The Delhi High Court, in an appeal challenging a dismissal of a Section 34 petition under the Arbitration and Conciliation Act, 1996, upheld an Arbitral Award directing a former licensee to pay substantial damages and occupation charges to the licensor (a public sector undertaking) for continued unauthorized occupation after the expiration of the license period.
The Court’s key finding was that disputes purely relating to contractual claims for license fees, damages, and occupation charges arising from continued use of public premises are arbitrable and do not fall within the exclusive jurisdiction of the Public Premises (Eviction of Unauthorised Occupants) Act, 1971 (PP Act).
The Bench, comprising Justices Anil Kshetarpal and Harish Vaidyanathan Shankar, affirmed that an Arbitral Award can only be interfered with on limited grounds, and the Appellant failed to demonstrate perversity, patent illegality, or conflict with the fundamental policy of Indian law.
Background
The Appellant, M/s Kapoor Tent & Caterers, was the licensee of the Respondent, Delhi Tourism & Transportation Development Corporation Ltd. (D.T.T.D.C.), for operating facilities at the Azad Hind Gram Tourist Complex under a License Agreement dated 01.10.2004, initially for a period of ten years (5+5).
The Appellant requested a further five-year extension upon the expiry of the initial term, but the Respondent only granted a three-month extension and later terminated the license. The resulting dispute was referred to arbitration.
The Arbitrator rejected the Appellant’s claim for extension and allowed the Respondent’s counter-claim, directing the Appellant to pay damages and occupation charges for the period of unauthorized occupation from December 2009 onwards, applying the rates specified in the License Agreement. The Appellant’s subsequent petition under Section 34 of the Arbitration Act to set aside the Award was dismissed by a Single Judge.
Delhi High Court’s Decision
The Division Bench dismissed the appeal, upholding the Arbitral Award and the judgment of the Single Judge. The Court addressed the Appellant’s main contentions:
- Non-Arbitrability under PP Act: The Court held that the claim that the counter-claims were non-arbitrable due to the PP Act was devoid of merit. Relying on the Supreme Court, the Court noted that disputes over arrears of license fees, overholding, damages, and quantification of occupation charges are contractual in nature and are distinct from eviction proceedings under the PP Act.
- Jurisdictional Objection: The Appellant was deemed estopped from challenging the Arbitrator’s jurisdiction, as the Appellant had actively participated in the arbitration and failed to raise a specific jurisdictional challenge under Section 16 of the AC Act at the appropriate time.
- Void Contract: The contention that the License Agreement was void because it conflicted with an earlier lease deed was rejected. The Court found the Appellant was a stranger to the earlier deed and could not rely on it to invalidate a contract it freely executed and performed.
- Damages for Sealed Period: The award of damages for the period when the premises were sealed by the Municipal Corporation of Delhi (MCD) was upheld. The sealing was found to be due to the Appellant’s alleged unauthorized activities, and the Appellant never surrendered possession of the property during that period. The quantification of damages for the entire period of overholding fell squarely within the Arbitrator’s jurisdiction.
Key Holdings
The Court held that:
- The jurisdiction of the Court in an Appeal under Section 37 of the AC Act is even more restricted than that under Section 34.
- Claims for license fee, occupation charges, damages for overholding, or quantification of dues arising from continued use of premises after expiry of a license are purely contractual and are capable of being adjudicated by an Arbitrator.
- Verbal assurances, uncorroborated by written commitments, cannot override the express terms of a validly executed agreement.
Case Title: M/S KAPOOR TENT & CATERERS THR. ITS PARTNER, SH. VIPIN KAPOOR Vs. DELHI TOURISM & TRANSPORTATION DEVELOPMENT CORPORATION LTD.
Citation: 2025:DHC:10751-DB
Date of Pronouncement: 03.12.2025