The High Court upheld that post-termination disputes related to lease agreements generally fall outside the jurisdiction of arbitration clauses, emphasizing the distinction between arbitration and statutory remedies.

JUDGMENT

Date : 25-07-2025

Heard the learned counsels for the respective parties on the point of maintainability.

02. The petitioners have approached this Court for quashing the order dated 24.09.2024 passed by the learned Arbitral Tribunal comprising of a sole Arbitrator in an arbitration case arising out of Request Case no. 65 of 2023, whereby and whereunder an application filed by the petitioner under Section 16 of the Arbitration and Conciliation Act, 2016 (for short ‘the Act’), challenging the jurisdiction of the Tribunal, has been rejected and the learned Tribunal proceeded to dispose of the matter on its merit.

03. Shorn of unnecessary details, the facts of the case are that petitioner no. 2 is an Insurance Company (a company registered under the Companies Act, 1956) and petitioner no. 1 is its Branch Manager and for the sake of convenience, both of them would hereinafter be referred to as ‘the petitioner’. The petitioner entered into a lease agreement with husband of respondent for its office premises and, accordingly, a registered agreement for lease dated 22.02.2011 was executed between the petitioner and one Anchit Kumar, the deceased husband of respondent, in respect of the subject unit (Unit No. 4002) which lease period starting from 16.02.2011 till 15.02.2017. The lease period was further extended in respect of said subject unit from 16.02.2017 to 15.02.2026 by executing an agreement for lease between the petitioner and respondent. Another registered agreement for lease dated 22.02.2011 was also executed between the petitioner and one Ajay Kumar in respect of Unit No. 4001, beginning from the period 16.02.2011 till 15.02.2017. This lease agreement was also extended in the same manner from 16.02.2017 to 15.02.2026 by execution of an agreement between the parties. The lease deed so entered between the parties had a termination clause which allowed the petitioner to terminate the lease deed without assigning any reason by giving the lessor prior notice of 90 days in writing of its intention to terminate the lease. It was further stipulated that the petitioner would pay the lease rent regularly to the lessor during the notice period and after expiry of the said period, the petitioner was required to vacate the premises along with its movables and handover the peaceful possession to the lessor. The lessor was required to return the security deposit against the vacant possession. Under the termination Clause, the lessee/petitioner gave a termination notice to the lessor on 14.12.2020 to refund the security deposit of Rs. 3,31,688/-. On 13^th March, 2021, a joint inspection was carried out by the parties. On 09.04.2021, the petitioner received a letter from the Advocates of the respondent, calling upon the petitioner to pay the sum of Rs. 27,78,672/- towards compensation for the purported structural damage caused to the subject unit and towards rent for the subject unit after termination of the lease deed by the petitioner. The petitioner replied to the said letter on 22.04.2021, denying the allegations made by the respondent. It further transpires that dispute arose between the parties over repair work in the subject unit and refund of the security deposit and the respondent refused to take possession of the subject unit. The respondent had been asking the petitioner to handover the possession of the subject unit after carrying out certain repairs and a number of meetings were held between the parties but the issues remained unresolved. In this manner, the keys of the subject unit were handed over to the respondent on 06.10.2021, but the respondent did not refund the security deposit to the petitioner. Thereafter, the respondent filed a petitioner under