Allowed

Union of India v. Prime Rakwool

Rajasthan HC6 May 2025CFA/278/2022

Case brief

AI extract

What is this about?

In this civil first appeal, the High Court of Rajasthan set aside the Commercial Court's decree that allowed a partial refund of a security deposit. The court held that where a lessee terminated a rail space lease contract prematurely, violating an explicit clause, the security must be fully forfeited.

What did the court decide?

Impugned judgment and decree decreeing partial refund of security deposit was quashed.

Union of India Vs Prime Rakwool — Contract and Commercial Disputes | Rajasthan HC (2025)

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[2025:RJ-JP:19020-DB]

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HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR

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D.B. Civil First Appeal No. 278/2022

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Union Of India, Through General Manager, West Central Railway, Jabalpur (M.p).

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Divisional Railway Manager, West Central Railway, Kota Division, Kota.

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----Defendants-Appellants

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Versus

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Prime Rakwool, Through Power Of Attorney Holder, Devendra Tripathi, Aged 40 Years, Office At F-124-Q, Inderprasth Area, Rod No. 5, Kota (Raj.).

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----Plaintiff-Respondent

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For Appellant(s) : Mr. Amit Jindal For Respondent(s) : Mr. Madho P. Swami for Mr. Arpit Srivastava

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HON'BLE MR. JUSTICE AVNEESH JHINGAN HON'BLE MR. JUSTICE BHUWAN GOYAL

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Judgment

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06/05/2025 AVNEESH JHINGAN, J:-

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This appeal is filed by Union of India and Divisional Railway Manager, West Central Railway, Kota Division aggrieved of judgment and decree dated 11.02.2022 passed by Commercial Court, Kota.

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2.The relevant facts are that the appellants defendants(hereinafter referred to as "appellants) invited bids for leasing of VP space. The respondent-plaintiff(hereinafter referred to as "respondent) was the successful bidder, the offer was accepted for three years. A amount of Rs.7,52,025/- was deposited as security, which was to be refunded with interest on successful completion of the contract.

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[2025:RJ-JP:19020-DB]

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[CFA-278/2022]

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(2 of 5)

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2.1. A notice dated 15.11.2016 was issued by respondent for termination of the lease contract and after 07.01.2017 the activity of running weekly trains was not carried out. The respondent aggrieved of non refund of security filed the summary suit. The suit was partly decreed by impugned judgment, hence the present appeal.

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Counsel for the appellants submits that the Commercial Court after having held that the respondent violated the terms and conditions of the contract, erred in directing refund of partial amount of security.

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Per contra in case of the violation of terms and conditions, the entire security could not have been forfeited, losses suffered by railway was rightly quantified by the Commercial Court and refund was ordered.

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It would be relevant to quote clause 18.3 of the contract:-

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"Right to terminate the lease ContractLeaseholder shall also have the right to terminate the agreement after serving 60 days notice to railway administration. However, leaseholder shall not be allowed to terminate the contract before one year in case of any contract whether it is on short term or long term. In case he does so, his security deposit and registration fee shall be forfeited and he shall be debarred from entering into any tender for one year. But he shall be allowed to operate existing tender of other trains, if any."

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It is undisputed fact that the contract was for period 05.12.2015 to 04.12.2018. Sixty days notice under clause 18.3 was issued by the respondent on 15.11.2016 and before expiry of sixty days period on 14.01.2017, the respondent stopped the activity of running trains on 07.01.2017.

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[2025:RJ-JP:19020-DB]

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[CFA-278/2022]

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(3 of 5)

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The dispute in the present appeal relates to issue no.3 & 5 framed by the Commercial Court;

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a) the issue no.3 whether the respondent-plaintiff had violated the terms and conditions of the lease contract, was decided against the respondent. It was held that the condition in clause 18.3 was violated.

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b). the issue no. 5 whether the respondent is entitled to refund of security deposit; was partially decided in favour of the respondent. The suit was decreed holding that the respondent is entitled to refund of Rs.5,11,555/-.

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The law is well settled that the parties are bound by the terms and conditions agreed between them. The court cannot re-write the contract even if the conditions appear to be unreasonable. Reference in this regard be made to the decision of the Supreme Court in Venkataraman Krishnamurthy Vs. Lodha Crown Buildmart Pvt. Ltd. reported in 2024 INSC 132:-

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"15. Once the parties committed themselves to a written contract, whereby they reduced the terms and conditions agreed upon by them to writing, the same would be binding upon them. In the event such a written contract provided for the consequences that are to follow in the event of breach of the conditions by one or the other of the parties thereto, such consequences must necessarily follow and if resisted, they would be legally enforceable. In the case on hand, the Agreement stipulated the date of delivery of possession of the apartment for fit outs with a grace period of one year. In terms thereof, the date for delivery of possession of the apartment for fit outs, with the grace period, was 30.06.2017. Admittedly, the respondent-company did not offer delivery of possession of the apartment for fit outs by that date. The ‘date of offer of possession’, under Clause 1.14, linked with issuance of the ‘Occupation Certificate’ was distinct and separate from the ‘date of delivery of possession for fit outs’ and Clause 11.3 unequivocally

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(4 of 5)

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[2025:RJ-JP:19020-DB]

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[CFA-278/2022]

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provided the consequences in the event of delay in that regard. The right of election given thereunder to the appellants to either continue or to terminate the Agreement within ninety days from the expiry of the grace period was absolute and it was not open to the NCDRC to apply its own standards and conclude that, though there was delay in handing over possession of the apartment, such delay was not unreasonable enough to warrant cancellation of the Agreement. It was not for the NCDRC to rewrite the terms and conditions of the contract between the parties and apply its own subjective criteria to determine the course of action to be adopted by either of them.

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In this regard, we may refer to the Constitution Bench decision in General Assurance Society Ltd. vs. Chandumull Jain and another(AIR 1966 SC 1644), wherein it was observed that, in interpreting documents relating to a contract of insurance, the duty of the Court is to interpret the words in which the contract is expressed by the parties because it is not for the Court to make a new contract, however reasonable, if the parties have not made it themselves. Thereafter, in Rajasthan State Industrial Development & Investment Corporation vs. Diamond & Gem Development Corporation Ltd.(2013)5SCC470, this Court reiterated that a contract, being a creature of an agreement between two or more parties, is to be interpreted giving the actual meaning to the words contained in the contract AIR and it is not permissible for the Court to make a new contract, however reasonable, if the parties have not made it themselves.

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17.More recently, in Shree Ambica Medical Stores vs. Surat People's Coop. Bank Ltd.(2020)13SCC564, it was observed that, through its interpretative process, the Court cannot rewrite or create a new contract between the parties and has to simply apply the terms and conditions of the agreement as agreed between the parties. Again, in GMR Warora Energy Ltd. vs. Central Electricity Regulatory Commission (2023)10 SCC 401, it was observed that Courts cannot substitute their own view of the presumed understanding of commercial terms by the parties, if the terms are explicitly expressed. It was held that the explicit terms of a contract are always the final word with regard to the intention of the parties."

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The language of clause 18.3 is unambiguous that on violation of the terms and conditions, the consequence of forfeiture of security

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(5 of 5)

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[2025:RJ-JP:19020-DB]

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[CFA-278/2022]

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shall follow. The finding of Commercial Court that there was violation of the clause 18.3 of the tender has not been challenged by the respondent. After having held that there was violation of terms and conditions of the contract, the only outcome was forfeiture of security deposit.

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The contention of learned counsel for the respondent that loss suffered by railway on account of respondent not managing the trains as per contract was determined lacks merit. The issue is that for termination of contract two conditions of clause 18.3 of contract were to be fulfilled. As per clause, the termination cannot be before one year and sixty days notice was to be served to railway. The respondent stopped managing the trains before the expiry of sixty days notice period and the security was rightly forfeited. The impugned judgment & decree is quashed.

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The appeal is allowed. Pending application(s), if any, shall also stand disposed of.

(BHUWAN GOYAL),J

(AVNEESH JHINGAN),J

Anu /28

Reportable: Yes

Union of India v. Prime Rakwool

Case brief

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Union of India v. Prime Rakwool

Case brief

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