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2012 DIGILAW 4946 (MAD)

Tamil Nadu Tourism Development Corporation Limited, rep. by its Managing Director v. K. Chandrasekaran

2012-12-13

K.K.SASIDHARAN, R.BANUMATHI

body2012
Judgment R. BANUMATHI, J. Being aggrieved by the common order in O.A.No.169 of 2012 and A.No.1250 of 2012 interalia issuing directions in respect of additional space allegedly encroached by the Respondent, Tamil Nadu Tourism Development Corporation Limited has preferred these appeals. 2. Brief facts:- During the year 2007, Tamil Nadu Tourism Development Corporation Limited (TTDC) invited tender for franching its Hotel at Unit-II, Madurai to run Restaurant in the name of "Hotel Tamil Nadu". Respondent quoted Rs.6,54,000/-and was the successful bidder and Respondent paid the bid amount of Rs.6,54,000/-by way of demand draft. Respondent also executed bank guarantee to the value of Rs.3,76,000/-. On 10.09.2007, franchise agreement was executed between the Appellant Corporation and Respondent which contains terms and conditions of the agreement. As per the franchise agreement dated 109.9.2007, franchisor and franchisee are bound by the terms and conditions and also the plan and inventory attached thereto. Tender was for a period of ten years. On 15.09.2007 possession was handed over to the Respondent. 3. Respondent was given possession of 7822 sq. ft. It is the case of Appellant Corporation that Respondent violated the terms and conditions of the agreement and that Respondent encroached upon additional space of 2503 sq. ft. and had unauthorisedly put up construction. Respondent-Franchisee had violated the terms and conditions of the agreement by conducting exhibition without getting prior permission from the Appellant Corporation. Respondent was served with show cause notice dated 22.09.2011 setting out in detail about the violations and calling upon him to pay Rs.6,50,780/- in respect of additional space on or before 07.10.2011 and also directing to surrender the additional space occupied by him. Respondent sent his reply on 07.10.2011. According to Appellant Corporation, Respondent never showed any response to pay the amount nor rectify the short coming pointed out and that Respondent was issued with termination order in Letter No.4118/FH/2007 dated 25.2.2012 as per the clauses contemplated in the franchise agreement. 4. Challenging the termination order dated 25.2.2012, Respondent filed W.P.(MD) No.2706 of 2012. Learned single Judge held that clause 35 of the agreement contains provision for arbitration and that Arbitrator would be in a better position to appreciate the facts and arrive at a decision on merits and dismissed the Writ Petition. 4. Challenging the termination order dated 25.2.2012, Respondent filed W.P.(MD) No.2706 of 2012. Learned single Judge held that clause 35 of the agreement contains provision for arbitration and that Arbitrator would be in a better position to appreciate the facts and arrive at a decision on merits and dismissed the Writ Petition. Being aggrieved by the dismissal of the Writ Petition, Respondent filed Writ Appeal in W.A. (MD) No.162 of 2012 and by the Judgment dated 09.03.2012, the Division Bench dismissed the Writ Appeal. 5. On representation of the learned counsel for Respondent, in Paragraph (8) of the judgment in W.A.(MD) No.162 of 2012, the Division Bench held as follows:- "8. ..... learned Senior Counsel for the appellant, sought for time to move the appropriate forum for an interim relief and the appellant filed an affidavit before this Court giving an undertaking that the appellant would hand over possession of the restaurant at Hotel Tamil Nadu, No.2, Alagarkovil Road, Madurai, the subject matter of the above writ appeal, immediately on 12.03.2012, subject to the orders that may be passed under the provisions of the Arbitration and Conciliation Act, 1996. This undertaking was given by the appellant in the presence of the learned Additional Government Pleader, in whose presence the present order is passed. Recording the same, we hold that the appellant is at liberty to work out his remedy under the provisions of Arbitration and Conciliation Act and shall vacate the premises on 12.03.2012 but, however, subject to any order that he may get in his favour by that date." 6. Immediately, thereafter on 12.3.2012, Respondent filed two applications under Section 9 of Arbitration and Conciliation Act (i) O.A.No.169 of 2012 seeking for interim injunction restraining TTDC from interfering with the Respondent's possession and enjoyment of the Hotel as franchisee and (ii) A.No.1250 of 2012 to stay the order of termination letter dated 25.02.2012. The said applications were filed on 12.03.2012. On being mentioned, both the applications are said to have been taken up by way of lunch motion on 12.03.2012. 7. Before the learned single Judge, when the applications were taken up for hearing, on behalf of TTDC, Mr. V.S. Sethuraman, learned Additional Advocate General took notice. The said applications were filed on 12.03.2012. On being mentioned, both the applications are said to have been taken up by way of lunch motion on 12.03.2012. 7. Before the learned single Judge, when the applications were taken up for hearing, on behalf of TTDC, Mr. V.S. Sethuraman, learned Additional Advocate General took notice. Upon hearing the submissions of Respondent as well as TTDC and without affording any further opportunity to file counter and advance elaborate arguments, on the same day the learned single Judge passed the final order disposing both the applications. The impugned order of the learned single Judge reads as under:- "7. ...... the petitioner is permitted to continue the Hotel/Restaurant as a Franchisee running in the name and style of Sindhu Restaurant, Hotel Tamil Nadu, Alagar Koil Road, Madurai 625 002 including the additional portion occupied by him, pending finalization of Arbitration proceedings subject to the following conditions:- (i) The applicant shall deposit the arrears of usual rent as well as the additional rent from 15.09.2007 to 14.02.2012 as claimed by the second respondent within a period four weeks from today without prejudice to his right. (ii) Apart from making payment of actual rent, the applicant is directed to make payment of a sum of Rs.32,539/- for every month from 15.09.2011 to 14.02.2012 without prejudice to his right; (iii) Failure in making deposit of actual rent as well as additional rent as mentioned above in columns (i) and (ii) this order shall stand vacated automatically without any reference to this Court. (iv) The learned counsel for the applicant undertakes that the applicant will not encroach further. The respondents are at liberty to take steps for recovery of encroached portion in due process of law if it is permissible, for which, this order will not prevent them to do so. 8. The Original Application is disposed of accordingly. Consequently, Application No.1250 of 2012 is closed. Challenging the impugned order of single Judge, TTDC preferred these appeals. 8. Contentions:-Mr. S. Gomathinayagam, learned Additional Advocate General submitted that the learned single Judge proceeded under the mistaken impression as if in the Writ Appeal, the Division Bench had given liberty to the Respondent to file an application under Section 9 of Arbitration and Conciliation Act. According to TTDC, since arbitration proceedings has not been commenced, Section 9 application ought not to have been entertained by the learned single Judge. According to TTDC, since arbitration proceedings has not been commenced, Section 9 application ought not to have been entertained by the learned single Judge. It was argued that the basis for filing application under Section 9 of Arbitration and Conciliation Act pertains to the complaint regarding additional space occupied by the Respondent and also the unauthorised acts of the Respondent. It was submitted that Respondent had also filed application under Section 11(6) of Arbitration and Conciliation Act for appointment of Arbitrator and therefore, the application filed under Section 9 of the Act is not maintainable. Learned Additional Advocate General further contended that in violation of terms and conditions of the agreement the Respondent encroached additional portion of 2503 sq. ft. and when that being so, he is not entitled to the equitable relief of injunction under Section 9 of Arbitration and Conciliation Act. Learned Additional Advocate General submitted that the learned single Judge was not right in regularising the encroachment by directing the Respondent to pay the rent and the learned single Judge exceeded its jurisdiction by rewriting the terms of agreement between the parties by directing the Appellant Corporation to receive the additional rent of Rs.32,539/- per month. 9. Learned Additional Advocate General submitted that Respondent has agreed to vacate the building on or before 12.03.2012 of course subject to the orders that may be passed under Section 9 of Arbitration and Conciliation Act. Writ Appeal in W.A.(MD) No.162 of 2012 preferred by the Respondent was dismissed on 09.03.2012. It was contended that Respondent even without serving notice for appointment of Arbitrator moved application under Section 9 of the Act before the learned single Judge by way of lunch motion. The learned counsel who appeared on behalf of the Appellant Corporation while passing the orders, sought time to file counter affidavit, however application was taken up and final orders came to be passed. 10. Main grievance of Appellant Corporation is that on being mentioned, the matter was taken up by way of lunch motion on 12.03.2012 and no opportunity was given to the Appellant Corporation to file counter and advance elaborate arguments. 11. On behalf of Respondent, Mr. K.V. Subramaniam, leaned Senior Counsel contended that Section 9 application is legally maintainable. 10. Main grievance of Appellant Corporation is that on being mentioned, the matter was taken up by way of lunch motion on 12.03.2012 and no opportunity was given to the Appellant Corporation to file counter and advance elaborate arguments. 11. On behalf of Respondent, Mr. K.V. Subramaniam, leaned Senior Counsel contended that Section 9 application is legally maintainable. Learned Senior Counsel contended that in respect of additional area occupied by the Respondent, Appellant Corporation in its show cause notice dated 22.09.2011 called upon the Respondent to pay a sum of Rs.6,50,780/- as additional rent and referring to the show cause notice, learned single Judge has rightly directed the Respondent to deposit the said amount and also issued further direction to pay additional rent of Rs.32,539/- per month. Learned Senior Counsel further submitted that in compliance with the said order, Respondent has also made payment of Rs.6,50,780/-which was received by the Appellant Corporation. 12. Discussion:- The dispute between the parties pertains to complaint regarding additional space of 2503 sq. ft. allegedly encroached by the Respondent which is the basis for filing Section 9 application. When the Respondent has encroached upon the additional space of 2503 sq. ft. in violation of terms and conditions of the agreement, show cause notice was issued to the Respondent calling upon him to pay the additional rent of Rs.6,50,780/-for the additional space of 2503 sq. ft. utilised by the Respondent. In the show cause notice, Respondent was called upon to pay additional rent on or before 07.10.2011 and also called upon to surrender additional space occupied by him immediately on receipt of the show cause notice. When the Respondent has not paid the additional rent before the stipulated date 07.10.2011 nor surrendered additional space, the single Judge was not right in referring to the said show cause notice dated 22.09.2011 and issuing direction to the Respondent to pay an amount of Rs.6,50,780/-and the further direction to pay additional rent of Rs.32,539/- per month for the said additional space. As rightly contended by the learned Additional Advocate General the impugned order would amount to rewriting the agreement. As rightly contended by the learned Additional Advocate General the impugned order would amount to rewriting the agreement. Appellant Corporation raised many serious questions viz., (i) maintainability of Section 9 application; (ii) in the Writ Petition as well as Writ Appeal, Court only directed the Respondent to take steps to initiate arbitration proceedings and without commencing the arbitration proceedings, application under Section 9 of Arbitration and Conciliation Act is not maintainable; (iii) when the Respondent has encroached upon the additional space and violated the terms and conditions of the agreement, Respondent is not entitled to the equitable relief under Section 9 of the Act; (iv) the relief sought for by the Respondent will not fall under any of the remedial measures under Section 9 of Arbitration and Conciliation Act. 13. Two applications were filed seeking stay not to terminate the agreement (A.No.1250 of 2012) and interim injunction not to disturb the possession of the Respondent in running the Restaurant as franchisee (O.A.No.169 of 2012). Both the applications were filed on 12.03.2012. On the same day, on being mentioned, the applications are said to have been taken up by way of lunch motion and final orders came to be passed in both the applications. Having regard to the serious questions raised by the Appellant Corporation, we are of the view that the single Judge ought to have given an opportunity to the Appellant Corporation to file its counter and advance elaborate arguments. 14. Principles regarding granting or refusing interim injunction relating to general civil law would apply to the powers of the Court to grant interim measures of protection under Section 9 of Arbitration and Conciliation Act, 1996 as well. In 2007 (4) CTC 340 (SC) [Adhunik Steels Limited v. Orissa Manganese and Minerals Pvt. Ltd.], the Hon'ble Supreme Court held as under:- "14. ..... For the grant of that interim injunction has necessarily to be based on the principles governing its grant emanating out of the relevant provisions of the Specific Relief Act and the law bearing on the subject. ...." 15. Granting of injunction under Section 9 of Arbitration and Conciliation Act is governed by the principles:- (i) whether a person seeking temporary injunction has made out a prima facie case; (ii) whether balance of convenience is in his favour; (iii) whether a person seeking temporary injunction would suffer irreparable injury. ...." 15. Granting of injunction under Section 9 of Arbitration and Conciliation Act is governed by the principles:- (i) whether a person seeking temporary injunction has made out a prima facie case; (ii) whether balance of convenience is in his favour; (iii) whether a person seeking temporary injunction would suffer irreparable injury. The power to grant interim injunction under Section 9 of Arbitration and Conciliation Act is given to the Court only as a measure of protection. 16. In the impugned order there is nothing to indicate, whether Respondent has satisfied the above three golden principles. When the Respondent is said to have encroached upon the additional space of 2503 sq. ft. and is alleged to have violated the terms and conditions of the agreement, whether he is entitled to equitable relief of injunction is a matter to be examined in the light of the well settled legal principles. 17. The order of single Judge dated 12.03.2012 in O.A.No.169 of 2012 and A.No.1250 of 2012 indicates that applications were moved on 12.03.2012, resulting in passing the order permitting the Respondent to keep the property in his possession pending finalisation of the arbitral proceedings. We are not here to decide as to whether learned counsel appearing for Appellant Corporation has actually made a request for filing counter. However, the fact remains that Appellants have not filed the counter-affidavit. The order also does not contain any indication that the parties have agreed to take up the main matter itself on the date of admission when it was moved by way of lunch motion. We are of the considered view that Appellant Corporation should have been given reasonable opportunity to file their response before passing the orders granting injunction. Since no opportunity was afforded to the Appellant Corporation to file its counter, we are of the view that the impugned order is liable to be set aside and the matter is to be remitted back to the learned single Judge. 18. Result:- For the foregoing reasons, the common order in O.A.No.169 of 2012 and A.No.1250 of 2012 (12.03.2012) is set aside and these appeals are allowed. The matter is remitted back to the learned single Judge for considering the matter afresh. Learned single Judge is requested to afford reasonable opportunity to the Appellant Corporation to file its counter and advance arguments and proceed with the matter in accordance with law. The matter is remitted back to the learned single Judge for considering the matter afresh. Learned single Judge is requested to afford reasonable opportunity to the Appellant Corporation to file its counter and advance arguments and proceed with the matter in accordance with law. We also request the learned single Judge to take up the matter at an early date.