Bombay High Court
Companies Act vs Companies Ac on 20 October, 2012
Bench: Anoop V.Mohta
ssm 1 arbp564.09
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 564 OF 2009
Motabhai Paras Private Limited,
a company incorporated under the
Companies Act, 1956,
having its office at 10, Khetan Bhavan,
4th Floor, J.T.Road, Churchgate,
Mumbai 400020 .. Petitioner
V/s.
Western Paper & Yarn Pvt. Ltd.,
a company registered under the
Companies Ac, 1956, having its office
at 10, Khetan Bhavan, 4th Floor,
J.T. Road, Churchgate, Mumbai 400020 .. Respondent
Mr. Pankaj Kawli with Mr. S.R. Rawal for the Petitioner.
Mr. Aspi Chinoy, Senior Counsel with Mr. Sunip Sen i/by M/s.
Udwadia & Udeshi for the Respondent.
CORAM : ANOOP V. MOHTA, J.
RESERVED ON : 11 SEPTEMBER 2012.
PRONOUNCED ON : 20 OCTOBER 2012.
ORAL JUDGMENT :-
The Petitioner, original Respondent, alleged
occupant/trespasser, has challenged the Award under Section
34 of the Arbitration and Conciliation Act, 1996 (for short, the
ssm 2 arbp564.09
Arbitration Act) of sole Arbitrator dated 24 April 2009. The
operative part of the Award is as under :-
"a) The Respondent shall forthwith cease to use the
facilities granted by the claimant to the Respondent and
described in the agreement dated 22 August 2002.
b) The Respondent do pay to the claimant a sum of Rs.
1,89,000/- for the months of March, April and May 2005.
c)
The Respondent do pay to the claimant a sum of Rs.
2961000/- for wrongful use of the facilities for the period
1 June 2005 to 30 April 2009. In case the Respondent
ceases to use and surrenders the facilities before 30 April
2009, it will pay lesser amount calculated at the rate of
Rs. 2100/- per day for non user.
d) The Respondent do pay to the claimant at the rate of
Rs. 63000/- per month from 1 May 2009 till it ceases to
use and surrenders the facilities granted under the
agreement dated 22 August 2002.
e) The Respondent do pay to the claimant Rs.
244504/- for electricity bills upto and inclusive of the bill
dated 23 May 2007. For the subsequent period the
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claimant will forward to the Respondent a copy of all the
bills received till the date of this award and a voucher at
60% of the bill. The Respondent do pay an amount
equivalent to 60% of the electricity bill within one week
of the receipt of the voucher with a copy of the bill. For
the future period the claimant will forward to the
Respondent a copy of all the bills received and a voucher
at 60% of the electricity within one week of the receipt of
the voucher with the bill.
f) The Respondent do pay to the claimant interest on
the amounts mentioned in b) to d) above @ 18 % p.a
from the date of the award till payment or realization.
g) The Respondent do pay to the claimant interest @
18% p.a on the amounts that may become due for
electricity bills received after the date of the award from
the expiry of one week after the receipt of the vouchers
with a copy of the bill if not paid within one week of
receipt.
h) The Respondent do pay to the claimant costs of this
arbitration fixed at Rs.500000/-."
ssm 4 arbp564.09
2 The following were the issues before the learned
Arbitrator :-
Issues Answers
1. Whether the Agreement was executed Negative
to create a tenancy by way of license in
favour of the Respondent and the Small
Causes Court will have the exclusive
jurisdiction to entertain and try the issue
and not the Arbitrator?
2. Whether the letters dated 19th August, Negative. They
2002 and 20th August, 2002 were basic contained some of
conditions of the Agreement dated 22nd the preliminary
August 2002? condition. The
agreement dated
22nd August 2002
was signed after
taking into
consideration such
conditions.
3. Whether the claimant did not provide Negative. The
five telephone connections exclusively for claimant did
the use of the Respondent as per clause 7 provide.
of the Agreement?
4. Whether the Agreement dated 22 nd Negative.
August, 2002 was not to be acted upon
and not acted upon?
5. Whether the said Agreement was Negative.
purely to create a license in favour of the
Respondent?
6. Whether the real intention of the Negative.
parties was to let the said premises?
7. Whether the Respondent was in Negative.
exclusive possession of the premises?
ssm 5 arbp564.09
8. Whether the Respondent is entitled to Negative.
damages to the tune of Rs. 2 crores?
9. Whether the Claimant is entitled to a The claimant is
sum of Rs. 24,30,000/-? entitled to claim
compensation in the
sum of
Rs.2430000/-. The
claimant is entitled
to the amounts
awarded.
10. Whether the Claimant is entitled to The claimant is
mesne profit of Rs.90,000/-? entitled to claim @
ig Rs.63000/- p.m.
11. Whether the Claimant is entitled to Yes.
an order directing the Respondent to
cease usage of the facilities and surrender
facilities?
12. Whether the Agreement was the Yes.
Business Service Centre Agreement
permitting the Respondent for mere use
of the business facilities of the Claimant?
13. Whether the Claimant is entitled to Yes; but after
reimbursement of telephone/electricity 31.5.2005 only of
charges? electricity charges.
14. Whether the Claimant is entitled to No. The claim is
declaration that in case the Claimant is premature.
evicted from the premises, the
Respondent should pay to the Claimant a
sum not less than Rs. 94 lacs?
15. Whether the Claimant is entitled to Yes; as awarded.
claim any interest on the amount
awarded?
16 Additional issue.
Yes. The claimant
did carry on the
business.
ssm 6 arbp564.09
3 The basic events as per the Petitioner are as under :
The Petitioner is a private limited company registered
under the Companies Act, 1956, carrying on the business in a
part of Flat No.10, Khetan Bhavan, J.T. Road, Churchgate,
Mumbai 400020, of providing counselling and arrange
education loans to students going abroad for higher studies.
4 On 22 August, 2002, Agreement was executed between
the parties stating in clause 1 that "The said Company
(Respondent) shall permit and allow the said clients
(Petitioners) to conduct the business of any thing and
everything, concerning Education counselling in the premises".
The Petitioner deposited Rs.3,78,000/-. The Respondent gave
the Petitioner alleged keys of the main door and put them in
exclusive possession of the premises. The Petitioner started
paying Rs.63,000/- per month and 60% of total electricity
consumed in the entire flat No. 10, started using the premises.
5 On 3 September, 2002, a letter given to and
ssm 7 arbp564.09
acknowledged by the Respondent and the Petitioner was
allowed the keys of the main door and opening and closing it as
per their requirement, bringing their own computers, printers,
furniture, fixtures and other items; permitted to install own 4
telephone lines, fax machine, 2 World Phone Instruments, a CC
T.V., 8 computers, 4 printers, electrical fittings, furniture,
fixtures, decorative materials, portable fans; unrestricted use
beyond 9 am-6 pm limit; even working on Sundays and
Holidays, when required.
6 In February, 2005, Respondent started negotiating with
Petitioner for renewing the Agreement. In March 2005, one
Kalpana Parikh, came to the premises and informed the
Petitioner that her mother-in-law was the owner of the flat
No.10, and on her death her son Ojus Parikh became the owner
(being her son). She enquired about the Petitioner's and the
Respondent's status vis-a-vis the premises.
7 The concept of "Business Service Centre" is not specifically
defined. Nothing placed on record to support the concept. The
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agreement in question dated 22 August 2002 was a "Business
Centre Agreement" for 33 months, subject to termination after
11 months, by giving a prior notice. There were disclaimer
clauses that agreement was not tenancy or leave and licence
agreement. The use and occupation timings were from 9 a.m. to
6 p.m.. The defence was that the agreement was sham and
bogus and it was created to protect tenancy, covered by the Rent
Control Legislation. This issue according to me goes to the root
of the matter. Therefore, I am inclined to consider together,
issue Nos. 1,5,6 and 12.
8 Both the parties have read and refer the relevant
provisions of Maharashtra Rent Control Act, 1999 (for short,
Rent Control Act) and The Presidency Small Cause Courts Act,
1882 (for short, Small Cause Courts Act) and cited various
judgments in support of their contentions/submissions. The
submissions were also made referring to the Sections of the
Indian Easements Act-1882 (for short, the Indian Easements
Act). Chapter VI of the Easements Act deals with the concept
"licences". It is settled that such licence can be expressed or
ssm 9 arbp564.09
implied and so also the revocation of the same. The Court
therefore, needs to consider the purpose and intention behind
this agreement "Business Service Centre". The purpose was to
create lease or licence or temporary permission to enjoy the
accessory rights, need to be considered on the basis of clauses of
the agreements and the facts and circumstances of the case and
the relevant material placed by the parties in support of their
respective contentions.
9 As the Court under Section 11 of the Arbitration Act, by
consent, appointed the learned Arbitrator to adjudicate the
dispute arising out of the contract, parties appeared accordingly.
The preliminary objection raised about the jurisdiction of the
Arbitrator, on the ground that it is not arbitrable dispute, in
view of the specific provisions of the Rent Control Legislation.
The Arbitrator rejected the objection and pass the award.
10 The learned Arbitrator, directed in the present case to
hand over the possession of the immovable property by giving
finding that there exists no relationship of landlord-tenant
ssm 10 arbp564.09
and/or licensor-licensee. The Petitioner, has been treated as
trespasser and the award has been passed accordingly including
for the payment of occupation charges.
11 The Apex Court has observed from time to time that "the
intention of the parties to an instrument must be gathered from
the terms of the agreement examined in the light of surrounding
circumstances." The aspect of exclusive possession is relevant.
(Sohan Lal Naraindas Vs. Laxmidas Raghunath Gadit) 1.
Section 52 of the Easements Act deals with the word "Licence".
The terms if not cleared, the intention need to be gathered from
the surrounding circumstances. (Natraj Studios (P) Ltd. Vs.
Navrang Studios and Anr. 2 ). (Khalil Ahmed Bashir Ahmed Vs.
Tufelhussein Samasbhal Sarangpurwala 3 )
12 The Full Bench of this Court in Central Warehousing
Corporation Vs. Fortpoint Automotive Pvt. Ltd. 4 has dealt with
Section 41 of the Small Causes Court Act, and the provisions of
1 (1971) 3 S.C.R. 319
2 AIR 1981 SC 537
3 1988 Mah. R.C.J. 384
4 2010(1) Bom. C.R. 560
ssm 11 arbp564.09
the Arbitration Act, referring to the exclusive jurisdiction of the
Small Causes Court to try and decide the disputes specified in
the Section. That was a case of agreement between the licensor
and the licensee, containing the clauses of Arbitration. The
relevant conclusion is as under:-
"40. ........
The question whether the exclusive jurisdiction of
the Small Causes Court vested in terms of section
41 of the Act of 1882 is ousted, if an agreement
between the licensor and licensee contains a clause
for arbitration, the same will have to be answered
in the negative. For, section 5 of the Act of 1996 in
that sense is not an absolute non obstante clause.
Section 5 of the Act of 1996 cannot affect the laws
for the time being in force by virtue of which
certain disputes may not be submitted to
arbitration, as stipulated in section 2(3) of the Act
of 1996. We hold that section 41 of the Act of 1882
falls within the ambit of section 2(3) of the Act of
1996. As a result of which, even if the Licence
Agreement contains Arbitration Agreement, the
exclusive jurisdiction of the courts of Small Causes
under section 41 of the Act of 1882 is not affected
in any manner. Whereas, Arbitration Agreement in
such cases would be invalid and inoperative on the
principle that it would be against public policy to
allow the parties to contract out of the exclusive
jurisdiction of the Small Causes Courts by virtue of
section 41 of the Act of 1882."
13 The Full Bench of this Court in Prabhudas Damodar
Kotecha and Anr. Vs. Smt. Manharbala Jeram Damodar &
ssm 12 arbp564.09
Ors. 5 has occasion to deal with the concept of "licensee" and
"gratuitous licencee" as used in Sub-Section (4-A) of Section 5
of the Bombay Rents, Hotel and Lodging House Rates (Control)
Act, 1947 (for short, the Rent Act). The reference was also
made to Section 52 of the Easements Act. The relevant
conclusion is as under:-
"62. Thus, looking at the controversy raised in
these petitions from all points of view, we answer
the questions formulated by us as follows : The
expression "licensee" used in section 41(1) of PSCC
Act does not derive its meaning from the expression
"licensee" as used in sub-section (4A) of section 5
of the Rent Act. The expression licensee used in
section 41(1) is a term of wider import so as to
mean and include a "gratuitous licensee" also. In
view of this, we hold that a suit by a licensor
against a gratuitous licensee is tenable before the
Presidency Small Causes Court under section 41 of
PSCC Act."
14 The Division Bench of this Court in Carona Limited Vs.
Sumangal Holdings 6 referring to Section 41 of the Small
Causes Court Act and Section 9 of the Arbitration Act, held that
the jurisdiction of Civil Court barred by necessary implication as
exclusive jurisdiction vests with the small Causes Court. The
reference to Arbitration of the question which falls for decision
5 2007(4) All MR 651
6 2007(4) All MR 4
ssm 13 arbp564.09
before the Small Causes Court, therefore not accepted.
15 The learned Arbitrator and the learned counsel appearing
for the Respondent has strongly relied on Vastu Invest &
Holdings Pvt. Ltd. Vs. Gujarat Lease Financing Ltd. 7 referring
to Section 34 (2)(b) (ii) of the Arbitration Act and the nature of
the Agreement for rendering Business Service Centre and
contended that no licencee or tenancy or any protected right
whatsoever in the premises was created or intended to be
created and therefore, upheld the order of Arbitrator to refund
of deposit with interest. The Division Bench accordingly
maintained the award. The facts and circumstances were totally
different than the present one, except that was also a case of
agreement for Business Service Centre. There was no order of
handing over of the possession and/or of the eviction passed by
the Arbitrator, as done in the present case.
16 I have also in Genesis Colors Private Limited Vs. Anil
Ramlabhaya Suri & Anr. 8 though dealing with Section 9 of the
,
7 2001 Vol. 103(2) Bom. L.R. 156
8 2010(1) Mh.L.J. 231
ssm 14 arbp564.09
Arbitration Act read with Section 41 of the Small Cause Courts
Act, observed that even the Court has no jurisdiction to grant
any relief when the dispute arising out of the agreements falls
within the ambit of special statutes. If the Court has no
jurisdiction, there is no question of permitting the Arbitral
Tribunal to deal with such issue in view of specific bar created
under those rent control and related statutes.
17 The shop owners put in possession on license various
shops and offices by a public local body, by retaining right of
exclusive possession, while dealing with the same, the Apex
Court, in New Bus-Stand Shop Owners Association Vs.
Corporation of Kozhikode & Anr 9 . has observed as under:-
"25. Reference in this connection can also be made to a
later judgment of the Court of Appeal in
Marchant Vs. Charters 10
where again Lord
Denning reiterated these principles in a slightly
different form by holding that the true test is the
nature and quality of the occupation and not
always whether the person has exclusive
possession or not. The true test in the language of
the learned Judge is as follows: (WLR p. 1185 F-
H)
"......It does not depend on whether he or she
9 (2009) 10 SCC 455
10 (1977) 1 WLR 1181 : (1977) 3 All ER 918 (CA)
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has exclusive possession or not. It does not
depend on whether the room is furnished or
not. It does not depend on whether the
occupation is permanent or temporary. It
does not depend on the label which the
parties put upon it. All these are factors
which may influence the decision but none
of them is conclusive. All the circumstances
have to be worked out. Eventually the
answer depends on the nature and quality of
the occupancy. Was it intended that the
occupier should have a stake in the room or
did he have only permission for himself
personally to occupy the room, whether
under a contract or not? In which case he is
a licensee."
27. In a rather recent judgment of this Court in C.M.
the learned
Judge relied on the ratio in Associated Hotels of
India Ltd.
in deciding the difference between
lease and licence. In para 8 of the said judgment,
learned Judges held that the difference between
lease and licence is to be determined by finding
the real intention of the parties from a total
reading of the document, if any, between the
parties and also considering the surrounding
circumstances. The learned Judges made it clear
that use of term "lease" or licence", "lessor" or
"licensor", "rent" or "licence fee" by themselves are
not decisive. The conduct and intention of the
parties before and after the creation of
relationship is relevant to find out the intention.
The learned Judges quoted from the treaties of
Evans and Smith on The Laws of Landlord and
Tenant and of Hill & Redman on Law of Landlord
and Tenant in support of their proposition.
11 (2004) 3 SCC 595
12 AIR 1959 SC 1262 : (1960) 1 SCR 368
ssm 16 arbp564.09
28. Following the aforesaid tests and in view of the
discussions made hereinabove, it is clear that the
intention of the parties in the case is to create a
licence and not a lease and the right of exclusive
possession was retained by the Corporation. In
that view of the matter, relationship which is
created between the Corporation and the shop
holders is that of a licensor and licensee and not
that of a lessor or a lessee. The stamp duty on
licence agreement should be governed by Entry
5(c) of the Kerala Stamp Act, which is a residuary
clause in the Schedule and not by Entry 33."
Therefore, it is necessary to consider the agreement
between the parties and its nature. Admittedly, even as per the
Respondent-original Claimant, the nature of contract and the
intention referred therein as averred in the reply, are as under:-
"g. .......
It was further agreed that the Petitioner would enjoy the
facilities during working days and during working hours
only. It was provided in the said Agreement that the
Respondent shall close and open entrance to the said
Premises at the time and days mentioned in the said
Agreement. The possession of the Premises, including the
area from which the Petitioner was allowed to conduct its
ssm 17 arbp564.09
business, continued to be with the Respondent at all times.
h. Since the access was only for the purpose of use of
the facilities, it was agreed and understood that access to
the premises and the facilities would always be in the
exclusive control of the Respondent. Accordingly, the
main entrance to the premises was kept under lock and
key of the Respondent. After some time, the Petitioner
however represented that they sometimes required access
to the facilities when the premises were locked and the
Respondent's representatives were not available. Without
giving the Petitioner any right to the premises or any part
thereof, the Respondent gave a duplicate set of main door
keys to the Respondent only by way of indulgence and
convenience."
19 There is no serious dispute with regard to the fact that the
Petitioner, was in possession of main door keys since long.
Though, based upon the agreement between the parties
including the alleged indulgence and convenience, yet the fact
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of possession of the premises and the duplicate keys, itself
means access to the premises at any point of time. Therefore,
merely the time was fixed/ mentioned in the agreement that
itself, in my view, is not sufficient to accept the case of the
Respondent that the use was only temporary for the business
purpose as agreed.
The Respondent, admittedly, is not the landlord/owner of
the premises. The Respondent, admittedly, a tenant of one Mr.
Parikh. There is material on record to show that the landlord
has filed the suit for relief against the Respondent also on the
ground of creation of sub-tenancy, without permission. The
eviction proceedings are pending. The Petitioner is also party in
the proceedings. The Petitioner has been in possession since
2002 even after 31 May 2005. The Respondent treated the
Petitioner as trespasser after expiry of the contractual period,
therefore, invoke the Arbitration clause. The evidence was led
by the parties. The nomenclature of service charges, itself is the
payment towards the use and occupation charges to the extent
of Rs.63,000/- per month which increased up to Rs.90,000/- per
ssm 19 arbp564.09
month.
21 The submission revolving around the provisions of the
Easements Act, that it was only facilities, which were provided
by the Respondent to the Petitioner to use and utilize the
premises, in view of the above judgments read with the
provisions of the Transfer of Property Act and the Easements
Act, is unacceptable. Admittedly, it is not the case that it was
only tenancy access to the particular cabin/room/premises. The
concept 'office premises' as falls within the provisions of
Sections 7, 9, 40 and 42 of the Rent Control Act, just cannot be
overlooked while adjudicating the case/contention so raised by
the parties.
22 I am also inclined to observe that the letter dated 20
August 2002 and the basic terms and conditions dated 22
August 2002 as read together with the circumstances and the
evidence led by the parties, the intention was to create licensor
or licensee relationship. Both the parties acted upon the
agreement throughout till the date of its expiry. The Petitioner
ssm 20 arbp564.09
original Respondent was in uninterrupted possession of the
premises, since the date of the agreement itself. I am not
inclined to observe that such agreement of Business Service
Center, permitted the Petitioner for mere use of business
facilities, as contended.
23 As recorded above, the learned Arbitrator has not only
awarded and decided the use and occupation charges, as the
nomenclature was the service charges, but also passed the order
of eviction by treating the Petitioner as trespasser. Therefore,
once considering the nature of contract between the parties and
the provisions of law read with the Judgments, I am inclined to
observe that the agreement in question falls at least within the
ambit of licensor and licensee relationship. It is definitely not a
lease agreement. Merely because fixed timing was mentioned
in the agreement to facilitate the Petitioner to occupy the
premises on hourly basis and/or temporary basis, itself is not
sufficient to accept the case of the Respondent, specifically
when the basic agreement was itself for 33 months and more
than 11 months. The concept of "license" as provided under the
ssm 21 arbp564.09
Transfer of Properties Act and as explained by the Courts, in my
view, covers the case in hand. Therefore, in view of specific
provisions of rent and related statute as available for evicting
such occupants/licensee and for the claim towards the
occupation and/or service charges, as awarded, also falls within
the prohibited provisions of law. It cannot be permitted to be
within the power of the Arbitrator, as done in the present case.
The Arbitrator has no power and authority to entertain such
claim and pass such order of eviction. It is without jurisdiction
and contrary to the provisions of Rent Control Legislation, as
well as, the Small Causes Court Act.
24 Having once observed above, I am inclined to accept the
contention led by the Petitioner's counsel that such dispute is
not Arbitral, the remedy is elsewhere. Therefore, if the
Arbitrator has no authority and/or power in view of the specific
provisions available, any order so passed by the Arbitrator, in
my view, goes to the root of the matter and it is without
jurisdiction. The award so passed in all other connected and
related aspects, is also bad in law and unsustainable. Therefore,
ssm 22 arbp564.09
once it is held that the Arbitrator has no jurisdiction, I am
inclined to observe that all other related issues need no further
discussion. It collapsed and get decided automatically, with the
above findings and observations, against the Respondent.
25 Therefore, taking overall view of the matter, in view of
above findings, I am inclined to quash and set aside the award.
The Arbitrator has no jurisdiction and/or authority to pass and
to entertain such claim, as it is barred by specific provisions as
referred above. The consequential orders/reliefs so passed,
therefore, also unsustainable. This itself is not mean that the
Respondent is not entitled to take appropriate steps in
accordance with law. We are concerned with the eviction order
and related orders passed by the Arbitrator. In the present facts
and circumstances, therefore, keeping all points open as the
remedy is elsewhere, I am inclined to set aside the award. The
amount paid and received shall be subject to adjustment. The
parties are at liberty to settle the matter.
26 The impugned award dated 24 April 2009, passed by the
ssm 23 arbp564.09
sole Arbitrator, is quashed and set aside. There shall be no
order as to costs.
27 The learned counsel appearing for the Respondent seeks
stay of the judgment and order passed today. Considering the
facts and circumstances, and as I have set aside the award, I am
inclined to grant stay of the judgment for 6 weeks.
(ANOOP V. MOHTA, J.)
