Calcutta High Court
Suresh Tulshan vs Marco Polo Restaurant Pvt. Ltd on 30 July, 2015
Equivalent citations: AIR 2016 CALCUTTA 26, (2016) 1 RENTLR 167, (2016) 2 ICC 562, (2016) 1 CALLT 79, (2015) 4 CAL HN 94
Author: I.P. Mukerji
Bench: I.P. Mukerji
GA No. 2827 of 2013
C.S. No. 221 of 2013
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
Original Side
Suresh Tulshan, Trustee of K.P. Foundation & Ors.
Vs.
Marco Polo Restaurant Pvt. Ltd.
For the Defendant/Petitioner:- Mr. Jishnu Saha, Sr. Advocate
Mr. Srenik Shinghvi, Advocate
Miss S. Ganguly,Advocate
For the Plaintiff/ Respondent: Mr. Abhrajit Mitra, Sr. Advocate
Mr. S. Ghose, Advocate
Judgement on : 30th July, 2015
I.P. MUKERJI,J.
In the beginning of July 2013, this suit was filed in this court by six trustees of 20 trusts. These trustees, on behalf of the trusts, were jointly the lessees of a single storied building within premises no.24 Park Street, Kolkata-16. The lease by which they held this property empowered them to sub-lease it. A part of this building was let out by the plaintiffs to the defendant on 22nd April 2004 as a monthly tenant. The area covered by the tenancy was 2731 sq. ft. The rent payable was Rs. 1,98,375/- per month together with the tenant's contribution to municipal rates and taxes.
On 16th May, 2013 the plaintiffs' advocate issued a 15 days' notice under Section 106 of the Transfer of Property Act to the defendant asking them to quit, vacate and deliver up vacant possession of the demised property to the trustees after 31st May, 2013, being the date of determination of the tenancy. In fact 15 days from the date of the receipt of the said notice expired with the close of 2nd June, 2013. Possession was not handed over to the plaintiffs. This suit was filed by the plaintiffs against the defendant asking for their eviction and for vacant and peaceful possession of the property. There is also a claim for mesne profit.
Now, the tenancy agreement between the plaintiffs and the defendant was on Rs. 10/- stamp paper. It was admittedly understamped. It contained an arbitration clause being III (ii). It was in the following terms:
"If any dispute arises howsoever in connection with or arising out of or relating to the interpretation or implementation or purported termination of this Agreement, the parties shall attempt in the first instance to resolve such disputes by friendly consultations. If such dispute is not resolved through friendly consultations within sixty (60) days after commencement of discussions or such longer period as the parties agree to in writing then any party "may" refer the dispute for resolution by arbitration by a sole arbitrator to be appointed jointly by the parties. In case the Lessor and the Lessee are not able to jointly appoint a sole arbitrator then the provisions of the Arbitration and Conciliation Act, 1996 relating to the appointment of Arbitral Tribunal will apply. The arbitration proceedings shall be conducted in accordance with the Arbitration and Conciliation Act, 1996. The language of the arbitration shall be English. The place of arbitration shall be Kolkata. The arbitration award shall be final and binding on the parties and the parties agree to be bound thereby and to act accordingly. When any dispute is under arbitration, except for the matters under dispute, the parties shall continue to exercise their remaining respective rights and fulfil their remaining respective obligations under this Agreement to the extent practicable."
On 23rd July, 2013, the defendant entered appearance in the suit. By a Master`s Summons dated 25th July, 2013, the plaintiff took out an application under Chapter XIIIA of the Original Side rules of this Court. On 20th September, 2013, the defendant filed an affidavit in opposition to the said application.
In the meantime on or about 10th September, 2013 the defendant filed an application under Order XI rule 11 of the Code of Civil Procedure, which I will discuss in due course.
On or about 13th September, 2013 the defendant filed this application under Section 8 of the Arbitration and Conciliation Act contending that all the disputes between the parties in the suit be referred to arbitration and that the suit be permanently stayed.
It is opposed by Mr.Jishnu Saha learned senior advocate for the plaintiffs on several grounds.
First of all, he said that the deed of lease was deficiently stamped. Therefore the arbitration clause could not be looked into.
Secondly, the use of the word "may" in the arbitration agreement suggests that arbitration was an option and not compulsory.
Next, it was contended that the defendant had taken out an Order 7 rule 11 application saying that the Rent Act applied. Since the Supreme Court had held that disputes under the Rent Act could not be tried by the arbitrator and could be tried only by the courts the defendant could not ask for arbitration. Lastly, the defendant having taken the above stand in the Order 7 rule11 application is estopped from challenging the jurisdiction of the court. In answer to this, Mr Abhrajit Mitra, learned senior advocate for the defendant made the following submissions.
At the interim stage, the court was entitled to rely on the arbitration clause in the deficiently stamped Deed of lease. The defendant always had the right of curing the defect by properly stamping the same. The Court could order so, after impounding it under section 33 of the Stamp Act, 1899. The Court has no option but to refer the parties to arbitration on the application of the defendant under section 8 of the Arbitration and Conciliation Act, 1996. The disputes between the parties arose out the Transfer of Property Act, 1882. They relate to the determination of the lease, eviction, mesne profits. The arbitrator is competent to decide the dispute.
The defendant was obliged to defend the Chapter XIIIA application taken out by the plaintiffs, as there was no stay of the suit in the s.8 application. It was, also compelled to take out the Order 7 r.11 application, to challenge the jurisdiction of the court.
Finally, since the defendant has challenged the jurisdiction of this court, and according to the defendant this court has no jurisdiction to try the suit, this court should not entertain the s.8 application.
I will discuss the various cases cited by learned counsel later. Certain very fundamental questions have arisen during consideration of this application.
A) Since, the tenancy agreement on 22nd April, 2004 was deficiently stamped, is there a valid arbitration clause at all?
B) Even if there is an arbitration clause did the use of the word "may" therein give an option to each of the parties to resort to arbitration? C) Whether the nature of the disputes between the parties permit them to be resolved by arbitration or by this Court?
D) Did the defendant by filing the application under order 7 rule 11 of the Code of Civil Procedure raise such a dispute that could only be tried by a court of law?
E) Did the defendant by its conduct show an intention not to avail of arbitration?
DISCUSSION AND CONCLUSIONS I will take the simplest point first. Whether or not there is an arbitration clause binding the parties? What is the interpretation to be given to the word "may" in the clause? Is it to denote that arbitration is optional? In my opinion the answer is no. If you consider the first sentence of the arbitration clause, it says that in case of a dispute between the parties they will try to resolve them by "friendly consultation". If the disputes are not resolved in this way within 60 days, any party may refer the dispute for resolution by arbitration, by a sole arbitrator to be appointed jointly by the parties. The plain and simple meaning of this part of the clause, to my mind, is that the parties may accept the result of the "friendly consultation" and do nothing thereafter. Or they may refer the dispute to arbitration. I do not think that this clause gives an option to the party either to resort to arbitration or file a suit. The structure and language of the remaining part of the clause also do not suggest that arbitration is optional. In interpreting a clause of this nature, one has to read the whole clause, purposively, to determine the intention of the parties, considering the dicta of the Supreme Court in Enercon (India) Ltd. and Ors.Vs. Enercon GMBH and Anr. reported in AIR 2014 SC 3152 that "in our opinion, the courts have to adopt a pragmatic approach and not a pedantic or technical approach while interpreting or construing an arbitration agreement or clause". The approach of the courts should be to promote arbitration than to defeat it.
In Willington Associates Ltd. Vs. Kirit Mehta reported in (2000) 4 SCC 272 there were two side by side clauses one which conferred jurisdiction on the Bombay courts to try a suit between the parties and the other which said that the parties may refer the dispute to arbitration. It is in connection with interpretation of this clause that Mr. Justice M. Jagannadha Rao opined that the word "may" was to be construed as giving an option to the parties to opt for arbitration. In Jagdish Chander Vs. Ramesh Chander & Others reported in (2007) 5 SCC 719 the Supreme Court was concerned with the interpretation of a term in the arbitration agreement which said that the dispute between the parties "shall be referred for arbitration if the parties were so determined". Mr. Justice R.V. Raveendran held that the parties had provided an option to themselves to enter into another agreement for the purpose of resolving the disputes by arbitration. Hence, the clause did not constitute an arbitration clause.
Hence, both these cases cited by Mr. Saha are distinguishable and do not apply to the arbitration clause in this case.
There is no dispute that the agreement containing the arbitration clause is unstamped. Section 35 of the Indian Stamp Act, 1899 stipulates in most clear terms that if an instrument required to be stamped is unstamped or deficiently stamped it cannot be looked into for any purpose. However, Section 33 of the Act has given power to the Court to impound the document and send it to the Collector for stamping. After stamping of the document under s. 35 and s. 38 it is admissible in evidence. [ see SMS Tea Estate (P) Ltd. Vs. Chandmari Tea Company (P) Ltd reported in (2011) 14 SCC 66], cited by Mr. Mitra. This Court has held in Merlin Orihects Vs. Eouco Ventures (P) Ltd. reported in AIR 2015(NOC) 65 Cal that legalistically, even, at the interim stage of a proceeding, a court cannot look into an unstamped document. However, considering that at that stage, the court has the power to impound it get it properly stamped from the Collector and thereby cure the defect, protective orders can be passed, assuming that the document will be valid at a later stage. Therefore, in my opinion the arbitration agreement cannot be overlooked as invalid.
The second point in this application was raised by Mr. Mitra, learned senior Advocate. It was that the dispute in the suit was with regard to a claim for eviction and mesne profit against a monthly tenant. The monthly tenancy or monthly lease had been determined by a notice under Section 106 of the Transfer of Property Act. Hence the dispute should be referred to arbitration. I will first refer to a body of authority on the subject pronounced by this court. In C.O. No. 3084 of 2009 M/s Fingertips Solutions Pvt. Ltd. Vs. Dhanashree Electronics Ltd. decided by Mr. Justice Harish Tandon on 7th December, 2011 his lordship held that a dispute arising out of a lease or tenancy covered by the Transfer of Property Act could be more conveniently decided by the courts. A similar view was expressed by Mr. Justice Tarun Kumar Gupta in C.O. No. 2555 of 2011 Jalan Carbon and Chemicals Limited Vs. Passport Brand Clothing Company Private Limited decided on 24th December, 2013. Following the principles in Sukanya Holdings (P) Ltd. Vs. Jayesh H. Pandya and Another reported in (2003) 5 SCC 531 Mr. Justice Tandon M/s Shyam Retails (India) Pvt. Ltd. Vs. M/s Bajaj Infracon Pvt. Ltd. reported in (2014) 2CLJ (Cal) 381 said that even if a part of the dispute was severable and could be referred to an arbitrator, it was better if the entirety of the eviction dispute be decided by the court. His lordship, maintaining his earlier view remarked that a suit for recovery of possession under the Transfer of Property Act could only be tried by a civil forum. All these decisions cited by Mr. Saha tried to make an interpretation of the judgement of Mr. Justice R. V. Raveendran in Booz Allen And Hamilton Inc Vs. SBI Home Finance Limited And Others reported in (2011) 5 SCC 532 cited by Mr. Saha. But in my opinion the view of Mr. Justice Soumen Sen in Diamond Apartments Pvt. Ltd. Vs. Abanar Marketing Ltd. decided on 3rd June, 2015 cited by Mr. Mitra is closer to the principles decided in that Supreme Court case. The Supreme Court, in that decision made a wonderful distinction between disputes that could be decided by a private forum like an arbitrator and those which could be decided by a court of law. It ruled that the disputes which resulted in a judgement in rem or in other words a judgement which binds the world at large are not to be decided by an arbitrator. Such disputes include matrimonial disputes like divorce and judicial separation, testamentary matters and eviction of tenants in tenancy matters governed by Special statutes where the tenants enjoy special protection against eviction and Special courts are conferred jurisdiction to decide disputes. This is opposed to actions in personam where only the rights of contesting parties are decided. The decree or order does not affect any third party, let alone being binding on the world at large. These disputes can be referred to arbitration and decided by an arbitrator.
In my opinion in a pure and simple case arising out of a lease or tenancy arising out of the Transfer of Property Act, where the plaintiff seeks a declaration that the lease has been determined and wants the eviction of the defendant together with a claim for mesne profits and where this broad position on facts is admitted by the defendant, the dispute is in personam. It is between the plaintiff and the defendant. No other person is involved or is likely to be affected by the decision to be made. This dispute is referable to an arbitrator. Here was a monthly tenancy where the rent was above the ceiling fixed by the West Bengal Premises Tenancy Act, 1997. If one scrutinises the case of the plaintiff in the plaint one would be left with little or no doubt that it relates to the determination of lease, eviction and computation of mesne profit under the Transfer of Property Act, 1882. The Transfer of Property Act, 1882 is a general statute and the above issues could be determined by the Arbitrator. But there is a twist in the tale. The defendant took out an application in the suit under order 7 rule 11 of the Code of Civil Procedure. It challenged the jurisdiction of this court to try the suit. The averments in the application inter alia were that the suit was by joint sub-lessors with a right to sub-let. The defendant ran their case like this. Each of the plaintiffs had a separate interest in the demised property and that they were a lessee under each lessor in respect of his share in the property. Now, according to the defendant if the total rent was broken up and divided into the several demises the rent paid per lessor would be far less than 10,000/- p.m. Hence, the tenancy was covered by the Rent Act and this court had no jurisdiction to try it. This application was dismissed by this court but the effect of this dismissal is nothing but a ruling that on perusal of the plaint only it could not be said that the suit had been filed in the wrong court or under a misconception of law or was barred by law. This point is available to the defendant at the trial of the suit. It should also be remembered that the plaintiffs also filed an application under Chapter XIIIA of the Original Side Rules. The defendant filed their affidavit- in-opposition on merits. This point about the applicability of the Rent Act and lack of jurisdiction of this court was taken in the affidavit. Disputes are those material facts in which the parties are at variance. A court trying a s.8 application should try to ascertain the disputes from the available pleadings, evidence and conduct of the parties.
After initiation of the order 7 rule 11 applications and filing of the affidavit- in-opposition to the Chapter XIIIA application, the dispute which is likely to be raised before the arbitrator or at the trial of the suit has become clear. One of the points of defence of the defendant is that they are a monthly tenant protected by the said Rent act.
The court hearing a s. 8 application should decide whether there is prima facie substance in the plea taken and take a decision . I find that there is some substance in the defendant's plea. Then following Booz Allen And Hamilton Inc Vs. SBI Home Finance Limited And Others reported in (2011) 5 SCC 532 this kind of a dispute is to be exclusively tried by the courts. The arbitrator does not have the jurisdiction to try this dispute.
Moreover, having taken the above stand the defendant is estopped from challenging the jurisdiction of this court and contending that the matter be referred to arbitration.( see Mumbai International Airport Pvt. Ltd. vs. Golden Chariot Airport and Anr. reported in (2010) 10 SCC 422) cited by Mr. Saha. Mr. Justice Soumen Sen had also decided the case of Diamond Apartments Pvt. Ltd. Vs. Abanar Marketing Ltd similarly. Now, I come to the next point. Has the defendant, by its conduct waived its right to seek arbitration? There is a passage in Booz Allen And Hamilton Inc Vs. SBI Home Finance Limited And Others reported in (2011) 5 SCC 532 as follows.
"25. Not only filing of the written statement in a suit, but filing of any statement, application, affidavit by a defendant prior to the filing of the written statement will be construed as "submission of a statement on the substance of the dispute", if by filing such statement/application/affidavit, the defendant shows his intention to submit himself to the jurisdiction of the court and waives his right to seek reference to arbitration. But filing of a reply by a defendant, to an application for temporary injunction/attachment before judgement/appointment of Receiver, cannot be considered as submission of a statement on the substance of the dispute, as that is done to avoid an interim order being made against him."
The order 7 rule 11 application was filed by the defendant. Look at the scope of this application. According to it the suit ought not to have been filed in this court. The valuation of each tenancy is lower than Rs. 10 lakhs. Moreover the suit is not covered by the Transfer of Property Act but is under the Rent Act. If you go by the contention of the defendant as a whole you will see that the objection is towards the trial of the suit in this court and not to the trial of the dispute by a competent court. This view is further strengthened by the fact that an order 7 rule 11 application was made, before this application under Section 8 of the Arbitration and Conciliation Act for reference of the dispute to arbitration was filed. Moreover, the defendant has contested the Chapter XIIIA of application by filing an affidavit on merits. Mr. Mitra said that his client had no option but to file an affidavit-in-opposition to the Chapter XIIIA application, after dismissal of the order 7 rule 11 application. Furthermore, his client was compelled to file an affidavit in the chapter XIIIA application because they were unable to obtain any interim order in the Section 8 application which was moved on 17th September, 2013.
In Rashtriya Ispat Nigam Limited and Anr. Vs. Verma Transport Company reported in AIR 2006 SC 2800 cited by Mr. Mitra the Supreme Court interpreted section 8 of the Arbitration and Conciliation Act as meaning that a party could file an application or affidavit in the suit to defend himself without waiving his rights to refer the disputes to Arbitration. On the other hand, Mr. Justice R. V. Raveendran in Booz Allen And Hamilton Inc Vs. SBI Home Finance Limited And Others reported in (2011) 5 SCC 532 went to the extent of pronouncing that even before filing the written statement an application or affidavit by the defendant might be evidence of the party's intention to submit himself to the jurisdiction of the court and waiver of his right to seek arbitration.
In my opinion the filing of the order 7 rule 11 application by the defendant manifested a firm intention on its part of submitting to the jurisdiction of the ordinary courts of the land, as the defendant wanted trial under the Rent Act by a subordinate court. They did not object to the jurisdiction of the courts in general but objected to the jurisdiction of this court. This interest is manifest despite a pleading that the application was being taken out without prejudice to the right of the defendant to seek arbitration.
For all the above reasons this matter cannot be referred to arbitration. Hence this application under Section 8 of the Arbitration and Conciliation Act, 1996 is dismissed. Interim order, if any, is vacated.
Certified photocopy of this Judgment and order, if applied for, be supplied to the parties upon compliance with all requisite formalities.
(I.P. MUKERJI, J.)