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Sunday, June 9, 2013

DECLARATION SUIT AND INJUNCTION - ARBITRATION ACT SEC. 8 = Or.39, Rule 1 & 2 C.P.C. PRIMA FAICE IS MAINTAINABLE = It is not in dispute that the plaintiffs are in possession and enjoyment of the property. As a matter of fact, the defendants wanted them to vacate the premises. Till the question raised in the suit is decided, they are entitled to be in possession, subject however to payment of rents. ;WHEN REFERRING ARBITRATION AROSE & WHEN SUIT IS MAINTAINABLE = Law is also fairly well settled to the effect that if the agreement governing relationship of the parties contains a clause providing for arbitration, a suit for seeking redressal in relation to any dispute covered by the agreement cannot be maintained and it stands barred by Section 8 of the Act. However, a keen observation of the clause extracted above reveals that it is only when the dispute or question of difference arises out of, or in respect of, those presents or as to the construction, meaning or the subject matter of the lease presents or as to any act done or omitted to be done under the lease or the rights, duties and liabilities of the respective parties, referable to the agreement, that the matter shall be referred to arbitration. - no application was filed by the defendants under Order 7 Rule 11 C.P.C. for rejection of the plaint. They did not make any counter claim in the suit nor did they file any suit for reference of the matter to arbitration. Therefore, the order passed by the trial Court, referring the matter to arbitration cannot be sustained in law. The termination of the suit does not accord with the procedure prescribed under C.P.C. A decree could not have been passed outside the prayer in the suits.; ORDERS WHICH ARE dependant' in nature and the challenge thereto cannot be rejected, on the ground that the suit itself stood terminated. That was a case, in which the delay in filing of appeal was condoned and the effected party challenged the order passed by the Court condoning the delay. Even while the proceedings, in which the order condoning delay was challenged, were pending, the appeal that came to be numbered was disposed of. An objection was raised to the effect that once the appeal has been disposed of, it is not at all open to the parties to challenge the order, through which the delay was condoned. This contention was negatived and the Hon'ble Supreme Court treated such appeals as 'dependant' upon the order, condoning the delay being sustained, whenever challenged. The same situation obtains in this case.

REPORTED/PUBLISHED IN http://judis.nic.in/judis_andhra/filename=9751

THE HON'BLE SRI JUSTICE L. NARASIMHA REDDY AND   THE HON'BLE SRI JUSTICE K.G.SHANKAR                  

C.M.A.Nos.126 of 2012 and Batch

03.04.2013
       
M/s. Ashok International rep., by its Managing Director.

State of A.P. and others.

Counsel for the Appellant: Sri V.L.N.G.K.Murthy

Counsel for respondents: G.P. for Arbitration

<GIST:

>HEAD NOTE:  
? Cases referred:
1. AIR 1988 SUPREME COURT 897    

C.M.A.Nos.126, 127, 128, 207, 209 & 218 of 2012
And
C.R.P.Nos.814, 815, 816, 1174, 1296 & 1307 of 2012

COMMON JUDGMENT: (Per LNR,J)      
        In this batch of C.M.As. and C.R.Ps., common questions of fact and law are
involved.  Hence, they are disposed of through a common judgment.
        For the sake of convenience, the parties are referred to as "plaintiffs"
and "defendants".
        The Government of Andhra Pradesh has initiated various steps for the
development of Kakinada Port.
 Fairly large extent of land was identified for
construction of godowns and for creation of other facilities around the Port.
Many traders were granted long leases of about 30 years by executing lease deeds
on 26.03.1996 and incorporating conditions.
However, the Government issued
notices, dated 15.12.2006 requiring the lessees to vacate the property by 30.06.2007, on the ground that the clause providing for revision of rent for every three years as contemplated under various G.Os. was missing and due to inadvertence, a clause providing for rent only for 30 years was included.  
After
undertaking some correspondence, the effected lessees filed O.S.No.47 of 2007
and batch in the Court of III Additional District Judge, Kakinada, for a
declaration to the effect that the respective notices issued to them are illegal and untenable and contrary to the terms of the agreements.  
They have also filed
applications under Order 39 Rules 1 and 2 C.P.C. for temporary injunction, to
restrain the defendants therein i.e., the officials of the Government, from
interfering with their possession over the property.
        The trial Court initially passed orders of ad interim temporary
injunction.
The defendants, on the other hand, filed I.A.No.3228 of 2007 and
batch with a prayer to stay the further proceedings in the suit and to refer the
dispute to arbitration in terms of the clauses in the lease deeds. 
Through
common orders, the trial Court dismissed the applications filed under Order 39 Rules 1 and 2 C.P.C. by the plaintiffs and allowed the applications filed under Section 8 of the Arbitration and Conciliation Act, 1996 (for short 'the Act') by the defendants. referring the matters to arbitration.
        The plaintiffs approached this Court, feeling aggrieved by the said
orders.  
While the C.M.As. are filed against the orders passed dismissing the
applications filed under Order 39 Rules 1 and 2 C.P.C., 
the Revisions are filed
assailing the orders passed in the applications filed under Section 8 of the
Act.
        Sri V.L.N.G.K.Murthy, learned counsel for the plaintiffs submits that the
suits were filed for the relief of declaration that the notices of termination
issued by the defendants are not tenable and that such notices were totally
outside the scope of the agreements themselves.
 He contends that the occasion to
seek reference of the dispute to arbitration would have arisen, if only the
respondents have taken any steps under the terms of the agreements and that
there was no justification for the trial Court in referring the matter to
arbitration and thereby, indirectly terminating the suits.
        As regards the relief of temporary injunction, he contends that the
plaintiffs are very much in possession of the property and the application ought
to have been allowed.
He submits that the correspondence that ensued between
the parties clearly discloses that the respondents themselves admitted that a
clause for revision of rents after every three years was missing.
Learned
counsel submits that if the defendants are of the view that such a clause ought
to have been included, they should have filed a suit for this purpose or
undertaken negotiations.
        Learned Government Pleader for Arbitration, on the other hand, submits
that the lease deeds contain a clause for arbitration and Section 8 of the Act
mandates that wherever the relationship between the parties is borne out by any
contract containing a clause providing for arbitration, the filing of a suit is
barred.
He submits that the plaintiffs cannot maintain any distinction between
the actions that are referable to any specific clause in the lease deeds, or any
other external factor, as long as the matter pertains to the lease.
 He submits
that the trial Court has taken the correct view of the matter.
        As regards temporary injunction, learned counsel submits that the
plaintiffs have already been put on notice about the inadequacy of rents and
despite the same, they did not come forward to pay the demanded amount and that
they do not have the right to continue in possession.
He raised an objection as
to the maintainability of the C.M.As., on the ground that once the suits stood
terminated on account of the reference of the matter to arbitration, it is not
open for the plaintiffs to challenge the order passed in the interlocutory
applications.
        The plaintiffs are lessees of the lands that are owned by the respondents
and their relationship is governed by the lease deeds executed in the year 1996.
The clause that provided for the stipulation of rent and the revision, thereof reads:
        "The rent will be at the rate of 6% on the land value of Rs.145/- per
square yard for 5600 sq. yards and amounts to Rs.48,720/- per annum upto 30 
years payable yearly, in advance in one instalment on or before 1st April of
each year with initial EMD equal to 6 months rent to be deposited at the
commencement of the tenancy by the Lessee with the Lessor.  
        And thereafter the rent to be revised and raised at the end of every three
years at the rate calculated at 6% on the revised value of teh land as made by
the District Revenue Authorities in their basic value register or based on some
other objective criterion or guidelines laid down by the Government subject to
the condition that the increase in annual rent shall not at any stage be less
than 15% of the proceeding years rent.  
The Lessee shall not question the
valuation made by the District Revenue Authorities and shall abide by the
fixation made by the Lessor thereon and also pay to THE LESSOR on demand by in   
addition to rent, a sum equal to the amount the Lessor may pay from time to time
for insuring the demised premises under powers hereinafter provided, and also
pay unto the Lessor, in the event of and immediately upon the said term being
determined earlier by re-entry under the provision hereinafter contained, a
proportionate part of the said rent upto the delay of such re-entry, provided
that the said valuation of the land by the District Revenue Authorities shall be
final and binding on both the parties."

        From this, it is evident that the lease amount is liable to be revised on expiry of 30 years.  
However, the defendants felt that the clause providing for
revision of rent on expiry of term of every three years ought to have been incorporated. 
Reliance was placed upon G.O.Ms.No.19, dated 31.01.1994 and  G.O.Ms.No.312, dated 26.11.1994.  
Notices were issued on 15.12.2006, requiring
the plaintiffs to pay the amount calculated on the basis of G.O., and in default
to vacate the premises.
That gave rise to the cause of action for the plaintiffs to file the suits.
        It is no doubt true that the leases contained a clause providing for arbitration, which reads:
        "In the event of any dispute, question of difference at any time arising
between the parties hereto or their respective representatives or assigns
touching or arising out of or in respect of those presents or as to the
construction, meaning or the subject matter of these presents or as to any act
done or omitted to be done under these presents or as the rights, duties and
liabilities of the respective parties (except 'such matters the decision whereof
is otherwise expressly hereinbefore provided for) the same shall be referred to
the sole arbitration of the Collector, East Godavari District, Kakinada.  If he
be unable or unwilling to act as an Arbitrator, then to any one of the three
persons kept in panel that may be appointed by him, and the provisions of the
Indian Arbitration Act, 1940 or any statutory modification or re-enactment
thereof and the rules made thereunder from time to time shall apply to such
arbitration AND this DEED shall be deemed to be an submission to Arbitration
within the meaning of the said Act, the Arbitrator shall give a detailed
reasoned award and that the decision of the Arbitrator shall be final and
binding on the parties hereto, subject to the provisions of the Arbitration
Act".

        Law is also fairly well settled to the effect that if the agreement governing relationship of the parties contains a clause providing for arbitration, a suit for seeking redressal in relation to any dispute covered by the agreement cannot be maintained and it stands barred by Section 8 of the Act.

However, a keen observation of the clause extracted above reveals that it is only when the dispute or question of difference arises out of, or in respect of, those presents or as to the construction, meaning or the subject matter of the lease presents or as to any act done or omitted to be done under the lease or the rights, duties and liabilities of the respective parties, referable to the
agreement, that the matter shall be referred to arbitration.
     
  In the instant case, the plaintiffs did not seek adjudication of any
dispute, which is referable to the clause in the lease deed.  
On the other hand,
they very much wanted to abide by it.
It is the defendants. who felt that the
agreements are somewhat defective, inasmuch as they did not provide for escalation of rents once in every three years. 

 The gist of their contention is
evident from paragraph 4 of the counter affidavit filed before this Court.
        "4. It is submitted that as per the said G.Os. the Rentals chargeable on
the Port land so allotted shall be @ 6% on the land value of Rs.145/- per square
yard per annum with an upward increase of 15% per annum for every three years as
agreed and incorporated in the lease Agreement, but however the escalation
clause is missing in the lease agreement which is clerical error."

        If the sole basis for the action of the defendants is a clause, which is
missing in the lease agreement, it is un-understandable as to how the dispute
arising out of their action can be treated as the one referable to lease deed.
        The matter can be viewed from another angle.
 If the defendants felt that
the plaintiffs were under obligation to pay any amount over and above the one
mentioned in the lease deeds or that the leases were liable to be terminated,
they ought to have initiated arbitration, if they have any respect for the
clause.
Instead, they have resorted to unilateral action.
 Once the defendants
have exhibited their disrespect to the clauses of the lease deeds, including the
one, which provides for arbitration, they cannot fall back upon the same clause
and oppose the suit filed for enforcing the lease deed. 
At any rate, these are
all the aspects, which need to be examined on merits in detail, by framing an
issue, than to be decided at the stage of interlocutory applications.
Further,
no application was filed by the defendants under Order 7 Rule 11 C.P.C. for
rejection of the plaint.  
They did not make any counter claim in the suit nor
did they file any suit for reference of the matter to arbitration.  
Therefore,
the order passed by the trial Court, referring the matter to arbitration cannot
be sustained in law.  
The termination of the suit does not accord with the
procedure prescribed under C.P.C.  
A decree could not have been passed outside the prayer in the suits.
        Now comes the question pertaining to temporary injunctions.
It is not in
dispute that the plaintiffs are in possession and enjoyment of the property.  As a matter of fact, the defendants wanted them to vacate the premises.  Till the question raised in the suit is decided, they are entitled to be in possession, subject however to payment of rents.
        The objection raised by the defendants as to the maintainability of the
C.M.As., on the ground that the suits themselves stood terminated cannot be
countenanced.  
The order passed by the trial Court dismissing the applications
filed under Order 39 Rules 1 and 2 C.P.C. on the sole ground that the suits
stood terminated, on account of reference of the matter to arbitration cannot be
accepted.  
In G.Ramegowda vs. Special Land Acquisition Officer, Banglore1,
the
Hon'ble Supreme Court held that the orders of this category are 'dependant' in nature and the challenge thereto cannot be rejected, on the ground that the suit itself stood terminated.  That was a case, in which the delay in filing of appeal was condoned and the effected party challenged the order passed by the
Court condoning the delay.  
Even while the proceedings, in which the order condoning delay was challenged, were pending, the appeal that came to be numbered was disposed of.  
An objection was raised to the effect that once the appeal has been disposed of, it is not at all open to the parties to challenge
the order, through which the delay was condoned.  
This contention was negatived and the Hon'ble Supreme Court treated such appeals as 'dependant' upon the order, condoning the delay being sustained, whenever challenged.  The same situation obtains in this case.
        Hence, the C.R.Ps. are allowed and the orders under revisions are set
aside. 
The trial Court shall decide the matter on merits, if necessary by
framing a preliminary issue as to the maintainability of the suits.
        The C.M.As. are also allowed and the orders passed by the trial Court
dismissing the applications filed under Order 39 Rules 1 and 2 C.P.C. are set
aside.  
As a result, the applications filed under Order 39 Rules 1 and 2 C.P.C.
in the respective suits are allowed and the respective defendants are restrained
from interfering with the possession of the plaintiffs or evicting them from the
suit schedule premises, subject, however, to the condition that the rent shall
be paid with enhancement at 10% over and above what is provided for under the
lease deeds from January 2013 onwards.  
The difference of rent, if any in, this
behalf, shall be paid within four (4) weeks from today. 
The payment of extra amount shall be subject to the outcome of the suits.
        The miscellaneous petitions filed in this C.M.As and C.R.Ps. shall also
stand disposed of.  There shall be no order as to costs.
_______________________  
L. NARASIMHA REDDY, J    
_______________________  
K.G.SHANKAR, J  
Dt:.04.2013

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