Evaluation Of Alternative Propositions By Arbitrator For Interim Award Does Not Constitute Inherent Contradiction Or Perversity: Calcutta HC

Brief Facts:

The dispute arises from an agreement dated December 26, 2004, between Star Track Agency Pvt. Ltd. (Appellant) and Efcalon Tie Up Pvt. Ltd. (Respondent), which purportedly created a license. Star Track sought to cancel the agreement through arbitration, while Efcalon filed a counterclaim for possession, arrears, and other reliefs.

The arbitrator declared the agreement void, awarded Rs.1,51,44,208/- to Star Track with interest, and imposed arbitration costs of Rs.1,00,000/-. The award was challenged under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) leading to a Division Bench judgment setting it aside, stating Star Track could not stay in possession without paying occupation charges.

The matter was referred to arbitration for the second time, and Efcalon filed an application under Section 31(6) for an interim award of possession recovery. The interim award dated July 15, 2017, granted the prayers in paragraph 39 of the Statement of Claim in full.

This was later amended by a corrected award on July 22, 2017, limiting the interim award to eviction under Section 31(6) of the Arbitration Act. Aggrieved, Star Track challenged the interim award under Section 34, which was dismissed on January 5, 2021.

Against the above order of dismissal, the present appeal under section 37 of the Arbitration Act has been filed.

Contentions:

The Appellant submitted that the Arbitrator passed the interim award solely based on the counsel for the claimant referencing specific clauses, without addressing the merits of the case or determining whether the agreement created a lease or a licence between the parties. Consequently, the award is argued to contravene Section 31(3) of the Arbitration Act which mandates that the Arbitrator must provide reasons for the award.

It was further submitted that Clause 14 clearly of the agreement, it is contended, provides for an advance notice of 3 months before terminating the jural relationship between the parties, which goes on to show that such jural relationship was a lease and not a licence.

It was further contended that since the impugned interim award was not passed on the ground of Sections 64 and 65 of the Contract Act, no such new ground can be taken for the first time under Section 34 or Section 37 of the Arbitration Act, more so since Section 34 is not a regular appeal and Section 37 is still more restrictive.

It was also argued that as the second proceeding is not a continuation of the first, it could not be said that the award debtor Star Track waived its right to object to the agreement being insufficiently stamped by virtue of no such objection being taken in the first proceeding.

Per contra, the Respondent submitted that in terms of Section 35 of the Indian Stamp Act, a compulsorily registrable document, if unregistered, would at the most be inadmissible in evidence and not a void document. Such defect is curable by the provisions of the Indian Stamp Act itself.

It was further submitted that since the appellant, Star Track, did not raise the objection regarding insufficient stamp duty or non-registration of the lease agreement in the previous arbitral proceedings, and instead invoked the arbitration clause in the agreement, the appellant is now estopped from claiming that the agreement was erroneously considered by the Arbitrator.

Observations:

The court noted that in view of the lease of the licensor itself having not been renewed at that point of time by the superior landlord, it was not possible to grant a sub-lease of the premises to the licensee, for which only a license was being granted instead of a sub-lease.

It further added that the grant of a sub-lease, even after the lease of the licensor was subsequently renewed by the superior landlord, would not be an automatic affair, since Clause 4 provided that the licensor would negotiate the grant of a sub-lease even thereafter. The expression “negotiate” denudes the prospective assurance to grant a sub-lease of certainty but leaves it to further negotiation between the parties.

The court further said that the mere permission granted to a licensee to make additions, alterations, or constructions does not by itself convert a license into a lease. There is no legal bar on conferring such ancillary rights if they facilitate the purpose and effective enjoyment of the license.

It further held that just because the license is given for a certain period does not debar the licensor to revoke it earlier, if the jural relationship otherwise satisfies the characteristics of a license and the intention of the parties was to create a license, and not a lease, as in the present case.

Based on the above, the court held that Clause 15, read with Clause 16 of the agreement, clearly denotes that exclusive possession was never vested with the licensee but the licensor retained with itself and its representatives the unfettered right to enter the premises at any given point of time and for whatever purpose, hitting at the very root of the exclusivity of possession urged by the appellant.

The court further opined that the non-consideration of the other clauses of the contract than Clauses H, I and 4 cannot be said to be of any impact which would vitiate the impugned interim award for non-consideration of such clauses within the ambit of Section 28(3) of the Arbitration Act.

It further observed that if a lease is created by an unregistered instrument, it will be construed as a month-to-month tenancy and not rendered unlawful. A combined reading of Sections 105 and 107 of the Transfer of Property Act supports this view. Therefore, whether the relationship is that of a license or a monthly tenancy, the agreement is not mandatorily registrable.

The court further opined that the Arbitrator considered alternative legal positions, whether the agreement constituted a monthly tenancy or a licence, and concluded that in either case, the appellant was liable to vacate the premises. It further held that the expiry of the agreement's term independently entitled the award holder to recovery of possession. This consideration of alternate scenarios is a valid exercise of judicial reasoning and does not reflect any inherent contradiction or perversity.

Accordingly, the present appeal was dismissed.

Case Title: Star Track Agency Private Limited Vs. Efcalon Tie Up Private Limited

Case Number:F.M.A.T. No. 57 of 2021

Judgment Date: 22/04/2025

For the appellant: Mr. Anindya Kumar Mitra, Mr. Zeeshan Haque, Mr. Chunky Agarwal, Ms. Abhismita Goswami, Mr. Ram Maroo

For the respondent: Mr. Sabyasachi Chowdhury, Mr. Mainak Bose, Mr. Siddhartha Banerjee, Mr. Dwipayan Basu Mullick, Mr. Naman Chowdhury, Mr. Rajesh Upadhyay, Mr. Akshay Jain Sukhani

For the Kolkata Port Trust: Mr. Ashok Kumar Jena

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