Lease Amount Recovery Dispute Can Be Adjudicated By Arbitrator: Punjab & Haryana HC

Appointing an arbitrator in a case of non-payment of rent accruing out of a lease deed between the parties, the Punjab and Haryana High Court recently said that a dispute related to recovery of lease amount in terms of lease agreement does not fall within the exclusive jurisdiction of Rent Controller and can be adjudicated by the Arbitrator.

The petitioner in this case moved the High Court for appointment of an independent Arbitrator to adjudicate their dispute under Section 11(5) of the Arbitration and Conciliation Act, 1996.

As per the petition, a lease deed was executed between the parties, as per which, the respondent was to occupy the premises for a fixed period of time, on a 'lock-in period' basis and the deed could not be terminated by either parties before the expiration of the lock in period.

The case of the petitioner was that the respondent terminated the lease prematurely and stopped remitting rent since April 2020. The respondent additionally sent a notice demanding refund of the security deposit which was made at the beginning of the lease and refused the payment of the outstanding rent. When efforts to amicably resolve their dispute could not fructify, the petitioner issued a notice initiating arbitration proceedings nominating an arbitrator, which was again refused by the respondent, leading to this petition.

The petitioner contended that since the lease was operating on a 'lock-in period' basis, it could not have been terminated prematurely, therefore he was liable to receive outstanding rent along with an interest payment, which dispute was to be settled through an arbitrator. Petitioner relied on Vidya Drolia and Others v. Durga Trading Corporation, (2021), in which landlord-tenant disputes were held to be arbitrable unless they are covered by rent control legislation.

The petitioner argued that since he had not argued for eviction of the respondent, which was a matter falling within the rent legislation, their dispute was arbitrable.

The respondent, on the other hand, argued that the property was a part of DLF Mega Mall, falling within the municipal limits of Gurugram, and therefore, the provisions of the Haryana Urban (Control of Rent and Eviction) Act, 1973 were applicable and not the Arbitration Act.

Justice Raj Mohan Singh, after hearing both the parties, noted that the dispute was arbitrable, since it was not ejectment which was being asked for by the petitioner. Even otherwise, the Arbitrator can decide his jurisdiction under Section 16 of the Act, the court noted.

"Keeping in view the nature of controversy involved in the both the cases, I find that the claim of the petitioner in respect of recovery of arrears of lease amount does not fall under the ambit of Rent Act, 1973 as the petitioner is not claiming any eviction of the respondent on the grounds available under the provisions of Rent Act, 1973."

Accordingly, the single bench appointed an arbitrator to resolve the dispute between the parties.

Case Title: Rohit Sawhney v. M/s DLF Power and Services Ltd.

Citation: ARB No.160 of 2021 (O&M)

Coram: Justice Raj Mohan Singh

Citation: 2022 LiveLaw (PH) 299 

Click Here To Read/Download the Order