Eviction Order Under Public Premises Act Doesn't Bar Arbitration For Contractual Disputes : Supreme Court

The Supreme Court observed that an eviction order passed by the Estate Officer under the Public Premises Act would not come in the way while invoking the arbitration clause upon filing an application under Section 11(6) of the Arbitration & Conciliation Act, 1996 (“Arbitration Act”) for appointment of an arbitrator to decide contractual disputes.

The bench comprising Justice PS Narasimha and Justice Sandeep Mehta observed that when the agreement entered between the parties specifically contains an arbitration clause saying that the dispute arising out of an agreement (especially renewal of the agreement) would be resolved by the arbitration then the order of the estate officer under the Public Premises Act ejecting the party being in unauthorized possession after the expiry of the agreement would not restrain the dispossessed party to invoke the arbitration clause to decide the dispute arising out of the agreement.

This was the case where the respondent availed the warehousing facility from the appellant to keep its goods in the appellant's warehouse. An agreement was entered between them containing the relevant clauses including the clause to invoke arbitration in the event of occurrence of any dispute between the parties related to the terms of the agreement.

The respondent sought renewal of the agreement after the validity of the agreement expired. However, the appellant rejected the plea for renewal of the agreement on the grounds of non-payment of renewed warehousing facility fees.

Since the dispute pertained to the non-renewal of the agreement by the appellant because of the non-payment of the revised fees during the subsistence of the agreement, therefore, the respondent considering the dispute to be arising out of the agreement invoked the arbitration clause and filed an application under Section 11(6) of the Arbitration Act for the appointment of the arbitrator.

The High Court while exercising powers under Section 11(6) referred the dispute to the arbitration because there exists a valid arbitration clause, and the dispute could be well settled by the arbitrator in arbitration proceedings. Following this, the appellant/warehousing company approached the Supreme Court protesting against the referral of the dispute to the arbitration.

Affirming the High Court's decision, the judgment authored by Justice PS Narasimha framed a question of whether the provision of the Public Premises Act overrides the provisions of the Arbitration Act.

Answering in negative, the Court observed as follows:

“This submission has to fail. The reasons are simple and straight forward. The dispute that is raised in the Section 11 application relate to promises and reciprocal promises arising out of the agreement dated 26.09.2012. The right of renewal as well as the legality and propriety of the enhanced demand arose during the subsistence of the agreement. It will be on the interpretation, construction and the obligations arising out of the agreement that the respondent's claim rests. On the other hand, The Public Premises Act authorises the ejectment of a tenant in unauthorised occupation of public premises and for consequential directions. The original lease as it were, validly subsisted till 11.09.2015 and the dispute between the parties related to the period commencing from 12.09.2012 to 11.09.2015, when the lease expired. The Public Premises Act would not even cast a shadow on this period. In so far as the dispute relating to this right of renewal is concerned, it depends on the terms of the agreement. The Public Premises Act neither bars nor overlaps with the scope and ambit of proceedings that were initiated under the Arbitration and Conciliation Act.”

The Court observed that the High Court didn't commit an error while referring the dispute to the arbitration considering the fact that the dispute so arose with respect to the revision of the storage charges and renewal of the agreement was based on the construction of the agreement itself.

“These two disputes will undoubtedly arise out of the agreement between the parties and the resolution of such disputes is clearly covered by the arbitration clause. After the recent decision of this court in SBI General Insurance Co. v. Krish Spinning the remit of the referral court to consider an application under Section 11(6) is clear and unambiguous. We need to just examine the existence of an arbitration agreement.”, the court observed.

“For the reasons stated above, we have no hesitation in rejecting the petition and we further hold that the appellant must bear the costs for this unnecessary litigation which we quantify at Rs. 50,000/-.”, the court held.

Accordingly, the appeal was dismissed.

Appearances:

For Petitioner(s) Mr. Ashish Kumar Tiwari, AOR Mr. Anurag Tiwari, Adv. Mr. Sahib Patel, Adv.

For Respondent(s) Mr. B.K.Choudhary, Adv. Mr. S. Balachander, Adv. Mr. Rameshwar Prasad Goyal, AOR

Case Title: CENTRAL WAREHOUSING CORPORATION & ANR. VERSUS M/S SIDHARTHA TILES AND SANITARY PVT. LTD., C.A. No. 011723 / 2024

Citation : 2024 LiveLaw (SC) 822

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