Smt. Palaparthi Sitamahalakshmi Rao vs. Zee Entertainment Enterprises Limited

Facts

Smt. Palaparthi Sitamahalakshmi Rao (Applicant) filed an application under Section 11(5) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator. The Applicant is the landlord of premises leased to Zee Entertainment Enterprises Limited (Respondent) under two registered lease deeds dated 09.08.2018 and 30.05.2019. The Respondent allegedly terminated the leases unilaterally via email on 02.06.2020, citing the COVID-19 pandemic, despite a four-year lock-in period. The Applicant claims significant losses due to the Respondent's breach of lease terms, including non-payment of rent, electricity bills, water charges, and other incidental expenses. The Applicant invoked arbitration under Clause 34 of the lease deed, nominating an arbitrator. The Respondent failed to respond to the arbitration notice and also defaulted on furnishing security in a related Section 9 application filed by the Applicant. The Court ordered personal notice to the Respondent, which was served.

Held

The Court held that there was compliance with the procedure contemplated under Section 11 of the Arbitration and Conciliation Act, 1996. The applicant had invoked the arbitration clause under Clause 34 of the registered lease deed dated 09.08.2018 and had sent a notice dated 25.08.2021, which was stated to have been served on the respondent on 28.08.2021. Since the respondent did not contest the application and made no appearance, the Court found no alternative but to allow the arbitration application. The Court appointed Sri Justice P. Swaroop Reddy, Retired High Court Judge, as the sole arbitrator to adjudicate the claims and disputes between the parties. The arbitrator's fees were to be as per the rates specified in the Fourth Schedule to the Act, borne equally by both parties. The ratio decidendi is that where a party has followed the prescribed procedure for invoking arbitration and the other party fails to appear or contest, the Court shall proceed to appoint an arbitrator.

Key Issues

1. Whether the Court has the power to appoint an arbitrator under Section 11(5) of the Arbitration and Conciliation Act, 1996, when the applicant has invoked the arbitration clause in the lease deed and served notice on the respondent. Contentions: Petitioner/Applicant: - Argued that the lease deeds contain an arbitration clause (Clause 34). - Submitted that arbitration was invoked by a notice dated 25.08.2021, which was served on the respondent. - Asserted that the respondent has failed to pay arrears of rent, maintenance, GST, and taxes, and has not appointed an arbitrator or consented to the nominated arbitrator. - Relied on the fact that the respondent was set ex parte in a Section 9 application filed by the applicant, and an order for security was passed. - Contended that there has been compliance with the procedure contemplated under Section 11 of the Act. Respondent/Revenue: - No appearance was made by the respondent, and therefore, no arguments were recorded.