ARB.P./122/2011 of M/S BARCO ELECTRONICS SYSTEMS Vs KIRAN MALIK

IN THE HIGH COURT OF DELHI AT NEW DELHI

ARB. P. 122/2011 & I.A. No. 6891/2011

Reserved on: November 30, 2011Decision on: December 21, 2011

M/S BARCO ELECTRONIC SYSTEMS PVT. LTD...... PetitionerThrough:Mr. Sachin Puri withMs. Vaadam Bari, Ms. Namitha Mathurand Ms. Monica Chugh, Advocates.

versus

MRS. KIRAN MALIK..... RespondentThrough:Mr. Jagjit Singh withMs. Neetu Chauhan, Advocates.

CORAM: JUSTICE S. MURALIDHAR

JUDGMENT21.12.2011

1. This is petition under Section 11(6) of the Arbitration and ConciliationAct, 1996 (‘Act’) seeking the appointment of an Arbitrator to adjudicatethe disputes between the parties.

The Petitioner’s version of the facts

2. The Petitioner states that it is private limited company and 100%subsidiaryofM/sBarcoN.V.,Belgiumwhichwascarryingonmanufacturing activities from the premises at A-5, Sector-5, Noida(hereinafter ‘premises in question’). On 11[th]September 2000 an agreementof lease was executed whereby the Respondent Mrs. Kiran Malik gave onlease to the Petitioner the premises in question, which is an industrialfactory built on plot measuring 1906 sq. m., and of which the Respondentis the absolute owner. It is stated that the covered area comprised of groundfloor, second floor and basement of 100 sq. m. with 32 toilets and 2

pantries. The lease amount was Rs. 2,50,000/- for the first four monthsbetween 15[th]September 2000 to 15[th]January 2001, Rs. 3,75,000/- for thenext four months, i.e., 15[th]January 2001 to 15[th]May 2001 and Rs.5,00,000/- per month for the next ten months, i.e., from 15[th]May 2001 to15[th]March 2002. The rent was to be increased by 6% from 15[th]March2002 for the next one year up to 15[th]March 2003 and thereafter increasedat rate of 6% yearly over the previous prevailing rent. The leaseagreement was for total period of eight years up to 15[th]September 2008.The Petitioner was to pay security deposit of Rs. 6 lakh which was to bereturned to the Petitioner on vacation of the premises after deduction by theRespondent of dues and damages, if any. It is stated that the Petitioner paidthe security deposit of Rs. 6 lakh and separate security deposit of Rs.1,01,437/- was given towards the security deposit of the U.P. StateElectricity Authority under the lease deed which was unregistered. Thelease could be terminated by either party by giving at least six months’prior notice. Clause 9 of the lease deed stated that any dispute between thelessee and lessor would be referred to the arbitrator “Mr. Sushil Nayar S/oY.P. Nayar R/o E-25, Sector-27, NOIDA whose award shall be final andbinding on both the parties.” The arbitration was to be governed by the Act.

3. On 6[th]February 2006 the Petitioner gave six months’ written notice tothe Respondent for termination of the lease expressing its intention tovacate the premises by 5[th]August 2006. According to the Petitioner, bymutual agreement of the parties the date of termination was extended up toJanuary 2007 and the Petitioner continued to pay rental and other charges.On 19[th]January 2007, to avoid any controversy, the Petitioner issuedanother notice of termination of 15 days calling upon the Respondent torefund all the security deposit held by her and further asked her to take overthe possession of the premises in question on 3[rd]February 2007, uponrefunding the entire security deposit. According to the Petitioner it asked

the Respondent to inspect the premises in question in the meanwhile incase the Respondent required any repairs to be carried out by the Petitioner.However, the Respondent failed to do so.

The Respondent’s version

4. The version of the Respondent however is that after the Petitioner’snotice dated 6[th]February 2006 discussions took place between the partiesand the Respondent requested the Petitioner to submit no dues certificate(‘NDC’)/no objection certificate (‘NOC’) from all the departmentsconcerned. The Respondent also requested the Petitioner to get thepremises repaired before handing over possession. The Petitioner in itsletter dated 7[th]April 2006 stated that there was no condition in the leaseagreement providing for NDC/NOC and that the premises could beinspected. In her reply dated 15[th]April 2006 the Respondent inter aliastated that she had already got the premises inspected and that damagescould only be assessed after the partition put up therein by the Petitionerwas removed. The Revenue Department of Noida had raised demand ofRs. 1 crore towards registration charges payable by the Petitioner in respectof the tenanted premises. further letter was sent by the Respondent on12[th]June 2006 calling upon the Petitioner to hand over the premises ingood and original condition. photocopy of pay order of Rs. 60,00,000/-dated 12[th]May 2006 was enclosed stating that the said amount would bepaid after the Respondent received the dues. Another letter dated 15[th]July2006 was written by the Respondent to the Petitioner whereby thePetitioner was informed that they had to vacate the premises in August2006 and that if they retained the premises beyond the said date they wouldhave to pay sum of Rs. 50,000/- per day in addition to the rent payable bythe Petitioner to the Respondent. It was also stated that, if the Petitioner didnot vacate the premises in question, the rent from August 2006 would bedouble the prevailing rent. According to the Respondent by letter dated

7[th]August 2006 the Petitioner was informed that since it was not vacatingthe premises, it was liable to pay double the prevailing rent and penalty inthe sum of Rs. 50,000/- per day. It is stated by the Respondent that afterreceiving letter dated 7[th]August 2006 the Petitioner paid the rent for themonth of August 2006 which was accepted by the Respondent underprotest.

5. According to the Respondent, the Petitioner wrote letter on 7[th]September 2006 stating that it was not in position to vacate the premisesin few months. At the same time it was demanding refund of the securitydeposit and denied its liability to provide NOC/NDC. The Respondentadmitted to receiving the notice dated 19[th]January 2007 whereby thePetitioner stated that the tenancy would stand terminated within fifteendays. According to the Respondent the Petitioner thereafter removed thegoods and vacated the premises in question. However, it is maintained thatthe Petitioner stopped paying rent from September 2006 till January 2007.

6. The Respondent states that the Petitioner vacated and the Respondenttook vacant possession of the premises on 3[rd]February 2007 from thePetitioner. The Respondent states that the Petitioner sent letter dated 12[th]March 2007 confirming the vacation of the premises in question on 3[rd]February 2007. However, the Petitioner states that the possession of thepremises in question remained with the Petitioner till 6[th]December 2007when the Respondent in order to avoid paying the security deposit, throughher agents and representatives (including her husband and Mr. SushilNayar) forcibly took over the possession of the premises in questionwithout refunding the security deposit.

7. The Petitioner states that by letter dated 17[th]April 2008 it invoked thearbitration clause and called upon the Respondent to either clear the dues,arbitration clause and called upon the Respondent to either clear the dues,

calculated as Rs.39,69,987 apart from the electricity deposit of Rs.1,15,077 togetherwith interest at 18% within period of seven days,failing which the disputes would be referred to arbitration. The Petitionernominated an Advocate as Arbitrator. This was reiterated by the Petitionerin letter dated 7[th]May 2008 to the Respondent. The Petitioner stated thatit has no faith in the named Arbitrator Mr. Sushil Nayar as he was thebroker of the Respondent and therefore not neutral person.

Submissions of the parties

8. It is mentioned in the petition that the Respondent has not taken anysteps to appoint her Arbitrator although the Respondent has from 2008onwards approached the Petitioner several times to settle the matter. It ismentioned that the Petitioner also took adjoining premises at A-4, Sector-5,Noida on lease from the Respondent’s husband Mr. Adarsh Malik onsimilar terms. With view to getting the disputes arising in respect of thesaid lease referred to arbitration, the Petitioner filed Arbitration PetitionNo. 225 of 2008 in this Court under Section 11 of the Act in July 2008. Byan order dated 21[st]October 2009, this Court appointed Ms. Justice UshaMehra (Retired) as Sole Arbitrator to adjudicate the said dispute. It is statedthat the said proceedings are pending. The Petitioner states that theRespondent filed suit for injunction in relation to the premises in questionin the civil court at Noida which was, however, dismissed for non-prosecution. In the above circumstances, the present petition was filed on18[th]April 2011 seeking the appointment of an Arbitrator.

9. There are two preliminary issues raised by the Respondent. The first isthat no part of cause of action has arisen within the jurisdiction of thisCourt and, therefore, this Court has no jurisdiction to entertain the petition.Secondly, it is contended that the cause of action in relation to the disputein respect of the return of the security deposit arose on 3[rd]February 2007

when possession of the premises was taken from the Petitioner. Thereforethe limitation for raising claim in that regard expired three yearsthereafter. The present arbitration petition was filed after the expiry of thesaid limitation period. With the claim sought to be referred to arbitrationitself being time barred, there was no arbitrable dispute which could bereferred for adjudication.

10. In addition, the Respondent also points out that, in response to thenotice issued to it, in the suit filed by her in the civil court at Noida, thePetitioner appeared and filed written statement. However, the Petitionerdid not raise any objection as to the maintainability of the said suit by filingan application under Section 8 of the Act. Lastly it is submitted that, in anyevent, the Petitioner cannot seek the appointment of an Arbitrator otherthan the one named in the lease agreement. The fact that differentArbitrator was appointed in relation to the dispute concerning the adjoiningpremises was not sufficient justification for the appointment an Arbitratorother than the named one as regards the present dispute.

The issue concerning limitation

11. Counsel for the Petitioner relied on the decisions in Pandit MunshiRam & Associates v. Delhi Development Authority 95 (2002) DLT 482(DB), Kartar Singh v. Punjab State Electricity Board (2007) 147 PLR 589and an order dated 13[th]September 2011 passed by this Court in ArbitrationPetition No. 192 of 2011 (M/s Satya Developers Pvt. Ltd. v. M/sSunflower Durabuild Pvt. Ltd.) to urge that the Petitioner having invokedthe arbitration clause on 17[th]April 2008, the present petition was filedwithin three years from the said date. Referring to Section 43(2) read withSection 21 of the Act, it is contended that the claim cannot be said to betime barred since the arbitration would be deemed to have commenced “onthe date on which request for that dispute to be referred to arbitration is

received by the respondent.”

12. The scope of the proceedings under Section 11 of the Act as regards theissue of limitation has been explained by the Supreme Court in Shree RamMills Ltd. v. Utility Premises (p) Ltd. (2007) 4 SCC 509 (SCC, p. 607) asunder:

“…what the Chief Justice or his designate does is to put the arbitrationproceedings in motion by appointing an arbitrator and it is for thatpurpose that the finding is given in respect of the existence of thearbitration clause, the territorial jurisdiction, live issue and thelimitation. It cannot be disputed that unless there is finding given onthese issues, there would be no question of proceeding with thearbitration.”

13. Explaining that the question of limitation was “always mixed questionof law and fact”, the Supreme Court in Shree Ram Mills Ltd. furtherobserved (SCC, p. 608):

“The same thing is about the limitation which is always mixedquestion of law and fact. The Chief Justice only has to record hissatisfaction that prima facie the issue has not become dead by the lapseof time or that any party to the agreement has not slept over its rightsbeyond the time permitted by law to agitate those issues covered by theagreement. It is for this reason that it was pointed out in the above parathat it would be appropriate sometimes to leave the question regardingthe live claim to be decided by the Arbitral Tribunal. All that he has todo is to record his satisfaction that the parties have not closed theirrights and the matter has not been barred by limitation. Thus, where theChief Justice comes to finding that there exists live issue, thennaturally this finding would include finding that the respective claimsof the parties have not become barred by limitation.”

14. In Shree Ram Mills Ltd. the Supreme Court reiterated the earlierdecision in Hari Shankar Singhania v. Gaur Hari Singhania (2006) 4SCC 658 (SCC, p. 611) “that till such time as the settlement talks are goingon directly or by way of correspondence no issue arises and with the result

the clock of limitation does not start ticking.” In Pandit Munshi Ram &Associates v. Delhi Development Authority after discussing the decisionsof the Supreme Court in Union of India v. L.K. Ahuja AIR 1988 1172,Union of India v. Momin Construction Company (1997) 9 SCC 97 andMajor I.S. Rekhi v. DDA (1998) 2 SCC 338, it was held that the rejectionby one party of the assertion of claim by the other would be the startingpoint of limitation as far as the filing of the petition under Section 11 of theAct was concerned.

15. The case of the Respondent, as stated in para 22 of its reply is that “thedispute in respect of return of security amount arose on 3.02.2007 when thepossession of the premises at Noida was taken from the Petitioner.” ThePetitioner however maintains that it retained possession till 16[th]December2007. This is therefore disputed question of fact which can beconclusively established only after evidence is led by the parties. For thepurposes of the present petition even if the starting point of limitation as faras the claim for return of security deposit is taken to be 3[rd]February 2007,the next relevant date is the date on which the Petitioner invoked thearbitration clause. The Petitioner’s assertion is that it invoked thearbitration clause on 17[th]April 2008 by sending letter of that date bySpeed Post with acknowledgment due and then resent the said notice on 7[th]May 2008. Receipt of both notices is denied by the Respondent. However,a photocopy of the said notice dated 17[th]April 2008 has been enclosed withthe petition. postal receipt in proof of despatch of the notice on 7[th]May2008 has also been enclosed by the Petitioner. For the purposes of thepresentpetition,thedispatchby registeredspeedpostpermits apresumption to be raised of delivery and is by itself sufficient to hold thatthe Petitioner invoked the arbitration clause either on 17[th]April 2008 or 7[th]May 2008 both within three years of 3[rd]February 2007. In terms of Section43 (1), which states that the Limitation Act 1963 (which in turn means

Article 137 thereof) read with Section 43 (2) and Section 21 of the Act, thearbitral proceedings would commence “on the date on which request forthat dispute to be referred to arbitration is received by the respondent.”

16. The situation that emerges is as follows. As far as the present petition isconcerned it has been filed within three years of the Petitioner invoking thearbitration clause by the notice dated 17[th]April 2008, re-sent on 7[th]May2008. Therefore in terms of Section 43 (1) of the Act read with Article 137of the Limitation Act 1963, the present petition is within time. As far as thequestion whether the claim for refund of the security deposit is time barred,it would be mixed question of fact and law and it is not necessary for thisCourt at the present stage to finally decide the said question. The deemedcommencement of arbitral proceedings on 17[th]April 2008 would be arelevant factor in determining whether the claim for refund of the securitydeposit can be said to be barred by limitation. This question is for theArbitrator to decide on the basis of the evidence led by the parties.Consequently, this Court rejects the plea of the Respondent as to limitation.

The issue concerning territorial jurisdiction

17. As regards the territorial jurisdiction of this Court, it requires to benoticed that both parties are ad idem that the claim of the Petitioner is forrefund of security deposit. Therefore even if the premises in question is 11[th]located at Noida and the agreement of lease datedSeptember 2000 wasexecuted there, the present claim of the Petitioner is not with reference tothe premises itself. In contrast, the reliefs sought by the Respondent in SuitNo. 999 of 2007 filed by her in the civil court at Noida was in relation tothe premises. With the Petitioner having admittedly vacated the premises,its claim is nothing but one for recovery of money. Therefore the said claimwould be outside the ambit of Section 16 CPC and would be covered bySection 20 CPC.

18. The decisions in Inox AIR Products Ltd. v. Rathi Ispat Ltd. 2007 (3)R.A.J. 492 (Del) and Harshad Chiman Lal Modi v. DLF Universal Ltd.JT 2005 (8) SC 561 are distinguishable on facts. In both cases, the reliefssought were in relation to the immovable property involved in those cases.In the present case, the claim of the Petitioner is only as regards the refundof the security deposit. Although, the security deposit was given by thePetitioner to the Respondent in relation to the premises located in Noida thesubject matter of the present claim is confined to the refund of the securitydeposit. If suit were to be field by the Petitioner for that purpose, thenunder Section 20 of the CPC it could be instituted in the Court within thelocal limits of which the defendant resides or is carrying on work.Admittedly, the Respondent resides at S-434, Greater Kailash-II, NewDelhi which is within the jurisdiction of this Court. Consequently, the pleaof the Respondent as regards the lack of territorial jurisdiction of this Courtto entertain the present petition is rejected.

Appointment of an arbitrator other than the one named

19. Considering that the suit filed by the Respondent was in relation toregaining the possession of the premises, which in any event is with theRespondent, the fact that the Petitioner did not file an application underSection 8 of the Act in the said suit is of little consequence. It will notaffect the right of the Petitioner to seek reference of the dispute relating torefund of security deposit to arbitration. As regards the named arbitrator, itis significant that Mr. Sushil Nayar was the named arbitrator even in thelease agreement relating to the adjoining premises which were taken onrent by the Petitioner from the Respondent’s husband. The dispute arisingfrom the said lease, was by consent of parties, referred to the adjudicationof Ms. Justice Usha Mehra (retired) as sole Arbitrator. Apart from this,there is no specific denial that Mr. Sushil Nayar did in fact act as the brokerof the Respondent. In the circumstances, there is merit in the contention of

the Petitioner that an arbitrator other than the named one should beappointed by the court.

20. This Court accordingly appoints Ms. Justice Usha Mehra, learnedretired Judge of this Court, C-1/36, Safdarjung Development Area, NewDelhi as Arbitrator to adjudicate the disputes between the parties. The feesof the learned Arbitrator will be in terms of the Delhi High CourtArbitration Centre (Arbitrators’ Fees) Rules.

21. The petition and pending application are disposed of in the aboveterms. copy of this judgment be delivered to the learned Arbitratorforthwith.

DECEMBER 21, 2011

S. MURALIDHAR, J.