Case: M/S ARUN KUMAR KAMAL KUMAR &amp; ORS.  Vs. M/S SELECTED MARBLE HOME &amp; ORS.

2. The appellants are in the business of running of restaurants/eateries and manufacture & sale of sweets and other food items. The appellants are running their business under the brand name Nathus Sweets. In the year 1990, the appellants entered into two separate licence agreements with the respondents whereunder it was agreed that the appellants will operate and run a restaurant cum sweets shop at the respondents premises and make payment to the respondents on commission basis. The first licence agreement dated 27.08.1990 was executed between appellant no. 1-M/s. Arun Kumar Kamal Kumar through appellant no.2-Arun Kumar Gupta and respondent no.1 M/s. Selected Marble Home through respondent no.2 Anil Kumar Jain and two other partners of the said respondent no. 1 firm and the second agreement of the same date was executed between appellant no. 1M/s. Arun Kumar Kamal Kumar through appellant No.2 Arun Kumar Gupta and respondent no.3 Bhim Sain Jain.3. According to the appellants, the respondents started violating the terms of the agreements after commencement of the business and raised obstacles in the smooth running of the business. The premises which were handed over to the appellants had only two electricity connections – one meter of 1 KV and the other of 0.25 KV respectively. Since the sanctioned capacity of the said connections was less than required, the appellants allege that the respondents had agreed to apply and obtain electricity connection with a sanction to load of 2.5 KV. However, in order to harass the appellants, the respondents did not make arrangements for sufficient electricity supply. On the other hand, it was due to their acts of omission and commission that the then Delhi Electricity Supply Undertaking (DESU) disconnected electricity supply to the entire building on 22.10.1990. The business could not be operated and the same was stopped in February 1991. The shop thereafter remained closed from March 1991 to October 1995.4. On account of the appellants non payment of commission and failure to handover the vacant possession of the premises to the respondents, the respondents filed Suit NO.3708 A/1991 before the Delhi High Court under Section 20 of the Arbitration Act, 1940 (for short, the Act). Vide Order dated 18.09.1995, the High Court appointed the Arbitrator to adjudicate upon the dispute between the parties.5. During the pendency of the arbitration proceedings, the business was restarted from November 1995 and continued in operation till March 2000 when possession of the same was handed over by the appellants to the respondents.6. In the arbitration proceedings, learned Arbitrator framed as many as 16 issues. The parties agreed to file their respective affidavits which were read as examination in chief, after which cross-examination took place. After the conclusion of the arguments of the appellants and during the arguments of the respondents, learned Arbitrator framed an additional issue No.15 A which reads as under:Whether the claimants are entitled to any damages? If so, for what period and to what amount.7. After the arguments were concluded, the respondents filed a statement of account calculating the commission that became payable to the appellants after restarting of the business, as directed by learned Arbitrator. This statement was not objected to by the respondents and was then taken by the Learned Arbitrator as the basis for calculating damages for the period during which the business was closed but the appellants had retained possession of the respondents8. The appellants challenged the said award before the High Court. The Learned Single Judge vide judgment and order dated 04.11.2004 rejected the objections and made the award of the Arbitrator rule of the court. As noticed above, the Division Bench of the High Court has confirmed the judgment of learned Single Judge, apart from allowing a reduction in the rate of interest applicable to post-award interest.

Court's reasoning:
12. As per Clause 10 of both the Agreements, in case of any dispute, it was incumbent on the appellants to handover vacant possession of the premises to the respondents. On this issue, it is clear that disputes had arisen between the parties. However, it is an admitted position that possession of the premises was not handed over to the respondents by the appellants until the arbitration proceedings had commenced and has, in fact, only been handed over on 13 March 2000. Therefore, the Arbitrator framed Issue No. 15-A regarding damages payable to the respondents. The Learned Arbitrator has rejected the plea of the appellants that they had to close the business because of the obstructionist tactics adopted by the respondents and for that reason the business activities remained closed from April, 1991 to November, 1995. On a detailed consideration of the materials on record, the Learned Arbitrator had come to the conclusion that the appellants are liable to pay the damages.13. This question was again considered by the learned Single Judge. The learned Single Judge noticed the plea of the appellants that the transaction between the parties was of tenancy and not licence. After dealing with this plea, the learned Single Judge upheld the award of damages by the Learned Arbitrator. The finding of the learned Single Judge in this regard is in paragraph 20 which reads as under:I find it has been the case of the respondents that the transaction between the parties was of tenancy and not of a licence. It is so pleaded in the objections also. Even if the respondents consider themselves to be tenants at the rent equivalent to commission @ 11% per month, the respondents would under Section 108 of the Transfer of Property Act have continued to remain liable for payment of rent, notwithstanding not carrying on business in the premises. It has been held by the Division Bench of this Court in State Bank of Patiala v. Chandermohan – 1996 RLR 404   held that a tenant continues to be liable for rent/damages even if the premises are destroyed and the only option of the tenant if desirous to stop the running of rent is to surrender the premises. Thus as per the respondents own understanding of the relationship also, the respondents were liable for payment of rent.14. We do not find any error in the said finding of the learned Single Judge.15. After finding the appellants liable to pay damages, the Learned Arbitrator has arrived at the quantum of damages as per the statement of accounts, furnished by the appellants based on their audited accounts, that too after deduction of TDS for a period of pre-closure i.e. 15.08.1990 to 22.02.1991 and post closure i.e. November 1995 to November 1997. The payment of damages for the closure period i.e. March 1991 to October 1995 has been arrived at as an average of commission actually paid pre closure and the commission payable post closure as per the statement of accounts of the appellants, after deducting TDS.16. There is also no merit in the contention of the learned senior counsel for the appellants that the appellants statement of accounts erroneously deducted expenses incurred on electricity and water from the sales instead of deducting the same from commission of the respondents. The admitted position is that there was no electricity supply and the appellants used generator set for electricity.This contention has been raised on the ground that the statement filed by the appellants was not correct since the appellants were only liable to pay commission at 6% and 5% under two agreements on the gross sales and the responsibility to provide electricity was on the respondents. We are of the view that the appellants cannot be permitted to withdraw their own statement made before the Learned Arbitrator which is predicated to on a mode of calculation, the same not being disputed by the respondents and accepted by the Arbitrator as correct. We are also of the view that the appellants are not justified in raising a contrary plea other than what was their defence and statement of counter claim in the arbitral proceedings.17. We are also of the view that the Learned Arbitrator has rightly relied on the appellants statement of accounts for awarding commission for the period when the business was restarted postclosure between November 1995 and November 1997. The formula adopted by the Learned Arbitrator for arriving at this commission amount as well as the damages has been accepted by learned Single Judge as also the Division Bench of the High Court.