IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION ARBITRATION APPEAL NO. 11 OF 2008 IN MISC. APPLICATION NO. 261 OF 2005. WITH ARBITRATION APPEAL NO.12 OF 2008. Padmashree Dr.D.Y.Patil Pratishthan ...... ......Appellant. V/s Pimpri Chinchwad Mun. Corpn. ..... ...... ......Respondent. Mr.S.U.Kamdar with Mr.Vineet B. Naik and Mr.S.R.Kulkarni, Adv. For the appellant. Mr.N.V.Walawalkar i/by Mr.G.H.Keluskar, Adv. For the respondent. CORAM: A.P.DESHPANDE, J. DATED: 2nd SEPTEMBER, 2008. Oral Judgment: By consent of parties this arbitration appeal is taken up for final hearing. Heard. This appeal takes an exception to an order dated 12.2.2008 passed by the District Judge in Civil Misc. Application No.261 of 2005 rejecting the application moved by the appellant-applicant under 1 section 9 of the Arbitration and Conciliation Act, 1996 (the “Act”). The appellant is a public trust registered under the Bombay Public Trust Act since the year 1990. The Trust has been formed and registered with the object of imparting education and to run educational institutions. As the Trust was not having its own premises for housing a medical college, the Trust took on rent certain premises owned by the landlord viz. Pimpri Chinchwad Municipal Corporation (PCMC)-the respondent on an agreed rate of rent. As some additional premises were required by the Trust the same was procured under different agreement yet again on an agreed rate of rent. Initially there was some dispute as to whether the rent agreed was exclusive of taxes or inclusive of taxes but at the time of hearing of the matter learned counsel for the appellant fairly conceded that the rent agreed was exclusive of taxes to be paid to the Corporation. In view of this agreed position I do not propose to demonstrate that the rent was to be paid exclusive of taxes. 2. The lease agreement in question which forms the basis of this litigation provide an arbitration clause viz. Clause 14 which if freely 2 translated reads thus: “If any dispute arises touching this agreement the same shall be first referred to the Commissioner, Pimpri Chinchwad Municipal Corporation as the sole arbitrator and his decision shall be binding on both the parties. Hence parties cannot first approach the Civil Court and the same has been agreed by the parties executing the agreement.” 3. The appellant seeks to raise dispute about payment of corporation taxes in relation to the premises taken on lease under the said agreements. During pendency of the application under section 9 which was filed in the year 2005 ad-interim injunction was granted in favour of the appellant-applicant. However the same has been vacated on dismissal of the application under section 9 by the District Judge. While dealing with the application the Court below has considered the objection raised by the respondent that the dispute sought to be raised by the applicant is not an arbitral dispute. Two fold contentions were raised by the applicant before the Court below viz; (i) that the liability for payment of Corporation taxes was that of 3 the landlord meaning thereby respondent-Corporation itself and thus the applicant is not liable to pay the same and (2) that the premises were solely occupied and used for public charitable purpose and hence it is exempted from payment of taxes by virtue of section 132 of the PCMC act. Per contra the respondent-corporation had submitted that the primary responsibility for payment of property taxes in respect of buildings held immediately from the corporation is that of the actual occupier thereof having regard to the provisions of section 139 of the Act. An objection was also raised that the applicant cannot claim an exemption from payment of taxes allegedly under section 132 in an arbitral dispute. It is also denied that the applicant is a public charitable institution. And lastly it was contended that the party aggrieved by a demand made by the Corporation in relation to taxes has a statutory remedy under section 406 of the Act. Dealing with the rival contentions the District Judge has in the first place held that there can be hardly any dispute in regard to payment of taxes by the applicant having regard to the provisions of section 139 of the Act. When the parties have agreed that the rent payable by the 4 applicant to the respondent is exclusive of taxes there is no scope for raising any dispute much less an arbitral dispute. It is also held that it is not a public charitable trust. If at all the applicant has any claim for seeking exemption on the ground that it is public charitable institute the same is to be done under the provisions of the statute and cannot be resolved in an arbitral dispute. The Court below has also concluded that the petitioner has failed to make out any case for claiming exemption. While dealing with equities and bonafides of the applicant the Court has held that though the applicant was protected by an interim order from the year 2005 to 2008 the applicant has failed to issue notice under section 21 for commencement of arbitration proceedings and thus recorded a finding against the applicant-appellant. 4. Challenging the impugned order learned counsel for the petitioner has submitted that the Court below has erred in law in holding that there is no arbitral dispute. It is also contended that as the parties have agreed to refer all disputes inter se to the sole arbitrator the relief claimed by the applicant should have been 5 granted by the Court below. Per contra learned counsel for the respondent has submitted that ordinarily recovery of taxes ought not be stayed is a settled position in law. He then submits that the Corporation has entered into lease agreements as any other landlord and thus the terms of the agreement cannot be so widely construed so as to include all disputes which are required to be addressed by statutory authorities before stipulated forum under the statute such as challenge to the demand of taxes, seeking exemption as a public charitable institution and the like. In the submission of the learned counsel for the Corporation the distinction has to be borne in mind about functioning of the Corporation as sovereign body imposing and recovery of taxes on one hand and executing a lease in favour of the tenant as a landlord on the other hand. 5. It is reiterated that the agreements of lease provide for payment of rent exclusive of taxes is an agreed position and hence it is strange on the part of the appellant to contend that the taxes are payable by the Corporation. Even otherwise under section 139 of the Corporation Act, the primary responsibility for payment of property 6 taxes in respect of the building held immediately from the Corporation is that of the actual occupier thereof. In view of this position the learned District ' Judge is right in holding that there is no arbitral dispute. So far as the claim of the appellant that it is entitled to exemption from payment of property tax is concerned, section 132 provides that general taxes shall be levied in respect of all buildings and lands except: (a)xxxx xxxxxx xxxxx xxxxxx (b) buildings and lands or portions thereof solely occupied and used for public worship or for a public charitable purpose. It is thus clear in the first place that it must be established by the appellant that it has occupied the building for public charitable purpose at least prima facie and in the second place it must demonstrate that the parties to the agreement were alive to refer for arbitration this type of dispute or it was in contemplation of the parties. The learned District Judge has held that the appellant has failed to establish even prim facie that it is occupying the premises for a public charitable purpose. The said finding cannot be faulted as it is 7 based on material and evidence on record. Reliance is rightly placed by the District Judge on the judgment of the Supreme Court in the case of Municipal Corporation of Delhi v/s Children Book Trust, reported in AIR 1992 SC 1456 to hold that the Appellant has failed to establish that it is a Public Charitable institution. 6. The agreement clearly provides that the rent shall be exclusive of taxes obviously meaning thereby that the taxes are to be paid by the occupier appellant. Entitlement of exemption under section 132 will have to be gone into by the authority under the Act. Even otherwise correctness of demand of taxes can be questioned under section 406 before a Judge of the Court Small Causes in the city of Pune. Parties never intended to refer the dispute regarding the claim for exemption of the payment of taxes to the Arbitrator. The Corporation had entered into an agreement of lease with the appellant in the capacity of a landlord and not as sovereign body exercising the functions of imposition and of recovery of taxes. A distinction has to be borne in mind when the Corporation is entering into an agreement as a landlord of a building. The Corporation as the 8 landlord and the lessee had agreed that the rent shall be paid exclusive of taxes. Now what is sought to be urged by the appellant is that the lessee should be exempted from payment of corporation taxes as it had occupied the premises solely for public charitable purpose. The exemption which can be claimed on that ground would be an issue directly falling under section 132 of the Corporation Act and the authority under the act is to adjudicate and determine the entitlement of a person claiming such an exemption. Correctness of the decision can also be questioned under section 406 of the Act. Perusal of the agreement of lease nowhere even remotely provides that such an issue i.e. grant of exemption from payment of the Corporation taxes was agreed to be referred to an arbitrator. Thus the learned District Judge was right in holding that there does not exist any arbitral dispute. The relief claimed under section 9 by the appellant is wholly unsustainable and has been rightly rejected by the District Judge. There being no merit in the appeal, appeal stands dismissed with costs throughout. 9 7. Counsel for the appellant seeks continuance of status quo order which was operating during pendency of the appeal. Status quo order is extended by a period of four weeks. 10