Delhi High Court - Orders
Sm Professionals Services Pvt Ltd vs Knowledge Podium Services Pvt Ltd & Anr on 25 February, 2021
Author: Sanjeev Narula
Bench: Sanjeev Narula
$~5
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ARB.P. 360/2020
SM PROFESSIONALS SERVICES PVT LTD ..... Petitioner
Through: Mr. Saurav Agrawal, Mr. Madhav
Misra, Mr. Vinay Misra and
Mr. Harshvardhan Singh, Advocates.
versus
KNOWLEDGE PODIUM SERVICES PVT LTD & ANR.
..... Respondents
Through: Mr. Kartik Nagarkatti, Advocate.
CORAM:
HON'BLE MR. JUSTICE SANJEEV NARULA
ORDER
% 25.02.2021
1. The present petition has been filed under Section 11(4) and 11(6) of the Arbitration and Conciliation Act, 1996 [hereinafter, 'the Act']. However, learned counsel for the Petitioner submits that having regard to the wording of the Arbitration Agreement, the same may be treated as one under Section 11(5) of the Act.
2. The Arbitration Agreement is contained in the Registered Lease Deed dated 21st February, 2017 executed between the parties in respect of premises comprising of first floor (17,435 sq. ft.) and second floor (22,178 sq. ft.) with parking space for 22 cars in the building at 21, IT Park, Sahastradhara Road, Dehradun, Uttrakhand-248001, for a term of nine years (hereinafter, 'Lease Deed'). In addition to it, the parties have also executed Signature Not Verified Digitally Signed ARB.P. 360/2020 Page 1 of 8 By:SAPNA SETHI Signing Date:05.03.2021 16:17 a separate Maintenance Agreement on the same day i.e. on 21st February, 2017 (hereinafter, 'Maintenance Agreement') which was coterminous with the lease deed.
3. Both the afore-noted agreements contain identical arbitration clauses. The clause is extracted from the Lease Deed hereinbelow:
"Article 9.
Dispute Resolution 9.1. The Parties shall attempt in the first instance to resolve any dispute or difference arising in any way or manner out of, in relation to or in connection with this Lease Deed by conciliation. If such a dispute is not resolved through conciliation within thirty (30) days after commencement of discussions, the same shall be decided by arbitration by a sole arbitrator appointed by the mutual consent of the Parties. The decision of the sole arbitrator shall be final and binding on the Parties. The arbitration proceedings shall be conducted in accordance with the Arbitration and Conciliation Act, 1996. Arbitration proceedings shall be conducted in English Language. The place of arbitration shall be New Delhi.
9.2. Each Party shall bear its cost of such Arbitration. When any dispute is under arbitration, except for the matters under dispute, the Parties shall continue to exercise their remaining rights and fulfil their remaining respective obligations under this Lease Deed."
4. The Petitioner contends that it has continued to perform its part of the obligations under the Lease Deed and the Maintenance Agreement, however, the Respondent has been continuously committing breaches in payment obligations towards maintenance and payment charges since January, 2018. Respondent has committed willful breach of Lease Deed by illegally and prematurely terminating the same, and unilaterally vacating the tenanted premises without making complete payments of dues and other Signature Not Verified Digitally Signed ARB.P. 360/2020 Page 2 of 8 By:SAPNA SETHI Signing Date:05.03.2021 16:17 charges under the Lease Deed and Maintenance Agreement. Petitioner claims that an amount of Rs. 7,29,34,795/- is due towards rentals and other charges till January 2020, inclusive of applicable taxes and interest at the rate of 18% until 14th January, 2020. A further claim is made of Rs. 8,41,45,972/- towards rental and car parking charges for the unexpired lock- in-period and damage claim of Rs. 2 crores for terminating the Lease Deed in violation of Clause 7.1 of the Lease Deed. It is further contended that Respondent has also defaulted in making other pending dues amounting to Rs. 93,47,352/-. Since the Respondent failed to make the payment despite demand, the Petitioner vide a notice dated 16th May, 2020, invoked the arbitration clause contained in the two afore-noted agreements. The Respondent did not reply to the said notice and accordingly, left with no other option, Petitioner has filed the present petition seeking appointment of an Arbitrator.
5. The Respondent on the other hand, contends that there is no arbitration agreement between the Petitioner and Respondent No. 1. It is contended that with a change in control and management of the Respondent No. 1 Company, the Petitioner and Respondent No. 1 entered into negotiations for a new arrangement vis-à-vis the use and occupation of the said premises and the rental and maintenance charges payable in respect thereof. It was the intention of the parties that this new arrangement completely supersedes the existing arrangement recorded in the Lease Deed and Maintenance Agreement and exclusively regulates their commercial relations going forward. Pursuant to the negotiations between Petitioner and Respondent No. 1, a fresh agreement was arrived at between the Petitioner and Signature Not Verified Digitally Signed ARB.P. 360/2020 Page 3 of 8 By:SAPNA SETHI Signing Date:05.03.2021 16:17 Respondent No. 1 in September, 2018 with respect to the use and occupation of the said premises, as well as rental and maintenance charges thereof. The terms and conditions of the fresh agreement, effective April, 2018, were captured in the email communication dated 26th September, 2018 addressed by the Petitioner to Respondent No. 1 and confirmed by Respondent No. 1 in their email communication dated 15th October, 2018. It is claimed that the fresh agreement constituted a complete understanding between the parties, and superseded the prior arrangement that was recorded under the terms of the Lease Deed and the Maintenance Agreement and pertinently, this agreement did not contain an arbitration clause. It is also contended that Respondent No. 2 has been wrongly impleaded as a party as he is only a director of Respondent No. 1 and has no arbitration agreement with the Petitioner. Lastly, it is contended that prior to filing of the present petition, the Respondent has filed a suit [CS (COMM) 377/2020] before this Court seeking inter alia the refund of the security deposit lying with the Petitioner in respect of the premises.
6. This court has heard the counsels at length. During the course of the arguments, the attention of the Court has been drawn to the order dated 25th January, 2021 passed in afore-noted suit [CS (COMM) 377/2020] filed by the Respondent against the Petitioner for recovery of interest-free refundable security deposit, mandatory injunction, damages etc. In the said suit, on an application by the Petitioner herein under Section 8 of the Arbitration and Conciliation Act, 1996, read with Order 7 Rule 11 of the CPC, the court has referred the parties to arbitration by appointing an Arbitrator. The operative portion of the said judgment reads as under:
Signature Not Verified Digitally Signed ARB.P. 360/2020 Page 4 of 8 By:SAPNA SETHI Signing Date:05.03.2021 16:17"28. In the present case, in my opinion, as the facts noted above show, it cannot be prima facie said that there is a completely new contract and that the old registered Lease Deed dated 21.02.2017 read with the Maintenance Agreement of the same date have been novated and substituted by a completely new contract. The e-mail dated 15.10.2018 sent by the defendant merely agrees to reduction of rent. It does not specifically state that all the terms and conditions of the Lease Deed and the Maintenance Agreement stand superseded or novated. The issue would require deeper consideration and is best left to the arbitral tribunal to adjudicate upon.
29. I, accordingly, allow the present application.
30. I appoint Mr. Justice G. S. Sistani (Retd.) (Mobile No.+91- 9871300034) as the Sole Arbitrator to adjudicate the dispute between the parties. The plaintiff will be at liberty to raise the plea about non- existence of an arbitration agreement before the Learned Arbitrator. It is left to the discretion of the Learned Arbitrator to fix his fees. The learned Arbitrator shall comply with mandatory stipulations."
7. Respondent's counsel contends that the aforesaid order has been assailed before the Supreme Court, however the SLP is yet to be listed. He requests that the decision in the present petition be deferred, as any order passed by this Court in the present petition would prejudice the respondent. Learned counsel for the Petitioner, on the other hand, contends that notwithstanding the order passed under Section 8 of the Act, the Petitioner's request under Section 11 of the Act has to be decided independently, and the filing of the SLP cannot be a fetter for this court to decide the present petition. He however submits that he has no objection in case this Court were to appoint the same Arbitrator as has been appointed pursuant to the order referred above. In support of his submission, the learned counsel for the Petitioner have also relied upon the decision of the Supreme Court in Vijay Kumar Sharma v. Raghunandan Sharma and Ors., 2010 2 SCC 486, to bring out Signature Not Verified Digitally Signed ARB.P. 360/2020 Page 5 of 8 By:SAPNA SETHI Signing Date:05.03.2021 16:17 the distinction between the two provisions.
8. From the above noted facts, it clearly emerges that there are agreements executed between the parties. The said agreements contain an arbitration clause. The plea regarding the non-existence of the arbitration clause is essentially based on the plea of novation. It cannot come in the way of this Court in allowing the present petition for two reasons. Firstly, because this very plea has already been considered and negated by this Court under Section 8 of the Act. The court has already held that:
"it cannot be prima facie said that there is a completely new contract and that the old registered Lease Deed dated 21.02.2017 read with the Maintenance Agreement of the same date have been novated and substituted by a completely new contract. The e-mail dated 15.10.2018 sent by the defendant merely agrees to reduction of rent. It does not specifically state that all the terms and conditions of the Lease Deed and the Maintenance Agreement stand superseded or novated. The issue would require deeper consideration and is best left to the arbitral tribunal to adjudicate upon".
9. Secondly, even otherwise, the question of existence of an arbitration agreement, while deciding a petition under Section 11, has to be determined only on a prima facie basis, as held by the Supreme Court in the case of Vidya Drolia and Others v. Durga Trading Corporation, 2020 SCC OnLine SC 1018. The judgment was also relied upon in the decision under Section 8 of the Act. As regards the pending challenge by way of SLP is concerned, in the opinion of the court, this factor would not be relevant for the purpose of deciding the present application. The scope of section 8 and 11 of the Act is entirely different. The order impugned in the SLP (yet to be listed) refers the parties to arbitration on the suit filed by the Respondent. The said order also appoints the Arbitral Tribunal. The Petitioner therefore Signature Not Verified Digitally Signed ARB.P. 360/2020 Page 6 of 8 By:SAPNA SETHI Signing Date:05.03.2021 16:17 now has a forum to file its claims/counter-claims. Nevertheless, the Petitioner cannot be precluded from seeking the appointment of arbitrator regardless of the order of reference under section 8 of the Act. The disputes raised in the suit that have now been referred to arbitration are certainly linked to the arbitration agreements being the Lease Deed and Maintenance Agreement, but the disputes raised by the Petitioner have to be adjudicated on a standalone basis which are squarely within the ambit of the arbitration agreements noted above.
10. In view of the above, there is no impediment for this Court to allow the petition and accordingly the same is allowed. As noted above, this court has already appointed the Arbitral Tribunal while allowing petition under section 8 of the Act. Thus, in the opinion of this court, in order to avoid multiplicity of Tribunals and inconsistent/ contradictory awards, the petition is allowed and accordingly Mr. Justice G. S. Sistani, Retd. Judge of this Court (Mobile No. +91-9871300034) is appointed as the Sole Arbitrator to adjudicate the disputes between the Petitioner and Respondent No. 1 under the aforementioned agreements. Petition qua Respondent No. 2, who is a non-signatory to the arbitration agreements, stands rejected.
11. Needless to say, Respondent No. 1 shall be at liberty to raise all objections as per law, including the plea of non-existence of the arbitration agreement, before the learned Arbitrator. Furthermore, it is clarified that the observations made in the present order are only for the purpose of deciding the present petition and they shall not come in the way of the learned Arbitrator to independently adjudicate upon the objections raised by the Signature Not Verified Digitally Signed ARB.P. 360/2020 Page 7 of 8 By:SAPNA SETHI Signing Date:05.03.2021 16:17 Respondent.
12. The petition is allowed in the above terms.
SANJEEV NARULA, J FEBRUARY 25, 2021 nk Signature Not Verified Digitally Signed ARB.P. 360/2020 Page 8 of 8 By:SAPNA SETHI Signing Date:05.03.2021 16:17