Not too way back, the Supreme Courtroom docket of India (hereinafter ‘Supreme Courtroom docket’), in Evergreen Land Mark Pvt. Ltd. v. John Tinson & Agencyseen that an interim measure cannot be granted beneath Half 17 of the Arbitration and Conciliation Act, 1996 (hereinafter ‘Arbitration Act’) the place the obligation to pay has been considerably disputed.
FACTUAL BACKGROUND
Evergreen Land Mark Pvt. Ltd. (hereinafter ‘tenant’) had entered proper right into a lease settlement concerning two separate premises owned by Respondents 1 and a pair of (collectively referred to as landlords) respectively. On every premises, the tenant was working a restaurant and a bar (hereinafter ‘retro-bar’). As disputes arose on account of termination of the lease settlement, the occasions referred to the disputes for arbitration.
By way of the pendency of the arbitral proceedings, the landlords filed features beneath Half 17 of the Arbitration Act, praying that the tenant is directed to deposit the rent for the interval between March 2020 and December 2021. The tenant contested the features by arguing that due to Covid-19, the Indian Authorities had imposed a lockdown inflicting full/partial closure, and thus the present dispute was coated by the drive majeure clause contained inside the lease settlement. Nonetheless, by an order dated 5 January 2022, the arbitral tribunal allowed the features filed beneath Half 17 of the Arbitration Act, thereby directing the tenant to deposit the entire rental amount for the interval between March 2020 and December 2021.
The tenant challenged the order of the arbitral tribunal sooner than the Extreme Courtroom docket of Delhi (‘Extreme Courtroom docket’) beneath Half 37(2)(b) of the Arbitration Act. Nonetheless, the Extreme Courtroom docket dismissed the equivalent on 10 February 2022. As a result of this truth, the tenant has approached the Supreme Courtroom docket inside the present proceedings.
ARGUMENTS BEFORE THE SUPREME COURT
The counsel argued on behalf of the tenant that the arbitral tribunal had failed to consider the influence of the drive majeure clause. In fact, the arbitral tribunal had seen in its order that it’s not considering the issue of drive majeure on the stage of deciding the features filed beneath Half 17. Thus, it was argued that the obligation to pay the entire rental amount by means of the lockdown interval was considerably disputed by the tenant and the order of the arbitral tribunal beneath Half 17 of the Arbitration Act could not have been handed. It was further argued that there is not a supplies on doc to counsel a threat of the tenant irritating the monetary award which might be handed in direction of it. As a result of this truth, it was submitted that the arbitral tribunal’s order, which is akin to an order handed beneath Order XXXVIII, Rule 5 of the Code of Civil Course of 1908 (hereinafter ‘CPC’), would possibly have not been handed till the circumstances therein had been blissful.
Extra, other than the time when there was an entire lockdown, by means of the remaining interval, the tenant was allowed to perform the premises with solely 50% functionality from 12 PM to 10 PM. Lastly, it was moreover argued that the tenant has already paid some amount as rent and does not have any intention of defrauding the landlords.
The landlords however argued that the tenant has continued to remain in possession of every the premises and has didn’t pay the month-to-month rent. Extra, it was moreover argued that Order XXXVIII, Rule 5 was inapplicable as, inside the immediate case, the arbitral tribunal’s order was solely directing the tenant to deposit the rental amount whereas it continued to be inside the tenant’s possession. As a result of this truth, as long as the tenant continued to remain in possession, the obligation of the tenant to pay the rent continued and the drive majeure clause was inapplicable.
THE ISSUE BEFORE THE SUPREME COURT
The one actual problem sooner than the Supreme Courtroom docket was whether or not or not the arbitral tribunal had rightly directed the tenant to deposit the entire rental amount as an interim measure beneath Half 17 of the Arbitration Act.
SUPREME COURT’S HOLDING
On the outset, the Supreme Courtroom docket held that given that obligation was considerably disputed by the tenant and the equivalent had not however been considered by the arbitral tribunal, the impugned order beneath Half 17 of the Arbitration Act could not have been handed by the arbitral tribunal .
Moreover, it was moreover seen that there was an entire lockdown for a considerable time, and for the remaining interval; the tenant was working the retro-bar with 50% functionality solely. The Supreme Courtroom docket, subsequently, directed the tenant to deposit the entire rental amount in addition to the interval all through which there was full lockdown. It moreover held that the issue of non-deposit of rent for the interval all through which there was full closure/lockdown might be lastly decided by the arbitral tribunal.
As a result of this truth, the Supreme Courtroom docket directed the arbitral tribunal to consider the principle of drive majeure and conclude the arbitral proceedings inside 9 months, subject to the cooperation of every occasions.
ANALYSIS
The authors respectively submit that the tactic of the Supreme Courtroom docket inside the present case is reverse to the settled concepts of laws. It was rightly argued on behalf of the tenant that the order beneath Half 17 of the Arbitration Act was akin to an order handed beneath Order XXXVIII, Rule 5 of the CPC. The order of the arbitral tribunal had the influence of securing the amount in dispute which is roofed by Half 17(1)(ii)(b) of the Arbitration Act.
Beneath Order XXXVIII, Rule 5 of the CPC, courts can order attachment sooner than judgment to cease a decree from becoming infructuous. Thus, the place a courtroom is blissful that the defendant, with the intent to hinder or delay the execution of any decree which can be handed in direction of him, is each about to eliminate the entire property or any half thereof or is about to remove the equivalent from the courtroom’s jurisdiction, then the courtroom would possibly identify upon the defendant to furnish security or to point set off why security should not be furnished. Beneath Half 9(1)(ii)(b) or 17(1)(ii)(b) of the Arbitration Act, an arbitral tribunal is empowered to cross an order for securing the amount in dispute inside the arbitration. The factor behind these provisions is to cease the get collectively in direction of whom the declare has been comprised of dispersing its property or from performing in a approach to frustrate the award which can be handed (see Navtrip Implementation Society v. IVRCL Restricted).
The Delhi Extreme Courtroom docket, in Navtrip Implementation Society v. IVRCL Restricted, had seen that the merchandise of Half 17(1)(ii)(b) of the Arbitration Act is very similar to that of Order XXXVIII, Rule 5 of the CPC and subsequently its circumstances have to be saved in ideas whereas passing orders beneath Half 17 (1)(ii)(b) of the Arbitration Act. Throughout the acknowledged case moreover, the Delhi Extreme Courtroom docket had refused to cross an order beneath Half 17(1)(ii)(b) of the Arbitration Act on account of there was no allegation of the defendant disposing of its property or performing in a manner which could frustrate the award which can be in the end handed in direction of it.
Conditions for granting an order beneath Order XXXVIII, Rule 5 of the CPC have been outlined by the Supreme Courtroom docket in Raman Tech. & Course of Eng. Co. v. Solanki Retailers. In para 4 of the acknowledged judgment, it was held {{that a}} plaintiff might be entitled to an order beneath Order XXXVIII, Rule 5 of the CPC the place it could be confirmed that there is a prima facie case in favor of the plaintiff and the defendant is trying to remove or eliminate his property to defeat the decree which can be handed.
Nonetheless, with out discussing the applicability or inapplicability of Order XXXVIII, Rule 5 of the CPC, the Supreme Courtroom docket focused on the reality that the obligation was considerably disputed by the tenant and that the issue of drive majeure was however to be adjudicated by the arbitral tribunal . In State Monetary establishment of India v. Ericsson India Private Restrictedthe Supreme Courtroom docket has held that an order handed beneath Half 17 of the Arbitration Act, which is akin to an order handed beneath Order XXXVIII, Rule 5 of the CPC, nonetheless has not blissful its requirements, needs to be put apart.
CONCLUSION
In light of the above, the Supreme Courtroom docket should have thought of the present dispute by analyzing if there was any supplies on doc to counsel that there was a prima facie case in favor of the landlords and whether or not or not the tenant was attempting to make the decree which can be lastly handed in direction of it, infructuous.
Considerably, the Supreme Courtroom docket positioned undue reliance on the reality that the obligation was considerably disputed. Inserting reliance on the reality that the obligation is considerably disputed by a celebration on the time of deciding interim measures is a dangerous precedent. Considerably than considering whether or not or not there is a prima facie case in favor of the plaintiff and the specter of the defendant irritating the decree which can be in the end handed in direction of it, courts/arbitrators, after this judgment, will consider whether or not or not the obligation was considerably disputed whereas deciding features beneath Sections 9/17 of the Arbitration Act.
As a result of this truth, this judgment items a dangerous precedent, and it will likely be fascinating to see if there are any future developments on this stage of laws.
(Raghav Bhatia, is an advocate practising on the Supreme Courtroom docket of India and Aastha Kapoor, the second creator, is a final 12 months laws pupil at Jindal Worldwide Laws College. The creator is also contacted by means of mail at [email protected] and [email protected]).
Cite as: Raghav Bhatia and Aastha Kapoor, ‘Evergreen v John Tinson: Analysing Supreme Courtroom docket’s Misguided Ruling on Half 17 of Arbitration Act’ (The RMLNLU Laws Evaluation Weblog09 September 2022)