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2013 DIGILAW 251 (AP)

Ashok International rep. , by its Managing Director v. State of A. P.

2013-04-03

K.G.SHANKAR, L.NARASIMHA REDDY

body2013
Judgment : LNR, J. In this batch of C.M.As. and C.R.Ps., common questions of fact and law are involved. Hence, they are disposed of through a common judgment. For the sake of convenience, the parties are referred to as “plaintiffs” and “defendants”. The Government of Andhra Pradesh has initiated various steps for the development of Kakinada Port. Fairly large extent of land was identified for construction of godowns and for creation of other facilities around the Port. Many traders were granted long leases of about 30 years by executing lease deeds on 26.03.1996 and incorporating conditions. However, the Government issued notices, dated 15.12.2006 requiring the lessees to vacate the property by 30.06.2007, on the ground that the clause providing for revision of rent for every three years as contemplated under various G.Os. was missing and due to inadvertence, a clause providing for rent only for 30 years was included. After undertaking some correspondence, the effected lessees filed O.S.No.47 of 2007 and batch in the Court of III Additional District Judge, Kakinada, for a declaration to the effect that the respective notices issued to them are illegal and untenable and contrary to the terms of the agreements. They have also filed applications under Order 39 Rules 1 and 2 C.P.C. for temporary injunction, to restrain the defendants therein i.e., the officials of the Government, from interfering with their possession over the property. The trial Court initially passed orders of ad interim temporary injunction. The defendants, on the other hand, filed I.A.No.3228 of 2007 and batch with a prayer to stay the further proceedings in the suit and to refer the dispute to arbitration in terms of the clauses in the lease deeds. Through common orders, the trial Court dismissed the applications filed under Order 39 Rules 1 and 2 C.P.C. by the plaintiffs and allowed the applications filed under Section 8 of the Arbitration and Conciliation Act, 1996 (for short ‘the Act’) by the defendants. referring the matters to arbitration. The plaintiffs approached this Court, feeling aggrieved by the said orders. While the C.M.As. are filed against the orders passed dismissing the applications filed under Order 39 Rules 1 and 2 C.P.C., the Revisions are filed assailing the orders passed in the applications filed under Section 8 of the Act. referring the matters to arbitration. The plaintiffs approached this Court, feeling aggrieved by the said orders. While the C.M.As. are filed against the orders passed dismissing the applications filed under Order 39 Rules 1 and 2 C.P.C., the Revisions are filed assailing the orders passed in the applications filed under Section 8 of the Act. Sri V.L.N.G.K. Murthy, learned counsel for the plaintiffs submits that the suits were filed for the relief of declaration that the notices of termination issued by the defendants are not tenable and that such notices were totally outside the scope of the agreements themselves. He contends that the occasion to seek reference of the dispute to arbitration would have arisen, if only the respondents have taken any steps under the terms of the agreements and that there was no justification for the trial Court in referring the matter to arbitration and thereby, indirectly terminating the suits. As regards the relief of temporary injunction, he contends that the plaintiffs are very much in possession of the property and the application ought to have been allowed. He submits that the correspondence that ensued between the parties clearly discloses that the respondents themselves admitted that a clause for revision of rents after every three years was missing. Learned counsel submits that if the defendants are of the view that such a clause ought to have been included, they should have filed a suit for this purpose or undertaken negotiations. Learned Government Pleader for Arbitration, on the other hand, submits that the lease deeds contain a clause for arbitration and Section 8 of the Act mandates that wherever the relationship between the parties is borne out by any contract containing a clause providing for arbitration, the filing of a suit is barred. He submits that the plaintiffs cannot maintain any distinction between the actions that are referable to any specific clause in the lease deeds, or any other external factor, as long as the matter pertains to the lease. He submits that the trial Court has taken the correct view of the matter. As regards temporary injunction, learned counsel submits that the plaintiffs have already been put on notice about the inadequacy of rents and despite the same, they did not come forward to pay the demanded amount and that they do not have the right to continue in possession. As regards temporary injunction, learned counsel submits that the plaintiffs have already been put on notice about the inadequacy of rents and despite the same, they did not come forward to pay the demanded amount and that they do not have the right to continue in possession. He raised an objection as to the maintainability of the C.M.As., on the ground that once the suits stood terminated on account of the reference of the matter to arbitration, it is not open for the plaintiffs to challenge the order passed in the interlocutory applications. The plaintiffs are lessees of the lands that are owned by the respondents and their relationship is governed by the lease deeds executed in the year 1996. The clause that provided for the stipulation of rent and the revision, thereof reads: “The rent will be at the rate of 6% on the land value of Rs.145/- per square yard for 5600 sq. yards and amounts to Rs.48,720/-per annum upto 30 years payable yearly, in advance in one instalment on or before 1st April of each year with initial EMD equal to 6 months rent to be deposited at the commencement of the tenancy by the Lessee with the Lessor. And thereafter the rent to be revised and raised at the end of every three years at the rate calculated at 6% on the revised value of teh land as made by the District Revenue Authorities in their basic value register or based on some other objective criterion or guidelines laid down by the Government subject to the condition that the increase in annual rent shall not at any stage be less than 15% of the proceeding years rent. The Lessee shall not question the valuation made by the District Revenue Authorities and shall abide by the fixation made by the Lessor thereon and also pay to THE LESSOR on demand by in addition to rent, a sum equal to the amount the Lessor may pay from time to time for insuring the demised premises under powers hereinafter provided, and also pay unto the Lessor, in the event of and immediately upon the said term being determined earlier by re-entry under the provision hereinafter contained, a proportionate part of the said rent upto the delay of such re-entry, provided that the said valuation of the land by the District Revenue Authorities shall be final and binding on both the parties.” From this, it is evident that the lease amount is liable to be revised on expiry of 30 years. However, the defendants felt that the clause providing for revision of rent on expiry of term of every three years ought to have been incorporated. Reliance was placed upon G.O.Ms.No.19, dated 31.01.1994 and G.O.Ms.No.312, dated 26.11.1994. Notices were issued on 15.12.2006, requiring the plaintiffs to pay the amount calculated on the basis of G.O., and in default to vacate the premises. That gave rise to the cause of action for the plaintiffs to file the suits. It is no doubt true that the leases contained a clause providing for arbitration, which reads: “In the event of any dispute, question of difference at any time arising between the parties hereto or their respective representatives or assigns touching or arising out of or in respect of those presents or as to the construction, meaning or the subject matter of these presents or as to any act done or omitted to be done under these presents or as the rights, duties and liabilities of the respective parties (except ‘such matters the decision whereof is otherwise expressly hereinbefore provided for) the same shall be referred to the sole arbitration of the Collector, East Godavari District, Kakinada. If he be unable or unwilling to act as an Arbitrator, then to any one of the three persons kept in panel that may be appointed by him, and the provisions of the Indian Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the rules made thereunder from time to time shall apply to such arbitration AND this DEED shall be deemed to be an submission to Arbitration within the meaning of the said Act, the Arbitrator shall give a detailed reasoned award and that the decision of the Arbitrator shall be final and binding on the parties hereto, subject to the provisions of the Arbitration Act”. Law is also fairly well settled to the effect that if the agreement governing relationship of the parties contains a clause providing for arbitration, a suit for seeking redressal in relation to any dispute covered by the agreement cannot be maintained and it stands barred by Section 8 of the Act. However, a keen observation of the clause extracted above reveals that it is only when the dispute or question of difference arises out of, or in respect of, those presents or as to the construction, meaning or the subject matter of the lease presents or as to any act done or omitted to be done under the lease or the rights, duties and liabilities of the respective parties, referable to the agreement, that the matter shall be referred to arbitration. In the instant case, the plaintiffs did not seek adjudication of any dispute, which is referable to the clause in the lease deed. On the other hand, they very much wanted to abide by it. It is the defendants. who felt that the agreements are somewhat defective, inasmuch as they did not provide for escalation of rents once in every three years. The gist of their contention is evident from paragraph 4 of the counter affidavit filed before this Court. “4. It is submitted that as per the said G.Os. It is the defendants. who felt that the agreements are somewhat defective, inasmuch as they did not provide for escalation of rents once in every three years. The gist of their contention is evident from paragraph 4 of the counter affidavit filed before this Court. “4. It is submitted that as per the said G.Os. the Rentals chargeable on the Port land so allotted shall be @ 6% on the land value of Rs.145/- per square yard per annum with an upward increase of 15% per annum for every three years as agreed and incorporated in the lease Agreement, but however the escalation clause is missing in the lease agreement which is clerical error.“ If the sole basis for the action of the defendants is a clause, which is missing in the lease agreement, it is un-understandable as to how the dispute arising out of their action can be treated as the one referable to lease deed. The matter can be viewed from another angle. If the defendants felt that the plaintiffs were under obligation to pay any amount over and above the one mentioned in the lease deeds or that the leases were liable to be terminated, they ought to have initiated arbitration, if they have any respect for the clause. Instead, they have resorted to unilateral action. Once the defendants have exhibited their disrespect to the clauses of the lease deeds, including the one, which provides for arbitration, they cannot fall back upon the same clause and oppose the suit filed for enforcing the lease deed. At any rate, these are all the aspects, which need to be examined on merits in detail, by framing an issue, than to be decided at the stage of interlocutory applications. Further, no application was filed by the defendants under Order 7 Rule 11 C.P.C. for rejection of the plaint. They did not make any counter claim in the suit nor did they file any suit for reference of the matter to arbitration. Therefore, the order passed by the trial Court, referring the matter to arbitration cannot be sustained in law. The termination of the suit does not accord with the procedure prescribed under C.P.C. A decree could not have been passed outside the prayer in the suits. Now comes the question pertaining to temporary injunctions. It is not in dispute that the plaintiffs are in possession and enjoyment of the property. The termination of the suit does not accord with the procedure prescribed under C.P.C. A decree could not have been passed outside the prayer in the suits. Now comes the question pertaining to temporary injunctions. It is not in dispute that the plaintiffs are in possession and enjoyment of the property. As a matter of fact, the defendants wanted them to vacate the premises. Till the question raised in the suit is decided, they are entitled to be in possession, subject however to payment of rents. The objection raised by the defendants as to the maintainability of the C.M.As., on the ground that the suits themselves stood terminated cannot be countenanced. The order passed by the trial Court dismissing the applications filed under Order 39 Rules 1 and 2 C.P.C. on the sole ground that the suits stood terminated, on account of reference of the matter to arbitration cannot be accepted. In G.Ramegowda vs. Special Land Acquisition Officer, Banglore AIR 1988 SUPREME COURT 897), the Hon’ble Supreme Court held that the orders of this category are ‘dependant’ in nature and the challenge thereto cannot be rejected, on the ground that the suit itself stood terminated. That was a case, in which the delay in filing of appeal was condoned and the effected party challenged the order passed by the Court condoning the delay. Even while the proceedings, in which the order condoning delay was challenged, were pending, the appeal that came to be numbered was disposed of. An objection was raised to the effect that once the appeal has been disposed of, it is not at all open to the parties to challenge the order, through which the delay was condoned. This contention was negatived and the Hon’ble Supreme Court treated such appeals as ‘dependant’ upon the order, condoning the delay being sustained, whenever challenged. The same situation obtains in this case. Hence, the C.R.Ps. are allowed and the orders under revisions are set aside. The trial Court shall decide the matter on merits, if necessary by framing a preliminary issue as to the maintainability of the suits. The C.M.As. are also allowed and the orders passed by the trial Court dismissing the applications filed under Order 39 Rules 1 and 2 C.P.C. are set aside. The trial Court shall decide the matter on merits, if necessary by framing a preliminary issue as to the maintainability of the suits. The C.M.As. are also allowed and the orders passed by the trial Court dismissing the applications filed under Order 39 Rules 1 and 2 C.P.C. are set aside. As a result, the applications filed under Order 39 Rules 1 and 2 C.P.C. in the respective suits are allowed and the respective defendants are restrained from interfering with the possession of the plaintiffs or evicting them from the suit schedule premises, subject, however, to the condition that the rent shall be paid with enhancement at 10% over and above what is provided for under the lease deeds from January 2013 onwards. The difference of rent, if any in, this behalf, shall be paid within four (4) weeks from today. The payment of extra amount shall be subject to the outcome of the suits. The miscellaneous petitions filed in this C.M.As and C.R.Ps. shall also stand disposed of. There shall be no order as to costs.