Calcutta High Court
Diamond Apartments Pvt. Ltd vs Abanar Marketing Ltd on 3 June, 2015
Equivalent citations: AIR 2016 CALCUTTA 255, (2016) 2 ICC 241
Author: Soumen Sen
Bench: Soumen Sen
ORDER
GA No. 1343 of 2015
CS No. 389 of 2014
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
DIAMOND APARTMENTS PVT. LTD.
Versus
ABANAR MARKETING LTD.
BEFORE:
The Hon'ble JUSTICE SOUMEN SEN
Date: 3rd June 2015.
Appearance:
Mr. Abhrajit Mitra, Senior Advocate
Mr. Jishnu Chowdhury, Advocate
Mr. Soumabha Ghose, Advocate
Ms. Rajshree Kajaria, Advocate
...for the defendant/petitioner.
Mr. Jishnu Saha, Senior Advocate
Mr. Sarathi Dasgupta, Advocate
...for the plaintiff.
The Court:- The defendant has filed this application for
dismissal of the suit on the ground that an arbitration proceeding
is pending and by reason of the existence of the arbitration
agreement, the parties are required to be referred to arbitration
for resolution of the disputes.
The petitioner before the initiation of the suit initiated an
arbitration proceeding on the basis of the arbitration clause
mentioned in the leave and licence agreement executed by and
between the parties on 1st August, 2012. There is a named
arbitrator before whom the proceeding commenced. The plaintiff
filed a statement of claim praying, inter alia, for recovery of
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possession on termination of the leave and licence agreement. The
plaintiff also claims certain monetary reliefs. The plaintiff
states that the leave and licence agreement expired in the month
of June, 2013 whereupon the defendant became oblige to deliver
vacant and peaceful possession of the claimant, however, the
defendant had failed and neglected to do. The plaintiff, in fact,
had served a notice to quit dated 25th September, 2013 under
Section 106 of the Transfer of Property Act, 1882 calling upon the
defendant to deliver vacant and peaceful possession of the suit
premises expired on 15 days from the date of respondent's receipt
of the same. It is stated that even assuming that the respondent was a lessee of the suit premises, the lease stood terminated on 11th October, 2013.
In the said proceeding, the plaintiff has also filed an application for interim relief under Section 17 of the Arbitration and Conciliation Act, 1996.
Mr. Chandranath Mukherjee, Advocate, since deceased, was the named Arbitrator.
Before the learned Arbitrator pleadings were filed. In the counter objection as well as the opposition filed in connection with the application filed under Section 17 of the Arbitration and Conciliation Act, 1996, the applicant questioned the jurisdiction of the Arbitrator to arbitrate the disputes canvassed in the said proceeding. In paragraphs 9 and 12 of the counter statement, it 3 is stated that the purported agreement on the basis of which the instant proceeding was initiated is invalid, illegal and not binding. The said agreement is not properly stamped and cannot be looked into. The purported arbitration clause as contained in the said agreement perishes with the said agreement which is void ab initio, uncertain, vague and the learned Arbitrator has no jurisdiction to entertain the instant arbitration proceeding. In paragraph 4 of the affidavit in opposition filed in connection with the Section 17 application, it is stated that in any event the arbitral tribunal does not have jurisdiction to entertain an application for eviction of tenants either under the Premises Tenancy Act or under the Transfer of Property Act and hence the arbitration is squarely barred by law and is not maintainable either in facts or in law.
The Arbitrator died during the pendency of the said proceeding. None of the parties had taken any step for substitution of the Arbitrator although it was open for the parties to take appropriate steps for appointment of a substituted arbitrator. Although the plaint proceeds on the basis that on the death of Mr. Chandranath Mukherjee the arbitration proceeding has come to an end, it has been fairly conceded from the bar that the agreement survives and the plaintiff could have taken steps for appointment of a new arbitrator consequent upon the death of Mr. Chandranath Mukherjee, since the law is well settled on this point 4 as one could find from the decision of the Hon'ble Supreme Court in ACC Limited (Formerly known as The Associated Cement Company Limited) Vs. Global Cements Limited reported at (2012) 7 Supreme Court Cases 71.
The other reason for filing the suit appears to be the objection raised by the defendant before the learned Arbitrator that the arbitrator had no jurisdiction to decide the dispute, that is to say, the said dispute is not arbitrable. It is stated that in view of such objection and on being advised, the plaintiff abandoned the arbitration and instituted the present proceeding.
In the instant application in prayer (b) of the petition it is stated that if the suit is not dismissed, then in that case the parties to the suit be referred to arbitration as per the arbitration clause contained in the agreement dated 1st August 2012 without prejudice to the maintainability of the reference (emphasis supplied). This prayer brings out the real essence of the dispute sought to be canvassed in this petition. The petitioner proceeds that in view of the existence of the arbitration clause and having regard to Section 5 of the Arbitration and Conciliation Act, 1996, the suit is not maintainable. The prayer for rejection of the plaint is made on the ground that the suit is barred by law i.e. by reason of the provisions of Section 5 of the Arbitration and Conciliation Act, 1996.
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The issue that has fallen for consideration is whether on the basis of the aforesaid averments i.e. by reason of the objection raised by the defendant as to the jurisdiction of the Arbitrator to adjudicate the disputes, it was open for the plaintiff to institute the suit.
The defendant in the application, however, did not disclose the objection that the defendant had taken before the Learned Arbitrator with regard to the jurisdiction of the Arbitrator to adjudicate the dispute. It was during the course of hearing that it transpired that the defendant had objected to the jurisdiction of the Arbitrator to proceed with the arbitration proceeding. The nature of the objection raised is covered by Section 16 of the Arbitration and Conciliation Act, 1996. The Arbitrator, before deciding the said issue, expired as a result whereof this issue has remained undecided.
Mr. Abhrajit Mitra, learned senior counsel appearing on behalf of the defendant submits that by reason of the death of the Arbitrator, the arbitration proceeding has not come to an end and having regard to the fact that there is an arbitration clause, a new arbitrator is required to be appointed to decide the dispute between the parties. Mr. Mitra has relied upon Section 14(3) and Section 32 of the Arbitration and Conciliation Act, 1996 to argue that there has been no formal termination of the arbitration proceeding. Death of the Arbitrator by itself would not result in 6 termination of the said proceeding when the agreement provides for supply of vacancy and a new Arbitrator could have been appointed to adjudicate the respective claims of the parties. In support of this argument, Mr. Mitra has relied upon a decision of this Hon'ble High Court in Sethi Constructions Vs. Kolkata West International City Private Limited reported at (2014) 3 CALLT 332 (HC).
On being confronted with the pleadings filed before the Arbitrator questioning the jurisdiction of the Arbitrator and on being asked to explain whether by reason of such plea being raised before the Arbitrator, is it still open for the defendant to argue for dismissal of the suit, it is argued that there cannot be any estoppel against statute inasmuch as the Arbitration and Conciliation Act, 1996 being a complete code in itself, the remedies provided under the said Act are required to be pursued. Mr. Mitra has referred to the decision of the Madras High Court in India Cements Capital Finance Limited Vs. Kwality Spinning Mills Ltd. & Others reported at [2000] 102 Company Cases 523 (Mad.) and submitted that mere denial of the existence of the arbitration agreement by the defendant does not by itself confer a power on the court to proceed with the suit when the issue required to be decided is as to whether the disputes are arbitrable. The issue necessarily has to be decided in a proceeding under the Arbitration and Conciliation Act, 1996. Mr. Mitra has also relied 7 upon the following cases for the proposition that the issue of estoppel is a mixed question of law and fact and having regard to the fact that the defendant did not derive any benefit out of the said objection it cannot preclude the defendant from filing an application under Section 8 of the Arbitration and Conciliation Act, 1996 for referring the parties to arbitration:
• Associated Publishers (Madras) Ltd. Vs. K. Bashyam alias 'Arya' & Another reported at AIR 1961 Mad 114, (1961) ILR Madras 134;
• Chandi Charan Nath Vs. Srimati Somla Bibi reported at 22 CWN 179, 44 Ind. Cas. 254;
• Chairman and MD, NTPC Limited Vs. Reshmi Constructions, Builders & Contractors reported at (2004) 2 Supreme Court Cases 663;
• Commissioner of Income Tax, Madras & Anr. Vs. V. MR P. Firm Muar & Ors. reported at (1965) 1 SCR 815 : AIR 1965 SC 1216 : (1965) 56 ITR 67.
It is submitted that in the pleading it has not been stated that the defendant by reason of such conduct is estopped from raising any plea with regard to maintainability of the suit and seeking adjudication of the disputes before the Arbitrator. The learned senior counsel was critical about the explanations offered for institution of the suit and abandoning the arbitration proceeding. It is submitted that if the plaintiff has abandoned the said proceeding then on a parity of reasons, as one could find from Order 23 Rule 4 of the Code of Civil Procedure, the suit is 8 clearly barred. It is submitted that although the provisions of the Code of Civil Procedure may not strictly apply to arbitration proceedings, but having regard to the law laid down by this Court as well as different High Courts, it is now abundantly clear that the provisions of the Code of Civil Procedure shall apply to arbitration proceedings. In this regard, reference is made to the following cases:
• West Bengal Government Employees (F&S) Co-Operative Housing Society Ltd. Vs. Shri Debabrata Sen & Ors. reported at 2009 (1) CLJ (Cal) 539;
• Delhi Development Authority & Ors. Vs. Alkarma reported at AIR 1985 Delhi 132, (1984) ILR 2 Delhi 660, 1984 RLR 693; • Jiwnani Engineering Works Pvt. Ltd. Vs. Union of India reported at AIR 1978 Cal 228.
In any event, it is submitted that having regard to the fact that the Arbitration and Conciliation Act, 1996 is a complete code and Section 5 of the said Act takes away the jurisdiction of this court as held in Empire Jute Company Limited & Others Vs. Jute Corporation of India Limited & Another reported at (2007) 14 Supreme Court Cases 680 subsequently followed in the decision of this court in LMJ International Limited vs. Swiss Singapore Overseas Enterprises Pte Limited (Ref: MANU/WB/0180/2015), the suit is barred by law.
Mr. Jishnu Saha, learned senior Counsel appearing on behalf of the plaintiff submits that the defendant has questioned the 9 very jurisdiction of the arbitrator to arbitrate the dispute. It is submitted that in an application under Section 8 of the Arbitration and Conciliation Act, 1996, having regard to the law laid down in Booz Allen and Hamilton Inc. vs. SBI Home Finance Limited & Ors. reported at (2011) 5 SCC 532, the Court would be required to decide the abritrability of the dispute. It is submitted that in the said decision in paragraph 36, the Hon'ble Supreme Court has given examples of non-arbitrable disputes which reads:
"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 (granted 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."
On the teeth of the objection raised by the defendant and having regard to the law laid down in Booz Allen (supra), following which our High Court has also delivered judgments, inter alia, holding that the said dispute is not arbitrable, the 10 plaintiff was advised to file a suit. The plaintiff in this regard has referred to the following judgments:
• M/s. Fingertips Solutions Pvt. Ltd. vs. Dhanashree Electronic Ltd. (Ref: MANU/WB/0937/2011); • Shyam Retails (India) Pvt. Ltd. vs. Bajaj Infracon Private Limited reported at (2014) 4 CHN (Cal) 73;
• Penumalli Sulochana Vs. Harish Rawtani reported at 2013 (4) Arbitration Law Reporter 264 Andhra Pradesh (Division Bench).
In the aforesaid decisions it has been categorically held that the issue of eviction is essentially an issue which could be adjudicated and/or decided by the Court as it involves various questions relating to the granting of the relief under the different provisions of Transfer of Property Act. The cumulative effect of the judgment of this Court in Eastern Coils (P) Ltd. Vs. Deb Prosad Ghosh [1992 (2) CLJ 349] and in case of Booz Allen (supra) is 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 a suit is maintainable. It has been submitted that the ratio laid down in the said judgments has also been followed recently by the Division Bench of Madras High Court in Penumalli Sulochana (supra) [paragraphs 17 to 22].
Before I decide the arbitrability of the dispute, it is necessary to examine the conduct of the defendant. It is material 11 since by conduct a party may waive a right or be estoped from exercising a right. Section 4 of the Arbitration and Conciliation Act, 1996 deals with waiver of a right to object. Let us take an example. A suit is instituted despite an arbitration clause in a contract. The defendant instead of filing an application under Section 8 of the Arbitration and Conciliation Act, 1996 has delivered his first statement of defence. Later on he filed an application under Section 8 of the Arbitration and Conciliation Act, 1996. The said application would not be maintainable since by delivering his first statement on the substance of the dispute he has waived his right to object to the jurisdiction of the court to decide the matter.
The jurisdiction of the civil court is plenary. It inheres a jurisdiction which is omnibus unless curtailed by a statute. The bar to jurisdiction must be express. There is no doubt that by reason of Section 5 of the Arbitration and Conciliation Act, 1996 there is an express bar to exercise any jurisdiction by any judicial authority in relation to matters covered by an arbitration agreement. The Arbitration and Conciliation Act, 1996 empowers a party to object to the jurisdiction of the Arbitrator to adjudicate the disputes by filing an application under Section 16(2) of the Arbitration and Conciliation Act, 1996 notwithstanding the fact that the said party has appointed or participated in appointment of an arbitrator. 12 The question arises what would happen if before the said issue is decided, the mandate of the arbitrator is terminated either by reason of death of the arbitrator or otherwise. Unless there is a clear specific bar that no other person other than the named arbitrator can proceed with the said arbitration and with the death of the said arbitrator the arbitration agreement would come to an end, the arbitration clause in the agreement would survive. In the instant case, none of the parties has taken any step for supplying the vacancy.
Mr. Mitra would urge that the issues raised before the Arbitrator are to be decided in the arbitration proceeding. However, in the course of submission, it is submitted that the defendant would not raise any objection as to the jurisdiction of the arbitrator to decide the dispute although the said submission is contrary to the pleadings filed before the arbitrator. The plaintiff appears to have accepted the plea taken by the defendant as to the arbitrability of the dispute by the arbitrator and accordingly has filed a suit. The plaintiff cannot be held to be remediless. The plaintiff on the basis of such objections has altered his positions in the sense that he has approached the Civil Court for adjudication of dispute. The defence disclosed before the arbitrator appears to be that the defendant is claiming certain protection under the Premises Tenancy Act and/or the Transfer of Property Act. If the defendant claims to be a tenant 13 and claims statutory protection under the West Bengal Premises Tenancy Act, then such dispute is required to be decided under the special statute in view of paragraph 36 of Booz Allen (supra) and Ranjit Kumar Bose & Anr. Vs. Anannya Chowdhury & Anr. reported at 2014 (11) SCC 446 shall apply. Although there is some substance in the argument of the defendant that Transfer of Property Act may not be considered to be a special statute, the fact remains that it is to be seen whether the defendant is claiming a protection under the West Bengal Premises Tenancy Act or not. The defendant just like a chameleon cannot change its colour and stand and take inconsistent plea before two different Fora. The defendant has to take a definite stand. On the basis of the defence disclosed before the Arbitrator, it seems that the defendant has asserted rights under the provisions of the West Bengal Premises Tenancy Act. In my view, the defendant is clearly estopped by conduct. The defendant has taken a clear stand before the Arbitrator that the Arbitrator has no jurisdiction to decide the dispute raised in the statement of claim. It was possibly to meet such contintencies that Justice Gupta in Jalan Carbon Chemicals(supra) held as follows:
"There is no denial that if any dispute is raised before an arbitrator as to the jurisdiction of the said forum to entertain the dispute, then said forum had the authority under section 16 of the said Act of 1996 to decide as to whether said dispute should be adjudicated in said forum or 14 not. But that does not mean that whenever a party will pray for referring the dispute to the arbitrator in view of an alleged arbitration clause in the agreement, the Court will blindly forward the matter to the arbitrator disregarding the objection of the other side as to its existence as well as arbitrability, on the ground that learned arbitrator may decide said issue under section 16 of the said Act of 1996. However, there is no denial that when there is an arbitration agreement and it is found that the entire dispute is referable to the arbitrator then learned Court should refer the dispute to the arbitrator under section 8 of the Act of 1996. I am of the opinion that eviction or tenancy matters governed by the Transfer of Property Act also may be decided in the Court of Law unless the Court is satisfied that the entire dispute was covered by an Arbitration Clause and that the nature of the dispute does not call for deciding intricate questions of law and that the dispute may effectively be decided in the forum of arbitration."
In Smt. Penumalli Sulochana (supra)the Hon'ble Division Bench after considering Paragraph 36 of Booz Allen (supra) stated:-
"18. In item - (vi) mentioned in the above paragraph, eviction or tenancy matters are governed by special State rules. The list furnished is only illustrative in nature and not exhaustive. The ratio that can discerned is that if a situation is governed by a specific provision of law, it cannot constitute subject matter of arbitration. If eviction of a tenant, governed by special statutes, cannot be the subject matter of arbitration, equally so, is a case, which squarely falls within the scope of Section 106 of the Act. The relationship between a lessor and a lessee is governed by 15 the provision of the Act. The arbitrator cannot be conferred with the power to decide the question, such as, whether a lessee is a tenant holding over, or the one at sufferance. Such matters are in the purview of a civil Court in a properly instituted suit.
19. In Padam Singh Jain v. M/s. Chandra brothers and others, the following view was expressed:
The right of a landlord to determine a tenancy arises under a statute namely, Transfer of Property Act. In a case covered by the building control legislation such as the said Act, in view of the decisions of the Supreme Court even such tenancies need not be terminated by serving a notice under S.106 of the Transfer of Property Act. It, therefore, follows that a right to file suit by a landlord against a tenant arises as soon as one or the other factors enumerated in various clauses of sub-section (1) of S.11 of the said Act are attracted."
In Ranjit Kr. Bose (supra)the Hon'ble Supreme Court relied upon an earlier decision in Natraj Studios (P) Ltd. Vs. Navrang Studios reported at 1981 (1) SCC 523 and held that the said decision supports the conclusion that the arbitration agreement between the landlord and tenant has to give way to Section 6 of the Premises Tenancy Act which confers exclusive jurisdiction on the Civil Judge decide the dispute between the landlord and the tenant with regard to the recovery of possession of the tenanted premises in a suit filed by the landlord. However, Booz Allen (supra) was considered in Orient Paper & Industries Ltd. Vs. Shaun 16 Automobiles Pvt. Ltd. reported at 2011 (5) CHN (Cal) 340 in which a learned single Judge while considering an application under Section 11 of the Arbitration and Conciliation Act, 1996, inter alia, held:-
"12. The 1996 Act does not stipulate what disputes are arbitrable and those which are not. Booz Allen & Hamilton Inc. is instructive on such score where it enumerates the classes of disputes that would not be arbitrable. The 1996 Act, however, recognizes that there are disputes that are incapable of adjudication in arbitration. Section 34(2)(b)(i) of the Act makes an award unenforceable if the reference included matters which were "not capable of settlement by arbitration under the law for the time being in force." As noticed earlier, it is only a particular class of disputes pertaining to eviction that would require adjudication in the specified for a and would not be amenable to arbitration.
13. In the present case, the assessment of the defence raised by the respondent - that the respondent is entitled to protection under the 1997 Act - would decide the entirety of the disputes between the parties. That would amount to usurping the authority of the arbitrator that the parties conferred on their consensual forum when they entered into the agreement. It is possible that a prima facie view on the matter is taken at this stage, and the arbitral tribunal is left free to decide the issue on an application under section 16 of the 1996 Act that may be carried before the tribunal by the 17 respondent, as to whether the respondent is entitled to protection under the 1997 Act.
15. It is made clear that the mere reference of the disputes to the arbitral tribunal cannot be cited as a bar to the arbitral tribunal entertaining any application as to its jurisdiction that may be filed by the respondent."
This judgment, however, was not cited and, accordingly not considered in M/s.Fingertips Solutions Pvt. Ltd.(supra).
That the dispute governed by the State Tenancy Act being held to be a special statute would debar an arbitrator to arbitrate such dispute is no more open to debate in view of Booz Allen (supra) and Ranjit Kr. Bose (supra). However, an eviction proceeding upon service of notice to Section 106 of the Transfer of Property Act may not be treated alike as Transfer of Property Act is a general law and the State Tenancy Act is special law. In fact, West Bengal Premises Tenancy Act was held to be a special statute in Ranjit Kr. Bose (supra). The fundamental question is if the defendant having raised a plea to the jurisdiction of the arbitrator to decide the dispute on the ground that it is not arbitrable could it have objected to the continuation of the suit on the ground that the arbitrator is only competent to decide the said issue in view of Section 16 of the Arbitration and Conciliation Act. In my view, the answer has to be in the negative.
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There cannot be any doubt that the civil court is not precluded from deciding the dispute but for the arbitration agreement. On the basis of the defence disclosed by the defendant irrespective of the outcome of such defence the defendant now at this stage cannot contend that the arbitrator is only competent to decide the dispute.
A party who has consciously taken a stand before an authority that the said authority lacks competence to decide the dispute by reason of some special law, could not thereafter take a different stand when the other party on the basis of such objection filed an appropriate proceeding before a civil court which is otherwise valid in law.
Under such circumstances, this application fails. There will, however, be no order as to costs.
(SOUMEN SEN, J.) S. Kumar / T.K.