Smt. Palaparthi Sitamahalakshmi Rao vs. M/S Food Haven INDIA Private Limited

Facts

This case involves an Arbitration Application filed by Smt. Palaparthi Sitamahalakshmi Rao (Applicant) against M/s Food Haven India Private Limited (Respondent). The Applicant, owner of a property, leased the first floor to the Respondent for a food and beverage business under a registered lease deed dated September 19, 2018, for a period of 9 years. The monthly rent was Rs. 3,45,000/- exclusive of GST and other taxes, payable by the Respondent. The Applicant claims the Respondent defaulted on payments from April 2020, leading to outstanding dues of Rs. 94,88,880/-. Despite an addendum to the lease deed and subsequent communications, the Respondent allegedly failed to clear the arrears. The Applicant invoked Clause 24(iv) of the lease deed to terminate it and issued a notice for vacating the premises and payment of dues. The Respondent, however, claims the business was hit by the Covid pandemic and the Applicant prematurely removed their belongings, causing business closure and loss. The Applicant then filed this application under Section 11(5) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a sole arbitrator.

Held

The Court held that Clause 32 of the Registered Deed of Lease dated September 19, 2018, clearly stipulates that any dispute between the parties must be resolved by referring the same to a sole arbitrator to be mutually appointed. The Court found no tenable objection to the appointment of a sole arbitrator for the settlement of the dispute between the parties, as they are bound by the terms of the lease deed. The question of whether the Respondent committed default in payment of rents or if the Applicant committed a breach of the lease terms, forcing the Respondent to close their business, is a matter to be decided in the arbitration proceedings. Consequently, the Court appointed Sri I. Ramesh, Retired Principal District and Sessions Judge, as the sole Arbitrator to adjudicate upon the dispute, directing the registry to send the necessary papers to the Arbitrator and for both parties to appear before him. The Arbitration Application was disposed of accordingly.

Key Issues

1. Whether a sole arbitrator should be appointed to adjudicate the disputes arising from the lease deed dated September 19, 2018, as per Clause 32 of the said deed. Petitioner's Arguments: The Applicant contended that the Respondent had committed a breach of the lease agreement by defaulting on rent payments and other charges, leading to significant outstanding dues. The Applicant had followed the contractual procedures, including issuing notices and attempting to resolve the matter through an addendum and modified lease deed, but the Respondent failed to comply. Therefore, an arbitrator needed to be appointed to resolve these disputes. Respondent's Arguments: The Respondent argued that their business was severely impacted by the Covid-19 pandemic, leading to closure. They further alleged that the Applicant prematurely removed their business belongings from the premises without informing them, which caused further loss and prevented them from recovering and clearing the rent arrears. The Respondent claimed the Applicant committed the initial breach and is liable for compensation.