Commercial Court's interim protection for Umang Cure Pvt. Ltd. challenged; arbitration clause survives beyond license expiry
In a notable decision, the Allahabad High Court has remanded a case back to the Commercial Court, Varanasi, for fresh adjudication concerning the interim protection granted to M/s Umang Cure Pvt. Ltd. against eviction by Banaras Hindu University (BHU). The dispute arose over the operation of a 24-hour pharmacy within the hospital premises of BHU, with significant implications on the interpretation of arbitration clauses in expired contracts.
The Division Bench, comprising Chief Justice Arun Bhansali and Justice Kshitij Shailendra, addressed an appeal by BHU challenging the Commercial Court's order dated June 12, 2025, which restrained the university from evicting Umang Cure Pvt. Ltd. from the disputed property and from taking coercive measures.
The crux of the appeal lay in whether the arbitration clause in the expired license deed continued to be operative, allowing the respondent to seek interim measures under Section 9 of the Arbitration and Conciliation Act, 1996. Despite the license deed’s expiry, the respondent had continued operations, and BHU had accepted license fees, albeit under the terms of the expired deed.
The High Court emphasized that arbitration clauses do not automatically expire with the termination of a contract if the conduct of the parties indicates a continuation of the agreement’s terms by implication or sub silentio. This position was reinforced by precedents including Bharat Petroleum Corporation Ltd. v. Great Eastern Shipping Co. Ltd. and Branch Manager, MAGMA Leasing and Finance Limited v. Potluri Madhavilata, which upheld the survival of arbitration clauses beyond contract expiry due to parties’ conduct.
The High Court found the Commercial Court's order deficient, as it failed to consider the essential prerequisites for granting an interim injunction, namely the existence of a prima facie case, balance of convenience, and irreparable harm. Furthermore, the Commercial Court did not address the respondent's readiness to enhance the license fee from October 11, 2023, nor did it issue directions regarding this concession.
Consequently, the High Court set aside the Commercial Court's order and remanded the matter for reconsideration, instructing the lower court to adhere to legal standards for interim relief and consider the respondent's offer concerning the license fee. The parties are directed to maintain the status quo until a new order is passed, with the Commercial Court tasked to complete the hearing by January 31, 2026.
This judgment underscores the judiciary's role in ensuring that arbitration clauses serve their intended purpose of resolving disputes, even after contractual terms have technically ended. The decision also reflects the courts' vigilance in requiring lower courts to substantiate orders with thorough legal reasoning, particularly concerning interim measures.
Bottom Line:
Arbitration Clause in License Deed - Arbitration clause does not perish with the expiry of the license deed if the conduct of the parties indicates an extension of terms sub silentio or by necessary implication. Commercial Court must record findings on prima facie case, balance of convenience, and irreparable injury while granting injunction under Section 9 of the Arbitration and Conciliation Act, 1996.
Statutory Provision(s): Arbitration and Conciliation Act, 1996 Section 9, Section 37
