TaxTMI 
TaxTMI 
2018 (3) TMI 2053
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....se out of the License Agreement dated 19th December, 2006 by which the license area along with the storage area in the basement was given on a license basis by the appellant to the respondent for running of a restaurant in the name of McDonald's Family Restaurants. The license was for a period of 20 years with an option to renew the same for a further term of 5 years. Some of the terms and conditions of the License Agreement that are relevant for the purposes of present appeal are reproduced herein under:- "2. GRANT OF LICENSE 2.1. In consideration of the license fees, covenants and agreements herein contained, AHRL agrees to give on license basis to CPRL and CPRL agrees to take on license from AHRL the Licensed Area along with storage of 450 sq. ft. built up covered area in the basement at a mutually agreed area, for a period of 20(Twenty years) with an option to renew the license for a period of one further term of 5 (Five) years upon serving a three months notice in advance prior to the expiry of the license and subject to the provisions of this agreement, with the right to use the common facilities in the Complex and for lawful purposes only including the right to ingre....
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.... CPRL shall furnish to AHRL for each quarter on or before 10th working day from the close of the quarter, a statement of quarterly gross sales at the restaurant for the purpose of accounting. 6.4. AHRL shall acknowledge and give valid receipts for receipt of license fees and such receipts shall be duly stamped and signed by AHRL or their duly authorized agents respectively, which shall be the conclusive proof of such payments. 7. DEPOSIT 7.1 "CPRL" has paid AHRL a sum of Rs. 1.75 crores (Rupees One crore seventy five lakhs only) as security deposit on the date of signing of the agreement. Out of the said sum of Rs. 1.75 crores Rs. 25 lakhs will stand as interest free refundable security deposit, and the balance amount of Rs. 1.5 crores will be refunded with interest to CPRL by AHRL in the following manner. 7.2 AHRL shall pay interest on the sum of Rs. 1.5 crores from the date of receipt of the said sum at the rate of 3% over and above the Bank Rate of 6% prevailing on the date of signing the agreement. Interest will be paid by AHRL to CPRL quarterly from the date of commencement of the commercial operation of the restaurant. The Principal amount of Rs. 1.5 crores shall be ref....
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....ing over vacant possession to AHRL at the expiry of the notice period upon termination, subject to the adjustment of dues, if any of AHRL. xxxxxx 22.4 AHRL cannot terminate this agreement except in the event of any three consecutive defaults by CPRL to pay the license fees. Notwithstanding the above, AHRL shall be entitled to terminate the Agreement only in the event of CPRL failing to make good the default as mentioned above within a grace period of 30 days after receiving a notice from AHRL in this regard. CPRL will pay interest at the rate of 12% per annum for each days delay in paying the License fees beyond the 10th day of the month." 3. As certain disputes arose between the parties in relation to the Common Area Maintenance (hereinafter referred to as 'CAM') charges, the respondent filed an application under Section 9 of the Act before the Additional District Judge, Patiala being Arbitration No. 154/2016. The Additional District Judge vide ad interim order dated 20.05.2016 directed the appellant to immediately restore the water and electricity supply to the respondent, subject to the respondent continuing to pay to the appellant the usage charges for electricity ....
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....er relying upon various Clauses of the agreement has held that the appellant has been unable to show the three consecutive defaults in the payment of license fee by the respondent as required in Clause 22.4 of the License Agreement. Even the notice of termination dated 27.01.2017 does not refer to any such default. The Arbitrator therefore, holds that in the absence of such ground being made, the respondent is able to make out a prima facie case and cannot be compensated in terms of money in case interim protection is not granted in its favour. The Arbitrator further holds that the balance of convenience is also in favour of the respondent and against the appellant. As far as Section 14(1)(c) of the Specific Relief Act, 1963 is concerned, the Arbitrator holds the same would not apply in the facts of the present case as the contract was not determinable unilaterally at the instance of the appellant, but only for specific defaults. He further holds that grant of interim relief would, in the present case be a "Just" exercise of the power of the Tribunal under Section 17(1)(e) of the Arbitration and Conciliation Act, 1996. He further holds that in the present case the respondent is not....
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..... Nilima Mandal & Ors. AIR 2009 SC 1103. 14. On the other hand, the learned senior counsel for the respondent submits that the License Agreement between the parties, in form of Clause 22.4 thereof, contains a negative covenant which prohibits the termination of the agreement "except in the event of any three consecutive defaults" by the respondent in the payment of the license fee. He submits that in the Show Cause Notice dated 27.01.2017 or the Termination Notice dated 01.03.2017 there is no allegation made that the respondent has not paid the license fee in accordance with Clause 6.1 of the License Agreement for three consecutive months. He submits that in view of the above, the Termination Notice, ex facie is illegal and cannot be given effect to. He further submits that in the present case, the respondent had made a huge investment in the form of the Security Deposit of Rs. 1.75 crores and also otherwise in setting up the restaurant at the licensed premises. He submits that the respondent has acquired goodwill for the place of business and has made such investment on an express promise that the License Agreement shall not be terminated except for the reasons mentioned in the C....
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....ise of discretion is said to be an appeal on principle. Appellate court will not reassess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by that court was reasonably possible on the material. The appellate court would normally not be justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion. If the discretion has been exercised by the trial court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial court's exercise of discretion. After referring to these principles Gajendragadkar, J. in Printers (Mysore) Private Ltd. v. Pothan Joseph: (SCR 721) "... These principles are well established, but as has been observed by Viscount Simon in Charles Osenton & Co. v. Jhanaton '... the law as to the reversal by a court of appeal of an order made by a judge below in the exercise of his discretion is well established, and any difficulty that arises is due only to the application of well settled p....
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....ther failure to install the Diesel Generator set can be construed to be a failure to pay license fee in terms of Clause 6.1 of the License Agreement; (ii) Even assuming that the answer on the first issue is in the favour of the appellant, where, in view of the order dated 30.11.2016 passed by this Court, as on 27.01.2017 the respondent can be said to be in default for three consecutive months. 19. Prima facie, the submissions of the appellant therefore do not seem to be correct that purportive loss of revenue due to non installation of the Diesel Generator set would also amount to a failure of payment of license fee for purposes of Clause 22.4 of the License Agreement. 20. The counsel for the appellant further contended that the last recital of the License Agreement and Clause 2.1 thereof, clearly provide that the grant of license itself is subject to the respondent complying with its obligations under the License Agreement. He submits that once the respondent fails to discharge its obligations under the License Agreement, it will lose its right to occupy the licensed premises under the License Agreement and cannot, therefore, be granted any protection by way of an injunction. ....
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.... breach of contract, because the payments were owed to the widow personally, it was likely that the measure of damages would be nominal. The House of Lords ordered specific performance of the contract even though an award of nominal damages would have covered all the losses of the estate. The Court made the award of compulsory performance because they though that it achieved a just result, for otherwise the nephew would have been unjustly enriched by being entitled to hold onto his uncle's business without paying his aunt penny. The modern judicial test asks the question: is it just in all the circumstances that the plaintiff should be confined to his remedy in damages?" This test squarely raises the issue of describing the circumstances which induce a Court to find the award of the remedy of specific performance more just than damages. The key to the law of compulsory performance lies in recognizing that such a remedy is not designed to compensate the injured party for the losses, but to force performance of the contract. Normally a Court declines to order performance because damages provide a sufficient incentive to complete most contracts except where the defendant hopes....
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....rceives to be more complete justice between the parties. The Courts reserve a discretion to award compulsory performance whenever it seems appropriate to do justice in the case." 115. In Halsbury's Laws of England Vol. 444th Edn., the statement of law is in the following terms: "In certain circumstances the Court may even grant a mandatory injunction directly requiring a party to the contract to perform his contractual obligations either on an interlocutory application or at the trial of the action." The footnote given in this Volume there is considerable law on the point and the same is in the following terms: "Smith v. Peters, (875) Lr 20 Eq 511, where a vendor was ordered to give a valuer access to premises; Sky Petroleum Ltd. v. Vip Petroleum Ltd., (1974) I All Er 954, (1974) I WLR 567, where the defendants were ordered not to withhold supplies of motor fuel from the plaintiffs; filling stations, no alternative sources of supply being available; Astro Exito Navegacion S.A. v. Southland Enterprise Co. Ltd. (Chase Manhattan Bank N. Aintervening). The Messinikai Tolmi (1982) 3 All ER 335, (1982) 3 WLR 296, Ca (cited in Practice And Procedure, Vol. 37, para 361), where th....
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....e, merger, surrender or otherwise". Thus, it is possible to argue that for whatever reasons it may be the cause for, if an interest comes to an end by efflux of time, a contract would be determinable in nature. This would be an argument in support of the appellants, and as urged. 17. But, the argument overlooks the concept of a fault liability and a fault effect and a no fault liability and a no fault effect. It overlooks the point that one should not rush to conclusions. Clause (c) uses the expression "in its nature determinable" and does not throw any light whether the determination contemplated embraces a fault effect determination. 18. If a defence by a contracting party that the sufferance of the default and hence the determination of the contract is to be accepted, it would amount to allowing the party committing the wrong to take advance of its own neglect and this would ex-facie not be acceptable to a court of equity." 25. In fact, Clause 22.4 of the License Agreement would also amount to a negative covenant, which can be enforced under Section 42 of the Specific Relief Act, 1963. In M/s. Gujarat Bottling Co. Ltd. and others v. Coca Cola Company and others (1995) 5 SCC....
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.... and inequitable manner in its dealings with Coca Cola, there was hardly any occasion to vacate the injunction order and the order passed by the Bombay High Court cannot be interfered with not even on the ground of closure of factory, as the party responsible, prima facie, for breach of contract cannot be permitted to raise this grievance." 26. Reliance of the petitioner on the judgment of the Supreme Court in Indian Oil Corporation Ltd. (Supra) and of this Court in Planet M. Retail Ltd. (Supra) also cannot be accepted. In both Indian Oil Corporation Ltd. and Planet M. Retail Ltd. the contract provided for a right in the parties to terminate the agreement on giving a notice without cause. As noted above, in view of Clause 22.4 of the agreement, in the present case such a right cannot be said to be vested in the appellant. 27. In Ram Sarup Gupta (Dead) by Lrs. (Supra), Supreme Court after analyzing Section 60 of the Easement Act, 1882 has held that, apart from the two circumstances mentioned in the said section, there may be a case, where the grantor of the license may enter into an agreement with the licensee making the license irrevocable. Present may be one such case. In Corpor....