TaxTMI 
TaxTMI 
2025 (8) TMI 111
X X X X Extracts X X X X
X X X X Extracts X X X X
....Kerala Buildings (Lease and Rent Control) Act, 1965 [hereinafter referred to as the 'KBLR Act']. The case throws up an interesting question regarding the interplay between the provisions of the Special Economic Zones Act, 2005 [hereinafter referred to as the 'SEZ Act'] and the provisions of the KBLR Act, especially in the context of the remedy of eviction of a defaulter tenant, available to a landlord under the KBLR Act. The brief facts necessary for a disposal of the original petition are as follows: 2. The developer had set up a Special Economic Zone [SEZ] for Information Technology [IT] and Information Technology Enabled Services [ITES] on 53.1809 hectares of land in Kakkanad Village. Towards this end, it had also entered into a registered lease agreement with the Government of Kerala under which it obtained possession and leasehold rights in respect of the land, together with the right to sub-lease portions of the land to entrepreneurs, as defined under the SEZ Act. The developer then approached the Central Government with a request for notifying the land as an SEZ, and approving it as a developer thereof. It is not in dispute that the SEZ was duly notified as such and that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tition filed by the developer before the Rent Control Court was not maintainable. In particular, it was pointed out that under Section 42 of the SEZ Act, there was a statutory mandate to refer all disputes of a civil nature to the arbitrator appointed by the Central Government, especially when the State Government had not designated any court, under Section 23 of the SEZ Act, to try suits of civil nature arising in the SEZ. Referring to the decisions of the Supreme Court in Vidya Drolia & Others v. Durga Trading Corporation - [(2021) 2 SCC 1], and of the Telangana High Court in Ranganath Properties Private Limited & Others v. Phoenix Tech Zone Private Limited & Others - [(2023) SCC Online TS 507], he would contend that the lease agreement entered into between the petitioner and the developer was an integral part of the letter of approval issued to the petitioner, and hence the dispute regarding payment of alleged arrears of rent had to be seen as a dispute of a civil nature arising in the SEZ. It is his further submission that the observations in Vidya Drolia (supra) regarding non-arbitrability, were rendered in the context of private arbitrations and cannot have any bearing on sta....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 14. Article 14 of exhibit A8 sub lease deed provides for dispute resolution. As per Article 14.1, it provides that all disputes, claims, controversies, and disagreements in connection with this deed shall be resolved by the parties through mutual consultations as provided therein. Article 14.2 provides that if the dispute is not resolved or if parties fails to reach an amicable settlement, then within a period of 15 days, either party may issue a written notice to other party as mentioned in Article 14.1 and then the dispute shall be subjected to arbitration as laid out in Article 14.3. As per Article 14.3 of sub-lease deed, it specifically provided that all the disputes shall be referred to and finally resolved by arbitration in accordance with the Arbitration and Conciliation Act, 1996. The forum of arbitral tribunal, the procedure to be followed in such matters are also specifically provided in Article 14.3 and 14.4 of sub-Lease deed. Therefore, it can be seen that in case of any dispute between the parties, such dispute shall be referred to an Arbitrator under the provisions of Arbitration and Conciliation Act, 1996. Further as per Article 14.4, it specifically prov....
X X X X Extracts X X X X
X X X X Extracts X X X X
....earned counsel for the petitioner also placed reliance on the decision of the Hon'ble Supreme Court in Vidya Drolia & others v. Durga Trading Corporation reported in 2020 KHC 6711. In paragraph 21 of the said Judgment, the Hon'ble Supreme Court held as follows. "Paragraph 21-Booz Allen & Hamilton Inc. draws a distinction between actions in personam, that is, actions which determine the rights and interests of parties themselves in the subject matter of the case, and actions in rem which refer to actions determining the title of the property and the rights of the parties not merely amongst themselves but also against all the persons at any time claiming an interest in that property. Rights in personam are considered to be amenable to arbitration and disputes regarding rights in rem are required to be adjudicated by the courts and public tribunals. The latter actions are unsuitable for private arbitration. Disputes relating to subordinate rights in personam arising from rights in rem are considered to be arbitrable. Paragraph 36 of the judgment in Booz Allen & Hamilton Inc. refers to certain examples of non-arbitrable disputes and reads: "36. The well-recognised exa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gislation would not be arbitrable, when specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligations. Such rights and obligations can only be adjudicated and enforced by the specified court/forum and not through arbitration, and also held that in eviction or tenancy matters given by special statutes and when the tenant enjoys statutory protection, only the specified court has been conferred jurisdiction." 18. In Suresh Shah v. Hipad Technology India Private Ltd. reported in 2021 (1) SCC 529, the division bench of the Hon'ble Supreme Court held that, "The disputes arising under the Rent Acts will have to be looked at from a different view point and therefore not arbitrable in those cases. This is for the reason that notwithstanding the terms and conditions entered into between the landlord and tenant to regulate the tenancy, if the eviction or tenancy is governed by a special statute, namely, the Rent Act the premises being amenable to the provisions of the Act would also provide statutory protection against eviction and the courts specified in the Act alone will be conferred jurisdiction to order eviction or to resolve su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erves their right to seek their claims and to recover the arrears. Even then, on the basis of the settled principles as discussed above, merely for the issuance of exhibit B10 notice, it cannot be seen that arbitration clause can be involved in a rent control petition. The contention of the respondent that by way of exhibit B4, the petitioner has issued mutual conciliation notice also in no way affect the maintainability of the present rent control petition filed under section 11(2) (b) of the KBLR Act. Thus, it can be very well found on the basis of settled position of law, that the proceedings under the KBLR Act are not arbitrable. Hence the parties in this proceedings cannot be relegated to arbitration proceedings. Therefore, the rent control petition is not hit by arbitration clause in Sub-lease deed dated 25.01.2017 executed between the parties and therefore issue No.1 is found in favour of the petitioner and it is answered accordingly." 8. Similarly, the findings that negative the arguments advanced regarding the overriding effect of the provisions of the SEZ Act are contained in paragraphs 20 to 31 of the impugned order, which read as follows: "20. Issue No. 2: N....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urts under Sub Section 1 of Section 23." Sub Section 2 of Section 42 states that "where a dispute has been referred to arbitration, under Sub Section 1, the same shall be settled or decided by the Arbitrator to be appointed by the Central Government." Section 51 reads as follows; "51. Act to have overriding effect: The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act." 21. In this context, it is also necessary to note that the petition schedule building is situated in a Special Economic zone covered under the SEZ Act. If so, as per section 23 of the SEZ Act, it provides that the state government, in which the special economic Zone is situated, may with the concurrence of Chief Justice of the High Court of that state, designate one or more courts to try all suits of a civil nature arising in the special economic zone and no court, other than the designated court shall try any dispute or conduct the trial of any such cases. Even then, it is admitted by both counsels before this court that,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssed by the Parliament has to prevail over the rent control court in view of Article 254(1) of the Constitution of India. The assent of the President obtained for the rent control act will not give it an overriding effect over the Public Premises Act since the non-obstante clause in the rent control act can override only those enactments which were already in force on the date of commencement of the rent control act and they do not include the public premises act, which was enacted subsequent to the rent control act". But even then, it is pertinent to note that in above decision, the central act as well as the state act provides for eviction, which operates in under the same field, but as far as the instant case is concerned, in the SEZ Act, there is apparently no provision provided for eviction proceedings as contemplated in the special enactment, KBLR Act. 24. The learned counsel for the respondent also placed reliance on the decisions of the Hon'ble Supreme Court in Solidaire India Ltd v. Fair Growth Financial services Ltd and Ors reported in (2001) 3 SCC 71 and also in Maruti Udyog v. Ram Lal and others reported in (2005) 2 SCC 638 which discusses about the effect of n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ilable is arbitration, due to the non-constitution of the designated courts under Section 23 of the SEZ Act. But as already found out, the settled position is that the arbitration proceedings are found not applicable to the disputes between landlord and tenants are concerned. Thus, in such a situation, the landlord as well as the tenant will become remediless and thus the very purport of the legislature in enacting the KBLR Act itself will fail. Moreover, under SEZ Act, the comparative hardships, bona fide requirements as in KBLR Act cannot be looked into. 26. Being so, when the petitioner and the respondent voluntarily entered into a lease deed containing various terms and conditions with respect to the tenancy and having all the characteristics of a tenancy and also considering the rights and liabilities of the parties to the sub-lease agreement and the different guidelines for transaction between them, they cannot be simply termed as a developer and entrepreneur. Since they voluntarily entered into a sub-lease agreement as referred to above, and having the characteristics of the transaction between them as landlord and tenant, they can only be termed as a landlord and t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... II (State List) of the Seventh Schedule. Both Parliament and the State Legislature have power to make laws with respect to matters enumerated in List III (Concurrent List) of the Seventh Schedule. The Kerala Buildings (Lease and Rent Control) Act comes under Entry Nos. 6,7 and 13 of the Concurrent List. The Securitisation Act was enacted under Entry 45 of List I. The State Financial Corporations Act comes under Entry 43 of List I of the Seventh Schedule. There is no conflict between the Securitisation Act and the Kerala Buildings (Lease and Rent Control) Act. They operate in different fields. It is well settled that the question of repugnancy between the law made by Parliament and the law made by the State Legislature may arise only in cases: where both the legislations occupy the same field with respect to any of the matters enumerated in the Concurrent List. The Securitisation Act and the Kerala Buildings (Lease and Rent Control) Act were enacted respectively under List I and List III of the Seventh Schedule. They occupy different fields. Therefore, Art.254 of the Constitution does not apply and it cannot be held that the Kerala Buildings (Lease and Rent Control) Act is repugnan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....this case. Consequently, it is found that the KBLR Act, does not conflict with nor is it superseded by the SEZ Act. Further with respect to the contention of the respondent that SEZ Act is a self-contained exclusive code which regulates the activities within the Cochin Special Economic Zone is also not sustainable, since as per exhibit A4, the Cochin Special Economic Zone is one which comes under serial No. 20, but the petitioner is seen separately scheduled as serial No.101 therein. 31. Furthermore with respect to the contention of the respondent that, since the dispute is between a developer and entrepreneur as per sections 3 and 4 of the SEZ Act, it is to be referred to arbitration. But as aforementioned, in this petition, the parties are not claiming as a developer and entrepreneur, but only as a lessor and lessee, which the exclusive purview of KBLR Act. Therefore, by applying the doctrine of harmonious construction, though nough the tenanted premises falls within a special economic zone, it can be seen that the operation of SEZ Act and KBLR Act are entirely different, and that the relief sought for in this petition is not one coming within the SEZ Act. Further, KBLR ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the share of the petitioner for default of Clause 7.2.2 of the Framework Agreement entered into in 2007, which is marked as exhibit B2. On perusal of the same, it reflects that the Government of Kerala hold only 16% of share in the venture. Though it is a published G.O, its proceedings has only just commenced and not obtained any finality, and also no exit plan as stated therein also so far formulated. So as of now, the petitioner cannot be termed to be in unauthorized occupation. And further mere apprehension of the respondent that the petitioner company will be dissolved in future is not a ground to challenge the maintainability of this rent control petition. 34. Further, the contention of the learned counsel for the respondent is that eviction proceedings in a special economic zone is governed by the PPEUO Act, by placing reliance on decision, Jayalakshmi v. Union of India reported in 2006 KHC 175, in which it was held that PPEUO Act while over rent control legislation. Going through exhibit A2, as per notification No. S.O 464(E) dated 01.03.2011, it can be seen that the petitioner as a private organization who has proposed to set up a sector specific special econom....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rule of Literal Construction, it is clear that the Act pertains only to public premises. Private tenancy issues, on the other hand, are governed by the KBLR Act. It would appear that both the scope and object of these acts are quite different from each other with the KBLR act, having wider application than PPEUO Act. Accordingly, the application of the PPEUO Act in the present matter is without legal foundation. 37. Further in M/s. Jain Ink Manufacturing Company v. Life Insurance Corporation of India and Another reported in 1980 (4) SCC 435, the Hon'ble Supreme Court held that, "So far as the Premises Act is concerned it operates in a very limited field in that it applies only to a limited nature of premises belonging only to particular sets of individuals, a particular set of juristic persons like companies, corporations or the Central Government. Thus, the Premises Act has a very limited application. Secondly, the object of the Premises Act is to provide for eviction of unauthorised occupants from public premises by a summary procedure so that the premises may be available to the authorities mentioned in the Premises Act which constitute a class by themselves." It was fu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itrable? and, if not (ii) whether the provisions of the SEZ Act, and the dispute resolution mechanisms envisaged thereunder, would override and exclude the provisions of the KBLR Act? We proceed to answer the said questions as follows: Re: Arbitrability of the dispute: 11. The Rent Control Court has placed considerable reliance on the decision of the Supreme Court in Vidya Drolia (supra) to find that the dispute between the parties was not arbitrable. While the said decision of the Supreme Court does indeed hold that landlord-tenant disputes falling under the ambit of rent control legislations would be non-arbitrable, we feel it would be profitable to consider some of the other aspects pertaining to arbitrability of a dispute that were discussed in the said judgment. Initially, the court drew a distinction between adjudication of actions in rem and adjudication of actions in personam. Pointing out that the distinction between the two turns on their power as res judicata, the court observed as follows at paragraphs 48 and 49 which read as follows: "48. A judgment in rem determines the status of a person or thing as distinct from the particular interest in it of a part....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s the dispute in the given facts, can be efficiently resolved only through collective litigation proceedings. Contractual and consensual nature of arbitration underpins its ambit and scope. Authority and power being derived from an agreement cannot bind and is non-effective against non-signatories. An arbitration agreement between two or more parties would be limpid and inexpedient in situations when the subject matter or dispute affects the rights and interests of third parties or without presence of others, an effective and enforceable award is not possible. Prime objective of arbitration to secure just, fair and effective resolution of disputes, without unnecessary delay and with least expense, is crippled and mutilated when the rights and liabilities of persons who have not consented to arbitration are affected or the collective resolution of the disputes by including non-parties is required. Arbitration agreement as an alternative to public fora should not be enforced when it is futile, ineffective, and would be a no result exercise." 12. The court then went on to examine the circumstances under which non-arbitrability could be implied. At paragraphs 54 and 55 of the judgme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es available to the litigants at the time of election which are repugnant and inconsistent. In any event, there is no repugnancy nor inconsistency between the two remedies, therefore, the doctrine of election has no application." 55. Doctrine of election to select arbitration as a dispute resolution mechanism by mutual agreement is available only if the law accepts existence of arbitration as an alternative remedy and freedom to choose is available. There should not be any inconsistency or repugnancy between the provisions of the mandatory law and arbitration as an alternative. Conversely and in a given case when there is repugnancy and inconsistency, the right of choice and election to arbitrate is denied. This requires examining the "text of the statute, the legislative history, and 'inherent conflict" between arbitration and the statute's underlying purpose" with reference to the nature and type of special rights conferred and power and authority given to the courts or public forum to effectuate and enforce these rights and the orders passed. When arbitration cannot enforce and apply such rights or the award cannot be implemented and enforced in the manner as provided a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsfer of Property Act do not expressly or by necessary implication bar arbitration. Transfer of Property Act, like all other Acts, has a public purpose, that is, to regulate landlord-tenant relationships and the arbitrator would be bound by the provisions, including provisions which enure and protect the tenants.- 80. In view of the aforesaid, we overrule the ratio laid down in Himangni Enterprises v. Kamalijeet Singh Ahluwalia - [(2017) 10 SCC 706] and hold that landlord-tenant disputes are arbitrable as the Transfer of Property Act does not forbid or foreclose arbitration. However, landlord-tenant disputes covered and governed by rent control legislation would not be arbitrable when specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligations. Such rights and obligations can only be adjudicated and enforced by the specified court/forum, and not through arbitration." 15. As can be seen from the above, landlord-tenant disputes covered and governed by rent control legislations would not be arbitrable because a specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligation....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Re: Interplay between the SEZ Act and the KBLR Act: 16. As for the interplay between the provisions of the SEZ Act and the KBLR Act, the former is a central legislation traceable to Entry 41 of List I of the VIIth Schedule to the Constitution of India whereas the latter is a State legislation traceable to Entry 18 of List II therein. There can therefore be no repugnancy as envisaged under the Constitution of India between the provisions of the two statutes unless they cover the same field. In that context, it is trite that if the dominant intention of the two statutes is different and they cover different subject matters, then merely because the two statutes refer to some allied or cognate subjects, they cannot be seen as covering the same field. On the facts before us, when an aspect of tenancy that is apparently covered by both statutes is examined for the purposes of determining the statute that will govern the tenancy, we have to first determine whether the essence of the relationship between the parties is one of landlord-tenant so as to bring it within the ambit and coverage of the rent control legislation? If, on the other hand, the essence of the relationship between the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t, 1999. It was also made clear that where the area of the SEZ was large enough the State government would declare the SEZ's as Industrial Townships under the 1999 Act so as to enable the SEZ's to function as self-governing autonomous municipal bodies. Acting in furtherance of the above policy, the State government has vide G.O.(Rt) No. 23/2003/ID dated 07.01.2003 (SRO No.43/2003) declared the Cochin Special Economic Zone as an Industrial Area for the purposes of the 1999 Act. The Smart City Kochi Masterplan, as available in the respondent's website, and an extract of which is produced by the appellants as Ext.P28, describes the SEZ as an Industrial Township and this description also finds mention in Ext.P11 sub-lease deed entered into between the appellant and the respondent, where the latter is referred to as the "Township authority". The above aspects assume significance because Section 17 of the 1999 Act clearly states that the KBLR Act, 1965 shall not apply to any premises belonging to the Industrial Township authority under Section 15 of the 1999 Act. It is clear therefore that under the scheme of SEZ's as regulated by the SEZ Act and the allied State legislations, leased pre....