Case Note & Summary
The proceedings arose from a Memorandum of Understanding (MoU) dated December 5, 1998 executed between Sahara India Commercial Corporation Ltd. (Sahara) and Champion Engineering Works Pvt. Ltd. (Champion). Sahara filed Commercial Arbitration Application No. 105 of 2017 under Section 11 of the Arbitration and Conciliation Act, 1996 seeking appointment of an arbitrator for disputes under the MoU. Sahara also filed Writ Petition No. 8929 of 2017 challenging an order dated September 21, 2016 passed by the Appellate Bench of the Small Causes Court at Mumbai, which dismissed Sahara's revision against an order dated November 30, 2012 of the Small Causes Court rejecting Sahara's application under Section 8 of the Arbitration Act in Champion's eviction suit. The MoU contemplated a future development agreement for properties and contained an arbitration clause in Clause 33. Sahara claimed its funds were used to clear encroachments but Champion failed to execute the development agreement, leading to disputes amenable to arbitration. Champion filed L.E.&C. Suit No.44/56 of 2011 on April 1, 2011 seeking eviction and mesne profits, treating Sahara as a licensee. Sahara sought dismissal/referral of the suit under Section 8, which was rejected by the Small Causes Court on November 30, 2012; the revision court affirmed on September 21, 2016. Both courts held that the eviction and mesne profits dispute was not arbitrable under Central Warehousing Corporation, Mumbai vs. Fortpoint Automotive Pvt. Ltd., Mumbai, 2009 SCC OnLine Bom 2023 and fell within the jurisdiction of the Small Causes Court. Before the High Court, Sahara argued that Clause 33 arbitration clause existed, the relationship was one of development not license, prior MoUs used 'demised premises', and Champion refused to execute the development agreement. Champion contended that as dominus litis it chose the eviction suit, the subject matter was not arbitrable, the 2015 Amendments did not apply retrospectively, and the Section 11 application was time-barred because the August 13, 2004 notice was an invocation under Section 21 and the May 10, 2014 notice was an attempt to ever-green limitation. The excerpt of the judgment did not record the final operative decision or ratio decidendi.
Headnote
A) Arbitration - Arbitrability of Eviction Dispute - Arbitration Clause in MoU - Arbitration and Conciliation Act, 1996, Section 8 - Champion filed L.E.&C. Suit No.44/56 of 2011 seeking eviction and mesne profits; Sahara sought referral to arbitration under Clause 33 of the MoU. The Small Causes Court and the revision court held that eviction and mesne profits disputes were not arbitrable under Central Warehousing Corporation, Mumbai vs. Fortpoint Automotive Pvt. Ltd., Mumbai, 2009 SCC OnLine Bom 2023. Held that at the stage of considering a Section 8 application, the court examines the pleadings in the plaint and the Section 8 application to determine arbitrability (Paras 3E-3J). B) Arbitration - Jurisdiction of Small Causes Court - Lease/License Distinction - The Presidency Small Cause Courts Act, 1882 - The courts below found that the MoU created license rights in favour of Sahara, bringing its occupation within the ambit of a license and thereby within the jurisdiction of the Small Causes Court. Sahara argued that prior memoranda of understanding used the term 'demised premises' and the relationship was one of development, not license. Held that the precise status of the MoU would be examined at final hearing, but for a Section 8 application, the pleadings in the plaint were compared with the Section 8 application (Paras 3H-3J and 7). C) Arbitration - Applicability of 2015 Amendments - Section 11(6A) and Section 8 as amended - Arbitration and Conciliation Act, 1996 - Champion contended that all material events occurred prior to October 23, 2015, so Section 11(6A) did not apply and the court should not restrict its examination to the existence of a formally executed arbitration agreement; Section 8 as it existed prior to the 2015 Amendments should apply. Held that the significant change in law brought about by the 2015 Amendments would not automatically become applicable (Para 3G). D) Limitation - Invocation Notice and Section 21 - Arbitration and Conciliation Act, 1996, Section 21 - Champion argued that the August 13, 2004 notice constituted an invocation under Section 21 and the May 10, 2014 notice ten years later could not reset the limitation period; repeated invocation notices cannot reset limitation. Held that limitation was an issue raised for the court's examination (Paras 4-6).
Issue of Consideration
Whether disputes under the Memorandum of Understanding dated December 5, 1998 were arbitrable and should be referred to arbitration under Section 8 or Section 11 of the Arbitration and Conciliation Act, 1996; whether the eviction suit filed by Champion fell within the exclusive jurisdiction of the Small Causes Court and was not arbitrable under Central Warehousing Corporation v. Fortpoint Automotive; whether the 2015 Amendments to the Arbitration Act applied to pre-existing proceedings; whether the Section 11 application was time-barred due to the August 13, 2004 notice and the May 10, 2014 invocation notice; and whether the relationship between the parties was that of licensor-licensee or parties to a development agreement.
Law Points
- Arbitrability of eviction and mesne profits disputes
- scope of Section 8 of Arbitration and Conciliation Act 1996
- applicability of 2015 amendments to pre-2015 arbitration agreements
- limitation period for Section 11 application
- invocation notice under Section 21
- jurisdiction of Small Causes Court over licensee eviction
- dominus litis principle
- distinction between license and development agreement
