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Cost of rental costs is a compulsion for occupancy regardless of non-working of enterprise

Payment of rental charges is a compulsion for occupancy despite non-working of business written by Diksha Sharma student of Government Law College, Mumbai

M/s Arun Kumar Kamal Kumar vs M/s Selected Marble Home


The appellants owned a brand name called Nathu’s Sweets and had entered into two separate license agreements, wherein it was decided that the appellants would run and operate the business in the respondents’ premises and the other being payment of commission on sales to the respondents. The dispute arose when the business had come to a halt owing to an incomplete installation of a required electricity connection, which was 2.5 KV, by the respondents. Consequent to this, the operations of the business were discontinued from March 1991 to October 1995.
A suit was filed in the Delhi High Court under section Section 20 of the Arbitration Act, 1940 on grounds of non-payment of commission along with the failure of handing over of the vacant premises to the owner. The court-appointed an arbitrator to adjudicate upon the case, according to whom calculations relating to the commission were incorrect and deliberate, but the issue which came up was ‘whether the respondents were entitled to any damages ?’. The award was challenged by the appellants in the Supreme Court.


Whether respondents were entitled to rent and any damages arising out of the course of business?

Legal Provisions:

• Section 20 of The Arbitration Act, 1940
• Section 108 of The Transfer of Property Act,1882

Appellants’ Contention:

The learned counsel submitted that there was no clause in the agreement mentioning any payment of damages on account of the occupation of the premises even when the business was not under any operation. The agreement was confined to payment of commission on gross sales. The erroneous calculations made inadvertently, if resolved, would have arrived at a lesser amount of compensation payable.

Respondents’ Contention:

The learned counsel for the respondent submitted that no mistake was made in the statement of accounts and learned Single Judge of the High Court did not err in concluding that the appellants are liable to pay the damages inclusive of the period when business was not running.

Observations of the Court:

The court after considering the submission from both sides observed that the vacant premises had not been handed over to the respondents until the commencement of arbitral proceedings. In view of the judgment made by Single learned judge, if the respondents were supposedly the tenants then under Section 108 of The Transfer of Property Act,1882, they would have been liable for payment of rent, despite non-working of the business. Therefore, no error was made by the Single Judge and the arbitrator.


The court stuck to the decision rendered by the Division Bench of High Court of reducing the interest rate from 16% per annum to 9% per annum payable from the date of the award till the date of the judgment which is to be duly completed by the appellants inclusive of interest accruing out of the same.

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