http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 15  

PETITIONER: NATRAJ STUDIOS (P) LTD.

       Vs.

RESPONDENT: NAVRANG STUDIOS & ANR.

DATE OF JUDGMENT07/01/1981

BENCH: REDDY, O. CHINNAPPA (J) BENCH: REDDY, O. CHINNAPPA (J) PATHAK, R.S. ISLAM, BAHARUL (J)

CITATION:  1981 AIR  537            1981 SCR  (2) 466  1981 SCC  (1) 523        1981 SCALE  (1)62

ACT:      Bombay Rents, Hotel and Lodging House Rates Control Act 1947-Sections   5   and   5A   and   28-Scope   of-Exclusive jurisdiction to  try suits  under the  Act given to Court of Small Causes-Parties,  if could  confer  jurisdiction  on  a arbitrator by agreement.

HEADNOTE:      The respondent  granted to  the  appellant  "leave  and licence" for  the  use  of  their  two  studios,  machinery, equipment and  certain other  materials.  With  effect  from February 1,  1973 section  15A was  inserted in  the  Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 under which any  person who  was in  occupation of any premises on February 1,  1973 as  a licensee  shall be  deemed  to  have become on  that date  a tenant of the landlord in respect of the premises  or part  thereof in his occupation. The ’leave and licence’ agreement was in force on that date.      In April,  1979 the  respondent purporting to terminate the leave  and licence’  agreement called upon the appellant to  hand  over  possession  of  the  studios  to  the  first respondent. Immediately  thereafter the  appellant  filed  a suit for  a declaration  that the  appellant was  a  monthly tenant of  the two  studios and  other structures covered by the agreement.      In August,  1979 the  appellant  filed  an  application under section  33 of  the Arbitration  Act for a declaration that the  arbitration clause  in  the  ’leave  and  licence’ agreement was  invalid and  inoperative. The application was dismissed by  a single  Judge on  the ground  that he had no jurisdiction  to  determine  the  rights,  if  any,  of  the appellant as  a tenant.  A Division  Bench of the High Court dismissed the  appellant’s appeal  against the  order of the single Judge  on the  ground that  it was  not  maintainable under section 39 of the Arbitration Act.      Allowing  the   first  respondent’s  application  under section 8  of the  Arbitration Act  the High Court appointed the second respondent as the sole arbitrator.      In appeal against the dismissal of his suit and against the  judgment  of  the  High  Court  appointing  the  second respondent as  sole arbitrator it was contended on behalf of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 15  

the appellant  that under  the 1947  Act the dispute between the parties  could only  be resolved  by the  Court of Small Causes and  that  the  jurisdiction  of  every  other  Court including that of an arbitrator was excluded.      On behalf of the first respondent it was contended that the subject  matter of ’leave and licence’ agreement was not ’premises’ within  the meaning of that expression as defined in the  1947 Act  but the business as such and therefore the provisions of the Act were not attracted. 467      Allowing the appeal ^      HELD :  A building in which a person is licensed to run a business is "premises" within the meaning of sections 5(8) and 5(8A), to which part II of the Act is made applicable by section 6(1)  notwithstanding the  fact that the building is not let as such. [474D]      If the definitions of "premises let or given on licence for business",  "premises" and  "licensee" are read together it will  be clear  that even  a building  so constructed  or designed as  to be  capable of  being  used  for  running  a certain business  only is  "premises" within  the meaning of section 5(8)  and section  5(8A) and  does not  cease to  be premises merely  because the  building is  capable of  being used for  the particular  business only  or  merely  because machinery or  equipment must  necessarily go  alongwith  the building if it is to be used for the business. If "premises" did not,  by definition, include a building given on licence but meant only a building which was let, it could perhaps be argued that  the expression ’premises’ would not take within its stride  a business  let as a business, but the situation is changed by the inclusion of any building given on licence in the  definition of  "premises" and  by the  deeming of  a licensee as  a tenant  under  section  15A  of  the  Act.  A licensee is not really a tenant but is a person deemed to be a tenant because of section 15A of the Act. [474 A-B]      Uttamchand v.  S. M.  Lalwani A.I.R.  1965 S.C. 716 and Dwarka Prasad  v. Dwarka Das Saraf, [1976] 1 S.C.R. 277 held inapplicable.      The 1947  Act applies  to a  licence to  use a building even  if   the  building  is  to  be  used  necessarily  and simultaneously along  with machinery and fixtures separately licensed to  be used.  In such  a situation  there can be no question of the licence to use the machinery and the licence to use  the building  being dominant and subsidiary purposes of the agreement. [475 G]      The argument that the agreement was primarily a licence to carry  on the  business of  shooting films  by using  the machinery and  equipments listed  in the  agreement and that the licence  to use  the  building  was  only  a  subsidiary incident of  the dominant  purpose of  the agreement  is not valid. The  two studios  given on  licence  would  still  be premises given on licence for business within the meaning of the Act so as to attract its protective provisions. [475 H]      The agreement  in  the  instant  case  is  a  composite agreement which  gave "leave and licence" to use the studios and other  premises for  producing  films  and  to  use  the machinery and  equipment for the same purpose. The licensors parted with  possession of  the studios and the machinery in favour of  the licensees.  Notwithstanding the fact that the agreement was  a composite  one and the two licences were to operate "simultaneously  and together"  there  could  be  no gainsaying the fact that the studios and other premises were certainly given  on licence  for the  business of  producing films.  The  parties  themselves  were  conscious  that  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 15  

licence granted  by the  licensor in  favour of the licensee was in  respect of  the studios  and other premises and that there was  even a  risk of  the licence being construed as a lease. They  were, therefore, anxious to emphasise that what was granted was a licence and not a lease. Both by reason of section 28  of the  1947 Act  and by  reason of  the broader consideration of public policy 468 the Court of Small Causes has and the arbitrator has not the jurisdiction to  decide the question whether the respondent- licensor-landlord is  entitled to seek possession of the two studios and  other  premises  together  with  machinery  and equipment from the appellant-licensee-tenant. [476 G-H]      Section  28(1)  of  the  1947  Act  positively  confers jurisdiction on  the Court  of Small Causes to entertain and try any  suit  between,  among  others,  a  licensor  and  a licensee relating  to the  recovery of  licence fee  and  to decide any  application made  under the  Act and  negatively excludes  the   jurisdiction  of   any  other   Court   from entertaining and  such suit,  proceeding or  application  or dealing with such claim or question. [477 D-E]      The scheme of the 1947 Act shows that the conferment of exclusive jurisdiction  on certain Courts is pursuant to the social objective  at  which  the  legislation  aims.  Public policy requires  that contracts  to the  contrary cannot  be permitted.  Therefore,   public  policy  requires  that  the parties  cannot   be  permitted   to  contract  out  of  the legislative mandate which requires certain kinds of disputes to be  settled by  special courts  constituted by  the  Act. [477G]      Exclusive jurisdiction  to entertain  and  try  certain suits, to  decide  certain  applications  or  to  deal  with certain claims  or questions  given to  the Court  of  Small Causes does  not necessarily  mean exclusive jurisdiction to decide jurisdictional  facts also. Jurisdictional facts have necessarily  to   be  decided   by  the   Court  where   the jurisdictional question falls to be decided and the question may  fall   for  decision  before  the  Court  of  exclusive jurisdiction or before the Court of ordinary jurisdiction. A suit by  the landlord  against the  tenant for  recovery  of possession of  his premises on grounds specified in the Rent Act will  have to  be brought  in the  Court of Small Causes which has  been made  the Court  of exclusive  jurisdiction. [478 A-C]      In  the  instant  case  the  relationship  between  the parties being  that of licensor-landlord and licensee-tenant and the  dispute between  them relating to the possession of the licensed-demised  premises the  Court  of  Small  Causes alone has  the jurisdiction  and the  Arbitrator has none to adjudicate upon the dispute between the parties.      Babulal Bhuramal  & Anr.  v.  Nandram  Shivram  &  Ors. [1959] S.C.R.  367, Raizada Topandas & Anr. v. M/s Gorakhram Gokalchand  [1964]   3  S.C.R.   214,  Vasudev  Gopalkrishna Tamwekar v. The Board of Liquidators, Happy Home Cooperative Housing Society  [1964] 3  S.C.R. 964  and Deccan  Merchants Cooperative Bank  Ltd. v.  M/s Dalichand  Jugraj Jain & Ors. [1969] 1 S.C.R. 887 referred to.      Chadha Motor  Transport Co.  (P) Ltd.,  Delhi v.  R. N. Chopra A.I.R.  1968 Delhi  75, and  Basanti Cotton  Mills v. Dhingra Brothers, A.I.R. 1949 Cal. 684 approved.      The  Court   of  Small   Causes   is   not   exercising jurisdiction over any arbitration proceedings merely because the agreement  between the  parties contains  an arbitration clause and  the Court  is asked  to stay a proceeding before itself. The jurisdiction under section 34 of the Arbitration

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 15  

Act may  be exercised by the judicial authority before which the proceedings  are pending  and not by the court which has jurisdiction over the arbitration proceedings. This is clear from the 469 language  of   section  34   of  the   Arbitration  Act.  An application  under   section  34   is  not   an  arbitration proceeding; nor  is it  an application arising thereout. The bar under  section 40  does not come in the way of the Court of Small  Causes exercising jurisdiction under section 34 of the Arbitration  Act to  stay proceeding  pending before it. [483 F-G]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION : Civil Appeal Nos. 1906- 1907 of 1980.      Appeals by  Special Leave from the Judgments and Orders dated 12-11-1979  and 29-2-1980  of the Bombay High Court in Arbitration Petition Nos. 94/79 and 9/80.      Soli J.  Sorabji, Talat Ansari and A. N. Haksar for the Appellant.      P. R.  Mridul,  P.  H.  Parekh,  Jushubhai  and  R.  N. Karanjawala for the Respondents.      The Judgment of the Court was delivered by      CHINNAPPA REDDY,  J. The  appellant Natraj Studies (P.) Ltd., and  the first  respondent Navrang  Studios,  a  firm, entered into  an agreement  on March  28, 1970, by which the latter granted the former "leave and licence" for the use of their two  studios and  other premises  described in  list I annexed to  the agreement  and situated  at 194  Kurla Road, Andheri Bombay,  and the  machineries, equipments,  property setting materials  etc. mentioned  in list  No. 2 annexed to the agreement.  Though the  agreement was  initially  for  a period of 11 months it was extended from time to time. By an agreement dated November 5, 1972, the original agreement was extended for a period of eleven months from January 1, 1973. The ’leave  and licence’  agreement was  thus  in  force  on February 1,  1973, with  effect from  which date  S. 15A was inserted in  the Bombay Rents, Hotel and Lodging House Rates Control Act,  1947, by  an amendment  (Maharashtra Act 17 of 1973). The  effect of  S. 15A was that any person who was in occupation of any premises on February 1, 1973 as a licencee was deemed to have become, on that date, for the purposes of the Act,  a tenant  of  the  landlord,  in  respect  of  the premises or  part thereof  in his  occupation. On  April 28, 1979, the first respondent purported to terminate the ’leave and licence’ agreement and called upon the appellant to hand over possession  of the  Studios to  the  first  respondent. Immediately, on May 8, 1979, the appellant filed Declaratory Suit No.  2326 of 1979 in the Court of Small Causes, Bombay, praying for a declaration that the plaintiff-appellant was a monthly tenant  of the  two studios and all other structures and open  land covered  by the agreement and for fixation of standard rent  and other  reliefs. A  written statement  was filed by  the first  respondent contesting the suit. Pending disposal of 470 the suit  an interim order was made provisionally fixing the rent as  Rs.  11500  per  month.  On  August  4,  1979,  the appellant  filed   an  application   under  S.   33  of  the Arbitration Act  in the  Bombay High Court for a declaration that the  arbitration clause  in  the  ’leave  and  licence’ agreement was  invalid, inoperative etc. The application was

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 15  

dismissed by  the High  Court on  November 12,  1979,  by  a learned  single   Judge  on  the  ground  that,  he  had  no jurisdiction to  determine the  alleged rights if any of the appellant as  a tenant.  On  January  21,  1980,  the  first respondent filed an application under s.8 of the Arbitration Act praying that the second respondent might be appointed as the sole  arbitrator to  decide the disputes and differences between the  parties under the ’leave and licence’ agreement dated March  28, 1970.  On February 29, 1980, the High Court allowed  the   application  of   the  first  respondent  and appointed the  second respondent  as the  sole arbitrator. A day earlier  that is,  on February 28, 1980, an appeal filed by the  appellant  against  the  judgment  and  order  dated November 12,  1979 of the learned single Judge was dismissed by a  Division Bench of the High Court on the ground that it was not  maintainable under S.39 of the Arbitration Act. The present two  Civil Appeals  have been filed by the appellant against the  orders of  the High  Court dated  November  12, 1979, and February 29, 1980.      Shri Soli Sorabji and Shri Talat Ansari learned counsel for the  appellant submitted that the essence of the dispute between the  parties was  the right to the possession of the two Studios,  that after  the 1973  Amendment to  the Bombay Rents, Hotel  and Lodging House Rates Control Act, 1947, the status of  the appellant  was at  least that  of  a  ’deemed tenant’, that  under the  scheme of the Bombay Rent, Hotel & Lodging House  Rates Control  Act, 1947, the dispute between the parties  could only  be resolved  by the  Court of Small Causes and  that every  other Court’s jurisdiction including that of  an arbitrator  was excluded.  Shri Mridual, learned counsel for  the first  respondent, argued  that the subject matter  of   the  ’leave  and  licence’  agreement  was  not ’premises’ within  the meaning of that expression as defined in the  Bombay Act  but the business as such and, therefore, the provisions  of the Bombay Rents, Hotel and Lodging House Rates Control Act were not attracted at all.      For a  clear appreciation of the rival submissions, the relevant provisions  of the  Bombay Rent,  Hotel  &  Lodging House Rates Control Act, 1947, may first be set out.      Section 5(4A) defines a licensee as follows:           "(4A) ’licensee’,  in respect  of any  premises or      any part thereof, means the person who is in occupation      of the pre- 471      mises or  such part,  as  the  case  may  be,  under  a      subsisting agreement  for licence  given for  a licence      fee  or   charge;  and  includes  any  person  in  such      occupation  of  any  premises  or  part  thereof  in  a      building vesting  in or leased to a cooperative housing      society registered or deemed to be registered under the      Maharashtra Co-operative  Societies Act, 1960; but does      not include  a paying  guest,  a  member  of  a  family      residing  together,   a  person   in  the   service  or      employment of  the licensor,  or a  person conducting a      running business belonging to the licensor, or a person      having any  accommodation in  a hotel,  lodging  house,      hostel,  guest  house,  club,  nursing  home,  hospital      sanatorium, dharmashala,  home for  widows, orphans  or      like  premises,   marriage  or   public  hall  or  like      premises, or  in a  place of amusement or entertainment      or like institution, or in any premises belonging to or      held by  any employee  or his  spouse who on account of      the exigencies  of service  or provision of a residence      attached to  his or  her post  or office is temporarily      not occupying  the premises,  provided that  he or  she

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 15  

    charges licence  fee or charge for such premises of the      employee or  spouse not exceeding the standard rent and      permitted  increases   for  such   premises,  and   any      additional  sum   for  services   supplied  with   such      premises, or  a  person  having  accommodation  in  any      premises or  part thereof  for  conducting  a  canteen,      creche, dispensary  or other  services as  amenities by      any undertaking  or institution;  and  the  expressions      ’licence’, ’licensor’  and ’premises  given on licence’      shall be construed accordingly";      Section 5(8) defines premises as follows:      "(8) ’premises’ means-           (a)  any land  not  being  used  for  agricultural                purposes,           (b)  any building  or part  of a  building let  or                given on  licence separately  (other  than  a                farm building) including-                (i)  the garden,  grounds, garages  and  out-                     houses,  if  any,  appurtenant  to  such                     building or part of a building,                (ii) any furniture  supplied by  the landlord                     for use  in such  building or  part of a                     building,                (iii)any fittings affixed to such building or                     part  of   a  building   for  the   more                     beneficial enjoyment thereof,      but does not include a room or other accommodation in a      hotel or lodging house." 472      Section 5(8A) is as follows:      "(8A) ’premises  let or  given on licence for business’ includes, and  shall be  deemed  always  to  have  included, premises  let  or  given  on  licence  for  the  purpose  of practising any  profession or  carrying  on  any  occupation therein";      Section 5(11) defines tenant as follows:-      "tenant" means  any person  by whom or on whose account rent is payable for any premises and includes-           (a)xxx              xxx            xxx           (aa)xxx             xxx            xxx           (b) xxx             xxx            xxx           (bb) such  licensees as  are deemed  to be tenants for the purposes of this Act by Section 15A.           (c) xxx             xxx            xxx      We may  add here  that the  definition of  landlord  in S.5(3) was  suitably amended  in 1973  so as  to include ’in respect of  a licensee  deemed to be a tenant by S.15A’ ’the licensor who has given such licence’.      Sec. 6(1) provides:           "(1) In  areas specified  in Schedule I, this part      shall apply  to premises  let or  given on  licence for      residence, education, business, trade or storage."      Sec. 15A which deems certain licensees in occupation of premises on 1.2.1973 as tenants says:           "15A.  (1)   Notwithstanding  anything   contained      elsewhere in this Act or anything contrary in any other      law for  the time  being in  force, or in any contract,      where any person is on the 1st day of February, 1973 in      occupation of  any premises,  or any part thereof which      is not less than a room, as a licensee he shall on that      date be deemed to have become, for the purposes of this      Act, the  tenant of  the landlord,  in respect  of  the      premises or part thereof, in his occupation.           (2) The  provisions of  sub-section (1)  shall not      affect in  any manner  the operation of sub-section (1)

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 15  

    of section 15 after the date aforesaid." 473           Sec. 28(1)  which  prescribes  and  prohibits  the      jurisdiction of certain Courts says:           "28(1) Notwithstanding  anything contained  in any      law and notwithstanding that by reason of the amount of      the  claim  or  for  any  other  reason,  the  suit  or      proceeding would not, but for this provision, be within      its jurisdiction,           (a) in  Greater Bombay, the Court of Small Causes,      Bombay,           (aa) in  any area  for which,  a  Court  of  Small      Causes is  established under the Provincial Small Cause      Courts Act, 1887, such Court and           (b)  elsewhere,  the  Court  of  the  Civil  Judge      (Junior Division)  having jurisdiction  in the  area in      which the  premises are situate or, if there is no such      Civil Judge,  the Court  of  the  Civil  Judge  (Senior      Division) having ordinary jurisdiction,      shall have  jurisdiction to  entertain and try any suit      or proceeding between a land-lord and a tenant relating      to the  recovery of  rent or possession of any premises      to which  any of  the provisions  of this Part apply or      between a  licensor and  a  licensee  relating  to  the      recovery of the licence fee or charge and to decide any      application made  under this  Act and  to deal with any      claim or question arising out of this Act or any of its      provisions and subject to the provisions of sub-section      (2),  no   other  court   shall  have  jurisdiction  to      entertain any  such suit,  proceeding or application or      to deal with such claim or question."      Sec. 6(1)  which occurs in Part II of the Act makes the provisions of  Part II  applicable to "premises let or given on licence  for  business"  also.  Sec.  5(8A)  expands  the meaning of  the expression "premises let or given on licence for business"  so as  to include  premises let  or given  on licence for  the purpose  of practising  any  profession  or carrying  on  any  occupation  therein.  Sec.  5(8)  defines "premises" among  other things, as any building or part of a building let  or given  on licence  separately’,  including, among other  things, ’any  fittings affixed to such building or part  of a  building for  the more  beneficial  enjoyment thereof’. Sec.  5(4A), while defining licensee as the person who is  in occupation  of the  premises or  any part thereof under a  subsisting agreement  for  a  licence,  excludes  a person  conducting  a  running  business  belonging  to  the licensor. If  the definitions  of "premises  let or given on licence for business", "premises" and 474 "licensee" are  read together  it will  at once become clear that even  a building  so constructed  or designed  as to be capable of being used for running a certain business only is "premises" within  the meaning  of Sec.  5(8) and Sec. 5(8A) and does  not  cease  to  be  premises  merely  because  the building  is  capable  of  being  used  for  the  particular business only  or merely because machinery or equipment must necessarily go  alongwith the  building if  it is to be used for the  business. If  "premises"  did  not,  by  definition include a  building  given  on  licence  but  meant  only  a building which  was let,  it could  perhaps be  argued  with great force  that the  expression premises  would  not  take within its  stride a  business let  as a  business, but  the situation is  changed by the inclusion of any building given on licence  in the  definition of  "premises",  and  by  the deeming of a licensee as a tenant under S. 15A of the Act. A

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 15  

licensee is not really a tenant but is a person deemed to be a tenant because of Sec. 15A of the Act. A building in which a person  is licensed to run a business is "premises" within the meaning  of S. 5 (8) and 5 (8A), to which Part II of the Act is  made applicable  by S. 6(1) notwithstanding the fact that the building is not let as such.      Shri Mridul relied upon Uttamchand v. S. M. Lalwani and Dwarka  Prasad  v.  Dwarka  Das  Saraf  in  support  of  his contention  that   having  regard   to  the   definition  of "premises" the  licensee of  a business or industry which is carried on  in a  building cannot  be considered  to be  the licensee of  the premises  as  such,  independently  of  the business, so  as to be deemed to be a tenant entitled to the protection of  the provisions of the Bombay Rents, Hotel and Lodging House  Rates Control  Act, 1947. In Uttamchand v. S. M. Lalwani  (supra) the  facts were  that Dal  Mill Building with fixed  machinery and  other accessories was the subject matter of  a lease.  The object was to use the building as a Dal Mill.  The question  arose whether the subject matter of the lease  was ’accommodation’ within the meaning of S. 3(A) of  the  Madhya  Pradesh  Accommodation  Control  Act  which defined ’accommodation’  as meaning, among other things, any building or  part of  a building  and including any fittings affixed to  such building or part of a building for the more beneficial  enjoyment  thereof.  This  Court  held  that  in construing the  lease it  was  necessary  to  determine  the dominant intention  of the  parties. It  was found  that the dominant intention  of the  parties was  that  the  building should be  used as  a Dal  Mill. It was not a case where the subject matter  of the  lease was the building and alongwith the leased  building, incidentally,  passed the  fixtures of the machinery  in regard  to the mill. In truth the Mill was the subject  matter of the lease and it was because the Mill was intended to be let 475 out that the building had inevitably to be let out alongwith the mill.  On that finding it was held that the lease was of the mill and not of the building and therefore, there was no lease of  any ’accommodation’.  Dwarka Prasad  v. Dwarka Das Saraf (Supra)  was a  case of  a composite lease of a Cinema theatre consisting  of the  building for  which the rent was Rs. 400/-  per month  and the  projector, fittings, fans and other fixtures  for which  the rent  was Rs. 1000 per month. The  question   arose  whether   there  was   a   lease   of ’accommodation’ as defined by Sec. 2(a) of the Uttar Pradesh (Temporary)  Control   of  Rent   and  Eviction  Act,  1947. Accommodation was  there defined  as meaning residential and non-residential accommodation  in any  building or part of a Building including any fittings, affixed to such building or part of  the building  for  the  more  beneficial  enjoyment thereof. This  Court held that where the lease was composite and had  a plurality  of purposes, the decisive test was the dominant purpose  of the  demise. Applying  the test  it was found that  the real  subject of  the lease  was the  cinema apparatus  and   fittings   including,   ’subsidiarily   and incidentally’, the  building. It  will be  seen that in both the cases  there was  no question  of  a  licence,  nor  any question of  a licensee  being deemed  to be  a tenant.  The question concerned a lease and the question was whether what was demised  was a  business or  a building as such. If what was intended to be demised was a business, the Act would not apply. If what was intended to be demised was a building the Act would  apply. The test of dominant intention was applied and it  was found in each of the cases that the lease was of a business and not of accommodation’.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 15  

    The question  in the present case is entirely different and is  one of  construction of the provisions of the Bombay Rent, Hotel & Lodging House Rates (Control) Act, 1947, which deem a licensee to be a tenant and, by definition, include a building or a part of a building given on licence within the meaning of  the expression  "premises", and,  expressly make the Act  applicable  to  "premises"  given  on  licence  for business. We  are of  the view that the Bombay Rent, Hotel & Lodging House  Rates  (Control)  Act,  1947,  applies  to  a licence to use a building even if the building is to be used necessarily and  simultaneously  along  with  machinery  and fixtures separately licenced to be used. In such a situation there can be no question of the licence to use the machinery etc. and  the licence to use the building being dominant and subsidiary purposes  of the  agreement as  suggested by Shri Mridul in  his argument.  The submission of Shri Mridul that the agreement  was primarily  a  licence  to  carry  on  the business of  shooting  films  by  using  the  machinery  and equipments listed  in the  agreement and that the licence to use the building was only subsidiary incident 476 of the  dominant purpose of the agreement does not appeal to us. On  the construction placed by us upon the provisions of the Bombay  Rent, Hotel & Lodging House Rates (Control) Act, 1947, the  two studios  given  on  licence  would  still  be premises given on licence for business within the meaning of the Act so as to attract its protective provisions.      At this  juncture we  may refer  to the  terms  of  the agreement. The agreement provided for (1) "leave and licence in respect  of studios  Nos. 2  and 3 duly sound proofed and electrified and  other premises  more particularly described in list  No. 1  hereto annexed  situated at  194 Kurla Road, Andheri, Bombay,  on  a  monthly  compensation  of  Rs.  250 including sound proofing and electrification" and (2) "leave and  licence   in  respect   of  the   machineries,  lights, equipments, setting and property materials etc. mentioned in list No.  2 hereto  annexed on a monthly compensation of Rs. 7500". The  two licences,  it was stipulated, were to be "in force and  operation simultaneously  and together"  and "not subject to  divisibility". The  licensees were  entitled  to carry on their work of producing motion picture films in the studios and  the machineries and other equipments were to be used for that purpose only. The licensees were also entitled to permit  the  use  of  the  studios  and  other  premises, machineries  and  other  articles  temporarily,  by  others, whomsoever they liked during the subsistence of the licences for the  purpose of producing motion pictures only. Property tax and  other taxes  were to  be  borne  and  paid  by  the licensors while  the licensees  were required to pay for the consumption of electricity and water. During the subsistence of the  licences the  licensees were  not to  part with  the possession of  the studios  and other  premises, machineries and equipments.  The Studios and other premises, machineries and equipments were to be used by the licensees in a prudent manner. The  agreement further  stipulated that  no  tenancy rights were  to be  understood as having been created by the licensors in  favour of  the licensees. The interest created was that  of licensees  only. The licensees were to carry on their business  of motion  picture films’  production in the licensed premises under the name and style of Natraj Studios (P) Ltd.  The agreement  is thus  seen  to  be  a  composite agreement which  gave ’leave  and licence’  (1) to  use  the studios and  other premises  for producing  films and (2) to use the  machinery and  equipment for  the same purpose. The licensors parted  with possession  of the  Studios  and  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 15  

machinery in  favour of  the licensees.  Notwithstanding the fact that  the agreement  was a  composite one  and the  two licences were  to  operate  ’simultaneously  and  together’, there could  be no  gainsaying the fact that the Studios and other premises  were certainly  given  on  licence  for  the business of producing films. The 477 parties themselves  were conscious  that the licence granted by the  licensor in favour of the licensee was in respect of the Studios  and other  premises and  that there  was even a risk the licence being construed as a lease      So they  were anxious, at that stage, to emphasise that what was  granted as  a licence  and not  a lease.  That was obviously to  circumvent the provisions of the Bombay Rents, Hotel and  Lodging House  Rates Control  Act, 1947.  It  was apparently thought that the sophisticated description of the transaction as  a ’licence’ instead of a lease would take it out of  the clutches  of the  Bombay Rent, Hotel and Lodging House Rates  Control Act.  It  was  precisely  the  type  of agreement  that  forced  the  hand  of  the  legislature  to intervene and  amend the Act by introducing S. 15 A by which such licensees were deemed to be tenants of the landlord.      We may  now proceed to consider the submission that the Court of  Small Causes  alone has  exclusive jurisdiction to resolve the  dispute between  the parties.  S. 28(1)  of the Bombay Rent  Act, positively  confers  jurisdiction  on  the Court of  Small Causes  to entertain  and try  any  suit  or proceeding between  a landlord  and tenant  relating to  the recovery of  rent or possession of any premises or between a licensor and  a licensee relating to the recovery of licence fee or  charge and  to decide any application made under the Act and  to deal  with any  claim or question arising out of the Act or any of its provisions, and negatively it excludes the jurisdiction  of any  other Court  from entertaining any such suit,  proceeding or  application or  dealing with such claim or question.      The Bombay  Rent Act  is a welfare legislation aimed at the definite  social  objective  of  protection  of  tenants against harassment  by landlords  in various  ways. It  is a matter of  public policy.  The scheme  of the Act shows that the conferment  of exclusive  jurisdiction on certain Courts is pursuant to the social objective at which the legislation aims. Public  policy requires that contracts to the contrary which nullify  the rights  conferred on  tenants by  the Act cannot be  permitted. Therefore, public policy requires that parties cannot  also be  permitted to  contract out  of  the legislative mandate  which requires certain kind of disputes to be  settled by  special courts constituted by the Act. It follows that  arbitration agreements  between parties  whose rights are  regulated by  the  Bombay  Rent  Act  cannot  be recognised by a Court of law.      Thus exclusive  jurisdiction is  given to  the Court of Small Causes  and jurisdiction is denied to other Courts (1) to entertain and try 478 any suit  or proceeding  between a  landlord  and  a  tenant relating to  recovery of rent or possession of any premises, (2) to  try any  suit or proceeding between a licensor and a licensee relating  to the recovery of licence fee or charge, (3) to decide any application made under the Act and, (4) to deal with  any claim  or question  arising out of the Act or any of  its provisions.  Exclusive jurisdiction to entertain and try  certain suits, to decide certain applications or to deal with  certain claims  or questions does not necessarily mean exclusive  jurisdiction to  decide jurisdictional facts

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 15  

also. Jurisdictional facts have necessarily to be decided by the Court  where the  jurisdictional question  falls  to  be decided, and  the question  may fall for decision before the Court of  exclusive jurisdiction  or  before  the  Court  or ordinary jurisdiction.  A person  claiming to  be a landlord may sue  his alleged  tenant for possession of a building on grounds specified  in the Rent Act. Such a suit will have to be brought in the Court of Small Causes, which has been made the Court  of exclusive  jurisdiction. In  such a  suit, the defendant may  deny  the  tenancy  but  the  denial  by  the defendant will  not oust  the jurisdiction of Court of Small Causes. If  ultimately the Court finds that the defendant is not a tenant the suit will fail for that reason. If the suit is instituted  in the  ordinary Civil  Court instead  of the Court of  Small Causes  the plaint  will have to be returned irrespective of  the plea  of the  defendant.  Conversely  a person claiming  to be  the owner of a building and alleging the defendant  to be a trespasser will have to institute the suit, on the plaint allegations, in the ordinary Civil Court only. In  such a  suit the defendant may raise the plea that he is  a tenant  and not  a trespasser. The defendant’s plea will not  straightaway oust the jurisdiction of the ordinary Civil Court  but if  ultimately the plea of the defendant is accepted the  suit must fail on that ground. So the question whether there is relationship of landlord and tenant between the parties  or such other jurisdictional questions may have to  be   determined  by   the  Court   where  it  falls  for determination-be  it  the  Court  of  Small  Causes  or  the ordinary Civil  Court. If  the  jurisdictional  question  is decided in favour of the Court of exclusive jurisdiction the suit or  proceeding before  the ordinary  Civil  Court  must cease to the extent its jurisdiction is ousted.      In Babulal  Bhauramal & Anr. v. Nandram Shivram & Ors., it was held that S.28 of the Bombay Rents, Hotel and Lodging House Rates  Control Act, 1947, excluded the jurisdiction of the  City  Civil  Court  from  entertaining  a  suit  for  a declaration that one of the plaintiffs was the tenant of the defendant-landlord and the other plaintiffs 479 were his  sub-tenants and  that they  were  entitled  to  be protected from  eviction, under the provisions of the Bombay Rents, Hotel  and Lodging House Rates Control Act, 1947. The argument  that   S.28  applied   only  to  suits  where  the relationship  of   landlord  and  tenant  was  admitted  was repelled with the observation that the suit did not cease to be a suit between a landlord and a tenant merely because the defendants denied the claim of the plaintiffs. It was said:           "On a  proper interpretation  of the provisions of      S.28 of  the suit  contemplated in  that section is not      only a  suit between  a landlord  and a tenant in which      that relationship  is admitted but also a suit in which      it is claimed that the relationship of a landlord and a      tenant within  the meaning  of the Act subsists between      the parties.  The Courts  which  have  jurisdiction  to      entertain and  try such a suit are the Courts specified      in S.28 and no other".      In Raizada Topandas & Anr. v. M/s. Gorakhram Gokalchand the plaintiff  instituted a  suit in  the City  Civil Court, Bombay, against  the defendant  for a  declaration that  the plaintiff was  in lawful  possession of  a shop  and for  an injunction restraining  the  defendants  from  entering  the shop. The  plaintiff alleged that the defendant was licensee for a  definite term of years and that the period of licence stipulated under  the agreement  had expired  (The suit  was instituted before  S.15A was  introduced into the Act by the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 15  

1973 amendment).  The defendant’s  plea was that there was a relationship of  landlord and tenant between the parties and that the Court of Small Causes alone had jurisdiction to try the suit  and not  the City Civil Court. It was held by this Court  that   since  the   plaintiff  did   not  admit   the relationship of  landlord and  tenant between  him  and  the defendant, the  defendant could  not, by  his plea force the plaintiff to  go to  a forum where, on his own averments, he could not  go. The  Court, however,  did not  say  that  the defence could  never be considered to decide the question of jurisdiction. It  would be the duty of the Court to consider the defence  at some stage, and come to a conclusion, if the facts  warrant   whether  the   plaintiff’s  denial  of  the relationship of  landlord and  tenant was  a mere camouflage and whether  on  the  facts  there  was  a  relationship  of landlord and  tenant between the parties which precluded the Court from trying the suit any further.      In  Vasudev  Gopalkrishna  Tamwekar  v.  The  Board  of liquidators, Happy  Home Cooperative  Housing Society, there was a dispute 480 between a  House Building Cooperative Society and one of its members. The question arose whether the relationship between the Society  and the  member was  that of  a landlord  and a tenant.  The   dispute  was   referred  to  a  Committee  of Arbitrators under  the Bombay  Cooperative Societies Act and an award  was made. When the award was sought to be executed it was  claimed that  it was  without  jurisdiction  as  the question whether  the relationship  between the  parties was that of  landlord and tenant could only be determined by the Court of  Small Causes  under the  Bombay Rents,  Hotel  and Lodging House  Rates Control  Act, 1947 and not by any other authority. The  Court found  that if the jurisdiction of the Arbitrators was  to be  excluded, the proceedings before the Arbitrators must  be between  landlord and  tenant and  must relate to  the recovery of rent or possession of a premises. Where the  person invoking the jurisdiction of the Court did not set up a claim that the opposite party was a tenant or a landlord, the  defendant was  not entitled  to displace  the jurisdiction  of   the  ordinary   Court  by   alleging  the relationship of  landlord and  tenant between  them. It  was held that  the jurisdiction  was not  ousted as  soon as the contesting party  raised a  plea about the relationship of a landlord and  a tenant.  The  Court,  however,  did  not  go further and say that the ordinary Court’s jurisdiction would not be  ousted even if the Court came to the conclusion that the relationship between the parties was of a landlord and a tenant. The  Court, however,  found as a fact that there was no relationship of landlord and tenant between the parties.      In Deccan  Merchants  Cooperative  Bank  Ltd.  v.  M/s. Dalichand Jugraj  Jain &  Ors., the conflict was between the jurisdiction of the Registrar of Cooperative Societies under the  Maharashtra   Cooperative   Societies   Act   and   the jurisdiction of  the Court  of Small Causes under the Bombay Rents, Hotel  and Lodging House Rates Control Act, 1947. The Court held that whether or not the Registrar of Co-operative Societies was  a ’Court’ whose jurisdiction was ousted under S.28 of  the Bombay  Rents, Hotel  and Lodging  House  Rates Control Act,  1947, the  jurisdiction of  the Registrar  was surely ousted  on broader  considerations of  public policy. The Court  pointed out  that the  Rent Act  had  a  specific social objective  in view  and for  the achievement  of that objective it  was necessary  that the Court set up under the Rent Act alone should deal with a dispute between a landlord and a  tenant and  that in accordance with the provisions of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 15  

the Rent Act. Necessarily, the jurisdiction of the Registrar was ousted. The Court said (at pp. 901, 902);           "The scheme  of the  various  Rent  Acts  and  the      public policy  underlying them are clear; the policy is      to give pro- 481      tection  to  the  tenants.  Various  powers  have  been      conferred on  the authorities  under the  Rent Acts  to      grant protection  to the  tenants against ejectment and      other reliefs  claimed by  the landlords  ...... If the      matter  is  heard  by  the  Registrar,  none  of  these      provisions would  apply. We  can hardly imagine that it      was the intention of the legislature to deprive tenants      in buildings  owned by  cooperative  societies  of  the      benefits given by the Rent Act. It seems to us that the      Act was  passed, in  the main,  to shorten  litigation,      lessen its costs and to provide a summary procedure for      the determination  of  the  disputes  relating  to  the      internal management  of the  societies. But  under  the      Rent Act a different social objective is intended to be      achieved and  for achieving that social objective it is      necessary that  a dispute  between the landlord and the      tenant should  be dealt with by the Courts set up under      the  Rent  Act  and  in  accordance  with  the  special      provisions of  the Rent Act. This social objective does      not impinge  on the  objective underlying  the Act.  It      seems to us that the two acts can be harmonised best by      holding that  in matters  covered by  the Rent Act, its      provisions, rather  than the  provisions  of  the  Act,      should apply.      In Govindram  Salamatrai Bachani  v. Dharampal Amarnath Puri, a  Division Bench  of the Bombay High Court consisting of Chagla  C.J.  and  Bhagwati  J.  considered  whether  the question as  to whether  the defendant  was a  tenant  or  a licensee was a question which arose out of the Act or any of its provisions  (the case  was decided  long before the 1973 amendment). Chagla,  C.J., observed  that the question was a jurisdictional question  and had  nothing to do with the Act or any of its provisions. Whether a person was a tenant or a licensee or  a trespasser  was a question which was not left to the  exclusive determination  of the Special Court set up under the Rent Control Act but the question whether a person was entitled to the benefits of any of the provisions of the Act  was   a  question  which  could  only  be  decided  and determined by  Special Court. It was observed by Bhagwati J. (at p. 391-392):           ’There was no bar to the High Court entertaining a      suit  for   ejectment  of  a  licensee  as  such  or  a      trespasser as such. It would be determined by a perusal      of the  plaint which  was filed in the High Court as to      whether such a suit was capable of being entertained by      the High  Court. Once  it was  a suit  which  could  be      entertained by the High 482      Court,  there   was  no   question  of  its  not  being      entertained by  it. It would only be when the defendant      filed a written statement and claimed the protection of      the Rent  Act that  the  question  would  arise  to  be      determined by  the High  Court whether the relationship      between  the   plaintiff  and   the  defendant  in  the      particular case  before it was that as between landlord      and tenant.  If it  came to  the conclusion that it was      not so,  it would  continue to have the jurisdiction to      try the  suit and  would be able to try the suit on the      merits to  its logical  conclusion. If,  on  the  other

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 15  

    hand, the  High Court  came to  the conclusion that the      relationship between  the plaintiff  and the  defendant      was as  between landlord  and tenant  it would cease to      have jurisdiction  on that  determination and  the suit      would be  liable to  be transferred to the Small Causes      Court which,  under s.  28 of  Bombay Act LVII of 1947,      would be the only Court to have jurisdiction to try the      suits as  between landlords  and tenants falling within      the purview of s. 28".      In Sabavva  Kom Hanmappa  Simpiger v. Basappa Andaneppa Chiniwar, the  question directly  arose, as  in the  present case, whether  s. 28  of the  Bombay Rents,  Hotel & Lodging House  Rates   Control  Act,  1947,  excluded  reference  to arbitration of  a dispute  relating to  recovery of  rent or possession of  premises. It  was held by a Division Bench of the Bombay High Court that the expression Court occurring in s.28 of  the Bombay  Rents, Hotel  and Lodging  House  Rates Control Act  1947 included  an arbitrator and therefore, the jurisdiction of  the Arbitrator  to make an award in respect of any  dispute  of  the  nature  mentioned  in  s.  28  was excluded.      In the  light  of  the  foregoing  discussion  and  the authority of  the precedents, we hold that both by reason of S.28 of  the Bombay  Rents, Hotel  and Lodging  House  Rates Control  Act,   1947  and   by   reason   of   the   broader considerations of  public policy mentioned by us earlier and also in  Deccan Merchants  Cooperative  Bank  Ltd.  v.  M/s. Dalichand Jugraj  Jain &  Ors. (supra),  the Court  of Small Causes has  and the  Arbitrator has  not the jurisdiction to decide the question whether the respondent-licensee-landlord is entitled  to seek possession of the two studios and other premises together  with machinery  and  equipment  from  the appellant-licensee-tenant. That  this is  the  real  dispute between the  parties is  abundantly clear  from the petition filed by  the respondents in the High Court of Bombay, under S.  8   of  the  Arbitration  Act  seeking  a  reference  to Arbitration. 483 The petition refers to the notices exchanged by the parties, the respondent  calling upon  the  appellant  to  hand  over possession of  the studios to him and the appellant claiming to be  a tenant  or protected  licensee in  respect  of  the studios. The  relationship between the parties being that of licensor-landlord  and   licensee-tenant  and   the  dispute between them  relating to  the possession  of the  licensed- demised premises,  there is no help from the conclusion that the Court of Small Causes alone has the jurisdiction and the Arbitrator has  none to  adjudicate upon the dispute between the parties.      Learned counsel  for the  appellant further argued that the respondent  had filed  a written  statement in  the suit instituted by the appellant in the Court of Small Causes and was  therefore,   precluded  from  seeking  a  reference  to Arbitration.      On the  other hand  it was  submitted  by  the  learned counsel for the respondent that S. 40 of the Arbitration Act prevented  the   Small  Cause   Court  from  exercising  any jurisdiction over arbitration proceedings. It was also urged that the questions at issue in the Court of Small Causes and before the arbitrator were not identical.      The suit  was properly instituted in the Court of Small Causes and  if  the  respondent  wanted  to  rely  upon  the arbitration  clause  an  application  under  s.  34  of  the Arbitration Act  should have been made to the Court of Small Causes before  the written statement was filed. That was not

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 15  

done. It  was said that the Court of Small Causes would have no jurisdiction  to stay  the proceedings under s. 34 of the Act as  it was  precluded from  exercising any  jurisdiction over  arbitration   proceedings  under  s.40.  There  is  no substance in  this argument.  S. 40  of the  Arbitration Act declares that a Small Cause Court shall have no jurisdiction over any  arbitration proceeding  or  over  any  application arising thereout.  We do not see how it can be said that the Court of  Small Causes  is exercising  jurisdiction over any arbitration proceedings merely because the agreement between the parties  contains an arbitration clause and the Court is asked to  stay a  proceeding before itself. The jurisdiction under s.  34 may  be exercised  by  the  judicial  authority before which  the proceedings  are pending  and not  by  the Court  which   has   jurisdiction   over   the   arbitration proceedings. This is clear from the language of s. 34 of the Arbitration Act.  An application  under  s.  34  is  not  an arbitration proceeding;  nor is  it an  application  arising thereout. The  bar under  s. 40  does not come in the way of the Court  of Small  Causes exercising jurisdiction under s. 34 of  the Arbitration  Act to  stay  a  proceeding  pending before it. If authority is necessary for this 484 proposition it  may be  found in  Chadha Motor Transport Co. (P) Ltd.  Delhi v.  R. N. Chopra and Basanti Cotton Mills v. Dhingra Brothers.  The submission  that there is no identity of dispute is also without substance. As already pointed out by us  the dispute  is  between  the  licensor-landlord  and licensee-tenant about  the right  to possess two studios and other premises.  The identity of the dispute is clear from a perusal of  the pleadings  in the suit in the Court of Small Causes and  the petition  for reference to Arbitration filed in the High Court.      In the  result both the appeals are allowed with costs. The arbitration clause in the agreement dated March 28, 1970 is  declared   to  be  inoperative  .  The  application  for reference to Arbitration is dismissed. P.B.R.    Appeals allowed. 485