WHETHER THE PROVISIONS OF PUBLIC PREMISES ACT, 1971 OVERRIDES THE ARBITRATION AND CONCILIATION ACT, 1996?

[Mr. M. GOVINDARAJAN]

In CENTRAL WAREHOUSING CORPORATION & ANR. VERSUS M/S SIDHARTHA TILES & SANITARY PVT. LTD - 2024 (10) TMI 1123 - SUPREME COURT, the appellant is a statutory body established under the Warehousing Corporation Act, 1962.  It is coming under the control of Ministry of Consumer Affairs.  The appellant is providing warehousing facilities.  The appellant provided warehousing facility to the respondent company which was engaged in the trading of ceramic tiles and sanitary ware.  The appellant provided a space of 1295 square feet.  The said space was handed over to the respondent by the appellant on 12.09.2012. 

A lease agreement was entered into between the parties.  According to the agreement the space provided to the respondent will be for 3 years from 12.09.2012.  The lease may be renewed by the mutual consent of the parties.  The rent for the storage space was fixed at Rs. 131/- per square feet per month.  The appellant revised the rent for storage with effect from 01.11.2012.  The same was communicated to the respondent by the appellant on 04.10.2012.  The said revision was revised by the Appellant on 10.05.2013 and 31.12.2014.  The appellant intimated the respondent that if the respondent did not pay the revised amount, it would be presumed that the respondent was not interested in retaining the space allotted to it. 

The rent was further revised by the appellant with effect from 01.04.2015 @ Rs.177/- per square feet per month.  The respondent informed the appellant that he wanted to continue to take rent of the space allotted to him.  Further he wanted to renew the agreement.  He was also ready to clear the outstanding dues to the appellant.  The lease expired on 11.09.2015.  Instead of terminating the lease for non-payment of dues the appellant raised a demand on 16.09.2015 to the tune of Rs.16,10,004/-.  But the appellant invoked the provisions of Public Premises (Eviction of Unauthorized Occupants) Act, 1971.  In the meantime, the respondent vacated the premises on 13.11.2015.  However, the Estate Officer, under the said Act, passed the orders on 31.12.2015 holding that the respondent was in unauthorized occupation from the date of expiry of lease ie., 11.09.2015 to till date of vacation i.e., 13.11.2015 and directed to pay the dues as indicated in the demand notice.

The respondent sent a notice to the Managing Director of the appellant on 23.09.2015 arising the following disputes-

• The enhancement of rent for the occupation of the floor offered by the appellant;
• The extension of the agreement for dedicated warehousing. 

The said notice was delivered to the appellant on 26.09.2015.  The contention of the appellant is that it is not an arbitrable dispute and beyond the agreement.

Therefore, the  respondent filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 for the appointment of arbitrator as per arbitration agreement before the High Court.  The said application specifically speaks about the dispute that has arisen under the agreement dated 26.09.2012. Broadly, they relate to the right of renewal of the contract and also the legality and propriety of the revision of rates during the subsistence of the agreement.  The High Court held that the claims made in the notice followed by the application under Section 11 are clearly covered by the arbitration clause.

The appellant filed an appeal before the Supreme Court against the order of the High Court.  The appellant contended that the Public Premises Act will override the provisions of the Arbitration Act.  The Supreme Court considered the following issues to be decided in the present appeal-

1. Whether the Public Premises Act, 1971 overrides the Arbitration and Conciliation Act, 1996?
2. Whether the High Court committed any error in appointing the arbitrator while exercising the jurisdiction under Section 11?

For the first question the Supreme Court observed that the application relate to promises and reciprocal promises arising out of the agreement dated 26.09.2012. The right of renewal as well as the legality and propriety of the enhanced demand arose during the subsistence of the agreement. It will be on the interpretation, construction and the obligations arising out of the agreement that the respondent’s claim rests.  The Public Premises Act authorizes the ejectment of a tenant in unauthorized occupation of public premises and for consequential directions.  The dispute between the parties is between the period from 12.09.2012 to 11.09.2015, when the lease expired.  The Supreme Court was of the opinion that the Public Premises Act would not even cast a shadow on this period.  Since the dispute is related to the rights of the concerned it depends on the terms of the agreement.   The Public Premises Act neither bars nor overlaps with the scope and ambit of proceedings that were initiated under the Arbitration and Conciliation Act.

In regard to the second question the Supreme Court observed that the disputes would undoubtedly arise out of the agreement between the parties and the resolution of such disputes is clearly covered by the arbitration clause.  Then the Supreme Court analyzed the provisions of the contract.  The Supreme Court analyzed the judgment of High Court in this regard. The High Court held that the scope of examination under Section 11(6-A) is confined to the existence of an arbitration agreement on the basis of Section 7. The examination of validity of the arbitration agreement is also limited to the requirement of formal validity such as the requirement that the agreement should be in writing.  The scope of enquiry under section 11(6-A) is limited to a prima facie scrutiny of the existence of the arbitration agreement, and does not include a contested or laborious enquiry, which is left for the arbitral tribunal to ‘rule’ under Section 16.   The scope of enquiry at the stage of appointment of arbitrator is limited to the scrutiny of prima facie existence of the arbitration agreement, and nothing else.

In view of the High Court judgment, the Supreme Court rejected the appeal filed by the appellant.  Further the Supreme Court imposed a cost of Rs.50,000/- on the appellant for the unnecessary litigation by way of filing appeal before the Supreme Court.  The Supreme Court directed for the restoration of the arbitral proceedings and delivered the award as quickly as possible.