Clear Intention to Create Licence I Calcutta High Court Upholds Eviction I Nothing was left to imagination as Court Affirms Agreement Did Not Confer Exclusive Possession or Sub-Lease Rights
Safiya Malik
The Division Bench of the High Court at Calcutta comprising Justice Sabyasachi Bhattacharyya and Justice Uday Kumar, dismissed an appeal under Section 37 of the Arbitration and Conciliation Act, 1996. The appeal contested the legality of an interim arbitral award directing eviction, previously affirmed under Section 34 by the Commercial Court at Alipore. The court held that the jural relationship between the disputing parties constituted a licence, and not a lease, and upheld the arbitrator’s interim directive for possession recovery.
The matter stemmed from an agreement dated December 26, 2004, between Star Track Agency Private Limited and Efcalon Tie Up Private Limited. The appellant, Star Track, initially invoked arbitration to cancel the agreement. Efcalon, in response, filed a counter-claim for possession and arrears. The first arbitral award had declared the agreement null and void, directing payment of Rs.1,51,44,208/- by Efcalon along with 15% interest and Rs.1,00,000/- arbitration costs.
Upon challenge under Section 34 and Section 37, the award was set aside, noting that Star Track could not retain possession without paying occupation charges. Subsequently, Efcalon initiated a second arbitration for recovery. After the parties failed to agree on an arbitrator, one was appointed under Section 11 of the 1996 Act. An interim award dated July 15, 2017 (amended on July 22, 2017), granted recovery of possession.
Star Track challenged this interim award under Section 34, which was dismissed on January 5, 2021. The present appeal under Section 37 followed.
The appellant argued that the arbitrator failed to consider the agreement holistically and relied only on specific clauses (H, I, and part of Clause 4) without assessing the entire document. It was contended that the agreement, although styled as a licence, created a lease based on factors like six-year term, exclusive possession, structural rights, and assignability. The appellant cited several precedents, including Associated Hotels of India Ltd. v. R.N. Kapoor, (AIR 1959 SC 1262) and Sohan Lal Narain Das v. Laxmidas Raghunath Gadit, ((1971) 1 SCC 276), to assert exclusive possession indicative of a lease.
Further, Star Track contended that the agreement was compulsorily registrable and inadequately stamped, and thus inadmissible. It challenged the arbitrator’s reliance on inadmissible evidence. The appellant also denied the second arbitration as a continuation of the first, citing differences in claims, dates, and no transposition of parties.
Efcalon, in turn, argued the intention was to create a licence, not a lease, citing Clause 4 which stated: "if the lease... is formally renewed... a sub-lease... will be granted... whereupon the license granted hereby shall automatically come to an end." Efcalon stated the severability of arbitration clauses and argued that the claim was within the arbitral scope.
The Division Bench affirmed the finding that the agreement constituted a licence. It stated, "A composite reading of the above clauses leaves no manner of doubt regarding the intention of the parties to create a licence, as opposed to a lease." It further recorded that the absence of formal renewal of Efcalon's own lease from Kolkata Port Trust made a sub-lease untenable.
Regarding exclusive possession, the Bench noted: "The licensor and/or its representatives may at any time enter the said premises for any purpose whatsoever... hitting at the very root of the exclusivity of possession urged by the appellant." The court thus negated the appellant's claim to lease status.
Addressing the stamp and registration objections, the court stated: "Whether the jural relationship between the parties is a licence or a monthly tenancy, the agreement could not be said to be mandatorily registrable." On admissibility, it observed: "The agreement was very much admissible in evidence... there cannot be said to have been any patent illegality going into the root of the matter in the impugned interim award."
On the arbitrability of the dispute, the court found the arbitration clause sufficient: "Clause 28... provides for reference to arbitration in case of any dispute or difference arising out or in connection with... the agreement." It held the clause severable and applicable.
With respect to Sections 64 and 65 of the Contract Act, the court concluded: "There has been no conclusive determination by the learned Arbitrator as to the agreement being actually void... the provisions... do not come into play in the facts of the present case."
The Division Bench recorded that no grounds under Section 34 or 37 warranted interference: "There is no palpable illegality or patent error of law and/or perversity which shocks the conscience of the court."
The court concluded: "Accordingly, F.M.A.T. No.57 of 2021 is dismissed on contest, thereby affirming the judgment and order dated January 5, 2021... as well as the interim award... July 15, 2017, as amended on July 22, 2017."
A prayer for stay on the eviction execution case was granted for six weeks to allow the appellant to explore further remedies.
"The connected eviction execution case is stayed for a period of six weeks from date."
Advocates Representing the Parties
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 Kolkata Port Trust: Mr. Ashok Kumar Jena
Case Title: Star Track Agency Private Limited Vs. Efcalon Tie Up Private Limited
Case Number: F.M.A.T. No. 57 of 2021
Bench: Justice Sabyasachi Bhattacharyya and Justice Uday Kumar
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