2020 (10) TMI 54 - SC - Indian Laws

Claim for damages - reduction in the rate of interest from 16% per annum to 9% per annum as applicable to future interest i.e. from the date of the Award, 16.03.1998, till the date of the judgment - nonpayment of commission and failure to handover the vacant possession of the premises to the respondents - HELD THAT - 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. 15A 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. 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 preclosure i.e. 15.08.1990 to 22.02.1991 and postclosure 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 preclosure and the commission payable postclosure as per the statement of accounts of the appellants, after deducting TDS. The Division Bench of the High Court while dismissing the appeal has reduced the rate of interest from 16% per annum to 9% per annum from the date of the Award till the date of its judgment, subject to the appellants paying the decretal amount to the respondents on or before 30.06.2010 - the rate of interest is reduced from 16% per annum to 9% per annum from the date of the Award till this date, subject to the appellants paying the complete decretal amount to the respondents on or before 31.12.2020 failing which the Award along with interest would stand as it is. Appeal allowed in part.

Issues Involved:
1. Legality and correctness of the High Court's judgment.
2. Nature of the agreement between the parties (tenancy vs. license).
3. Calculation and justification of damages.
4. Errors in the statement of accounts.
5. Reduction of the interest rate on the award.

Detailed Analysis:

1. Legality and Correctness of the High Court's Judgment:
The appellants challenged the High Court's final judgment dated 11.02.2010, which dismissed their appeal against the Single Judge's decision to make the Arbitrator's Award dated 16.03.1998 the rule of the court. The Division Bench reduced the rate of interest from 16% per annum to 9% per annum for future interest, conditional upon the appellants paying the complete decretal amount by 30.06.2010.

2. Nature of the Agreement (Tenancy vs. License):
The appellants argued that the agreements were not licenses but tenancies, and thus they should not be liable for damages for the use and occupation of the premises. The Arbitrator and the Single Judge rejected this plea, holding that even if the appellants were considered tenants, they would still be liable to pay rent under Section 108 of the Transfer of Property Act. The court upheld that the appellants were liable for damages as they did not hand over vacant possession of the premises until 13 March 2000, contrary to Clause 10 of the agreements.

3. Calculation and Justification of Damages:
The Arbitrator framed Issue No. 15A to determine the damages payable to the respondents. The damages were calculated based on the appellants' statement of accounts, which included periods of pre-closure and post-closure of the business. The Arbitrator and the courts found the appellants liable for damages for the period when the business was closed and the premises were not handed over. The damages were calculated as an average of the commission paid pre-closure and payable post-closure, after deducting TDS.

4. Errors in the Statement of Accounts:
The appellants contended that there were errors in the statement of accounts, specifically regarding the deduction of sales tax and expenses on electricity and water bills. These errors, they argued, led to an inflated commission payable. The courts found no merit in this contention, noting that the appellants themselves had filed the statement and deducted taxes accordingly. The Single Judge emphasized that the appellants could not retract their statement at this stage, especially when taxes were already paid based on it.

5. Reduction of Interest Rate:
The Division Bench of the High Court reduced the interest rate on the award from 16% per annum to 9% per annum, conditional upon timely payment of the decretal amount. The Supreme Court extended a similar benefit, reducing the interest rate to 9% per annum from the date of the Award till the date of the judgment, provided the appellants pay the complete decretal amount by 31.12.2020. Failure to do so would result in the original interest rate of 16% per annum being applicable.

Conclusion:
The Supreme Court dismissed the appeal, finding no merit in the appellants' contentions. The judgments of the Arbitrator, Single Judge, and Division Bench were upheld, including the calculation of damages and the reduction in the interest rate, subject to the appellants' compliance with the payment deadline. There was no order as to costs.

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