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ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION APPLICATION NO. 202 OF 2023
Anuj Kabra and anr. … Applicants
Vs
CL Educate Ltd.
(Formerly Known As Career Launcher
India Ltd.) .. Respondent
Preeti Kabra … Applicant
Vs
CL Educate Ltd. .. Respondent
Mr. Hrushi Narvekar a/w Shaheda Madraswala & Jenifer Mogrelia, i/b
Vashi & Vashi, for Applicants.
Mr. Sandeep Mohan Hirvadekar, for Respondent.
Context and Factual Background:
JUDGMENT
1. These Applications have been filed under Section 11 of the Arbitration and Conciliation Act, 1996 (“the Act”). The disputes and differences between the parties relate to a License Agreement dated August 25, 2016 by which certain premises were licensed for a period of 60 months from August 25, June 17, 2025 2016 to August 25, 2021. On the same date, a Hire Agreement was also executed for hire of furniture and fixtures contained in the aforesaid premises. The Hire Agreement does not have an arbitration clause, but the License Agreement has an arbitration clause. Learned Counsel for the parties have no objection to proceed to arbitration in respect of disputes and differences under both Agreements in reliance upon the arbitration agreement contained in the License Agreement.
2. Despite the consent of the parties to proceed to arbitration, the legal issue that emerges at this stage (as also framed by a Learned Single Judge of this Court on an earlier occasion) is whether the nature of the License Agreement being one of Leave and License, the dispute would at all be arbitrable, even if the parties choose to have an arbitration agreement. Since this issue has already been framed earlier, by consent of the parties, it is taken up for consideration and disposal, although strictly speaking, all this Court has to do is make a reference to an arbitral tribunal and leave it to the arbitral tribunal to deal with jurisdiction under Section 16 of the Act.
3. The core issue that has been framed is whether in view of the decision of Full Bench of this Court in Central Warehousing Corporation[1]. In that decision, the Full Bench has held that disputes relating to Leave and License Central Warehousing Corporation, Mumbai vs. Fortpoint Automotive Pvt. Ltd. – 2010 (1) MhLJ 658 agreements would exclusively fall in the jurisdiction of the Small Causes Court established for this purpose under the Presidency Small Cause Court Act, 1882 (“Presidency Act”), ousting the jurisdiction of any arbitral tribunal that the parties may have agreed to constitute under any arbitration agreement. Analysis and Findings:
4. The licensed premises in the instant case are located in Vashi, Navi Mumbai, thereby attracting the jurisdiction of the Provincial Small Cause Court Act, 1887 (“Provincial Act”) and not the Presidency Act. However, the Provincial Act contains terms that are in para materia and near identical to the provisions that fell for consideration in Central Warehousing Corporation.
5. Learned Advocates for the Applicants had been directed on earlier occasions when the matter came up, to formally ascertain the latest position as to whether a Small Causes Court with territorial jurisdiction in this matter has been set up. Considering that more than two years have passed since these applications were filed, the Applicants were asked to reconfirm whether a Small Causes Court with territorial jurisdiction over the licensed premises has been established by now and whether any other Court has been designated for exercising the jurisdiction under the Provincial Act by way of any administrative decision of this Court. Such exercise has been carried out by the Applicants and Learned Counsel for the Applicants has tendered a compilation containing the correspondence in this regard.
6. It is seen from the compilation that by a response dated March 4, 2025 from the state government under the Right to Information Act 2005, the State Government has confirmed that it has neither established any Small Causes Court having jurisdiction in the subject matter in Navi Mumbai, nor has it received any proposal for such establishment from the High Court. Likewise, the Learned Advocates for the Applicants have also corresponded with the Registrar of this Court on the Appellate Side to check whether any Small Causes Court has been established under Section 26 of the Provincial Act, and whether any judge or Court has been empowered and designated to exercise the jurisdiction of the Small Causes Court in exercise of this Court's powers under Section 28 of the Maharashtra Civil Courts Act, 1869 (“Civil Courts Act”).
7. In response to this endeavor, it is apparent that the Registry of this Court has confirmed that no Small Cause Court has been established with jurisdiction over Vashi, Navi Mumbai. In response to the queries raised by a letter dated February 13, 2025 from the Learned Advocates for the Applicants, the Registry of this Court has provided a reply dated March 7, 2025 specifically confirming that no court has been designated to carry out the function of Small Causes Court pursuant to Section 28 of the Civil Courts Act. However, a list of Civil Judges presently working in Thane District who have been conferred with with Small Causes power to a limited extent has been enclosed. It is seen from a notification dated December 21, 2024 that the pecuniary jurisdiction which is the maximum amount within which these judges shall exercise such power has been set out. A plain reading of the same would show that the maximum pecuniary jurisdiction conferred under this notification on any judge is a value of Rs. 12,000/-. These limits are but derived from the provisions of Section 28 itself which enables a jurisdiction of Rs. 12,000 on a Civil Judge (Senior Division) and Rs. 6,000 on a Civil Judge (Junior Division). The provisions of Section 28 of the Civil Courts Act are extracted below:-
28. Power to invest Civil Judges with small cause powers. (1) The High Court may invest any Civil Judge with the jurisdiction of a Court of Small Causes for the trial of suits cognizable by such courts upto such amount as it may deem proper, not exceeding in the case of a Civil Judge (Senior Division) twelve thousand rupees and in the case of a Civil Judge (Junior Division) Six thousand rupees. (2) A Civil Judge (Senior Division) or a Civil Judge (Junior Division), who is invested with the jurisdiction of a Court of Small Causes under subsection (1), shall continue to have such jurisdiction within the local limits of his ordinary jurisdiction so long and as often as he may fill the office of Civil Judge (Senior Division) or Civil Judge (Junior Division), as the case may be, without reference to the District in which he may be employed. (3) The High Court may, whenever it thinks fir, withdraw such jurisdiction from any Civil Judge so invested. [Emphasis Supplied]
8. The disputes and differences in this case are said to be in the region of approximately Rs. 16 Lakhs. Consequently, none of these judges who have been so conferred with power can adjudicate disputes and differences under the License Agreement pursuant to such notification. Even if one were to focus only on the claim under the Leave and License Agreement and disregard the connected claim under the Hire Agreement, the amount claimed is in the order of nearly Rs. 7 Lakhs and consequently, none of these judges who have been so designated, can exercise power of a Small Cause Court for purposes of this dispute.
9. However, it would also be necessary to deal with Section 26 of the Provincial Act, which is extracted below:
26. Suits or proceedings between licensors and licensees or landlords and tenants for recovery of possession of immovable property and licence fees or rent, except those to which other Acts apply, to lie in Court of Small Causes.— (1) Notwithstanding anything contained elsewhere in this Act, but subject to the provisions of sub-section (2), the Court of Small Causes shall have jurisdiction to entertain and try all suits and proceedings between a licensor and licensee, or a landlord and tenant, relating to the recovery of possession of any immovable property situated in the area within the local limits of the jurisdiction of the Court of Small Causes, or relating to the recovery of the licence fee or charges or rent therefor, irrespective of the value of the subject-matter of such suits or proceedings. (2) Nothing contained in sub-section (1) shall apply to suits or proceedings for the recovery of possession of any immovable property or of licence fee or charges or rent thereof, to which the provisions of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, the Bombay Government Premises (Eviction) Act, 1955, the Bombay Provincial Municipal Corporations Act, 1949, or the Maharashtra Housing and Area Development Act, 1976, or any other law for the time being in force, apply. [Emphasis Supplied]
10. It will be seen from the foregoing that the section is a non-obstante provision, having overriding effect over any other provision of Provincial Act. Therefore, it may indicate that potentially, regardless of the jurisdictional limit imposed by the High Court in its notification conferring Small Cause power over some civil judges under Section 28 of Civil Courts Act to exercise jurisdiction, the courts held by such judges could be regarded as a Small Cause Court and thereby enable them to exercise jurisdiction regardless of the size of the subject matter of the proceedings.
11. However, the careful reading of the same would indicate the words, “irrespective of the value of the subject matter” would have to be harmoniously read with Section 28 of the Civil Courts Act and the designation made under it. Even while conferring the High Court with power to designate a Civil Judge not being a judge in a Small Cause Court, with such power under the Civil Courts Act, care has been taken to specifically delimit the size of disputes for which such judges may exercise such jurisdiction. The legislature is conscious of the ingredients of Section 26 of the Provincial Act, and yet under the Civil Courts Act, the power of the High Court to designate a judge with such power has been limited in respect of the size of the pecuniary jurisdiction. Besides, the non-obstante provision overrides the other provisions of Provincial Act, and not the provisions of the Civil Courts Act and the designation made under Section 28 of that law.
12. It cannot be forgotten that the very conferment of Small Cause power on the designated civil judge has been effected with an inherent cap on the size of jurisdiction conferred. If a special provision enabling conferment of power on a civil judge has consciously has limited the size of the pecuniary jurisdiction that can be conferred, one would necessarily have to see it as defining the size of disputes that could at all be considered by the civil judge not otherwise being a judge in a duly established Small Cause Court. Therefore, since the provision enabling a designation of civil judges and the actual notification of such judges in Thane District for exercise of powers of Small Causes Court, contains an inherent maximum limit of their pecuniary jurisdiction, the necessary corollary would be that no Small Cause Court with pecuniary jurisdiction that can handle the dispute at hand is available.
13. Learned Counsel for the Applicants points out that such a view is supported by a view taken by a Learned Division Bench of this Court. In Radheshyam[2], the Learned Division Bench examined the question as to whether a Court invested with Small Cause power under Section 28 of the Civil Courts Act could function as a Small Cause Court and exercise unlimited pecuniary jurisdiction regardless of the notification creating that jurisdiction itself limiting the pecuniary jurisdiction.
14. Dealing with near-identical facts and the very same provisions that arise for consideration, the Court has explicitly ruled as follows: Radheshyam s/o Zumbarlal Candak vs. District Judge, Amravati & Anr. – 2011 (1) MhLJ
33. From the provisions pointed out above and the discussion followed, it is clear that the Small Cause Courts Act deals with the jurisdiction therein to be exercised either by a Court of Small Causes established under Section 5 of the said Act or by a Civil Judge invested with the jurisdiction of a Court of Small Causes by the High Court in exercise of its powers under Section 28(1) of the Civil Courts Act. If neither a Court of Small Causes is established at a particular place, nor has the High Court in exercise of its powers under Section 28(1) of the Civil Courts Act invested any Civil Judge with the jurisdiction of a Court of Small Causes for the trial of suits cognizable by such Courts, then obviously the ordinary original civil jurisdiction conferred upon the Civil Judge, Junior Division, or the Civil Judge, Senior Division, is available. However, in that event, such a suit, which is otherwise cognizable by a Court of Small Causes, would be tried by such Civil Judge as regular civil suit in accordance with the provisions of the Code of Civil Procedure, depending upon the pecuniary limits of its jurisdiction, as provided under Section 24 of the Civil Courts Act.
36. If the value of the subject matter of the suit covered by Section 26(1) of the Small Cause Courts Act exceeds the pecuniary limits specified under Section 28(1) of the Civil Courts Act, then a Civil Judge invested with the jurisdiction of a Court of Small Causes shall not have jurisdiction to entertain, try and decide such suit, as a small cause suit of a summary nature, but it will have to be decided as a regular suit and the procedure for deciding such suit will be governed by the Code of Civil Procedure and not by the procedure prescribed under the Small Cause Courts Act. The reason for this is that the High Court is not competent under Section 28(1) of the Civil Courts Act to invest any Civil Judge with the jurisdiction of a Court of Small Causes beyond the pecuniary limits specified in that Section.
15. Therefore, if the summary procedure and special jurisdiction of the Small Cause Court is not available, it would follow that the fallback is what the parties intended. If the parties did not have an arbitration agreement, they would have to litigate in a civil court without the summary procedure of the Small Cause Court. Since the parties have an arbitration agreement, it would follow that the net effect of the notification under Section 28 of the Civil Courts Act read with the ouster of jurisdiction under Section 26(1) of the Provincial Act, would be that in Thane, there exists no Court vested with Small Cause Court’s powers for exercise of jurisdiction over the License Agreement which is of a value higher than the value for which power has been conferred on the civil judges in Thane for exercise of Small Cause power by the High Court.
16. This is the only logical and reasonable manner of reading all the provisions of the applicable law harmoniously, because without such a construction, the delimitation of the pecuniary jurisdiction conferred by the High Court under the Civil Courts Act would be rendered otiose.
17. Consequently, the necessary corollary would be that in the absence of the existence of a Small Cause Court, read with the existence of the arbitration agreement, the parties cannot be left denuded of the benefit of the conscious remedy of arbitration chosen by them in exercise of their sovereign autonomy. The arbitration agreement which is a conscious choice of the parties must then be allowed to run its course in the absence of a Small Cause Court being available with jurisdiction over the dispute at hand. Under Central Warehousing Corporation, the ouster of jurisdiction of other courts would occur when there is a Small Cause Court. If such a court is not available, there is no ouster of the arbitration agreement. Directions and Order:
18. In these circumstances, taking on board the consent of the parties to proceed to arbitration, all disputes and differences between them, whether under the Leave and License Agreement or under the Hire Agreement, both dated August 25, 2016 are hereby referred to arbitration, by consent of the parties in the following terms: A] Mr. Yashodhan Divekar, a learned advocate of this Court is hereby appointed as the Sole Arbitrator to adjudicate upon the disputes and differences between the parties arising out of and in connection with the Agreement referred to above; Office Address: 1st Floor, Rajabahadur Mansion, 14, Ambala Doshi Marg, Fort, Mumbai - 400023 Email ID: yashodhandiverkar@yahoo.in B] A copy of this Order will be communicated to the Learned Sole Arbitrator by the Advocates for the Applicants within a period of one week from the date on which this order is uploaded on the website of this Court. The Applicants shall provide the contact and communication particulars of the parties to the Arbitral Tribunal along with a copy of this Order; C] The Learned Sole Arbitrator is requested to forward the statutory Statement of Disclosure under Section 11(8) read with Section 12(1) of the Act to the parties within a period of two weeks from receipt of a copy of this Order; D] The parties shall appear before the Learned Sole Arbitrator on such date and at such place as indicated, to obtain appropriate directions with regard to conduct of the arbitration including fixing a schedule for pleadings, examination of witnesses, if any, schedule of hearings etc. At such meeting, the parties shall provide a valid and functional email address along with mobile and landline numbers of the respective Advocates of the parties to the Arbitral Tribunal. Communications to such email addresses shall constitute valid service of correspondence in connection with the arbitration; E] All arbitral costs and fees of the Arbitral Tribunal shall be borne by the parties equally in the first instance, and shall be subject to any final Award that may be passed by the Tribunal in relation to costs.
19. Needless to say, nothing contained in this order is an expression of an opinion on merits of the matter or the relative strength of the parties. All issues on merits are expressly kept open to be agitated before the arbitral tribunal appointed hereby.
20. All actions required to be taken pursuant to this order, shall be taken upon receipt of a downloaded copy as available on this Court’s website. [SOMASEKHAR SUNDARESAN, J.]