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2018 Supreme(Kar) 930

IN THE HIGH COURT OF KARNATAKA
Vineet Kothari, J.
Sudha S. Raju - Appellant
Vs.
Iffco Tokio General Insurance Company Limited - Respondent
Writ Petition No. 1554 of 2017
Decided On : 13-08-2018

Advocates:
Advocate Appeared:
Raghavendra C., V. Ramesh Babu

Headnote:ARBITRATION AND CONCILIATION ACT, 1996 [C.A. No. 26/1996] - Section 8 - Lease agreement - Dispute regarding refund of security deposit, withheld by lessor landlady - Reference of dispute to arbitration rejected by Trial Court on ground that alleged withholding was, according to lessor, for justifiable reasons - It was an arbitral issue and arbitration clause was a separate and severable clause from the lease deed in question - That the same would not perish with termination of lease deed after handing over of vacant possession of premises to leesor - However, after said observations, the Trial Court suddenly changing the course of its order towards insufficiency of stamp of lease deed and failure of defendant to make efforts to pay stamp duty on it -This impugned order, held, being self - contradictory, deserves to be rejected - mere non - stamping of the lease deed itself could not have been taken as a ground by the Trial Court to refuse reference of dispute to arbitration, under Section 8 of he Arbitration Act - In view thereof, the second and offending part of the impugned order of the Trial Court - Not sustainable and set aside - Trial Court directed to refer matter to arbitration under Section 8 of the Act.

JUDGMENT :

Vineet Kothari, J.

The defendant-Mrs. Sudha Raju, lessor/land lady has filed this writ petition under Article 227 of the Constitution of India aggrieved by the order dated 14.12.2016 passed in O.S.No.5577/2009 (Iffco Tokio General Insurance Company Limited (plaintiff) vs. Mrs. Sudha S. Raju (defendant) rejecting her application I.A. No. VI filed under Order 7 Rule 11(d) of CPC for referring the dispute to Arbitration in regard to refundability of the Security Deposit made by the lessee-plaintiff with the defendant/land lady-Mrs. Sudha S. Raju, u/S. 8 of the Arbitration and Conciliation Act, 1996 (for short 'Act').

2. It may be noted that the lease premises in question have already been vacated by the plaintiff-lessee-Company on 14.09.2006 and the dispute is only about refund of Security Deposit to the Lessee- Company.

3. On the said application-I.A.No.6 filed by the defendant-land lady, the learned Trial Court, in the impugned order dated 14.12.2016, has held that issue relating to refund of the Security Deposit, which was withheld by the lessor-land lady, according to her, for justifiable reasons and it was an arbitrable issue and the Arbitration Clause was a separate and severable clause from the lease deed in question and the same would not perish with the termination of the lease deed after handing over the vacant possession of the premises to the land lady on 14.09.2006 and this view was given by the learned Trial Court following the Supreme Court decision in the case of M/s. SMS Tea Estates Pvt. Ltd. vs. M/s. Chandmari Tea Co., Pvt. Ltd, (2011) AIR(SCW) 4484 and Branch Manager, Magma Leasing and Finance Limited and another vs. Potluri Madhavilata and another, (2009) 10 SCC 103 but in para-26 of the impugned order the learned Trial Court suddenly changed the course of its order and commenced from the words "However, it is also clear that lease deed is insufficiently stamped and even after giving sufficient opportunities, defendant has not made efforts to pay stamp duty on it." The Trial Court, thus, fell into error in holding that since the lease deed is insufficiently stamped and even after giving sufficient opportunities to the defendant-lessor has not made efforts to pay stamp duty on it, therefore, I.A.No.6 for referring the arbitrable dispute to the Arbitrator u/S. 8 of the Act deserves to be rejected. The impugned order therefore is self-contradictory.

4. The first part of the Order is quoted below for ready reference:

"20. Thus, in the above citation reported in 2011 AIR SCW 4484 also, the Division of Hon'ble Supreme Court held that even though the document is not registered though it requires compulsory registration, the court can look into the said document to say whether there exists arbitration clause in said agreement or not, because arbitration agreement need not be registered and their Lordships have elaborately discussed this point of registration with S.17 & 49 of the Registration Act and concluded as stated above.

21. Section 17 of the Registration Act made it clear that the lease is compulsorily registrable one, if it is pertaining to immoveable property for a period of one year or more than that. However, as per S.18(c) of the Registration Act, it is optional for parties to register the leases of immovable properties for any term not exceeding one year. Hence, the coupled reading of this section 17, 18 of the Registration Act and S.107 of the Transfer of Property Act, it is crystal clear that, unregistered lease is permissible pertaining to lease of immoveable property if it is made for a period within one year.

22. Furthermore, if arbitration clause is separable from the main agreement; then this question of non-registration does not arise for consideration.

23. The learned counsel for defendant has relied on another citation in "Branch Manager, Magma Leasing and Finance Limited and another vs. Potluri Madhavilata and another, (2009) 10 SCC 103" wherein their lordships held as follows:

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