Clause 29 said force majeure. The tribunal ignored it. The Supreme Court didn't.

Two lockdowns, one lease, and a deposit order the Supreme Court rewrote

When Evergreen Land Mark Pvt. Ltd. leased two properties in Delhi to run a restaurant and bar, nobody foresaw a pandemic. Nobody foresaw government orders that would shut the doors completely for months, then allow partial operation. Nobody foresaw a force majeure clause—clause 29 of the lease deed—becoming the centre of a dispute that would travel from an Arbitral Tribunal to the Supreme Court, with millions in rental arrears hanging in the balance.

The lessee stopped paying full rent from March 2020. The landlords, John Tinson & Company Pvt. Ltd. and another, terminated the lease. Arbitration followed. And then came the interim order that changed everything—or almost everything.

The Arbitral Tribunal, by its order dated 5 January 2022, directed Evergreen Land Mark to deposit 100% of the rental arrears from March 2020 to December 2021 in fixed deposits. The Tribunal did this without deciding whether the force majeure clause applied. It expressly declined to render even a prima facie opinion on that question. The Delhi High Court, hearing the appeal under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996, dismissed it on 10 February 2022. The lessee came to the Supreme Court.

The stakes were clear: if the deposit order stood, the lessee would have to pay rent for periods when the government had ordered it to stay shut. If it fell, the landlords would have to wait for the final award to recover anything. The Supreme Court had to decide: can an Arbitral Tribunal order deposit of amounts whose very liability is seriously disputed and yet to be adjudicated?

What the lease deed actually said

The lease deed contained clause 29—a force majeure provision. The lessee argued that COVID-19 lockdowns, being government-imposed closures, fell squarely within its scope. The landlords disagreed. The Arbitral Tribunal, when passing the interim order, sidestepped the issue entirely. It ordered 100% deposit without forming any view on whether the force majeure clause excused payment for the lockdown periods.

The lessee's counsel argued before the Supreme Court that this was impermissible. An interim measure under Section 17 of the Arbitration Act, they contended, could not be used to collect amounts whose liability was itself in dispute. They cited Raman Tech. & Process Engg. Co. & Anr. v. Solanki Traders (2008) 2 SCC 302, which dealt with the conditions for attachment before judgment under Order XXXVIII Rule 5 of the Code of Civil Procedure, 1908. They also cited Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd. (2007) 7 SCC 125, which held that while passing interim orders under Section 9 of the Arbitration Act, courts must bear in mind the principles applicable for granting interim injunctions under Order XXXIX CPC.

The argument was simple: if a court cannot order deposit of money under Order XXXVIII Rule 5 without evidence that the defendant is about to dispose of property or remove assets to frustrate a decree, an Arbitral Tribunal cannot do so under Section 17 without satisfying similar conditions. The Tribunal's own observation—that there was no evidence of the lessee disposing property or removing assets out of India—undermined the basis for such a direction.

The witness rule the Supreme Court applied

Justice M.R. Shah, writing for the Bench (also comprising Justice B.V. Nagarathna), stated the principle with clarity. The Court held that no order for deposit of amounts can be passed by an Arbitral Tribunal by way of interim measure under Section 17 of the Arbitration Act where there is a serious dispute with respect to the very liability to pay such amounts, which is yet to be adjudicated upon by the Tribunal.

This is the core ratio. It is not a new principle—it flows from the nature of interim measures themselves. Interim orders are meant to preserve the subject matter of the dispute or to protect a party from irreparable harm pending final adjudication. They are not meant to pre-judge the dispute or to collect amounts whose liability is genuinely contested.

The Court distinguished between two categories of lockdown periods. For periods of complete lockdown—22 March 2020 to 9 September 2020, and 19 April 2021 to 28 June 2021—the lessee was exempted from depositing rent. For periods where the restaurant operated at reduced capacity, the deposit obligation continued.

The distinction made practical sense. During complete lockdown, the lessee could not operate at all. The force majeure argument had real force. During partial operation, the lessee was earning revenue, even if reduced. The interim deposit for those periods was a fair balance between the competing interests.

Why the Tribunal got it wrong

The Arbitral Tribunal's order had one fundamental flaw: it directed 100% deposit without addressing the force majeure issue. The Tribunal expressly stated that it was not rendering even a prima facie opinion on clause 29. Yet it ordered deposit of the entire amount. This created a situation where the lessee was required to pay for periods when it might ultimately be found to have no liability at all.

The Supreme Court corrected this. It modified the deposit order to exclude the complete lockdown periods. The lessee must still deposit rent for the non-lockdown periods, but the amount for lockdown periods is subject to the ultimate outcome of the arbitration. The Tribunal has been directed to adjudicate the force majeure issue on its merits, uninfluenced by the Supreme Court's interim order. The Tribunal must also conclude the arbitration within nine months, subject to the cooperation of the parties.

THE PLAY: When resisting an interim deposit order under Section 17 of the Arbitration Act, argue that the Tribunal cannot order deposit of amounts whose very liability is seriously disputed and yet to be adjudicated—and point to the Tribunal's own failure to form even a prima facie view on the defence.

What this means for practitioners

This judgment is a reminder that Section 17 is not a collection mechanism. It is a preservation tool. An Arbitral Tribunal cannot use its interim powers to effectively decide the dispute before hearing it on merits. If a party raises a serious defence—force majeure, frustration, illegality—the Tribunal must at least form a prima facie view before ordering deposit of the disputed amount.

For lessees and tenants who faced lockdowns, this judgment provides a template. If your lease has a force majeure clause, and if the government ordered complete closure, you can argue that interim deposit orders should exclude those periods. The key is to show that the liability is seriously disputed and that the Tribunal has not adjudicated the defence.

For landlords and lessors, the takeaway is different. If you seek an interim deposit order, ensure the Tribunal records a prima facie finding on the defence raised. If the Tribunal sidesteps the defence and orders full deposit, the order may be vulnerable on appeal. Better to have the Tribunal engage with the defence and form a view, even if that view is adverse to the tenant.

The Supreme Court also kept all contentions open. The lessee can still argue force majeure before the Tribunal. The landlords can still argue that the clause does not apply. The interim deposit order is just that—interim. The final award will decide the rights of the parties.

The bottom line

An Arbitral Tribunal cannot order deposit of disputed amounts under Section 17 without addressing the defence raised—and if the defence is force majeure during a government-imposed lockdown, the interim deposit must exclude periods of complete closure.