Arbitration Petition (Lodg.) No.748 of 2007

30th January, 2008

Petitioner Counsel: Mr. P. K. SAMDANI,Mr. INDRANIL DESHMUKH
Respondent Counsel: Ms. RAJNI IYER,Ms. SUDESHNA GUHA ROY

Cases Cited:
Natraj Studios (P) Ltd. Vs. Navrang Studios, (1981)1 SCC 523 [Para 9]
Mansukhlal Dhanraj Jain Vs. Eknath Vithal Ogale, (1995)2 SCC 665 [Para 10]
Dattatraya Krishna Jangam Vs. Jairam Ganesh Gore, AIR 1965 Bom 177 [Para 11]
Vijaya Bank Vs. Maker Development Services Pvt. Ltd., 2001(4) ALL MR 143=2001(3) Bom.C.R. 652 [Para 12]
Carona Ltd. Vs. Sumangal Holding, 2007(4) ALL MR 4=2007(4) Bom.C.R. 265 [Para 13]
Siemens Ltd. Vs. Captech Online Pvt. Ltd., Arbitration Petition No.99/2004 Dt.22-08-2005 [Para 14]
Syndicate Bank Vs. East India Hotels Ltd., 2005(1) Bom.C.R. 514 [Para 15]
Tejbai Tejshi Dedhia Vs. Central Bank of India, 2007(5) ALL MR 879=2007(6) Bom.C.R. 60 [Para 16]
Adcon Electronics Pvt. Ltd. Vs. Daulat, 2001(4) ALL MR 479 (S.C.)=AIR 2001 SC 3712 [Para 21]
Moolji Jaitha and Co. Vs. Khandesh Spinning and Weaving Mills Co. Ltd., AIR 1950 FC 83 [Para 21]
Debendra Nath Chowdhury Vs. Southern Bank Ltd., AIR 1960 Cal 626 [Para 21]
Raghubir Narayan Lotlikar Vs. G. A. Fernandes, AIR 1953 Bom 76 [Para 21]
V. Dhanapal Chettiar Vs. Yasodai Ammal, AIR 1979 SC 1745 [Para 21]

JUDGMENT

JUDGMENT:- The principal issue which falls for the determination of the Court is whether the provisions of Section 41 of the Presidency Small Cause Courts Act, 1882 would bar the jurisdiction of an arbitral tribunal to entertain a claim for specific performance of an agreement of renewal contained in an agreement of licence executed between a licensor and licensee. The relief which has been sought in these proceedings under Section 9 of the Arbitration and Conciliation Act, 1996 is an order of injunction restraining the licensor from terminating the agreement of licence and acting upon a communication calling upon the licensee to hand over vacant possession and in particular, restraining the licensor from initiating proceedings for the recovery of possession of the licensed premises. An injunction has also been sought restraining the licensor from disturbing the use and occupation of the premises by the licensee; from entering into any third party rights in respect of the licensed premises. Other consequential reliefs restraining the licensor from interfering with the use of common facilities have been sought.

2. The Respondents are licensors and the Petitioner is a licensee in respect of commercial premises consisting of Unit No.7 in the A Wing on the first floor of a building known as Modern Centre situated at Mahalakshmi, Mumbai. The Petitioner has been in occupation of the premises from 1st January 2002. A leave and licence agreement is stated to have been initially entered into on 19th October, 2001 for a term of three years commencing from 1st January, 2002 which was to expire on 31st December, 2004. According to the Petitioner a right was conferred upon it of a refusal to renew the agreement for a further two terms of three years each commencing from 31st December, 2004. On 11th January, 2005 an agreement of licence was entered into between the parties under which a licence was granted by the Respondents to the Petitioner to utilize the facilities of a business center at the premises for a period of three years commencing from 1st January, 2005 and ending on 31st December, 2007. The licence fee under the agreement was fixed at Rs.5,75,000/- per month and a deposit of Rs.60 lacs was furnished free of interest for the due performance of the obligations under the agreement. Towards the provision of certain services and facilities, the Petitioner was to pay in addition an amount of Rs.14,510/- each month. Clause 5 of the agreement deals with renewal and made the following provisions:

"5(a) Client shall have the right of refusal to renew this Agreement for further periods of three years from 1st January, 2008 to 31st December, 2010.

(b) In the event of the Client opting for renewal, the charges under sub-clause (a) of Clause No.8 shall be increased by 15% i.e. to Rs. 6,61,250/- (Rupees six lacs sixty-one thousand two hundred fifty only) per month.

(c) In the event of the Client desiring to renew the agreement after completion of three years (36 English calender months) beyond 31st December, 2007 the Client shall give to the Conductor advance notice of 6 months in writing before the expiry of the agreement.

(d) All other terms and conditions herein shall remain the same during the extended period of agreement for renewal period."

3. Clause 6 of the agreement provided that the agreement was terminable for a breach on the part of the other party. During the period of renewal the Petitioner was entitled to terminate the agreement with a notice of six months while on the other hand the Respondents did not have any right to terminate the agreement other than for a breach of the conditions of the agreement. Under clause 7(a)(i) the agreement was to be terminable by efflux of time. Sub-clause (c) of clause 7 provides that upon the termination of the agreement the Petitioner would hand over vacant and peaceful possession to the Respondents failing which the Respondents were entitled to remove the belongings of the Petitioner upon the expiry of seven days. In the event that the Petitioner continued to use the premises after the expiry of the agreement, it was provided that charges of Rs.50,000/- per day would be levied until possession was handed over. Sub-clause (n) of Clause 11 of the agreement provides for a reference to arbitration in the following terms :

"(n) The Parties agree that all disputes arising out of or in connection with the Agreement, which cannot be settled amicably between the parties, shall be finally settled exclusively by Arbitration under the Arbitration and Conciliation Act, 1996 or any reenactment, modification or amendment thereto by three arbitrators, one to be appointed by the Conductor and one by the Client each. The two appointed arbitrators shall appoint the third Arbitrator. The Arbitration may be conducted at Mumbai. The Award of the Arbitrators shall be final, conclusive of the settlement of the disputes and binding all parties."

4. The case of the Petitioner is that it has duly performed its obligations under the agreement without breach or default and the Petitioner has been desirous of occupying the licensed premises by exercising its option of renewal. According to the Petitioner, its representatives were in dialogue with the Respondents well before the commencement of the six months period of notice required for exercising the right of renewal. On 14th November, 2007 the Petitioner addressed a communication to the Respondents intimating an intention to renew the agreement for a period of three years from 1st January, 2008 to 31st January, 2010 on enhanced charges as envisaged in the agreement. The contention of the Respondents is that the aforesaid letter was received on 29th November, 2007 prior to which on 27th November, 2007 the Petitioner was informed that the agreement would be expiring on 31st December, 2007 upon which peaceful and vacant possession of the premises would have to be granted. Upon receipt of the Petitioner's letter dated 14th November, 2007 on 29th November, 2007, the Respondents addressed a further communication dated 30th November, 2007 stating that since advance notice of six months had not been issued before the expiry of the agreement, the agreement would automatically stand terminated as of 1st January, 2008. The Respondents, however, stated that they were prepared, having regard to the long association of the parties, to enter into a new agreement on fresh terms and conditions with effect from 1st January, 2008. On 10th December, 2007 the Respondents, while drawing attention to their earlier letters recorded that no communication was received from the Petitioner and an appointment for a joint inspection of the premises was fixed. On 18th December, 2007 the Respondents furnished an offer to the Petitioner for a fresh agreement with effect from 1st January, 2008. On 24th December, 2007 a further communication was addressed recording the absence of any response from the Petitioner and calling for vacant and peaceful possession on the expiry of the term of the agreement.

5. The contention of the Petitioner is that the Respondents were aware of the intention of the Petitioner to renew the agreement well prior to the commencement of the notice period of six months as contemplated in the provision for renewal; that there was a deemed exercise of the option of renewal by the Petitioner and that there was a waiver on the part of the Respondents of the condition that atleast six months' prior notice should be given for the renewal of the agreement. The Petition was instituted with an averment that the Petitioner was in the process of invoking the arbitration agreement and commencing arbitral proceedings against the Respondents. Subsequent to the institution of the present proceedings under Section 9 of the Arbitration and Conciliation Act, 1996, a further affidavit has been filed recording that by a letter dated 4th January, 2008 the Petitioner has invoked the provision for arbitration stating that in the arbitral proceedings, the Petitioner would be seeking the following relief:

"(i) that the Hon'ble Arbitral Tribunal be pleased to declare that our clients have a right of renewal under the Agreement and you are bound and liable to specifically perform the same and renew the Agreement for a further period of three years on agreed terms;

(ii) that this Hon'ble Arbitral Tribunal be pleased to pass an award directing you and your servants, officers, assigns or agents to specifically perform your obligation contained in the Agreement by doing all things and taking all actions as are necessary to fully and effectively carry out its obligations thereunder including without limitation to execute fresh Leave and License Agreement in terms of the Agreement;

(iii) that for the aforesaid purpose, you be ordered, decreed and directed to do all acts deeds and things and execute and register all writings necessary."

6. An affidavit in reply has been filed on behalf of the Respondents in which it has been urged that the proceedings under Section 9 of the Act of 1996 are not maintainable by virtue of the provisions of Section 41 of the Presidency Small Cause Courts Act, 1882 under which jurisdiction has been conferred upon the Small Causes Court in respect of proceedings between licensors and licensees relating to the recovery of possession of immovable property or of licence fees. The contention of the Respondents is that based on an existing relationship of licensor and licensee the Petitioner seeks the assistance of this Court to protect his possession and that the dispute would fall within the purview of Section 41 of the Act of 1882. The contention of the Respondents is that in the garb of seeking specific performance, the Petitioners actually seek a restraint against the Respondents from disturbing the use and occupation of the licensed premises. Such a dispute, it is contended is not arbitrable under the Arbitration and Conciliation Act, 1996 in view of an implied bar created by Section 41 of the Presidency Small Cause Courts Act, 1882. On merits, the contention of the Respondents is that under the terms of the agreement the Petitioner was required to furnish advance notice of an intention to renew the agreement before 30th June, 2007. Upon an enquiry by the Respondents in June, 2007 of whether the Petitioner would be interested in a renewal of the agreement, the Petitioner had stated that a communication would be addressed to the Respondents which, however, never came. According to the Respondents, the Petitioner has acquired premises in the Bandra Kurla Complex and was, therefore, not desirous of continuing after 31st December, 2007. The contention of the Respondents is that in the absence of any communication from the Petitioner, it was the Respondent which had addressed a letter on 27th November, 2007 calling for vacant possession on the expiry of the agreement and it was thereafter on 29th November, 2007 that the letter purportedly dated 14th November, 2007 was received from the Petitioner evincing an intention to renew the agreement. Therefore, according to the Respondents there was no valid renewal of the agreement by the Petitioner and the Respondents are entitled to delivery of possession on the expiry of the agreement. In the rejoinder which has been filed by the Petitioner it has been contended that the Petitioner has been in use and occupation since 1st January, 2002 and it was within the contemplation of the parties that the Petitioner would be entitled to a right of refusal to renew the agreement of a further two terms of three years each expiring on 31st December, 2010. Consequently, it has been submitted that the Petitioner invested a large amount in the upkeep of the licensed premises. On 17th August, 2004 the Petitioner claims to have exercised the right to renew the agreement of licence pursuant to a clause to that effect contained in the first agreement dated 19th October, 2001. It has been stated that at that stage, the Respondents had not asserted that the Petitioner had not furnished six months notice prior to the expiry of the agreement. Consequently, it has been submitted that parties had never intended that the exercise of the option of renewal within six months prior to the expiry of the agreement was of the essence of the contract.

7. The principal issue that falls for determination is whether the provisions of Section 41 of the Presidency Small Cause Courts Act, 1882 would bar the jurisdiction of the arbitral tribunal to consider the dispute that has been raised by the Petitioner. Chapter IV of the Presidency Small Cause Courts Act, 1882 deals with the jurisdiction of the Court in respect of suits. Under Section 18, the Small Causes Court has jurisdiction to try all suits of a civil nature, subject to the exceptions in Section19 when the amount or value of the subject matter does not exceed the pecuniary limit prescribed therein and the conditions prescribed in clauses (a), (b) and ( c) are fulfilled. Clauses (a), (b) and (c) to which a detailed reference is unnecessary deal with the accrual of the cause of action within the local limits of the jurisdiction and the place where the Defendants reside or carry on business. Section 19 provides that the Small Causes Courts shall have no jurisdiction in certain cases, among them in Clause (h) being suits for specific performance or rescission of contracts. Chapter VII of the Act deals with the recovery of possession of immovable property and certain licence fees and rent. Section 41 provides as follows:

"41. (1) Notwithstanding anything contained elsewhere in this Act but subject to the provisions of sub-section (2), the Court of Small Causes shall have jurisdiction to entertain and try all suits and proceedings between a licensor and licensee, or a landlord and tenant, relating to the recovery of possession of any immovable property situated in Greater Bombay, or relating to the recovery of the licence fee or charges or rent therefor, irrespective of the value of the subject matter of such suits or proceedings.

(2) Nothing contained in sub-section (1) shall apply to suits or proceedings for the recovery of possession of any immovable property, or of licence fee or charges or rent thereof, to which the provisions of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, the Bombay Government Premises (Eviction) Act, 1955, the Bombay Municipal Corporation Act, the Maharashtra Housing and Area Development Act, 1976 or any other law for the time being in force, apply."

8. The first thing to be noted about Section 41 is that it is prefaced with a non-obstante provision as a result of which the provisions of sub-section (1) are given overriding force and effect notwithstanding anything contained elsewhere in the Act nonetheless, however, subject to sub-section (2). The jurisdiction to entertain and try all suits and proceedings between a licensor and a licensee and/or a landlord or tenant is conferred upon the Court of Small Causes where the suit relates to the recovery of possession of immovable property or to the recovery of licence fees or charges or rent therefore, irrespective of the value of the subject matter of such suit or proceeding. The words "irrespective of the value of the subject matter of such suits or proceedings" are intended to indicate that even though the value of the subject matter would exceed the pecuniary limits on the jurisdiction of the Court, it is the Court of Small Causes which is conferred with the jurisdiction to entertain and try suits of the descriptions specified in sub-section (1). However, sub-section (2) carves out an exception in respect of those suits for the recovery of possession or of licence fees, rent or charges to which the Rent Act, the other Acts enunciated or any other law for the time being in force apply. The non-obstante clause in Sub-section (1) of Section 41 has overriding effect over all the other provisions of the Act. That would include the provisions contained in Section 18 defining the pecuniary limits of the jurisdiction of the Small Causes Court. Suits falling in the description contained in Sub-section (1) of Section 41would lie within the exclusive jurisdiction of the Small Causes Court notwithstanding the fact that the value of the subject matter exceeds the limits on its pecuniary jurisdiction. The non-obstante provision in Sub-section (1) of Section 41 will also prevail over Section 19 because when the suit is of the description contained in the former provision that will prevail over the latter. The primary determination which the Court must make in every such case is whether the suit in substance and in essence is a suit relating to the recovery of possession or the recovery of licence fee, rent or other charges between a landlord and tenant or a licensor and licensee. The Court will decide the issue by looking at the kernel and disregarding the chaff. The existence of a jural relationship of licensor and licensee or, as the case may be, of landlord and tenant; the nature of the cause of action; the character of the reliefs sought and whether the claim of the Plaintiff arises from and out of the obligations of the parties as licensor and licensee or, landlord and tenant are important considerations. The garb or cloak which is wrapped around the pleadings by an astute draftsman must be kept aside to deduce the pith and substance of the pleadings. If the suit relates to the recovery of possession, it is a suit to which Section 41(1) applies notwithstanding the fact that some of the reliefs or a portion of the cause of action is structured around a claim for specific performance. The Court must ask itself : Does the theme and the foundation relate to the recovery of possession? And in answering that question, the pleadings must be considered as a whole without severing its constituents or reading parts in isolation.

9. In Natraj Studios (P) Ltd. Vs. Navrang Studios, (1981)1 SCC 523 the Supreme Court held that exclusive jurisdiction is given to the Court of Small Causes and jurisdiction is denied to other Courts to deal with suits and proceedings of the nature and character stipulated in the legislation. In the case before the Supreme Court a leave and licence agreement was entered into under which the First Respondent granted a licence to the Appellant in respect of certain premises which was extended. The agreement was in force on 1st February, 1973 when Section 15-A was inserted into the Rent Act, the consequence of which was that a person who was in occupation as a licensee on the aforesaid date was deemed to have become a tenant of the landlord. The licence was terminated upon which the Appellant filed a declaratory suit in the Small Causes Court. The First Respondent filed an application for the appointment of an arbitrator for determining the dispute under the leave and licence agreement and an order was passed by this Court allowing the application. Prior thereto an application had been filed by the Appellant under Section 33 of the Arbitration Act for a declaration that the arbitration clause in the licence agreement was invalid. The application was dismissed by this Court. Dealing with the question as to whether a dispute of the nature could be arbitrable, the Supreme Court held as follows:

"The Bombay Rent Act is a welfare legislation aimed at the definite social objective of protection of tenants against harassment by landlords in various ways. It is a matter of public policy. The scheme of the Act shows that the conferment of exclusive jurisdiction on certain courts is pursuant to the social objective at which the legislation aims. Public policy requires that contracts to the contrary which nullify the rights conferred on tenants by the Act cannot be permitted. Therefore, public policy requires that parties cannot also be permitted to contract out of the legislative mandate which requires certain kind of disputes to be settled by Special Courts constituted by the Act. It follows that arbitration agreements between parties whose rights are regulated by the Bombay Rents Act cannot be recognised by a court of law."

10. Thereafter in Mansukhlal Dhanraj Jain Vs. Eknath Vithal Ogale, (1995)2 SCC 665 the Supreme Court construed the provisions of Section 41 (1) of the Presidency Small Cause Courts Act, 1882. In a suit instituted by a person claiming to be a licensee of the premises for an injunction restraining the licensor from recovering the possession by forcible means, the Supreme Court held that the suit related to the recovery of possession and fell within the exclusive jurisdiction of the Small Causes Court. Observing that the words 'relating to the recovery of possession' were wider than 'for the recovery of possession', the Supreme Court held thus:

"It is pertinent to note that Section 41(1) does not employ the words "suits and proceedings for recovery of possession of immovable property". There is a good deal of difference between the words "relating to the recovery of possession" on the one hand and the terminology "for recovery of possession of any immovable property". The words 'relating to' are of wide import and can take in their sweep any suit in which the grievance is made that the defendant is threatening to illegally recover possession from the plaintiff-licensee. Suits for protecting such possession of immovable property against the alleged illegal attempts on the part of the defendant to forcibly recover such possession from the plaintiff, can clearly get covered by the wide sweep of the words "relating to recovery of possession" as employed by Section 41(1)."

11. The Supreme Court reaffirmed the principle that the jurisdiction of the Small Causes Courts was exclusive and it was only that Court which could entertain suits of the description falling in Section 41(1) which was pari materia with Section 28 of the Rent Act of 1947. The Court upheld the correctness of the view taken in the judgment of the Full Bench of this Court in Dattatraya Krishna Jangam Vs. Jairam Ganesh Gore, AIR 1965 Bom 177 that a suit for injunction against a landlord for restraining him from forcibly evicting the tenant from possession of the premises would lie within the exclusive jurisdiction of the Small Causes Court. The Supreme Court held that once the Plaintiff contends that he is a licensee of the suit premises and the Defendant is a licensor and he seeks the assistance of the Court on that basis to protect his possession, it would be a suit between a licensee and licensor relating to the recovery of possession. In a given case, the Supreme Court noted an injunction suit purely based on previous peaceful possession and a subsequent threatened dispossession may stand on an entirely different footing and may not attract the sweep of Section 41(1), but the suits before the Supreme Court in that case were based on the allegation that the Plaintiffs were licensees on monetary considerations who apprehended dispossession not in accordance with law at the hands of the licensors. Such a suit would attract the provisions of Section 41(1) by satisfying both the requirements viz. of being a suit between a licensor and a licensee and relating to the recovery of possession of immovable property.

12. In several judgments of Division Benches of this Court, this Court had occasion to consider the width and ambit of Section 41(1) of the Act of 1882. In Vijaya Bank Vs. Maker Development Services Pvt. Ltd., 2001(3) Bom.C.R. 652 : [2001(4) ALL MR 143] a licence agreement was entered into by the Respondent. One of the conditions of the agreement was that if at the expiry of the period reserved, the licensee was unable to deliver possession of the licensed premises to the licensor, then at the option of the licensor the licensee agreed to purchase the licensed premises on ownership basis at a price to be determined. The Respondent, called upon the Appellant in the exercise of the option to purchase the premises. The Respondent instituted a suit on the Original Side of this Court seeking a declaration that there was a valid agreement for the purchase of the premises by the Appellant. In the course of certain interlocutory proceedings, the disputes and differences between the parties were referred to arbitration. The arbitrator delivered an award. One of the challenges to the award was that the arbitrator had directed the Appellant to pay compensation to the Respondent from the date of the award till the execution of the sale deed which pertained to the jurisdiction of the Small Causes Court under Section 41(1). The Division Bench held that this was not a case where the considerations which have weighed the Supreme Court in Natraj Studios would be attracted and the real nature of the dispute was not whether the Respondent was entitled to licence compensation since the stand of both the parties was that the licence has come to an end and the difference between the parties was on the consequences of what should transpire thereafter. This the Court ruled did not fall within the jurisdiction of the Small Causes Court under Section 41(1). The Division Bench held that the suit was for the specific performance of an agreement to buy property and was supplanted by the arbitration agreement.

13. In Carona Limited Vs. Sumangal Holding, 2007(4) Bom.C.R. 265 : [2007(4) ALL MR 4] an arbitration petition under Section 9 of the Arbitration and Conciliation Act, 1996 had been dismissed by the Learned Single Judge on the ground that the exclusive jurisdiction to deal with such a dispute vested with the Small Causes Court under Section 41. The relief sought in the arbitration petition was a direction to the Respondent to hand over possession of certain premises, in the alternative for the appointment of a Receiver with a direction to collect compensation from the Respondent and the furnishing of security towards the claim in arbitration. The Division Bench upheld the judgment of a Learned Single Judge and observed thus:

"...the Court would have due regard to the fact that the Legislature had a stated object - conceived in the public interest - in conferring exclusive jurisdiction to deal with matters between licensors and licensees or between landlords and tenants on the Small Causes Court. Rent Control Legislation constitutes a statutory regulation of the relationship between landlords and tenants and between Licensors and licensees in the public interest and as a matter of protecting public welfare. The question whether the Small Causes Court has exclusive jurisdiction must be understood in the backdrop of the object which the legislature intended to subscribe. A comprehensive remedy has been provided. Sub-section (1) of section 42 provides an appeal from a decree or order made by the Court of Small Causes exercising jurisdiction under section 41 to a Bench of two Judges of the Court. In Natraj Studio Pvt. Ltd. Vs. Navrang Studio, (supra), the Supreme Court had occasion to consider the question as to whether an arbitration agreement could operate in respect of a dispute as to the possession of premises where the Court of Small Causes had jurisdiction under section 28(1) of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947. Sub-section (1) of section 28 of the Rent Act provided that notwithstanding anything contained in any law, in Greater Bombay, the Court of Small Causes, Bombay, and in any area for which a Court of Small Causes is established under the Provincial Small Cause Courts Act, 1887, such Court and elsewhere the Court of Civil Judge, Senior Division, shall have jurisdiction to entertain and try suits or proceedings between landlords and tenants relating to the recovery of rent or possession or between licensors and licensees relating to the recovery of licence fee or charges. The Supreme Court held that both on the basis of the non-obstante provision as well as the object of the legislation the exclusive jurisdiction would vest in the courts stipulated by the Legislature and an arbitration agreement cannot be recognised in the field:

"The Bombay Rent Act is a welfare legislation aimed at the definite social objective of protection of tenants against harassment by landlords in various ways. It is a matter of public policy. The scheme of the Act shows that the conferment of exclusive jurisdiction on certain Courts is pursuant to the social objective at which the legislation aims. Public policy requires that contracts to the contrary which nullify the rights conferred on tenants by the Act cannot be permitted. Therefore, public policy requires that parties cannot also be permitted to contract out of the legislative mandate which requires certain kind of disputes to be settled by special Courts constituted by the Act. It follows that arbitration agreements between parties whose rights are regulated by the Bombay Rent Act cannot be recognised by a Court of law."

After referring to the judgment of the Supreme Court in Natraj Studios, the Division Bench observed as follows:

"The object of the legislation deals with a matter of public interest and the ground which weighed with the Supreme Court in Natraj Studio in excluding the applicability of an arbitration agreement in the field would apply here as well."

14. The appeal before the Division Bench arose out of a judgment of Mr. Justice D. K. Deshmukh. While confirming the correctness of the view taken by the Learned Single Judge this Court held that it was in agreement with a similar view taken by the Learned Judge in Siemens Limited Vs. Captech Online Pvt. Ltd. (Arbitration Petition No.99 of 2004 decided on 22nd August, 2005). The Division Bench observed that it was in agreement with the following observations contained in the judgment of Mr. Justice Deshmukh:

"It can now be taken as a settled law that when the legislature creates special forum for adjudication of disputes of a particular nature then by necessary implication, jurisdiction of the Court of Original Civil Jurisdiction to entertain those disputes is barred by necessary implication. The legislature by enacting section 41 created a special forum for adjudication of disputes between the licensor and licensee in relation to recovery of licence fee and recovery of possession. Section 41 also created forum for filing an appeal against the decision of Small Causes Court. Thus, as the legislature has created a special forum for adjudication of disputes between the licensee and licensor in relation to recovery of possession and licence fee, the jurisdiction of the Court of Original Civil Jurisdiction will be ousted by necessary implication and, therefore, applying the law laid down by the Supreme Court in Natraj Studios, the reference to arbitration of the question which falls for decision before the Small Causes Court suit under section 41, cannot be possible."

15. In Syndicate Bank Vs. East India Hotels Ltd., 2005(1) Bom.C.R. 514 there was an agreement between the Respondent and the Appellant under which the Respondent, in consideration of a loan allowed the Appellant to use and occupy certain premises situated in a hotel for a certain period which was subject to renewal. The Respondent called upon the Appellant to vacate a little before the expiry of the term while the Appellant purported to exercise a right of renewal. The Appellant instituted a suit under Section 6 of the Specific Relief Act, 1963 alleging forcible dispossession which was decreed. Thereupon the Respondent instituted a suit in this Court seeking a declaration that the Appellant had no right or interest and that the decree passed in the suit under Section 6 of the Specific Relief Act was inoperative. The contention of the Appellant was that Section 41 of the Act of 1882 barred the jurisdiction of the Civil Court to entertain the suit. The Division Bench held that the suit was neither based on the relationship of a licensor or licensee nor did it relate to the recovery of possession of immovable property based on such relationship past or present. The suit in substance was to establish that upon the Defendant handing over possession, the Plaintiff would be entitled to continue in possession as co-owner and that the decree under Section 6 be declared to be inoperative. The suit, the Court held did not relate to the recovery of possession based on the relationship of licensee or licensor.

16. A recent judgment of the Division Bench in Tejbai Tejshi Dedhia Vs. Central Bank of India, 2007(6) Bom.C.R. 60 : [2007(5) ALL MR 879] involved a situation where the Appellant was a landlord of a tenanted building. The Respondent was a tenant. The landlord had filed certain suits for eviction under the Rent Act which were contested by the tenants upto the Supreme Court without any success. Subsequently an agreement was executed between the Appellant and the Respondent under which the Respondent agreed to vacate the premises in its occupation upon which the Appellant agreed to allot on a rental basis certain premises in the reconstructed building. The Respondent filed a suit for specific performance which was decreed by a Learned Single Judge. The issue which arose before the Division Bench of this Court was whether in a suit for specific performance of an agreement to lease new premises, jurisdiction would lie before the Court of Ordinary Civil Jurisdiction and not the Small Causes Court. The Division Bench held that the agreement was executed between a landlord and tenant and in pursuance thereof the tenant agreed to vacate the premises to enable the landlord to demolish the building and construct a new structure. The landlord undertook to allot premises in the newly constructed building. The Division Bench held that the Rent Act provided a specific procedure for the delivery of possession of new premises in the event that a tenant had to vacate old premises for the purpose of construction of a new building. Though the agreement between the parties was not strictly in terms of the procedure envisaged in the Rent Act, the Division Bench held that nevertheless the agreement essentially was between a landlord and tenant in relation to the delivery of possession of old premises to enable the landlord to reconstruct a new structure and deliver possession of newly constructed premises to the tenant. This the Court noted was essentially in terms of the provisions contained in Section 13(1)(hh) of the Rent Act. The Division Bench held as follows:

"Perhaps, it would have been a different thing if the agreement had to disclose that the respondent No.1 had surrendered its leasehold rights, and independently as a proposed new tenant, the respondent No.1 has entered into an agreement with the appellants to hire premises in the building to be constructed in the property in place of the old demolished building. The agreement nowhere discloses any such intention or conduct on the part of the parties. On the contrary the agreement essentially discloses continuation of landlord-tenant relationship between the parties. The agreement refers to the existing relationship of the landlord-tenant in relation to the existing premises and further continuation of such relationship in relation to the premises in the new building to be constructed on demolition of the old building. The clause regarding payment of rent nowhere discloses that the same would amount to an independent agreement of lease in relation to the premises to be alloted, unconnected to the existing landlord-tenant relationship between the parties."

17. The Court dealt with the decisions which were cited on behalf of the Respondents where it had been held that a suit for specific performance would lie before the Civil Court. Such suits, the Division Bench noted were for the specific performance of an agreement simplicitor. The Division Bench, however, distinguished that position by holding thus:

"All decisions which are sought to be relied upon on behalf of the respondents are undoubtedly in relation to the suit for specific performance of an agreement. Equally it is true that a person seeking specific performance of an agreement to lease can initiate action in the Civil Court, as such a suit would be for specific performance of an agreement simplicitor. However, when the parties to such an agreement undisputedly disclose a clear admission on their part about existence of landlord-tenant relationship in respect of the premises which are sought to be vacated in terms of the agreement in that regard, and further disclose an intention to continue the said relationship even in respect of a new premises in the new building on completion of construction thereof in place of the old building to be demolished, it cannot be said that such an action would be merely for a specific performance of the agreement; it would be essentially an action for specific performance of the agreement for continuation of the existing leasehold rights."

18. Now in the background of these authorities, if the facts of the present case are considered, the following facts emerge before the Court as reflecting an undisputed position:

i) The Respondents are the licensors and the Petitioner is a licensee in respect of the commercial premises to which the dispute relates;

ii) There was a license agreement dated 11th January, 2005;

iii) The occupation of the Petitioner is relatable to the agreement of licence and the Petitioner is in possession of licensed premises;

iv) A monthly compensation is determined to be due and payable by the Petitioner to the Respondents under the terms of the agreement;

v) The license agreement confers upon the Petitioner an option of renewal; and

vi) The Petitioner claims an entitlement for the renewal of the agreement and the continuation of the relationship of licensor and licensee, by virtue of the exercise of the option acting under and in pursuance of the license agreement.

There is in other words, a pre existing relationship of licensor and licensee between the parties; the occupation of the Petitioner is relatable to the existence of that relationship and the Petitioner seeks an extension of the relationship upon the exercise of the option of renewal under an existing agreement. The expression that is used in Section 41(1) is a suit relating to the recovery of possession. As the Supreme Court noted in Ogale's case, a suit relating to the recovery of possession is a concept which is much wider in its ambit than a suit for possession. What the Petitioner claims in essence is the continuation of the relationship of a licensor and licensee on the strength of the exercise of the option of renewal.

19. The relief that has been sought in the arbitration Petition under Section 9 is indicative in some measure of the nature and character of the dispute between the parties. The Respondents dispute that the Petitioner exercised the option of renewal as provided in the agreement. The relief which the Petitioner claims in the application under Section 9 is an injunction restraining the Respondents from terminating the agreement; from acting in pursuance of a letter demanding possession and from adopting proceedings for securing the eviction of the Petitioner or the recovery of the possession of the licensed premises. The Petitioner seeks an injunction restraining the Respondents from obstructing its "uninterrupted, unbroken, quiet and peaceful use, occupation and enjoyment of the licensed premises"; from selling, transferring or alienating the licensed premises; obstructing or preventing the delivery of service envisaged in the agreement; obstructing supply of utilities such as electricity and water and other consequential reliefs. There can be absolutely no manner of doubt that the relief sought relates to the recovery of possession.

20. But Counsel appearing for the Petitioner urged that while invoking the arbitration, the Petitioner in its letter dated 4th January, 2008 has only sought specific performance. That, however, would only be an isolated appreciation of the real nature of the dispute. The letter dated 4th January, 2008 when read in its entirety would clearly demonstrate that parties had a preexisting relationship of a licensor and licensee and that in pursuance of a provision for renewal contained in the agreement, the Petitioner was seeking a continuation of that relationship. Apart from a decree for specific performance, the Petitioner seeks consequential directions against the Respondents to do all necessary things and to take all necessary actions to fully and effectively carry out their obligations including without limitation, the execution of a fresh leave and licence agreement. This is, therefore not a case where parties have entered into an agreement to create an agreement of licence in future and a bare relief of specific performance is sought for the implementation of such an agreement.

21. On behalf of the Petitioner reliance is sought to be placed on the judgment of the Supreme Court in Adcon Electronics Pvt. Ltd. Vs. Daulat, AIR 2001 SC 3712 : [2001(4) ALL MR 479 (S.C.)]. The judgment in this case, it must be noted is not with reference to the provisions of Section 41 of the Presidency Small Cause Courts Act, 1882 (as were the decisions of the Supreme Court in Natraj Studio and Ogale's case noted earlier) but related to the provisions of Clause 12 of the Letters Patent. Adcon Electronics involved a situation where a suit was instituted against the Defendant on the Original Side of this Court for specific performance of an agreement for sale of immovable property situated at Indore. A Single Judge granted leave under Clause 12 of the Letters Patent and a Chamber Summons taken out by the Defendant for the revocation of the leave came to be dismissed. Clause 12 of the Letters Patent empowers this Court in its Ordinary Original Jurisdiction to entertain suits for land if such property is situated within the local limits of the original jurisdiction. The Supreme Court noted the judgment of the Federal Court in Moolji Jaitha and Co. Vs. Khandesh Spinning and Weaving Mills Co. Ltd., AIR 1950 FC 83 where divergent views were expressed by the Learned Judges on the merits of expression "suit for land". The Supreme Court held that the view of Justice Mahajan laid down the correct position which was that in order for a suit to be a suit for land, the Court is called upon to decide conflicting claims to such property and a decree or order is prayed which will bring about a change in the title to it. However, if the main purpose of the suit is different and some relief has to be given about land, the title to it not being in dispute, such a suit would not fall within the ambit of the expression. In the circumstances, the Supreme Court held that a suit for land is a suit in which the relief claimed relates to title to or delivery of possession of land or immovable property whereas in a suit for specific performance of an agreement for sale, if delivery of the property is not specifically claimed, it cannot be treated as a suit for land. The judgment in Adcon Electronics thus relates to the construction of provisions of Clause 12 of the Letters Patent. The provisions of Section 41(1) of the Presidency Small Cause Courts Act, 1882 cover in their wide ambit a suit relating to the recovery of possession between a landlord and tenant and/or a licensor and licensee. Similarly the judgment of the Calcutta High Court in Debendra Nath Chowdhury Vs. Southern Bank Ltd., AIR 1960 Cal 626 was also rendered on an interpretation of Clause 12 of the Letters Patent. Reliance was sought to be placed on the judgment of the Division Bench in Raghubir Narayan Lotlikar Vs. G. A. Fernandes, AIR 1953 Bom 76. That was a case in which the Plaintiff-landlord had instituted ejectment proceedings against the tenant in the small causes Court. An agreement was arrived at under which the tenants were to give reasonable facilities to the landlord for repairing the property, but the landlord agreed not to eject any of the tenants. Upon the repairs being complete, the tenants were to be given premises in substitution. The landlord instituted a suit for the specific performance of the agreement. A Learned Single Judge held that this Court had no jurisdiction to try the suit for specific performance. The Division Bench held in appeal that Section 28 of the Rent Act applied only to those suits between a landlord and a tenant where a landlord has become entitled to possession or recovery of the premises. and under the Transfer of Property Act a landlord would be entitled to possession only upon a determination of tenancy. The Court held thus:

"In our opinion, S.28 applies only to those suits between a landlord and a tenant where a landlord has become entitled to possession or recovery of the premises demised. Under the Transfer of Property Act a landlord becomes entitled to possession when there is a determination of tenancy. A tenancy can be determined in any of the modes laid down in S.111, and once the tenancy is determined, under S.108(q) the lessee is bound to put the lessor into possession of the property. It is, therefore, only on the determination of the lease or the tenancy that the landlord becomes entitled to the possession of the property, and when he has so become entitled to possession, if he files a suit for a decree for possession, then S.28 applies and such a suit can only be filed in the Small Causes Court."

The Division Bench held that in that case the tenancy had not been terminated and all that was asserted by the landlord was a right to recover possession by reason of a particular agreement. Moreover, the Court held that unlike in a suit for possession a discretion was conferred upon the Court on whether or not to grant the relief of specific performance. The Division Bench held that Section 28 of the Act only applies to those suits where the landlord becomes entitled to possession by reason of the determination of the lease on any one of the grounds contained in Section 111 of the T.P. Act. Now with great respect the view taken by the Division Bench in Lotlikar's case would stand impliedly overruled by the judgment of the Supreme Court in V. Dhanapal Chettiar Vs. Yasodai Ammal, AIR 1979 SC 1745.

The Supreme Court held thus:

"....determination of a lease in accordance with the Transfer of Property Act is unnecessary and a mere surplusage because the landlord cannot get eviction of the tenant even after such determination. The tenant continues to be so even thereafter. That being so, making out a case under the Rent Act for eviction of the tenant by itself is sufficient and it is not obligatory to found the proceeding on the basis of the determination of the lease by issue of notice in accordance with Section 106 of the Transfer of Property Act."

It is now a well settled principle of law that the determination of a tenancy is not a condition precedent for a landlord to sue for eviction under the provisions of rent control legislation. The fundamental basis of the judgment in Lotlikar's case is thus overruled by the law laid down by the Supreme Court.

22. In the alternative, it was urged by Learned Counsel for the Petitioner that the words or any other law for the time being in force in Sub-section (2) of Section 41 will cover the Arbitration and Conciliation Act, 1996. While considering this submission it must be noted that Sub-Section (2) of Section 41 is an exception to the principle contained in Sub-Section (1). The underlying purpose of conferring exclusive jurisdiction on the Court of Small Causes has been referred to in the judgment of the Supreme Court in Natraj Studios. The Supreme Court held, having regard to the salutary public purpose underlying the legislation that arbitration agreements between parties whose rights are regulated by the Bombay Rent Act cannot be recognised by a Court of law. Among the Acts referred to in the Sub-section (2) is the Rent Act of 1947. Section 28 of the Rent Act, which the Supreme Court regarded as pari materia, made a similar provision for conferring exclusive jurisdiction. Sub-section (2) of Section 41 therefore carves out certain legislation where an exclusive or special provision is made for regulating the jural relationship of landlord and tenant or licensor and licensee. The words or any other law for the time being in force must be construed in the context in which they occur or else the important public purpose underlying the conferment of exclusive jurisdiction on the Small Causes Court will be defeated. The exception carved out by Sub-section (2) of Section 41 will not encompass the Arbitration and Conciliation Act, 1996.

23. For all these reasons, I am of the view that the objection to the jurisdiction of this Court to entertain the Petition is well founded. The recourse to arbitration under the terms of the arbitration clause contained in the agreement of leave and licence would be barred by virtue of the exclusive jurisdiction conferred upon the Court of Small Causes by Section 41(1) of the Presidency Small Cause Courts Act, 1882. The Petition shall stand dismissed.

Petition dismissed.