Arbitration Award Reinforces the Importance of Contract Compliance in Commercial Leasing

Introduction

A recent arbitration award, successfully handled by LawCite Advocates highlights the significance of honoring contractual commitments in commercial leave and license arrangements.This case involved a dispute over a cold storage facility and demonstrates how timely arbitration and proper documentation can protect a party’s interests in complex business relationships.

Background

The dispute arose between a licensor (owner of a cold storage premises) and a licensee company that had taken the property on a five-year leave and license basis.

Under the registered agreement, the licensee was required to:

• Pay a monthly license fee of ₹6,50,000 plus GST;

• Maintain the premises, machinery, and equipment; and

• Bear operational costs such as electricity and maintenance.

However, within the first year, the licensee defaulted on payments and neglected key maintenance obligations. Despite repeated notices and assurances, the arrears continued to grow, prompting the licensor to invoke the arbitration clause.

Core Legal Issue

The central question before the arbitrator was:

Whether the licensee had breached the Leave and License Agreement by failing to pay the agreed license fees and comply with maintenance and operational obligations.

The licensee denied liability, alleging that the licensor had forcibly taken back possession and caused business losses, and filed a counterclaim exceeding ₹2.5 crore.

Arguments and Representation

• Licensor’s Case (Handled by LawCite Advocates):
  
  The licensee defaulted on payments from April to December 2021 and failed to maintain the premises as agreed. The licensor sought recovery of outstanding license fees and arbitration costs.

• Licensee’s Defense:

  
  The licensor had allegedly taken over the premises without authorization, leading to loss of business, goods, and reputation. The licensee sought substantial damages and refund of the security deposit.

Findings of the Arbitrator

The arbitrator, after detailed examination, held that:

• The licensee had admitted arrears of over ₹16 lakh in written correspondence.

• There was no evidence to prove the claim of forcible possession or damages.

• The counterclaim lacked proof and was not supported by any credible documents.

Accordingly, the arbitrator concluded that the licensee was in breach of the Leave and License Agreement.

Final Award

The arbitrator partly allowed the licensor’s claim and issued the following directions:

• The licensee must pay ₹10,13,300 towards unpaid license fees.

• The licensee must also pay ₹8,40,000 as arbitration costs.

• Both sums shall carry 10% annual interest if not paid within four weeks.

• The claim for repair expenses was disallowed for lack of evidence.

• The licensee’s counterclaim of ₹2.5 crore was dismissed in entirety.

Legal Takeaways

1. Non-payment of license fees constitutes a clear contractual breach under Indian contract law.

2. Written admissions, even informal letters or emails, can decisively establish default.

3. Counterclaims must be supported by clear documentary evidence to be maintainable.

4. Arbitration offers swift, enforceable relief for commercial lease and license disputes.

5. Legal representation matters strategic presentation and documentation can be the difference between success and failure.

Conclusion

This arbitration award, handled by LawCite Advocate Vipin Sharma, is a strong reminder that commercial relationships rest on contractual discipline. For businesses, landlords, and licensees alike, the case illustrates that defaulting on financial or maintenance obligations can have costly consequences.

Arbitration continues to serve as an efficient and enforceable dispute resolution mechanism for contractual disputes, particularly where clarity, documentation, and timely legal intervention are present.

About LawCite Advocates

LawCite is a progressive law firm focused on commercial disputes, arbitration, and corporate advisory. Our team represents clients across India in complex contractual and property-related matters, combining strategic legal expertise with practical business insight.

Target Audience:

• Business owners, landlords, and corporate clients entering lease or license agreements.

• In-house counsels and compliance officers managing commercial contracts.

• Legal professionals and students following arbitration trends in India.