M/S Berkley Lifestyle Brands Private Limited vs. M/S Raj Builders Private Limited

Held

The Court acknowledged the parties' openness to amicable resolution but found no impediment to appointing an arbitrator. It identified two core issues: the entitlement to a refund of the security deposit with interest, and the respondent's alleged failure regarding GST obligations. The Court expressed apprehension that there might not be a genuine dispute for a fresh arbitration, considering the prior adjudication of disputes under the same Lease Deed. It noted that claims that could have been raised in the previous arbitration ought not to be raised again, citing Order 2 Rule 2 of the CPC and the potential for litigative harassment. However, referencing the Supreme Court's decision in 'Goqii Technologies Private Limited vs. Sokrati Technologies Pvt. Ltd.', the Court held that the allegation of initiating arbitration for non-existent or mala fide claims, or frivolity, should not be decided at the Section 11 stage by the referral court. Instead, the Arbitral Tribunal is competent to adjudicate these aspects and may direct the costs of arbitration to be borne by the party found to have abused the process. Accordingly, the Court appointed Mr. Shubham Shukla as the Sole Arbitrator, to conduct arbitration under the aegis of the Delhi International Arbitration Centre (DIAC). All rights and contentions of the parties were kept open for the Arbitrator to decide on merits. The Arbitrator was also directed to consider the possibility of the petitioner abusing the process of law and causing harassment, and to direct costs accordingly.

Facts

The petitioners, M/s Berkley Lifestyle Brands Private Limited, M/s Brompton Private Limited, M/s Burlington Luxury Brands Private Limited, and M/s Brompton Lifestyle Brands Private Limited, filed petitions seeking the appointment of an arbitrator. The disputes arose from a Lease Deed dated 21.10.2019 executed by the respondent, M/s Raj Builders Private Limited, in favour of the petitioners. The petitioners claimed entitlement to a refund of a security deposit of Rs. 3,30,000 along with interest at 18% per annum, and also alleged the respondent's failure to fulfil its obligations regarding the payment and reporting of GST on alleged invoices. The parties had previously undergone arbitration concerning the same Lease Deed, culminating in an award dated 27.03.2023, which was upheld after a Section 34 challenge. The respondent opposed the current petitions, arguing they were barred by limitation and res judicata.

Key Issues

1. Whether the petitioner is entitled to a refund of the security deposit of Rs. 3,30,000 along with interest accrued at 18% per annum, as per Clause 13 of the Lease Deed? (Question of law/mixed fact and law, turning on Clause 13 of the Lease Deed). 2. Whether the respondent has failed to fulfil its obligations under Clause 3 of the Lease Deed relating to the payment and reporting of GST on alleged invoices raised by the respondent? (Question of law/mixed fact and law, turning on Clause 3 of the Lease Deed). Petitioner's arguments: The petitioners contended that these questions were not adjudicated in the previous arbitration and therefore could be raised in a fresh arbitration. They relied on 'Dolphin Drilling Ltd. v. ONGC Ltd.' and 'Indian Oil Corporation Ltd. v. SPS Engg. Ltd.' to argue that such objections should be considered in arbitration proceedings. They also highlighted Clause 13 of the Lease Deed, which they claimed entitled them to interest at 18% per annum on the security deposit from the lease expiry. They asserted that the GST dispute was not considered by the previous Arbitral Tribunal. Respondent's arguments: The respondent argued that the petitions were barred by limitation and res judicata. They contended that the claims, including those for interest on the security deposit, were considered in paragraph 68 of the previous award, and the court had held in paragraph 86 that the respondent was entitled to adjust Rs. 23,24,200 as security deposits. They also pointed to Clause 2 of the Lease Deed, stating the security deposit shall not bear any interest.