M/s. Suyosha Health Care P\it. Ltd v. 1. Sri.D. Muralidhar Rao S/o. D. Narayana Rao R/o. B-19

Judgment

6 <- THE HON'BLE SRT JUSTICE T. VINOD KUMAR AND THE HON'BtE SMT. JUSTICE P.SREE SUDHA Civil Miscellaneous Appeal No.56O ot 2022

JUDGMENT:(per Honbte Sri Justice T.Vinod Kuna1 This Clvil Miscellaneous Appeal is filed aggrieved by the order dt.26.02.2019 passed in I.A.No.1399 of 2018 in O.S.No.575 of 2016 on the file of XV Additional District and Sessions ludge-cum-Xv Additional Metropolitan Sessions Judge-cumJl Additional Family Judge, Ranga Reddy District, Kukatpally (for short, 'the Court below').

2. The appellant herein is the petitioner in the underlying interlocutory application and defendant No.3 in the suit, vide O.S.N0.575 of 2016. The 1't respondent herein has filed the subject suit, vide O.S.No.575 of 2016 as plaintiff, for the relief of declaration, injunction and recovery of arrears of rent in respect of suit schedule property.

3. For ease of reference, the pafties herein are referred to as per their position in the suit.

4. Briefly stated the case of the 3'd defendant is that he had taken the suit schedule property admeasuring 34,000 square feet consisting of small +\geund + four upper floors constructed on Plot No.7 I 2 admeasuring 1136 square yards situated in Sy.No.64, Sector II of HMDA, Techno Enclave, Madhapur Village, Serilingampally Mandal, Ranga Reddy District, on lease, from the plaintiff and the 2nd defendant in the suit under a deed of lease dt.08.08.2015 for a period of 15 years commencing from 01.10.2015; that the aforesaid deed of lease provides fcr resolving the disputes between the parties through mutual negotiations, failing which, such disputes are to be finally settled by arbitration in accordance with Arbitration and Conciliation Act, 1996 (for short, 'the Act,'); that for the aforesaid reason, the 3'd defendant has filed t-he underlying interlocutory application before the Court below under Section B of the Act; and that the Couft below, without considering the subject application in correct and proper perspective and withou: taking into account the existence oF arbitration clause in the lease agreement, has erroneously dismissed the same.

5. In support of its contention, the 3rd defendant has relied upon the decision of the Apex Court in Vinay Eknath Lad v,/s. Chiu Mao Chei.

6. Per centra, on behalf of the plaintiff, it is contended that he is the owner oF Plot of land admeasuring 1100 square yards having ' 12otsy zo scc rt,: I I I I I ,4 3 purchased the same for valuable consideration; that the plaintilf had entered into a development agreement with defendant Nos.1 and 2 for constructing the suit schedule property i.e. commercial complex; that certain disputes have arisen in relation to the agreement entered into by the plaintiff with defendant Nos.l and 2, in relation to sharing oF the suit schedule property; that the aForesaid suit schedule property was agreed to be let out to the 3'd defendant as a tenant under a deed of lease dt.08.08.2015; that inasmuch the said lease deed had not been registered, the same is not a validly executed deed; and that since, the 3'd defendant is not paying rent in respect of the suit schedule property to the plaintiff, a declaration had been sought against that the 3'd defendant being the tenant of the plaintiff, while seeking the main relief of permanent injunction against defendant Nos.1 and 2 reskaining them from interfering with the suit schedule property and from executing any nature of documents in respect of the suit property.

7. On behalf of plaintiff, it is also contended that there is no dispute with the 3d defendant in relation to implementation or enforcement of deed of lease dt.08.08.2015 which is not valid as proper stamp duty is not paid and is not registered under Section 17 of the Registration Act, for it to claim to be referred to arbitration in terms I , j I I 4 of covenants of the lease, in pafticular clause 9 thereof, as per dispute resolution mechanism. It is also contended by the plaintiff that after defendant lilos.l and 2 having failed in their effot to defeat the suit, by filing irterlocutory application claiming exrsten(:e of arbitration clause in the development agreement they had entered into with the plaintiff, which order stands affirmed up to the Apex Court, have now instigated the 3'd defendant to file the underlying interlocutory application l.,l delay the suit filed by him; and thus, the underlying interlocutory application as filed by the 3'd defenclant is a proxy litigation at tne behest of defendant Nos.1 and 2. B. It is further contended that the 3'd defendant did not file the underlying interlocutory application at the first instanr:e as provided under Section B ofthe Act and only as an afterthought, after a lapse of 2 years after the subject suit is filed by the plaintiff, had filed the underlying int()rlocutory application seeking to refer the dispute to arbitration, and as such, cannot be permitted, having taken part in the suit proceedings all through including filing a civil revision petition seeking stay of further proceedings in O.S.No.575 of 201(-:,

9. In suppo.t of his contention, the plaintiff has relied upon the judgment of the Delhi High Court in SPML Infra Limited v,/s. I I I I l I I i 1 I I I I I I2 5 Trisquare Switchgears Private Limited, wherein it was held that the expression "first statement on the substance of the dispute" is of wide import and it would take within its sweep any statement filed to join or raise issues regarding the substratum of the matter in dispute.

10. We have taken note of the respective contentions urged.

11. Though on behalf of the 3'd defendant as well as plaintiff elaborate arguments were advanced to support their contentions, the short point that fails for consideration is "as to whether the Court below was correct in rejecting the undertying intertocutory application flled by the .7d defendant in the suit claiming that the dispute is to be resolved by refering to arbitration as per dispute resolution mechanism agreed to between the parties in the lease deed."

12. In order to decide the aforesaid issue, it is necessary to refer to the deed of lease entered into by the plaintiff and 2nd defendant with the 3'd defendant agreeing to let out the suit schedule property to the 3'd defendant. Though the plaintilf in the suit had claimed that the said Iease deed being an unregistered one/ no rights have accrued or can be claimed, it is to be noted that the suit filed by the plaintifF was ' rno(couu.) arlz 2 and cM No.24865/2o22 Decided on 06.07.2022 5 mainly in relation to the development agreement for construction of a commercial complex entered into by the plaintiff with the 2''d defendant and disputes arising in relation thereto and not relating to the deed of lease dt.08.08.2015. Further, deficit stamp d.rty and non-registration of lease deed would not by itself is a bar to invoke arbitration clause contained therein, being a separate agreement.

13. Further, while the main dispute in the suit is between the plaintiff and defendant Nos.1 and 2, since the 3'd defendant has been inducted as a tenant into the suit schedule property, relief of declaration that the 3'd defendant is a tenant of the plaintiff had been sought for with a direction to the 3'd deFendant to pay arrears of rent to the plaintiff, Seeking the said relief by the plaintiff in the suit filed by him primarily against 1't and 2nd defendant by itself cannot be construed as dispute arising under the deed of lease for the 3'd defendant to claim that, such dispute is to be resolved by reference to arbitration in terms of covenants of deed oF lease it had entered into with plaintiff and 2nd defendant, being altogether an independent contract.

14. Further, if only the 3'd defendant had acted in terms of the deed \ of lease by iSying rents as agreed thereunder, without getting himself involved in the dispute between the plaintiff and defendant Nos.1 and 1 2 there could not have been any objection or hindrance for the 3'd defendant to enjoy the suit schedule property as a tenant. However, it appears that the 3'd respondent by taking sides is claiming disputes having arisen under the deed of lease for the parties to be referred to arbitration in terms of deed of lease dt.08.08.2015 after defendant Nos.1 and 2 having failed to secure an order under Section 8 of the Act in an application flled under development agreement.

15. Though on behalf of the 3'd defendant it was sought to be contended that the Couft below ought to have referred the dispute to arbitration, as provided under the deed of lease, by allowing the application filed under Section B of the Act, in order to appreciate the aforesaid contention, it would be appropriate to refer to Section B of the Act, reading as under: "Section 8. Power to refer parties to arbitration where there is an arbitration agreement. (1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so an the date of submittinq his first statement on the aoolies not late substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Couft or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists. T I I I 8 (2) The application referred to in sub-section (1) shall not be entertainr:d unless it is accompanied by the original arbitration agreement or a duly cetified copy thereof: IPrrvided that where the original arbitration aqreement or a certified copy thereof is not available with the party applyinq for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file slrch application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.l (3) I'iotwithstanding that an application has been made under sub- section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made."

16. A plain reading of Section 8 of the Act would show that an objection relating to continuation of a dispute in a Civil Court would have to be taken at the earliest point of time, and not after the Court proceeding fufther in the matter oF dispute. Though the plaintiff in the suit had claimed that the deed of lease entered into by him along with the 2n'r defendant with 3'd defendant, being not properly stamped and unregistered and invalid document, thereby not conferring any right or interest in favour of the 3'd defendant, the 3'd defendant on receiving notices in the suit ought to have brought to the notice of the Court the existence of dispute resolution mechanism under the deed of lease and I I t, I I ,z ./. thereby, requiring the Court to relegate the parties to resolve their dispute firstly through arbitration.

77. It is not shown to this Court of the 3'd defendant taking such a stand either by Rling interlocutory application or through written statement, in the suit filed by the plaintiff, to claim that the Court below having not considered the said plea.

18. That apart, as noted hereinabove, there is no dispute which can be said to have arisen in terms of the lease for the 3'd defendant to claim that the same is required to be resolved by arbitration, except the fact that by viftue of the suit filed by the plaintiff, a declaration has been sought to declare the 3'd defendant as tenant of the plaintiff which even if granted would not impact the enjoyment of the suit schedule property by the 3'd defendant as tenant from the commencement of the deed of lease till it is terminated in accordance with law.

19. Merely because the 3'd defendant is arrayed as one of the parties to the suit filed by the plaintiff, wherein an injunction had been sought against defendant Nos.l- and 2 in relation to the suit schedule property, the 3'd defendant cannot claim of a dispute arising or existence of dispute under the lease deed for him to approach the 10 Court and l file the underlying interlocutory application under Section B of the Act seeking reference of a non-existing dispute to arbitration.

20. it would also be worthwhile to note that the underlying interlocutorv application had been filed by the 3-d defendant in November, ;U 018, i.e. about two years after the plaintiff having filed the subject suit. In the meantime, defendant Nos.1 and 2 having Failed in their effort to get the dispute between the plaintiff and defendant Nos.1 and .l referred to arbitration, the underlying interlocutory application fi t:d by the 3'd defendant cannot be said as complying with the requirement of Section B of the Act of having been submitted "rof /ater than when submitting his tirst statement on the substance of the dispute. " 2t. It is also to be noted that what is necessary is to take an objection by bringing to the notice of the Court with regard to the existence of a dispute resolution mechanism, requiring the Court to relegate the parties to avail the remedy provided under the agreement and not proceerding by itself with the matter. It is not necessary to file a separate application under Section B of the Act.

22. In this regard, reference can be made to the decisions of the Delhi High Court in Sharad P, Jagtiani v/s. M/s. Edelweiss I I ,, I 11 Securities Limitef and Parasramka Hotdings Private Limited v/s. Ambience Private Limited.

23. The Delhi High Court in the case of Sharad P. Jagtiani (3 supra) dealing with the scope of Section B of the Act, observed in paras 14, 15, 16 and 17 as under: "14. We simply need to highlight the phrase 'not later than when submitttng his first statement on the substance of the dispule', in sub-Section (1) of Section B. The requirement is to bring to the notice of the Court at a point not later than when submitting the first statement on the substance oF the dispute that there exists an arbitration clause between the parties and that the subject matter oF the action brought before the Court by way of the suit falls within the ambit of the arbitration clause.

15. Section 8 does not specify the manner in which the parly has to submit its first statement on the substance of the dispute, and normally with respect to a suit, the first statement on the substance of the dispute by the defendant would be the written statement. Thus, if in the written statement filed it is brought to the notice of the Court that there exists an arbitration agreement between the parties which embraces the subject matter of the suit there would complete compliance with the mandate of the law and the Court would be obliged to refer the parties to arbitration if the plea in the written statement is made good.

16. On the facts of the instant case, it may be true that in the written statemgir{led a specific prayer has not been made to refer the r (2014) SCc Online Del4015 o varuu/oe/or rglzorg -1 I I 12 parties to arbitration, but we have highlighted hereinabove that in the written statemeni filed a preliminary objection has been taken that the suit is barred in view c,i the arbitration agreement. The written statement filed is with strings attached by challenging the maintainability of the suit in view of the arbitration clause and therefore in such circumstanc-e the said objection aken by Edelwe ss contained in the written statement could be treated as an applicatior under Section 8 of the Arbitration and Conciliation Act, 1996.

17. It is trite that it is the substance of a matter contained in a document rflhich matters and not the form thereof."

24. The aforesaid view has been followed by the Delhi High Court in another juCgment in Madhu Sudan Sharma and others v/s. Omaxe Limitef .

25. Though on behalf of the 3'd defendant, by placing reliance on the decision of the Apex Cout in Vidya Drolia v/s. Durga Trading Corporatiotf , it is contended that when there exists a doubt as to whether the dispute falls in terms of the agreement or not, the Court should refer the pafties to avail the remedy of d ispute resolution mechanism .e. by referring the dispute to arbitration, as noted hereinabove, admittedly, there is no dispute that has arisen in terms of ' varuu/oElzhrr?oz: u (zozr) z scc r i I I I I I I 13 deed of lease dt.08.08.2015 for the 3'd defendant to claim of existence of dispute for it to be referred to arbitration as per the deed of lease.

26. On the other hand, the 3'd defendant having entered into independent agreement with plaintiff and defendant No.2 i.e. deed of lease, is claiming disputes having arisen under the aforesaid agreement requiring it to be referred to arbitration, even though there is no hindrance caused to the 3'd defendant's enjoyment of the leased premises.

27. Though the Court below did not deal with the scope of Section B of the Act, however, having taking note of the fact that defendant Nos.1 and 2 having failed in their effort to seek reFerence to arbitration, the 3'd defendant cannot be permitted to raise the said plea, this Court is of the view that the said order of the Court below in rejecting the underlying interlocutory application filed by the 3'd defendant, cannot be said to be either perverse or erroneous for being disturbed by this Court in the present appeal.

28. Though reliance has been placed by the 3'd defendantin Vinay Eknath Lad(l supra), the same would not advance its case. L4

29. Arcordingry, the civir Misceilaneous Appear is devoid of merit and it is accordingly dismissed. No order as to costs. 30. Petrding miscellaneous petitions, if any, shall stand closed in the light of this final order. Si(l/- l. NAGA LAKSHMI REGrsrR^R /f YorNr //TRUE COPY// ECTION OFFICER To 1.

5. The XV Addilronal District and Sessions Judge -c Metropolitan Sessions Judge, Ranga Reddy District , Kukatpally. One CC to S,1l P. KANTHI KIRAN, Advocate [OPUC] One CC to S.il. D. MADHAVA RAO Advocate [OPUC] One CC to SRI K. PRABHAKAR , Advocate (OPUC) X\/ Additional Two CD Cop,es kul/AIIK \c- I I I I HIGH COURT DATED:221041202t: JUDGMNET CMA.No.560 at 2O2i ,a:- ,',,. /.,'.. .i'- 16 [{]I ?C[ \. !'l i I I DISMISSING THE {]tvlA WITHOUT COSTS +OP?NA \-tc