Essa Brothers vs Hotel Maurya Palace Seraton And ...
1986 Latest Caselaw 304 Del

JUDGMENT

Dalip K. Kapur, C.J.

(1) This is an appeal directed against the judgment of the learned single Judge, passed on an application under section 34 of the Arbitration Act, 1940. staying suit No. 424/83. That suit is between M/s. Easa Brothers as the plaintiff and M/s. Hotel Maurya Sheraton & Others two others as defendants.

(2) The suit was for recovery of possession of a shop situated in the Maurya Place Sheraton and for the recovery of Rs. 6 lakhs (rupees six lakhs only) as damages for illegal possession. The hotel has a number of shops in it and one of those shops was occupied by the Plaintiff for business purposes. The monthly rent was Rs. 15.000.00 (rupees fifteen thousand only). The document was described as a license Deed. A sum of Rs. 1,80.000.00 (rupees one lakh eighty thousand only) was given as deposit which continues to remain with the Hotel.

(3) The case of the Plaintiffs was that on 16.12.82 a letter was received from Shri Ravi Suri. Manager of the Hotel, accusing the Plaintiffs of breach of some of the terms of license Deed and following this the plaintiff was dispossessed on 2.1.83.

(4) The defendants applied for a stay of the suit on the ground that there was an Arbitration clause, viz clause 36 of the license Deed. The plaintiff complained that the relationship between the parties was that of landlord and Tenant and the license Deed was a camouflage. It was also claimed that the matter was one to be decided by the Rent Control Authorities and therefore, not a matter which could be referred to arbitration. It was also claimed that in any event, the subject matter of the suit was such that it was not capable of being referred to Arbitration. Another aspect was that it was an important matter applying to various hotels in the Union Territory of Delhi and, therefore, this matter could not be referred to Arbitration. In arguments before the learned single Judge the Counsel for the plaintiff referred to a judgment of the Supreme Court in Natraj Studios (P) Ltd. v. Navrong Studios and another, (AIR 1981 S.C. 537) to submit that the entire facts of the case were covered by that decision and, therefore, the application under section 34 of the Arbitration Act should be dismissed. The learned single Judge found that case was covered by the Bombay Rents, Hotels and Lodging House' Rates Control Act, 1947, and there was a considerable difference between the two Acts.

(5) We agree that there may be some difference between the provisions of the Bombay Rents, Hotels and Lodging House Rates Control Act. 1947, and the Rent Control Act applicable to Delhi because in Bombay some lease and license agreements are also subject to the jurisdiction of the Court.

(6) The fact of the matter is that the present suit instituted by the plaintiff was one based on dispossession of a lodged tenant, which would not normally be before the Rent Control Authorities under the Delhi Rent Control Act, It would normally be in a civil court.

(7) At the hearing of this Appeal we had the opportunity to examine the plaint filed by the plaintiff and also examined the provisions of the license Deed in order to determine whether this was a case in which stay of the suit should be ordered or not. The operative clause in the Agreement as far as the future arbitration is concerned is clause 36, which reads as follows : "In the event of any dispute cr difference except as provided in the clauses 24,25,26 where the decision of the General Manager is final, the matter shall be referred to the sole arbitration of the Director, I.T.C, Hotels Division, 28, Community Centre, Basant Lok, Vasant Vihar or any officer appointed by him in this behalf. The award given by the arbitrator shall be binding upon the parties. It is specifically agreed by the license that it will be no objection to any such appointment that the Arbitrator so appointed is an employee of the Licensor or he has already expressed view on, for or on any of the matters in dispute or difference. Arbitrator so appointed shall have power to extend the time from time to me for making an award. Save as above, the said Arbitrator shall act under the provision of the Arbitrator Act, 1940."

This clause provides that disputes or differences between the parties, except as provided in clause 24, 25 and 26, where the decision of the General Manager is final, would be referred to the the also Arbitration of a Director of M/s. I.T.C. In other words the Arbitrator is a Director of one of the parties to the dispute. Of course, that is not by itself a ground for holding that Arbitration should not take place, if it is otherwise within the scope of Arbitration. The question to be seen, however, is whether clauses 24, 25 and 26 do not exclude the operation of the Arbitration clause. For this purpose, it is now necessary to reproduce clauses 24, 25 and 26, which are as follows :

CLAUSE24: "In case the Licensee commits any breach or infringement of any of the terms or conditions of this license, by his act or omission, the Licensor will have the right to cancel or terminate the license after giving seven days notice. The opinion of the General Manager of Hotel Maurya Sheraton, Sardar Patel Marg, New Delhi and/or his nominee shall be final and binding on the point whether or not any breach has been committed."

CLAUSE25: "On termination of the license, the Licensee shall have no right under the license and shall further have no right to enter the premises of the Hotel as a Licensee. The Licensee shall remove his articles and goods from the Licensed premises within the notice period and shall deliver peaceable possession to the Licensor and in case the Licensee does not remove his articles and goods, the same shall be removed be the Licensor at the risk and cost of the Licensee and the Licensee shall have no claim whatsoever on this account against the Licensor. The Licensor shall, however have lien over the goods and articles and the Licensee shall not be allowed to remove the same unless all the dues of the Licensor have deen paid by the Licensee."

CLAUSE26: "Upon the expiry of the period of this license or earlier termination of the license for any clause whatsoever, the Licensee shall have no right to carry on business at the said shop. The Licensor shall have undisputed right to make use of the said shop at his discretion thereafter. It will be lawful for the Licensor without notice to enter upon the shop after the termination/expiry of the license."

(8) The first of these clauses, i e. clause 24 shows what happens when the Licensee commits a breach of she term of this license. It shows that the Licensor can cancel or terminate the license. This is exactly what has happened in this case. The plaintiff was doing business in the shop in the Maurya Sheraton Hotel and the accusation was carrying on a business which was not permitted by the terms and conditions of the license. The very question whether the license could or could not be terminated on this ground is involved in the dispute as a primary question. This, by the very language of the Clause 36, is excluded from the scope of the Arbitration Clause.

(9) Now, when we read Clause 25, we find that the Licensee should have no right to enter the premises as Licensee and he shall remove his articles and goods and deliver peaceful possession to the Licensor, And if he does not do so, the same can be removed. This is exactly what has happened in this case. The license has been revoked and the plaintiff has been estopped. There is a lien on the goods and articles as provided by this clause. How can this matter be referred to Arbitration ? It is excluded by the very terms of the Arbitration Clause.

(10) Now if we turn to clause 26, we see that after the termination, the Licensor has authority to make full use of the shop as he deems fit. Therefore the entire dispute between the parties is one covered by clauses 24, 25 and 26.

(11) Now turning to the other element of the case that has been urged on behalf of the appellant, it is well to keep in view the fact that according to the plaintiff this is a camouflage for a Rent Deed. He claims that there can be no termination of the contract because this is a Lease Deed and not a license Deed. He claims that he is saved from unlawful eviction by the Rent Control Act and be cannot be dispossessed in this manner.

(12) Learned counsel for the appellant contended that if you take a parallel case of an ordinary renting agreement concerning a house or shop, or a rent deed or rent note or lease deed or any other document, provided that there shall be an arbitration clause, could it be said that the Rent Control Act will not apply and the matter can be decided by the Arbitrator? Admittedly, it is a difficult question. We feel that when the very Act is challenged as being ultra vires of the Rent Control Act, it is not very correct to say that the suit should be stayed and the matter should be referred to arbitration, to be conducted by one of the parties, who are said to have defaulted. It is in this context that it seems in appropriate that a Director of I.T.C., which owns Maurya Sheraton Hotel should be the Arbitrator. We were considering whether the matter could not be referred to an independent Arbitrator, instead of the named Arbitrator. No measure of agreement could be obtained on this aspect of the case.

(13) The main question to be decided when a stay is involved under section 34 of the Act is to determine whether the suit before the Court is capable of being decided by the Arbitrator under the terms of the arbitration Agreement. Here there is an express exclusion of the Arbitration clause in its application to the termination of the license to the stopping of the trade of the Licensee and to the taking over of the shop Licensor. If this is so, then nothing can be decided by the Arbitrator in this case because plaintiffs' case is concerned solely with the termination of the license, the dispossession of the Licensee andthe question of the Hotel taking back the shop. It seems to us that these matter cannot be adjudicated upon by the Arbitrator in terms of the Arbitration Agreement between the parties.

(14) On the other point, it would appear that when an important question relating to a room in the Hotel is involved and the question is whether the lease agreement is a license agreement or the license agreement, is a lease agreement, an important question of law is involved. Also it has to be decided whether the Rent Control Act is applicable to such cases.

(15) It does not seem to us that this is a case which should be left to be decided by an Arbitrator. For these reasons, we allow this appeal and discharge the order of stay. The appellant would get costs Counsel fee Rs. 500.00 (rupees five hundred only).