LOCK IN PERIOD

Terms in an agreement prescribing for a time period

within which any one of the contracting parties or either
of the contracting parties cannot terminate the contract is
known as a lock-in clause. If a contracting party
terminates the contract within the lock-in period then
such clause claims that the breaching party has to pay
the rent for the remaining of the lock-in period, even
though he would not be using the licensed premise
anymore as a result of the termination of the contract.

Things that are generally specified in a lock-in clause:

 duration of the lock-in period
 remedy in case of breach of the lock-in
commitment
 notice period (to give a reasonable time for
relocation to the licensee or, to give time to the
licensor to select a suitable licensee for his property)
If there is a notice period of 3/4 months in the
agreement, then after the notice of termination of
the agreement, the licensee has to pay the rent for
subsequent 3 months from the notice, even if he
hands over the possession of the licensed place
before completion of the 3 months of notice period.
This time period has to be reasonable and the time
period may vary depending on the use of the
 licensed premise. If the claim is unreasonable to
burden the licensee then such claim is not
enforceable in the court of law.

In the case of ‘EXPRESS NETWEB SOLUTIONS PRIVATE LTD. V IVK

MOBILE PVT. LTD’ , The petition under Section 34 of the Arbitration
and Conciliation Act, has been filed by the petitioner challenging the
Arbitral Award dated 29.08.2014 passed by the Sole Arbitrator
adjudicating the disputes that have arisen between the parties in
relation to the Lease Deed dated 11.08.2011. The lease period agreed
upon was for three years commencing from 19.08.2011. Clause 2.2 of
the Lease Deed provided for a restriction on the right of respondent to
terminate the Lease Deed until the expiry of initial three years period,
which was prescribed as the Lock-in period. The respondent, upon
change of its management sought to terminate the Lease Deed and
with this intent sent a notice dated 28.02.2013 seeking termination of
the Lease Deed with effect from 31.05.2013. The petitioner claimed
that the lease cannot be terminated during the Lock-in period and is
liable to pay the lease rental for the unexpired period of the Lock-in
period. A Sole Arbitrator was appointed by this Court and the Arbitrator
noted that there is no term in the Lease Deed which imposes any
liability upon the respondent to pay the lease rental for the balance
Lock-in period. The Arbitrator further held that the nature of the claim
of the petitioner was that of damages for breach of the contract and as
the petitioner had failed to lead any evidence in support of such claim,
the claim could not be granted.