- 1 - HC-KAR NC: 2025:KHC:29558-DB COMAP No. 166 of 2025 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 31ST DAY OF JULY, 2025 PRESENT THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE AND THE HON'BLE MR. JUSTICE C M JOSHI COMMERCIAL APPEAL NO. 166 OF 2025 BETWEEN: 1. M/S. BIOELECTRIC PRIVATE LIMITED A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 HAVING ITS OFFICE AT NO.7, 9TH MAIN, JAYANAGAR, 2ND BLOCK BENGALURU - 560 011 REPRESENTED BY ITS AUTHORIZED REPRESENTATIVE MR. L. JAYARAMA …APPELLANT (BY SRI H.V. DEVARAJU, ADVOCATE) AND: 1. M/S MOBILEUM TECHONOLGIES PRIVATE LIMITED A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE AT 7TH FLOOR SIGMA TECHNOLOGY STREET HIRANANDANI GARDENS, POWAI MUMBAI - 400 076. Digitally signed by SUMATHY KANNAN Location: High Court of Karnataka - 2 - HC-KAR NC: 2025:KHC:29558-DB COMAP No. 166 of 2025 REPRESENTED BY ITS AUTHORIZED SIGNATORY MR. NITESH RANJAN S/O MR. A K SRINAVSTAVA PRESENTLY AGED ABOUT 48 YEARS …RESPONDENT THIS COMMERCIAL APPEAL IS FILED UNDER SECTION 13(1A) OF COMMERCIAL COURTS ACT 2015, READ WITH UNDER SECTION 37 (1) (C) OF THE ARBITRATION AND CONCILATION ACT, 1996, PRAYING TO ALLOW THE APPEAL BY SETTING ASIDE THE JUDGMENT DATED 16.01.2025 PASSED IN COM A.P. NO. 89/2024 ON THE FILE OF THE LXXXV ADDITIONAL CITY CIVIL AND SESSIONS JUDGE (CCH - 86)(COMMERCIAL COURT) CONFIRMING THE AWARD DATED 28.03.2024 PASSED IN AC. NO. 384/2022 ON THE FILE OF THE ARBITRAL TRIBUNAL SOLE ARBITRATOR AT ARBITRATION AND CONCILIATION CENTRE BENGALURU (DOMESTIC AND INTERNATIONAL) AND DISMISS THE CLAIM PETITION & ETC. THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: - 3 - HC-KAR NC: 2025:KHC:29558-DB COMAP No. 166 of 2025 CORAM: HON'BLE MR. VIBHU BAKHRU ,CHIEF JUSTICE AND HON'BLE MR. JUSTICE C M JOSHI ORAL JUDGMENT (PER: HON'BLE MR. VIBHU BAKHRU,CHIEF JUSTICE) 1. The appellant has filed the present appeal under Section 37(1)(c) of the Arbitration & Conciliation Act, 1996 [A&C Act], impugning a judgment dated 16.01.2025 passed by the learned Commercial Court [LXXXV Addl. City Civil & Sessions Judge, Bengaluru], whereby the appellant's application under Section 34 of the A&C Act for setting aside the arbitral award passed by the Sole Arbitrator in A.C.No.384/2022 dated 28.03.2024 [hereafter ‘the impugned award’], was set aside. 2. The Arbitral Tribunal had rendered the impugned award in the context of the disputes that had arisen in connection with a lease-deed dated 15.10.2020 in respect of the premises described as, 'Office premises comprising of II Floor bearing No.15, Shezan Lavelle, Walton Road, Bengaluru-560 001 with a super built-up area of 8,160 sq.ft., [hereafter ‘the demised premises’]. - 4 - HC-KAR NC: 2025:KHC:29558-DB COMAP No. 166 of 2025 3. The appellant company [hereafter also referred to as ‘the lessor’] is the owner of the demised premises and the same was occupied by the respondent [hereafter also referred to as 'the lessee'] for past several years. The lessor and the lessee had entered into a registered lease-deed dated 09.08.2018 in respect of the demised premises. The said lease was for a term of two years commencing from 15.08.2018 to 14.08.2020. The lease for the demised premises was renewed for a further period of two years commencing from 15.08.2020 to 14.08.2022 and a fresh lease- deed dated 15.10.2020 (hereafter ‘the lease deed’) was entered into by the parties. 4. The lessee terminated the lease by a letter dated 31.03.2021, which the lessor (the appellant) claims was received on 02.04.2021. The lessor responded to the said termination notice inter alia, by letters dated 14.05.2021 as well as 31.05.2021. The appellant disputed the right of the lessee to terminate the lease of the demised premises prior to the expiry of the full term of two years. - 5 - HC-KAR NC: 2025:KHC:29558-DB COMAP No. 166 of 2025 5. The lessee sent a communication dated 08.06.2021, asserting that the in terms of clause 20(iii) of the lease deed, it was expressly entitled to terminate the lease. 6. The lessee vacated the demised premises and handed over the keys to the authorised representative of the lessor and the lessor accepted the same, albeit, without prejudice to its rights and contentions to claim the lease rent for the remaining term of the lease. 7. The lessee also called upon the lessor to refund the security deposit of a sum of Rs.69,36,000/-, which was refundable on handing over the vacant possession of the demised premises. According to the lessee, the lessor did not refund the same. The lessor was entitled to recover the lease rent for the remaining term of the lease deed, that is till 14.08.2022. 8. In the aforesaid circumstances, the lessee issued a notice dated 08.10.2021 invoking the arbitration clause of the lease deed. Thereafter, the lessee filed a petition under Section 11 of the A&C Act before this Court [CMP No.356/2022]. This Court, allowed the - 6 - HC-KAR NC: 2025:KHC:29558-DB COMAP No. 166 of 2025 same by an order dated 24.06.2022 and appointed a former District Judge as a sole arbitrator [the Arbitral Tribunal]. 9. The lessee raised a claim of an amount of Rs.92,49,667/- for refund of the security deposit along with interest computed at the rate of 18% per annum from the date of default, that is from 01.06.2021, till the date of filing the statement of claim. Additionally, the lessee also claimed pendente lite and future interest as well as the cost of the arbitral proceedings. The lessor (appellant) filed a counter claim for an amount of Rs.1,68,42,283/-, the details of which are reproduced below: Sl.No. Particulars Amount 1. Rents due from July 2021 to August 2022 in terms of Lease Deed, which includes GST @ 18%. Rs.1,43,03,968/- 2 Interest on the due rents from respective dates upto the date of Counter Claim; Rs. 20,38,315/- 3 Costs incurred by the Respondent towards litigation and legal expenses etc., Rs. 5,00,000/- TOTAL Rs.1,68,42,283/- - 7 - HC-KAR NC: 2025:KHC:29558-DB COMAP No. 166 of 2025 10. Additionally, the lessor also claimed interest at the rate of 18% per annum from the date of filing the counter claim till realization of the said amount. 11. The Arbitral Tribunal held in favour of the lessee. The Arbitral Tribunal concluded that in terms of clause 20(iii), of the lease deed, the lessee was entitled to terminate the lease by issuing three months’ prior notice. The Arbitral Tribunal awarded the refund of security deposit amount to Rs.69,36,000/-, along with interest in favour of the lessee (respondent) and against the lessor (appellant). The Arbitral Tribunal also awarded rent for the period from 01.07.2021 to 04.08.2021 along with interest in favour of the lessor. The dispositive portion of the impugned award is set out below: “AWARD i. The claim petition is allowed in part. ii. The claimant is entitled to receive a sum of Rs.69,36,000/- together with interest at the rate of 12% per annum from 01.07.2021 till the date of award. iii. Claimant is also entitled to future interest at the rate of 6% per annum on the award amount from date of award till the date of realization. iv. The respondent is entitled to receive the admitted rent from 01.07.2021 to 04.08.2021 with interest at the rate of - 8 - HC-KAR NC: 2025:KHC:29558-DB COMAP No. 166 of 2025 12% per annum from 01.07.2021 till the date of award and future interest at the rate of 6% per annum from the date of award till realization on rent from 01.07.2021 to 04.08.2021 plus interest at the rate of 12% per annum. v. Parties to bear their own costs. vi. The Stamp duty is payable as per the Karnataka Stamp Act, 1957. vii. The award is signed and issued in 3 originals, one for record of Arbitration & Conciliation Centre and remaining two to each of the parties." 12. As noted above, the appellant (lessor) filed an application under Section 34 of the A&C Act, to set-aside the impugned award, which was dismissed in terms of the impugned order. Submissions 13. The learned counsel appearing for the lessor (appellant) submitted that term of the lease-deed dated 15.10.2020 was two years from 15.08.2020 to 14.08.2022 and therefore, it was not open for the respondent to terminate the same. He submitted that the respondent had committed to occupy the demised premises for a full term of two years and therefore, was estopped from terminating the lease prior to its expiry of the full term. The learned counsel also handed over a copy of the emails dated 08.05.2020 (Ex.R1) and 25.06.2020 (Ex.R3) and contended that in view of the - 9 - HC-KAR NC: 2025:KHC:29558-DB COMAP No. 166 of 2025 representations made by the respondent in its communications, it was not open for the respondent to terminate the lease prior to 14.08.2022. Reasons & Conclusion 14. There is no dispute that the parties had entered into the lease-deed dated 15.10.2020. Clause (2) of the lease deed, expressly provided the term of the lease could be two years commencing from 15.08.2020 and ending on 14.08.2022, with an option to the lessee to renew the same for the further period as may be mutually agreed to between the parties. Admittedly, the lessee had deposited a sum of Rs.69,36,000/- as refundable security deposit with the appellant. 15. Clause 20 of the lease-deed contained provisions regarding termination of the lease. The same is set out below: "TERMINATION OF LEASE: (i) By efflux of time; (ii) In the event of the Lessee committing breach of any of the terms of this Lease or defaults in payment of rents for three months in terms of Clause 5(v) above or as mutually agreed between the Parties and recorded in writing, then in - 10 - HC-KAR NC: 2025:KHC:29558-DB COMAP No. 166 of 2025 that event the Lessor's shall give an advance notice of such default by the Lessee and the Lessee must, within 30 (thirty) days of the receipt of such notice, rectify such default failing which the Lessor's at their option will have the right to terminate the Lease by providing a written notice of 3 (Three) months before resuming possession of the Demised Premises. (iii) Without prejudice to any of the other terms and conditions contained herein, the Lessee shall be entitled to terminate the Lease by a prior written notice of 3 (Three) months before the expiry of the Lease Term without assigning any reason or cause for termination. (iv) In the event of the Lessee being ordered to be wound up for any reasons by any Court or Tribunal / authority and / or liquidator / receiver being appointed, this lease shall stand terminated and Lessor's shall become entitled to vacant possession of the Schedule premises and to resume possession as the benefit of this Lease is not available to any third party. However, till such time as the actual, vacant and peaceful possession of the scheduled premises is handed over to the Lessor's by the Liquidator or other person in charge, the Lessor's right to receive all the rents shall continue and the Lessor's are hereby indemnified against losses on account of the said fact and this clause shall be deemed as creating a first charge on the assets of the Lessee for any such purpose and the Lessor's shall be deemed as a secured creditors for all legal effects and purposes." - 11 - HC-KAR NC: 2025:KHC:29558-DB COMAP No. 166 of 2025 16. It is clear that sub-clause (iii) of Clause 20 of the lease-deed expressly entitles the lessee to terminate the lease without assigning any reasons or cause by issuing a prior notice of three months. In view of the above, the contention that the lessee was not entitled to terminate the lease prior to the expiry of the term, is insubstantial. 17. The Arbitral Tribunal had rightly rejected the aforesaid contention advanced by the appellant. The emails dated 08.05.2020 (Ex.R1) and 25.06.2020 (Ex.R3), which were relied upon by the learned counsel for the lessor are of little assistance to the lessor. The email dated 08.05.2020 mainly communicates the decision of the lessee to renew the agreement for a further period of two years on the same terms and conditions. Admittedly, the lease deed for the period 15.08.2018 to 14.08.2020 also contains similar clause regarding termination of the lease. The email dated 25.06.2020 mainly expresses that the lessee had been in occupation of the demised premises for 10 years and expresses the respondent's desire to continue occupying the premises for several years in the future, albeit “subject to business requirements and demands”. - 12 - HC-KAR NC: 2025:KHC:29558-DB COMAP No. 166 of 2025 18. We find no grounds to interfere with the arbitral award or the impugned order. The appeal is unmerited and accordingly dismissed with costs quantified at Rs.20,000/-. 19. Pending applications also stand disposed of. Sd/- (VIBHU BAKHRU) CHIEF JUSTICE Sd/- (C M JOSHI) JUDGE KS List No.: 1 Sl No.: 23