Arbitration Can't Be Inferred From Parties' Conduct Alone, Calcutta High Court Dismisses S. 8 Application Due To Non-Renewal Of Original Agreement

Brief Facts:

Mr Sharad Goenka (“Defendant”) entered into a monthly tenancy agreement in 2006 with the original landlady for the premises in question. The said agreement was valid for 5 years. Two incidental agreements regarding the tenancy were also signed along with the main agreement. All these agreements contained an arbitration clause to refer any dispute to arbitration. The original lady passed away in 2012 and left behind her legal heir Joy Mitra who also passed away 6 years later. Thereafter, Mr Tarit Mitra (“Plaintiff”) took ownership of the premises as the subsequent legal heir. He terminated the tenancy agreement of the Defendant by sending a notice under Section 106 of the Transfer of Property Act, 1882. The Defendant refused to vacate the premises. Therefore, the Plaintiff filed a suit for the recovery of possession in the High Court of Calcutta (“High Court”).

In response, the Defendant filed an application under Section 8 of the Arbitration and Conciliation Act (“the Act”) praying for referring the dispute to arbitration. He contended that the tenancy and its incidental agreements had a valid arbitration clause, and the subject matter was arbitrable. On the other hand, the Defendant contested the existence of an arbitration agreement/clause and subjected himself to the jurisdiction of the Civil Court, thereby, negating the applicability of the Act of 1996.

Observations by the High Court:

The High Court found that a tenancy was created based on an agreement dated January 27, 2006, by the predecessor-in-interest of the Plaintiff. The original tenancy agreement, along with two other incidental agreements, contained an arbitration clause. However, all agreements expired after five years. Despite the expiration, the tenancy continued under different successors, including the present Plaintiffs, with rent increases, but without any renewed agreements.

The High Court further noted that there was no explicit agreement showing that disputes related to tenancies should be resolved through arbitration. Additionally, the other two incidental agreements were not renewed, and there was no written indication that disputes between the parties should be referred to arbitration, as required by Section 7 of the Arbitration and Conciliation Act, 1996. It emphasized that while a tenancy may be established by conduct, arbitration cannot be inferred from the parties' conduct alone. The original agreement had a clause stating that disputes under the tenancy agreement should be referred to arbitration, but as the tenancy was renewed and novated, the parties were not in agreement regarding the applicability of the arbitration clause.

Therefore, it was concluded that there existed no arbitration agreement within the meaning of Section 7 of the Act. The application filed by the Defendant under Section 8 of the Act was dismissed. A next date of hearing was assigned to proceed with the suit for the recovery of possession.

Case Title: Tarit Mitra and Anr. vs Sharad Goenka

Case No.: IA No. GA/1/2022 and IA No. GA/2/2022 in CS/19/2022

Advocate for the Plaintiff: Mr Sakya Sen, Mr Sukrit Mukerjee and Ms Somali Bhattacharya

Advocate for the Defendant: Mr Mainak Bose, Mr Naresh Balodia and Mr Pallav Chaoudhury

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