Calcutta High Court
Poonawalla Fincorp Ltd vs Aditya Lands Pvt. Ltd. And Anr on 18 August, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
OCD 7
ORDER SHEET
AP-COM/606/2025
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL DIVISION
ORIGINAL SIDE
POONAWALLA FINCORP LTD.
VS
ADITYA LANDS PVT. LTD. AND ANR.
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 18th August, 2025.
Appearance:
Mr. Ayan Chakraborty, Adv.
Mr. Dhilan Sengupta, Adv.
Mr. Sohini Mukherjee, Adv.
Ms. Sharmistha Das, Adv.
...for the petitioner
Mr. Ayan Poddar, Adv.
Mr. Gaurav Ghosh, Adv.
Mr. Soham Dutta, Adv.
...for the respondent.
1. This is an application for appointment of an arbitrator under Clause 23 of
the Deed of Lease dated April 2, 2019.
2. Mr. Sengupta, learned advocate for the petitioner submits that the
respondent no.1 leased out the property to the petitioner for a period of
nine years. On August 1, 2019, an addendum was executed by which the
area leased out to the respondent No. 1 was reduced. Accordingly, the
lease rent was also reduced to Rs.85,000/- per month, exclusive of the
GST. It was further agreed that upon completion of every one year, the
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lease rent would be enhanced by 5% over the last paid rent. At the time of
execution of the deed of lease, the petitioner made over to the respondent
no.1, a sum of Rs.5,70,000/- by way of interest free refundable security
deposit. The petitioner continued business from the said premises.
3. By a letter dated July 20, 2023, the petitioner informed the respondent
no.1 that the petitioner did not intend to continue with the lease agreement
and would terminate the agreement upon expiry of 30 days. Clause 16 of
the lease agreement allegedly permitted premature termination of the
agreement, upon issuing 30 days notice. The petitioner wanted to deliver
peaceful possession and claimed refund of the security deposit, but the
respondent no.1 failed to take steps. By a letter dated November 14, 2024,
the petitioner through its learned advocate terminated the agreement and
demanded a sum of Rs.12,19,313/- towards outstanding security deposit,
interest and other incidental charges. The respondent replied to the said
letter through the learned advocate on January 6, 2025. The respondent
alleged non-compliance of the terms and conditions of the lease deed and
wrongful termination thereof, in violation of the agreement. The petitioner
invoked the arbitration clause. A learned advocate was appointed as the
sole arbitrator, to adjudicate upon the dispute between the parties.
4. The petitioner unilaterally appointed the arbitrator. The respondents raised
a dispute with regard to such unilateral appointment and by a letter dated
May 5, 2025, the learned arbitrator recused. Thus, this application has
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been filed for adjudication of the dispute arising out of non-refund of the
security deposit along with interest and other incidental charges.
5. Mr. Poddar, learned advocate for the respondents, submits that Clause 23
is not a binding arbitration agreement. It is further submitted that the
petitioner has violated all the terms and conditions of the lease deed and as
such, the claims are inadmissible. Mr. Poddar relies on the decision of this
Court in AP/15/2022 [Sunil Kumar Samanta v. Smt. Sikha Mondal]
(decided on 7th April 2025), in support of his contention. This Court had
held that the arbitration clause should indicate that the parties had agreed
that they shall refer the dispute to arbitration i.e. to a private tribunal and
be bound by the said decision of the tribunal. Further reliance was placed
on the decision of BGM and M-RPL-JMCT (JV) v. Eastern Coalfields
Limited reported in 2025 SCC OnLine SC 1471, in support of the
contention that where there was a possibility of the parties agreeing to refer
dispute to arbitration in future, as contrasted from an obligation to refer
the dispute to arbitration, the said clause would not be treated as a valid
arbitration clause. It was further contended that the use of the expression
'shall endeavour' in the subject agreement would not indicate that the
parties had explicitly expressed their willingness to refer their disputes
arising out of the said agreement to arbitration. Instead, the parties agreed
that they would 'endeavour' to refer disputes. Mere use of the expression
'arbitration' as a heading to Clause 23, would not ipso facto make Clause
23 a binding arbitration agreement. A further agreement was to be executed
between the parties, in order to refer the dispute to arbitration.
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6. Having considered the rival contentions of the parties, this Court deems it
fit to set out the arbitration clause for convenience:-
"23 Arbitration
23.1 If any dispute and/or difference arises between the parties
hereto during the subsistence of this Deed or any renewals of the
same or thereafter, in connection therewith including the validity,
interpretation, implementation or alleged material breach of any
provision of this Deed or regarding any question, the Parties hereto
shall endevour to settle such dispute amicably on mutual
agreement appoint a sole arbitrator in terms or provisions
contained in the arbitration and conciliation Act 1996 or any
subsequent law for the time being in force.
23.2 The proceedings of arbitration shall be in English language.
23.3 The provisions of this clause shall survive the termination of
the Deed for any reason whatsoever.
23.4 That the place of Arbitration shall be in Kolkata."
7. Upon a comprehensive and meaningful reading of this clause, this Court
finds that the parties had agreed that in the event of any dispute arising
out of the said agreement, the parties shall endeavour to settle such
dispute amicably or on mutual agreement, appoint a sole arbitrator. It is
true that clause 23.1 could have been more articulately drafted. In my
view, if a comma is incorporated after the word amicably and a coordinating
conjunction 'or' is incorporated after the comma, the same would read as
follows :-
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23.1 If any dispute and/or difference arises between the parties hereto
during the subsistence of this Deed or any renewals of the same or
thereafter, in connection therewith including the validity, interpretation,
implementation or alleged material breach of any provision of this Deed
or regarding any question, the Parties hereto shall endevour to settle
such dispute amicably, or on mutual agreement appoint a sole
arbitrator in terms or provisions contained in the arbitration and
conciliation Act 1996 or any subsequent law for the time being in
force."
8. Such incorporation of the comma, and or, would make the clause more
coherent and effective. Thus, Mr. Poddar's contention is not accepted. Mr.
Poddar has tried to convince the Court that the expression 'endeavour'
which has been used, would mean that the parties shall try to settle the
dispute amicably or on a further agreement, refer the dispute to arbitration.
The intention of the parties, from a reading of the clause, is clear. The
parties agreed that they shall either endeavour to settle the dispute
amicably or mutually appoint an arbitrator. Thus, the meeting of the
minds to refer the dispute to arbitration, is inbuilt in the said clause. The
requirement for amicable settlement is optional, but referring to arbitration
is not. If the amicable settlement was not availed of, or failed, the parties
agreed to appoint a sole arbitrator on mutual consent. The 'mutual
agreement' referred to by Mr. Poddar indicates consensual appointment of
the arbitrator i.e. agreement on the person to be appointed as an arbitrator
and not a further agreement to refer. The agreement to refer is already
incorporated in the clause, the syntax of the sentence may not be happy.
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9. In today's commercial world, interpretation of an arbitration clause should
be in consonance with business common sense. The text of the agreement
should be interpreted in a way that it is reasonable, practical and meets the
commercial expectation of the parties. The contract and the dispute
resolution clause must work effectively. The Arbitration Act has been
promulgated, to encourage party autonomy and to ensure that disputes
and differences arising out of commercial transactions are settled
expeditiously. Under the law, the parties are free to decide on the
mechanism for resolution of disputes amongst them. The true intent and
purport of clause 23.1 is available from the subsequent clauses. Clause
23.2 mentions that the arbitral proceeding shall be in English language.
The next provision states that the clause will survive the termination of the
deed and the place of arbitration shall be Kolkata. These clauses were
incorporated with a purpose. If Mr. Poddar's interpretation is accepted, the
subsequent clauses will be rendered otiose. It is well settled that the
agreement should be read as a whole, to enable the referral court to give
primacy to party autonomy, upon taking into account what the parties had
actually intended. In K.K. Modi v. K.N. Modi reported in (1998) 3 SCC
573, the Hon'ble Apex Court held that the referral court should decide and
consider the intention of the parties, by constructing the arbitration
agreement broadly. The true intention must be gathered from the
surrounding in circumstances. The relevant paragraphs are quoted below:-
21. Therefore our courts have laid emphasis on (1) existence of
disputes as against intention to avoid future disputes; (2) the tribunal
or forum so chosen is intended to act judicially after taking into
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account relevant evidence before it and the submissions made by the
parties before it; and (3) the decision is intended to bind the parties.
Nomenclature used by the parties may not be conclusive. One must
examine the true intent and purport of the agreement. There are, of
course, the statutory requirements of a written agreement, existing or
future disputes and an intention to refer them to arbitration. (Vide
Section 2 Arbitration Act, 1940 and Section 7 Arbitration and
Conciliation Act, 1996.)
***
26. In the case of J&K State Forest Corpn. v. Abdul Karim
Wani [(1989) 2 SCC 701] (SCC para 24) this Court considered the
agreement as an agreement of reference to arbitration. It has
emphasised that (1) the agreement was in writing; (2) it was a
contract at the present time to refer the dispute arising out of the
present contract; and (3) there was a valid agreement to refer the
dispute to arbitration of the Managing Director, Jammu and Kashmir
State Forest Corporation. The Court observed that endeavour should
always be made to find out the intention of the parties, and that
intention has to be found out by reading the terms broadly and
clearly without being circumscribed.
***
28. The Court has further observed that it is to be decided whether
the existence of an agreement to refer the dispute to arbitration can
be clearly ascertained in the facts and circumstances of the case.
This, in turn, depends on the intention of the parties to be gathered
from the relevant documents and surrounding circumstances.”
10. In Visa International Ltd. v. Continental Resources (USA) Ltd.,
reported in (2009) 2 SCC 55 the Hon’ble Apex Court held that:
“25. The submission is unsustainable for more than one reason. No
party can be allowed to take advantage of inartistic drafting of
arbitration clause in any agreement as long as clear intention of parties
to go for arbitration in case of any future disputes is evident from the
agreement and material on record including surrounding
circumstances.
26. What is required to be gathered is the intention of the parties from
the surrounding circumstances including the conduct of the parties and
the evidence such as exchange of correspondence between the parties.
The respondent in none of its letters addressed to the applicant
suggested that the dispute between the parties is required to be settled
through conciliation and not by arbitration. In response to the
applicant’s letter invoking the arbitration clause the respondent merely
8objected to the names inter alia contending that the suggested
arbitration would not be cost-effective and the demand for arbitration
itself was a premature one.”
11. The Hon’ble Apex Court held that, the courts should adopt a pragmatic
approach and not a pedantic one, while interpreting or construing an
arbitration agreement or an arbitration clause. It is the duty of the Court to
make the same workable within the permissible limits of law, without
stretching it beyond the boundaries of recognition. A common sense
approach has to be adopted. The clause should be interpreted just as a
reasonable businessman, having business common sense, as well as being
equipped with the knowledge that may be peculiar to the business venture,
would interpret the same. If a detailed, semantic and syntactical analysis of
the words in a commercial contract leads to a conclusion that flouts
business common sense, the agreement must be made workable.
12. Interpreting the arbitration clause in the said agreement, the Hon’ble Apex
In the decision of Enercon (India) Limited and other Vs. Enercon GMBH
and Another reported in (2014) 5 SCC 1 Court held that it was a well-
recognized principle of arbitration jurisprudence in almost all jurisdictions,
especially, those following the Uncitral Model Law, that Courts should play
a supportive role in encouraging arbitration, by following the practice of
least intervention by Courts. Upon considering the principles behind the
enactment of the law, the Hon’ble Apex Court found that an arbitration
clause could not be frustrated on the ground that it was un-workable and
any obvious omission could be set right by Court.
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13. The decision in BGM and M-RPL-JMCT (JV) is distinguishable, inasmuch
as, the arbitration clause, which is quoted below, used the expression
‘may’:-
“In case of parties other than Govt. Agencies, the redressal of the
dispute may be sought through ARBITRATION AND CONCILIATION ACT,
1996 as amended by AMENDMENT ACT OF 2015”.
14. Under such circumstances, the Hon’ble Apex Court held that when the
expression ‘may’ was used, it meant that the parties may or may not refer
the dispute to arbitration. It was an option. Thus, if they wished to refer the
dispute, there should be a further agreement. This was also the view of
this Court in Sunil Kumar Samanta vs Smt. Sikha Mondal decided in
AP. 15 of 2022, as the expression ‘may’ had been used in the arbitration
clause.
15. Under such circumstances, the application is allowed. This Court appoints
Mr. Rohit Banerjee, Advocate (Mobile: 9163891670), as the arbitrator, to
arbitrate upon the disputes between the parties. This appointment is
subject to compliance of Section 12 of the Arbitration and Conciliation Act,
1996. The learned Arbitrator shall fix his remuneration as per the
Schedule of the Arbitration and Conciliation Act, 1996.
16. The application is disposed of.
(SHAMPA SARKAR, J.)
B.Pal / S. kumar