Madras High Court
M/S.Chennai Network Infrastructure ... vs T.Kannan on 15 July, 2022
Author: M.Sundar
Bench: M.Sundar
Arb O.P(Com.Div.)No.307 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 15.07.2022
CORAM
THE HONOURABLE Mr.JUSTICE M.SUNDAR
Arb O.P(Com.Div.)No.307 of 2022
and
A.No.2712 of 2022
M/s.Chennai Network Infrastructure Limited,
Now M/s.GTL Infrastructure Limited,
City Centre, 3rd Floor, No.232, Old No.186,
Purasawalkam High Road, Kilpauk,
Chennai 600 010. ... Petitioner
vs.
T.Kannan
S/o. Thiruvengada Mudaliar
No.3, Mahalakshmi Street
Velan Nagar Annexe
Valasaravakkam, Chennai600 087. ... Respondent
Arbitration Original Petition filed under Section 34(2) of the
Arbitration and Conciliation Act, 1996 to
(a) to set aside the Arbitral Award dated 16.03.2022 passed by the
learned Arbitrator Mr.Karthik Rajan in Arbitration No. Nil, pertaining to the
disputes between the petitioner and respondent; and
1/31
https://www.mhc.tn.gov.in/judis
Arb O.P(Com.Div.)No.307 of 2022
(b) to direct the respondent to pay the costs;
For Petitioner : Mr.C.Sakthimanikandan
For Respondents : Mr.S.Sai Shankar,
Counsel for Caveator
*****
ORDER
Captioned 'Arbitration Original Petition' [hereinafter 'Arb OP' for the sake of convenience and clarity] has been presented in this Court on 14.06.2022 assailing an arbitral award dated 16.03.2022 made by an 'Arbitral Tribunal' [hereinafter 'AT' for the sake of convenience and clarity] constituted by a sole Arbitrator who was appointed by a Section 11 Court in and by order dated 07.07.2021 made in O.P.No.628 of 2020.
2. As the case on hand is a Section 34 legal drill, unlike an appeal exercise under Section 96 of the 'Code of Civil Procedure, 1908 (Central Act V of 1908)' [hereinafter 'CPC' for the sake of brevity] it is not necessary to capture the facts with elaboration setting out granular details. Law is well settled that a Section 34 legal drill is not an appeal. The only commonality between the legal drills under Section 34 of 'The Arbitration and Conciliation Act, 1996 (Act No.26 of 1996)' [hereinafter referred to as 'A and C Act' for 2/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 the sake of convenience, clarity and brevity] and Section 96 of CPC is, both assail a verdict. While a verdict returned in the form of an arbitral award by a AT (a private Tribunal) is assailed in a Section 34 of A and C Act legal drill, a verdict returned by a Lower Court is assailed in a legal drill under Section 96 CPC appeal. The commonality begins and ends there. A legal drill under Section 34 of A and C Act and an appeal exercise under Section 96 of CPC in all other aspects are virtually bipolar opposites. The reason is, Section 34 is neither an appeal nor a revision. It is not even a full-fledged judicial review. It is a limited challenge to an arbitral award within the slots (described as pigeon holes by this Court) adumbrated under Section 34, more particularly, sub-section (2) of Section 34 of A and C Act. If a protagonist of Section 34 petition is able to demonstrate to the Court that his campaign against the impugned award fits snugly into any one or more of the pigeon holes, the protagonist will be entitled to have the award dislodged, otherwise there will be no judicial intervention. To put it differently, Section 34 of A and C Act is a default provision and it is a delicate balance between the sanctity of 'finality of arbitral award' ingrained in Section 35 of A and C Act read with Section 5 of A and C Act in which minimum judicial intervention principle is ingrained on one side and judicial review which is one of the facets of due 3/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 process of law on the other side.
3. Before proceeding further, this Section 34 Court also deems it appropriate to remind itself that a Section 34 legal drill is by way of summary procedure. This has been clearly set out in clause 8.5 of Practice Directions forming part of 'The Madras High Court (Arbitration) Rules, 2020' [hereinafter 'MHC Arbitration Rules' for the sake of convenience and clarity] made by Madras High Court in exercise of powers under Section 82 of A and C Act. Clause 8.5 of MHC Arbitration Rules reads as follows:
'8. Challenge to an award under Section 34 of the Act:
8.1 ......................
8.2 .....................
8.3 .....................
8.4 .....................
8.5 Proceedings under Section 34 of the Act shall be disposed of by a summary procedure'
4. Rule 8 of MHC Arbitration Rules talks about the admission procedure qua Section 34 and the same reads as follows:
'8. Procedure in relation to petitions under Section 34 of the Act:
(i) Every petition under Section 34 shall be posted for admission before the Court. On hearing a petition under Section 34 for 4/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 admission, the Court may-
(a) admit and order notice to the respondent, or
(b) direct the petitioner to issue notice along with the petition and documents to the respondent before the matter is heard for admission; or
(c) dismiss the petition, with or without costs.
(ii) Where the court orders notice on admission, the Court shall endeavour to decide the admission within three months from the date of first hearing.
(iii) When notice is issued under sub-rule (i), the records of the Arbitral Tribunal:
(a) shall be requisitioned where the admission is on one or more grounds under Section 34 (2) (a); and
(b) may be requisitioned in other cases.
(iv) Notwithstanding the above, the arbitral tribunal shall preserve the records of such arbitral proceedings for a period of two years from the date of the award.
(v) The Court may, at any stage of the proceedings before it, at the request of any party or suo motu, call for all or any part of the records of the arbitral tribunal.
(vi) Where notice is ordered under sub rule (i), the Respondent shall not fi le any counter statement or counter affi davit, unless (a) the Court directs otherwise or (b) the petition alleges that the making of the Award was induced or effected by fraud or corruption. The petition shall be decided on the grounds of challenge and the records of the arbitral tribunal in cases where the same is requisitioned under sub rules (iii) and (v).' 5/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022
5. Aforementioned clause 8.5 of Practice Directions has been made by drawing inspiration from Fiza Developers case law [Fiza Developers and Inter-Trade Private Limited Vs. AMCI (India) Private Limited reported in (2009) 17 SCC 796] wherein Hon'ble Supreme Court held that a Section 34 legal drill is a one issue summary procedure. It was also clarified that by saying one issue it does not mean that the lis should turn on one issue but the protagonist of Section 34 petition putting to challenge the arbitral award itself is the issue before Section 34 Court. To be noted, subsequently in Emkay Global case [Emkay Global Financial Services Ltd. v. Girdhar Sondhi reported in (2018) 9 SCC 49] Hon'ble Supreme Court held that Fiza Developers ratio is a step in the right direction.
6. This Court having set out the rules of the game, if one may say so in Sports parlance (statutory perimeter within which a Section 34 legal drill should perambulate, to put in a legal parlance) now proceeds to capture the factual matrix in a nutshell.
7. Short facts are that the petitioner which is a company is a holder of licence issued by Department of Telecommunication and is in the business of 6/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 providing telecommunications infrastructure services to its clients in India; that as part of business, the petitioner-Company [hereinafter 'CNIL' for the sake of convenience, brevity and clarity which stands for 'Chennai Network Infrastructure Limited'] entered into an arrangement with the respondent for the purpose of putting up mobile towers; that the agreement was merely for provision of space / land by the respondent for putting up mobile towers. In the case on hand, the 'land concerned admeasures 400 sq.ft or thereabouts and is situate at No.3, Mahalakshmi Street, Velan Nagar Annexe, Valasaravakkam, Chennai' [hereinafter 'said land' for the sake of brevity, convenience and clarity]; that originally predecessor entity of CNIL and respondent entered into a lease deed dated 20.05.2004; that this lease deed elapsed by efflux of time in 2013; that thereafter parties i.e., CNIL and the respondent entered into a licence agreement dated 01.07.2013 for said land for same purpose i.e., putting up mobile towers; that under this licence agreement, the petitioner-CNIL agreed to pay a monthly licence fee to the respondent which is the owner of said land; that this licence agreement dated 01.07.2013 contains an arbitration clause and the same is in the form of clause 16; that arbitrable disputes erupted between CNIL and respondent regarding payment of licence fee resulting in the arbitration clause being 7/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 triggered which in turn resulted in order dated 07.07.2021 made in O.P.No.628 of 2020 by a Section 11 Court which has been alluded to supra; that the Arbitrator appointed by Section 11 Court entered upon reference, adjudicated arbitrable disputes between the parties and made the impugned award. To put it in a nutshell, the respondent before Section 34 Court, as claimant, made a claim of a little over Rs.5 Lakhs namely, Rs.5,56,415/- towards arrears of licence fee, sought a direction to the respondent to remove the towers, electronic devices, genset used for running the tower etc., and made an alternate prayer for quantifying a sum of Rs.50,000/- for removal of equipment besides one limb of prayer for cause of arbitration and usual residuary limb of any prayer, the respondent resisted the same by filing a counter statement; that ultimately, AT rendered the impugned award acceding to the prayers of the respondent which is before this Section 34 Court; that CNIL saying that they are aggrieved by the impugned award has presented this captioned Arb OP in this Court.
8. This Court having set out the factual matrix in a nutshell deems it appropriate to capture the undisputed obtaining position that CNIL in its counter statement dated 30.09.2021 before AT had not made any counter 8/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 claim.
9. Learned counsel for the petitioner before this Court also has no doubt in his mind that no counter claim has been made in the counter statement dated 30.09.2021 before AT. It has become necessary to record this as the AT in the impugned award while capturing the case of CNIL has mentioned that CNIL has taken the stand that it is not liable to pay any monies and on the contrary it is entitled to return of security deposit. This is captured in sub-paragraph (f) of paragraph No.6 of the impugned award. In the light of the stated position of CNIL that there is no counter claim before AT this recording in paragraph No.6(f) of the impugned award pales into insignificance, it pales into oblivion. It is also submitted that CNIL does not have any claim against the respondent and it is only assailing the impugned award.
10. This Section 34 Court now proceeds to consider the grounds on which the learned counsel for the petitioner has assailed the impugned award. Notwithstanding very many averments and several grounds raised in the petition, learned counsel made three pointed and focused submissions 9/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 and they are as follows:
(a) Lease deed dated 20.05.2004 (Ex.A1) before the AT is insufficiently stamped and it is also unregistered being a lease deed for over one year. Therefore, the arbitration clause in the lease deed i.e., clause 6 is not valid in the light of N.N.Global principle [N.N.Global Mercantile Pvt. Ltd., Vs. Indo Unique Flame Ltd., and others reported in 2021 SCC Online SC 13];
(b) Respondent before Section 34 Court as claimant before the AT in the claim statement has only sought for future interest i.e., interest from the date of the award whereas the AT has awarded interest at the rate of 8% p.a from the date of filing of OP;
(c) AT ought not to have mulcted CNIL with costs;
11. This Court now proceeds to deal with the aforesaid two points, discuss the same and give its dispositive reasoning. As regards the argument that the arbitration clause contained in a lease deed is for a period exceeding one year being unregistered besides being insufficiently stamped and therefore hit by N.N.Global principle is concerned, this Court is of the 10/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 considered view that it is a non-starter. The reason is, this issue was specifically raised before the AT and the claimant had made it clear that it is laying its claim before AT not on the basis of the lease deed dated 20.05.2004 but only on the basis of licence agreement dated 01.07.2013 which has been marked as Ex.A2 before the AT. To be noted, this licence agreement has been marked as Ex.A2 without any objection before the AT which means it has been marked by consent.
12. I had the occasion to deal with some more similar circumstances with regard to the same petitioner vide O.P.No.961 of 2019 which was disposed of by an order dated 24.01.2020. Paragraph No.9 captioned 'DISCUSSION AND DISPOSITIVE REASONING' reads as follows:
'9. DISCUSSION AND DISPOSITIVE REASONING:
9(i) From the aforesaid rival submissions, one of the first points that need to be decided is whether a licence agreement is compulsorily registrable. This Court turns to Section 17 of Registration Act, 1908, which is inter-alia an adumbration of documents which are compulsorily registrable. A perusal of the list of documents which are compulsorily registrable, which has been adumbrated therein make leases of immovable property from year to year or for any term exceeding one year, or reserving a yearly rent compulsorily registrable vide Section 11/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 17(1)(d), but what is of significance is, there is no mention about Licence Agreement. No contra provision has been shown to this Court. Therefore, licence agreement is not compulsorily registrable argument is accepted.
9(ii) This take us to the next question about whether the said licence agreement is sufficiently stamped. As alluded to supra, with regard to stamp duty, it is necessary to look at the the Indian Stamp Act, 1899 (Central Act II of 1899) (as in force in the State of Tamil Nadu), which shall hereinafter be referred to as 'Stamp Act' for brevity. This takes us to Schedule I of the Stamp Act. The stamp duty on an instrument, which is a Lease Deed, is set out in Clause 35, which reads as follows:
35. Lease, including an under lease or sub-lease and any agreement to led or sub-let_
(a) where the period of lease is One rupee for every Rs.100 or below thirty years part thereof of the amount of rent, fine, premium or advance, if any, payable;
(b) where the period of lease is Four rupees for every Rs.100 or thirty years and above and upto part thereof of the amount of ninety-nine years rent, fine, premium or advance, if any, payable;
(c) where the period of lease is [S Rupees] for every Rs.100 or above ninety-nine years part thereof of the amount of rent, fine, premium or advance, if any, payable Provided that in any case when an agreement to lease is stamped with the ad valorem stamp required for a lease and a lease in pursuance of such 12/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 agreement is subsequently executed, the duty on such lease shall not exceed twenty rupees 9(iii) On the contrary, there is no specific entry or serial number regarding licence. Therefore, a licence will necessarily fall under Serial No.5(j), which is a residuary entry. Vide serial No.5(j), if an instrument has not been specifically provided for, the stamp duty is Rs.20/- and there is no disputation that said licence agreement has been executed in a non-judicial stamp paper of the value Rs.20/- (Rupees Twenty only).
9(iv) Learned counsel for respondent drew the attention of this Court to the judgment of Hon'ble Supreme Court in Garware case (Garware Wall Ropes Limited Vs. Coastal Marine Constructions and Engineering Limited reported in (2019) 9 SCC 209). The most relevant and instructive paragraph in Garware is Paragraph 22 and the same reads as follows:
'22. When an arbitration clause is contained “in a contract”, it is significant that the agreement only becomes a contract if it is enforceable by law. We have seen how under the Stamp Act, an agreement does not become a contract, namely, that it is not enforceable in law, unless it is duly stamped. Therefore, even a plain reading of Section 11(6-A), when read with Section 7(2) of the 1996 Act and Section 2(h) of the Contract Act, would make it clear that an arbitration clause in an agreement would not exist when it is not enforceable by law. This is also an indicator that SMA Tea Estates has, in no manner, been touched by the amendment of Section 11(6-A).
9(iv) While Garware principle read in the context of Duro 13/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 Felguera as well as Mayavati Trading principles makes it clear that the question regarding an instrument being duly stamped (when there is an arbitration agreement (arbitration agreement within the meaning of Section 7 of A and C Act) in the form of a covenant in an instrument) clearly falls within the contours of sub-section 6-A of Section 11. In the light of facts of this case, Garware principle does not help the respondent as the petitioners have restricted instant OP to be one predicated on clause 16 of said licence agreement, which is not compulsorily registrable and which is undisputedly sufficiently stamped. As already alluded to supra, Section 17 of the Registration Act and entry 5(j) of Schedule I of Indian Stamp Act makes this position very clear.
9(v) Now that Garware principle does not help the respondent in the instant case owing to the peculiar facts and circumstances of case on hand, this Court shall follow Duro Felguera principle reiterated by Hon'ble Supreme Court in Mayavati Trading case law, which has already been alluded to supra.
9(vi) There is one other aspect of the matter (though not projected) which this Court reminds itself about and that question pertains to an arbitration clause in a lease deed or in other words, the question as to whether arbitration agreement qua a lease or in other words whether disputes arising out of a lease deed are arbitrable is one which a larger Bench of Hon'ble Supreme Court is in seizin of, as Himangni case (Himangni Enterprises Vs. Kamaljeet Singh Ahluwalia reported in (2017) 10 SCC 706) has been referred to a larger Bench vide Vidya Drolia & Ors. Vs.Durga Trading Corporation reported in 2019 SCConline SC 358. However, in the instant case, as the petitioners have abridged the scope of instant OP to one predicated on an 14/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 arbitration clause in said licence agreement alone and not the lease deed, it may not be necessary to advert to these aspects of the matter any further detail in this order.
9(vii) This Court, therefore, proceeds to appoint Mr.M.Senthil Kumaran, Advocate, Flat No.A, Jayam Villa, No.11, East Circular Road, Mandaveli, Chennai-28 (Mobile No.7550111110) as sole arbitrator to enter upon reference qua said licence agreement i.e., licence agreement dated 16.04.2015 and decide the arbitrable issues between the parties and pass an award. While entering upon reference and conducting arbitration, learned sole arbitrator shall bear in mind the observations made by this Court in this order.'
13. To be noted, the same learned counsel represented CNIL in the above matter and this Court is informed that the aforesaid order dated 24.01.2020 penned by me has attained finality. In other words, it has been given legal quietus and it was not carried to next Court is his say.
14. Thereafter, another Hon'ble single Judge of this Court in O.P.No.550 of 2020 vide order dated 15.04.2021 followed the principle laid down by me. In this order, other Hon'ble Judge has copiously extracted and reproduced my order. This in turn has been extracted and reproduced in the aforementioned order dated 07.07.2021 in O.P.No.628 of 2020 in and by 15/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 which AT which rendered the impugned award was constituted by Section 11 Court. This is vide paragraph No.8 of the said order which reads as follows:
'8. The petition was opposed by the respondent by filing a counter affidavit. The objection for appointment of Arbitrator was that the lease agreement which was relied on for invoking the arbitration clause is insufficiently stamped and therefore, the clauses contained therein cannot be relied upon. In this regard, the counsel for the respondent has cited a judgment of the Hon'ble Supreme Court of India reported in 2021 SCC Online SC 13 (N.N.Global Mercantile Pvt.Ltd. vs. Indo Unique Flame Ltd., and others). This was specifically refuted by the learned counsel for the petitioner by relying on a recent decision of the learned single Judge of this Court dated 15.04.2021 in O.P.No.550 of 2020. While dealing with similar objection, the learned single Judge has observed as under:
"9(v) While the Garware principal read in the context in Dura Felguera as well as Mayavati Trading Principles makes it clear that the question regarding an instrument being duly stamped (when there is an arbitration agreement (arbitration agreement within the meaning of Section 7 of A and C Act) in the form of a covenant in an instrument) clearly falls within the contours of sub-section 6-A of Section 11. In the light of facts of this case, Garware principle does not help the respondent as the petitioners have restricted instant OP to be one 16/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 predicated on clause 16 of the said license agreement, which is not compulsorily registrable and which is undisputedly sufficiently stamped. As already alluded to supra Section 17 of the Registration Act and entry 5(j) of Schedule I of Indian Stamp Act makes this position very clear."
In this case also, the petitioner merely relied on the arbitration clause and for the purpose of invoking the same, the document is sufficiently stamped. Therefore, he would submit that the Original Petition may be allowed.'
15. The above is mentioned for the sake of clarity and specificity besides making it clear that this issue turning on N.N.Global principle and Garware principle [Garware Wall Ropes Limited Vs. Coastal Marine Constructions and Engineering Limited reported in (2019) 9 SCC 209] was raised even before Section 11 Court though there can be no bar to raise the same before AT. This is owing to the statutory perimeter sketched by sub- section (6A) of Section 11 of A and C Act which makes it clear that Section 11 legal drill is limited to examination of existence of arbitration agreement. The only other facet added to a Section 11 legal drill is also only in exceptional / rare cases and that is ex facie barred by limitation plea i.e., Nortel principle [Bharat Sanchar Nigam Limited and another Vs. Nortel 17/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 Networks India Private Limited reported in (2021) 5 SCC 738]. Therefore, CNIL was certainly well within its rights to raise arbitration agreement issue i.e., insufficiently stamped / unregistered document issue before AT, it did so but AT has returned a finding by saying that the respondent before this Court as claimant has restricted its claim to the licence agreement i.e., Ex.A2 dated 01.07.2013. This is directly and squarely covered by the aforementioned order penned by me in the same GTL Infrastructure case alluded to supra. Though paragraph No.9 has been extracted and reproduced supra, I deem it appropriate to extract and reproduce the entire order which reads as follows:
'Instant 'Original Petition' (hereinafter 'OP' for the sake of brevity) under Section 11 of 'The Arbitration and Conciliation Act, 1996 (Act No.20 of 1996)' which shall hereinafter be referred to as 'A and C Act' for the sake of brevity, raises a very interesting question.
2. Before embarking upon the exercise of a discussion on the rival submissions and setting out dispositive reasoning, this Court reminds itself of the scope of a OP under Section 11. Hon'ble Supreme Court has made declaratory pronouncement qua law on the scope of a OP under Section 11 of A and C Act vide Duro Felguera and Mayavati Trading principles. In other words, law laid down by Hon'ble Supreme Court regarding scope of a OP under Section 11 of A and C Act in Duro Felguera, S.A. [Duro Felguera, S.A. versus Gangavaram Port Limited reported in (2017) 9 SCC 729I] and Mayavati Trading [Mayavati Trading Pvt. Ltd., Vs. Pradyuat Deb Burman reported in (2019) 8 SCC 18/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 7961] are declaratory qua scope, contours and confines of a Section 11 OP. This Court reminds itself about these instructive principles laid down by Hon'ble Supreme Court before embarking upon the exercise of a discussion qua rival submissions and giving dispositive reasoning on the same. Relevant Paragraphs in Duro Felguera S.A are Paragraphs 47 and 59, which read as follows:
'47. What is the effects of the change introduced by the Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter referred to as 'the 2015 Amendment' ) with particular reference to Section 11(6) and the newly added Sectin 11(6-A) of the Arbitration and Conciliation Act, 1996, (hereinafter referred to as “the 1996 Act”) is the crucial question arising for consideration in this case.' '59. The scope of the power under Section 11 (6) of the 1996 Act was considerably wide in view of the decisions in SBP and Co. (supra) and Boghara Polyfab (supra). This position continued till the amendment brought about in 2015. After the amendment, all that the Courts need to see is whether an arbitration agreement exists - nothing more, nothing less. The legislative policy and purpose is essentially to minimize the Court’s intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11 (6A) ought to be respected. '
3. Relevant paragraph in Mayavati Trading case is Paragraph 10 and the same reads as follows:
'10. This being the position, it is clear that the law prior to the 2015 Amendment that has been laid down by this Court, which would have included going into whether accord and satisfaction has taken place, has now been legislatively overruled. This being the position, it is difficult to agree with the reasoning contained in the aforesaid 19/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 judgments, as Section 11(6-A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid down in the judgment in Duro Felguera SA.' (underlining made by this Court to supply emphasis and highlight)
4. This Court having reminded itself about the contours and confines of instant OP i.e., scope of instant OP, now proceeds to set out short facts shorn of unnecessary details, which are as follows:
a) Petitioners in instant OP are two in number and they are spouses;
b) Petitioners are owners of a 'property in the city of Chennai at Door No.68/2, Thirunarayana Guru Road, Choolai, Chenani – 600 112' (hereinafter 'said property' for the sake of brevity);
c) A portion of terrace admeasuring 400 sq.ft or thereabouts in said property is the subject matter of lis and therefore, the same shall hereinafter be referred to as 'demised area' for the sake of convenience and clarity;
d) First petitioner entered into a Lease Deed dated 03.03.2004 giving on lease the demised area to a company, which went by the name 'AIRCEL CELLULAR LIMITED' (hereinafter 'ACL' for brevity). This lease is for a period of 9 years i.e., 05.03.2004 to 04.03.2013 to be precise;
e) Though the aforementioned lease is for 9 years and though the monthly rent is Rs.12,000/- for first three years, Rs.13,800/- for next three years and Rs.15,870/- for the last three years, the Lease Deed was neither registered nor executed in non-judicial stamp paper of proper 20/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 value qua the Indian Stamp Act, 1899 (Central Act II of 1899) (as in force in the State of Tamil Nadu). To be noted, it was executed in non- judicial stamp paper of Rs.20/-;
f) Lessee company ACL was acquired by Chennai Network Infrastructure Limited' ('CNIL' for brevity) through a scheme of arrangement by this Court, vide order dated 24.06.2010 made in C.P.Nos.103, 110 to 112 of 2010;
g) Owing to the aforesaid acquisition of ACL by CNIL, a supplementary agreement dated 04.03.2011 came to be executed and vide clause 13 of supplementary agreement, parties agreed that the principal agreement as well as the supplementary agreement will be registered before a Sub-Registrar, stamp duty and registration charges will be borne by parties in equal proportion, but this never happened. Be that as it may, 9 years lease period elapsed on 04.03.2013.
h) Thereafter, on 16.04.2015, parties realized that the demised area continues to be in possession of the petitioners and therefore, it is a case of licence and not lease (there being no transfer of possession of demised area) owing to which they decided to enter into a licence agreement instead of a Lease Deed. The parties entered into a 'licence agreement dated 16.04.2015' (hereinafter 'said licence agreement' for the sake of brevity). It may not be necessary to dilate on facts and delve on details qua covenants in the said licence agreement. It will suffice to say that there is no disputation or contestation that this licence agreement contains an arbitration clause, the same is clause 16 of said licence agreement and this clause serves as arbitration agreement within the meaning of Section 7 of A and C Act;
i) In the interregnum, CNIL merged with 'GTL Infrastructure 21/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 Limited' (hereinafter 'GTL' for brevity) through a scheme sanctioned / approved by National Company Law Board, Chennai Bench vide order dated 13.12.2017 and National Company Law Board, Mumbai Bench vide order dated 15.12.2017. Considering the narrow scope of instant OP on hand, it is not necessary to dilate on facts qua these proceedings any further.
j) Suffice to say that instant OP has been filed with a prayer for appointment of an Arbitrator for entering upon reference adjudicating upon and deciding on the aforementioned arbitral dispute between parties i.e., claim of alleged arrears of licence fee.
5. Having set out short facts shorn of unnecessary details, this Court now proceeds to set out the rival submissions.
6. Mr.K.P.Gopalakrishnan, learned counsel appearing on behalf of counsel on record for petitioners made submissions, which are broadly as follows:
a) In instant OP, notwithstanding very many averments in the petition, petitioners abridged the scope and limited the scope of instant OP to one seeking appointment of an arbitrator qua clause 16 of said licence agreement alone. In other words, it is made clear that instant OP shall not now stand predicated only on licence agreement dated 16.04.2015 i.e., said licence agreement and not the lease agreement and the supplementary agreement. To state with specificity instant OP is predicated on clause 16 of said lease agreement, which is admittedly an arbitration clause and which reads as follows:
'16.Any dispute or claim between the parties hereto arising out of or relating to this agreement, or its implementations and/or its effect, or the breech, termination, due to efflux of time or otherwise or invalidity 22/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 thereof, either during its subsistence or after its termination, shall be referred to the arbitration of a sole arbitrator in accordance with the provisions of Arbitrations and Reconciliation Act, 1996. The Arbitration shall be held at Chennai.
b) As there is no disputation or contestation about the existence of an arbitration agreement between the parties, there is no impediment in this Court for acceding to the prayer of the petitioners.
7. Mr.C.Sakthi Manikandan, learned counsel on record for respondent GIL made submissions summation of which is as follows:
a) A Lease Deed is compulsorily registrable under the Registration Act, as the Lease Deed dated 03.03.2004 and supplementary agreement dated 04.03.2011 have neither been registered nor executed on stamp paper of proper value, the same cannot be looked into and as a sequitur, the arbitration clause thereat can also not be taken note of.
Lease Deed dated 03.03.2004, supplementary agreement dated 04.03.2011 and said license agreement dated 16.04.2015 have to be read together and therefore, the lease agreement and supplementary agreement not being registered and not being sufficiently stamped is fatal to instant OP.
b) There is a cross reference to the Lease Deed in the said Licence Agreement vide clause 6 and 23 of said Licence Agreement.
8. Having set out the rival submissions by way of summation, this Court now proceeds to discuss the rival submissions in detail and give its dispositive reasoning.
9. DISCUSSION AND DISPOSITIVE REASONING:
9(i) From the aforesaid rival submissions, one of the first points that need to be decided is whether a licence agreement is compulsorily 23/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 registrable. This Court turns to Section 17 of Registration Act, 1908, which is inter-alia an adumbration of documents which are compulsorily registrable. A perusal of the list of documents which are compulsorily registrable, which has been adumbrated therein make leases of immovable property from year to year or for any term exceeding one year, or reserving a yearly rent compulsorily registrable vide Section 17(1)(d), but what is of significance is, there is no mention about Licence Agreement. No contra provision has been shown to this Court. Therefore, licence agreement is not compulsorily registrable argument is accepted.
9(ii) This take us to the next question about whether the said licence agreement is sufficiently stamped. As alluded to supra, with regard to stamp duty, it is necessary to look at the the Indian Stamp Act, 1899 (Central Act II of 1899) (as in force in the State of Tamil Nadu), which shall hereinafter be referred to as 'Stamp Act' for brevity. This takes us to Schedule I of the Stamp Act. The stamp duty on an instrument, which is a Lease Deed, is set out in Clause 35, which reads as follows:
35. Lease, including an under lease or sub-lease and any agreement to led or sub-let_
(a) where the period of lease is One rupee for every Rs.100 or below thirty years part thereof of the amount of rent, fine, premium or advance, if any, payable;
(b) where the period of lease is Four rupees for every Rs.100 or thirty years and above and upto part thereof of the amount of ninety-nine years rent, fine, premium or advance, if any, payable;
24/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022
(c) where the period of lease is [S Rupees] for every Rs.100 or above ninety-nine years part thereof of the amount of rent, fine, premium or advance, if any, payable Provided that in any case when an agreement to lease is stamped with the ad valorem stamp required for a lease and a lease in pursuance of such agreement is subsequently executed, the duty on such lease shall not exceed twenty rupees 9(iii) On the contrary, there is no specific entry or serial number regarding licence. Therefore, a licence will necessarily fall under Serial No.5(j), which is a residuary entry. Vide serial No.5(j), if an instrument has not been specifically provided for, the stamp duty is Rs.20/- and there is no disputation that said licence agreement has been executed in a non- judicial stamp paper of the value Rs.20/- (Rupees Twenty only).
9(iv) Learned counsel for respondent drew the attention of this Court to the judgment of Hon'ble Supreme Court in Garware case (Garware Wall Ropes Limited Vs. Coastal Marine Constructions and Engineering Limited reported in (2019) 9 SCC 209). The most relevant and instructive paragraph in Garware is Paragraph 22 and the same reads as follows:
'22. When an arbitration clause is contained “in a contract”, it is significant that the agreement only becomes a contract if it is enforceable by law. We have seen how under the Stamp Act, an agreement does not become a contract, namely, that it is not enforceable in law, unless it is duly stamped. Therefore, even a plain reading of Section 11(6-A), when read with Section 7(2) of the 1996 Act and Section 25/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 2(h) of the Contract Act, would make it clear that an arbitration clause in an agreement would not exist when it is not enforceable by law. This is also an indicator that SMA Tea Estates has, in no manner, been touched by the amendment of Section 11(6-A).
9(iv) While Garware principle read in the context of Duro Felguera as well as Mayavati Trading principles makes it clear that the question regarding an instrument being duly stamped (when there is an arbitration agreement (arbitration agreement within the meaning of Section 7 of A and C Act) in the form of a covenant in an instrument) clearly falls within the contours of sub-section 6-A of Section 11. In the light of facts of this case, Garware principle does not help the respondent as the petitioners have restricted instant OP to be one predicated on clause 16 of said licence agreement, which is not compulsorily registrable and which is undisputedly sufficiently stamped. As already alluded to supra, Section 17 of the Registration Act and entry 5(j) of Schedule I of Indian Stamp Act makes this position very clear.
9(v) Now that Garware principle does not help the respondent in the instant case owing to the peculiar facts and circumstances of case on hand, this Court shall follow Duro Felguera principle reiterated by Hon'ble Supreme Court in Mayavati Trading case law, which has already been alluded to supra.
9(vi) There is one other aspect of the matter (though not projected) which this Court reminds itself about and that question pertains to an arbitration clause in a lease deed or in other words, the question as to whether arbitration agreement qua a lease or in other words whether disputes arising out of a lease deed are arbitrable is one which a larger Bench of Hon'ble Supreme Court is in seizin of, as 26/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 Himangni case (Himangni Enterprises Vs. Kamaljeet Singh Ahluwalia reported in (2017) 10 SCC 706) has been referred to a larger Bench vide Vidya Drolia & Ors. Vs.Durga Trading Corporation reported in 2019 SCConline SC 358. However, in the instant case, as the petitioners have abridged the scope of instant OP to one predicated on an arbitration clause in said licence agreement alone and not the lease deed, it may not be necessary to advert to these aspects of the matter any further detail in this order.
9(vii) This Court, therefore, proceeds to appoint Mr.M.Senthil Kumaran, Advocate, Flat No.A, Jayam Villa, No.11, East Circular Road, Mandaveli, Chennai-28 (Mobile No.7550111110) as sole arbitrator to enter upon reference qua said licence agreement i.e., licence agreement dated 16.04.2015 and decide the arbitrable issues between the parties and pass an award. While entering upon reference and conducting arbitration, learned sole arbitrator shall bear in mind the observations made by this Court in this order.
Instant OP disposed of on above terms.'
16. As regards the impugned award, AT has rightly held in favour of the claimant by noticing that the claimant has predicated the claim petition only on license agreement as this has been clearly articulated in the claim petition itself. To be precise, this has been articulated in paragraph No.4 of the claim petition which reads as follows:
'4. It is submitted that the lease agreement dated 20.05.2004 27/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 expired during the year 2013 and subsequently on 01.07.2013 license agreement was entered between parties containing the same clauses, terms and condition as contained in the lease agreement dated 20.05.2004. As per the said license agreement dated 01.07.2013, the monthly consideration was fixed as Rs.10,000/-. Hence from 01.07.2013 the respondents were paying a sum of Rs.10,000/- as monthly consideration to the claimant.'
17. That draws the curtains on first point on which the learned counsel for petitioner predicated his campaign against the impugned award. This takes us to the second point which is fairly simple. The claim petition makes it clear that the claimant has sought for future interest only. In the impugned award in internal page 24 in which sub-paragraphs have been given alpha series in sub-paragraph (d) of paragraph No.33 it has been mentioned as follows:
''D. INTEREST ON A+B only for the period from February 2020 (date of filing OP) to September 2021 (date of filing claim) A+B = Rs.1,65,000/- + Rs.92,575/- = Rs.2,57,575 Interest @ 8% for the period of 20 months on total of A+B=Rs.34,340 Total amount claimed A+B+C+D=Rs.5,56,415/-'.
Notwithstanding such mention the relevant operative portion 28/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 of the impugned award reads as follows:
'36. In view of the determination of Issues No.1 and 2 in favour of the Claimant, I hereby pass the following Award :
(a) The respondent is directed to pay a sum of Rs.5,56,415/- (Rupees Five Lakhs Fifty Six Thousand Four Hundred and Fifteen Only) to the claimant together with interest @ 8% from the date of Award till the date of realisation.'
18. Therefore, it is clear that AT vide the impugned award has awarded only future interest and that too at 8% per annum from the date of the impugned award. In any event, as long as there is no bar qua pendente lite interest, it is well within the adjudicatory discretion of AT to award interest but it is not necessary to dilate qua discussion into those facets of the matter as it does not fall for consideration in the light of paragraph No.36(a) which is the operative portion.
19. As regards CNIL being mulcted with costs, as the prayers of the claimant have been acceded to, considering the costs being the discretion of AT, this Court finds no ground to have judicial intervention under Section 34 of A and C Act. To be noted, it is not costs of the nature or quantum which 29/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 shocks the conscience of this Section 34 Court.
20. As the aforementioned points on which the impugned award was assailed fail, the sequitur is captioned Arb OP does not pass muster qua Admission under Rule 8 of MHC Arbitration Rules.
21. Before writing the concluding paragraph of this order, this Court deems it appropriate to make it clear that the narrative, discussion and dispositive reasoning set out supra will make it clear that the campaign of the protagonist of the captioned Arb OP does not fit into any of the pigeon holes under Section 34 of A and C Act.
22. Sum sequitur is, captioned Arb OP fails and the same is dismissed.
Consequently, captioned application is also dismissed. There shall be no order as to costs.
15.07.2022 Speaking/Non-speaking order Index : Yes / No mk 30/31 https://www.mhc.tn.gov.in/judis Arb O.P(Com.Div.)No.307 of 2022 M.SUNDAR. J., mk Arb O.P(Com.Div.)No.307 of 2022 and A.No.2712 of 2022 15.07.2022 31/31 https://www.mhc.tn.gov.in/judis