2014 (6) TMI 208 - HC - Indian Laws

Legality of Arbitration award - Dispute as to ownership of property - Enhancement in rent - Vacating the premises - Appointment of arbitrator - Held that - Respondent is not the original owner of the property. The Petitioner was in exclusive possession of the property subject to rent/licence fee which was also enhanced from time to time. The learned Arbitrator, based upon the alleged occupation, even after termination of the agreement, passed the Award for recovery of arrears of occupation charges/rent. The relevant ingredients as required and necessary to hold that there exists relationship of a licensor and/or licensee also apply to the present case. The submission that it was warehousing agency agreement that itself, in my view, is not sufficient to overlook the case of the Petitioner. The learned Arbitrator, therefore, in view of above settled provisions of law as laid down by the Full Bench of this Court ought not to have proceeded with the matter merely because the possession was handed over during the pendency of the arbitration proceedings. The orders passed by the Court protecting the possession based upon the Respondent s statement and the consent order so recorded, ought to have taken note of before proceeding with the matter in such fashion. Arbitrator has no jurisdiction to entertain and/or decide the dispute so raised/referred by the parties, based upon the alleged arbitration clause in the agreement between the parties. The dispute so referred itself was not arbitrable. - Therefore, there is no question of invoking the principle of estoppal and/or waiver by the parties. The Court, under Section 34 of the Arbitration Act, is therefore required to adjudicate and decide this issue as it goes to the root of the matter. The Petitioner has raised those grounds in the petition. Therefore, in view of the reasons so recorded above, I am inclined to observe that the sole Arbitrator has no jurisdiction to try and entertain the reference and as the same was beyond its competence and jurisdiction. Therefore, I am inclined to quash and set aside the award and also the consequential orders/reliefs so granted. This order, in no way, deny the rights of the Respondent to invoke the appropriate proceedings in accordance with law - Decided in favour of appellants.

Summary

Issues Involved:
1. Jurisdiction of the Arbitrator.
2. Relationship between the parties (Licensor-Licensee vs. Warehousing Agency).
3. Validity of the arbitration agreement.
4. Applicability of the Maharashtra Rent Control Act, 1999 and the Presidency Small Causes Court Act, 1882.

Detailed Analysis:

1. Jurisdiction of the Arbitrator:
The Petitioner challenged the jurisdiction of the Arbitrator to adjudicate disputes related to licensor-licensee relationships and recovery of possession of immovable property. The court emphasized that under Section 41(1) of the Presidency Small Causes Court Act, 1882, the Small Causes Court has exclusive jurisdiction to entertain and try suits between a licensor and licensee or a landlord and tenant related to recovery of possession and any license fee or rent. The court noted that the Arbitrator's decision to proceed with the matter, despite objections, was challengeable under Sections 16(6) and 34 of the Arbitration and Conciliation Act, 1996.

2. Relationship between the Parties:
The court examined whether the relationship between the parties was that of a licensor-licensee or a warehousing agency. Despite the agreement being termed as a "warehousing agency" agreement, the court found that the Petitioner was in exclusive possession of the godown and paid charges akin to rent. The court referred to judgments clarifying that the term "licensee" in the Presidency Small Causes Court Act includes all forms of licensees, not just those under the Rent Act. The court concluded that the relationship was indeed that of a licensor and licensee.

3. Validity of the Arbitration Agreement:
The court addressed whether the arbitration clause in the agreement could override the exclusive jurisdiction of the Small Causes Court. Citing Full Bench judgments, the court held that even if an agreement contains an arbitration clause, it does not affect the exclusive jurisdiction of the Small Causes Court under Section 41 of the Act of 1882. The arbitration agreement, in such cases, would be invalid and inoperative as it would be against public policy to allow parties to contract out of the exclusive jurisdiction of the Small Causes Court.

4. Applicability of the Maharashtra Rent Control Act, 1999 and the Presidency Small Causes Court Act, 1882:
The court noted that the Maharashtra Rent Control Act, 1999 exempts premises belonging to the Government or a local authority from its purview. However, the court emphasized that the Small Causes Court has jurisdiction over disputes related to recovery of possession and license fees between licensors and licensees. The court also referred to Section 19 of the Presidency Small Causes Court Act, which lists suits that the Small Cause Court has no jurisdiction over, but confirmed that suits related to licensor-licensee relationships are within its jurisdiction.

Conclusion:
The court concluded that the Arbitrator had no jurisdiction to entertain and decide the dispute between the parties. The arbitration award dated 8 October 2010 was quashed and set aside. The court allowed the petition, keeping all points open and clarified that this decision does not deny the Respondent's right to invoke appropriate legal proceedings. The court also noted that any amounts paid or received shall be subject to adjustment, and the parties are at liberty to settle the matter.