Indian Kanoon - Search engine for Indian Law

B. B. Srikrishna. J.

1. This appeal under Section 37(1)(b) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") challenges the order of the learned Single Judge, dated 6th/7th November, 2000 dismissing the petition to set aside the arbitral Award.

FACTS

2. The facts giving rise to the present appeal, concisely stated, are as under :-

The appellant is a nationalised bank, carrying on the business of banking in its various branches and offices in the city of Mumbal. The respondent is a company registered under Companies Act, 1956 doing business in real estate including the business of hiring out built up areas of business premises. The respondent, at the material time, was the owner of certain premises situated on the ground floor and basement of Maker Chamber No. IV. Nariman Point. Mumbai 400 021. These premises were offered to the appellant under agreements of leave and licence dated 23rd May. 1988 and 27th June, 1989. Under the agreement of 23rd May, 1988 an area of 6078 sq. ft. on the ground floor and 620 sq. ft. in the basement of the suit property was given on leave and licence basis for a period of ten years. An amount of Rs. 2,75,00,000/- was paid by the appellant to the respondent as advance payment under the agreement which was to carry interest at the rate of 15% per annum with quarterly rest and was liable to be adjusted towards the compensation during the last five years of the licence period. The compensation for use of the aforesaid premises was fixed at the rate of Rs. 362,500/- per month for the first five years and at the rate of Rs, 4,71,250/- per month for the second term of five years.

This letter also places on record that, inspite of the termination of the leave and licence agreement by efflux of time or otherwise, the Bank would be entitled to continue to occupy the Licensed premises until the entire loan with interest thereon was repaid by the respondent to the appellant Bank.

5. The leave and licence agreement was to come to an end on 31st March, 1998. On 27th February, 1978, the appellant addressed a letter to the respondent and informed it that the appellant would like to continue its possession of the suit premises and called upon , the respondent to execute renewal documents. By a letter dated 3rd April, 1998, the respondent informed the appellant Bank that it did not wish to enter into any fresh leave and licence agreement with the appellant in respect of the suit premises and as such the question of executing any renewal documents did not arise.

6. On 7th April, 1998 the respondent addressed a letter to the appellant pointing out that, by its letter dated 3rd April. 1998 the appellant had already informed the respondent that it did not wish to enter into any fresh leave and licence agreement in respect of the suit premises: that despite the expiry of the said two agreements, the appellant had failed to deliver vacant possession of the suit premises under use and occupation by the Bank on or before 31st March, 1998, on which date the two leave and licence agreements expired. Finally, it was stated :-

36. Turning to the first of the judgments i.e. Natraj Studio (supra), we notice that the appellant and the 1st respondent therein had entered into a leave and licence agreement for use of two studios and other premises. Though the agreement of leave and licence was initially for a period of 11 months, it was extended from time to time. By an agreement made on November 5, 1972, the original agreement extended for a period of 11 months from January 1, 1973. Thus, the leave the licence agreement was in force on February 1, 1973 with effect from which Section 15A was inserted in the Bombay Rents, Hotel and Lodging House Rates Act 1947. The effect of the amendment was that a licensee who was in possession of certain premises under such unexpired licence was deemed a tenant within the meaning of the expression used in 5(11) of the Rent Act. On April 28. 1979 the first respondent purported to terminate the leave and licence agreement and called upon the appellant to hand over possession of the licensed premises. A declaratory suit was filed by the respondent in the Court of Small Causes at Bombay praying for a declaration that the appellant was a monthly tenant of the premises and entitled to the protection of the Rent Act. Pending disposal of the suit, an interim order was made fixing an interim rent. An application was made under Section 33 of the Arbitration Act, 1940 before this Court for a declaration that an arbitration clause in the leave and licence agreement' was invalid. Inoperative, etc. The application was dismissed by the High Court on the ground that the Court had no jurisdiction to determine the alleged right, if any, of the appellant as a tenant. An application was filed under Section 8 of the Arbitration Act for appointment of Arbitrators to decide the disputes and differences between the parties arising under the leave and licence agreement. The High Court allowed the application and appointed an Arbitrator. Art appeal there against was dismissed by the Division Bench on the ground that it was not mandatory under Section 39 of the Arbitration Act, 1940. Finally, the matter landed up before the Supreme Court by way of Special Leave. The Supreme Court took the view that the question whether there was relationship of landlord and tenant between the parties, and such Other jurisdictional questions, would have to be determined by the Court where it falls for determination be it the Court of Small Causes Court or ordinary Civil Court. If the jurisdictional question is decided in favour of the Court of exclusive jurisdiction and the jurisdiction of the ordinary Civil Courts must cease to the extent its Jurisdiction is ousted. The Supreme Court was further of the view that, by reason of Section 28 of the Bombay Rent Act and by reason of the broader consideration of public policy, the Court of Small Causes has, and the Arbitrator has not, the jurisdiction to decide the question whether the respondent-landlord-licensee is entitled to seek possession of the premises. The relationship between the parties is that of licensor-landlord and licensee-tenant and the dispute between them relating to the possession of the licensed-demised premises, there was no escape from the conclusion that the Court of Small Causes alone had jurisdiction and the Arbitrator had none to adjudicate the dispute. It would be noticed that two reasons were given by the Supreme Court for this conclusion. The first was the express language used in Section 28 of the Bombay Rent Act, the second, was broader policy consideration. In paragraph 17, the Supreme Court indicated the policy consideration in the following words :-