Case Note & Summary
The applicant, Jadavlal Mavji Patel, as lessor, filed a miscellaneous civil application under the Arbitration and Conciliation Act, 1996 seeking appointment of an arbitrator to resolve disputes arising from a lease deed dated 22.5.2013 with the respondent, Mahindra First Choice Services Limited, as lessee. The disputes pertained to recovery of possession of the tenanted premises, recovery of rents, and other charges. The respondent objected to the appointment, arguing that the arbitration clause was invalid because it was inconsistent with Section 41 of the Provincial Small Cause Court Act, 1887, which bars arbitration in suits for recovery of possession and rent. The applicant contended that since the respondent's paid-up share capital exceeded Rs. 1 crore, the suit could not be brought under the Maharashtra Rent Control Act, 1999, and thus arbitration was the only remedy. The court examined the nature of the dispute and found that it clearly involved recovery of possession and rent, which falls within the exclusive jurisdiction of the Small Cause Court under Section 41 of the Act of 1887. The court held that the arbitration clause was void to that extent and dismissed the application, leaving the applicant to seek remedy before the appropriate Small Cause Court. The court also noted that there was indeed a dispute between the parties, but that did not affect the applicability of Section 41.
Headnote
A) Arbitration Law - Validity of Arbitration Clause - Section 41 of Provincial Small Cause Court Act, 1887 - Arbitration clause in lease deed held invalid as it is inconsistent with Section 41 which bars arbitration in suits for recovery of possession and rent - Court held that the dispute falls within the exclusive jurisdiction of the Small Cause Court and cannot be referred to arbitration (Paras 3-5).
Issue of Consideration
Whether an arbitration clause in a lease deed is valid and enforceable when the dispute relates to recovery of possession and rent, given the bar under Section 41 of the Provincial Small Cause Court Act, 1887.
Final Decision
The court dismissed the application for appointment of an arbitrator, holding that the arbitration clause is invalid to the extent it covers disputes relating to recovery of possession and rent, which fall within the exclusive jurisdiction of the Small Cause Court under Section 41 of the Provincial Small Cause Court Act, 1887. The applicant is at liberty to approach the appropriate Small Cause Court for relief.
Law Points
- Arbitration clause invalid if inconsistent with Section 41 of Provincial Small Cause Court Act
- 1887
- Dispute regarding recovery of possession and rent falls within exclusive jurisdiction of Small Cause Court
- Section 3 of Maharashtra Rent Control Act
- 1999 does not oust jurisdiction of Small Cause Court if dispute is covered by Section 41
Case Details
2017 LawText (BOM) (07) 237
MISC. CIVIL APPLICATION (ARBITRATION) No.343 OF 2017
Shri L.B. Patel for Applicant, Shri Prasad Kulkarni a/w. Prasad Dharaskar for Respondent
Mr. Jadavlal s/o. Mavji Patel
Mahindra First Choice Services Limited
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Nature of Litigation
Miscellaneous civil application for appointment of arbitrator under the Arbitration and Conciliation Act, 1996.
Remedy Sought
Applicant (lessor) sought appointment of an arbitrator to resolve disputes regarding recovery of possession, rent, and other charges under a lease deed.
Filing Reason
Disputes arose between lessor and lessee regarding vacating premises, payment of rent, adjustment of arrears against security deposit, and other charges.
Issues
Whether the arbitration clause in the lease deed is valid and enforceable given the bar under Section 41 of the Provincial Small Cause Court Act, 1887.
Whether the dispute regarding recovery of possession and rent can be referred to arbitration.
Submissions/Arguments
Respondent argued that the arbitration clause is inconsistent with Section 41 of the Provincial Small Cause Court Act, 1887, which bars arbitration in suits for recovery of possession and rent.
Applicant argued that since the respondent's paid-up share capital exceeds Rs. 1 crore, the suit cannot be brought under the Maharashtra Rent Control Act, 1999, and thus arbitration is the only remedy.
Ratio Decidendi
An arbitration clause in a lease deed is invalid and unenforceable if it is inconsistent with Section 41 of the Provincial Small Cause Court Act, 1887, which bars arbitration in suits for recovery of possession of immovable property or recovery of rent. Such disputes fall within the exclusive jurisdiction of the Small Cause Court and cannot be referred to arbitration.
Judgment Excerpts
There is no doubt about the fact that the lease deed dated 22.5.2013 contains an arbitration clause. But, a serious objection as to the validity of this clause has been raised by the learned counsel for the respondent, the lessee, on the ground that it is inconsistent with Section 41 of the Provincial Small Cause Court Act, 1887.
The dispute between the parties relates to recovery of possession of the tenanted premises as well as recovery of the rents and other charges.
In the circumstances, the arbitration clause, to the extent it covers the dispute regarding recovery of possession and recovery of rent, is invalid and cannot be enforced. The application is dismissed.
Procedural History
The applicant filed Misc. Civil Application (Arbitration) No.343 of 2017 before the Bombay High Court, Nagpur Bench, seeking appointment of an arbitrator. The respondent raised an objection regarding the validity of the arbitration clause. The court heard the matter and delivered judgment on 28 July 2017.
Acts & Sections
- Provincial Small Cause Court Act, 1887: Section 41
- Maharashtra Rent Control Act, 1999: Section 3
- Arbitration and Conciliation Act, 1996:
