Rajhans Cine World Ltd v. Zen Matrix Private Limited
2025-06-13
PRANAV TRIVEDI, SUNITA AGARWAL
body2025
DigiLaw.ai
JUDGMENT : SUNITA AGARWAL, J. 1. Heard Mr.Sudhir Nanavati, the learned Senior Counsel with Mr.Tarak Damani and Ms.Prachiti Shah, the learned counsels for the appellant and Mr.Unmesh D.Shukla, the learned Senior Counsel with Mr.Shashvata U. Shukla, Ms.Aashka Shah and Mr.Heet B. Jhaveri, the learned counsels for the respondent. 2. For convenience, reference to the appellant and respondent hereinafter would be as per the description of the parties in the First Appeal No.1022 of 2025 filed by the lessee. 3. Two connected appeals under Section 37 of the Arbitration and Conciliation Act’ 1996 (for short, ‘the Act’ 1996’) have been filed by the rival parties challenging the judgment and order dated 21.03.2025 passed by the Judge, Commercial Court, City Civil Court, Ahmedabad in Commercial Misc.Application No.160 of 2023 under Section 34 of the Act’ 1996. 4. The challenge under Section 34 was to the eviction award dated 17.8.2023 passed by the learned Arbitrator appointed by this Court. As per the final directions contained in the award, the appellant namely Rajhans Cine World Ltd. in First Appeal No.1022 of 2025 is required to handover vacant and peaceful possession of the property, subject matter of the lease deed dated 04.07.2022, within a period of four weeks from the date of the award. Another direction was to make payment of unpaid rent and other amount as under:- “ i Rent as agreed in the lease deed from 15.03.2020 till 24.03.2020. ii. Rent @ 50% of the lease rent for the period commencing from 16.4.2020 to 31.7.2020. iii. Rent w.e.f. 1.08.2020 till the possession of the lease property is handed over to the Claimant Rs. 15,14,045/- (as discussed in para 39 hereinabove). iv. Interest @ 18% from the day when the amounts mentioned hereinabove in clauses (I), (ii) and (iii) became due. v. All municipal and other taxes and cess payable in respect of lease property. including penalty if any, imposed upon unpaid amount shall be paid forthwith to the Claimant till the date of handing over of possession of the lease property to the Claimant as per the terms of the lease deed. vi.
v. All municipal and other taxes and cess payable in respect of lease property. including penalty if any, imposed upon unpaid amount shall be paid forthwith to the Claimant till the date of handing over of possession of the lease property to the Claimant as per the terms of the lease deed. vi. As the entire litigation had been initiated on account of non-payment of rent and due to not handing over possession of the lease property to the Claimant even after completion of the lease period, the Claimant was unnecessarily dragged to these proceedings and therefore the Respondent is liable to pay the cost of litigation which is quantified at Rs.25 lakhs (Rupees twenty five lakhs), which the Respondent shall pay to the Claimant within four weeks from the date of the award, failing which it shall pay interest @ 18% per annum from the date of date of the award till the date of payment of the cost.” 5. The Commercial Court, though, while allowing the application under Section 34 of the Act’ 1996 in part, has refused to interfere in the award of eviction, however, a portion of the award providing for payment of unpaid lease rent and interest for the delay in payment of rent has been set aside granting 100% relaxation for the period between 16.04.2020 to 31.07.2020. 6. Undisputed facts of the case relevant to decide the controversy at hands noted by the Commercial Court are that the property in question belonging to Zen Matrix Pvt. Ltd., comprising of four floors admeasuring 25,008 sq.ft. situated at Ahmedabad City, has been given on lease to the appellant Rajhans Cine World Ltd. As per the lease deed, the tenure of the lease was from 01.08.2011 to 31.07.2020, however, the lessee failed to handover the possession of the property after expiry of the lease period. As a result, the owner/lessor invoked arbitration clause. 7. In the claim petition filed by the lessor, apart from the relief of handing over peaceful and vacant possession of the property, the payment of unpaid rent along with the interest was also prayed for. The claimant owner has also prayed for a mandatory direction to the lessee to pay the maintenance, municipal and other taxes so as to discharge all liabilities under the lease deed dated 01.08.2011 till the date of handing over possession of the lease property. 8.
The claimant owner has also prayed for a mandatory direction to the lessee to pay the maintenance, municipal and other taxes so as to discharge all liabilities under the lease deed dated 01.08.2011 till the date of handing over possession of the lease property. 8. The counter claim was filed by the lessee praying for a direction to the lessor to execute a further lease deed for the remaining period of six years considering the date of agreement to lease. Injunction was also sought against the lessor from interfering in the peaceful and physical possession of the lessee over the lease property. 9. The Commercial Court, while considering the validity of the award, has returned a categorical finding that there is no infirmity or patent illegality in the findings of the learned Arbitrator with regard to Issue No.4 decided in favour of the claimant/lessor, which was “Whether the respondent can prove the lease deed was for a period of 15 years and not for the period of 9 years?”. The counter claim of the lessee was also rejected by saying that as per the conditions of the lease deed, the period of lease was nine (9) years and the lessor/owner of the property had stated in clear words that they did not want to give extension in the lease period. 10. The finding in the arbitral award on Issue No.3 “Whether the respondent can prove that the lease deed stands renewed from 01.08.2020?” was also affirmed by the Court while holding that the same cannot be said to suffer from any patent illegality. By noticing that the Court has limited jurisdiction under Section 34 of the Act’ 1996 and cannot examine the award as a court of appeal under the Civil Procedure Code, the Commercial Court has reached at the conclusion that the award pertaining to the agreed period of lease and on the plea of renewal cannot be interfered with as it was the best possible view based on the evidence on record. 11. However, on the issue with regard to the dues towards the lease rent for the period from 16.04.2020 to 31.07.2020, as awarded by the learned Arbitrator at the rate of 50% of the lease rent agreed in the lease deed, it was held by the Commercial Court that relaxation in the payment of lease rent for the period during Covid-19 pandemic shall be 100%.
It was observed that the learned Arbitrator has accepted the case of the lessee for relaxation in payment of rent during COVID period. Full relaxation in the rent due for initial Covid period, i.e. from 15.04.2020 was granted by the learned Arbitrator with the clear finding that during the said period, there was a prohibition in running cinema halls under the notification issued by the Ministry of Home Affairs, Government of India on account of the Covid-19 Pandemic. The lease period was over on 31.07.2020, but a judicial notice can be taken of the fact that from 25.03.2020 to 31.07.2020 there was lockdown due to Covid Pandemic, which has greatly jeopardized running of business of Cinema Halls. 12. Accepting the case of the lessee for 100% relaxation in payment of rent due during the Covid period, the Commercial Court has held that this alteration in the award in exercise of the powers under Section 34 of the Act’ 1996, would not amount to modification of the award. It was noted that the award is in three different aspects and three different reliefs have been granted which are severable, namely:- (i) For possession; (ii) For rent; and (iii) For rent with interest after expiry of the lease period. 13. Finally, while upholding the award that after expiry of the lease period, the lessee has no right to retain the possession of the lease property, the award made by the arbitrator regarding payment of unpaid rent with interest and eviction etc. has been upheld, while partially accepting the claim of the lessee for grant of 100% relaxation in the lease rent for the period of Covid-19 Pandemic uptil 31.07.2020, i.e. until the period of subsistence of lease. 14. The order passed by the Commercial Court under Section 34 of the Act’ 1996 has been challenged by both the rival parties on the grounds that the Commercial Court had no jurisdiction to modify the award albeit for different reasons and on different grounds and with different pleas. The contention of Mr.Sudhir Nanavati, the learned Senior Counsel for the appellant/lessee is that the Court under Section 34 of the Act’ 1996 has limited powers to examine the validity of an award on the grounds provided in Section 34 (2) read with Sub-section (2A) of the Act’ 1996.
The contention of Mr.Sudhir Nanavati, the learned Senior Counsel for the appellant/lessee is that the Court under Section 34 of the Act’ 1996 has limited powers to examine the validity of an award on the grounds provided in Section 34 (2) read with Sub-section (2A) of the Act’ 1996. Once the Commercial Court has reached at the conclusion that the award of 50% of the lease rent for the period commencing from 16.04.2020 to 31.07.2020 was bad, there was no option for the Court except to set aside the whole award and remit the matter back for fresh consideration by the learned Arbitrator in a fresh arbitration proceedings. The Commercial Court, in any case, has no jurisdiction to retain one part of the award passing the eviction decree and then modify the other part with respect to the lease rent. 15. Considering these submissions of the learned Senior Counsel for the appellant lessee, a pointed query has been made as to whether the lessee is in a position to challenge the award of eviction, which has been passed on the ground that the period of lease had expired on 31.07.2020 and there was no renewal. In reply, no dispute could be raised with respect to the finding of the learned Arbitrator that the counter claim of renewal after 31.07.2020 was liable to be rejected. In fact, no argument could be raised by the learned Senior Counsel for the appellant on the issue of the tenure of the lease coming to an end on 31.07.2020 and that the lessee had no right to retain the possession of the property in question after expiry of the period of lease. In fact, there is no challenge to the award of damages for the period after 31.07.2020, i.e. with effect from 01.08.2020 till the vacant possession of the lease property is to be handed over. There is no challenge to the interest and other dues payable with respect of the lease property as awarded by the learned Arbitrator. The only interference by the Commercial Court is with regard to unpaid rent for which 100% relaxation has been granted for the period commencing from 16.04.2020 to 31.07.2020, which relief, in fact, is in favour of the lessee namely the appellant herein. 16.
The only interference by the Commercial Court is with regard to unpaid rent for which 100% relaxation has been granted for the period commencing from 16.04.2020 to 31.07.2020, which relief, in fact, is in favour of the lessee namely the appellant herein. 16. At the outset, we are amazed in the manner in which the appellant lessee is trying to assail the correctness of the order passed by the Commercial Court under Section 34 of the Act’ 1996, when the deviation made by the Court under Section 34 , from the award is for the unpaid lease rent for the period commencing from 16.04.2020 to 31.07.2020 which is actually in favour of the lessee. This effort of the lessee in challenging the order passed under Section 34 by the Commercial Court on the plea of modification of the arbitral award is nothing but an attempt to get even the award of eviction being set aside so as to continue to retain the possession of the lease property. 17. We may further note that even the learned Arbitrator has recorded that the entire litigation had been initiated on account of the non-payment of lease rent and due to not handing over the possession of the lease property to the owner even after expiry of the lease period. While observing that the appellant lessor had unnecessarily dragged the proceedings, the learned arbitrator awarded cost to the appellant lessor/original owner. 18. Coming to the challenge put forth by the lessor namely the original owner to the order passed by the Commercial Court in the connected appeal, we may record that the ground of challenge is that the commercial court has erred in modifying the award by holding that for the period from 16.04.2020 to 31.07.2020, 100% relaxation is to be granted on account of COVID-19 Pandemic. Pertinent is to note, at the outset, that it was fairly submitted by the learned Senior Counsel for the respondent lessor that the lessor has accepted the arbitral award in toto and hence, has chosen not to challenge the same by filing any application under Section 34 .
Pertinent is to note, at the outset, that it was fairly submitted by the learned Senior Counsel for the respondent lessor that the lessor has accepted the arbitral award in toto and hence, has chosen not to challenge the same by filing any application under Section 34 . However, the appeal under Section 37 of the Act’ 1996 has been filed as the Commercial Court went beyond its jurisdiction in modifying the award by considering the claim of the lessee for 100% relaxation in the unpaid lease rent uptil the date of subsistence of the lease, though the lessee has failed to hand over vacant possession of the property even after expiry of the lease period prescribed in the lease deed. 19. Placing Clause 16(c) of the lease agreement, it was argued by the learned Senior Counsel for the respondent lessor that the claim of lessee that Covid-19 Pandemic was a force majeure, was not accepted by the learned Arbitrator. Rather, the learned Arbitrator has proceeded on equitable considerations while taking note of the notification issued by the Central Government, Ministry of Home Affairs that all social/political/sports/entertainment/academic/cultural/religious functions/gatherings were banned for a period of 21 days with effect from 25.03.2020. The learned Arbitrator has, thus, noted that pursuant to the notification dated 24.03.2020 of the Central Government for the period of 21 days on account of COVID-19 Pandemic, all theaters remained closed. It was also recorded that except the notification dated 24.03.2020, there was no other evidence on record to establish that theaters could not run beyond the period of ban of 21 days, when Covid-19 Pandemic was prevailing, i.e. from 16.04.2020 till 31.07.2020, which is till the date of expiry of the lease period. However, taking note of the prevailing conditions, extraordinary and overwhelming situations during the COVID-19 Pandemic, which had resulted in restrictions on several activities, as large gatherings were not allowed and people were required to keep certain distances during the gathering so as to avoid spread of the disease, the learned Arbitrator has noted that the business had been disrupted and commercial activities had been substantially reduced, which had resulted in a situation where everybody had suffered financially. 20.
20. Placing the above observations, it was argued that it is evident that the learned Arbitrator, on equitable considerations, while balancing the interest of both the parties, exercising its power under Section 28 of the Act’ 1996, has proceeded to hold that, on the one hand, the lessee cannot be burdened to pay full lease rent for the entire period during which its business had suffered, but at the same time, the lessor/claimant cannot be put to substantial financial loss by providing full exemption to the lease in the rent for the period of occupation of the lease property during the subsistence of lease. 21. Considering the above submissions, we may record that the observations made by the learned Arbitrator that the period of 21 days when the theaters could not be run on account of the ban imposed by the Union Government can be treated as force majeure within the meaning of Clause 6 (c) of the lease agreement, is not subject matter of challenge. 22. The submissions of the learned Senior Counsel for the appellant/lessee, however, is that once the learned Arbitrator has considered the Covid-19 Pandemic period as the force majeure, instead of 50%, 100% relaxation ought to have been granted in the dues towards lease rent as lessee could not use the lease property for the purposes for which lease was granted. The submission is that the Commercial Court, thus, found that Clause 6 (c) of the lease deed was wrongly interpreted and applied by the learned Arbitrator and, as such, proceeded to modify the award. The submission, thus, is that once the Commercial Court reached at the conclusion that the learned Arbitrator has committed illegality in application of the force majeure clause of the lease agreement, it had no option but to set aside the entire award and remit the matter for fresh consideration. In fact, the learned Senior Counsel for the respondent lessee based his arguments on the force majeure Clause 6 (c) of the lease deed to assert that the entire COVID period uptil 31.07.2020 was required to be considered as a force majeure as the events made it impossible for the lessee to use the lease property to run a cinema theater. 23.
23. On merits, by reading and re-reading Clause 6(c), it was vehemently argued by the learned Senior Counsel for the appellant/lessee that for the fact that the property in question became unfit for use due to no cause attributable, directly or indirectly to the lessee, the lessee is entitled to the full relaxation for the Covid period. The contention is that though the Commercial Court was right in holding that 100% relaxation was required to be granted to the lessee for the period of occupation up till 31.07.2020 during the subsistence of lease, but due to restricted nature of powers, it had no option but to set aside the entire award and remit the matter back for fresh consideration. 24. Amidst the arguments made by the learned Senior Counsel appearing for the appellant/lessee, on a query made by the Court, no plausible submissions could be made on the merits of the award of eviction passed by the learned Arbitrator. 25. Having carefully gone through the record and considering the arguments of the learned counsels for the parties, we may record that the appellant/lessee has no right to retain the possession of the lease property after 31.07.2020, when the period of lease had expired. The occasion for invoking the arbitration clause arose when the appellant/lessee refused to deliver possession to the lessor much after the expiry of the lease period. The plea of the learned Senior Counsel for the appellant/lessor that COVID- 19 Pandemic is required to be treated as covered by the force majeure clause prescribed in the lease deed under Clause 6 (c) and the entire period of non-payment of lease rent uptil the date of expiry of the lease is to be considered as force majeure event, is found to be unacceptable for the reason as stated below:- 26. We further find substance in the arguments of the learned Senior Counsel appearing for the respondent/lessor that the period of 21 years was rightly treated to be force majeure in view of the notification of the Central Government stopping all activities including running of theaters.
We further find substance in the arguments of the learned Senior Counsel appearing for the respondent/lessor that the period of 21 years was rightly treated to be force majeure in view of the notification of the Central Government stopping all activities including running of theaters. However, with regard to the remaining period of occupation without payment of lease rent, when there was no prohibition, it is evident that the learned Arbitrator balancing the interest of the parties on equitable consideration, made an equitable distribution of the rival claim by holding that both the parties should not be made to suffer on account of the extraordinary and overwhelming situations prevailed during Covid-19 Pandemic. 27. As rightly noted by the learned Arbitrator, the property in question was given on lease to the appellant/lessee for commercial purpose and the respondent/lessor was also doing business by letting out his property for running a theater. The learned Arbitrator has rightly observed that the extraordinary circumstances, social and commercial prudence would require that both sides should be given some relief in the interest of justice, which should be just and fair in the facts and circumstances of the case. 28. In our considered opinion, within the limited scope of Section 34 of the Act’ 1996, the Commercial Court was not justified in interfering with the decision of the learned Arbitrator for levying 50% of the lease rent for the period from 16.04.2020 uptil 31.07.2020 as the same could not be said to suffer from any patent illegality. It was not permitted to the Commercial Court, while examining the validity of the award, to substitute its own view with that of the learned Arbitrator on any of the grounds stated in Section 34 (2) read with sub-section (2A) of Section 34 of the Act’ 1996. As argued by the learned Senior Counsel appearing for the appellant/lessee, the force majeure Clause 6(c) of the lease deed cannot be applied in stricto sensu to COVID-19 Pandemic period and has rightly not been applied, as such, by the learned Arbitrator. 29. The view taken by the learned Arbitrator on equitable considerations, balancing the interest of the parties, could not be substituted by the Commercial Court in its limited jurisdiction as not being a possible view. The test is that no reasonable man of ordinary prudence could have taken such a view in the fact and circumstances of the case.
29. The view taken by the learned Arbitrator on equitable considerations, balancing the interest of the parties, could not be substituted by the Commercial Court in its limited jurisdiction as not being a possible view. The test is that no reasonable man of ordinary prudence could have taken such a view in the fact and circumstances of the case. It was absolutely not open for the Commercial Court to substitute its own view from that of the view taken by the learned Arbitrator by reading the terms and conditions of the lease deed in the peculiar facts and circumstances of the present case. No patent illegality can be found in the decision of the tribunal. 30. We, therefore, find that the Commercial Court has over- reached its jurisdiction under Section 34 of the Act’ 1996 in substituting its own opinion from that of the learned Arbitrator with respect to the award of lease rent for the period of non-payment from 16.04.2020 to 31.07.2020, by granting 100% relaxation, without understanding the essence of the findings of the learned Arbitrator in that regard. 31. For the above discussions, from no angle, the arbitral award can be said to be vitiated by any patent illegality appearing on the face of the award, within the meaning of Sub-section (2A) of Section 34 of the Act’ 1996. No other grounds to set aside the arbitral award as per the provisions under Sub-section (2) of Section 34 are available in the facts and circumstances in the present case. 32. With the above, both the appeals filed by the rival parties are disposed of by holding that while setting aside the judgment and order dated 21.03.2025 passed by the Judge, Commercial Court, City Civil Court, Ahmedabad in Commercial Misc.Application No.160 of 2023 under Section 34 of the Act’ 1996, holding it being without jurisdiction, the award dated 17.08.2023 passed by the learned Arbitrator is hereby upheld. No order as to costs. 33. In view of the disposal of the main appeals, the connected Civil Applications also stand disposed of.