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SUPREME COURT OF INDIA
INDIRA BANERJEE, C.T. RAVIKUMAR, JJ.
Brij Raj Oberoi – Appellant
Versus
The Secretary, Tourism and Civil Aviation Department & Anr. – Respondents
Civil Appeal Nos. 5509-5510 of 2022 [Arising out of S.L.P. (C) Nos. 19520-19521 of 2021]
Decided On : 18-08-2022
Arbitration and Conciliation Act, 1996 – Section 11 read with Section 10 of Commercial Courts Act, 2015 – Appointment of Arbitrator – Clauses in a lease deed cannot be read and construed in isolation – Dispute arising out of non-renewal of lease is clearly arbitrable – Arbitration clause cannot be rendered otiose by refusal of Respondent State to renew lease – Respondent State may have formulated a policy for encouraging self-employment of local youth who are duly qualified and competent to run hotel – Such policy decision cannot impact an existing agreement with a renewal clause – All disputes between parties to lease with regard to renewal and/or non-renewal, period of renewal and quantum of rent would have be decided by Arbitrator – Issue of arbitrability of dispute over non-renewal of lease is within realm of Arbitral Tribunal/Arbitrator – Division Bench fell in error in rejecting application of Appellant under Section 11(6) of 1996 Act for appointment of Arbitrator – Impugned judgment and order set aside – Former Chief Justice of Gujarat High Court and Former Chairman of Sikkim Law Commission appointed Arbitrator to adjudicate disputes between parties. (Paras 14, 15, 18, 19 and 20)
Facts of the case:
Present appeals are against a common judgment and final order dated 18th November 2021 passed by the High Court of Sikkim at Gangtok allowing Arbitration Appeal No.02 of 2021 filed by the Respondents, setting aside the impugned order dated 31st May 2021 passed by the Commercial Court on an application of the Appellant under Section 9 of Arbitration and Conciliation Act, 1996 and also dismissing Arbitration Petition No. 02 of 2021 filed by Appellant under Section 11 of 1996 Act for appointment of an Arbitrator.
Findings of Court:
The order of status quo passed by this Court shall continue for a period of three months from today or until further orders of the Arbitral Tribunal, whichever is earlier.
Result : Appeals allowed.
JUDGMENT :
Indira Banerjee, J.
Leave granted.
2. These appeals are against a common judgment and final order dated 18th November 2021 passed by the High Court of Sikkim at Gangtok allowing Arbitration Appeal No.02 of 2021 filed by the Respondents, setting aside the impugned order dated 31st May 2021 passed by the Commercial Court on an application of the Appellant under Section 9 of the Arbitration and Conciliation Act, 1996, hereinafter referred to as “the 1996 Act”, and also dismissing Arbitration Petition No. 02 of 2021 filed by the Appellant under Section 11 of the 1996 Act for appointment of an Arbitrator.
3. The State of Sikkim, impleaded as Respondent No.2 in this appeal, is the absolute owner of the property bearing Plot No.309, Paljor Stadium Road, Gangtok, East Sikkim, known as Norkhill Hotel, hereinafter referred to as the ‘said property’ along with its land, buildings, annexe, servants quarters and garages.
4. By a registered deed of lease dated 9th December 1997, the Respondent State leased out the said property to the Appellant on terms and conditions stipulated in the said deed of lease. Some of the terms and conditions of the Deed of Lease are set out hereinbelow for convenience:-
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2. The consideration of the lease of the premises fully described in the schedule I below, the lessee undertakes to pay to the lessor the sum of Rs.30.00 lakhs (Rupees Thirty lakhs) only per annum with a 10% (ten percent) increase compounded every three years in quarterly installments of Rs.7,50,000/- (Rupees Seven Lakhs Fifty Thousand only) payable by the 7th April, 7th July, 7th October and 7th December of each year and the first installment shall be payable on the date of the execution of this deed.
3. That the initial terms of the lease under this deed shall be a period of twenty four years from 01.06.1997 to 31.05.2021 (First day of June one thousand nine hundred and ninety seven to the thirty first day of May two thousand and twenty one) and shall be renewable for such acceptance of the lessee’s offer in terms of clause 4(xiii) hereinafter.
4. The lessee covenants with the Lessor as follows:
(i) The lessee shall pay the lease amounts on the dates aforesaid in clause 2 hereinabove.
(ii) The lessee shall pay the increased lease amounts at the rate of 10% (ten percentage) to be compounded every three years as follows:
(a) from 01.06.2000 to 31.05.2003 Rs. 33,30,000.00 per annum.
(b) from 01.06.2003 to 31.05.2006 Rs. 36,30,000.00 per annum.
(c) from 01.06.2006 to 31.05.2009 Rs. 39,93,000.00 per annum.
(d) from 01.06.2009 to 31.05.2012 Rs. 43,92,300.00 per annum.
(e) from 01.06.2012 to 31.05.2015 Rs. 48,31,530.00 per annum.
(f) from 01.06.2015 to 31.05.2018 Rs. 53,14,683.00 per annum.
(g) from 01.06.2018 to 31.05.2021 Rs. 58,46,151.30 per annum.
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(v) The lessee shall keep the leased premises in good order and condition and in the same condition in which it was handed over the lessee with a reasonable wear and tear for which he shall not be entitled to make any claim subsequently.
(vi) The lessee shall comply with all the provisions of the relevant enactments and regulations thereunder and with any other obligations imposed by the local laws in regard to the lease premises.
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(x) The lessee shall upon termination and/or expiry of the lease quit and vacate the leased premises.
(xi) The lessee shall give three months notice in writing of his intention to terminate this agreement if he wants to vacate the premises before the expiry of the lease period. If such notice is given the lessee shall be entitled to vacate the leased premises on expiry of the term of notice.
(xii) The lessee if he fails and neglects to pay two consecutive quarterly lease amounts within the period situated in clause 2 the lessee shall become a defaulter in payment of the lease amount and on and from the eight day of such second and consecutive defaulting month, the lessee shall be deemed to be a trespasser in the demised premises.
(xiii) The lessee shall in the last year of the
(1) Dispute arising out of non-renewal of lease is clearly arbitrable – Arbitration clause cannot be rendered otiose by refusal of Respondent State to renew lease.(2) Clauses in a lease deed cannot b....
A lease renewal requires an accepted proposal for arbitration; without acceptance, no arbitrable disputes exist, undermining the basis for court intervention.
The main legal point established in the judgment is that for a stipulation to be considered an arbitration agreement under Section 8 of the Arbitration and Conciliation Act, 1996, it must fulfill the....
The arbitrator must address allegations of fraud and collusion affecting the enforceability of a contract; failure to do so results in an award being set aside for patent illegality.
The disputes regarding recovery of lease amount were found to be arbitrable and did not fall under the exclusive jurisdiction of the Rent Controller.
The disputes related to premature termination of leases and non-payment of rent were found to be arbitrable, and the claims for recovery of arrears of lease amount did not fall under the Rent Act, 19....
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