The Nagaland Government gained a breakthrough in the bitter and prolonged litigation relating to the Nagaland House at Shakespeare Sarani, Kolkata through the dedicated and sustained efforts of the counsel for the State of Nagaland, an official report said.
“Hopefully, the State Government will be able to get a favorable judgment against an entity that is trying to exploit some loopholes in the law to pay a paltry sum as rent,” the report added.
History of the Case:
On 24th December, 1997 the State of Nagaland executed a lease deed in favor of Civil Engineers Enterprises Pvt. Ltd. (CEEPL), concerning premises no. 11 Shakespeare Sarani, Calcutta for 20 years. The said lease deed was to commence on 1st January 1998 and end on 31st December 2017. The total area rented is 1,05,000 sq. ft. The premises are in the heart of Calcutta.
As per clause 3 of the lease deed, the rent per annum was fixed at Rs. 5 lakh per month or Rs. 60 lakh per annum. Under clause 2.1 of the said lease deed, the tenant was entitled to renew the lease deed by another 20 years subject to the enhancement of rent in terms of the West Bengal Premises Tenancy Act, 1997 (amended).
There was a further clause that after the expiry of the second term the lessor i.e. the State of Nagaland shall renew the lease in favor of the lessee i.e. CEEPL for a further period subject to enhancement as per the market value as mentioned in the second schedule.
The State of Nagaland is the owner of the Nagaland House commercial complex located at Premises no. 11 Shakespeare Sarani, Calcutta. The complex includes many buildings including the 10-floor Nightingale hospital.
The rent was fixed following the West Bengal Premises Tenancy Act, 1997, and rules. In case a tenant comes under this act, the rent will be nominal and not in accordance with the prevailing market rate. As per clause 3 of the lease deed, the rent was fixed at a rate of Rs. 5 lakh per month on account of this Act.
Not only was the rent to be fixed for the 1997 lease deed under the West Bengal Premises Tenancy Act, but in the renewal clause it was mentioned that on renewal of the lease the rent would continue to remain according to the rate prescribed under the West Bengal Premises Tenancy Act.
Incidentally, this Act does not cover premises owned by the central or the state government and also any premises let out for non-residential purposes which carries more than Rs. 10,000 as monthly rent.
On the expiry of the lease by efflux of time on 31.12.2017, the tenant once again approached the government for renewal of the lease deed on the condition that the rent will be paid only as per the West Bengal Premises Tenancy Act, 1997.
The State of Nagaland on the other side issued notices to the tenant seeking payment of Rs. 2.2 crore per month as rent and refused to accept the fixation of rent in terms of West Bengal Premises Tenancy Act, 1997 on the ground that the said Act does not apply to the Nagaland State properties because under the aforesaid Act, State, and Central Government properties are exempted from its purview.
Further, some of the salient one-sided features of the lease were:-
* The tenant was entitled to sublet the premises to third parties on terms mentioned in the lease deed.
* They were entitled to mortgage the property of the Government of Nagaland.
* They could take loans by using this property as collateral security.
* 1500 sq. ft. free of cost for the entire lease period for the tenant.
In effect the lease deed looked more like a sale deed because the lessee had supreme rights over the property and when he was put to notice that his lease is terminated by efflux of time for not paying enhanced rent, the lessee filed civil suit no. 26/2018 in the High Court of Calcutta seeking the relief of specific performance of the lease deed dated 24.12.1997 in which there was a renewal clause of payment of the rent in terms of West Bengal Premises Tenancy Act which the government refused to accept.
However, according to law one cannot enforce an illegal agreement or an agreement against public policy or public interest. Meanwhile, the State of Nagaland filed suit no. 242/2021 for possession and damages.
Latest Development:
In the light of the above, the Civil Engineer Enterprises Pvt. Ltd. obtained a stay against the suit filed by Nagaland on the ground that if one suit has been filed and consequent to that another suit has been filed by the opposite party the first suit filed by the lessee shall take precedence over the second suit. This stay was for 2 months after which the stay automatically stood vacated.
Since there was a possibility of the State of Nagaland being drawn into lengthy litigation, and since both the suits are between the same parties based on the same facts and law it was decided to refer the cases from the High Court to Arbitration though there is no arbitration clause in the lease deed.
Accordingly, the High Court passed an order dated 06.05.2022 directing the case to be referred to arbitration and an Arbitrator was appointed. Even after the order was passed CEEPL attempted to get a stay of the suit of Nagaland and the same was opposed on the ground that the High Court has got no jurisdiction to decide this matter anymore as the matter has been referred to arbitration.
The State Government would move appropriate applications before the arbitrator for joint trial of both the cases on the ground confirmed by the High Court itself that the cases are between the same parties and the fact and law involved are the same.
It may be noted the lessee did not allow the officials of the State to inspect the lease premises, nor did they furnish details of the sent deeds/taxes etc. Application have been filed in the Court for direction to the lessee to disclose these facts to ascertain whether they have sold any part of the premises.
CEEPL also attempted to refer the case for mediation on the last hearing which was again rejected by the court when in open court, the court remarked that you are paying a paltry amount of Rs. 5 lakh per month in such a posh locality in Calcutta and therefore, you are not entitled to relief of mediation. The purpose of seeking mediation was only to put the case in cold storage.
By virtue of these orders, the state of Nagaland is in a more advantageous position. The counsel for the State of Nagaland is led by Mr. K.N. Balgopal Learned Advocate General, Nagaland and assisted by Adv. Nitya Nambiar and Adv. Vitso Rio.