Arbitration Clause Cannot Be Invoked Post Expiry Of Tenancy Agreement: Allahabad High Court

While entertaining a revision petition related to a tenancy agreement, the Allahabad High Court has held that a clause for arbitration cannot be invoked for any disputes that arise after the contract has come to an end.“… it clearly transpires that existence of a contract is necessary for invocation of arbitration clause prescribed under the agreement as the clause would perish with the contract,” held Justice Ajit Kumar.Factual BackgroundThe revisionist and opposite party entered into a tenancy agreement on 27.08.2016, which was to last for a period of eleven months, from 01.09.2016 to 31.07.2017. The opposite party issued two notices, the latter of which asked the revisionist to vacate the property by 31.07.2017, the date on which the tenancy was to come to an end. Revisionist raised a dispute by submitting a reply on 29.07.2019, stating that as per their oral agreement, the tenancy was supposed to last a period of ten years. It was submitted that when this agreement was reduced to writing, however, it was only done for a period of eleven months, subject to a renewal. Thus, the revisionist contended that the notice to leave the premises was untenable. He refused to vacate the premises and in response, the opposite party instituted a Small Causes Court suit. Revisionist raised an objection by filing an application under Order VII Rule 11 CPC, challenging the maintainability of the suit on ground that in view of the arbitration clause provided under the agreement, the matter should be referred to arbitration rather than a suit.Per contra, the opposite party contended that the contract between the parties came to an end on 31.07.2017 and since the suit was instituted subsequently, he had every right to sue the revisionist for not leaving the property. The Trial Court held that since the suit was filed after the contract came to an end, the terms of the contract could not be invoked and thus the matter could not be referred to arbitration. Aggrieved, the revisionist filed the revision before the High Court. High Court Verdict The Court held that since the contract had ended on 31.07.2017, the arbitration clause provided in agreement, could not be referred to in order to non-suit the plaintiff. The Court referred to Union of India v. Kishori Lal Gupta and Ors., where the Supreme Court considered the question of enforceability of an arbitration agreement to determine the validity of a suit and held that “… (2) however comprehensive the terms of an arbitration clause may be, the existence of the contract is a necessary condition for its operation; it perishes with the contract.”In the present case, the Court held that both parties were agreement about the fact that the contract was to only last a period of eleven months and thus, its legal effect would come to an end on 31.07.2017. The Court held that in different categories of disputes such as repudiation, frustration and breach, etc., the contract could have been said to have subsisted. However, considering the matter at hand, this was not the case.“Repudiation/ frustration and breach relate to the condition flowing from contract but the moment contract perishes the lease ends, the condition under lease also perishes with such contract and hence, the suit for eviction would lie,” held Justice Kumar. The Court held that as per Section 8 of the Arbitration and Conciliation Act, 1996 and Section 9 of the C.P.C., the clause providing for arbitration would be enforceable only if the contract was in existence. Relying on the judgement of the Andhra Pradesh High Court in Chunduru Visalakshi v. Chunduru Rajendra Prasad, the Court held that “Order VII Rule 11 CPC application would be maintainable only when there is a bar and since the amended provision Section 8 of the Arbitration and Conciliation Act, 1996 does not provide an absolute bar, therefore, the order VII rule 11 application would certainly not be maintainable.” The Court held that as per Clause 7 of the agreement, even if the opposite party had issued notices to the revisionist during the validity of the agreement, he would be completely within his rights to and the same would not amount to a dispute referable to arbitration. The said clause divulged rights to the lessee and lessor to vacate the premises after giving a month's written notice, held the Court. Accordingly, the revision was dismissed. Case Title: Anoop Maheshwari v. Thomas T. Kurian [S.C.C. REVISION No. - 157 of 2024]Counsel for Revisionist: Ishir SripatCounsel for Opposite Party: Nipun Singh, Naman AgarwalClick Here To Read/Download Order

Arbitration Clause Cannot Be Invoked Post Expiry Of Tenancy Agreement: Allahabad High Court

Upasna Agrawal

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