Contract Which Is Renewable Based On 'Criteria Of Performance' Is Deemed Renewed Unilaterally After Criteria Is Met, Cannot Be Terminated: J&K HC

The Jammu and Kashmir High Court held that where renewal of contract is based on the criteria of performance, the contract is deemed to have to been extended, if the said criteria is met. In this case, the Arbitrator was to determine legality of breach of agreement by interpreting the agreement-clause which said that “the agreement between the parties was compulsorily renewable after the expiry of first five years, if the sales remained satisfactory.” The court observed that “what is satisfactory cannot be left to the whim and caprice of one party to the agreement. In the absence of any criteria relating to interpretation of this term, arbitrator had relied on other provisions of the agreement and concluded that if the sales are Rs.15 lacs or above in a month, the same would constitute 'satisfactory sales.” Court said that this view, being plausible and possible, cannot be interfered with while exercising powers under Section 34 of the Arbitration Act. The court upheld the view of the arbitrator that said agreement was not a lease agreement but a business agreement as the petitioner was to take share of 4% of the gross sales made by the Respondent per month. Court also noted that as a natural corollary of the interpretation the contract was deemed as renewed and eviction as illegal therefore, finding relating to grant of compensation are also justified and reasonable keeping in view disruption caused in the business for 5 years, term which was renewed, after finding sales to be satisfactory and also damages to the stock while petitioner was incharge of the said premises.