J U D G M E N T
This appeal is filed by the appellant under Section 37(1)(b) of the Arbitration and Conciliation Act, 1996 ('Act' for short) challenging the judgment and order dated 30.11.2018 passed by the Principal District and Sessions Judge, Chitradurga ('Trial Court' for short) in A.A.No.3/2017, whereby the petition/application filed by the respondent herein under Section 9 of the Act has been allowed holding that the appellant herein - M/s Janardhana Enterprises shall pay Rs.81,56,124/- as arrears of rent to the respondent as on October, 2017 (i.e., total Rs.1,26,14,330 - Rs.44,58,206 (already paid) = Rs.81,56,124/-) within a period of 30 days. It has been further observed that the parties are at liberty to
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approach before the Arbitrator under the provisions of law for their grievances and for arrears of future rent.
2. The parties are referred to as per their status before this Court.
3. Succinctly stated the facts are that the appellant is running "KSRTC - Athithya Midway Plaza"
having restaurant and hotel facility situated in Sy.No.79/3 on NH4 at Metikurki, Hiruyur, Chitradurga District, Karnataka, under two separate sub-lease agreements both dated 20.04.2015 with the respondent who in turn has parental license deed dated 07.02.2011 with the Karnataka State Road Transport Corporation (KSRTC) on Build Operate and Transfer (BOT) basis. It is the contention of the respondent that it could not run the said midway plaza after taking over the project from KSRTC and constrained to find a new enterprise to run the show. Accordingly, the respondent entered into agreement of sub-lease of hotel etc., and agreement of
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sublease of lodge, both dated 20.04.2015, with the appellant in view of the express permission of sub-lease under clause 16 in the parental deed of license dated 07.02.2011. The dispute has arisen between the parties regarding the payment of rent.
4. It transpires that the appellant has filed O.S.No.97/2015 against the respondent before the Hon'ble Additional Civil Judge and JMFC, Hiriyur, seeking protection against the dispossession without due process of law. During the pendency of the said proceedings, the respondent has filed A.A.No.3/2017 before the Hon'ble Principal District and Sessions Judge, Chitradurga under Section 9 of the Act seeking interim relief of recovery of arrears of rent amongst other reliefs which was contested by the appellant. Meanwhile, the respondent has filed CMP No.185/2017 before this Court seeking appointment of Arbitrator under Section 11(6) of the Act and the same came to be
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dismissed on 09.08.2018 recording the submissions made on behalf of the respondent/petitioner therein that in view of the dictum of the Hon'ble Supreme Court in the case of Himangni Enterprises vs. Kamaljeet Singh Ahluwalia reported in 2017 (10) SCC 706, the petition may be dismissed with liberty to pursue its remedy in accordance with law. Subsequent to the dismissal of the CMP No.185/2017, the impugned judgment and order has been passed by the Trial Court as aforesaid.
5. Being aggrieved by the said judgment and order, the present appeal has been filed by the appellant.
6. Learned counsel for the appellant submitted that the Trial Court grossly erred in allowing the petition filed under Section 9 of the Act. The ground of challenge to the impugned judgment and order is primarily on two counts. Firstly, that the subject
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dispute is not an arbitral dispute coming within the purview of the Act. Secondly, interim relief granted as an interim measure under Section 9 of the Act has a limited life as per Section 9(2) of the Act and Rule 9(4) of the High Court of Karnataka Arbitration (Proceedings before the Courts) Rules, 2001 ('Rules, 2001' for short). It was further argued that the order passed by this Court in CMP No.185/2017 dismissing the petition on the submission made by the learned counsel appearing for the respondent herein that it is not an arbitral dispute in terms of the judgment of the Hon'ble Apex Court in Himangni Enterprises, supra, fortifies the same. Even entertaining the petition/application under Section 9 of the Act is wholly untenable.
7. Learned counsel appearing for the respondent supporting the impugned judgment and order submitted that the interim relief has been rightly granted by the Trial Court having appreciated the
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material aspects inasmuch as payment of rents withheld by the appellant without any reasonable cause. Learned counsel argued that dismissal of the CMP No.185/2017 would not preclude the respondent in invoking Section 9 of the Act seeking for the relief having regard to the merits of the case.
8. We have carefully considered the rival submissions of the learned counsel appearing for the parties and perused the material on record.
9. As could be seen from the material on record, it cannot be gainsaid that CMP No.185/2017 filed by the respondent under Section 11(6) of the Act to refer the dispute between the parties to the arbitrator to settle the same as per the terms of the agreements dated 20.04.2015 has been dismissed and the same has reached finality. In such circumstances, in our opinion, the argument advanced by the learned counsel appearing for the appellant stands on a terra firma. It is
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apparent that the Trial Court has passed the impugned judgment and order subsequent to the order passed by this Court in CMP No.185/2017 on 09.08.2018.
10. In paragraph 10 of the impugned judgment, the Trial Court though noticed the filing of the CMP No.185/2017 before this Court sans looking into the said order of this Court, merely observed that the said petition came to be dismissed as not pressed. It is significant to note that the order of this Hon'ble Court is not dismissal simplictor as not pressed. For the purpose of clarity, we find it apposite to extract the relevant portion of the said order which reads thus:
"After arguing the matter for some time, Sri. S. Shaker Shetty, learned counsel for the petitioner fairly submits that in view of the dictum of the Hon'ble Supreme Court in the case of Himangni Enterprises vs. Kamaljeet Singh Ahluwalia reported in 2017 (10) SCC 706, the petition may be dismissed with
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liberty to pursue his remedy in accordance with law.
The said submission is placed on record.
Accordingly, the petition is dismissed with liberty as prayed for."
11. The learned counsel for the appellant has referred to Himangni Enterprises, supra. The Hon'ble Apex Court in Himangni Enterprises, supra in paragraphs 19, 20, 21 has held thus:-
"19. So far as Natraj Studio's case (AIR 1981 SC 537) (supra) is concerned there also, the landlord had filed a civil suit against the tenant in the Small Causes Court, Bombay claiming therein the tenant's eviction from the leased premises. There also, the tenant was inducted pursuant to "leave and license" agreement executed between the landlord and the tenant.
20. The tenant filed an application under Section 8 of the Arbitration Act, 1940 contending therein that since the "leave and license" agreement contained an arbitration
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clause for resolving all kinds of disputes arising between the parties in relation to the
"leave and license" agreement and the disputes had arisen between the parties in relation to the "leave and license" agreement, such disputes could only be resolved by the arbitrator as agreed by the parties in the agreement. It was contended that the civil suit was, therefore, not maintainable and the disputes for which the suit has been filed be referred to the arbitrator for their adjudication.
21. This Court (Three Judge Bench) speaking through Justice O. Chinnappa Reddy rejected the application filed by the tenant under Section 8 of the Act and held, inter alia, that the civil suit filed by the landlord was maintainable. It was held that the disputes of such nature cannot be referred to the arbitrator."
12. In the light of the said judgment, the dispute arising out of the lease and license agreement as accepted by the respondent in the CMP cannot be
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construed as an arbitral dispute. The dismissal of the petition seeking for the appointment of Arbitrator has not been considered by the Trial Court in a right perspective. The Trial Court's order in reserving liberty to approach the Arbitrator under the provisions of the Act for their grievance and for arrears of future rent is in direct contravention of the decision rendered by this Court in CMP. No such direction issued by the Trial Court contrary to the decision of the Hon'ble High Court is sustainable.
13. Sub-Section (2) of Section 9 of the Act contemplates that where, before the commencement of the arbitral proceedings, a Court passes an order for any interim measure of protection under sub-section (1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine.
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14. Sub-section [1](ii) of Section 9 of the Act provides that a party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to a court for an interim measure of protection in respect of any of the matters specified therein.
15. As per sub-rule (4) of Rule 9 of the Rules, 2001, in the case of an application for interim measure made before initiating arbitral proceedings, if the arbitral proceedings are not initiated within three months from the date of the presentation of the application under Section 9, any interim order granted shall stand vacated without any specific order being passed by the Court to that effect.
16. These provisions are considered by the co- ordinate bench of this Court in M/s Paton Constructions Private Ltd., vs. M/s. Lorven Projects
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Ltd., and another reported in ILR 2017 KAR 3016 and it is held that as per sub-section (2) of Section 9 of the Act, where a Court passes an order for any interim measure under Section 9(1) of the Act before commencement of the arbitral proceedings, the arbitral proceedings shall be commenced within the period stated in the sub-section. Commencement of the arbitral proceedings within the period stated in Section 9(2) of the Act is made mandatory by parliament to see that an order for any interim measure passed under Section 9(1) shall not continue to be in force indefinitely in the absence of the arbitral proceedings. Thus, it is held that the commencement of arbitral proceedings within the period stated in sub-section (2) is a requirement for the legal effectiveness of the order passed for any interim measure under Section 9(1) of the Act. Any other interpretation of sub-Section (2) will defeat the intention of the Parliament.
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The said judgment is squarely applicable to the facts of the present case.
17. Thus, in terms of sub-Section (2) of Section 9 of the Act and sub-rule (4) of the Rule 9 of the Rules, 2001, the impugned judgment and order passed under sub-section (1) of Section 9 as an interim measure stands automatically vacated on the expiry of three months from the date of presentation of the application under Section 9 of the Act. Viewed from any angle, the order impugned is not sustainable.
18. Hence, the following
ORDER
(i) Appeal is allowed.
(ii) The impugned judgment and order dated 30.09.2018 passed in A.A.No.3/2017 by the learned Principal District and Sessions Judge, Chitradurga is set aside. However, liberty is reserved to the
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respondent/petitioner to pursue his remedy in accordance with law for recovery of rents in terms of the agreement and sub lease agreement of even date 20.04.2015 from the date of the rents become due
notwithstanding the period of limitation prescribed under the Limitation Act, 1963.
Sd/-
JUDGE
Sd/-
JUDGE
PMR
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