TMI Blog2022 (8) TMI 822X X X X Extracts X X X X X X X X Extracts X X X X ..... offer is to be in terms of Clause 4(xiii) - Prima facie, the parties to the lease deed have used the expression shall which connotes a command. If the lessee offered its terms for renewal or extension of the lease within the time stipulated in the lease, prima facie the same would have to be accepted. However, if the quantum of rent or the period of lease could not be mutually agreed upon, the same would necessarily have to be referred to arbitration by an Arbitrator to be appointed by the Chief Justice of the Sikkim High Court. The Division Bench fell in error in rejecting the application of the Appellant under Section 11(6) of the 1996 Act for appointment of an Arbitrator. The dispute arising out of non-renewal of the lease is clearly arbitrable - All disputes between the parties to the lease with regard to renewal and/or non-renewal, the period of renewal and the quantum of rent would have be decided by the Arbitrator. The issue of arbitrability of the dipsute over non-renewal of the lease is within the realm of the Arbitral Tribunal/Arbitrator. Justice Bhaskar Bhattacharya, Former Chief Justice of Gujrat High Court and Former Chairman of the Sikkim Law Commission is ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or as follows: i) The lessee shall pay the lease amounts on the dates aforesaid in clause 2 hereinabove. ii) The lessee shall pay the increased lease amounts at the rate of 10% (ten percentage) to be compounded every three years as follows: a) from 01.06.2000 to 31.05.2003 Rs. 33,30,000.00 per annum. b) from 01.06.2003 to 31.05.2006 Rs. 36,30,000.00 per annum. c) from 01.06.2006 to 31.05.2009 Rs. 39,93,000.00 per annum. d) from 01.06.2009 to 31.05.2012 Rs. 43,92,300.00 per annum. e) from 01.06.2012 to 31.05.2015 Rs. 48,31,530.00 per annum. f) from 01.06.2015 to 31.05.2018 Rs. 53,14,683.00 per annum. g) from 01.06.2018 to 31.05.2021 Rs. 58,46,151.30 per annum. ... v) The lessee shall keep the leased premises in good order and condition and in the same condition in which it was handed over the lessee with a reasonable wear and tear for which he shall not be entitled to make any claim subsequently. vi) The lessee shall comply with all the provisions of the relevant enactments and regulations thereunder and with any other obligations imposed by the local laws in regard to the lease premises. ... x) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted. 5. The lease was due to expire by efflux of time on 31st May 2021. By a letter dated 12th November 2020 addressed to the Respondent State, through the Secretary, Tourism Department, the Appellant offered its terms and conditions for renewal of the lease of the said property, for a further period of 30 years, at an annual rent of Rs.64,30,766.43 per year, that is, 10% more than annual rent being paid then, with escalation of 10% every three years. 6. By a letter dated 17th May 2021 written in response to the Appellant s letter dated 12th November 2020, Dr. K. Jayakumar, IAS, Additional Chief Secretary, Department of Tourism and Civil Aviation, Gangtok rejected the offer of the Appellant for renewal of lease of the property in question. The said letter is extracted hereinbelow for convenience:- ...This has reference to your request for renewal of lease ownership of Norkhill hotel period for a further period of 30 years vide your letter dated 12 Nov. 2020. 2. In the context of the above, this is to inform you that the State Government has approved a policy as part of executing the vision for bringing about transformative changes in the tourism sector, which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases, which lays down that Public property partakes the character of a trust and that, public purpose would be served only by getting the best price for government property, so that larger revenue coming into the coffers of the State administration can be utilized for beneficent activities to subserve public purpose namely, the welfare State... 7. By a letter dated 21st May 2021, the Appellant requested the Respondents to refrain from taking steps to hand over the hotel to a third party until the disputes and differences were decided through arbitration. 8. The Appellant filed an application under Section 9 of the 1996 Act, being Arbitration Suit No.05 of 2021 in the Commercial Court, being the Court of the District Judge, East Sikkim at Gangtok. 9. On or about 28th May 2021, the Respondent State filed its Response to the application under Section 9 of the 1996 Act, contending that the Appellant had misconstrued Clause 4(xiii) of the Lease Agreement. It was contended that as the Respondent State had not accepted the offer made by the Appellant, there was no case for arbitration. Read properly, clause 4(xiii) would permit reference of disputes with regard to the quantum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le dispute - as specified hereinbefore, are present in the facts of the instant case. In absence of any arbitrable dispute, an order could not have been passed by the Learned Commercial Court under section 9 of the Arbitration Act. 12. Consequently, Arbitration Appeal No. 02 of 2021, is allowed and the impugned judgment and order dated 31.05.2021, passed by the learned Commercial Court on the application filed by Brij Raj Oberoi under section 9 of the Arbitration and Conciliation Act, 1996 is set aside. The Arbitration Petition No. 02 of 2021 seeking appointment of Arbitrator under section 11 of the Arbitration and Conciliation Act, 1996 read with section 10 of the Commercial Courts Act, 2015 is also dismissed. The parties to bear their own costs. 14. In our considered opinion, the Division Bench fell in error in arriving at the finding that the arbitration clause could only be invoked if the proposal for renewal was accepted by the lessor, but there was dispute with regard to the period of renewal or there was dispute with regard to the quantum of rent proposed to be paid by the lessee to the lessor. 15. It is well settled that clauses in a lease deed cannot be read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitration clause. Connected and incidental matters, unless the arbitration clause suggests to the contrary, would normally be covered. 152. Which approach as to interpretation of an arbitration agreement should be adopted in a particular case would depend upon various factors including the language, the parties, nature of relationship, the factual background in which the arbitration agreement was entered, etc. In case of pure commercial disputes, more appropriate principle of interpretation would be the one of liberal construction as there is a presumption in favour of one-stop adjudication. 153. Accordingly, we hold that the expression existence of an arbitration agreement in Section 11 of the Arbitration Act, would include aspect of validity of an arbitration agreement, albeit the court at the referral stage would apply the prima facie test on the basis of principles set out in this judgment. In cases of debatable and disputable facts, and good reasonable arguable case, etc., the court would force the parties to abide by the arbitration agreement as the Arbitral Tribunal has primary jurisdiction and authority to decide the disputes including the question of jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll, in the last year of the lease tenure and not later than six months prior to the expiry of the present lease, communicate in writing to the lessor, his terms and conditions for the renewal of the present lease and if the same is accepted by the lessor, then the present lease may be renewed for such further period and on such rent as may be mutually agreed. The arbitration clause cannot be rendered otiose by refusal of the Respondent State to renew the lease. The Respondent State may have formulated a policy for encouraging self-employment of local youth who are duly qualified and competent to run the hotel. Such policy decision cannot impact an existing agreement with a renewal clause. All disputes between the parties to the lease with regard to renewal and/or non-renewal, the period of renewal and the quantum of rent would have be decided by the Arbitrator, as observed above. The issue of arbitrability of the dipsute over non-renewal of the lease is within the realm of the Arbitral Tribunal/Arbitrator. 20. The appeals are allowed. The impugned judgment and order is set aside. Justice Bhaskar Bhattacharya, Former Chief Justice of Gujrat High Court and Former Chairman of the S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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