Motabhai Paras Private Limited Vs. Western Paper and Yarn Pvt. Ltd. - Court Judgment

Excerpt:
.....of section 2(3) of the act of 1996. as a result of which, even if the licence agreement contains arbitration agreement, the exclusive jurisdiction of the courts of small causes under section 41 of the act of 1882 is not affected in any manner. whereas, arbitration agreement in such cases would be invalid and inoperative on the principle that it would be against public policy to allow the parties to contract out of the exclusive jurisdiction of the small causes courts by virtue of section 41 of the act of 1882.” 13 the full bench of this court in prabhudasdamodar kotecha and anr. vs. smt. manharbala jeram damodar and ors. (2007(4) all mr 651)has occasion to deal with the concept of “licensee” and “gratuitous licencee” as used in sub-section (4a) of section 5 of.....

Judgment:

Oral Judgment:-

The Petitioner, original Respondent, alleged occupant/trespasser, has challenged the Award under Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Arbitration Act) of sole Arbitrator dated 24 April 2009. The operative part of the Award is as under:-

“a) The Respondent shall forthwith cease to use the facilities granted by the claimant to the Respondent and described in the agreement dated 22 August 2002.

b) The Respondent do pay to the claimant a sum of Rs. 1,89,000/- for the months of March, April and May 2005.

c) The Respondent do pay to the claimant a sum of Rs. 2961000/- for wrongful use of the facilities for the period 1 June 2005 to 30 April 2009. In case the Respondent ceases to use and surrenders the facilities before 30 April 2009, it will pay lesser amount calculated at the rate of Rs. 2100/- per day for non user.

d) The Respondent do pay to the claimant at the rate of Rs. 63000/- per month from 1 May 2009 till it ceases to use and surrenders the facilities granted under the agreement dated 22 August 2002.

e) The Respondent do pay to the claimant Rs. 244504/- for electricity bills upto and inclusive of the bill dated 23 May 2007. For the subsequent period the claimant will forward to the Respondent a copy of all the bills received till the date of this award and a voucher at 60% of the bill. The Respondent do pay an amount equivalent to 60% of the electricity bill within one week of the receipt of the voucher with a copy of the bill. For the future period the claimant will forward to the Respondent a copy of all the bills received and a voucher at 60% of the electricity within one week of the receipt of the voucher with the bill.

f) The Respondent do pay to the claimant interest on the amounts mentioned in b) to d) above @ 18 % p.a from the date of the award till payment or realization.

g) The Respondent do pay to the claimant interest @ 18% p.a on the amounts that may become due for electricity bills received after the date of the award from the expiry of one week after the receipt of the vouchers with a copy of the bill if not paid within one week of receipt.

h) The Respondent do pay to the claimant costs of this arbitration fixed at Rs.500000/-.”

2 The following were the issues before the learned Arbitrator:

Issues	Answers
1. Whether the Agreement was executed to create a tenancy by way of license in favour of the Respondent and the Small Causes Court will have the exclusive jurisdiction to entertain and try the issue and not the Arbitrator?	Negative
2. Whether the letters dated 19th August, 2002 and 20th August, 2002 were basic conditions of the Agreement dated 22nd August 2002?	Negative. They contained some of the preliminary condition. The agreement dated 22nd August 2002 was signed after taking into considerationsuch conditions.
3. Whether the claimant did not provide five telephone connections exclusively for the use of the Respondent as per clause 7 ofthe Agreement?	Negative. The claimant did provide.
4. Whether the Agreement dated 22nd August, 2002 was not to be acted upon and not acted upon?	Negative.
5. Whether the said Agreement was purelyto create a license in favour of the Respondent?	Negative.
6. Whether the real intention of the partieswas to let the said premises?	Negative.
7. Whether the Respondent was in exclusivepossession of the premises?	Negative.
8. Whether the Respondent is entitled to damages to the tune of Rs. 2 crores?	Negative.
9. Whether the Claimant is entitled to a sum of Rs. 24,30,000/?	The claimant is entitled to claim compensation in the sum of Rs.2430000/-. The claimant is entitled to the amounts awarded.
10. Whether the Claimant is entitled to mesne profit of Rs.90,000/-?	The claimant is entitled to claim @ Rs.63000/- p.m.
11. Whether the Claimant is entitled to an order directing the Respondent to cease usage of the facilities and surrender facilities?	Yes.
12. Whether the Agreement was the Business Service Centre Agreement permitting the Respondent for mere use of the business facilities of the Claimant?	Yes.
13. Whether the Claimant is entitled to reimbursement of telephone/electricity charges?	Yes; but after 31.5.2005 only of electricitycharges.
14. Whether the Claimant is entitled to declaration that in case the Claimant is evicted from the premises, the Respondent should pay to the Claimant a sum not less than Rs. 94 lacs?	No. The claim is premature.
15. Whether the Claimant is entitled to claim any interest on the amount awarded?	Yes; as awarded.
16	Additional issue. Yes. The claimant did carry on the business.

3 The basic events as per the Petitioner are as under:

The Petitioner is a private limited company registered under the Companies Act, 1956, carrying on the business in a part of Flat No.10, Khetan Bhavan, J.T. Road, Churchgate, Mumbai 400020, of providing counselling and arrange education loans to students going abroad for higher studies.

4 On 22 August, 2002, Agreement was executed between the parties stating in clause 1 that “The said Company (Respondent) shall permit and allow the said clients (Petitioners) to conduct the business of any thing and everything, concerning Education counselling in the premises”. The Petitioner deposited Rs.3,78,000/-. The Respondent gave the Petitioner alleged keys of the main door and put them in exclusive possession of the premises. The Petitioner started paying Rs.63,000/- per month and 60% of total electricity consumed in the entire flat No. 10, started using the premises.

5 On 3 September, 2002, a letter given to and acknowledged by the Respondent and the Petitioner was allowed the keys of the main door and opening and closing it as per their requirement, bringing their own computers, printers, furniture, fixtures and other items; permitted to install own 4 telephone lines, fax machine, 2 World Phone Instruments, a CC T.V., 8 computers, 4 printers, electrical fittings, furniture, fixtures, decorative materials, portable fans; unrestricted use beyond 9 am-6 pm limit; even working on Sundays and Holidays, when required.

6 In February, 2005, Respondent started negotiating with Petitioner for renewing the Agreement. In March 2005, one Kalpana Parikh, came to the premises and informed the Petitioner that her mother-in-law was the owner of the flat No.10, and on her death her son Ojus Parikh became the owner (being her son). She enquired about the Petitioner's and the Respondent's status visavis the premises.

7 The concept of “Business Service Centre” is not specifically defined. Nothing placed on record to support the concept. The agreement in question dated 22 August 2002 was a “Business Centre Agreement” for 33 months, subject to termination after 11 months, by giving a prior notice. There were disclaimer clauses that agreement was not tenancy or leave and licence agreement. The use and occupation timings were from 9 a.m. to 6 p.m.. The defence was that the agreement was sham and bogus and it was created to protect tenancy, covered by the Rent Control Legislation. This issue according to me goes to the root of the matter. Therefore, I am inclined to consider together, issue Nos. 1, 5, 6 and 12.

8 Both the parties have read and refer the relevant provisions of Maharashtra Rent Control Act, 1999 (for short, Rent Control Act) and The Presidency Small Cause Courts Act, 1882 (for short, Small Cause Courts Act) and cited various judgments in support of their contentions/submissions. The submissions were also made referring to the Sections of the Indian Easements Act-1882 (for short, the Indian Easements Act). Chapter VI of the Easements Act deals with the concept “licences”. It is settled that such licence can be expressed or implied and so also the revocation of the same. The Court therefore, needs to consider the purpose and intention behind this agreement “Business Service Centre”. The purpose was to create lease or licence or temporary permission to enjoy the accessory rights, need to be considered on the basis of clauses of the agreements and the facts and circumstances of the case and the relevant material placed by the parties in support of their respective contentions.

9 As the Court under Section 11 of the Arbitration Act, by consent, appointed the learned Arbitrator to adjudicate the dispute arising out of the contract, parties appeared accordingly. The preliminary objection raised about the jurisdiction of the Arbitrator, on the ground that it is not arbitrable dispute, in view of the specific provisions of the Rent Control Legislation. The Arbitrator rejected the objection and pass the award.

10 The learned Arbitrator, directed in the present case to hand over the possession of the immovable property by giving finding that there exists no relationship of landlord-tenant  and/or licensor-licensee. The Petitioner, has been treated as trespasser and the award has been passed accordingly including for the payment of occupation charges.

11 The Apex Court has observed from time to time that “the intention of the parties to an instrument must be gathered from the terms of the agreement examined in the light of surrounding circumstances.” The aspect of exclusive possession is relevant. (Sohan Lal Naraindas Vs. Laxmidas Raghunath Gadit) (1971) 3 S.C.R. 319). Section 52 of the Easements Act deals with the word “Licence”. The terms if not cleared, the intention need to be gathered from the surrounding circumstances. (Natraj Studios (P) Ltd. Vs. Navrang Studios and Anr. (AIR 1981 SC 537). (Khalil Ahmed Bashir Ahmed Vs. Tufelhussein Samasbhal Sarangpurwala (1988 Mah. R.C.J. 384).

12 The Full Bench of this Court in Central Warehousing Corporation Vs. Fortpoint Automotive Pvt. Ltd. (2010(1) Bom. C.R. 560)has dealt with Section 41 of the Small Causes Court Act, and the provisions of the Arbitration Act, referring to the exclusive jurisdiction of the Small Causes Court to try and decide the disputes specified in the Section. That was a case of agreement between the licensor and the licensee, containing the clauses of Arbitration. The relevant conclusion is as under:-

“40. ….....

The question whether the exclusive jurisdiction of the Small Causes Court vested in terms of section 41 of the Act of 1882 is ousted, if an agreement between the licensor and licensee contains a clause for arbitration, the same will have to be answered in the negative. For, section 5 of the Act of 1996 in that sense is not an absolute non obstante clause. Section 5 of the Act of 1996 cannot affect the laws for the time being in force by virtue of which certain disputes may not be submitted to arbitration, as stipulated in section 2(3) of the Act of 1996. We hold that section 41 of the Act of 1882 falls within the ambit of section 2(3) of the Act of 1996. As a result of which, even if the Licence Agreement contains Arbitration Agreement, the exclusive jurisdiction of the courts of Small Causes under section 41 of the Act of 1882 is not affected in any manner. Whereas, Arbitration Agreement in such cases would be invalid and inoperative on the principle that it would be against public policy to allow the parties to contract out of the exclusive jurisdiction of the Small Causes Courts by virtue of section 41 of the Act of 1882.”

13 The Full Bench of this Court in PrabhudasDamodar Kotecha and Anr. Vs. Smt. Manharbala Jeram Damodar and Ors. (2007(4) All MR 651)has occasion to deal with the concept of “licensee” and “gratuitous licencee” as used in Sub-Section (4A) of Section 5 of the Bombay Rents, Hotel and Lodging House Rates (Control) Act, 1947 (for short, the Rent Act). The reference was also made to Section 52 of the Easements Act. The relevant conclusion is as under:-

“62. Thus, looking at the controversy raised in these petitions from all points of view, we answer the questions formulated by us as follows : The expression “licensee” used in section 41(1) of PSCC Act does not derive its meaning from the expression “licensee” as used in sub-section (4A) of section 5 of the Rent Act. The expression licensee used in section 41(1) is a term of wider import so as to mean and include a “gratuitous licensee” also. In view of this, we hold that a suit by a licensor against a gratuitous licensee is tenable before the Presidency Small Causes Court under section 41 of PSCC Act.”

14 The Division Bench of this Court in CaronaLimited Vs. Sumangal Holdings (2007(4) All MR 4)referring to Section 41 of the Small Causes Court Act and Section 9 of the Arbitration Act, held that the jurisdiction of Civil Court barred by necessary implication as exclusive jurisdiction vests with the small Causes Court. The reference to Arbitration of the question which falls for decision before the Small Causes Court, therefore not accepted.

15 The learned Arbitrator and the learned counsel appearing for the Respondent has strongly relied on VastuInvest and Holdings Pvt. Ltd. Vs. Gujarat Lease Financing Ltd. (2001 Vol. 103(2) Bom. L.R. 156)referring to Section 34 (2)(b) (ii) of the Arbitration Act and the nature of the Agreement for rendering Business Service Centre and contended that no licencee or tenancy or any protected right whatsoever in the premises was created or intended to be created and therefore, upheld the order of Arbitrator to refund of deposit with interest. The Division Bench accordingly maintained the award. The facts and circumstances were totally different than the present one, except that was also a case of agreement for Business Service Centre. There was no order of handing over of the possession and/or of the eviction passed by the Arbitrator, as done in the present case.

16 I have also in Genesis Colors Private Limited Vs. Anil Ramlabhaya Suri and Anr. (2010(1) Mh.L.J. 231), though dealing with Section 9 of the Arbitration Act read with Section 41 of the Small Cause Courts Act, observed that even the Court has no jurisdiction to grant any relief when the dispute arising out of the agreements falls within the ambit of special statutes. If the Court has no jurisdiction, there is no question of permitting the Arbitral Tribunal to deal with such issue in view of specific bar created under those rent control and related statutes.

17 The shop owners put in possession on license various shops and offices by a public local body, by retaining right of exclusive possession, while dealing with the same, the Apex Court, in New BusStand Shop Owners Association Vs. Corporation of Kozhikode and Anr (2009) 10 SCC 455). has observed as under:-

“25. Reference in this connection can also be made to a later judgment of the Court of Appeal in MarchantVs. Charters (1977) 1 WLR 1181 : (1977) 3 All ER 918 (CA)where again Lord Denning reiterated these principles in a slightly different form by holding that the true test is the nature and quality of the occupation and not always whether the person has exclusive possession or not. The true test in the language of the learned Judge is as follows: (WLR p. 1185 F-H)

“......It does not depend on whether he or she has exclusive possession or not. It does not depend on whether the room is furnished or not. It does not depend on whether the occupation is permanent or temporary. It does not depend on the label which the parties put upon it. All these are factors which may influence the decision but none of them is conclusive. All the circumstances have to be worked out. Eventually the answer depends on the nature and quality of the occupancy. Was it intended that the occupier should have a stake in the room or did he have only permission for himself personally to occupy the room, whether under a contract or not? In which case he is a licensee.”

27. In a rather recent judgment of this Court in C.M. Beena V. P.N. Ramchandra Rao (2004) 3 SCC 595)the learned Judge relied on the ratio in Associated Hotels of India Ltd. (AIR 1959 SC 1262 : (1960) 1 SCR 368)  in deciding the difference between lease and licence. In para 8 of the said judgment, learned Judges held that the difference between lease and licence is to be determined by finding the real intention of the parties from a total reading of the document, if any, between the parties and also considering the surrounding circumstances. The learned Judges made it clear that use of term “lease” or licence”, “lessor” or “licensor”, “rent” or “licence fee” by themselves are not decisive. The conduct and intention of the parties before and after the creation of relationship is relevant to find out the intention. The learned Judges quoted from the treaties of Evans and Smith on The Laws of Landlord and Tenant and of Hill and Redman on Law of Landlord and Tenant in support of their proposition.

28. Following the aforesaid tests and in view of the discussions made hereinabove, it is clear that the intention of the parties in the case is to create a licence and not a lease and the right of exclusive possession was retained by the Corporation. In that view of the matter, relationship which is created between the Corporation and the shop holders is that of a licensor and licensee and not that of a lessor or a lessee. The stamp duty on licence agreement should be governed by Entry 5(c) of the Kerala Stamp Act, which is a residuary clause in the Schedule and not by Entry 33.”

18 Therefore, it is necessary to consider the agreement between the parties and its nature. Admittedly, even as per the Respondent-original Claimant, the nature of contract and the intention referred therein as averred in the reply, are as under:-

“g. …....

It was further agreed that the Petitioner would enjoy the facilities during working days and during working hours only. It was provided in the said Agreement that the Respondent shall close and open entrance to the said Premises at the time and days mentioned in the said Agreement. The possession of the Premises, including the area from which the Petitioner was allowed to conduct its business, continued to be with the Respondent at all times.

h. Since the access was only for the purpose of use of the facilities, it was agreed and understood that access to the premises and the facilities would always be in the exclusive control of the Respondent. Accordingly, the main entrance to the premises was kept under lock and key of the Respondent. After some time, the Petitioner however represented that they sometimes required access to the facilities when the premises were locked and the Respondent's representatives were not available. Without giving the Petitioner any right to the premises or any part thereof, the Respondent gave a duplicate set of main door keys to the Respondent only by way of indulgence and convenience.”

19 There is no serious dispute with regard to the fact that the Petitioner, was in possession of main door keys since long. Though, based upon the agreement between the parties including the alleged indulgence and convenience, yet the fact of possession of the premises and the duplicate keys, itself means access to the premises at any point of time. Therefore, merely the time was fixed/ mentioned in the agreement that itself, in my view, is not sufficient to accept the case of the Respondent that the use was only temporary for the business purpose as agreed.

20 The Respondent, admittedly, is not the landlord/owner of the premises. The Respondent, admittedly, a tenant of one Mr. Parikh. There is material on record to show that the landlord has filed the suit for relief against the Respondent also on the ground of creation of sub-tenancy, without permission. The eviction proceedings are pending. The Petitioner is also party in the proceedings. The Petitioner has been in possession since 2002 even after 31 May 2005. The Respondent treated the Petitioner as trespasser after expiry of the contractual period, therefore, invoke the Arbitration clause. The evidence was led by the parties. The nomenclature of service charges, itself is the payment towards the use and occupation charges to the extent of Rs.63,000/- per month which increased up to Rs.90,000/- per month.

21 The submission revolving around the provisions of the Easements Act, that it was only facilities, which were provided by the Respondent to the Petitioner to use and utilize the premises, in view of the above judgments read with the provisions of the Transfer of Property Act and the Easements Act, is unacceptable. Admittedly, it is not the case that it was only tenancy access to the particular cabin/room/premises. The concept 'office premises' as falls within the provisions of Sections 7, 9, 40 and 42 of the Rent Control Act, just cannot be overlooked while adjudicating the case/contention so raised by the parties.

22 I am also inclined to observe that the letter dated 20 August 2002 and the basic terms and conditions dated 22 August 2002 as read together with the circumstances and the evidence led by the parties, the intention was to create licensor or licensee relationship. Both the parties acted upon the agreement throughout till the date of its expiry. The Petitioner original Respondent was in uninterrupted possession of the premises, since the date of the agreement itself. I am not inclined to observe that such agreement of Business Service Center, permitted the Petitioner for mere use of business facilities, as contended.

23 As recorded above, the learned Arbitrator has not only awarded and decided the use and occupation charges, as the nomenclature was the service charges, but also passed the order of eviction by treating the Petitioner as trespasser. Therefore, once considering the nature of contract between the parties and the provisions of law read with the Judgments, I am inclined to observe that the agreement in question falls at least within the ambit of licensor and licensee relationship. It is definitely not a lease agreement. Merely because fixed timing was mentioned in the agreement to facilitate the Petitioner to occupy the premises on hourly basis and/or temporary basis, itself is not sufficient to accept the case of the Respondent, specifically when the basic agreement was itself for 33 months and more than 11 months. The concept of “license” as provided under the Transfer of Properties Act and as explained by the Courts, in my view, covers the case in hand. Therefore, in view of specific provisions of rent and related statute as available for evicting such occupants/licensee and for the claim towards the occupation and/or service charges, as awarded, also falls within the prohibited provisions of law. It cannot be permitted to be within the power of the Arbitrator, as done in the present case. The Arbitrator has no power and authority to entertain such claim and pass such order of eviction. It is without jurisdiction and contrary to the provisions of Rent Control Legislation, as well as, the Small Causes Court Act.

24 Having once observed above, I am inclined to accept the contention led by the Petitioner's counsel that such dispute is not Arbitral, the remedy is elsewhere. Therefore, if the Arbitrator has no authority and/or power in view of the specific provisions available, any order so passed by the Arbitrator, in my view, goes to the root of the matter and it is without jurisdiction. The award so passed in all other connected and related aspects, is also bad in law and unsustainable. Therefore, once it is held that the Arbitrator has no jurisdiction, I am inclined to observe that all other related issues need no further discussion. It collapsed and get decided automatically, with the above findings and observations, against the Respondent.

25 Therefore, taking overall view of the matter, in view of above findings, I am inclined to quash and set aside the award. The Arbitrator has no jurisdiction and/or authority to pass and to entertain such claim, as it is barred by specific provisions as referred above. The consequential orders/reliefs so passed, therefore, also unsustainable. This itself is not mean that the Respondent is not entitled to take appropriate steps in accordance with law. We are concerned with the eviction order and related orders passed by the Arbitrator. In the present facts and circumstances, therefore, keeping all points open as the remedy is elsewhere, I am inclined to set aside the award. The amount paid and received shall be subject to adjustment. The parties are at liberty to settle the matter.

26 The impugned award dated 24 April 2009, passed by the sole Arbitrator, is quashed and set aside. There shall be no order as to costs.

27 The learned counsel appearing for the Respondent seeks stay of the judgment and order passed today. Considering the facts and circumstances, and as I have set aside the award, I am inclined to grant stay of the judgment for 6 weeks.