IN THE HIGH COURT OF DELHI
V. Kameswar Rao, J.
Omega Finvest LLP - Appellant
Versus
Direct News Private Limited - Respondent
Arb. P. 818 of 2021
Decided On : 11-10-2022
The Court held that the arbitration clause in the Second Rent Agreement still binds the parties and the limited jurisdiction of the Court while considering an application under Section 11 of the A&C Act, 1996 is to see the existence of an arbitration agreement and not its validity. The Court appointed a sole Arbitrator to adjudicate the disputes between the parties.
Fact of the Case:
The petitioner and respondent entered into a Rent Agreement for a period of 9 years. On the expiry of the Rent Agreement, a new Rent Agreement was executed between the parties renewing the lease for a period of 3 years. According to the petitioner, the respondent failed to handover the possession of the premises and also defaulted in paying the due rent. The petitioner approached the Court and filed a Petition under Section 9 of the Arbitration and Conciliation Act, 1996 (A&C Act, 1996) with the following prayer: "In view of the facts and circumstances of the present case, it is respectfully prayed that this Hon'ble Court may be pleased to: a. Appoint a Sole Arbitrator as per the provisions of the Arbitration and Conciliation Act, 1996 pursuant to Arbitration Clause in the Second Rent Agreement, dated 13.07.2016; b. Grant the cost of the present Petition to the Petitioner; c. Pass any other order/s that this Hon'ble Court may deem fit and proper in the facts and circumstances of the present case." The respondent contended that the petition is not maintainable since the disputes which have arisen between the parties are not subject to arbitration agreement between the parties. The respondent stated that the disputes which have arisen between the parties are subject matter of the Terms of Settlement and the Addendum to Settlement, which is an independent contract not comprising of any arbitration clause and not by the terms of the Second Rent Agreement.
Finding of the Court:
The Court held that the arbitration clause in the Second Rent Agreement still binds the parties and the limited jurisdiction of the Court while considering an application under Section 11 of the A&C Act, 1996 is to see the existence of an arbitration agreement and not its validity. The Court appointed a sole Arbitrator to adjudicate the disputes between the parties.
Issues: 1. Whether the arbitration clause in the Second Rent Agreement still binds the parties? 2. Whether the limited jurisdiction of the Court while considering an application under Section 11 of the A&C Act, 1996 is to see the existence of an arbitration agreement and not its validity?
Ratio Decidendi: 1. The Court held that the arbitration clause in the Second Rent Agreement still binds the parties as the relationship between the parties with regard to the Demised Premises came into existence on the execution of the Rent Agreement dated February 28, 2008 and the new rent agreement dated July 13, 2016 (i.e. Second Rent Agreement) was executed between the respondent and the petitioner, renewing the lease for a period of three years which contains the arbitration clause. 2. The Court held that the limited jurisdiction of the Court while considering an application under Section 11 of the A&C Act, 1996 is to see the existence of an arbitration agreement and not its validity as held by the Supreme Court in the case of Vidya Drolia v. Durga Trading Corporation.
Final Decision: The Court allowed the petition and appointed Justice V.B. Gupta, a former Judge of this Court as the Arbitrator, to adjudicate the disputes between the parties.
JUDGMENT
V. Kameswar Rao, J. (ORAL)
1. The present petition is filed by the petitioner under Section 11(5) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as `A&C Act, 1996') with the following prayer:
"In view of the facts and circumstances of the present case, it is respectfully prayed that this Hon'ble Court may be pleased to:
a. Appoint a Sole Arbitrator as per the provisions of the Arbitration and Conciliation Act, 1996 pursuant to Arbitration Clause in the Second Rent Agreement, dated 13.07.2016;
b. Grant the cost of the present Petition to the Petitioner;
c. Pass any other order/s that this Hon'ble Court may deem fit and proper in the facts and circumstances of the present case."
2. It is the case of the petitioner that the respondent had taken on lease the premises situated at B-4, Sector IlI, Noida, Uttar Pradesh- 201301 (hereinafter `Demised Premises') vide registered Rent Agreement, dated February 28, 2008 for a period of 9 years.
3. On the expiry of the Rent Agreement dated February 28, 2008, a new registered Rent Agreement dated July 13, 2016 (hereinafter `Second Rent Agreement') was executed between the respondent and the petitioner renewing the lease for a period of 3 years i.e. w.e.f., July 01, 2016 to June 30, 2019 which was subsequently modified by the Deeds of Modification, dated September 12, 2016 (hereinafter `First Deed of Modification') and June 14, 2018 (hereinafter `Second Deed of Modification').
4. According to him that on expiry of lease by efflux of time on June 30, 2019, the respondent failed to handover the possession of the `Demised Premises' and also defaulted in paying the due rent.
5. That on account of disputes and differences which had arisen between the parties due to breach of terms and conditions of the `Second Rent Agreement', the petitioner approached this Court, and filed a Petition under Section 9 of the `A & C Act, 1996' bearing no. OMP (I) (COMM) No.265/2019, seeking urgent interim reliefs against the respondent.
6. It is the case of the petitioner that with the assistance of this Court, the parties arrived at a settlement and moved a Joint Application dated September 16, 2019 before this Court for placing the terms of settlement on record ('Terms of Settlement'). As a result, the Court disposed of the afore-said petition in the `Terms of Settlement' arrived at between the parties.
7. Pursuant to this, the respondent in contravention to the `Terms of Settlement' failed to hand over the vacant possession of the `Demised Premises' by December 31, 2019 and therefore the petitioner initiated the Contempt proceedings [bearing Cont. Case (Civil) 37/2020] against the respondent before this Court for violation of the order dated September 16, 2019.
8. Thereafter, the respondent started making several structural changes in the `Demised Premises' and this led to filing of another petition by the petitioner under Section 9 of the `A&C Act, 1996', bearing OMP(I) (COMM) 19/2020.
9. As per the petitioner, during the course of the afore-said Section 9 petition, the respondent once again assured the Court to hand-over the vacant possession of the `Demised Premises', after restoring it to a position as laid down in the terms of settlement, to the petitioner on or before March 31, 2020. Moreover, the respondent also undertook to pay a monthly sum of .23,50,000/- as mesne profit for the period between January 2020 to March 2020.
10. Again, based on mutual representations and undertakings, the parties executed an `Addendum to the Terms of Settlement' (hereinafter `Addendum to Settlement') dated February 26, 2020 and as a consequence thereto, the Court vide Order dated February 26, 2020, disposed of the petition in terms of the `Addendum to Settlement' arrived at between the parties.
11. The respondent once again failed to honour the terms laid down in the `Addendum to Settlement'. Though, the respondent managed to handover the possession of the `Demised Premises' on July 17
The main legal point established in the judgment is that the appointment of an arbitrator must be in accordance with the agreed procedure in the contract. If the appointment is not in line with the a....
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