THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Arbitration Application No.195 of 2010 Date:21st July, 2011 Between: 1. Kiran Kumar Alladi & Ors. …Applicants And M/s. Core Tree Solutions Pvt. Ltd. ( A company registered under the Companies Act) at No.400, 4th floor, “Moin Court”, A.C. Guards, Hyderabad rep. by its Managing Director. …Respondent *** THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Arbitration Application No.195 of 2010 ORDER: This Arbitration Application has been taken out by the applicants, who are 8 in number, under Section 11(6) of the Arbitration and Conciliation Act, 1996, (for short, ‘the Act’), seeking appointment of an arbitrator for resolution of the disputes between the applicants and the respondent relatable to the lease deed, dated 15.11.2007. 2. The applicants are the owners of the premises admeasuring 13056 sq. fts together with plug-in facilities therein situated in Survey Nos.240, 242 and 243 of Thokatta Village Bowenpally, Secunderabad Cantonment, Andhra Pradesh. The respondent took the premises on lease under a lease deed, dated 15.11.2007. The lease commenced with effect from 31.01.2008. Subsequently, the respondent requested the applicants to accommodate in a smaller portion in the first floor of the building on a monthly rent of Rs.3,00,000/- due to financial difficulties. The applicants obliged the respondent and allowed to occupy a smaller portion on a monthly rent of Rs.3,00,000/-. Ultimately, the respondent closed the business and offered to sell 207 computer systems along with one UPS of 60 KVA and one UPS of 6 KVA (both Emerson make) for a lump sum value of Rs.24,00,000/- to M/s. First League Info-tech Pvt. Ltd., which is owned by the applicants’ company. Some negotiations took place between the applicants and the respondent with regard to return of the nonrefundable security deposit of Rs.30,00,000/-. Ultimately, a Memorandum of Understanding, dated 23.10.2009, came to be executed between the parties. Of course, the applicants denied the Memorandum of Understanding, dated 23.10.2009, and also subsequent lease deed, dated 15.11.2008. Since the original lease deed, dated 15.11.2007, contains arbitration clause, the applicants invoked the arbitration clause and nominated Sri Justice R.Ramanujam, Retd. Judge of High Court of A.P., as an arbitrator and intimated the same to the respondent by registered letter, dated 20.05.2010. There being no response from the respondent, the applicants filed this application seeking the relief stated supra. 3. Notice to the respondent came to be ordered on 30.12.2010. The respondent entered appearance and filed counter-affidavit. 4. It is stated in the counter affidavit that original lease deed, dated 15.11.2007, has been superceded by a subsequent lease deed, dated 15.11.2008, whereunder the area originally taken on lease came to be restricted to a smaller area and accordingly, the rent has been reduced to Rs.3,00,000/- per month. It is further stated in the counter affidavit that the applicants and the respondent entered into a Memorandum of Understanding and the terms of the understanding came to be reduced into writing on 23.10.2009. In a nutshell, it is the plea of the respondent that the original lease deed, dated 15.11.2007, has been superceded by a subsequent lease deed, dated 15.11.2008, and the Memorandum of Understanding, dated 23.10.2009, in which case, the application seeking appointment of arbitrator is liable to be dismissed. 5. The applicants filed rejoinder disputing the execution of the subsequent lease deed, dated 15.11.2008, and the Memorandum of Understanding, dated 23.10.2009. 6. Heard learned counsel appearing for the applicants and the learned counsel appearing for the respondent. 7. Learned counsel appearing for the applicants submits that the respondent admitted of taking the premises owned by the applicants on lease under a lease deed, dated 15.11.2007, and the said lease deed contains an arbitration clause for resolution of the disputes between the parties and as the disputes have arisen between the arties, the applicants invoked the arbitration clause and issued notice, dated 20.05.2010, and there being no response from the respondent, the applicants approached this Court seeking for appointment of an arbitrator, in which event, the application is deserves to be allowed. Learned counsel makes a specific reference that the subsequent lease deed, dated 15.11.2008, does not contain the signatures of the applicants 2 to 8 and the said lease deed allegedly signed by the applicant No.1 alone and even the 1st applicant disputes his signature on the lease deed, in which case, no reference can be made to the terms of the said lease deed. He would also contend that the respondent fabricated the Memorandum of Understanding, dated 23.10.2009, and pressed into service. 8. Learned counsel appearing for the respondent submits that the reduction of the area of the leased premises has been admitted by the applicants in a reply to the notice issued in cheque bouncing case, that itself indicates of there being a subsequent lease deed. Learned counsel took me to the signatures of the 1st applicant on the lease deed, dated 15.11.2007 and also on the lease deed, dated 15.11.2008, to buttress his submissions that the signatory to both the documents on behalf of the applicants is one and the same. 9. I have gone through the reply notice issued by the 1st applicant to the notice issued in the cheque bouncing case. Para.9 of the reply notice needs to be noted and it is thus: “9. My clients state that while your client had occupied my clients premises from 31.01.2008 by virtue of lease deed dated 15.11.2007 for 3 years with a lock-in lease period of 2 years on a monthly rent of Rs.6,00,000/- they had made payment of rent for the period up to October, 2008 and thereafter, started making part payments of rent citing financial difficulties with a promise to pay them later. Consequently, for the period up to October, 2009 against the rent payable and due by your client at Rs.72,00,000/-, your client made part payment/remittance of Rs.29,00,000/- lakhs thus remained a defaulter of payment of rent to the tune of R.43,00,000/-. Due to your client’s financial inability to pay full rent, they had requested to be accommodated in a smaller portion on the First Floor of the building at a monthly rent of Rs.3,00,000/-, which my client had agreed to and have shifted them to First Floor which they are still occupying and had already fallen arrears of rent for the month of November and December, 2009, which is Rs.6,00,000/-. Therefore, the total rental arrears of your client as on 31.12.2009 would be Rs.49,00,000/- and even if the deposit of Rs.30,00,0000/- is adjusted against the same (provided your clients vacate and handover the premises to my clients on 31.12.2009) your client owe an amount of Rs.19,00,000/- to my clients.” 10. A reading of the reply notice issued by the applicant No.1, to the cheque bouncing case indicates that the respondent reduced the area of occupation because of the recession in the business. This reduction is evidenced by the lease deed, dated 15.11.2008. The 1st applicant denies of his signature appearing on the lease deed, dated 15.11.2008. It is apparent to the naked eye that the signature appearing on the lease deed, dated 15.11.2007 and the signature appearing on the lease deed, dated 15.11.2008, are of one and the same. Once the lease deed, dated 15.11.2008, came into existence, it supersedes the earlier lease deed, dated 15.11.2007. At this stage, it is contended by the learned counsel appearing for the applicants that even the lease deed, dated 15.11.2008, contains an arbitration clause. He drew my attention to Clause 10 of the lease deed, dated 15.11.2008, which reads as hereunder: “10. ARBITRATION If any dispute arises between the Parties hereto during the subsistence of this Agreement or thereafter in connection with the validity, interpretation, implementation or alleged breach of any provisions of this Agreement, the dispute shall be referred to a sole Arbitrator or in case of disagreement to two Arbitrators, so nominated shall then mutually appoint a third Arbitrator. The place of arbitration shall be Hyderabad. The Indian Arbitration & Conciliation Act, 1996, shall govern the arbitration proceedings. The arbitration proceedings shall be in the English language.” 11. I have gone through the original lease deed, dated 15.11.2007, and the subsequent lease deed, dated 15.11.2008. Both the lease deeds contain arbitration clause. With regard to the Memorandum of Understanding, dated 23.10.2009, the applicants are seriously disputing about the execution of the same. There are criminal cases between the parties relatable to the said Memorandum of Understanding. In view of the criminal Court ceasing of the matter, I deem it appropriate not to record any findings with regard to the validity or otherwise of the Memorandum of Understanding, dated 23.10.2009. It is suffice to say that both the lease deeds, dated 15.11.2007 and 15.11.2008, do contain the arbitration clause. Disputes have arisen between the parties relatable to the lease deeds, in which case, they are required to be resolved by taking recourse to the arbitration clause. The applicants invoked the arbitration clause and issued a notice to the respondent. There seems to be no reply to the said legal notice. In that view of the matter, I find that the applicants made out a valid ground for appointment of arbitrator for resolution of the disputes that have arisen between the parties relatable to the lease deeds, dated 15.11.2007 and 15.11.2008. 12. Accordingly, the Arbitration Application is allowed. Sri V.V.Raghavan, Retd. District Judge, (R/o.No.302, Legends Residency, Street No.2, Shanthi Nagar, Masab Tank, Hyderabad-28), is appointed as sole arbitrator, for resolution of the disputes between the parties, relatable to the lease deed, dated 15.11.2007. He shall fix his own fee. No order as to costs. ______________________ B.SESHASAYANA REDDY, J. Date:21st July, 2011. cs THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Arbitration Application No.195 of 2010 Date:21st July, 2011