Arbitration Clause Prevails Over Public Premises Act, 1971 – Supreme Court Upholds Arbitrator's Appointment in Lease Dispute. The Supreme Court dismisses the appeal, confirming that the Arbitration and Conciliation Act, 1996 applies to lease disputes, even with the Public Premises (Eviction of Unauthorised Occupants) Act, 1971 in play.

Case Note & Summary

The Supreme Court ruled that the Arbitration and Conciliation Act, 1996 governs disputes related to lease agreements. The appellant, a statutory body, had invoked the Public Premises Act after the lease expired and claimed unpaid charges. The respondent sought arbitration under the lease agreement’s arbitration clause. The Court upheld the High Court's decision to appoint an arbitrator, ruling that the Public Premises Act does not override the Arbitration Act in disputes arising from lease agreements.

1. Appeal Admitted

The legal question: Does the Public Premises (Eviction of Unauthorised Occupants) Act, 1971 override the Arbitration and Conciliation Act, 1996?

2. Nature of the Case

The Court examined whether the High Court erred in appointing an arbitrator under Section 11 of the Arbitration Act.

3. Background: Lease Agreement

The appellant (Central Warehousing Corporation) leased 1295 sq. mtrs. of space to the respondent (a company trading in ceramic tiles). Lease executed on 26.09.2012 for 3 years, expiring on 11.09.2015.

4. Key Terms of the Lease

Clause 1: Lease term. Clause 2: Renewal by mutual consent. Clause 16: Arbitration clause covering disputes.

5. Revised Storage Charges

Appellant revised storage charges from Rs. 131 to Rs. 177 per sq. mtr. during the lease, demanding payment through multiple letters.

6. Renewal Request by Respondent

Respondent sought renewal while agreeing to clear arrears. Appellant rejected the renewal request and demanded Rs. 16,10,004.

7. Public Premises Act Invoked

After the lease expired, the appellant invoked the Public Premises Act for eviction and recovery of dues.

8. Premises Vacated, Estate Officer’s Order

Respondent vacated premises on 13.11.2015. The Estate Officer declared the respondent an unauthorized occupant from 11.09.2015 to 13.11.2015.

9. Arbitration Initiated by Respondent

Respondent invoked arbitration based on Clause 16 of the agreement, challenging revised charges and the non-renewal.

10. High Court’s Decision

High Court found the disputes covered by the arbitration clause and appointed an arbitrator.

11. Appeal by Appellant

Appellant appealed, claiming the Public Premises Act should override the Arbitration Act.

12. Applicability of the Public Premises Act

The Court rejected the appellant's claim, stating the Public Premises Act pertains to unauthorized occupation and does not affect arbitration agreements during the lease period.

13. Error in High Court's Judgment

No error in the High Court's decision to appoint an arbitrator under Section 11 of the Arbitration Act.

14. Limited Scope of Referral Court

The Court reaffirmed that a referral court's role is limited to determining the existence of an arbitration agreement (SBI General Insurance case cited).

15. Dismissal of Appeal

The appeal was dismissed, with a Rs. 50,000 fine imposed on the appellant for unnecessary litigation.

16. Arbitration to Resume

Arbitral proceedings, stayed during the appeal, were directed to resume.

17. Conclusion

The Court dismissed the appeal and instructed the arbitrator to expedite the proceedings. Ratio Decidendi:

The Supreme Court clarified that the Public Premises Act does not override the Arbitration and Conciliation Act in cases of lease disputes. The key issue was whether the parties' contractual relationship and related disputes, which arose during the validity of the lease, should be resolved through arbitration as agreed, despite the appellant invoking the Public Premises Act for eviction and recovery of dues.

Acts and Sections Discussed: Public Premises (Eviction of Unauthorised Occupants) Act, 1971 Section: Authorizes eviction of unauthorized occupants from public premises. Arbitration and Conciliation Act, 1996 Section 11: Appointment of arbitrators. Section 7: Existence of arbitration agreements. Section 16: Competence of arbitral tribunals to rule on their own jurisdiction. Subjects: Arbitration Clause Lease Agreement Public Premises Act Section 11 Arbitration Act Renewal of Lease Storage Charges Dispute Unauthorised Occupants