JUDGMENT

Vibhu Bakhru, J.

Introduction

1. Unique Dicor (India) Pvt. Ltd. - a company incorporated under the Companies Act, 1956 - has filed the present appeal under Section 37(1)(a) of the Arbitration and Conciliation Act, 1996 (hereafter `the A&C Act') impugning an order dated 24.02.2023 (hereafter `the impugned order') passed by the learned Commercial Court, whereby the appellant's application under Section 8 of the A&C Act, in a suit for recovery filed by the respondent, Synchronised Supply Systems Ltd., bearing no. C.S. (Comm) 150/2020, was rejected.

Factual Context

2. The appellant/defendant is the owner of a property/warehouse situated at SP 1-31, RIICO Industrial Area, Neemrana, Rajasthan (hereafter `the Demised Premises'). The parties entered into an agreement for the purpose of leasing out the property to the respondent and, in this regard, executed a rent agreement dated 01.07.2017 (hereafter `the Rent Agreement').

3. The Rent Agreement provided that the lease period for the Demised Premises would be for the period of one year, from 01.08.2017 to 31.07.2018, subject to further renewal on a yearly basis. In terms of the Rent Agreement, the respondent/plaintiff also agreed to deposit a sum of Rs.28,64,043/- (Rupees Twenty-eight Lac Sixty-four Thousand Forty-three Only), being three months' rent as interest free refundable security.

4. The respondent continued to be in possession of the Demised Premises after the expiry of the period of one year from 01.08.2017. Admittedly, the respondent continued to pay rent as agreed and vacated the Demised Premises on 20.03.2019.

5. After vacating the Demised Premises, the respondent called upon the appellant to refund the security deposit. The appellant declined to refund the security deposit alleging that the Demised Premises have been damaged and repair of the flooring of the Demised Premises itself would cost twice the amount of the security deposit.

6. In the aforesaid background, the respondent instituted the suit [C.S.(COMM) No.150/2020], seeking a decree for recovery of Rs.33,11,775/- (Rupees Thirty-three Lacs Eleven Thousand Seven Hundred Seventy-five Only) being the amount of security deposit of Rs.28,64,043/- plus pre-suit interest at the rate of 18% per annum on the said amount quantified at Rs.4,47,732/-. The respondent also sought interest at the rate of 18% per annum from the date of institution of the suit.

7. The appellant filed an application under Section 8 of the A&C Act praying that the parties be referred to arbitration in terms of the arbitration agreement as embodied in Clause 21 of the Rent Agreement.

Impugned Order

8. The learned Commercial Court rejected the application filed by the appellant to refer the parties to arbitration. The learned Commercial Court held that since the Rent Agreement had come to an end on 31.07.2018, and the parties chose not to enter into a fresh written agreement or renew the prior agreement, the appellant could not rely on the arbitration clause of the expired Rent Agreement. It held that there was no arbitration agreement subsisting between the parties and therefore, they could not be referred to arbitration. Additionally, the learned Commercial Court imposed costs of Rs.10,000 on the appellant, to be paid to the respondent.

Reasons & Conclusion

9. At the outset, it is noted that there is no dispute that the parties had entered into the Rent Agreement and that, the same included an arbitration clause. Clause 21 of the Rent Agreement reads as under:

"21. ARBITRATION

All disputes and differences between the parties hereto regarding the interpretation scope or effect of any of the terms and condition herein contained or in any way touching or concerning those presents shall be referred to a sole Arbitrator appointed jointly by TENANT and LANDLORD and the same shall be deemed to be a reference within the meaning of the arbitration and conciliation Act 1996 or any other statutory reenactment or modification thereto for the time be