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

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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

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

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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 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

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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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