Karnataka High Court
Mrs Sudha S Raju vs M/S Iffco Tokio General Insurance on 13 August, 2018
Author: Vineet Kothari
Bench: Vineet Kothari
1/21
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 13TH DAY OF AUGUST, 2018
BEFORE
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
W.P. No.1554/2017 (GM-CPC)
BETWEEN
MRS. SUDHA S RAJU
AGED ABOUT 59 YEARS
W/O SUBBARAJU
No.28, CITI CENTRE
CHRUCH STREET
BANGALORE-560001.
...PETITIONER
(By Mr. RAGHAVENDRA C, ADV.,)
AND
M/S IFFCO TOKIO GENERAL INSURANCE
COMPANY LIMITED
A COMPANY REGISTERED UNDER THE
COMPANIES ACT, 1956
REGISTERED OFFICE AT No.34
NEHRU PLACE, NEW DELHI AND
ITS CORPORATE OFFICE AT
IFFCO TOWER, PLOT No.3
SECTOR 29, GURGAON, HARYANA-122022
REPRESENTED BY ITS EXECUTIVE
VICE PRESIDENT AND COMPANY SECRETARY
SRI. V.S. RAO.
...RESPONDENT
(By Mr. V. RAMESH BABU, ADV.,)
THIS WRIT PETITION IS FILED UNDER ARTICLE 227 OF
THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER
DTD:14-12-2016 PASSED IN O.S.No.5577/2009 PENDING ON
THE FILE OF XIX ADDL. CITY CIVIL AND SESSIONS JUDGE
DATE OF ORDER 13-08-2018 W.P.NO.1554/2017
MRS. SUDHA S RAJU vs.
M/S. IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED
2/21
(CCH-18) BANGALORE IN SO FAR AS IN SO FAR AS REJECTING
THE I.A. No.6 (ANNEXURE-A) & ETC.
THIS WRIT PETITION COMING ON FOR PRLY. HEARING IN
'B' GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
Mr. Raghavendra C, Adv. for Petitioner/defendant Mr. V. Ramesh Babu, Adv. for Respondent/plaintiff The defendant-Mrs.Sudha Raju, lessor/land lady has filed this writ petition under Article 227 of the Constitution of India aggrieved by the order dated 14.12.2016 passed in O.S.No.5577/2009 (Iffco Tokio General Insurance Company Limited (plaintiff) -vs- Mrs.Sudha S. Raju (defendant) rejecting her application I.A.No.VI filed under Order 7 Rule 11(d) of CPC for referring the dispute to Arbitration in regard to refundability of the Security Deposit made by the lessee- plaintiff with the defendant/land lady-Mrs.Sudha S. Raju, u/S. 8 of the Arbitration and Conciliation Act, 1996 (for short 'Act').
DATE OF ORDER 13-08-2018 W.P.NO.1554/2017
MRS. SUDHA S RAJU vs. M/S. IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED 3/21
2. It may be noted that the lease premises in question have already been vacated by the plaintiff- lessee-Company on 14.09.2006 and the dispute is only about refund of Security Deposit to the Lessee- Company.
3. On the said application-I.A.No.6 filed by the defendant-land lady, the learned Trial Court, in the impugned order dated 14.12.2016, has held that issue relating to refund of the Security Deposit, which was withheld by the lessor-land lady, according to her, for justifiable reasons and it was an arbitrable issue and the Arbitration Clause was a separate and severable clause from the lease deed in question and the same would not perish with the termination of the lease deed after handing over the vacant possession of the premises to the land lady on 14.09.2006 and this view was given by the learned Trial Court following the Supreme Court decision in the case of M/s.SMS Tea DATE OF ORDER 13-08-2018 W.P.NO.1554/2017 MRS. SUDHA S RAJU vs. M/S. IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED 4/21 Estates Pvt. Ltd. vs. M/s.Chandmari Tea Co., Pvt. Ltd. (2011) AIR SCW 4484 and Branch Manager, Magma Leasing and Finance Limited and another - vs- Potluri Madhavilata and another (2009) 10 SCC 103 but in para-26 of the impugned order the learned Trial Court suddenly changed the course of its order and commenced from the words "However, it is also clear that lease deed is insufficiently stamped and even after giving sufficient opportunities, defendant has not made efforts to pay stamp duty on it." The Trial Court, thus, fell into error in holding that since the lease deed is insufficiently stamped and even after giving sufficient opportunities to the defendant-lessor has not made efforts to pay stamp duty on it, therefore, I.A.No.6 for referring the arbitrable dispute to the Arbitrator u/S. 8 of the Act deserves to be rejected. The impugned order therefore is self-contradictory. DATE OF ORDER 13-08-2018 W.P.NO.1554/2017
MRS. SUDHA S RAJU vs. M/S. IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED 5/21
4. The first part of the Order is quoted below for ready reference:
"20. Thus, in the above citation reported in 2011 AIR SCW 4484 also, the Division of Hon'ble Supreme Court held that even though the document is not registered though it requires compulsory registration, the court can look into the said document to say whether there exists arbitration clause in said agreement or not, because arbitration agreement need not be registered and their Lordships have elaborately discussed this point of registration with S.17 & 49 of the Registration Act and concluded as stated above.
21. Section 17 of the Registration Act made it clear that the lease is compulsorily registrable one, if it is pertaining to immoveable property for a period of one year or more than that. However, as per S.18(c) of the Registration Act, it is optional for parties to register the leases of immovable properties for any term not exceeding one year. Hence, the coupled reading of this section 17, 18 of the Registration Act and S.107 of the Transfer of Property Act, it is crystal clear that, unregistered lease is permissible pertaining to DATE OF ORDER 13-08-2018 W.P.NO.1554/2017 MRS. SUDHA S RAJU vs. M/S. IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED 6/21 lease of immoveable property if it is made for a period within one year.
22. Furthermore, if arbitration clause is separable from the main agreement; then this question of non-registration does not arise for consideration.
23. The learned counsel for defendant has relied on another citation reported in (2009) 10 SCC 103 in "Branch Manager, Magma Leasing and Finance Limited and another vs Potluri Madhavilata and another" wherein their lordships held as follows:
"A. Contract and Specific Relief - Contractual dispute resolution clauses - Termination of contract due to breach - Effect of, on arbitration clause contained therein - Reiterated, arbitration clause neither perishes nor becomes inoperative in such a case - It survives for purpose of resolution of disputes to the extent specified in the clause concerned - Arbitration and Conciliation Act, 1996 - Ss7, 2(1)(b) & (8) of Contract Act, 1872, Ss:39 & 28 Exception.DATE OF ORDER 13-08-2018 W.P.NO.1554/2017
MRS. SUDHA S RAJU vs. M/S. IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED 7/21 "B. Arbitration and Conciliation Act, 1996 - S.8 - Power under, to refer parties to arbitration - Invocation of - Conditions required to be satisfied for, reiterated - Obligation of Court on fulfillment of said conditions - Held, S.8 is in the form of legislative command - Hence, on fulfillment of conditions required for applicability of S.8, Court has to option except to refer the parties to arbitration.
24. In the above said citation, their lordships held that, if all the ingredients of Section 8 of Arbitration and conciliation Act are fulfilled, then, the court has no option but to refer the dispute for arbitration.
25. Relying on the above said citations and above provisions of law, this court holds that as the lease deed in question is for 11 months, even though, the lease deed is unregistered one, the court can look into the contents of lease deed to decide whether, there exist arbitration clause in this agreement or not.
26. As discussed above, apparently, all the ingredients of S.8 of Arbitration and conciliation Act are fulfilled........".DATE OF ORDER 13-08-2018 W.P.NO.1554/2017
MRS. SUDHA S RAJU vs. M/S. IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED 8/21
5. The contradiction starts from the 2nd line of para-26, which is quoted below for ready reference:
"26. ........ However, it is also clear that lease deed is insufficiently stamped and even after giving sufficient opportunities, defendant has not made efforts to pay stamp duty on it."
.... (paras- 27 & 28 not quoted) "29. With this background, the subsequent developments in present suit are to be looked into. While hearing arguments on this I.A.No.VI, Plaintiff's counsel filed I.A.No.VII for impounding the said lease deed. After considering the contentions of both sides, this court holds that the lease deed is insufficiently stamped and same has to be impounded. Subsequently, as per the request of defendant's counsel, this court referred the document to learned Deputy Commissioner, Stamps and District Registrar, Shivajinagar, Bangalore for collection of duty and penalty on it, but even after giving sufficient time, duty and penalty was not collected by the concerned Deputy Commissioner and ultimately, he sent back the document to this court. Thus, defendant has not shown any DATE OF ORDER 13-08-2018 W.P.NO.1554/2017 MRS. SUDHA S RAJU vs. M/S. IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED 9/21 inclination to pay deficit stamp duty on the lease deed. Learned counsel for defendant submitted arguments that it is plaintiff who has to pay deficit stamp duty on the lease deed. But, defendant's counsel has not made any efforts to direct plaintiff to pay stamp duty and only as per his request, the lease deed was sent to the Deputy Commissioner, Stamps and District Registrar, Shivajinagar, Bangalore for collection of stamp duty and penalty. But, as discussed above, defendant has not shown his interest in appearing before Deputy Commissioner, Stamps and District Registrar, Shivajinagar, Bangalore and to do the needful action for collection of deficit stamp duty and penalty on lease deed who has to pay stamp duty on lease deed is not the point for consideration at this juncture. But, it is defendant who is relying upon said lease deed to refer the matter to arbitration. Hence, it is his duty to pay duty and penalty or made the plaintiff to pay duty and penalty on it and he cannot escape from this initial responsibility. Under these circumstances, when lease deed is insufficiently stamped, though there is a clause No.24 in this lease deed for arbitration, it cannot be looked into and thus, the court cannot refer the dispute to arbitrator as required under S.8 of DATE OF ORDER 13-08-2018 W.P.NO.1554/2017 MRS. SUDHA S RAJU vs. M/S. IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED 10/21 Arbitration and conciliation Act. Accordingly, point No. 2 is answered in negative."
6. Both the learned counsels fairly submitted that the dispute relating to refund of security deposit is not an issue governed by the special law dealing with the eviction of the tenants under the provisions of the Karnataka Rent Act, 1999 (for short 'Act')and therefore the decision of the Hon'ble Supreme Court in the case of Booz Allen and Hamilton Inc. -vs- SBI Home Finance Limited and Others (2011) 5 SCC 532 and the judgment in the case of Himangni Enterprises -vs- Kamaljeet Singh Ahluwalia (2017) 10 SCC 706 prohibiting reference of such dispute is governed by special laws, would not bar such a reference to Arbitrator in the present case.
7. In the aforesaid two judgments, the Hon'ble Supreme Court narrated the following categories of non-arbitrable disputes as under:
DATE OF ORDER 13-08-2018 W.P.NO.1554/2017
MRS. SUDHA S RAJU vs. M/S. IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED 11/21
(i) In Booz Allen's case (supra) the Hon'ble Supreme Court in para-36 has held that:
"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 (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes."
(ii) In Himangni Enterprises's case (supra) the Hon'ble Supreme Court reiterated the same at paras-18 to 22, which are quoted below for ready reference:
"18. In our considered opinion, the question involved in the appeal remains no longer res integra and stands answered by two decisions DATE OF ORDER 13-08-2018 W.P.NO.1554/2017 MRS. SUDHA S RAJU vs. M/S. IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED 12/21 of this Court in Natraj Studios (P) Ltd. vs. Navrang Studios & Another, 1981(1) SCC 523 and Booz Allen & Hamilton Inc. vs. SBI Home Finance Ltd. & Ors., (2011) 5 SCC 532 against the appellant and in favour of the respondent.
19. So far as Natraj Studio's case (supra) is concerned there also, the landlord had filed a civil suit against the tenant in the Small Causes Court, Bombay claiming therein the tenant's eviction from the leased premises. There also, the tenant was inducted pursuant to "leave and license"
agreement executed between the landlord and the tenant. The tenant filed an application under Section 8 of the Arbitration Act, 1940 contending therein that since the "leave and license"
agreement contained an arbitration clause for resolving all kinds of disputes arising between the parties in relation to the "leave and license"
agreement and the disputes had arisen between the parties in relation to the "leave and license"
agreement, such disputes could only be resolved by the arbitrator as agreed by the parties in the agreement. It was contended that the civil suit was, therefore, not maintainable and the disputes for which the suit has been filed be referred to the arbitrator for their adjudication.DATE OF ORDER 13-08-2018 W.P.NO.1554/2017
MRS. SUDHA S RAJU vs. M/S. IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED 13/21
20. This Court (Three Judge Bench) speaking through Justice O. Chinnappa Reddy rejected the application filed by the tenant under Section 8 of the Act and held, inter alia, that the civil suit filed by the landlord was maintainable. It was held that the disputes of such nature cannot be referred to the arbitrator. This is what their Lordships held as under:
"24. In the light of the foregoing discussion and the authority of the precedents, we hold that both by reason of Section 28 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 and by reason of the broader considerations of public policy mentioned by us earlier and also in Deccan Merchants Cooperative Bank Ltd. v. Dalichand Jugraj Jain, the Court of Small Causes has and the arbitrator has not the jurisdiction to decide the question whether the respondent licensor-landlord is entitled to seek possession of the two Studios and other premises together with machinery and equipment from the appellant licensee-tenant. That this DATE OF ORDER 13-08-2018 W.P.NO.1554/2017 MRS. SUDHA S RAJU vs. M/S. IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED 14/21 is the real dispute between the parties is abundantly clear from the petition filed by the respondents in the High Court of Bombay, under Section 8 of the Arbitration Act seeking a reference to arbitration.
The petition refers to the notices
exchanged by the parties, the
respondent calling upon the
appellant to hand over possession of the Studios to him and the appellant claiming to be a tenant or protected licensee in respect of the Studios. The relationship between the parties being that of licensor-landlord and licensee tenant and the dispute between them relating to the possession of the licensed demised premises, there is no help from the conclusion that the Court of Small Causes alone has the jurisdiction and the arbitrator has none to adjudicate upon the dispute between the parties."
21. Yet in another case of Booz Allen & Hamilton Inc. (supra), this Court (two Judge Bench) DATE OF ORDER 13-08-2018 W.P.NO.1554/2017 MRS. SUDHA S RAJU vs. M/S. IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED 15/21 speaking through R.V.Raveendran J. laid down the following proposition of law after examining the question as to which cases are arbitrable and which are non-arbitrable:
"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
(grant of probate, letters of
administration and succession
certificate); and (vi) eviction or
tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes."DATE OF ORDER 13-08-2018 W.P.NO.1554/2017
MRS. SUDHA S RAJU vs. M/S. IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED 16/21
22. Keeping in view the law laid down by this Court in aforementioned two decisions and applying the same to the facts of this case, we have no hesitation to hold that both the Courts below were right in dismissing the appellant's application filed under Section 8 of the Act and thereby were justified in holding that the civil suit filed by the respondent was maintainable for grant of reliefs claimed in the plaint despite parties agreeing to get the disputes arising therefrom to be decided by the arbitrator."
8. Learned counsel for the petitioner Mr.Raghavendra C. relied upon the judgment of A.Ayyasamy -vs- A. Paramasivam and Others (2016) 10 SCC 386, wherein the Hon'ble Supreme Court in the case of Vimal Kishor Shah Vs. Jayesh Dinesh Shah (2016) 8 SCC 788 added one more category to the aforesaid six categories of non-arbitrable disputes set out in Booz Allen's case (supra) namely the disputes relating to trusts, trustees and beneficiaries arising out DATE OF ORDER 13-08-2018 W.P.NO.1554/2017 MRS. SUDHA S RAJU vs. M/S. IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED 17/21 of a trust deed and the trust Act. Para-35 of the said judgment is quoted below for ready reference:
"Ordinarily every civil or commercial dispute whether based on contract or otherwise which is capable of being decided by a civil court is in principle capable of being adjudicated upon and resolved by arbitration "subject to the dispute being governed by the arbitration agreement"
unless the jurisdiction of the Arbitral Tribunal is excluded either expressly or by necessary implication. In Booz-Allen and Hamilton Inc.v. SBI Home Finance Ltd., this Court held that adjudication of certain categories of proceedings is reserved by the legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not exclusively reserved for adjudication by courts and tribunals may by necessary implication stand excluded from the purview of private fora. This Court set down certain examples of non-arbitrable disputes such as:
(i) Disputes relating to rights and liabilities which give rise to or arise out of criminal offences;DATE OF ORDER 13-08-2018 W.P.NO.1554/2017
MRS. SUDHA S RAJU vs. M/S. IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED 18/21
(ii) Matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights and child custody;
(iii) Matters of guardianship;
(iv) Insolvency and winding up;
(v) Testamentary matters, such as the grant of probate, letters of administration and succession certificates; and
vi) Eviction or tenancy matters governed by special statutes where a tenant enjoys special protection against eviction and specific courts are conferred with the exclusive jurisdiction to deal with the dispute.
This Court held that this class of actions operates in rem, which is a right exercisable against the world at large as contrasted with a right in personam which is an interest protected against specified individuals. All disputes relating to rights in personam are considered to be amenable to arbitration while rights in rem are required to be adjudicated by courts and public tribunals. The enforcement of a mortgage has been held to be a right in rem for which proceedings in arbitration would not be maintainable. In Vimal Kishor Shah v. Jayesh Dinesh Shah, this Court added a seventh category of cases to the six non-arbitrable categories set out in Booz Allen, namely, DATE OF ORDER 13-08-2018 W.P.NO.1554/2017 MRS. SUDHA S RAJU vs. M/S. IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED 19/21 disputes relating to trusts, trustees and beneficiaries arising out of a trust deed and the Trust Act".
9. However, the aforesaid legal position does not cover the ordinary civil dispute between the lessor and the lessee like the one involved in the present case namely, refund of Security Deposit made under the Lease Agreement which has refused to be refunded by the lessor or the land lady for some reasons and there is a dispute between the parties with regard to the same. Since that issue is not within the exclusive domain and jurisdiction of the Special Court or the Tribunal created under the provisions of the Karnataka Rent Act, 1999, therefore, the aforesaid judgments of the Hon'ble Supreme Court would not debar the reference of the present arbitrable dispute to the Artibitrator u/S.8 of the Act, which otherwise mandates to the Trial Court to refer such a dispute to the Arbitration. DATE OF ORDER 13-08-2018 W.P.NO.1554/2017
MRS. SUDHA S RAJU vs. M/S. IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED 20/21
10. From the first part of the Trial Court, it is clear that the existence of the said arbitrable dispute was held to be existing by the learned Trial Court and the Arbitration Clause from the Lease Deed itself was taken to be separable and validly existing between the parties. Therefore, on the ground of non-stamping of the Lease Deed itself could not have been taken as a ground by the Trial Court to refuse the reference to the Arbitration u/S.8 of the Act. In this view of the matter, the second and the offending part of the learned Trial Court cannot be sustained.
11. The present writ petition filed by the defendant-land lady or lessor therefore, deserves to be allowed and the same is accordingly allowed and the second part of the order of the learned Trial Court commencing from later part of the para-26 quoted above deserves to be quashed and the same is quashed DATE OF ORDER 13-08-2018 W.P.NO.1554/2017 MRS. SUDHA S RAJU vs. M/S. IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED 21/21 and the learned Trial Court is directed to refer the matter to the Arbitrator u/S.8 of the Act.
12. In view of the matter being allowed, it is expected that the proceedings in that regard including the proceedings by the learned Arbitrator to whom the said matter is referred shall be expeditiously undertaken and concluded preferably within a period of six months from today.
13. The parties may appear before the Trial Court without any further notice in this regard on 03.09.2018.
Sd/-
JUDGE TL