Supreme Court modifies rental deposit rule during lockdown, directs force majeure clause review.

The Supreme Court partially allowed the appeal, modifying the Arbitral Tribunal's order to exclude the complete lockdown periods from the rental deposit requirement. The court directed the Arbitral Tribunal to adjudicate the force majeure clause's applicability during the final arbitration proceedings, uninfluenced by the interim order. The arbitration proceedings were to be concluded within nine months, subject to the parties' cooperation.

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Issues Involved:
1. Liability to deposit rental amount during the Covid-19 pandemic.
2. Applicability of the force majeure clause in the lease agreement.
3. Validity of the Arbitral Tribunal's interim order under Section 17 of the Arbitration Act.
4. High Court's confirmation of the Arbitral Tribunal's interim order under Section 37(2)(b) of the Arbitration Act.

Issue-wise Detailed Analysis:

1. Liability to deposit rental amount during the Covid-19 pandemic:
The appellant, a lessee running a Restaurant and Bar, was directed by the Arbitral Tribunal to deposit 100% of the rental amount for the period between March 2020 and December 2021. The appellant contended that due to the Covid-19 pandemic and the resultant lockdowns, there was a complete or partial closure of operations, invoking the force majeure clause (Clause 29) of the lease deed to dispute the liability to pay the rental amount. Despite these submissions, the Arbitral Tribunal ordered the appellant to deposit the rental amount, which was to be kept in fixed deposit accounts.

2. Applicability of the force majeure clause in the lease agreement:
The appellant argued that the force majeure clause should apply due to the pandemic-induced lockdowns, which led to a complete closure from 22.03.2020 to 09.09.2020, 19.04.2021 to 28.06.2021, and 11.01.2022 to 27.01.2022, and partial operation with 50% capacity during other periods. The Arbitral Tribunal, however, did not provide a definitive opinion on the applicability of the force majeure clause at this stage, stating that evidence was yet to be adduced by the parties.

3. Validity of the Arbitral Tribunal's interim order under Section 17 of the Arbitration Act:
The appellant challenged the Arbitral Tribunal's interim order, arguing that it was akin to an order under Order XXXVIII Rule 5 of CPC, which requires certain conditions to be met. The appellant cited previous Supreme Court cases to support the argument that such interim orders should consider the principles applicable for granting interim injunctions. The Supreme Court observed that the Arbitral Tribunal should not have passed an interim order for the deposit of rental amounts when the liability was seriously disputed and yet to be adjudicated.

4. High Court's confirmation of the Arbitral Tribunal's interim order under Section 37(2)(b) of the Arbitration Act:
The High Court dismissed the appeal against the Arbitral Tribunal's interim order, confirming the directive to deposit the rental amount. The Supreme Court, however, modified this order, stating that the appellant should only deposit the rental amount for periods other than the complete lockdown periods. The non-deposit for the lockdown periods would be subject to the final outcome of the arbitration proceedings, where the force majeure clause's applicability would be adjudicated.

Conclusion:
The Supreme Court partially allowed the appeal, modifying the Arbitral Tribunal's order to exclude the complete lockdown periods from the rental deposit requirement. The Arbitral Tribunal was directed to adjudicate the force majeure clause's applicability during the final arbitration proceedings, uninfluenced by the interim order. The arbitration proceedings were to be concluded within nine months, subject to the parties' cooperation.

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