Kerala High Court
Raju.J. Vayalattu vs Veeteejay Motors Pvt Limited on 2 April, 2025
AR NO.18/2025 1
2025:KER:28292
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE SYAM KUMAR V.M.
WEDNESDAY, THE 2ND DAY OF APRIL 2025 / 12TH CHAITHRA, 1947
AR NO. 18 OF 2025
PETITIONER:
RAJU.J. VAYALATTU
AGED 46 YEARS
S/O.LATE V.T.JOSEPH, 1/262, VAYALAT HOUSE,
FORT KOCHI, ERNAKULAM DISTRICT, REPRESENTED BY
HIS POWER OF ATTORNEY SINI RAJU, W/O RAJU. J.
VAYALATTU, VAYALATTU HOUSE, 1/262, FORT KOCHI.,
PIN - 682001
BY ADVS.
S.K.PREMJITH MENON
BINU V V VEETTIL VALAPPIL
P.J.STEPHEN
MANEKSHA D.
RESPONDENTS:
1 VEETEEJAY MOTORS PVT LIMITED
1/575 G, NH47 BYE PASS ROAD, KANNADIKADU,
MARADU P.O, ERNAKULAM. REPRESENTED BY ITS
MANAGING DIRECTOR THOMAS.J.VAYALAT, PIN - 682304
2 THOMAS.J.VAYALAT
MANAGING DIRECTOR, VEETEEJAY MOTORS PVT LIMITED
RESIDING AT 6/419 B, VAYALAT HOUSE, VAYALAT
AVENUE, MARADU, KOCHI, PIN - 682001
BY ADVS.
FIROZ K.M.
DIPU JAMES(K/1315/2003)
THIS ARBITRATION REQUEST HAVING BEEN FINALLY HEARD ON
02.04.2025, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
AR NO.18/2025 2
2025:KER:28292
ORDER
Dated this the 02nd day of April, 2024 This Arbitration Request has been filed by the petitioner, invoking Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act of 1996'), to appoint an Arbitrator to adjudicate the differences and disputes that have arisen between the petitioner and the 1st respondent under Annexure A2 lease agreement.
2. Petitioner was the owner of a property situated in Re.Sy. No.135/1 of Maradu Village in Ernakulam District. He leased out the said property to the 1st respondent vide Annexure A2 agreement dated 01.12.2012. The said agreement in Clause 28 stipulated arbitration as the chosen dispute resolution mechanism. Though originally envisaged for a period of 11 months, the agreement was extended from time to time. Later disputes arose between the parties regarding payment of rent. Efforts to resolve the dispute amicably met with failure. Petitioner hence issued Annexure A3 notice of invocation of arbitration clause nominating an Arbitrator to AR NO.18/2025 3 2025:KER:28292 which the respondent did not reply. Hence this Arbitration Request has been filed seeking to appoint an Arbitrator.
3. Respondents have filed a detailed counter affidavit. The 2 nd respondent is the brother of the petitioner and the Managing Director of the 1st respondent. Annexure A2 though has been signed by the 2nd respondent as the Managing Director of the 1 st respondent, it does not bear the signature of the Petitioner. Hence Annexure A2 does not meet the mandates of Section 7 (4) (a) of the Act of 1996. Thus there is no agreement to arbitrate which can lead to the invocation of Section 11 of the Act of 1996. There is no meeting of minds or a bilateral agreement. Alleged arbitration agreement is non-existent, invalid and the dispute is non-arbitrable. It is further contended that Annexure A2 dated 01.12.2012 mentions a lease for a period of 11 months ending on 31.10.2013. There is no renewal clause or written extension. Consequently, the alleged agreement had expired long time back. There can be no arbitration now based on Annexure A2. The subject property had been granted on lease to the respondents much prior to 01.12.2012. The lease arrangement was thus not based on Annexure 2. The 1st respondent is now continuing in possession of the premises and its status is that of a AR NO.18/2025 4 2025:KER:28292 statutory tenant as envisaged in Section 2 (6) (ii) of the Kerala Building Lease and Rent Control Act, 1965 (hereinafter referred to as 'the Act of 1965'). Hence the 1 st respondent is entitled to the statutory rights under the said Act. The dispute between the parties thus relates to tenancy and alleged arrears of rent, which are matters governed by the Act of 1965. The dispute is thus governed by a special statute which stipulates special rights and protections. Such a dispute is not by its very nature arbitrable. Additionally, the Annexure A2 agreement has not been sufficiently stamped under the Kerala Stamp Act and the same is not valid and enforceable. The alleged oral extension of the agreement is denied. The same militates against the stipulations in clause 25 of Annexure A2. The Arbitrator nominated by the petitioner in Annexure A3 is not acceptable to the respondents. The amount of Rs.60,63,650/- claimed by the petitioner is denied and disputed. There are no arrears as alleged and no amount is payable by the respondents to the petitioner. No reply was issued to Annexure A3 notice since in the mutual settlement talks held, it had been agreed that no further action would be initiated. Petitioner breached the said solemn undertaking. Arbitration Request is not maintainable in law and is AR NO.18/2025 5 2025:KER:28292 only to be dismissed with costs.
4. Heard Sri. Premjith Menon S.K., Advocate for the petitioner and Sri.K.M. Firoz, Advocate for the respondent.
5. The learned counsel for the petitioner reiterates the contentions made in the Arbitration Request and submits that all the essential mandates for invoking Section 11 of the Act of 1996 have been duly satisfied. As regards the contention that Annexure A2 did not bear the signature of the petitioner and hence cannot be treated as meeting the mandates of Section 7 of the Act of 1996, it is submitted that the same does not invalidate the lease agreement nor render ineffective the arbitration clause, therein. Since admittedly the 1st respondent is continuing to occupy the relevant premises mentioned in Annexure A2 pursuant to the lease arrangement between the parties the said agreement in its entirety which is still in subsistence. Further, the respondents do not have a case that they have not signed Annexure A2. Non-signature of the document by the petitioner does not exonerate the respondent from the terms and conditions therein as long as the meeting of minds on the question of arbitration is evident and clear. As regards non- arbitrability, the learned counsel submits that the right, if any, AR NO.18/2025 6 2025:KER:28292 under the Act of 1965 does not oust the arbitration clause. Petitioner vide in Annexure A3 had not sought to eviction of the respondent. None of the statutory rights of the respondent are impacted by the invocation of the arbitration clause. The limited purpose of the proposed arbitration is to decide on the dispute regarding outstanding payments. A simple monetary claim between a landlord and tenant is always open settlement through arbitration. Kerala Building Lease and Rent Control Act, 1965 does not stipulate nor envisage any restriction on the rights of a tenant and landlord to arbitrate their inter se monetary disputes. Bar, if any by virtue of special statute can only be regarding the rights, immunities and privileges conferred by such statute and not for resorting to arbitration to resolve simple money claims. As regards the alleged insufficiency in stamping in Annexure A2 agreement, it had been held by the Hon'ble Supreme Court in In Re Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act 1899 [2023 KHC 1028] that the referral court at Section 11 stage should not examine or impound an unstamped or insufficiently stamped instrument and should rather leave it for the determination by the Arbitral Tribunal. AR NO.18/2025 7
2025:KER:28292 The learned counsel thus vehemently contended that the Arbitration Request is fit to be allowed and the objections of the respondents are legally unsustainable.
6. Per contra, the learned counsel for the respondents reiterated the contentions in the counter affidavit. Towards substantiating the contention regarding non-arbitrability and for buttressing the argument that only Rent Control Courts can have jurisdiction in the matter thereby excluding the possibility of invoking Section 11 of the Act of 1996, reliance is placed on the judgment of the Hon'ble Supreme Court in Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. and others [2011 KHC 4388], wherein it has been held as follows.
"22. 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 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 a 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 AR NO.18/2025 8 2025:KER:28292 forum for settlement of such disputes. The well- recognized 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". (emphasis supplied)
7. Reliance is also placed on the observations of the Hon'ble Supreme Court touching on the same aspect in Vidya Drolia and others v. Durga Trading Corporation [2020 KHC 6711], which reads as follows:
"48. Landlord-tenant disputes governed by the Transfer of Property Act are arbitrable as they are not actions in rem but pertain to subordinate rights in personam that arise from rights in rem. Such actions normally would not affect third-party rights or have erga omnes affect or require centralized adjudication. An award passed deciding landlord-tenant disputes can be executed and enforced like a decree of the civil court. Landlord-tenant disputes do not relate to inalienable and sovereign functions of the State. The provisions of the Transfer of Property Act do not expressly or by necessary implication bar arbitration. Transfer of Property Act, like all other Acts, has a public purpose, that is, to regulate landlord- tenant relationships and the arbitrator would be bound by the provisions, including provisions which enure and protect the tenants.
49. In view of the aforesaid, we overrule the ratio laid down in Himangni Enterprises and hold that landlord- tenant disputes are arbitrable as the Transfer of Property Act does not forbid or foreclose arbitration. However, landlord-tenant disputes covered and governed by rent control legislation would not be arbitrable when specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligations. Such rights and obligations can only be adjudicated and AR NO.18/2025 9 2025:KER:28292 enforced by the specified court/forum, and not through arbitration." (emphasis supplied)
8. Attention is invited to the dictum laid down by the Hon'ble Supreme Court in Hemalatha Devi M. v. B. Udayasri [2023 KHC6928] wherein after a detailed survey of the precedents on the point, it was held as follows:
"21. This Court ultimately held that the main purpose of bringing an amendment inter alia in Sections 8 and 11 of the Arbitration Act, 1996 was to minimise the scope of judicial authority, which was to refuse reference to arbitration only on the ground when it prima facie finds that there was no valid arbitration agreement. The legislative intent for the amendment was confined to limiting judicial intervention, and once the Court finds that there is a valid arbitration agreement, it has no option but to refer the matter for arbitration. But this would not mean that where the matter itself is non-arbitrable, or is covered by a special legislation such as the Consumer Protection Act, it still has to be referred for arbitration. In Para 59 of Emaar III (supra), it was stated as under: "59. The amendment in Section 8 cannot be given such expansive meaning and intent so as to inundate entire regime of special legislations where such disputes were held to be not arbitrable. Something which legislation never intended cannot be accepted as side wind to override the settled law. The submission of the petitioner that after the amendment the law as laid down by this Court in National Seeds Corpn. Ltd. [National Seeds Corpn. Ltd. v. M. Madhusudhan Reddy, (2012) 2 SCC 506 : (2012) 1 SCC (Civ) 908] is no more a good law cannot be accepted. The words "notwithstanding any judgment, decree or order of the Supreme Court or any court" were meant only to those precedents where it was laid down that the judicial authority while making reference under Section 8 shall be entitled to look into various facets of the arbitration agreement, subject-matter of the arbitration whether the claim is alive or dead, whether the arbitration agreement is null and void. The words added in Section 8 cannot be meant for any other meaning." Emaar III (supra) though ends with a caveat, where it leaves the option with the party who may have an option to choose between a public or private forum, may consciously choose to go for private fora. This is what it says:AR NO.18/2025 10
2025:KER:28292 "63. We may, however, hasten to add that in the event a person entitled to seek an additional special remedy provided under the statues does not opt for the additional/special remedy and he is a party to an arbitration agreement, there is no inhibition in disputes being proceeded in arbitration. It is only the case where specific/special remedies are provided for and which are opted by an aggrieved person that judicial authority can refuse to relegate the parties to the arbitration."
22. Thus, in our considered opinion in the case at hand, the Telangana High Court had adopted the right approach in its two impugned orders, where it declined to interfere in the matter and appoint an arbitrator.
True in Emaar III (supra) this Court had examined the scope of sub-section (1) to Section 8 and not of sub- section 6A to Section 11 of the Arbitration Act, 1996. All the same, the reasoning given in the above judgment would be equally applicable to Section 11 application before the High Court. Both the provisions incorporated in Section 8 and Section 11 of the Arbitration Act, 1996 [i.e., subsection (1) and sub-section 6A respectively], seemingly restrict the scope of the examination by the concerned courts, in their reference to arbitration, or appointment of arbitrator, as the case might be, and the language being common, "notwithstanding any judgment, decree or order" places a similar question before the two courts. More importantly, when the Principal Civil Court or a judicial authority such as consumer redressal forum can have powers to dismiss a Section 8 application on the ground of arbitrability of a dispute, will such powers not be available with the High Courts? In SBP & Co. v. Patel Engg. Ltd. , it was decided by this Court that both Section 8 and Section 11 of Arbitration Act, 1996 are complementary provisions. This position has been reiterated, in the post-amendment context, in Vidya Drolia v. Durga Trading Corpn."
9. Relying on the dictum laid down by the Hon'ble Supreme Court in In Re. Interplay (supra), the learned counsel for the respondents submits that a court while exercising jurisdiction under Section 8 or 11 of the Act of 1996 must examine whether the AR NO.18/2025 11 2025:KER:28292 arbitration agreement prima facie exists. When parties append their signature to a contract containing an arbitration agreement, they are regarded in effect as independently appending their signatures to the same for the reason that the parties intend to treat an arbitration agreement contained in an underlying contract as distinct from the other terms of the contract. Placing reliance on a Division Bench judgment of this Court in Girindra Global Hospitality and another v. Manappuram Hotels (P) Ltd. and others [2022 (5) KHC 684] it is contended that landlord-tenant disputes covered and governed by Rent Control Legislation will not be arbitrable when a specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligations.
10. The learned counsel for the respondents in fairness also brought to my notice a decision of the High Court of Punjab and Haryana in Rohit Sawhney v. M/s.DLF Power and Services Ltd. [2023 KHC2449] and attempted to distinguish the same. In the said judgment, it had been held that where the petitioner has not claimed the eviction of the respondent on any of the grounds available to a landlord under the provisions of the relevant rent statute and had only sought recovery of the lease amount in terms of the lease AR NO.18/2025 12 2025:KER:28292 agreement, such dispute is not a dispute which falls within the exclusive jurisdiction of the Rent Controller under the rent statute. Therefore, the exercise of powers under Section 11(6) of the Act of 1996, to appoint an independent Arbitrator to resolve the dispute is not barred.
11. Based on the above-mentioned precedents the learned counsel for the respondent, contended that since Annexure A2 relates to a lease arrangement and the claim of the petitioner is for arrears of rent, the subject matter squarely falls under Section 11 of the Act of 1965. The petitioner as the landlord has the right to invoke the relevant provisions of the said Act with respect to fair rent fixation or arrears of rent. Since non-payment of rent is the bone of contention between the parties, the remedy is to invoke rights under the special statute viz., the Kerala Building Lease and Rent Control Act, 1965. Of the two parties to the agreement, the petitioner landlord alone can invoke the said rights. Without invoking the same, he cannot choose to invoke the arbitration clause as the subject matter does not admit arbitration. Relying on the above, the counsel for the respondents sought dismissal of the Arbitration Request.
AR NO.18/2025 13
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12. I have heard both sides in detail. The primary question that comes up for consideration is whether Annexure A2 agreement, which contains the arbitration clause, can be termed an agreement that meets the mandates of Section 7 of the Act of 1996 to constitute a valid arbitration agreement. The reason for so doubting its status is the fact that Annexure A2 does not bear the signature of one of the parties to the agreement viz., the petitioner who had filed this Section 11 application. It is relevant to note that Section 7 of the Act while explaining the essential ingredients for an arbitration agreement inter alia mandates that it shall be in writing and that it should bear the signature of the parties. Annexure A2 bears only the signature of the 2nd respondent as the Managing Director of the 1 st respondent. It does not however bear the signature of the other party to the agreement viz., the petitioner. This lacuna is termed as thoroughly inconsequential by the counsel for the petitioner since the signature that binds the respondents, against whom the clause is sought to be invoked, is very much present in Annexure A2 and the genuineness or veracity thereof has not been challenged by the respondents. That the signature of the petitioner is absent is of no consequence also since the petitioner admits Annexure A2 AR NO.18/2025 14 2025:KER:28292 document and had moved the Arbitration Request only after invoking the arbitration clause therein by issuance of a notice envisaged under Section 21 of the Act of 1996. This argument, though attractive at the first blush, conceals the specific mandate in Section 7 of the Act of 1996 whereby to be termed as a written agreement, the same needs to be signed by all the parties thereto and not by one or any of the parties. Though it may be true that the parties had for years together by their conduct adhered to the lease agreement and by their conduct exhibited adherence to the terms of the lease, in this AR the question to be considered is whether there is concurrence between the parties to arbitrate the matter. Such concurrence and consensus ad idem regarding arbitration cannot be presumed from conduct. It needs to be revealed by the express compliance with the terms mandated in Section 7 of the Act of 1996 . Since such compliance is factually lacking, I hold that the existence of a binding arbitration agreement between the parties has not been proved by the petitioner in order to satisfy this court to hold that the parties are to be referred to arbitration in an invocation under Section 11 of the Act of 1996. In In Re. Interplay (supra), it has been held that the scope of reference under Section 11 (6) is AR NO.18/2025 15 2025:KER:28292 limited to an examination of the existence of an arbitration agreement and the use of the term 'examination' should be understood as regarding the formal validity of the arbitration agreement such as the requirement that it should be in writing. The issue of substantive existence and validity of the arbitration agreement is to be left to the arbitral Tribunal to decide. An examination of the formal validity of the arbitration agreement in Annexure A2 reveals that the same does not meet the mandate of Section 7 of the Act of 1996. Hence it has to be concluded that the invocation of Section 11 of the Act by the petitioner fails at the very threshold. Nevertheless, I deem it relevant to consider the other contentions put forth by the petitioner in substantiation of the prayers sought in the Arbitration Request.
13. As regards the arbitrability, it is trite law as laid down in Booz Allen (supra), Vidya Drolia (supra), Hemalatha Devi (supra) and In Re. Interplay (supra) that, where the cause/dispute is in- arbitrable or non-arbitrable, the court shall refuse to refer the parties to arbitration, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes. Among the well- recognized examples of 'non-arbitrable disputes' enumerated in AR NO.18/2025 16 2025:KER:28292 Booz Allen (supra) are the 'eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction'. Only specified courts are conferred jurisdiction to grant eviction or decide such disputes. This view has been followed by this court in Girindra Global Hospitality (supra). Though there may be a difference in parameters for judicial review under Section 8 and Section 11 of the Act of 1996 and the said two provisions may not lay down the same standard, it is now well settled that even in a reference stage under Section 11 it is open to decline reference to arbitration of matters that are 'non-arbitrable' ie., those which are covered by special legislation. Coming to the facts of the case at hand, the time period mentioned in Annexure A2 has expired, and the 1st respondent is admittedly staying over and is in possession of the premises. Thus the status of a statutory tenant has been claimed by the 1st respondent. When contractual tenancy to which the rent control legislation applies has expired by efflux of time and the tenant continues in possession of the premises by virtue of statutory protection, he becomes a statutory tenant. He can then be evicted only under the provisions of the rent control legislation. A statutory tenant, albeit with restrictions and limitations, has vested in him the AR NO.18/2025 17 2025:KER:28292 rights and obligations of a tenant. It is this legal position in tenancy law that the respondent relies on to contend that the 1st respondent being entitled to statutory rights cannot be compelled to arbitrate the matter since rights conferred by the statute can only be adjudicated by the special court or forum constituted under the rent control legislation.
14. I do not lose sight of the fact that Annexure A3 does not seek eviction of the 1st respondent and confines the claim therein to the arrear dues that are payable by the 1st respondent to the petitioner. Since the petitioner has not sought eviction of the 1st respondent invoking the grounds available to a landlord under Section 11 of the 1965 Act and had only sought recovery of arrears, would such a claim which does not prima facie attract the exclusive jurisdiction of the Rent Controller debar the petitioner from invoking the provisions of Section 11(6) to seek appointment of an independent Arbitrator? Is not such a dispute or difference between the parties regarding the settling of outstanding dues a simple monetary claim that could be arbitrated as it does not call for the invocation of the provisions of the special statute? The precedents on the point answer these questions against the petitioner. Vidya AR NO.18/2025 18 2025:KER:28292 Drolia (supra) holds that landlord-tenant disputes covered and governed by rent control legislation would not be arbitrable when a specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligations. It has been held that such rights and obligations can only be adjudicated and enforced by the specified court/forum, and not through arbitration. This Court has in Girindra Global Hospitality (supra) followed the same and held that landlord-tenant disputes covered and governed by Rent Control Legislation will not be arbitrable when a specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligations. In view of the above settled position of law, arbitrability though is a matter to be left to the Arbitrator to decide, in the facts and circumstances of this case merits it to be considered in the Section 11 reference stage itself. As laid down in the precedents discussed above, disputes and differences arising under Annexure A2 being matters essentially concerning special rights and obligations covered by the Kerala Building Lease and Rent Control Act, 1965, cannot be arbitrated. Legal remedy, if any, available to the petitioner landlord with respect to his claim for arrears of rent will have to be invoked before the competent forum constituted under AR NO.18/2025 19 2025:KER:28292 the relevant statute. The mere inclusion of an arbitration clause in the lease agreement/ rent deed does not entitle the landlord to seek arbitration regarding matters that are integrally governed by the special statute governing the subject viz., the Kerala Building Lease and Rent Control Act, 1965.
From the above, it follows that this Arbitration Request is not maintainable in law. Hence, it is dismissed. No costs.
Sd/-
SYAM KUMAR V.M. JUDGE csl AR NO.18/2025 20 2025:KER:28292 APPENDIX OF AR 18/2025 PETITIONER ANNEXURES Annexure-A1 TRUE COPY OF THE POWER OF ATTORNEY EXECUTED BY THE PETITIONER Annexure-A2 TRUE COPY OF THE AGREEMENT DATED 01-12- 2012 ENTERED BETWEEN THE PETITIONER AND RESPONDENT Annexure-A3 TRUE COPY OF THE NOTICE DATED 24-07- 2024 ISSUED BY THE PETITIONER TO THE RESPONDENT Annexure-A4 TRUE COPY OF POSTAL TRACK RECORD OF ANNEXURE A3 NOTICE