M/S. Arjun Dairy Pvt. Ltd. vs M/S. God County Eden Homes Pvt. ...
2015 Latest Caselaw 3651 Del

*        IN THE HIGH COURT OF DELHI AT NEW DELHI

                                                 Pronounced on: 6th May, 2015
+        CS(OS) 875/2013

         M/S. ARJUN DAIRY PVT. LTD.          ..... Plaintiff
                       Through   Mr. D.S. Narula, Senior Advocate
                                 with Mr. Ravi Sikri, Senior Advocate
                                 with Ms. Manmeet Arora, Advocate,
                                 Ms. Princy Ponnan, Adv. and
                                 Mr. Pratyush Sharma, Adv.

                            versus

         M/S. GOD COUNTY EDEN HOMES PVT. LTD.
                                                                 .... Defendant
                            Through:     Mr. Sanjay S. Chhabra, Advocate


         CORAM:
         HON'BLE MR. JUSTICE G.P.MITTAL

                               JUDGMENT

G. P. MITTAL, J.

IA No.3091/2014 (u/S. 8 of the Arbitration & Conciliation Act, 1996)

1. This suit for possession, recovery of `8,12,220/- towards arrears of

license fee, service tax, recovery of `9,00,000/- towards arrears of

damages, mesne profits, pendente lite interest and future damages, etc.

has been filed by the Plaintiff against the Defendant with the averment

that the Defendant through its Director approached the Plaintiff

Company in May, 2011 for taking the suit premises, i.e. commercial

office space bearing unit no.502, 5th Floor, Elegance Tower, Jasola,

New Delhi-110025, admeasuring 2310 square feet on license basis.

After due negotiations, the License Deed dated 31.05.2011 was

executed between the parties, which was duly registered in the office

of the Sub-Registrar V, Delhi. The License Agreement was for a

period of three years commencing from 1st June, 2011 with a lock-in

period of 18 months on monthly license fee @ `171/- per square feet

of the total super area of 2310 sq. ft.

2. It is the case of the Plaintiff that the Defendant also deposited

refundable security amount equal to three months license fee, i.e.

`11,85,030/- which was to be refunded to the Defendant upon

vacation of the suit premises by it after making necessary deductions,

if any, on account of license fee dues or other dues.

3. As per Clause 7.1 of the License Agreement, it was agreed between

the parties that if the Licensee (the Defendant) failed to pay the license

fee to the Licensor (the Plaintiff) for three consecutive months, it will

be construed to be a case of non regular payment of license fee and the

Licensor (the Plaintiff) by its own sole discretion would be entitled to

terminate the License Agreement. According to the Plaintiff, the

Defendant stopped making payment of the agreed license fee w.e.f.

01.11.2012. However, on pressing hard and asking the Defendant to

vacate the suit premises, the Defendant issued a cheque bearing

no.290318 dated 02.01.2013, drawn on Corporation Bank, New

Friends Colony for a sum of `3,99,450/- towards part liability qua the

arrears of monthly license fee. The cheque, however, was dishonoured

whereupon a complaint under Section 138 of the Negotiable

Instruments Act, 1881 was filed by the Plaintiff against the Defendant.

The Plaintiff consequently revoked the license granted in favour of the

Defendant by a legal notice dated 14.03.2013 and hence, this suit.

4. Written statement to the suit was not filed by the Defendant. On the

other hand, the Defendant moved an application under Section 8 of the

Arbitration and Conciliation Act, 1996 (the Act) stating that under the

terms and conditions of the Agreement, the Licensor/Plaintiff was

under an obligation to perform the following:-

"(i) The Licensor has paid all the charges, dues and taxes, including payable in respect of the said premises and shall continue to pay such charges in a timely manner;

(ii) The Licensor shall carry out at its own cost all major external structural repairs to the said premises;

(iii) Maintenance Agreement and Payment of Maintenance Deposit and Charges/outgoings to the Maintenance Agency."

5. It is the case of the Defendant/Applicant that there were frequent

disturbances in the peaceful enjoyment of the premises by the

Applicant on account of defaults on the part of the Plaintiff. There

were issues raised by the Plaintiff with the maintenance agency time

and again because of which the maintenance agency regularly

disrupted the basic services to the license premises. The Defendant

also raised these issues with the Plaintiff orally as well as in writing.

However, the parties were unable to amicably resolve the said issues.

6. According to the Defendant/Applicant, all disputes arising between

the parties in respect of the License Agreement were referable to

arbitration. The suit is therefore, not maintainable and the disputes are

liable to be referred to arbitration. Clause 16 of the License

Agreement extracted in Para 4 of the application reads as under:-

                     "16. GOVERNING            LAW        AND        DISPUTE
                     RESOLUTION

16.1 Any dispute between the parties in respect of this Agreement shall be governed by the laws of India.

16.2 Any dispute arising between the parties in respect of this Agreement shall be referred to arbitration which shall be conducted as per the Arbitration and Conciliation Act, 1996. The language of the Arbitration shall be the English. The Place of Arbitration shall be at New Delhi. Expenses of the arbitral proceedings shall be borne and paid up by the Licensor and the Licensee equally.

16.3 Any dispute arising in respect of this Agreement shall be subject to the exclusive jurisdiction of Courts at New Delhi."

7. It is thus, prayed that the disputes which have arisen between the

parties regarding use and occupation of the premises are consequently

liable to be referred to arbitration and the suit is liable to be dismissed.

8. The Plaintiff/Respondent has contested the application by way of

filing a written reply. The Plaintiff/Respondent has taken up a plea

that the application under Section 8 of the Act has been filed belatedly

in February, 2014 in order to overcome to provisions of Order VIII

Rule 1 of the Code of Civil Procedure, 1908. It is stated that the

application fails to set out any arbitrable dispute which requires

reference to arbitration. The License Agreement dated 30.01.2011 has

not been disputed which was to expire by efflux of time on

31.05.2014. The said License Agreement has already also been

revoked by the Plaintiff by a legal notice dated 14.03.2013.

9. It is stated that under the License Agreement, it was the

Defendant/Applicant who was responsible for paying the maintenance

charges directly to the maintenance agency. The access to common

services, common area and other services provided by the

maintenance agency was subject to the Defendant duly paying the

Common Area Maintenance (CAM) charges to the maintenance

agency. The relationship between the Defendant and the maintenance

agency was direct. The Plaintiff hence, denied the allegations of

disturbance in enjoyment of the property at the instance of the

Plaintiff. Thus, it is stated that the application for reference of alleged

disputes to arbitration is liable to the dismissed and on the other hand,

the Defendant is under obligation to handover the possession of the

suit premises to the Plaintiff.

10. It is urged by the learned counsel for the Applicant (Defendant) that

the possession of the suit premises was admittedly delivered to the

Defendant on the basis of License Agreement dated 31.05.2011 which

contained a Clause for resolution of the disputes between the parties

through arbitration under the Act. Referring to State of Goa v. Praveen

Enterprises (2012) 12 SCC 581, the learned counsel urges that once

there is an arbitration agreement and a dispute has arisen with regard

to the same, the Court has no jurisdiction to entertain the suit and the

parties have to be relegated to arbitration.

11. On the other hand, the learned counsel for the Respondent (Plaintiff)

has contended that the averments made in Para 2 of the application

with regard to the terms and conditions of the agreement are not

correct. The Defendant has taken out a part of the relevant clause with

regard to the maintenance agreement which was directly between the

Applicant (Defendant) and the maintenance agency and the

Respondent (Plaintiff) had nothing to do with the same. It is also

contended that in Para 3 of the application, the Applicant has vaguely

stated about disturbances in the peaceful enjoyment of the license

premises on account of defaults of the Plaintiff.

12. With regard to the maintenance services, admittedly as per the Licence

Agreement, the Defendant was expected to have a separate agreement

with regard to the payment of the CAM, common services, etc. etc.

with the maintenance agency. Thus, it is urged that even if it is

assumed that there was any such dispute with the maintenance agency

and even if the same was raised by the Defendant with the Plaintiff as

well, it will mean that there was intervention of a third party who was

a stranger to the arbitration agreement and thus, the dispute cannot be

referred to an arbitrator.

13. It will be appropriate to extract the alleged dispute which the

Defendant wants to be referred to arbitration hereunder:-

"3. That there were frequent disturbances in peaceful enjoyment of the premises by the Applicant on account of the defaults of the Plaintiff. There were issues raised by the Plaintiff with the maintenance agency time and again because of which the maintenance agency regularly disrupted the basic services to the premises. The issues were raised by the Defendant with the Plaintiff on

repeated occasions orally as well as in writing. However, the parties were unable to amicably resolve the said issues."

14. At this stage, it will be appropriate to revert back to the Licence

Agreement dated 31.05.2011 which has been placed on record by the

Plaintiff and which has not been disputed by the Defendant. In fact,

the same is relied upon by the Defendant. Clause 10 of the Agreement

deals with the maintenance agency and the maintenance charges

payable by the licensee, i.e. the Defendant to the maintenance agency.

The same reads as under:-

10. Maintenance Agreement and Payment of Maintenance Deposit and Charges/Outgoings to the Maintenance Agency.

10.1 It is unconditionally agreed by the Licensee that the Licensee, during the License terms, in addition to license Fee reserved, shall regularly also pay Building's Common Area Maintenance (CAM) charges towards Air Conditioning, Stand-by Power Backup and General maintenance which shall be borne and paid by the Licensee directly to the Building's maintenance Agency. 10.2 This licensee to occupy the said Premises shall be finally granted subject to timely payment of all sums stipulated in the body of this Agreement and under the following clauses as stated hereinafter. The Licensee shall, in addition to the performance of its obligations hereinafter stipulated, pay to the Maintenance Agency a "Maintenance Deposit/Sinking fund at the rate as mentioned in the Maintenance Agreement and/or till such time the Licensee occupies" the said Premises. These rates shall be increased from time to time as would be applicable to other occupants of the Commercial Complex and payable by the Licensee without any

objection or reservation what so ever till the Licensee occupies the said Premises.

10.3 The Licensee shall, if required enter into a Separate Maintenance Agreement with the Maintenance Agency for the said Premises. The Maintenance charges, during the fit out period shall be applicable only for electricity charges and water based on the actual meter reading basis. The set printbooklet when shared by Licensor will be read and understood by the Licensee in this regard.

10.4 The Agreement to be executed and the Maintenance Agreement executed separately shall run concurrently and shall be co-terminus. The said charges, penalties, fine, interests on delayed payments of maintenance charges, as fully specified in all the sub- clauses of Clause 15 of the Agreement shall be payable as applicable to the Licensee.

10.5 Electricity, water and air-conditioning charges shall be borne by the Licensee during the License Term, as per the actual meter readings and as per authority rates/invoices for the Said Premises so drawn by the Maintenances agency in that."

15. It is thus, evident that as per Licence Agreement, CAM charges

towards air-conditioning, stand-by power back up and general

maintenance were to be borne and to be paid by the licensee, i.e. the

Defendant directly to the Building Maintenance Agency. The licensee

was also under an obligation to enter into a separate maintenance

agreement with the maintenance agency, if so required by the

maintenance agency, which was to run concurrently and co-terminus

with the Licence Agreement.

16. The Plaintiff in reply to the application has categorically denied any

dispute with regard to maintenance charges and it is also borne out

from the record that it was the obligation of the Defendant to pay out-

going charges to the maintenance agency. The Plaintiff has also

denied that any issue with regard to the maintenance agency was

raised either by the Plaintiff with the maintenance agency or by the

Defendant with the Plaintiff.

17. According to the Defendant, the issue with regard to maintenance was

raised orally as well as in writing with the Plaintiff. However, no

document has been placed on record which may reflect about raising

of any dispute by the Defendant. Even if it is assumed that there was

any issue or dispute between the Plaintiff and the maintenance agency

or that any such issue was raised by the Defendant with the Plaintiff as

well, the maintenance agency admittedly was a party to the said

dispute. At the same time, it is not in dispute that the maintenance

agency is not a party to the arbitration agreement. Thus, the

application of the Defendant is liable to be dismissed on two counts;

First, there is no arbitrable dispute raised by the Defendant and second

that in the alleged dispute with regard to maintenance, the

maintenance agency was a necessary party, which was a stranger to

the arbitration agreement.

18. A dispute arises when there is a claim made by one party and denial

and repudiation of the claim by the other. The existence of a dispute is

essential for appointment of an arbitrator under Section 8 of the Act. A

reference may be made to National Textile Corporation Ltd. & Anr. v.

Ashval Vaderaa, 167 (2010) DLT 602 and Sanjay Saxena v. K.

Sudershan Reddy & Ors., 190 (2012) DLT 33, wherein it was held that

a dispute can be referred to arbitration, provided there exists a dispute.

19. A reference may also be made to the report of the Supreme Court in

Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya & Anr., (2003) 5

SCC 531, wherein it was held that where a dispute is between some of

the parties, who are not parties to the arbitration agreement, the same

cannot be referred to arbitration. Paras 15 and 16 of the report are

extracted hereunder:-

"15. The relevant language used in Section 8 is: "in a matter which is the subject of an arbitration agreement". The court is required to refer the parties to arbitration. Therefore, the suit should be in respect of "a matter" which the parties have agreed to refer and which comes within the ambit of arbitration agreement. Where, however, a suit is commenced -- "as to a matter" which lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement, there is no question of application of Section 8. The words "a matter" indicate that the entire subject-matter of the suit should be subject to arbitration agreement.

16. The next question which requires consideration is

-- even if there is no provision for partly referring the dispute to arbitration, whether such a course is possible under Section 8 of the Act. In our view, it would be difficult to give an interpretation to Section 8 under which bifurcation of the cause of action, that is to say, the subject-matter of the suit or in some cases bifurcation of the suit between parties who are parties to the arbitration agreement and others is possible. This would be laying down a totally new procedure not contemplated under the Act. If bifurcation of the subject-matter of a suit was contemplated, the legislature would have used appropriate language to permit such a course. Since there is no such indication in the language, it follows that bifurcation of the subject-matter of an action brought before a judicial authority is not allowed."

20. In view of the above discussion, there is no manner of doubt that the

Defendant's application is not maintainable; the same is accordingly

dismissed.

CS(OS) 875/2013 and IA No.8930/2014

To be listed before the Roster Bench on 20th May, 2015.

(G.P. MITTAL) JUDGE MAY 06, 2015 vk