M/s.Inox Leisure Limited v. M/s.Chennai Citi Centre Holdings Pvt Ltd.

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 24-11-2009CORAMTHE HONOURABLE MR.JUSTICE M.CHOCKALINGAMANDTHE HONOURABLE MR.JUSTICE V.PERIYA KARUPPIAHOSA Nos.125 and 126 of 2009andM.P.No.1 of 2009 in OSA 125 of 2009andMP No.1 of 2009 in OSA 126 of 2009M/s.Inox Leisure LimitedHaving its Registered Officeat ABS TowersOld Padra RoadVadodara 390 007represented by its Company Secretary & V.P. LegalRajesh Parte.. Appellant in both appealsvsM/s.Chennai Citi Centre HoldingsPvt Ltd.,having its office at:Chennai City Centre, IV FloorNo.10 & 11, Dr.Radhakrishnan SalaiMylapore, Chennai 600 004,Rep. By its Chairman.. Respondent in both appealsOriginal side appeals preferred under Order XXXVI Rule 1 ofthe O.S. Rules read with Clause 15 of the Letters Patent againstthe order of this Court made in O.A.No.1236 of 2008 and A.No.5373of 2008 dated 21.4.2009.For Appellant: Mr.P.S.Raman AAG Senior Counsel for Mr.Sathish ParasaranFor Respondent: Mr.G.Masilamani Senior Counsel for Mr.Srinath Sridevan https://hcservices.ecourts.gov.in/hcservices/ COMMON JUDGMENT(Judgment of the Court was delivered by M.CHOCKALINGAM, J.)These two intracourt appeals have arisen from a common orderof the learned Single Judge of this Court made in O.A.No.1236 of2008 and A.No.5373 of 2008 filed under Sec.9 of the Arbitrationand Conciliation Act, 1996. 2.The appellant has filed the first application seeking aninterim injunction to restrain the respondent from in any mannerseeking to claim or demand payment towards CAM charges other thanin accordance with clause 5 of the Common Area MaintenanceAgreement dated 10.8.2006, entered into between the parties hereinas modified by an agreement in the meeting dated 19.11.2007, whilethe second application was filed seeking an interim orderdirecting the respondent to continue to provide services as setout in Clause 2 of the Common Area Maintenance Agreement dated10.8.2006 without disruption in any manner whatsoever pendingdisposal of the arbitral proceedings.3.For the sake of convenience, the parties hereinafter willbe referred to as applicant and respondent respectively.4.On perusal of the materials available, the following wouldemerge as admitted facts:(a) The applicant carrying on business in multiplex movietheatre, and the respondent, the owner of the complex, enteredinto an agreement of lease on 10.8.2006. Though the complexconsisted of nearly 60 tenements occupied by different tenants, anarea of 34269 sq.ft. was leased out to the applicant. Apart fromthe lease agreement under which the applicant has to pay themonthly rental as agreed upon, two other agreements were enteredinto between the parties namely Common Area Maintenance Agreementand Facilities and Utilities Agreement. Now, this Court isconcerned with the Common Area Maintenance Agreement. Under thesaid agreement, the respondent-complex owner agreed to provide andmaintain proper and adequate security for the complex and alsoassured maintenance of housekeeping, gardening, landscaping, waterservices, air-conditioning, light and certain other facilities aslisted in the common area for the better utilisation and enjoymentof the premises leased out to the applicant. It was also agreedthat the respondent should keep the common areas fully operationaland functional at their full capacity uninterruptedly between10.00 A.M. and 1.30 A.M. or half an hour before the starting ofthe first show and half an hour after the completion of the lastshow whichever was later, but all the days of the year. (b) Clause 5 of the agreement dated 10.8.2006, stipulatedthat the applicant should reimburse the respondent theproportionate actual expenses incurred by the respondent towardscommon maintenance and security for the complex, which should notexceed Rs.5/- per sq.ft. during the entire term of the lease deed https://hcservices.ecourts.gov.in/hcservices/ for the above mentioned area. There was a demand made by therespondent to increase the common maintenance charges. A meetingwas convened. The parties arrived at an agreement, and the samewas reduced into writing on 19.11.2007, according to which theparties agreed that the applicant should pay the revised CAMcharges at Rs.8/- per sq.ft. which was to be given effect from thedate of operation and should remain firm unless there was increasein power tariff. It was also agreed that there should be anincrease of 12% in CAM charges every three years similar to theescalation of lease rental to cover inflationary cost. (c) While the matter stood thus, the respondent issued acircular on 10.7.2008 intimating that the applicant should pay therevised CAM charges at Rs.16.95 per sq.ft. with effect from1.4.2008 and called upon all the tenants in the complex to remitthe same. A sum of Rs.14,61,715/- as on 15.7.2008 was demandedfrom the appellant by a claim voucher. Denying the claim as oneagainst the agreement and unsustainable, the applicant sent aletter on 16.7.2008 which brought forth a reply from therespondent on 5.9.2008. Thus, the dispute arose as to the extentof CAM charges payable by the applicant. (d) An application was filed for appointment of anArbitrator. Since there was no consensus between the parties innaming the arbitrator, the above applications were made forinterim reliefs pending the arbitral proceedings to be initiated.An opportunity was given to the respondent for filing the counter.Accordingly, a common counter was filed. The learned Single Judgeon enquiry of the applications dismissed both of them holding thatthe applicant have not made out a case for the interim reliefs.Under such circumstances, these appeals have arisen at theinstance of the applicant.5.Advancing arguments on behalf of the appellant/ applicant,the learned Senior Counsel Mr.P.S.Raman would submit that both theapplications were filed under Sec.9 of the Arbitration andConciliation Act, 1996; that in such circumstances, the interestof the applicant should be protected pending the arbitralproceedings, and interim orders should have been granted in favourof the applicant since the circular issued by the respondentincreasing the Common Area Maintenance (CAM) charges wasunilateral and the same was overriding the terms of the agreementbetween the parties dated 10.8.2006 and the modifications recordedin the meeting dated 19.11.2007; that the express contract betweenthe parties should not be overlooked since it was binding on them;that the minutes of the meeting dated 19.11.2007 between theparties was a conclusive action; that the dismissal of theapplications by the learned Single Judge was to the effect ofpermitting the respondent to repudiate the contract, which wasbinding on the parties; that the very reading of the circularwould indicate that the charges were raised unilaterally, and thusit was a repudiation of the contract thereby making deviation fromthe same and that too on the ground of alleged unilateral mistake;that if it was a unilateral mistake, the contract was voidable; https://hcservices.ecourts.gov.in/hcservices/ that if it was a bilateral mistake, the contract itself wouldbecome void; that in the instant case, the learned Single Judgewithout assigning a meaning to the terms of the contract betweenthe parties which was not even pleaded by the respondent, hasrendered a finding contrary to the clear and express terms of thecontract; that under Sec.9 of the Arbitration and ConciliationAct, 1996, the principal objective is to protect the interest ofthe parties pending arbitration; but, the dismissal order hasinstead entirely changed the status quo pending arbitralproceedings; and that the reading of the order under challengewould clearly indicate that findings have been recorded on theterms of the contract between the parties even at the interimstage and without appreciating any evidence. 6.Added further the learned Senior Counsel that till suchtime as the contract between the parties continued to operate, theburden was upon the respondent to prove that the CAM agreementwhich was entered into between the parties was void in thearbitral proceedings and till such time, it was only the terms ofthe CAM agreement and the minutes dated 19.11.2007 would governthe parties; that the parties cannot be directed to act contraryto the contract between them; that the learned Single Judge hasrelied upon the dealings of the respondent with the other tenantswithout any documentary evidence or any iota of evidence orpleadings in that regard; that the relationship between therespondent and the other various tenants would be governed by theseparate inter se contracts between them; that the applicantworked out its investment commitments and the cash flows entirelybased upon payment obligations under the various agreements; thatthe CAM charges was an important pre requisite for such agreementand formed an important aspect of the overall commercialunderstanding between the parties; that the CAM agreement cannotbe read in part; but, it should be appreciated in its entiretytogether with the modifications recorded in the minutes of themeeting dated 19.11.2007, which gave rise to an increase in theCAM charges from Rs.5/- to Rs.8/-; that Clause 5 stipulated thatincrease in CAM charges as contemplated therein would not beimplemented unless discussed and agreed upon between the partiesand other major tenants in the complex; that this clause should beread together with the other provisions contained in Clause 5;that this is in fact a protective clause in favour of theapplicant; that Clause 5 provided that the commercial charges wereonly reimbursable as set out therein; that the revision at therate of Rs.16.95 per sq.ft. was by way of unilateral demand by therespondent; that there is no material available to indicate thatother tenants have either agreed or been paying so; and that evenassuming that the other tenants are paying under compelledcircumstances, the appellant cannot be directed to pay because ofthe compulsion put forth by the respondent. 7.The learned Senior Counsel would further submit that therates paid by the other tenants would obviously be governed by therespective contracts and would not have any impact upon thewritten contract between the applicant and the respondent; that https://hcservices.ecourts.gov.in/hcservices/ the applicant was a tenant with one of the largest area inoccupation; that the area of business of the appellant wassituated on the higher floor; that it was based upon suchcommercial consideration of the larger area under occupation andthe role of the appellant in attracting customers to other areasof the other tenements that a rate other than on actuals wasnegotiated and fixed by the appellant to prevent an unjustifiedincrease as also on other commercial considerations; that thelearned Single Judge was not correct in holding that the appellantcannot be singled out since the increased rate was applicable toall tenants occupying the complex; that the learned Single Judgewas also not correct in holding that the enjoyment of CAM beingcommon to one and all, the question of differential rate to beapplied did not call for any acceptance; that the specialcircumstances attendant and the status of the appellant inoccupying a larger area of 34269 sq.ft. was not taken note of bythe learned Single Judge; that till a fresh agreement is enteredinto between the parties, no payment of additional CAM chargescould be made; that the appellant has made out a prima facie casefor grant of interim injunction as asked for pending arbitralproceedings, and hence the order of the learned Single Judgeallowing the respondent making collection of charges contrary tothe express terms of the agreement between the parties has got tobe set aside and interim orders be granted.8.Contrary to the above contentions, the learned SeniorCounsel Mr.G.Masilamani for the respondent after reiterating thesubmissions made before the learned Single Judge, would submitthat apart from the applicant who is occupying 34269 sq.ft., thereare about 60 tenements occupied by various tenants; that theapplicant and all other tenants have been paying the monthlyrental as agreed upon by them; that apart from the rentalagreement, all the tenants including the applicant have enteredinto an independent agreement for the maintenance of the commonareas by the respondent; that the applicant has entered into thefirst agreement dated 10.8.2006 whereby it was agreed that theapplicant should pay Rs.5/- as CAM charges per sq.ft.; that underClause 5 of the agreement, the applicant has agreed to reimbursethe respondent for the proportionate actual expenses incurred bythe respondent towards CAM and security for the complex; that itwas also further clarified and understood between the parties thatCAM charges were reimbursable only and the same would only beincreased if necessary, and such necessity shall arise only in theevent of an actual increase in the power tariff and otherinflationary factors; that even at the earliest when the partiesentered into the agreement, they have agreed that the CAM Chargescould be increased in view of the inflationary factors; that it isalso true that subsequently it was raised; that when a differenceof opinion arose between the parties as to the charges, they haveentered into an agreement in a meeting on 19.11.2007 and minuteswere drawn; that it was also agreed that the respondent would paythe revised CAM charges at Rs.8/- per sq.ft. instead of Rs.5/-;that subsequently it was found that the said rate was fixedmistakenly in view of the data furnished by the auditor of the https://hcservices.ecourts.gov.in/hcservices/ respondent which was found to be defective; and that under suchcircumstances, explaining the reasons, a circular was issued toall 60 tenements including the applicant.9.Added further the learned Senior Counsel that all the othertenants in appraisement of the circumstances and appreciation ofthe truth have been paying the respective revised charges asclaimed by the respondent; that the respondent is bound to provideand maintain all the facilities utmost throughout the year withoutwhich neither the applicant nor any one of the tenements couldcarry on their business; that even during power cut, therespondent has to maintain thorough electric flow for the purposeof lighting and air-conditioning; that equally when there wasdeficiency in water supply, the respondent has to supply water bysecuring the same; that it is pertinent to point out that therespondent is actually seeking reimbursement of the amount spentby them; that it is not as if the respondent is making profit outof the collection from the applicant or from the other tenants;that the applicant is also not making payment of not even one pieother than what is actually spent by the respondent; that to carryon its business of running the theatres, all the facilities shouldbe provided and maintained adequately without any deficiency; but,at the same time, the applicant should pay its divisional share ofthe actual cost incurred by the respondent; that while all othertenants are paying, only the applicant has taken exception for thesame pointing to the minutes of the meeting dated 19.11.2007wherein a mistake has crept in in view of the auditor's data; thatso long as the applicant was insisting the respondent to provideand maintain all the facilities continuously, it has tonecessarily pay for the same; that at one time after getting thecommunication from the applicant, the respondent has also repliedto the applicant to mention such of those facilities which werenot needed by the applicant so that it could not be continued;but, the applicant was not for the same; and that under suchcircumstances, till the arbitral proceedings are over, theapplicant should be directed to continue to make payment at therate of Rs.16.95 per sq.ft. 10.Added further the learned Senior Counsel that in thearbitral proceedings if the CAM rate is fixed below Rs.16.95,there could not be any difficulty for the applicant getting itreimbursed from the respondent since the applicant is inoccupation of the building of the respondent to an extent of 34269sq.ft. and running four theatres; that under such circumstances,the learned Single Judge has considered all the aspects of thematter and dismissed the applications, and hence both the appealshave got to be dismissed.11.The Court paid its consideration on the submissions madeand looked into all the materials available.12.It is not in controversy that the appellant herein is atenant in the complex belonging to the respondent. The appellantis carrying on its business in running four multiplex movie https://hcservices.ecourts.gov.in/hcservices/ theatres occupying an area of 34269 sq.ft. It is also not incontroversy that as per the agreement of lease dated 10.8.2006,the appellant is making the payment of monthly rental. At thetime of entering into the lease agreement, the parties haveentered into another agreement namely Common Area MaintenanceAgreement on the very day. Clause 5 of the said agreement readsas follows:"INOX shall, reimburse CCCHPL for the proportionateactual expenses incurred by CCCHPL towards CAM andSecurity for the Complex, which reimbursement shall not,during the entire term of the Lease Deed, exceed therate of Rs.5/- per sq. ft. for the super built up areaof approximately 34269 sq. ft. for the space of themultiplex cinema theatre in the Demised Premises(hereinafter referred to as "CAM Charges"), on receiptof bills for the same from CCCHPL within 4 (four) daysof such receipt of bills by INOX and CCCHPL shallfurnish to INOX an annual statement from its Auditors inrespect of the bills regarding CAM Charges stating thatthe sums reimbursed by INOX to CCCHPL have beenutilized/appropriated towards CAM and Security. It isclarified and understood between the parties that CAMCharges are reimbursable only and the same would only beincreased if necessary and such necessity shall ariseonly in the event of an actual increase in power tariffand /or other inflationary factors. The parties agreethat the increase in CAM Charges as contemplated hereinwould not be implemented unless discussed and agreedupon between the parties and other major tenants in theComplex and in such an event of increase in CAM Charges,CCCHPL shall provide complete breakup thereof."13.The very reading of the above Clause would indicate thatthe applicant should reimburse the respondent for theproportionate actual expenses incurred by the respondent towardsthe CAM and Security for the complex which should not exceed therate of Rs.5/- per sq.ft. for the area of 34269 sq.ft. occupied bythe applicant. It also contemplated an increase of the said chargein the event of the actual increase in the power tariff and alsoother inflationary factors.14.When the respondent expressed its intention to raise theCAM charges to which course the applicant was not amenable, ameeting was convened on 19.11.2007. Clauses 5, 8 and 9 of theminutes of the said meeting read as follows:"5.In order to arrive at a settlement, Mr.Ismail agreedto Inox's contentions and arrived at a direct cost ofRs.11.28 per sq. ft. after removing the items objectedby Inox such as contingencies, sinking fund, painting,spares, etc. This was further reduced to Rs.10.98 persq. ft. after removing the differential rates betweenOffice and Retail tenants. https://hcservices.ecourts.gov.in/hcservices/ ...8.After further discussion, it was agreed that Inox willpay a revised CAM charges at Rs.8/- per sq. ft. insteadof the present Rs.5/- effective from the date of theiroperation and this will remain firm unless there isincrease in power tariff.9.Inox also agreed to give an increaser of 12% in CAMcharges every three years similar to escalation of leaserental to cover the inflationary cost."15.While the matter stood thus, the respondent issued acircular on 10.7.2008 that the revised rate was at Rs.16.95 persq. ft. effective from 1.4.2008 and called upon the occupants inthe complex to remit the same. It is not in controversy that thiscommunication was addressed not only to the applicant, but also toall the tenements. What was contended by the applicant before thelearned Single Judge and also before this Court is that the saidcommunication was unilateral; that as per the original agreemententered into between the parties on 10.8.2006 and also the minutesof the meeting dated 19.11.2007, if there was any proposal ofincrease in the CAM charges, there should have been discussionsand thereafter, it must be implemented, but no such freshagreement was entered into between the parties and hence it wasnot bilateral, but unilateral, and it cannot be given effect to.On the contrary, it was contended by the respondent's side inshort that while the CAM charges was agreed at Rs.8/-, the minutesof the meeting dated 19.11.2007, was issued based upon themistaken data furnished by the auditors, and hence that could notbe taken as the basis; that the actual expenses incurred by therespondent for providing and maintaining the facilities, if to beshared by the tenants, come to Rs.16.95 per sq. ft.; that it wasnot demanded to make any profit out of it; and that all thetenants have appraised the reality of the circumstances and havepaid proportionate to their area of occupation. 16.Admittedly, the matter has got to be referred toarbitration, and the main question to be addressed before theArbitrator would be whether the minutes of the meeting dated19.11.2007, would be binding on the parties and if so, to whatextent, and also what should be the CAM charges payable by theappellant/applicant. Answering these two questions could be doneonly by the Arbitrator on appreciation of evidence both oral anddocumentary to be produced by the parties, and this would no doubtinvolve the interpretation of the different Clauses found in theagreement between the parties. Under the circumstances, thisCourt is of the considered opinion that not even a comment on thearguments advanced by either side is needed at the hands of thisCourt at this juncture. Under the circumstances, it becomesnecessary to find out an interim solution to be followed by theparties till a decision is taken by the Arbitrator in the arbitralproceedings. The appellant who is carrying on four theatres is inactual need of all the facilities narrated in the agreement, tocarry on its business. But, the appellant pointing to theagreement entered into between the parties in the meeting on https://hcservices.ecourts.gov.in/hcservices/

19.11.2007, would contend that they would pay only Rs.8/- per sq.ft. On the contrary, it is contended by the respondent that theclaim of Rs.16.95 per sq. ft. towards CAM charges was actually thedivisional share of the actual expenditure incurred by therespondent in providing and maintaining the facilities as found inthe CAM agreement; and that all other tenants except the applicantare paying the respective shares. 17.Taking into consideration the need of the appellant forthe said facilities to carry on its business and that therespondent has to provide and maintain all the facilities asagreed upon and incur the actual expenditure therefor and thatthere is also a Clause for reimbursement and that the appellant isoccupying 34269 sq. ft. in the complex belonging to the respondentas a tenant, this Court is of the considered opinion that interimorder directing the respondent to continue to provide services asset out in Clause 2 of the Common Area Maintenance Agreement dated10.8.2006, without disruption in any manner whatsoever pendingdisposal of the arbitral proceedings, could be granted oncondition of the appellant making payment at the rate of Rs.12/-per sq. ft. per month towards CAM charges calculated from1.4.2008, for the area under its occupation namely 34269 sq.ft.till a decision is taken in the arbitral proceedings. It isbrought to the notice of the Court that at the time of initiationof the appeal proceedings, interim orders were made by this Courton condition of the appellant paying CAM charges at the rate ofRs.10/- per sq. ft. till the disposal of this appeal. It is statedthat the appellant is paying the same from the month of May 2009. 18.It is brought to the notice of the Court that anapplication was filed under Sec.11 of the Arbitration andConciliation Act, 1996, before this Court for appointment of anArbitrator, and the same is also pending. Since both the partiescould not arrive at consensus in naming the Arbitrator, they filedthe above two applications, and now the appeals are taken up forenquiry. At the time of disposal of the appeals, both the Counselwould submit that Mr.Justice R.Jayasimha Babu, a retired Judge ofthis Court, could be appointed as Arbitrator to resolve thedispute between the parties. The learned Counsel also undertakesto withdraw the application under Sec.11 of the Act which ispending. 19.Accordingly, Mr.Justice R.Jayasimha Babu, Judge (Retd),High Court, Madras, residing at No.612, RMV Extension II Stage,III Block, Bangalore 560 003 is appointed as Arbitrator to resolvethe dispute between the parties with regard to the Common AreaMaintenance Charges under the said agreement. The Arbitratorshall enter upon reference and after issuing notices to theparties, decide the dispute between the parties within a period ofsix months from the date of the Arbitrator entering uponreference. The Arbitrator shall be at liberty to decide thequestion of remuneration and other things.20.In the result, both these original side appeals are https://hcservices.ecourts.gov.in/hcservices/ disposed of in the following manner:(a) There will be an interim order as stated supra oncondition that the appellant should pay CAM charges at the rate ofRs.12/- per sq. ft. per month calculated from 1.4.2008, for thearea under its occupation namely 34269 sq.ft. till a decision istaken in the arbitral proceedings.(b) In view of the interim orders passed as referred toabove, the appellant has to pay to the respondent the remainder atthe rate of Rs.2/- per sq. ft. per month from May 2009 till time.(c) As regards CAM charges at the rate of Rs.12/- per sq. ft.per month from April 2008 to April 2009, the payment if any madeby the appellant shall be adjusted, and the remainder has got tobe paid by the appellant to the respondent.(d) The payment of arrears shall be made by the appellantwithin a period of six weeks herefrom. (e) The payments made and to be made by the appellant asreferred to above, has got to be adjusted or reimbursed as thecase may be, towards the quantum of CAM charges to be fixed by theArbitrator in the arbitral proceedings.21.It is also made clear that the above is an interregnumarrangement to be followed by the parties till the decision of thearbitral proceedings is made. It is further made clear thatneither the observations made above nor the rate fixed at Rs.12/-per sq. ft. towards CAM charges will have any bearing on theArbitrator in taking a decision on appreciation of evidence and inaccordance with law. The parties will bear their own costs.Consequently, connected MPs are closed.Sd/Asst.Registrar/true copy/Sub Asst.RegistrarnsvToThe Sub Asst. Registrar,Original Side Section,High Court,Madras.+1cc to Mr.Satish Parasaran, Advocate Sr 63511MS(CO)km/15.12.OSA Nos.125 and 126/2009