Lease Finance Agreement (Equipment)
This lease agreement made the 5th day of November 2000 between AB Limited, a company incorporated under the Companies Act 1956 and having its registered office at 5 T.N. Road, Chennai hereinafter called the lessor (which expression shall unless excluded by or repugnant to the context include its successors and assigns) of the First Part, CD Co. Ltd. and a company incorporated under the Companies Act 1956 having its registered office at 6 G.K. Street, Calcutta hereinafter called the lessee (which expression shall unless excluded by or repugnant to the context include its successors) of the Second Part and Mr. MN, son of PQ, residing at 3 L.K. Street, Calcutta hereinunder called the guarantor (which expression shall unless excluded by or repugnant to the context include his heirs, executors, administrators and legal representatives) of the Third Part.
Whereas the lessee has approached the lessor and has requested the lessor to purchase and/or acquire plants and machinery and equipment and thereafter to lease the same to the lessee subject to the terms, conditions and covenants herein contained and subject to payment of charges and Lease Rentals contained in the Schedule hereunder.
And whereas the lessee has agreed to pay to the lessor a one time fee called Lease Management Fee amounting to Rs. 1 lakh only simultaneously with the execution of this agreement which fee will be non-refundable and non-adjustable and shall not in any way constitute an obligation on the part of the lessor to provide the lease-assistance to the lessee which assistance shall always be at the sole discretion of the lessor and the lessee agrees to be bound by any such decision of the lessor.
And whereas the guarantor in consideration of the lessor entering into this Agreement with the lessee and granting the equipment on lease to the lessee has agreed to guarantee the due payment and the performance and observance of all the terms, covenants and conditions herein contained and on the part of the lessee to be paid, observed and performed.
And whereas the Parties hereto have agreed to enter into this Agreement and record the terms and conditions.
Now this agreement witnesseth and it is hereby agreed and declared by and between and among the Parties hereto as follows:
1. Lease of equipment. The lessor hereby leases out to the lessee and the lessee takes on lease from the lessor the equipments/plants and machinery and/or vehicles more particularly specified in Schedule I hereunder written and hereinafter called “the equipments” for the period and subject to the due and punctual payment of the lease-rentals as specified in Schedule I hereunder written and upon and subject to the terms, covenants, conditions and stipulations herein contained and on the part of the lessee to be paid observed and performed. Subject to the payment of the said lease-rentals and observance and performance of the terms, covenants, conditions and stipulations herein contained the lessor hereby grants unto the lessee the right to use by way of lease the said equipments.
2. Period.(a) The lease hereby created under this Agreement is for a period of 10 years commencing from the date of the Agreement; and if the lessee exercises the option to renew and the lessor agrees to such renewal, the lease-period shall run for a further period of five years commencing from the date of expiry of the 10 years.
(b) The lease for the first period is non-cancellable but at the end of the first period, the lessee shall have an option to terminate this Agreement by giving a notice of not less than 15 days before the end of the first period and in that event, the lessee shall at its own cost deliver the equipment to the lessor at the place to be indicated in good repair, order and condition.
3. Lease rent and payment. (a) The lessee shall during the said terms punctually pay to the lessor free of any deduction or abatement whatsoever the sum of money specified in Schedule I hereunder as rent for the equipment. All rent shall be paid at the address of the lessor shown above or as otherwise directed by the lessor in writing. The lessee further agrees that the obligations to pay the rentals shall remain absolute in all circumstances and is without any reference to the state, description, use or performance of the equipment leased out.
(b) The lessee either at the inception of the lease shall give to the lessor cheques, promissory notes or any other acceptable instrument for all or any sums payable under this Agreement. Such cheques or notes or other instruments shall be deemed to have been given for adequate consideration already received by the lessee and shall not absolve the lessee from his liability to pay the said sums hereunder until the cheques, notes or other instruments are duly realised.
(c) The lessor shall be entitled to appropriate at its absolute discretion any money received from the lessee first towards the costs, charges and expenses incurred by the lessor for receipts or recovery of such sums, secondly towards overdue charges and other money demanded but unpaid, thirdly towards the lease rentals due and payable and lastly towards the dues owed by the lessee under any other Agreement.
(d) It is recorded that the lessee has paid the sum mentioned in Schedule 1 as and by way of Security Deposit for the due observance and performance by the lessee of the terms and conditions of this Agreement. The said deposit is to be held by the lessor without any liability to pay interest thereon and with the right to the lessor to adjust the said deposit against all amounts due and payable by the lessee to the lessor. The lessor shall refund to the lessee the said deposit after necessary adjustments on the expiry of the lease of the equipment and on the return of the equipment to the lessor in accordance with the terms of the Agreement. From the amount to be so refunded, the lessor shall be entitled to deduct:
(i) any sum, which has become due to be paid by the lessee to the lessor as per this Agreement;
(ii) if any sum has become payable by the lessee to the lessor the exact quantum whereof is not ascertainable an estimated amount on account thereof, including overdue charges;
(iii) if it is likely that any liability of the lessee shall arise in future, the lessor may retain such part of the deposit as it thinks necessary to take care of such liability, and continue paying interest, if any, on the sum so retained as per Schedule I hereunder. The part so retained shall be adjustable against the liability of the lessee to the extent the same remains unsatisfied and the balance, if any, shall be refundable to the lessee.
Provided that the lessor shall not be entitled to retain any sum in pursuance of this Clause if the lessee shall furnish a guarantee from a bank acceptable to the lessor for reimbursement of the apprehended or contingent liability or otherwise secures such reimbursement in a manner acceptable to the lessor.
4. Additional equipments and rents. (a) If further equipment is required by the lessee and the lessor agrees to lease out such further equipment the said further equipment as may be specified in Schedule IA attached and/or to be attached hereto shall be granted on lease on the same terms and conditions as herein contained save and except as to the respective commencement dates and the lease rentals as specified in Schedule IA hereunder written.
(b) It is agreed that the lessee shall abide by the draw down period as mentioned in Schedule I hereunder written and in no event the acquisition costs of the equipment shall exceed the sanctioned amount as mentioned in the Schedule. In the event of any part of the sanctioned amount being not utilised by the lessee within the draw down period, the unutilised amount shall lapse and the lessee shall thereafter not be entitled to claim the said unutilised amount.
5. Delivery, commencement and disbursement. (a) The equipment shall be delivered to the lessee and/or installed by the Supplier/Manufacturer at the factory of the lessee and the entire risk cost or any outgoing pertaining to the said delivery and installation shall be to the account of the lessee. If any advance payment is made by the lessor to the Manufacturer/Supplier, pending the commencement of the Lease it shall be deemed to have been advanced on the lessee’s behalf and at his request as an accommodation to the lessee and the amount shall carry additional financial costs at the rate of Re. 1 per Rs. 1,000 per day with monthly rests on such advanced amount. The lessee must ensure that the equipment is delivered by the supplier within such time as may be stipulated by the lessor. For this purpose, time is essence of this Agreement. Any failure on the part of the lessee in ensuring such delivery shall entitle the lessor to treat the Agreement of the lease revoked and recover from the lessee the amount advanced to the supplier together with the financial costs and shall have a full and paramount lien over all unencumbered assets belonging to the lessee and/or lying at its place for the purpose of recovery of the amount advanced and the financial costs.
(b) It is explicitly agreed notwithstanding anything contained herein in case of any misstatement or any other material adverse change including any change in the Government policies taking place after execution of this Agreement but before commencement date or complete draw down of the Lease assistance as a result of which, in the opinion of the lessor, the lessee ceases to be an acceptable risk then any further draw down may be discontinued by the lessor and the lessor shall have the option to exercise his right to terminate the Lease in respect of equipment already delivered.
(c) If delivery on or before the date of commencement of the rentals is not effected by the manufacturer/supplier, the lessor shall not be liable for any loss suffered by the lessee thereby. Lease rentals shall be deemed to commence from the date of the commencement of the rentals as specified in Schedule II. In the event that the lessee causes cancellation of or instructs the lessor to cancel the purchasee order/contract with the supplier of the equipment or the lessee shall refuse or be unable for any reason to accept delivery, the lessor shall be entitled to terminate the lease of the equipment and the lessee shall pay to the lessor on demand all costs, charges, expenses, damages incurred by the lessor as a consequence thereof.
(d) The purchase order for individual item of equipment under this Agreement shall be placed forthwith by the lessor at the instance of the lessee. In the event of undue delay on receiving such instructions for placement of orders beyond 60 days from the date of this Agreement the lessor shall reserve the right to review this Agreement.
(e) Taking delivery of and using the equipment shall be deemed to have been found the same complete, in proper order and condition and entirely fit for its purpose and the lessee does not and will not at any time have any claim against the lessor in respect of or arising out of such equipment.
(f) The lessor shall not be responsible for any direct, indirect or consequential loss to the lessee or third party arising from any delay in delivery and/or installation of or damage to the equipment either by the action of the manufacturer or otherwise.
(g) The sole responsibility for obtaining timely delivery of the equipment and the necessary clearances, statutory or otherwise, required for obtaining such delivery shall be of the lessee.
(h) The lessee has selected the equipment and notified itself that it is of the required size, capacity and manufacture, suitable for its purpose.
(i) The lessor agrees that the lessee shall be entitled to the benefits of the warranties provided by the manufacturer/supplier of the equipment. Any performance guarantee provided by the supplier shall be in the joint names of the lessor and the lessee and shall be enforceable by the lessor or the lessee or both of them. For this purpose, the lessor if so requested by the lessee, shall authorise the lessee for enforcing the performance by the supplier of the equipment for any warranties or performance guarantees relating to the equipment.
6. Ownership. (a) The sole and exclusive ownership of the equipment shall remain with the lessor and the lessee shall have no right, title or interest therein except as a lessee.
(b) No attempt shall be made by the lessee to capitalise the leased assets in the lessee’s Balance Sheet since the ownership of the asset undisputably rests with the lessor. The lessee shall not claim any relief by way of reduction, losses or grant available to the lessor as the owner of the equipment under the Income Tax Act 1961 or any other statute, rules, etc. that are issued by the Government of India or any statutory authority or not to do or be done any act, deed or thing whereby the lessor is deprived, either wholly or partly of any such relief by way of reduction, allowance or grants. The lessee shall at the end of each accounting year of the lessor provide to the lessor such information as it may require to claim relief by way of deduction, allowance or grant as the owner of the equipment under the Income Tax Act 1961 and comply with and observe all the terms and conditions to be complied with in the use and operation of the equipment so as to entitle the lessor to obtain such a relief.
7. Location. The lessee shall keep the equipment at all times in the lessee’s possession and control at the location as stated in Schedule I and shall not be removed therefrom without the lessor’s written consent provided that in the case of the equipment being a motor vehicle within the meaning of the Motor Vehicles Act, the operation of the equipment may be in such State or area as the lessor may from time to time approve in writing.
8. Imported equipment. In the event of any equipment being an Imported Equipment, the lessee warrants that without prejudice to the generality of the provisions contained in this Agreement, the following provisions shall apply:
(a) The lessee shall not contravene any provision of Import Control, Regulations, Foreign Exchange Regulations or any other Statute, rule and regulation to which the equipment and/or the lessee is subjected.
(b) The lessee shall obtain all consent, Import Licence or other licences, Reserve Bank approval or any other approvals and permission as are necessary for or in connection with the acquisition or Import of the Equipment, clearances from the relevant authorities, for execution, validity and enforceability of the Agreement and for the storage, installation use and operation of the equipment and undertakes to keep them effective and in force during the period of this Agreement and till the equipment is delivered back to the lessor in good order and condition.
(c) The lessee agrees and undertakes that in the event of the acquisition of the imported equipment being financed out of the foreign currency lines of credit or foreign currency loans (hereinafter referred to as fclc) availed of by lessor for this purpose, it shall:
(i) bear the entire exchange risk on the foreign currency funds utilised by the lessor out of the fclcs;
(ii) reimburse the lessor with all such expenses, charges as are required to be paid by the lessor in respect of fclcs to the Foreign Bank/Institution concerned;
(iii) observe and meticulously follow all the covenants in respect of such fclcs as may be advised by the lessor;
(iv) Execute all such documents, deeds, undertakings, etc. as may be required under the covenants of the fclc.
(d) It will be the obligation of the lessee to comply with all the terms, conditions and obligations of the Import Licence, including submission of reports and other requirements in that behalf to such authorities as may be required and shall also provide to the lessor all such informations as may be required to be furnished by the lessor to such authorities and as may be required in terms of the licence for the equipment. In default thereof the lessee shall indemnify the lessor for all claims and demands made upon the lessor by reason of such default.
9. Additional conditions in case of motor vehicles. The Clauses mentioned in this Agreement shall apply to the lease of a vehicle mutatis mutandis and to the extent they are not repugnant to the clauses herein and the following further clauses shall apply to the vehicle.
(a) The vehicle shall be registered as required under the Motor Vehicles Act 1988 in the name of the lessee as owner of the vehicle and the lessor’s name shall be registered therein as the financier making the lessee fully liable and responsible for all the obligations, liabilities and duties as provided under the said Act or under any other law or instrument pertaining to the ownership, use or maintenance of the vehicle.
(b) The lessee shall deliver as soon as may be after the registration of the vehicle certified copies of the registration papers, Insurance receipts, tax tokens and all other papers connected with the vehicle and continue to provide to the lessor certified copies thereof.
(c) In the event of the termination of the lease, or the lessor taking repossession of the vehicle, the lessee shall sign, execute, and deliver all such instruments, forms, applications and writings and shall do all such other acts, deeds and things as may be required by the lessor and for this purpose the lessee hereby irrevocably and unconditionally authorises the lessor that in the event of the lessee refusing or being unable to or failing to sign and deliver any of the aforesaid instruments, application forms or other writings as may be required by the lessor, the lessor shall be entitled without being obliged to do so to sign such instruments, forms, applications papers and writings for and on behalf of the lessee as a duly constituted attorney of the lessee.
(d) The lessee shall operate the vehicle only in the areas specified in the schedule or in such other place or places previously approved in writing by the lessor and only for lawful purposes and in a lawful manner.
(e) The lessee shall keep the vehicle in good repair and working condition and replace all such parts, accessories, tyres, tubes or other annexures as becomes obsolete, get damaged or unusable parts replaced.
(f) The lessor may make reasonable use of force to possess the vehicle in any of the events of defaults and the lessor may possess the vehicle wherever the vehicle may be or is believed to be whether with or without whatever is in or on the vehicle and the lessor hereby disclaims and the lessee hereby assumes the liability on account of loss or damage caused to any person or property because of such repossession.
10. Operation and maintenance. The lessee shall at all times keep and maintain at its cost the equipment in good operation condition and working order and repair the same whenever necessary and shall dutifully follow the equipment’s manufacturer’s recommendations as to use, service and maintenance thereof.
11. Markings. (a) On the equipment there should be maker’s names, marks plates and identifications and identification to show that the equipment is under lease from the lessor which shall not be removed or defaced in any manner whatsoever.
(b) The lessor’s Banker/Financial Institution or any other financier has rights to inspect the aforesaid equipment, to seize the equipment and to appoint receiver thereon. The lessee shall not do or cause to be done anything during the currency of the Agreement which will impede the exercise of such rights.
12. Insurance. (a) The equipment shall be kept fully insured by the lessee at its own cost for an amount equal to its full insurable value with an insurance company approved by the lessor and in the name of the lessor against all insurable risks and shall keep such insurance in full force and effect during the terms of this Lease Agreement. The name of the respective Bank/financial institution/any other financier/creditor as specified by the lessor shall be mentioned in the Insurance Policy as the hypothecatee of the equipment.
(b) Further, the lessee shall purchase and pay for policy under Public Liability Insurance Act 1991 and insure and keep insured all substances which have been declared to be hazardous under the notification issued from time to time under the Act or any rule framed thereunder or under any notification, clarification, modification or addendum thereto and which sustances are employed at or used in any of the lessee’s undertakings whether or not connected with the operations of the equipments. The Insurance Policy should be taken out in the name and for the benefit of the lessor and the bankers of the lessor or such other names as the lessor may advise in this regard. The lessee shall indemnify and keep indemnified the lessor from any suits, proceedings, actions, claims, demands and/or prosecution and/or the costs, charges and expenses in relation to the liability and obligation suffered by the lessor on account of any such hazardous substance or on account of failure of the lessee to purchase the Insurance Policy as aforesaid as also pay any cost or expenses related to the lessor’s defending any suit/proceeding action/claim/prosecution brought or launched against the lessor.
(c) If for any reason, the amount paid by the Insurance Company on a claim is less than the full insurance value of the equipment, then the lessee shall be liable to pay to the lessor the difference between the actual loss and the amount paid by the Insurance Company.
(d) (i) In case of a motor vehicle, the lessee shall have and keep at its own cost the same duly registered and have and keep the same insured against comprehensive risks including strike, riots and civil commotion, liability against passenger risks by a policy enuring to the benefit of both parties hereto;
(ii) The lessor agrees to permit the lessee to have the Registration under the Motor Vehicles Act 1988, any of the equipment in his own name provided that the lessee shall transfer the registration in the name of the lessor when the lease Agreement comes to an end or whenever required to do so by the lessor and especially when the lessee commits a breach of any of the conditions of this Agreement stated herein and the lessor is entitled to retake possession of the equipment.
(e) The lessee shall hand over to the lessor all Registration Certificates and policies of insurance or xerox copies thereof and pay promptly all premiums and stamp duty in respect thereof and promptly forward to the lessor all receipts evidencing payments thereof.
(f) In the event of any claim arising under the insurance hereunder the lessee shall give the lessor immediate written notice thereof and comply with all instructions of the lessor in connection therewith and the lessor shall be entitled to receive and retain to the exclusion of the lessee and without thereby divesting itself of the equipment or in the salvage thereof all moneys payable with respect to such claims.
(g) In the event the equipment is damaged and in the opinion of the lessor it is economic that such damage be made good, all insurance moneys payable under the said insurance may, if the lessor agrees, be applied in making good the said damage. If the equipment be destroyed or damaged to such an extent as to be in the opinion of the lessor incapable of economic repair then at the lessor’s sole discretion the insurance moneys payable under the said insurance shall be applied so far as possible in replacing the equipment with another equipment of similar type and quality. In such an event, the fresh equipment shall be deemed to have been leased out by the lessor under this Agreement and the lessee shall hold the same on lease subject to the terms and conditions as are contained in the Agreement. The lease of the equipment so sold, lost or destroyed will be deemed to have been terminated except in the case where the lessor elects to exercise its option as stated above. Without prejudice to the aforesaid right of the lessor in the event of such termination, the lessor shall also be entitled to recover from the lessee all sums as payable under this Agreement.
(h) The lessee shall insure the equipment against the usual risks during transportation of the equipment from the place of manufacture/delivery to the place of installation and any other transportation during the currency of the lease period.
(i) Any failure to recover the insurance money shall not relieve the lessee from its responsibility under this lease Agreement.
(j) On the lessee failing to furnish evidence of insurance within a period of seven days from the date of installation of the equipment the lessor may in its absolute discretion arrange an insurance cover as may be needed, and the cost of such insurance shall be forthwith reimbursed by the lessee.
13. Loss or damage. The entire risk of loss and damage to the equipment from any cause whatsoever shall be borne by the lessee. In the event of any such loss or damage the lessee shall at the option of the lessor replace at the lessee’s cost the equipment which is in the opinion of the lessor comparable. Such equipment shall, for all purposes thereafter, be the equipment hereunder and be the property of the lessor. Any moneys received in respect of insurance against loss and/or damage to the equipment shall, if the lessor so requires, be applied in or towards discharge of obligations of the lessee.
14. Inspection. The lessor and the Bank, Financial Institution or any other financier to whom the assets covered by this Agreement are hypothecated by the lessor shall have the right at all reasonable times to enter upon any premises where the equipment is believed to be and inspect and/or test the equipment and/or observe its use.
15. Fees. The lessee will comply with all relevant Acts, Rules, Regulations and Bye-Laws relating to the registration or licensing of the equipment relating to it or its use and will pay promptly all requisite fees and charges.
16. Payments by lessor. On failure by the lessee to pay any sum payable, the lessor may pay the same and recover such amount with compensation for overdue period at the same rate as failure to make any payment of rent hereunder.
17. Covenants. The parties agree and covenant that:
(a) the equipment is of a size, design, capacity and manufacture selected by the lessee;
(b) the lessee is satisfied that the equipment is suitable for its purpose;
(c) after inspection of the equipment the lessee has signed this Agreement relying entirely on its own judgment and not on any statement made by the lessor or the agents or servants of the supplier and no warranty of fitness or that the equipment is merchantable shall apply to the contract;
(d) the equipment is accepted by the lessee with all faults and defects;
(e) the lessor has not made and does not hereby make any representation or give any warranty with respect to the merchantability, condition, quality, durability or suitability of the equipment in any respect;
(f) the lessee has obtained all consents, licences, approvals as are necessary for or in connection with the execution, validity and enforcement of the Agreement and for the import, storage, installation, use and operation of the equipment and undertakes to keep them effective and in force during the period of this Agreement and carry out all such tests or inspection as may be required statutorily or otherwise till the equipment is delivered back to the lessor in good order and condition;
(g) the lessee undertakes to abide by all the conditions of any licence, permit or other rule applicable to the lessee’s business or the equipment;
(h) the lessee has satisfied itself about the lessor’s right to enter into the lease hereunder;
(i) the lessor and the lessee hereby confirm that their intent is that the equipment shall at all times remain the property of the lessor. The lessee shall not sell, assign, sublet, pledge, hypothecate, or otherwise encumber or suffer a lien upon or against the equipment or remove the equipment from the Factory or office or site as originally put to use or located, without the prior consent of the lessor in writing which consent the lessor agrees will not be unreasonably withheld;
(j) the lessee shall not sell, mortgage, charge, demise, sublet or otherwise dispose of any land or building on or in which the equipment is stored, used or operated or enter into any Agreement or arrangement to do any of the aforesaid acts without prior approval in writing of the lessor. The lessee shall in any event ensure by giving such notices that may be necessary and by obtaining confirmations in writing that such sale, mortgage, charge, demise, sub-letting or other dispositions, as the case may be, is subject to the rights of the lessor as the owner of the equipment to repossess the equipment at any time whether or not the same or any part thereof shall have become affixed to the said land or building and for that purpose to enter upon such land or building and reclaim and repossess the equipment lying thereat. The lessee shall obtain declaration and undertaking containing ‘no lien charge’ over the equipment and recognition of the right of access of the lessor to the equipment from such transferees;
(k) the lessor shall not be liable to the lessee for any liability, claim, loss, damage or expenses of any kind or nature;
(i) caused directly or indirectly by the equipment or any inadequacy thereof for any purpose, or any defect therein or by the use thereof; or
(ii) arising out of or in relation to any repairs, servicing, maintenance or adjustments thereto or to any delay in providing or failure to provide the same, or in relation to any interruption or loss of use thereof or any loss of business or any damage whatsoever and however caused.
(l) the lessor shall not be under any liability with respect to any statements regarding the lessee’s right or position in respect to any law relating to taxation or any other matter; and
(m) the lessee shall pay lease rent as specified in Schedule I during the lease period irrespective of whether the equipment is under repair or otherwise not working.
18. Indemnity. The lessee shall indemnify and keep indemnified the lessor at all times against and in respect of the following:
(a) Any loss by seizure of the equipment under distress, execution or other legal process or loss or destruction or damage to the equipment by fire, accident or any other cause, any claim or demand arising out of the import, storage, installation, use or operation of the equipment or any risk or liability for death or loss of life or limb for any person whether employee of the lessee or of third party or not or injury or damage to any property of the lessee, or of any third party and hold the lessor harmless against all losses, damages, claims, penalties, expenses, suits or proceeding of whatsoever nature made, suffered or incurred consequent thereupon and for this purpose take out such workmen’s compensation/third party insurance cover as may be necessary, customary or in practice in the business carried out by the lessee or as may be directed by the lessor in that behalf. The lessee undertakes not to do or omit to do any such act which may result in seizure and/or confiscation of the equipment by the Central or State Government or local authority or any public officer or authority under any law for the time being in force and in the event of seizure or confiscation of other equipments belonging to the lessee and coming in the process of such seizure or confiscation to keep the leased equipment separate from the block or similar or other assets belonging to the lessee.
(b) Any claim arising out of the use, operation or keeping of the equipment and depletion in value as a result of excessive use; and
(c) Any liability or additional liabilities the lessor may incur under the Income-tax Act or under any other law by reason of use of the equipment by the lessee for any purpose other than that stated by the lessee to the lessor.
(d) Any liability arising out of any and all Sales Tax payable on lease rentals as and when applicable to the lease.
(e) The lessee will be liable for all violation of statutory requirements all risks and liability for the equipment, for the use, operation and storage thereof and for injuries to or death of persons and damage to property howsoever arising from or incidental to such use, operation or storage whether such injury or death of persons be of agents or employees of the lessee or lessor or of third parties and such damage in property be of the lessee or of others. The lessee will save and hold the lessor harmless against all losses, damages, claims, penalties, liabilities and expenses including legal costs howsoever arising or incurred because of or incidental to the equipment or the use, operation or storage or alleged use operation or storage thereof.
19. Assignment. During the lease period the lessee shall not agree, attempt, offer or purport to sell, assign, pledge, charge suffer attachment, mortgage, lend or let on hire or otherwise part with or attempt to part with the possession of the equipment or its interest therein.
20. Automatic time related upward revision of amounts due. (a) Where any sums payable by the lessee hereunder is payable on the specified date and is paid by the lessee after such date, the difference between the date of payment and the specified date shall be taken as the overdue period.
(b) Where any sum payable by the lessee hereunder is payable on demand by the lessor and is paid by the lessee after three days from the date of demand the difference between the date of payment and the date three days after the date of demand shall be taken as the overdue period.
(c) Where any sum payable by the lessee hereunder does not fall under cls. (a) and (b) above and is payable without demand by the lessor and is paid by the lessee after three days from the date on which the such liability arises, the difference between the date of such payment and the date three days after the date on which the lessee first becomes aware of such a liability shall be taken as the overdue period.
(d) All sums paid by the lessee having an overdue period shall automatically stand increased by rupee one per thousand per day with monthly rests and the lessee shall pay such sums as increased hereunder and any sum payable hereunder but paid without overdue charge shall be deemed to be unpaid to the extent of the automatic increase provided hereunder.
(e) The lessee understands and affirms that the provisions for automatic increase of any sum paid with an overdue period:
(i) is an essential part of the sums payable hereunder and its non-payment shall be taken as a breach of an essential condition of the lease;
(ii) is a genuine pre-estimate of the commercial loss of opportunity and other damages suffered by the lessor on account of untimely payment of sums payable hereunder;
(iii) is capable of variation by a written notification by the lessor in case of a continuing recurring or persistent default in payment of sums hereunder and the lessee agrees not to call in question lessor’s discretion in treating the lessee’s default as falling under this clause.
21. Fixture to immovable property. Plants and machineries have often to be fixed to the earth.
22. Warranty. The lessee warrants and represents that every statement made and every particulars given by it in relation to the transaction effected by the lease is true and correct.
23. Events of default and termination. On the occurrence of any of the events specified below, the lessor shall be entitled, without prejudice to any other right or remedy which the lessor may have under this agreement or otherwise in law and notwithstanding any subsequent acceptance of rental or indulgence shown to the lessee, to terminate this lease:
(a) If the lessee fails to pay the rentals on the dates and in the manner stipulated in the respective schedule(s) or other monies payable hereunder within 14 days of their becoming due, whether demanded or not or if a cheque, bill, promissory note or other instrument issued, made, drawn or accepted by the lessee for discharge of the lease rentals is returned unpaid for any reason whatsoever when presented for payment.
(b) If the lessee fails or neglects to observe or perform or commits or allows to be committed a breach of any of the terms, conditions, provisions or stipulations of this agreement on its part to be observed and performed (other than failure to pay any sum hereunder when due and payable) and if such breach is remediable, fails to remedy the same within 14 days of notice by the lessor specifying such default and requiring such default to be remedied.
(c) If the lessee fails or neglects to observe or perform or commits or allows to be committed breach of any of the terms, conditions or regulations in respect of the use, operation or keeping of the equipment imposed by any authority or by the manufacturer.
(d) If the lessee passes any resolution for its winding up or a petition for winding up be presented against it by any of its members or creditors or otherwise or if a receiver is appointed for the whole or part of the assets, properties or undertakings of the lessee or enters into any composition with its creditors.
(e) The following changes shall be regarded as material changes with reference to the financial year immediately preceding the one in which this agreement commences which will entitle the lessor to terminate the agreement and take possession of the equipment:
(i) decrease in net worth, that is, the aggregate of paid up capital and the reserves (including credit balance in P and L Account and premium but excluding unrealised revaluation reserves) by 40% or more;
(ii) decrease in return on investment, that is profits before tax, interest and lease rentals, to long term funds including assets financed under finance lease to the extent not repaid consecutively for two financial years, by 40% or more;
(iii) decrease in turnover excluding stock adjustments and excluding extraordinary or non-recurring items consecutively for two financial years by 40% or more;
(iv) decrease in debt (including obligations under finance lease) service coverage ratio by or more than 20% consecutively for two financial years of the lessee.
(f) On failure of the lessee to provide to the lessor cheques, promissory notes or other instruments as required by the lessor, whether post dated or otherwise for discharge of the lessee’s obligations hereunder, or having provided to the lessor any such instrument the lessee, by any act or omissions on its part impedes the possibility of such instrument being honoured when presented for payment.
24. Remedies. On the occurrence of any event of default and at any time thereafter, the lessor shall declare all sums due and to become due hereunder for the full term of the lease including any renewal thereof immediately due and payable and on failure of the lessee to make payment of the sum due within 14 days thereof the lessor may in its sole discretion do any one or more of the following:
(a) upon notice to the lessee terminate the Agreement;
(b) demand that the lessee return all equipment to the lessor at its own cost and upon failure of the lessee to do so within 14 days from the date of demand the lessor shall be entitled to remove or repossess the equipment by itself, its servants or agents, enter upon the land, building or premises where the equipment is situated or is reasonably believed by the lessor to be situated for the time being and for such entry, the lessee hereby gives to the lessor an irrevocable licence, and detach and dismantle and take away the same;
(c) sell the equipment by public auction or private sale with or without notice to lessee or otherwise dispose of, hold, use, operate, lease to others such equipment;
(d) without prejudice to and in addition to the lessor’s right provided herein the lessor shall also be entitled to recover from the lessee:
(i) the entire amount of the rental already fallen due and in arrears together with any charges due;
(ii) the entire amount of lease rentals for the unexpired period of lease;
(iii) all other sums which may have become due along with overdue charges and other sums that may become due;
(iv) the cost of all repair and maintenance of the equipment and all expenses incurred by the lessor in repossessing the equipment and in enforcing its remedies;
(v) a default premium equal to 10% of the amount mentioned in cls. (i) and (ii) above.
Provided that the estimated market value and in case the equipment is sold by the lessor then its net sale proceeds shall be allowed as a deduction from the aggregate amount calculated under this clause.
The parties hereto agree and record that amounts to be paid by the lessee to the lessor as aforesaid have been bona fide and satisfactorily estimated to be the proper and reasonable amount that may be suffered by the lessor as and by way of liquidated damages and are not as deterrent or in terrorem.
All rentals or other sums paid by the lessee herein shall be deemed to have been appropriated against the liabilities of the lessee hereunder immediately upon payment thereof.
In addition the lessee shall be liable to all legal fees costs and other expenses resulting from the foregoing defaults or the exercise of the lessor’s remedies including repossession of any equipment. No remedy referred to herein above is intended to be exclusive but each shall be in addition to any other remedy available to the lessor at law.
25. Inability to retake possession. If the lessor upon the termination of the lease be unable to recover possession of the equipment then without prejudice to the other amounts payable by the lessee hereunder, the lessee shall be liable to pay and pay to the lessor by way of liquidated and ascertained damages a sum equal to 25% of the cost of the equipment and shall continue to pay every month to the lessor during the unexpired portion of the lease twice the monthly rent payable as per Schedule I till such time as the lessor is able to get possession of the equipment.
26. Residual value. Having regard to lessee’s use of equipment under these presents, the residual value hereof at the expiration of the terms of the lease hereby granted shall not be less than Rs. 55,000.
27. Collateral security. On execution of these presents the lessee shall place the documents/certificates mentioned in Schedule II hereunder as and by way of collateral security with the lessor to ensure due compliance with the terms and conditions of the lease including the return of the equipment at the end of the lease period and thereupon, the lessor shall be deemed to be holding beneficial interest in the properties represented by the documents/certificate lodged with the lessor which the lessor shall hold, until complete satisfaction of the lease terms.
28. Prepayment. The lessee may pay and the lessor shall accept any payment hereunder before they are due and allow in respect thereof such concession on account of advance payment as the lessor may think fit. The lessee may foreclose the lease before the expiry of the term of the lease by paying to the lessor all the sums referred to above, and delivering the equipment to the lessor in good working order and condition, reasonable wear and tear excepted.
29. Imposts, taxes and other charges. The lessee shall during the period of this agreement and till the equipment is delivered back to the lessor in good working order and condition, bear all imposts, charges, taxes and penalties as may be levied from time to time by the Government or any other authority pertaining to or in respect of this equipment (including purchase tax or differential tax or other sums in case the lessor has concessional rate of tax), any incremental duty or other tax payable with reference to the purchase or acquisition of the equipment or this transaction. The lessee shall reimburse to the lessor all taxes (including sales tax), duties or other sums imposed now or hereafter may be imposed on the equipment or on this transaction or on the rentals hereunder.
30. Time. Time shall be of the essence of this contract in so far as it relates to performance of obligations.
31. Lessor’s right to assign the receivables, etc. (a) The lessor may transfer, assign, hypothecate or create any lien upon or in any other manner deal with or encumber the equipment covered under this lease or any interest therein in favour of the lessee’s Bank(s)/Financial Institution(s) or any other financier or may assign, transfer to any person any right or any interest in the lease or any part thereof on notice to the lessee and the consent of the lessee to such assignment, hypothecation, encumbrance or transfer, if any, is hereby given and any notice to the lessee is hereby waived by the lessee.
(b) In case the lessor has obtained finance against the equipment from any bank(s) the lessee does hereby agree to:
(i) assignment by lessor all or any part of the lease rental in favour of the bank(s) and to make payment of such lease rentals strictly to the bank(s) if so desired by the lessor;
(ii) to allow the lessor’s Banker to cause any inspection of the equipment to be made at any time and from time to time during reasonable hours on any day during the continuance of the Agreement on prior notice;
(e) The lessor may on notice to the lessee transfer, hypothecate or mortgage the equipment and the rights attached thereto under the Agreement whether in whole or in part and the lessee shall have no right to raise any objection thereto.
32. Disruption of work to be notified. The lessee will inform the lessor promptly in the event of disruption of work/go-slow in its organisation of a continuous period exceeding 15 days due to whatsoever reasons.
33. Modification of rental payments. In the event of the Bank lending rates chargeable to the lessor by its Banker(s) and/or Financial Institution and other financier is increased the lease rentals reserved hereunder are liable to upward variation. The lease rentals will stand increased by Rupee one per month for every Rs. 1,000 of lease rental for every percentage of increase in the said bank lending rate. A letter from any of the lessor’s Banker/Financial Institution indicating the revised rate of interest consequent to any announcement of increase in interest rates shall be final and conclusive evidence of the extent and the date of such increase.
The lease rentals hereunder are based on the assumption that the lessor shall be entitled to claim depreciation based on the acquisition cost of the equipment at the rate specified in respective Schedule for the whole of the period of the lease. Should the lessor not be able to claim the said benefit on account of any change in law, or rules or for any act or omission of the lessee or for any other reason whatsoever either for the whole or any part of the lease period and at all those rates, the lease rental specified in the respective schedule shall stand altered so as to compensate the lessor for the loss in the tax benefits thereby and maintain the post-tax implicit rate of return to the lessor as would have been available to the lessor had the depreciation allowance been granted as stipulated in the respective schedules, all factors other than the depreciation allowance being kept constant for that purpose.
34. Consequence of the breach of contract. If the lessee commits a breach of any of the terms and conditions of this Agreement, the lessor shall be entitled to claim damages/repossession of the equipment and/or any other appropriate remedy.
35. Warranties. The lessee shall be entitled to the benefit of the warranties provided by the manufacturer/supplier of the equipment. Any performance guarantee provided by the supplier shall be in the joint names of the lessor and the lessee and shall be enforceable by the lessor or the Lessee or both of them.
36. Sale and lease back. (a) The lessor has bought the equipment on specific requisition from the lessee and the actual cost of the equipment has been negotiated and ascertained by the lessee which the lessor has paid/shall pay at the lessee’s instructions.
Provided that where the lessee himself is the supplier/manufacturer, the cost of the equipment to the lessor shall be the fair market price of the equipment in an arms length transaction. If the cost transpires to be more than fair market value of the equipment the lessor may, at his sole discretion, have either of the following recourses against the lessee:
(b) If the fair value of the equipment or part thereof supplied by the lessee is substantially less than the cost of the equipment the lessor may treat this agreement as having been entered into with a basic mistake of fact and on misrepresentation by the lessee, and may treat the lease as terminated and forthwith demand upon the lessee to pay up all the sums as stated in the agreement hereof, along with any other or further damages that the lessor might have suffered as a result of such a misrepresentation, including any loss of the benefits and all the consequences arising therefrom; or
(c) The lessor may treat the lease to have been terminated to the extent the cost of the equipment or the part thereof supplied by the lessee exceeds the fair value of asset so established, and ask the lessee to immediately pay up the lease rentals proportionate to such excess along with any other or further damages that the lessor might have suffered as a result of such a misrepresentation, including any loss of tax benefits and all the consequences arising therefrom; or
(d) The lessor may claim appropriate damages, by revision of rentals or otherwise and/or security deposit to cover himself to the extent of such excess and continue the lease in the status quo ante.
37. Waiver—must be express. The rights and powers of the lessor under this Agreement shall remain in full force notwithstanding any indulgence given forbearance or neglect or delay in the enforcement thereof by the lessor. The lessor shall not be deemed to have waived any of the lessor’s rights or any provisions of this Agreement or any notice given hereunder unless such waiver be in writing signed by the lessor and no waiver by the lessor of any breach by the lessee of this Agreement shall be deemed a waiver of any continuing or recurring breach.
38. Indulgence is not waiver. The failure of the lessor to insist upon the punctual performance of any of the obligations of the lessee hereunder or to exercise of any right or remedy available to the lessor, under this Agreement or to require payment from or by the lessee, when due or any sum owing hereunder or any extension of credit or any forbearance on the part of the lessor shall not constitute a waiver by the lessor of any subsequent or continuing default by the lessee hereunder nor shall the same prejudice affect or restrict the rights and powers of the lessor hereunder.
39. Renewal of lease. Subject to the lessee punctually observing and performing the terms covenants and conditions of this Agreement and unless the lessee is in default the lessee shall at the discretion of the lessor have an option to renew the lease after expiry of the present agreement by efflux of time for such further period on such rental and such other terms as would be decided mutually by the lessor and the lessee.
40. Affirmation as to statement made by parties. The parties herein declare and represent that every statement and representation made and every particular given in relation to this transaction are true and correct and by execution hereof, the respective signatories hereby certify that they have read this agreement including the Schedules hereto and that they are duly authorised to execute the agreement on behalf of the respective parties.
41. Service of notices. Any notice by one party to the other shall be in writing and posted to the party’s address first above-written. Any change in the address of any party shall be notified to the other by Registered Post.
42. Financial Information. The lessee shall furnish the lessor during the continuance of this Agreement its latest audited Balance Sheet and Profit and Loss Account together with all notes and reports attached to the same, as and when they are ready and such other statements of accounts and financial statements as may be requested by the lessor from time to time.
43. Guarantee. In consideration of lessor agreeing at the requests of the guarantor to lease out the equipment to the lessee, the guarantor guarantees to the lessor the due observance and performance of all obligations of the lessee and to pay on demand any money due under this Agreement and not paid by the lessee either by way of lease rent, residual charges, collection expenses, expenses on repossession, garage rentals, costs of repairs and replacement, compensation charges for the late payments, costs of legal proceedings, damages and any other charges. The guarantor agrees that any time granted to lessee or any indulgence shown to it in respect of this Agreement either in the shape of releasing to the lessee the equipment after detention, seizure, or in any other manner, shall not prejudice the lessor’s rights or release the guarantor from his guarantee which shall be continuing guarantee and his liability will be co-extensive with that of the lessee and that it shall not be necessary for the lessor to give notice to the guarantor for any defaults committed by the lessee or any concession or indulgence shown to the lessee by the lessor. The obligation of the guarantor under this guarantee shall be continuing and irrevocable.
The guarantor declares that no charge has been created on the lease equipment by the lessee for giving of this guarantee and the guarantor agrees that he will not so long any moneys remain outstanding take any such security in respect of the guarantor’s liability hereunder.
44. Variation. This Agreement represents the entire agreement of lease between the parties hereto and shall be capable of variation only if agreed upon in writing by a note of amendment signed by and on behalf of the lessor and the lessee.
45. Place for payment. All monies due and payable by the lessee to the lessor under these presents shall be paid only at the corporate office of the lessor or such other place as the lessor may designate by cheque or bank draft drawn in favour of the lessor on a scheduled bank and shall be so paid as to enable the lessor to realise at par on or before the due date. Credit for all payments by cheque/bank draft will be given only on the realisation thereof.
46. Arbitration. Any dispute or difference arising out of or in connection with the agreement between the parties including any dispute or difference relating to the interpretation of the agreement or any clause thereof shall be referred to the sole arbitration of Mr. XY with summary powers and the provisions of the Arbitration and Conciliation Act 1996 and rules framed thereunder and any amendment thereto from time to time shall apply. No objection shall be taken on the ground that the arbitrator so appointed is an employee of the lessor or is in any way associated with the lessor. It is made clear that the venue of Arbitration Proceedings will be the sole discretion of the Arbitrator and no objection shall be entertained from any party in this regard. The award of the Arbitrator shall be final, conclusive and binding on all the parties. The Arbitrator shall be competent to decide whether any matter of dispute or difference referred to him falls within the purview of arbitration as provided for above and/or any matter relating to arbitration comes under the Arbitration and Conciliation Act 1996.
The award shall be made in writing within four months after entering upon the reference or within such extended time as agreed upon by the parties.
The Arbitrator shall be entitled to proceed summarily and in a summary manner.
The Arbitrator shall have power to order and direct either of the parties to abide by, observe and perform all such directions as the Arbitrator may think fit having regard to the matter in dispute before him. The Arbitrator shall have all necessary powers and may take such evidence oral and/or documentary, as the arbitrator in his absolute discretion thinks fit and shall be entitled to exercise all powers under the Arbitration and Conciliation Act 1996 including admission of any affidavit as evidence concerning the matter in dispute before him.
The Arbitrator shall be at liberty to appoint, if necessary, any accountant or engineer or other technical person to assist him, and to act on the basis of the opinion, if any, taken.
The parties hereby agree that the Courts in Calcutta shall have jurisdiction to entertain any application or other proceedings in respect of anything arising under this Agreement and any award made by the sole Arbitrator hereunder shall be filed in the concerned court in the city of Calcutta only.
Provided however that if the lessor apprehends that the lessee may allocate or charge or dispose of the equipment or may cause damage to the equipment, the lessor is at liberty to seek redress in a Court of Law under the said Act.
47. Court of jurisdiction. (a) This Agreement and the terms, covenants and conditions herein contained have been negotiated by and between the Parties hereto at the lessee’s Office at 6 G.K. Street, Calcutta and the Lease Agreement has been concluded at the lessee’s said office and executed by the lessor, lessee and the guarantor at 6 G.K. Street, Calcutta.
(b) Subject to the arbitration as aforesaid it is agreed between the Parties that Courts in Calcutta shall have jurisdiction in respect of any matter, claim or dispute arising out of or in any way relating to this Agreement.
Signed, sealed and delivered by the
lessor at Calcutta in the presence of:
…………………
………………… Calcutta
Signed, sealed and delivered by the
lessee in the presence of:
…………………
………………… Calcutta
Signed, sealed and delivered by the
guarantor in the presence of:
…………………
………………… Calcutta
Schedule I
To Lease Agreement Dated ………………
1. Fixed non-cancellable period : …………. …….months from the commencement date of the lease
2. Renewal : As may be opted by the lessee
3. Lease management fee : …….…………% of the asset cost/ Rs. ……………………….
4. Contingency deposit/Sales tax : At applicable rates (to be borne by lessee) ………… (included as part of rentals as on actuals)
5. Security deposit : ………………………………………
6. Interest on security deposit : ………………% p.a. ……………
7. Collateral security : ……………………………………
8. Depreciation allowance : …………………………………..…
as per I.T. Act
9. Assured residual value at the
end of the primary lease period : …………………………………..…
10. Sanctioned amount : Rs. …………………………………
11. Drawdown periods : …………………………………..…
Sd. Sd. Sd.