EVERGREEN LAND MARK PVT. LTDversusJOHN TINSON & COMPANY PVT. LTD. & ANR

                         [2022] 4 S.C.R. 879



             EVERGREEN LAND MARK PVT. LTD.
                                  v.
        JOHN TINSON & COMPANY PVT. LTD. & ANR.
                   (Civil Appeal No. 2783 of 2022)
                          APRIL 19, 2022.
         [M. R. SHAH AND B. V. NAGARATHNA, JJ.]
       Arbitration and Conciliation Act, 1996: ss.17, 37(2)(b) –
Appellant was lessee in the premises of respondent no.1 and 2 and
was running a Restaurant and Bar in the said premises – Lease
agreement terminated by the owners, as a consequence of which,
dispute arose and the same referred for arbitration – During
pendency of dispute, owners made applications seeking deposit of
rental amount – Lessee sought to invoke the force majeure clause
in light of outbreak of Covid-19 pandemic – Arbitral Tribunal
allowed the application of the owners in exercise of the power u/
s.17 of the Act – High Court upheld the same – On appeal, held:
Applicability of the force majeure principle contained in clause 29
is yet to be considered by the Arbitral Tribunal – Therefore, no
order could have been passed by the Tribunal by way of interim
measure on the applications filed u/s.17 of the Arbitration Act since
there was serious dispute with respect to the liability of the rental
amounts to be paid – As the applicability of force majeure principle
(clause 29) is yet to be considered at least, for the period during
the complete closure, it would not be justified to direct the lessee to
deposit the rental amount for the said period of complete closure by
way of an interim measure, pending final adjudication – Contract,
principle of – Force majeure principle.
      Partly allowing the appeal, the Court
      HELD: 1. The dispute is with respect to the rental amount
for the period between March, 2020 to December, 2021, for which
the Arbitral Tribunal has directed the appellant to deposit while
passing the order by way of an interim measure on the applications
under Section 17 of the Arbitration Act. The liability to pay the
lease rental for the period between March, 2020 to December,
2021 is seriously disputed by the appellant by invoking the force
majeure principle contained in clause 29 of the lease agreement.
                                 879
880            SUPREME COURT REPORTS                        [2022] 4 S.C.R.


A     It is the case on behalf of the appellant that for a substantial period
      there was a total closure due to lockdown and for the remaining
      period the appellant was allowed with 50% capacity and therefore,
      the force majeure principle contained in clause 29 shall be
      applicable. When the same was submitted before the Arbitral
      Tribunal, no opinion, not even a prima facie opinion on the
B
      aforesaid aspect was given by the Arbitral Tribunal. Therefore,
      applicability of the force majeure principle contained in clause 29
      is yet to be considered by the Arbitral Tribunal. Therefore, no
      order could have been passed by the Tribunal by way of interim
      measure on the applications filed under Section 17 of the
C     Arbitration Act in a case where there is a serious dispute with
      respect to the liability of the rental amounts to be paid, which is
      yet to be adjudicated upon and/or considered by the Arbitral
      Tribunal. Thus, no such order for deposit by way of an interim
      measure on applications under Section 17 of the Arbitration Act
      could have been passed by the Tribunal. However, at the same
D
      time, the aforesaid can be considered only for the period of
      complete closure due to lockdown. As per the available record,
      there was complete closure for the period between 22.03.2020
      to 09.09.2020; for the period between 19.04.2021 to 28.06.2021
      and for the period between 11.01.2022 to 27.01.2022 and for the
E     remaining period the appellant was allowed to run the Restro/
      Bar with 50% capacity. The appellant will therefore have to
      deposit the entire rental amount except the period for which there
      was complete closure due to lockdown. As the applicability of
      force majeure principle (clause 29) is yet to be considered at
      least, for the period during the complete closure, it would not be
F
      justified to direct the appellant to deposit the rental amount for
      the said period of complete closure by way of an interim measure,
      pending final adjudication. [Para 6][885-F-H; 886-A-F]
            Raman Tech. Process Engg. Co. & Anr. v. Solanki
            Traders (2008) 2 SCC 302: [2007] 12 SCR 409;
G           Adhunik Steels Ltd. v. Orissa Manganese and Minerals
            (P) Ltd. (2007) 7 SCC 125 : [2007] 8 SCR 213
            – referred to.


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     EVERGREEN LAND MARK PVT. LTD. v. JOHN TINSON &                         881
               COMPANY PVT. LTD. & ANR.

                        Case Law Reference                                  A
[2007] 12 SCR 409                  referred to              Para 3.1
[2007] 8 SCR 213                   referred to              Para 3.1
      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2783
of 2022.                                                                    B
      From the Judgment and Order dated 10.02.2022 of the High Court
of Delhi at New Delhi in Arb. A(Comm.) No. 9 of 2022.
      Ms. Aastha Mehta, Ms. Swati Setia, Rinku Garg, Nishant Rao,
Advs. for the appellant.
                                                                            C
       Ms. Shyel Trehan, Raghav Anand, Ms. Liz Mathew, Advs. for
the respondents.
      The Judgment of the Court was delivered by
      M. R. SHAH, J.
       1. Feeling aggrieved and dissatisfied with impugned judgment and     D
order dated 10.02.2022 passed by the High Court of Delhi at New Delhi
in ARB.A. (Comm.) No.9/2022 under Section 37(2)(b) of the Arbitration
& Conciliation Act, 1996 (hereinafter referred to as the “Arbitration
Act”), by which the High Court has dismissed the said appeal in which
the appellant herein challenged order dated 05.01.2022 passed by the        E
Arbitral Tribunal in two applications filed by respondent No. 1 and 2
herein under Section 17 of the Arbitration Act, seeking deposit of the
rental amount for the period between March, 2020 and December, 2021,
the appellant herein – lessee has preferred the present appeal.
      2. The dispute is with respect to two separate premises owned by      F
respondent No. 1 and 2 herein which were given on lease to the appellant,
who is running a Restaurant and Bar in the premises in question. The
lease agreement came to be terminated by respondent No. 1 and 2 –
original owners. The dispute with respect to the termination of lease
agreement is the subject matter before the Arbitral Tribunal. Before the
Arbitral Tribunal, respondent No. 1 and 2 filed two separate applications   G
under Section 17 of the Arbitration Act seeking deposit of the rental
amount due and payable for the period between March, 2020 to
December, 2021. By way of an interim measure, in exercise of powers
under Section 17 of the Act, the Arbitrator vide order/orders dated
05.01.2022 directed the appellant to deposit 100% of rental amount due      H
882             SUPREME COURT REPORTS                           [2022] 4 S.C.R.


A     and payable of the period between March, 2020 to December, 2021. At
      this stage, it is required to be noted that before the Arbitral Tribunal, it
      was the case on behalf of the appellant that due to the Covid-19 Pandemic,
      there was a lockdown declared by the Government and therefore, there
      was a complete closure/partial closure and therefore, invoking clause 29
      (Force Majeure) of the lease deed, the appellant disputed the liability to
B
      pay the rental amount for the period during which there was a lockdown/
      complete closure/partial closure. Despite the above submissions, the
      Arbitral Tribunal directed the appellant to deposit the rental amount from
      March, 2020 onwardsand up to December, 2021. The Arbitral Tribunal
      also passed an order that amount so deposited shall be kept in fixed
C     deposit accounts. The operative portion of the order contained in para
      43 is as under: -
            “43.(a) The Respondent shall compute the arrears towards rent
            separately in respect of each premises under lease at the agreed
            rate - Rs. 10,35,000/- per month (subject to applicable taxes) for
D           the period from 01.05.2018 to 30.04.2021 and Rs. 11,90,250/- from
            01.05.2021 onwards in respect of leased premises of JTCPL and
            Rs. 2,39,390/- per month (inclusive of GST) in respect of leased
            premises of BIET - for the period of default and pendency of the
            matter thus far, i.e. from March 2020 onwards for and up to
            December 2021, adjusting the amounts already paid (as per
E           declarations made before this tribunal), deducting the TDS as per
            law, and communicate the same to the respective Claimants within
            a week of this order.
            (b) The amounts of money equivalent to the arrears computed as
            above shall be deposited by the Respondent in Fixed Deposit (FD)
F           accounts - separately in relation to the respective Claimants - in a
            public sector Bank, initially for a period of six months with provision
            of auto-credit of Interest and periodical auto-renewal within four
            weeks of this order.”
             2.1 Feeling aggrieved and dissatisfied with the order passed by
G     the Arbitral Tribunal by way of an interim arrangement in exercise of
      powers under Section 17 of the Arbitration Act, the appellant preferred
      an appeal before the High Court under Section 37(2)(b) of the Arbitration
      Act. By the impugned judgment and order, the High Court has dismissed
      the said appeal and has confirmed the interim order passed by the Arbitral
      Tribunal passed in exercise of powers under Section 17 of the Arbitration
H     Act. Hence, the present appeal.
     EVERGREEN LAND MARK PVT. LTD. v. JOHN TINSON &                              883
         COMPANY PVT. LTD. & ANR. [M. R. SHAH, J.]

       3. Ms. Aastha Mehta, learned counsel appearing on behalf of the           A
appellant has vehemently contended that in the present case, both, Arbitral
Tribunal as well as the High Court have not at all considered the
submissions on behalf of the appellant on clause 29 of the agreement
and the aspect of force majeure as prayed on behalf of the appellant. It
is submitted by Ms. Mehta that even the Arbitral Tribunal has specifically
                                                                                 B
observed in para 39 of the order that at this stage, the Arbitral Tribunal is
not deciding anything on the import and effect of the force majeure
clause (No. 29) contained in the lease deed. It is contended that therefore
when the liability to pay the rentals during the lockdown period while
applying the force majeure clause is seriously disputed by the appellant
– lessee, such an order to deposit 100% rental amount by way of an               C
interim measure under Section 17 of the Arbitration Act, ought not to
have been passed by the Arbitral Tribunal.
        3.1 It is further submitted by Ms. Mehta that even the learned
Arbitral Tribunal has also observed that there is no evidence showing
that the appellant is disposing of any part of its property much less removing   D
itself or its assets out of India so as to create a possibility of frustrating
the monetary award that may be passed in favour of the claimants upon
conclusion of arbitration proceedings within the scope of Order XXXVIII
of CPC. It is submitted that therefore, in absence of such evidence the
impugned order which can be said to be akin to Order XXXVIII Rule 5
                                                                                 E
could not have been passed unless the conditions while invoking powers
under Order XXXVIII Rule 5 are satisfied. Reliance is placed on the
decision of this Court in the case of Raman Tech. & Process Engg.
Co. & Anr. Vs. Solanki Traders; (2008) 2 SCC 302. While relying
upon the decision of this Court in the case of Adhunik Steels Ltd. Vs.
Orissa Manganese and Minerals (P) Ltd.; (2007) 7 SCC 125, it is                  F
urged by Ms. Mehta, learned counsel appearing on behalf of the appellant
that as held by this Court,even while passing an order under Section 9 of
the Arbitration Act, the court has to bear in mind and consider principles
applicable for exercise of general power to grant an interim injunction
under Order XXXIX of CPC.                                                        G
      3.2 It is contended by Ms. Mehta, learned counsel appearing on
behalf of the appellant that apart from the fact that there was a complete
closure due to complete lockdown for the period between 22.03.2020 to
09.09.2020 and thereafter for the period between 19.04.2021 to
28.06.2021 and the period between 11.01.2022 to 27.01.2022 due to the
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884             SUPREME COURT REPORTS                            [2022] 4 S.C.R.


A     pandemic, for the remaining period the appellant was allowed to run the
      Restro/Bar with only 50% capacity and that too, from 12:00 noon to
      10:00 pm. It is submitted that therefore, clause 29 of the agreement
      (force majeure clause) shall be applicable. It is submitted that the appellant
      could not use the rented premises for the aforesaid period either fully
      and/or partially due to Act of God and which was beyond the control of
B
      the appellant. It is submitted that therefore, the force majeure clause
      contained in clause 29 of the agreement shall be applicable. It is urged
      that whether in the facts and circumstances of the case, the principle of
      force majeure contained in clause 29 is applicable or not is yet to be
      considered by the Arbitral Tribunal at the time of the final adjudication
C     and therefore, the Arbitral Tribunal has committed an error in directing
      the appellant to pay the full rental amount for the aforesaid period, by
      way of interim measure.
             3.3 Ms. Mehta, learned counsel appearing on behalf of the
      appellant has also submitted that it is not that the appellant has not paid
D     any amount at all and/or that the intention of the appellant is to defraud
      the landlords. It is contended that the dispute raised by the appellant is a
      bonafide dispute. It is pointed out that undisputedly during the pendency
      of the arbitration proceedings, the appellant itself had paid a substantial
      amount towards rentals of the two rented premises. That an amount of
      Rs. 87,64,133.76/- has been paid towards rentals for the period from
E
      October, 2020 to March, 2021 and July, 2021 to December, 2021. The
      appellant had also incurred other over head expenses, TDS dues, electricity
      and water charges. That even during the lockdown period, the appellant
      paid wages to its employees. Therefore, it will be too harsh on the
      appellant to pay the entire rental amount for the period between March,
F     2020 to December, 2021, as per the order passed by the learned Arbitral
      Tribunal confirmed by the High Court is the submission of the learned
      counsel for the appellant.
             4. The present appeal is opposed by Ms. Shyel Trehan, learned
      counsel appearing on behalf of the respondents. It is contended that in
G     the facts and circumstances of the case no error has been committed by
      the learned Arbitral Tribunal in directing the appellant to deposit the entire
      amount which is admittedly due and payable by the appellant. It is pointed
      out that on one hand, the appellant has continued to remain in possession
      of the leased properties and at the same time, he is not paying the rental
      amount. It is submitted that therefore, the learned Tribunal has rightly
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     EVERGREEN LAND MARK PVT. LTD. v. JOHN TINSON &                              885
         COMPANY PVT. LTD. & ANR. [M. R. SHAH, J.]

passed an order by way of an interim measure directing the appellant to          A
deposit the rental amount due and payable under the lease agreement.
      4.1 According to learned counsel for the respondents neither the
principles applicable under Order XXXVIII Rule 5 nor Order XXXIX
Rule 1 are appliable in case of a direction issued by way of an interim
measure, as in the instant case, directing the lessee to deposit the rental      B
amount due and payable while the lessee is continued to be in possession.
      4.2 It is further submitted that in the present case the principles of
force majeure would not apply as the appellant – lessee continued to
remain in possession of the leased premises. It is submitted that none of
the decisions relied upon by the counsel appearing on behalf of the              C
appellant, is applicable.
       4.3 It is pointed out that as rightly observed by the High Court, the
business of the appellant may have been impacted due to the outbreak
of Covid-19 pandemic but that may not absolve the appellant from its
contractual obligations to pay the lease rent. It is submitted that so long      D
the appellant continues to occupy the premises, the liability of the appellant
to pay the rental amount continues. It is urged that no error has been
committed by the Arbitral Tribunal by directing the appellant to deposit
the rental amount for the period between March, 2020 and December,
2021 and the same is rightly confirmed by the High Court.
                                                                                 E
      5. We have heard learned counsel appearing on behalf of the
respective parties at length.
       6. At the outset, it is required to be noted that the dispute is with
respect to the rental amount for the period between March, 2020 to
December, 2021, for which the Arbitral Tribunal has directed the appellant       F
to deposit while passing the order by way of an interim measure on the
applications under Section 17 of the Arbitration Act. The liability to pay
the lease rental for the period between March, 2020 to December, 2021
is seriously disputed by the appellant by invoking the force majeure
principle contained in clause 29 of the lease agreement. It is the case on
behalf of the appellant that for a substantial period there was a total          G
closure due to lockdown and for the remaining period the appellant was
allowed with 50% capacity and therefore, the force majeure principle
contained in clause 29 shall be applicable. When the same was submitted
before the Arbitral Tribunal, no opinion, even a prima facie opinion on
the aforesaid aspect was given by the Arbitral Tribunal. In para 39, it is
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886             SUPREME COURT REPORTS                            [2022] 4 S.C.R.


A     observed that “it would not be fair at this stage of the proceedings, where
      evidence is yet to be adduced by the parties in support their rival
      contentions on the issues that arise, to record any definitive opinion on
      the import and effect of the force majeure clause (clause no.29) contained
      in the lease deed”. Therefore, applicability of the force majeure principle
      contained in clause 29 is yet to be considered by the Arbitral Tribunal at
B
      the time of final adjudication. Hence, the liability to pay the rentals for
      the period during lockdown is yet to be adjudicated upon and considered
      by the Tribunal. Therefore, no order could have been passed by the
      Tribunal by way of interim measure on the applications filed under Section
      17 of the Arbitration Act in a case where there is a serious dispute with
C     respect to the liability of the rental amounts to be paid, which is yet to be
      adjudicated upon and/or considered by the Arbitral Tribunal. Thus, no
      such order for deposit by way of an interim measure on applications
      under Section 17 of the Arbitration Act could have been passed by the
      Tribunal. However, at the same time, the aforesaid can be considered
      only for the period of complete closure due to lockdown. As per the
D
      available record, there was complete closure for the period between
      22.03.2020 to 09.09.2020; for the period between 19.04.2021 to
      28.06.2021 and for the period between 11.01.2022 to 27.01.2022 and for
      the remaining period the appellant was allowed to run the Restro/Bar
      with 50% capacity. The appellant will therefore have to deposit the entire
E     rental amount except the period for which there was complete closure
      due to lockdown. As the applicability of force majeure principle (clause
      29) is yet to be considered at least, for the period during the complete
      closure, it would not be justified to direct the appellant to deposit the
      rental amount for the said period of complete closure by way of an
      interim measure, pending final adjudication.
F
            7. In view of the above and for the reasons stated above, the
      present appeal succeeds in part. The order passed by the Arbitral Tribunal
      passed in applications under Section 17 of the Arbitration Act, directing
      the appellant to deposit the entire rental amount for the period between
      March, 2020 to December, 2021, confirmed by the High Court by the
G     impugned judgment and order, is modified and it is directed that the
      appellant to deposit the entire rental amount for the period other than the
      period during which there was complete lockdown i.e., 22.03.2020 to
      09.09.2020 and for the period between 19.04.2021 to 28.06.2021.
      However, non-deposit of the rental amount for the aforesaid period during
H     which there was a complete closure/lockdown shall be subject to the
     EVERGREEN LAND MARK PVT. LTD. v. JOHN TINSON &                              887
         COMPANY PVT. LTD. & ANR. [M. R. SHAH, J.]

ultimate outcome of the Arbitration Proceedings and the Arbitral Tribunal        A
shall have to adjudicate and consider the principle of force majeure
contained in clause 29 as contended on behalf of the appellant in
accordance with law and on its own merits. All contentions which may
be available to either party are kept open to be considered by the learned
Arbitral Tribunal. The learned Tribunal to adjudicate and consider the
                                                                                 B
aforesaid issue in accordance with law and on its own merits uninfluenced
by the present order and observations by this Court in the present order
shall be treated to be confined to while deciding the applications under
Section 17 of the Arbitration Act and the interim measure order in exercise
of powers under Section 17 of the Arbitration Act only, and the same
shall not have any bearing on the final adjudication on the liability to pay     C
the rentals even for the aforesaid period. The balance amount as per the
present order shall be deposited by the appellant as observed by the
learned Arbitral Tribunal in para 43(b) of interim order. The learned
Tribunal to conclude the arbitration proceedings at the earliest preferably
within a period of nine months, subject to the co-operation of both the
                                                                                 D
parties. With this the present appeal is partly allowed to the aforesaid
extent. There shall be no order as to costs.

Devika Gujral                                           Appeal partly allowed.
(Assisted by : Mahendra Yadav, LCRA)
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