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Brij Raj Oberoi vs. The Secretary, Tourism And Civil Aviation Department and Anr. - (Supreme Court) (18 Aug 2022)

Issue of arbitrability of the dispute over non-renewal of the lease is within the realm of the Arbitral Tribunal/Arbitrator



Present appeals are against a common judgment passed by the High Court allowing Arbitration Appeal filed by the Respondents, setting aside the impugned order passed by the Commercial Court on an application of the Appellant under Section 9 of the Arbitration and Conciliation Act, 1996, and also dismissing Arbitration Petition filed by the Appellant under Section 11 of the 1996 Act for appointment of an Arbitrator.

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.

It is well settled that, clauses in a lease deed cannot be read and construed in isolation. The lease deed is to be construed as a whole. Clause 4(xiii) has to be read with Clause 3 which clearly provides that the initial term of the lease under the deed shall be a period of 24 years from 1st June 1997 to 31st May 2021 and shall be renewable for such acceptance of the lessee’s offer in terms of Clause 4(xiii). Clause 4(xiii) has wrongly been printed as Clause 4(xii). It is not in dispute that it is to be read as Clause 4(xiii) and all concerned have proceeded on the basis that the offer is to be in terms of Clause 4(xiii).

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.

Clause 4(xiii) of lease deed provides that the Appellant-lessee shall, 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. The issue of arbitrability of the dispute over non-renewal of the lease is within the realm of the Arbitral Tribunal/Arbitrator.

The impugned judgment and order is set aside. Justice Bhaskar Bhattacharya, Former Chief Justice of Gujrat High Court and Former Chairman of the Sikkim Law Commission is appointed Arbitrator to adjudicate the disputes between the parties. Appeals allowed.


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