Supreme Court Appoints Former SC Judge Justice K.M. Joseph As Arbitrator In SmartCity Kochi Lease Dispute

The Supreme Court has appointed former Supreme Court Judge Justice K.M. Joseph as Arbitrator to resolve the monetary disputes between Smart City Kochi Infrastructure Pvt Ltd. and Musthafa and Almana International Consultants arising from a sub lease of premises in the SmartCity Special Economic Zone (SEZ). 

A Division Bench of Justices J.B. Pardiwala and K. Vinod Chandran while asking the parties to approach Justice Joseph within two weeks with a copy of the order, directed that the parties' claims relating to rent, maintenance charges, damages and the legality of termination be adjudicated in arbitration under the Arbitration and Conciliation Act, 1996.

The dispute arose after Smart City Kochi which had established the Central Government approved SmartCity SEZ on land leased by the Kerala Government for 99 years, executed a sub-lease with the respondent on January 25, 2017. The unit was not operationalised with the parties blaming each other for the delay.

Following a termination letter, they entered into a settlement on October 31, 2018, granting the respondent time until April 30, 2019 to commence operations. The Rent Control Court and High Court had taken divergent views on the maintainability of the eviction proceedings and the interplay between the SEZ Act and Kerala Buildings (Lease and Rent Control) Act.

The Court observed that deciding the legal question at this stage would be academic since neither party had derived the intended benefit from the agreement, whether viewed as a landlord tenant or developer-entrepreneur relationship.

It therefore left the question of law open for an appropriate case.

The Court noted that the October 31, 2018 settlement gave the respondent a final deadline of April 30, 2019 to commence operations after which the sub lease and settlement agreement would terminate and rent and maintenance liabilities would arise.

The Court further observed that the premises should now be put to use in the interest of commerce and industry.

It noted that an interim order dated March 2, 2020 in a writ petition before the supreme court had prevented the petitioner from leasing the premises to third parties and accordingly left the underlying legal question open.

The parties were directed to approach the Arbitrator within two weeks for appointment of an Advocate Commissioner and an Architect or Engineer to oversee removal of the respondent's movables and evaluation of improvements.

The petitioner must facilitate their entry into the SEZ, with concerned authorities permitting inspection and inventory and the process is to be completed within two weeks of permission,after which the petitioner may take over the vacant premises.

The Supreme Court accordingly disposed of the Special Leave Petition with the above directions.

For Petitioner: V. Giri, Gyanendra Kumar, Senior Advocates, Cyril Amarchand Mangaldas, AOR, Anuradha Mukherjee, Abhilash Pillai, Shree Sinha, Shivam Tiwari, Vipashyana Hilasayan, Hardik Choubey, Harshed Sundar, Sugandh Virmani, Vikash Kumar Jha, Nikhil Bhasin, Advocates 

For Respondent: R. Basant, Sr. Advocate, Kaushik Poddar, AOR, Saurabh Jain, Kumar Ranjan, Prayag Jain, Naman Vashishta