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2008 DIGILAW 978 (AP)

M. B. Enterprises v. S. R. K. Estates Pvt Ltd.

2008-11-15

G.V.SEETHAPATHY, V.ESWARAIAH

body2008
ORDER (Per V. Eswaraiah, J.) The appellant is the plaintiff, who filed the suit O.S.NO. 366 of 2008 on the file of the Chief Judge, City Civil Court, Hyderabad, seeking a decree of declaration that the plaintiff is entitled to continue the management of the hotel business being carried on by him under the name and style of Megacity in premises bearing Municipal No. 3-6-335 to 339, situated at Basheerbagh, Hyderabad, admeasuring 627 Sq. yards till 10-11-2012 or in the alternative a decree for specific performance, directing the defendant to honour Clause 7 of the agreement dated 10-11-2002 and Clause (C)i of the Supplementary agreement 6-9-2004 pertaining to automatic extension of period till 10-11-2012. 1. Pending disposal of the suit, the plaintiff also filed I.A.No. 2457 of 2008 under Order XXXIX, Rules 1 and 2 of Code of Civil Procedure for grant of an order of injunction, restraining the respondent from interfering with the business and management of the Megacity hotel in the said premises including obtaining of licence from the authorities or from dispossessing the petitioner from the said premises. 2. The appellant herein is called as the plaintiff and respondent herein is called as the defendant. The Civil Court initially granted an order of ad-interim injunction and after hearing both parties, the interim injunction granted earlier has been vacated, dismissing the injunction application by the impugned order dated 14-10-2008, against which, this appeal has been filed. 3. In is the case of the appellant that it is a registered partnership firm and one Smt. Yaseem Tabasum is the absolute owner of the said property, which was originally leased out to M/s. Deepthi Builders in March, 1991 and the said Deepthi Builders had sublet the said property to the respondent. Thereafter, said Deepthi Builders withdrew the lease in favour of the respondent and the respondent obtained the said property on lease for a period of 35 years with a right to sublease. The suit schedule property comprises of Cellar, Ground Floor and three upper floors and the entire building is used for running a hotel. The respondent gave the said property to M/s. Gananadha Hotels, who could not manage the same, as such, the respondent entered into an agreement with the appellant on 10-11-2002. The suit schedule property comprises of Cellar, Ground Floor and three upper floors and the entire building is used for running a hotel. The respondent gave the said property to M/s. Gananadha Hotels, who could not manage the same, as such, the respondent entered into an agreement with the appellant on 10-11-2002. It is stated that the original landlord also filed a case for eviction of the respondent vide O.S. NO.6 of 2005 on the file of the I-Senior Civil Judge, City Civil Court, Hyderabad and the same is pending adjudication. As per the agreement dated 10-11-2002, the appellant is liable to pay a sum of RS.1 ,75,0001- per month as franchisee fee with annual increment of 3.5% of every year and in the event of default of payment in monthly franchisee fee, the appellant is liable to pay simple interest at the rate of 18% per annum. It is the case of the appellant that the franchisee fee is paid regularly without any default up-to-date every month to the respondent according to the terms of the agreement after deducting TDS. (a) It is also stated that the appellant paid an amount of Rs.9,00,0001- as security deposit which is refundable without any interest. The appellant also paid a sum of Rs.33,00,000/- at the request of the respondent to Ms. Gananadha Hotels, out of which a sum of Rs.17,00,000/- was paid to Gananadha Hotels for the purchase of equipment, furniture, air conditioners etc. Hence, the appellant is the owner of the equipment, furniture and air conditioners etc., in the said hotel premises in view of the purchase made by the appellant from Gananadha Hotels Private Limited. The transactions of the Hotel Megacity were to be done in the name of the respondent as the licences of Hotel Megacity were initially in the name of the respondent including commercial tax licence. It is stated that the other terms and conditions of the agreement of management contract dated 10-11-2002 were also fulfilled and honoured. (b) Thereafter, there was an agreement among the parties on 10-7-2003 for reduction of the franchisee fee from 1.75,000/- to RS.1 ,55,000/- per month for a period of five years. Accordingly, supplementary agreement dated 6-9-2004 was entered into, amending Clauses 2 and 6 of original agreement dated 10-11-2002 making the appellant liable to pay only Rs.1,65,000/towards franchisee fee with an automatic extension of five more years. Accordingly, supplementary agreement dated 6-9-2004 was entered into, amending Clauses 2 and 6 of original agreement dated 10-11-2002 making the appellant liable to pay only Rs.1,65,000/towards franchisee fee with an automatic extension of five more years. As per the original and supplementary agreements, the initial period of agreement is for five years, which is automatically extendable ,for five more years with the usual enhancement of 5% every year. Thus, it is the case of the appellant that he is entitled to carry on the business up to 10-11-2012. (c) It is further stated that as per the supplementary agreement dated 6-9-2004, the appellant enhanced the franchisee fee by 5% after expiry of five years making liable the appellant to pay at the rate of RS.1 ,81 ,500/- up to 10-11-2007 and a sum of Rs.1,89,750/- from 11-11-2007 onwards, which is being paid regularly. The respondent received the enhanced fee as per Clause 7 of the original agreement dated 10-11-2002 and Clause (C)i of the supplementary agreement dated 6-9-2004. Thus, it is contended that the appellant is entitled to manage the hotel as per the original agreement till 1 0-11-2012. (d) While so, the respondent got issued a notice dated 30-6-2008 terminating the management contract by 30-6-2008 contrary to the aforesaid agreement based on the alleged agreement dated 12-6-2006, which was never acted up and which was given go-by, by both the parties. It is further stated that the appellant performed its part of contract without any default. The respondent tried to dispossess the appellant from the suit schedule property on 30-6-2008 and addressed a letter dated 16-6-2008 to the Superintendent of Excise objecting the renewal of the Excise licence without any justification and therefore, the appellant sought for a temporary injunction. 4. It is the case of the respondent that an agreement was entered in to by the respondent in favour of the appellant on 10-11-2002, but the appellant was never regular in payment of the franchisee fee of RS.1 ,75,000/- per month, and the same was reduced to Rs.1,55,000/- and Rs.10,000/towards use of roof top area of the Hotel Magacity, total of which is RS.1 ,65,000/- and the appellant is due and liable to pay a sum of Rs.5,94,000/- towards roof top licence as on 30-6-2008. It is stated that the respondent has nothing to do with the payment of Rs.33,00,000/- to Gananadha Hotels. It is stated that the respondent has nothing to do with the payment of Rs.33,00,000/- to Gananadha Hotels. In fact, the equipments, furniture, air conditioners etc., belonging to the respondent alone, but the appellant clandestinely cancelled the trade licence obtained by the respondent and got the same issued by the Greater Hyderabad Municipal Corporation in the name of the appellant fraudulently. On making a representation, the trade licence granted in favour of the appellant was cancelled on 2-7-2008 and the appellant has been doing illegal acts by submitting faise representations to the statutory authorities. It is further stated that as the appellant was unable to pay the franchisee fee of Rs.1,75,000/- which was reduced to RS.1,55,000/-, another agreement dated 6-9-2004 was entered into. As the agreement dated 6-9-2004 came to an end by 30-6-2008, another agreement dated 12-6-2006 was entered into according to which, the earlier agreement stands rescinded and as per the agreement dated 12-6-2006, the appellant is liable to be evicted as the lease expires by 30-6-2008. It is stated that the appellant is not entitled to remain in the management of Hotel Megacity after 30-6-2008 and all the agreements have come to an end by 30-6-2008, therefore, the appellant is not entitled for any order of injunction. It is stated that the respondent never tried to dispossess the appellant on 30-6-2008. It is further stated that the liquor licence was not granted/renewed in favour of the appellant as the respondent filed W.P.No. 13266 of 2008 on 20-6-2008 and obtained interim orders and therefore, the request to renew the licence was refused. It is stated that as per the terms and conditions of the contract entered into on 10-11-2002, 10-7-2003, 6-9-2004 and finally on 12-6-2006, the management of the appellant with effect from 1-7-2008 is illegal and against the aforesaid agreement and therefore, the appellant is not entitled for any order of injunction. 5. The appellant filed the agreement for management contract for the hotel Megacity as EX.A-7 and supplementary agreement dated 6-9-2004 as EX.A-9. The agreement for management contract of Bar and Restaurant of Hotel Megacity dated 12-6-2006 was also filed as EX.A-20. The copies of the same were also filed by the respondent as Exs. B-1, B-3 and B-4 respectively. Various other documents have been filed on behalf of both the parties before the Court below. The agreement for management contract of Bar and Restaurant of Hotel Megacity dated 12-6-2006 was also filed as EX.A-20. The copies of the same were also filed by the respondent as Exs. B-1, B-3 and B-4 respectively. Various other documents have been filed on behalf of both the parties before the Court below. The Court below considered the only point as to whether the appellant is entitled for temporary injunction as prayed for. 6. The Court below observed that the relationship of the parties is not in dispute and the original owner of the said property is Smt. Yaseem Tabasum, who leased out the same in favour of M/s. Deepthi Builders, who in turn sublet the same in favour of the respondent and later, an agreement was entered into between the parties herein on 10-11-L002 for a period of five years extendable for five more years if there is no default by the appellant and as per the agreement, the contract came to an end by 30-6-2008. As per the recitals of EX.A-7 agreement dated 10-11-2002, the period is extendable for five more years if there is no default by the appellant. Exs.A-8 and A-9 are the supplementary agreements and according to which, the contract has come to an end by 30-6-2008. In so far as the agreement dated 12-6-2006 is concerned, the contention of the appellant is that the said agreement was not acted upon and not. binding on the appellant. It is stated that unless the appellant established that the said agreement was not acted upon and not binding on him, the appellant cannot be held to be entitled for the injunction as prayed for. On that ground alone, the injunction earlier granted was vacated dismissing the injunction application. 7. The point that arises for consideration as to whether the agreement for management contract of Bar and Restaurant of Hotel Megacity dated 12-6-2006 corresponding to Exs.A-20 and B-4 was acted upon and in the absence of any evidence establishing the said agreement was not acted upon whether the injunction granted earlier is liable to be vacated. 8. We have perused the agreement dated 10-11-2002 and as per Clause 7 of the said agreement, the agreement for management contract between the parties is initially for a period of five years, which is automatically extendable for five more years, subject to fulfillment of other conditions stipulated therein. 8. We have perused the agreement dated 10-11-2002 and as per Clause 7 of the said agreement, the agreement for management contract between the parties is initially for a period of five years, which is automatically extendable for five more years, subject to fulfillment of other conditions stipulated therein. It is also not in dispute that the supplementary agreement dated 6-9-2004 was entered into by the parties and the said agreement is continuous, forming part and parcel of the earlier agreement dated 10-11-2002 except the clauses mentioned in the supplementary agreement. There was a change with regard to the payment of franchisee amounts. With regard to the renewal is concerned, as per Clause (C)i of the supplementary agreement, the initial period of 5 years is automatically extendable for a period of five more years if there is no default by the appellant by way of payment of monthly fees or default with regard to the statutory requirements. The franchisee fee for the extended period of five years shall be 5% enhanced franchisee fee every year. Thus, supplementary agreement also stipulates the extension period of five years. As per the original agreement, the period of contract was for a period of five years from 10-11-2002 to 10-11-2007 and renewal period of five years is from 10-11-2007 to 10-11-2012. The perusal of the agreement dated 12-6-2006 goes to show that it relates to the agreement for management contract of Bar and Restaurant of Hotel Megacity, in which there is a mention about earlier agreement dated 10-11-2002, 10-7-2003 and 6-9-2004. It is stated that those agreements shall form part and parcel o~ the said agreement. As per Clause 2 of the said agreement, the agreed franchisee fee was Rs.45,0001- and RS.1 ,00,0001- was refundable deposit fee and the agreement is valid up to 30-7-2008 and the earlier agreement shall form part and parcel of the said agreement and the said agreement comes to any end by 30-6-2008 with an option to renew for a further period of five years with fresh terms and conditions mutualiy agreed upon. It is the case of the appellant that the agreement dated 12-6-2006 was never acted upon as the fact shows that the appellant paid franchisee fee at the rate of Rs.1,65,000/per month from 10-11-2005 to 9-11-2007 and thereafter the enhanced rate of 5% was also regularly paid as per the supplementary agreement dated 6-9-2004 and the enhanced franchisee fee of RS.1 ,81 ,500/- was paid up to 10-11-2007 and a sum of Rs. 1,89,750/was also paid from 11-11-2007 till date by enhancing the franchisee fee of 5% from 1 0-11-2007 and the same is received by the respondent without any protest and demur. Hence, it is the case of the appellant that the period was automatically renewed for five more years from 10-11-2007 as the respondent received the enhanced fee as per Clause 7 of the agreement dated 6-9-2004 and Clause (C)i of the supplementary agreement dated 6-9-2004 and thus, the agreement dated 12-6-2006 was never acted upon. 9. Had the agreement dated 12-6-2006 was acted upon, the respondent would not have received the franchisee fee at the rate of Rs.1,89,000/- per month, but he would have received only Rs.45,000/- from 12-6-2006. Thus, it cannot be said that the agreement dated 12-6-2006 was acted upon. It is stated that the notice dated 30-6-2008 terminating the contract by the same day 30-6-2008 is per se illegal and contrary to Clause 7 of the agreement dated 10-11-2002 and also Clause (C)i of the supplementary agreement dated 6-9-2004. It is further 3tated that in fact the respondent addressed EX.A-10 letter dated 20-2-2008 to the appellant, in which he never referred to the agreement dated 12-6-2006 and therefore, it cannot be said that the agreement dated 12-6-2006 was acted upon. 10. We have heard the rival contentions and we are of the opinion that vacating the interim order of injunction only on the ground that unless the appellant establishes that the agreement dated 12-6-2006 was not acted upon and not binding on the appellant, he is not entitled for any temporary injunction as prayed for is without any justification as the learned Judge did not consider any of the contentions with regard to the payment of franchisee fee as per the supplementary agreement dated 12-9-2004 even after the agreement dated 12-6-2006. We are of the opinion that the appellant has prima facie submitted about the payment of franchisee fee as per the agreement dated 6-9-2004 in support of his contention that the agreement dated 12-6-2006 was not at all acted upon, but however, unless a regular trial takes place, it cannot be said that the agreement dated 12-6-2006 was acted upon and that there is novation of contract. The legality or otherwise of the termination of the contract is yet to be decided in the suit. Therefore, we are of the opinion that if the injunction is vacated, the subject matter of the suit itself becomes infructuous and therefore, the learned trial Judge ought not to have dismissed the injunction application by vacating the earlier interim injunction. 11. We are of the opinion that the appellant has established the prima facie case and the balance of convenience is also in favour of the appellant in granting injunction. If the injunction is not granted, the appellant will suffer irreparable loss and injury. The controversy with regard to the right of renewal is to be resolved in the main suit. Having regard to the facts and circumstances of the case, without expressing any opinion with regard to the merits of the case, we set aside the order under appeal, granting injunction as prayed for pending disposal of the suit. The Civil Miscellaneous Appeal is accordingly allowed. The suit be disposed of as expeditiously as possible without being influenced by any of the observations made in this order and without any undue delay. No order as to costs.