Holding

The dispute over non‑renewal and the terms of renewal under the lease is arbitrable, and the arbitration clause cannot be rendered otiose by the lessor’s refusal to renew; therefore an arbitrator must be appointed under Section 11(6) of the Arbitration Act.

Summary

Brij Raj Oberoi leased the Norkhill Hotel from the State of Sikkim for 24 years under a deed that contained a renewal clause (clause 4(xiii)) requiring the lessee to give notice and, if the parties could not agree on the rent or period, to refer the dispute to arbitration. Oberoi offered renewal on 12 November 2020, but the State rejected the offer on policy grounds and decided to re‑tender the lease. Oberoi filed a Section 11(6) application for appointment of an arbitrator and a Section 9 suit; the Commercial Court restrained the State, but the Sikkim High Court Division Bench set aside that order and dismissed the arbitration petition, holding that no arbitrable dispute existed because the renewal was not accepted. The Supreme Court held that the lease clauses must be read as a whole, that the arbitration clause is not rendered otiose by the State’s refusal to renew, and that the dispute over non‑renewal and the terms of renewal is arbitrable. Consequently, the appeals were allowed, the High Court order set aside, and Justice Bhaskar Bhattacharya was appointed as arbitrator to decide the matters.

Issues considered

The arbitration clause in clause 4(xiii) of the lease deed is triggered when the lessor refuses to accept the lessee's renewal offer, making the dispute arbitrable.
Whether a refusal to renew a lease renders the arbitration clause otiose and non‑enforceable.
Whether Section 11(6) of the Arbitration and Conciliation Act, 1996 permits appointment of an arbitrator in the present circumstances.
How lease clauses should be interpreted – in isolation or as a whole – for the purpose of determining arbitrability.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11(6), s. 34(2)(a), s. 34(2)(b), s. 9
Commercial Courts Act, 2015s. 10, s. 13

Subjects

arbitrationlease renewalarbitrabilitySection 11(6)contract interpretationlease deednon-renewalcommercial arbitrationSikkimpublic policy

Judgment

78 [2022]
SUPREME COURT 7 S.C.R. 78
REPORTS [2022] 7 S.C.R.

A BRIJ RAJ OBEROI
v.
THE SECRETARY, TOURISM AND CIVIL AVIATION
DEPARTMENT & ANR.
B (Civil Appeal Nos. 5509-5510 of 2022)
AUGUST 18, 2022
[INDIRA BANERJEE AND C. T. RAVIKUMAR, JJ.]
Arbitration and Conciliation Act, 1996: s. 11(6) – Appointment
of an arbitrator – On facts, issue as regards reference of dispute
C
pertaining to lease deed between the parties, to the arbitrator –
Held: Clauses in a lease deed cannot be read and construed in
isolation – Lease deed is to be construed as a whole – All disputes
between the parties to the lease with regard to renewal and/or non-
renewal, the period of renewal and the quantum of rent would have
D be decided by the Arbitrator – Issue of arbitrability of the dipsute
over non-renewal of the lease is within the realm of the arbitral
tribunal/arbitrator – Thus, the Division Bench erred in rejecting
the application of the appellant u/s. 11(6) for appointment of an
arbitrator – Arbitration clause cannot be rendered otiose by refusal
of the respondent State to renew the lease – Thus, the impugned
E
judgment and order is set aside – Appointment of an arbitrator to
adjudicate the disputes between the parties.
Allowing the appeals, the Court
HELD: 1.1 The Division Bench erred in arriving at the
F finding that the arbitration clause could only be invoked if the
proposal for renewal was accepted by the lessor, but there was
dispute with regard to the period of renewal or there was dispute
with regard to the quantum of rent proposed to be paid by the
lessee to the lessor. [Para 14][87-D-E]
G 1.2 Clauses in a lease deed cannot be read and construed
in isolation. The lease deed is to be construed as a whole. Clause
4(xiii) has to be read with Clause 3 which clearly provides that
the initial term of the lease under the deed shall be a period of 24
years from 1st June 1997 to 31st May 2021 and shall be renewable
for such acceptance of the lessee’s offer in terms of Clause 4(xiii).
H
78
BRIJ RAJ OBEROI v. THE SECRETARY, TOURISM AND CIVIL 79
AVIATION DEPARTMENT

Prima facie, the parties to the lease deed have used the A
expression “shall” which connotes a command. If the lessee
offered its terms for renewal or extension of the lease within the
time stipulated in the lease, prima facie the same would have to
be accepted. However, if the quantum of rent or the period of
lease could not be mutually agreed upon, the same would
B
necessarily have to be referred to arbitration by an Arbitrator to
be appointed by the Chief Justice of the Sikkim High Court.
[Paras 15, 16][87-C-F, G-H]
1.3 The Division Bench erred in rejecting the application
of the appellant under Section 11(6) of the Arbitration and
Conciliation Act, 1996 for appointment of an Arbitrator. The C
dispute arising out of non-renewal of the lease is clearly arbitrable.
The deed of lease provided “that the initial terms of the lease
under this deed shall be a period of twenty four years from
01.06.1997 to 31.05.2021 and shall be renewable for such
acceptance of the lessee’s offer in terms of clause 4(xiii) D
hereinafter”. Clause 4(xiii) provides that the appellant-lessee
shall, in the last year of the lease tenure and not later than six
months prior to the expiry of the present lease, communicate in
writing to the lessor, his terms and conditions for the renewal of
the present lease and if the same is accepted by the lessor, then
the present lease may be renewed for such further period and on E
such rent as may be mutually agreed. The arbitration clause
cannot be rendered otiose by refusal of the respondent State to
renew the lease. The respondent State may have formulated a
policy for encouraging self-employment of local youth who are
duly qualified and competent to run the hotel. Such policy decision F
cannot impact an existing agreement with a renewal clause. All
disputes between the parties to the lease with regard to renewal
and/or non-renewal, the period of renewal and the quantum of
rent would have be decided by the Arbitrator. The issue of
arbitrability of the dipsute over non-renewal of the lease is within
the realm of the Arbitral Tribunal/Arbitrator. [Paras 18, 19][89- G
H; 90-A-E]
1.4 The impugned judgment and order is set aside. An
arbitrator is appointed to adjudicate the disputes between the
parties. The Arbitrator is requested to complete the proceedings
H
80 SUPREME COURT REPORTS [2022] 7 S.C.R.

A as early as possible preferably within the stipulated period. [Para
20][90-F-G]
Vidya Drolia & Ors. v. Durga Trading Corporation
(2021) 2 SCC 1 - referred to.
Case Law Reference
B
(2021) 2 SCC 1 referred to Para 17
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 5509-
5510 of 2022.
From the Judgment and Order dated 18.11.2021 of the High Court
C of Sikkim at Gangtok in Arb. A. No.02 of 2021 and Arb. P. No. 02 of
2021.
Mukul Rohatgi, Sr. Adv., Saurav Agrawal, Debarshi Dutta, Sahil
Tagotra, Aayush Kevlani, Abhishek Pandey, Ms. Kavya Pahwa, Advs.
for the Appellant.
D
Dr. M. S. Domat Bhutia, AAG, K. V. Vishwanathan, Sr Adv.,
Raghvendra Kumar, Shashank Singh, Varun Singh, Advs. for the
Respondents.
The Judgment of the Court was delivered by
E INDIRA BANERJEE, J.
1. Leave granted.
2. These appeals are against a common judgment and final order
dated 18th November 2021 passed by the High Court of Sikkim at Gangtok
allowing Arbitration Appeal No.02 of 2021 filed by the Respondents,
F setting aside the impugned order dated 31st May 2021 passed by the
Commercial Court on an application of the Appellant under Section 9 of
the Arbitration and Conciliation Act, 1996, hereinafter referred to as
“the 1996 Act”, and also dismissing Arbitration Petition No. 02 of 2021
filed by the Appellant under Section 11 of the 1996 Act for appointment
G of an Arbitrator.
3. The State of Sikkim, impleaded as Respondent No.2 in this
appeal, is the absolute owner of the property bearing Plot No.309, Paljor
Stadium Road, Gangtok, East Sikkim, known as Norkhill Hotel,
hereinafter referred to as the ‘said property’ along with its land, buildings,
annexe, servants quarters and garages.
H
BRIJ RAJ OBEROI v. THE SECRETARY, TOURISM AND CIVIL 81
AVIATION DEPARTMENT [INDIRA BANERJEE, J.]

4. By a registered deed of lease dated 9th December 1997, the A
Respondent State leased out the said property to the Appellant on terms
and conditions stipulated in the said deed of lease. Some of the terms
and conditions of the Deed of Lease are set out hereinbelow for
convenience:-
“ *** B
2. The consideration of the lease of the premises fully
described in the schedule I below, the lessee undertakes to
pay to the lessor the sum of Rs. 30.00 lakhs (Rupees Thirty
lakhs) only per annum with a 10% (ten percent) increase
compounded every three years in quarterly installments of C
Rs. 7,50,000/- (Rupees Seven Lakhs Fifty Thousand only)
payable by the 7 th April, 7 th July, 7 th October and
7th December of each year and the first installment shall be
payable on the date of the execution of this deed.
3. That the initial terms of the lease under this deed shall be a D
period of twenty four years from 01.06.1997 to 31.05.2021
(First day of June one thousand nine hundred and ninety
seven to the thirty first day of May two thousand and twenty
one) and shall be renewable for such acceptance of the
lessee’s offer in terms of clause 4(xiii) hereinafter.
E
4. The lessee covenants with the Lessor as follows:
i) The lessee shall pay the lease amounts on the dates aforesaid
in clause 2 hereinabove.
ii) The lessee shall pay the increased lease amounts at the
rate of 10% (ten percentage) to be compounded every three F
years as follows:
a) from 01.06.2000 to 31.05.2003 Rs. 33,30,000.00 per
annum.
b) from 01.06.2003 to 31.05.2006 Rs. 36,30,000.00 per
annum. G

c) from 01.06.2006 to 31.05.2009 Rs. 39,93,000.00 per
annum.
d) from 01.06.2009 to 31.05.2012 Rs. 43,92,300.00 per
annum. H
82 SUPREME COURT REPORTS [2022] 7 S.C.R.

A e) from 01.06.2012 to 31.05.2015 Rs. 48,31,530.00 per
annum.
f) from 01.06.2015 to 31.05.2018 Rs. 53,14,683.00 per
annum.
g) from 01.06.2018 to 31.05.2021 Rs. 58,46,151.30 per
B annum.
...
v) The lessee shall keep the leased premises in good order
and condition and in the same condition in which it was
C handed over the lessee with a reasonable wear and tear for
which he shall not be entitled to make any claim subsequently.
vi) The lessee shall comply with all the provisions of the
relevant enactments and regulations thereunder and with any
other obligations imposed by the local laws in regard to the
D lease premises.
...
x) The lessee shall upon termination and/or expiry of the lease
quit and vacate the leased premises.
xi) The lessee shall give three months notice in writing of his
E intention to terminate this agreement if he wants to vacate the
premises before the expiry of the lease period. If such notice
is given the lessee shall be entitled to vacate the leased
premises on expiry of the term of notice.
xii) The lessee if he fails and neglects to pay two consecutive
F quarterly lease amounts within the period situated in clause
2 the lessee shall become a defaulter in payment of the lease
amount and on and from the eight day of such second and
consecutive defaulting month, the lessee shall be deemed to
be a trespasser in the demised premises.
G xiii) The lessee shall in the last year of the lease tenure and
not later than six months prior to the expiry of the present
lease, communicate in writing to the lessor his terms and
conditions for the renewal of the present lease and if the same
is accepted by the lessor, then the present lease may be renewed
H for such further period and on such rent as may be mutually
BRIJ RAJ OBEROI v. THE SECRETARY, TOURISM AND CIVIL 83
AVIATION DEPARTMENT [INDIRA BANERJEE, J.]

agreed upon between the parties thereto, failing which the A
matter shall be referred to arbitration by an arbitrator to be
appointed by the Chief Justice of the Sikkim High Court.
...
xvii) The lessee shall after the expiry of the tenure of this
lease or sooner determination thereof, shall peacefully and B
quietly surrender to the lessor, the possession of the demised
premises in the condition in which the same has been delivered
to the lessee.
5. The lessor covenants with the lessee as follows:
C
...
ii) The lessee upon paying the lease amount and observing
and performing the other covenants and conditions and
agreements to be observed and performed, shall peaceably
hold and enjoy the leased premises during the tenure of this D
lease without any interruption or disturbance.
6. In the event of any breach of the terms and conditions of
the agreement by the lessee, the agreement/terminated by the
lessor, at his option, after giving one months notice in writing
of its intention to do so and the lessor shall be entitled to
E
exercise its right of reentry, into the leased premises without
prejudice to its right to recover all arrears of rent and other
claims for damages caused by such breach of the terms and
conditions hereinbefore covenanted.”
5. The lease was due to expire by efflux of time on 31st May
F
2021. By a letter dated 12th November 2020 addressed to the Respondent
State, through the Secretary, Tourism Department, the Appellant offered
its terms and conditions for renewal of the lease of the said property, for
a further period of 30 years, at an annual rent of Rs.64,30,766.43 per
year, that is, 10% more than annual rent being paid then, with escalation
of 10% every three years. G
th
6. By a letter dated 17 May 2021 written in response to the
Appellant’s letter dated 12th November 2020, Dr. K. Jayakumar, IAS,
Additional Chief Secretary, Department of Tourism and Civil Aviation,
Gangtok rejected the offer of the Appellant for renewal of lease of the
H
84 SUPREME COURT REPORTS [2022] 7 S.C.R.

A property in question. The said letter is extracted hereinbelow for
convenience:-
“...This has reference to your request for renewal of lease
ownership of Norkhill hotel period for a further period of
30 years vide your letter dated 12 Nov. 2020.
B 2. In the context of the above, this is to inform you that the
State Government has approved a policy as part of executing
the vision for bringing about transformative changes in the
tourism sector, which interalia envisages professional methods
of managing tourism infrastructure, assets and facilities in
C the State.
3. Efforts are being made for mobilization of revenues for the
government with effective mechanisms, with effective
mechanisms, with associated enforcement of policies for their
professional regulation, processes for deciding on lease
D ownership, and for monitoring and enforcement of regulations.
Assessment and revenue collections are to be realistic, with
focus on quality assurance and standards, in keeping with
the image and branding efforts, to make Sikkim a preferred
destination for tourism.

E 4. The State Government has considered the fact that Norkhill
property being a heritage hotel located at a most commanding
place near the Palzor Stadium has considerable significance
and would need to be treated as a premium property with a
potential to generate better revenues for the State exchequer,
in order that much needed funds to operate and manage the
F state machinery< especially in the context of the current
pandemic is ensured.
5. Furthermore, in the present context, energetic enthusiastic
qualified younger generation hoteliers having the experience
of having served in the hotel industry in Sikkim and outside
G the State are available. It would only be fair for the State to
provide an opportunity for them to also make their offers for
lease ownership, in terms of providing augmented quality of
value added services and spelling out their capability to
generate and offer more revenues for the state.
H
BRIJ RAJ OBEROI v. THE SECRETARY, TOURISM AND CIVIL 85
AVIATION DEPARTMENT [INDIRA BANERJEE, J.]

6. Hence, the State has decided that it would be in public A
interest to adopt a process with stringent qualifications and
bid participating criteria, and determine appropriate lease
owner through a selection process. This approach would
ensure that capacities of emerging, capable, professional
hoteliers who provide more value added services and revenues
B
can be given the opportunity to participate for lease ownership
selection.
7. Hence, the Government has after crateful consideration
and application of mind, has decided in public interest that,
your request for consideration of renewal of lease ownership
and extension of tenure of lease in respect of Nikhill hotel C
would not be accepted. The decision is also in keeping with
the principles laid down by the Hon’ble Supreme Court for
letting out Government properties, in a number of cases,
which lays down that Public property partakes the character
of a trust and that, public purpose would be served only by D
getting the best price for government property, so that larger
revenue coming into the coffers of the State administration
can be utilized for beneficent activities to subserve public
purpose namely, the welfare State...”
7. By a letter dated 21st May 2021, the Appellant requested the E
Respondents to refrain from taking steps to hand over the hotel to a third
party until the disputes and differences were decided through arbitration.
8. The Appellant filed an application under Section 9 of the 1996
Act, being Arbitration Suit No.05 of 2021 in the Commercial Court, being
the Court of the District Judge, East Sikkim at Gangtok. F
9. On or about 28th May 2021, the Respondent State filed its
Response to the application under Section 9 of the 1996 Act, contending
that the Appellant had misconstrued Clause 4(xiii) of the Lease
Agreement. It was contended that as the Respondent State had not
accepted the offer made by the Appellant, there was no case for G
arbitration. Read properly, clause 4(xiii) would permit reference of
disputes with regard to the quantum of rent and the period of renewal,
to arbitration. Furthermore, under clause 4(xvii), upon termination and/
or expiry of the lease, the Appellant was required to quit and vacate the
said property.
H
86 SUPREME COURT REPORTS [2022] 7 S.C.R.

A 10. By an order dated 31 st May 2021, the learned Judge,
Commercial Court restrained the Respondent State from disturbing the
Appellant’s possession of the property in question, until the
commencement of the arbitral proceedings.
11. The Respondent State filed an appeal from the said order
B dated 31st May 2021 under Section 37 of the 1996 Act read with Section
13 of the Commercial Courts Act, 2015 and Article 227 of the Constitution
of India being Arbitration Appeal No. 02 of 2021. The Appellant, on the
other hand, filed an application under Section 11 of the 1996 Act, read
with Section 10 of the Commercial Courts Act, 2015 being Arbitration
Petition No.02 of 2021 for appointment of an Arbitrator.
C
12. By the impugned judgment and order, the Division Bench of
the High Court allowed Arbitration Appeal No. 02 of 2021, set aside the
order dated 31st May 2021 passed by the Commercial Court and also
dismissed Arbitration Petition No.02 of 2021 filed by the Appellant under
Section 11 of the 1996 Act, for appointment of an Arbitrator.
D
13. The Division Bench, inter alia, held:-
“9. As stated hereinbefore, the arbitration clause is set out
under clause 4 (xiii). A plain reading of this clause reveals
that it can be invoked only if the following two situations
E arise, once the proposal for renewal of the present lease -
communicated in writing by the lessee to the lessor within the
stipulated time frame is accepted by the lessor:-
i. If there is a dispute with regard to the further period of
renewal of the present lease, as proposed; and
F ii. If there is a dispute with regard to the quantum of rent
proposed to be paid by the lessee to the lessor for the
extended period of lease.
10. In the instant case, the State expressed its inability to renew
the lease through its letter dated 17th May, 2021. It may have
G been written belatedly, however, it was before expiry of the
lease period. As a consequence, the result of this letter dated
17th May, 2021, tantamount to a final decision on the part of
the State not to renew the present lease in favour of Brij Raj
Oberoi.
H
BRIJ RAJ OBEROI v. THE SECRETARY, TOURISM AND CIVIL 87
AVIATION DEPARTMENT [INDIRA BANERJEE, J.]

11. In such circumstances, none of the disputes - which can A
be termed as arbitrable dispute - as specified hereinbefore,
are present in the facts of the instant case. In absence of any
arbitrable dispute, an order could not have been passed by
the Learned Commercial Court under section 9 of the
Arbitration Act.
B
12. Consequently, Arbitration Appeal No. 02 of 2021, is
allowed and the impugned judgment and order dated
31.05.2021, passed by the learned Commercial Court on the
application filed by Brij Raj Oberoi under section 9 of the
Arbitration and Conciliation Act, 1996 is set aside. The
Arbitration Petition No. 02 of 2021 seeking appointment of C
Arbitrator under section 11 of the Arbitration and Conciliation
Act, 1996 read with section 10 of the Commercial Courts Act,
2015 is also dismissed. The parties to bear their own costs.”
14. In our considered opinion, the Division Bench fell in error in
arriving at the finding that the arbitration clause could only be invoked if D
the proposal for renewal was accepted by the lessor, but there was
dispute with regard to the period of renewal or there was dispute with
regard to the quantum of rent proposed to be paid by the lessee to the
lessor.
15. It is well settled that clauses in a lease deed cannot be read E
and construed in isolation. The lease deed is to be construed as a whole.
Clause 4(xiii) has to be read with Clause 3 which clearly provides that
the initial term of the lease under the deed shall be a period of 24 years
from 1st June 1997 to 31st May 2021 and shall be renewable for such
acceptance of the lessee’s offer in terms of Clause 4(xiii). Clause 4(xiii) F
has wrongly been printed as Clause 4(xii). It is not in dispute that it is to
be read as Clause 4(xiii) and all concerned have proceeded on the basis
that the offer is to be in terms of Clause 4(xiii).
16. Prima facie, the parties to the lease deed have used the
expression “shall” which connotes a command. If the lessee offered its G
terms for renewal or extension of the lease within the time stipulated in
the lease, prima facie the same would have to be accepted. However, if
the quantum of rent or the period of lease could not be mutually agreed
upon, the same would necessarily have to be referred to arbitration by
an Arbitrator to be appointed by the Chief Justice of the Sikkim High
Court. H
88 SUPREME COURT REPORTS [2022] 7 S.C.R.

A 17. In Vidya Drolia & Ors. v. Durga Trading Corporation1, a
three-Judge Bench of this Court held :-
“151. ....Broad or narrow interpretations of an arbitration
agreement can, to a great extent, effect coverage of a
retroactive arbitration agreement. Pro-arbitration broad
B interpretation, normally applied to international instruments,
and commercial transactions is based upon the approach that
the arbitration clause should be considered as per the true
contractual language and what it says, but in case of doubt
as to whether related or close disputes in the course of parties’
business relationship is covered by the clause, the assumption
C is that such disputes are encompassed by the agreement. The
restrictive interpretation approach on the other hand states
that in case of doubt the disputes shall not be treated as
covered by the clause. Narrow approach is based on the
reason that the arbitration should be viewed as an exception
D to the court or judicial system. The third approach is to avoid
either broad or restrictive interpretation and instead the
intention of the parties as to scope of the clause is understood
by considering the strict language and circumstance of the
case in hand. Terms like “all”, “any”, “in respect of”, “arising
out of”, etc. can expand the scope and ambit of the arbitration
E clause. Connected and incidental matters, unless the
arbitration clause suggests to the contrary, would normally
be covered.
152. Which approach as to interpretation of an arbitration
agreement should be adopted in a particular case would
F depend upon various factors including the language, the
parties, nature of relationship, the factual background in
which the arbitration agreement was entered, etc. In case of
pure commercial disputes, more appropriate principle of
interpretation would be the one of liberal construction as there
G is a presumption in favour of one-stop adjudication.
153. Accordingly, we hold that the expression “existence of
an arbitration agreement” in Section 11 of the Arbitration
Act, would include aspect of validity of an arbitration
agreement, albeit the court at the referral stage would apply
1
H (2021) 2 SCC 1
BRIJ RAJ OBEROI v. THE SECRETARY, TOURISM AND CIVIL 89
AVIATION DEPARTMENT [INDIRA BANERJEE, J.]

the prima facie test on the basis of principles set out in this A
judgment. In cases of debatable and disputable facts, and
good reasonable arguable case, etc., the court would force
the parties to abide by the arbitration agreement as the Arbitral
Tribunal has primary jurisdiction and authority to decide the
disputes including the question of jurisdiction and non-
B
arbitrability.
xxx xxx xxx
154.3. The general rule and principle, in view of the legislative
mandate clear from Act 3 of 2016 and Act 33 of 2019, and
the principle of severability and competence-competence, is C
that the Arbitral Tribunal is the preferred first authority to
determine and decide all questions of non-arbitrability. The
court has been conferred power of “second look” on aspects
of non-arbitrability post the award in terms of sub-clauses
(i), (ii) or (iv) of Section 34(2)(a) or sub-clause (i) of Section
34(2)(b) of the Arbitration Act. D

154.4. Rarely as a demurrer the court may interfere at Section
8 or 11 stage when it is manifestly and ex facie certain that
the arbitration agreement is non-existent, invalid or the
disputes are non-arbitrable, though the nature and facet of
non-arbitrability would, to some extent, determine the level E
and nature of judicial scrutiny. The restricted and limited
review is to check and protect parties from being forced to
arbitrate when the matter is demonstrably “non-arbitrable”
and to cut off the deadwood. The court by default would refer
the matter when contentions relating to non-arbitrability are F
plainly arguable; when consideration in summary
proceedings would be insufficient and inconclusive; when
facts are contested; when the party opposing arbitration
adopts delaying tactics or impairs conduct of arbitration
proceedings. This is not the stage for the court to enter into a
mini trial or elaborate review so as to usurp the jurisdiction G
of the Arbitral Tribunal but to affirm and uphold integrity
and efficacy of arbitration as an alternative dispute resolution
mechanism.”
18. In the considered opinion of this Court, the Division Bench fell
in error in rejecting the application of the Appellant under Section 11(6) H
90 SUPREME COURT REPORTS [2022] 7 S.C.R.

A of the 1996 Act for appointment of an Arbitrator. The dispute arising out
of non-renewal of the lease is clearly arbitrable. As observed above, the
deed of lease provided “That the initial terms of the lease under this
deed shall be a period of twenty four years from 01.06.1997 to
31.05.2021 (First day of June one thousand nine hundred and
ninety seven to thirty first day of May two thousand and twenty
B
one) and shall be renewable for such acceptance of the lessee’s
offer in terms of clause 4(xiii) hereinafter”.
19. Clause 4(xiii) provides that the Appellant-lessee shall, in the
last year of the lease tenure and not later than six months prior to the
expiry of the present lease, communicate in writing to the lessor, his
C terms and conditions for the renewal of the present lease and if the
same is accepted by the lessor, then the present lease may be renewed
for such further period and on such rent as may be mutually agreed.
The arbitration clause cannot be rendered otiose by refusal of the
Respondent State to renew the lease. The Respondent State may have
D formulated a policy for encouraging self-employment of local youth who
are duly qualified and competent to run the hotel. Such policy decision
cannot impact an existing agreement with a renewal clause. All disputes
between the parties to the lease with regard to renewal and/or non-
renewal, the period of renewal and the quantum of rent would have be
decided by the Arbitrator, as observed above. The issue of arbitrability
E of the dipsute over non-renewal of the lease is within the realm of the
Arbitral Tribunal/Arbitrator.
20. The appeals are allowed. The impugned judgment and order
is set aside. Justice Bhaskar Bhattacharya, Former Chief Justice of Gujrat
High Court and Former Chairman of the Sikkim Law Commission is
F appointed Arbitrator to adjudicate the disputes between the parties. The
Arbitrator is requested to complete the proceedings as early as possible
preferably within three months from the date of communication of this
order. Needless to mention that the learned Arbitrator will not be influenced
by any observations made in this order on the merits and/or arbitrability
G of the disputes.
21. The order of status quo passed by this Court shall continue for
a period of three months from today or until further orders of the Arbitral
Tribunal, whichever is earlier.

H Nidhi Jain Appeals allowed.