In a recent ruling delivered by the Apex Court, it has been laid down that the presence of an arbitration clause or arbitration agreement will not necessarily bar civil proceedings and the Civil Court is bound to see whether arbitration proceedings are hit by any statutory provision.
FACTS IN BRIEF:
The Appellants had inducted the Respondents as tenants in respect of a shop room measuring 600 sq. feet at HA-3, Sector-3, Salt Lake City, Kolkata, and paying a monthly rent to the Appellants. In respect of the tenancy, the Appellants and the Respondents had executed an unregistered tenancy agreement which has been notarized on 10.11.2003. On 06.03.2008, the Appellants, through their Advocates, served a notice on the Respondents terminating the tenancy and asking them to vacate the shop premises and the notice stated that after April, 2008 the relationship of landlord and tenant between the Appellants and the Respondents shall cease to exist and the Respondents will be deemed to be trespassers liable to pay damages at the rate of Rs. 500/- per day for wrongful occupation of the shop. The Respondents, however, did not vacate the shop premises and the Appellants filed Title Suit No. 89 of 2008 against the Respondents for eviction, arrears of rent, arrears of municipal tax, mesne profit and for permanent injunction in the Court of the Civil Judge (Senior Division), 2nd Court at Barasat, District North 24-Parganas in the State of West Bengal. In the suit, the Respondents filed a petition Under Section 8 of the Arbitration and Conciliation Act, 1996 (for short ‘the 1996 Act’) stating therein that the tenancy agreement contains an arbitration agreement in Clause 15 and praying that all the disputes in the suit be referred to the arbitrator. By order dated 10.06.2009, the learned Civil Judge dismissed the petition Under Section 8 of the 1996 Act and posted the matter to 10.07.2009 for filing of written statement by the Defendants (Respondents herein).
Aggrieved, the Respondents filed an application (C.O. No. 2440 of 2009) under Article 227 of the Constitution of India before the Calcutta High Court and contended that the tenancy agreement contains an arbitration agreement in Clause 15, which provides that any dispute regarding the contents or construction of the agreement or dispute arising out of the agreement shall be settled by Joint Arbitration of two arbitrators, one to be appointed by the landlords and the other to be appointed by the tenants and the decision of the arbitrators or umpires appointed by them shall be final and that the arbitration will be in accordance with the 1996 Act and, therefore, the learned Civil Judge rejected the petition of the Respondents to refer the disputes to arbitration contrary to the mandate in Section 8 of the 1996 Act. The Appellants opposed the application under Article 227 of the Constitution of India contending inter alia that the dispute between the Appellants and the Respondents, who are landlords and tenants respectively, can only be decided by a Civil Judge in accordance with the provisions of the West Bengal Premises Tenancy Act, 1997 (for short ‘the Tenancy Act’). By the impugned judgment dated 16.04.2010, the High Court held that in view of the decisions of the Apex Court in Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleums (2003) 6 SCC 503], Agri Gold Exims Ltd. v. Sri Lakshmi Knits and Wovens and Ors. (2007) 3 SCC 686] and Branch Manager, Magma Leasing and Finance Limited and Anr. v. Potluri Madhavilata and Anr. (2009) 10 SCC 103], the Court has no other alternative but to refer the disputes to the arbitrators to be appointed by the parties as per the arbitration agreement.
ARGUMENTS:
Counsel for the Appellants submitted that in Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleums, Agri Gold Exims Ltd. v. Sri Lakshmi Knits and Wovens and Ors. and Branch Manager, Magma Leasing and Finance Limited and Anr. v. Potluri Madhavilata and Anr. (supra), the Apex Court has not decided as to whether the dispute between the landlord and the tenant could be decided by the arbitrator in accordance with the arbitration agreement between the landlord and the tenant and the provisions of the 1996 Act or by the appropriate forum in accordance with the law relating to tenancy. The appellant cited the decision of the Apex Court in Natraj Studios (P) Ltd. v. Navrang Studios and Anr. (1981) 1 SCC 523], wherein it has been held that Court of Small Causes alone and not the arbitrator as a matter of public policy has been empowered to decide disputes between the landlord and the tenant under the Bombay Rent Act. The appellant also relied on the observations of the Apex Court in Booz Allen and Hamilton Inc. v. SBI Home Finance Limited and Ors. (2011) 5 SCC 532] in para 36 at page 547 that eviction or tenancy matters governed by a special statute where the tenant enjoys statutory protection against eviction can be decided by specified courts conferred with the jurisdiction to grant eviction and such disputes are non-arbitrable.
Counsel for the Respondents, on the other hand, relied on the decisions of the Apex Court in Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleums, Agri Gold Exims Ltd. v. Sri Lakshmi Knits and Wovens and Ors. and Branch Manager, Magma Leasing and Finance Limited and Anr. v. Potluri Madhavilata and Anr. (supra) to support the impugned judgment. It was submitted that there can be no doubt that the Tenancy Act will determine the rights of the landlord and the tenant in this case, but when there is an arbitration agreement between a landlord and a tenant, instead of the Civil Judge, the arbitrator will decide the disputes between the landlord and the tenant by applying the provisions of the Tenancy Act.
JUDGMENT:
The Apex Court held that section 6 of the Tenancy Act, 1997 contained a non obstante clause i.e “ Notwithstanding anything else”. The non obstante clause clearly gave the Act overriding effect over any other understanding between the parties. The Court distinguished the judgments cited by the respondent on the ground that none of those cases dealt with a conflict between a statutory provision and an arbitration clause and therefore the High Court in all those cases was indeed right in referring the parties to arbitration.
ANALYSIS:
The Apex Court in the present case was concerned with a conflict between a statutory provision and an arbitration clause. It was not dealing with a conflict between a statute imposed arbitration (for example the Telegraph Act) and a statute barring arbitration. We feel that under these circumstances, the Court will uphold the provisions of the later enactment on the basis that the Legislature must have been aware of the earlier enactment while drafting the later legislation and therefore the intent of the legislature was to override the earlier enactment by necessary implication.
