-Report by Reyanshi Bansal
It has been held by the hon’ble Supreme court of India in the case of Brij Raj Oberoi v. The Secretary that the refusal of the renewal of leave was an arbitrable dispute.
The state of Sikkim, the absolute owner of the Norkhill Hotel, had registered a deed of lease with the petitioner on December 9, 1997, with certain terms and conditions. One of such terms under clause 4 (xiii) directed that if the lessee communicates his interest in extending the lease for a further period in the last year of the lease tenure and if the proposal is accepted by the lessor, then the lease shall be renewable as is mutually agreed.
Following this, the appellant addressed a letter to the state through the secretary of the Tourism department proposing the terms and conditions for the renewal of said property along with the annual rent. This was rejected by the state to use the hotel as a heritage site for the purpose of increasing tourism, revenue and employment opportunities.
Brij Raj Oberoi filed an application under section 9 of the 1996 Act (Arbitration Act) so that disputes and differences could be decided through arbitration. In response, the respondent State contended that since the offer made by the petitioner had not been accepted, there was no case for arbitration. The contract only provides for reference to arbitration to discuss the rent and period of renewal. The commercial court directed that there would be no interference with the possession of the property till the matter is decided by Arbitration. While the respondent filed an appeal against the order before the High Court, the appellant filed an application for the appointment of an arbitrator.t The division bench of the High Court came to the conclusion stating that the clause for arbitration could not be invoked since there was a refusal of offer and not a dispute in the rent or terms and conditions. Hence, the application was rejected by the division bench of the High court. The appellant filed an appeal before the Supreme Court of India.
The Court observed that the division bench fell in error by interpreting the clause alone. The lease deed had to be analyzed wholly. Prima facie, the expression “shall” is used in the deed which connotes a command. As the offer terms and conditions were expressed, the proposal was to be accepted, and if it was not mutually agreed, the matter became arbitrable. It was observed that
“The arbitration clause cannot be rendered otiose by refusal of the Respondent State to renew the lease. The Respondent State may have formulated a policy for encouraging self-employment of local youth who are duly qualified and competent to run the hotel. Such policy decision cannot impact an existing agreement with a renewal clause. All disputes between the parties to the lease with regard to renewal and/or non-renewal, the period of renewal and the quantum of rent would have be decided by the Arbitrator, as observed above. The issue of arbitrability of the dipsute over non-renewal of the lease is within the realm of the Arbitral Tribunal/Arbitrator.”
Therefore, the appeals were allowed and the Former Chief Justice of Sikkim High Court, Justice Bhaskar Bhattacharya, was appointed as an arbitrator to adjudicate the disputes among the parties.