Case: International Airports Authority of India Now Known As Airports Authority of India Vs. Hotel Leela Venture Limited

2. Admitted facts are that the petitioner/appellant is International Airports Authority of India, now known as Airports Authority of India. The petitioner is the owner of 29,000 sq.mtr. of land situated at Sahar, Bombay in the vicinity of international airport. The respondent was promoted by one Leela Scottish Lace Private Limited (hereinafter referred to as Promoter Company), which held 3219.5 sq.mtrs. of land adjoining the land of the petitioner. The said Promoter Company requested the petitioner for grant of 9,000 sq.mtrs. of land on lease and remaining 20,000 sq.mtrs. of land on licence The land sought on lease was proposed to be used for construction of flight kitchen and hotel while the land proposed to be taken on licence was for beautifying it, for landscaping and for providing a beautiful garden, swimming pools, squash courts, golf course and other recreational facilities. The proposal made by the promoter company by the letter dated 20th May, 1982 was accepted by the petitioner by its letter dated 21st May, 1982. As agreed, about 5,000 sq.mtrs. land was to be used for flight kitchen and about 4,000 sq.mtrs. land was to be used for construction of the hotel. Accordingly, a lease deed datedwas executed between the petitioner and the promoter company. The lease period was to be 30 years ending onThe lease deed provided for payment of lease money of Rs.1,80,000/per annum and in addition to the same, Clause 3A provided as under:"3.A. In addition to the lease money mentioned hereinabove as revised from time to time, the lessee shall pay a fixed sum based on his gross turnover as follows:a) 2 percent of the gross turnover from the flight kitchen, plusb) that part of 2% of the gross turnover of the Hotel which the IAAI land area bears to the total area of the Hotel."The above proportion of the gross turnover shall be paid by the lessee quarterly. The said payment shall be made within 30 days of the close of each quarter.Licence agreement dated 2nd August, 1982 was executed between the petitioner and promoter company in respect of remaining 20,000 sq.mtrs. of land for a period of 30 years. The licence was also to end onalongwith the lease. Licence fee was to be Rs.2,00,000/. After the respondent company, i.e., the hotel Leela Venture was promoted by the promoter company, a fresh lease deed dated 19th October, 1983 came to be executed between the petitioner and the respondent for the same 9,000 sq.mtrs. of land, which was the subject matter of the earlier lease deed dated 12th July, 1982. This lease was for the remaining period and was to expire on 11th July, 2012. In terms of this lease, the only difference was that lease money was increased to Rs.2,25,000/while other terms and conditions continued to be the same.Thereafter on 23rd November, 1983, another lease deed of additional 9,000 sq.mtrs. out of 20,000 sq.mtrs. land, which was given on licence, was executed between the petitioner and the respondent. The terms of this lease deed were similar to the terms of the lease deed dated 19th October, 1983. Thus, out of 29,000 sq.mtrs. land belonging to the petitioner, 18,000 sq.mtrs. land was leased out to the respondent while the remaining 11,000 sq.mtrs. land was in possession of the respondent on the basis of licence agreement executed between the petitioner and the promoter company.Shortly after the execution of the lease deeds, by letters dated 9th December, 1983 and 31st March, 1984, the respondent sought clarification from the petitioner to the effect that under both the lease agreements, respondent would be liable to pay altogether 2% of the gross turnover from the flight kitchen and the share in 2% of the gross turnover of the hotel in proportion to the land of the petitioner with the total land of the hotel. However, the petitioner informed the respondent that it was liable to pay 2% of gross turnover separately under each lease agreement and thus, the total amount to be paid by the respondent to the petitioner would be 4% of the gross turnover of the hotel as well as flight kitchen. A lot of correspondence took place between the parties from time to time. According to the petitioner, the respondent finally agreed that it is liable to pay 4% of the gross turnover of the hotel in view of the terms of two separate lease deeds. However, by letter dated 3rd April, 1989, the respondent contended that their offer to pay 4% of the gross turnover of the hotel in letter datedwas in context of the negotiations that were in progress for conversion of the license to lease in respect of remaining 11,000 sq.mtrs. land. In view of the dispute, the matter was referred to the learned Sole Arbitrator.7. On the request of the respondent, Chairman of the petitioner referred the following point for decision of the Sole Arbitrator by letter dated 5th November, 1992."The correct interpretation of Clauseof the two Lease Agreements datedrelating to the payment of a fixed sum based on the gross turnover of the Lessee as mentioned in their letter dated 10th April 1990 invoking the arbitration clause (enclosed)."Subsequently by another reference letter dated 2nd April, 1993, the chairman of the petitioner referred to the Arbitration, the following point also for determination anddetermine the amount payable in accordance with the true meaning of Clauseof the two lease agreements and interest thereon and award payment of the said amount."8. Both the parties submitted their Written Statements, several documents and material before the learned Sole Arbitrator. It was contended by the petitioner that whole of 29,000 sq.mtrs. land including that under licence, should be treated as hotel land for the purpose of proportion of petitioners share in the gross turnover of the hotel. After hearing the parties, the learned Sole Arbitrator held that the promoter company had already contributed 3219.50 sq.mtrs. of land on which some hotel was already in existence, and thus, upto June, 1989, the total area of the hotel including 18,000 sq.mtrs. lease land of the petitioner, was 21,219.50 sq.mtrs. The learned Arbitrator also held that the respondent had also taken 4305.50 sq.mtrs. of land on lease from the promoter company on 20th June, 1989 and out of the same 2,001 sq.mtrs. land was used for the purpose of hotel of the respondents and thus, from June, 1989, the area of land with hotel 23,220.50 sq.mtrs. It was also held by the learned Arbitrator that the respondent had purchased 2102.28 sq.mtrs. land from Anmol properties on 29th December, 1989 and it was used for parking cars, etc. of the hotel and thus, with effect from 1st January, 1990, the total area of land with hotel was 25322.78 sq.mtrs. It does not include 11,000 sq.mtrs. of the land of the petitioner held by the respondent on the basis of licence agreement. The learned Arbitrator held that the petitioner was not entitled to 2% of gross turnover of the hotel independently under each of the two lease agreements but was entitled to share in 2% of the gross turnover of the hotel in the proportion which the I.A.A.I land (The petitioners land) bears to the area of the hotel for three different periods depending upon the amalgamation of land of the respondent with 18,000 sq.mtrs. of land of the petitioner.9. In view of the findings about the total area of the land of the hotel and the proportion of I.A.A. land, the petitioner was held entitled to 1.70%, 1.52% and 1.42% of the gross turnover respectively for each of the three different periods. The learned Arbitrator accordingly passed an award whereby the respondent was required to pay arrears of the royalty based on the share of the petitioner in 2% gross turnover of the hotel with simple interest at the rate of 18% per annum as per lease agreement. The learned Arbitrator observed that the respondent had made some excess payment and the interest on such excess amount would also be at the rate of 18% per annum till the date of adjustment of such excess payment.Being not satisfied with the award, the petitioner filed arbitration petition no.107 of 1996 which came to be dismissed by the learned Single Judge. By the impugned judgment, the learned Single Judge directed that there shall be decree in favour of the petitioner as per the award and the petitioner shall be entitled to recover the amount awarded with 18% per annum from the date of decree till payment. This is subject to the adjustment of the amount already paid by the respondent pursuant to the award.Heard the learned counsel for both the Parties.

Reasoning: 17. It is contended on behalf of the respondents that this was only offer to pay 4% of the gross turnover on condition of conversion of licence to lease in respect of the remaining land. The learned Arbitrator accepted this contention and held that as the petitioner had not accepted the proposal of conversion, the respondent is also not liable to pay 4% of the gross turnover. The learned Arbitrator observed that the matter was referred to him only for the purpose of interpretation of the Clause 3A(b) of the contract and on the basis of language of the said Clause, the petitioner could not claim 4% of the gross turnover. The learned Arbitrator observed that the Clause 3A(b) in both the agreements being similar, the petitioner could claim only that part of the 2% of the gross turnover of the hotel which the I.A.A.I. (Petitioners) land area bears to the total area of the hotel. In view of this language, the learned Arbitrator came to conclusion that with the increase in land proportion will also tilt in favour of the petitioner but the total gross turnover for sharing the profit on the basis of contribution of the land could not be more than 2% of the grossview of the facts, circumstances and the unconditional and unambiguous admission made by the respondent in the aforesaid three letters, there remains no doubt that the respondent had agreed to pay fee to the petitioner on the basis of 4% of the gross turnover of the hotel.In view of the above observations, we find that the total area of the hotel was as follows:(a). Upto 30th June, 1989, 21,219.50 sq.mtrs.From 1st July, 1989, 21,719.75 sq.mtrs.30. In view of the total land of the hotel and the I.A.A.I. (Petitioners) land being 18,000 sq.mtrs., the proportion of the petitioners land will be asUpto 30th June, 1989, 18,000/21,219.50 equal to 85%.b). From 1st July, 1989 onwards, 18,000/21,719.75 sq.mtrs. equal to 82.87%.Therefore, in terms of the Clause 3A(b) of the lease agreements read with the agreement by the respondent by their letters, the petitioner will be entitled to get share out of the 4% gross turnover of total as follows:(a). Upto 30th June, 1989, 85% of 4% of the gross turnover equivalent to 3.4% of the total turnover.From 1st July, 1989 onwards, 82.87% of 4% of the gross turnover equal to 3.31% of the total turnover.After careful perusal of record, We find that the learned Arbitrator did not consider the vital documentary evidence and facts before passing the award. In our opinion it has resulted in miscarriage of justice and if we do not interfere it would result in perpetuation of injustice. The learned Single Judge also did not consider the relevant documents before dismissing the petition challenging the award. Therefore, we find it necessary to set aside the impugned judgment and the award.