2014 (6) TMI 212 - HC - Indian Laws

Court quashes Arbitrator's award, directs disputes on 'leave & license' to Civil Court

The court quashed the Arbitrator's award due to lack of jurisdiction, emphasizing that disputes involving 'leave and license' agreements should be ... Arbitrability of disputes concerning leave and licence, possession and occupation charges - power of Arbitral Tribunal to decide disputes barred by special statutes - exclusive jurisdiction of civil/special courts under rent/landlord tenant statutes - setting aside award for lack of jurisdiction - power of Arbitral Tribunal under Section 34 of the Arbitration and Conciliation Act, 1996Arbitrability of disputes concerning leave and licence, possession and occupation charges - power of Arbitral Tribunal to decide disputes barred by special statutes - exclusive jurisdiction of civil/special courts under rent/landlord tenant statutes - Whether the sole Arbitrator had jurisdiction to entertain and decide the counterclaim and related reliefs concerning possession, occupation charges and eviction when the dispute falls within the domain of special civil/statutory fora - HELD THAT: - The Court held that the arbitrator lacked jurisdiction to adjudicate the disputes complained of because, on a total reading of the agreement and the admitted facts, the relationship and the nature and quality of occupancy fall within the scope of special statutes and fora dealing with licensor/licensee and landlord/tenant issues. Reliance was placed on Full Bench and Supreme Court authorities (as discussed in the judgment) establishing that nomenclature in the agreement is not decisive and that the real intention and circumstances determine whether a dispute is arbitrable. The learned Arbitrator proceeded to decide the preliminary objection as to jurisdiction and granted consequential reliefs despite the bar; that exercise exceeded his competence. In view of these principles the Court concluded that the reference itself was not capable of being finally decided by the Arbitral Tribunal and that the award in respect of those matters must be set aside. All substantive points on merits, limitation and other defenses were kept open for adjudication in the appropriate forum or by agreement of the parties. [Paras 18, 19, 22, 24]The award dated 4 February 2010 is quashed and set aside insofar as it decides the disputed questions of possession, occupation charges and related reliefs for want of jurisdiction; all points are kept open.Setting aside award for lack of jurisdiction - power of Arbitral Tribunal under Section 34 of the Arbitration and Conciliation Act, 1996 - Consequences of quashing the award as to costs and payment directed in the award - HELD THAT: - Although the award was quashed for lack of jurisdiction, the Court dealt with the costs ordered by the arbitrator and the bill of the arbitrator. The Court modified the award's costs direction: since the award is set aside on jurisdictional grounds without touching merits, the petitioner shall bear its own costs and shall not be directed to pay the respondent's arbitration costs as originally awarded. Separately, the Court observed that the petitioner remains obliged to clear the Arbitral Tribunal's bill dated 14 January 2010 before taking possession of the award and directed the petitioner to make the payment directly to the respondent within four weeks if the respondent has already discharged such amounts, subject to adjustment. The Court declined to remand the matter for rehearing and left other remedies and adjustments open to the parties. [Paras 20, 21]The award is modified insofar as costs are concerned - the petitioner to bear its own costs (respondent's costs under the award are not to be enforced); the petitioner shall pay the amount due under the arbitral bill as directed, within four weeks, and any amounts paid or received are subject to adjustment; all other points are kept open.Final Conclusion: The High Court quashed and set aside the arbitral award dated 4 February 2010 for want of jurisdiction insofar as it adjudicated disputes relating to possession, leave and licence/occupation charges and eviction, modified the costs direction so that the petitioner bears its own costs, directed payment of the arbitral bill as specified (subject to adjustment), kept all substantive points open and left the parties free to pursue or settle their rights in the appropriate forum. Issues Involved:1. Jurisdiction of the Arbitrator.2. Nature of the agreement (Leave and License vs. Business Conducting Agreement).3. Award of costs and payment obligations.Detailed Analysis:1. Jurisdiction of the Arbitrator:The primary issue was whether the Arbitrator had jurisdiction to entertain and decide the dispute, given the nature of the agreement and the relationship between the parties. The Petitioner argued that the nature of the possession was that of a license to use the Hyper Market Store Area and that such issues should be determined exclusively by the Civil Court, not through arbitration. The court referred to several precedents indicating that disputes involving 'leave and license' agreements, possession, and occupation charges fall under the jurisdiction of specific statutes and not under arbitration. The court concluded that the Arbitrator lacked jurisdiction, stating, 'The Arbitrator has no jurisdiction and/or authority to pass and to entertain such claim, as it is barred by specific provisions as referred above.'2. Nature of the Agreement:Another significant issue was the interpretation of the agreement between the parties-whether it was a 'Leave and License Agreement' or a 'Business Conducting Agreement.' The Petitioner contended that the agreement was a Leave and License Agreement, which would fall under the jurisdiction of the Civil Court. The court examined the agreement's clauses and the parties' conduct, concluding that the agreement created a relationship of 'Licensor and Licensee.' The court noted, 'The nature of clauses and the agreement, in my view, create the relationship of 'Licensor and Licensee' and fall within the ambit of specific law.'3. Award of Costs and Payment Obligations:The Arbitrator had awarded costs to the Respondent and directed the Petitioner to pay specific amounts. The court modified this aspect of the award, stating that since the award was quashed on jurisdictional grounds, the Petitioner should bear its own costs and not the costs of the Respondent. The court ordered, 'The award is modified to that extent,' and clarified that the Petitioner was still obligated to make payments as per the bill dated 14 January 2010 but not the costs awarded in paragraph 69 of the Award.Conclusion:The court quashed and set aside the Arbitrator's award on the grounds of lack of jurisdiction, emphasizing that disputes involving 'leave and license' agreements should be adjudicated by the Civil Court. The court also modified the award concerning costs, directing the Petitioner to bear its own costs. The parties were encouraged to settle the matter, with all points kept open for further adjudication if necessary. The order concluded with, 'Award dated 4 February 2010 is quashed and set aside, except the award of costs as modified in paragraph No. 21 of this Judgment.'