INTERNATIONAL AMUSEMENT LIMITED Vs. INDIA TRADE PROMOTION ORGANIZATION & ANR
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 11474 of 2014, Judgment Date: Dec 17, 2014
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.11474 OF 2014
(Arising Out of SLP (C) No. 13982 of 2007)
International Amusement Limited .........APPELLANT
Vs.
India Trade Promotion
Organisation & Anr. .........RESPONDENTS
With
CIVIL APPEAL NO.11475 OF 2014
(Arising Out of SLP (C) No. 13983 of 2007)
J U D G M E N T
V.GOPALA GOWDA, J.
Leave granted.
These appeals are directed by the appellant against the common impugned
judgment and order dated 16.07.2007 passed in writ petition (c) No. 2015 of
2001 and C.M. (M) No.553/2007 by the High Court of Delhi, urging various
facts and legal grounds and raising two substantial questions of law which
read thus:-
Whether the arbitration proceedings can be continued between the
International Amusement Limited and the India Trade Promotion Organisation?
b) Whether the Estate Officer appointed as Arbitrator is the correct forum?
Necessary brief facts are stated hereunder with a view to find out whether
the questions of law framed in these appeals would arise for our
consideration.
The appellant herein was running an amusement park in Pragati Maidan, New
Delhi since the year 1984, which was well known as "Appu Ghar". The land
for the purpose was initially allotted to the appellant by India Trade
Promotion Organisation (for short 'the ITPO) on licence basis as the lease
between the Central Government and the ITPO was still pending and as such
permanent allotment of the land could not be made in favour of the
appellant. Only as an administrative measure, the license agreements were
entered into between the appellant and the ITPO. The appellant claimed that
it was the permanent allottee of the land for running the amusement park on
the similar lines as were allotted in favour of the Statutory
Corporations/Instrumentalities of the State and Central Government. It was
only on the assurance of the Land & Development Office (for short "the
L&DO"), Ministry of Urban Development and ITPO that the appellant made huge
amount of investment for establishing and running "Appu Ghar". The last
agreement entered into between the parties was on 6.11.1995. In the said
agreement, arbitration clauses 27 and 28 were incorporated, which are
extracted hereunder :-
"27. The licensed premises are public premises as defined in the Public
Premises (Eviction of Unauthorised Occupants) Act, 1971 and fall within the
jurisdiction of the Estate Officer, Pragati Maidan.
28. In case of any dispute arising out of or in connection with this
agreement the disputes shall be referred to the sole arbitration of the
Chairman, India Trade Promotion Organisation or his nominee whose
decision/award shall be final, conclusive and binding on the parties.
Application for reference to arbitration shall be made by either party
within two months of arising of the dispute."
The case of the appellant is that it being a permanent allottee of the land
at Pragati Maidan, it had made huge investments for opening Water Park, in
order to provide additional amusement facilities to the public at large.
The ITPO being aware of the permanent status of the appellant in respect of
the land as well as the factum of huge investments made by it upon the same
towards establishing the Water Park, called upon the appellant to vacate
the premises vide letter dated 02.09.1999. The appellant has raised various
disputes, claims and counter claims against the ITPO.
Immediately after the notice was received by the appellant, it submitted a
detailed representation to ITPO with a request to renew the lease of the
land for further period. Being unsuccessful, the appellant commenced
proceedings under the Arbitration and Conciliation Act, 1996 (for short
"the Arbitration Act") invoking its right under clause 28 of the agreement
referred to supra. The arbitration notice dated 11.11.1999 was issued to
the ITPO invoking the provisions of clause 28 of the aforesaid licence
agreement and filed an application under Section 8 of the Arbitration Act
before the Estate Officer for referring the matter for arbitration. On
18.11.1999 ITPO issued notice of eviction under Section 4A of the Public
Premises (Eviction of Unauthorized Occupants) Act, 1971 (for short "the
P.P. Act") to the appellant to evict from the land of its unauthorised
occupation. The application for arbitration filed by the appellant was
rejected by the Estate Officer vide his order dated 28.3.2000 on the ground
that the Estate Officer exercises his jurisdiction as provided under the
provisions of the P.P. Act. It was further stated that it is an admitted
case that the premises in Pragati Maidan for running Appu Ghar was given to
the appellant on licence basis and on expiry of the licence period the
appellant becomes an unauthorised occupant as defined under Section 2(g)
of the P.P. Act and therefore, it was required to vacate the premises and
hand over the same to ITPO, hence, the appellant cannot take up the plea
that it was a permanent allottee of the premises involved in this case and
that there was no dispute at all between the parties, which could be
agitated as raised by the appellant.
Being aggrieved by the order of Estate Officer, the appellant filed W.P.
(C) No.1425 of 2000 before the Delhi High Court questioning the correctness
of the order passed by him. Thereafter, on 08.05.2000, the appellant filed
an application being A.A. No.111/2000 under Section 11(6) and petition OMP
No.63/2000 under Section 9 of the Arbitration Act before the Chief Justice
of Delhi High Court. The learned single Judge, who is the nominee of the
learned Chief Justice, vide his order dated 23.01.2001 allowed the
application by appointing an arbitrator for deciding the disputes between
the parties through the process of arbitration.
Aggrieved by the said order, the ITPO filed Writ Petition (C) No.2015 of
2001 before the Division Bench of Delhi High Court, challenging the
correctness of the order of appointment of the arbitrator by the High
Court. On 12.04.2001, the High Court stayed the arbitration proceeding
which has been in force till the disposal of the writ petition.
During the pendency of the above matter, some part of "Appu Ghar" land was
required by Delhi Metro Rail Corporation for construction of Pragati Maidan
Metro Station which was handed over by the appellant to the ITPO.
Thereafter, the land of Appu Ghar was resumed by the L&DO and the same was
allotted to the Supreme Court Registry for its expansion plan.
The High Court vide its common order dated 16.7.2007 allowed Writ Petition
(C)No. 2015 of 2001 filed by the ITPO holding that the matters enumerated
under Section 15 of the P.P. Act cannot be referred to arbitration for
adjudication for arbitrator. The application C.M. (M) No. 553 of 2007 filed
by the appellant was also dismissed. Hence, these appeals.
It is contended by Mrs. Pratibha M. Singh, the learned senior counsel for
the appellant that the legal position prevailing with respect to Section 16
of the Arbitration Act, was that any directions qua-jurisdiction ought to
be raised before the Arbitrator and the same cannot be adjudicated under
Section 11 of the Arbitration Act by the Judge who is a designate of the
Chief Justice under Sections 11(6) and 11(7) of the Arbitration Act as per
the law laid down by this Court in its judgments in Konkan Railway
Corporation. Ltd. and Ors. v. Mehul Construction Co.[1] and Konkan Railway
Corpn. Ltd. and Anr. v. Rani Construction Pvt. Ltd.[2]
Further reliance was placed by the learned senior counsel upon the
Constitution Bench decision of this Court in SBP & Co. v. Patel Engineering
Limited and Anr.[3], wherein this Court has succinctly held that power
under Section 11(6) of the Arbitration Act is not an administrative power
of either the Chief Justice of the High Court or his designate but a
judicial power. The said position of law was re-affirmed and re-emphasized
by this Court in Maharshi Dayanand University and Anr. v. Anand Coop. L/C
Society Ltd. and Anr.[4] and again in the case of S.N. Prasad, Hitek
Industries (Bihar) Ltd. v. Monnet Finance Ltd. and Ors.[5] in support of
the above said proposition of law. Further reliance was placed by the
learned senior counsel on behalf of appellant on another judgment in the
case of Andhra Pradesh Tourism Development Corpn. Ltd. and Anr. v. Pampa
Hotels Ltd.[6]
It is further contended by the learned senior counsel that under Section 15
of the P.P. Act, the bar of jurisdiction applies only to a Court and
placed reliance on the judgments in the cases of Kamal Pushp Enterprises v.
D.R. Construction Company[7], Firm Ashok Traders & Anr. v. Gurumukh Das
Saluja & Ors.[8] and Ashoka Marketing Ltd. & Anr. v. Punjab National Bank &
Ors.[9]
Without prejudice to the above legal contentions, the learned senior
counsel also contended that though in general, licences may be governed by
the P.P. Act, in the case on hand, the agreement and the nature of
relationship between the parties was not that of a licensee and licensor,
as it is evident from the various documents produced on record by the
appellant. There are several documents spanning from 1980s to 1997 which
reflect that the Government's intention was always to raise the appellant
as permanent allottee of the land. However, for various reasons and
subsequent events, the permanent allotment of land was not made despite the
huge investments made by the appellant and the appellant was forced to
vacate the premises. It was under these circumstances, the Government was
conscious of the different nature of the relationship of parties and the
arbitration clause was incorporated in the license agreement.
On the other hand, Mr. Ravi Sikri, the learned senior counsel appearing on
behalf of the ITPO and Mrs. M. Diwan, learned counsel on behalf of Union of
India rebutted the above said contentions urged on behalf of the appellant
contending that arbitration clause 28 in the agreement does not deal with
the arbitration under the provisions of the Arbitration Act. The learned
senior counsel contended that the Division Bench of Delhi High Court after
examining the provisions of Section 5 and in the light of Section 2(3) of
the Arbitration Act, held that Section 2(3) protects the existing laws,
both common law as well as statutory law, under which some disputes cannot
be made subject matter of arbitration. Further, it is urged that the
Division Bench of the High Court has rightly held that Section 15 read with
Sections 5 and 7 of the P.P. Act, confers exclusive jurisdiction on the
Estate Officer appointed under Section 3 of the P.P. Act, to deal with the
application that is filed by the ITPO to evict unauthorised occupants from
the public premises and pay the damages as provided under Sections 5 and 7
of the P.P. Act respectively. Further, Section 15 of the P.P. Act bars and
prohibits any court from entertaining any suit or proceeding for eviction
from the premises etc. as provided under clauses (a) to (e) of Section 15
and that the general power of the Court under Section 9 of the Code of
Civil Procedure, 1908 to entertain suit or proceedings is therefore ousted
if a dispute raised by the appellant falls in clauses (a) to (e) of Section
15 of the P.P. Act. It was further contended that the Division Bench of the
High Court rightly held that the provisions of Sections 5 and 7 of the P.P.
Act empower the Estate Officer appointed under Section 3 of the P.P. Act
to deal with applications that will be filed by the respondent-ITPO for
eviction of unauthorised occupation and for payment of rent and damages in
respect of the public premises against the unauthorised occupants. Sections
5 and 7 of the P.P. Act conferred exclusive jurisdiction upon the Estate
Officer and makes it very clear that he alone has sole and exclusive
jurisdiction to decide such applications of the ITPO in respect of the
dispute regarding public premises. The said jurisdiction conferred upon the
Estate Officer by the statute cannot be taken away by a contract between
the parties by incorporating arbitration clause in the agreement or made
subject matter of any dispute in relation to the public premises which will
be in occupation of the licensee for reference before an arbitrator to
arbitrate the same. It cannot be waiver of statutory provisions of the P.P.
Act. The contract between the parties must be within the legal framework
and parties cannot contract out of the statute. Further, it was contended
that the Estate Officer having exclusive jurisdiction is not arbitrable and
parties by a contract cannot agree to refer the matters in respect of which
jurisdiction has been conferred upon the Estate Officer. Therefore, the
arbitrability of claims of the appellant covered under Sections 5 and 7 of
the P.P. Act, is excluded. To arrive at the said conclusion, the Division
Bench of the High Court rightly placed reliance upon the Constitution Bench
judgment of this Court in the case of Ashoka Marketing Ltd. (supra),
wherein the legal question that arose was as to whether the Rent Control
Act,1995, which is also a Special Act will override the provisions of the
P.P. Act. After interpreting the relevant provisions of the Act, the
Constitution Bench of this Court in the above case has held that the P.P.
Act, is a special statute relating to eviction of unauthorised occupants
from public premises and therefore, the same will prevail over the Rent
Control Act. In the said case it was held that the 1971 enactment did away
with the option of the parties and conferred exclusive jurisdiction on the
Estate Officer in relation to the public premises. The power and
jurisdiction of a civil court to adjudicate matters enumerated under
Section 15 of P.P. Act was withdrawn.
Further, reliance was placed by the learned senior counsel for the
respondents upon the judgment of this Court in Haryana Telecom Limited v.
Sterlite Industries (India) Limited[10], wherein, this Court has referred
to the provisions of the Companies Act and held that power to wind up a
company is conferred on the Company Court. The said power cannot be subject
matter of arbitration.
In view of the above rival legal contentions urged on behalf of the
parties, to answer the aforesaid substantial questions of law, it is
necessary for us to examine arbitration clause 28 of the license agreement
dated 06.11.1995 entered between the parties, which has been extracted in
the earlier portion of this judgment.
This Court must accept the contention of the learned senior counsel on
behalf of the ITPO that the said clause in the licence agreement is not an
arbitration agreement between the parties for the reasons discussed below.
The three Judge Bench decision of this Court (of which two of us were
members) in P. Dasaratharama Reddy Complex v. Government of Karnataka &
Anr.[11], while examining a similar clause of an arbitration agreement,
after careful consideration and interpretation of the clause, has held
that in all the matters of dispute arising out of the agreement regarding
quality of materials and work, etc., the decision of the Board of Directors
of the Nagarika Yogbakashema Mathu Gruha Nirmana Sahakara Sangha, shall be
final and binding on the part of the Contractor. Further, the case of
Mysore Construction Company v. Karnataka Power Corporation Ltd. & Ors.[12]
was discussed in P. Dasaratharama Reddy (supra) by this Court, at para 14,
wherein, the Designated Judge has referred to the passage from Russell, on
Arbitration (19th Edition, page 59) and the other judgments of this Court
in K.K. Modi v. K.N. Modi and Ors., Chief Conservator of Forests, Rewa v.
Ratan Singh Hans[13], Rukmanibai Gupta v. The Collector, Jabalpur[14],
State of Uttar Pradesh v. Tipper Chand[15], State of Orissa v. Damodar
Das[16], Bharat Bhushan Bansal v. Uttar Pradesh Small Industries
Corporation Ltd., Kanpur[17] and observed that the decisions in the
abovementioned cases make it clear by laying down the conditions, when an
agreement or a clause in the agreement can be construed as an arbitration
agreement between the parties.
Further, at paragraph 16 of P. Dasaratharama Reddy (supra), the distinction
between an expert determination and arbitration between the parties has
been spelt out as per Russell, on Arbitration (21st Edn.) in the following
words:-
"16......Many cases have been fought over whether a contract's chosen form
of dispute resolution is expert determination or arbitration. This is a
matter of construction of the contract, which involves an objective enquiry
into the intentions of the parties. First, there are the express words of
the disputes clause. If specific words such as 'arbitrator', 'Arbitral
Tribunal', 'arbitration' or the formula 'as an expert and not as an
arbitrator' are used to describe the manner in which the dispute resolver
is to act, they are likely to be persuasive although not always
conclusive.... Where there is no express wording, the court will refer to
certain guidelines. Of these, the most important used to be, whether there
was an 'issue' between the parties such as the value of an asset on which
they had not taken defined positions, in which case the procedure was
[pic]held to be expert determination; or a 'formulated dispute' between the
parties where defined positions had been taken, in which case the procedure
was held to be an arbitration. This imprecise concept is still being relied
on. It is unsatisfactory because some parties to contract deliberately
choose expert determination for dispute resolution. The next guideline is
the judicial function of an Arbitral Tribunal as opposed to the expertise
of the expert.... An Arbitral Tribunal arrives at its decision on the
evidence and submissions of the parties and must apply the law or if the
parties agree, on other consideration; an expert, unless it is agreed
otherwise, makes his own enquiries, applies his own expertise and decides
on his own expert opinion...."
It was further held that a clause substantially similar to the clauses
referred to in P. Dasaratharama Reddy (supra) was interpreted by the three
Judge Bench of this Court in the State of Uttar Pradesh v. Tipper Chand
(supra) wherein paras 2 and 3 of the said judgment contain the reasons for
holding that the clause in the agreement cannot be construed as an
arbitration clause.
At para 18 in P. Dasaratharama Reddy (supra), the case of State of
Maharashtra v. Ranjeet Construction[18] has been discussed wherein a two
Judge Bench of this Court interpreted clause 30 of the agreement entered
into between the parties, which is almost identical to the clauses under
consideration, relying upon the judgment in the Tipper Chand (supra), and
held that clause 30 cannot be relied upon by the parties for seeking
reference of any dispute to an Arbitrator arising out of the contract.
At para 17 in the P. Dasaratharama Reddy Complex case (supra), the case of
State of Orissa v. Damodar Das (supra) has also been examined, wherein the
three Judge Bench of this Court interpreted clause 21 of the contract
entered into between the parties. In the said case, this Court referred to
clause 25 of the agreement, relied upon the judgment in State of U.P. v.
Tipper Chand (supra) and held that the said clause cannot be interpreted
for resolution of the dispute by an Arbitrator, the case fell for
consideration of this Court in the case of State of Uttar Pradesh v. Tipper
Chand (supra) which was relied upon in the said case is extracted at para
20 of the P. Dasaratharama Reddy case (supra) as under:-
"20......(10)...... A reading of the above clause in the contract as a
conjoint whole, would give us an indication that during the progress of the
work or after the completion or the sooner determination thereof of the
contract, the Public Health Engineer has been empowered to decide all
questions relating to the meaning of the specifications, drawings,
instructions hereinbefore mentioned and as to the quality of workmanship or
material used on the work or as to any other question, claim, right, matter
or thing whatsoever in any way arising out of, or relating to, the contract
drawings, specifications, estimates, instructions, orders or those
conditions or otherwise concerning the works or the execution or failure to
execute the same has been entrusted to the Public Health Engineer and his
decision shall be final. In other words, he is nominated only to decide the
questions arising in the quality of the work or any other matters
enumerated hereinbefore and his decision shall be final and bind the
contractor. A clause in the contract cannot be split into two parts so as
to consider one part to give rise to difference or dispute and another part
relating to execution of work, its workmanship, etc. It is settled now that
a clause in the contract must be read as a whole. If the construction
suggested by the respondent is given effect then the decision of the Public
Health Engineer would become final and it is not even necessary to have it
made rule of the court under the Arbitration Act. It [pic]would be
hazardous to the claim of a contractor to give such instruction and give
power to the Public Health Engineer to make any dispute final and binding
on the contractor. A careful reading of the clause in the contract would
give us an indication that the Public Health Engineer is empowered to
decide all the questions enumerated therein other than any disputes or
differences that have arisen between the contractor and the Government. But
for Clause 25, there is no other contract to refer any dispute or
difference to an arbitrator named or otherwise."
Further, at paragraph 21 of the case of P. Dasaratharama Reddy (supra) the
case of K.K. Modi v. K.N. Modi (supra) fell for consideration, wherein this
Court interpreted clause 9 of the Memorandum of Understanding that was
signed by the two groups of Modi family. The relevant portion from the said
judgment with regard to interpretation of Clause 9 of the Memorandum of
Understanding between the parties is extracted below:-
"9. Implementation will be done in consultation with the financial
institutions. For all disputes, clarifications, etc. in respect of
implementation of this agreement, the same shall be referred to the
Chairman, IFCI or his nominees whose decisions will be final and binding on
both the groups."
Further, in the decision of P. Dasaratharama Reddy at para 30 referred to
the case of Mallikarjun v. Gulbarga University[19] wherein it was held that
the decision of the Superintending Engineer of Gulbarga Circle was final,
conclusive and binding on all parties to the contract upon all questions
relating to the meaning of the specifications, designs etc. whether arising
during the progress of the work or after the completion or abandonment
thereof in case of dispute arising between the contractor and the Gulbarga
University. The case of Punjab State v. Dina Nath[20] was also referred
supporting the same view in the case of P. Dasaratharama Reddy (supra).
In view of the aforesaid decisions and the law laid down by this Court in
catena of cases referred to supra which are reiterated in the case of P.
Dasaratharama Reddy (supra) we are of the view that the clause 28 in the
agreement which is referred to in the case on hand is not an arbitration
clause. Therefore, the appointment of an Arbitrator by the nominee of the
Chief Justice has been rightly set aside in the impugned judgment by the
Division Bench of the Delhi High Court. The law laid down by this Court in
the above referred judgments, after interpretation of relevant arbitration
clauses in the agreement in those cases, are aptly applicable to the fact
situation on hand and we answer the questions of law framed by this Court
against the appellant and in favour of the ITPO and Union of India.
The other proceedings involved in this case, if any, pending under
the provisions of the P.P. Act before the Estate Officer, the same shall be
continued by him.
Accordingly, the civil appeals are dismissed as there is no merit for
consideration to interfere with the impugned judgment and order. No costs.
.....................................................................J.
[V. GOPALA GOWDA]
.....................................................................J.
[C. NAGAPPAN]
New Delhi, December 17, 2014
ITEM NO.1A-For JUDGMENT COURT NO.11 SECTION XIV
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
C.A. No. ......../2014 arising from SLP (C) No(s). 13982/2007
INTERNATIONAL AMUSEMENT LIMITED Petitioner(s)
VERSUS
INDIA TRADE PROMOTION ORGANIZATION & ANR Respondent(s)
WITH
C.A. No. ......../2014 arising from SLP(C) No. 13983/2007
Date : 17/12/2014 These appeals were called on for pronouncement of
JUDGMENT today.
For Petitioner(s) Mr. Abhinav Mukerji,Adv.
For Respondent(s) Mr. A.K. Pandey, Adv.
Mr. K.V. Upadhyay, Adv.
Ms. Madhu Sikri,Adv.
Mr. Vishnu B. Saharya, Adv.
Mr. Viresh B. Saharya, Adv.
M/s Saharya & Co.
M/s. S. Narain & Co.
Ms. Sushma Suri,Adv.
Hon'ble Mr. Justice V.Gopala Gowda pronounced the judgment of the
Bench comprising His Lordship and Hon'ble Mr. Justice C. Nagappan.
Leave granted.
The appeals are dismissed in terms of the signed reportable
judgment.
(VINOD KR.JHA) (MALA KUMARI SHARMA)
COURT MASTER COURT MASTER
(Signed Reportable judgment is placed on the file)
-----------------------
[1] (2000) 7 SCC 201
[2] (2002) 2 SCC 388
[3] (2005) 8 SCC 618
[4] (2007) 5 SCC 295
[5] (2011) 1 SCC 320
[6] (2010) 5 SCC 425
[7] (2000) 6 SCC 659
[8] (2004) 3 SCC 155
[9] (1990) 4 SCC 406
[10] (1999) 5 SCC 688
[11] (2014) 2 SCC 201
[12] ILR 2000 KAR 4953
[13] AIR 1967 SC 166
[14] (1980) 4 SCC 556
[15] (1980) 2 SCC 341
[16] (1996) 2 SCC 216
[17] (1992) 2 SCC 166
[18] AIR 1986 Bom 76
[19] (2004) 1 SCC 372
[20] (2007) 5 SCC 28