Delhi District Court
Ashok Kumar Rana vs M/S Reliane Jio Infocomm Ltd on 20 July, 2021
: IN THE COURT OF :
DR. V.K. DAHIYA
ADDITIONAL DISTRICT JUDGE01:
SOUTHWEST DISTRICT: DWARKA COURTS:
NEW DELHI
Civil Suit No. 687/2017 (515787 / 2016)
In the matter of:
Ashok Kumar Rana
son of Sh.Kalyan Chand Rana
R/oShop No.6, Aliganj Market
Jorbagh Line, Lodhi Road
New Delhi
..... Plaintiff
VERSUS
M/s Reliane Jio Infocomm Ltd.
Formerly known as Infotel Broadband Services Ltd.
3rd Floor, Maker Chambers IV
222, Nariman Point, Mumbai400021
(Through its Managing Director)
ALSO AT:
Building1, First Floor
Reliance Corporate Park
Ghansoli, Thane Belapur Road
Navi Mumbai400701
........ Defendant
CS No.687/2017 (515787/2016)
Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.
Page No.1 of 35
Date of Institution of Suit : 13.08.2015
Date of reserving judgment : 20.07.2021
Date of pronouncement : 20.07.2021
Appearance:
(i) Sh.Amit Srivastava, Advocate, Ld. Counsel for plaintiff
(ii) Sh.Rohit Jain, Advocate, Ld. Counsel for defendant.
SUIT FOR RECOVERY OF RS. 3,71,475 ALONG WITH PENDENTE
LITE AND FUTURE INTEREST
O R D E R:
1. Vide this order, I shall dispose of an application moved by the applicant/defendant under Section 8 of the Arbitration & Conciliation Act, 1996 (in short the Act).
2. Brief facts relevant for disposal of this application are like this:
(i) It is averred that the plaintiff filed the present suit and, interalia, averred that defendant approached plaintiff to use the terrace of the property of plaintiff bearing flat No.629, BlockB, Pocket3, Bindapur, Dwarka Residential Scheme, New Delhi110059 on lease hold basis for the purpose of installation, operation and maintenance of single or multiple transmission tower/pole/mast and other related equipments etc for business purposes (in short the tenanted premises). The CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.Page No.2 of 35
plaintiff agreed for the same and in terms of lease deed dated 19.11.2012, the tenanted premises was let out to the defendant for a period of 20 years at a monthly rent of Rs.7,800/ (in short, the said lease deed).
(ii) That plaintiff as per the requirement, specifications and directions of defendant renovated the tenanted premises and spent a sum of Rs.65,000/. Apart from that, plaintiff has incurred expenses for installation of iron stairs, plumbing and shifting of water tank from the tenanted premises to the tune of Rs.35,000 and Rs.30,000/ respectively.
(iii) That the defendant was supposed to install the transmission tower/pole/mast and other related equipments on the tennated premises, however, defendant failed to install the same for the reason best known to the defendant. Plaintiff after waiting for few months contacted the employees of defendant and requested them to install the equipments on the tenanted premises as per the terms and conditions of the lease deed and those employees had assured plaintiff that very soon such equipments will be installed on the tenanted premises. The plaintiff time and again approached the employees of defendant and also made several calls to them for payment of the rent of the tenanted premises and finally plaintiff in the month of December, 2014 requested the employees of defendant to CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.
Page No.3 of 35install their equipments on the tenanted and pay the rent as per the terms and conditions of the lease deed.
(iv) Plaintiff was shocked to receive notice dated 18.12.2014 whereby the lease deed was terminated by the defendant without assigning any reason. The defendant did not pay the rent for a period of 26 months for the tenanted premises. Defendant neither paid rent for 3 months advance notice period nor paid the amount of Rs.65,000/, i.e. the expenses borne by the plaintiff for renovation and installation of iron stairs.
(v) That the defendant kept the tenanted premises for 266 months and thereby causes huge loses to the plaintiff, therefore, plaintiff sent legal notice dated 30.03.2015 and demanded the rent for the tenanted premises at the agreed rate. The defendant did not respond, therefore, the present suit has been filed for recovery of the suit amount.
3. Summons for settlement was issued to the defendant.
Defendant appeared and moved an application under Section 8 of the Arbitration & Conciliation Act stating therein that defendant was looking for suitable property for installation of its telecommunication tower in order to loose its signal strength in the area so that its subscribers should not face any call drop or low signal while CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.
Page No.4 of 35accessing broadband internet services, voice call allied services etc. Plaintiff approached the defendant and showed his interest to rent the tenanted premises for setting up telecommunication tower and after due deliberation, the lease deed was entered into between the parties in respect of the tenanted premises.
4. The lease deed dated 19.11.2012 contained a clause6 for referring the dispute between the parties to the arbitrator, therefore, as per the mandate of Section 8 read with 5 of the Act and in view of the mandate of law laid down in Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petrolems, (2003) 6 SCC 503, the plaint deserves to be returned to the plaintiff and parties may be directed to approach the ld. arbitrator as per the arbitration clause contained in the said deed.
5. Reply to this application has been filed by the plaintiff wherein the contents of the plaint are reiterated and, interalia, it is submitted that the application is nothing but a gross misuse of the process of law and filed with the sole intention to delay the trial in as much as defendant did not respond for more than six months, and suddenly appeared, when this court was about to pass an exparte order against the defendant, thereafter, instead of filing written statement, defendant filed the present application. It is submitted that the plaintiff has admitted the tenancy, the rate of rent as well as CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.
Page No.5 of 35factum of cancellation of lease deed and termination of the tenancy by the defendant, however, the lease deed is not registered, therefore, this court cannot look at or rely upon the said lease deed. The tenancy of law shall be treated as month to month basis tenancy as per mandate.
6. It has been contended by counsel for the defendant that, even if, the lease deed is not registered, arbitration clause is an independent and separate clause providing resolution of dispute without affecting substantive rights of the parties and as per mandate of 16 of the Act, the arbitration clause which forms part of the contract shall be treated as an agreement independent from the other terms of the contract. It is further submitted that and even if, it is held that the contract is null and void, the same shall not be invalidate the arbitration clause in the lease deed. It is further contended that as per mandate of Section 8 of the Act, the court is duty bound to dismiss the suit and refer the parties to arbitration. Arbitration clause did not govern rights and obligations arising out of substantive contract but only govern the way the dispute, if any, between the parties has to be adjudicated upon. In this regard reliane is placed upon Sasan Power Ltd. v. North American Coal Corporation India Pvt. Ltd. judgment passed in Civil Appeal No.8299/2016 by Hon'ble Supreme Court and A. Ayyasamy v. A.Paramasivam & Ors., VII (2016) SLT 254.
CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.
Page No.6 of 357. It is further contended that the parties are free to agree on the procedure for resolution of the dispute and it is mandate of the superior courts that party autonomy is supreme for the purpose of arbitration in as much as parties can confer power to get their dispute resoled through arbitral tribunal. In this regard, reliance is placed upon Centroade Minerals and Metals Inc. v. Hindustan Copper Ltd., (2017) 1 SLT 379; Union of India v. Uttar Pradesh State Bridge Corporation Ltd., (2015) 2 SCC 52 and Booz Allen & Hamilton Inc. v. SBI Home Finance Limited and Ors., VI (2011) SLT 653.
8. It is further contended that once it is brought to the notice of the court that there is an arbitration clause between the parties then it is the bounden duty of the court to refer the parties to the arbitration as court ceases to exercise any jurisdiction over the dispute. In this regard, reliance is placed upon P.Anand Gajapathi Raju v. P.V.G.Raju (Dead), (2000) 4 SLT 123; Sundaram Finane Ltd. v. T.Thankam, (2015) 2 SLT 575 and Hema Khattar & Anr. v. Shiv Khera, (2017) 4 SLT 430.
9. It is further contended that even if the lease deed is not registered, the arbitration clause contained in the said unregistered lease deed is an independent and separate agreement to the substantive agreement and did not require registration for CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.
Page No.7 of 35invocation of the said arbitration clause. Reliance is placed upon Trans World Finance & Real Estate Co. Pvt. Ltd. v. Union of India 97 (2002) DLT 767; Parasvnath Developers Ltd. & Ors. vs. Rail Land Development Authority in Arbitration Petition No.724/2018 judgment passed by Hon'ble High Court of Delhi; Garware Wall Ropers Ltd. vs Coastal Marine Constructions, Vol.II (2019) SLT 678; Vidya Drolia v. Durga Trading Corporation judgment passed in civil appeal 2402/2019 by Hon'ble Supreme Court (in short Vidya Drolia I); Vidya Drolia v. Durga Trading Corporation (2021) 2 SCC 1 (in short Vidya Drolia II); N.N.Global Mercantile Pvt. Ltd. v. M/s Indo Unique Flame Ltd., 2021 SCC Online SC 13 and SMS Tea Estates (P) Ltd. v. Chandmari Tea Co (P) Ltd.
(2011) 14 SCC 66.
10. Per contra, counsel for the plaintiff has contended that despite the fact that defendant has admitted the factum of existence of the unregistered lease deed, the rate of rent and nature of the tenancy, however, the defendant has sought invocation of Section 8 of the Act relying on the arbitration clause contained in unregistered lease deed. The unregistered lease deed cannot be looked into for any purpose except for collateral purpose as per Section 49 of the Indian Registration Act. Reliance is placed upon National Textiles Corporation and Anr. v. Ashval Vaderaa judgment passed by Hon'ble High Court of Delhi in CRP No.166/2007.
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Page No.8 of 3511. It is further contended that apart from lease deed not registered there is a violation of the provision of the Stamp Act and, therefore, this arbitration clause can neither be invoked nor this lease deed can be acted upon and this lease deed deserved to be impounded as per the provision of the Stamp Act. In this regard reliance is placed upon M/s Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram & Other Charities & Ors. v. Bhaskar Raju & Others, 2020 SCC Online Online SC 183; Himgiri Enterprises v. Kanwaljeet Singh Ahluwalia, 2017 Law Suit (SC) 1020.
12. I have heard ld. counsels for the parties and have through the records as well as the written submissions filed by the parties including the case laws relied upon by counsels for the parties.
13. It may be noted that the said lease deed dated 19.11.2012 contains the arbitral clause, which is reproduced as under :
6(a) xxx
(b) "In the event of any controversy, dispute or difference arising out of or in connection with or in relation to any term of this Deed, both parties shall endeavor to settle each dispute or difference by negotiation inter se within CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.Page No.9 of 35
15 (fifteen days) days, or such extended time as may be mutually agreed, failing which, such dispute or difference shall be referred to a sold arbitrator appointed by the Lessee. The place of arbitration shall be at Mumbai and the language of the arbitration shall be English. The arbitration shall be in accordance with the Arbitration & Conciliation Act, 1996 or any statutory modification or re enactment thereof. The award of the arbitrator shall be final and binding on the parties.
14. Therefore, as per the above said clause, any dispute that arises between the parties should only be resolved through arbitration, and no civil court should have the jurisdiction in the matter.
15. At this stage, it is necessary to extract Section 8 of the Arbitration & Conciliation Act, which is as under :
"8. Power to refer parties to arbitration where there is an arbitration agreement. (1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.
(2) The application referred to in Subsection (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.
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Page No.10 of 35(3) Notwithstanding that an application has been made under Subsection (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made."
16. A bare perusal of the above said provision makes it clear that no court will have jurisdiction, if it is expressly or impliedly barred by any law. However, so far as the express bar is specified in the above provision is with regard to the existence of the arbitration agreement. The factum of the Arbitration clause is not denied by the parties in their pleadings. Section 8 clearly stipulates that whenever a suit is filed in a civil court the cause of the action of the said suit emanates from a contract in which parties have voluntarily and willingly agreed to settle the dispute by arbitration. If such conditions are met, then it is bounden duty of the court to refer the parties to arbitration. It is mandatory that the essentials of Section 8 of Arbitration and conciliation Act are fulfilled the procedure contemplates therein has to be as followed as such. when a party approaches the Civil Court for redressal of disputes and the different who alleges that there is an arbitral clause for the resolution of disputes arising between them should be prudent enough to follow the conditions enumerated under Section 8 of the Act, 1996. As Section 8 is the only provision in the act, which entitles a party seeking a referral to arbitration, in a pending suit. Even if there is arbitration agreement between the parties, the onus CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.
Page No.11 of 35is on the party claim to have approached the Court under Section 8 of the Act. So is the ratio of other case law relied upon on this issue and, in particular, in Sasan Power (supra), it has been observed as under :
"Whether an arbitration agreement is exclusively governed by the provisions of either by part1 or by part2 of 1996 Act or both, judicial authorities seized of an action in respect of which there exist an arbitration agreement are bound to refer the dispute between the parties to arbitration and are precluded under Section 8 and 45 from adjudicating the dispute."
17. By placing reliance on Himgiri Enterprises (supra), Dharmaratnakara Rai (supra), and National Textile (supra), the contention of ld. Counsel for the plaintiff, apart from the issue of arbitrability, is that the dispute in question cannot be referred to the ld.arbitrator in as much as the said lease deed is neither registered nor sufficiently stamped as per the provisions of the Indian Stamp Act.
18. It may be noted that in Natraj Studios (P) Ltd vs Navrang Studios & Anr 1981 1 SCC 523, it was held that the CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.
Page No.12 of 35dispute between landlord and tenant under Bombay Rent, Hotel and Lodging House Rent Act cannot be referred to an Arbitrator.
19. It was held in Booz Allen & Hamilton (supra) that a suit to enforce a mortgage must be decided by court of law and not by arbitral Tribunal that every civil or commercial dispute which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration, unless it is excluded expressly (as a matter of public policy) or by necessary implication and the the Court enumerated examples of nonarbitrable disputes. Regarding landlordtenant disputes, the Court stated in obiter that tenancy disputes are not arbitrable when (i) the eviction or tenancy matters are governed by special statutes; (ii) the tenant enjoys statutory protection against eviction; and (iii) only specified courts are conferred jurisdiction to grant eviction or decide the disputes.
20. It may be noted that in SMS Tea Estates Pvt. Ltd. (supra), while dealing with the question as whether an Arbitration Agreement in an unregistered (but compulsorily registrable) instrument is valid and enforceable, the Hon'ble Supreme Court opined as under: "7. When a contract contains an arbitration agreement, it is a collateral term relating to the resolution of disputes, unrelated to the performance of the contract. It is as if two CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.
Page No.13 of 35contracts one in regard to the substantive terms of the main contract and the other relating to resolution of disputes had been rolled into one, for purposes of convenience. An arbitration clause is therefore an agreement independent of the other terms of the contract or the instrument. Resultantly, even if the contract or its performance is terminated or comes to an end on account of repudiation, frustration or breach of contract, the arbitration agreement would survive for the purpose of resolution of disputes arising under or in connection with the contract. Similarly, when an instrument or deed of transfer (or a document affecting immovable property) contains an arbitration agreement, it is a collateral term relating to resolution of disputes, unrelated to the transfer or transaction affecting the immovable property. It is as if two documents one affecting the immovable property requiring registration and the other relating to resolution of disputes which is not compulsorily registrable are rolled into a single instrument. Therefore, even if a deed of transfer of immovable property is challenged as not valid or enforceable, the arbitration agreement would remain unaffected for the purpose of resolution of disputes arising with reference to the deed of transfer." XXXXX CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.
Page No.14 of 3516. It is trite that the law clearly provides that lease of immovable property from year to year, or for any term exceeding one year, can be made only by a registered instrument [Section 17(1)(d) of the Registration Act, 1908 and Section 107 of the Transfer of Property Act, 1882] and that Section 49 of the Registration Act sets out the effect of nonregistration to be that if a document which is compulsorily registrable, if not registered, will not affect any immovable property comprised therein in any manner nor would be received as evidence of any transaction affecting such property except for two limited purposes, viz., as evidence of a contract in a suit for specific performance and as evidence of any collateral transaction not required to be effected by registered instrument [Proviso to Section 49 of the Registration Act]. In the present case, the first exception is clearly not applicable, this being a dispute premised on a Lease Deed. It is the second exception which is sought to be pressed into service by the counsel for the Petitioner by submitting that the Petitioner seeks recovery of the security deposit and not the enforcement of the Lease Deed dated 04.07.2011."
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Page No.15 of 3521. A bare perusal of the above said paras depict that Hon'ble Supreme Court delved into two issues, namely, (I) whether arbitration agreement in unregistered documents are valid and (ii) whether arbitration agreements in unstamped documents are valid. On the first issue the court held that arbitration agreement does not require registration in the light of the proviso to Section 49 of the Registration Act, 1908. The Hon'ble Supreme Court based on the doctrine of severability held that agreement being independent of the main contract is valid. However, on the second issue the Hon'ble Supreme Court held that Section 35 of the Stamp Act does not provide a similar provision and therefore, arbitration agreement cannot be enforced in unstamped document.
22. So far as the reliance on Himgiri (supra) is concerned, it may be noted that the ratio of Himgiri (supra) has been taken note of in Vidya DroliaI, wherein it has been observed:
19. A perusal of both the aforesaid judgments, therefore, shows that a Transfer of Property Act situation between a landlord and tenant is very far removed from the situation in either Natraj Studios (supra) or in subparagraph (vi) of paragraph 36 of Booz Allen (supra). We are, therefore, of the respectful view that the question involved in a Transfer of Property Act situation cannot possibly be said to have CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.Page No.16 of 35
been answered by the two decisions of this Court, as has been stated in paragraph 18 of the said judgment.
20. The said judgment then goes on to state:
"23. The learned counsel for the appellant, however, argued that the provisions of the Delhi Rent Act, 1995 are not applicable to the premises by virtue of Section 3(1)(c) of the Act and hence, the law laid down in the aforementioned two cases would not apply. We do not agree.
24. The Delhi Rent Act, which deals with the cases relating to rent and eviction of the premises, is a special Act. Though it contains a provision (Section 3) by virtue of it, the provisions of the Act do not apply to certain premises but that does not mean that the premises conferring jurisdiction on the arbitrator to decide the eviction/rent disputes. In such a situation, the rights of the parties and the demised premises would be governed by the Transfer of Property Act and the civil suit would be triable by the civil court and not by the arbitration. In other words, though by virtue of CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.Page No.17 of 35
Section 3 of the Act, the provisions of the Act are not applicable to certain premises but no sooner the exemption is withdrawn or ceased to have its application to a particular premises, the Act becomes applicable to such premises. In this view of the mater, it cannot be contended that the provisions of the Arbitration Act would, therefore, apply to such premises.
21. It may be noticed that none of the provisions of the Transfer of Property Act have been noticed by this judgment. In fact, none of the aforesaid provisions would indicate that disputes under the said Act are triable only by the civil court and not by arbitration, as has been held in this paragraph. It is clear that the Transfer of Property Act is silent on arbitrability, and does not negate arbitrability.
22. In a similar situation, this court in Olympus Superstructures Pvt. Ltd. v. Meena Vijay Khetan and Others, (1999) 5 SCC 651, held that when it came to the grant of specific performance, there is no prohibition in the Specific Relief Act that issues relating to specific performance cannot be referred to arbitration, unlike the English statute.
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Page No.18 of 3523. Equally, because a discretion had to be exercised by the court on whether or not to grant specific performance, would not militate against specific performance being granted {see paragraph 44, in particular of Booz Allen (supra)}. It is clear, therefore, that the judgment in Himangi Enterprises (supra) will require a relook by a Bench of three Hon'ble Judges of this court.
23. In Vidya DroliaI, the Court held that a dispute between landlordtenant governed by TP Act was never covered under either Natraj Studios (as this was a case under Bombay Rent Act) or Booz Allen (as this was a case involving enforcement of mortgage which was a right in rem). The Court differed with its judgment in Himangni Enterprises and held that the decision was not based on sound reasoning. It held that merely because the government could withdraw the exemption (from the applicability of Delhi Rent Act) would not render the dispute in arbitrable. The Court agreed that if the Delhi Rent Act becomes inapplicable, the dispute would be governed by TP Act. However, it was not convinced that an arbitrator could not decide landlordtenancy matters governed under TP Act. Analysing the provisions of the TP Act (particularly Sections 111, 114 and 114A, which specifically cover landlordtenants' rights and liabilities), the Court held that the CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.
Page No.19 of 35disputes under TP Act can be decided by an arbitrator, and there is nothing in the TP Act that prohibits arbitrability.
24. A bare perusal of the abovesaid para depicts that the ratio of Himgiri Enterprises (supra) was required to be relooked by a larger bench. Having thus found itself at odds with its judgment in Himangni Enterprises, the Hon'ble Supreme Court referred the matter to a larger bench of three judges, which culminated in the passing of Vidya DroliaII judgment.
25. In Vidya DroliaII, regarding arbitrability, it has been observed as under :
"48. Landlordtenant 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 thirdparty rights or have erga omnes affect or require centralized adjudication. An award passed deciding landlordtenant disputes can be executed and enforced like a decree of the civil court. Landlordtenant 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 CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.Page No.20 of 35
tenant disputes are arbitrable as the Transfer of Property Act does not forbid or foreclose arbitration. However, landlordtenant 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 enforced by the specified court/forum, and not through arbitration. Who decides nonarbitrability?"
"96. Discussion under the heading Who decides Arbitrability? can be crystallized as under:
(a) Ratio of the decision in Patel Engineering Ltd. on the scope of judicial review by the court while deciding an application under Sections 8 or 11 of the Arbitration Act, post the amendments by Act 3 of 2016 (with retrospective effect from 23.10.2015) and even post the amendments vide Act 33 of 2019 (with effect from 09.08.2019), is no longer applicable."
(b) Scope of judicial review and jurisdiction of the court under Section 8 and 11 of the Arbitration Act is identical but extremely limited and restricted.
(c) The general rule and principle, in view of the legislative mandate clear from Act 3 of 2016 and Act 33 of 2019, and the principle of severability and competence competence, is that the arbitral tribunal is the preferred first authority to determine and decide all questions of nonarbitrability. The court has been conferred power of second look on aspects of non arbitrability post the award in terms of subclauses (i), (ii) or (iv) of Section 34(2)(a) or subclause (i) of Section 34(2)(b) of the Arbitration Act.
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Page No.21 of 35(d) Rarely as a demurrer the court may interfere at the Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is non existent, invalid or the disputes are nonarbitrable, though the nature and facet of nonarbitrability would, to some extent, determine the level and nature of judicial scrutiny. The restricted and limited review is to check and protect parties from being forced to arbitrate when the matter is demonstrably nonarbitrable and to cut off the deadwood. The court by default would refer the matter when contentions relating to nonarbitrability are plainly arguable; when consideration in summary proceedings would be insufficient and inconclusive; when facts are contested; when the party opposing arbitration adopts delaying tactics or impairs conduct of arbitration proceedings. This is not the stage for the court to enter into a mini trial or elaborate review so as to usurp the jurisdiction of the arbitral tribunal but to affirm and uphold integrity and efficacy of arbitration as an alternative dispute resolution mechanism.
26. In Vidya DroliaII, the Court laid down a fourfold test to determine the arbitrability of disputes. It held that a dispute would be inarbitrable when:
i) it relates to actions in rem or actions that do not pertain to subordinate rights in personam that arise from rights in rem.
ii) it affects third party rights; have erga omnes 9 effect; require centralized adjudication, and mutual adjudication would not be appropriate and enforceable;
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Page No.22 of 35iii) it relates to the inalienable sovereign and public interest functions of the state; and
iv) it is expressly or by necessary implication nonarbitrable as per mandatory statute(s).
27. In Vidya DroliaII, broad principles has been set out regarding arbitrability of dispute. It has been laid down that the landlord and tenant dispute under the transfer of property Act and not under any special Statute, (such as State Specific Rent Legislation etc.) could be arbitrable. In addition to it, Vidya Drolia II, judgment also demarcates the scope of inquiry by courts in determining question of arbitrability at the prearbitration/reference stage under Section 8 & 11 of the Act, along with issues relating to the arbitrability of dispute involving fraud and debt recovery, amongst others.
28. Thereafter, Hon'ble Supreme Court in N.N. Global (supra) has laid down law regarding arbitrability and has held as under :
"10 In the present case, since both parties have admitted the existence of the arbitration agreement between the parties, as recorded in the judgment of the High Court, and even before this Court during oral submissions, parties may either appoint a sole arbitrator consensually; failing which, an application u/S. 11 for appointment of the arbitrator may be made before the High Court.
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11. In view of the discussion hereinabove, we hold that:
(i) The impugned judgment and order dated 30.09.2020 in W.P. No. 1801 of 2020 passed by the Bombay High Court is set aside;
(ii) We direct the Secretary General of this Court to impound the Work Order dated 28.09.2015, and forward it to the concerned Collector in Maharashtra for assessment of the Stamp Duty payable on the said instrument, to be completed within a period of 45 days from receipt of the same;
(iii) On determination of the Stamp Duty payable, the Appellant / Plaintiff is directed to make the payment assessed by the Collector u/S.30(fa) of the Maharashtra Stamp Act, 1958 within a period of four weeks from the date of receipt of communication of the Order; The Stamp Duty assessed by the Collector will, however, be subject to the statutory right available to file a revision / appeal under the Maharashtra Stamp Act.
(iv) With respect to the invocation of the Bank Guarantee, the Appellant may seek interim relief u/S. 9 of the Arbitration and Conciliation Act, 1996. We extend the stay granted by the High Court for a further period of eight weeks.
12. We are of the considered view that the finding in SMS Tea Estates and Garware that the nonpayment of stamp duty on the commercial contract would invalidate even the arbitration agreement, and render it nonexistent in law, and unenforceable, is not the correct position in law.
In view of the finding in paragraph 92 of the judgment in Vidya Drolia by a coordinate bench, which has affirmed the judgment in Garware, the aforesaid issue is required to be authoritatively settled by a Constitution bench of this CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.
Page No.24 of 35Court. We consider it appropriate to refer the following issue, to be authoritatively settled by a Constitution bench of five judges of this Court :
"Whether the statutory bar contained in Section 35 of the Indian Stamp Act, 1899 applicable to instruments chargeable to Stamp Duty under Section 3 read with the Schedule to the Act, would also render the arbitration agreement contained in such an instrument, which is not chargeable to payment of stamp duty, as being non existent, unenforceable, or invalid, pending payment of stamp duty on the substantive contract / instrument ?"
29. From the above discussion, it can be safely concluded that the landlord and tenant dispute are arbitrable as per the mandate of law laid down in SMS Tea Estate, Vidya DroliaI and Vidya DroliaII and N.N.Global (supra). It may also be noted that in N.N.Global (supra) the Hon'ble Supreme Court also expressed some important views regarding arbitrabality of void and voidable agreements. In SMS Tea Estate (supra), it was held that an arbitration agreement tis voidable at the option of a party and, therefore, the court has a power to adjudicate upon the same. However, in N.N.Global (supra), it was held that issue regarding a contract being void and voidable can be referred to arbitration in as much as allegation regarding contract being voidable are to be proved through evidence which can be assessed through arbitrator. Furthermore, only when the court is satisfied that the contract is void upon reading of the contract without any additional evidence the court can refuse to refer the parties to arbitration. This judgment furthered proarbitration approach in India and Hon'ble CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.
Page No.25 of 35Supreme court has restricted its jurisdiction to merely examine the existence of arbitration agreement. Hon'ble Supreme Court re enforced the competence of the arbitral tribunal to determine issue with respect to the void and voidable nature of the contract as well as cases of fraud. This further boosted the autonomy of the arbitrator and established them as competent as other judicial officer in handling complex dispute. The issue of arbitrability of dispute is to be decided by the ld.arbitrator and not by the court except for the limited purpose for satisfying that, prima facie, there is a dispute between the parties, which is required to be referred to arbitration. Needless to say that non registration of said lease deed is no ground to reject the application in as much as dispute between landlord and tenant as per the arbitration clause contained in the unregistered lease deed can be referred to the ld.arbitrator, as per mandate of the law laid down by superior courts.
30. After having delve upon question of arbitrability of the dispute as per the mandate laid down by Hon'ble Supreme Court, and that the arbitrator can be appointed in respect of the dispute between landlord and tenant even in case of an unregistered lease deed, this court would like to deal with the contention of the counsel for the plaintiff that an insufficiently stamped lease deed is legally inadmissible and liable to be impounded, therefore, arbitrator cannot be appointed in terms of the insufficiently stamped lease deed/document.
CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.
Page No.26 of 3531. So far as the said lease deed is not sufficiently stamped, suffice is to say that in SMS Tea Estate(supra), it was observed that a document containing arbitration clause or an independent arbitration agreement which is insufficiently stamped is not enforceable in Indian Courts for Arbitration under PartI of the Act. The same position was reiterated by Hon'ble Supreme Court of India in Garware Wall (supra) and Dharmaratnakara (supra), the principle laid down in SMS Tea Estate(supra) has been reaffirmed. However, in Dharmaratnakara (supra), the directions were issued to the parties to pay the deficient court fees, however, the parties failed to pay the deficient stamp duty and the Hon'ble High Court relied upon the such insufficiently stamped lease deed and in this context the Hon'ble Supreme Court has held that when a lease deed or any other instrument is relied upon as containing an arbitration agreement, at the outset, the court must consider whether the instrument is properly stamped or not.
32. The question regarding the reference of the matter to ld. Arbitrator in case the lease deed/documents is insufficiently stamped was taken care of in the judgment N.N. Global (supra), wherein the SMS Tea Estate (supra) and Garware (supra) has been over ruled, which has already been reproduced in foregoing paras. However, it was further observed as under: CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.
Page No.27 of 35"7. The Stamp Act is a fiscal measure enacted to secure revenue for the State on certain classes of instruments: It is not enacted to arm a litigant with a weapon of technicality to meet the case of his opponent. The stringent provisions of the Act are conceived in the interest of the revenue once that object is secured according to law, the party staking his claim on the instrument will not be defeated on the ground of the initial defect in the instrument. Viewed in that light the scheme is clear. Section 35 of the Stamp Act operates as a bar to an unstamped instrument being admitted in evidence or being acted upon; Section 40 provides the procedure for instruments being impounded, subsection (1) of Section 42 provides for certifying that an instrument is duly stamped, and subsection (2) of Section 42 enacts the consequences resulting from such certification. (emphasis supplied) 6.6 In our view, there is no legal impediment to the enforceability of the arbitration agreement, pending payment of Stamp Duty on the substantive contract. The adjudication of the rights and obligations under the Work Order or the substantive commercial contract would however not proceed before complying with the mandatory provisions of the Stamp Act. 6.7 The Stamp Act is a fiscal enactment for payment of stamp duty to the State on certain classes of instruments specified in the Stamp Act. Section 40 of the Indian Stamp Act,1899 provides the procedure for instruments which have been impounded, and sub section (1) of Section 42 requires the instrument to be endorsed after it is duly stamped by the concerned Collector. Section 42(2) provides CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.Page No.28 of 35
that after the document is duly stamped, it shall be admissible in evidence, and may be acted upon. 6.8 In our view, the decision in SMS Tea Estates does not lay down the correct position in law on two issues i.e. (i) that an arbitration agreement in an unstamped commercial contract cannot be acted upon, or is rendered un enforceable in law; and (ii) that an arbitration agreement would be invalid where the contract or instrument is voidable at the option of a party, such as u/S. 19 of the Indian Contract Act, 1872.
We hold that since the arbitration agreement is an independent agreement between the parties, and is not chargeable to payment of stamp duty, the nonpayment of stamp duty on the commercial contract, would not invalidate the arbitration clause, or render it un enforceable, since it has an independent existence of its own. The view taken by the Court on the issue of separability of the arbitration clause on the registration of the substantive contract, ought to have been followed even with respect to the Stamp Act. The nonpayment of stamp duty on the substantive contract would not invalidate even the main contract. It is a deficiency which is curable on the payment of the requisite Stamp Duty.
6.9 The second issue in SMS Tea Estates that a voidable contract would not be arbitrable as it affects the validity of the arbitration agreement, is in our view not the correct position in law. The allegations made by a party that the substantive contract has been CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.
Page No.29 of 35obtained by coercion, fraud, or misrepresentation has to be proved by leading evidence on the issue. These issues can certainly be adjudicated through arbitration. We overrule the judgment in SMS Tea Estates with respect to the aforesaid two issues as not laying down the correct position in law. 6.10 The Garware judgment has followed the judgment in SMS Tea Estates. The Counsel for the Appellant has placed reliance on paragraph 22 of the judgment to contend that the arbitration clause would be non existent in law, and unenforceable, till Stamp Duty is adjudicated and paid on the substantive contract.
We hold that this finding is erroneous, and does not lay down the correct position in law. We have already held that an arbitration agreement is distinct and independent from the underlying substantive commercial contract. Once the arbitration agreement is held to have an independent existence, it can be acted upon, irrespective of the alleged invalidity of the commercial contract.
6.11 We notice that the judgment in Garware Wall Ropes Limited has been cited with approval by a coordinate bench of this Court in Vidya Drolia & Ors. v. Durga Trading Corporation.28 Paragraph 92 of the judgment reads thus :
"92. We now proceed to examine the question, whether the word existence in Section 11 merely refers to contract formation (whether there is an arbitration agreement) and excludes the question of enforcement (validity) and therefore the latter falls CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.Page No.30 of 35
outside the jurisdiction of the court at the referral stage. On jurisprudentially and textualism it is possible to differentiate between existence of an arbitration agreement and validity of an arbitration agreement. Such interpretation can draw support from the plain meaning of the word existence. However, it is equally possible, jurisprudentially and on contextualism, to hold that an agreement has no existence if it is not enforceable and not binding. Existence of an arbitration agreement presupposes a valid agreement which would be enforced by the court by relegating the parties to arbitration. Legalistic and plain meaning interpretation would be contrary to the contextual background including the definition clause and would result in unpalatable consequences. A reasonable and just interpretation of existence requires understanding the context, the purpose and the relevant legal norms applicable for a binding and enforceable arbitration agreement. An agreement evidenced in writing has no meaning unless the parties can be compelled to adhere and abide by the terms. A party cannot sue and claim rights based on an unenforceable document. Thus, there are good reasons to hold that an arbitration agreement exists only when it is valid and legal. A void and unenforceable understanding is no agreement to do anything. Existence of an arbitration agreement means an arbitration agreement that meets and satisfies the statutory requirements of both the Arbitration Act and the Contract Act and when it is enforceable in law. We would proceed to elaborate and give further reasons :
(i) In Garware Wall Ropes Ltd., this Court had examined the question of stamp duty in an underlying contract with an arbitration clause and in the context CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.Page No.31 of 35
had drawn a distinction between the first and second part of Section 7(2) of the Arbitration Act, albeit the observations made and quoted above with reference to existence and validity of the arbitration agreement being apposite and extremely important, we would repeat the same by reproducing paragraph 29 thereof :
29. This judgment in Hyundai Engg. case is important in that what was specifically under consideration was an arbitration clause which would get activated only if an insurer admits or accepts liability Since on facts it was found that the insurer repudiated the claim, though an arbitration clause did exist, so to speak, in the policy, it would not exist in law, as was held in that judgment, when one important fact is introduced, namely, that the insurer has not admitted or accepted liability. Likewise, in the facts of the present case, it is clear that the arbitration clause that is contained in the subcontract would not exist as a matter of law until the subcontract is duly stamped, as has been held by us above. The argument that Section 11(6A) deals with existence, as opposed to Section 8, Section 16 and Section 45, which deal with validity of an arbitration agreement is answered by this Court's understanding of the expression existence in Hyundai Engg. case, as followed by us. Existence and validity are intertwined, and arbitration agreement does not exist if it is illegal or does not satisfy mandatory legal requirements. Invalid agreement is no agreement. 6.12 We doubt the correctness of the view taken in paragraph 92 of the threejudge bench in Vidya Drolia.
We consider it appropriate to refer the findings in paras 22 and 29 of Garware Wall Ropes Limited, which has been affirmed in paragraph 92 of Vidya Drolia, to a Constitution Bench of five judges."
CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.
Page No.32 of 357. The next issue which arises is as to which authority would exercise the power of impounding the instrument under Section 33 read with Section 34 of the Maharashtra Stamp Act, in a case where the substantive contract contains an arbitration agreement.
7.1 In an arbitration agreement, the disputes may be referred to arbitration by three modes.
a) The first mode is where the appointment of the arbitrator takes place by the parties consensually in accordance with the terms of the arbitration agreement, or by a designated arbitral institution, without the intervention of the court. In such a case, the arbitrator / tribunal is obligated by Section 33 of the Indian Stamp Act, 1899 (or the applicable State Act) to impound the instrument, and direct the parties to pay the requisite Stamp Duty (and penalty, if any), and obtain an endorsement from the concerned Collector.
This would be evident from the provisions of Section 34 of the Stamp Act which provides that any person having by law or consent of parties authority to receive evidence is mandated by law to impound the instrument, and direct the parties to pay the requisite stamp duty.
b) The second mode of appointment is where the parties fail to make the appointment in accordance with the arbitration agreement, and an application is filed under Section 11 before the Court to invoke the default power for making the appointment.
In such a case, the High Court, or the Supreme Court, as the case may be, while exercising jurisdiction under Section 11, would impound the substantive contract which is either unstamped or inadequately stamped, and direct the parties to CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.
Page No.33 of 35cure the defect before the arbitrator / tribunal can adjudicate upon the contract.
c) The third mode is when an application is filed under Section 8 before a judicial authority for reference of disputes to arbitration, since the subject matter of the contract is covered by an arbitration agreement. In such a case, the judicial authority will make the reference to arbitration. However, in the meanwhile, the parties would be directed to have the substantive contract stamped in accordance with the provisions of the relevant Stamp Act, so that the rights and obligations emanating from the substantive contract can be adjudicated upon."
33. A bare perusal of the above said paras depicts that an arbitrator can be appointed for a dispute between landlord tenant dispute even, in case of an insufficiently stamped lease deed/document containing an arbitration clause. It was mandated by Hon'ble Supreme Court that stamp duties as a mere fiscal measure to secure revenue and based on severalbility, it was held that an arbitration agreement is a distinct from a commercial agreement and would survive independently on the main contract. Hence if the main contract is unstamped, it will not render the arbitration agreement as unenforceable. However, Hon'ble Supreme Court has further held that the adjudication of the substantive rights and obligation could not proceed till the provision of stamp duty were complied with.
34. From the above discussion, it can be safely concluded that an arbitration clause as provided in an unsufficiently stamped lease CS No.687/2017 (515787/2016) Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.
Page No.34 of 35deed/document can be enforced and arbitrator can be appointed subject to the impounding of such insufficiently stamped lease deed/document and payment of the penalties so imposed by the competent authority under the Indian Stamp Act as per law.
35. In view of the contention raised by the counsel for the plaintiff did not hold water and the same appears to be attractive but found to be falacious and, therefore, deserves to be rejected and is hereby rejected. Resultantly, this application under Section 8 of the Act is allowed and disposed of accordingly.
Parties are directed to invoke the aribtration proceedings, as per the arbitration clause provided in the lease deed.
Reader of the court is directed to impound the "lease deed"
and forward it to the concerned Collector of Stamps for assessment of the stamp duty payable on the said instrument and on determination of the stamp duty so assessed, defendant is directed to make the payment thereof.
Original application and court fee be returned in original as per law.
File be consigned to record room. DR VIJAY Digitally signed
by DR VIJAY
KUMAR KUMAR DAHIYA
Date: 2021.07.24
DAHIYA 17:28:00 +0530
Announced in the open court (VIJAY KUMAR DAHIYA)
on 20.07.2021 Addl.District Judge01
South West, Dwarka Courts
Delhi
CS No.687/2017 (515787/2016)
Ashok Kumar Rana v. M/s Reliance Jio Infocomm Ltd.Page No.35 of 35