K.K. Enterprises vs VGP Universal Kingdom

Sanjay Kishan Kaul, C.J.—The respondent has entered into a Licence Agreement with the appellant dated 29.06.2012 to run a Speciality Restaurant with Bar, Partying facility, adjacent to VGP Universal Kingdom at Injambakkam, Chennai, owned by the respondent on terms and conditions provided in the Licence Agreement. A sum of Rs. 15,00,000/- was to be paid towards security deposit on signing the agreement which is refundable on termination of the agreement, without interest, while a sum of Rs. 10,00,000/- was to be deposited as non-refundable amount within thirty days of the signing of the agreement. The Licence Fee was scheduled over a different period of time, that is, a sum of Rs. 2,50,000/- per month for the first six months, Rs. 3,00,000/- per month thereafter for the remaining three year period with further revision of 15% for every three years thereafter and the total period of licence was six years with a fit out period of three months.

The obligations of both the parties were set out in the Licence Agreement. In terms of Clause 6.0 of the Licence Agreement, the same was terminable inter alia on default of either party, apart from the situation where there was a persistent closure of business by either party for consecutive 45 days in any business year.

Clause 9.0 is the Dispute Resolution Clause and on failure to be able to resolve the disputes, arbitration was provided for by seeking appointment of an Arbitrator by the Madras High Court with the Venue of arbitration at Chennai in case the parties failed to agree on the appointment of Arbitrator. The said Clause reads as under:

"9.4. Any disputes and differences whatsoever arising under or in connection with this Agreement which could not be settled by Parties through negotiations, after the period of thirty (30) days from the service of the Notice of Dispute, shall be finally settled by arbitration by a sole arbitrator to be mutually agreed upon between the parties. In the event the parties are not able to mutually agree upon the appointment of sole arbitrator, the aggrieved party can seek appointment of the arbitrator by approaching the Honourable High Court of Madras, in accordance with the Arbitration and Conciliation Act, 1996 and:

(a) All proceedings shall be conducted in English and a daily transcript in English shall be prepared;

(b) The venue of arbitration shall be in Chennai, India.

(c) The order of such arbitrator shall be final and binding on both parties."

It appears that though a considerable period has lapsed, the business was not commenced. The parties seem to be blaming each other for it. On 04.09.2014, a notice was issued by the respondent stating that the appellant had done nothing to commence the business and had also stopped payment of licence fee of Rs. 3,00,000/- per month after making payment for March, 2014. The licence was, thus, sought to be revoked. This was replied to by the appellant vide reply dated 18.09.2014, seeking to put the blame on the respondent and also seeking to refer the disputes to arbitration by proposing an Arbitrator.

However, before an Arbitrator could be appointed by this Court invoking Section 11 of the Arbitration and Conciliation Act, 1996, the appellant filed an application under Section 9 of the said Act, seeking interim injunction on an apprehension that coercive and unlawful elements may be deployed by the respondent for ejecting the appellant from the premises, while enriching himself of the amount already paid to him.

The aforesaid application has been dismissed by the impugned order dated 14.11.2014. A certified copy of the order produced before us seeks to suggest as if it is a decree sheet, but, the learned counsel states that it is the order passed. The order reads as under:

"This Court observing that needless to state that all licence issued under the Tamilnadu Prohibition Act, 1937, is not transferable, therefore, there cannot be any transfer of licence, much less in the name of M/s.K.K. Enterprises represented by its Proprietor. Agreement entered into between the parties for running the bar, captioned as ''Licence Agreement'' with conditions for payment of licence fee, itself is contrary to the provisions of Tamilnadu Prohibition Act, 1937 and in such circumstances, this Court issue orders under Section 9 of the Arbitration and Conciliation Act, 1996,

It is ordered:

That the Original Application No. 751 of 2014 do stand dismissed."

It appears from the aforesaid reasoning that while rejecting the application for interim relief, what weighed with the learned Single Judge was that there could not have been any transfer of licence under the Tamil Nadu Prohibition Act, 1937 and thus, no cognizance can be taken by any agreement between the parties under Section 9 of the said Act.

On hearing the learned counsel for the appellant, we are of the view that while prima facie no doubt the disputes inter se the parties arising from the agreement provided for the mode of resolution of disputes through arbitration, the appellant is not entitled to the interim relief by the very nature of the licence agreement. It is an agreement of licence and no tenancy rights have been created. Of course, the appellant pleads that the agreement is really in the nature of tenancy rights. The agreement is for running "a Speciality Restaurant with Bar" and without the cooperation of the respondent, the same cannot be done, as license could not have been transferred, as rightly observed by the learned Single Judge. The business was not commenced for more than two years and the appellant was also not paying licence fee after March, 2014. We are, thus, of the view that the conclusion arrived at by the learned Single Judge is correct, though for the reasons recorded by us as aforesaid and thus, the appeal must fail and is, accordingly, dismissed. No costs. Consequently, M.P.No. 1 of 2014 is also dismissed.

Needless to say that any observation made in the impugned order or by us in the present order would only prima facie for the purpose of deciding the issue of interim relief and will not affect the rights of the parties in the main case. We may however clarify that it is open to the appellant to file an appropriate petition under Section 11(6) of the said Act, subject to the issues of maintainability which may be raised by the respondent and the same will be determined in the said proceedings.