15 th
February, 2021 surrender all its rights in its leas e with Universal
Engineering Corporation to the said landlord along with vacant peaceful
physical possession of the entire premises and rest rain the appellant from,
after 15 th February, 2021 and for a period of three years fro m 31 st January,
2021, carrying on any activity, in any capacity wha tsoever from the
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aforesaid premises, neither itself nor through its
shareholders/directors/agents and/or using its corp orate veil and caution the
appellant and its directors/shareholders through co unsel that if it is found
that the want of surrendering the possession of the premises to the landlord
is found to have been used as a pretence or a guise to remove the
respondent from the premises, the consequences in l aw shall follow.
24. We may make it clear that all claims of the par ties against each other,
including arising from this interim order, shall be subject matter of
arbitration and nothing observed herein shall have any bearing on the
Arbitral Award or the proceedings.
The appeal is disposed of.

RAJIV SAHAI ENDLAW, J

SANJEEV NARULA, J

JANUARY 12, 2021
‘pp’..

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