Evergreen Land Mark Pvt. Ltd. vs John Tinson & Company Pvt. Ltd. & Anr.

Evergreen Land Mark Pvt. Ltd. vs John Tinson & Company Pvt. Ltd. & Anr. 

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले


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
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 auto3
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
5
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
Traders;   (2008)   2   SCC   302.   While   relying   upon   the
decision of this Court in the case of Adhunik Steels Ltd.
Vs.  Orissa  Manganese  and  Minerals   (P)  Ltd.;   (2007)  7
SCC   125,  it   is   urged   by   Ms.   Mehta,   learned   counsel
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
(force majeure  clause)  shall be applicable. It is submitted
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  force   majeure  clause
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
8
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
9
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
10
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
12
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 force majeure principle (clause 29) is yet
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
13
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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