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IN THE HIGH COURT OF DELHI
JAYANT NATH, J.
Knowledge Podium Systems Pvt. Ltd. - Appellant
Versus
S.M. Professional Services Pvt. Ltd. - Respondent
CS(COMM). No. 377 of 2020
Decided On : 25-01-2021
Arbitration - Recovery of Refundable Security Deposit - Arbitration and Conciliation Act, 1996 - Section 8 - Order 7 Rule 11 CPC - [Arbitration] - [Recovery of Refundable Security Deposit] - [Arbitration and Conciliation Act, 1996, Section 8, Order 7 Rule 11 CPC] - The court discussed the novation of contract, arbitration clauses, and the scope of Section 8 of the Arbitration Act. It found that the emails exchanged between the parties did not prima facie establish a completely new contract, and therefore, referred the matter to arbitration.
Fact of the Case:
The plaintiff filed a suit for recovery of a refundable security deposit and sought a mandatory injunction for the handover of movables. The defendant argued that the matter should be referred to arbitration as per the Lease Deed and Maintenance Agreement.
Finding of the Court:
The court found that the emails exchanged between the parties did not establish a completely new contract, and therefore, referred the matter to arbitration.
Issues: The main issue was whether the emails exchanged between the parties constituted a novation of the original contract, and whether the matter should be referred to arbitration.
Ratio Decidendi: The court held that for rejection of a Section 8 application, a party has to make out a prima facie case of non-existence of a valid arbitration agreement. When in doubt, the court has to refer the matter to arbitration.
Final Decision: The court allowed the application and appointed a Sole Arbitrator to adjudicate the dispute between the parties. The suit and pending applications were also disposed of.
JUDGMENT :
IA No.8471/2020
1. This application is filed under Section 8 of the Arbitration and Conciliation Act, 1996 read with Order 7 Rule 11 CPC for rejection of the plaint and for referring the parties to arbitration.
2. The present suit is filed by the plaintiff for recovery of Rs.2,58,24,648/- being refund of the available interest-free refundable security deposit together with interest. A decree of mandatory injunction is also sought to handover the movables of the plaintiff which, it is stated, have been illegally detained by the defendant. Alternative relief of Rs.91,05,539/- by way of damages or compensation is also sought.
3. Some of the relevant facts are that vide a Lease Deed dated 21.02.2017, the defendant leased to the plaintiff the office premises on the First Floor and Second Floor at 21, IT Park, Sahastradha Road, Dehradun, Uttarakhand admeasuring 39,614 sq.ft. super built up area with 22 car parking slots in the building for nine years from 01.01.2017. Simultaneously, a Maintenance Agreement was also executed between the parties which was co-terminus with the Lease Deed for payment of fit out and maintenance charges for the said premises. As per the lease deed, there was a lock-in period from 01.01.2017 to 31.12.2022. The plaintiff deposited with the defendant, an interest free refundable deposit of Rs.1,90,14,720/- being 12 months rental under the Lease Deed, Rs.1,04,58,096/- being 12 months monthly fit out charges and Rs.57,04,416/- being annual maintenance charges respectively under the Maintenance Agreement.
4. It is the case of the plaintiff that a Fresh Agreement was arrived at between the parties in respect of use and occupation of the said premises and maintenance thereof with effect from April 2018. It is stated that the terms and conditions of the Fresh Agreement were captured and agreed upon in emails dated 26.09.2018 and 15.10.2018 exchanged between the parties. Hence, it is the case of the plaintiff that the Lease Deed and the Maintenance Agreement stood substituted/novated on account of the said Fresh Agreement.
5. It is stated that later it became commercially unviable for the plaintiff to retain the rented premises. It is stated that the plaintiff initiated negotiations with the defendant for reduction of rentals and maintenance with effect from April, 2019. However, it is stated that the defendant did not budge. On 17.01.2020, it is stated, the defendant illegally disconnected the electricity connection of the rented premises as means to coerce the plaintiff to make payments. It is stated that before the plaintiff could formally terminate the Fresh Agreement and remove its movables, assets, furniture, etc, lying in the rented premises and hand over vacant physical possession of the premises to the defendant, one of the employees of the plaintiff who was present at the rented premises at that time acting in concert with the defendant handed over the keys of the rented premises to the defendant without seeking authorization of the plaintiff.
6. On 03.02.2020, the plaintiff sent a legal notice to the defendant whereby it terminated the Fresh Agreement for the reasons stated therein and also requested defendant No. 1 to adjust a sum of Rs. 61,02,584/- from the available interest-free refundable security deposit of Rs. 3,19,27,232/- and to refund the remaining interest-free refundable security deposit of Rs.2,58,24,648/-. The legal notice also sought grant of access to the authorised representative of the plaintiff to remove the movables and the server. Hence, the present suit.
7. In the present application, the defendant/applicant has taken the stand that the plaintiff has failed to place on record the fact that the plaintiff was on 10.08.2020 served with an advance copy of the petition filed under Section 11 of the Arbitration and Conciliation Act which has since been registered as Arbitration Petition No. 360/2020. The said arbitration petition is said to be pending.
8. Essentially, the case of the de
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