Whether dispute between landlord and tenant can be referred to arbitration?

IN THE HIGH COURT OF BOMBAY

Appeal No. 365 of 1996 in Arbitration Petition No. 424 of 1991

Decided On: 12.11.2003

Vinayak Balkrishna Samant And …
vs
Mahanagar Telephone Nigam Ltd.

on 12 November, 2003
Equivalent citations: AIR 2004 Bom 227, 2004 (2) ARBLR 94 Bom, 2004 (3) BomCR 111, 2004 (1) MhLj 1102
Author: R Lodha
Bench: R Lodha, N Mhatre
JUDGMENT R.M. Lodha, J.

1. The Appellants are the owners of the building known as ‘Nalanda’ situate at Plot No. 28, Samant Estate, Goregoan (E), Mumbai. By the Deed of Lease dated 3-9-1984, the appellants (hereinafter be referred as ‘lessors’) leased out second floor of the said building admeasuring about 2540 sq.ft. to the President of India for the purpose of Bombay Telephones (the lessee) on a monthly rent of Rs. 10,160/- and the service amenity charges of Rs. 3,810/-. The said lease was for a period of three years effective from 8-8-1983 with a renewal clause allowing lessee to seek renewal for a further period of three years. The lease provided that the lease of premises may mutually be renewed for a term of three years on the same terms and conditions including the rate of compensation and service amenity charges. The lease further provided that after the expiry of six years’ lease period, if a further renewal is required by the lessee and notice of such intention by the lessee is given at least three months before the expiration of lease, the lessors and the lessee shall mutually decide the compensation, amenity and service charges on the basis of the rate and situation then existing and other conditions of lease would be same after renewal. The present respondent is the successor in interest of the Bombay Telephones. It is admitted case of the parties that on the lease period of three years having been expired on 7-8-1986, it was extended for three years from 8-8-1989. It appears that on expiry of the extended period of three years on 7-8-1989, the lessors requested the lessee to surrender the premises. On the other hand, the lessee intimated to the lessors their decision to continue the lease for a further period of five years w.e.f. 8-8-1989 on the same terms and conditions. The lessors seem to have declined to extend the lease period for further period of five years on the same terms and conditions as desired by the lessee and intimated the lessee that as per the terms of the lease such further renewal could only be on terms and conditions that may be mutually agreed upon including rent and service amenities charges. The parties could not arrive at mutually agreed rent for further extension. However, the lessee continued to remain in possession of the premises as protected tenant. There is no dispute and it is admitted case of the parties that the provisions of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 (for short ‘Bombay Rent Act’) is applicable to the leased premises. The lessee filed an arbitration suit on the Original Side of this Court under Section 20 of the Arbitration Act, 1940 praying for; (a) to order the lessee to file the arbitration agreement as contained in the Deed of Lease dated 23-9-1984 and (b) to appoint a fit and proper person as Arbitrator to decide the dispute between the parties as to the increase of compensation, service amenity charges and payment of interest on delayed payments in respect of the lease premises. The Arbitration Petition was contested by the lessee and by the order dated 21-11-1995, the learned Trial Judge of this Court dismissed the arbitration suit holding that the plaintiffs’ claim was not referable to arbitration and the exclusive jurisdiction lay with the Small Causes Court under Section 28 of the Bombay Rent Act. Aggrieved thereby, the present appeal has been preferred by the lessors.

2. Mr. H. J. Thakkar, the learned Senior Counsel appearing for the appellants, while assailing the judgment of the learned Trial Judge strenuously urged that by the arbitration suit, the lessors sought reference to the arbitrator for determination of agreed rent under the lease agreement as the parties were not able to decide the mutually agreed rent. According to the learned Senior Counsel, the reference to the arbitrator for the determination of the agreed rent on behalf of the parties was not hit by Section 28 of the Bombay Rent Act as the determination of agreed rent between the parties by the arbitrator was not covered by the expression ‘the recovery of rent’ occurring in Section 28 of the Bombay Rent Act. In support of his submission, the learned Senior Counsel referred to the judgments of this Court in Harilal Shamalji Parekh v. The Jain Co-operative Housing Society Limited, 59 BLR 217, Rajnikant v. Rameshchandra, , Shivaling Gangadhar Tambekar v. Navnitlal Amritlal Gandhi, (1957) 60 BLR 374. He also referred to the Black’s Law Dictionary and Oxford Dictionary for the word ‘recovery’. On the other hand, the learned Counsel for the Respondent supported the reasoning given by the learned Trial Judge.

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3. We reflected over the matter and in our considered view, the submissions of the learned Senior Counsel for the appellants do not merit acceptance.

4. The relevant clause of renewal in the deed of Lease reads thus :

“…And further that the Lease of the premises shall mutually be renewed for a further term of THREE YEARS on the same terms and conditions including rate of compensation and service amenity charges and notice of such intention by the Lessee to the Lessors be given atleast three months before the expiration of the lease hereby granted. After expiration of six years lease period as above, if further renewal is required by the Lessee and notice of such intention by the Lessee be given again atleast three months before expiration of lease. The Lessors and the Lessee shall mutually decide the compensation, amenities and service charges on the basis of Rate and situation then existing and other conditions of lease would be same after renewal…..”

5. The arbitration clause in the Deed of Lease provides thus:

PROVIDED ALWAYS and it is hereby expressly agreed that if at any time there shall arise any dispute, doubt difference of question with regard to the interpretation of meaning or any of terms and conditions of this demise or in respect of the rights, duties and liabilities of the parties hereto or in any way touching or arising out of those presents or otherwise in relation to the premises then every such dispute, difference, doubt or question (except the decision whereof is herein expressly provided for) shall be referred to the sole arbitration of the Director General, Posts and Telegraphs or in case his designation is changed or his office is abolished, the officer who for the time being is entrusted whether or not in addition to other functions, with the functions of the Director General of Posts and Telegraphs, by whatsoever designation such official may be called or if he be unable or unwilling to act, then of an officer appointed by him in this behalf. It will be no objection to any such appointment that the person appointed is a Government servant, that he had to deal with the matters to which the indenture of lease relates and that in the course of his duties as such Government servant has expressed view on all or any of the matters in dispute or difference. The decision of the arbitration shall be final and binding on the parties to this deal. The provisions of the Indian Arbitration Act, 1940 or any statutory modifications or re-enactments thereof and the rules made thereunder for the time being in force shall apply to such arbitration and this deed shall be deemed to be a submission to arbitration within the meaning of the said Act.”

6. It would be thus seen from the Deed of Lease that on expiry of six years of lease period, the renewal of the lease was permissible on mutually agreed rent, amenities and service charges. The fact is that on expiry of the lease period of six years, the lessee continued to remain in occupation of premises as a protected lessee but at the same time no mutual agreement could be arrived at between the parties for the renewal of lease on agreed terms. The question before us is : whether the lessors could seek the determination of the rent through the medium of the arbitrator under the arbitration clause in the light of the aforenoted admitted facts and the provisions of Section 28 of the Bombay Rent Act.

7. The relationship of the parties admittedly is that of lessor and lessee. The lessee came in occupation of the leased premises under the deed of Lease on the agreed rent and the other charges provided therein initially for a period of three years. The lease was admittedly renewed for a further period of three years on the same terms and conditions including the rent and the other charges. On expiry of six years, the lessee continued to remain in possession of the premises as protected lessee and continued to pay the rent as was being paid under the deed of Lease. It appears to us that the rent that was being paid by the lessee after expiry of lease period of six years was found inadequate by the lessors and it was for this reason that the arbitration petition (suit) was filed by the lessors under Section 20 of the Arbitration Act, 1940 and the prayer was made for filing of the arbitration agreement as contained in the deed of Lease dated 23-9-1984 and for appointment of arbitrator to decide the dispute between the parties as to the increase of compensation, service amenity charges and payment of interest on delayed payment in respect of the premises in question.

8. We have no hesitation in holding that such dispute between the parties in respect of increase of rent could be gone into only by the Court of competent jurisdiction under Section 28 of the Bombay Rent Act and no other forum. Section 28 of the Bombay Rent Act reads thus :

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“28. Jurisdiction of Courts. — (1) Notwithstanding anything contained in any 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 Greater Bombay, the Court of Small Causes, Bombay, (aa) in any area for which, a Court of Provincial Small Causes is established under the Provincial Small Cause Courts Act, 1887, such Court and

(b) 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 and try suit or proceeding between a landlord and a tenant relating to the recovery of rent or possession of any premises to which any of the provisions of this Part apply or between a licensor and a licensee relating to the recovery of the licence fee or charge and to decide any application made under this Act and to deal with any claim or question arising out of this Act or any of its provisions and subject to the provisions of Sub-section (2), no other Court shall have jurisdiction to entertain any such suit, proceedings, or application or to deal with such claim or question.

(2)(a) Notwithstanding anything contained in Clause (aa) of Sub-section (1), the District Court may at any stage withdraw any such suit, proceeding or application pending in a Court of Small Causes established for any area under the Provincial Small Cause Courts Act, 1887, and transfer the, same for trial or disposal to the Court of the Civil Judge (Senior Division) having ordinary Jurisdiction in such area.

(b) Where any suit, proceeding or application has been withdrawn under Clause (a), the Court of the Civil Judge (Senior Division) which thereafter tries such suit, proceeding or application, as the case may be, may either retry it or proceed from the stage at which it was withdrawn.

(c) The Court of the Civil Judge trying any suit, proceeding or application withdrawn under Clause (a) from the Court of Small Causes, shall, for purposes of such suit, proceeding or application, as the case may be, deemed to be the Court of Small Causes.”

Explanation :– In this Section “proceeding” does not include an execution proceeding arising out of a decree passed before the coming into operation of this Act.

9. The aforesaid provision contained in Section 28 would reveal that not only the Courts mentioned therein have been given exclusive jurisdiction to entertain and try any suit or proceeding between the landlord and tenant relating to the recovery of rent or possession of any premises to which the provisions of the Rent Control Act are applicable but also the jurisdiction of all other fora to entertain such suit or proceeding has been taken away. The expression relating to occurring before the expression recovery of the rent reflects the legislative intention that there may be matters which may not, strictly speaking, be the subject matter of suits for recovery of rent and yet they may relate to the suits for recovery of rent. The expression relating to recovery of the rent is wide and comprehensive enough to cover not only the suit for recovery of rent but also such suits which are incidental and ancillary to the suits for the recovery of rent. The expression ‘relating to the recovery of rent’ occurring in Section 28 does not admit of narrowness and cannot be confined to the suits for recovery of rent only and no other matters incidental or ancillary thereto. When the Legislature used the expression ‘relating to the recovery of the rent’, it obviously used it to give more comprehensiveness to the expression ‘recovery of rent’. Any dispute between the landlord and tenant for fixation of rent or increase of the rent would surely be covered by the expression ‘relating to the recovery of rent’. Though the learned Senior Counsel sought to draw distinction between the fixation of the standard rent under Section 11 of the Bombay Rent Act and the dispute between the parties for determination of agreed rent by the arbitrator, in our considered view, such distinction substantially does not exist. Ultimately, what the lessors wanted through the arbitration suit under Section 20 was resolution of dispute between the parties about the increase of rent. This is the prayer substantially in the arbitration suit. We are afraid such dispute between the landlord and tenant about the increase of rent can only be gone into by competent Court having jurisdiction under Section 28 of the Bombay Rent Act and no other forum including the arbitrator. In Harilal Shamalji Parekh (supra), the learned Single Judge of this Court while dealing with Section 11(1)(a) of the Bombay Rent Act held that the intervention of the Court with contractual rent can only be where the rent is not only unreasonable but exceeds by some substantial margin what is reasonable, so that it may be termed to be excessive. The learned Single Judge further observed that there was always a gap between what was reasonable and what was excessive and what was excessive do not begin where what was reasonable necessarily ended and if the rent was within the gap between what was excessive and what was reasonable, the Court had no jurisdiction to fix a just rent in such a case. The judgment of the learned Single Judge in Harilal Shamalji Parekh (supra) does not deal with the controversy raised before us. What is laid down in Harilal Shamalji Parekh’s case (supra) is that the jurisdiction of the Court under Section 11(1)(a) of the Bombay Rent Act could only be invoked if it was found that the contractual rent was excessive. In my suit for increase of rent concerning the premises governed by Bombay Rent Act, the necessary facts which confers such jurisdiction have to be pleaded and proved.

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10. The learned Single Judge of Gujarat High Court in Rajnikant v. Rameshchandra (supra) has followed the judgment of this Court in Harilal Shamlji Parekh (supra) and held that under Section 11(1)(a) of the Bombay Rent Act, the Court gets the jurisdiction to interfere with the contractual rent if and only if it finds that the contractual rent is excessive. We hardly find relevance of Harilal Shamalji Parekh (supra) and Rajnikant (supra) to the controversy in hand before us.

11. In Shivaling Gangadhar Tambekar (supra), the question before this Court was whether a suit for damages and mandatory injunction for the removal of machines between the landlord and tenant could be tried by Civil Court. The answer of the learned Single Judge was in the affirmative holding that the claim of damages and mandatory injunction for the removal of machinery cannot be said to arise out of Rent Control Act and, therefore, the Civil Court has jurisdiction to deal with that claim. In the matter before us, the claim of the lessors for increase of rent of the premises which are governed by the Bombay Rent Act wholly and squarely arises out of the Bombay Rent Act and, therefore, could only be decided by Court having competence and jurisdiction under Section 28 of the Bombay Rent Act and no other Court or forum including the arbitrator. Incidentally, we may note that the Apex Court in Natraj Studios (P) Ltd v. Navrang Studios and Anr., AIR 1981 SC 537 clearly held that the parties governed by the Bombay Rent Act cannot be permitted to contract out of the legislative mandate which require their disputes to be settled under the Act by the special Courts constituted by the Act and that the arbitration agreements between the parties whose rights are regulated by the Bombay Rent Act cannot be recognised by Court of law. Whether the rent being paid by the lessee as a protected lessee deserves to be refixed is a question that can only be gone into by the Court having jurisdiction under Section 28 of the Bombay Rent Act and the parties cannot by the agreement even if it be assumed that there is such agreement and have rent refixed through the arbitrator. This is simply impermissible under Section 28 of the Bombay Rent Act. Moreover, it needs no elaboration that under the Bombay Rent Act the parties cannot have the rent of the premises governed by the Bombay Rent Act fixed by the agreement or otherwise beyond what is permissible as standard rent in relation to such premises and the increase of rent cannot exceed permissible increase as provided under the Bombay Rent Act. Section 18 of the Bombay Rent Act provides that if any landlord receives inter alia any consideration other than standard rent with permitted increases in respect of renewal or continuance of any premises, he may be convicted with imprisonment for a term which may extend to six months and also be punished with fine which shall not be less than the amount so received by him. Such excess amount is also recoverable by the tenant or his legal heirs within the time provided under Sub-section (2) of Section 18. The legislative scheme is that the landlord cannot charge the rent other than the standard rent or the permitted increases in respect of the renewal or continuance of lease and when that is the legislative scheme we are afraid the appellant’s submission that he has a right to have the agreed rent fixed by the arbitrator under the arbitration clause of the deed of Lease is wholly misconceived and misplaced.

12. Taking all these aspects into consideration, we are satisfied that the consideration of the matter by the learned Trial Judge did not suffer from any error warranting interference by us in appeal.

13. Appeal is, accordingly, dismissed with no order as to costs.

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