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Allahabad High Court · body

2024 DIGILAW 2433 (ALL)

Fashion World v. Banke Bihari Developers Pvt. Ltd.

2024-11-28

AJIT KUMAR

body2024
JUDGMENT : Ajit Kumar, J. 1. Heard Sri Prakhar Saran Srivastava, learned counsel for the petitioners and Sri A.P. Srivastava, learned counsel for the respondents landlord. 2. The petitioner as well as respondents entered a lease agreement styled as ‘Memorandum of Understanding’ on 06th February, 2017 for a period of 9 years on an agreed rent as per Clause 1 of the agreement, with a right reserved with the landlord/lessor vide clause 9 to terminate the lease upon default in payment of rent. 3. Clause 21 of the Memorandum of Understanding prescribed for arbitration under the Arbitration and Conciliation Act, 1996 in the event of any dispute or deference arising out of Memorandum of Understanding. Taking recourse to the Clause 9 of the Memorandum of Understanding lessor/landlord issued a notice to the petitioner to vacate the premises in question. The petitioner upon not being paid rent and taking it to be a case of month to month tenancy instituted a suit for recovery of rent and eviction under Section 15 of The Provincial Small Cause Courts Act, 1887. Petitioner filed miscellaneous application questioning forum on the ground that as per Clause 21 of the Memorandum of Understanding reached between the parties, the matter was referrable to arbitration and no suit would lie. The point was considered as to the maintainability of suit by Judge, Small Causes in view of Section 8 of the Arbitration and Conciliation Act, 1996 and said application was rejected chiefly on the ground that Memorandum of Understanding reached between the parties was an unregistered document and it being unregistered and not duly stamped was inadmissible in evidence and hence not enforceable in law. This order is challenged before this Court in this revision petition. 4. Submission advanced on behalf of the petitioner is that legal position as was held in the case of Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd. (2019) 9 SCC 209 has come to be reversed by a seven judges’ constitution Bench in a latest authority of the Supreme Court in the case of Interplay Between Arbitration Agreements Under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899, In Re: (Curative Petition C No. 44 of 2023 in Review Petition (C) 704 of 2021 reported in (2024) 6 SCC 1 . 5. 5. In the judgment delivered on 13th December, 2023 adjudicating upon Interplay Between Arbitration Agreements Under Arbitration and conciliation Act,1996 and Stamp Act, 1899 for which matter was registered to be decided, the Court held vide paragraph 229 that "when a party produces an arbitration agreement or its certified copy, the Referral Court only has to examine whether an arbitration agreement exists in terms of Section 7 of Arbitration Act. The Referral Court under Section 11 is not required to examine whether a certified copy of the agreement/instrument/ contract discloses the payment of stamp duty on the original.” Accordingly judgment delivered in the SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd. (2011) 14 SCC 66 and in the matter of N.N. Global Mercantile (P) Ltd. vs. Indo Unique Flame Ltd. (2023) 7 SCC 1 were held to be no longer good law. 6. In the matter of Garware Wall Ropes Ltd. (supra), it was earlier held that if an instrument was invalid in law for being unregistered, it would not confer any right to be enforceable in law. This view was doubted by a coordinate bench of three judges bench in case of Vidya Drolia v. Durga Trading Corporation , (2021) 2 SCC 1 and it is by way of such reference that 7 judges bench came to be held that judgment of Garware Wall Ropes Ltd (Supra) was not a good law and hence overruled it. 7. Mr. Prakhar Saran Srivastava, therefore, urges that in view of changed legal position in the judgment of seven judges’ bench in the Re- Interplay Between Arbitration Agreements Under Arbitration and conciliation Act,1996 and Stamp Act, 1899, the judgment of the Court dated 9.6.2020 in between same parties arising out of suit instituted by present petitioner for not to be evicted except in accordance with law, holding such suit to be maintainable for MOU by unregistered to be no more a binding precedent. 8. Meeting the above argument, Mr. Srivastava has relied upon an authority of Calcutta High Court in the case of M/s Madhav v. Mukund Finance Pvt. Ltd. v. M/s Exterior Interior Limited , AIR 2024 Calcutta 303 and contended that suit for recovery of arrears of rent and eviction under the special provisions of law would still be maintainable in view of notice prescribed under Section 106 of the Transfer of Property Act, 1882. He contends that this statutory right created for eviction and recovery of arrears of rent cannot be diluted by any provision of law including any Memorandum of Understanding reached between the parties which is not registered one. Accordingly, he submits that the order passed by the Judge, Small Causes is liable to be upheld and so the suit is to be held maintainable. 9. Having heard learned counsel for the respective parties and having perused the records, I find it necessary to reproduce terms and conditions given under the Memorandum of Understanding between the parties not in its entirety but relevant Clause 1, 4, 9, 15 and 21: “1. Both, the parties to this MOU have specifically agreed that the Lessee shall pay rent of Rs. 45.00 per Sq. Feet per month for Ground floor (7653.00 Sq.ft) and Rs. 40.00 per sp.ft per month (6000.00 sq.ft) for Upper Basement. 4. Lease Period shall be for 9 years and may be extended on desire of both parties as per new Mutual Agreement between the parties on terms contained herein this Memorandum. 9. The minimum lessee period shall not be less than 9 years. In case the Lessee decides to vacate the said property before expiry of lease period then the lessee will have to serve upon a notice of 2 month in advance to the Leaser. The Lessor cannot terminate the agreement before the termination of the lease period i.e. 9 years. However the Lesser may terminate the agreement case of default in payment of monthly rental for continuous. 15. The parties shall execute separate Lease Deed in respect to the said premises & until the same is executed the present Memorandum of Understanding shall govern the legal relations between the parties. 21. In case of any deference or dispute arising between the parties herein on any of the terms and conditions contained herein, such deference or dispute shall be referred in arbitrator appointed by the both parties, as per provision of the Arbitration and conciliation Act, 1996, as amended thereto. The venue of the Arbitration proceedings shall be at the Corporate Office of the Leaser at Gorakhpur. In case of ingestible relief, the Courts at Gorakhpur (U.P.) shall have the territorial jurisdiction.” 10. The venue of the Arbitration proceedings shall be at the Corporate Office of the Leaser at Gorakhpur. In case of ingestible relief, the Courts at Gorakhpur (U.P.) shall have the territorial jurisdiction.” 10. Upon a bare reading of the aforesaid Clauses, it clearly transpires that tenancy agreement reached between the parties created certain rights and obligations to be exercised and discharged. The tenant was bound in law as per agreement to pay rent as agreed between the parties and so landlord had a right to issue notice terminating tenancy on account of default in payment of rent. Clause 15 very interestingly provided that parties may enter some registered agreement creating lease deed and until such agreement was registered Memorandum of Understanding would govern the field qua terms and conditions inter se parties. Clause 21 very clearly provided that in the event of any dispute or deference arising out of agreement, the same shall be referable for resolution only under the Arbitration and Conciliation Act, 1996. The arbitrator has to be appointed with the agreement of both the parties as per provisions of 1996 Act. 11. Yet another intersting part of the agreement is that this Memorandum of Understanding was executed on 6th February, 2017 to last for a period of 9 years and 9 years have yet not ended. In the event of any contract in subsistence while tenant is under obligation to pay rent and landlord is vested with a right to terminate tenancy by issuance of notice mid way, then such right is to be taken to be flowing from the agreement itself. If right is sought to be exercised under an agreement to which other authority to the agreement disputes, then it becomes matter of dispute and deference arising out of contract and then parties are to be taken to be bound under the Arbitration Clause provided under the agreement. The question arose as to whether such agreement is enforceable or not to chose a forum for adjudication as while Mr. A.P.Srivastava pleaded repeatedly that agreement being unregistered was not enforceable and the notice under Section 106 to terminate tenancy rights was still a statutory right to be enforced by a landlord and earlier judgment of this Court in between same parties was binding. 12 Mr. A.P.Srivastava pleaded repeatedly that agreement being unregistered was not enforceable and the notice under Section 106 to terminate tenancy rights was still a statutory right to be enforced by a landlord and earlier judgment of this Court in between same parties was binding. 12 Mr. Prakhar Saran Srivastava submitted that whether the agreement was unregistered or not duly stamped would not in any manner dilute legal position in view of change in law by Supreme Court in the case of Re-Interplay Between Arbitration Agreements Under Arbitration and conciliation Act, 1996 and Stamp Act, 1899 13. This Court in its earlier judgment had relied upon in the case of Garware Wall Ropes Ltd. (Supra) latest case to hold that suit was maintainable. The Interplay Between Arbitration Agreements Under Arbitration and conciliation Act, 1996 and Stamp Act, 1899 and Garware Wall Ropes Ltd case now has been overruled. Vide paragraphs, 228, 229, 235.1, 235.2, 235.3, 235.4, 235.5, the Supreme Court has held thus: “228. An arbitration agreement or its certified copy is not rendered void or unenforceable because it is unstamped or insufficiently stamped. We accordingly clarify that the position of law laid down in Jupudi Kesava Rao v. Pulavarthi Venkata Subbarao, (1971) 1 SCC 545 and Hariom Agrawal v. Prakash Chand Malviya, (2007) 8 SCC 514 cannot constrain a Referral Court at Section 11 stage (as well as Section 8 stage) from acting upon a certified copy of an arbitration agreement and referring the parties to Arbitral Tribunal. 229. The discussion in preceding segments indicates that the Referral Court at Section 11 stage should not examine or impound an unstamped or insufficiently stamped instrument, but rather leave it for the determination by the Arbitral Tribunal. When a party produces an arbitration agreement or its certified copy, the Referral Court only has to examine whether an arbitration agreement exists in terms of Section 7 of the Arbitration Act. The Referral Court under Section 11 is not required to examine whether a certified copy of the agreement/instrument/contract discloses the fact of payment of stamp duty on the original. Accordingly, we hold that the holding of this Court in SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. The Referral Court under Section 11 is not required to examine whether a certified copy of the agreement/instrument/contract discloses the fact of payment of stamp duty on the original. Accordingly, we hold that the holding of this Court in SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd., (2011) 14 SCC 66 : (2012) 4 SCC (Civ) 777, as reiterated in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2023) 7 SCC 1 : (2023) 3 SCC (Civ) 564, is no longer valid in law. 235. The conclusions reached in this judgment are summarized below: 235.1. Agreements which are not stamped or are inadequately stamped are inadmissible in evidence under Section 35 of the Stamp Act. Such agreements are not rendered void or void ab initio or unenforceable; 235.2. Non-stamping or inadequate stamping is a curable defect; 235.3. An objection as to stamping does not fall for determination under Sections 8 or 11 of the Arbitration Act. The Court concerned must examine whether the arbitration agreement prima facie exists; 235.4. Any objections in relation to the stamping of the agreement fall within the ambit of the Arbitral Tribunal; and 235.5. The decision in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2023) 7 SCC 1 : (2023) 3 SCC (Civ) 564 and SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd., (2011) 14 SCC 66 : (2012) 4 SCC (Civ) 777 are overruled. Paras 22 and 29 of Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209 : (2019) 4 SCC (Civ) 324 are overruled to that extent.” 14. In the judgment delivered in the case of M/s Madhav v. Mukund Finance Pvt. Ltd. (Supra) the Calcutta High Court was not dealing with the matter of enforcement of an arbitration clause. The issue that is involved in the instant case before this Court was not an issue there in that case, and therefore, on fact the said judgment is distinguishable and of no help to the respondents. 15. In view of above, the order passed by the Judge Small Cause Court is held to be unsustainable and accordingly, judgment and order dated 16.12.2021 is hereby set aside. The revision petition stands allowed. Parties are directed to seek appropriate remedy of arbitration as per Clause 21 of the Memorandum of Understanding. 15. In view of above, the order passed by the Judge Small Cause Court is held to be unsustainable and accordingly, judgment and order dated 16.12.2021 is hereby set aside. The revision petition stands allowed. Parties are directed to seek appropriate remedy of arbitration as per Clause 21 of the Memorandum of Understanding. It is further provided that in view of paragraph 235.4 (supra) arbitration would be well within his right to lack into its validity and enforceability of rights under the MOU.