BRIJ RAJ OBEROI versus THE SECRETARY, TOURISM AND CIVIL AVIATION DEPARTMENT & ANR.

Citation: [2022] 7 S.C.R. 78 · Decided: 18-08-2022 · Supreme Court of India · Bench: INDIRA BANERJEE · Disposal: Appeal(s) allowed

Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 7 S.C.R.
BRIJ RAJ OBEROI
v.
THE SECRETARY, TOURISM AND CIVIL AVIATION
DEPARTMENT & ANR.
(Civil Appeal Nos. 5509-5510 of 2022)
AUGUST 18, 2022
[INDIRA BANERJEE AND C. T. RAVIKUMAR, JJ.]
Arbitration and Conciliation Act, 1996: s. 11(6) – Appointment
of an arbitrator – On facts, issue as regards reference of dispute
pertaining to lease deed between the parties, to the arbitrator –
Held: Clauses in a lease deed cannot be read and construed in
isolation – Lease deed is to be construed as a whole – 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 – Issue of arbitrability of the dipsute
over non-renewal of the lease is within the realm of the arbitral
tribunal/arbitrator – Thus, the Division Bench erred in rejecting
the application of the appellant u/s. 11(6) for appointment of an
arbitrator – Arbitration clause cannot be rendered otiose by refusal
of the respondent State to renew the lease – Thus, the impugned
judgment and order is set aside – Appointment of an arbitrator to
adjudicate the disputes between the parties.
Allowing the appeals, the Court
HELD: 1.1 The Division Bench erred in arriving at the
finding that the arbitration clause could only be invoked if the
proposal for renewal was accepted by the lessor, but there was
dispute with regard to the period of renewal or there was dispute
with regard to the quantum of rent proposed to be paid by the
lessee to the lessor. [Para 14][87-D-E]
1.2 Clauses in a lease deed cannot be read and construed
in isolation. The lease deed is to be construed as a whole. Clause
4(xiii) has to be read with Clause 3 which clearly provides that
the initial term of the lease under the deed shall be a period of 24
years from 1st June 1997 to 31st May 2021 and shall be renewable
for such acceptance of the lessee’s offer in terms of Clause 4(xiii).
[2022] 7 S.C.R. 78
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Prima facie, the parties to the lease deed have used the
expression “shall” which connotes a command. If the lessee
offered its terms for renewal or extension of the lease within the
time stipulated in the lease, prima facie the same would have to
be accepted. However, if the quantum of rent or the period of
lease could not be mutually agreed upon, the same would
necessarily have to be referred to arbitration by an Arbitrator to
be appointed by the Chief Justice of the Sikkim High Court.
[Paras 15, 16][87-C-F, G-H]
1.3 The Division Bench erred in rejecting the application
of the appellant under Section 11(6) of the Arbitration and
Conciliation Act, 1996 for appointment of an Arbitrator. The
dispute arising out of non-renewal of the lease is clearly arbitrable.
The deed of lease provided “that the initial terms of the lease
under this deed shall be a period of twenty four years from
01.06.1997 to 31.05.2021 and shall be renewable for such
acceptance of the lessee’s offer in terms of clause 4(xiii)
hereinafter”. Clause 4(xiii) provides that the appellant-lessee
shall, in  the last year of the lease tenure and not later than six
months prior to the expiry of the present lease, communicate in
writing to the lessor, his terms and conditions for the renewal of
the present lease and if the same is accepted by the lessor, then
the present lease may be renewed for such further period and on
such rent as may be mutually agreed. 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. The issue of
arbitrability of the dipsute over non-renewal of the lease is within
the realm of the Arbitral Tribunal/Arbitrator. [Paras 18, 19][89-
H; 90-A-E]
1.4 The impugned judgment and order is set aside. An
arbitrator is appointed to adjudicate the disputes between the
parties. The Arbitrator is requested to complete the proceedings
BRIJ RAJ OBEROI v. THE SECRETARY, TOURISM AND CIVIL
AVIATION DEPARTMENT
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[2022] 7 S.C.R.
as early as possible preferably within the stipulated pe

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