The court affirmed that an arbitral award can only be set aside for patent illegality, emphasizing that lessor maintained obligations under the lease despite lessee's claims. Termination due to non-payment was valid.

JUDGMENT :

VIBHU BAKHRU, CJ.

INTRODUCTION

1. The appellant has filed the present appeal under Section 37 (1)(c) of the Arbitration & Conciliation Act, 1996 [A&C Act], impugning the judgment dated 07.02.2025 [impugned judgment] passed by the learned Commercial Court in Com.A.P.No.155/2023 captioned ''Godolphine India Private Limited v. UM Projects LLP and another". The appellant [hereafter also referred to as 'the lessee'] had filed the said application under Section 34 of the A&C Act, seeking to set aside the arbitral award dated 09.10.2023 ['impugned award'] rendered by the Arbitral Tribunal comprising of a sole arbitrator ['Arbitral Tribunal'].

2. The impugned award was rendered in the context of disputes arising between the parties in connection with the lease of premises measuring 30,350 square feet, which is a part of the property bearing New Municipal No.39 [BBMP PID No.76-1-39] known as 'United Mansions' situated at Mahatma Gandhi Road, Bangalore, along with nine car parking spaces in the basement of the said building [' the demised premises'].

3. The demised premises was leased to the lessee by the respondent [hereafter also referred to as 'the lessor'], in terms of a Lease Deed dated 10.06.2020 [the Lease Deed]. The lease was for a period of twenty-five years. However, the same was prematurely terminated by the lessor, on account of failure on the part of the lessee to pay of rent and Common Area Maintenance [CAM], for a period of three months.

4. The lessee disputed the termination of the lease and its liability to pay rent, alleging failure on the part of the lessor to maintain the demised premises and to carry on the necessary repairs. According to the lessee, the same was an obligation required to be discharged by the lessor. The lessee also claimed damages on account of the alleged breach of the Lease Deed on the part of the lessor.

5. The Arbitral Tribunal, inter alia, found that the lessor's termination of the Lease Deed was valid and in accordance with the terms of the Lease Deed. The Arbitral Tribunal also rejected the lessee's contention that the lessor had failed to maintain the leased premises. The lessee's claim for damages was accordingly, rejected. The Arbitral Tribunal awarded an amount of Rs.3,06,80,000/- in favour of the lessor on account of lease rent and the applicable GST. In addition, the Arbitral Tribunal held that the lessor would also be entitled to arrears of occupation charges and maintenance charges from the date on which the same became due. The Arbitral Tribunal also awarded interest at the rate of 18% per annum on the amount recoverable from the lessee. Additionally, the Arbitral Tribunal awarded costs towards legal and miscellaneous expenses quantified at Rs.50,00,000/- and the Arbitrator's fee and expenses paid by the lessor.

6. Aggrieved by the impugned award, the lessee preferred an application under Section 34 of the A&C Act to set aside the impugned award, inter alia on the ground that it was vitiated by patent illegality. The learned Commercial Court did not accept the said contention and accordingly, dismissed the said application in terms of the impugned order. The principal question to be addressed is, whether the impugned award is liable to be set aside on the ground that it is vitiated by patent illegality.

PREFATORY FACTS

7. The lessee is a Company incorporated under the provisions of the Companies Act, 1956 and its registered office is located in Ahmedabad, Gujarat. The lessee claims that it is primarily involved in the business of real estate including buying, selling, renting and operating self-owned or leased buildings and dwell