Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2783 OF 2022
Evergreen Land Mark Pvt. Ltd. ..Appellant (S)
Versus
John Tinson & Company Pvt. Ltd. & Anr. ..Respondent (S)
J U D G M E N T
M. R. Shah, J.
1. Feeling aggrieved and dissatisfied with impugned judgment
and order dated 10.02.2022 passed by the High Court of
Delhi at New Delhi in ARB.A. (Comm.) No.9/2022 under
Section 37(2)(b) of the Arbitration & Conciliation Act, 1996
(hereinafter referred to as the “Arbitration Act”), by which
the High Court has dismissed the said appeal in which the
appellant herein challenged order dated 05.01.2022
passed by the Arbitral Tribunal in two applications filed by
respondent No. 1 and 2 herein under Section 17 of the
Signature Not Verified
Digitally signed by R
Natarajan
Date: 2022.04.19
16:53:45 IST
Reason:
Arbitration Act, seeking deposit of the rental amount for
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the period between March, 2020 and December, 2021, the
appellant herein – lessee has preferred the present appeal.
2. The dispute is with respect to two separate premises
owned by respondent No. 1 and 2 herein which were given
on lease to the appellant, who is running a Restaurant and
Bar in the premises in question. The lease agreement came
to be terminated by respondent No. 1 and 2 – original
owners. The dispute with respect to the termination of
lease agreement is the subject matter before the Arbitral
Tribunal. Before the Arbitral Tribunal, respondent No. 1
and 2 filed two separate applications under Section 17 of
the Arbitration Act seeking deposit of the rental amount
due and payable for the period between March, 2020 to
December, 2021. By way of an interim measure, in
exercise of powers under Section 17 of the Act, the
Arbitrator vide order/orders dated 05.01.2022 directed the
appellant to deposit 100% of rental amount due and
payable of the period between March, 2020 to December,
2021. At this stage, it is required to be noted that before
the Arbitral Tribunal, it was the case on behalf of the
appellant that due to the Covid19 Pandemic, there was a
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lockdown declared by the Government and therefore, there
was a complete closure/partial closure and therefore,
invoking clause 29 ( Force Majeure ) of the lease deed, the
appellant disputed the liability to pay the rental amount
for the period during which there was a
lockdown/complete closure/partial closure. Despite the
above submissions, the Arbitral Tribunal directed the
appellant to deposit the rental amount from March, 2020
onwards and up to December, 2021. The Arbitral Tribunal
also passed an order that amount so deposited shall be
kept in fixed deposit accounts. The operative portion of the
order contained in para 43 is as under:
“43.(a) The Respondent shall compute the arrears
towards rent separately in respect of each premises under
lease at the agreed rate Rs. 10,35,000/ per month
(subject to applicable taxes) for the period from
01.05.2018 to 30.04.2021 and Rs. 11,90,250/ from
01.05.2021 onwards in respect of leased premises of
JTCPL and Rs. 2,39,390/ per month (inclusive of GST) in
respect of leased premises of BIET for the period of
default and pendency of the matter thus far, i.e. from
March 2020 onwards for and up to December 2021,
adjusting the amounts already paid (as per declarations
made before this tribunal), deducting the TDS as per law,
and communicate the same to the respective Claimants
within a week of this order.
(b) The amounts of money equivalent to the arrears
computed as above shall be deposited by the Respondent
in Fixed Deposit (FD) accounts separately in relation to
the respective Claimants in a public sector Bank,
initially for a period of six months with provision of auto
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credit of Interest and periodical autorenewal within four
weeks of this order.”
2.1 Feeling aggrieved and dissatisfied with the order passed by
the Arbitral Tribunal by way of an interim arrangement in
exercise of powers under Section 17 of the Arbitration Act,
the appellant preferred an appeal before the High Court
under Section 37(2)(b) of the Arbitration Act. By the
impugned judgment and order, the High Court has
dismissed the said appeal and has confirmed the interim
order passed by the Arbitral Tribunal passed in exercise of
powers under Section 17 of the Arbitration Act. Hence, the
present appeal.
3. Ms. Aastha Mehta, learned counsel appearing on behalf of
the appellant has vehemently contended that in the
present case, both, Arbitral Tribunal as well as the High
Court have not at all considered the submissions on behalf
of the appellant on clause 29 of the agreement and the
aspect of force majeure as prayed on behalf of the
appellant. It is submitted by Ms. Mehta that even the
Arbitral Tribunal has specifically observed in para 39 of
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the order that at this stage, the Arbitral Tribunal is not
deciding anything on the import and effect of the force
majeure clause (No. 29) contained in the lease deed. It is
contended that therefore when the liability to pay the
rentals during the lockdown period while applying the
force majeure clause is seriously disputed by the appellant
– lessee, such an order to deposit 100% rental amount by
way of an interim measure under Section 17 of the
Arbitration Act, ought not to have been passed by the
Arbitral Tribunal.
3.1 It is further submitted by Ms. Mehta that even the learned
Arbitral Tribunal has also observed that there is no
evidence showing that the appellant is disposing of any
part of its property much less removing itself or its assets
out of India so as to create a possibility of frustrating the
monetary award that may be passed in favour of the
claimants upon conclusion of arbitration proceedings
within the scope of Order XXXVIII of CPC. It is submitted
that therefore, in absence of such evidence the impugned
order which can be said to be akin to Order XXXVIII Rule 5
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could not have been passed unless the conditions while
invoking powers under Order XXXVIII Rule 5 are satisfied.
Reliance is placed on the decision of this Court in the case
of Raman Tech. & Process Engg. Co. & Anr. Vs. Solanki
. While relying upon the
Traders; (2008) 2 SCC 302
decision of this Court in the case of Adhunik Steels Ltd.
Vs. Orissa Manganese and Minerals (P) Ltd.; (2007) 7
it is urged by Ms. Mehta, learned counsel
SCC 125,
appearing on behalf of the appellant that as held by this
Court, even while passing an order under Section 9 of the
Arbitration Act, the court has to bear in mind and consider
principles applicable for exercise of general power to grant
an interim injunction under Order XXXIX of CPC.
3.2 It is contended by Ms. Mehta, learned counsel appearing
on behalf of the appellant that apart from the fact that
there was a complete closure due to complete lockdown for
the period between 22.03.2020 to 09.09.2020 and
thereafter for the period between 19.04.2021 to
28.06.2021 and the period between 11.01.2022 to
27.01.2022 due to the pandemic, for the remaining period
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the appellant was allowed to run the Restro/Bar with only
50% capacity and that too, from 12:00 noon to 10:00 pm.
It is submitted that therefore, clause 29 of the agreement
( clause shall be applicable. It is submitted
force majeure )
that the appellant could not use the rented premises for
the aforesaid period either fully and/or partially due to Act
of God and which was beyond the control of the appellant.
It is submitted that therefore, the clause
force majeure
contained in clause 29 of the agreement shall be
applicable. It is urged that whether in the facts and
circumstances of the case, the principle of force majeure
contained in clause 29 is applicable or not is yet to be
considered by the Arbitral Tribunal at the time of the final
adjudication and therefore, the Arbitral Tribunal has
committed an error in directing the appellant to pay the
full rental amount for the aforesaid period, by way of
interim measure.
3.3 Ms. Mehta, learned counsel appearing on behalf of the
appellant has also submitted that it is not that the
appellant has not paid any amount at all and/or that the
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intention of the appellant is to defraud the landlords. It is
contended that the dispute raised by the appellant is a
bonafide dispute. It is pointed out that undisputedly
during the pendency of the arbitration proceedings, the
appellant itself had paid a substantial amount towards
rentals of the two rented premises. That an amount of Rs.
87,64,133.76/ has been paid towards rentals for the
period from October, 2020 to March, 2021 and July, 2021
to December, 2021. The appellant had also incurred other
over head expenses, TDS dues, electricity and water
charges. That even during the lockdown period, the
appellant paid wages to its employees. Therefore, it will be
too harsh on the appellant to pay the entire rental amount
for the period between March, 2020 to December, 2021, as
per the order passed by the learned Arbitral Tribunal
confirmed by the High Court is the submission of the
learned counsel for the appellant.
4. The present appeal is opposed by Ms. Shyel Trehan,
learned counsel appearing on behalf of the respondents. It
is contended that in the facts and circumstances of the
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case no error has been committed by the learned Arbitral
Tribunal in directing the appellant to deposit the entire
amount which is admittedly due and payable by the
appellant. It is pointed out that on one hand, the appellant
has continued to remain in possession of the leased
properties and at the same time, he is not paying the
rental amount. It is submitted that therefore, the learned
Tribunal has rightly passed an order by way of an interim
measure directing the appellant to deposit the rental
amount due and payable under the lease agreement.
4.1 According to learned counsel for the respondents neither
the principles applicable under Order XXXVIII Rule 5 nor
Order XXXIX Rule 1 are appliable in case of a direction
issued by way of an interim measure, as in the instant
case, directing the lessee to deposit the rental amount due
and payable while the lessee is continued to be in
possession.
4.2 It is further submitted that in the present case the
principles of force majeure would not apply as the
appellant – lessee continued to remain in possession of the
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leased premises. It is submitted that none of the decisions
relied upon by the counsel appearing on behalf of the
appellant, is applicable.
4.3 It is pointed out that as rightly observed by the High
Court, the business of the appellant may have been
impacted due to the outbreak of Covid19 pandemic but
that may not absolve the appellant from its contractual
obligations to pay the lease rent. It is submitted that so
long the appellant continues to occupy the premises, the
liability of the appellant to pay the rental amount
continues. It is urged that no error has been committed by
the Arbitral Tribunal by directing the appellant to deposit
the rental amount for the period between March, 2020 and
December, 2021 and the same is rightly confirmed by the
High Court.
5. We have heard learned counsel appearing on behalf of the
respective parties at length.
6. At the outset, it is required to be noted that the dispute is
with respect to the rental amount for the period between
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March, 2020 to December, 2021, for which the Arbitral
Tribunal has directed the appellant to deposit while
passing the order by way of an interim measure on the
applications under Section 17 of the Arbitration Act. The
liability to pay the lease rental for the period between
March, 2020 to December, 2021 is seriously disputed by
the appellant by invoking the force majeure principle
contained in clause 29 of the lease agreement. It is the
case on behalf of the appellant that for a substantial
period there was a total closure due to lockdown and for
the remaining period the appellant was allowed with 50%
capacity and therefore, the force majeure principle
contained in clause 29 shall be applicable. When the same
was submitted before the Arbitral Tribunal, no opinion,
even a prima facie opinion on the aforesaid aspect was
given by the Arbitral Tribunal. In para 39, it is observed
that “it would not be fair at this stage of the proceedings,
where evidence is yet to be adduced by the parties in
support their rival contentions on the issues that arise, to
record any definitive opinion on the import and effect of
the force majeure clause (clause no. 29) contained in the
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lease deed”. Therefore, applicability of the force majeure
principle contained in clause 29 is yet to be considered by
the Arbitral Tribunal at the time of final adjudication.
Hence, the liability to pay the rentals for the period during
lockdown is yet to be adjudicated upon and considered by
the Tribunal. Therefore, no order could have been passed
by the Tribunal by way of interim measure on the
applications filed under Section 17 of the Arbitration Act in
a case where there is a serious dispute with respect to the
liability of the rental amounts to be paid, which is yet to be
adjudicated upon and/or considered by the Arbitral
Tribunal. Thus, no such order for deposit by way of an
interim measure on applications under Section 17 of the
Arbitration Act could have been passed by the Tribunal.
However, at the same time, the aforesaid can be
considered only for the period of complete closure due to
lockdown. As per the available record, there was complete
closure for the period between 22.03.2020 to 09.09.2020;
for the period between 19.04.2021 to 28.06.2021 and for
the period between 11.01.2022 to 27.01.2022 and for the
remaining period the appellant was allowed to run the
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Restro/Bar with 50% capacity. The appellant will therefore
have to deposit the entire rental amount except the period
for which there was complete closure due to lockdown. As
the applicability of principle (clause 29) is yet
force majeure
to be considered at least, for the period during the
complete closure, it would not be justified to direct the
appellant to deposit the rental amount for the said period
of complete closure by way of an interim measure, pending
final adjudication.
7. In view of the above and for the reasons stated above, the
present appeal succeeds in part. The order passed by the
Arbitral Tribunal passed in applications under Section 17
of the Arbitration Act, directing the appellant to deposit the
entire rental amount for the period between March, 2020
to December, 2021, confirmed by the High Court by the
impugned judgment and order, is modified and it is
directed that the appellant to deposit the entire rental
amount for the period other than the period during which
there was complete lockdown i.e., 22.03.2020 to
09.09.2020 and for the period between 19.04.2021 to
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28.06.2021. However, nondeposit of the rental amount for
the aforesaid period during which there was a complete
closure/lockdown shall be subject to the ultimate outcome
of the Arbitration Proceedings and the Arbitral Tribunal
shall have to adjudicate and consider the principle of force
majeure contained in clause 29 as contended on behalf of
the appellant in accordance with law and on its own
merits. All contentions which may be available to either
party are kept open to be considered by the learned
Arbitral Tribunal. The learned Tribunal to adjudicate and
consider the aforesaid issue in accordance with law and on
its own merits uninfluenced by the present order and
observations by this Court in the present order shall be
treated to be confined to while deciding the applications
under Section 17 of the Arbitration Act and the interim
measure order in exercise of powers under Section 17 of
the Arbitration Act only, and the same shall not have any
bearing on the final adjudication on the liability to pay the
rentals even for the aforesaid period. The balance amount
as per the present order shall be deposited by the
appellant as observed by the learned Arbitral Tribunal in
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para 43(b) of interim order. The learned Tribunal to
conclude the arbitration proceedings at the earliest
preferably within a period of nine months, subject to the
cooperation of both the parties. With this the present
appeal is partly allowed to the aforesaid extent. There shall
be no order as to costs.
…………………………………J.
(M. R. SHAH)
…………………………………J.
(B.V. NAGARATHNA)
New Delhi,
April 19, 2022.
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