1 ARA23.11 srp IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION ARBITRATION APPEAL NO. 23 OF 2011 WITH CIVIL APPLICATION NO. 26 OF 2011 IN ARBITRATION APPEAL NO. 23 OF 2011 Haresh N. Sanghavi ... Appellant Vs Home Care Retail Marts Pvt. Ltd. ... Respondent Mr. Ravi Kadam, Advocate General with Mr. Shailesh Shah, senior counsel with Mr. Y.M. Choudhari and Mr. Vishal Kanade i/b Omkar Kulkarni for the Appellant. Ms. Rajani Iyer, senior counsel with Ms. Alpana Ghone, Ms. Loshika Bulchandani and Mr. Nikhil Sakhardande i/b Hansa I. Advani for the Respondent. CORAM : S.J. VAZIFDAR, J. FRIDAY, 11TH NOVEMBER, 2011 P.C.: 1. This is an appeal under section 37 of the Arbitration & Conciliation Act, 1996, against an order dated 16th August, 2011, passed by the learned arbitrator in the appellant’s application under 2 ARA23.11 section 17 of the said Act. The appellant is the respondent before the arbitrator. By consent, the appeal admitted and by consent heard finally. 2. The appellant sought an order vacating an injunction passed by this Court; an order directing the respondent to deposit or secure a sum of Rs.9,47,83,000/- and also a sum of Rs.40,21,000/- per month, commencing from May, 2011 and for permission to give the premises on leave and licence to a third party for a period of five years. 3. I am not inclined to interfere with the order insofar as it rejects the application for security. The learned arbitrator has considered all the facts and circumstances of the case and held that the same did not justify a conclusion that there is likelihood on the part of the respondent to defeat an award that may be passed in the appellant’s favour. The learned arbitrator, after referring to judgments and provisions of order XXXVIII Rule 5 of the Code of Civil Procedure, held that a case for security had not been made out. The learned arbitrator also came to the conclusion that because the financial position of the respondent was poor, an order for security, in the facts 3 ARA23.11 and circumstances of the case, would not be justified. 4. There is no warrant for coming to the conclusion that the above findings are unsustainable or perverse. The learned arbitrator exercised his discretion after considering all the facts and the law. The appeal against this part of the order is, therefore, rejected. 5. That leaves for consideration, the appellant’s application for permission to give the premises out on leave and licence basis. I am inclined to permit the same. Firstly, the impugned order itself suggests that the learned arbitrator would have permitted the same, but refrained from doing so apprehending that the licencee would not be amenable to his jurisdiction and, therefore, complications were bound to arise if the licencee did not give the premises at the end of the period for which they are given. 6. Paragraphs 10 and 11 of the order read as under :- “10. However, I did feel that such a large commercial property should not be blocked for a long period of time without being used. But I had to weigh this factor against other factors. I must keep in mind the fact that the full program for hearing and disposal of the matter is fixed and, with the co-operation of the parties, the hearings in 4 ARA23.11 the matter should be concluded by the end of March, 2012. Therefore, one has to consider what interim arrangement should continue for the next seven to eight months. Prayer (d) of the Respondent sought permission to give out the premises for a period of five years, which is much longer than the expected life of the present proceeding. I asked Mr.Joshi if it was possible to give it out for a shorter period, and he stated that practically speaking, it may not be possible to find someone who would be willing to take it for a shorter period. Also, I had another reservation about giving the premises to a third party. Such party would not be amenable to my jurisdiction and, therefore, complications are bound to arise if that party does not give back the premises at the end of the period for which they are given to it. 11. As an alternative, I suggested that the Claimant be allowed to use the premises, without prejudice to the rights and contentions of the parties, on terms that I may fix. But the Respondent was not willing to accept this unless the Claimant offered security upfront for the licence fee that may be payable. I do not think such security ought to be asked from the Claimant for such use. Therefore, that suggestion also could not be gone ahead with.” 7. That the arbitration is likely to end by March, 2012, would by itself not justify the refusal of such an application. There is no guarantee that the arbitration would end by the end of March, 2012. Further, there is every possibility of the award being challenged. The ultimate execution of the award is likely to take considerable time. It is pertinent to note that the learned arbitrator himself felt that such a large commercial property should not be blocked for a long 5 ARA23.11 period of time without being used. Despite the same, the learned arbitrator did not grant the application in this regard, essentially because of the aforesaid apprehension. It is necessary, therefore, in the interest not merely of the appellant but also the respondent to ensure that the property is not wasted by leaving it vacant. This cannot possibly enure to the benefit of either party. I am unable to understand the respondent’s opposition to the property being given out on leave and licence basis. Despite being asked several times, Ms. Iyer, the learned senior counsel for the respondent was unable to offer any logical explanation for the opposition to this application which can only enure to the benefit of the parties and cannot possibly be detrimental to the interests of either of them. The successful party would be entitled to the compensation that is deposited in Court. To leave the property vacant would be detrimental to the interest of all the parties. Even under the agreement, the compensation is stipulated at Rs.40,21,000/- per month i.e. an amount of about Rs.5,00,00,000/- per annum. If the property is kept vacant, the successful party would be deprived of Rs. 5,00,00,000/- per annum. 6 ARA23.11 8. Moreover, considering the nature of the property viz. commercial premises admeasuring about 62,000 square feet, it is necessary to permit the leave and licence agreement for a period of at least three years. Licencees would naturally spend considerable amount of money, including towards the interior work. It would be desirable, therefore, to also provide that even in the event of the respondent succeeding in obtaining an order of specific performance, the licencee would be permitted to continue in occupation during the period of the licence. Otherwise, licencees would be reluctant to pay the fair market value on the apprehension that the licence may be terminated mid-way. I am satisfied that but for the apprehension expressed by the learned arbitrator in paragraph 10, this is the nature of order that would have been passed. 9. I am, however, not inclined to grant the appellant’s application that the compensation ought to be paid to him on the ground that he is not, in any event, entitled to the same under the agreement. There are considerable disputes, including regarding the nature of the construction. Till the award is made and the rights of the parties are 7 ARA23.11 implemented, it is necessary to protect the interest of all the parties. 10. Ms. Iyer raised various contentions on the merits of the case. For instance, she contended that the respondent had a strong case for the grant of specific performance. She further contended that the construction was not in accordance with the agreement between the parties. 11. These contentions, however, are irrelevant for the purpose of considering the application for giving the premises out on leave and licence basis. Indeed, if the respondents succeed, the order I propose passing will enure to their benefit. On the other hand, if the premises are kept vacant, the respondents would themselves suffer grave harm and prejudice even if they succeed in their claim. 12. In the circumstances, the appeal is disposed of by modifying the impugned order to the following extent:- (i) The Court Receiver, High Court, Bombay, is appointed as Receiver of the property. The Court 8 ARA23.11 Receiver shall appoint an agent in respect of the said property on a leave and licence basis for a period, not exceeding three years on the usual terms and conditions. (ii) Parties shall be entitled to bid for the agency of the Court Receiver. In the event of the respondents bid being the highest, the Court Receiver shall grant the agency, in the first instance, to the respondents. (iii) The leave and licence agreement shall stipulate that the same shall remain in force during the period mentioned therein irrespective of the award and the execution thereof. (iv) There shall be no order as to costs. (v) The Civil Application is, accordingly, disposed of.