2022 (2) TMI 1218 - HC - Indian Laws

Court Upholds Order to Deposit Lease Arrears; Rejects Force Majeure Claim

EVERGREEN LAND MARK PVT LTD. Versus JOHN TINSON AND CO PVT LTD AND ANR.

The Court dismissed the appeal under Section 37(2)(b) of the Arbitration & Conciliation Act, 1996, challenging the order to deposit arrears of lease ... Seeking direction to appellant to deposit the amount equivalent to the arrears of lease rentals in respect of the premises leased to the appellant - HELD THAT:- The fact that it is not disputed that the appellant had taken on lease the premises from the respondents and is continuing to occupy the same is sufficient ground for the Arbitral Tribunal to have directed the respondents to deposit the arrears of rent payable in terms of the leases (which as stated earlier are not disputed). There is no denying the fact that the business of the appellant may have been adversely impacted due to the outbreak of Covid-19, however, that may not absolve the appellant from its contractual obligations to pay the lease rent. The respondents are not in the business of running a restaurant and therefore it is doubtful whether they can be mulcted with the risks attendant to running that business. This Court concurs with the prima facie finding returned by the Arbitral Tribunal that the financial commitments of appellant may not be dependent on the business operated by the appellant. The security deposit furnished by the appellant to the respondents in terms of the lease agreements is required to be dealt with in terms of the agreements. Thus the contention that the same may be adjusted from the arrears of rent cannot be accepted - Appeal dismissed. Issues:1. Appeal under Section 37(2)(b) of the Arbitration & Conciliation Act, 1996.2. Impugning order directing deposit of arrears of lease rentals.3. Claim of force majeure conditions due to Covid-19 outbreak.4. Arbitral Tribunal's direction for depositing arrears in Fixed Deposit accounts.5. Contention regarding adjustment of security deposits against claimed amounts.6. Dismissal of appeal and pending applications.Analysis:1. The appellant filed an appeal under Section 37(2)(b) of the Arbitration & Conciliation Act, 1996, challenging the order passed by the Arbitral Tribunal directing the deposit of arrears of lease rentals. The Tribunal's order was based on the appellant's non-payment of lease rentals for the leased premises and the termination notices issued by the respondents. The disputes were referred to arbitration.2. The appellant claimed force majeure conditions due to the Covid-19 outbreak, arguing that the pandemic adversely affected its business operations. However, the Tribunal found that the financial terms of the lease were not dependent on revenue sharing, leading to the direction for depositing arrears. The Tribunal invoked Order XV-A of CPC to implement the measures under Section 17 of the A&C Act.3. The Tribunal directed the appellant to compute and deposit the arrears of lease rentals in Fixed Deposit accounts in a public sector bank. The amounts were specified for each premises under lease, with provisions for TDS deductions and auto-renewal. The encashment of Fixed Deposits was subject to the final awards in the arbitration proceedings.4. The appellant contended that certain security deposits with the respondents could be adjusted against the claimed amounts. However, the Court rejected this argument, emphasizing that the security deposits should be dealt with as per the lease agreements and cannot be adjusted against the arrears of rent.5. The Court dismissed the appeal, stating that the appellant's occupation of the leased premises and non-payment of rent were sufficient grounds for the Tribunal's direction. The Court agreed with the Tribunal's finding that the appellant's financial commitments were not dependent on the business operated on the premises. Consequently, the appeal and pending applications were dismissed, affirming the Tribunal's order for depositing arrears of lease rentals.