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IN THE HIGH COURT OF ALLAHABAD
SUBHASH VIDYARTHI, J.
Chitra Misra And Others - Petitioners
Versus
M/s. Decathlon Sports India Private Ltd., Thru. Managing Director And Another - Respondents
Matters Under Article 227 No. 2475 of 2024
Decided On : 21-05-2024
ARBITRATION - JURISDICTION AND ARBITRATION AGREEMENT - Arbitration & Conciliation Act, 1996 - Sections 7, 16(2), 37; Commercial Court Act, 2015 - Section 13(1A); Transfer of Property Act, 1882 - Section 109; Insolvency and Bankruptcy Code, 2016 - Section 14 - The court discussed the jurisdiction of the Arbitral Tribunal under Section 16(2) of the Arbitration Act, emphasizing that the existence of a valid arbitration agreement is a prerequisite for arbitration proceedings. The court interpreted Section 109 of the Transfer of Property Act, clarifying that the transferee of a lessor's rights does not automatically acquire the right to initiate arbitration if the transfer violates the lease terms. The court upheld the Arbitrator's decision to drop proceedings due to lack of jurisdiction, influenced by the ongoing insolvency proceedings under the IBC, which imposed a moratorium on legal actions against the lessor.
Fact of the Case:
The petitioners challenged the validity of an order by the Sole Arbitrator dropping arbitration proceedings for lack of jurisdiction, stemming from a lease agreement between M/s Rohtas Projects Limited and M/s Decathlon Sports India Private Ltd. The petitioners claimed rights to various units in the leased property but faced jurisdictional challenges due to the absence of a valid arbitration agreement and ongoing insolvency proceedings against the lessor.
Finding of the Court:
The court found that there was no valid arbitration agreement between the petitioners and the respondents, as the lease deed explicitly prohibited the transfer of rights without consent. The court upheld the Arbitrator's decision to drop the proceedings, noting that the moratorium imposed by the NCLT under the IBC barred the arbitration.
Issues: 1. Whether the petitioners had a valid arbitration agreement with the respondents. 2. Whether the moratorium under the IBC affected the arbitration proceedings. 3. Whether the Arbitrator had jurisdiction to hear the case.
Ratio Decidendi: The court held that the existence of a valid arbitration agreement is essential for arbitration proceedings. It ruled that the transfer of rights by the lessor to the petitioners violated the lease terms, thus negating any claim to initiate arbitration. The moratorium under the IBC further precluded the arbitration from proceeding.
Final Decision: The petition was dismissed, affirming the Arbitrator's order to drop the proceedings for lack of jurisdiction and the Commercial Court's dismissal of the petitioners' application challenging the Arbitrator's decision.
JUDGMENT :
(Subhash Vidyarthi, J.) :
1. Heard Sri Pritish Kumar and Sri Amal Rastogi Advocates, the learned counsel for the petitioners and Sri S.C. Mishra, Senior Advocate assisted by Sri Sanjeev Singh, Advocate for the respondents.
2. By means of instant petition filed under Article 227 of the Constitution of India, the petitioners have challenged the validity of an order dated 15.07.2022 passed by Hon’ble Justice Shri Dilip B. Bhosale (retired), Sole Arbitrator in the arbitration proceedings instituted by the petitioners against the respondents, whereby an application under Section 16(2) of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as ‘the Arbitration Act’) has been allowed and the arbitration proceedings have been dropped for want of jurisdiction, leaving it open to the parties to take appropriate remedy for redressal of their grievances at proper stage before appropriate Forum. The petitioners have also challenged the validity of the judgment and order dated 30.01.2024 passed by the Presiding Officer, Commercial Court No. 1, Lucknow in Arbitration Case No. 124 of 2022, dismissing an application under Section 13(1A) of the Commercial Court Act, 2005 read with Section 37 of the Arbitration Act, filed by the petitioners, challenging the aforesaid order dated 15.07.2022 passed by the Sole Arbitrator.
3. Briefly stated, facts of the case are that M/s Rohtas Projects Limited had executed a lease deed dated 07.04.2017 in favour of M/s Decathlon Sports India Private Ltd (the respondent no. 1), letting out an area of 21,825 Square feet i.e. 2,028 square meters, bearing Unit Nos. GF-01, GF-02, GF-03, GF-04, GF-05, GF-06, GF-07, GF-08, GF-9, GF-9A, GF-9B, GF-10A, GF-10B, GF-10C at Plot No. TC-G 4/4 in Rohtas Presidential Arcade situated in Vibhuti Khand, Gomti Nagar, Lucknow, for a period of 20 years.
4. The petitioner no. 2, Hina Juneja had entered into an agreement to purchase the unit no. GF-03 on 21.05.2013 and an agreement to sell Unit No. GF-05 of the Complex was executed in favour of Vijay Path Traders Link Private Limited on 28.03.2012. Rest of the petitioners claim to have purchased various units forming part of the leased premises from M/s Rohtas Projects Ltd. subsequent to execution of the lease deed in favour of the respondent no.1
5. The petitioners filed an Arbitration application No. 48 of 2020 before this Court under Section 11 of the Arbitration Act stating that they had been allotted commercial units by M/s Rohtas Projects Limited. M/s Rohtas Projects Limited had executed a lease deed in favour of respondent no. 1 for an area measuring 21825 square feet on 07.04.2017 for a period of 20 years w.e.f. 16.01.2017. The petitioners had obtained transfers of various portions of the leased property between the years of 2017-2018 from M/s Rohtas Projects Limited. The petitioners requested the respondent no. 1 to clear the outstanding liability of payment of rent under the lease deed executed by M/s Rohtas Projects Limited in favour of respondent no. 1 and upon failure of the respondent no. 1 to clear the dues, they issued a joint notice dated 25.08.2020 terminating the tenancy of respondent no. 1 created by the lease deed dated 07.04.2017 executed by M/s Rohtas Projects Limited. They requested this Court to appoint an Arbitrator for adjudication of the dispute between the parties. Elaborate submissions were advanced on behalf of the parties in proceedings under Section 11 of the Arbitration Act.
6. The learned counsel for the petitioner had placed reliance on the decision of Hon’ble Supreme Court in the case of Mayavati Trading (P) Ltd. versus Pradyuat Deb Burman, (2019) 8 SCC 714, wherein the Hon’ble Supreme Court held that the scope of judicial intervention, as per under Section 11(6-A) is confined to examination of the existence of Arbitral Agreement and is to be understood in the narrow sense as has been laid down in the judgment rendered in Duro Felguera, S.A. versus Gangavaram Port Ltd., (2017)
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