1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY, BENCH AT AURANGABAD ARBITRATION APPLICATION NO. 4 OF 2009 Ravindra s/o Vitthalrao Songire .. APPLICANT VERSUS M/s Labhshetwar and Sakkarwar Constructions (through its partners) .. RESPONDENTS Mr. S.S. Laddha, Advocate for the applicant. Mr. P.M. Shah, Senior Counsel instructed by Mr. S.P. Shah, Advocate for respondent nos. 1 to 4. ===== CORAM : R. M. BORDE, J. DATE : 8 th October, 2009. PER COURT : 1 This is an application by applicant seeking appointment of Arbitrator under section 11 of the Arbitration and Conciliation Act, 1996. 2 Petitioner claims to be leasee in respect of leasehold premises belonging to the respondents. Petitioner contends that the lease is in respect of the constructed property having basement, ground floor, second floor and terrace constructed on plot no. 4 situate at Vedant Nagar, 2 Aurangabad. It is the contention of the applicant that the parties initially executed agreement titled as Leave and License, however, according to the terms and conditions of the said agreement, the document shall have to be construed as lease agreement. It is contended that after expiry of the period prescribed under the first agreement, fresh agreement came to be executed on 19-1-2007 which is also titled as Leave and License for a period until 18-7-2009. However, according to the applicant, although the document is styled as Leave and License agreement, proper construction of the terms contained in the document make it clear that it is lease deed executed by respondents in favour of the petitioner. According to petitioner, there arose certain dispute/differences between the parties which necessitates appointment of Arbitrator. The document executed between the parties contain a clause in respect of appointment of Arbitrator for resolving the disputes arising between the parties. It is contended by the petitioner that agreement arrived at between the parties which is reduced into writing contain clause no. 21 which makes it mandatory to make reference to the Arbitrator for resolving the dispute. It is contended that there exists disputes which are required to be resolved by making appointment of the Arbitrator. Thus, according to the petitioner, their exists live claim which is required to be settled through mechanism of the 3 Arbitrator. 3 Contentions raised by the petitioners have been opposed by the respondents mainly on two grounds. It is contended that clause 21 contained in the agreement cannot be construed as arbitration agreement within meaning of section 7 of the Arbitration and Conciliation Act, 1996. According to the respondents, the agreement necessarily or mandatorily does not require appointment of Arbitrator. As such, application seeking appointment of Arbitrator is not maintainable. Second argument advanced by the respondents is that as the petitioner himself has pleaded about the relationship between the parties as leasor and leasee and as the petitioner himself has contended that the agreement in question is essentially a lease agreement, by virtue of provisions of section 33 of the Maharashtra Rent Control Act, the questions / disputes raised by the applicant fall within exclusive domain of the forum created under the provisions of said enactment. It is contended that section 33 of the Maharashtra Rent Control Act excludes the jurisdiction to entertain any suit, proceeding or application which deals with, claims or questions relating to recovery of rent or possession arising between the landlord and tenant. Determination of the question between the landlord and tenant relating to recovery of rent or 4 possession falls within the exclusive jurisdiction of the civil court in view of provisions of section 33(1)(c) of the Maharashtra Rent Control Act. According to learned counsel for the respondents, therefore, reference to Arbitrator for determination of the questions / disputes is impermissible. 4 In order to appreciate the objections raised by the respondents, it is necessary to refer to clause 21 contained in the agreement which, according to the petitioner makes it obligatory to refer the dispute to Arbitrator : 21 It is understood and by the parties to the agreement that for all disputes “Aurangabad only” will be the jurisdiction and in such event both the parties shall try to resolve the problem by negotiations and shall recourse to arbitration proceedings before approaching the court of law and appointment of the arbitrator shall by mutual consent of parties in writing. . Section 33 of the Maharashtra Rent Control Act reads thus : 33 Jurisdiction of Courts 1 Notwithstanding anything contained in, any law for the time being in force, but subject to the provisions of Chapter VIII, and notwithstanding that by reason of the 5 amount of the claim or for any other reason, the suit or proceeding would not, but for this provision, be within its jurisdiction, a in Brihan Mumbai, the Court of Small Causes, Mumbai, b in any area for which a Court of Small Causes is established under the Provincial Small Causes Courts Act, 1987, such court, and c elsewhere, the court of the Civil Judge (Junior Division) having jurisdiction in the area in which the premises are situate or, if there is no such Civil Judge, the court of the Civil Judge (Senior Division) having ordinary jurisdiction, shall have jurisdiction to entertain or try any suit or proceeding between a landlord and a tenant relating to the recovery of rent or possession of any premises and to decide any application made under this Act (other than the applications which are to be decided by the State Government or an officer authorized by it or the Competent Authority); and subject to the provisions of sub-section (2), no other court shall have jurisdiction to entertain any such suit, proceeding, or application or to deal with such claim or question. . It is contended by respondents that clause 21 cannot be construed as an arbitration agreement mandatorily requiring reference of dispute to the Arbitrator. Section 7 of the Arbitration and Conciliation Act, 1996 defines arbitration agreement thus : 6 7 Arbitration agreement :- 1 In this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. 2 An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. 3 An arbitration agreement shall be in writing. 4 An arbitration agreement is in writing if it is contained in- a a document singed by the parties. b an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or c an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. 5 The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract. . According to respondents the question as regards “existence” of the arbitration agreement is required to be decided by the court and not 7 necessarily by the arbitrator alone. In view of the provisions of section 33 of the Arbitration Act, 1940, the question was required to be decided only by the court and not by the arbitrator. However, section 16 of the Arbitration and Conciliation Act, 1996 confers powers on the arbitral tribunal to decide whether there exists arbitration clause. However, the language employed by section 16 of the new act is only enabling one and permits the arbitral tribunal also to decide the question relating to existence of arbitration clause. Section 16 of the Act, however, does not take away the jurisdiction of the Chief Justice of India or his designate to decide the question of existence of arbitration clause. Thus, it is contended that the question as regards existence of the arbitration agreement which necessitates reference to arbitral tribunal is required to be determined by this court while dealing with the instant application. Reliance is placed on judgment of the Apex court in the matter of Jagdish Chander vs. Ramesh Chander and others reported in (2007) 5 Supreme Court Cases 719 . In paragraph no. 8 of the judgment, Apex court has observed thus : 8 This Court had occasion to refer to the attributes or essential elements of an arbitration agreement in K.K. Modi v. K.N. Modi, Bharat Bhushan Bansal v. U.P. Small Industries Corpn. Ltd, and Bihar State Mineral Development Corpn, v. Encon Builders (I) (P) Ltd., In 8 State of Orissa v. Damodar Das this Court held that a clause in a contract can be construed as an “arbitration agreement” only if an agreement to refer disputes or differences to arbitration is expressly or impliedly spelt out from the clause. We may at this juncture set out the well-settled principles in regard to what constitutes an arbitration agreement : i The intention of the parties to enter into an arbitration agreement shall have to be gathered from the terms of the agreement. If the terms of the agreement clearly indicate an intention on the part of the parties to the agreement to refer their disputes to a private tribunal for adjudication and a willingness to be bound by the decision of such tribunal on such disputes, it is arbitration agreement. While there is no specific form of an arbitration agreement, the words used should disclose a determination and obligation to go to arbitration and not merely contemplate the possibility of going for arbitration. Where there is merely a possibility of the parties agreeing to arbitration in future, as contrasted from an obligation to refer disputes to arbitration, there is no valid and binding arbitration agreement. ii Even if the words “arbitration” and “Arbitral Tribunal (or arbitrator)” are not used with reference to the process of settlement or with reference to the private tribunal which has to adjudicate upon the disputes, in a clause relating to settlement of disputes, it does not detract from the clause being an arbitration agreement if it has the attributes or elements of an arbitration agreement. They are: (a) the agreement should be in writing. (b) The parties should have agreed to refer any disputes (present or future) between them to the decision of a private tribunal. (c) The private tribunal should be empowered to adjudicate upon the disputes in an an impartial manner, giving due opportunity to the parties 9 to put forth their case before it. (d) The parties should have agreed that the decision of the private tribunal in respect of the disputes will be binding on them. iii Where the clause provides that in the event of disputes arising between the parties, the disputes shall be referred to arbitration, it is an arbitration agreement. Where there is a specific and direct expression of intent to have the disputes settled by arbitration, it is not necessary to set out the attributes of an arbitration agreement to make it an arbitration agreement. But where the clause relating to settlement of disputes, contains words which specifically exclude any of the attributes of an arbitration agreement or contains anything that detracts from an arbitration agreement, it will not be an arbitration agreement. For example, where an agreement requires or permits an authority to decide a claim or dispute without hearing, or requires the authority to act in the interests of only one of the parties, or provides that the decision of the authority will not be final and binding on the parties, or that if either party is not satisfied with the decision of the authority, he may file a civil suit seeking relief, it cannot be termed as an arbitration agreement. iv But merely use of the word ‘arbitration’ or arbitrator’ in a clause will not make it an arbitration agreement, if it requires or contemplates a further or fresh consent of the parties for reference to arbitration. For example, use of words such as ‘parties can, if they so desire, refer their disputes to arbitration’ or ‘in the event of any dispute, the parties may also agree to refer the same to arbitration’ or ‘if any disputes arise between the parties, they should consider settlement by arbitration’ in a clause relating to settlement of disputes, indicate that the clause which states that ‘if the parties so decide, the disputes shall be referred to arbitration’ or ‘any disputes between parties, if they so 10 agree, shall be referred to arbitration’ is not an arbitration agreement. Such clauses merely indicate a desire or hope to have the disputes settled by arbitration, or a tentative arrangement to explore arbitration as a mode of settlement if and when a dispute arises. Such clauses require the parties to arrive at a further agreement to go to arbitration, as and when the disputes arise. Any agreement or clause in an agreement requiring or contemplating a further consent or consensus before a reference to arbitration, is not an arbitration agreement, but an agreement to enter into an arbitration agreement in future. . According to learned counsel for the respondents, clause 21 contained in the agreement is merely an enabling provision which merely contemplates possibility of going to arbitration. According to him, said clause does not disclose determination and obligation to go to arbitration. There is merely possibility of the parties agreeing for arbitration in future and there is no obligation to refer the dispute to the arbitrator. Thus, there is no valid and binding arbitration agreement. Clause 21 provides that for all the disputes Aurangabad only will be the jurisdiction meaning thereby that the proceedings for settlement of dispute shall have to be initiated in the court within the jurisdiction of Aurangabad. It further provides that both the parties shall try to resolve the dispute by negotiation which is the second mode of settlement of dispute provided under clause 21 and the third mode 11 prescribed is in respect of reference to arbitration and that too before approaching the court of law. Thus, bare reading of clause 21 would give an impression that firstly the dispute, if any, shall have to be presented with the forum having powers to settle the dispute within the jurisdiction of Aurangabad city, the second mode prescribed for settlement of dispute is by way of negotiation, the third mode prescribed is by having recourse to arbitration proceedings and the same shall be before approaching the court of law, thus, meaning thereby approach to court of law is the fourth mode prescribed for settlement of dispute. Thus, clause 21 does not spell out the mandate for making reference to arbitration for settling the dispute arising between the parties. Thus, considering the test laid down by the Apex court in the judgment cited supra, the agreement in question in the instant matter provides merely a possibility of the parties agreeing to refer the matter to the arbitration. Clause 21 of the agreement does not mandatorily require the parties to make reference of dispute to the arbitrator alone. In these circumstances, clause 21 contained in the agreement cannot be construed as arbitration agreement within meaning of section 7 of the Act mandatorily requiring reference of dispute to the arbitrator. Thus, existence of arbitration clause is sine quo non for reference of dispute to the arbitrator. In the instant matter, arbitration clause is uncertain and as such 12 incapable to conclude that the parties are at ad idem for referring their dispute to the arbitrator. Thus, reference to arbitrator is uncalled for. 5 The second limb of argument advanced by the respondent is that the question raised by the applicant or reference of dispute sought to to the arbitrator falls essentially within the exclusive domain of the judicial forum created under the provisions of Maharashtra Rent Control Act for settlement of dispute. It is contended that the dispute relating to which reference is sought is relating to recovery of possession of premises and the petitioner himself has claimed relationship of tenant and landlord subsisting between the parties. Thus, the question or dispute falls within the exclusive domain of the judicial forum created under the Maharashtra Rent Control Act and as such, reference to arbitrator for adjudication of the dispute is impermissible. Petitioner himself in the application contends that the agreement arrived at between the parties on 19-1-2007 although is styled as Leave and License agreement, the same is essentially lease agreement. In paragraph no. 1 of the application, it is contended that the petitioner is leasee of constructed property belonging to the respondents. In order to determine which court has jurisdiction to try the suit, it is obligatory for the court to read the plaint or application as a whole and ascertain the real nature of the suit or 13 proceeding. Whatever may be the form of relief claimed, if on fair reading of the plaint or application it becomes apparent that the petitioner has alleged relationship of landlord and tenant between him and the respondents, the relief claimed in the proceeding relating to recovery of rent or possession then it is the special court alone that will have jurisdiction to decide the dispute. Thus, the pleadings raised in the application will have to be taken into account for considering the questions raised by the applicant. The petitioner in the instant petition has claimed existence of relationship of tenant and landlord between him and the respondents. Thus, applicability of provisions of Maharashtra Rent Control Act cannot be ruled out. Section 33 of the Act excludes the jurisdiction of any other forum or entertainment of any suit, proceeding or application dealing with the claim or question relating to recovery of rent or possession falling between the landlord and tenant. It is argued by learned counsel for the respondents that the dispute arising between the parties is essentially relating to recovery of possession. The petitioner himself has pleaded in the application about existence of relationship of landlord and tenant between the parties. Thus, according to learned counsel for the respondents, reference to arbitration is barred and the clause contained in the agreement i.e. clause 21 even if construed as an arbitration agreement shall have to be declared as non est. Reliance is 14 placed on Full Bench judgment in the matter of Dattatraya Krishna Jangam vs. Jairam Ganesh Gore reported in 1965 BCI (0) 11. Question raised in the matter was as to whether the jurisdiction of the Special Court depends on the plaintiff’s case as made out in the plaint or whether the contentions raised by the defendants are also required to be taken into consideration. It is ruled by the court that the jurisdiction of the court should ordinarily be determined at the time of institution of the suit when the plaint is filed, that the plea of the defendant will not determine or change the forum and that in order to decide whether a suit comes within the purview of section 28 what must be considered is what the suit as formed in substance is and what the relief claimed therein is. In a case reported in 1966 BLR 205, it was held that under section 28 of the Maharashtra Rent Control Act, the exclusive jurisdiction of the court has to be informed only if the person invoking the jurisdiction of the court alleges that the other party is a tenant or landlord and the question is one which is referred to under section 28 of the Act. Whether the person so invoking does not set up the claim that the other party is tenant or landlord, defendant is not entitled to displace the jurisdiction of the ordinary court by an allegation that he stands in that relation and on that ground the court has no jurisdiction to try the suit or proceeding or an application. It is also observed by the court that the term 15 appearing in section 28 of the Bombay Rent Act “relating to recovery of rent or possession” is wide and would include any suit or proceeding in connection with or having direct bearing on the question of possession of the premises. Section 33 of the Maharashtra Rent Control Act also refers to proceeding between the landlord and tenant “relating to recovery of rent or possession”. The Special Court is invested with powers not only to decide the question referred to in the section but also of matters which are incidental or ancillary for dermination of these questions. Reliance is placed on judgment of the Apex court in the matter of Natraj Studio (P) Ltd. vs. Navrang Stuidos and another reported in (1981) 1 Supreme Court Cases 523. Dispute before the Apex court between the parties was relating to possession of the premises and the relationship between the parties claimed was that of licensor or landlord and licensee / tenant. In the facts appearing in the matter, it was held that the court of small causes alone shall have jurisdiction to deal with the dispute and the arbitrator has none to adjudicate upon the dispute between the parties. The question arising in the matter was in respect of construction of the provisions of Bombay Rents, Hotel and Lodging House Control Act, 1947 and the Apex court found that the provisions of Bombay Rent Act 1947 have applicability considering the nature of the dispute. Section 28 of the Act is pari 16 materia with section 33 of the Maharashtra Rent Control Act. Under the Bombay Rent Control Act, exclusive jurisdiction to deal with the issues is invested with the court of small causes in Greater Bombay. Section 28 of the act provides that no other court shall have jurisdiction to entertain such suit or proceeding or application or to deal with such claim or question. Relying on the provisions of section 28 of the Act it was canvassed before the Apex court that the jurisdictional questions fall to be decided before the court of exclusive jurisdiction and as such adjudication by any other forum is not permissible including reference to arbitration. While dealing with the issue, the Apex court has observed in paragraph no. 18 of the judgment thus: 18 Thus exclusive jurisdiction is given to the Court of Small Causes and jurisdiction is denied to other courts (1) to entertain and try any suit or proceeding between a landlord and a tenant relating to recovery of rent or possession of any premises, (2) to try any suit or proceeding between a licensor and a licensee relating to the recovery of licence fee or charge, (3) to decide any application made under the Act and, (4) to deal with any claim or question arising out of the Act or any of its provisions. Exclusive jurisdiction to entertain any try certain suits, to decide certain applications or to deal with certain claims or questions does not necessarily mean exclusive jurisdiction to decide jurisdictional facts also. Jurisdictional facts have necessarily to be decided by the court where the jurisdictional question falls to be decided, and the 17 question may fall for decision before the court of exclusive jurisdiction or before the Court of ordinary jurisdiction. A person claiming to be a landlord may sue his alleged tenant for possession of a building on grounds specified in the Rent Act. Such a suit will have to be brought in the Court of Small Causes, which has been made the Court of exclusive jurisdiction. In such a suit, the defendant may deny the tenancy but the denial by the defendant will not oust the jurisdiction of Court of Small Causes. If ultimately the court finds that the defendant is not a tenant the suit will fail for that reason. If the suit is instituted in the ordinary Civil Court instead of the Court of Small Causes the plaint will have to be returned irrespective of the plea of the defendant. Conversely a person claiming to be the owner of a building and alleging the defendant to be a