Development Corporation Ltd. vs Impression

The appeal is admitted and taken up for hearing along with the application being C.A.N. 3697 of 2015.

The appeal is against an Order No. 14 dated 30th March, 2015 passed by the Additional District Judge, 3rd Court at Barasat, in connection with Miscellaneous Case No. 958 of 2014, under Section 9 of the Arbitration and Conciliation Act 1996, hereinafter referred to as the 1996 Act.

The respondent entered into an agreement with the appellant for operating a Food court at the ECO Tourism Park, New Town, Kolkata. The agreement was on its face terminable at any time by either party by giving thirty days'' prior notice to the other party.

The agreement provided that the respondent would be liable to pay to the appellant rent fee of Rs. 6,66,000/- per month for the first year, enhanceable thereafter, in the manner provided in the agreement, for running the Food Court. In terms of Clause 3 of the agreement the rent fee payable by the respondent to the appellant was to be paid in advance within the first 7 working days of the month.

By a letter/notice being Memo. No. 2959/HIDCO/Admn-2628/2013 dated 17th October, 2014 the appellant informed the respondent that as per the agreement the respondent was required to deposit Rs. 5,00,000/- as security deposit, but on verification, it had been found that the respondent had paid only Rs. 4,00,000/-. The respondent had failed to deposit the balance Rs. 1,00,000/- as security deposit. Moreover, the respondent was required to pay monthly rent fee of Rs. 6,66,000/- per month to the appellant in advance within the first seven days of the month, by bank draft drawn in favour of the appellant, and payable at Kolkata, which also the respondent had not done.

By the said letter/notice dated 17th October, 2014, the respondent was duly informed that the agreement would stand terminated on 17th November, 2014 and all facilities including electricity provided for running the Food Court would be withdrawn with immediate effect, if the respondent failed to deposit the entire outstanding dues with the appellant.

By a notice dated 20th November, 2014, the appellant directed the respondent to vacate the Food Court by 8 a.m. on 24th November, 2014, after returning all fixtures, fittings, materials etc. provided by the appellant, failing which the appellant would take possession of the Food Court, since the respondent had failed to clear its dues within 17th November, 2014, and the agreement stood terminated.

The respondent filed an ex parte application under Section 9 of the 1996 Act before the learned District Judge at Barasat, being Miscellaneous Case No. 958 of 2014.

By an ex parte order passed on 24th November, 2014 the learned District Judge directed both the parties to maintain status quo in respect of the nature, character and possession of the Food Court till 27th November, 2014.

The learned Advocate General submitted that the ex parte order was communicated to the appellant on 26th November, 2014. In the meanwhile, on the 24th itself, at about 12 noon, the appellant took possession of the Food Court.

The learned Advocate General submitted that the appellant took over the Food Court before the order of status quo was passed, and in any case, without knowledge of the proceedings under Section 9 of the order of the District Judge.

The Misc. Case was transferred by the Learned District Judge to the learned Additional District Judge, 3rd Court at Barasat for disposal.

The respondent filed an application under Section 151 of the Civil Procedure Code before the Additional District Judge, 3rd Court at Barasat for restoration of possession of the "Banquet Hall cum Restaurant".

By the order under appeal, the learned Additional District Judge, 3rd Court at Barasat allowed the said application under Section 151 of the Civil Procedure Code and directed the appellant to restore status quo ante as on 24th November, 2014, within two weeks from the date of the said order. The appellant and the respondent were further directed to maintain status quo with regard to the nature, character and possession of the Food Court (referred to as the suit property) till conclusion of the arbitration proceedings, after restoration of possession thereof to the respondent.

The learned Advocate General drew the attention of this Court to the terms and conditions of the agreement between the appellant and the respondent and pointed out that the said agreement was terminable by either party by giving one month''s notice.

The learned Advocate General submitted that the respondent, by its failure to pay the rent fee, had committed breaches of the said agreement between the appellant and the respondent, and accordingly the appellant terminated the said agreement upon notice to the respondent.

The learned Advocate General argued that the said agreement between the appellant and the respondent being terminable in nature, the said agreement was not specifically enforceable. Even if the agreement had wrongfully been terminated, the remedy of the appellant would be in a claim for damages. The learned Court below should not, therefore, have directed the restoration of status quo ante as on 24th December, 2014.

The learned Advocate General further argued that the appellant took over the Food Court on 24th November, 2014 at around 12 noon before the ex parte order of status quo was passed. As such, there could be no reason for directing restoration of status quo ante. Before directing restoration of status quo ante as on 24th November, 2014, the learned Court did not undertake the exercise of ascertaining who was in possession of the Food Court, when the order of status quo was passed.

Mr. Aninda Lahiri, appearing on behalf of the respondent, could not dispute the fact that the application under Section 9 of the 1996, was moved ex parte before the District Judge on 24th November, and the order of status quo, obtained without any notice to the appellant was communicated to the appellant after 24th November, 2014. Mr. Lahiri, however, submitted that the action of the appellant in taking possession of the premises was totally high handed, arbitrary and unreasonable.

Mr. Lahiri argued that the appellant had no right to dispossess the respondent from the premises without taking recourse to the process of law. He argued that possession of the Food Court could only have been taken pursuant to orders of Court.

Mr. Lahiri cited the Five Judge Constitution Bench judgement of the Supreme Court in Bishan Das and Others Vs. The State of Punjab and Others, AIR 1961 SC 1570 : (1962) 2 SCR 69 and submitted that the respondent could not be deprived of possession of the premises by executive orders without recourse of law.

The judgement in Bishan Das (supra) was rendered in the facts of the case before the Supreme Court. The Supreme Court found that the respondents before the Supreme Court had clearly violated the fundamental rights of the respondents, who had been in bona fide possession of constructions in issue in the aforesaid case.

A judgment is a precedent for the proposition of law that is decided. Sentences in a judgment cannot be read in the manner as statutory provisions. It is well settled that observations in a judgement are to be construed in the context of the factual background in which the observations were made.

We were almost persuaded by the forceful advocacy of Mr. Lahiri to uphold the interim relief granted to the respondent, but have refrained from doing so as the respondent is prima facie in breach of the terms and conditions of the agreement between the appellant and the respondent as it has not paid any rent fee at all.

In this case, the respondent has not been able to make out any prima facie right of possession of the Food Court in question, whether as lessee or tenant or trespasser or by adverse possession. By and under the said agreement between the appellant and the respondent, the respondent was engaged by the appellant, to run its Food Court for a period of five years.

It appears that the learned Additional District Judge has not considered terms and conditions of the agreement between the appellant and the respondent, which clearly show that the agreement was, by its nature determinable. It was an express terms of the agreement, that the agreement could be terminated by either party upon thirty days'' notice. The appellant terminated the agreement after giving the respondent notice of thirty days.

In this case, the nature of the agreement makes it amply clear that the petitioners were never given any right to possession of the Food Court. They were given the right to operate the Food Court, on operational contract basis inter alia on the following conditions:

"(i) The respondent would be responsible for running catering operations with its own employees.

(ii) The respondent would have to run the Food Court with necessary equipment for heating, grinding and serving.

(iii) Recurring costs of running the Food Court and electricity consumption would have to be borne by the agency.

(iv) The Food Court would remain open and functional on such days and for such hours as might be determined by the authority from time to time.

(v) Night stay inside the complex would not be allowed under normal circumstances. If required, night stay might be allowed under specific instructions from the appellant.

(vi) All raw materials used would have to comply with the rules and regulations of Health Department.

(vii) Food items would have nutritious value and might be inspected daily by the authority concerned.

(viii) The respondent would ensure that staff engaged for operating the Food Court were well trained, polite and free from communicable diseases.

(ix) The staff would be well dressed, in a uniform whose design would have prior approval of the appellant.

(x) The respondent would have to arrange to display the menu conspicuously for general information of the public."

The agreement also contemplated that furniture and fixtures might be provided by the appellant including electrical installations and illuminations, of which the respondent would have to ensure proper maintenance.

There can be no doubt that an application might be filed under Section 9 of the 1996 Act before the commencement of arbitration proceedings, while arbitration proceedings are in progress and even after an award is made but before the award is put into execution in accordance with law.

The learned Court might have rightly found that the disputes between the appellant and the respondent are arbitrable. However, the existence of arbitrable disputes does not, in itself, give any right to a party to an arbitration agreement to obtain interim relief.

In passing the order under appeal learned Court has completely overlooked the principles with regard to grant of interim relief, where the court is required to consider the prima facie case made out in the petition as also the balance of convenience. The learned Court has not even discussed the prima facie merits of the case made out by the respondent.

The principles governing the grant of injunction are well settled. The power is discretionary, and is to be exercised on sound judicial and legal principles. The Court is to satisfy itself that the applicant for injunction has been able to make out a good prima facie case, and that the balance of convenience is in favour of an order of injunction being made, as prayed for by the applicant. The onus is on the applicant to make out a case for grant of interim relief in his favour. We are of the view that the respondent failed to make out any case for grant of interim relief of restoration of status quo ante.

In any case, where the applicant for injunction is in breach of the terms and conditions of the agreement on the basis of which injunction is sought, injunction should be refused. A party claiming injunction against dispossession must show some right to remain in the premises. In this case the respondent had no right to remain in the Food Court. Moreover, normally, ex parte relief by way of injunction or stay in respect of public projects and claims and/or economic policies should be avoided.

The party invoking the jurisdiction of the Court has to show that he himself was not at fault and he himself was not responsible for bringing about the state of things complained of. In this case, the respondent was itself in breach of agreement.

Moreover, it is well settled that interim injunction is granted in aid of final relief. If final relief is not available, no interim injunction should be granted. Prima facie, the agreement between the appellant and the respondent is terminable at any time and involves minute details. The agreement is not specifically enforceable. The remedy, if any, of the respondent would lie by way of damages. The order under appeal is, therefore, set aside.

The learned Advocate General appearing on behalf of the appellant has drawn our attention to a judgement of a Division Bench of this Court in M/s. National Highway Authority of India v. M/s. B. Seenaiah & Company (Projects) Ltd. where the Division Bench held that an Additional District Judge has no jurisdiction to decide an application under the 1996 Act as the Court of the Additional District Judge is not ''Court'' within the meaning of the said Act.

''Court'' as defined in Section 2(1)(e) of the 1996 Act, set out hereinbelow for convenience.

"2(1)(e) "Court" means the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes"

Section 9 of the 1996 Act provides that a party may before, or during arbitral proceedings or at any time after the making of the arbitral award, but before it is enforced in accordance with Section 36, apply to a Court for inter alia interim measures of protection in respect of any of the matters specified in Section 9(ii) of the 1996 Act. Similarly, under Section 14(2), parties may apply to the Court to decide on the termination of the mandate of the arbitrator, if the arbitrator becomes de jure or de facto unable to perform his functions, or fails to act without delay or withdraws from his office or if the Court finds that the parties had agreed to termination of his mandate. Section 34 provides for recourse to a Court against an arbitral award on grounds stipulated in Section 34 (2).

There can be no doubt, that in view of the definition of ''Court'' in Section 2(1)(e), a Court for the purpose of Section 9, or for that matter, Section 34 or Section 14(2) would mean the principal Civil Court of original jurisdiction in the district. The question is whether the principal Civil Court of original jurisdiction in a district would mean the Court of the District Judge alone and not any Court of Additional District Judge, as held by the Division Bench of this Court by its judgment dated 13th March, 2015 in M/s. National Highway Authority of India v. M/s. B. Seenaiah & Company (Projects) Ltd. (supra).

In M/s. National Highway Authority of India v. M/s. B. Seenaiah & Company (Projects) Ltd. (supra), the Hon''ble Division Bench very rightly held that there could be no dispute regarding the settled legal proposition that conferment of jurisdiction was a legislative function and could neither be conferred by the consent of the parties, nor by a Superior Court and that an order/decree passed by a Court having no jurisdiction over the matter, would amount to a nullity. Such an order would suffer from the vice of being an order of "coram non judice".

There can also be no doubt that statute has conferred the power to set aside an arbitral award, under Section 34 of the 1996 Act, or for that matter, the power to grant interim relief under Section 9 of the said Act, to the principal Civil Court of original jurisdiction in a district, having jurisdiction to decide the subject matter of the arbitration, if the same had been the subject matter of a suit. However, it is difficult to agree that the Court of the Additional District Judge is not a Court within the meaning of Section 2(1)(e) of the 1996 Act.

The District Judge is appointed under Article 233 of the Constitution. In Article 236 of the Constitution, the expression ''District Judge'' has been defined to include amongst others, the Additional District Judge. Article 233 read with Article 236 of the Constitution makes it clear that the Court of the Additional District Judge is not inferior to the Court of the District Judge in any manner.

Section 3 of the Bengal, Agra and Assam Civil Courts Act, 1887, hereinafter referred to as the Civil Courts Act provides for the following classes of Courts:--

"(1) The Court of the District Judge (2);

(2) The Court of the Additional District Judge (3);

(3) The Court of the Civil Judge (Senior Division);

(4) The Court of the Civil Judge (Junior Division)."

Section 8(1) and 8(2) of the Civil Courts Act provides as follows:--

"Additional Judges.--(1) When the business pending before any District Judge requires the aid of Additional Judges for its speedy disposal, the [State Government] may, [having consulted] the High Court, [* * * *] appoint such Additional Judges as may be requisite.

(2) Additional Judges so appointed shall discharge any of the functions of a District Judge which the District Judge may assign to them, and, in the discharge of those functions, they shall exercise the same powers as the District Judge."

The Additional District Judge has been conferred the same status as a District Judge by the Constitution of India and an Additional District Judge exercises all the powers of a District Judge as might be delegated to the Additional District Judge, by the District Judge, as provided in Section 8(1) and 8(2) of the Civil Courts Act quoted above.

Section 4 of the Civil Courts Act, empowers the State Government to alter the number of District Judges, Civil Judges (Senior Division) and Civil Judges (Junior Division) now fixed. The exclusion of Additional District Judge in Section 4 also indicates that the Additional District Judges are considered to be District Judges, in view of the definition of District Judge in Article 236 of the Constitution.

Section 9 of the Civil Courts Act provides that, subject to superintendence of the High Court, the District Judge shall have administrative control over all the Civil Courts under the Civil Courts Act within the local limits of its jurisdiction. A combined reading of Articles 233 and 236 of the Constitution of India read with Sections 3, 4, 8 and 9 of the Civil Courts Act makes it patently clear that the District Judge has additional administrative powers over the Additional District Judge for example, the power of allocation of business amongst Additional District Judges.

There is no difference between the Court of the District Judge and the Court of the Additional District Judge in relation to judicial functions. We are, therefore, of the view that the Court of the Additional District Judge is also the principal Civil Court in the District.

Section 3 of the Code of Civil Procedure, 1908 provides that for the purposes of the code, a District Court is subordinate to the High Court and every Civil Court of a grade inferior to that of the District Court and every Court of Small Causes is subordinate to the High Court and District Court.

Under the Code of Civil Procedure the Court of the Additional District Judge is not a Civil Court of a grade inferior to that of the District Court. Had the Court of the Additional District Judge been a Civil Court of a grade inferior to the District Court, the Second part of the Section would probably have read ".....and every other Civil Court and every Court of Small Causes is subordinate to the High Court and the District Court". On the other hand, Sub-section 3 of Section 24 provides that for the purpose of the said section, that is for the express purpose of transfer of proceedings from one Court to another, the Court of Additional and Assistant Judges are to be deemed to be subordinate to the District Court. This also makes it clear that for all other purposes, Courts of Additional District Judges are not to be deemed to be subordinate to the District Court. If Additional District Judges were to be deemed subordinate to the District Court for all purposes, it would not been necessary to insert Section 24(3) of the Code of Civil Procedure.

In our view, had it been the legislative intent that Court should mean only the Court of the District Judge and no Additional District Judge, the legislature would perhaps specifically have used the expression "District Court" and not "principal Civil Court" in a district and would perhaps have expressly excluded any Court other than the District Court from the definition of Court in Section 2(1)(e) of the 1996 Act.

''Court'' has been defined in the 1996 Act as the principal Civil Court of original jurisdiction in a district. If the Additional District Judge is empowered to exercise all powers of a District Judge, the Court of the Additional District Judge is as much the principal Civil Court of original jurisdiction as the Court of the District Judge.

Had it been the legislative intent that Additional District Judges should not decide applications under the 1996 Act, the expression "Civil Court" would not have been used. The legislature would perhaps have used the expression "Court of District Judge" and would expressly have excluded all other Civil Courts, which has not been done.

With the greatest of respect to the Division Bench, we have not been able to agree that the Court of the Additional District Judge is not ''Court'' within the meaning of the 1996 Act. We are of the view that the Court of an Additional District Judge is ''Court'' within the meaning of Section 2(1)(e) of the 1996 Act and had jurisdiction to entertain the application under Section 9 of the 1996 Act, which gave rise to the order under appeal.

The judgement and order under appeal has been set aside on merits for the reasons discussed above. The issue as to whether the Additional District Judge has jurisdiction to decide an application under Section 9 of the Arbitration and Conciliation Act, 1996 may be referred to a larger Bench since we have differed with the judgement of a Bench of co-ordinate strength.

The application being CAN 3697 of 2015 is disposed of.

Let the appeal be placed before the Hon''ble Chief Justice for constitution of a larger Bench to decide the issue of whether the Court of the Additional District Judge is ''Court'' within the meaning of the Arbitration and Conciliation Act, 1996.

Any observation made by us will not influence the arbitration proceeding in any manner whatsoever.