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2008 DIGILAW 1021 (DEL)

National Textile Corporation Ltd. v. Ashval Vaderaa

2008-11-04

SHIV NARAYAN DHINGRA

body2008
JUDGMENT: JUSTICE SHIV NARAYAN DHINGRA 1. The petitioner is aggrieved by an order dated 31st May, 2007 whereby an application made by the petitioner for referring the subject matter of suit to the arbitration was declined by the learned Trial Court. 2. The respondent filed a suit for recovery of possession of the premises in dispute along with mesne profits. The premises were let out to the petitioner in May, 1975 and again by an agreement on 16th August, 1978. This agreement was for a period of 2 years. Thereafter, the premises remained under tenancy of the petitioner without any written agreement. The terms of oral tenancy also kept on changing and a new oral month-to-month tenancy came into existence on 1st January, 2005. There was an arbitration clause in the lease agreement dated 16th August, 1978. The respondent/landlord filed this suit for possession on the basis of termination of tenancy by a notice dated 30th August, 2006. The petitioner filed an application that the matter should be referred to arbitration. This application was dismissed by the Trial Court holding that the terms of tenancy got changed between the parties by oral agreement and the defendant cannot rely upon agreement dated 16th August, 1978 to claim existence of arbitration clause. 3. It is submitted by counsel for the petitioner that the agreement dated 16th August, 1978 was a business agreement executed between the parties and the respondent/plaintiff in terms of this agreement was entitled to a guaranteed sale commission and it was agreed that the petitioner shall pay a consolidated sum of Rs.15,000/- per month towards sale commission and rental. Since this agreement of 1978 contained an arbitration clause, the Court was bound to refer the matter to the Arbitrator for adjudication. 4. A perusal of the agreement dated 16th August, 1978 filed by the petitioner would show that the relationship between petitioner and the respondent was that of a lesser and lessee and lease was granted to the petitioner in 1978 for a period of 3 years starting from 3rd March, 1977. An option was given in the agreement to renew the terms and conditions of the lease upon mutually agreed terms. There was also a clause for terminating the agreement in case of failure on the part of either of the parties in fulfilling the terms. After this agreement, which expired in 1980, no new agreement was executed. An option was given in the agreement to renew the terms and conditions of the lease upon mutually agreed terms. There was also a clause for terminating the agreement in case of failure on the part of either of the parties in fulfilling the terms. After this agreement, which expired in 1980, no new agreement was executed. 5. It is settled law that in case of lease of immovable properties, if the lease is for a period of one year or more lease deed is required to be compulsorily registered. The agreement relied upon by the petitioner is an unregistered. Even otherwise, this agreement exhausted itself in 1980 and after 1980 there was no written agreement between the parties. After 1980 premises remained in occupation of petition on the basis of a lease which was orally created from time to time and renewed from time to time as a month-to-month tenancy. The Court cannot look into or rely upon an unregistered document which purports to create lease of one year or more than one year. If a document is inadmissible because of its non-registration or because of its not having proper stamp duty, all its terms are inadmissible including the one which provides for an arbitration between the parties. An arbitration agreement can be enforced only along with the contract between the parties and such a contract must be a valid contract, admissible under law. If a contract is not admissible in law, every clause of it is inadmissible in law including arbitration clause. 6. Even if this lease agreement had been a registered lease agreement, on expiry of the lease period fixed in the original lease deed, the lease would have come to an end. Since no written lease deed was executed between the parties a new contract of tenancy had come into existence between the parties created orally. The parties cannot resort to the terms and conditions of the exhausted contract when a new contract had come into existence. If parties wanted that there should have been an arbitration clause between them in respect of further tenancy period, nobody stopped the parties from entering into such an agreement in writing, which is the basic requirement of any arbitration clause. Therefore, the reasoning of the petitioner that there was an arbitration clause in 1978 agreement was rightly rejected. If parties wanted that there should have been an arbitration clause between them in respect of further tenancy period, nobody stopped the parties from entering into such an agreement in writing, which is the basic requirement of any arbitration clause. Therefore, the reasoning of the petitioner that there was an arbitration clause in 1978 agreement was rightly rejected. When the written lease deed came to an end and a new oral lease was entered between the parties, the arbitration clause finding place in earlier lease deed cannot be invoked by a tenant. In Vardhaman Spinning and General Mills vs. Veena Kumari Wadhawan 68 (1997) DLT 761 a similar contention was put forward by the appellant before this Court and this Court observed as under”- “One of the arguments advanced by Mr. Bawa Shiv Charan Singh, learned Counsel for the respondent/plaintiff is that the lease created by agreement dated 1.11.1980 was determined by afflux of time and the lease deed dated 1.11.1980 vanished by afflux of time. The unregistered lease deed dated 1.11.1980 having been determined by afflux of time in the year 1984, the arbitration clause perishes along with the determination of original lease deed dated 1.11.1980 and can not be availed of by the appellant/defendant. In the case of ITC Ltd. v. George Joseph Fernandes and Another reported in AIR 1989 SC p: 839, it has been held that “where the dispute between the parties is that the contract itself does not subsists either as a result of its being substituted by a new contract or by rescission or alteration, that dispute cannot be referred to the arbitration as the arbitration clause itself would perish if the averment was found to be valid. As the very jurisdiction of the Arbitration is dependent upon the existence of the arbitration clause under which he is appointed, the parties have no right to invoke a clause which perished with the contract........... As dispute as to the binding nature of the contract cannot be determined by resort to arbitration because the arbitration clause itself stands or falls according to the determination of the question in dispute”. As pointed out above in the instant case the agreement dated 1.11.1980 has been determined by afflux of time. As dispute as to the binding nature of the contract cannot be determined by resort to arbitration because the arbitration clause itself stands or falls according to the determination of the question in dispute”. As pointed out above in the instant case the agreement dated 1.11.1980 has been determined by afflux of time. There has been no fresh registered lease creating mutual rights and obligations by and between the parties including the arbitration clause and the payments of rents from 1.11.1984 have been under the correspondence referred to above. 7. Similarly in Union of India and Ors. vs. Smt. Jagdish Kaur AIR 2007 Allahabad 67, Allahabad High Court had considered similar situation and observed as under : “On point (B), it appears from clause 15 of the agreement that it provided for arbitration. The suit was instituted by the landlady on 1-7-2004 after expiry of term of agreement. Courts below have rightly held that after expiry of five years, the agreement was non-existent and the arbitration clause was not applicable. This view finds support from the law laid down by Honble the Apex Court in Union of India vs. Kishori Lal Gupta and Brothers, AIR 1959 SC 1362 .” 8. In Ghulam Hassan Dar vs. Controller of Aerodrome AIR 1987 J and K 25, Jammu and Kashmir High Court had considered a similar situation and observed as under : “After the expiry of the period of licence and after the expiry of period of agreement nothing survives for arbitration. The arbitration clause was for any dispute or difference of questions having regard to the covenants and conditions of the agreement and in respect of rights, duties and liabilities and duties of the contracting parties. This clause after the lapse of the agreement will cease to be effective because the petitioners right as licencee has ended with the expiry of period of licence.” 9. This clause after the lapse of the agreement will cease to be effective because the petitioners right as licencee has ended with the expiry of period of licence.” 9. In Ram Baboo Lal vs. Harish Chandra Burman AIR 1974 Allahabad 433, Allahabad High Court had occasion to consider the same situation and observed as under : “It was strenuously urged by the learned counsel for the defendant-appellant that the arbitration clause in the instant case quoted above is wide enough to cover the dispute which will arise in the suit, as the right for eviction and recovery of the mesne profits would have a bearing on the terms of the contract of lease and recourse will have to be taken to the terms of the contract for the purpose of deciding the matter in dispute. We fail to appreciate this line of argument. The right to evict the defendant and obtaining possession of the mills from him is not based on the contract of lease and by no stretch of imagination it can be said that recourse will have to be taken to the terms of the contract for determining whether the plaintiff has that right when it is not disputed that the lease expired on28-4-1966, and the defendant had not exercised his option for further renewal of the lease in accordance with the terms of the contract of lease.” 10. The petitioner has relied upon judgment of State Wakf Board vs. Abdul Azeez AIR 1968 Madras 79, Mansukh Lal Dhanraj Jain and Ors. vs. Eknath Vithal Ogale (1995) 2 SCC 665 , P. Anand Gajapathi Raju and Ors. vs. P.V.G. Raju (dead) and Ors. (2000) 4 SCC 539 and some other judgments. None of these judgments are helpful to the petitioner since none of the judgments have dealt with situation in this case. 11. I find that the Trial Court rightly dismissed the application of the petitioner. This petition has no force and is hereby dismissed.