Delhi High Court
Asian Hotels (North) Limited vs Poonam Sood Menon & Anr. on 3 November, 2020
$~2(original side)
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ARB.P. 246/2020
ASIAN HOTELS (NORTH) LIMITED ..... Petitioner
Through: Dr. Lalit Bhasin, Ms.Nina
Gupta and Ms.Radhika Gupta, Advs.
versus
POONAM SOOD MENON & ANR. ..... Respondents
Through: Mr. Amardeep Singh and
Mr.Prasahnt Sharma, Advs.
CORAM:
HON'BLE MR. JUSTICE C. HARI SHANKAR
JUDGEMENT (O R A L)
% 03.11.2020
(Video-Conferencing)
1. By a perpetual lease deed dated 22nd July, 1982, a plot of land,
admeasuring 20,000 sq.mtrs., was taken on lease, by the petitioner,
from the Delhi Development Authority (DDA). On the said plot of
land, the petitioner proceeded to construct and establish the well
known Hyatt Regency Hotel, which was completed and came into
operation in 1983.
2. The statutory architectural control conditions, applicable in this
regard in respect of five star hotels, allowed the petitioner to allot area,
in its premises, equal to or less than 2000 sq. mtrs., for commercial
purposes. On the basis of the said covenant, the petition avers that 41
shops were constructed, in the aforesaid hotel.
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3. Permission to operate the shops was granted, by the petitioner,
to various licensees, under individual license agreements. One such
license agreement was executed between the petitioner and the
respondents on 18th July, 1983, whereby and whereunder the
respondents were granted the license to carry out commercial
activities in shop no. L-75A. Under the license agreement, the
respondents were further required to furnish an interest free
refundable deposit of ₹ 2 lakhs, as well as pay license fee @ of
₹1650/- per month. The license was renewable on a five yearly basis.
4. Clause 12 in the aforesaid License Agreement dated 18th July,
1983 provided for resolution of the disputes between the parties, if
any, by arbitration, and read thus:
"12. That in case of any dispute, difference, between the
Licensor and you, with regard to any mailer including
interpretation of this agreement and the clarifications thereof,
the same shall be referred to the joint arbitration of the
Chairman of the Licensor or any person appointed by the
Chairman and the arbitrator appointed by you, whose decision
shall be final and binding between the parties and shall not be
questioned in any court of law ".
5. The License Agreement, whereby the respondents were granted
the license to operate Shop L-75A was last renewed up till 31st July,
2018. The petition avers that, after the said date, the respondents were
using the shop as a permissive licensee, on payment of monthly
license fee of ₹ 4950/-.
6. The hotel, as well as the shopping arcade, had, from its
inception, been mortgaged with various financial institutions, against
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moneys advanced by such institutions to the petitioner. The petition
avers that, as the shopping arcade was more than 40 years old, and
was in need of demolition, replacement and repairs, it had become
necessary to discontinue commercial operations in the shopping
arcade. As a result, on 29th May, 2020, communications were issued
by the petitioner to all the licensees, including the respondents,
revoking the licenses granted for operation of the premises on a
commercial basis, with effect from 1st June, 2020. The licensees were
granted time, to vacate the premises, till 30th June, 2020.
7. The respondents joined issue with the petitioner, on this
proposed course of action and, vide a letter dated 19th June, 2020,
invoked the afore-extracted arbitration clause 12, in the License
Agreement dated 18th July, 1983. The communication stated that the
respondents were appointing Mr. Dinesh Dayal, a learned Retired
District Judge, as its arbitrator.
8. It was also stated, in the letter, that, rather than appointing its
own arbitrator, it would be more appropriate for the petitioner to move
this Court, for appointment of its arbitrator.
9. It is in these circumstances that the petitioner has moved this
Court by means of the present petition, in which the petitioner has
chosen to rely on Section 10 of the Arbitration and Conciliation Act,
1996 (hereinafter referred to as the "1996 Arbitration Act") which
reads thus:
"10. Number of arbitrators.--
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(1) The parties are free to determine the number of
arbitrators, provided that such number shall not be an even
number.
(2) Failing the determination referred to in sub-section (1),
the arbitral tribunal shall consist of a sole arbitrator."
10. The contention of the petitioner, in the petition, is that Clause
12 in the License Agreement dated 18th July, 1983 is incapable of
enforcement, as it violates Section 10(i) of the 1996 Arbitration Act,
the number of arbitrators being required to be appointed under the said
clause being an even number, i.e. two. In these circumstances, the
petitioner has submitted, in the present petition, that, Clause 12 in the
License Agreement being incapable of being operative, in view of
Section 10(i) of the 1996 Arbitration Act, this Court would have to
appoint a sole arbitrator. Accordingly, it has been prayed that a sole
arbitrator be appointed by this Court, to arbitrate on the disputes
between the parties.
11. A reply, to the petition, has been filed by the respondents.
Giving voice to the contentions contained in the said reply, Mr.
Amardeep Singh, learned Counsel for the respondents, has sought to
dispute the contention, in the petition, that Clause 12 of the License
Agreement dated 18th July, 1983 was hit by Section 10(i) of the 1996
Arbitration Act. Pointing out that, at the time of execution of the
license agreement on 18th July, 1983, the Arbitration Act, 1940
(hereinafter referred to as the "1940 Arbitration Act") was in force,
Mr. Singh invites my attention to Section 3 of the said Act, which
reads thus:
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"3. Provisions implied in arbitration agreement. - An
arbitration agreement, unless a different intention is expressed
therein, shall be deemed to include the provisions set out in
the First Schedule in so far as they are applicable to the
reference."
12. In conjunction with Section 3 of the 1940 Arbitration Act, Mr.
Singh invites my attention to Clause 2 of the First Schedule to the
1940 Arbitration Act, which reads thus:
"2. If the reference is to an even number of arbitrators, the
arbitrators shall appoint an umpire not later than one month
from the latest date of their respective appointments."
13. Mr. Singh submits that, by a combined operation of Section 3,
read with the First Schedule of the 1940 Arbitration Act, the
requirement of the two arbitrators, nominated by the petitioner and the
respondent, having to appoint a third umpire, was to be read into
Clause 12 of the License Agreement dated 18th July, 1983. This, he
submits, impliedly amended the said clause by statutory fiat, resulting
in the arbitral tribunal consisting, not of two, but of three members.
As a result, he submits, there is no infraction of Section 10(1) of the
1996 Arbitration Act, under the aegis of which the arbitration can
continue, with three members, the third member being the umpire to
be appointed by the arbitrators appointed by the petitioner and the
respondents respectively.
14. On a careful consideration, the submission of Mr. Singh is
found to have merit. Section 3 of the 1940 Arbitration Act, read with
Clause 2 of the First Schedule thereto, results in an implied
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modification of clause 12 of the License Agreement dated 18th July,
1983, and the arbitrators appointed by the petitioner and the
respondents would, by virtue of such modification, mandatorily have
to appoint a third arbitrator as umpire. This modification, which came
into effect immediately on execution of the agreement between the
parties, would continue to remain in operation despite the repeal of the
1940 Arbitration Act by the 1996 Act.
15. Dr. Lalit Bhasin, fairly, expresses no objection, to the
arbitration being conducted by a three member arbitral tribunal, as
suggested by Mr. Amardeep Singh.
16. He, however, requests that some time may be granted to his
client to appoint its arbitrator, whereafter the two arbitrators could
appoint the third arbitrator as umpire.
17. In view thereof, the present petition is disposed of, granting
liberty to the petitioner to appoint its arbitrator within a period of one
month from today, and communicate the name of the arbitrator to the
respondents. The two arbitrators would, thereafter, proceed to appoint
a third arbitrator, as umpire, within a period of one month from the
said date.
18. The Arbitral Tribunal thus constituted would proceed to enter
on the reference and decide the disputes between the parties, in
accordance with the provisions of the 1996 Arbitration Act which
would entirely govern the arbitration proceedings and all aspects
thereof including the fees to be paid to the arbitrator.
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19. With the aforesaid directions, the petition stands disposed of.
C. HARI SHANKAR, J.
NOVEMBER 3, 2020/kr
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