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Judgment
K.L. Manjunath, J.—The legality and correctness of the order passed by the IV Addl. City Civil & Sessions Judge, Mayo Hall Unit, Bangalore, in A.A. No. 25008/2011 dated 15.08.2011 is called in question in this appeal. The appellant herein is the respondent No. 1. Respondents 2 to 7 in this appeal are co-respondents with the appellant before the Trial Court. Respondent No. 1 in this appeal was the applicant before the Trial Court. First respondent filed an application u/s 9 of the Arbitration and Conciliation Act, 1996. The said application has been allowed in part and the said order passed by the Trial Court reads as hereunder:
The respondents shall furnish bank guarantee for Rs. 178,10,04,815/- (Rupees one hundred seventy eight crores ten lakhs four thousand eight hundred fifteen only) within 15 days. Till the time of furnishing bank guarantee, the respondents shall not sell or dispose of or encumber the movable and immovable properties of first respondent company including the mortgaged property.
In the present appeal, the appellant is aggrieved by the order passed by the Trial Court directing the appellant not to encumber the movable or immovable properties of the appellant-Company.
We have heard Mr. Ananth Mandagi, learned Senior Counsel appearing for the appellant and Sri Udaya Holla, learned Senior Counsel appearing for the respondents
During the course of arguments, learned counsel Mr. Mandagi, submits that if this Court clarifies whether renewal of lease or grant of lease of the immovable property by the appellant in favour of its tenant, would amount to creation of encumbrance or not.
According to him, the appellant has developed a Technology Park and has let out various buildings to different tenants. Collection of rents from the lessees or not, is the source of income for the appellant. After the expiry of lease period, the appellant has to renew the lease in favour of the existing tenants. It is also the case of the appellant that, if the buildings are not let out as done earlier and if new tenants are to be inducted, the same cannot be treated as creation of encumbrance. If he is not allowed to do so, the appellant would be deprived of getting income from the existing unleased property.
Learned Senior counsel for the respondents Sri Udaya Holla, submits that the order called in question in regard to creation of encumbrance of movable and immovable properties of the appellant Company is seized by the Hon''ble Supreme Court and a similar direction has been issued.
Since the said matter is pending in the Hon''ble Apex Court, we need not give our finding about the same in this appeal. Be that as it may, admittedly the business of the appellant is to grant lease of the buildings and collection of rent from the lessees and if the buildings have already been leased and same has to be renewed. As such renewal would ensure to the benefit of the appellant and if the appellant is benefited out of enhanced rent, it would be in the best interest of the respondent because the respondent is one of the creditors of the appellant. If the appellant flourishes in the business, that will also be for the better interest of the respondents. Instead of keeping the building idle without letting out, it would also be not in the interest of the respondents. If buildings are let out, the same will improve the revenue of the appellant.
In such an event, the appellant would be in a position to clear the debts payable to its creditors. Therefore, we are of the view that renewal of lease or creation of fresh lease cannot be considered as encumbrance, since it is the main business and occupation of the appellant. Whatever clarification we have made is to the limited effect of disposing of this appeal and this shall not be construed as if we have defined the word ''encumbrance''. In view of the above clarification, we are of the view that no further orders are required. Accordingly, the appeal is disposed of.
Parties to bear their own costs.