A lease renewal requires an accepted proposal for arbitration; without acceptance, no arbitrable disputes exist, undermining the basis for court intervention.

JUDGMENT

1. Arbitration Appeal No. 02 of 2021 arises out of the impugned order dated 31.05.2021 passed by the learned Commercial Court on an application filed by the respondent (Brij Raj Oberoi) under section 9 (1) (ii) of the Arbitration and Conciliation Act, 1996 (the Arbitration Act). The learned Commercial Court examined, inter-alia, the relevant arbitration clause i.e. 4 (xiii) of the lease agreement dated 09.12.1997 entered between the appellant (the State) and the respondent (Brij Raj Oberoi) leasing out the premises known as “Norkhil Hotel”. It held that arbitrable dispute had arisen between the parties which were to be referred to arbitration and restrained the appellant from disturbing the possession and enjoyment of “Norkhil Hotel” until the commencement of arbitral proceedings.

2. Arbitration Petition No. 02 of 2021 is an application filed by Brij Raj Oberoi on 16.07.2021 for appointment of arbitrator under section 11 of the Arbitration Act read with section 10 of the Commercial Courts Act , 2015.

3. Both cases shall be disposed by this common judgment.

4. On 09.12.1997 the deed of lease was executed between the State and Brij Raj Oberoi by which “Norkhil Hotel” was leased to Brij Raj Oberoi for a period of 24 years. The lease was to expire on 31.05.2021. The lease deed, inter-alia, contained the following relevant clauses:-

“3. That the initial terms of the lease under this deed shall be a period of twenty four years from 1.6.1997 to 31.5.2021 (First day of June one thousand nine hundred and ninety seven to the thirty first day of May two thousand and twenty one) and shall be renewable for such further period as the lessor deems fit subject to acceptance of the lessee’s offer in terms of clause 4 (xii) hereinafter.”

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“4. xiii. The lessee shall in the last year of the lease tenure and not later than six months prior to the expiry of the present lease, communicate in writing to the lessor his terms and conditions for the renewal of the present lease and if the same is accepted by the lessor, then the present lease may be renewed for such further period and on such rent as may be mutually agreed upon between the parties thereto, failing which the matter shall be referred to arbitration by an arbitrator to be appointed by the Chief Justice of the Sikkim High Court.”

5. On 12.11.2020 before the expiry of the period of lease on 31.05.2021 Brij Raj Oberoi sent an offer of renewal to the State to the following effect:-

“The rent for the period commencing from 01.06.2021 will be Rs.64,30,766.43/- per year i.e., 10% more than the annual rent that is being paid now. The escalation clause will remain the same i.e. 10% more every three years. The rent will be paid in equal quarterly installment every year. It is suggested that the period of the renewed lease will be 30 years commencing from 1.6.2021. All other terms and conditions of the lease will remain the same.”

6. As there was no response to the letter dated 12.11.2020, Brij Raj Oberoi sent a reminder on 09.04.2020. Thereafter, it was followed by a legal notice dated 05.05.2021. On 15.05.2021 Brij Raj Oberoi moved an application under section 9 (1) (ii) of the Arbitration Act (the application). The State thereafter, issued a letter dated 17.05.2021 to Brij Raj Oberoi conveying their inability to renew the lease on the ground that the State Government had approved a policy which envisages professional methods of managing tourism infrastructure, assets and facilities in the State. For that purpose the State had decided to adopt a process, in public interest, with stringent qualifications and bid parti