Kiran Raj

The Calcutta High Court Single Bench of Justice Shampa Sarkar has constituted an arbitral tribunal to resolve a commercial lease dispute involving a banquet hall in Kolkata. The case pertains to an alleged breach of contractual obligations between the petitioner and the respondents, leading to a request for arbitration. The court held that the arbitration clause within the lease agreement mandated resolution through an arbitral tribunal and subsequently appointed arbitrators to oversee the proceedings.

The dispute originates from a lease agreement executed on June 13, 2023, between the petitioner and the respondents for a banquet hall known as Punjab House, located at premises number 22, Gorcha, 2nd Lane, Kolkata 700019. The leased property consists of a covered, air-conditioned banquet hall spanning 6,000 square feet, along with an adjoining open concrete lawn and additional structures.

The agreement was for a period of 11 months, commencing from October 1, 2023, with an option for renewal for another 11 months. The total lease consideration was set at ₹82,50,000, payable in multiple instalments, including an initial sum of ₹15,00,000 on the date of execution, ₹12,50,000 on the lease commencement date, and the remaining amount in four instalments.

The petitioner contended that the lease terms obligated the lessor to provide continuous electricity supply, soundproof generators, well-maintained electrical lines, adequate security at entry points, fire safety measures, and necessary modifications to the premises. Additionally, the supplementary agreement provided certain privileges for members of the Sikh community regarding bookings and social functions.

Despite formal service of the application and notice of motion, certain respondents failed to appear before the court. Consequently, substituted service was carried out through publications in Business Standard and Dainik Vishwamitra in compliance with the court’s directive. The case proceeded in the absence of the non-appearing respondents.

The petitioner alleged that the respondents breached their obligations by unilaterally taking bookings for the banquet hall, denying permission for temporary structural modifications, failing to provide security and adequate parking, and not ensuring uninterrupted electricity supply. These breaches, according to the petitioner, impaired the business operations under the lease agreement.

On June 11, 2024, the petitioner issued a notice demanding specific performance of the lease agreement. Following the respondents' failure to comply, another notice invoking arbitration under clauses 26 and 27 of the agreement was sent on September 7, 2024. The petitioner nominated Mr. Domingo Gomes, Advocate, as their arbitrator.

The petitioner further sought interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, from the Commercial Court at Alipore. The court issued an order restraining the respondents from creating third-party interests in the leased property.

The Calcutta High Court examined whether the arbitration clause extended to both the lease agreement and the supplementary agreement. The court referenced Giriraj Garg v. Coal India Ltd. & Ors., (2019) 5 SCC 192, which established that an arbitration clause in a primary agreement could extend to a supplementary agreement if the latter was executed in furtherance of the principal contract.

The judgment cited the Supreme Court’s ruling in M.R. Engineers & Contractors (P) Ltd. v. Som Datt Builders Ltd., (2009) 7 SCC 696, which held that an arbitration clause in another document can be incorporated by reference into a contract if specific conditions are met. The court observed:

“Where a contract between the parties provides that the execution or performance of that contract shall be in terms of another contract (which contains the terms and conditions relating to performance and a provision for settlement of disputes by arbitration), then, the terms of the referred contract in regard to execution/performance alone will apply, and not the arbitration agreement in the referred contract, unless there is special reference to the arbitration clause also.”

The court noted that the supplementary agreement contained explicit references to the lease deed and its provisions. It concluded that disputes under both agreements should be adjudicated through a single arbitration proceeding, observing:

“Disputes arising out of both these agreements are to be settled by one composite reference to arbitration.”

Upon confirming that arbitration was the appropriate forum for dispute resolution, the court appointed the following arbitral tribunal:

• Petitioner’s Nominee: Domingo Gomes, Advocate, Bar Library Club, High Court at Calcutta.

• Respondents’ Nominee: Sarbajit Mukherjee, Advocate, Bar Library.

• Presiding Arbitrator: Hanshohana Chakraborty, Advocate, Bar Library Club.

The appointments were made subject to compliance with Section 12 of the Arbitration and Conciliation Act, 1996. The tribunal was also authorized to determine its remuneration per the schedule outlined in the Act.

The court stated that no order as to costs shall be made. The parties have been directed to act upon the server copy of this judgment. Additionally, if an urgent certified copy is requested, it shall be provided upon compliance with the necessary formalities.

Case Title Pawan Prahladka v. Sri Guru Singh Sabha & Ors.

 Case Number: AP-COM/926 of 2024

Bench Justice Shampa Sarkar.

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