M/S Cosmos Infrabuild Private Limited vs. M/S Kalyan Jewellers INDIA Limited

Facts

This appeal concerns an order by a learned Single Judge restraining the appellant/lessor from interfering with the respondent/lessee's possession of a property. The dispute arose from a lease agreement. Initially, a lease was entered into on September 17, 2013, for fifteen years. This was terminated on September 14, 2019. Subsequently, a fresh lease agreement was executed on January 6, 2020, for a lesser portion of the property, commencing March 1, 2020, for six years. This second lease agreement was modified on February 11, 2022, enhancing the rent and security deposit. The respondent/lessee sought to terminate this lease early, effective September 14, 2023, and requested the refund of the security deposit after adjustments. The appellant/lessor refused to refund the full amount, leading to the present dispute.

Held

The Court held that the learned Single Judge did not err in restraining the appellant/lessor from interfering with the respondent/lessee's possession. The reasoning was based on a plain reading of Clause 6 of the second lease agreement. The Court found that expenses related to restoration, repair, demolition, or removal of temporary structures could not be adjusted against the security deposit as they required quantification, falling under adjudication. The Single Judge had quantified the refundable security deposit at Rs. 2,30,00,000/-, meaning the appellant could retain Rs. 70,00,000/- for rent and GST for the notice period. The Court noted the peculiar arrangement allowing the respondent/lessee to hold over the premises until the appellant/lessor failed to make over the security deposit. The appeal was disposed of with the parties to settle their rights in the pending suit or other appropriate proceedings. The appellant was also directed to pay costs of Rs. 75,000/- within two weeks.

Key Issues

1. Whether the learned Single Judge erred in restraining the appellant/lessor from interfering with the respondent/lessee's possession of the suit property, considering the agreement between the parties? The appellant argued that the respondent/lessee was in breach of the lease agreement by failing to vacate the premises and that the security deposit was legitimately retained to cover potential damages and outstanding rent. The respondent/lessee contended that the lessor was obligated to refund the security deposit, after adjustments, before taking possession and that their continued occupation was permissible until the deposit was returned. The court had to interpret Clause 6 of the second lease agreement regarding the adjustment of the security deposit for restoration, repairs, demolition, or removal of temporary structures.