The court emphasized the admissibility of unregistered documents and the parties' actions based on those documents, ultimately upholding the respondent's claim based on the memorandum of understanding.

1. The challenge in this petition under Section 34 of the Arbitration and Conciliation Act, 1996 (‘Act’) by Fitness First India Private Limited (‘FFIPL’) is to an Award dated 12th June, 2015 passed by the sole Arbitrator in the disputes between the parties.

2. The background of the present petition is that the Petitioner and Respondent entered into a lease deed dated 13th August, 2007 whereby the Petitioner took on rent from the Respondent landlord half of Flat Nos. N-61 and N-62 on the First Floor and half portion of N-94 and N-95 on the Second Floor in Munshi Lal Building, Connaught Place, New Delhi for a period of nine years extendable by three years.

3. In terms of the said lease deed which was a registered lease deed, the rent was Rs. 195 per sq. ft. per month for the first two years. Thereafter, the rent payable was increased to Rs. 200 per sq. ft. per month for one year, to Rs. 236 per sq.ft. per month for the next 3 years and to Rs. 278 per sq. ft. per month for the next 3 years. In terms of Clause 3 there was a 'lock in' period of five years from the commencement of the lease. Under Clause 4 of the lease deed there was an option to renew the lease after nine years. Clause 10 provided for an interest-free refundable security deposit (‘IFRSD’) which was to be refunded within seven days from the date of handing over of the vacant possession. Under Clause 24, an option was given to the lessee i.e., the Petitioner herein to terminate the lease after giving three months notice or payment of rent for the notice period. The date of commencement of the lease was 27th December, 2007.

4. The Petitioner wrote to the Respondent requesting for reduction of the rent on account of financial issues. Consequently, the parties entered into a supplementary lease agreement (‘SLA’) on 18th March, 2011. Admittedly, this was not a registered document. In terms of Clause 1 of the SLA, the rent was reduced to Rs.172.55 per sq. ft. per month up to 30th April, 2012 and thereafter increased to Rs.203.61 per sq. ft. per month up to April, 2014. Clause 3 permitted both the Lessor and the Lessee to terminate the lease any time after the ‘lock-in period’ by giving the other party a notice of three months. Clause 5 of the SLA provided that the other clauses of the original lease deed not contrary to the SLA would continue to bind the parties. Although Clause 6 of the SLA provided that the SLA would be registered at the cost of the Lessee i.e., the Petitioner herein, it was in fact not registered.

5. On 5th March, 2013, a Memorandum of Understanding (‘MOU’) was entered into between the parties. This MOU provided for a lock-in period of two years i.e., up to 28th February, 2015 within which neither party had the right to terminate the lease. It was stated that the MOU would be subject to the approval of the Board of Directors of the Petitioner herein and that this approval would be communicated to the Respondent. Till that happened, the rent was to be paid in terms of the SLA.

6. The Petitioner issued to the Respondent a notice dated 1st August, 2013 of termination of the lease deed with effect from 1st November, 2013 giving three months time for vacating the premises on the ground that the Board of Directors of the Petitioner did not approve the terms of the MOU. Admittedly, the vacant possession of the premises was handed over by the Petitioner to the Respondent on 3rd January, 2014.

7. By a letter dated 6th January, 2014, the Petitioner claimed a sum of Rs. 49,02,980 from the Respondent which was the interest-free refundable security deposit minus adjustments for rent payable etc. By a letter dated 11th January, 2014, the Respondent raised a claim in the sum of Rs.1,20,16,998 on the basis of the MOU. Alternatively, a sum of Rs.96,53,035 was claimed by the Respondent from the Petitioner under the registered lease deed dated 13th August, 2007. This led the Petitioner to invoke the arbitration clause by letter dated 5th March, 2014 seeking reference of