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1994 DIGILAW 855 (DEL)

KRISHAN GOPAL ARORA v. ROSHAN LAL ARORA

1994-12-20

R.C.LAHOTI

body1994
R. C. Lahoti, J. ( 1 ) THIS is a petition styled as one under Sections 5, 11 and 12 of the Arbitration Act, 1940 seeking removal of the respondent No. 2 from acting as an arbitrator and for an order setting aside the arbitration agreement. ( 2 ) ACCORDING to the petitioner he is engaged in printing work on job basis in the name and style of M/s. Delux Printers. The work is situated in the premises owned by the respondent No. 1. The respondent No. 1 had let out the premises to the petitioner w. e. f. 1. 4. 1973 at a monthly rent of Rs. 650. However, in order to circumvent the provisions of the tenancy laws, instead of tenancy agreement the respondent No. 1 got executed a commission agency agreement from the petitioner. Material terms of the agreement are set-out in para 6 of the petition. Substance of the agreement shows that the respondent No. 1 shall be paid commission @ 1. 5% on the sales. However, the petitioner has to be completely in charge of the business and of possession over the premises. Electricity connection is to be provided by the respondent No. 1 to the petitioner and charges for the electricity consumed are to be paid by the petitioner. ( 3 ) THE said commission agency agreement incorporates an arbitration clause requiring disputes arising out of the agreement to be settled by arbitration at Delhi. ( 4 ) BY yet another document, the petitioner is said to have undertaken to pay a fixed commission of Rs. 650 per month to the respondent No. 1. ( 5 ) THE petitioner was served with a telegraphic notice by an advocate, appointed by the respondent No. 1 demanding appointment of an arbitrator for adjudication of certain disputes having arisen between the parties. The petitioner is said to have given no response. Thereafter the respondent No. 1 has entrusted a few disputes to the respondent No. 2 for adjudication by arbitration. The respondent No. 1 has appointed the respondent No. 2 as a sole arbitrator on the ground that the petitioner had failed in concurring: in the appointment made by the respondent No. 1. Thereafter the respondent No. 1 has entrusted a few disputes to the respondent No. 2 for adjudication by arbitration. The respondent No. 1 has appointed the respondent No. 2 as a sole arbitrator on the ground that the petitioner had failed in concurring: in the appointment made by the respondent No. 1. ( 6 ) ACCORDING to the petitioner, the documents got executed from the petitioner by the respondent No. 1 are nothing but a camouflage on the tenancy law ; in substance the relationship between the parties is that of a tenant and a landlord, the petitioner having been inducted into the premises on a monthly rent at Rs. 650. In the nature of transaction entered into between the parties, there were no sales to be made by the petitioner, no commission to be paid by petitioner to respondent and yet the petitioner had signed a commission agency agreement. The appointment of an arbitrator in the proceedings is nothing but an attempt to set at naught the provisions of the tenancy laws affording protection to a tenant. Moreover, the respondent No. 1 could not have unilaterly appointed an arbitrator. Other contentions were also raised which it is not necessary to enumerate. . . . . ( 7 ) THE respondent No. 1 is contesting the petition. According to him the transactions and relationship between the parties is that which appears from the documents and the disputes between the parties having arisen out of the commission agency contract, they are capable of being adjudicated upon by the arbitrator. As the petitioner failed in naming any arbitrator or in agreeing with the respondent No. I, the respondent No. 1, was justified in law in entrusting the dispute to the sole adjudication of respondent No. 2. ( 8 ) HAVING heard the learned counsel for the parties, this court is of the opinion that the petition deserves to be allowed. ( 9 ) THERE. is a serious dispute as to the real nature of transaction between the parties. It is a subtle question of law requiring interpretation of the document which would enable an inference being drawn whether it was merely a commission agency agreement or a tenancy created between the parties. ( 9 ) THERE. is a serious dispute as to the real nature of transaction between the parties. It is a subtle question of law requiring interpretation of the document which would enable an inference being drawn whether it was merely a commission agency agreement or a tenancy created between the parties. If it is a tenancy then it is only the court of law contemplated by Delhi Rent Control Act which would determine whether the petitioner is liable to be evicted or not from the suit premises. Such questions cannot be left to be determined by an arbitrator on the ground of public policy. In Natraj Studio (P) Ltd. v. Narangstudio1, their Lordships of the Supreme Court have held : "public policy requires that contracts to the contrary which nullify the rights conferred on tenants by the Act cannot be permitted. Therefore, public policy requires that parties cannot also be permitted ;.-to contract out of the legislative mandate which requires certain kind of disputes to be settled by special courts constituted by the Act, Thus, arbitration agreement between parties whose rights are regulated by the Bombay Rent Act cannot be recognised by a court of law. So the question whether there is relationship of landlord and tenant between the parties or such other Jurisdictional questions may have to be determined by the court where if falls for determination-be it the Court of Small Causes or the ordinary Civil Court. If the Jurisdictional question is decided in favour of the court of exclusive jurisdiction the suit or proceeding before the ordinary Civil Court must cease to the extent its jurisdictionis ousted. Both by reasons of Section 28 of the Bombay Rent Act and by reason of the broader consideration of public policy, the Court of Smalt Causes has and the Arbitrator has not the jurisdiction to decide the question whether the respondent-licensor-landlord is entitled to seek possession of the two studios and other premises together with machi- nary and equipment from the appellant-licencee-tenant. The relationship between the parties being that of licensor-landlord and licencee- tenant and the dispute between them relating to the possession of the licenced-demised premises, 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. The relationship between the parties being that of licensor-landlord and licencee- tenant and the dispute between them relating to the possession of the licenced-demised premises, 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. " ( 10 ) THE arbitration clause contemplates arbitration by a sole arbitration to be appointed by consent of the parties. If the parties do not concur in the appointment inspite of service of a written notice by one of them to the other to concur in the appointment, then it is the court which shall on the application of the party giving the notice to appoint an arbitrator shall make such appointment under Section 8 of the Arbitration Act, 1940. One party cannot unilaterally appoint an arbitrator. It is worth being noted that the arbitrator is not named in the arbitration clause. ( 11 ) THOUGH other contentions were also raised, it is not necessary to dwell upon them. ( 12 ) IT was submitted by the learned counsel for the respondent that petitioner has participated in about eight proceedings before the arbitrator and so he would be deemed to have acquiesced in the jurisdiction of arbitrator appointed by the respondent. This contention cannot be accepted. There has been no appointment of arbitrator in the eye of law. An appointment is in clear breach of Section 8 of the Act cannot be treated valid by relying on theory of acquiescence. ( 13 ) FOR the foregoing reasons/the petition deserves to be allowed. ( 14 ) BEFORE parting, it may be placed on record that the learned counsel for the respondent No. 1 had submitted that the appropriate remedy available to the petitioner was to file a petition under Section 33 and not under Sections 5,11 and 12 of the Arbitration Act, 1940. However, this court is not inclined to entertain such a technical objection. It is the substance of the prayer made in the petition which has to be seen. As was pointed out by the learned counsel for the respondent No. 1 there were serious disputes raised between the parties calling for an early adjudication, but this matter itself has been pending since 1991 and by an interim order dated 30. 7. 1991 proceedings before the arbitrator have been stayed. As was pointed out by the learned counsel for the respondent No. 1 there were serious disputes raised between the parties calling for an early adjudication, but this matter itself has been pending since 1991 and by an interim order dated 30. 7. 1991 proceedings before the arbitrator have been stayed. It will - be in the interest of the parties, if this petition is disposed of by looking at the substance of the matter so that the party aggrieved may have an early recourse to the appropriate forum and the law. ( 15 ) THE petition is allowed. The appointment of respondent No. 2 as an arbitrator and all the proceedings conducted by him are directed to be quashed.