Calcutta High Court (Appellete Side)
M/S. Fingertips Solutions Pvt. Ltd vs Dhanashree Electronics Ltd on 7 December, 2011
Author: Harish Tandon
Bench: Harish Tandon
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In The High Court At Calcutta
Civil Revisional Jurisdiction
Appellate side
Present :
The Hon'ble Justice Harish Tandon.
C.O. No. 3084 of 2009
M/s. Fingertips Solutions Pvt. Ltd.
-vs-
Dhanashree Electronics Ltd.
For the petitioner : Mr. Durbadal Sen
Mr. Prabal Mukherjee
Mr. Amal Krishna Saha
For the Opposite Party : Mr. Jishnu Saha
Ms. Sonel Shah
Mr. Kushagra Shah
Heard on : 23.11.2011 & 25.11.2011
Judgment on : 7.12.2011
HARISH TANDON, J.:
This revisional application is directed against an order no. 14 dated
1. 9.2009 passed by the Civil Judge (Senior Division), 2nd Court, Barasat in 2 Title suit No. 164 of 2008 by which an application under section 8 of the Arbitration and Conciliation Act 1996 was rejected.
Before dealing with the points emerges for consideration in this revisional application the short facts are required to be narrated.
By a sub-lease deed dated 26th September 2003 the opposite party demised unto the petitioner a super built-up area of 2990 sq. ft. on the ground floor along with two exclusive car parking places in respect of the building constructed by the opposite party on the payment of the lease rent as provided therein for initial period of 3 years from the date of the final possession with an option for renewal for two successive terms of the same period on enhancement of the rent by 15 % at the last rent paid. The said deed contains an arbitration clause.
The suit for eviction being Title Suit No. 164 of 2008 is instituted by the opposite party against the petitioner after terminating the said agreement upon issuance of a notice under section 106 of the Transfer of Property Act. In the plaint the opposite party pleaded various misdeeds of the petitioner which led to the issuance of notice under section 106 of the Transfer of Property Act.
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The petitioner took out an application under section 8 of the Arbitration and Conciliation Act (said Act) for referring the dispute to the Arbitral Tribunal as the parties in the said deed consented for determination of the disputes through a private Fora and not by judicial authority.
In the said application it is contended that an option for renewal was exercised before the expiration of the initial term which was agreed by the opposite party by accepting the enhanced rent for four months but subsequently refused to accept the rent and illegally and wrongfully stopped the electricity and supply of water to the petitioner. It is further stated that an application under section 9 of the said Act which was registered as Misc. Case no. 49 of 2007 was filed before the District Court at Barasat and an order of status quo was passed in the said proceeding on 29th March 2007. Subsequently the said application was dismissed by the learned District Judge, Barasat and the said order is assailed in appeal before this court where an order of status quo is passed till the disposal of the appeal.
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It is alleged that the letter to nominate the arbitrator was served upon the opposite party and on its failure to nominate and/or appoint the arbitrator within the time stipulated therein, sole arbitrator is appointed who entered in the reference and already held several sittings.
The opposite party objected the said application in contending that the matter relating to the eviction and recovery of possession which is outside the ambit and scope of an arbitration agreement as well as Atbitral Tribunal. However, a specific denial is made for appointment of sole arbitrator or a proceeding initiated before the Arbitral Tribunal.
The petitioner could not dispute before this court that the matter before the Atbitral Tribunal relates to the renewal of the lease and the eviction matter is not before the Arbital Tribunal but it is tried to be contended by the petitioner that if the Arbitral Tribunal ultimately finds that the petitioner is entitled to renewal of the lease, the eviction suit before the court cannot be decreed. What is tried to be contended is that the decision of the private Fora (Arbitral Tribunal) has a vital impact upon the suit instituted before the public Fora (court).
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According to the petitioner, the arbitration agreement inheres within all kinds of disputes regarding the construction or interpretation of any terms and conditions contained therein or touching these presents or determinations of any liability which includes the liability to hand over the possession under section 108 (q) of the Transfer of Property Act.
Mr. Prabal Mukherjee, learned Advocate appearing for the petitioner succinctly argues that the provisions contained under section 8 is mandatory and the judicial authority (court) has no option but to refer the parties to arbitration. He succinctly argues that the dispute as to whether there is any existence of arbitration agreement relating to the subject matter being outside the purview of the said agreement, can be determined by the Arbitral Tribunal itself under section 16 of the said Act. By relying upon the judgment of the apex court in case of Rashtriya Ispat Nigam Ltd. Vs. Verma Transport Co. reported in (2006) 7 SCC 275 Mr. Mukherjee contends that any dispute relating to the termination of a contract would be a dispute arising out of a contract and thus capable of being determined by a private Fora. By referring another judgment of the apex court in case of P. Anand Gajapathi Raju Vs. P. V. G. Raju reported in (2000) 4 SCC 539 it is contended that if the subject matter of action is the same as the subject matter of arbitration agreement, then it is 6 obligatory for the court to refer the parties to arbitration in terms of the arbitration agreement.
Mr. Mukherjee further contends that section 108 (q) of the Transfer of Property Act provides that in absence of a contract on determination of lease the lessee is bound to put the lessor into possession of the property. Thus any dispute as to the reversion of possession is subject to a contract and therefore the dispute as to the eviction is also coming within the ambit of the arbitration agreement and placed reliance upon the judgment of the Supreme Court in case of Madan Lal Vs. Bhai Ananda Singh reported in (1973) 1 SCC 84.
On the aforesaid proposition that the dispute as to the eviction is capable of being adjudicated and /or determined by a private Fora (Arbitral Tribunal) he placed reliance upon a Single Bench judgment of this court in case of Anannya Chowdhury & Anr. Vs. Ranjit Kumar Bose reorted in 2010 (3) CHN (cal) 64 and unreported judgment of Single Bench of this court in case of Anannya Chowdhury & Anr. Vs. Ranjit Kumar Bose in AP no. 182 of 2008 decided on 15.5.2008.
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Mr. Jishnu Saha, learned Advocate appearing for the opposite party submits that the court should not refer the parties to arbitration under section 8 of the said Act mechanically but should adjudicate whether the subject matter of dispute involved in the judicial proceeding either comes within the arbitration clause or whether the private Fora is competent to decide the said dispute or the dispute can only be decided by the public Fora. He submits that the relief for eviction arises from a statute and not from a contract by placing reliance upon the Single Bench judgment of Patna High court in case of Padam Singh Jain Vs. M/s. Chandra Bros. & Ors. reported in AIR 1990 Patna 95. By contending that if the dispute either contractual or non-contractual can only be decided by a public Fora (court) than the adjudication of those categories of proceedings should be reserved or to be adjudicated and/or determined by a court as a matter of public policy and by necessary implication the private Fora is excluded and relies upon a judgment of the Supreme Court in case of Booz Allen and Hamilton Inc Vs. SBI Home Finance Ltd. & Ors. reported in (2011) 5 SCC 532.
He further submits that the eviction proceeding under section 111 of the Transfer of Property Act can only be decided by the court as has been held by the Single Bench of this court in case of Eastern Coils (P) Ltd. Vs. 8 Deb Prosad Ghosh reported in 1992 (2) CLJ 349. He therefore submits that the other co-ordinate Bench decision relied upon by the petitioner being contrary to the Equal Bench decision as well as the decision of the apex court cannot be said to be a good law having binding precedence.
Lastly he contends that if some of the disputes which are covered under the arbitration agreement whereas others are not, the court should not split up the disputes but the entire disputes should be adjudicated by the court by placing reliance upon the judgement of the Supreme Court in case of Sukanya Holdings (P) Ltd. Vs. Jayesh H. Pandya & Anr. reported in (2003) 5 SCC 531.
Having considered the respective submissions, the point which emerges is whether an eviction proceeding is capable of being determined by an Arbitral Tribunal in the event the said dispute comes within the purview of the arbitration agreement or is only capable of being adjudicated by the court.
Admittedly, the lease deed contains an arbitration clause in the following manner :
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"All disputes and differences between the parties hereto regarding the construction or interpretation of any of the terms and conditions herein contained or touching these presents or determinations of any liability shall be referred to the sole Arbitration and same shall be deemed to be reference within meaning of the Arbitration and Conciliation Act, 1996.
The Arbitrator shall have summary power to give interim awards and/or directions."
From the reading of the plaint it is noticed that the relief for recovery of possession is claimed on the basis of service of notice under section 106 of the Transfer of Property Act. Section 111 of the Transfer of Property Act postulates different eventualities and/or contingencies for determination of the lease one of which is the expiration of the period envisaged under section 106 of the Transfer of Property Act. Though the lease is a creature of a contract but the mode of recovery is provided under section 111 of the Transfer of Property Act. It has been pointed out in case of Padam Singh Jain (supra) by the Single Bench of the Patna High Court that the suit for recovery of possession and/or eviction germinates from the Statute and not from the contract. The court in case of Eastern Coils (P) Ltd., considers the similar point whether the parties should be referred to arbitration under section 8 of the said Act where the subject matter of the 10 suit is the recovery of possession under section 111 of the Transfer of Property Act. The court held that certain reliefs viz. a relief against the forfeiture under section 114 of the Transfer of Property Act or under section 114A of the similar Act can only be granted by the court and parties by consensus cannot confer such power upon the private Fora. The Co-ordinate Bench in case of Anannya Chowdhury (supra) did not take into consideration the Equal strength Bench decision. The Supreme Court in case of Booz Allen and Hamilton Inc (supra) has set up an example of non-arbitral disputes in these words :
"36. The well-recognised examples of non-arbitrable disputes are:
(i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding-up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes."
The apex court further held that the judicial authority (court) should not deal the application under section 8 in mechanical manner i.e. to refer the parties to arbitration once it is found that there is an arbitration agreement, but should have decided apart from others whether the relief sought in the suit are those that can be adjudicated and granted in an 11 arbitration and also whether the subject matter of suit is capable of being adjudicated by the Arbitral Tribunal in paragraph 19 of the said report which runs thus :
"19. Where a suit is filed by one of the parties to an arbitration agreement against the other parties to the arbitration agreement, and if the defendants file an application under Section 8 stating that the parties should be referred to arbitration, the court (judicial authority) will have to decide:
(i) whether there is an arbitration agreement among the parties;
(ii) whether all the parties to the suit are parties to the arbitration agreement;
(iii) whether the disputes which are the subject-matter of the suit fall within the scope of arbitration agreement;
(iv) whether the defendant had applied under Section 8 of the Act before submitting his first statement on the substance of the dispute; and
(v) whether the reliefs sought in the suit are those that can be adjudicated and granted in an arbitration.
33. But where the issue of "arbitrability" arises in the context of an application under Section 8 of the Act in a pending suit, all aspects of arbitrability will have to be decided by the court seized of the suit, and cannot be left to the decision of the arbitrator. Even if there is an arbitration agreement between the parties, and even if the dispute is covered by the arbitration agreement, the court where the civil suit is pending, will refuse an application under Section 8 of the Act, to refer the parties to arbitration, if the subject-matter of the suit is capable of adjudication only by a public forum or the relief claimed can only be granted by a special court or Tribunal.
34. The term "arbitrability" has different meanings in different contexts. The three facets of arbitrability, relating to the jurisdiction of the Arbitral Tribunal, are as under:
(i) Whether the disputes are capable of adjudication and settlement by arbitration? That is, whether the disputes, having regard to their nature, could be resolved by a private forum chosen by the parties (the Arbitral 12 Tribunal) or whether they would exclusively fall within the domain of public fora (courts).
(ii) Whether the disputes are covered by the arbitration agreement?
That is, whether the disputes are enumerated or described in the arbitration agreement as matters to be decided by arbitration or whether the disputes fall under the "excepted matters" excluded from the purview of the arbitration agreement.
(iii) Whether the parties have referred the disputes to arbitration? That is, whether the disputes fall under the scope of the submission to the Arbitral Tribunal, or whether they do not arise out of the statement of claim and the counterclaim filed before the Arbitral Tribunal. A dispute, even if it is capable of being decided by arbitration and falling within the scope of arbitration agreement, will not be "arbitrable" if it is not enumerated in the joint list of disputes referred to arbitration, or in the absence of such joint list of disputes, does not form part of the disputes raised in the pleadings before the Arbitral Tribunal.
35. The Arbitral Tribunals are private fora chosen voluntarily by the parties to the dispute, to adjudicate their disputes in place of courts and tribunals which are public fora constituted under the laws of the country. Every civil or commercial dispute, either contractual or non- contractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of the Arbitral Tribunals is excluded either expressly or by necessary implication. Adjudication of certain categories of proceedings are reserved by the legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not expressly reserved for adjudication by public fora (courts and tribunals), may by necessary implication stand excluded from the purview of private fora. Consequently, where the cause/dispute is inarbitrable, the court where a suit is pending, will refuse to refer the parties to arbitration, under Section 8 of the Act, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes.
36. The well-recognised examples of non-arbitrable disputes are:
(i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding-up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by 13 special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes."
The issue of eviction is essentially an issue which could be adjudicated and/or decided by the court as it involved various question relating to the granting of the relief under the different provisions of the Transfer of Property Act. The cumulative effect of the judgment of this court in case of Eastern Coils (P) Ltd. (supra) and the supreme Court in case of Booz Allen and Hamilton Inc (supra) that the eviction or a recovery proceeding under the special statute or where the express power is conferred upon the court which necessarily implies the exclusion of the private Fora.
The second contention that the dispute whether the opposite party is obliged to renew the lease after an option is exercised by the petitioner which is pending adjudication before the Arbitral Tribunal if decided in favour of the petitioner would non-suit the opposite party, is also not tenable. The point of renewal is also intrigue questions before the court while adjudicating whether the notice under section 106 of the Transfer of Property Act is valid or not which would be determined by the public Fora and not by the private Fora. Some overlapping disputes cannot be 14 segregated from the larger dispute which is only capable of being adjudicated and decided by the court as has been held by the apex court in case of Sukanya Holdings (P) Ltd. (supra) the same principle has been reiterated by the Supreme Court in case of Booz Allen and Hamilton Inc in these words :
"51. If the three issues referred by the appellant are the only disputes, it may be possible to refer them to arbitration. But a mortgage suit is not only about determination of the existence of the mortgage or determination of the amount due. It is about enforcement of the mortgage with reference to an immovable property and adjudicating upon the rights and obligations of several classes of persons (referred to in para 48.2 above), who have the right to participate in the proceedings relating to the enforcement of the mortgage, vis-à-vis the mortgagor and mortgagee. Even if some of the issues or questions in a mortgage suit (as pointed out by the appellant) are arbitrable or could be decided by a private forum, the issues in a mortgage suit cannot be divided.
52. The following observations of this Court in a somewhat different context, in Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya (2003) 5 SCC 531 are relevant: (SCC p. 536, para 16) "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." 15 Thus the aforesaid contention of the petitioner that the dispute is covered under the arbitration agreement is not tenable. This court does not find any infirmity and/or illegality in the impugned order.
The revisional application is, therefore, fails.
There shall however be no order as to costs.
Urgent photostat certified copy of this order, if applied for, be given to the parties on priority basis.
(Harish Tandon, J.) LATER After the judgment is delivered in open court, learned Advocate appearing for the petitioner prays for stay of the order.
Prayer is considered and rejected.
(Harish Tandon, J.)