Under a commercial lease deposit agreement, is the lessor required to refund the security deposit only after the lessee vacates, or are the obligation to vacate and the obligation to refund the deposit simultaneous?

The appellant-landlady is aggrieved by the judgment dated 30 th July, 2015 passed by the Division Bench 1 as also the order dated 09 th January, 2012 passed by the learned Single Judge in a writ petition 2 filed before the High Court of Judicature for Rajasthan at Jaipur Bench, preferred by her under Article 227 of the Constitution of India.

The facts of the case reveal that the appellant-owner of a commercial premises at Vashistha Marg, Raja Park,Jaipur had leased out a part of the said premises 3 to the respondent-Bank for a period of nine years in terms of the lease geeta ahuja 1 D.B. Civil Spl. Appeal (Writ) No.332 of 2012 2 S.B. Civil Writ Petition No.8464 of 2009 3 Shop No.485 and basement agreement dated 13th October, 2000, executed between the parties. The relevant clauses of the said lease agreement are reproduced hereinbelow :

In terms of the lease agreement, the agreed monthly rent of the premises was fixed at ₹28,625/- (Rupees Twenty eight thousand six hundred twenty five only). Vide letter dated 10 th May, 2004, the respondent-Bank terminated the lease agreement by issuing a three months’ notice in terms of clause 6 thereof. The said notice period was made effective from 16 th August, 2004.

It is the version of the appellant-landlady that the respondent-Bank did not hand over the vacant and peaceful possession of the leased premises to her and instead, continued occupying the subject premises upto 18 th June, 2006, when the keys were finally handed over to her. It is also the stand of the appellant-landlady that the respondent-Bank did not pay her the use and occupation charges in respect of the subject premises from 16 th August, 2004 till 20th February, 2006, after adjusting the security deposit of ₹85,875/- (Rupees Eighty five thousand eight hundred seventy five only) towards the rent payable for three months.

Aggrieved by the non-payment of rent by the respondent-Bank, the appellant filed an application before the Rent Tribunal, Jaipur City, Jaipur on 20th February, 2006 seeking eviction and recovery of the arrears of rent. It was after institution of the aforesaid petition by the appellant-landlady that the respondent-Bank handed over the keys of the premises to her before the Presiding Officer of the Rent Control Tribunal on 18 th June, 2006. The petition filed by the appellant-landlady was contested to the hilt by the respondent-Bank who also filed a counter claim seeking refund of the security amount along with interest @ 24% per annum compounded quarterly, w.e.f. 17 th August, 2004, till realization. Vide judgment dated 10th April, 2008, the rent application filed by the appellant-landlady was decreed in her favour and the counter claim filed by the respondent-Bank was rejected.

Aggrieved by the aforesaid decision, the respondent-Bank filed an appeal before the Appellate Rent Tribunal which was allowed vide order dated 05th March, 2009. As a consequence thereof, the decree passed in favour of the appellant-landlady was set aside and the counter claim filed by the respondent- Bank was allowed. The said order was challenged by the appellant-landlady by filing a petition under Article 227 of the Constitution of India before the High Court which was dismissed by the learned Single Judge vide order dated 09th January, 2012. Instead of approaching this Court for relief against the said order, the appellant filed a misconceived intra court appeal that has been dismissed by the Division Bench of the High Court as not maintainable vide order dated 30th July, 2015. Both the orders are under appeal before us.

Ms. Shobha Gupta, learned Senior counsel appearing for the appellant-landlady submits that the learned Single Judge has erred in upholding the order passed by the Appellate Rent Tribunal whereby the decree passed in favour of the appellant-landlady was set aside inasmuch as the Court failed to appreciate the fact that the notice dated 10 th May, 2004 issued by the respondent-Bank referred to its proposal to handover possession of the subject premises on 16th August, 2004. It is urged that the security deposit could have been refunded to the respondent-Bank contemporaneous to handing over vacant and peaceful possession of the premises to the appellant-landlord, which in the instant case was not done. It is therefore, submitted that the obligation cast on the appellant-landlady to refund the security amount in terms of the lease agreement did not arise till the respondent-Bank actually vacated the subject premises which admittedly remain in its possession till 18 th June, 2006. 8. Per contra, Mr. Sandeep P. Agarwal, learned Senior counsel appearing for the respondent-Bank seeks to rely on the terms and conditions of the lease agreement and, in particular clauses of the Deposit Agreement dated 13th October, 2000. Clauses 6 and 8 of the Deposit Agreement read as follows :

In the event the Lessor does not refund the said deposit to the Lessee in full, at the time of the said Lease Agreement or any renewal thereof comes to an end, as aforesaid, then the consequences mentioned in para nos. i) to iii) hereunder shall follow: i) The Lessee shall (without prejudice to its rights and remedies in law) , not be obliged or bound to vacate and give charge of the leased premises to the Lessor and the Lessee shall be entitled to use or permit , the leased premises to be used by any person of its choice without being liable to pay any rent, outgoings or damages to the Lessor until such time as the Lessor does not refund to the Lessee the said deposit in full ; and ii) In addition, the Lessor shall be liable to pay to the Lessee interest @ 24% p. a. compounded quarterly, on the said deposit from the date of termination or expiry of the said Lessee Agreement or any renewal thereof till the date of refund of the said deposit by the Lessor to the Lessee; and iii) In the event the Lessor is unable to return the deposit as aforesaid for a period of 30 days from the date it becomes due, the Lessee shall be liberty to further sub- let the leased premises for period of not less than 12 months at a time on such terms and conditions as the Lessee may in its absolute discretion may deem fit”

It is the stand of the respondent-Bank that in terms of the aforesaid clauses of the Deposit Agreement, the appellant-landlady was under an obligation to refund the security deposit to the respondent-Bank at the time of handing over vacant and peaceful possession of the leased premises, which she failed to do and therefore, the aforesaid clauses entitle the respondent- Bank to continue using the leased premises itself or by any other person of its choice without any liability to pay any rent/outgoings/damages.

We are afraid, the aforesaid argument advanced by learned counsel for the respondent-Bank is not persuasive. The language of Clause 6 of the Deposit Agreement makes it abundantly clear that the respondent-Bank was liable to refund the deposit amount contemporaneous to the Bank removing itself from the leased premises and handing over vacant possession thereof to the appellant-landlady and giving charge thereof to her, which procedure in the instant case, had not been followed. There is nothing on record to demonstrate that any steps were taken by the respondent-Bank calling upon the appellant- landlady to remain present at the subject premises for purposes of handing over/taking over possession of the leased premises on a particular date and time and giving charge thereof to her for her to refund the security deposit simultaneously to the respondent-Bank.

For the aforesaid reasons, we are unable to sustain the impugned order dated 09th January, 2012 passed by the learned Single Judge that has upheld the order dated 05th March, 2009, passed by the Appellate Rent Tribunal, Jaipur. However, the order dated 30 th July, 2015 passed by the Division Bench of the High Court is maintained for the reason that no intra-court appeal could have been preferred by the appellant-Landlady against an order passed by the learned Single Judge on a petition filed under Article 227 of the Constitution of India. As a result, Civil Appeal No. 6096 of 2017 is allowed, the judgment dated 10th April, 2008 passed by the Rent Tribunal is restored and the decree passed in favour of the appellant-landlady is upheld. Civil Appeal No. 6097 of 2017 is however dismissed as there is no error in the finding returned by the Division Bench of the High Court regarding maintainability of an appeal against the order dated 09th January, 2012, passed in proceedings under Article 227 of the Constitution of India. Parties are left to bear their own expenses. ……………………….......................J. ( HIMA KOHLI ) ……………………….......................J. ( AHSANUDDIN AMANULLAH )