Case: Natraj Studios (P) Ltd Vs. Navrang Studios &amp; Anr

The appellant Natraj Studios (P) Ltd., and the first respondent Navrang Studios, a firm, entered into an agreement on March 28, 1970, by which the latter granted the former "leave and licence for the use of their two studios and other premises described in List 1 annexed to the agreement and situated at 194 Kurla Road, Andheri, Bombay, and the machineries, equipments, property setting materials etc., mentioned in List 2 annexed to the agreement. Though the agreement was initially for a period of 11 months it was extended from times to time. By an agreement dated November 5, 1972, the original agreement was extended for a period of eleven months from January 1, 1973. The leave and licence agreement was thus in force on February 1, 1973, with effect from which date Section 15-A was inserted inthe Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, by an amendment (Maharashtra Act 17 of 1973). The effect of Section 15-A was that any person who was in occupation of any premises on February 1, 1973 as a licensee was deemed to have become, on that date, for the purposes of the Act, a tenant of the landlord, in respect of the premises or part thereof in his occupation. On April 28, 1979, the first respondent purported to terminate the leave and licence agreement and called upon the appellant to hand over possession of the Studios to the first respondent. Immediately, on May 8, 1979, the appellant filed Declaratory Suit 2326 of 1979 in the Court of Small Cayses, Bombay, praying for a declaration that the plaintiff-appellant was a monthly tenant of the two Studios and all other structures and open land covered by the agreement and fox fixation of standard rent and other reliefs. A written statement was filed by the first respondent contesting the suit. Pending disposal of the suit an interim order was made provisionally fixing the rent as Rs. 11, 500 per month. On August 4, 1979, the appellant filed an application under Section 33 of the Arbitration Act in the Bombay High Court for a declaration that the arbitration clause in the leave and license agreement was invalid, inoperative etc. The application was dismissed by the High Court on November 12, 1979, by a learned single Judge, on the ground that he had no jurisdiction to determine the alleged rights if any of the appellant as a tenant. On January 21, 1980, the first respondent filed an application under Section 8 of the Arbitration Act praying that the second respondent might be appointed as the sole arbitrator to decide the disputes and differences between the parties under the leave and licence agreement dated March 28, 1970. On February 29, 1980, the High Court allowed the application of the first respondent and appointed the second respondent as the sole arbitrator. A day earlier that is, on February 28, 1980, an appeal filed by the appellant against the judgment and order dated November 12, 1979 of the learned single Judge was dismissed by a Division Bench of the High Court on the ground that it was not maintainable under Section 39 of the Arbitration Act. The present two civil appeals have been filed by the appellant against the orders of the High Court dated November 12, 1979, and February 29, 1980

Court's reasoning:
We are of the view thatthe Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, applied to a licence to use a building even if the building is to be used necessary and simultaneously along with machinery and fixture separately licensed to be used. In such a situation there can be no question of the licence to use the machinery etc. and the licence to use the building being dominant and subsidiary purposes of the agreement as suggested by Shri Mridul in his argument. The submission of Shri Mridul that the agreement was primarily a licence to carry on the business of shooting films by using the machinery and equipments listed in the agreement and that the licence to use the building was only a subsidiary incident of the dominate purpose of the agreement does not appeal to us. On the construction placed by us upon the provisions ofthe Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, the two Studios given on licence would still be premises given on licence for business within the meaning of the Act so as to attract its protective provisions15. At this junction we may refer to the terms of the agreement. The agreement provided for (1) "leave and licence in respect of Studios 2 and 3 duly sound proofed and electrified and other premises more particularly described in List 1 hereto annexed situated at 194 Kurla Road, Andheri, Bombay, on a monthly compensation of Rs. 250 including sound proofing and electrification" and (2) "leave and licence in respect of the machineries, lights, equipments, setting and property materials etc. mentioned in List 2 hereto annexed on a monthly compensation of Rs. 7500". The two licences, it was stipulated, were to be "in force and operation simultaneously and together" and "not subject to divisibility". The licensees were entitled to carry on their work of producing motion picture films in the Studios and the machineries and other equipments were to be used for that purpose only. The licensees were also entitled to permit the use of the Studios and other premises, machineries and other articles temporarily, by others, whomsoever they like during the subsistence of the licences for the purpose of producing motion pictures only. Property tax and other taxes were to be borne and paid by the licences while the licensees were required to pay for the consumption of electricity and water. During the subsistence of the licences the licensees were not to part with the possession of the Studios and other premises, machineries and equipments. The Studios and other premises, machineries and equipments were to be used by the licensees in a prudent manner. The agreement further stipulated that no tenancy rights were to be understood as having been created by the licensors in favour of the licensees. The interest created was that of licensees only. The licensees were to carry on their business of motion picture films production in the licenced premises under the name and style of Natraj Studios (P) Ltd. The agreement is thus seen to be a composite agreement which gave leave and licence (1) to use the Studios and other premises for producing films and (2) to use the machinery and equipment for the same purpose. The licensors parted with possession of the Studios and the machinery in favour of the licensees. Notwithstanding the fact that the agreement was a composite one and the two licences were to operate simultaneously and together, there could be no gainsaying the fact that the Studios and other premises were certainly given on licence for the business of producing films. The parties themselves were conscious that the licence granted by the licensor in favour of the licensee was in respect of the Studios and other premises and that there was even a risk of the licence being construed as a lease. So they were anxious, at that stage, to emphasise that what was granted was a licence and not a lease. That was obviously to circumvent the provisions of the Bombay Rents, Hotel and Lodging house Rates Control Act, 1947, It was apparently though that the sophisticated description of the transaction as a licence instead of a lease would take it out of the clutches of the Bombay Rents, Hotel and Lodging House Rates Control Act. It was precisely the typed of agreement that forced the hand of the legislature to intervence and amend the Act by introducing Section 15-A by which such licensees were deemed to be tenants of the landlord16. We may now proceed to consider the submission that the Court of Small Causes alone has exclusive jurisdiction to resolve the dispute between the parties. Section 28(1) of the Bombay Rent Act, positively, confers jurisdiction on the Court of Small Causes to entertain and try any suit or proceeding between a landlord and tenant relating to the recovery of rent or possession of any premises or between a licensor and a licensee relating to the recovery of licence fee or charge and to decide any application made under the Act and to deal with any claim or question arising out of the Act or any of its provisions, and negatively it excludes the jurisdiction of any other court from entertaining any such suit, proceeding or application or dealing with such claim orThe suit was properly instituted in the Court of Small Causes and if the respondent wanted to rely upon the arbitration clause an application under Section 34 of the Arbitration Act should have been made to the Court of Small Causes before the written statement was filed. That was not done. It was said that the Court of Small Causes would have not Jurisdiction to stay the proceeding under Section 34 of the Act as it was precluded from exercising any jurisdiction over arbitration proceedings under Section 40. There is no substance in this argument. Section 40 of the Arbitration Act declares that a Small Cause Court shall have no jurisdiction over any arbitration proceeding or over any application arising thereout. We do not see how it can be said that the Court of Small Causes is exercising jurisdiction over any arbitration proceedings merely because the agreement between the parties contains an arbitration clause and the Court is asked to stay a proceeding before itself. The jurisdiction under Section 34 may be exercised by the judicial authority before which the proceedings are pending and not by the court which has jurisdiction over the arbitration proceedings. This is clear from the language of Section 4 of the Arbitration Act. An application under Section 34 is not an arbitration proceeding; nor is it an application arising thereout. The bar under Section 40 does not come in the way of the Court of Small Causes exercising jurisdiction under Section 34 of the Arbitration Act to stay a proceeding pending before it. If authority is necessary for this proposition it may be found in Chadha Motor Transport Co. (P) Ltd., Delhi v. R. N. Chopra (AIR 1968 Del 75   : 1967 69 Pun LR (D) 154), and Basanti Cotton Mills v. Dhingra Brothers (AIR 1949 Cal 684  ). The submission that there is not identity of dispute is also without substance. As already pointed out by us the dispute is between the licensor-landlord and licensee-tenant about the right to possess two Studios and other premises. The identity of the dispute is clear from a pleadings in the suit in the Court of Small Causes and the petition for reference to Arbitration filed in the High Court.In the light of the foregoing discussion and the authority of the precedents, we hold that both by reason of Section 28 ofthe Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 and by reason of the broader considerations of public policy mentioned by us earlier and also in Deccan Merchants Cooperative Bank Ltd. v. M/s. Dalichand Fugraj Fain (1969 1 SCR 887   : AIR 1969 SC 1320   : 1970 40 Com Cas 187), the Court of small Causes has and the arbitrator has not the jurisdiction to decide the question whether thelandlord is entitled to seek possession of the two Studios and other premises together with machinery and equipment from the appellantThat this is the real dispute between the parties is abundantly clear from the petition filed by the respondents in the High Court of Bombay, under Section 8 of the Arbitration Act seeking a reference to Arbitration. The petition refers to the notices exchanged by the parties, the respondent calling upon the appellant to hand over possession of the Studios to him and the appellant claiming to be a tenant or protected licensee in respect of the Studios. The relationship between the parties being that ofnt and the dispute between them relating to the possession of theand the dispute between them relating to the possession of thepremises, there is no help from the conclusion that the Court of Small Causes alone has the jurisdiction and the Arbitrator has none to adjudicate upon the dispute between the parties