* IN THE HIGH COURT OF DELHI AT NEW DELHI + CS(OS) No. 1439/2008 % Date of Decision: April 06, 2009 # M/s Satya Narain Sharma-HUF. ..... Plaintiff ! Through: Mr. Hemant Chaudhri, Advocate Versus $ M/s Ashwani Sarees Pvt. Ltd. .....Defendant ^ Through: Mr.R.P.Bansal, Sr. Advocate with Mr.Atul Sharma, Mr.Ajay Saroya and Mr.Abhishek Agarwal for the defendant. Mr.Girish Aggarwal with Ms.Mugdha Pandey for the applicants. CORAM: HON'BLE MR. JUSTICE S.N. AGGARWAL 1. Whether reporters of Local paper may be allowed to see the judgment? YES 2. To be referred to the reporter or not?YES 3. Whether the judgment should be reported in the Digest?YES S.N.AGGARWAL, J The legality, validity and enforceability of a 'three years lock- in-period Clause' contained in the agreement to lease between the parties to the suit is the only question that needs consideration and CS(OS)No.1439/2008 Page 1 of 32 an answer by the Court in the present suit. 2 The brief facts of the case giving rise to the above question are as follows:- The plaintiff is the owner and landlord of suit premises bearing No. G-27 on the ground floor of MGF Metropolitan Mall, Saket, New Delhi. The defendant is in the business of manufacturing and dealing in garments for children under the name and style 'CATMOSS'. The defendant is a private limited company incorporated under the Companies Act. 3 It is stated that the defendant had approached the plaintiff with a letter of intent dated 05.09.2007 expressing a desire to take the suit premises on lease. As per letter of intent issued by the defendant to the plaintiff and signed by both the parties, the suit premises were sought to be taken on lease by the defendant on a monthly rent of Rs.3,00,000/- for a fixed period of three years with an option to the lessee for the renewal of three years term each with the stipulation to increase the rent @ 15% after a period of every three years. It was specifically stipulated in the letter of intent dated 05.09.2007 that the defendant can vacate the suit property at any time but only after an initial period of three years. It was stipulated that the initial three years of the lease shall be a CS(OS)No.1439/2008 Page 2 of 32 'lock-in-period'. However, an option was given to the defendant to terminate the lease by giving a 90 days notice after the lock-in- period of initial three years of the lease. 4 In furtherance of letter of intent dated 05.09.2007, a registered agreement to lease dated 27.09.2007 was executed between the plaintiff and the defendant w.e.f. 15.11.2007 for a fixed period of three years ending on 14.11.2010. Since a lock-in- period of three years was provided in the agreement to lease dated 27.09.2007 executed between the parties, the plaintiff is alleged to have planned to invest the monthly rent to be received by the plaintiff from the defendant in his interior furnishing business and is alleged to have made further commitments on the basis of fixed period of three years. 5 It was further provided in Clause 4 of the agreement to lease dated 27.09.2007 that the liability for payment of rent by the defendant will stand deferred in case the Mall in which the suit premise is situated does not become fully operational by 15.11.2007 till the date of operation of the Mall. The plaintiff has stated in para 6 of the plaint that as the Mall became fully operational, the defendant started making the payment of rent w.e.f. 15.11.2007. As per the plaint, since the plaintiff did not CS(OS)No.1439/2008 Page 3 of 32 receive rent for the months of April and May, 2008, the plaintiff got served a legal notice dated 17.05.2008 upon the defendant calling upon the defendant to pay a sum of Rs.6,74,160/- being the rent and taxes for the months of April and May, 2008 along with interest @ 36% per annum for the delayed period. The said legal notice dated 17.05.2008 was duly served on the defendant and the defendant gave reply dated 05.06.2008 to the said legal notice. In the reply dated 05.06.2008, the defendant took a plea of the Mall being allegedly not fully operational and there being allegedly low foot fall in the Mall. Through the reply dated 05.06.2008, the defendant sought to terminate the lease agreement dated 27.09.2007 w.e.f. 30.09.2008 and thus refused to pay the arrears of rent. However, the defendant in the reply dated 05.06.2008 did not deny its liability to pay a sum of Rs.6,74,160/- being the rent for the months of April and May, 2008 along with interest @ 36% per annum for the delayed period but called upon the plaintiff to adjust the same from the security deposit of Rs.18 lacs lying deposited with the plaintiff. 6 The plaintiff got served a rejoinder/rebuttal notice dated 10.06.2008 to the defendant through its counsel whereby the plaintiff again drew attention of the defendant to the stipulation in CS(OS)No.1439/2008 Page 4 of 32 the lease agreement of a lock-in-period up to 14.11.2010 and brought to the notice of the defendant that in view of lock-in-period of three years, the defendant is liable to pay a sum of Rs.1,10,97,990/- to the plaintiff being the rent, maintenance charges, taxes and interest on the delayed period of rent for the period up to 14.11.2010. The plaintiff also informed the defendant that the purported termination of the lease by the defendant w.e.f. 30.09.2008 is neither valid nor legal and does not alter the terms of the lease agreement in any manner. By means of rebuttal/rejoinder notice dated 10.06.2008, the plaintiff again called upon the defendant to pay a sum of Rs.10,11,240/- being the rent for the months of April, May and June, 2008 along with interest @ 36% per annum for the delayed period. It is alleged that the defendant has not paid any rent to the plaintiff after 01.04.2008. 7 The plaintiff, immediately after serving rebuttal/rejoinder notice dated 10.06.2008 upon the defendant, filed the present suit for declaration seeking a declaration that the termination of the lease agreement dated 27.09.2007 by the defendant is invalid and for further declaration to declare the lease to be subsisting and continuing till 14.11.2010. The plaintiff has also prayed for a decree of mandatory injunction directing the defendant to pay a sum of CS(OS)No.1439/2008 Page 5 of 32 Rs.3,37,080/- every month w.e.f. 01.08.2008 till 14.11.2010 in advance on or before 10th day of each English calender month. The plaintiff has further prayed for a decree of Rs.14,02,320/- being the arrears of rent and taxes and interest for the delayed period for the months of April to July, 2008. 8 In response to summons of the suit, the defendant has filed its written statement. In the written statement filed by the defendant, execution of agreement to lease dated 27.09.2007 which is the basis of the plaintiff's suit has not been denied. However, the defendant has taken a plea that at the time of first settling the terms of the proposed agreement to lease, there was no meeting of minds or intention of the parties to incorporate or agree on a term of lock-in-period for the termination of lease. The defendant has denied its liability under the lock-in-period Clause contained in the agreement to lease dated 27.09.2007. The defendant has taken an alternative plea that a stipulation of lock-in-period for the defendant with a right to the plaintiff to terminate the lease during the lock-in- period, as set out in the Clause 10(e), is onerous, void and unenforceable. The further stand of the defendant is that the agreement to lease has become impossible to perform. The defendant has stated that in terms of Clauses 9(f), 9(k) and 10 (g) CS(OS)No.1439/2008 Page 6 of 32 of the agreement to lease, the suit premises can be used by the defendant only for commercial purposes. It is stated that the defendant though tried to use the premises for commercial purposes but for the reasons beyond its control and due to world wide economic meltdown in the economies, the defendant started incurring losses in its business and was not able to pay hefty monthly rent to the plaintiff for the premises from where it was having no income. It is alleged that due to these reasons, the agreement to lease executed between the parties became impossible of performance as the defendant cannot use the premises for commercial purposes as envisaged in the agreement to lease. The defendant has denied ownership of the plaintiff in respect of the suit premises and according to the defendant, MGF Metropolitan Mall is the owner of the suit property. The defendant has alleged that this suit is not maintainable for non-impleadment of MGF Metropolitan Mall as party/ defendant in the said suit. The defendant has prayed for dismissal of the present suit. 9 For deciding the present suit filed by the plaintiff against the defendant, the only legal issue that arises from the pleadings of the parties is whether 'three years lock-in-period Clause' contained in the agreement to lease dated 27.09.2007 executed between the CS(OS)No.1439/2008 Page 7 of 32 parties is binding on the parties. The other objection taken by the defendant in its written statement to the grant of prayers made by the plaintiff in the suit do not merit any consideration because the defendant has admitted the execution of the agreement to lease dated 27.09.2007 which is the foundation of the plaintiff's claim in the said suit. The decision in the suit virtually depends on the construction and interpretation of various clauses contained in the agreement to lease in respect of the suit premises. 10 On 19.01.2009, counsel for both the parties had made a statement at Bar that the case does not require admission/denial of documents to be carried out as according to them also, the decision in the present suit depends upon the interpretation of the lease agreement between the parties which is made basis of the suit. On this statement being made by the counsel for the parties before the Court on 19.01.2009, case was adjourned for hearing for 30.01.2009. On 30.01.2009 arguments of counsel for both the parties were heard in the matter and the case was reserved for judgment. Before the judgment could be delivered, Mr. Ram Phal Bansal, Senior Advocate came and appeared on behalf of the defendant and mentioned to the Court on 02.02.2009 that the Court should not hasten to pronounce the judgment because he CS(OS)No.1439/2008 Page 8 of 32 wants to make certain submissions and satisfy the Court that the case cannot be decided without framing of issues. On this request being made by Mr. Ram Phal Bansal in presence of counsel for the plaintiff on 02.02.2009, pronouncement of judgment was deferred and on that day case was adjourned for further hearing for 13.02.2009. However, in the meanwhile, the defendant filed a review application under Order 47 Rule 1 read with Section 151 CPC (Review Application No. 57/2009) for review of order dated 19.01.2009 and this Court vide its order dated 06.02.2009 passed on the review application of the defendant observed that the parties will be given an opportunity for admission/denial of their respective documents at appropriate stage of the suit. This observation came to be made in the review application of the defendant because of a stand taken on behalf of the defendant that Mr. Abhishek Aggarwal, Advocate who made a statement before the Court on 19.01.2009 that admission/denial of documents was not required was not authorised to make such a statement. However, the plea of the defendant that Mr. Abhishek Aggarwal was not competent to make a statement to the court on 19.01.2009 appears to be an absolutely false, vexatious and an after-thought plea. Mr. Abhishek Aggarwal who appeared in the matter on behalf CS(OS)No.1439/2008 Page 9 of 32 of the defendant and made a statement on 19.01.2009 that admission/denial of documents is not required, has in fact replied to the legal notice of the plaintiff and has also filed his vakalatnama on behalf of the defendant in the suit. Therefore, it cannot be said that Mr. Abhishek Aggarwal acted without instructions on 19.01.2009. 11 I have heard the arguments of the counsel for the parties and have also gone through the entire case file and the documents of the parties available on record. 12 In view of the order dated 06.02.2009 in the review application No. 57/2009, the first question that arise for consideration is whether there is any document of either of the parties on record which require admission/denial by them. Though I have observed in my order dated 06.02.2009 in review application No. 57/2009 that the parties will be given an opportunity for admission/denial of documents at appropriate stage but upon hearing the counsel for the parties and upon perusal of the record, I find that there is no document on record which require admission/denial by either of the parties. The agreement to lease dated 27.09.2007 is the foundation of the plaintiff's claim in the present suit. The execution and contents of the document CS(OS)No.1439/2008 Page 10 of 32 described as 'agreement to lease' is not disputed by the defendant. The decision of the suit depends upon the construction of various clauses contained in the said document described as 'agreement to lease' and also on the legal notice of the plaintiff dated 17.05.2008, reply of the defendant dated 05.06.2008 and rejoinder/rebuttal notice of the plaintiff dated 10.06.2008. None of these documents is in dispute by either of the parties. I would like to mention that I had repeatedly asked Mr. Ram Phal Bansal, learned senior counsel appearing on behalf of the defendant whether there is any document on record either filed by him or by the plaintiff which require admission/denial by the parties. Mr. Bansal did not point out any such document which require admission/denial by either of the parties. In that view of the matter, I did not consider it necessary to send the case for admission/denial of documents before the Joint Registrar. 13 Mr. Ram Phal Bansal, learned senior counsel appearing on behalf of the defendant had argued that the suit cannot be decided by the Court without framing of issues notwithstanding whether there is a dispute or no dispute between the parties on any factual aspect. Mr. Bansal was repeatedly told that the only issue that arise for decision in the present suit is a legal issue regarding the legality CS(OS)No.1439/2008 Page 11 of 32 and validity of the 'lock-in-period clause' contained in the agreement to lease between the parties and he was asked to address the Court on this legal issue and show why and how the said 'lock-in-period clause' contained in the lease agreement is not binding on the parties. Though Mr. Bansal has addressed his arguments on this legal issue but he has insisted for framing of following issues. (Copy of proposed issues handed over by Mr. Bansal to the Court) 1. Whether Court has pecuniary jurisdiction to try the suit? 2. Whether the plaint is not liable to be rejected for not disclosing any cause of action? 3. Whether the suit is not liable to be dismissed for deficiency of court fee as the amount for which the declaration is sought comes to Rs.1.8 crores but the court fee affixed by the plaintiff is only Rs.57000/-. 4. Whether any lease deed subsists between the parties, as the document on which the plaintiff relies for maintaining the suit is only agreement to lease and not lease deed? 5. Whether there exists any lock in period regarding the tenancy of the defendant in the suit premises and if so whether the defendant has no right to terminate the lease during the lock in period? 6. Whether the suit is maintainable in the present form in the absence of any lease deed? Whether the plaint is not liable to be rejected, as it does not provide material Particulars regarding the CS(OS)No.1439/2008 Page 12 of 32 ownership of the plaintiff over the suit premise. 7. Whether any cause of action arose in favour of the plaintiff to file the present suit? 8. Whether the suit is maintainable as the plaintiff has claimed in the suit future rent which has not accrued in his favour so far? 14 Mr. Bansal has relied upon a Division Bench judgment of this Court in S. Shandi (Mrs.) VS. D.A.V. College Managing Committee 2006 III AD (DELHI) 598 and has laid emphasis on para 7 of the said judgment which is extracted below:- “We cannot appreciate the approach adopted. It needs hardly be said that the procedure laid down by law has to be followed while deciding a civil suit. The Code of Civil Procedure requires that after a written statement is filed contesting the claim of the Plaintiff, issues need to be framed and those issues are required to be decided. A perusal of the Trial Court record shows that issues were not framed in the case and it was straightaway taken up for decision on its maintainability. It is not clear why it was felt that the suit was not maintainable. It is not as if the right of the Appellant to approach a civil Court was barred by any law nor could it be said that judicial review was prohibited. Learned counsel for the Respondent has also not been able to give us any CS(OS)No.1439/2008 Page 13 of 32 reason why the civil suit filed by the Appellant was not maintainable.” 15 Relying on the above judgment, particularly para 7 of the said judgment extracted above, Mr. Bansal had argued that this suit should not be finally disposed of unless issues as proposed above are framed and an opportunity is given to the parties to adduce their evidence on the said proposed issues. I do not agree with this submission made on behalf of the defendant. The issues in this suit may be issues of fact or issues of law or may be mixed issues of fact and law. In case the suit raises only issues of law, then the parties need not be sent for trial in every case as the case can be conveniently disposed of on hearing being given on the issues of law. However, in case the issues of fact arises in any suit then those issues can be decided only after giving opportunity to both the parties to produce their evidence on such issues. The judgment in S. Shandi's case (Supra) relied upon by learned senior counsel appearing on behalf of the defendant is not applicable to the facts of this case. The trial court, in that suit, dismissed the suit as not maintainable without framing of issues that arose from the pleadings of the parties and it was in this context that the Division Bench observed that the trial court should not have dismissed the CS(OS)No.1439/2008 Page 14 of 32 suit on the ground of its maintainability alone without framing of issues. However, this is not the case here in the present suit. 16 The present suit can conveniently be decided on the basis of a legal issue regarding legality and validity of 'lock-in-period Clause' contained in the lease agreement. Notwithstanding that, I have heard Mr. Bansal on the issues proposed by him extracted hereinabove. Even the issues proposed by the counsel for the defendant can be conveniently decided without evidence. Therefore, in order to allay any confusion in the matter, I even propose to deal with the issues proposed by learned senior counsel for the defendant so that the case may be decided to the satisfaction of both the parties. 17 The first issue raised on behalf of the defendant is regarding the pecuniary jurisdiction of this Court to try the present suit. Learned senior counsel appearing on behalf of the defendant has not given any reason why this Court has no pecuniary jurisdiction to try this suit. The objection of the defendant at best on the point of pecuniary jurisdiction of this Court could have been that since the plaintiff has prayed for a decree of mandatory injunction directing the defendant to pay a sum of Rs.3,37,080/- every month w.e.f. 01.08.2008 till 14.11.2010 and for a decree of Rs.14,02,320/- CS(OS)No.1439/2008 Page 15 of 32 towards arrears of rent, taxes and interest for the delayed period till the date of filing of this suit, he ought to have filed this suit before the Court of lowest pecuniary jurisdiction competent to entertain the said claim being the Court of District Judge. This objection, if taken, would have no merit because the main relief claimed by the plaintiff in this suit is a declaration declaring the termination of the lease agreement dated 27.09.2007 by the defendant as invalid and to direct the lease to be subsisting and continuing till the expiry of lock-in-period of three years i.e. 14.11.2010. The plaintiff has valued his suit for declaration @ Rs.36 lacs on which ad-valorem Court fee has been paid. Since the main relief claimed by the plaintiff in the suit exceeds the pecuniary jurisdiction of the District Court, the plaintiff was well within its right to file the present suit in this Court. Hence the issue proposed to be framed on the point of pecuniary jurisdiction of this Court is not tenable. It may be noted that the defendant has not taken any objection to the pecuniary jurisdiction of this Court in its written statement and therefore issue on this point even otherwise does not arise from the pleadings of the parties. 18 The third issue proposed by the defendant is on the point of Court fees. The pleadings regarding valuation of the suit are CS(OS)No.1439/2008 Page 16 of 32 contained in para 16 of the plaint. The defendant has vaguely denied in reply to para 16 of the plaint that the valuation of the suit has not been correctly done. The defendant has not explained as to how the valuation of the suit has not been correctly done or that deficit court fee has been paid on the plaint. However from the proposed issue No. 3, the stand of the defendant appears to be that the relief for declaration ought to have been valued at Rs.1.8 crores but Court fee affixed by the plaintiff is only Rs.57,000/-. This plea is not there in the written statement of the defendant. The relief of declaration seems to have been correctly valued by the plaintiff at Rs.36 lacs on the basis of rent in respect of the suit premises for the preceding 12 months. Therefore, the issue proposed on the point of court fee is not relevant. 19 Proposed issue No. 4 is not an issue of fact. The decision on this issue depends upon the interpretation to be placed on various clauses contained in the agreement to lease dated 27.09.2007 between the parties. Mr. Ram Phal Bansal, learned senior counsel appearing on behalf of the defendant has referred to Clause 6 contained in the agreement to lease dated 27.09.2007 to contend that the document on which the plaintiff relies for maintaining the suit is only an agreement to lease and not the lease deed. Relying CS(OS)No.1439/2008 Page 17 of 32 on Clause 6, he has further submitted that since the lease deed in terms of the said Clause was not executed, the lease in respect of the suit premises between the parties does not subsist. 20 Per contra Mr. Hemant Chaudhri, learned counsel appearing on behalf of the plaintiff has argued that the agreement to lease dated 27.09.2007 is virtually a lease deed in respect of the suit premises and was executed on a non-judicial stamp paper of Rs.72,100/-. The contention of Mr. Chowdhary is that the agreement to lease dated 27.09.2007 has all the trappings of a lease deed and is a duly registered document and according to him, 'lock-in-period Clause' contained in the said document is binding on the parties to the suit. The rival stand taken by the