THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Arbitration Application No.155 of 2010 O R D E R: This application has been taken out under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996 seeking appointment of an Arbitrator for resolution of the disputes relatable to lease agreement- rental deed dated 20.12.2007 between the applicant and the respondents. The applicant is owner and possessor of a building (ground plus 4 floors) with a total built up area of 9025 sq.feet including ground floor bearing Municipal No.8-2-272/30 situated at Road No.2, Banjara Hills, Hyderabad. The respondents took the premises on lease and the rental deed dated 20.12.2007 came to be executed. The respondents deposited a sum of Rs.39,00,000/- with the applicant as security and agreed to pay monthly rent of Rs.3,25,000/-. Accordingly, the rental deed was executed on 20.12.2007. The respondents for certain reasons discontinued their business and vacated the premises. Thereby the disputes arose between the parties relatable to rental agreement dated 20.12.2007. The rental agreement contained an arbitration clause for resolution of the disputes. Therefore, the applicant invoked the arbitration clause and issued a notice dated 10.08.2010 to the respondents calling upon them to suggest the name of a retired Judge of High Court, Hyderabad, to act as an arbitrator to resolve the disputes relatable to the rental agreement. The respondents issued a notice stating that the disputes between the parties have been settled, the rights of the parties of the rental agreement have been worked out and the applicant issued various cheques towards refund of Rs.53,60,468/-. In a way the respondents stated in the reply that there are no disputes which are required to be resolved relatable to the rental agreement. Notice to respondents came to be ordered on 06.10.2010. Respondents entered appearance and filed counter. It is stated in the counter that the rights of the parties relatable to the rental agreement have been settled and the applicant issued post dated cheques towards payment of Rs.53,60,468/- under a covering letter dated 15.01.2009. Out of 36 post dated cheques, the first cheque was issued for a sum of Rs.7,50,000/- , second cheque was issued for a sum of Rs.12,50,000/- and the remaining 33 cheques were issued for a sum of Rs.1,00,000/- each and the last cheque was issued for a sum of Rs.60,468/- respectively. On deposit of 20 cheques, they came to be dishonoured on the ground of “Funds Insufficient”. Thereupon, the respondents issued statutory notice as provided under Section 138 of N.I.Act and issued proceedings before the appropriate Court. The respondent also filed C.S.No.599 of 2010 for recovery of the amount from the applicant. The respondents filed I.A.No.3394 of 2010 in C.S.No.599 of 2010 seeking direction to the applicant to furnish security to a tune of suit amount. The same came to be ordered on 06.09.2010. For better appreciation, I may refer para 3 of the counter-affidavit of the respondents, which reads as hereunder: “I submit that alleged dispute arising out of the rental agreement dated 20.12.2007 for payment of damages for a sum of Rs.30,00,000/- is only a concocted, fictitious, malicious plea and only made with the intention to defraud us of a legal claim. The contention of the petitioner that we are liable to pay Rs.30 lakhs since the tenanted premises was vacated within one year as against 10 years contract, that we are liable to pay arrears towards rent for five months is false and incorrect. The termination letter dated 15.01.2009, another covering letter dated 15.01.2009 and the reply notice dated 19.05.2009 issued by the petitioner himself acknowledging the issuance of cheques towards amount payable to us falsify such contention of the petitioner. It is submitted that the cheque bouncing cases filed by us in C.C.No. 3217 of 2010, 4567 of 2010, 4569 of 2010, 4707 of 2010, 4708 of 2010, 5001 of 2010 and 5002 of 2010 are pending on the file of V Metropolitan Magistrate, Egmore, Chennai. In the case of C.C.No.3217 of 2010 bailable warrant has been issued as against the petitioner herein. In view of the facts stated above, it is submitted that there is no arbitral dispute which needs to be adjudicated and as sought by the petitioner. The effect of the agreement dated 27.12.2007 provides for arbitration in the event of a dispute arising between the parties to the agreement is no longer valid in view of the termination of the agreement dated 27.12.2007 by the petitioner herein himself. The instant application is filed as a preemptive measure to avoid payment under the cheque and create a false defence in the cheque bouncing cases and to scuttle my legitimate claim against the petitioner herein in C.S.No.599 of 2010 before the Hon’ble Madras High Court. There are no merits in the petition and hence the petition is liable to be dismissed with exemplary cost. The petitioner prosecuting the criminal case as well as summary suit at Madras on other hand, the petitioner filed the present petition for appointment of Arbitrator is an abuse of process of law which warrants the interference of this Hon’ble Court for the dismissal of the same”. The applicant filed reply-affidavit. It is stated in the reply- affidavit that the disputes between the parties were never settled and therefore, the application is maintainable. Heard the learned counsel appearing for the applicant and the learned counsel appearing for the respondents. Learned counsel appearing for the applicant submits that there are various disputes between the parties relatable to rental agreement dated 20.12.2007 and the said disputes are required to be dissolved by taking recourse to the provisions of Arbitration and Conciliation Act 1996, as per Clause (h) of the rental agreement. Therefore, the application deserves to be allowed. It is also contended by him that the applicant never issued the termination letter dated 15.01.2009 and never settled the amount payable to the respondents, in which case, the disputes cannot be said to have been settled. The learned counsel appearing for the respondents submits that the applicant himself terminated the lease under a letter dated 15.01.2009 and thereafter issued 36 cheques for return of the advance amount. He would also submit that the respondents in a reply notice dated 19.05.2009 have categorically stated with regard to the issuance of cheques after settling the disputes by way of mutual discussions and in which case the question of appointment of an arbitrator does not arise. The only issue that calls for adjudication is whether the application has made out a valid ground for appointment of an arbitrator? Indisputably, the applicant is the owner of the premises bearing Door No.8-2-272/30, Road No.2, Banjara Hills, Hyderabad and the same has been taken on lease by the respondent under rental agreement dated 20.12.2007. It is also not in dispute that the respondent vacated the premises and handed over the same to the applicant. According to the applicant, disputes relatable to rental agreement subsist and therefore, they are required to be settled by taking recourse to the provisions of the Arbitration and Conciliation Act. Per contra, it is the contention of the respondents that the rights of the parties relatable to the rental agreement have been settled amicably and in pursuance of the said settlement, the applicant issued cheques for return of the advance amount and the cheques came to be dishonoured and there upon they initiated cheque bouncing cases and also filed suit for recovery of the amounts covered under the said cheques in which case, it is to be construed that the parties had worked out their respective rights relatable to rental agreement by mutual understanding and therefore, no dispute subsists which is required to be resolved. I have gone through the letter 15.01.2009 emanating from applicant and it reads as hereunder: “This is to inform you that Rental Agreement which is executed on 20.12.2007 for the premises D.No.8-2- 272/13, Road No.2, Banjara Hills, Hyderabad – 500034 to run his software Testing Busincess been terminated on 20.12.2009 after serving proper notice period by the LESSEE. As on 20.01.2009 there is no such due from LESSEE to LESSOR in regards to Building maintenance amount, Electricity Bills, Municipal Water Bill etc., to claim in future for the above said premises”. The said letter finds place at page 7 of the material papers filed by the respondents. There is also a letter on the even date whereunder total amount which the applicant said to have been paid by way of cheques to the respondents has been worked out. The applicant has to return Rs.53,60,468/- for which cheques came to be issued. The particulars of the cheques are annexed to the letter dated 15.01.2009. The copy of the letter finds place at page 9 of the material papers. The applicant has admitted the termination of lease in categorical terms in his reply dated 19.05.2009. He also admitted about the issuance of the post dated cheques. For better appreciation, I may refer the relevant portion of the reply notice which reads as hereunder: “My client states that in so far as your client being his tenant and the execution of rental agreement dated 20.12.2007 in favour of your client is admitted. As per the convenience of your client for his business requirement, he had spent amounts for infrastructure, facilities and interiors in the leased premises. It is true that your client represented to my client that he had sustained loss in his business due to Global Economic crises and proposed to wind up business and vacate the premises. Though your client had compulsorily agreed to remain in the leased premises for a period of 10 years, considering his financial restraints my client agreed for the termination of the lease at a pre-matured period. Your client represented and insisted my client to take the fixed infrastructure, interiors together with furniture, systems and air conditioners of the leased premises at Rs.20,00,000/- and to which my client reluctantly agreed. In fact as against the said amount two post dates cheques bearing Cheque No.682101 dated 07.02.2009 for Rs.7,50,000/- and cheque No.682102 dated 07.04.2009 for Rs.12,50,000/-, both cheques drawn on State Bank of Hyderabad were issued as Security to your client subject to the condition that if any third party agrees to take the premises with the said infrastructure, interiors together with furniture, systems and air conditioners on lease, then the amounts would be repaid. Unfortunately your client became greedy and without the knowledge and consent of my client your client removed all the air conditioners, systems, chairs etc., from the leased premises and was not seen since then. Thereafter my client was astonished to know that your client was indebted to several people and cheated them and some criminal complaints have also been booked against him. My client had also made efforts to meet your client personally and ask for return of all the cheques in his possession and to take back the left out furniture from the leased premises, as he did stand on his promise, but to no avail. Since your client did not comply with the aforesaid condition, my client issued instructions to his banker to stop the payment of cheques. Thus it cannot be said that the said cheuques are issued in discharge of legally recoverable debt”. The material brought on record clearly indicates that the parties mutually settled the disputes between them relatable to the rental deed and by virtue of mutual settlement, the applicant issued the cheques towards return of the security amount. Therefore, there are no disputes which are required to be resolved relatable to the rental agreement. In that view of the matter, I find that the application failed to make out any valid ground for appointment of an arbitrator. Accordingly, the application is dismissed. No costs. _____________________ B.SESHASAYANA REDDY, J 8th July, 2011 PNV