Telangana High Court

Smt. A. Sudha Reddy vs M/S Om Convention on 17 March, 2023

Bench: T.Vinod Kumar

        THE HON'BLE SRI JUSTICE T. VINOD KUMAR

     ARBITRATION APPLICATION Nos. 27 and 32 of 2022

COMMON ORDER:

1.      These Arbitration Applications are filed under Section 11(6)

of the Arbitration and Conciliation Act, 1996 (hereinafter 'the Act,

1996') for appointment of an arbitrator to resolve the disputes

between the parties. Since the parties in the present applications are

same, the properties involved are abutting to each other and the

disputes raised are connected, they are disposed of by this common

order

2.      Heard Mr. R. A. Achuthanand, learned counsel for the

Applicants and Mr. M. Pramod, representing Mr. A. Venkatesh,

learned counsel for Respondent.

3. The Applicants are the owners of A - Square Convention

consisting of two built up AC Halls, including two lawns and

kitchen, constructed over total land admeasuring Ac.8.00 Gts in

Sy.No. 344/part situated at Narsingi village, Gandipet Mandal,

R.R. District (hereinafter 'Subject Property No.1') and the land

admeasuring 6680 Sq. yards in Sy.Nos. 346 and part of 347

situated at Narsingi village, Gandipet Mandal, R.R. District

(hereinafter 'Subject Property No.2').

4. It is the case of the applicants that the respondents had

approached them to grant a lease of the Subject Property No. 1 for

the purpose of a function hall. It is contended that after due

negotiations they had executed lease deed vide Doc. No. 7796 of

2017 dated 10.11.2017 in respect of Subject Property No.1 for a

period of 13 years and 4 months from 01.03.2018. As per the lease

deed, the monthly rent was fixed at Rs.10 lakhs upto 30 months,

which will be increased to Rs.15 Lakhs for a period of 12 months.

Thereafter the rents will be enhanced at 5% per annum.

5. It is contended that as the respondents intended to carry out

high end horticulture, they again approached the applicants for

lease of Subject Property No.2, as a result of the agreement arrived

at they had executed a lease deed vide Doc. No. 11304 of 2018

dated 09.11.2018 for a period of 12 years and 3 months from

01.04.2019. The monthly rent was fixed at Rs. 4 Lakhs, subject to

5% yearly enhancement.

6. Thus, the lease of the subject property No.1 commenced on

01.03.2018 with initial lease rent of Rs.10 lakhs, while the lease of

subject property No.2 has commenced on 01.04.2019 with initial

lease rent of Rs.4 lakhs.

7. It is contended by the applicants that the respondents had

issued a letter dated 10.04.2020 requesting the applicants to

waive the rent payable under the lease deeds, on account of

lockdown imposed by the Government in view of Covid-19; and

that the applicants have denied to waive the rent, vide letters

dated 07.07.2020 and 20.07.2020, since lockdown was lifted

from 31.05.2020.

8. Applicants further contend that, despite the exchange of

correspondences with the respondents, they did not come forward

to clear the dues from June, 2020. Resultantly, the applicants had

issued separate notices dated 25.09.2020 terminating the lease.

The notices of termination were issued invoking Clause 25 of the

lease deed dated 10.11.2017 and Clause 19 of lease deed dated

09.11.2018. As the said Clause(s) in the lease deeds provided for

arbitration as a mode of dispute resolution, the applicants

proposed the name of Hon'ble Sri Justice B. Prakash Rao

(Retired) as an arbitrator to resolve the disputes between them.

9. It is contended that, subsequent to issuing the above said

arbitration notices, on account of negotiations between the

parties, they had entered into two MOU(s) both dated

05.05.2021, wherein an interim arrangement was made to

facilitate the respondents to clear the arrears of rent. As the

respondents had breached the terms of the MOU(s), the

applicants had issued a notice dated 14.01.2022 reviving their

earlier notices of termination both dated 25.09.2020.

10. As the respondents failed to reply to the notice dated

14.01.2022, the present arbitration applications are filed.

11. The respondents in their counter affidavit oppose the

appointment of arbitrator. It is contended that the leased premises

could not be run owing to the lockdown imposed by the

Government in view of COVID-19. It is further contended that

the imposition of lockdown was a Force Majeure event as per

Clause 6 of the lease deed dated 10.11.2017 and Clause 5 of the

lease deed dated 09.11.2018, thus the respondents were not liable

to pay rents for the disputed period. Therefore, the dispute raised

by the applicants is ex-facie deadwood as the claims relate to a

period when the Force Majeure event was in operation.

12. The dispute resolution Clause in lease deed dated 10.11.2017

is as under:

Clause 25: All disputes, controversies, claims and differences arising out of or in relation to this agreement or any breach hereof except those which cannot be settled by arbitration through correspondence and mutual consultation of the parties hereto, shall be settled by arbitration to be conducted in Hyderabad in accordance with the provisions of the Arbitration and Conciliation Act, 1996. All proceedings in any such arbitration shall be conducted in English. The arbitration award shall be final and binding on all the parties.

Whereas the dispute resolution Clause in lease deed dated

09.11.2018 is as under:

Clause 19: All disputes, controversies, claims and differences arising out of or in relation to this agreement or any breach hereof except those which cannot be settled by arbitration through correspondence and mutual consultation of the parties hereto, shall be settled by arbitration to be conducted in Hyderabad in accordance with the provisions of the Arbitration and Conciliation Act, 1996. All proceedings in any such arbitration shall be conducted in English. The arbitration award shall be final and binding on all the parties.

13. The disputes in the present applications arise from the two

lease deeds dated 10.11.2017 and 09.11.2018. Further from the

language used in the MOU(s) both dated 05.05.2021, it is

understood that it was an interim arrangement to facilitate the

respondents to clear the arrears of rents arising from the lease

deeds. Thus, in view of the ratio laid down by the Supreme Court

in Chloro Controls (I) P. Ltd. Vs. Severn Trent Water

Purification Inc. and Ors1, any contravention from MOU(s) dated

05.05.2021 would also be governed by the dispute resolution

Clauses 25 and 19 in the lease deeds dated 10.11.2017 and

09.11.2018 respectively.

14. Having observed that there is a valid arbitration agreement

between the parties, it is relevant to note that the role of High Court

under Section 11 of the Arbitration and Conciliation Act, 1996 is

extremely limited. The Court after having seen that prima facie an

arbitration agreement exists, is required to refer the disputes to

arbitration unless a claim is manifestly deadwood. The Supreme

Court in Vidya Drolia v. Durga Trading Corpn2, held as under:

244. Before we part, the conclusions reached, with respect to Question 1, are:

(2013)1SCC641

(2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549

244.1. Sections 8 and 11 of the Act have the same ambit with respect to judicial interference.

244.2. Usually, subject-matter arbitrability cannot be decided at the stage of Section 8 or 11 of the Act, unless it is a clear case of deadwood.

244.3. The court, under Sections 8 and 11, has to refer a matter to arbitration or to appoint an arbitrator, as the case may be, unless a party has established a prima facie (summary findings) case of non-existence of valid arbitration agreement, by summarily portraying a strong case that he is entitled to such a finding.

244.4. The court should refer a matter if the validity of the arbitration agreement cannot be determined on a prima facie basis, as laid down above i.e. "when in doubt, do refer".

244.5. The scope of the court to examine the prima facie validity of an arbitration agreement includes only:

244.5.1. Whether the arbitration agreement was in writing? or

244.5.2. Whether the arbitration agreement was contained in exchange of letters, telecommunication, etc.?

244.5.3. Whether the core contractual ingredients qua the arbitration agreement were fulfilled?

244.5.4. On rare occasions, whether the subject-matter of dispute is arbitrable?

15. In paragraph 96 of the above judgment, the Supreme Court

had also held that once a dispute is not ex-facie deadwood, all

further questions pertaining to non-arbitrability have to be decided

by the Arbitral Tribunal.

16. In the facts at hand, as the disputes have arisen in and around

March, 2020 onwards, leading to issuance of notice(s) dated

25.09.2020 terminating the lease, and the present applications

having been preferred on 05.02.2022, the disputes cannot be treated

as deadwood as they are clearly within limitation as per Article 137

of the Limitation Act, 1963. So far as the admissibility of the claim

is concerned, the respondents despite having requested waiver of

rent vide letter dated 10.04.2020 claiming that a Force Majeure

event occurred, had subsequently entered into two MOU(s) both

dated 05.05.2021 to clear rental dues pertaining to the disputed

period. Thus, execution of the MOU(s) prima facie shows that

dispute is surviving.

17. The Supreme Court in Bharat Sanchar Nigam Ltd. and Ors.

Vs. Nortel Networks India Pvt. Ltd3, while dealing with the issue of

a claim being deadwood had held as under:

37...It is only in the very limited category of cases, where there is not even a vestige of doubt that the claim is ex facie time-barred, or that the dispute is non-arbitrable, that the court may decline to make the reference.

However, if there is even the slightest doubt, the Rule is to refer the

(2021) 5 SCC 738

disputes to arbitration, otherwise it would encroach upon what is essentially a matter to be determined by the tribunal.

18. In the light of the settled position of law, any further

questions pertaining to the impossibility of performance, frustration

of contract, application of Force Majeure principle would have to

be dealt with by the Arbitral Tribunal. Thus, the defence taken by

the respondents as to non-arbitrability of disputes cannot be

accepted at this stage and is liable to be rejected and I do so.

19. Accordingly, the present arbitration applications are allowed;

the disputes between the applicants and the respondents are hereby

referred to arbitration. Since, the parties in the present applications