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M/s. Sparks Gym A Partnership firm represented by is Managing Partner M. Sakthivel, Velachery & Others v/s M/s.Faery Estates Private Limited, represented by Authorised Signatory Jair Dsouza, Mumbai & Others

    O. A. No. 351 of 2018 & A. No. 5413 of 2018 in C.S. 230 of 2018

    Decided On, 01 August 2018

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MR. JUSTICE N. SATHISH KUMAR

    For the Applicants: R. Balachanderan, Advocate. For the Respondents: D. Ranganatha Reddy for King & Patridge, Advocates.



Judgment Text

(Prayer: This application has been filed for grant of interim injunction restraining the respondents and their men from interfering with the right of the plaintiff in running of the Gym in the respondent's premises or interfering with the business of the applicants in running the Gym in the respondent's premises in nay manner till the disposal of the suit.)

This application has been filed under section 151 of the Code of Civil Procedure to amend the plaint to direct the respondents to remit the entire outstanding license fee of Rs.13,38,406.62 (as on date) to the first applicant, failing which he respondents/plaintiffs to vacate from the Licensed premises (admeasuring 3,000 sq. ft.) at Tower B, SP Infocity MGR Road, Kandachavadi, Perungudi, Chennai – 600 096.)

Common Order:

The application in O.A.No.351 of 2018 has been filed by the plaintiff for interim injunction restraining the respondents and their men from interfering with the right of the plaintiff in running the Gym in the respondent's premises or interfering with the business of the applicants in running the Gym in the respondent's premises in any manner till the disposal of the suit.

2. Similarly, the application in A.No.5413 of 2018 has been filed by the defendants for directing the plaintiff to pay a sum of Rs.13,13,406.42 failing which to vacate the premises.

3. The suit has been filed to declare that the plaintiff is the tenant under the first defendant to an extent of 1830 sq.ft. in running and operating Gym in the defendant's premises under the agreement dated 01.09.2016 and also to declare that the terminated addendum agreement dated 01.06.2017 signed by the plaintiff under undue influence of the defendants as null and void and various reliefs including relief of damages of Rs.40,00,000/-.

4. It is the contention of the applicant that they are engaged in the business of Health and Fitness and as such running physical fitness Gym in the name and style of 'Sparks Gym'. The first defendant is a private Limited Company and is owner, developer and promoter of Information Technology Park (IT Park) and as such having an IT Park by name 'SP Infocity' at No.40, M.G.R.Salai, Kandanchavadi, Chennai – 600 096. The second respondent is working as Head Assets in the first respondent company and third respondent is also working under the first respondent as Head Facilities. As the first respondent has leased or rented out to the IT companies, gymnasium facility is one of the mandatory amenity to the employees of the IT companies. As the first respondent has no knowledge in operating a gym, it looked out for outsourcing in setting up and operating gym in the respondent premises. The respondents approached the plaintiff during February 2016 for setting up and operating gym by the first plaintiff at its cost in the respondent premises. The cost for setting up a gym worked out to Rs.60 lakhs. The defendants promised that they will ensure and co-operate with the plaintiff in running the gym profitably.

5. Believing the words of the defendants, the plaintiffs arranged a sum of Rs.60 lakhs by availing bank loan and set up the gym in the defendant premises. The respondents also have full knowledge that the applicants are fully depending on the successful running of the gym in the respondent premises in discharging their loan amount and in the event of any failure on the part of the respondents in co-operating with the applicants in smooth running of the gym in the respondent premises, they shall ruin the future of the first applicant and its partners and as such the applicants are totally dependent upon the respondents in setting up and operating the gym smoothly. Taking advantage of the above said situation, the respondents exercised real and apparent authority over the applicants and dominated the will of the applicants in agreeing to the terms and conditions of the respondents and as such having put the applicants in such a situation in availing loan and thereby made payment to the suppliers in purchasing the equipments utilizing the loan amount and as such the applicant cannot withdraw from the proposed setting up and operating the gym in the respondent premises and thereby the applicants came under the real and apparent authority of the respondents in setting up and operating the gym. By exercising such real and apparent authority over the applicants, the applicants had entered into an agreement dated 01.09.2016 to operate the gym in the respondents premises and they paid a sum of Rs.3,75,000/- as interest free security deposit.

6. The respondents also represented that a portion where the gym is set up is to an extent of 3000 sq.ft. However, while handing over the portion to the first applicant for the purpose of operating the gym has not identified total extent of 3000 sq.ft. as promised by them and as such delayed the progress of works regarding carrying out the gym work by utilizing 3000 sq.ft. However, by email dated 25.01.2017, the respondents informed the applicants that the first applicant has violated the terms of the contract and directed the first applicant to construct partition wall at its cost for lesser extent and thereby created artificial delay in completion of the gym till mid February 2017 and as such the first applicant was forced to establish in lesser extent of 1830 sq.ft. Till date, the respondents have not handed over the remaining 1170 sq.ft. to the first applicant as promised as per the agreement dated 01.09.2016. Without handing over the remaining extent of 1170 sq.ft., falsified their account and illegally treating that the first applicant is in occupation of 3000 sq.ft. recorded in their account. As per the agreement dated 01.09.2016, monthly rent is fixed at the rate of 72,500/- per month for 3000 sq.ft. at the value of Rs.20.80 per sq. feet. As such the applicants are liable to pay the rent only for 1830 sq.ft. which is the actual extent handed over to the applicants by the respondents. Therefore, the applicants are actually liable to pay a sum of Rs.38,125/- per month. However, the respondents taking advantage of their own violation illegally falsified the account in compelling the applicants to pay rent at the rate of 62,500/- per month for the entire extent of 3000 sq.ft. and exerting their real and apparent authority over the applicants obtained cheques to the tune of Rs.8 lakhs in permitting the applicants to enter into the respondent premises and inaugurate and operate the gym in the respondent premises. Simultaneously, they have also forced the applicant to enter into an addendum agreement dated 01.06.2017 and the respondents grabbed the power and management the gym by culling out the right of collecting subscription fees from the customers and permitted the applicants to operate the gym from 15.06.2017. The respondents are collecting all the revenues of the applicants from 15.06.2017 till date. It is also alleged in the application that the respondents also prevented the applicants from running the gym and hence, interim injunction is prayed for.

7. The respondents filed counter denying the entire allegation and submitted that the suit filed by the applicants is an abuse of process of law. In fact, the applicants were licensed to run the gym on the basis of the agreement dated 01.09.2016. Owing to the applicants to honour their financial commitment, the respondents and the applicants entered into addendum agreement dated 01.06.2017 to the said license agreement. It is their further contention that both the agreements were terminated by the respondent on 20.02.2018 due to several breach of the terms and conditions of the above agreement. The applicant has admittedly entered into the above said agreement to use and occupy the licensed premises for a period of three years. But they have not complied with the terms and conditions of the license agreement dated 01.09.2016 and they have committed breach of the agreement and the applicants have not made out primafacie case and prayed for dismissal of the application.

8. The respondents/defendants have also took out an application for direction to the applicants/plaintiffs to deposit a sum of 13,38,406.62.

9. The main contention of the learned counsel for the applicant in the interim injunction application is that admittedly, he is in possession of the property. Though the nomenclature of the document show as if it is a license agreement, the conduct of the parties, the nature of possession, clearly show that it is only a lease. Hence, it is his contention that the interim injunction granted by this Court may be made absolute.

10. Whereas it is the contention of the respondent that the applicant has entered into a license agreement, that the possession was not made exclusive and that he is only permitted to get permission to run gymnasium. As the applicant had violated the terms of the contract, the licence agreement has been revoked. Therefore, it is the contention of the learned counsel for the respondent that the applicant has no right to continue in the possession of the property. Besides, it is the contention of the learned counsel that admittedly as per the agreement, there is a due of more than Rs.13 lakhs and it has to be deposited by the applicants and without paying the above amount, they have no right to squat in the property.

11. The suit itself has been filed for declaration to declare the plaintiffs as tenant under the first defendant to an extent of 1830 sq.ft. in running and operating the gym in the defendant's premises under the agreement dated 01.09.2016 and also to set aside the subsequent agreement dated 01.06.2017 and also to declare that the plaintiffs are the tenant with respect to 1830 sq.ft. in running the gym and as such liable to pay monthly rent at the rate of Rs.38,125 per month.

12. Admittedly, the parties have entered into a contract in the name and style of 'Leave and License Agreement' on 01.09.2016. Wherein the applicants are permitted in the second schedule of the agreement solely on Leave and License basis to run the gym. It is also clearly agreed between the parties that the agreement can be renewed for a further two terms of 36 months each after mutual discussion with the licensor and licensee once license fees and other commercial fees and other commercial terms are agreed. The lock in period is also agreed between the parties. The schedule attached to the agreement show that the term of three years has been agreed between the parties and the rent commencement date is shown as 25.08.2016.

13. Subsequent to the above agreement, an addendum agreement dated 01.07.2017 has also been entered into between the parties. Wherein, it is specifically agreed between the parties that the principal agreement and terms shall be effect from 01.06.2017, which shall hereby refer to effective date of agreement. Further, the invoice issued by the respondents clearly show that the respondents have received lease rent from 01.02.2018 to 28.02.2018 a sum of Rs.62,499/-. Though the nomenclature of the agreement shows that it is only a license agreement, the schedule attached to the agreement and the invoice issued by the respondent shows the period of commencement of rent to run the gym is clearly mentioned and lease rent has also been received.

14. Now the applicant has raised various allegations against the respondents that they are preventing them from exercising their right as per the agreement and sought to declare them as tenant in the property and disputed that it is only a license agreement. It is well settled that if a document gives only a right to use the property in a particular way or under certain terms, while it remains in their possession and control of the owner thereof, it will be a license. The legal possession, therefore, continues to be with the owner of the property, but the licensee is permitted to make use of the premises for the particular purpose. The difference between lease and license is very thin. Therefore, mere nomenclature of the document alone is not a determinative factor. But only the substance of the agreement that matters and not the nomenclature of the document. Having regard to the fact that the plaintiffs, namely the applicants, are put in possession under the leave and license agreement and the period is for three years and rent commencement date is also given in the schedule, subsequently, the amount has also been received as rent, this Court is of the view that the intention of the parties has to be seen to find out whether

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it was lease or license and it is a matter of evidence. The same cannot be decided in the interim injunction application stage itself. Admittedly, the applicants are in possession of the property, which is not disputed by the respondents. Merely because the documents appears to have been revoked, that itself is not a ground to evict the applicants at this stage. It is also to be noted that admittedly, the applicant has entered in an agreement agreeing to pay certain amounts. Whether agreed portion has been given to him or not is also matter of evidence. Therefore, at this stage, this Court is not in a position to accept the contention of the applicant as such. Having agreed to pay the specified amount per month, it is the duty of the applicant to pay the amount. Without paying the amount they cannot enjoy the premises. Therefore, having regard to the above facts, this Court is of the view that till the disposal of the suit, there shall be an interim injunction as prayed for. However, the above Order is subject to the deposit of a sum of Rs. 13,13,406.42 by the applicant before this Court to the credit of the suit. 15. According, both the applications are Ordered and the applicant is directed to deposit a sum of Rs. 13,13,406.42 before this Court to the credit of the suit on or before 30.08.2018. Failure to deposit the amount, the interim injunction will be automatically vacated.
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