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2013 Supreme(P&H) 425
IN THE HIGH COURT OF PUNJAB AND HARYANA
Before
The Hon’ble Mr. Justice A.N. Jindal
FAO No.2114 of 2013 (O&M)
M/s Hymn Hospitality Services Pvt. Ltd.
v.
M/s JVL Properties & Travels Pvt. Ltd.
{Decided on 26/04/2013}
For the Appellant:Mr. Anil Goel, Advocate.
Headnote:Arbitration--Court has power to direct the appellant to furnish a bank guarantee in order to secure the amount in dispute during the pendency of the arbitration proceedings.
(A) Arbitration and Conciliation Act, 1996, S.9(ii)(b)--Default in payment of rent--Direction to submit bank guarantee towards future dues and interest till final disposal of the claim--Legality of--Held, the right of rent, as provided under the admitted covenant between the parties, if challenged or is likely to be challenged by way of a suit or proceedings under the Arbitration Act, then the provisions of S.9(ii)(b) of the Act, which simply require that the security could be asked for securing the amount in dispute in the arbitration, could be brought into operation--Trial Court, keeping in view the conduct of appellant, appears to have rightly directed the appellant to furnish the bank Guarantee--However, it appears that the trial Court has committed an error while holding that the said bank guarantee would be towards future dues and interest till the final adjudication of the claim petition, whereas this bank guarantee should have been qua the arrears due against appellant--Impugned order modified to the extent that bank guarantee would be qua the arrears due against it--However, the respondent would be at liberty to claim security of the future arrears independently by having recourse to law. (Paras 1, 4, 16 & 18)
(B) Arbitration and Conciliation Act, 1996, S.9(ii)(b)--Default in payment of rent--Pendency of arbitration proceedings--Direction to submit bank guarantee--Power of Court--Held, a bare reading of S.9(ii)(b) indicates that the Court was well within its jurisdiction to direct the appellant to furnish a bank guarantee in order to secure the amount in dispute during the pendency of the arbitration proceedings, which may take long time for disposal and also for the future amount, which may become due on account of the use and occupation of the premises by the appellant. (Para 11)
Mr. A.N. Jindal, J. (Oral):- This petition has arisen out of the order dated 20.03.2013 passed by the Additional District Judge, Gurgaon, directing the appellant to submit bank guarantee of Rs.2,35,32,230/- towards future dues and interest till the final adjudication of the claim of the respondent by the arbitrator, to be appointed.
2. M/s JVL Properties & Travels Pvt. Ltd.-respondent is the owner of a hotel premises located at land measuring 1750 Sq. yards, out of Khasra No.762/1, situated at village Nathupur, Tehsil and District Gurgaon. The appellant-company had taken the said property on lease for the purpose of running a hotel, at the rate of Rs.18,00,000/- per month w.e.f. 22.09.2010. The lease agreement dated 22.09.2010 was executed in this regard. But, the appellant started committing default in payment of the rent. However, the respondent, on assurance of the appellant that it would make payment of the due amount with the passage of time, further extended the lease period vide separate lease deed executed between the parties on 13.10.2011, which was duly registered with the Sub Registrar, Gurgaon. As per covenant No.2.1 of the said lease deed, the appellant was under legal obligation to pay a sum of Rs.18,00,000/- per month and if the appellant claims and gets the benefit of income tax exemption in its return, then the rent was to be enhanced up to Rs.20,00,000/- from the date, from which the income tax exemption would apply. It was further agreed that the amount of rent would be increased by 7% at the end of every year. Accordingly, the respondent had handed over a fully furnished hotel premises to the appellant. However, the appellant committed default in payment of rent and the rent summary is given as under:-
MONTH RENT RENT PAID DIFFERENCE Sep-10 5,40,000.00 2,22,192.00 3,17,808.00 Oct-10 18,00,000.00 5,98,898.00 12,01,102.00 Nov-10 18,00,000.00 7,13,454.00 10,86,546.00 Dec-10 18,00,000.00 7,42,500.00 10,57,500.00 Jan-11 18,00,000.00 7,42,600.00 10,57,500.00 Feb-11 18,00,000.00 7,42,500.00 10,57,500.00 Mar-11 18,00,000.00 7,43,119.00 10,56,881.00 Apr-11 18,00,000.00 - 18,00,000.00 May-11 18,00,000.00 - 18,00,000.00 Jun-11 18,00,000.00 - 18,00,000.00 July-11 18,00,000.00 12,63,303.00 5,36,697.00 Aug-11 18,00,000.00 12,63,303.00 5,36,697.00 Sep-11 18,37,000.00 12,89,832.00 5,47,168.00 Oct-11 19,26,000.00 13,51,733.00 5,74,267.00 Nov-11 19,26,000.00 13,51,734.00 5,74,266.00 Dec-11 19,26,000.00 13,51,734.00 5,74,266.00 Jan-12 19,26,000.00 13,51,734.00 5,74,266.00 Feb-12 19,26,000.00 13,51,734.00 5,74,266.00 Mar-12 19,26,000.00 - 19,26,000.00 Apr-12 19,26,000.00 - 19,26,000.00 May-12 19,26,000.00 - 19,26,000.00 Jun-12 16,05,000.00 16,05,000.00 TOTAL 3,91,90,000.00 1,50,80,270.00 2,41,09,730.00 LESS TDS:- 5,77,500.00 BALANCE : 2,35,32,230.00 Thus, balance against the appellant, as on 08.09.2012, came to be Rs.2,35,32,230/-.
3. As per clause 15.1 of the lease agreement, executed between the parties, in case of any dispute or difference between the parties, the matter was to be referred to the Arbitrator. Clause 15.1 of the lease agreement is reproduced as under:-
“15.1. Any dispute or difference arising between the parties shall be resolved amicably at the first instance. Unresolved disputes, controversies, contests, disputes, if any shall be submitted to arbitration. The arbitration shall be conducted in accordance with the provisions of the Arbitration and conciliation Act, 1996 along with Rules thereunder and amendments thereto. The arbitration shall be conducted in English. The decision/award of the arbitrator shall be final/conclusive and binding on the parties. The seat of the arbitration shall be at New Delhi.”
4. Since the appellant was not paying the rent, the respondent moved an application under Section 9 of the Arbitration and Conciliation Act, 1996 (for brevity ‘the Act’) before the Court as an interim measure, to direct the appellant to deposit a sum of Rs.2,35,32,230/- in the shape of FDR in a na
