Bombay High Court
Paperbox Company Of India vs Goldensource International Pvt Ltd on 5 August, 2025
2025:BHC-OS:12697
ARBP.113.2024.Final.docx
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 113 OF 2024
ALONGWITH
COMM. ARBITRATION PETITION (L) NO. 21730 OF 2023
Paperbox Company of India ...Petitioner
Versus
Goldensource International Pvt. Ltd. ...Respondent
Mr. Rohan Cama a/w Mr. Anish Karande i/b Ashish Amritlal Gatagat
for the Petitioner.
Mr. Anil D'souza a/w Mr. Mark Dbritto and Mr. Ernest Tuscano for
the Respondent.
CORAM : SOMASEKHAR SUNDARESAN, J.
RESERVED ON : January 31, 2025
PRONOUNCED ON : August 5, 2025
JUDGEMENT :
Context and Factual Background:
1. These Petitions are filed under Section 34 of the Arbitration and
Conciliation Act, 1996 (“the Act”) challenging two arbitral awards dated May
15, 2023 (“Impugned Award”) by which the Petitioner, Paper Box Company
Digitally
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signed byAARTI
AARTI
GAJANAN
August 5, 2025
GAJANAN PALKAR
PALKAR Date:
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ARBP.113.2024.Final.docxof India (“Paperbox”) has been held liable to refund the security deposit and
electricity deposit with interest at the rate of 10% from June 12, 2020 to the
Respondent, GoldenSource International Pvt. Ltd. (” GoldenSource”).
2. The two arbitration proceedings relate to interpreting provisions of two
identical Leave and License Agreements dated April 30, 2019 (collectively,
“Agreement”) for the period from April 1, 2019 to March 31, 2020, for
GoldenSource to use 10,262 square feet of super built-up area on the lower
ground floor and 22,777 square feet of super built-up area on the first floor of
the Paper Box House building, along with proportionate usage of identified
common areas (“Licensed Premises”).
3. The parties also contracted an agreement for amenities in parallel for
each floor and overall, the relationship between the parties is governed by
four concurrent and contemporaneous Agreements. For all purposes of this
Judgement, references are made to the proceedings and pleadings in
Arbitration Petition No. 113 of 2024 (relating to the ground floor) since the
determination of issues in that Petition would be dispositive of the issues
involved in both proceedings.
4. The relationship between the parties first began in 2005 and license
agreements were first executed on April 9, 2005. The agreements were kept
renewed from time to time. These agreements entailed GoldenSource
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providing a security deposit and a deposit for electricity connection. The
relationship came to an end in 2020 on the scheduled expiry of the license
period on March 31, 2020, bringing to an end a 15-year relationship. The
parties did not have an amicable parting – they have been locked in a dispute
about whether and when ” vacant possession” was handed over by
GoldenSource to Paperbox.
5. What the word “vacate” and all its derivatives mean, forms the core
issue relevant for the dispute between the parties. Against GoldenSource
vacating the Licensed Premises, the security deposit was to be refunded – Rs.
~1.51 crores for the first floor and Rs. ~68.24 lakhs for the ground floor.
According to GoldenSource, vacant possession was handed over on June 12,
2020, while according to Paperbox, vacant possession can only be said to
have been handed over on November 4, 2022.
6. A brief overview of the relevant facts would be necessary. As seen
above, the Agreement was executed on April 30, 2019. On March 9, 2020,
ahead of the expiry of the Agreement scheduled for March 31, 2020,
GoldenSource wrote to Paperbox stating that it would hand over quiet,
peaceful and vacant possession of the Licensed Premises by the date of expiry
of the Agreement. The specific equipment that would be removed was listed
(for example, diesel generator sets, air-conditioners, chairs, some woodwork,
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gym equipment, fire extinguishers etc.) and it was stated that dismantling of
the office and workstations would be decided mutually. Paperbox was
requested to refund the security deposit at the earliest.
7. It would be necessary to allude to a development that took place during
the 15-year relationship between the parties but before the execution of the
final Agreement. The Municipal Corporation of Greater Mumbai (” MCGM”)
had objected to a full-size glass/wooden partitions on the first floor of the
Licensed Premises and had directed that the same ought to be removed,
failing which it would have to be demolished. A Notice dated April 23, 2018
was issued in proceedings initiated by the MCGM under Section 351 of the
Mumbai Municipal Corporation Act, 1888, directing removal and demolition
of the partitions. A reply to this Notice was rejected by the MCGM and by an
Order dated June 15, 2018, removal and demolition of the partitions was
ordered by the MCGM.
8. Extrude Design Pvt. Ltd., an architect firm was engaged to attempt
regularisation. On July 10, 2018, the Chief Fire Officer granted a no-
objection certificate for the regularisation of the partitions. Paperbox filed
Writ Petition No. 2540 of 2018 in which this Court granted ad interim relief
by an Order dated July 15, 2018 in the form of a stay on the MCGM carrying
out the demolition. That relief continued at all times relevant to the dispute
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between the parties. Paperbox would contend that the Writ Petition was filed
by Paperbox as the owner with legal possession of the Licensed Premises, but
it was all under the directions and oversight of GoldenSource, which was the
entity that had erected the partitions.
9. The Agreement of April 30, 2019 had been signed after the aforesaid
developments. Evidently, no special provision was made in the Agreement
about consequences of the MCGM Notice, Order and the Writ Petition
relating to the partitions. This is what led to one of the facets of the dispute
between the parties – the linkage of the refund of security deposit to the
allegedly unauthorised partitions being erected. That apart, GoldenSource’s
proposal to remove the partitions too came in for controversy when the
Agreement came to an end.
10. On March 12, 2020, Paperbox replied to GoldenSource asserting that
removal of the partitions would constitute contempt of court. Paperbox
would contend that the security deposit would not be refunded until the
culmination of the proceedings in Writ Petition 2540 of 2018 and
ascertaining the costs. What is of utmost significance in this letter is that
Paperbox used the word “vacant” and “vacate” as it then understood the term
– that GoldenSource would be ” vacating the premises” on March 31, 2020
(Paragraph 11) and that the continuance of the partitions would result in the
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“premises being vacant” after March 31, 2020 with intending licensees being
unwilling to take the Licensed Premises (Paragraph 12) due to the partitions.
Even in relation to the refund of electricity deposit, Paperbox would write
that after “vacating the premises” Paperbox would have to get the load
capacity on the electricity meters reduced and that would involve further
expenditure (Paragraph 18). That apart, the electricity bills would be
received only in April and all these amounts and costs would need to be set
off against the electricity deposit and only then would a refund be considered.
11. According to Paperbox, partitions could not be disturbed because
removing them would constitute contempt of court in view of the protection
granted by this Court in the Writ Petition. Indeed, GoldenSource politely
refuted Paperbox’s allusion to removal of partitions constituting contempt of
court in a letter dated March 31, 2020, pointing out that the stay order was a
restraint on MCGM taking action and not on the parties removing the
partitions. Moreover, the partitions related only to the first floor premises
and not the ground floor premises and therefore, it was contended that the
security deposit for the ground floor had no relation with the partition issue
that was being raked up. Since the lock-down owing to the Covid-19
Pandemic was underway, GoldenSource hoped Paperbox would cooperate
with the process of handing over quiet and vacant possession of the Licensed
Premises consistent with the letter and spirit of the Agreement. An email of
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that date also indicated that all the equipment indicated for removal in the
letter dated March 9, 2020 could not be removed and that it would be taken
down as the lockdown conditions eased up.
12. Eventually, on June 11, 2020, GoldenSource wrote to Paperbox
recording that it had moved out by March 15, 2020 and due to the lockdown
imposed in the city, all the equipment as indicated earlier had not been
removed by March 31, 2020, but on the easing of the lockdown, everything
had been removed except for those that Paperbox had directed not to be
removed. Such equipment and items were listed in an annexure to that
letter. Paperbox was requested to nominate a representative to collect the
keys and accept the hand over of possession. The letter of June 11, 2020 is
countersigned as received by Paperbox on August 8, 2020, and there is a
dispute about whether the letter was back-dated or the signature
acknowledgement was post-dated, but that is not really material for how the
dispute panned out eventually.
13. On November 9, 2020, Paperbox wrote a letter accusing GoldenSource
as having abandoned the Licensed Premises and not having handed over
vacant possession. In this letter, Paperbox claimed that it had made an error
earlier about interpreting removal of partitions as constituting contempt. It
was asserted that after August 2020, the partitions were agreed to be
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removed but had not yet been removed. Adding up costs claimed towards
litigation, the purported costs attributable to inability to get new licensees
and the like, Paperbox demanded payment of Rs. ~5.49 crores from
GoldenSource – a multiple of the security deposit and electricity deposit.
14. The disputes and differences eventually led to the Learned Arbitral
Tribunal being constituted by a Learned Single Judge of this Court on
November 23, 2021. After hearing the parties, examining the evidence, and
taking a view of the matter, the Learned Arbitral Tribunal has passed the
Impugned Award on May 15, 2023. The two awards in the two references
provide for a refund of the security deposit and the electricity deposit,
holding that the refund of the deposits had no connection to the
interpretation of “vacant” possession as canvassed by Paperbox in the arbitral
proceedings i.e. ripping out the Licensed Premises to a bare shell, by
emptying it out of every single fixture.
Analysis and Findings:
15. I have heard Mr. Rohaan Cama, Learned Advocate on behalf of
Paperbox and Mr. Anil D’Souza, Learned Advocate on behalf of
GoldenSource at length. I have taken on record their respective Written
Submissions and the List of Dates tendered by Mr. Cama. With their
assistance, I have examined the record.
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Jurisdictional Challenge – Section 16:
16. Before dealing with the Impugned Award, it is necessary to note that
Paperbox has also impugned an Order dated February 8, 2022 (” Section 16
Order”) by which the Learned Arbitral Tribunal rejected a jurisdictional
challenge under Section 16 of the Act. The premise of the challenge was that
the disputes and differences are amenable to the exclusive jurisdiction of the
Small Causes Court under Section 41 of the Presidency Small Cause Courts
Act, 1882 (“Small Cause Courts Act“).
17. What is evident from the record is that the reference to arbitration is
explicitly specific to the refund of security deposit. In fact, it was Paperbox’
case before the Learned Arbitral Tribunal too that the arbitral proceedings
were only about refund of security deposit and electricity deposit and interest
thereon. However, Paperbox contended that GoldenSource had not yet
handed over possession and had simply abandoned the Licensed Premises.
Therefore, it was contended, that the claim for refund of security deposit was
premature. It was stated that the Small Causes Court would determine the
disputes about recovery of possession of the Licensed Premises in L.C. Suit
No. 86 of 2021 which was still pending. It was only thereafter, that there
could be any assessment of whether the security deposit was to be refunded.
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18. As is conventional for such contention, reliance was placed on, among
others, Mansukhlal1 and ING Vysya2 to contend that the phrase “relating to”
must be widely construed and any dispute that relates to recovery of
possession would have to go to the Small Causes Court alone. Sukanya
Holdings3 was also relied upon to contend that there could not be a splitting
of a cause of action for multiple forums to contend with different elements of
the dispute.
19. The Learned Arbitral Tribunal has rightly noticed that there can be no
quarrel with the proposition that the term “relating to recovery of possession”
is wider than the term “for recovery of possession”. However, on the face of
the record it is apparent that the dispute is not remotely connected to
recovery of possession. If anything, Paperbox had claimed that
GoldenSource had abandoned possession. Therefore, there could not be an
element of having to go to court to recover possession. The Statement of
Claim filed by GoldenSource in the arbitration was for refund of security
deposit and that alone.
20. The Learned Arbitral Tribunal is accurate in its finding that by no
stretch of extrapolation could it be said that the subject matter of the arbitral
proceedings (claim for refund of security deposit) was not arbitrable by
1
Mansukhlal Dhanraj Jain vs. Eknath Ogale – (1995) 2 SCC 665
2
ING Vysya vs. Modern India – (2008) 2 Mh.L.J 653
3
Sukanya Holdings vs. Jayesh Pandya – (2003) 5 SCC 531
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reason of jurisdiction being vested in the Small Causes Court. It must be
mentioned that the 2015 Amendments to the Act were effected in order to
overcome the ruling in Sukanya Holdings (which was essentially under
Section 8 of the Act). The 2015 Amendments not only reduced the scope of
review under Section 8(1) of the Act by mandating that the parties shall be
referred to arbitration unless it is found prima facie that no arbitration
agreement exists; but also made such provision applicable notwithstanding
any judgement of the Supreme Court or any Court. The 246 th Law
Commission Report that led to the 2015 Amendments specifically indicated
that the amendment to Section 8 of the Act was intended to depart from the
declaration of the law in Sukanya Holdings. Such an amendment gave new
meaning and force to Section 8(3) of the Act which provides that the
pendency of an application under Section 8(1) of the Act would not come in
the way of the arbitral proceedings being commenced, continued and
concluded with an arbitral award.
21. In these proceedings, Mr. Cama had fairly stated that he was not giving
up on the challenge to Section 16 of the Act but would focus on the merits of
the Impugned Award. In any case, at the stage of the Section 16 Order, the
Learned Arbitral Tribunal could only look at the pleadings of the parties, and
even if it took the pleadings of Paperbox into account, what was evident was
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that there was not even a remote connection to recovery of possession.
Therefore, no fault can be found with the Section 16 Order.
Impugned Award Impeccable:
22. The Learned Arbitral Tribunal has returned impeccably plausible
findings. No case has been made out for interference with the Impugned
Award. Even a bare reading of the provisions of the License Agreement
would indicate that under Clause 5(a) of the Agreement, the parties had
explicitly agreed to a refund of the security deposit after deducting any utility
dues such as electricity, broadband and telephone use at the time of
“vacating” the Licensed Premises “upon expiry” of the Agreement by efflux of
time. The parties had even agreed on how to deal with unpaid invoices – they
would adopt an average of the last four billing cycles of the utility bills and
one and half times of the average amount would be withheld, and the rest of
the security deposit would be refunded. Once the bills were received and
paid, the accounts would be adjusted.
23. Under Clause 5(b) of the Agreement, GoldenSource was to remove
itself, its officers and employees and vacate the Licensed Premises “giving
charge” of the Licensed Premises to Paperbox for the refund of the security
deposit under Clause 5(a). It is noteworthy that reasonable wear and tear
and damage due to any force majeure event was acceptable. On Paperbox’
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failure to refund the security deposit, interest was payable at 12% per annum
under Clause 5(c) while under Clause 5(d), GoldenSource would have to bear
interest at 1% per month for any overdue payment left pending.
24. Under Clause 11(a), “movable fixtures” were to be removed by
GoldenSource “at the time of vacating” the Licensed Premises. Under Clause
11(f), GoldenSource is obliged not to remove wall, ceilings and floors and is
required to keep all materials and fixtures in “good and tenantable
condition”.
25. It is evident from the aforesaid provisions of the contract between the
parties that nowhere had the parties agreed to conflate the term “vacate” to
ripping out the Licensed Premises to a bare shell. It is not even commercially
commonsensical that the understanding between the parties was that
“vacant” possession would mean stripping the Licensed Premises down and
ripping out anything and everything fixed in the Licensed Premises as a pre-
condition to refund of security deposit. If that were the requirement,
evidently, the fixtures could not be left in good and tenantable condition as
required in Clause 11(f) of the Agreement.
26. It is noteworthy that on March 9, 2020, GoldenSource indeed wrote to
Paperbox that the parties would need to engage on what to do with the
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permanent fixtures and clearly indicated the specific equipment that it
intended to remove.
27. What is reasonably discernible from the record is that Paperbox has
been unreasonable, obtuse and irrationally litigious in its approach to losing
out on a 15-year stable source of revenue and was adopting interpretations
that would delay and frustrate the refund of the security deposit. The
Learned Arbitral Tribunal has rightly observed the three clear events – the
letter of GoldenSource dated March 9, 2020; the reply dated March 12, 2020;
and the eventual letter and email of March 31, 2020. These three events have
been analysed and it has been rightly noted that it was only in October 2020
that a novel point was brought up on interpreting what “vacating” the
Licensed Premises ought to mean.
28. By no stretch of imagination could any commercial entity, that was in
the business of letting out its premises, have reasonably read the order of this
Court in the Writ Petition as imposing a fetter on removal of the partitions.
The Court had protected Paperbox (and GoldenSource) from demolition of
the partitions by the BMC. Indeed, Mr. Cama would seek to explain this away
as a bona fide mistake in interpretation, but it is evident that this was nothing
but a hurdle thrown in GoldenSource’s path to a smooth refund of the
security deposit. Clause 5 of the Agreement is a self-contained code on how
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the parties intended to deal with the security deposit. What deductions and
withholdings could be made before the refund of deposit had also been
contracted. Therefore, clearly the Learned Arbitral Tribunal was completely
right in its decision that the refund of the security deposit was due in June
2020. No fault can be found with the Impugned Award in this regard.
29. The Learned Arbitral Tribunal has rightly noted that the keys and
possession was handed over by GoldenSource to the security personnel in
June 2020. There is nothing in the Agreement to indicate that vacating the
Licensed Premises is synonymous with emptying out the Licensed Premises
of everything fixed in it. As a matter of fact, the Agreement has provisions to
the contrary. As seen above, the reference to fixtures being removed at the
time of “vacating” the Licensed Premises in Clause 11(a) is a reference to
“movable fixtures”. This could never bring within its fold the false ceilings or
walls decorations or other fixtures that were meant to be permanently fixed.
That is also evident from Clause 11(f), which requires the fixtures in the
Licensed Premises to be left in “good and tenantable” condition. Stripping
down the Licensed Premises to a bare shell can never be regarded as being
consistent with a “good and tenantable” condition. Indeed, the next potential
licensee may accept the structure of the fixtures as they stood or desire to
make further changes to it. This is why the parties have explicitly agreed in
Clause 11(f) of the Agreement, that at the time of vacating, GoldenSource
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would be expected to leave such fixtures that were not movable, in a good and
tenantable condition.
30. Therefore, by no stretch could it be held that the Learned Arbitral
Tribunal has exceeded the scope of the Agreement or that the Impugned
Award has breached the very terms of the Agreement, of which the Learned
Arbitral Tribunal is a creature.
31. The partitions are permanently fixed to the floor. They could well get
regularised or removed, obviating the need to persist with the Writ Petition –
Mr. Cama would submit that the Writ Petition was eventually withdrawn in
2023. Expenses relating to the partition would be a matter of settling
accounts between the parties. However, by no stretch could this potential
contingent claim be the basis to withhold the interest-free security deposit.
The only withholding permissible was also specifically contracted – utility bill
amounts with a one-and-half-times of the average of last four billing cycles
being permitted to be withheld. Any other withholding would attract interest
at 12% per annum. In fact, the Learned Arbitral Tribunal has reduced the
interest rate to 10%, which has not been challenged by GoldenSource.
Meaning of Vacant Possession:
32. The semantic insistence on interpreting the word “vacant possession”
and “vacating”, to my mind, is brazenly disingenuous and also inflicts
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ARBP.113.2024.Final.docxviolence to the terms of the Agreement. First, as the Learned Arbitral
Tribunal has rightly noticed, it was an afterthought adopted in November
2020, when the “abandonment” theory was advisedly propounded by
Paperbox. Even a plain reading of the term in the Agreement would show
that the principle of interpretation to be adopted for this phrase is that the
Agreement treated the word in the same manner as the words “quiet” and
“peaceful”. The plain English meaning4 of the term “vacate” in relation to
something is to leave that thing so that it is available for others to use. The
phrase “vacant possession”5 of a property means to have the people using the
property move out to make it empty. It reflects the fact that no one is using
the property in question so that others can use it.
33. The landmark case law on the subject is that of Topfell6 (per.
Templeman L.J.), where it was held as follows:-
The meaning of the words “vacant possession” can, I think, vary from
context to context but the background to this case is that, to all outward
appearances, the house consisted of two separate occupations. To all
outward appearance, the ground floor was capable of being occupied by the
owner or his tenants and licensees. When the contract boasted that vacant
possession of the ground floor would be given, it was saying that the great
advantage of this property is that you can occupy the ground floor. In my
judgement, when the vendors said they would give vacant possession in the
context of these particulars in this contract and in the context of this property,4
Cambridge Dictionary: https://dictionary.cambridge.org/dictionary/english/vacate; Oxford Dictionary:
https://www.oxfordlearnersdictionaries.com/definition/english/vacate
5
Cambridge Dictionary: https://dictionary.cambridge.org/dictionary/english/vacant-possession; Oxford
Dictionary: https://www.oxfordlearnersdictionaries.com/definition/english/vacant-possession
6
Topfell Ltd. Vs. Galley Properties Ltd. (Ch. D) – (1979) 1 W.L.R. 446 @ 449
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ARBP.113.2024.Final.docxthe vendors cannot now say, “Oh, no; all we intended and all we contracted
to give was the right to possession in the negative sense. There is no rubbish
on the floor, no other tenants and nobody else was there. It was vacant.” I
have come to the conclusion that the vendors were contractually bound, on
completion, to hand over the ground floor in a condition which would allow
the plaintiffs to occupy it. It is quite plain that the at date of the contract and
at the date fixed for completion, the vendors cannot do that because, by
reason of the Housing Act direction, in fact, nobody can occupy the ground
floor. The vendors cannot occupy it themselves, they cannot sell it to
somebody who wishes to purchase it in order to go and live there himself
and they cannot let it.
[Emphasis Supplied]
34. As indicated in Topfell, it is the context in which the term is used that
should inform the meaning of the term “vacant possession”. In Topfell, the
context was the auction of a property promising vacant possession, indicating
that the person acquiring would be able to bring occupants into it to earn
from it and enjoy the fruits of the acquisition. When it was found that only
one family could legally reside in the property and a tenant was already
occupying it, vacant possession as promised had not been given.
35. In the present case, in the context of the Agreement, the term
“vacating” used in Clause 5(a) is linked to the timing of doing so – at the time
of expiry or earlier termination of the tenure. Clause 9(h) of the Agreement
provides for “vacant premises” being handed over in accordance with the
other terms of the Agreement. Such other terms would necessarily include
ensuring that the Licensed Premises are left in “good and tenantable”
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ARBP.113.2024.Final.docxcondition. In Clause 9(j), the term used is “vacate with all of his belonging”
which means the personnel must leave the place with the belongings – again
this has to be harmoniously read with other provisions in the same
Agreement and can never be regarded as stripping the Licensed Premises to a
bare shell. Clause 9(m)(c) deals with earlier termination by Paperbox if
GoldenSource were to be asked to leave upon a breach of the contract – that
too requires GoldenSource to “vacate without any protest”.
36. In the Agreement, there are at least 11 instances of usage of words
derived from “vacant” and “vacate”. This evidently not being a term of art, it
is evident that what the parties understood it to mean is that the Licensed
Premises ought to be capable of use by the next licensee, which is why the
same contract provided for leaving the Licensed Premises in good and
tenantable condition as required in Clause 11(f) of the Agreement. The usage
of the term has to be harmoniously construed across the multiple provisions
of the Agreement to give it commercial logic and common sense. For
purposes of the Agreement, the expectation of handing over quiet and vacant
possession to Paperbox can reasonably only mean leaving the Licensed
Premises free of occupants and encumbrances such that Paperbox could put
in others in the Licensed Premises, and also to ensure that only movable
fixtures were removed and other fixtures were to be left in good and
tenantable condition.
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37. Paperbox itself understood the property as becoming vacant after
GoldenSource would leave on March 31, 2020. This is seen from Paperbox’s
own letter dated March 12, 2025 which used the term “vacating” and “vacant”
in the normal sense as articulated above, without inflicting the violence of the
newfound interpretation adopted in November 2020. In fact, Paperbox had
stated on March 12, 2020 that the Licensed Premises would remain “vacant”
after March 31, 2020 with the partitions intact. This indicated that Paperbox
understood what “vacant” would mean, or better still, what it would not
mean. The theory of stripping it down of every fixture was not the intention
of the parties when they agreed on handing over of vacant possession as a
milestone for refund of the security deposit.
38. Therefore, the Learned Arbitral Tribunal has rightly been unimpressed
by the argument that 32 trucks were involved to remove whatever was
eventually stripped out and removed in October 2022. Even a plain reading
of the two “Quantification Reports” of October 2022 pursuant to the joint
agreement to strip down and remove fixtures in the course of proceedings in
the Small Causes Court, along with photographs would show that the activity
carried out in 2022 by the consent, was to strip the Licensed Premises down
to bare shell. This is something the parties agreed to do in 2022, and cannot
be extrapolated to be linked to the obligation under the Agreement, as a
condition to refund the security deposit. Every firm fixture fastened to the
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floor, table, partition, ceiling, ducting and the like being ripped out (as was
done in October 2022) could never constitute leaving the Licensed Premises
in a good and tenantable condition at the expiry of the Agreement on March
31, 2020.
Interim Order – only a Prima Facie View:
39. I have had to examine the Agreement in this degree of detail, only
because of the core contention of Paperbox that the Impugned Award has
gone out of the scope of the Agreement. Since the assault on the Impugned
Award is that of perversity and of patent illegality for being in conflict with
the very Agreement containing the arbitration clause, such analysis became
necessary. This degree of review exercised by me, although capable of being
regarded as intense, was necessary, even while taking care to ensure that the
standard being applied is not of an appellate review but of a review that is
deferential to the standards of Section 34 of the Act.
40. That apart, Mr. Cama (sincere to his role for his client) sought to
emphatically rely upon the strong prima facie observations made by a
predecessor Learned Single Judge in an order dated April 5, 2024 in these
very proceedings. The Learned Single Judge had granted interlocutory relief
in these proceedings by a stay on the effect, operation and execution of the
Impugned Award, indeed subject to a full deposit of the awarded amount,
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coupled with liberty to apply for withdrawal of the amount so deposited.
While doing so, the Learned Single Judge made the following observations:-
18. In my prima facie view, in the present case the learned Arbitrator has
not arrived at either a possible or a plausible interpretation of the clauses /
terms of the Leave & License Agreement relating the Security Deposit by
interpreting Clause 5 of Leave & License Agreement relating to Security
Deposit as being independent and absolute. Further, the interpretation placed
upon the clauses by the learned Arbitrator to hold that the Claimant’s
obligation to remove furniture / fittings etc, are without any consequence and
sequitur is neither a possible nor plausible interpretation.
19. I prima facie find that the learned Arbitrator has lost site [sic] of the
relevant clauses which have been referred to above which concern the
Licensee’s Covenants and the Licensee’s rights. I am of the prima facie view
that there can be no manner of doubt that these clauses read with Clause 5 of
the Leave & License Agreement provide for the Licensee / Respondent to
vacate the Licensed Premises / subject premises by removing all articles in
the subject premises and restoring the subject premises in its existing
condition in which it was at the time of executing the first Leave & License
Agreement for the subject premises. Thus, the Security Deposit was to be
refunded simultaneously upon the Licensee removing itself, its officers and
employees as well as vacating the subject premises and giving charge thereof
to the Licensor.
[Emphasis Supplied]
41. Needless to say, despite the strength of their expression, these were
prima facie views. It is at the final hearing that the depth of the issues
involved were to be analysed. I have reproduced these observations to
indicate the need to have gone into the degree of detail in interpreting the
provisions of the Agreement and the contemporaneous correspondence of
March 12, 2020, where Paperbox’s own understanding of the term “vacate”
speaks eloquently to the contractual understanding between the parties.
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42. The observation of the Learned Arbitral Tribunal is not at all that there
is no sequitur to the non-removal of other belongings. Right from its letter
dated March 9, 2020, GoldenSource has indicated the need to discuss and
agree upon what to do with the equipment and fixtures other than what was
proposed to be removed. The Learned Arbitral Tribunal’s observation is that
the refund of security deposit is not linked to the removal of fixtures – not
that there is no obligation to remove any fixture, or that non-removal has no
consequences whatsoever.
43. Paperbox attitude and approach in March 2020 to GoldenSource
moving away from a 15-year old relationship is apparent. It was strategic – to
keep GoldenSource at a standstill without removing the partitions and yet
pay a penal charge of Rs. ~1.17 lakh per day for non-removal of the partitions.
At the same time, Paperbox’ own understanding of “vacating” in March 2020
was clearly not to strip down the place to a bare shell that would be incapable
of being immediately tenantable and fit for occupation by anyone else.
44. That the Learned Arbitral Tribunal has considered this well becomes
clear upon a careful examination of the Impugned Award and all the
attendant material on record. The Learned Arbitral Tribunal has actually
taken care to notice that the cost of the eventual removal and stripping down
the place was quoted by Paperbox to be in region of Rs. 22 lakhs.
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Consideration of this facet is left to the Small Causes Court, which is seized of
the matter. The security deposit that has been withheld by Paperbox is in the
order of Rs. ~2.19 crores when the costs incurred was a fraction of the value
unlawfully retained by Paperbox despite securing possession and admittedly
taking steps to show the Licensed Premises to other potential future
licensees, who are said to have indicated that the partitions were the cause of
their reluctance to use the Licensed Premises.
45. In fact, Mr. Cama’s approach to making submissions in these
proceedings has been entirely in the vein of making submissions in a full
appellate jurisdiction. Mr. D’Souza rightly relied on Konkan Railway7 to repel
such an approach – the following extracts are noteworthy:
15. Therefore, the scope of jurisdiction under Section 34 and Section 37 of
the Act is not akin to normal appellate jurisdiction. It is well-settled that
courts ought not to interfere with the arbitral award in a casual and cavalier
manner. The mere possibility of an alternative view on facts or interpretation
of the contract does not entitle courts to reverse the findings of the Arbitral
Tribunal. In Dyna Technologies Private Limited v. Crompton Greaves
Limited (2019) 20 SCC 1, this Court held:
“24. There is no dispute that Section 34 of the Arbitration Act limits
a challenge to an award only on the grounds provided therein or as
interpreted by various courts. We need to be cognizant of the fact that
arbitral awards should not be interfered with in a casual and cavalier
manner, unless the court comes to a conclusion that the perversity of
the award goes to the root of the matter without there being a
possibility of alternative interpretation which may sustain the arbitral
award. Section 34 is different in its approach and cannot be equated
with a normal appellate jurisdiction. The mandate under Section
7
Konkan Railway Corporation Ltd. Vs. Chenab Bridge Project Undertaking – (2023) 11 SCR 215
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autonomy to get their dispute adjudicated by an alternative forum as
provided under the law. If the courts were to interfere with the
arbitral award in the usual course on factual aspects, then the
commercial wisdom behind opting for alternate dispute resolution
would stand frustrated.
25. Moreover, umpteen number of judgments of this Court have
categorically held that the courts should not interfere with an award
merely because an alternative view on facts and interpretation of
contract exists. The courts need to be cautious and should defer to the
view taken by the Arbitral Tribunal even if the reasoning provided in
the award is implied unless such award portrays perversity
unpardonable under Section 34 of the Arbitration Act.”
20. The principle of interpretation of contracts adopted by the Division
Bench of the High Court that when two constructions are possible, then
courts must prefer the one which gives effect and voice to all clauses, does
not have absolute application. The said interpretation is subject to the
jurisdiction which a court is called upon to exercise. While exercising
jurisdiction under Section 37 of the Act, the Court is concerned about the
jurisdiction that the Section 34 Court exercised while considering the
challenge to the Arbitral Award. The jurisdiction under Section 34 of the Act
is exercised only to see if the Arbitral Tribunal’s view is perverse or
manifestly arbitrary. Accordingly, the question of reinterpreting the contract
on an alternative view does not arise. If this is the principle applicable to
exercise of jurisdiction under Section 34 of the Act, a Division Bench
exercising jurisdiction under Section 37 of the Act cannot reverse an Award,
much less the decision of a Single Judge, on the ground that they have not
given effect and voice to all clauses of the contract. This is where the
Division Bench of the High Court committed an error, in re-interpreting a
contractual clause while exercising jurisdiction under Section 37 of the
Act. In any event, the decision in Radha Sundar Dutta (supra), relied on by
the High Court was decided in 1959, and it pertains to proceedings arising
under the Village Chaukidari Act, 1870 and Bengal Patni Taluks Regulation
of 1819. Reliance on this judgment particularly for interfering with the
concurrent interpretations of the contractual clause by the Arbitral Tribunal
and Single Judge under Section 34 of the Act is not justified.
[Emphasis Supplied]
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Summary of Conclusions:
46. Therefore, in my opinion, there is no case at all for interference with
the Impugned Award. It is not only eminently plausible but seen from the
prism of Section 34, it is just, fair and responsive to a reasonable and
accurate interpretation of the Agreement. No case whatsoever is made out to
interfere with the Impugned Award.
47. To summarise my conclusions:
a) The Agreement emphatically deals with refund of security
deposit against handing over of quiet and vacant possession by
GoldenSource to Paperbox with the only cause for any
withholding being for payment of any outstanding utility bills;
b) Vacant possession does not mean emptying out the Licensed
Premises of every fixture as was done subsequently in October
2022 – such emptying out requires stripping down the Licensed
Premises to its bare shell. Such stripping of the Licensed
Premises to a bare shell would militate against the obligation in
the Agreement on GoldenSource to hand over the Licensed
Premises removing only movable fixtures and leaving the
remaining fixtures in a good and tenantable condition;
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c) The photographs with the two Quantification Reports make it
abundantly clear that Paperbox’ rendition of the requirement of
vacant possession would be in direct conflict with the state of the
Licensed Premises being immediately tenantable on
GoldenSource’s exit;
d) Paperbox itself confirmed in writing that the Licensed Premises
would remain “vacant” after March 31, 2020 because of the
partitions subsisting, and in the same breath also stated that
removing the partitions was prohibited and constituted
contempt of court. GoldenSource politely pointed out that
Paperbox was wrong and there was no prohibition on removal of
the partitions and equally pointed out that it was vacating the
Licensed Premises as planned but with some spill over beyond
March 31, 2020 due to Covid-19 Pandemic lockdown
restrictions;
e) On June 12, 2020, despite Paperbox’s evasion of taking
possession, GoldenSource vacated the Licensed Premises.
Paperbox had no authority under the Agreement to withhold the
security deposit after this point;
f) The Learned Arbitral Tribunal has interpreted the Agreement
accurately and has delivered a fair, just and even-handed
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outcome that cannot by any stretch be regarded as being in
conflict with either the Agreement, or with the most basic
notions of law and justice;
g) The Impugned Award is consistent with the Agreement and the
interpretation of the provisions are impeccable and cannot be
regarded as implausible or untenable as apprehended at the
interim stage in these proceedings; and
h) The Learned Arbitral Tribunal, as the master of the evidence,
has returned an eminently defensible and well-justified arbitral
award. There is no scope at all to assail the Impugned Award
under Section 34 of the Act.
48. The Petitions challenging the Impugned Awards are hereby dismissed
as being devoid of merit. All that is stated in relation to the Impugned Award
and analysis in Arbitration Petition No. 113 of 2024 is as relevant and
applicable to dismissal of the other companion petition, Arbitration Petition
(L) No. 21730 of 2023.
Costs and Release of Deposits:
49. Since costs must follow the event, taking into account the nature of the
obstruction posed by Paperbox, it would be reasonable to impose costs in the
sum of Rs. 2.5 lakh, which shall be payable by Paperbox to GoldenSource
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within a period of four weeks from the upload of this judgement on this
Court’s website.
50. I have factored in the lower scale of involvement of resources at the
Section 34 stage as opposed to the investment of time and resources at the
arbitration in the first instance. The Impugned Award factored in costs of Rs.
7.25 lakh in each of the two proceedings, the scale of which was adopted by
both sides (before it became clear who was going to be the judgement
creditor). The cumulative costs awarded by me in both the proceedings put
together is one-third of the amount of costs awarded in each of the
proceedings by the Learned Arbitral Tribunal. This, in my opinion, is a
reasonable estimate of costs considering that as proceedings go higher, the
issues get more distilled and involve lesser investment of time and resources.
51. Deposits, if any, of the amount awarded made in the Registry of this
Court shall, along with all accruals thereon, be released to GoldenSource
forthwith after a period of four weeks from the upload of this judgement on
this Court’s website, and preferably within a week of being approached.
52. All actions required to be taken pursuant to this order, shall be taken
upon receipt of a downloaded copy as available on this Court’s website.
[SOMASEKHAR SUNDARESAN J.]
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