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Contemplation or the existence of an arbitral proceedings is a must before the Court can pass protective orders as contemplated in section 9 (1) (ii) (a) to (e) of the Arbitration Act: Sikkim High Court

 

This dispute arises out of the impugned order dated 31.05.2021 passed by the learned Commercial Court on an application filed by the respondent (Brij Raj Oberoi) under section 9 (1) (ii) of the Arbitration and Conciliation Act, 1996. The learned Commercial Court examined, inter-alia, the relevant arbitration clause i.e. 4 (xiii) of the lease agreement dated 09.12.1997 entered between the appellant (the State) and the respondent (Brij Raj Oberoi) leasing out the premises known as “Norkhil Hotel”. After an appeal by the plaintiff this dispute was decided by Sikkim High court in the matter of The Secretary, Tourism & Civil Aviation Department & Anr. v. Brij Raj Oberoi [Arb.A. No. 02 of 2021]

The facts of the case were that the on 09.12.1997 the deed of lease was executed between the State and Brij Raj Oberoi by which “Norkhil Hotel” was leased to Brij Raj Oberoi for a period of 24 years. The lease was to expire on 31.05.2021 further, the lease deed contained some important facts for the consideration of the case as: The 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 upon between the parties thereto, failing which the matter shall be referred to arbitration by an arbitrator to be appointed by the Chief Justice of the Sikkim High Court. On 12.11.2020 before the expiry of the period of lease on 31.05.2021 Brij Raj Oberoi sent an offer of renewal to the State but there was no response from the state side. Thus, Brij Raj decided to send a legal notice.

The State thereafter, issued a letter dated 17.05.2021 to Brij Raj Oberoi conveying their inability to renew the lease furthermore, on 21.05.2021 Brij Raj Oberoi wrote to the State contending that disputes and differences had arisen between them in respect of the renewal of the lease and its terms; and keeping in mind clause 4(xiii) of the lease agreement to refrain from taking any steps as contemplated by them for tender to handover “Norkhil Hotel” to a third party until the disputes are decided through arbitration.

The state side argued that Brij Raj Oberoi had misconstrued clause 4(xiii) of the lease agreement. It was contended that as the State had not accepted the offer made by Brij Raj Oberoi there was no case for arbitration.

The bench comprising of consisting of Justice Bhaskar Raj Pradhan and Chief Justice Biswanath Somadder decided that Section 9 of the Arbitration Act deals with interim measures for protection which a party may, before or during arbitral proceedings or at any time after the making of the arbitral award or before it is enforced in accordance with section 36, apply to a Court for. It is certain that a contemplation or the existence of an arbitral proceedings is a must before the Court can pass protective orders as contemplated in section 9 (1) (ii) (a) to (e) of the Arbitration act. The bench relied on the case of Firm Ashok Traders vs. Gurmukh Das Saluja [(2004) 3 SCC 155] in which the supreme court held that party invoking section 9 may not have actually commenced the arbitral proceedings but must be able to satisfy the Court that arbitral proceedings were actually contemplated or manifestly intended and were positively going to commence within a reasonable time. “In such circumstances, none of the disputes – which can be termed as arbitrable 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.”

Hence, the arbitration appeal was 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 was set aside.

Click here to read Judgment

Judgment Reviewed by Anshuman Singh

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