Asia Health Care Development Private Limited Vs Murshidabad Zilla Parishad (Calcutta High Court)
Summary: Asia Health Care Development Private Limited filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 before the Calcutta High Court seeking appointment of an arbitrator to adjudicate disputes arising out of a Deed of Agreement dated July 9, 2004. Clause 28 of the agreement provided that any dispute or difference between the parties, including regarding the validity or interpretation of the agreement, would be referred to the sole arbitration of the District Magistrate, Murshidabad.
A dispute arose following a letter dated January 11, 2022 issued by Murshidabad Zilla Parishad alleging neglect and failure to pay rent. The respondent also raised suspicion regarding the actual amount collected by the petitioner in running the hospital and the figures disclosed to it. The petitioner challenged the termination notice by filing a suit before the Civil Judge (Senior Division), First Court, Murshidabad at Berhampore. In that suit, the respondent invoked Section 8 of the Arbitration and Conciliation Act, 1996, contending that the dispute arising from the termination letter was required to be decided through arbitration.
The Trial Court rejected the Section 8 application and granted an injunction until disposal of the suit. The orders were challenged before the High Court in FMA 816 of 2025. By judgment dated July 15, 2025, the Division Bench allowed the appeal and held that the dispute ought to have been referred to arbitration under Section 8. The Division Bench also held that the injunction granted by the Trial Court was without jurisdiction because the Trial Court was required to refer the entire dispute to arbitration instead of entertaining the suit and deciding the prayer for injunction.
According to the petitioner, the Division Bench had already held that the disputes raised in the suit were governed by the arbitration clause. Following disposal of the appeal, the petitioner issued a notice under Section 21 of the Arbitration and Conciliation Act, enumerating disputes including termination, arrear rent, audit discrepancies, eviction proceedings, denial of rents and extension. The petitioner also alleged that it had invested more than Rs.20 crores in running the hospital and claimed that such amount was recoverable from the respondent.
The petitioner relied upon the Supreme Court decision in Central Warehousing Corporation and Another vs. Sidhartha Tiles & Sanitary Pvt. Ltd., reported at 2024 SCC OnLine SC 2983. The reliance was placed on the distinction between contractual disputes falling within an arbitration agreement and proceedings under a special statute governing eviction. The petitioner contended that even if the special statute governed eviction proceedings, the area of operation of the Arbitration and Conciliation Act and the West Bengal Public Land (Eviction of Unauthorised Occupants) Act, 1962 were different and arbitration could not be refused merely because proceedings under the 1962 Act had been initiated.
The respondent contended that the issues of eviction and termination were included in the notice invoking arbitration. It argued that its right to proceed against the petitioner under the 1962 Act was not an arbitrable issue and that the referral court should therefore resist referring the dispute concerning eviction and termination to arbitration. It was further submitted that the lease had expired by efflux of time on July 9, 2025 and that the petitioner had thereafter become an authorised occupant. According to the respondent, nothing prevented it from evicting the petitioner under the 1962 Act. The notice under that Act had been issued on July 22, 2025, before the notice invoking arbitration.
The High Court noted that the respondent had accepted the existence of the arbitration clause. It further noted that, on the respondent’s own appeal, the dispute arising in the suit had already been referred to arbitration and that the principal dispute in the suit concerned termination of the tenancy prior to expiry of the lease. The Court also found from the notice invoking arbitration that there were claims and allegations apart from eviction.
While considering the issue, the Court reproduced paragraphs 13 and 14 of the Supreme Court judgment in Central Warehousing Corporation. The Supreme Court had held that contractual disputes concerning renewal and enhanced demands arising during subsistence of the agreement were governed by the arbitration clause and that the Public Premises Act neither barred nor overlapped with the arbitration proceedings. The Supreme Court had further observed that at the stage of appointment of an arbitrator, the referral court was required to examine the existence of the arbitration agreement.
The Calcutta High Court consequently held that it found no impediment in referring the dispute to arbitration notwithstanding the pendency of eviction proceedings before another forum. It specifically held that the continuation or validity of the eviction proceeding was not an issue to be gone into by the referral court. At the same time, the Court preserved the respondent’s right to raise before the arbitrator the issue of non-arbitrability of any claim of the petitioner if such claim overlapped with the jurisdiction of the authority under the 1962 Act.
The Court therefore appointed Hon’ble Justice Subrata Talukdar, former Judge of the Calcutta High Court, as the arbitrator to adjudicate the disputes between the parties. The appointment was made subject to compliance with Section 12 of the Arbitration and Conciliation Act, 1996, and the arbitrator was directed to fix his own remuneration in accordance with the Schedule to the Act.
The Court clarified that its order was restricted to the prayer for reference and that the parties remained at liberty to proceed with their matter. AP-COM/733/2025 was accordingly disposed of.
Cases Discussed
- Central Warehousing Corporation and Another Vs. Sidhartha Tiles & Sanitary Pvt. Ltd., 2024 SCC OnLine SC 2983 — considered on the distinction between contractual disputes falling within an arbitration clause and proceedings under a special statute concerning eviction, and on the limited scope of enquiry at the stage of appointment of an arbitrator.
- SBI General Insurance Co. Ltd. vs. Krish Spinning, 2024 SCC OnLine SC 1754 — referred to in the reproduced passage from Central Warehousing Corporation concerning the limited remit of the referral court under Section 11.
- In Re: Interplay — referred to in the reproduced passage from Central Warehousing Corporation in relation to the scope of enquiry at the stage of appointment of an arbitrator.
FULL TEXT OF THE JUDGMENT/ORDER OF HIGH COURT AT CALCUTTA
The Court:
1. Affidavit-in-opposition and affidavit-in-reply are taken on record.
2. The application has been filed by the petitioner for appointment of an arbitrator to arbitrate upon the dispute which arose between the parties in respect of the Deed of Agreement dated July 9, 2004. Clause 28 of the said agreement contains an arbitration clause which is as follows:
“In case of any dispute or difference arising between the parties herein or regarding validity and/or interpretation of the agreement the matter shall be referred for arbitration of a sole arbitrator to the District Magistrate, Murshidabad.”
3. Dispute cropped up between the parties with regard to an alleged termination of the tenancy/lease when the respondent issued a letter dated January 11, 2022 on various allegations of neglect and failure to pay the rental agreement. Suspicion was also raised with regard to the actual amount collected by the petitioner to run the hospital and the purported figures which were disclosed to the respondent. Challenging such termination notice, a suit was filed before the Civil Judge (Senior Division) First Court of Murshidabad at Berhampore. In the said suit, the respondent filed an application under Section 8 of the Arbitration and Conciliation Act. Referring to Clause 28 of the said agreement, the respondent contended that the dispute between the parties which arose out of the termination letter should be decided in arbitration. The learned Trial Court rejected the application and granted an injunction till the disposal of the suit. Both these orders were challenged. An appeal was preferred by the respondent before the High Court vide FMA 816 of 2025. The said appeal was allowed by a judgment dated July 15, 2025. The Division Bench was of the view that the dispute between the parties ought to have been referred to arbitration by allowing the application under Section 8 of the said Act. The part of the order impugned by which the injunction was granted in favour of the petitioner, was held to be without jurisdiction as the Bench was of the view that, the Trial Court was duty bound to refer the entire dispute to arbitration instead of itself entertaining the suit and deciding on the prayer for injunction.
4. Mr. Tewari, learned senior advocate appearing for the petitioner submits that the specific observation of the Division Bench was that the disputes between the parties which were raised in the suit, were governed by the arbitration clause. The disputes were thus, referred to arbitration. Reliance has been placed on the reasons supplied by the Bench, in support of such contention. It is submitted that, the petitioner would be non-suited if an objection is taken by the respondent with regard to supersession of the arbitration agreement. On the prayer of the respondent, the dispute was referred to arbitration, in their appeal. At this juncture, the respondent cannot turn around and object to reference by this Court. Reference here will be a mere formality, after the Division Bench had put the issue at rest, upon holding that the Trial Judge did not have any jurisdiction to continue with the suit and adjudicate the dispute between the parties. Upon disposal of the appeal and as per the observations made by the court of appeal, notice under Section 21 of the said Act was issued by the petitioner. In the said notice, the petitioner had enumerated the disputes which were not limited to, but included termination, arrear rent, audit discrepancies, eviction proceeding, denial of rents, extension etc. Further allegation was that the petitioner had invested more than Rs.20 crores in running the hospital, in the course of their business. Such claim was recoverable from the respondent. Reliance has been placed on the decision of the Hon’ble Apex Court in the matter of Central Warehousing Corporation and Another vs. Sidhartha Tiles & Sanitary Pvt. Ltd. reported at 2024 SCC OnLine SC 2983 in support of the contention that even if the special statute governs the process of eviction at the instance of the respondent, the area of operation of the Arbitration and Conciliation Act and the said special statue are entirely different and reference cannot be refused on the ground that a proceeding has been initiated under the West Bengal Public Land (Eviction of Unauthorised Occupants) Act, 1962 (hereinafter referred to as 1962 Act).
5. Mr. Sakya Sen, learned senior advocate for the respondent submits that the issue of eviction and termination have also been referred to in the notice invoking arbitration. The right of the respondent to proceed against the petitioner under the 1962 Act, is not an arbitrable issue and as such, the referral court should resist from referring the dispute to arbitration on the question of eviction and termination. It is further submitted that the lease had expired by efflux of time on July 9, 2025 and the petitioner has since become an authorized occupant. Thus, nothing prevents the respondent from evicting the petitioner by taking recourse to the 1962 Act. The notice under the 1962 Act was issued on July 22, 2025, soon after the expiry of the lease and before the notice invoking arbitration was issued.
6. It is not in doubt that the respondent had accepted that the arbitration clause between the parties, existed. On an appeal by respondent, the dispute which arose in the suit was referred to arbitration. The dispute in the suit was primarily with regard to termination of the tenancy prior to expiry of the lease. Moreover, from the notice invoking arbitration it appears that apart from the issue of eviction there were other claims and allegations, which were made by the petitioner. The relevant paragraphs of Central Warehousing Corporation (supra) are quoted below :-
“13. Re: Whether the Public Premises Act, 1971 overrides the Arbitration and Conciliation Act, 1996: This submission has to fail. The reasons are simple and straight forward. The dispute that is raised in the Section 11 application relate to promises and reciprocal promises arising out of the agreement dated 26.09.2012. The right of renewal as well as the legality and propriety of the enhanced demand arose during the subsistence of the agreement. It will be on the interpretation, construction and the obligations arising out of the agreement that the respondent’s claim rests. On the other hand, The Public Premises Act authorises the ejectment of a tenant in unauthorised occupation of public premises and for consequential directions. The original lease as it were, validly subsisted till 11.09.2015 and the dispute between the parties related to the period commencing from 12.09.2012 to 11.09.2015, when the lease expired. The Public Premises Act would not even cast a shadow on this period. In so far as the dispute relating to this right of renewal is concerned, it depends on the terms of the agreement. The Public Premises Act neither bars nor overlaps with the scope and ambit of proceedings that were initiated under the Arbitration and Conciliation Act.
14. Whether the High Court committed any error in appointing the arbitrator while exercising the jurisdiction under Section 11: We have already extracted the relevant portion of the order passed by the High Court. The revision of storage charges occurred during the subsistence of the contract. Its legality and propriety will depend on the terms of the agreement dated 26.09.2012. Similarly, the right of renewal will also be based on and a construct of the said agreement. These two disputes will undoubtedly arise out of the agreement between the parties and the resolution of such disputes is clearly covered by the arbitration clause (Cl. 16 of the agreement). After the recent decision of this court in SBI General Insurance Co. (supra) the remit of the referral court to consider an application under Section 11(6) is clear and unambiguous. We need to just examine the existence of an arbitration agreement. The context is clearly delineated in paras 110-111 and 114 of the judgment which are extracted below for ready reference.
“110. The scope of examination under Section 11(6-A) is confined to the existence of an arbitration agreement on the basis of Section 7. The examination of validity of the arbitration agreement is also limited to the requirement of formal validity such as the requirement that the agreement should be in writing.
111. The use of the term ‘examination’ under Section 11(6-A) as distinguished from the use of the term ‘rule’ under Section 16 implies that the scope of enquiry under section 11(6-A) is limited to a prima facie scrutiny of the existence of the arbitration agreement, and does not include a contested or laborious enquiry, which is left for the arbitral tribunal to ‘rule’ under Section 16. The prima facie view on existence of the arbitration agreement taken by the referral court does not bind either the arbitral tribunal or the court enforcing the arbitral award.
[…]
114. In view of the observations made by this Court in In Re: Interplay (supra), it is clear that the scope of enquiry at the stage of appointment of arbitrator is limited to the scrutiny of prima facie existence of the arbitration agreement, and nothing else.[…]”
(emphasis supplied)
15. For the reasons stated above, we have no hesitation in rejecting the petition and we further hold that the appellant must bear the costs for this unnecessary litigation which we quantify at Rs. 50,000/-.
7. Under such circumstances, I do not find any impediment in referring the dispute to arbitration, irrespective of the fact that an eviction proceeding is pending before another forum. The continuation or validity of such proceeding is not to be gone into by the referral court. The learned arbitrator will adjudicate the disputes in accordance with law and the respondent will be at liberty to raise the issue of non-arbitrability of any of the claims of the petitioner, in the event such claim overlaps with the jurisdiction of the authority under the 1962 Act.
8. Under such circumstances, the Court appoints Hon’ble Justice Subrata Talukdar, former Judge of this Court, as the Arbitrator, to arbitrate upon the disputes between the parties. This appointment is subject to compliance of Section 12 of the Arbitration and Conciliation Act, 1996. The learned Arbitrator shall fix his own remuneration as per the Schedule of the Act.
9. AP-COM/733/2025 is, accordingly, disposed of.
10. The parties are at liberty to proceed with their matter and this Court has only restricted the order to the prayer for reference.
