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2023 DIGILAW 695 (CHH)

Nova Iron And Steel Ltd. v. KMAG International

2023-12-13

DEEPAK KUMAR TIWARI, GOUTAM BHADURI

body2023
JUDGMENT : Goutam Bhaduri, J 1. Heard. 2. The present Appeal is against the order dated 07.09.2023 passed by the Commercial Court, New Raipur in Arbitration MJC No.44/2023. 3. Brief facts of the case are that Appellants and the Respondent entered into a lease agreement styled as “Railway Siding Lease Agreement (“Agreement”) whereby, the land in hold of the Appellants from various sources situated at railway siding (PSNS14322913) known as railway siding at Dagori was leased out to the Respondent. The lease deed was executed on 10th day of May, 2023 and in the said lease deed, the period of term of the lease was for 3 years and the same was effective from 01.07.2023. The lease rent was fixed Rs.30 lacs per month and the said lease was to terminate on 30.06.2026. Obligations were imposed on both landlord and tenant by the agreement and the dispute arose when the tenancy was terminated by final termination notice dated 19.08.2023 which specify that the termination will come into effect from 31.08.2023. Since the lease agreement contained an arbitration clause, the Respondent resorted to a Petition before the Commercial Court under Section 9 of the Arbitration and Conciliation Act, 1996 (for short ‘the Act of 1996’). The Commercial Court, by its order dated 07.09.2023, passed the impugned order (Annexure A-1) wherein, it was ordered that the effect of termination of lease deed shall remain stayed till the validity of termination is decided by the Arbitral Tribunal to be constituted under Clause-15 of the lease deed. Being aggrieved by such order, the present Appeal. 4. Shri Paranjpe, learned Counsel for the Appellants submits that certain obligations were imposed on the tenant and despite notice, the lessee could not fulfill the same, therefore, initially, a notice dated 05.08.2023 (Annexure A-3) was issued by the Appellants whereby, the Respondent was directed to restrain from any illegal activities. As notice was required to be issued before 30 days as per Clause-14.1.3, final termination notice was served on 19.08.2023 (Annexure A-5). At this point, it is stated that the Respondent resorted to a Petition under Section 9 of the Act of 1996. As notice was required to be issued before 30 days as per Clause-14.1.3, final termination notice was served on 19.08.2023 (Annexure A-5). At this point, it is stated that the Respondent resorted to a Petition under Section 9 of the Act of 1996. He further submits that the dispute is between the landlord and tenant and was a pure and simple question of land-lordship and tenancy and in view of the fact of instant case, Chhattisgarh Rent Control Act, 2011 (for short ‘the Act of 2011’) is applicable, therefore, the issue would not be arbitral in nature. He refers to the law laid down in the matter of Vidya Drolia & Ors vs. Durga Trading Corporation reported in (2021) 2 SCC 1 and submits that Section 2(2) of the Act of 2011 defines the “Agreement”, Section 2(9) defines the “Rent” and Section 2(14) defines “Tenant” and reading of the Act itself would show that the jurisdiction was conferred on the rent controller to decide any question between the landlord and tenant and since the special legislation was applicable, the right of the parties to approach the Commercial Court was excluded. He further refers that even the agreement itself was not registered, therefore, as per the law laid down in the matter of N.N. Global Mercantile Private Limited vs. Indo Unique Flame Limited and Others reported in (2023) 7 SCC 1 , the instant agreement of lease cannot be taken cognizance thereof, it being inadmissible in evidence. He further refers to the decision rendered in the matter of Union of India vs. Sapna Jain and Others reported in (2021) 2 SCC 782 and submits that termination has been invoked as per the Act of 2011 and the parties cannot be referred to the Arbitrator. 5. Per contra, Shri Shrivastava, learned Senior Advocate submits that the entire reliance placed by the Appellants on the law laid down in the matter of N.N. Global Mercantile Private Limited vs. Indo Unique Flame Limited and Others (supra) speaks about the applicability of the Act of 2011 and sub-Section (2) Section 1 of the said Act would show that only on notification, the Act would be said to have been applicable. He further submits that the concerned subject area of dispute situated at Gram Panchayat, village Dagori where, the Act of 2011 is not applicable. He further submits that the concerned subject area of dispute situated at Gram Panchayat, village Dagori where, the Act of 2011 is not applicable. Referring to Union of India vs. Sapna Jain and Others (supra), he submits that in case the special legislation is not applicable, then the dispute needs to be adjudicated by the Arbitrator by following the provisions of Transfer of Property Act. He further submits that the effective date of agreement was from 01.07.2023 and the locking period was 2 years and before that, the parties could not have terminated the contract. It is contended that the notice of termination was given prior to such locking period on the basis of which, the Appellants based their case by saying that illegal activities were pointed out by the Railways, however, that was prior to issuance of notice to the Appellants in the month of April, 2022. It is contended that the commencement of the lease took place in the month of July, therefore, by taking an undue advantage, the notice of termination was served, so, the said order passed by the Commercial Court is well merited and does not call for any interference. 6. We have heard learned Counsel for the parties, perused the documents annexed with the Appeal as also gone through the impugned order. 7. The primary question which falls for consideration before us is as to whether in the given facts of this case, the parties are to be referred to the Arbitrator or otherwise a different forum would have jurisdiction to adjudicate the issue. Admittedly, the agreement for lease was executed on 10.05.2023 styled as “Railway Siding Lease Agreement (“Agreement”) between the Appellants and the Respondent and the lease hold property is situated at village Dagori. According to submission of learned Counsel for the parties, it is not disputed that village Dagori is comprised within the Nagar Panchayat, Bodri. 8. Perusal of the agreement would show that the lease was for a period of 3 years with a monthly lease consideration of Rs.30 lacs which was to take effect from 01.07.2023 to 30.06.2026. The terms of lease imposes the obligation both on the part of the tenant, the lessee as also the lessor, the Appellant. 8. Perusal of the agreement would show that the lease was for a period of 3 years with a monthly lease consideration of Rs.30 lacs which was to take effect from 01.07.2023 to 30.06.2026. The terms of lease imposes the obligation both on the part of the tenant, the lessee as also the lessor, the Appellant. The notice of termination of tenancy was initially issued on 05.08.2023 and subsequently, the final notice issued was on 19.08.2023 whereby, the termination of tenancy was to take effect from 31.08.2023. The notice was replied by the Respondent who, thereafter invoked Section 9 of the Act of 1996 for grant of injunction with a prayer that the effect and operation of the notice dated 19.08.2023 so far as it relates to termination of the lease of the Respondent may be stayed till the Arbitrator is appointed. 9. The Chhattisgarh Rent Control Act, 2011 received the assent of the President on 5th October, 2012 and Governor on 23rd May, 2011, published in the Chhattisgarh Rajpatra on 6th November, 2012. Section 1 of the Act speaks about the extent and commencement, which reads as under:- “1. Short title, extent and commencement._ (1) This Act may be called the Chhattisgarh Accommodation Control Act, 1961. (2) It extends to the whole of Chhattisgarh.” 10. Sub-section (1) of Section 2 of the Act of 2011 defines the “Accommodation”, Sub-section (2) defines the “Agreement”, Sub-section (5) defines “Landlord”, Sub-section (6) defines the “Municipal area” and Sub-section (14) defines “Tenant” which would be relevant to adjudicate the issue and read as under:- 2. Definitions. (2) It extends to the whole of Chhattisgarh.” 10. Sub-section (1) of Section 2 of the Act of 2011 defines the “Accommodation”, Sub-section (2) defines the “Agreement”, Sub-section (5) defines “Landlord”, Sub-section (6) defines the “Municipal area” and Sub-section (14) defines “Tenant” which would be relevant to adjudicate the issue and read as under:- 2. Definitions. - In this Act, unless the context otherwise requires,- (1) "Accommodation" means any building or part of a building, whether residential or non-residential, leased out by the landlord to the tenant and includes open space, staircase, grounds, garden, garage and all facilities and amenities forming part of the agreement between them of any land which is not being used for agricultural purposes; (2) "Agreement" means the written agreement executed by the landlord and the tenant as required under this Act; (5) "Landlord" means a person who for the time being is receiving or is entitled to receive, the rent of any accommodation, whether on his own account or on account of or on behalf of or for the benefit of any other person or as a trustee, guardian or receiver for any other person or who would so receive the rent or to be entitled to receive the rent, if the accommodations were let to a tenant; (6) "Municipal area" means the Municipal area or Nagar Panchayat area as defined under Chhattisgarh Municipal Corporation Act, 1956 (No. 23 of 1956) of Chhattisgarh Municipalities Act, 1961 (No. 37 of 1961), as the case may be;” 11. Sub-section (2) of Section of 1 of the Act of 2011 defines that it shall extent in first instance to such of the Municipal areas which are comprising the District Headquarters in the State and later on to such of the other Municipal areas or any areas within the State as the State Government may, by Notification in the Official Gazette. 12. 12. In order to assess whether such notification was before us, the notification dated 06.09.2022 is being placed, which is reproduced as under:- vf/klwpuk dzekad 5871@1315@2022@ LFkkiuk@32 fnukad 6 flrEcj] 2022- NŸkhlx< HkkM+k fu;a=.k vf/kfu;e] 2011 dh /kkjk 1 dh mi/kkjk ¼2½ o ¼3½ ,oa /kkjk 2 dh mi/kkjk ¼6½ esa iznRr 'kfDr;ksa dks iz;ksx esa ykrs gq,] jkT; 'kklu ,rn~}kjk] NRrhlx< HkkM+k fu;a=.k vf/kfu;e] 2011 dh /kkjk 7 dh mi/kkjk ¼1½ ds rgr jkT; ds Hkhrj fuEufyf[kr uxj ikfydk ifj"kn ,oa Ukxj iapk;rksa es izR;sd ftys ds tks mi ftyk/kh'k ls fuEu Js.kh dk u gks] HkkM+k fu;a=d ds #i esa fu;qDr djrk gS rFkk mldk dk;Z{ks= dysDVj }kjk fofufnZ"V fd;k tk;s dz0 ftyk dk uke uxj ikfydk ifj"kn ,oa uxj iapk;r dk uke 1- jk;iqj uxj ikfydk ifj"kn] frYnk&usojk] xkscjk uokikjk ,oa vkjaxA uxj iapk;r] vHkuiqj] [kjksjk] ekuk&dSEi] dqjk] eafnj glkSn] pan[kqjh ,oa leksnkA 2- cykSnkcktkj & HkkVkikjk uxj iapk;r] flexk] dlMksy] iykjh] HkVxkao] you] VqMjk] fcykbZx<+A 3- /kerjh uxj iapk;r] dq#n] exjyksM] ukxjh] Hk[kjk] vkenhA 4- xfj;kcan uxj iapk;r] jkfte] Nqjk fQaxjs'oj A 5- egkleqan uxj ikfydk ifj"kn] ljk;ikyh ,oa ckxckgjkA uxj iapk;r fiFkkSjk] cluk] rqexkaoA 6- chtkiqj uxj iapk;r] HkSjex< HkksikyiV~VueA 7 nUrsokM+k uxj ikfydk ifj"kn] fdjUnqy] cM+h cpsyhA uxj iapk;r] xhne] ckjlqjA 8- Lkqdek uxj iapk;r] nksjukiky] dks.VkA 9- cLrj uxj iapk;r] cLrjA 10- dks.Mkxkao uxj iapk;r] Qjlxkao] ds'kdkyA 11- dkadsj Hkkuqizrkiiqj] pkjkek] ia[kktqj] varkx<] ujgjiqjA 12- nqxZ uxj ikfydk ifj"kn tkeqy] dqEgkjh] vfgokjkA 13- ckyksn uxj ikfydk ifj"kn] nYyhjktgjkA uxj iapk;r] MkSaMh] MkSaMh yksgkj fp[kyk dlkj] xq#j] vtZqUnk] xq.MjnsghA 14- csesrjk uxj iapk;r] uokx< lktk] csjyk] ekSjks] Fkku[kEgfj;k] nsodj] ijiksM+hA 15- dchj/kke uxj iapk;r] if.M;k] cksM+yk] ik.Mk rjkbZ] lgliqj yksgkjk] fiifj;kA 16- jktukanxkao uxj ikfydk ifj"kn] Mksaxjx<] [kSjkx<A uxj iapk;r x.MbZ] NqbZ[knku] vackx<+&pkSdh] Mksaxjxkao] Nqfj;kA 17- fcykliqj uxj ikfydk ifj"kn] jruiqj] r[kriqjA uxj iapk;r] dksVk] cksnjh] fcYgk] eYgkjA 18- eqaxsyh uxj iapk;r yksjeh] iFkfj;k] ljxkaoA 19- jk;x<+ uxj ikfydk ifj"kn] [kjfl;k] lkjax<A uxj iapk;r] /kjet;x<] ?kj?kksM+k] ySyaqxk] lfj;k] cjedsyk] fdjksM+heyuxj] iqlksjA 20- tkatxhj uxj ikfydk ifj"kn tkatxhj&uSyk] pkaik] lfDr] vdyrjkA uxj iapk;r u;kckjk}kj] cyksnk] [kjkSn] f'kojhukjk;.k] vaMekj] tStSiqj] MHkjk] panziqj] lkjkxkao] uox<] jkgkSnA 21- dksjck uxj ikfydk ifj"kn dV?kksjkA uxj iapk;r] ikyh] NqjhdykA 22- xkSjsyk&is.Mªk&ej okgh uxj iapk;r] xkSjsyk & is.MªkA 23- ljxqtk uxj iapk;r] lhrkiqj] y[kuiqjA 24- cyjkeiqj uxj iapk;r] jkekuqtxat] dqleh] jktiqj] okMªQuxjA 25- lwjtiqj uxj iapk;r] foJkeiqj] izrkiiqj] tjgh] HkBxkao] izseuxjA 26 dksfj;k uxj ikfydk ifj"kn] eusUnzx<] cSdq.Biqj] f'koiqjpjpkA uxj iapk;r] >xjk[k.M] [kksxkiuh] ubZ ysnjhA 27- t'kiqj uxj iapk;r] iFkyxkao] dksrck] cxhpk] dqudqjhA 13. Perusal of the record, it is evident that the village Dagori is not under the notification and as per the notification dated 18-7-2014 the village Dagori is comprised in village. Relevant extract of the notification dated 18-7-2014 is quoted below : dysDVj ftyk fcykliqj ¼NRrhlx<+½ fcykliqj fnukad 18 tqykbZ 2014 ^^vf/klwpuk** Øekad@iapk;r@306@2014 ftyk fcykliqj fnukad 18@7@2014 NRrhlx<+ 'kklu] iapk;r ,oa xzkeh.k fodkl foHkkx dh vf/klwpuk Øekad ,Q&1&11&95&22&ia&02] fnukad 23 Qjojh] 1999 }kjk iznRr 'kfDr;ksa dks iz;ksx esa ykrs gq,] NRrhlx<+ iapk;r jkt vf/kfu;e 1993 ¼Øekad 1 lu~ 1994½ ¼ftls blds i'pkr mDr vf/kfu;e dgk x;k gS½ dh /kkjk 03 ds izko/kkuksa ds v/khu jktLo ftyk fcykliqj ds dysDVj }kjk layXu lkj.kh] ¼ftls] blds i'pkr~ ^^lkj.kh** dgk x;k gS½ ds LraHk ¼4½ esa n'kkZ;s x;s xkWo ;k xkWoksa ds lewg ds fy, ftldh tula[;k lkj.kh ds LraHk ¼5½ esa n'kkZ;h xbZ gS] lkj.kh ds LraHk ¼3½ esa mYysf[kr uke ls mDr vf/kfu;e ds iz;kstuksa ds fy, ^^xzke^^ ds :i esa fofufnZ"V fd;k tkrk gS] rFkk lkoZtfud tkudkjh ds fy, ,rn~ }kjk izdkf'kr fd;k tkrk gSA bl LFkkfir xzke esa vf/kfu;e dh /kkjk 8 ¼d½ ds vuqlkj xzke iapk;r dk xBu fd;k tk;sxkA bl izdkj xfBr xzke iapk;rksa dks vf/kfu;e dh /kkjk 11 ds varxZr of.kZr vf/kfu;e ds iz;kstu ds fy;s vko';d vU; leLr 'kfDr;ksa izkIr gksaxhA lkj.kh [k.M dk uke vuqØekad xzke dk uke xzke ds varxZr vkus okys xkWo@xkWoksa dk uke tula[;k iVokjh gYdk Øekad 1 2 3 4 5 6 XX XX XX XX fcYgk 99 nxkSjh nxkSjh 4720 21 14. The Supreme Court, in the matter of Vidya Drolia and Others v Durga Trading Corporation (supra), held thus at paras 78, 79, and 80:- “78. In view of the aforesaid discussions, we overrule the ratio in N. Radhakrishnan inter alia observing that allegations of fraud can (sic cannot) be made a subject-matter of arbitration when they relate to a civil dispute. This is subject to the caveat that fraud, which would vitiate and invalidate the arbitration clause, is an aspect relating to non-arbitrability. We have also set aside the Full Bench decision of the Delhi High Court in HDFC Bank Ltd. which holds that the disputes which are to be adjudicated by the DRT under the DRT Act are arbitrable. They are non-arbitrable. 79. We have also set aside the Full Bench decision of the Delhi High Court in HDFC Bank Ltd. which holds that the disputes which are to be adjudicated by the DRT under the DRT Act are arbitrable. They are non-arbitrable. 79. Landlord-tenant disputes governed by the Transfer of Property Act are arbitrable as they are not actions in rem but pertain to subordinate rights in personam that arise from rights in rem. Such actions normally would not affect third-party rights or have erga omnes effect or require centralized adjudication. An award passed deciding landlord-tenant disputes can be executed and enforced like a decree of the civil court. Landlord-tenant disputes do not relate to inalienable and sovereign functions of the State. The provisions of the Transfer of Property Act do not expressly or by necessary implication bar arbitration. The Transfer of Property Act, like all other Acts, has a public purpose, that is, to regulate landlord-tenant relationships and the arbitrator would be bound by the provisions, including provisions which enure and protect the tenants. 80. In view of the aforesaid, we overrule the ratio laid down in Himangni Enterprises and hold that landlord-tenant disputes are arbitrable as the Transfer of Property Act does not forbid or foreclose arbitration. However, landlord-tenant disputes covered and governed by rent control legislation would not be arbitrable when specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligations. Such rights and obligations can only be adjudicated and enforced by the specified court/forum, and not through arbitration.” 15. Reading of the aforesaid decision, it is apparent that landlord-tenant disputes covered and governed by Rent Control legislation would not be arbitrable when specific court or forum has been given exclusive jurisdiction and apply and decide special rights and obligation. However, when the specific forum has not been given exclusive jurisdiction over such disputes then landlord-tenant disputes are arbitrable in nature. Therefore, the notification, which purports and produced before us do not envelope the village Dagori, therefore, by virtue of Section 1 (2) of the Chhattisgarh Rent Control Act, 2011, the village Dagori has been excluded from the applicability of the provisions of the Act, 2011. Thus, the order impugned is just and proper, warranting no interference of this Court. 16. In the result, the Appeal is dismissed, leaving the parties to bear their own cost(s).