M/S. Rheotech Foundry Pvt. Ltd., Vs Mrs. Shobha Vikram

M/S. RHEOTECH FOUNDRY PVT. LTD., REGISTERED OFFICE AT NO.176/174, BLOCK-A, KIADB INDUSTRIAL AREA, CHOKKANAHALLI VILLAGE, HOSAKOTE TALUK, BANGALORE RURAL DISTRICT-562 114. AND ALSO AT KOTTANAYAKANAHALLI, ELECTRONIC CITY, BOMMASANDRA, BENGALURU-560 099, REP. BY ITS DIRECTORS MR. GOPINATH THANKA PANDI, MR. THANGAMARI.

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…APPELLANT

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Digitally (BY SRI. A GUNASEKARAN, ADVOCATE) signed by K G RENUKAMBA AND: Location: High Court of MRS. SHOBHA VIKRAM Karnataka AGED ABOUT 47 YEARS, W/O. VIKRAM KUMAR. J, RESIDING AT NO. H204, ETA GARDEN APARTMENT, NO. 9, KEMPAPURA AGRAHARA, BINNYPET, MAGADI ROAD, BENGALURU-560 023. …RESPONDENT (BY SRI. V.B.SHIVAKUMAR, ADVOCATE FOR C/R)

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THIS COMMERCIAL APPEAL IS FILED UNDER SECTION 13(1)(A) OF THE COMMERCIAL COURT ACT, R/W SECTION 96 OF THE CPC, PRAYING TO SET ASIDE IMPUGNED JUDGMENT AND DECREE DATED 19.12.2023 PASSED BY X ADDL. DISTRICT AND SESSIONS JUDGE, BENGALURU RURAL DISTRICT, BENGALURU IN COM.O.S.NO.57/2022, ETC.

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THIS APPEAL COMING ON FOR ADMISSION THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

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CORAM: HON'BLE MR JUSTICE V KAMESWAR RAO and HON'BLE MR JUSTICE S RACHAIAH

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ORAL JUDGMENT

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(PER: HON'BLE MR JUSTICE V KAMESWAR RAO)

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This appeal has been filed by the appellant challenging the judgment and decree dated 19.12.2023 passed in Com.O.S.No.57/2022, whereby the Court of X Addl. District and Sessions Judge, Bengaluru Rural District, Bengaluru (‘Trial Court’ for short) has decreed the suit filed by the respondent herein by stating in paragraph No.90 as under:

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“90. Issue No. 5 : In view of the findings on issue Nos. 1 to 4 and additional issue Nos. 1 to 6, I proceed to pass the following:

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O R D E R

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The suit filed by the plaintiff is hereby party decreed with cost.

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The relief of set off claimed by the defendant as mentioned in its written statement is hereby rejected. The defendant is directed to quit, vacate and handover the vacant possession of the suit schedule property to the plaintiff within 4 months from the date of this order.

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Further, it is ordered that the defendant is liable to pay arrears of rent of Rs.56,00,000/- to the plaintiff and directed it to pay the said amount to the plaintiff within 4 months from the date of this order.

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Further, it is ordered that the defendant is liable to pay GST at the rate of 18% on the above said arrears of rent. After receiving the said arrears of rent along with GST, the plaintiff is liable to pay the said GST to the concerned Government Department.

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Further, it is ordered that the defendant is liable to pay mesne profits to the plaintiff at the rate of Rs.7,00,000/- per month from March 2022 to till handing over the vacant possession of the suit schedule property to the plaintiff.

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Further, office of this court is directed to send the unregistered xerox copy of lease agreement dated 26.11.2019 produced by the plaintiff to the Concerned District Registrar to decide the duty and penalty payable on the said document and recover the same from the

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concerned party and later intimate the same to this court.

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Draw decree accordingly.

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Office is directed to send copy of the Judgment to both the parties through E-mail as required under Order XX Rule 1 of Code of Civil Procedure.”

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The facts which are relevant to be considered for the

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purpose of this order are, it was the case of the respondent in the suit that she is the sole and absolute owner of the Industrial plot No.67D in Sy.No.305 of Bommasandra Industrial Area, Hosur road, Bengaluru. In the month of January 2020, the appellant had approached her and requested her to let-out the schedule property with machinery for rent. After negotiation, monthly rent came to be fixed at Rs.7,25,000/- per month. It was also decided that the appellant-defendant shall pay an amount of Rs.72,00,000/- to the plaintiff-respondent as a security deposit and towards the same, the appellant has paid Rs.60,00,000/- and later paid Rs.12,00,000/- to the respondent herein. It was also agreed that there shall be an enhancement of monthly rent for the first and second year at

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the rate of 20% and 10% for the third year. It was also agreed between the parties that rent has to be paid within 10^th day of every month and in case of delay in payment of rent, interest at the rate of 1.5% per month has to be paid by the appellant to the respondent.

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The case of the respondent in the suit was that, the appellant had to pay arrears of monthly rent of Rs.7,25,000/- from 29.02.2020 till 31.01.2021 amounting to Rs.87,00,000/- to her. Further, the appellant had to pay rent at the rate of Rs.8,70,000/- from 01.02.2021 to 31.08.2021 amounting to Rs.60,90,000/-. In all, the appellant had to pay an amount of Rs.1,47,90,000/- to the respondent. It was also the case of the respondent-plaintiff that, as per the agreed terms, the appellant had not paid the monthly rent within 10^th day of every month, as such the appellant is liable to pay interest at the rate of 1.5% per month towards arrears of rent amounting to Rs.21,37,650/and the same was calculated upto 31.08.2021 and as such, including the above said interest, the appellant is liable to pay an amount of Rs.1,36,27,650/-. It was also stated by

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the respondent that the appellant had requested her to deduct the security deposit of Rs.72,00,000/- out of the outstanding amount of Rs.1,36,27,650/- payable to the respondent. Then, the respondent has deducted the security deposit and in spite of that, still the appellant is due for payment of Rs.64,27,650/-.

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It was the case of the respondent that, on 13.09.2021 she got issued the termination notice to the appellant terminating the tenancy.

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Suffice to state, the suit being OS No.330/2021 was filed by the appellant before the Civil Court at Anekal seeking the relief of injunction against the respondent not to dispossess the appellant without due process of law. The respondent had appeared before the Court and filed written statement.

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It was the case of the respondent-plaintiff that in spite of termination notice, the appellant had not vacated the suit property. She had filed pre-institution mediation application before the District Legal Services Authority,

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Bengaluru. Later, after following the procedure contemplated under law, the said authority has issued the non-starter report dated 14.02.2022 to the respondent. The case of the respondent was also that non-vacation of property by the appellant had given cause of action for her to file the suit, in which the impugned judgment has been passed.

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The case of the appellant in the written statement as noted by the Trial Court was, that the schedule industrial premises which had few machineries fixed therein, was leased to it by Shobha Vikram Vardhaman Pressure Die Casting under unregistered lease agreement for plant and machinery on 26.11.2019. The lease commenced from 01.02.2020 for a period of five years. It was contended that the rent for machinery inclusive of industrial premises was initially fixed at Rs.7,25,000/- per month with a security deposit of Rs.72,00,000/-. After August 2020, the rent was reduced to Rs.7,00,000/- per month as one of the major machineries was returned by the appellant to the respondent at her request. Further, the appellant had initially paid an

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amount of Rs.60,00,000/- and later another amount of Rs.12,00,000/-, in total the appellant had paid an amount of Rs.72,00,000/-.

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The plea of the appellant before the Trial Court was that, the lease agreement dated 26.11.2019 being an unregistered document, there is no evidentiary value on the said document, as such the terms mentioned in the said document is not binding upon the parties to the suit and the same cannot be acted upon in entirety. Further, it was contended that the clauses for enhancement of rent cannot be acted upon or enforced in Court as the lease agreement is an unregistered document and the said lease agreement was compulsorily registerable, but in spite of that, it was not registered. Further contention of the appellant was that, it is not liable to pay GST as claimed by the respondent, as clause for payment of GST is mentioned in the unregistered agreement, as such, the same cannot be enforced. The appellant has also denied the receipt of the legal notice terminating the rent agreement. It was also contended that the suit is premature and not warranted one.

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Based on the pleadings, the following issues were

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framed:

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“ ISSUES

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1) Whether the plaintiff proves that the tenancy of the defendant in respect of the schedule property has been lawfully terminated?

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(DECIDED AS PER ORDER DT.18.08.2022)

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2) Whether the plaintiff proves that the defendant is in arrears of Rs. 1,09,60,350/- towards rent, late fee interest and GST?

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3) Whether the suit is premature? (DECIDED AS PER ORDER DT.18.08.2022)

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4) Whether the plaintiff is entitled for the reliefs sought for?

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5) What order or decree?”

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On 03.09.2022, further six additional issues were

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framed:

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“ ADDITIONAL ISSUES

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1. Whether the plaintiff proves that the defendant is liable to pay her Rs.87,00,000- towards arrears of rent @ Rs.7,25,000/- per month from 29.02.2020 to 31.01.2021 and Rs.60,90,000/- towards arrears of rent @ Rs.8,70,000/- per month from 01.02.2021 to 31.08.2021?

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2. Whether the plaintiff proves that the defendant is liable to pay her Rs.43,50,000/- towards arrears of rent @ Rs.8,70,000/- per month from 01.09.2021 to 31.01.2022?

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3. Whether the plaintiff proves that the defendant is liable to pay her interest @ 1.5% per month amounting to Rs.21,37,650/- on the arrears of rent up to 31.08.2021?

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4. Whether the plaintiff proves that the defendant is liable to pay GST @ 18% on the outstanding rent?

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5. Whether the defendant proves that monthly rent was reduced to Rs.7,00,000/- per month as one of the major machinery was returned to the plaintiff at her request?

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6. Whether the defendant proves that he is entitled to set off Rs.75,42,000/- payable by the plaintiff against supply of goods and service in terms of purchase orders, towards arrears of rent?”

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The findings of the Trial Court on all the aforesaid issues

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are as under:

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“27. My findings to the above Issues are as under:

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Issues No. 1 : In the Affirmative; (Answered by the Hon'ble High Court of Karnataka in WP No.21686/2022 dt.24.02.2023.) Issue No.2 : In the partly Affirmative; Issue No.3 : In the Negative;

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(Answered by the Hon'ble High Court of Karnataka in WP No.21686/2022 dt.24.02.2023.)

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Issue No.4 : In the partly Affirmative;

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Addl. Issue No.1 & 2: In the partly Affirmative;

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Addl. Issue No.3 : In the Negative;

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Addl. Issue No.4 : In the Affirmative;

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Addl. Issue No.5 : In the Negative:

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Addl. Issue No.6 : In the Negative;

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Issue No.5 : As per the final order for the following:”

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On issue No.2 and additional issues No.1 to 3 and 5, the Trial Court has, in paragraphs No.62, 63 and 76 to 80, held as under:

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“62. On perusal of the records, it reveals that to prove the case, GPA holder of the plaintiff has examined himself as PW1, who has stated in his evidence by reiterating the contents of plaint. Further, in support of his evidence, he has produced the documents and the same re marked as Ex.Pl to Ex.P7.

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63. Thereafter learned counsel for the defendant has cross-examined the PW1 at length. In the crossexamination, the PW1 has clearly stated at page No.6 to 13 that:-

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"It is true to suggest that the schedule property is registered in the name of M/s

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Vardhaman Pressure Dyecasting on 24.03.2016. Witness volunteers that the plaintiff is the proprietor of M/s Vardhaman Pressure Dyecasting. It is true to suggest that the schedule property is leased in favour of the defendant. It is true to suggest that Mr. Gopinath and Mrs. Thangamari are the directors of the defendant. It is true to suggest that the plaintiff has leased the schedule property to the defendant for five years.

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It is true to suggest that all the terms and conditions regarding the lease and enhancement of rent are incorporated in unregistered and not properly stamped lease agreement. It is false to suggest that we are collecting rent for the usage of machineries in the schedule property. Witness volunteers that the rent is for machinery and property. It is true to suggest that we have raised invoice for rent of Rs.7,25,000/- and GST as per Ex.P.2 upto 30th November 2020. It is true to suggest that we have not raised invoice for rent and GST from 01.12.2020 onwards. Witness volunteers that since the defendant was not paying rent, we have not raised invoices.

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It is true to suggest that initially we were issuing job orders to the defendant. It is true to suggest that we were issuing job orders to him till August 2021. It is true to suggest that the defendant used to raise invoices in respect of the said job orders against us for payments due. We can produce the invoices raised by the defendant against us in respect of job orders which we have placed. I have to check whether the total

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amount of invoices raised by the defendant against the said job orders is Rs.75,42,000/-. It is true to suggest that we have not made any payment in respect of invoices raised by the defendant against our job orders. Witness volunteers that since the defendant has not settled the account and has returned the remaining raw material and dyes and moulds, we have not paid the amount. We have not made any written communication with the defendant that amount of said invoices is not paid due to non returning of raw material, dyes and moulds.

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it is false to suggest that after delivery of one machinery by the defendant in November 2020, the rent was reduced to Rs.7,00,000/- per month. It is true to suggest that the defendant has not paid rent at the rate of Rs.8,70,000/- per month from the second year. Witness volunteers that the defendant has not paid arrears of previous year rent. We have calculated interest @ 1.5% per month in our legal notice. It is false to suggest that the defendant has not agreed to pay late rent interest @ 1.5% per month. Since, the defendant has requested for time to pay the arrears of rent, we have waited till 13.09.2021 for issuing legal notice claiming arrears of rent I have no document to show that the defendant has delivered us the keys of the schedule property on 31.08.2021. We have no document to show that the defendant had promised a joint inspection of the schedule property on 01.09.2021. It is true to suggest that the defendant is continued in the schedule premises from 01.09.2021. Witness volunteers that on 31.08.2021, at evening

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hours, the defendant has forcibly broke open the locks of the schedule premises and gained entry to it. It is true to suggest that the defendant has paid us Rs.60,00,000/- plus Rs.12,00,000/totally Rs.72,00,000/as security deposit. It is true to suggest that we have agreed to adjust the said amount towards of arrears of rent on the request of the defendant. Witness volunteers that since the defendant told us that they are vacating the premises, we have agreed to adjust the security deposit towards arrears of rent."

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On perusal of the above evidence, it reveals the defence of the defendant is that at no point of time, he has paid the rent at the rate of Rs.8,70,000/- per month to the plaintiff as mentioned in the plaint and the said fact is also admitted by PW1 in his evidence. Further, another contention of the defendant is that at no point of time he has agreed to pay interest at the rate of 1.5% per month on delayed in payment of rent as sought by the plaintiff. Further another contention of the defendant is that the arrears of rent was adjusted towards the amount of Rs. 75,42,000/- in respect of invoice raised by the defendant for job orders placed by the plaintiff herein. Further, it is the contention of the defendant that as per hi request and as per the agreed terms, the plaintiff has agreed to receive the rent at the rate of Rs.7,00,000/- per month and he has paid the said rent to the defendant at the rate of Rs.7,00,000/per month in respect of the suit schedule property from 01.02.2020. Further another contention/defence of the defendant is that the plaintiff has to pay an amount of

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Rs.75,42,000/- to it against the the job work conducted by it as per the purchase order placed by the plaintiff herein.

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xx xx xx xx xx

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76. Further as stated above, admittedly from 29.02.2020 till 31.08.2021, the defendant has not paid the rent to the plaintiff in respect of the suit schedule property and also the DW.1 has admitted the said fact in his evidence. Considering the above facts and in the absence of positive documents regarding the rate of rent, I am of the opinion that at this stage if the admitted rate of rent of Rs.7,00,000/- per month is considered as a rent for calculating the arrears of rent for the above said period certainly it would meet the ends of justice. Considering the above facts and for the above reasons, I am of the opinion that at this stage if the admitted rate of rent of Rs.7,00,000/- per month is calculated for the above said period (March-2020 to August-2021), then it comes to Rs.1,26,00,000/-.

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77. Further as stated above that admittedly there was an oral understanding between the plaintiff and defendant that when the plaintiff has requested the defendant to pay arrears of rent, then the defendant has requested the plaintiff to deduct the refundable security deposit amount of Rs. 72,00,000/- regarding the arrears of rent. Further, on perusal of the contents of para No.5 of the plaint, it shows that towards the arrears of rent, the defendant has already paid an

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amount of Rs.33,00,000/- to the plaintiff and as such the said amount is deducted in total arrears of rent of Rs. 1,26,00,000/-, on such deduction remaining arrears of rent comes to Rs.93,00,000/-. Further towards the said arrears of balance of rent amount, if the refundable security deposit amount of Rs.72,00,000/- is with the plaintiff herein is deducted/adjusted towards the arrears rent, on such deduction remaining arrears of rent comes to Rs.21,00,000/-.

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78. Further admittedly the defendant has not paid the rent from September 2021 to January 2022 to the plaintiff in respect of the suit schedule property. Considering the above facts, I am of the opinion that at this stage if the rate of rent is Rs.7,00,000/- per month is calculated for the above said period i.e., September2021 to January-2022 which comes to Rs.35,00,000/and as such the same is added in the above said balance of arrears of rent of Rs.21,00,000/-, on such addition, the total amount comes to Rs.56,00,000/-. Considering the above facts and circumstances of the case and for the above reasons, I am of the opinion that as on January 2022, the defendant is liable to pay arrears of rent of Rs.56,00,000/- to the plaintiff in respect of the suit schedule property.

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79. At this stage, I have gone through the above said citations relied upon by the learned counsel for the plaintiff and defendant. On going through the said citations, the observation of the Hon'ble Apex court and

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the Hon'ble High Court of Karnataka and the other Hon'ble High Courts are not aptly applicable to the case on hand as the facts and circumstances involved in the said citations and the facts and circumstances of the present case on hand are different one.

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80. Considering the above facts and circumstances of the case and on appreciation of evidence of PW1 and DW1 coupled with contents of above mentioned documents and in the absence of proper documents regarding rate of rent and for the above reasons, I am of the opinion that plaintiff has partly proved the issue No.2 and additional issue Nos. 1 and 2 and failed to prove the issue No.3 and the defendant has failed to prove the additional issue No.5 by producing proper evidence and documents. Accordingly, I answer the issue No.2 and additional issue Nos.1 and 2 in the Partly Affirmative and additional issue No.3 and 5 in the Negative .”

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On additional issue No.4, the Trial Court has held as under:

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“81. Additional Issue No. 4 :- As far as this issue is concerned, as stated above, the specific contention of the plaintiff is that the defendant is liable to pay GST at the rate of 18% on the outstanding rent amount. To prove the above said fact, the plaintiff has relied upon the document at Ex.P14 i.e., unregistered

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lease deed. But, as stated above, that the said document is an unregistered document and as such the same cannot be considered to accept the contention of the plaintiff. However, on perusal of the contents of Ex. P20 i.e., letter dated 06.09.2021 sent by the defendant to the plaintiff, wherein he has clearly mentioned and calculated that the defendant is liable to pay GST at the rate of 18% to the plaintiff towards arrears of rent payable by him to the plaintiff. Considering the above facts and circumstances of the case and looking the contents of Ex.P.20 and for the above reasons, I am of the opinion that the defendant is liable to pay the GST at the rate of 18% on the arrears of rent payable by him to the plaintiff. Considering the above facts and circumstances of the case and on perusal of the evidence of PW1 and DW1 coupled with contents of Ex.P20 and for the above reasons, I am of the opinion that the plaintiff has proved this issue by producing proper evidence and documents. Accordingly, I answer this issue in affirmative .”

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On additional issue No.6, the Trial Court has held

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as under:

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“82. Additional Issue No.6 :- The defendant has contended in his written statement and it is his specific contention that from 04.02.2020 to 26.08.2021, the plaintiff herein is due to the defendant for an Rs. 75,42,000/- against the purchase order given to the defendant herein by the plaintiff. Further, it is the

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contention of the defendant that he and the plaintiff have mutually agreed to set of/adjust the said amount on the outstanding arrears of rent amount payable by the defendant to the plaintiff. On the other hand, the plaintiff has denied the above said contention of the defendant in toto.

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83. Further on perusal of the records, it shows that to prove the above said contention, the defendant has not produced any supportive documents before this court to show that plaintiff has agreed to set off/adjust an amount of Rs. 75,42,000/- said to have been payable by her to the plaintiff towards the arrears of rent.

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84. On the other hand on perusal of the evidence of PW1, it shows that learned counsel for the defendant has suggested the PW1 regarding the said alleged amount of Rs. 75,42,000/- said to have been payable by the plaintiff to the defendant towards purchase order given to the defendant by the plaintiff. But the PW1 has not totally denied the said suggestion of the defendant in his evidence. On the other hand he has shown his ignorance regarding the said fact and in his cross examination at page No.8, he has admitted as under:-

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"It is true to suggest that initially we were issuing job orders to the defendant. It is true to suggest that we were issuing job orders to him till August 2021. It is true to suggest that the defendant used to raise invoices in respect of the said job orders against us for payments due. We can produce

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the invoices raised by the defendant against us in respect of job orders which we have placed. I have to check whether the total amount of invoices raised by the defendant against the said job orders is Rs. 75,42,000/-. It is true to suggest that we have not made any payment in respect of invoices raised by the defendant against our job orders. Witness volunteers that since the defendant has not settled the account and has returned the remaining raw material and dyes and moulds, we have not paid the amount. We have not made any written communication with the defendant that amount of said invoices is not paid due to non returning of raw material, dyes and moulds".

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85. But as stated above that to prove the above said contention that the plaintiff herein has agreed to set off/adjust the above said alleged amount said to have been payable by her to the plaintiff against the job orders towards arrears of rent payable by the defendant to the plaintiff. Considering the above facts and circumstances of the case and for the above reasons, I am of the opinion that if at all as per the version of defendant, the plaintiff herein is liable to pay an amount of Rs.75,42,000/- to it towards purchase order given by her to the defendant as mentioned in the written statement, then it is the duty of the defendant to take appropriate action for recovery of the said alleged amount from the plaintiff by following the procedure contemplated under law. 86. Considering the facts and circumstances of the case and in the absence of proper documents regarding the set off an amount Rs.

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75,42,000/- said to have been payable by the plaintiff against the supply of goods and services in terms of purchase order placed by the plaintiff and for the above reasons, I am of the opinion that the defendant has failed to prove its contention as contended in the written statement by producing proper evidence and documents. Accordingly, I answer this issue in the Negative .”

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On issue No.4, the Trial Court has held as under:

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“87. Issue No. 4 :- As far as this issue is concerned, as stated above, the plaintiff has partly proved her case as contended in the plaint by producing proper evidence and documents and as such the plaintiff is entitled for the partial relief as prayed for in this suit.

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88. Further on perusal of the relief sought for by the plaintiff in this suit, it shows that the plaintiff has claimed the mesne profits from the defendant in respect of the suit schedule property. But, on perusal of the contents of plaint and on perusal of the evidence of PW1, it shows that the plaintiff has not mentioned regarding the rate of mesne profit payable by the defendant in respect of the suit schedule property. But as stated above that the plaintiff has legally terminated the tenancy of the defendant over the suit schedule property. Further, admittedly even after termination of tenancy of the defendant over the suit schedule

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property and till today, the defendant has not vacated and handed over the vacant possession of the suit schedule property to the plaintiff. Considering the above facts and circumstances of the case, I am of the opinion that from the date of suit till handing over the vacant possession of the suit schedule property to the plaintiff, the defendant is liable to pay mesne profits to the plaintiff in respect of the suit schedule property. Considering the above facts and circumstances and in the absence of positive documents regarding the rate of mesne profits, I am of the opinion that at this stage if the admitted rate of rent is fixed as mesne profits certainly it would meet the ends of justice. Considering the above facts and for the above reasons, I am of the opinion that the defendant is liable to pay mesne profit at the rate of Rs.7,00,000/- per month from March 2022 till handing over the vacant possession of the suit schedule property to the plaintiff.

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The only submission made by learned counsel for the appellant is that, as the rent deed was not registered, the same could not have been read in evidence. The plea is not appealing for the reason stated by the Trial Court and also the fact, for collateral purposes, the same can be looked into and there is no denial to the fact that the appellant was on rent in the premises and paying the rent of Rs.7,00,000/-

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. If that be so, the appellant being tenant and the rent agreement depicts the rent amount as Rs.7,00,000/- (also), which has been granted as mesne profits, the decree cannot be contested on any ground. It is precisely for this reason the Trial Court has decreed the suit. The plea that mesne profits could not have been granted in law is also unmerited for the reason there is a specific prayer for damages in the suit. What has been granted as damages/mesne profits is the rent which was mentioned in the rent deed as Rs.7,00,000/- per month. The same was given from March 2022 till the handing over of the possession of the schedule property.

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The aforesaid being the only submission made by the learned counsel for the appellant, with which we are not in agreement, we are of the view that the Trial Court is justified in decreeing the suit in the manner it has done in paragraph No.90 of the impugned judgment.

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