Dismissed

Sri Rajendra Singh Rathore v. Royal Orchid Associated Hotels Private Limited

Karnataka HC12 Jun 2023COMAP/47/2022

Case brief

AI extract

What is this about?

This commercial appeal challenges a temporary injunction granted in favor of a respondent seeking protection under an arbitration agreement. The High Court held that the appellant waived any objection to arbitration and dismissed the appeal, upholding the injunction.

What did the court decide?

The appeal was dismissed, and the order dated 13.12.2021 passed by the Commercial Court granting a temporary injunction was affirmed.

Sri Rajendra Singh Rathore Vs Royal Orchid Associated Hotels… — Arbitration | Karnataka HC (2023)

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1 - NC: 2023:KHC:19974-DB COMAP No.47 of 2022

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12^TH DAY OF JUNE, 2023

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PRESENT

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THE HON'BLE MR. JUSTICE ALOK ARADHE

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AND

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THE HON'BLE MR. JUSTICE ANANT RAMANATH HEGDE

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COMAP NO.47 OF 2022

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BETWEEN:

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Digitally signed by RUPA V Location: High Court of Karnataka

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SRI. RAJENDRA SINGH RATHORE S/O RANVEER SINGH RATHORE AGED ABOUT 46 YEARS

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PROPRIETOR OF HOTEL PUSHKAR FORT

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VILLAGE ADDRESS: DADA PULTRY FARM LOHAGAL AJMER RAJASTHAN -305023.

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PERMANENTLY R/AT HOTEL PUSHKAR FORT MOTISAR ROAD, GANAHERA TEH-PUSHKAR, DIST AJMER STATE OF RAJASTHAN -305022.

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…APPELLANT

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(BY SRI. M. RAJASHEKAR, ADV.,)

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AND:

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ROYAL ORCHID ASSOCIATED HOTELS PRIVATE LIMITED A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT 1956 HAVING ITS REGISTERED

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OFFICE AT NO.1 GOLF AVENUE KODIHALLI, OFF AIRPORT ROAD BENGALURU -560008 REPRESENTED BY ITS CHIEF FINANCIAL OFFICER AND AUTHORISED SIGNATORY MR. AMIT JAISWAL.

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…RESPONDENT

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(BY SRI. M.V. SUNDARAMAN, ADV., FOR C/R)

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THIS COMAP/COMMERCIAL APPEAL IS FILED UNDER SECTION 37 OF THE ARBITRATION AND CONCILIATION ACT, 1996 R/W SECTION 13(1A) OF THE COMMERCIAL COURTS ACT, 2015, PRAYING TO CALL FOR THE RECORDS IN COM.A.A.NO. 187/2019, ON THE FILE OF THE LXXXIX ADDITIONAL CITY CIVIL AND SESSIONS JUDGE AT BENGALURU (CCH-90). SET ASIDE THE JUDGMENT AND ORDER DATED 13/12/2021 PASSED IN COM.A.A.NO. 187/2019, ON THE FILE OF THE LXXXIX ADDITIONAL CITY CIVIL AND SESSIONS JUDGE AT BENGALURU (CCH-90) AND DISMISS THE APPLICATION FILED BY THE RESPONDENT HEREIN AS DEVOID OF MERITS, BY AWARDING COSTS TO THE RESPONDENT THROUGHTOUT. PASS SUCH OTHER ORDER OR ORDERS THAT THIS HON'BLE COURT DEEMS FIT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IN THE INTEREST OF JUSTICE AND EQUITY.

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THIS APPEAL COMING ON FOR ADMISSION, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING:

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JUDGMENT

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Mr.M.Rajashekar, learned counsel for the

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appellant.

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Mr.M.V.Sundaraman, learned counsel for the

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respondent.

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This appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') read with Section 13(1-A) of the Commercial Courts Act, 2015, has been filed against an order dated 13.12.2021 passed by the Commercial Court by which petition filed by the respondent under Section 9 of the Act has been allowed and the appellant, his agents and representatives as well as successors-in-interest and anyone claiming through him, have been restrained by way of temporary injunction from interfering or obstructing in any manner impeding, either directly or indirectly with the right of the respondent to manage, operate and discharge the duties of the hotel under the

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hotel operation agreement dated 17.11.2017. It has further been directed that the aforesaid order shall remain in force for a period of 90 days from the date of the order or till passing of any order by the learned Arbitrator to be appointed, whichever is later.

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Facts giving rise to filing of this appeal briefly stated are that the parties entered into an agreement on 17.11.2017. Under the aforesaid agreement, the respondent was authorized to operate a hotel for a period of 10 years which was extendable by mutual consent by both the parties. Clause XXIV(3) of the Agreement reads as under:

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"The first four years of the terms of the Contract staring from the effective date shall be considered as a lock-in-period. During the terms of contract starting from the effective date the Owner shall not be entitled to terminate this contract under any

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circumstances except in the case of sale of Hotel as specified under Article XX".

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Thus, from perusal of the aforesaid clause, it is evident that the appellant was not entitled to terminate the agreement during the lock-in-period i.e. first four years of the agreement. It is not in dispute that the lock-in-period expired on 17.11.2021. However, before the lock-in-period was expired, the appellant sent an e- mail on 07.08.2019 stating that on account of recurring losses, the appellant intends to discontinue the agreement.

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Thereupon, the respondent sent a notice to the appellant and filed a petition under Section 9 of the Act seeking an injunction restraining the appellant to interfere with the right of the management of the respondent to manage the hotel under the hotel operation agreement dated 17.11.2019. The respondent

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filed statement of objections to the aforesaid petition.

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The Commercial Court, by an order dated 13.12.2021 inter alia held that the respondent has been able to make out a prima facie case and balance of convenience also lies in favour of the respondent and that irreparable injury will be caused to the respondent if the interim relief is not granted in favour of the respondent. Accordingly, temporary injunction was granted restraining the appellant from interfering with the right of respondent to manage and operate the hotel under the hotel operation agreement dated 17.11.2019. In the aforesaid factual background, this appeal has been filed.

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Learned counsel for the appellant submits that

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the learned Judge of the Commercial Court ought to have appreciated that the agreement did not mandatorily require the parties to refer to arbitration. It is further submitted that on account of recurring losses,

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the appellant had taken a decision not to continue with the agreement. However, the aforesaid aspect of the matter has not been appreciated by the Commercial Court.

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On the other hand, learned counsel for the respondent, while inviting the attention of this Court to statement of objections filed on behalf of the appellant, pointed out that at no point of time, the appellant has raised any objections with regard to arbitration clause and therefore, the appellant has waived his right to raise a petition and the arbitration clause binds the appellant.

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We have considered the submissions made on both sides and have perused the record. In WELLINGTON AND ASSOCIATES LTD. Vs. KIRIT

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MEHTA¹ , the Hon'ble Supreme Court, after taking note of provisions under Section 7 of the Act, held that Section 7 does not cover a case where the parties agree to a suit or they may go to arbitration. Thereafter, in S.N.PRASAD Vs. MONNET FINANCE LTD. AND ORS.² , while dealing with Section 7(4)(c) of the Act, it was held that if there is no denial on the part of the party in a counter statement about the arbitration clause, it follows that the Court can proceed on the basis that there is an arbitration agreement in writing between the parties.

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In the instant case, from perusal of the statement

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of objections filed on behalf of the appellant, it is evident that no such defence has been taken by the appellant in the statement of objections that the arbitration clause does not require the parties to mandatorily resort to arbitration. It is an agreement to refer the existing dispute to arbitration than in an appropriate case be even

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1 (2000) 4 SCC 272

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2 (2011) 1 SCC 320

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implied by conduct of parties. In S.N.PRASAD , supra, the

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Hon'ble Supreme Court, while interpreting Section 7(4)(c)

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of the Act has held as under:

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"10. But the words, ‘statements of claim and defence’ occurring in section 7(4)(c) of the Act, are not restricted to the statement of claim and defence filed before the arbitrator. If there is an assertion of existence of an arbitration agreement in any suit, petition or application filed before any court, and if there is no denial thereof in the defence/counter/written statement thereto filed by the other party to such suit, petition or application, then it can be said that there is an “exchange of statements of claim and defence” for the purposes of section 7(4)(c) of the Act. It follows that if in the application filed under section 11 of the Act, the applicant asserts the existence of an arbitration agreement with each of the respondents and if the respondents do not deny the said assertion, in their statement of defence, the court can proceed on the basis that there is

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an arbitration agreement in writing between the parties."

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Therefore, in view of Section 7(4) of the Act as interpreted by the Hon'ble Supreme Court in S.N.PRASAD, supra, it can be held that there is an agreement to refer the existing dispute between the parties to arbitration.

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From perusal of Clause XXIV(3) of the agreement,

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it is evident that the appellant is not entitled to terminate the contract during the lock-in-period. Admittedly, in the instant case, the appellant against its intention to terminate the agreement, sent an e-mail dated 07.08.2019 during the lock-in-period. Therefore, the learned Judge of the Commercial Court has rightly held

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that prima facie case is made out in favour of the respondent and balance of convenience also lies in favour of the respondent and further that in case the appellant is

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not restrained from terminating the agreement, the

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