both appeals Original side appeals preferred under Order XXXVI Rule 1 of the O.S. Rules read with Clause 15 of the Letters Patent against the order of this Court made in O.A.No.1236 of 2008 and A.No.5373 of 2008 dated 21.4.2009.
For Appellant : Mr.P.S.Raman Senior Counsel for Mr.Sathish Parasaran For Respondent : c Senior Counsel for Mr.Srinath Sridevan COMMON JUDGMENT (Judgment of the Court was delivered by M.CHOCKALINGAM, J.) These two intracourt appeals have arisen from a common order of the learned Single Judge of this Court made in O.A.No.1236 of 2008 and A.No.5373 of 2008 filed under Sec.9 of the Arbitration and Conciliation Act, 1996.
2.The appellant has filed the first application seeking an interim injunction to restrain the respondent from in any manner seeking to claim or demand payment towards CAM charges other than in accordance with clause 5 of the Common Area Maintenance Agreement dated 10.8.2006, entered into between the parties herein as modified by an agreement in the meeting dated 19.11.2007, while the second application was filed seeking an interim order directing the respondent to continue to provide services as set out in Clause 2 of the Common Area Maintenance Agreement dated 10.8.2006 without disruption in any manner whatsoever pending disposal of the arbitral proceedings.
3.For the sake of convenience, the parties hereinafter will be referred to as applicant and respondent respectively.
4.On perusal of the materials available, the following would emerge as admitted facts:
(a) The applicant carrying on business in multiplex movie theatre, and the respondent, the owner of the complex, entered into an agreement of lease on 10.8.2006. Though the complex consisted of nearly 60 tenements occupied by different tenants, an area of 34269 sq.ft. was leased out to the applicant. Apart from the lease agreement under which the applicant has to pay the monthly rental as agreed upon, two other agreements were entered into between the parties namely Common Area Maintenance Agreement and Facilities and Utilities Agreement. Now, this Court is concerned with the Common Area Maintenance Agreement. Under the said agreement, the respondent-complex owner agreed to provide and maintain proper and adequate security for the complex and also assured maintenance of housekeeping, gardening, landscaping, water services, air-conditioning, light and certain other facilities as listed in the common area for the better utilisation and enjoyment of the premises leased out to the applicant. It was also agreed that the respondent should keep the common areas fully operational and functional at their full capacity uninterruptedly between 10.00 A.M. and 1.30 A.M. or half an hour before the starting of the first show and half an hour after the completion of the last show whichever was later, but all the days of the year.
(b) Clause 5 of the agreement dated 10.8.2006, stipulated that the applicant should reimburse the respondent the proportionate actual expenses incurred by the respondent towards common maintenance and security for the complex, which should not exceed Rs.5/- per sq.ft. during the entire term of the lease deed for the above mentioned area. There was a demand made by the respondent to increase the common maintenance charges. A meeting was convened. The parties arrived at an agreement, and the same was reduced into writing on 19.11.2007, according to which the parties agreed that the applicant should pay the revised CAM charges at Rs.8/- per sq.ft. which was to be given effect from the date of operation and should remain firm unless there was increase in power tariff. It was also agreed that there should be an increase of 12% in CAM charges every three years similar to the escalation of lease rental to cover inflationary cost.
(c) While the matter stood thus, the respondent issued a circular on 10.7.2008 intimating that the applicant should pay the revised CAM charges at Rs.16.95 per sq.ft. with effect from 1.4.2008 and called upon all the tenants in the complex to remit the same. A sum of Rs.14,61,715/- as on 15.7.2008 was demanded from the appellant by a claim voucher. Denying the claim as one against the agreement and unsustainable, the applicant sent a letter on 16.7.2008 which brought forth a reply from the respondent on 5.9.2008. Thus, the dispute arose as to the extent of CAM charges payable by the applicant.
(d) An application was filed for appointment of an Arbitrator. Since there was no consensus between the parties in naming the arbitrator, the above applications were made for interim 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 Judge on enquiry of the applications dismissed both of them holding that the applicant have not made out a case for the interim reliefs. Under such circumstances, these appeals have arisen at the instance of the applicant.
5.Advancing arguments on behalf of the appellant/ applicant, the learned Senior Counsel Mr.P.S.Raman would submit that both the applications were filed under Sec.9 of the Arbitration and Conciliation Act, 1996; that in such circumstances, the interest of the applicant should be protected pending the arbitral proceedings, and interim orders should have been granted in favour of the applicant since the circular issued by the respondent increasing the Common Area Maintenance (CAM) charges was unilateral and the same was overriding the terms of the agreement between the parties dated 10.8.2006 and the modifications recorded in the meeting dated 19.11.2007; that the express contract between the parties should not be overlooked since it was binding on them; that the minutes of the meeting dated 19.11.2007 between the parties was a conclusive action; that the dismissal of the applications by the learned Single Judge was to the effect of permitting the respondent to repudiate the contract, which was binding on the parties; that the very reading of the circular would indicate that the charges were raised unilaterally, and thus it was a repudiation of the contract thereby making deviation from the same and that too on the ground of alleged unilateral mistake; that if it was a unilateral mistake, the contract was voidable; that if it was a bilateral mistake, the contract itself would become void; that in the instant case, the learned Single Judge without assigning a meaning to the terms of the contract between the parties which was not even pleaded by the respondent, has rendered a finding contrary to the clear and express terms of the contract; that under Sec.9 of the Arbitration and Conciliation Act, 1996, the principal objective is to protect the interest of the parties pending arbitration; but, the dismissal order has instead entirely changed the status quo pending arbitral proceedings; and that the reading of the order under challenge would clearly indicate that findings have been recorded on the terms of the contract between the parties even at the interim stage and without appreciating any evidence.
6.Added further the learned Senior Counsel that till such time as the contract between the parties continued to operate, the burden was upon the respondent to prove that the CAM agreement which was entered into between the parties was void in the arbitral proceedings and till such time, it was only the terms of the CAM agreement and the minutes dated 19.11.2007 would govern the parties; that the parties cannot be directed to act contrary to the contract between them; that the learned Single Judge has relied upon the dealings of the respondent with the other tenants without any documentary evidence or any iota of evidence or pleadings in that regard; that the relationship between the respondent and the other various tenants would be governed by the separate inter se contracts between them; that the applicant worked out its investment commitments and the cash flows entirely based upon payment obligations under the various agreements; that the CAM charges was an important pre requisite for such agreement and formed an important aspect of the overall commercial understanding between the parties; that the CAM agreement cannot be read in part; but, it should be appreciated in its entirety together with the modifications recorded in the minutes of the meeting dated 19.11.2007, which gave rise to an increase in the CAM charges from Rs.5/- to Rs.8/-; that Clause 5 stipulated that increase in CAM charges as contemplated therein would not be implemented unless discussed and agreed upon between the parties and other major tenants in the complex; that this clause should be read together with the other provisions contained in Clause 5; that this is in fact a protective clause in favour of the applicant; that Clause 5 provided that the commercial charges were only reimbursable as set out therein; that the revision at the rate of Rs.16.95 per sq.ft. was by way of unilateral demand by the respondent; that there is no material available to indicate that other tenants have either agreed or been paying so; and that even assuming that the other tenants are paying under compelled circumstances, the appellant cannot be directed to pay because of the compulsion put forth by the respondent.
7.The learned Senior Counsel would further submit that the rates paid by the other tenants would obviously be governed by the respective contracts and would not have any impact upon the written contract between the applicant and the respondent; that the applicant was a tenant with one of the largest area in occupation; that the area of business of the appellant was situated on the higher floor; that it was based upon such commercial consideration of the larger area under occupation and the role of the appellant in attracting customers to other areas of the other tenements that a rate other than on actuals was negotiated and fixed by the appellant to prevent an unjustified increase as also on other commercial considerations; that the learned Single Judge was not correct in holding that the appellant cannot be singled out since the increased rate was applicable to all tenants occupying the complex; that the learned Single Judge was also not correct in holding that the enjoyment of CAM being common to one and all, the question of differential rate to be applied did not call for any acceptance; that the special circumstances attendant and the status of the appellant in occupying a larger area of 34269 sq.ft. was not taken note of by the learned Single Judge; that till a fresh agreement is entered into between the parties, no payment of additional CAM charges could be made; that the appellant has made out a prima facie case for grant of interim injunction as asked for pending arbitral proceedings, and hence the order of the learned Single Judge allowing the respondent making collection of charges contrary to the express terms of the agreement between the parties has got to be set aside and interim orders be granted.
8.Contrary to the above contentions, the learned Senior Counsel Mr.G.Masilamani for the respondent after reiterating the submissions made before the learned Single Judge, would submit that apart from the applicant who is occupying 34269 sq.ft., there are about 60 tenements occupied by various tenants; that the applicant and all other tenants have been paying the monthly rental as agreed upon by them; that apart from the rental agreement, all the tenants including the applicant have entered into an independent agreement for the maintenance of the common areas by the respondent; that the applicant has entered into the first agreement dated 10.8.2006 whereby it was agreed that the applicant should pay Rs.5/- as CAM charges per sq.ft.; that under Clause 5 of the agreement, the applicant has agreed to reimburse the respondent for the proportionate actual expenses incurred by the respondent towards CAM and security for the complex; that it was also further clarified and understood between the parties that CAM charges were reimbursable only and the same would only be increased if necessary, and such necessity shall arise only in the event of an actual increase in the power tariff and other inflationary factors; that even at the earliest when the parties entered into the agreement, they have agreed that the CAM Charges could be increased in view of the inflationary factors; that it is also true that subsequently it was raised; that when a difference of opinion arose between the parties as to the charges, they have entered into an agreement in a meeting on 19.11.2007 and minutes were drawn; that it was also agreed that the respondent would pay the revised CAM charges at Rs.8/- per sq.ft. instead of Rs.5/-; that subsequently it was found that the said rate was fixed mistakenly in view of the data furnished by the auditor of the respondent which was found to be defective; and that under such circumstances, explaining the reasons, a circular was issued to all 60 tenements including the applicant.
9.Added further the learned Senior Counsel that all the other tenants in appraisement of the circumstances and appreciation of the truth have been paying the respective revised charges as claimed by the respondent; that the respondent is bound to provide and maintain all the facilities utmost throughout the year without which neither the applicant nor any one of the tenements could carry on their business; that even during power cut, the respondent has to maintain thorough electric flow for the purpose of lighting and air-conditioning; that equally when there was deficiency in water supply, the respondent has to supply water by securing the same; that it is pertinent to point out that the respondent is actually seeking reimbursement of the amount spent by them; that it is not as if the respondent is making profit out of the collection from the applicant or from the other tenants; that the applicant is also not making payment of not even one pie other than what is actually spent by the respondent; that to carry on its business of running the theatres, all the facilities should be provided and maintained adequately without any deficiency; but, at the same time, the applicant should pay its divisional share of the actual cost incurred by the respondent; that while all other tenants are paying, only the applicant has taken exception for the same pointing to the minutes of the meeting dated 19.11.2007 wherein a mistake has crept in in view of the auditor's data; that so long as the applicant was insisting the respondent to provide and maintain all the facilities continuously, it has to necessarily pay for the same; that at one time after getting the communication from the applicant, the respondent has also replied to the applicant to mention such of those facilities which were not needed by the applicant so that it could not be continued; but, the applicant was not for the same; and that under such circumstances, till the arbitral proceedings are over, the applicant should be directed to continue to make payment at the rate of Rs.16.95 per sq.ft.
10.Added further the learned Senior Counsel that in the arbitral proceedings if the CAM rate is fixed below Rs.16.95, there could not be any difficulty for the applicant getting it reimbursed from the respondent since the applicant is in occupation of the building of the respondent to an extent of 34269 sq.ft. and running four theatres; that under such circumstances, the learned Single Judge has considered all the aspects of the matter and dismissed the applications, and hence both the appeals have got to be dismissed.
11.The Court paid its consideration on the submissions made and looked into all the materials available.
12.It is not in controversy that the appellant herein is a tenant in the complex belonging to the respondent. The appellant is carrying on its business in running four multiplex movie theatres occupying an area of 34269 sq.ft. It is also not in controversy that as per the agreement of lease dated 10.8.2006, the appellant is making the payment of monthly rental. At the time of entering into the lease agreement, the parties have entered into another agreement namely Common Area Maintenance Agreement on the very day. Clause 5 of the said agreement reads as follows:
"INOX shall, reimburse CCCHPL for the proportionate actual expenses incurred by CCCHPL towards CAM and Security for the Complex, which reimbursement shall not, during the entire term of the Lease Deed, exceed the rate of Rs.5/- per sq. ft. for the super built up area of approximately 34269 sq. ft. for the space of the multiplex cinema theatre in the Demised Premises (hereinafter referred to as "CAM Charges"), on receipt of bills for the same from CCCHPL within 4 (four) days of such receipt of bills by INOX and CCCHPL shall furnish to INOX an annual statement from its Auditors in respect of the bills regarding CAM Charges stating that the sums reimbursed by INOX to CCCHPL have been utilized/appropriated towards CAM and Security. It is clarified and understood between the parties that CAM Charges are reimbursable only and the same would only be increased if necessary and such necessity shall arise only in the event of an actual increase in power tariff and /or other inflationary factors. The parties agree that the increase in CAM Charges as contemplated herein would not be implemented unless discussed and agreed upon between the parties and other major tenants in the Complex 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 that the applicant should reimburse the respondent for the proportionate actual expenses incurred by the respondent towards the CAM and Security for the complex which should not exceed the rate of Rs.5/- per sq.ft. for the area of 34269 sq.ft. occupied by the applicant. It also contemplated an increase of the said charge in the event of the actual increase in the power tariff and also other inflationary factors.
14.When the respondent expressed its intention to raise the CAM charges to which course the applicant was not amenable, a meeting was convened on 19.11.2007. Clauses 5, 8 and 9 of the minutes of the said meeting read as follows:
"5.In order to arrive at a settlement, Mr.Ismail agreed to Inox's contentions and arrived at a direct cost of Rs.11.28 per sq. ft. after removing the items objected by Inox such as contingencies, sinking fund, painting, spares, etc. This was further reduced to Rs.10.98 per sq. ft. after removing the differential rates between Office and Retail tenants.
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8.After further discussion, it was agreed that Inox will pay a revised CAM charges at Rs.8/- per sq. ft. instead of the present Rs.5/- effective from the date of their operation and this will remain firm unless there is increase in power tariff.
9.Inox also agreed to give an increaser of 12% in CAM charges every three years similar to escalation of lease rental to cover the inflationary cost."
15.While the matter stood thus, the respondent issued a circular on 10.7.2008 that the revised rate was at Rs.16.95 per sq. ft. effective from 1.4.2008 and called upon the occupants in the complex to remit the same. It is not in controversy that this communication was addressed not only to the applicant, but also to all the tenements. What was contended by the applicant before the learned Single Judge and also before this Court is that the said communication was unilateral; that as per the original agreement entered into between the parties on 10.8.2006 and also the minutes of the meeting dated 19.11.2007, if there was any proposal of increase in the CAM charges, there should have been discussions and thereafter, it must be implemented, but no such fresh agreement was entered into between the parties and hence it was not bilateral, but unilateral, and it cannot be given effect to. On the contrary, it was contended by the respondent's side in short that while the CAM charges was agreed at Rs.8/-, the minutes of the meeting dated 19.11.2007, was issued based upon the mistaken data furnished by the auditors, and hence that could not be taken as the basis; that the actual expenses incurred by the respondent for providing and maintaining the facilities, if to be shared by the tenants, come to Rs.16.95 per sq. ft.; that it was not demanded to make any profit out of it; and that all the tenants have appraised the reality of the circumstances and have paid proportionate to their area of occupation.
16.Admittedly, the matter has got to be referred to arbitration, and the main question to be addressed before the Arbitrator would be whether the minutes of the meeting dated 19.11.2007, would be binding on the parties and if so, to what extent, and also what should be the CAM charges payable by the appellant/applicant. Answering these two questions could be done only by the Arbitrator on appreciation of evidence both oral and documentary to be produced by the parties, and this would no doubt involve the interpretation of the different Clauses found in the agreement between the parties. Under the circumstances, this Court is of the considered opinion that not even a comment on the arguments advanced by either side is needed at the hands of this Court at this juncture. Under the circumstances, it becomes necessary to find out an interim solution to be followed by the parties till a decision is taken by the Arbitrator in the arbitral proceedings. The appellant who is carrying on four theatres is in actual need of all the facilities narrated in the agreement, to carry on its business. But, the appellant pointing to the agreement entered into between the parties in the meeting on 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 the claim of Rs.16.95 per sq. ft. towards CAM charges was actually the divisional share of the actual expenditure incurred by the respondent in providing and maintaining the facilities as found in the CAM agreement; and that all other tenants except the applicant are paying the respective shares.
17.Taking into consideration the need of the appellant for the said facilities to carry on its business and that the respondent has to provide and maintain all the facilities as agreed upon and incur the actual expenditure therefor and that there is also a Clause for reimbursement and that the appellant is occupying 34269 sq. ft. in the complex belonging to the respondent as a tenant, this Court is of the considered opinion that interim order directing the respondent to continue to provide services as set out in Clause 2 of the Common Area Maintenance Agreement dated 10.8.2006, without disruption in any manner whatsoever pending disposal of the arbitral proceedings, could be granted on condition of the appellant making payment at the rate of Rs.12/- per sq. ft. per month towards CAM charges calculated from 1.4.2008, for the area under its occupation namely 34269 sq.ft. till a decision is taken in the arbitral proceedings. It is brought to the notice of the Court that at the time of initiation of the appeal proceedings, interim orders were made by this Court on condition of the appellant paying CAM charges at the rate of Rs.10/- per sq. ft. till the disposal of this appeal. It is stated that the appellant is paying the same from the month of May 2009.
18.It is brought to the notice of the Court that an application was filed under Sec.11 of the Arbitration and Conciliation Act, 1996, before this Court for appointment of an Arbitrator, and the same is also pending. Since both the parties could not arrive at consensus in naming the Arbitrator, they filed the above two applications, and now the appeals are taken up for enquiry. At the time of disposal of the appeals, both the Counsel would submit that Mr.Justice R.Jayasimha Babu, a retired Judge of this Court, could be appointed as Arbitrator to resolve the dispute between the parties. The learned Counsel also undertakes to withdraw the application under Sec.11 of the Act which is pending.
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 resolve the dispute between the parties with regard to the Common Area Maintenance Charges under the said agreement. The Arbitrator shall enter upon reference and after issuing notices to the parties, decide the dispute between the parties within a period of six months from the date of the Arbitrator entering upon reference. The Arbitrator shall be at liberty to decide the question of remuneration and other things.
20.In the result, both these original side appeals are disposed of in the following manner:
(a) There will be an interim order as stated supra on condition that the appellant should pay CAM charges at the rate of Rs.12/- per sq. ft. per month calculated from 1.4.2008, for the area under its occupation namely 34269 sq.ft. till a decision is taken in the arbitral proceedings.
(b) In view of the interim orders passed as referred to above, the appellant has to pay to the respondent the remainder at the 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 made by the appellant shall be adjusted, and the remainder has got to be paid by the appellant to the respondent.
(d) The payment of arrears shall be made by the appellant within a period of six weeks herefrom.
(e) The payments made and to be made by the appellant as referred to above, has got to be adjusted or reimbursed as the case may be, towards the quantum of CAM charges to be fixed by the Arbitrator in the arbitral proceedings.
21.It is also made clear that the above is an interregnum arrangement to be followed by the parties till the decision of the arbitral proceedings is made. It is further made clear that neither the observations made above nor the rate fixed at Rs.12/- per sq. ft. towards CAM charges will have any bearing on the Arbitrator in taking a decision on appreciation of evidence and in accordance with law. The parties will bear their own costs. Consequently, connected MPs are closed.