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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
KUNURU LAKSHMAN, J.
Y. Anand Kumar and Ors. – Appellants
Versus
Lalithaa Jewellery Mart Pvt. Ltd. – Respondents
Arb. App. No. 143 of 2021
Decided On : 11-07-2022
Arbitration and Conciliation Act, 1996 - Section 11 – Arbitration application - Disputes - Appointment of a Sole Arbitrator - Whether the leaser deed was acted upon or not and whether the deed was in the nature of a contingent contract is to be decided by an Arbitrator – Held, In present case, according to the respondent lease deed would have commenced only after handing over of physical possession of schedule property - As handing-over did not happen lease deed was not acted upon by parties - Applicant contended that it was ready and willing to hand-over the physical possession, but no response was received from respondent - There is no dispute that parties by incorporating Clause 26 had agreed to resolve their disputes through arbitration - Given limited jurisdiction of this Court under Section 11 of the Act, 1996 question whether the leaser deed was acted upon or not and whether deed was in nature of a contingent contract is to be decided by an Arbitrator - It is appropriate to refer the dispute to arbitration - Arbitration application is allowed
ORDER :
Kunuru Lakshman, J.
1. The present arbitration application is filed under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter 'the Act, 1996') for appointment of a Sole Arbitrator to resolve the disputes between the parties.
2. Heard Mr. Srinivas Velagapudi, learned Counsel for the applicants and Mr. N. Bhujanga Rao, learned Counsel for the respondent.
3. The applicants are the owner of land admeasuring 1,266.3 Square yards, H. No. 13-17-85/A/NR situated at Sri Nagar Colony, Gaddiannaram Village, Saroornagar Mandal, R.R. District (hereinafter referred to as 'schedule property'). The applicants and the respondent entered into a lease deed dated 05.03.2020 whereby the schedule property was leased out to the respondent.
4. As per the terms of the lease deed, the period of lease was nine years with a lock-in period of two years. The monthly rent for the first three years was fixed as Rs. 22,00,000/-. The lease deed also provided that after handing over the physical possession, the first three months will be a rent-free period for completion of interior works by the respondent. If the respondent fails to complete the interior works within three months from the date of handing over of the possession, then they shall be liable to pay the rent after expiry of three months of the rent-free period. An amount of Rs. 1,32,00,000/- was deposited as security deposit by the respondent.
5. According to the applicants, the lease commenced from 17.03.2020 when the applicants addressed an email to the respondent requesting them to issue drawings of the civil works so that they can handover the physical possession to the respondent, after which the rent-free period of three months shall begin. No reply was received from the respondent. Another e-mail dated 18.04.2020 was sent to the respondents stating that the construction workers and materials are mobilized at the work place and the applicants can complete the civil works if drawings are provided by the respondent. Subsequently, e-mail dated 19.05.2020 and 22.05.2020 were issued to the respondent, but no reply was received.
6. On 24.06.2020, an e-mail was addressed by the respondent to the applicants terminating the lease deed dated 05.03.2020. In the said e-mail, the respondent stated that due to Covid-19, the lease deed was being terminated. The respondent also stated that the lease did not commence and demanded the return of an amount of Rs. 1,32,00,000/- which was deposited as security deposit.
7. On 29.07.2020, the applicants replied to the termination notice dated 24.06.2020. The applicants stated that lease deed cannot be terminated unilaterally and security deposit cannot be released unless the rent for the lock-in period of two years is paid. On 08.09.2020, another letter was issued by the applicants to the respondents demanding Rs. 3,96,00,000/- towards rent due to the termination of lease deed. The respondent replied to the notice dated 08.09.2020 denying all the allegations and stating that the lease deed had not commenced and the same was never acted upon. Further, it also alleged that the applicants failed to handover the physical possession of the schedule property within two months from the date of execution of the lease deed.
8. On 29.09.2020, the applicants invoked Clause 26 of the lease deed and issued an arbitration notice and nominated one Mr. B. Satish Kumar as the Sole Arbitrator. The respondent replied on 27.10.2020 not accepting the appointment of Mr. B. Satish Kumar. Therefore, the present arbitration application is filed seeking to appoint an Arbitrator.
9. Clause 26 of the lease deed which incorporates the arbitration agreement is extracted below:
The disputes regarding recovery of lease amount were found to be arbitrable and did not fall under the exclusive jurisdiction of the Rent Controller.
The disputes related to premature termination of leases and non-payment of rent were found to be arbitrable, and the claims for recovery of arrears of lease amount did not fall under the Rent Act, 19....
Unregistered lease disputes are non-arbitrable and must be brought before the Competent Civil Court.
Disputes between landlords and tenants governed by rent control legislation are non-arbitrable and must be addressed exclusively by statutory authorities.
The court reaffirmed that the existence of an arbitration agreement is sufficient for appointing an arbitrator, emphasizing minimal judicial interference in arbitration processes.
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