J&K High Court Upholds Arbitral Award Of ₹1.37 Crore To Entrepreneur Whose Gulmarg Hotel's Lease Was Illegally Terminated By Govt

The Jammu & Kashmir High Court has upheld Rs. 1.37 crore in compensation to a woman entrepreneur whose hotel lease was wrongfully cancelled, stating that illegal termination of lease resulted in losses to the extent of Rs.1,37,57,009/.A bench of Justice Sanjay Dhar held that the Arbitral tribunal was justified in awarding the amount towards the financial loss suffered by the claimant, stemming from the unlawful termination of the lease, which had rendered her unable to operationalise a tourism project and repay institutional loans.The case revolved around a 1989 lease deed granted by the government to the respondent/claimant for running a hotel in Gulmarg. However, the lease was terminated midway on the ground that the claimant had not commissioned the project for over 14 years. The court however observed that “Asking the respondent to set up a new hotel business at Gulmarg during peak militancy would be asking for the moon."The court said that the claim that there was failure on the part of the respondent/claimant to commission the project on the demised premises is, therefore, misconceivedIt said that "illegal termination of lease resulted into losses least to the extent of Rs.1,37,57,009/ as she had to liquidate this amount without actually making use of this money for the purpose of commissioning the project which she could not do because of the illegal actions of the petitioners."The respondent/claimant had leased land from the government to construct a hotel and had availed a loan of Rs 17.78 lakh from the J&K State Financial Corporation. However, before she could operationalise the hotel, her lease was arbitrarily terminated, making it impossible for her to generate revenue.The court noted that the loan liability had swollen to Rs 1.37 crore, as per official communication from the Corporation. Noting that the claimant had to repay the amount without ever putting the project to use, resulting in severe financial loss.The Arbitral Tribunal, recognising this causal chain, awarded the sum of Rs 1,37,57,009 as compensation, even though it rejected other claims related to construction costs and profits.Rejecting the government's contention that the award exceeded the terms of reference or conflicted with public policy.The counsel for the petitioner had argued that the arbitrator had rejected the two claims made by the claimant with respect to loss of business and the amount for which she claimed to have invested in the business both amounting to Rs.1,37,57,009 and Rs.25,86,07,059/ respectively.The court said it is not a case where the Arbitrator has, with his eyes shut, accepted the claims of the respondent/claimant.It said while declining the aforesaid two claims, the learned Arbitrator has taken into account the fact that the respondent/claimant has not succeeded in substantiating these two claims with any cogent and convincing evidence. BACKGROUND The case revolved around a 1989 lease deed granted by the government to the respondent/claimant for running a hotel in Gulmarg. The lease provided for an initial term of 15 years with a compulsory renewal clause for another 15 years. However, the lease was terminated midway on the ground that the claimant had not commissioned the project for over 14 years. The property was then re-allotted to a third party without auction or public notice.APPEARANCE: Faheem Nissar Shah, GA. Mr. Ilyas Nazir Laway, GA., For PetitionersMir Suhail, Advocate, with Mr. Raja Jaffar, Advocate for Respondent.Case-Title: UT Of J&K & ORS VS MRS. RAJINDER OBEROICitation: 2025 LiveLaw (JKL) 257Click Here To Read/Download Order

J&K High Court Upholds Arbitral Award Of ₹1.37 Crore To Entrepreneur Whose Gulmarg Hotel's Lease Was Illegally Terminated By Govt

Aleem Syeed

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