Allowed

M/S. Lulu Cyber Park Ltd. v. M/S. Zeron Consulting (P) Ltd.

Kerala HC17 Mar 2022AR/70/2014

Case brief

AI extract

What is this about?

The High Court of Kerala admitted an arbitration request filed by a property owner against a tenant for recovery of rent arrears. The court held that while prior Rent Control orders establish the base rent, the dispute over unpaid arrears remains arbitrable and rejected the argument that the Special Economic Zone Act provided the exclusive remedy.

What did the court decide?

The sole Arbitrator Justice C.N.Ramachandran Nair was nominated to adjudicate the dispute; parties directed to appear before him.

M/S. Lulu Cyber Park Ltd. Vs M/S. Zeron Consulting (P) Ltd. — Arbitration | Kerala HC (2022)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR. JUSTICE DEVAN RAMACHANDRAN

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THURSDAY, THE 17^TH DAY OF MARCH 2022 / 26TH PHALGUNA, 1943

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AR NO. 70 OF 2014

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PETITIONER:

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M/S. LULU CYBER PARK LTD., A COMPANY IN CORPORATE UNDER THE COMPANIES ACT, 1956, HAVING REGISTERED OFFICE AT "Y" TOWER, 12/971 B, CIVIL LINE ROAD, VAZHAKKALA P.O., KOCHI-682030, REP. BY ITS DIRECTOR, A JANARDHANA PAI, S/O.ACHUTA PAI, RESIDING AT C3, AYER'S APARTMENT, C C NO.40/6535, T.D.ROAD, ERNAKULAM-682035, KOCHI, KERALA.

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BY ADV SRI.G.SREEKUMAR (CHELUR)

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RESPONDENT:

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M/S. ZERON CONSULTING (P) LTD., A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE AT GCDA COMPLEX, JOURNALIST COLONY ROAD, KALOOR, KOCHI-682017, REP. BY ITS CHIEF EXECUTIVE OFFICER AND MANAGING DIRECTOR, MR.JAYESH PUTHUPARAMBIL (PAN AOOPP 0720N), S/O.MR.P.B.ABDUL RAHMAN, RESIDING AT 29, NOEL PALMDALE, KAKKANAD, KOCHI-680030.

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BY ADVS. SRI.S.ANANTHAKRISHNAN SRI.N.K.SUBRAMANIAN

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THIS ARBITRATION REQUEST HAVING COME UP FOR ADMISSION ON 17.03.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

AR NO. 70 OF 2014

ORDER

The petitioner, which is stated to be a Company incorporated under the provisions of the Companies Act, 1956, has filed this Arbitration Request invoking the jurisdiction of this Court under Section 11 of the Arbitration and Conciliation Act (hereinafter referred to as 'the Act' for short).

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2 . According to the petitioner, they had leased out a portion of the building owned by them in favour of the respondent - which is also a Company, on the strength of Annexure I agreement and that a few years thereafter, disputes arose between them as to the rate of rent and such other ancillary matters, which finally ended up in a Rent Control Court at the instance of both sides.

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3 . Sri.G.Sreekumar - learned counsel for the petitioner, explained that, on the allegation that the rent fixed in Annexure I lease agreement is excessive, the respondent filed R.C.P.No.175/2012 before the Rent Control Court, Ernakulam; while his client filed R.C.P.No.70/2012, seeking their eviction, based on a letter of termination of lease dated 02.03.2012. The learned counsel then showed me that the Rent Control Court

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issued Annexure II order allowing both the Rent Control Petitions, fixing the fair rent as being Rs.26/- per sq.ft. and directing the respondent to deliver vacant possession of the petition schedule building to his client within one month. He concedes that this judgment was taken up in appeal which finally ended in a judgment fixing the fair rent as being Rs.30/per sq.ft. He added that this was confirmed by this Court in a Revision.

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Sri.G.Srikumar then submitted that since the

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respondent defaulted payment of rent fixed as above, his client had no other option but to issue to him Annexure V notice dated 28.02.2014, seeking that they pay off the arrears of rent; or in the alternative, agree to arbitration, to adjudicate and resolve the said dispute. He submitted that the respondent responded to Annexure V through Annexure VI reply denying their liability to pay any amounts to his client and thus refusing to accede to their request for arbitration. He concluded his submissions arguing that, in such circumstances, his client has been left without any other option but to file this Arbitration Request in the year 2014.

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The afore contentions and allegations of the

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petitioner were vehemently refuted and contested by Sri.S.Anantha Krishnan - learned counsel for the respondent, on various grounds, inter alia, that no amounts are due from his client as per the orders of Rent Control Court and the Appellate Authority since they have already deposited the requisite amounts in full discharge. He argued that the attempt of the petitioner is to reopen all the issues which have already been settled by the competent Courts, which is evident from Annexure IV demand, wherein, large amounts have been shown to be an arrears, blatantly disregarding the fixation of rent already ordered by the competent Rent Control Court and the Appellate Authority. He predicated that, therefore, since his client has already honoured the fair rent fixed, by depositing necessary amounts in Court, no dispute arises as asserted by the petitioner and therefore, that this Arbitration Request is not maintainable.

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Sri.S.Anantha Krishnan, thereafter, proceeded to argue that since this Arbitration Request has been impelled prior to the coming into force of Section 11(6) of the Act, it is enjoined upon this Court to consider the arbitrability of the disputes, going by the judgments of the Hon'ble Supreme

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Court in SBP & Co. v. Patel Engineering Ltd. and Another [2005 (8) SCC 618] and Vidya Drolia and Others v. Durga Trading Corporation [2021 (2) SCC 1]. He thus reiteratingly contended that since all issues between the parties have already been settled by the competent Rent Control Court and the Appellate Authority, there is nothing left for arbitration and therefore, that the petitioner cannot seek any further relief in this Request.

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After arguing as afore, Sri.Anantha Krishnan made an adscititious plea that, even if any dispute is found to be subsisting between the parties, the remedy of the petitioner is not to have approached this Court through this Request, but to have invoked the provisions of Section 42 of the Special Economic Zone Act, 2005 (for short 'SEZ Act'). He contended that since the petitioner has chosen not to do so and since, under the said provision, an Arbitrator can be appointed only by the Central Government, this Arbitration Request is incompetent and not maintainable.

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I have considered the afore submissions with a great amount of thought.

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It is indubitable, going by the submissions of Sri.Anantha Krishnan, that the sheet anchor of his client's case against the prayers of the petitioner in this Arbitration Request are two fold: namely: (a) that the disputes impelled by them are not arbitrable; and (b) that even if the disputes are arbitrable, then it can be resolved only through the procedure as mandated under Section 42 of the SEZ Act.

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When I endevour to answer the afore contentions of the respondent, I must certainly keep in mind certain basic facts involved.

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It is without doubt that the lease agreement dated 01.04.2009 is admitted to have been entered into between the parties. Of course, Sri.Anantha Krishnan has a case that, along with Annexure I in this Arbitration Request, another agreement dated 13.03.2008 has also been appended and he objected this saying that this agreement cannot even be looked into, while this Arbitration Request is decided. I certainly find force in this submission and therefore, any direction that I propose herein will be confined to the lease agreement dated 01.04.2009, which, for the purpose of convenience, will continue to be referred to as Annexure I.

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As noticed above, both sides had earlier invoked their remedies before the Rent Control Court: the petitioner approaching it for eviction of the respondent; while the respondent invoking his jurisdiction for the purpose of fixing of the fair rent. Both these petitions were allowed, resulting in a common order, namely Annexure II. It is also uncontested that Annexure II was challenged by both sides in the hierarchy of Courts and that it has now been concluded, fixing the fair rent at Rs.30/- per sq.ft. and confirming the order of eviction against the respondent. It is also admitted by Sri.Anantha Krishnan that his client continued to be in occupation of the premises until about August 2020 or so, though he asserts that the entire amount as determined by the Rent Control Court has already been deposited, but conceding that the enhancement of Rs.4/- per sq.ft. by the Appellate Authority may not have been so, because the petitioner did not permit the same.

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It is thus obvious that the petitioner seeks recovery of the arrears of rent; while the respondent takes the stand that there are no such arrears, going by the judgment of the Rent Control Court, but being unable to say affirmatively if

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the enhanced rent as ordered by the Appellate Authority has been honoured. Therefore, the dispute between the parties is unmistakable and the only question is whether they are liable to be arbitrated under the provisions of the Act.

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The specific assertion of the respondent is that under the guise of an arbitration, what the petitioner seeks is to reopen the Rent Control Proceedings and to refix the rent payable and therefore, that this is not a matter that can be arbitrated. I am afraid that I cannot find favour with this argument because, whatever be the claim that may be impelled by the petitioner before the learned Arbitrator, only that which falls within the parameters of law can and will be allowed, for which purpose, certainly the arbitration proceedings will be guided by the applicable judgments and decrees of Courts. When the parties are ad idem that the Rent Control Court and the Appellate Authority have issued orders fixing fair rent and that they have become final, it is indubitable that any claim of the petitioner will have to be decided based on the same.

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To paraphrase, the claim of arrears of rent will surely have to be guided by the declarations of Courts which

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are now binding upon the parties and any amount which is over and above what has been determined therein will require to be disregarded by the learned Arbitrator.

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That apart, even going by the submissions of Sri.Anantha Krishnan, his client appears to have deposited rent only at the rate of Rs.26/- per sq.ft; while admitting that the said figure had been enhanced by about Rs.4/- per sq.ft. by the Appellate Authority. It is thus luculent that the disputes certainly require to be arbitrated and that it is for the Arbitrator to decide the quantum that may be found eligible to the petitioner, if any, based on the contra assertions of the latter.

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The afore issue being so answered, I am now enjoined to consider the second contention of the respondent that the disputes can only be decided under the “SEZ Act”. I must say upfront that this contention does not appeal to me at all because, admittedly, the respondent themselves approached the Rent Control Court for fixing the fair rent, de hors their present contention that only the “SEZ Act” would have applied for resolution of disputes between the parties. They cannot, therefore, approbate and reprobate among the

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available alternatives and then take the stand that, when it comes to arrears of rent, only the “SEZ Act” would apply.

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That apart, as is evident from the “SEZ Act”, only disputes of civil nature between “Entrepreneurs” and “Developers” would come within its ambit. The word “Developer” has been defined under it to be a person who has been granted a letter of approval by the Central Government under Section 10(3); while an Entrepreneur is described to be a person granted a letter of approval by the Development Commissioner under Sub Section 9 of Section 15 thereof. When the Statute then talks about disputes between these two categories of persons, it certainly presupposes a privity between them qua the activities of the SEZ Zone, but will not bring into its ambit a dispute as presented herein, which is purely between a lessor and lessee, on the basis of a lease agreement. Therefore, on both these counts, the argument of Sri.Anantha Krishnan, that the “SEZ Act” alone would apply, deserves to be repelled and I do so without hesitation.

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The germane aspects being so answered, I must now proceed to examine Annexure I and verify whether there is a subsisting arbitration clause between the parties. Clause

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3.12 of the said lease agreement stipulates that if any disputes arise between the lessor and the lessee, they must resolve it by mutual discussion and that if it fails, it will have to be referred to arbitration in accordance with the Act. It is conceded before me that several attempts of mutual discussions were attempted between the parties, but that all of them failed; and obviously therefore, they are now bound to abide by their contractual obligations under the agreement, to have the disputes referred to arbitration.

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Before I conclude this judgment, I must record that I asked Sri.G.Srikumar - the learned counsel for the petitioner, as to how the claims in Annexure IV was formulated, to which his answer was that whatever be the figure shown therein, his client will confine to the rent determined by the Rent Control Court and by the Appellate Authority and nothing else. I record this submission, so that the learned Arbitrator can then proceed to adjudicate the disputes between the parties without being hampered by any contest with respect to these aspects.

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In the afore circumstances, leaving open all other contentions of the rival parties to be pursued before the

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learned Arbitrator, I dispose of this Arbitration Request in the following manner:

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(a) I nominate Justice C.N.Ramachandran Nair, 3B, Bhavani, Kunnumpuram, Kakkandad, Kochi – 682 030, as the sole Arbitrator to adjudicate and resolve the disputes and differences between the parties to this case arising from Annexure I agreement.

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(b) The Registry is directed to communicate a copy of this order to the learned Arbitrator within two weeks from today and to obtain a Statement of Disclosure from him under Section 11(8), read with Section 12(1), of the Arbitration and Conciliation Act, 1996.

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(c) Once the Disclosure Statement is obtained from the learned Arbitrator, the Registry shall release the certified copy of this order, with a copy of the said statement appended to it, retaining the original of the same on the files of this case.

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(d) The fees of the Arbitrator shall be governed by the Fourth Schedule of the Arbitration and Conciliation Act, 1996.

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(e) In order to enable the Arbitrator to commence the

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proceedings without delay, I direct the parties to mark appearance before him at 11 A.M. on 20.04.2022.

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Sd/- DEVAN RAMACHANDRAN

JUDGE

stu

AR NO. 70 OF 2014

APPENDIX

PETITIONER ANNEXURES

Annexure A1 TRUE COPY OF THE AGREEMENT OF LEASE AND THE SERVICE AGREEMENT WITH THE PETITIONER AND THE RESPONDENT DATED 1.4.2009 AND 13.3.2008 Annexure A2 A TRUE COPY OF THE COMMON ORDER IN R C P NO. 70 OF 2012 AND R C P NO 175 OF 2012 ON THE FILE OF THE RENT CONTROL COURT , ERNAKULAM DATED 10.1.2014 Annexure A3 A TRUE COPY OF THE COUNTER AFFIDAVIT FILED BY THE FIRST PETITIONER HEREIN DATED 1.8.2014. Annexure A4 A TRUE COPY OF THE STATEMENT OF AMOUNTS DUE TO THE PETITIONER. Annexure A5 A TRUE COPY OF THE NOTICE ISSUED ON BEHALF OF THE PETITIONER DATED 28.2.2014 Annexure A6 A TRUE COPY OF THE REPLY OF THE RESPONDENT. Annexure R (1) TRUE COPY OF THE LAWYER NOTICE DT. 11.8.2011 ISSUED ON BEHALF OF THE PETITIONER TO THE RESPONDENT. Annexure R (2) TRUE COPY OF THE FIXED DEPOSIT RECEIPT NO. A2480433. Annexure R (3) TRUE COPY OF THE LETTER DT. 7.6.2011 ISSUED BY THE PETITIONER TO M/S.L & T TECH PARK LIMITED. Annexure R(4) TRUE COPY OF THE LETTER DT.2.5.2014 ISSUED TO THE PETITIONER BY M/S.L & T TECH PARK LIMITED. Annexure R(5) TRUE COPY OF THE STATUTORY NOTICE DT. 7.7.2014 ISSUED BY THE PETITIONER TO M/S.

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L & T TEJOMAYA LIMITED.

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Annexure R (6) TRUE COPY OF THE INJUNCTION ORDER IN O.S.NO. 104/2015 DT. 23.1.2015, PRINCIPAL MUNSIFFS COURT, ERNAKULAM.

M/S. Lulu Cyber Park Ltd. v. M/S. Zeron Consulting (P) Ltd.

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M/S. Lulu Cyber Park Ltd. v. M/S. Zeron Consulting (P) Ltd.

Case brief

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