Indiana Travels Pvt. Ltd. v. Insion Private Limited

1. Allowed, subject to all just exceptions and as per extant Rules.

2. The application is disposed of. FAO (COMM) 63/2021 and CM APPL. 9202/2021 (of the appellant for interim relief)

3. This appeal, under Section 37(2) of the Arbitration and Conciliation Act, 1996 read with Section 13 of the Commercial Courts Act, 2015, impugns the order dated 11th February, 2021 of the Commercial Court on an application for interim measures, under Section 9 of the Arbitration Act, being OMP (COMM) No. 611/2020 preferred by the appellant.

4. We have heard the counsel for the appellant at length.

5. The Arbitration Agreement between the appellant and the respondent is contained in a registered Lease Deed dated 7th March, 2019, for a period 2021:DHC:884-DB of 9 years, executed by the appellant as landlord in favour of the respondent tenant with respect to Flat No. 11, 1st and 2nd Floor, Khan Market, New Delhi. The application under Section 9 of the Arbitration and Conciliation Act, from the order wherein this appeal arises, was filed by the appellant, complaining of non-payment of agreed rent by the respondent tenant and seeking reliefs of, (i) directing the respondent tenant to pay arrears of rent and to continue to pay future rent to the appellant; (ii) appointment of a Receiver to take over possession of the tenanted premises; (iii) direction to the respondent tenant and its directors to file a list of their movable and immovable assets; and, (v) restraining the respondent tenant from alienating, transferring and in any manner creating third party interest in movable and immovable assets including the tenanted premises.

6. The Commercial Court, vide the impugned order, though has granted the reliefs of directing the respondent tenant to pay Rs.25,00,000/- to the appellant landlord and though has restrained the respondent tenant from creating third party rights in the tenanted premises, but has not granted the other reliefs.

7. The appellant, in this appeal, is aggrieved from non-grant of the relief of appointment of Receiver with respect to the premises.

8. The Commercial Court has declined appointment of Receiver, reasoning (i) that there was a dispute between the parties with respect to payment of rent during the national and local lock down owing to the prevalent pandemic; (ii) that the term of tenancy had not expired by efflux of time; (iii) that on opening of the lock down, the restaurant business being carried on by the respondent tenant in the tenanted premises had started picking up; (iv) that the respondent tenant had shown intention to clear the arrears and pay reasonable rent; (v) Arbitrator had already been appointed to adjudicate the disputes between the parties; and, (vi) that there was nothing to indicate that the respondent tenant was acting in a manner so as to defeat the realisation of the monetary award/decree which may be passed by the Arbitrator in favour of the appellant.

9. The contention of the counsel for the appellant is, that once the respondent tenant was in default of payment of rent and had not complied with the directions for payment of rent, appointment of Receiver of the property should have axiomatically followed. Strong reliance is placed on S.C. Mehta Vs. Aviral Kaushik 2007 (93) DRJ 769, followed in order dated 4th April, 2014 of this Court in OMP 146/2014 titled Asha Dass Vs. Fiorano Motors LLP, both of Single Judges of this Court.

10. In S.C. Mehta supra, the tenant did not comply with the direction for payment of rent issued in exercise of powers under Section 9 of the Arbitration Act and also failed to appear in the Court and his appearance was compelled by issuing bailable warrants; upon such appearance, the tenant gave an undertaking to the Court, to pay the arrears of rent; however he was in breach of that undertaking also and was held guilty of contempt of Court and orders, by the Contempt Court, for attachment of movable and immovable properties of the tenant were issued. It was in such circumstances that the landlord was appointed as the Receiver, to take possession of the property. In Asha Dass supra, finding the tenant to be in defiance of earlier directions for payment of arrears of rent and further finding that the term of the lease deed had also expired and without noticing that in the earlier judgment in S.C. Mehta supra, there was an order, in a contempt proceedings, for attachment of movable and immovable goods of the tenant, the same was followed and the landlord was appointed as a Receiver to take possession of the tenanted property.

11. We are afraid, the Court, in exercise of powers under Section 9 of the Arbitration Act and which, carving out an exception to Section 5 of the said Act barring interference by Court in arbitral proceedings, empowers the Court to issue interim measures, that too normally till the Arbitral Tribunal is not constituted, cannot make an order in the nature of granting a final relief. It cannot be lost sight of that the substantive dispute is to be adjudicated by the Arbitral Tribunal in which the parties, at the time of entering into the agreement, have reposed faith. In the present case, in spite of Arbitral Tribunal having been constituted (we are informed after the filing of instant Section 9 application), the appellant landlord, instead of approaching the Arbitral Tribunal for appropriate relief, is pursuing Section 9 application and the appeal against the order therein.

12. Attention of the counsel for the appellant has been drawn to Order XV-A of the Code of Civil Procedure, 1908 (CPC) as incorporated in Delhi, which expressly provides for the eventuality of the tenant/occupant not complying with a direction for payment of rent/user charges. The remedy therefor is by striking down the defence of the tenant and by passing an order against the tenant forthwith. In the face of such an express provision in law, we are afraid, the Court entrusted only with grant of interim measures, cannot pass an order having the effect of finality, as in fact, the order of divesting the tenant of possession of the tenanted premises would have. Such power being a substantive power, has to be exercised by the chosen form of the parties i.e. the Arbitral Tribunal. The only reason given by the counsel for the appellant for not going before the Tribunal, is of the delays in applying and in completion of pleadings therein. However the same cannot be a reason in law. Moreover the Arbitral Tribunal is not bound by the Rules of CPC and evidence and it is for the parties to draw the attention of the Arbitral Tribunal to the clauses, if any, in the lease deed between the parties in this regard and to seek relief. If the parties do not have faith in Arbitral Tribunals, agreed to by them, we do not understand why the parties, while entering into contracts, agree for the arbitration clause. Once the parties have agreed to adjudication of their disputes by arbitration, they are bound therewith and cannot approach the Courts, stating that the Courts are more effective than the Arbitral Tribunal.

13. In Firm Ashok Traders Vs. Gurmukh Das Saluja (2004) 3 SCC 155 the Supreme Court emphasised existence of Section 17 in the Arbitration Act empowering the Arbitral Tribunal to make orders amounting to interim measures and held that the court approached by a party with an application under Section 9 is justified in asking the party to take further steps before the Arbitral Tribunal. Here, if the appellant, as per the terms and conditions of the lease deed is entitled to rent, notwithstanding the lockdown and the respondent tenant has not paid the rent and if the lease deed permits the appellant landlord to terminate the same for non-payment of rent, the appellant, instead of seeking interim measure of appointment of Receiver, ought to approach the Arbitral Tribunal for an order of ejectment of the respondent tenant, on admissions.

14. This Court, in C.V. Rao Vs. Strategic Port Investments K.P.C. Ltd. 218 (2015) DLT 200 (DB) held that interim measures under Section 9 should be for the purposes of safeguarding the interest of the parties to the arbitration proceedings, to ensure that the arbitration proceedings are not rendered infructuous. It was further held that the underlying object is to preserve the property which is the subject matter of dispute, till the Arbitral Tribunal decides the dispute and the scope of Section 9 cannot be extended to directing specific performance of the contract itself. Comparatively recently, in Samir Narain Bhojwani Vs. Aurora Properties and Investments MANU/SC/0884/2018, the Supreme Court, concerned with an order of interlocutory mandatory injunction of delivery of certain flats, made by the Arbitrator in exercise of powers under Section 17 of the Act, held that interim mandatory relief can be granted only to restore status quo and not to establish a new set of things differing from the state which existed at the date of commencement of the lis. The grant of interim mandatory relief, in the facts of that case was held to be a drastic order.

15. Applying the aforesaid law, if the respondent tenant, by an interim order is directed to deliver possession of the tenanted premises in its occupation, to the appellant landlord, even if as a Receiver, the same would amount to an order of ejectment of the respondent tenant from the premises and which is the final relief claimed by the appellant landlord in the arbitration proceedings. Once the said relief is granted at the interim stage, there will be nothing left for the Arbitral Tribunal to decide qua the claim for recovery of possession and the respondent tenant would have lost, without having a chance to contest the claim of the appellant landlord.