IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE PIUS C.KURIAKOSE & THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM FRIDAY, THE 26TH MARCH 2010 / 5TH CHAITHRA 1932 RFA.No. 142 of 2010() --------------------- OS.261/2008 of I ADDL.SUB COURT,ERNAKULAM .................... (S): APPELLANT/DEFENDANT --------------------------------------- CLERYSYS TECHNOLOGIES PVT. LTD., CHACKACHERIL TOWER, XI/781, C1-C11, SEAPORT AIRPORT ROAD, KAKKANAD, KOCHI, REPRESENTED BY THE MANAGING DIRECTOR, BENJAMIN JOHN CHANDY. BY ADV. SRI.DINESH MATHEW J.MURICKEN RESPONDENT(S): PLAINTIFF ------------------------ CENSURA SOLUTIONS PVT. LTD., XI/781, C1-C11, SEAPORT AIRPORT ROAD, KAKKANADU, KOCHI, REPRESENTED BY THE MANAGING DIRECTOR, MOHANAN MAVILAKANDY. ADV. P.R.AJITHKUMAR,K.SREEKUMAR,P.V.THOMAS FOR RESPONDENT SRI.M.HARISHARMA FOR R SRI.P.R.AJITHKUMAR FOR R THIS REGULAR FIRST APPEAL HAVING COME UP FOR ADMISSION ON 26/03/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: PIUS C. KURIAKOSE & C.K. ABDUL REHIM, JJ. ------------------------------------------ RFA. No. 142 of 2010 ------------------------------------------- Dated this the 26th day of March, 2010 J U D G M E N T Pius C. Kuriakose, J. The defendants in a suit for recovery of money allegedly due by way of defaulted rent and defaulted maintenance fees which was decreed by the court below as prayed for by the plaintiff is the appellant. The parties will be referred to as they were before the trial court as plaintiff and defendant. 2. The plaintiff's case as averred in the plaint is that the plaintiff company engaged in software development and related activities took a six storied building at Kakkanad on lease from its owner for the purpose of starting software business and related other businesses. Since the commencement of software business was found not possible the plaintiff decided to sublet the building to other business concerns. While so, the defendant approached the plaintiff RFA. 142/10 - 2 - for taking the second floor of the said building on sublease for a limited period of 11 months. Even though there were other takers on sublease since the defendant's request was sublease for a minimum period of 11 months to be renewed further, the plaintiff agreed to the defendant's request. Accordingly tenancy agreement dated 16-11-2007 was executed between the plaintiff and the defendant. On the terms of the tenancy agreement the monthly rent was fixed at Rs.25,000/-. The agreement was that the monthly rent will be paid on or before the 5th of every service month, i.e., on or before the 21st day of every calendar month. Apart from rent, it is agreed to pay Rs.1250/- per mensem towards cost of electricity, water, lift and common area, lighting apart from a sum of Rs.250/- per mensem towards waste removal charges. According to the plaintiff, the defendant is also liable to pay service tax for the usage of the building at the rate of 12.36% of the rent. A sum of RFA. 142/10 - 3 - Rs.75,000/- was paid by the defendant as security deposit at the time of execution of the tenancy agreement. The period of agreement was 11 months commencing from 16- 11-2007. It was also agreed that in case the premises are vacated by the defendant during the lock-in-period the security amount would not be refunded. 3. Apart from the tenancy agreement, a maintenance agreement was also executed between the parties in respect of the furniture, fittings and other valuables such as computers and accessories in the petition schedule building. The maintenance agreement was executed in view of the permission granted by the plaintiff to the defendant to use furiture and other fittings during the lease period. The maintenance fee for using the said infrastructures and materials was fixed at Rs.1 lakh per mensem. Here also the minimum fixed period of usage was stipulated as 11 months from 16-11-2007. A security deposit of Rs.3 lakhs was RFA. 142/10 - 4 - given by the defendant to the plaintiff on the same conditions regarding refund as in the case of the security deposit made on account of the tenancy agreement. 4. According to the plaintiff, the defendant occupied the building on 16-11-2007 on the basis of the two agreements and paid the monthly rent and maintenance fees for the first month. However, on 17-12-2007 to his utter surprise, the plaintiff received a letter from the defendant stating that the defendant intends to vacate the premises and requesting the plaintiff to treat the notice as three months notice in advance for vacating the premises. It was also requested through the said letter to appropriate the security deposit given at the time of execution of the agreement towards the fees for the next three months. According to the plaintiff, the above letter was in violation of the terms agreed upon. Hence the defendant was informed that the request cannot be accepted. The plaintiff requested the defendant to pay RFA. 142/10 - 5 - rent and maintenance fees as agreed. But the defendant did not comply with the plaintiff's request. The plaintiff alleges that after committing default in paying the monthly rent and maintenance fees as agreed, the defendant filed OS. 26 of 2008 before the Munsiff's Court, Ernakulam seeking a decree of permanent prohibitory injunction restraining the plaintiff from forcibly evicting the defendant from the schedule building raising absolutely false and frivolous allegations. According to the plaintiff, the defendant has deliberately and dishonestly committed default in payment of maintenance fees agreed. The defendant is liable to pay the rent and maintenance fees for the entire period occupied by him. The defendant is also liable to make good loss of the plaintiff for the rent and other charges for the remaining period of 7 months of lock- in-period, in the event of no-availability of any other tenant in the scheduled premises during the said period. On these RFA. 142/10 - 6 - allegations the suit is instituted for recovery of a lump sum amount of Rs.4,67,875-00 with interest at the rate of 12% per annum from date of suit till realisation and cost. 5. The defendant filed a written statement raising various contentions. Execution of the lease agreement as well as the maintenance agreement on 16-11-2007 and the payment of Rs.75,000/- and Rs.3 lakhs towards advance deposits is admitted. It is contended that the defendant occupied the leased premises from 19-11-2007 and paid advance rent of Rs.99,925/- after deducting TDS to the plaintiff. It is contended that the defendant was running a software development centre catering to the offshore requirements of its American Associates M/s. Clerysys Incorporation in the plaint schedule building. There were nine employees working in the defendant company. After occupying the plaint schedule building, the defendant found that the leased premises was not suitable for its business as RFA. 142/10 - 7 - the plaintiff had failed to provide facilities as per the lease deed. As per the terms of the lease deed the plaintiff had to provide 5 KV generator facility in the event of electricity break down. 5 KV generator facility was never given to the defendant. Hence the defendant was unable to function its office uninterruptedly, since the facility of automatic uninterrupted power supply was indispensable for the functioning of the defendant's business which require steady and uninterrupted inter action with their associates in the United States. Though there was lift facility in the building for reaching the leased premises the facility was not allowed to be used by the defendant's employees. It was under the above circumstance that the defendant found the leased premises unsuitable for business and accordingly sent their letter dated 17-12-2007 informing clearly of the defendant's intention to vacate the premises and that three months notice as contemplated by the lease agreement and the RFA. 142/10 - 8 - maintenance agreement is being given. Through the said notice it was specifically mentioned that the advance rent deposit and advance maintenance deposit made by the defendant may be adjusted towards three months rent and maintenance charges. On receiving the said notice the plaintiff threatened the defendant and demanded the defendant to vacate the building immediately. It was to prevent forcible eviction that the defendant filed OS. No. 26 of 2008 seeking a decree of injunction restraining forcible dispossession. The court granted interim injunction. During the pendency of the suit and on expiry of the three months i.e., on 15-3-2008 the defendant vacated the leased premises and handed over the key to the plaintiff on 18-3- 2008. The suit became infructuous and it was dismissed by the court as not pressed. The defendant denied the averment that the defendant is not entitled to vacate during the agreed period of 11 months. According to the defendant RFA. 142/10 - 9 - the only rider in the lease agreement as well as the maintenance agreement for vacating the leased premises within the period of 11 months is that the defendant has to issue three months notice to the plaintiff. In this regard the defendant highlights clause (8) of the lease agreement and clause (4) of the maintenance agreement. 6. Denying the averment in the plaint that the defendant was satisfied with the building as well as the infrastructure available in the building it is contended that after occupying the premises it was found that the building was not provided with the generator facility as well as the lift facilities for the employees. The averment that there were several takers for the premises is also denied and it is pointed out that several floors of the building were lying vacant at the time when the defendant occupied the leased premises. According to the defendant, having issued notice prior to the vacation of the building the defendant is not RFA. 142/10 - 10 - guilty of violation of the any of the terms of the agreement. It is then contended in the written statement that the plaintiff does not have any legal right to claim rent and maintenance fees for three months during which the defendant occupied the building after issuing notice. Pursuant to the defendant's request the plaintiff had already adjusted the rent deposit of Rs.75,000/- and maintenance deposit of Rs.3 lakhs. The plaint claim, according to the defendant, after the period will amount to unjust enrichment for the plaintiff. 7. On the above pleadings, the learned Subordinate Judge formulated the following issues for trial. 1. Has the defendant any right to adjust the security deposits towards the rent and maintenance fees? 2. Is the plaintiff entitled to realise plaint amount from the defendant, as prayed for? 3. Reliefs and costs. At trial the evidence consisted of Exts. A1 to A4(c), B1 and RFA. 142/10 - 11 - B2 and oral evidence of PW1 and DW1. The learned Subordinate Judge on appreciating the evidence and on considering the arguments addressed by the counsel would answer issue no.1 in favour of the respondent plaintiff. According to the learned court, even though the agreement was not received in evidence for non-payment of deficit stamp duty and penalty despite direction after the document was impounded, clause (2) and clause (4) of Ext. A1, the maintenance agreement were clear to the effect that the parties intended to treat the period of 11 months as a lock- in-period. According to the learned court, Exts.A2 and A3 notices issued by the defendant on 17-12-2007 terminating the tenancy is in violation of the terms of lock-in-period agreed to between the parties. The learned Sub Judge certainly noticed the request in Exts.A2 and A3 to the plaintiff to adjust maintenance fees by the three months notice period against the security deposit. However, RFA. 142/10 - 12 - according to the learned Judge the defendant has no right to get such adjustment. Even the notice is in violation of the terms of the agreement. Thus issue No.1 was answered by the learned Sub Judge in favour of the plaintiff. 8. Coming to issue No.2, the learned Sub Judge would start the discussion by observing as follows: “Defendant has not raised any counter claim, set off or adjustment for the rent and maintenance fee payable towards amount of security deposit.” Even the action of the defendant in deducting TDS from the rent and maintenance charges payable for the first month comes up for severe criticism at the hands of the learned Sub Judge. The observation is that the defendant is not the authority to deduct income tax at source. The learned Sub Judge would refer Ext.A4 series of invoices. The learned Sub Judge would refer to Ext.A5 which was a joint letter showing the damage caused by the defendant to the infrastructure during the period of occupation of the leased RFA. 142/10 - 13 - premises and observe that it is admitted by DW1 that he has not even rectified the damages in full. The court would reiterate once again that the “defendant has not even pleaded for adjustment towards the security deposit and is not entitled to adjust the security deposit.” Elsewhere in paragraph 9 of the judgment the learned Sub Judge would observe that the question whether the defendant is entitled for refund of the security deposit in terms of clause (2) of Ext.A2 is a matter to be adjudicated in terms clause (2) of Ext.A2. As the plaintiff has reserved his right to take appropriate action in the matter, the question whether the defendant is entitled to get refund of the security amount is not a matter in issue. Taking such a view the learned Subordinate Judge concludes that the defendant having occupied the premises upto 16-3-2008 is bound to pay rent and maintenance fee agreed to the plaintiff in terms of clause (a), (b) and (c) of Ext.A4. According to the learned RFA. 142/10 - 14 - Subordinate Judge the action of the defendant in occupying the premises after issuing notice within the lock-in-period and his further action in instituting OS. No. 26 of 2008 and in getting the order of injunction against eviction amounts to violation of the terms of contract and abuse of legal process and would conclude that the defendant is liable to pay the entire plaint claim as explained through A4 series to the plaintiff. Thus the suit was decreed as prayed for with full cost. 9. In this appeal various grounds assailing the judgment impugned are raised and we have heard the submissions of Sri. Murikan, learned counsel for the appellant and also those of Sri.P.R.Ajithkumar, learned counsel for the respondent. Sri.Murikan, learned counsel for the appellant would address arguments on the basis of the grounds raised in the appeal memorandum assailing the impugned judgment. Sri.Ajith Kumar per contra would RFA. 142/10 - 15 - support the impugned judgment for the various reasons stated therein. 10. Having anxiously considered the rival submissions addressed at the Bar we are of the view that the impugned judgment warrants interference. The issue that came up for maximum discussion at the Bar during the course of the hearing of the appeal was whether the appellant defendant was justified in adjusting the advance rent deposit of Rs.75,000/- and the advance maintenance fee deposit of Rs.3 lakhs towards the amount payable by him for his three months occupation after Exts.A2 andA3 notices had been sent by them to the defendant. The learned Sub Judge would observe that the defendant has not raised the plea of adjustment. We are of the view that the above observation of the learned Subordinate Judge is incorrect. It is clear from Exts.A2 and A3 notices dated 17-12-2007 the originals of which are produced as item Nos. 3 and 4 by the plaintiff RFA. 142/10 - 16 - themselves along with the plaint that the appellant defendant seeks adjustment of the amounts payable by them for occupation of the three succeeding months. Exts. A2 and A3 being documents produced along with the plaint itself can be construed as part of the plaintiff's own pleadings. In paragraph 3 of the written statement the defendant refers to Exts.A2 and A3 and points out that they had requested through Exts.A2 and A3 that the advance rent deposit and advance maintenance deposit given by them be adjusted towards three months rent and maintenance charge. Further down at paragraph 6 of the written statement this is what the defendant contended. “The advance rent deposit of Rs.75,000/- and the advance maintenance charges of Rs.3 lakhs had already been adjusted by the plaintiff towards the 3 months rent and the defendant had remitted the TDS for the same and the same is accounted by the Income Tax Department in the account RFA. 142/10 - 17 - of the plaintiff. The claim made by the plaintiff amount to unjust enrichment.” We fail to see why the learned Subordinate Judge observes that the plaintiff has not claimed adjustment of the amounts claimed against the deposits. It appears to us that the learned Subordinate Judge appears to be of the view that a plea of adjustment being similar to a plea of set off or counter claim will be considered only if court fee is paid. But the issue is no longer res integra. It has been held in Khanna v. Tosh and Sons India Ltd., 2001(1) KLT 801 and Cheria Elias v. Surendra Chit Fund, 1989 (1) KLT 449 that since adjustment is already made before the filing of the suit no court fee is payable on a plea that the amounts stand adjusted already. 11. It was through Ext. A2 and A3 that the defendant conveyed to the plaintiff, his intention to vacate the premises within three months. Such a notice is issued obviously in terms of clause (8) of the lease agreement and RFA. 142/10 - 18 - clause (4) of the maintenance agreement. Significantly no reply was sent by the plaintiff to Exts.A2 and A3 through which the defendant had requested the plaintiff to adjust the amounts due from the defendant for the succeeding three months against the amounts under deposit with them already. The learned Subordinate Judge appears to have accepted the plaintiff's interpretation of the terms of the rental agreement as well as the maintenance agreement regarding the lock-in-period. We do not propose to say that the above interpretation is not a plausible one at all. But at the same time, through Exts.A2 and A3 notices the defendant had given cogent reasons as to why they are becoming constrained to surrender the premises before the expiry of the apparent lock-in-period. The evidence in the case will also show that uninterrupted power supply was indispensable for the continued functioning of the defendant's business which necessitated constant contact RFA. 142/10 - 19 - with their associates in the United States over the inter net and that such power supply was not facilitated in the lease hold premises. Yet another reason mentioned in Exts.A2 and A3 was that the lift facility was not allowed to the employees of the defendant, many of them obviously Software Engineers. These two reasons, according to us, could have been good reasons for any contracting party in a contract like the subject one to withdraw from the same. The plaintiff having not responded to Exts.A2 and A3 should be presumed to have accepted the correctness of the reasons stated by the defendants in Exts. A2 and A3. 12. A reading of the impugned judgment will show that the learned Subordinate Judge was prejudiced against the appellant for having apparently violated the terms of rental agreement and the maintenance agreement by vacating the premises before the expiry of the apparent lock-in-period of 11 months. Even the institution of OS. No. RFA. 142/10 - 20 - 26 of 2008 is described by the learned Subordinate Judge as an act of abuse of legal process forgetting the evidence in the case that the plaintiff demanded immediate surrender of the premises upon receiving Exts.A2 and A3 even before the expiry of the notice period of three months. We fortified in the above view by the observations the learned Subordinate Judge has made in the judgment regarding the action of the defendant lessee in having deducted TDS. The obligation of the lessee to deduct income tax at source from the monthly rent and maintenance charges payable to the lessor is statutory and Ext.B1 certificate will show that Ext.B1 Form No.16-A (TDS) gives ample support to the defendant's plea of having deducted TDS and payment of the same to the Income Tax Department. Interestingly even the plaintiff has not raised any complaint against the defendant for having deducted income tax at source. The dispute is only regarding the payment of rent and RFA. 142/10 - 21 - maintenance charges for the last three months of occupation and not for the first month of occupation. 13. The learned Sub Judge at paragraph 9 of the judgment has observed that re-payment of security deposit arises only after termination of the lease and that the same is a matter to be adjudicated whether the defendant is entitled for refund of security deposit in terms of clause (2) of Ext.A2. According to the learned Sub Judge the plaintiff having reserved his right to take appropriate action in the matter, the question whether the defendant is entitled to get refund of security amount is a matter not in issue in the suit. But then the defendant's plea as already noticed by us is that the rent and maintenance charges for the last three months stands already adjusted against the security amount. Having raised an issue in the suit as issue No.2 it was highly improper for the learned Subordinate Judge to have observed so in paragraph 9 of the impugned judgment. RFA. 142/10 - 22 - 14. A scrutiny of Ext.A4 series will indicate that the plaint claim of Rs.4,67,875/- takes in amounts allegedly due towards service tax at 12.36% both on rent and on monthly maintenance amount. But there is nothing in the plaint even to indicate that the plaint claim includes claim of these amounts also. As a matter of fact no split up of the plaint claim is available in the plaint. In the valuation portion an amount of Rs.4,67,875/- is claimed. We are of the view that the defendant has been put to prejudice due to insufficiency of pleadings regarding the nature of the claim. 15. According to us, the learned Subordinate Judge should have accepted the plea of adjustment of the amounts due from the defendant towards monthly rent and monthly maintenance charges for the last three months of their occupation against the security deposits. In disallowing the above plea on technical reasons the court below has unfortunately permitted the plaintiff to have unjust RFA. 142/10 - 23 - enrichment at the expense of the defendant. The appeal necessarily has to be allowed to the extent permitting the adjustment sought for by the defendant. The result of the above discussion is as follows: The appeal is allowed to the following extent. The appellant is allowed to adjust the sum of Rs.3,75,000/- deposited by him with the respondent as security under rental agreement as well as under the maintenance agreement against the plaint claim. The respondent is permitted to seek amendment of the plaint, so that split up of plaint claim with respect for the balance amount can be shown in the plaint. The suit is remanded to the extent it pertains to the balance amount claimed in the plaint. Though we have allowed amendment it will not be open to the respondent to enhance the plaint claim. Registry will refund full court fee remitted on the appeal memorandum less Rs.10,000/- to the appellant's counsel since we find RFA. 142/10 - 24 - that there was some latches on the part of the appellant also in the matter of specifically raising available defence in the suit. The parties are given opportunity to adduce further evidence. Revised judgment is to be passed on the basis of the evidence already available on record and the further evidence if any, to be adduced by the parties. The parties will appear before the court below on 24-5-2010 PIUS C.KURIAKOSE, JUDGE C.K. ABDUL REHIM, JUDGE ksv/-