Swamina International Pvt. Ltd. v. West Bengal Electronics Industry & Development Corporation Ltd.
2000-08-18
Prabir Kumar Samanta, Tarun Chatterjee
body2000
DigiLaw.ai
JUDGMENT T. Chatterjee, J. : This appeal is preferred against the judgment and/or order being Order No.9 dated 15th September, 1999 passed by Shri S.R. Banerjee, Judge, 7th Bench, City Civil Court at Calcutta in title Suit No. 1215/99 whereby the application for temporary injunction filed by the plaintiff/appellant was rejected and the application filed by the defendants/respondents under Order 39 Rule 4 of the Code of Civil Procedure was disposed of. 2. After filing an application for temporary injunction, an interim order of injunction was passed on 22nd July, 1999 restraining the defendants/respondents from proceeding with an arbitration proceeding. After appearance the defendants/respondents filed an application under Order 39 Rule 4 of the Code of Civil Procedure for vacating, varying and/or modifying the interim order of injunction passed by the Trial Court on 22nd July, 1999. A written objection to the application for injunction was also filed by them denying the allegations made in the application for injunction. In the application for injunction, the plaintiff/appellant alleged that the defendant No.1, W.B. Electronics Industrial Development Corporation Ltd., a Government company (herein after referred as "sub-lessor") on 10th January, 1995, by a registered deed of lease has given 90 year's lease to the plaintiff/appellant in respect of a plot of land comprising an area of .2514 acres for setting up exclusively an Electronics Industry, solely for manufacturing purposes of electronics items. The terms and conditions set out in the registered deed of lease include the following: I. The sub-lessee will be required to take possession of the plot immediately after the date of execution of the lease deed. II. The lessee shall be obliged to complete the construction of the factory building at his own expenses within three years from the date of the lease agreement conforming to the Rules and Formalities of the concerned authorities and to the satisfaction of the sub-lessee. Paragraphs 4 and 6 of the lease deed provide as follows:- "4. Provided always that if there be any breach of any of the terms and conditions and covenants herein on the part of the sub-lessee contained the sub-lessor shall call upon the sub-lessee to rectify and remedy the same within three months of the date of the receipt of such notice.
Provided always that if there be any breach of any of the terms and conditions and covenants herein on the part of the sub-lessee contained the sub-lessor shall call upon the sub-lessee to rectify and remedy the same within three months of the date of the receipt of such notice. If the required rectifications or remedial measures are not carried out within the given period, the sub-lessor shall have the right to re-enter into possession of the demised premises or any part thereof in the name of the whole and thereupon the lease shall forthwith stand determined but not otherwise without prejudice to any right of the sub-lessor in respect of the antecedent breach." 6. It is hereby agreed by the sub-lessor and sub-lessee that the opinion of the Managing Director or his duly authorised nominee of the sub-lessor in the matter or breach of any of the covenants mentioned thereof on the part of the sub-lessee would be final and binding and shall not be called into question by the sub-lessee in any manner whatsoever." 3. Paragraph 6 of the lease deed is the centre of attack by the learned counsel for the parties. Mr. Mullick, learned advocate for the plaintiff/appellant urged that the matter of arbitration has been trusted upon the plaintiff/appellant although that lease deed does not contain any arbitration clause as would be evident from a reading of the different clauses in the lease deed not indicating that any arbitration clause has been included in the lease deed. According to Mr. Mullick, clause 6 of the lease deed cannot be construed to be an arbitration clause as in the said clause there is no expression like "arbitration" and "reference". 'He further contended that the letter of reference to arbitration written by the respondent does not show that the named arbitrator was the authorised nominee of the Managing Director. It was contended by Mr. Mullick that even assuming there was an arbitration clause and the named arbitrator was the authorised nominee of the Managing Director of the respondent, then also the question of referring the matter to arbitration could not arise at all as no dispute arose for reference to arbitration. 4. According to the learned advocate for the defendants/respondents, there need not be any formal expression like the word "arbitration" and "reference" and, therefore, no such wordings are necessarily required to be incorporated in arbitration clause.
4. According to the learned advocate for the defendants/respondents, there need not be any formal expression like the word "arbitration" and "reference" and, therefore, no such wordings are necessarily required to be incorporated in arbitration clause. The learned counsel for the respondent contended that clause of 6 of the lease deed must be construed as an arbitration clause and if different provisions of the lease deed are taken into consideration, it would be clear that the intention of the parties was to refer any dispute arising between them to arbitration. He contended that a dispute had arisen as to the non-utilisation of the plot in question by the plaintiff/appellant and also for not completing the factory building of the defendant/respondent within the time specified in one of the clauses of the lease deed, and, therefore, according to the learned advocate for the defendant/respondent, the Trial Court was fully justified in holding that as there has been an arbitration clause and a dispute has arisen, there cannot be an order of injunction restraining the defendant/respondent and the arbitrator from proceeding with the arbitration proceeding. In this connection, the learned advocate for the defendants/respondents also relied on section 7 of the Arbitration and Reconciliation Act, 1996 which defines "arbitration agreement." According to the learned advocate for the defendant/respondent, in view of clause 6 of the lease deed, which clearly indicates that the parties have agreed to refer their disputes to arbitration, it cannot be said that either the arbitration clause was thrust upon the plaintiff/appellant or the said clause can be construed to be an arbitration clause within the meaning of section 7 of the Arbitration and Reconciliation Act. 5. Having heard the learned counsel appearing for the parties and after considering the materials on record and the different provisions of the lease deed in question we are of the view that the submission made on behalf of the plaintiff/appellant by Mr. Mullick inviting us to hold that clause 6 of the lease deed does not contain any arbitration clause cannot be accepted. It is true that in clause 6 of the lease deed, there is no such expression like the words "arbitration" and "reference".
Mullick inviting us to hold that clause 6 of the lease deed does not contain any arbitration clause cannot be accepted. It is true that in clause 6 of the lease deed, there is no such expression like the words "arbitration" and "reference". But it is equally well-settled that in order to arrive at a positive conclusion on the question whether a particular clause contains an arbitration clause or not one has to look into the said clause in its entirety and also other clauses of the agreement or the lease deed, as the case may be, from which the intention of the parties to refer their disputes to arbitration may be gathered. From a reading of paragraph 6 of the lease deed and also different clauses in the same, it appears to us that although the formal expressions like the words "arbitration" and "reference" do not appear in paragraph 6 of the lease deed, then also, in our opinion, clause 6 contains an arbitration clause. It is now well settled that an arbitration agreement is not required to be in any particular form. What is required to be written is whether the parties have agreed that if dispute arises between them in respect of the subject matter of contract, such dispute shall be referred to arbitration, then such an agreement would spell out an arbitration agreement. In the case of Rukamanabai vs. Collector, (1980) 4 SCC 556 , the Supreme Court, after interpreting clause 15 of the lease deed which is somewhat similar to clause 6 of the lease deed involved in the present appeal observed as follows:- "Clause 15 provides that any doubt, difference or dispute, arising after the execution of the lease deed touching the construction of the terms of the lease deed or anything therein contained or any matter or things connected with the said lands or the working or non-working thereof or the amount or payment of any rent or royalty reserved or made payable thereunder, the matter in difference shall be decided by the lessor whose decision shall be final. The reference has to be made to the lessor and the lessor is the Governor. His decision is declared final by the terms of the contract.
The reference has to be made to the lessor and the lessor is the Governor. His decision is declared final by the terms of the contract. His decision has to be in respect of a dispute or difference that may arise either touching the construction of the terms of the lease deed or disputes or differences arising out of the working or non-working of the lease or any dispute about the payment of rent or royalty payable under the lease deed. Therefore, clause 15 read as a whole provides for referring future disputes to the arbitration of the Governor. Arbitration agreement is not required to be in any particular form. What is required to be ascertained is whether the parties have agreed that if disputes arise between them in respect of the subject matter of contract such dispute shall be referred to arbitration, then such an agreement would spell out an arbitration agreement." (Emphasis added) 6. From the aforesaid observations of the Supreme Court and in view of the discussions made hereinabove, we have no hesitation in our mind that clause 6 or the lease deed spells out arbitration agreement. 7. Let us now consider whether the parties to the appeal had intended to refer any dispute that may crop up between them to an arbitration by incorporating clause 6 of the lease deed. To find out the intention of the parties to refer their disputes to arbitration, it is necessary to take into consideration some of the other relevant clauses of the lease deed. The 2nd schedule of the lease deed contains a clause that the sub-lessee will be required to take possession of the plot immediately after the date of execution of the lease deed. The lessee shall be obliged to complete construction of the factory building at his own expenses within three years from the date of the lease agreement conforming to the rules and formalities of the concerned authorities and to the satisfaction of the sub-lessor. Clause 4 of the lease deed says that if there be any breach of any of the terms and conditions and covenants on the part of the sub-lessee contained the sub-lessor shall call upon the sub-lessee to rectify and remedy the same within three months of the date of the receipt of such notice.
Clause 4 of the lease deed says that if there be any breach of any of the terms and conditions and covenants on the part of the sub-lessee contained the sub-lessor shall call upon the sub-lessee to rectify and remedy the same within three months of the date of the receipt of such notice. If the required rectifications or remedial measures are not carried out within the given period, the sub-lessor shall have the right to reenter into possession of the demised premises or any part thereof in the name of the whole and thereupon the lease shall forthwith stand determined, but not otherwise without prejudice to any right of the sub-lessor in respect of the antecedent breach. Clause 5 of the lease deed provides that the sub-lessee shall always observe the conditions of allotment detailed in the 2nd schedule written in the lease deed. After a careful perusal of these clauses as incorporated in the lease deed particularly clause 6 of the lease deed, we are, therefore, of the view that if there is any breach of any of the covenants mentioned in the lease deed, such breach would be construed to be a dispute which shall be referred to the Managing Director of the company whose or his authorised nominee's opinion would be final and binding and shall not be called into question by the sub-lessee in any manner whatsoever. Therefore, we are of the firm opinion that clause 6 of the lease deed has clearly intended to be for a decision of the dispute in respect of breach of covenants of the lease deed in question. Therefore, the judicial determination, regarding evidence etc. was certainly contemplated. Moreover as noted hereinearlier, the intention of the parties from a careful reading of the different clauses was to have a judicial determination on the basis of the evidence that would be led before the Managing Director or its authorised nominee. Accordingly, we are in agreement with the learned Trial Judge that clause 6 of the lease deed must be construed to be an arbitration clause. 8. Let us now consider the other aspect of the matter that is to say whether any dispute has arisen for which reference may be made to arbitration. In other words, whether there has been a breach of covenants on the part of the sub-lessee for which reference is required to be made to arbitration.
8. Let us now consider the other aspect of the matter that is to say whether any dispute has arisen for which reference may be made to arbitration. In other words, whether there has been a breach of covenants on the part of the sub-lessee for which reference is required to be made to arbitration. For this purpose, we have perused some of the relevant clauses in the lease deed. From a perusal of the same, it appears to us that the sub-lessee was required to take possession of the plot in question immediately after the date of execution of the lease deed and the sub-lessee shall be obliged to complete the construction of the factory building at his own expenses within three years from the date of the lease agreement conforming to rules and regulations of the authorities and to the satisfaction of the sub-lessor. It also appears from one of the clauses of the lease deed that it was provided that if there be any breach of any other terms and conditions of the covenants of the said lease on the part of the sub-lessee, in that case the sub-lessor shall call upon the sub-lessee to rectify and remedy the same within three months of the date of receipt of such notice. It also appears from the aforesaid clause that if the required rectifications or remedial measure are not carried out within the period specified in the aforesaid clause, the sub-lessor shall have the right to reenter the demised premises or any part thereof in the name of the whole and thereupon the lease shall forthwith stand determined but not otherwise. It was not disputed before us that the sub-lessee has not yet completed the construction of the factory building within three years from the date of the lease agreement. On the other hand, the plaintiff/appellant being the sub-lessee makes a defence that since possession was not delivered within the date mentioned in the lease deed, the question of completing factory building within the period mentioned above could not arise at all. From this it is evident that a dispute regarding non utilisation of the plot in question and thereby breach of the covenants of the said lease was committed, has certainly arisen for which the same shall be referred to the Managing Director or his authorised nominee for an opinion or a decision.
From this it is evident that a dispute regarding non utilisation of the plot in question and thereby breach of the covenants of the said lease was committed, has certainly arisen for which the same shall be referred to the Managing Director or his authorised nominee for an opinion or a decision. In view of our discussions made hereinabove, we are of the view that the learned Trial Judge, was justified in holding that there was a breach of terms and conditions as incorporated in the lease deed for which a dispute has arisen and accordingly, such dispute must be referred to arbitration. We are also of the view that the question of thrusting upon the arbitration clause namely clause 6 of the lease deed upon the plaintiff/appellant in the facts and circumstances of the case and in view of the clauses contained in the lease deed, cannot arise at all as both the parties agreed by incorporating clause 6 in the lease deed to refer any dispute to arbitration. Therefore, it is difficult to accept the submission of Mr. Mullick that the arbitration clause was thrust upon the plaintiff/appellant and accordingly, this submission of Mr. Mullick is also devoid of any merit. The last submission of Mr. Mullick was to the effect that the letter dated 26th April, 1999 appointing Dr. Saha Roy as an arbitrator by the Managing Director of the defendant/respondent did not show that Dr. Saha Roy the learned arbitrator was his authorised nominee. We are also unable to accept this submission of Mr. Mullick. This letter appointing Dr. Saha Roy as an arbitrator was filed in the Trial Court. We have carefully examined the said letter and the contents therein. This is a letter written by the Executive Director (personnel and administration) who was at the relevant point of time exercising the power of the Managing Director of the defendants/respondents. From a careful examination of the contents of this letter, it is clear to us that Dr. Saha Roy was the authorised nominee of the Managing Director of the defendants/respondents to act as a sole arbitrator in clause 6 of the lease deed to determine the disputes and differences that have cropped up between the parties regarding non utilisation of the plot in question and other disputes.
Saha Roy was the authorised nominee of the Managing Director of the defendants/respondents to act as a sole arbitrator in clause 6 of the lease deed to determine the disputes and differences that have cropped up between the parties regarding non utilisation of the plot in question and other disputes. Therefore, we are of the view that this letter clearly indicates that the Managing Director of the company duly nominated Dr. Saha Roy as an arbitrator to decide the dispute raised by the parties to this appeal. Accordingly there is no merit in the submission of Mr. Mullick and, it is therefore, rejected. 9. Before parting with this judgment, we may however, deal with a decision of the Supreme Court in the case of K.K. Modi vs. M.N. Modi, AIR 1998 Supreme Court, 1297, on which Mr. Mullick has strongly relied on for the purpose of satisfying this Court that clause 6 of the lease deed cannot be construed to be an arbitration clause. In our view, the decision of the Supreme Court referred to above cannot be said to have any manner of application to the facts of this case. We have carefully gone through the said decision of the Supreme Court. In the said decision, the facts were that differences and disputes which had arisen between one Kedar Nath Modi and his sons constituting Group A and sons of late Gujjar Mal constituting Group B on the other hand were referred to the financial institutions which had lent money to the companies of the aforesaid persons and ultimately a memorandum of understanding was arrived at between Group A and Group B. Under the Memorandum of Understanding so arrived at it was agreed upon between the parties that Group A will manage some companies of the parties and Group B would be entitled to manage or control such other companies of the parties. Clause 9 of the same provides as follows:- "Implementation will be done in consultation with the financial institutions. For all disputes clarifications, etc. in respect of implementation of this agreement, the same shall be referred to the Chairman, IFCL or his nominees whose decision will be final and binding on both the parties." This clause 9 as referred to in the said decision of the Supreme Court was called into question as to whether the same contained arbitration clause.
in respect of implementation of this agreement, the same shall be referred to the Chairman, IFCL or his nominees whose decision will be final and binding on both the parties." This clause 9 as referred to in the said decision of the Supreme Court was called into question as to whether the same contained arbitration clause. Some of the parties contended before the Supreme Court that this clause 9 could not be construed to be an arbitration clause in view of the fact that the parties to the agreement did not have any intention to refer any dispute to arbitration. According to them all the disputes were settled by the Memorandum of Understanding dated 24th January, 1989 and what remained was only the valuation of the shares and the division of the three companies as agreed to in the Memorandum of Understanding. The Supreme Court in that decision accepted the contention to the effect that when all the disputes were settled by the Memorandum of Understanding dated 24th January, 1989, clause 9 would not be construed to be an arbitration clause. In Paragraph 33 of the said decision, the Supreme Court explained the position which is as follows:- "In the present case, the Memorandum of Understanding records the settlement of various disputes as between Group A and Group B in terms of the Memorandum of Understanding. It essentially records a settlement arrived at regarding disputes and differences between the two groups which belong to the same family. In terms of the settlement, the shares and assets of various companies are required to be valued in the manner specified in the agreement. The valuation is to be done by M/s. S. B. Billimoria & Co. Three companies which have to be divided between the two groups are to be divided in accordance with a scheme to be prepared by Bansi S. Mehta & Co. In the implementation of the Memorandum of Understanding which is to be done in consultation with the financial institutions, any disputes or clarifications relating to implementation are to be referred to the Chairman, IFCL or his nominee whose decision will be final and binding. The purport of clause 9 is to prevent any further disputes between Groups A and B. Because the agreement requires division of assets in agreed proportions after their valuation by a named body and under a scheme of division by another named body.
The purport of clause 9 is to prevent any further disputes between Groups A and B. Because the agreement requires division of assets in agreed proportions after their valuation by a named body and under a scheme of division by another named body. Clause 9 is intended to clear any other difficulties which may arise in the implementation of the agreement by leaving it to the decision of the Chairman, IFCL. This clause does not contemplate any judicial determination by the Chairman of the IFCL. He is entitled to nominate another person for deciding any question. His decision has been made final and binding. Thus, clause 9 is not intended to be for any different decision than what is already agreed upon between the parties to the dispute. It is meant for a proper implementation of the settlement already arrived at. A judicial determination, recording of evidence etc. are not contemplated. The decision of the Chairman, IFCL, is to be binding on the parties. Moreover, difficulties and disputes in implementation may not be between the parties to the Memorandum of Understanding. It is possible that the valuers nominated in the Memorandum of Understanding or the firm entrusted with the responsibility of splitting some of the companies may require some classifications or may find difficulties in doing the work. They can also resort to clause 9. Looking to the scheme of the Memorandum of Understanding and the purpose behind clause 9, the learned single Judge, in our view, has rightly come to the conclusion that this was not an agreement to refer disputes to arbitration. It was meant to be an expert's decision." From the aforesaid decision of the Supreme Court, it is, therefore, clear that in that decision differences and disputes which arose were settled by the Memorandum of Understanding arrived at on 24th January, 1989. From the aforesaid observation, it is also clear to us that clause 9 was intended to implement the Memorandum of Understanding between the parties. Clause 9 of the said decision was not intended to be for any different decision that what was already agreed upon between the parties to the disputes by the Memorandum of Understanding arrived at by them. In the background of this fact, the Supreme Court held that clause 9 could not be construed to be an arbitration clause. This is not the case here.
In the background of this fact, the Supreme Court held that clause 9 could not be construed to be an arbitration clause. This is not the case here. In this case as we have already discussed it has been made clear in the lease deed or the agreement that any breach of covenants that is to say any dispute if arises between the parties to the agreement would be referred to the Managing Director or to his authorised nominee for decision which, in our view was a clear indication for an arbitration between the parties. That being the position, we are unable to agree with Mr. Mullick that this decision has any manner of application to the facts of this case. 10. For the reasons aforesaid, we do not find any merit in this appeal and the appeal is dismissed. 11. There will be no order as to costs. 12. Urgent certified copy be supplied to the parties. Prabir Kr. Samanta, J.: I agree. Appeal dismissed.