Bombay High Court
Bxin Office Parks India Private ... vs Kailasa Urja Private Limited on 20 August, 2022
Bench: G. S. Kulkarni
Digitally
signed by
VIDYA VIDYA
SURESH AMIN
SURESH Date:
AMIN 2022.08.20
17:43:06
+0530
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Prajakta Vartak
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION (L.) NO. 22526 OF 2022
BXIN Office Parks India Pvt. Ltd. ...Petitioner
Vs.
Kailasa Urja Pvt. Ltd. ...Respondent
AND
ARBITRATION PETITION NO. 351 OF 2022
One International Center Pvt. Ltd. ...Petitioner
Vs.
Symphony Kitchen Pvt. Ltd. ...Respondent
AND
ARBITRATION PETITION (L.) NO. 1692 OF 2022
Indiabulls Properties Pvt. Ltd. ...Petitioner
Vs.
Symphony Kitchen Pvt. Ltd. & Anr. ...Respondents
-----
Mr. Sharan Jagtiani, Senior Advocate with Mr. Karl Tamboly, Ms. Krushi
Barfiwala i/b. Parinam Law Associates for Petitioners.
Mr. Surel Shah i/b. Mr. Saurabh Butala with Mr. Omkar Chitale and Ms.
Manvi Sharma for Respondents.
-----
CORAM : G.S. KULKARNI, J.
Reserved on : JULY 28, 2022.
Pronounced on : AUGUST 20, 2022.
JUDGEMENT:-
1. These are three petitions filed under Section 9 of the Arbitration
and Conciliation Act, 1996 (for short, "the Act") whereby the petitioners
are praying for interim measures pending the arbitral proceedings.
2. Arbitration Petition (L.) No. 22526 of 2022 (BXIN Office Parks
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India Pvt. Ltd.) has been argued as the lead petition. The subject matter
of the proceedings is quite common, namely, a dispute as raised by the
petitioner in the capacity of licensors against the respondent in all these
proceedings being the licensees under the respective leave and licence
agreements as entered between the parties.
3. For convenience, the facts in the lead petition are required to be
noted:
The petitioner is a company incorporated under the Companies
Act, 1956 and is stated to have absolute right, title and authority in land
admeasuring 39085.43 square meters bearing City Survey No. 841 lying,
being and situated at Jupiter Mills, Lower Parel, Mumbai - 400 013
including the building constructed thereon called "One World Center"
(formerly known as One Indiabulls Centre). The building consists of
Tower-1 (Ground + 18 floors), Tower-2A and 2B (Ground + 20 floors)
and Wing B1 & B2 (Ground + 8 floors) (for short, referred to as "the
building"). The building was originally under the ownership of
Indiabulls Properties Private Limited (for short, "IPPL").
4. The respondent is also a company incorporated under the
Companies Act, 1956. It is stated that the respondent requested the
IPPL to allow it to use a cumulative area of 16,256.70 sq. ft. in Tower 1
of the One World Centre for the purposes of operating a food court.
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5. On 06 January, 2017, a Leave and Licence Agreement was entered
between the parties granting the respondent a license to use the
premises admeasuring 16,256.70 sq. feet in Tower - 1 of the building
which comprises of the seating, preparation and wash area situated on
the 1st floor. The term of the licence was for sixty months which has
expired on 31 July, 2021.
6. In accordance with Clause 4 of the Leave and Licence Agreement,
a monthly fee of Rs.10,000/- was payable within a period of 10 days of
the beginning of the successive month.
7. Clauses 2, 6, 9.6, 16 and 22 of the Leave and Licence Agreement
are required to be noted which read thus:-
"Clause 2 of the Agreement - Grant of License
LICENCE TERM:- The Licensor hereby grants on a Leave and
license to the Licensee and the Licensee hereby takes on leave and
license from the Licensor, to use and occupy the Licensed Premises
for the purpose of setting up a Food Court for a period of 60 (sixty)
months (the License Period commencing from License
Commencement Date of 1st August 2016 and expiring on the
completion of 60 (Sixty) from the License Commencement Date i.e.
31 July 2021 unless terminated earlier in accordance with the terms
of this Agreement. There shall be 60 (Sixty) months Lock in period
for the Parties during which period neither Party shall be entitled to
terminate the Leave and License Agreement save and except as set
out herein.
Clause 6 of the Agreement - Possession and Occupation of Premises
6.1 The Licensee hereby acknowledges that on the
commencement and during the continuation of the use and
occupation of the Licensed Premises, the Licensor shall not assign its
rights in relation to operation of the Food Courts. However, Licensee
shall be free to sub-let, sub-license, grant the right to use the
Licensed Premises to third parties for any activities it may consider fit
in its sole discretion.
6.2 Except to the extent set out above, it is hereby agreed
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between the Parties hereto that at all times the juridical possession of
the Licensed Premises shall be of the Licensor.
Clause 9 of the Agreement - Covenants of the parties
9.6 Upon the expiry of this License Period or on earlier
determination/ termination of this Agreement, the Licensee shall on
its own remove all articles and things belonging to the Licensee, Sub-
Licensee (being the Third Parties) or their employees and hand over
and/or deliver the vacant, quiet and peaceful charge of the Licensed
Premises and other movables without any claim or hindrance and the
Licensor shall refund the Interest Free Security Deposit subject to
such deduction/adjustment of outstanding dues, if any, payable by
the Licensee under this Agreement against possession of the Licensed
Premises. In the event the Licensee fails to hand over and/or deliver
the vacant, quiet and peaceful charge of the License Premises on the
expiry or sooner determination of the Agreement although the
Licensor is ready and willing to refund the Interest Free Security
Deposit to the Licensee, the Licensee shall be liable and shall pay to
the Licensor liquidated damages, double the amount of the License
fee per day, for each day of delay in vacating the Licensed Premises.
Clause 14 of the Agreement - Termination
Either party may be entitled to terminate the agreement by serving a
notice of one (1) month to the other party anytime after the 54 th
month of the Lock-in Period.
Clause 16 of the Agreement - Entirety
16.1 This Agreement (including the schedules and the annexures
attached to this Agreement) constitutes the entire agreement
between the parties with respect to the subject matter of this
Agreement.
16.2 It is hereby clarified and agreed that this Agreement
supersedes all previous arrangements/ agreements/ understandings
and representations, written and oral between the Parties hereto with
respect of the transaction contemplated in this Agreement and that
this Agreement shall alone govern the rights and obligations of the
parties herein.
16.3 This Agreement shall not be amended, altered or modified in
any manner except by an instrument in writing and signed by both
the Parties.
Clause 22 of the Agreement - Dispute Resolution
The Parties will attempt in good faith to resolve any dispute,
differences or claim arising out of or relating to this Agreement
promptly through negotiations between them. In the event of the
Parties failing to resolve the dispute amicably then the Parties shall
refer such dispute or claim arising out of or in connection with this
Agreement to arbitration by a mutually agreeable sole arbitrator. The
Arbitration proceedings will be conducted according to the provisions
of the Arbitration & Conciliation Act, 1996 or amendment or re-
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enactment thereof and the decision of the said Arbitrator shall be
final and binding on both the Parties. The venue of the arbitration
proceedings will be Mumbai."
8. The share holding of IPPL, which was managed by Indiabulls was
transferred to a new management held by Blackstone Group.
9. By its letters dated 14 June, 2021 and 17 June, 2021, the
petitioner informed the respondent that the leave and licence agreement
would expire by efflux of time on 31 July, 2021. The respondent was
informed to handover vacant and peaceful possession of the licensed
premises and remove any furniture and fittings that may have been
installed in the licensed premises on the expiry of the licence. It was
also informed that on the respondent handing over possession, the
petitioner would refund to the respondent the interest free security
deposit of Rs.10 Lakhs, as per the terms and conditions as set out in
Clause 4.4 of the agreement. It is stated that the respondent, however,
refused to accept the service of the petitioner's letter dated 14 June,
2021, which was thereafter forwarded by petitioner's e-mail dated 17
June, 2021.
10. On 26 July, 2021, IPPL addressed another letter to the respondent
being a reminder to hand over and vacate the licensed premises by 31
July, 2021. On 31 July, 2021 the leave and licence agreement expired
by efflux of time. The petitioner has contended that despite receipt of
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its letters and knowing fully well that the term of the licence had
expired, the respondent continued to occupy the licensed premises. This
compelled the petitioner to paste notices on the access points of the
licenced premises intimating the respondent and its employees that the
leave and licence agreement having expired, the respondent cannot
utilize the licensed premises.
11. It is the petitioner's case that despite continued efforts of the
petitioner, the respondent has refused to vacate and handover the
licence premises to the petitioner. It is contended that on 27 August,
2021, the Health Department of the Municipal Corporation served on
the respondent an inspection report whereby the respondent was called
upon to close the licensed premises on account of not having the
requisite licenses.
12. As similarly the respondent was acting in breach of the leave and
licence agreements qua the other premises (being the subject matter of
Arbitration Petition No.351 of 2022), the petitioner was required to
approach this Court by filing a petition under Section 9 of the Act
(Arbitration Petition Lodging No.20565 of 2021) praying for interim
measures. On 20 December, 2021, this Court (B.P. Colabawalla, J.)
passed an order granting reliefs in terms of prayer clauses (c) and (d)
namely restraining the respondent from making any application to the
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statutory authorities for renewal of the licenses for operating the
licensed premises as also restraining the Municipal Corporation from
granting any of the applicable licenses to the respondent. Prayer clauses
(a) and (b) of the petition were not pressed. The petition was
accordingly disposed of.
13. It is thus contended by the petitioner that the respondent has
continued to occupy the licensed premises despite the licence having
expired, as also the respondents are not conducting and cannot conduct
any business which is causing a serious prejudice to the petitioner as
also there are other issues inter alia in regard to the pest control of the
premises etc. It is contended that the respondent is causing a serious
obstruction to the other licensees of the petitioner, as the respondent has
encroached over an area which was allowed to other licensees of the
petitioner in respect of which police complaints are also made by the
petitioner.
14. The petitioner being aggrieved by such conduct of the respondent,
lastly addressed an e-mail dated 05 May, 2022 to the respondent
pointing out the harassment being caused to the petitioner and called
upon the respondent to remove the barricades as put up by the
respondent within a period of 48 hours and cease from its illegal
occupation. It is the petitioner's case that employees of the respondent
have now started squatting on the licensed premises. It is on such
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backdrop, the petitioner has approached this Court praying for the
following reliefs:-
(Reliefs as prayed for in Arbitration Petition (L) No. 22526 of 2022)
"a) That pending the hearing and disposal of arbitral proceedings,
making of the arbitral award and until execution of the arbitral
award, this Hon'ble Court be pleased to restrain and injunct
Respondent from utilising the Licensed Premises as a Food Court or
for any other purposes including but not limited to permitting the
Respondent's staff from staying at the Licensed Premises;
b) that pending the hearing and disposal of arbitration
proceedings, making of arbitral award and until execution of the
arbitral award, this Hon'ble Court be pleased to direct the Respondent
to deposit a sum of Rs. 68,60,000/- (Rupees Sixty Eight Lakhs and
Sixty Thousand Only);
c) that pending the hearing and disposal of arbitration
proceedings, making of arbitral award and until execution of the
arbitral award, this Hon'ble Court may be pleased ot direct the
Respondent to forthwith disclose on oath the audited balance sheets
of the Respondent for the last three years, its assets and properties
(moveable and immoveable) including shares, stock in trade, furnish
list of all the bank accounts with copies of the statement of accounts
of the same for the last 3 (three) accounting years, demat statements
of the Respondent for the last three years, savings, financial
investments, including but not limited to bonds, government
securities, along with the details of the
charges/mortgages/encumbrances (if any) subsisting as on the date
of the disclosure;
d) that pending the hearing and disposal of arbitration
proceedings, making of arbitral award and until execution of the
arbitral award, this Hon'ble Court be pleased to order and attach
assets and properties, both movable and immovable as disclosed in
terms of prayers clause (d) above together with all the machinery,
equipment, stores, plant, furniture, fixtures, articles, things,
appurtenances, and other paraphernalia situated therein until the
satisfaction of the Petitioner's claim of in the sum of Rs. 68,60,000/-
(Rupees Sixty Eight Lakhs and Sixty Thousand only);
e) that pending the hearing and disposal of arbitration
proceedings, making of arbitral award and until execution of the
arbitral award, an order of attachment be passed in respect of all the
bank accounts in the name of the Respondent and other assets and
properties of the Respondent to secure the dues of the Petitioner and/
or in the alternative, be pleased to pass an order of injunction
restraining the Respondent from in any manner transacting;
transferring and withdrawing any amounts thereof and to "debit
freeze" the banks accounts as may be disclosed by the Respondent;
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f) that pending the hearing and disposal of arbitration
proceedings, making of arbitral award and until execution of the
arbitral award, the Respondent, by itself, jointly and/or severally, or
through their employees; servants, agents, trustees or any person
acting through it or on its behalf, or otherwise however, be ordered
and directed to provide security in favour of the Petitioner a sum of
Rs. 68,60,000/- (Rupees Sixty Eight Lakhs and Sixty Thousand only);
g) that pending the hearing and disposal of arbitration
proceedings, making of arbitral award and until execution of the
arbitral award, the Respondent, their servants and agents be
restrained by an order of injunction by this Hon'ble Court from
dealing with, disposing off, transferring, alienating, encumbering or
in any manner creating third party rights in respect of the assets and
properties (moveable and immoveable) disclosed in terms of prayers
clause (d) above, including shares, stock in trade, bank accounts,
bank statements, savings, financial investments, including but not
limited to bonds, government securities;
h) that without prejudice to the aforesaid, pending the hearing
and disposal of arbitration proceedings, making of arbitral award and
until execution of the arbitral award, this Hon'ble Court be pleased to
grant such reliefs in order to enable the Petitioner to effectively carry
out the capex work to renovate and refurbish the Licensed Premises;
i) that without prejudice to the aforesaid, pending the hearing
and disposal of arbitration proceedings, making of arbitral award and
until execution of the arbitral award, this Hon'ble Court be pleased to
appoint the Court Receiver, High Court, Bombay, or some other fit and
proper person for the Licensed Premises with all powers under Order
XL Rule 1 of the Code of Civil Procedure 1908, with the power to
appoint such agency to run a food court from the Licensed Premises
in terms of the requirements and demands prevalent in the area and
of the Building and/or recover and/or realise such amounts from the
agency which will be paid as license fee for usage of the License
Premises and such amounts be deposited with the Office of the
Prothonotary and Senior Master of this Hon'ble Court;
j) that without prejudice to the aforesaid, pending the hearing
and disposal of arbitration proceedings, making of arbitral award and
until execution of the arbitral award, this Hon'ble Court be pleased to
grant such other reliefs to in order to enable the Petitioner to provide
the essential service of providing food to the other licensees and
occupants of the Building.
k) ad-interim reliefs in terms of prayer clauses (a) to (h) above."
(emphasis supplied)
15. Although the first petition was argued as a lead petition, the
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reliefs as prayed for in the companion petitions are also similar and,
therefore, the prayers in those petitions need not be extracted.
16. Mr. Jagtiani has drawn the Court's attention to the various clauses
of the leave and licence agreement. He has also referred to the
correspondence between the parties. Mr. Jagtiani has made extensive
submissions to contend that as the leave and licence agreements having
expired by efflux of time on 31 July, 2021 which is almost a year back,
the respondent cannot continue to occupy the licensed premises. It is
his submission that the reliefs as prayed for are thus required to be
granted and more particularly the relief that the Court Receiver, High
Court be appointed as a receiver of the licensed premises, so that the
another agency can be appointed to run the Food Court in the licensed
premises. It is his submission that this would be beneficial to the
occupants of the building who are in requirement of such facilities. Mr.
Jagtiani referring to the decisions in Brainvisa Technologies Pvt. Ltd. vs.
Subhash Gaikwad (HUF)1 and Bafna Motors Private Limited vs.
Amanulla Khan2 would submit that even if a dispute between the parties
arises under the leave and licence agreement, this Court has granted
reliefs by exercising jurisdiction under section 9 of the Arbitration and
Conciliation Act. The other submissions are on merits which need not be
adverted in detail in view of the stand taken by the respondent.
1 Arbitration Application No. 195 of 2010, dated 14.09.2012
2 Arbitration Application No. 340 of 2019
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17. Mr. Surel Shah and Mr. Kanade, learned counsel for the
respondent have raised a preliminary objection to the maintainability of
the petition on the ground that the disputes are not arbitrable as
necessarily by statutory implication arbitration would be barred in view
of the provisions of Section 41 of the Presidency Small Cause Courts Act,
1882 (for short, "PSCC Act"). Mr. Shah's contention is that primary
intention of the petitioner is to dispossess the respondent from the
licensed premises and in seeking such reliefs or any incidental thereto
would disturb the respondent's possession of the premises.
18. Mr. Shah has submitted that Section 41 of the PSCC Act would bar
arbitration as the Small Causes Court is conferred exclusive jurisdiction
to entertain and try all suits and proceedings between a licensor and
licensee relating to the recovery of possession of any immovable
property situated in Greater Bombay, relating to the recovery of the
licensed fees or charges or rent thereof, irrespective of value of the
subject matter of such suit or the proceedings. It is his submission that
in the facts of the present case, the only remedy available to the
petitioner is to file a civil suit seeking all reliefs relating to the
possession of the property. It is his submission that the principal prayers
as made by the petitioners, are prayers which are necessarily in relation
to the recovery of possession of licensed premises and hence, by virtue
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of Section 41 of the PSCC Act, arbitration is clearly barred. In support
of his contention, Mr. Shah has placed reliance on the decision of the
Division Bench of this Court in Carona Ltd. Vs. Sumangal Holdings3, the
decision of the Full Bench of this Court in Central Warehousing
Corporation, Mumbai vs. Fortpoint Automotive Pvt. Ltd., Mumbai 4,
decision of the Supreme Court in Prabhudas Damodar Kotecha & Ors. vs.
Manhabala Jeram Damodar & Anr.5 and a decision of the three Judges
Bench of the Supreme Court in Vidya Drolia & Ors. vs. Durga Trading
Corporation6.
19. It is his submission that the petitioner had in fact approached the
respondent to set up and operate Food Court in the premises in question
admeasuring 16,256.70 sq. ft. located at Tower 1 at One World Center
comprising of the seating preparation and wash area on the first floor of
the said Tower, described as the 'licensed premises'. The premises were
in bare shell condition whereby even the basic infrastructure for running
a food court was required to be developed by the respondent by
incurring substantial capital expenditure. It was thus proposed that the
respondent shall develop the premises for setting up and operating a
food court at the respondent's own cost and on such investment, the
premises would be let out to the respondent at minimal license fee. It is
3 2007(4) MhLJ 551
4 2010(1) Mh. L.J. 658
5 2013(6) All MR 399(S.C.)
6 (2021) 2 SCC 1
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submitted that accordingly, it was agreed between the parties that it is
the respondent who would undertake the development of the food
court. It is submitted that at the relevant time the occupancy of the
main building was also low and the respondent operated the food court
at a substantial loss for the initial period. The respondent has invested
an amount of Rs.16.64 Crores and there was hardly any return of such
capital investment for variety of reasons. It is submitted that it was
understood between the parties that the agreement shall be executed for
at least a period of 10 years, however, due to petitioner's internal
policies, the petitioner had informed the respondent that initially the
agreement would be for 5 years from 01 August, 2016 to 31 July, 2021
and which would be subsequently renewed for another 5 years. Mr.
Shah would also submit that it is also the respondent's case that it was
agreed between the parties that the respondent would be entitled to
enter into business conducting agreements with third parties and sub-
let/sub-license the premises for operating the food court. He submits
that it was also specifically agreed that no privity of contract shall exist
between the petitioner and the third parties wherein the respondent
shall solely deal with such third parties. The respondent accordingly
had approached the brokers to sublet some of the stalls which were in
possession of the respondent under the leave and licence agreement and
accordingly, the respondent had executed business conducting
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agreements with Mountains Trail Foods Private Limited, Poncho
Hospitality Private Limited, Fresh Juices and Hospitality Pvt. Ltd. and
Juno's Hospitality LLP. It is submitted that in contravention of this
arrangement, the petitioner in April 2018, had tried to forcefully enter
into business conducting agreements directly with the third parties
whereby according to the respondent, the petitioner defrauded the
respondent by illegally appropriating the operating fees under the said
business conducting agreements which otherwise was to come to the
benefit of the respondent by virtue of clause 9.10 of the leave and
licence agreement. It is also the respondent's case that one Aditya Birla
Group in collusion with the petitioner had encroached on the
respondents area of about 2000 sq. ft. as licenced in favour of the
respondent which was revealed to the respondent by the Aditya Birla
Group by providing a copy of the agreement. Such encroachment and
the collusive approach of the petitioner with Aditya Birla Group resulted
in the respondent filing a criminal complaint against Aditya Birla Group
and the petitioner with N.M. Joshi Marg Police Station.
20. It is submitted that the respondent was associated with the
petitioner even prior to the leave and licence agreement. It is for such
reasons and as set out in the reply affidavit which are almost similar in
both the proceedings, the respondent has contended that the petitioner
is not entitled to any relief much less for a drastic relief of appointment
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of a receiver.
21. It is the respondent's case that in view of the specific provision of
Section 41 of the PSCC Act, the petitioner does not have a right to seek
remedy of possession or any remedy relating thereto either before the
arbitral tribunal in any arbitral proceedings or before this Court in
proceedings under Section 9 of the Act. It is the respondent's contention
that as the main relief of recovery of possession itself is not maintainable
before the arbitral tribunal, hence there is no question of Section 9
proceedings being maintainable, praying for any ancillary relief or any
other interim reliefs. It is submitted that this Court would not have
jurisdiction to grant any interim relief relating to possession including
appointment of Court Receiver and thereby displacing the petitioner
from the subject premises. Referring the decision of the Supreme Court
in Booz Allen & Hamilton Inc. vs. SBI Home Finance Ltd. 7 and the
decision of the Full Bench of this Court in Central Warehousing
Corporation, Mumbai vs. Fortpoint Automotive Pvt. Ltd. (supra), it is
submitted that the present dispute falls under the category of a non-
arbitrable dispute and the exclusive jurisdiction to entertain such dispute
would lie with the Small Causes Court under Section 41 of the PSCC
Act. It is on such pleas, the reliefs as prayed for in the petition are
opposed by the respondent.
7 2011(5) SCC 532
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22. Mr. Shah although has advanced the above submissions on the
maintainability, he would not dispute that in the event the disputes
between the parties under the leave and licence agreements in question,
if were to be purely monetary claims of the petitioner and nothing to do
with possession and any other incidental reliefs thereto, in such case, as
per the well-settled principles of law, arbitral proceedings in regard to
pure monetary claims would have been maintainable, being a cause
falling outside Section 41 of the PSCC Act. Mr. Shah has also fairly
stated that his clients without prejudice to their rights and contentions
are willing to deposit in this Court the amounts towards liquidated
damages as agreed between the parties under the leave and licence
agreement.
Analysis and Conclusion
23. I have heard learned counsel for the parties. I have also perused
the record with their assistance. At the outset, the preliminary objection
as raised on behalf of the respondent as to whether in view of the
provisions of Section 41 of the PSCC Act in the present facts, this Court
would lack jurisdiction to entertain proceedings under section 9 of the
Act, would be required to be decided.
24. To consider such objection, it would be necessary to first advert to
Section 41 of the PSCC Act, which is found in Chapter VII of the PSCC
Act. Section 41 reads thus:-
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"41. Suits or Proceedings between licensors and licensees or
landlords, land tenants for recovery of possession of immovable property
and licence fees or rent, except to those to which other Acts apply to lie
in Small Cause Court.
(1) Notwithstanding anything contained elsewhere in this Act but
subject to the provisions of sub-sections of (2), the Court of Small Causes
shall have jurisdiction to entertain and try all suits and proceedings
between a licensor and licensee, or a landlord and tenant, relating to the
recovery of possession of any immovable property situated in Greater
Bombay, or relating to the recovery of the licence fees or charges or rent
therefore, irrespective of the value of the subject matter of such suits or
proceedings.
(2) Nothing contained in sub-section (1) shall apply to suits or
proceedings for the recovery of possession of any immovable property, or
of licence fee or charges or rent thereof, to which the provisions of the
Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, the
Bombay Government premises (Eviction) Act, 1955, the Bombay
Municipal Corporation Act 8[the Maharashtra housing and Area
Development Act, 1976 or any other law for the time being in force,
apply]."
25. It may be stated that the PSCC Act was enacted to amend the law
relating to the Small Causes Courts established in the Presidency Towns
of Calcutta, Madras and Bombay. Chapter II of the Act provides for
'Constitution and Officers of the Court', under which section 5 is the
provision which provides for establishment of the Small Causes Court.
Section 6 provides that the Small Cause Court shall be deemed to be a
Court subject to the superintendence of the High Court. Chapter IV of
the Act provides for 'Jurisdiction in respect of Suits'. Chapter V provides
for 'Procedure in Suits'. Chapter VI providing for 'New Trials and
Appeals', is not relevant in the present context. Chapter VII provides for
'Recovery of Possession of Certain Immovable Property and Certain
Licence Fees and Rent' under which the provision of Section 41
pertaining to 'Suits or proceedings between licensors and licensees or
8 These words and figures were substituted for the word and signed "the Bombay Housing Board Act, 1948 or any other law
for the time being in force, apply"were submitted
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landlords, land tenants for recovery of possession of immovable property
and licence fees or rent, except those to which other Acts apply to lie in
Small Cause Court is incorporated.
26. On a plain reading of Section 41 of the PSCC Act, it is clear that it
is the Small Causes Court, which has been conferred jurisdiction to
entertain and try all suits and proceedings between a licensor and
licensee, or a landlord and tenant, "relating to" the recovery of
possession of any immovable property situated in Greater Bombay, or
relating to the recovery of the licence fee or charges or rent therefor,
irrespective of the value of the subject matter of such suits or
proceedings. Sub-section (2) of Section 41 of the PSCC Act provides
that nothing contained in sub-section (1) shall apply to suits or
proceedings for the recovery of possession of any immovable property,
or of licence fee or charges or rent thereof, to which the provisions of
the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947,
the Bombay Government premises (Eviction) Act, 1955, the Bombay
Municipal Corporation Act [the Maharashtra housing and Area
Development Act, 1976 or any other law for the time being in force,
apply.].
27. Thus, the question which would arise for consideration in the
present proceedings is whether Section 41 of the PSCC Act would create
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a implied bar for this Court to grant any reliefs under section 9 of the
Arbitration and Conciliation Act.
28. To answer such preliminary issue which is in regard to the
maintainability of the present proceedings, it would be necessary to
consider as to what is the legal position in such context as seen from the
different pronouncements.
29. In Natraj Studios (P) Ltd. Vs. Navrang Studios and Another 9,
which is a decision of three Judges Bench of the Supreme Court, the
dispute between the parties had arisen under an agreement dated 28
March, 1970 by which Navrang Studios granted to Natraj Studios, on
leave and licence, two studios situated at Andheri, Bombay along with
machineries, equipments etc. Although the agreement was initially for a
period of 11 months, it was extended from time to time. By a further
agreement dated 5 November, 1972, the original agreement was
extended for 11 months from 01 January, 1973. The leave and license
agreement was thus in force on 01 February, 1973, with effect from
which date Section 15-A was inserted in the Bombay Rents, Hotel and
Lodging House Rates Control Act, 1947, by an amendment
(Maharashtra Act 17 of 1973), which provided that any person who was
in occupation of any premises on 01 February, 1973 as a licensee, had
deemed to have become a tenant of the landlord on that day for the
9 (1981) 1 Supreme Court Cases 523
20 904-arbpl [email protected]
purposes of the Act. Much later i.e. on 28 April, 1979 Navrang Studios
terminated the leave and licence agreement and called upon Natraj
Studios to vacate and hand over possession of the studios to Navrang
Studios. This caused Natraj Studios to file a declaratory suit in the
Small Causes Court at Bombay which was instituted on 08 May, 1979
praying for a declaration that it was a monthly tenant of the two
Studios. Natraj Studios also filed an application under Section 33 of the
Arbitration Act, 1940 before the Bombay High Court for a declaration
that the arbitration clause was invalid, inoperative, etc. Such
application was dismissed by the learned Single Judge of the Bombay
High Court on the ground that the High Court had no jurisdiction to
determine the alleged rights if any of Natraj Studios as a tenant.
Consequently, Navrang Studios filed an application under Section 8 of
the 1940 Act praying that a sole arbitrator be appointed to decide the
disputes and differences between the parties under the leave and licence
agreement. Such application was allowed by the High Court and the sole
arbitrator came to be appointed. It is against such orders passed by the
High Court, the proceedings came to be filed before the Supreme Court,
being the subject matter of the said decision. Natraj Studios contended
that the essence of the dispute between the parties was the right to the
possession of the two studios being sought by Navrang and hence the
dispute between the parties could only be resolved by the Small Causes
21 904-arbpl [email protected]
Court and that every other court having jurisdiction including that of an
arbitrator was excluded. It is in such context, examining the provisions
of Bombay Rents, Hotel and Lodging House Rates Control Act as also the
provisions of the PSCC Act and adverting to the prior decisions as
rendered by the Court in such context, the Supreme Court observed that
as a matter of public policy, any arbitration agreement between the
parties, whose rights would be regulated by such acts cannot be
recognised by a Court of law. It was held that exclusive jurisdiction is
given to the Court of Small Causes and jurisdiction is denied to other
Courts to entertain and try any suit or proceeding between a licensor
and a licensee relating to recovery of licence fees and charge or to deal
with any claim or question arising out of the Act or any of its provisions.
The observations of the Supreme Court as contained in paragraphs 2,
16, 17, 18 and 24 which are relevant in the context of the present
proceedings are required to be noted which read thus:-
"2. Shri Soli Sorabji and Shri Talat Ansari learned counsel for the
appellant submitted that the essence of the dispute between the
parties was the right to the possession of the two Studios, that after
the 1973 Amendment to the Bombay Rents, Hotel and Lodging
House Rates Control Act, 1947, the status of the appellant was at
least that of a 'deemed tenant', that under the scheme of the Bombay
Rent, Hotel & Lodging House Rates Control Act, 1947, the dispute
between the parties could only be resolved by the Court of Small
Causes and that every other Court's jurisdiction including that of an
arbitrator was excluded. Shri Mridual, learned counsel for the first
respondent, argued that the subject matter of the 'leave and licence'
agreement was not 'premises' within the meaning of that expression
as defined in the Bombay Act but the business as such and,
therefore, the provisions of the Bombay Rents, Hotel and Lodging
House Rates Control Act were not attracted at all.
..........
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16. We may now proceed to consider the submission that the
Court of Small Causes alone has exclusive jurisdiction to resolve the
dispute between the parties. Section 28(1) of the Bombay Rent Act,
positively confers jurisdiction on the Court of Small Causes to
entertain and try any suit or proceeding between a landlord and
tenant relating to the recovery of rent or possession of any premises
or between a licensor and a licensee relating to the recovery of
licence fee or charge and to decide any application made under the
Act and to deal with any claim or question arising out of the Act or
any of its provisions, and negatively it excludes the jurisdiction of
any other Court from entertaining any such suit, proceeding or
application or dealing with such claim or question.
17. The Bombay Rent Act is a welfare legislation aimed at the
definite social objective of protection of tenants against harassment
by landlords in various ways. It is a matter of public policy. The
scheme of the Act shows that the conferment of exclusive
jurisdiction on certain Courts is pursuant to the social objective at
which the legislation aims. Public policy requires that contracts to
the contrary which nullify the rights conferred on tenants by the Act
cannot be permitted. Therefore, public policy requires that parties
cannot also be permitted to contract out of the legislative mandate
which requires certain kind of disputes to be settled by special courts
constituted by the Act. It follows that arbitration agreements
between parties whose rights are regulated by the Bombay Rent Act
cannot be recognised by a Court of law.
18. Thus exclusive jurisdiction is given to the Court of Small
Causes and jurisdiction is denied to other Courts (1) to entertain and
try any suit or proceeding between a landlord and a tenant relating
to recovery of rent or possession of any premises, (2) to try any suit
or proceeding between a licensor and a licensee relating to the
recovery of licence fee or charge, (3) to decide any application made
under the Act and, (4) to deal with any claim or question arising out
of the Act or any of its provisions. Exclusive jurisdiction to entertain
and try certain suits, to decide certain applications or to deal with
certain claims or questions does not necessarily mean exclusive
jurisdiction to decide jurisdictional facts also. Jurisdictional facts
have necessarily to be decided by the Court where the jurisdictional
question falls to be decided, and the question may fall for decision
before the Court of exclusive jurisdiction or before the Court or
ordinary jurisdiction. A person claiming to be a landlord may sue his
alleged tenant for possession of a building on grounds specified in
the Rent Act. Such a suit will have to be brought in the Court of
Small Causes, which has been made the Court of exclusive
jurisdiction. In such a suit, the defendant may deny the tenancy but
the denial by the defendant will not oust the jurisdiction of Court of
Small Causes. If ultimately the Court finds that the defendant is not
a tenant the suit will fail for that reason. If the suit is instituted in
the ordinary Civil Court instead of the Court of Small Causes the
plaint will have to be returned irrespective of the plea of the
defendant. Conversely a person claiming to be the owner of a
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building and alleging the defendant to be a trespasser will have to
institute the suit, on the plaint allegations, in the ordinary Civil
Court only. In such a suit the defendant may raise the plea that he is
a tenant and not a trespasser. The defendant's plea will not
straightaway oust the jurisdiction of the ordinary Civil Court but if
ultimately the plea of the defendant is accepted the suit must fail on
that ground. So the question whether there is relationship of
landlord and tenant between the parties or such other jurisdictional
questions may have to be determined by the Court where it falls for
determination-be it the Court of Small Causes or the ordinary Civil
Court. If the jurisdictional question is decided in favour of the Court
of exclusive jurisdiction the suit or proceeding before the ordinary
Civil Court must cease to the extent its jurisdiction is ousted.
..........
24. In the light of the foregoing discussion and the authority of
the precedents, we hold that both by reason of Section 28 of the
Bombay Rents, Hotel and Lodging House Rates Control Act, 1947
and by reason of the broader considerations of public policy
mentioned by us earlier and also in Deccan Merchants Cooperative
Bank Ltd. v. M/s. Dalichand Jugraj Jain & Ors. (supra), the Court of
Small Causes has and the Arbitrator has not the jurisdiction to
decide the question whether the respondent-licensee-landlord is
entitled to seek possession of the two studios and other premises
together with machinery and equipment from the appellant-licensee-
tenant. That this is the real dispute between the parties is
abundantly clear from the petition filed by the respondents in the
High Court of Bombay, under S. 8 of the Arbitration Act seeking a
reference to Arbitration. The petition refers to the notices exchanged
by the parties, the respondent calling upon the appellant to hand
over possession of the studios to him and the appellant claiming to
be a tenant or protected licensee in respect of the studios. The
relationship between the parties being that of licensor-landlord and
licensee-tenant and the dispute between them relating to the
possession of the licensed- demised premises, there is no help from
the conclusion that the Court of Small Causes alone has the
jurisdiction and the Arbitrator has none to adjudicate upon the
dispute between the parties."
30. In Carona Ltd. Vs. Sumangal Holdings (supra), the question
before the Division Bench of this Court was as to whether the Court
would have jurisdiction under Section 9 of the Act to pass orders in the
nature of interim measures in a dispute between licensor and licensee,
in the context as to what Section 41 of the PSCC Act would provide. In
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such case, the proceedings before the Division Bench had arisen from
the order passed by the learned Single Judge dismissing the section 9
petition filed by the appellant-Carona Ltd. on the ground that the
dispute between the parties had arisen under a leave and licence
agreement in respect of which the PSCC Act would provide for exclusive
jurisdiction over the subject matter under Section 41 of the PSCC Act.
The prayer before the learned Single Judge was for a direction to hand
over possession of the premises or in the alternative, direction for
appointment of a Receiver in respect of the premises, as also a prayer for
direction to the respondent to deposit an amount as security towards the
claim of the appellant in arbitration which are also some of the reliefs in
the present proceedings. The Division Bench referring to the decision of
the Supreme Court in Natraj Studios (P) Ltd. Vs. Navrang Studios and
Another (supra), as also referring to the decision of the learned Single
Judge of this Court in Siemens Ltd. vs. Captech Online Pvt. Ltd. 10 held
that the legislature having created a special forum for adjudication of
disputes of a particular nature by necessary implication, the jurisdiction
of the other Civil Courts as also of the arbitrator under any arbitration
agreement between the parties stood excluded. The relevant
observations of the Division Bench need to be noted which read thus:-
"10. On the contrary, the Court would have due regard to the fact
that the Legislature had a stated object - conceived in the public
interest -in conferring exclusive jurisdiction to deal with matters
between licensors and licensees or between landlords and tenants on
10 Arbitration Petition No. 99 of 2004
25 904-arbpl [email protected]
the Small Causes Court. Rent Control Legislation constitutes a
statutory regulation of the relationship between landlords and
tenants and between Licensors and licensees in the public interest
and as a matter of protecting public welfare. The question whether
the Small Causes Court has exclusive jurisdiction must be
understood in the backdrop of the object which the legislature
intended to subscribe. A comprehensive remedy has been provided.
Sub-section (1) of Section 42 provides an appeal from a decree or
order made by the Court of Small Causes exercising jurisdiction
under Section 41 to a Bench of two Judges of the Court. In Natraj
Studio Pvt. Ltd. v. Navrang Studio, (supra), the Supreme Court had
occasion to consider the question as to whether an arbitration
agreement could operate in respect of a dispute as to the possession
of premises where the Court of Small Causes had jurisdiction under
Section 28(1) of the Bombay Rents, Hotel and Lodging House Rates
Control Act, 1947. Sub-section (1) of Section 28 of the Rent Act
provided that notwithstanding anything contained in any law, in
Greater Bombay, the Court of Small Causes, Bombay, and in any area
for which a Court of Small Causes is established under the Provincial
Small Cause Courts Act, 1887, such Court and elsewhere the Court
of Civil Judge, Senior Division, shall have jurisdiction to entertain
and try suits or proceedings between landlords and tenants relating
to the recovery of rent or possession or between licensors and
licensees relating to the recovery of licence fee or charges. The
Supreme Court held that both on the basis of the non-obstante
provision as well as the object of the legislation the exclusive
jurisdiction would vest in the Courts stipulated by the Legislature
and an arbitration agreement cannot be recognised in the field:
"The Bombay Rent Act is a welfare legislation aimed at the definite
social objective of protection of tenants against harassment by
landlords in various ways. It is a matter of public policy. The scheme
of the Act shows that the conferment of exclusive jurisdiction on
certain Courts is pursuant to the social objective at which the
legislation aims. Public Page 1108 policy requires that contracts to
the contrary which nullify the rights conferred on tenants by the Act
cannot be permitted. Therefore, public policy requires that parties
cannot also be permitted to contract out of the legislative mandate
which requires certain kind of disputes to be settled by special
Courts constituted by the Act. It follows that arbitration agreements
between parties whose rights are regulated by the Bombay Rent Act
cannot be recognised by a Court of law."
11. These observations would apply in construing the provisions
of Section 41 of the Presidency Small Cause Courts Act, 1882. The
object of the legislation deals with a matter of public interest and the
ground which weighed with the Supreme Court in Natraj Studio in
excluding the applicability of an arbitration agreement in the field
would apply here as well. In his judgment in Siemens (supra) Mr.
Justice D.K. Deshmukh held that the mere deletion of the non-
obstante clause in Section 41 would not make any difference. The
Learned Single Judge held that the Legislature having created a
special forum for adjudication of disputes of a particular nature by
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necessary implication, the jurisdiction of the other Civil Courts
would also stand excluded. The Learned Judge observed thus:
"In my opinion, however, mere deletion of non obstante
clause from Section 41 will not make much difference. Because of
the non-obstante clause contained in Section 41, the jurisdiction of
the civil court to entertain the suit between the licensee and licensor
for recovery of possession and for recovery of licence fee was
expressly barred. But perusal of the provisions of Section 9 of the
Civil Procedure Code shows that the jurisdiction of the civil court to
entertain the suit can be expressed barred and it also can be barred
by necessary implication. It can now be taken as a settled law that
when the legislature creates special forum for adjudication of
disputes of a particular nature then by necessary implication,
jurisdiction of the Court of original civil jurisdiction to entertain
those disputes is barred by necessary implication. The legislature by
enacting Section 41 created a special forum for adjudication of
disputes between the licensor and licensee in relation to recovery of
licence fee and recovery of possession. Section 41 also created forum
for filing an appeal against the decision of Small Causes Court. Thus,
as the legislature has created a special forum for adjudication of
disputes between the licensee and licensor in relation to recovery of
possession and licence fee, the jurisdiction of the court of original
civil jurisdiction will be ousted by necessary implication and,
therefore, applying the law laid down by the Supreme Court in
Natraj Studios, the reference to arbitration of the question which
falls for decision before the Small Causes Court suit under Section
41, cannot be possible."
31. In ING Vysya Bank Ltd. vs. Modern India Ltd.11, the learned Single
Judge of this Court while considering the issue whether the petitioner-
licensee who had filed the petition under Section 9 of the Act claiming a
relief in the nature of specific performance of an agreement of renewal
in terms of agreement of licence executed between him and the
respondent licensor, as also, who had sought an order of injunction
restraining the licensor from terminating the agreement of licence and
from initiating proceedings for the recovery of possession of the licensed
premises, held that the recourse to arbitration under the terms of the
arbitration clause contained in the agreement of leave and licence would
11 2008(2) Mh. L.J. 653
27 904-arbpl [email protected]
be barred by virtue of the exclusive jurisdiction conferred upon the
Court of Small Causes by Section 41(1) of the PSCC Act and accordingly,
dismissed the petition.
32. In a decision of the Full Bench of this Court in Central
Warehousing Corporation, Mumbai vs. Fortpoint Automotive Pvt. Ltd.,
Mumbai (supra), the Court considered a question "Whether in view of
the provision of Section 5 of the Arbitration and Conciliation Act 1996,
if any Agreement between licensor and licensee which contains a clause
for arbitration, the jurisdiction of the Small Causes Court under the
Presidency Small Cause Courts Act, 1882 would be ousted?" The Full
Bench taking a review of the legal position and examining the purport of
Section 41 of the PSCC Act, answered the said question in the negative,
thereby holding that even if an arbitration agreement exists between the
parties and despite the non-obstante clause in Section 5 of the
Arbitration and Conciliation Act, the exclusive jurisdiction of the Small
Causes Court to try and decide the dispute specified in Section 41 of the
PSCC Act would not be ousted. The relevant observations in that regard
needs to be noted, which reads thus:
"40. In summation, we would hold that section 41(1) of the Act of 1882
is a special law which in turn has constituted special Courts for
adjudication of disputes specified therein between the licensor and
licensee or a landlord and tenant. The effect of section 41(2) of the Act
of 1882 is only the suits or proceedings for recovery of possession of
immovable property or of licence fee thereof, to which, the provisions of
specified Acts or any other law for the time being in force apply, have
been excepted from the application of non-obstante clause contained in
section 41(1) of the Act. The expression "or any other law for the time
28 904-arbpl [email protected]
being in force" appearing in section 41(2) will have to be construed to
mean that such law should provide for resolution of disputes between
licensor and licensee or a landlord and tenant in relation to immovable
property or licence fee thereof, to which immovable property, the
provisions of that Act are applicable. The Act of 1996 is not covered
within the ambit of section 41(2) in particular the expression "or any
other law for the time being in force" contained therein. 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 to oust the exclusive jurisdiction of the
Small Causes Courts by virtue of section 41 of the Act of 1882.
41. Accordingly, we answer the question referred to us in the
negative. We, therefore, hold that in spite of Arbitration Agreement
between the parties and non-obstante clause in section 5 of the Act of
1996, the exclusive jurisdiction of the Small Causes Court to try and
decide the dispute specified in section 41 of the Act of 1882 is not
ousted."
(emphasis supplied)
33. In Prabhudas Damodar Kotecha & Ors. vs. Manhabala Jeram
Damodar & Anr. (supra), the Supreme Court while examining the
provisions of Section 41 of the PSCC Act as also the provisions of the
Bombay Rent Act held that the provisions of Section 41 ought to be
given a liberal construction and the attempt should be to achieve the
purpose and object of the legislature and not to frustrate it. In the facts
of the case, the Court held that the expression "Licensee" used in section
41(1) of the PSCC Act would take within its ambit even a "gratuitous
licensee" which was held to be a term of wider import. The relevant
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observations of the Court are required to be noted which read thus:-
"49. The interpretation of the expressions licensor and licensee
which we find in Section 41(1), in our view, is in tune with the
objects and reasons reflected in the amendment of the PSCC Act by
the Maharashtra Act (XIX) of 1976 which we have already extracted
in the earlier part of the judgment. The objects and reasons as such
may not be admissible as an aid of construction to the statute but it
can be referred to for the limited purpose of ascertaining the
conditions prevailing at the time of introduction of the bill and the
extent and urgency of the evil which was sought to be remedied. The
legal position has been well settled by the judgment of this Court in
M.K. Ranganathan and Anr. v. Government of Madras and Ors. AIR
1955 SC 604. It is trite law that the statement of objects and reasons
is a key to unlock the mind of legislature in relation to substantive
provisions of statutes and it is also well settled that a statute is best
interpreted when we know why it was enacted. This Court in Bhaiji v.
Sub Divisional Officer, Thandla and Ors. (2003) 1 SCC 692 stated
that the weight of the judicial authority leans in favour of the view
that the statement of objects and reasons cannot be utilized for the
purpose of restricting and controlling statute and excluding from its
operation such transactions which it plainly covers. Applying the
above-mentioned principle, we cannot restrict the meaning and
expression licensee occurring in Section 41(1) of the PSCC Act to
mean the licensee with monetary consideration as defined under
Section 5(4A) of the Rent Act.
ONE UMBRELLA POLICY
50. We are of the considered view that the High Court has
correctly noticed that the clubbing of the expression "licensor and
licensee" with "landlord and tenant" in Section 41(1) of the PSCC Act
and clubbing of causes relating to recovery of licence fee is only with
a view to bring all suits between the "landlord and tenant" and the
"licensor and licensee" under one umberalla to avoid unnecessary
delay, expenses and hardship. The act of the legislature was to bring
all suits between "landlord and tenant" and "licensor and licensee"
whether under the Rent Act or under the PSCC Act under one roof.
We find it difficult to accept the proposition that the legislature after
having conferred exclusive jurisdiction in one Court in all the suits
between licensee and licensor should have carved out any exception
to keep gratuitous licensee alone outside its jurisdiction. The various
amendments made to Rent Act as well the Objects and Reasons of the
Maharashtra Act XIX of 1976 would clearly indicate that the
intention of the legislature was to avoid unnecessary delay, expense
and hardship to the suitor or else they have to move from the one
court to the other not only on the question of jurisdiction but also
getting reliefs.
51. We are of the view that in such a situation the court also should
give a liberal construction and attempt should be to achieve the
purpose and object of the legislature and not to frustrate it. In such
circumstances, we are of the considered opinion that the expression
30 904-arbpl [email protected]
licensee employed in Section 41 is used in general sense of term as
defined in Section 52 of the Indian Easement Act.
52. We have elaborately discussed the various legal principles and
indicated that the expression 'licensee' in Section 41(1) of the PSCC
Act would take a gratuitous licensee as well. The reason for such an
interpretation has been elaborately discussed in the earlier part of
the judgment. Looking from all angles in our view the expression
'licensee' used in the PSCC Act does not derive its meaning from the
expression 'licensee' as used in Sub-section (4A) of Section 5 of the
Rent Act and that the expression "licensee" used in Section 41(1) is a
term of wider import intended to bring in a gratuitous licensee as
well."
34. Another facet of Section 41 of the PSCC Act as interpreted by the
Division Bench of this Court in Nagin Mansukhlal Dogli vs. Haribhai
Manibhai Patel12 also needs to be noted. Mr. Justice D.P. Madon
speaking for the Bench observed that Section 41 would take within its
ambit even a claim for damages for trespass in a suit between the
licensor and licencee. It was held that the words "relating to" as used in
Section 41 are intentionally and designedly used in the provision not to
confine the section only to a suit for the recovery of possession of
immovable property but also to permit to be included within the ambit
of such a suit all other reliefs which the plaintiff can claim in a suit for
the recovery of possession of immovable property on the termination of
a licence or a tenancy. The observations in this regard are required to be
noted, which reads thus:
"21. Mr. Sanghavi also submitted that in the plaint the plaintiff has
claimed a sum of Rs. 35,625 by way of damages for trespass for the
period from June 1, 1970, till the date of the suit, that is, till April 1978,
at the rate of Rs. 375 per month and for a sum of Rs. 375 per month
from the date of the suit till possession of the said flat is handed over to
the plaintiff either by way of future mesne profits or damages or
compensation for wrongful use and occupation of the said fiat Mr.
12 1979 SCC Online Bom 29
31 904-arbpl [email protected]
Sanghavi argued that section 41 of the Presidency Small Cause Courts
Act did not in terms include a suit for damages for trespass or for
compensation for wrongful use and occupation or for mesne profits. In
his submission, the section only related to recovery of licence tea or
charges and that the license having been determined, all that the
plaintiff could recover from the defendant was either damages for
trespass or compensation for wrongful use and occupation of the
property or mesne profits. This argument of Mr. Sanghvi overlooks the
language used in the said section 41. The said section 41 speaks or "all
suits and proceedings between a licensor and licensee, or a landlord and
tenant, relating to the recovery of possession of any immovable property
situated in Greater Bombay". It is significant that the words used in the
said section 41 are "suits ... relating to the recovery of possession" and
not "suits, for possession". Rule 12, of Order XX of the Code of Civil
Procedure, 1908, provides as to how a Court is to proceed "Where a suit
is for the recovery of possession of immovable property and for rent or
mesne profits." The contrast between the language used in Order XX,
Rule 12 and the said section 41 immediately strikes one. The phrase
"relating to the possession of any immovable property" is wider than the
phrase "for the recovery of possession of any immovable property." The
words "relating to" are intentionally and designedly used in the said
section 41 not to confine the section only to a suit for the recovery of
possession of immovable property situate in Greater Bombay but also to
permit to be included within the ambit of such a suit all other reliefs
which the plaintiff can claim in a suit for the recovery of possession of
immovable property on the termination of a licence or a tenancy."
(emphasis in original)
35. In Mansukhlal Dhanraj Jain & Ors. vs. Eknath Vithal Ogale 13 the
Supreme Court considered the purport of the provisions of Section 41 of
the Act to hold that a suit under section 41 would take within its ambit
even a relief in relation to the recovery of the licence fees or charges or
rent thereof. Paragraph 12 reads thus:
"12. A mere look at the aforesaid provision makes it clear that because
of the non-obstante clause contained in the section, even if a suit may
otherwise lie before any other court, if such a suit falls within the sweep
of Section 41(1) it can be entertained only by the Court of Small Causes.
In the present proceedings we are not concerned with the provisions of
sub- section (2) of Section 41(1) and hence we do not refer to them. For
applicability of Section 41(1) of the Small Causes Courts Act, the
following conditions must be satisfied before taking view that jurisdiction
of regular competent civil court like City Civil Court is ousted:
(i) it must be a suit or proceeding between the licensee and
licensor; or
(ii) between a landlord and a tenant;
13 (1995) 2 SCC 665
32 904-arbpl [email protected]
(iii) such suit or proceeding must relate to the recovery of
possession of any property situated in Greater Bombay; or
(iv) relating to the recovery of the licence fee or charges or rent
thereof."
36. In Vidya Drolia & Ors. vs. Durga Trading Corporation (supra), the
Court considered the concept of non-arbitrability and laid down a
fourfold test for determining when claim(s) or subject matter of a
dispute is not arbitrable. Propounding a fourfold test, the three Judge
Bench of the Supreme Court held that the subject-matter of a dispute in
an arbitration agreement is not arbitrable when (i) the cause of action
and subject matter of the dispute relates to actions in rem, that do not
pertain to subordinate rights in personam that arise from rights in rem
(ii) cause of action and subject matter of the dispute affects third party
rights; have erga omnes effect; require centralized adjudication, and
mutual adjudication would not be appropriate and enforceable; (iii)
cause of action and subject matter of the dispute relates to inalienable
sovereign and public interest functions of the State and hence mutual
adjudication would be unenforceable; and (iv) the subject-matter of the
dispute is expressly or by necessary implication non-arbitrable as per
mandatory statute(s) as in the present case. The Court considered the
principle of implicit non- arbitrability, being a well established principle.
The Court also considered the decision of the Supreme Court in Natraj
Studios (P) Ltd. vs. Navrang Studios (supra) The relevant observations
in that regard are required to be noted which read thus:-
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"52. The order of reference notes that Dhulabhai refers to three
categories mentioned in Wolverhampton New Waterworks Co. v.
Hawkesford,27 to the following effect:
"There are three classes of cases in which a liability may be
established founded upon a statute. One is, where there was a
liability existing at common law, and that liability is affirmed by
a statute which gives a special and peculiar form of remedy
different from the remedy which existed at common law; there,
unless the statute contains words which expressly or by
necessary implication exclude the common law remedy, and the
party suing has his election to pursue either that or the statutory
remedy. The second class of cases is, where the statute gives the
right to sue merely, but provides no particular form of remedy:
there, the party can only proceed by action at common law. But
there is a third class, viz. where a liability not existing at
common law is created by a statute which at the same time gives
a special and particular remedy for enforcing it."
53. Dhulabhai's case is not directly applicable as it relates to
exclusion of jurisdiction of civil courts, albeit we respectfully agree with
the Order of Reference that the condition No. 2 is apposite while
examining the question of non-arbitrability. Implied legislative intention
to exclude arbitration can be seen if it appears that the statute creates a
special right or a liability and provides for determination of the right
and liability to be dealt with by the specified courts or the tribunals
specially constituted in that behalf and further lays down that all
questions about the said right and liability shall be determined by the
court or tribunals so empowered and vested with exclusive jurisdiction.
Therefore, mere creation of a specific forum as a substitute for civil
court or specifying the civil court, may not be enough to accept the
inference of implicit non- arbitrability. Conferment of jurisdiction on a
specific court or creation of a public forum though eminently
significant, may not be the decisive test to answer and decide whether
arbitrability is impliedly barred.
54. Implicit non-arbitrability is established when by mandatory law
the parties are quintessentially barred from contracting out and waiving
the adjudication by the designated court or the specified public forum.
There is no choice. The person who insists on the remedy must seek his
remedy before the forum stated in the statute and before no other
forum. In Transcore v. Union of India and Another, this Court had
examined the doctrine of election in the context whether an order
under proviso to Section 19(1) of the Recovery of Debts Due to Banks
and Financial Institutions Act,1993 (the 'DRT Act') is a condition
precedent to taking recourse to the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002 (the
'NPA Act'). For analysing the scope and remedies under the two Acts, it
was held that NPA Act is an additional remedy which is not inconsistent
with the DRT Act, and reference was made to the doctrine of election in
the following terms:
"64. In the light of the above discussion, we now examine the
doctrine of election. There are three elements of election, namely,
existence of two or more remedies; inconsistencies between such
remedies and a choice of one of them. If anyone of the three
elements is not there, the doctrine will not apply. According to
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American Jurisprudence, 2d, Vol. 25, p. 652, if in truth there is
only one remedy, then the doctrine of election does not apply. In
the present case, as stated above, the NPA Act is an additional
remedy to the DRT Act. Together they constitute one remedy and,
therefore, the doctrine of election does not apply. Even according
to Snell's Principles of Equity (31st Edn., p. 119), the doctrine of
election of remedies is applicable only when there are two or
more co-existent remedies available to the litigants at the time of
election which are repugnant and inconsistent. In any event,
there is no repugnancy nor inconsistency between the two
remedies, therefore, the doctrine of election has no application."
55. Doctrine of election to select arbitration as a dispute resolution
mechanism by mutual agreement is available only if the law accepts
existence of arbitration as an alternative remedy and freedom to choose
is available. There should not be any inconsistency or repugnancy
between the provisions of the mandatory law and arbitration as an
alternative. Conversely and in a given case when there is repugnancy
and inconsistency, the right of choice and election to arbitrate is denied.
This requires examining the "text of the statute, the legislative history,
and 'inherent conflict' between arbitration and the statute's underlying
purpose" with reference to the nature and type of special rights
conferred and power and authority given to the courts or public forum
to effectuate and enforce these rights and the orders passed. When
arbitration cannot enforce and apply such rights or the award cannot be
implemented and enforced in the manner as provided and mandated by
law, the right of election to choose arbitration in preference to the courts
or public forum is either completely denied or could be curtailed. In
essence, it is necessary to examine if the statute creates a special right or
liability and provides for the determination of each right or liability by
the specified court or the public forum so constituted, and whether the
remedies beyond the ordinary domain of the civil courts are prescribed.
When the answer is affirmative, arbitration in the absence of special
reason is contraindicated. The dispute is non- arbitrable.
58. Consistent with the above, observations in Transcore on the
power of the DRT conferred by the DRT Act and the principle
enunciated in the present judgment, we must overrule the judgment of
the Full Bench of the Delhi High Court in HDFC Bank Ltd. v. Satpal
Singh Bakshi, which holds that matters covered under the DRT Act are
arbitrable. It is necessary to overrule this decision and clarify the legal
position as the decision in HDFC Bank Ltd. has been referred to in M.D.
Frozen Foods Exports Private Limited, but not examined in light of the
legal principles relating to non-arbitrability. Decision in HDFC Bank Ltd.
holds that only actions in rem are non-arbitrable, which as elucidated
above is the correct legal position. However, non-arbitrability may arise
in case the implicit prohibition in the statute, conferring and creating
special rights to be adjudicated by the courts/public fora, which right
including enforcement of order/provisions cannot be enforced and
applied in case of arbitration. To hold that the claims of banks and
financial institutions covered under the DRT Act are arbitrable would
deprive and deny these institutions of the specific rights including the
modes of recovery specified in the DRT Act. Therefore, the claims
covered by the DRT Act are non-arbitrable as there is a prohibition
against waiver of jurisdiction of the DRT by necessary implication. The
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legislation has overwritten the contractual right to arbitration."
(emphasis supplied)
37. Mr. Jagtiani, learned senior counsel for the petitioners relying on
the decisions of the Division Bench of this Court in Deccan Chronicle
Holdings Limited Vs. L & T Finance Limited 14, T. Krishnaswamy Chetty
Vs. C. Thangavelu Chetty & Ors.15 and a decision of the learned Single
Judge of this Court in The Royal Bank of Scotland vs. Earnest Business
Services Private Limited16 would submit that this petition be held
maintainable. These are the decisions, wherein in my opinion, in the
facts of the respective cases, the Court has entertained proceeding filed
under section 9 of the Act. The decisions can be discussed.
38. Deccan Chronicle Holdings Limited Vs. L & T Finance Limited
(supra) was a case wherein the respondent-L & T Finance Limited being
a creditor was asserting its money claims in arbitration. The Court in
the facts of the case observed that the principle which has been laid
down by the Supreme Court in Booz Allen and Hamilton Inc. (supra)
was not breached because the claim in the arbitration was not an
assertion of a right in rem but a claim for recovery of monies due and
outstanding, simplicitor. It was also observed that a secured creditor can
invoke the provisions of Section 9 of the Act which is a provision
incidental to or ancillary to the arbitration proceedings for seeking an
14 2013 SCC OnLine Bom 1005
15 1954 SCC OnLine Mad 374
16 2017 SCC OnLine Bom 9363
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interim measure for protection that would ensure that the fruits of the
arbitral award are not destroyed or lost by dealings of the debtor with
the properties in the meantime. It was observed that this is exactly what
was done by the secured creditors and correctly accepted by the learned
Single Judge. Thus this decision would not assist the petitioners in the
context as to a dispute between a licensor and licensee on possession of
the licenced premises and the reliefs incidental thereto. Also there
cannot be any dispute on the proposition of law as to what has been
held by the Court in T. Krishnaswamy Chetty Vs. C. Thangavelu Chetty &
Ors. (supra) namely as to in which circumstances a receiver would be
required to be appointed which is to protect the property for the benefit
of the person or persons to whom the Court on materials thinks that it
properly belongs. In so far as the decision of the learned Single Judge in
The Royal Bank of Scotland vs. Earnest Business Services Private Limited
(supra) is concerned, the dispute between the parties was a case where
a claim of the petitioner was a money claim as arising under the
Agreement to Provide Business Centre Facilities under which the
petitioner had agreed to pay to the respondent a consolidated sum per
month. Such agreement was terminated by the petitioner and handed
over possession of such facilities to the respondent. However, under
such agreement, the petitioner made claims for refund of the security
deposit, interest as also damages. A petition under section 9 of the Act
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came to be filed by the petitioner before this Court in which this Court
passed an order appointing a sole arbitrator who was a Former Judge of
this Court. In the arbitral proceedings, the respondent had filed an
application under Section 16 of the Act contending that the arbitral
tribunal had no jurisdiction as the jurisdiction to decide the petitioner's
claim would vest with the Small Causes Court under the provisions of
Section 41(1) of the PSCC Act. The arbitral tribunal upheld the
objection and held that the disputes would not be arbitrable and the
exclusive jurisdiction to entertain/adjudicate such dispute would lie with
the Small Causes Court. The Court, in these circumstances, considering
the nature of the claims and the decisions as referred to in paragraph 13
held that considering the nature of the claim, it was clearly seen that it
was only a monetary claim, hence such claim would not fall within the
exclusive jurisdiction of the Small Causes Court. It was accordingly held
that the arbitrator was in an error to come to a conclusion that the
claims would fall within the jurisdiction of the Small Causes Court.
Hence, even this decision would not forward the case of the petitioners.
39. Thus, Mr. Jagtiani would not be correct in his contention referring
to these decisions that the present proceedings are of a nature which
would fall on the principles as to what was decided by the Court in such
decisions. No doubt in a given case even in regard to a dispute under
the leave and licence agreement when the claim is purely a monetary
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claim and not in relation to the possession of the licenced premises or
reliefs incidental thereto, the Court has consistently held that the
arbitral proceedings would be maintainable. Hence, such disputes being
arbitrable, it is available to the aggrieved party to invoke the jurisdiction
of this Court under Section 9 of the Act praying for interim measures
(see RMC Readymix (I) Pvt. Ltd. vs. Kanayo Khubchand Motwani 17, A.S.
Patel Trust and Others vs. Wall Street Finance Limited 18, Brainvisa
Technologies Pvt. Ltd. (supra) and Bafna Motors Private Limited (supra).
Applying the principles of law as laid down in these decisions, it would
be open to the petitioner to seek any reliefs in arbitral proceedings
which are purely in the realm of monetary claims as arising under the
leave and licence agreement in question.
40. In the light of the foregoing discussion, the real dispute between
the parties is in relation to the possession of the licensed premises being
claimed by the petitioner. The petitioner has referred to the repeated
notices issued to the respondent to hand over the licensed premises to
the petitioner. Admittedly, the relation between the parties is that of a
licensor and licensee. In these circumstances, there can be no other
conclusion that the Court of Small Causes alone has the exclusive
jurisdiction and not an arbitral tribunal to adjudicate the dispute
between the parties, being a special forum created by the legislature for
17 Summons for Judgment No. 602 of 2005, dated 21.03.2006
18 Com. Arbitration Petition No. 452 of 2019, dated 23.07.2019
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adjudication of disputes between the licensor and licensee inter alia in
relation to the recovery of possession as Section 41(1) of the PSCC Act
would provide. The reason being that the exclusive jurisdiction of the
Court of Small Causes under Section 41 of the PSCC Act would remain
sacrosanct and stand unaffected even if the parties agree to an
arbitration agreement in the leave and licence agreement. As held by
the Full Bench in Central Warehousing Corporation, Mumbai (supra) in
the arbitration agreement in such cases is held to be invalid and
inoperative on the principle that it would be against public policy to
allow the parties, by a contract to oust the exclusive jurisdiction of the
Small Causes Court by virtue of Section 41 of the PSCC Act.
41. Thus, in my opinion, the respondents are correct in their
contention that this Court would not have jurisdiction to entertain the
Section 9 petition considering the nature of the reliefs, which in fact
pertain to or are incidental to the possession of the licenced premises as
asserted by the petitioners, subject matter of the leave and licence
agreements. Hence, as held by the Court in the decisions as discussed
above, jurisdiction to entertain any such proceedings would lie with the
Small Causes Court under the provisions of Section 41 of the PSCC Act.
In view of such conclusion, it may not be possible for the Court to pass
any orders on the present petition permitting the respondent to deposit
in this Court liquidated damages which Mr. Shah had agreed to deposit
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even in the present proceedings. In view of the fact that the present
proceedings are held as not maintainable and having reached such
conclusion, it may not be permissible for the Court to bifurcate causes of
action, the principles of law in that regard being well settled. Needless
to observe that it would be open to the petitioner to seek prayers in that
regard in appropriate proceedings in the event the claims are pure
monetary disputes falling within the realm of arbitrability of such
disputes. All contentions of the parties in that regard are expressly kept
open.
42. Resultantly, these petitions filed under Section 9 of the Arbitration
and Conciliation Act,1996, cannot be entertained. The petitions are
accordingly dismissed. The petitioners are at liberty to take recourse to
other appropriate proceedings as may be available to the petitioners in
law including to assert pure monetary claims in arbitral proceedings as
discussed in paragraph 37 of this judgment. All contentions of the
parties in that regard are expressly kept open.
43. No costs.
[G.S. KULKARNI, J.]
