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Synopsis

The Supreme Court has said that the Public Premises Act neither bars nor overlaps with the scope and ambit of proceedings that are initiated under the Arbitration and Conciliation Act.

In a judgment on October 21, 2024, a bench of Justices P S Narasimha and Sandeep Mehta dismissed a plea by public sector Central Warehousing Corporation and another with Rs 50,000 cost for unnecessary litigation.

After the recent decision in SBI General Insurance Co Ltd Vs Krish Spinning (2024), the bench said, 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 bench said.

The appellant raised a question whether the Public Premises Act, 1971 overrides the Arbitration and Conciliation Act, 1996. Another question was whether the High Court committed any error in appointing the arbitrator while exercising the jurisdiction under Section 11 of the Arbitration and Conciliation Act, 1996. 

"Having examined the matter in detail, it is clear that the said question does not arise in the facts and circumstances of the case. We are guided by the existence of the Arbitration Clause and the decision of this Court in SBI General Insurance Co Ltd Vs Krish Spinning (2024) which discussed the scope of referral court’s interference when a valid arbitration clause exists," the bench said.

The appellant was a statutory body under the Warehousing Corporations Act, 1962, and was under the administrative control of the Ministry of Consumer Affairs, Government of India. 

As it was providing warehousing facilities, the respondent, a company engaged in the business of trading ceramic tiles and sanitary ware, had approached the appellant for storage of its goods. The appellant agreed and provided a storage space of 1295 sq mtrs and possession of this space was handed over to the respondent on September 12, 2012, even before an agreement could be entered between the parties.

Even before the three-year expiry of the lease, the storage charges were revised on a pan India basis w.e.f. November 01, 2012. The revision of the storage charges was communicated to the respondent and, a demand for enhanced payment was raised. The appellant renewed the said demand subsequently too in 2013 and in 2014 and intimated that if the amount was not paid, it would be inferred that the respondent was not interested in retaining the facility. 

While the matter was pending, the storage charges were further revised in 2015 when the respondent was informed that the tariff will be at the rate of Rs 177 per sq mtr per month.

In turn, the respondent intimated the appellant that it was interested in continuing the facility but sought renewal of the 2012 agreement by also committing that any arrears due as per the original agreement would be cleared.

However, on September 16, 2015, the appellant rejected the request for renewal of the agreement and in turn raised a demand of Rs 16,10,004. In view of the fact that the respondent had not vacated the premises despite the lease’s expiry on September 11, 2015, the appellant invoked the provisions of the Public Premises (Eviction of Unauthorised Occupants) Act, 1971.

Even before the order of the Estate Officer under the Public Premises Act could be passed, the respondent vacated the premises on November 13, 2015. The Estate Officer anyway passed his order on December 31, 2015 holding that the respondent was in unauthorised possession only from September 11, 2015 (i.e. when the lease expired) to November 13, 2015 (when premises were vacated) and also directed payment of certain dues.

In this background, the respondent invoked arbitration by filing an application under Section 11(6) of the Act for the appointment of an arbitrator in view of a subsisting clause in the agreement.

The High Court considered the matter in detail and came to the conclusion that the claims made in the notice followed by the application under Section 11 were clearly covered by the arbitration clause. 

The appellant questioned the judgment and order passed by the High Court, referring the dispute to arbitration. 

Addressing the question whether the Public Premises Act, 1971 overrides the Arbitration and Conciliation Act, 1996, the bench said, "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 of 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, it pointed out.

"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 bench said.

With regard to a question whether the High Court committed any error in appointing the arbitrator while exercising the jurisdiction under Section 11, the bench pointed out, the revision of storage charges occurred during the subsistence of the contract and its legality and propriety will depend on the terms of the 2012 agreement.

"Similarly, the right of renewal will also be based on and a construct of the said agreement. 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," the bench said.

While dismissing the appeal, the court directed the arbitral tribunal to resume the proceedings, which was stayed on April 1, 2022 and to endeavour to deliver the award as expeditiously as possible.

Case Title: M/s Sidhartha Tiles & Sanitary Pvt Ltd