r,. r THE HIGH COURT OF DELHI AT NEW DELHI % Judgment Reserved on: 25.08.2011 Judgment Pronounced on: 30.08.2011 + CS(OS) 1661/2003 M/S. SILICON GRAPHICS SYSTEMS INDIA PRIVATE LIMITED Plaintiff Through: Mr. Rajiv Tyagi, Adv. versus NIDAS ESTATES PRIVATE LIMITED & ORS ...Defendants Through: Ms. Malavika Rajkotia, Adv., Mr Ravi Awasthi and Mr Ramakant Sharma, Advs. & + CS(OS) No. 2108/2011 (SUIT NO. 100/2005/02 of District Court) M/S NIDAS ESTATES PRIVATE LTD. ,...Plaintiff versus SILICON GRAPHICS SYSTEMS INDIA PRIVATE LIMITED .... Defendant CORAM:- HON'BLE MR JUSTICE V.K. JAIN 1. Whether Reporters of local papers 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 Digest? Yes CS(OS) 1661/2003&CS(OS)2I0S/201I Page1of51 Signing Date:31.08.2024 17:30:37 Certify that the digital and physical file have been compared and the digital data is as per the physical file and no page is missing. Signature Not Verified 4 V.K. JAIN, J CSfOSt 1661/2003 1. This is a suit for recovery of Rs.45,23,414/-. The plaintiff and defendant No.l, both of which are Priveite Limited Companies, entered into a license agreement dated l®t September 1995 in respect of premises bearing No.305-A and 305-B, Embassy Square, 148 Infantry Road, Bangalore. Under the agreement the aforesaid premises was given to the plaintiff company on license for a period of 36 months and license was renewable for another term of three years. The license was accordingly renewed for a further period of three years expiring on 31®^ August 2001. The plaintiff company also deposited a sum of Rs.2,02,100/- as security with Karnataka Electricity Board on behalf of defendant No. 1 company. This amount according to the plaintM was agreed to be refunded to it b}^ defendant No.l on expiry of the license. Another sum of Rs.6,25,000/- was deposited by the plaintiff with defendants No.2 and 3 for providing standby generating sets and upkeep and maintenance of the premises subject matter of the license agreement, and CS(OS) 1661/2003£ CS(OS)2108/2011 P"8t;2ofSI ^ according to the plaintiff was to be refunded to it on expirj^ of the term of the license. It is alleged that on expiiy of the term of the license defendant No.l requested the plaintiff not to take refund of the deposits made by it with Karnataka Electricity Board and defendants No.2 and 3 since it wanted to retain the benefit of the higher load sanctioned by Karnataka Electricity Board as also the generator sets made available by defendant No.2 and 3 and agreed to pay an equivalent amount to the plaintiff company. 2. Vide letter dated 4th September 2001 the plaintiff called upon defendant No.l to either renew the license on the terms contained in the letter or to take back possession of the licensed premises, against refund of security deposits. Defendant No.l, however, did not agree to the terms offered by the plaintiff for renewal of the license and the plaintiff had to repeatedly caU it upon to take possession of the licensed premises against security deposits. This led to a , meeting between the officials of the plaintiff and defendant No.l on 5th October 2001, wherein the possession of the licensed premises was again offered to defendant No.l against refund of security deposits. It is alleged that CS(OS) 1661/2003 & CS(OS) 2108/2011 Page 3 ofSI defendant No. 1 did not come forward to take possession of the premises and also did not refund the security deposit, despite repeated reminders. It rather sent a notice claiming a sum of Rs.25,29,582.50 from the plaintiff towards license fee for the period from September to December, 2001. In a legal notice dated 14^^ February 2002 defendant No.l also raised a claim of Rs.9,58,448/- on the plaintiff company, after adjusting the security amount of Rs.27,45,000/-. Finally defendant No.l took possession of the premises using a duplicate set of keys and also failed to release the security deposits and other deposits amounting to a total sum of Rs.35,72,100/-. According to the plaintiff, defendants No.2 and 3 have also failed to refund the amount of Rs.6,25,000/- which it had deposited witri tlTem, in respect of the aforesaid premises, taking the stand that this deposit was made by the plaintiff on behalf of defendant No.l. The plaintiff has now claimed the aforesaid sum of Rs.35,72,100/- from all the defendants along witli interest on that amount @ 18 % per annum amounting to Rs.9,51,314/-, thereby raising a total claim of Rs.45,23,414/-. Alternatively the plaintiff has sought Rs.36,74,647/- comprising security deposit of CS(OS) 1661/2003& CS(OS) 2108/2011 Page 4 of51 Rs.27,45,000/- and a sum of Rs.2,02,100/- deposited with Kamataka Electricity Board along with interest on that amount @ 18% per annum making a total sum of Rs.36,74,647/- and a sum of Rs.8,48,767/- from defendants No.2 and 3 which comprises Rs.6,25,000/- towards security deposit and tlie balance amount towards interest @ 18% per annum. 3. The suit has been contested by defendant No.l. It is alleged in the written statement that defendant No.l wanted the plaintiff to remove the fixtures and restore the premises to its original condition as per the terms of the license agreement, but the plaintiff wanted a sum of Rs.5 Lacs for those fittings and was refusing to vacate the premises till its demand for such payment was met. Defendant No.l, however, was not willing to pay Rs.5 lacs which the plaintiff was demanding for those fittings and fixtures comprising false ceiling air condition ducting with pipes, fire protection pipes, electrical control panel and was willing to take vacant possession of the premises on payment of its just dues which comprised license fee arrears of two months at that time. It is further alleged that when it CS(OS) 1661/2003 & CS(OS) 2108/2011 Page 5 of51 became clear to defendant No. 1 that the plaintiff had no intention of returning the premises it entered the premises exercising its right under the license agreement. Defendant No. 1 has however admitted having entered into license agreement dated 1®^ September 1995 and having raised a sum of Rs.27,45,000/- as deposit from defendant No.l. It is also admitted that the plaintiff deposited a sum of Rs.2,02,100/- for sanction of additional load of electricity and Rs.6,25,000/- with defendants No.2 and 3 for providing standby generators and for maintenance charges. This is also the claim of defendant No.l that the plaintiff is entitled to pay rent for the months of September 2001 and October 2001 as no notice to terminate the license was given by it. CSfOS^ No. 2108/2011 (Suit No. 100/2005/02 of District Court) 4. This suit filed before the District Court, Delhi was transferred to this Court and was consolidated with CS(OS) No. 1661/2003 vide order dated July 13,2011. The case of the plaintiff in this suit, which is defendant no.l in CS(OS) No. 1661/2003 is that it is entitled to a sum of CS(OS) 1661/2003 & CS(OS) 2108/2011 Page 6 of51 Rs.37,03,448/- from the plaintiff which comprises Rs. 1,17,425/- being the deficient license fee for September 1995, Rs. 1,37,750/- towards Ucense fee arrears, Rs.6,69,828/- towards license fee from June to August, 2001, Rs.21,62,336/- towards additional license fee from September 2001 to 10^^ Februarys 2002, Rs.258754/- towards interest @ 18% per annum and Rs.357855/- towards maintenance charges, and that after adjusting Rs.2745000/- deposited by the plaintiff company, it is yet to recover a sum of Rs.958448/- from it. The claim for additional license fee is based on the license agreement which provided for payment of additional fee of Rs.5,000/- per day upto 30 days and thereafter at the rate of 10% of the total license fee payable immediately prior thereto for each 30 days period after the first 30 days period, in case the licensee continued to use the premises beyond the terms of the license. 5. The following issues were framed in CS(OS) No.1661/2003:- 1. Has the plaintiff been always willing to make over possession w.e.f 1.9.01 and accordingly not liable to pay any charges for any period beyond CS(OS) 1661/2003 & CS(OS) 210S/2011 Page 7of51 1.9.01? 2. Has the defendant been in possession w.e.f 1.9.01 by virtue of Clause of the Licence Deed? 3. Is the defendant entitled to adjust the security amount in the manner stated by him in the written statement? 4. Is the plaintiff entitled to recover the suit amount and if so from whom? 5. Relief. The following issues were framed in suit No.100/2005/02 of District Court:- 1. Whether plaintiff is entitled to relief claimed? 2. Relief. Issues No.l to 3 in CSfOS) 1661/2003 and issue No.l in suit No.100/2005/02 of District Court 6. In CS(OS) 1661/2003, the plaintiff has filed affidavit of its Financial Controller Shri Sanjay Bhanot by way of evidence. Defendant No.l in this suit has filed the affidavit of its Director Mr. Rajesh Dutta by way of evidence. The suit against defendants No.2 & 3 in CS(OS) 1661/2003 was decreed for recovery of Rs.6,25,000/- since they failed to deposit a sum of Rs.6,25,000/- which they were required to deposit as a pre-condition for grant of leave to contest the suit. 7. In 100/2005/02, Mr. Rajesh Dutta has appeared CS(OS)1661/2003& CS(OS)2108/2011 Page 8 of51 in the witness box as PW-1 and Mr. Sanjay Bhanot has been examined as DW-1. In his affidavit by way evidence, Mr. Sanjay Bhanot has stated that on expiiy of the licence agreement, the plaintiff called upon defendant No.l several times to take over vacant possession of the premises, but, defendant No.l did not come forward to take possession since the rentals at that time were faUing and it was not able to find another suitable tenant. According to him, the plaintiff had taken a new accommodation at 405/406, P-2, Prestige Metropolitan, M.G.Road, Bangalore, with effect from 01.09.2001, vide lease agreement PW-17 and it was always ready and willing to handover the possession of the premises to defendant No.l. According to him, the plaintiff having already vacated the premises, defendant No. 1 could have taken its possession at any time, but, it did not come forward to take the possession until its own pressing need arose in this regard. 8. Mr. Rajesh Dutta, Director of defendant No.l Company has, in his affidavit, stated that the plaintiff was holding defendant No.l to ransom by insisting upon large payments, ostensibly for fixtures like control panel and refusing to vacate the premises till the payment demanded CS(OS)1661/2003& CS(OS)2108/2011 Page 9 of51 by it was made. According to him, the plaintiff was in possession and occupation of the premises till they re-entered the premises on 15^^ February, 2002. According to him, defendant No. 1 had entered into a fresh agreement commencing 15.02.2002 to let out the premises in question. 9: The license deed, executed between the parties, initially provided as under "As a security for the due payment by the Licensee and due performance by the Licensee of its obligations hereunder, the Licensee shall at the time of the execution of this Agreement deposit with the Licensor a sum of Rs 27,45,000/- (Rupees Twenty Seven Lac forty five thousand only) which the Licensor shall hold until the Licensee vacates the licensed Premises. Without prejudice to any other right or remedy which the Licensor has in this behalf the Licensor shall be entitled to adjust from the security deposit any License Fee or other amounts payable hereunder, which remain unpaid by the Licensee and, upon such adjustment the Licensee shall forthwith replenish the security deposit to bring it to an amount of Rs 27,45,000/- (Rupees twenty seven lacs and forty five thousand only) and pay interest on the amount adjusted @ 18% per annum from the date of adjustment up to date of repletion. The Licensor shaU refund to the Licensee CS(OS)1661/2003&CS(OS)2108/2011 Page10of51 the unadjusted amount of the security deposit remaining in the hand of the Licensor simultaneously at the time of the Licensee vacating the Licensed Premises, free of any liability of interest and after deducting a reasonable amount for any damage caused to the premises. However, should the Licensor fail to make the refund of the security deposit stipulated above simultaneously with the Licensor delivering the vacant possession of the Licensed Premises, the Licensor shall be liable to pay interest during the period the unadjusted amount of security deposit remain unpaid by the Licensor to the Licensee. Such interest on the unadjusted amount of the security deposit shall be payable by the Licensor to the Licensee at the rate of the 18% per annum (payable on a per day basis) for up to the first 30 days during the period the amounts remain unpaid and thereafter at a rate which is enhanced by 10% (ten percent) of the rate immediately prior thereto for each 30 (thirty) days period after the first 30 (thirty) days period of non-refund of the unadjusted amount of security deposit. Interest at the enhanced rates of interest shall be payable on a cumulative basis. The Licensee may apply for and obtain additional electricity/power for the purposes of its office activities and the Licensor shall provide aU necessary assistance to enable the Licensee to security such additional electricity/power requirements from concerned authorities, to the paid or made for the additional load. CS(OS) 1661/2003 & CS(OS) 2108/2011 Page 11 of51 In so far as such payments shall / C constitute refundable deposits the ^ Licensee shall on determination of the license give the Licensor an option to retain the original load, and if the Licensor opts to retain the load, the Licensor shall pay the Licensee the refundable amount of such deposits. If the Licensor opts not to retain the additional load, the Licensee will be at liberty to withdraw the refundable deposits with respect to addition loan and the Licensor shall execute any and all documents , and authorities as are required to enable the Licensee to obtain the refund. The Licensee shall not make any structural alterations in the Licensed Premises. However, the Licensee may make any additions or alterations in the Licensed Premises for making enclosures, cabins, false ceilings etc., and install air conditioners, exhaust fans, coolers and other electric appliances and wiring for local area network without in any manner damaging the Licensed Premises and on termination of the license, the Licensee shall be entitled to remove the same. The Licensee may remove the wall connecting the licensed premises to flat nos. 304A and 304B. However, the LICENSEE shall on determination of the license restore the Licensed Premises to its original condition, including the partition wall or pay the Licensor the costs likely to be incurred for such restoration. The Licensee shall stop using the Licensed Premises on the expiry of this license either by efflux of time or revocation by the Licensor. If tlie Licensee commits default. CS(OS) 1661/2003 & CS(OS) 2108/2011 Page 12 of51 the Licensee shall be bound to pay apart ^ from the license fee payable under Clause / u (2) supra, an addition fee of Rs.5000/- (Rupees five thousand only) per day during the period in which it continues to use the Licensed Premises for upto 30 (thirty) days, and thereafter an additional license fee enhanced by 10% (ten per cent) of the total license fee payable immediately prior thereto for each 30 (thirty) days period after the first 30 (thirty) days period of use beyond the term of license. Acceptance of such amount, however shaU not constitute acceptance of a fresh license, and shall be without prejudice to all recourse/remedy that the Licensor may have to repossess the premises." 10. It is an admitted case that the license agreement expired on 31®^ August, 2001. Vide letter dated 04^^ September, 2001 (Ex.PW-8), the plaintiff proposed renewal of the lease/license for two years on payment of rent/license if which was lower than the rent/license fee wliich it was paying up to 31®^ August, 2003. It also requested defendant No. 1 to refund the security deposit and accept vacant possession of the premises if the terms proposed for the renewal of the lease/license were not acceptable to it. Admittedly, the lower rent/license fee proposed by the plaintiff was not accepted by defendant No. 1. Vide letter dated OS^h September, 2001 (Ex.PW-9), defendant No. 1 CS(OS)1661/2003& CS(OS)2108/2011 proposed renewal of the lease at the rent of Rs 60 per sq. feet as against the rent Rs 50 per sq. feet offered by the plaintiff This, obviously, was not acceptable to the plaintiff, which vide its letter dated 28^^ September, 2001 (Ex.PW-11), referring to its letter dated 04^^ September, 2001, reiterated its request for refund of the security deposit and asked the plaintiff to send its representative to accept vacant possession of the premises and complete the formalities in this regard not later than OS^h October, 2001. In reply to plaintiffs letter dated 28^^ September, 2001, defendant No. 1 wrote a letter dated l^t October, 2001 (Ex.PW-12) informing that its representative will get in touch with the plaintiff on 05^^ October, 2001 to take the possession of the premises in tenantable condition, subject to the premises being restored to its original condition and to hand over security deposit after deducting outstanding dues against the premises, including cost of restoration to original condition if it was found necessary and deducting rent arrears in accordance with a statement, enclosed with the letter. The statement indicated that a sum of Rs 13,71,055/- was due to defendant No. 1 from the plaintiff. This amount comprised Rs 1,37,250/- towards past arrears, CS(OS) 1661/2003 & CS(OS) 2108/2011 Page 14 of51 ^ Rs 2,54,675/- towards rent for September, 1995, Rs 8,93,104 towards rent from June, 2001 to September, 2001 @ Rs 2,23,276 per month and Rs 2,23,276/- towards one month's additional rent in lieu of notice as per agreement. After amount of tax required to be deducted at source, the net amount payable by the plaintiff to defendant No. 1, as per this statement, came to Rs 11,15,314/-. 11. Admittedly, a meeting was held on 05"^^ October, 2001 between Mr. Ashish Randhawa of defendant No. 1- Company and Mr, K.V. Subramanian of plaintiff-company. The minutes of the meeting, signed by both these persons, read as under:- 1. NEPL acknowledge the receipt of securily deposit of Rs 6,25,000/-. 2. NEPL also has confirmed from Embassy Group, the deposit of Rs 6,25,000/- for genset paid by SGI to Embassy Group on NEPL's behalf. This amount needs to be refunded to SGI. Embassy Group and NEPL to decide amongst themselves as to who would refund this. 3. NEPL have claimed that rent for the month of CS(OS)1661/2003&CS(OS)2108/2011 Page15of51 September, 1995 (Rs 152,500 less TDS of Rs 35,075/-) has not been received by them, SGI to reconcile this account by Tuesday the October, 9, 2001 and get back to NEPL. 4. NEPL has also claimed Rs 1,37,250 being the balance due against arrears received in the month of May, 1998. SGI to reconcile this as w^ell by Tuesday the October 9, 2001 and get back to NEP, 5. NEPL has requested SGI not to surrender the additional electrical load obtained by SGI to KEB since NEPL wants to retain the same. NEPL to apply to KEB for transferring the same from SGI to NEPL. Any deposits paid by SGI would be refunded to SGI by NEPL. All charges pertaining to this would be borne by NEPL. 6. The vacant possession has already been offered by SGI to NEPL at the end of the lease period, against refund of Security Deposit. 7. SGI offers the following to NEPL against payment. Amounts to be mutually decided. ® False Ceiling CS(OS) 1661/2003&CS(OS)2108/2011 P»Se of51 • Air Condition ducting with pipes • Fire protection pipes • Electrical Control Panel 12. The following facts emerged from the above- referred correspondence and minutes of the meeting held on October, 2001:- (a) Though the offer of the plaintiff to renew the lease/license for two years on payment of rent at the rate of Rs 50 per sq. feet, made vide letter dated 04^^ September, 2001, was rejected by defendant No. 1 on the veiy next day and a counter offer for renewal of lease at the rate of 60 per sq. feet was given, there was no response from the plaintiff, to the counter offer till 28^^ September, 2001. If the counter offer made by defendant No. 1 was not acceptable to the plaintiff, it ought to have rejected the same immediately on receipt of the letter dated OS^h September, 2001. Moreover, the plaintiff itself had requested defendant No.l, vide letter dated 28^^ September, 2001, to take possession by 05^^ October, 2001. CS(OS)1661/2003&CS(OS)2108/2011 Page17of51 Hence, it is difficultto acceptthatthe plaintiffhad ^ ^ unequivocally offered vacant possession of the premises to defendant No. 1 on 04^^ September, 2001; (b) The plaintiff having sought refund of security deposit and having requested defendant No. 1 to depute its representative to accept vacant possession of the premises not later than 05^^ October, 2001, it made an unambiguous and unequivocally offer to defendant No. 1 to take possession of the premises and refund the security deposit. In fact, defendant No. 1 also had no doubt in its mind regarding the intention of the plaintiff in this regard and that is why it informed the plaintiff that its representative would get in touch with them on 05^^ October, 2001 to take vacant possession of the premises. (c) The letter of defendant No. 1 dated 01®^ October, 2001 leaves no doubt that defendant No. 1 was not prepared to accept vacant possession of the premises in the condition in which the premises at CS(OS) 1661/2003&CS(OS)2108/2011 Page1«of51 that time was and wanted to accept possession / only when the premises was restored to its original condition. Admittedly, the plaintiff, in terms of the provisions of the license agreement, had installed fittings and fixtures comprising false ceiling air condition ducting with pipes, fire protection pipes, electrical control panel in the tenancy premises. Defendant No. 1, obviously, wanted the plaintiff to remove those fittings and fixtures before it took possession of the premises from the plaintiff, (d) The letter of defendant No. 1 dated Ol^t October, 2001 also shows that defendant No. 1 was not willing to refund the whole of the security deposit to the plaintiff at the time of taking vacant possession of the premises and wanted to deduct from it a sum of Rs 11,15,314/-, as detailed in the annexure of the letter. (e) though defendant No. 1 had claimed a gross sum of Rs 13,71,055/-, net amount of Rs 11,15,314/- after deduction of tax at source amount to Rs 2,55,714/-), the whole of the demand was not CS(OS)1661/2003&CS(OS)2108/2011 Page19of51 justified, as is evident from the minutes of the meeting held on 05^^ October, 2001, wherein defendant No. 1 claimed only a sum of Rs 1,17,425/- towards arrears of license fee and Rs 1,37,250/- toward balance due against arrears received in May, 1998. Hence, it cannot be disputed that defendant No. 1 had not offered to refund the whole of the amount due to the plaintiff, after adjustments which were permissible in terms of the license deed. (f) Even on 05^^^ October, 2001, defendant No. 1 acknowledged that the plaintiff had offered vacant possession of the premises to it at the end of the lease period, against refund of security deposit. Thus, it cannot be disputed that the plaintiff was ready and willing to deliver possession to the defendant on the refund of the security deposit. 13. The next question which comes up for consideration is as to whether defendant No. 1 could have insisted upon removal of the fittings and fixtures and payment of the aforesaid sums of Rs 1,17,425/- and Rs CS(OS)1661/2003& CS(OS)2108/2011 Page 20of51 1,37,250/- before accepting possession of the premises. 14. As noted earUer, the licensor was required to refund the unadjusted amount of the security deposit to the licensee simultaneously at the time of the licensee vacating the licensed premises, after deducting a reasonable amount for any damage caused to the premises. The correspondence between the parties up to the meeting held on 05th October, 2001 does not indicate