CS (OS) 1116/1998 & connected matters Page 1 * IN THE HIGH COURT OF DELHI AT NEW DELHI Judgment reserved on: 13.04.2009 Judgment pronounced on: 01.07.2009 + CS(OS) 1116/1998 Siemens Public Communication Network ....... Plaintiff Through : Mr. Pradeep K. Bakshi with Mr. Rajat, Advocates Versus Sukhanlal Memorial Charitable Society ....... Defendant Through: Mr. B.K. Sood, with Mr. Rajesh Kumar and Mr. Yogesh Kumar Bhatt, Advocates CS (OS) Nos.1115/1998 Siemens Public Communication Network ....... Plaintiff Through : Mr. Pradeep K. Bakshi with Mr. Rajat, Advocates Versus Kanha Credit and Holdings ........ Defendant Through: Mr. B.K. Sood, with Mr. Rajesh Kumar and Mr. Yogesh Kumar Bhatt, Advocates CS(OS) No.1117/1998 Siemens Public Communication Network ....... Plaintiff Through : Mr. Pradeep K. Bakshi with Mr. Rajat, Advocates Versus Aditya Developers ......... Defendant Through: Mr. B.K. Sood, with Mr. Rajesh Kumar and Mr. Yogesh Kumar Bhatt, Advocates CS(OS) No.1124/2000 Sukhan Lal Memorial Charitable Society ......... Plaintiff Through : Mr. B.K. Sood, with Mr. Rajesh Kumar and Mr. Yogesh Kumar Bhatt, Advocates Versus. CS (OS) 1116/1998 & connected matters Page 2 Siemens Public Communication Network ........ Defendant Through : Mr. Pradeep K. Bakshi with Mr. Rajat, Advocates CS(OS) No.1125/2000 Kanha Credit and Holdings Pvt. Ltd. ......... Plaintiff Through : Mr. B.K. Sood, with Mr. Rajesh Kumar and Mr. Yogesh Kumar Bhatt, Advocates Versus Siemens Public Communication Network ......... Defendant Through : Mr. Pradeep K. Bakshi with Mr. Rajat, Advocates CS(OS) No.1126/2000 Mr. Atul Bansal ........ Plaintiff Through : Mr. B.K. Sood, with Mr. Rajesh Kumar and Mr. Yogesh Kumar Bhatt, Advocates Versus. Siemens Public Communication Network ......... Defendant Through : Mr. Pradeep K. Bakshi with Mr. Rajat, Advocates CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT 1. Whether the Reporters of local papers may be allowed to see the judgment? 2. To be referred to Reporter or not? 3. Whether the judgment should be reported in the Digest? Hon’ble Mr. Justice S. Ravindra Bhat *1. This judgment will dispose of six suits, i.e., CS (OS) No.1115/1998, 1116/1998 and 1117/1998 which were filed by M/s Siemens Public Communication Network (hereafter called “Siemens”) against M/s Sukhanlal Memorial Charitable Society; M/s Kanha Credit & CS (OS) 1116/1998 & connected matters Page 3 Holdings and M/s Aditya Developers; the latter filed Suits against Siemens (being CS (OS) No.1124/2000, 1125/2000 and 1126/2000). The said three concerns are hereby collectively referred to as “Sukhanlal and Group” or “Sukhanlal group” and variously as “Sukhanlal Society” (in the case of Sukhanlal Memorial Charitable society); “Kanha”, in the case of Kanha Credit and Holdings; and “Aditya” in the case of Aditya Developers. 2. The common and undisputed facts, emerging from the pleadings and materials on record are that the Sukhanlal group, which own the premises, 215/70/2/1, Sarai Sahaji (P.F. Colony), Malviya Nagar (hereafter “the suit premises”) agreed to lease them to Siemens on rent, by Agreement to Lease dated 25th May 1995; Siemens intended to use them for its telecommunication division. Together with the Lease Agreement, M/s Siemens Ltd., also entered into two other Agreements with other concerns of the Sukhanlal group, i.e Kanha and Aditya. These were the “Agreement for Use and Facility” and “Hire Agreement AC Systems” respectively; both dated 25.5.1995, with respect to the suit premises. Besides these three Agreements, the concerns of the Sukhanlal Society, Kanha and Aditya; entered into a Joint Agreement with Siemens, in respect of security deposit paid by the latter, to them, on 25.5.1995. A sum of Rs.4,74,00,000/- (Rs. Four crores and seventy four lakhs only) (in proportions mentioned in the said Agreement) was given as security deposit to the Sukhanlal group in terms of the Security Deposit Agreement. 3. According to the Agreement to lease, the monthly rent reserved was Rs.10,00,000/- (Rs. Ten lakhs only) per month. The total lease was for a period of nine years with an increment of 10% of the rent at the expiry of each year. M/s Siemens Ltd., agreed to pay 12 months’ advance rent to be adjustable in 36 equal monthly instalments from the month of rental of the lease. On termination or on the expiry of the lease, the Sukhanlal group were CS (OS) 1116/1998 & connected matters Page 4 to refund the unadjusted amount of rent and security before taking over the possession of the premises and in the event of Sukhanlal group’s failure to return the amounts, M/s Siemens Ltd. were entitled continue in possession in the premises without paying any rent or compensation, till such time the lessor (Sukhanlal group) paid the said amounts along with interest @ 1% per month for any delay of the refund of the security deposit and unadjusted advance. M/s Siemens Ltd., could terminate the Lease and receive back the entire amount i.e. Security Deposit and unadjusted advance rent, in the event of there being any defect or deficiencies or inadequacy in the Sukhanlal’ right to execute the Lease Agreement lease the premises. 4. The terms of the Agreement for Use of Facilities, between M/s Siemens Ltd. and M/s Kanha inter alia, postulated that – (a) that the Agreement was for a period of nine years and was to be coterminous with the Lease Agreement of lease dated 25.5.1995 between M/s Siemens Ltd. and Sukhan Lal Memorial Trust and could be terminated along with the termination of the Lease Agreement; (b) Siemens Ltd. were to pay M/s Kanha Credit & Holding Pvt. Ltd. a sum of Rs.5,50,000/- (Five lakhs and fifty thousand only) per month, as charges for use of the facilities provided by the former (M/s Kanha Credit & Holding Pvt. Ltd.), with an increment of 10% of the hire charges at the expiry of each year; and (c) M/s Siemens Ltd., agreed to pay twelve months rent in advance to be adjusted in 36 (thirty six) equal monthly installments, which amount was paid accordingly. CS (OS) 1116/1998 & connected matters Page 5 5. The Hire Agreement of AC Systems, between M/s Siemens Ltd. and M/s Aditya Developers, stipulated that: - (a) The tenure of the arrangement was nine years; it was to be coterminous with the Agreement of lease dated 25.5.1995 between Siemens and Sukhan Lal Memorial Trust; it same could be terminated along with the termination of the Lease Agreement. (b) M/s Siemens Ltd., was to pay M/s Aditya Developers a sum of Rs.8,00,000/- (Eight lakhs only) per month, as hire charges for A.C. System provided by the latter (M/s Aditya Developers,) with an increment of 10% of the hire charges at the expiry of each year; and (c) M/s Siemens Ltd., agreed to pay twelve months rent in advance to be adjusted in 36 (thirty six) equal monthly instalments. 6. In addition to the above, the Sukhanlal group jointly executed an Undertaking cum Indemnity dated 25.5.95 in favour of M/s Siemens Ltd., agreeing to indemnify the latter for all costs of actions, claims, proceedings, demands, losses, charges, expenses, penalties, litigations, liabilities, prosecutions, if an any as regards to the use and occupation of the premises, from the various government/payable agencies. 7. Citing objections by the Delhi Development Authority (DDA), M/s Siemens Ltd., and parties to the three suits agreed to mutually terminate the Agreement for Lease, Agreement for Use and Facilities and the Agreement for AC Systems in respect of the premises. Three Supplementary Agreements were entered between M/s Siemens Ltd., on one side and Defendants being the Sukhanlal Society, Kanha and Aditya respectively on the other side on 17.4.1997, by which the parties agreed to the closure of the Agreement to Lease, Agreement for Use and Facility and Hire Agreement for AC Systems respectively. The CS (OS) 1116/1998 & connected matters Page 6 Supplementary Agreements dated April 17, 1997 were entered between M/s Siemens Ltd., with the Sukhanlal Society; Kanha and Aditya, respectively. The terms of those Supplementary Agreements, required Siemens to hand over to the Sukhanlal group, possession of ‘the premises’, within six months (of signing of the Supplementary Agreements) i.e., by 16th October 1997. The Sukhanlal group agreed to pay back a sum of Rs.2,79,10,000 (Rupees Two crore, seventy nine lakhs and ten thousand only), Rs.72,99,660/- (Rupees Seventy two lakhs ninety nine thousand six hundred sixty only) and Rs.1,56,13,336/- (Rupees One Crore fifty six lakhs thirteen thousand three hundred thirty six only) respectively to Siemens Ltd., being security deposit amount and balance of the rent, hire charges and other charges paid in advance, within six months from the date of Supplementary Agreements. A sum of Rs.10,00,000/- (Rupees Ten Lakhs only) each were paid to Siemens by each of the three Sukhanlal concerns at the time of signing of the Agreements. These agreements also stipulated that M/s Siemens was to hand over the possession of ‘the Premises’ to the Sukhanlal after receipt of all the dues from the latter; It was also agreed that in case of delay on part of any party, the defaulting party was to indemnify the other party for the losses sustained on account of such breach/delay. 8. Apparently, the telecommunication division of M/s. Siemens Ltd., the original lessee, was taken over by the plaintiff Company w.e.f. 1.6.1997 along with all its assets, rights and liabilities including the rights in ‘the Premises’. The Sukhanlal group of concerns were informed of this development; they accepted the Siemens as successor interest of the original lessee. 9. Siemens alleged that in violation of the three Supplementary Agreements dated 17th April 1997 the Sukhanlal group paid back only a sum of Rs.25,00,000/- (Rupees Twenty five CS (OS) 1116/1998 & connected matters Page 7 lacs only) by cheque No.631618 dated 29.9.1997 and an amount of Rs.20,00,000/-. It was alleged that the entire amounts were not paid, despite repeated requests and extension of time for repayment, which expired on 31st December 1997. Siemens vacated the premises on 16th October 1997. However, the possession of the same was not delivered to the Sukhanlal group; Siemens’ position was that the premises could not be handed back due to default in regard to refund the amounts. Siemens served upon each of the Sukhanlal concerns, three separate legal notices dated 29.4.1998 through their Advocates calling upon them to pay the balance amount according to terms of the Supplementary Agreements. The Sukhanlal group of concerns did not pay the amounts demanded, and resisted the notice. Siemens therefore filed the three suits, i.e Suit Nos 1115/98, 1116/98 and 1117/98 claiming the amounts of Rs.2,74,57,800/- (Rs. Two crores Seventy Four lacs Fifty Seven thousand and eight hundred only) from Sukhanlal; a sum of Rs.57,28,592/- (Rs. Fifty seven lakhs twenty eight thousand five hundred and ninety two only) from Kanha, Defendant in Suit No.1115/1998, inclusive of Rs.52,96,660/- (Rs. Fifty two lakhs ninety six thousand six hundred and sixty only) being the principal amount and an amount of Rs.4,16,932/- (Rs. Four lakhs sixteen thousand nine hundred and thirty two only) on account of interest thereupon w.e.f. January 1, 1998 till April 30, 1998 @ 24% p.a. Siemens claims the sum of Rs.1,68,77,403/- (Rs. One crore sixty eight lakhs seventy seven thousand four hundred and three only) i.e Rs.1,56,13,336/- (Rs. One crore fifty six lakhs thirteen thousand three hundred and thirty six only) as the principal amount, and Rs.12,49,667/- from Aditya, Defendant in Suit No.1117/1998, as due on April 30, 1998. 10. After Siemens filed the three suits, the Sukhanlal Memorial Charitable trust paid an amount of Rs.1,84,70,000/- on 8.8.2000; Aditya paid a sum of Rs.90,21,336/- whereas M/s CS (OS) 1116/1998 & connected matters Page 8 Kanha Credit Pvt. Ltd. paid a sum of Rs.38,76,661/-. Pursuant to receipt of the said amounts, Siemens handed over possession of the suit premises without prejudice to its rights and contentions in the three Suits, to the Sukhanlal group. The three suits filed by Siemens were initially summary suits; after the receipt of the amounts, they were ordered to be registered as ordinary Suits. According to Siemens, a sum of Rs.89,87,800/- is now due from Sukhanlal towards the suit amount including interest till the date of filing of the Suit i.e. on 1st May, 1998. Siemens also claims interest on the entire amount of Rs.2,74,57,800/- (Rs. Two crores Seventy Four lacs Fifty Seven thousand and eight hundred only) till 8.8.2000 and on the amount of Rs.89,87,800 (Eighty nine lakhs eighty seven thousand eight hundred only) till date of its payment, computed @ 24% p.a. being the agreed rate of interest between the parties. Siemens claims Rs.78,56,167/- from Aditya in Suit No.1117/98 including interest till the date of filing of the Suit i.e. on 1st May 1998. It states that Aditya are liable to pay interest on the entire amount of Rs.1,68,77,403/- till 8.8.2000 and on the amount of Rs.78,56,167/- (Seventy Eight lakhs fifty six thousand one hundred sixty seven only) till date of its payment, computed @ 24% p.a. being the agreed rate of interest between the parties. The sum of Rs.57,28,592/- is claimed from Kanha in Suit No.1115/98 including interest till the date of filing of the Suit i.e., on 1st May, 1998. According to Siemens, M/s Kanha Credit Pvt. Ltd. are liable to pay interest on the entire amount of Rs.57,28,592/- till 8.8.2000 and on the amount of Rs.38,76,661/- (Rupees Thirty Eight lakhs seventy six thousand six hundred sixty one only) till date of its payment, computed; @ 24% p.a. being the agreed rate of interest between the parties. 11. The Sukhanlal Society, in Suit No.1116/1998, in its written statement, contends that the condition in the lease deed relied upon by the Siemens to retain possession of the CS (OS) 1116/1998 & connected matters Page 9 premises without paying rent is hit by Section 74 of the Indian Contract Act and, therefore, is unenforceable. M/s Sukhanlal group in all the suits rely upon terms of the lease deed stating that the arrangement was not terminable prior to two years period from the date of commencement of the lease and that termination could be made only in specified eventualities. It is contended that having regard to this condition the lessor (Sukhan Lal Group) agreed to spent Rs.1.5 Crores for repair, renovation and alternation of the premises. In Suit No.1116/1998 it is submitted that as on the date of the supplementary agreement dated 17.4.1997, Rs. 2,7910,000/- was payable to Siemens, of which Rs.10 Lakhs was paid. It is stated that Rs. 25 Lakhs were paid subsequently and that the Lessors/ owners (ie. the Sukhanlal group) were entitled to adjust four months’ rent out of the amounts payable by Siemens as well as towards payment of municipal taxes from March, 1997. An adjustment of Rs.59,40,000/-, therefore, claimed on the basis of computation of Rs. 14,85,000/- per month. It is thus contended that a sum of Rs. 1,84,70,000/- was payable and not Rs.2,79,10,000/-. Such amount, it is stated, was paid to Siemens on 8.8.2000. 12. The Sukhan Lal Group contend, in the written statement, that since the Siemens retained the possession of the premises and did not deliver it; it continued to be liable to pay lease amounts or rent each month till the handing over of the vacant and peaceful possession over and above amount payable towards damage caused to the premises. The Sukhan Lal Group contest that they are liable to pay any amounts to Siemens and submit that on the contrary Siemens cannot rely upon the supplementary agreements to say that it was absolved from paying rents for the period it continued to retain possession even after terminating the lease. The Sukhan Lal Group also denies the liability to pay interest, as claimed. CS (OS) 1116/1998 & connected matters Page 10 13. In Suit No.1115 & 1117 of 1998, the pleas urged by the defendants i.e. M/s Aditya Developers and Kanha Credit & Holdings Pvt. Ltd. etc. are identical to those urged by the M/s Sukhanlal Memorial Charitable Society in Suit No.1116/1998 except as to the amounts payable by them. Similar adjustments are claimed; it is also urged that the condition entitling Siemens to retain the possession of the premises is unenforceable by the reasons of Section 74 of Indian Contract Act. 14. During the pendency of three Suits filed by Siemens, each of the concerns forming part of the Sukhan Lal Group filed Suits being No.1124, 1125 and 1126 of 2000. In these, the factual averments pertaining to leasing of the premises, conditions of lease, Security deposit agreement, Agreement for use of facilities and agreement for air conditioning hiring etc. have been made. The circumstances leading to the execution of the Supplementary agreement, termination of lease of the premises; retention of possession by Siemens etc. have also been pleaded. After outlining all these and mentioning about the Suits filed by Siemens against the Sukhan Lal Group of concerns, it is urged in the three Suits that the conditions contained in the lease agreement and agreement for security deposit, enabling Siemens to retain the possession of the property and of using of the facilities and fixtures without payment of rent or damages are invalid and not binding and are unenforceable. The Sukhan Lal Group and concerns, therefore, allege that the retention of possession by Siemens despite having entered into supplementary agreement on 17.4.1997 and consequently terminating the lease without payment of charges or rent are not legal. The Sukhan Lal Group urge that they are entitled to payment of amounts on account of rents, damages, hire charges etc., towards the premises, fittings, fixtures and for the A.C. system at least on the basis of the terms of the agreement for the period Siemens was in occupation. It is claimed that the premises incurred some damages during the occupation CS (OS) 1116/1998 & connected matters Page 11 of Siemens which the latter is liable to be reimbursed. On the basis of these averments, a declaration that Clause 2 (b) of the Lease agreement and clause 3 (b) of the agreement for security deposit besides clause-5 of the supplementary agreement dated 17.4.1997 are unenforceable as being penal is sought. Besides a sum of Rs. 3,39,05,000/- is sought by the Sukhanlal Society (in Suit No.1124/2000), in Suit No.1126/2000 identical reliefs of declaration and a decree for Rs. 3,10,78,000/- is sought ( the plaintiff in this suit i.e. Shri Atul Bansal is the proprietor of Aditya Developers and has sought for a decree of the said amount; issue No.8 however claims Rs.3,10,78,000/- with interest – the averments in the suit nevertheless continue to claim Rs.2,20,56,664/-) and in Suit No.1125/2000 by Kanha Credit & Holdings Pvt. Ltd. similar declaration and decree for Rs.2,16,75,000/- is sought. 15. Siemens, which is a common defendant in all the three Suits, disclaims any liability and urges that Sukhan Lal Group is not possessed of any cause of action to lay claim to the reliefs that they have sought. It is urged that Sukhan Lal Group are estopped from challenging the provisions of the lease deed and supplementary agreement after having acted on it and having derived benefits from it. The Siemens denies that huge amounts or the sum of Rs.1.5 Crores was spent towards the renovation of the premises or its repairs. It also disputes that the lease agreement could not be terminated in two years and urges that parties voluntarily agreed to end the lease arrangement in terms of the Supplementary Agreements. 16. According to Siemens, the retention of premises without payment of rent upon termination of the agreement was in tune with the supplementary agreement dated 17.4.1997. It is contended that the Sukhan Lal Group entered into Supplementary agreement in terms of which the entire security deposit amounts were to be paid within the time specified. Since that condition was not complied with, Siemens urged that CS (OS) 1116/1998 & connected matters Page 12 continuation of possession of the premises by it was in terms of the agreement itself. The Siemens disputes liability to pay any amount to each of the Sukhan Lal Group concerns in the three Suits filed by them. 17. On 8.8.2000, a sum of Rs.1,84,70,000/- (in Suit No.1116/1998) and Rs. 90,21,336/- (in Suit No.1117/1998) was paid to Siemens. Consequently, possession of the premises were handed over. The Sukhan Lal group which paid the amounts contends that they were undisputed, and payable on account of refund of security deposit under the agreement with Siemens. By the same order (of 8.8.2000) the Court directed that Siemens’ suits to be converted from summary, to ordinary Suits. On 20.11.2003, the Court, with consent of parties directed that since issues of fact and law were common in all the six Suits, Suit No.1116/1998 was to be treated as a lead case and evidence recorded only in that Suit. It was also ordered that such evidence was to be treated as the evidence in other proceedings as well; the Court framed issues in all the Suits. 18. The Court by subsequent order after hearing and with consent of the parties recast the issues on 1.2.2008. Some of the issues were subsequently modified – again with consent of the parties. Since the documentary evidence in the form of exhibits were common, but had been marked separately in all the Suits, counsel agreed that a common series of exhibits ought to be adopted and accordingly filed a joint singed statement, which was taken on the record on 26.3.2008. The Court then recorded that the documentary evidence in the form of various agreements between the parties including the three supplementary agreements and correspondences exchanged between them as well as the two Local Commissioner’s report were to be read as Ex.A to Ex.T. CS (OS) 1116/1998 & connected matters Page 13 19. The following issues have to be decided by the Court by virtue of orders dated 1.2.2008, 15.2.2008 and 27.2.2008. The issues, which were also recast are in the following terms:- 1. Whether the suit filed by Sukhan Lal is within time? OPP. 2. Whether Sukhan Lal and Group are estopped from challenging of the terms of the lease deed and the supplementary agreement dated 17.4.1997 and other agreements entered into with SIEMENS? OPD SIEMENS 3. Whether Sukhan Lal and Group are entitled to a declaration that clause 2 (b) of the agreement of the lease and clause 3 (b) of the agreement for the security as well as clause 5 of the supplementary agreement dated 17.4.1997 are void and unenforceable, as claimed? OPP SUKHAN LAL. 4. Whether Siemens could retain possession of the property without payment of charges/rent/air-conditioning charges, as claimed by it? OPP SIEMENS 5. Whether Siemens are entitled to any amounts towards interest for delayed repayment of security and other amounts by the Sukhan Lal and Group, if so at what rate and for what period? OPP SIEMENS. 6. Whether Sukhan Lal and Group are entitled to Rs.3,39,05,000 along with further amount in suit No.1124/2000? OPP SUKHAN LAL. 7. Whether Sukhan Lal and Group are entitled to Rs.2,55,51,661 along with further amount in suit No.1125/2000? OPP SUKHAN LAL. 8. Whether Sukhan Lal and Group are entitled to Rs.3,10,78,000 along with further amount in suit No.1126/2000? OPP SUKHAN LAL. CS (OS) 1116/1998 & connected matters Page 14 9. Whether Sukhan Lal Group are entitled to payment of interest by SIMENS on any account, if so at what and for what period? OPP SUKHAN LAL. 10. Any other relief to any other party. Issue No.1 – Whether the Suits filed by the Sukhanlal Group are within time: 20. Siemens contends that the relief of declaration which are primarily sought in the Sukhanlal group’s Suits is time-barred in view of Article 59 of the Limitation Act. It is submitted that the relief amounts to seeking cancellation of part of a contract, for which limitation is three years from the date of knowledge of the offending condition; according to Siemens, the starting point of limitation is 25th May, 1995 and even if that date were not to be taken into account, the supplementary agreement dated 17th April, 1997 afforded the cause of action. Since the Suits were filed beyond the period of three years provided for, they are time-barred. It is also urged, as an adjunct submission that the relief of recovery