Case Note & Summary
The dispute arose between a co-operative housing society and one of its members over the possession of a plot and house and the recovery of dues. The Happy Home Cooperative Housing Society Ltd was registered in February 1949 and obtained a lease of land at Nehru Road, Vile Parle (East), Bombay. The society divided the land into 17 plots for allotment to members for building purposes. Members were required to pay premium, annual rent of Re.1, and other charges, and to construct houses. The society advanced loans to members for construction, recoverable in monthly instalments along with premium and interest. Plot No.10 measuring about 676 sq. yards was allotted to the appellant, and through the society's agency he constructed a house, occupying it on or about May 1, 1951. A loan of Rs.26,922/- odd was advanced to him. An agreement dated March 26, 1952 and registered on May 27, 1952 provided for repayment in 366 or smaller monthly instalments and stated that after full repayment the society would execute a sub-lease in favour of the appellant. It also provided that in default of any instalment, the society could determine the agreement, forfeit amounts already paid, and require surrender of vacant possession. The appellant made no instalment payments, so on August 26, 1954 the society issued notice demanding vacant possession. Upon refusal, the society referred the dispute to the Registrar under Section 54 of the Bombay Co-operative Societies Act, 1925. A committee of three arbitrators, by majority, awarded in favour of the society, directing delivery of vacant possession of the plot and house, payment of Rs.150 per month as compensation for unauthorised use and occupation from October 1, 1954, and costs. The appellant's revisional application to the Bombay Co-operative Tribunal was dismissed, and the award was certified under Section 59 and filed in the Bombay City Civil Court for execution. The appellant then filed a chamber summons for stay of execution, contending that the arbitrator lacked jurisdiction because the agreement created a landlord-tenant relationship and that under Section 28 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, only the Small Causes Court had exclusive jurisdiction over recovery of rent and possession. The City Civil Court accepted this argument and stayed execution on October 16, 1956. On appeal, the Bombay High Court reversed, holding that the agreement was an executory contract to grant a sub-lease only after full payment, and no landlord-tenant relationship existed. The High Court directed execution to proceed. The appellant then appealed to the Supreme Court by certificate. Before the Supreme Court, the appellant reiterated that the agreement created a tenancy and that the dispute was essentially between landlord and tenant, thus falling within the exclusive jurisdiction of the Small Causes Court under Section 28 of the Rent Act. The respondent society argued that the agreement was merely an executory contract; no sub-lease had been executed, and until full payment of all dues the appellant remained a debtor, so the dispute was properly arbitrable under Section 54 of the Co-operative Societies Act. The Supreme Court examined the terms of the agreement as quoted in the High Court judgment, since the document was not included in the paper book. It found that although the society had described the agreement as a lease and the appellant as a tenant in the plaint, the substance of the agreement showed it was an executory contract. The society was itself a lessee and was to execute a sub-lease only after the appellant fulfilled all obligations, including payment of the entire loan, premium, interest and other charges. Until then, no relationship of landlord and tenant subsisted. The Court also held that the jurisdiction of an arbitrator under Section 54 of the Bombay Co-operative Societies Act, 1925 is excluded only if the proceedings are between landlord and tenant and relate to recovery of rent or possession of premises to which Part II of the Bombay Rent Act applies. Since no such relationship existed, Section 28 did not bar the arbitration. The Court distinguished Babulal Bhuramal v. Nandram Shivram, AIR 1958 SC 677, as in that case a landlord-tenant relationship existed. Accordingly, the Supreme Court dismissed the appeal, upheld the High Court's order, and held that the award was valid and executable.
Headnote
A) Contract Law - Nature of Agreement - Executory Contract vs Lease - Bombay Co-operative Societies Act, 1925, Section 54 - The agreement dated March 26, 1952 was construed as a whole; it was an executory contract entitling the appellant to a sub-lease only upon full payment of all dues and fulfilment of conditions; the society was itself a lessee and had not executed any sub-lease. Held that no relationship of landlord and tenant subsisted between the parties until the sub-lease was executed, and the appellant remained a debtor (Paras Not mentioned). B) Arbitration - Jurisdiction of Arbitrator - Exclusion of Jurisdiction - Bombay Co-operative Societies Act, 1925, Section 54; Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, Section 28 - The arbitrator's jurisdiction under Section 54 was ousted only if the proceedings were between landlord and tenant and related to recovery of rent or possession of premises to which Part II of the Rent Act applied. Since the agreement did not create a landlord-tenant relationship, Section 28 did not apply, and the award was within jurisdiction. Held that the award was valid and executable (Paras Not mentioned). C) Precedent - Applicability of Babulal Bhuramal v. Nandram Shivram - Distinguishing Cases - Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, Section 28 - The Supreme Court held Babulal Bhuramal v. Nandram Shivram, AIR 1958 SC 677 inapplicable because in that case a landlord-tenant relationship existed; here the agreement was an executory contract and no such relationship had arisen. Held that the precedent did not support the appellant's contention (Paras Not mentioned). D) Execution - Award as Decree - Enforcement of Award - Bombay Co-operative Societies Act, 1925, Sections 54, 59 - The award was certified under Section 59 and filed as a decree in the City Civil Court; execution proceedings were valid. Held that the High Court correctly directed execution to proceed (Paras Not mentioned).
Issue of Consideration
Whether the arbitration award made under the Bombay Co-operative Societies Act, 1925 was without jurisdiction because the agreement between the society and the appellant allegedly created a landlord-tenant relationship, thereby attracting the exclusive jurisdiction of the Small Causes Court under Section 28 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947.
Final Decision
The Supreme Court dismissed the appeal and upheld the High Court's order directing execution of the arbitration award. It held that the agreement was an executory contract, not a lease, and no landlord-tenant relationship existed between the parties. Consequently, Section 28 of the Bombay Rent Act did not apply, and the arbitrator had jurisdiction. The award was valid and executable.
Law Points
- An agreement to grant a sub-lease upon full repayment of loan and other dues is an executory contract
- not a lease
- no landlord-tenant relationship arises until the sub-lease is executed
- jurisdiction of arbitrator under Section 54 of Bombay Co-operative Societies Act
- 1925 is not excluded unless the dispute is between landlord and tenant and relates to recovery of rent or possession of premises to which Part II of Bombay Rents
- Hotel and Lodging House Rates Control Act
- 1947 applies
- award certified under Section 59 is valid and executable
- Babulal Bhuramal v. Nandram Shivram
- AIR 1958 SC 677 held inapplicable.
