Disputes Exceeding Rent Control Act Threshold Are Arbitrable If Lease Agreement Includes Arbitration Clause: Calcutta High Court

Further, the bench held that in a petition filed under Section 11 of the Arbitration and Conciliation Act, 1996, the court is not permitted to examine the merits of the disputes between the parties.

Brief Facts:

The matter pertained to a petition filed under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of the arbitrator in the High Court. Sagar Jagdish Daryani (Respondent) requested an adjournment and sought a reference to mediation. However, Tapan Kumar Samaddar (Petitioner) strongly opposed the request and argued that previous attempts at mediation and settlement failed. Acting on instructions, the Petitioner expressed a clear preference for arbitration and insisted that the matter be referred to that process instead of further mediation.

It was further noted that, on September 6, 2024, the counsel for Respondent indicated that he would seek instructions regarding his engagement on behalf of Respondent no. 2. Despite this, no clear decision was communicated, leading the Petitioner to argue that no further adjournments should be granted. Given the Petitioner's firm stance against further mediation, the High Court observed that it could not compel the petitioner to participate in a mediatory process, particularly when past efforts had proven unsuccessful. Therefore, the Court proceeded to hear the application under Section 11 of the Arbitration Act on its merits.

Observations by the High Court:

The High Court noted that the Petitioner sought a composite reference to arbitration based on two interconnected agreements: a lease agreement and an amenities agreement. The dispute arose from the monthly payments required to be made by the Respondent, which exceed the statutory limit for matters falling within the scope of the West Bengal Premises Tenancy Act, 1997. This Act is a special statute governing tenancy disputes in West Bengal and designates specific forums for such matters. However, given that the composite amount payable by the Respondent is beyond the ceiling specified under the Rent Control Act, the High Court observed that the matter lies outside the purview of the Rent Control Act and was thus arbitrable.

Upon a prima facie examination, the High Court noted that the two agreements were inseparably linked. It held that the total amount payable by the Respondent for the enjoyment of the property must, as per existing legal provisions, be considered as the rent or occupational charge. As this amount exceeded the statutory threshold, the High Court noted that the dispute can't be governed by the Rent Control Act. Therefore, it held that the matter does not fall within the jurisdiction of the forums established under that special law.

The High Court further reasoned that since the lease agreement contained an arbitration clause, and the amenities agreement stipulated in Clause 7 that its provisions should be read in conjunction with the lease agreement, the two agreements must be treated as one composite arrangement. The lease agreement was described in the amenities agreement as the "main agreement." Thus, the High Court held that any disputes arising out of both agreements must be referred to arbitration under the terms set out in the lease agreement.

The respondent raised several objections questioning the merits of the Petitioner's claims. However, the High Court held that under Section 11 of the Arbitration Act it is not within the court's jurisdiction at this stage to delve into the merits of the dispute. It held that the role of the Section 11 court is limited to determining whether there is a valid arbitration agreement between the parties and whether the matter in question is arbitrable.

Consequently, the High Court allowed the petition and appointed Mr. Tanmoy Mukherjee, a member of the Bar Association, as the sole arbitrator to resolve the disputes between the parties.

Case Title: Tapan Kumar Samaddar Vs Sagar Jagdish Daryani And Anr.

Case Number: AP/163/2024

Advocate for the Petitioner: Ms. Meenakshi Manot, Adv. Ms. Shreya Choudhary, Adv. …for the petitioner

Advocate for the Respondent: Mr. Raunak Satpathy, Adv. …for the respondents

Date of Judgment: 10th September, 2024

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