Kiran Raj

The High Court at Calcutta, Commercial Division, Single Bench of  Justice Shampa Sarkar has dismissed an appeal challenging an arbitral order that directed Hindustan Petroleum Corporation Limited (HPCL) to pay occupational charges amounting to Rs. 22,14,894/- to the respondents. The judgment, delivered on March 13, 2025, upheld the arbitrator’s findings regarding HPCL’s continued retention of possession over the premises despite claims of vacating it.

The dispute originated from a lease agreement between HPCL and the respondents, which expired on December 31, 2020. The lease pertained to a premises located at 6 Church Lane, 2nd floor, Kolkata, measuring 12,592 square feet, with a monthly rental value of Rs. 2,01,354/-. Despite the expiration of the lease, HPCL continued to occupy the premises while negotiations for a fresh lease agreement were ongoing.

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The respondents issued a notice on July 21, 2023, demanding the appellant vacate the premises. HPCL claimed that it vacated the premises on December 31, 2023, and sent a letter on January 13, 2024, requesting the respondents to take possession. The respondents, however, refused to take over possession without conducting a joint inspection to assess damages allegedly caused to the premises during HPCL’s occupancy.

The arbitration proceedings were initiated due to the dispute over possession and the demand for occupational charges. The respondents filed an application under Section 17 of the Arbitration and Conciliation Act, 1996, seeking security of Rs. 9,47,67,472.62 and payment of occupational charges at Rs. 25,63,101.60 per month. HPCL, in its application under Section 17, sought the appointment of special officers for inspection and a directive to the respondents to accept the keys.

The arbitrator, in an order dated November 7, 2024, rejected the respondents’ claim for security deposit but directed HPCL to pay occupational charges at the monthly rent rate of Rs. 2,01,354/- for the period between December 1, 2023, and October 31, 2024. HPCL challenged this order before the High Court, arguing that it had vacated the premises and that the arbitrator’s directive amounted to an interim relief akin to a final award.

Justice Shampa Sarkar noted that the crux of the matter was whether HPCL retained possession of the premises despite claiming to have vacated it. The judgment recorded that "the delay in handing over the premises, prima facie, entitled the respondents to the agreed rent."

The court examined the timeline of communications and found that HPCL had not proactively responded to the respondents’ proposal for a joint inspection, despite being notified by a letter dated February 8, 2024. Instead, HPCL waited until July 19, 2024, to file an application seeking the appointment of special officers for the inspection. The court observed that the filing of this application indicated that HPCL had not taken necessary steps to complete the formalities required for handing over possession.

The judgment also recorded that HPCL retained the keys to the premises until the intervention of the special officers appointed by the arbitrator. This, the court observed, reinforced the arbitrator’s finding that HPCL continued to be in possession of the property, even if it was unoccupied. Citing Sarup Singh Gupta v. S. Jagdish Singh, the court reiterated that "when a lease is terminated, courts have followed the practice of permitting the landlord to receive rent every month by way of compensation for the use and occupation of the premises."

The court dismissed HPCL’s contention that the arbitration order exceeded the scope of Section 17 of the Arbitration and Conciliation Act. The judgement stated that interim measures of protection under Section 17 include the ability to direct payments where continued possession is established. The court further noted that the arbitrator had exercised restraint by denying the respondents’ claim for security deposit and by limiting the payment obligation to the agreed rent amount, rather than the significantly higher sum claimed as occupational charges.

Additionally, the court pointed out that HPCL’s argument regarding non-utilization of the premises was not a sufficient defense against the obligation to pay rent until formal handover was completed. The judgment recorded that "the respondents could have generated an income from the property had the premises been handed over in the proper manner, in December 2023."

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The High Court upheld the arbitrator’s order and dismissed HPCL’s appeal. However, the court modified the order slightly by directing the respondents to file an undertaking before the arbitrator stating that, in the event HPCL succeeds in the final arbitration proceedings, the occupational charges paid would be refunded within two weeks from the date of the arbitral award.

HPCL was ordered to comply with the payment directive within six weeks. Accordingly, the appeal and the connected application were disposed of.

Advocates Representing the Parties

 For the Appellant (HPCL): Mr. Sabyasachi Choudhury, Senior Advocate; Mr. Biswanath Chatterjee, Advocate; Mr. Sobhan Kumar Pathak, Advocate.

For the Respondents (Rukmani Devi Bangur & Others): Mr. Ranjan Bachawat, Senior Advocate; Mr. Sarosij Dasgupta, Advocate; Ms. Ratnadipa Sarkar, Advocate; Ms. Rajeshwari Prasad, Advocate.

Case Title: Hindustan Petroleum Corporation Limited vs. Rukmani Devi Bangur & Others

Case Number: APOT-421 of 2024 with IA NO: GA-COM/1/2024

Bench: Justice Shampa Sarkar

[Read/Download order]