Holding

The studios licensed for business are "premises" under the Act, the licensee is a deemed tenant, exclusive jurisdiction lies with the Court of Small Causes, and the arbitration clause is inoperative.

Summary

Natraj Studios (P) Ltd. held a "leave and licence" agreement with Navrang Studios for the use of two film studios, associated premises and equipment. After Navrang sought possession in 1979, Natraj filed a suit in the Court of Small Causes claiming to be a monthly tenant, and also challenged the arbitration clause in the agreement. The Supreme Court examined whether the licensed studios constitute "premises" under the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, and whether Section 28 confers exclusive jurisdiction on the Court of Small Causes, thereby excluding arbitration. It held that a building licensed for business is "premises" within the meaning of the Act, that the licensee is a deemed tenant under Section 15A, and that the dispute must be decided solely by the Court of Small Causes. Consequently, the arbitration clause was declared inoperative and the application for reference to arbitration was dismissed.

Issues considered

The nature of the "leave and licence" agreement: whether the studios and associated premises constitute "premises" under the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947.
Whether the licensee is deemed a tenant under Section 15A of the Act.
Whether Section 28(1) of the Act grants exclusive jurisdiction to the Court of Small Causes, thereby excluding the jurisdiction of an arbitrator.
The validity and operability of the arbitration clause in the agreement.
The effect of Section 40 of the Arbitration Act on the Small Causes Court's power to stay proceedings under Section 34.

Legislation cited

Arbitration Act, 1940s. 33, s. 34, s. 39, s. 40, s. 8
Bombay Rents, Hotel and Lodging House Rates Control Act, 1947s. 15A, s. 28(1), s. 5(4A), s. 5(8), s. 5(8A), s. 5(SA), s. 6(1)
Maharashtra Act 17 of 1973 (amendment inserting Section 15A)

Subjects

leave and licencedeemed tenantexclusive jurisdictionCourt of Small Causesarbitration clauseBombay Rent Actpublic policypossession disputestudioslicence of premises

Judgment

466

A NATRAJ STUDIOS (P) LTD.
'
v.
NAVRANG STUDIOS & ANR.
January 7, 1981
B
(R. S. PATHAK, 0. CmNNAPPA REDDY AND BAHARUL ISLAM;'JJ.]

Bonzbay Rents, Hotel and Lodging House Rates Control Act 1941-Sectioua
5 and SA and 28-Scope of-Exclusive jurisdiction to try suits under the Act
given to Court of S1nall Causes-Parties, if could confer jurisdiction on a ·arbit~
r.ator by agreement.
c
1hc 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
D 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' agree·
ment was in force on that date.

In April, 1979 the respondent purporting to terminate the l~ave and
licence' agreement called upon the appellant to hand over possession of the
studio3 to the first respondent. Immediately thereafter the appellant filed a suit
E for a declaration that the appella.nt 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
F rights, if any, of the appellant as a tenant. A Division Bench of the liigh
Court dismissed the appellant's appeal against the order of the single Judge en
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 Arbitra-
tion Act the High Court appointed the second respondent as the sole arbitrator.
G Jn 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 the appellant that under tne 1947 Act the dispute between the
parties could only be resolved by the Court of Small Causes and that the juris·
djction of every other Court including that of an arbitrator was excluded.
On behalf of the first respondent it was contended that the subject matter
H 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.

•
NATRAJ STUDIOS V. NAVRANG STUDIOS 467

Allowing the appeai

IIELD : A building in which a person is licensed te run a. business is "pre-
mises" 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 build·
ing is not let as such. [474D]

If the definitions of "premises let or given on licence for business", "pre-
mises" and "licensee" are read together it will be clear that even a building
so conshucted or designed as to be capable of being used for running a
tcrtain business Only is "premises" within the meaning of section 5(8) and
section 5(SA) 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 build·
ing 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
c

building given on licence in the definition of "premises" a-nd by the deeming of
t
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-BJ

Uttamchand v. S. M. Lalwani A.l.R. 1965 S.C. 716 and Dwarka Prasad
v. Dwarka Das Saraf, [19761 I 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 E-
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 t!_arry 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 F
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 aggrement in the instant case is a composite agreement which gave
"leave and licence" tc use tbc studios and other premises for producing films
... , ,, and to use the machinery and equipment for the same purpose. The liccnsors
G
parted with possession of the studios and the machinery in favour of the licen·
sees. 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 cons·
cious that the licence granted by the licensor in favour of the licensee was in
respect of the studios &nd other premises and that there was even a risk of the
lic:ence being construed as a lease. They were, therefore, anxious to emphasise
R
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 SUPREME COURT REPORTS [1981] 2 S.C.R.

A the Court of Small Causes has and the arbitrator has not the jurisdiction to
decide the question whether the rcspondent-1icensor~landlord is e-ntiiled to seek
p05session 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 po.ritively confc-f8 jurisdiction on the Collrt
of Small Causes to entertain and try any suit between, among others, a liccttsor
._II and a licensee relating to the recovery of licence fee and to decide any applica-
tion made under the Act and negatively exclude8 the jurisdiction of ony other
Court from entertaining any 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 juris-
diction on certain C-Ourts is pursuant to the social objective at which the legEla-
t1on aims. Public policy requires that contracts to the contrary cannot be l

1
permitted. Therefore, public policy requires that the parties cannot. be per-
mitted to contract out of the legislative mandate which require~ certain kinds
of d;sputes to be settled by special C-Ourts constituted by the Act. [477 G]

Exclusive jurisdiction to entertain arul try certain suits, to decide certain '
<1pplications or to deal with cert.'"lin claims or questions given to the Court of
J) Small Causes does not necessarily mean exclusive jurisdiction to decide jurlsdic~
tional facts also. Juri..,dictional facts have necess:)fl1y to be decided by the Court
where the jurisdictional question falls to be decided and the question n1ay fall
for decision before tJ1e Court of exclusive jurisdiction or before the C.ourt 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 \Vill have to
be brought in the Court of Small Causes which has been n1ade the Court of
exclusive jurisdiction. [478 A-CJ

In the instant case the relationship between the parties bcin~ that of licensor·
landlord and licensee~tenant and the dispute bei\Veen then1 relating to the pos-
session of the licensed-demised premises the Court of Small Causes alone has the
jurisdiction and the 1\rhitrator has none to adjudicate upon the dispute bct\veen
the parties.
Hablffal Bhurarnal & Anr. v. 1\rt111dra111 Sltivra111 & Ors. [19591 S.C.R. 367,
Rniwda Topandm & Anr. '" M/1 Gorakhrnm Gukalcha11d [1964] 3 S.C.R. 214,
Vas1ulev Gopalkri'shna Tarnwekar v. The Board of Liquidators, Ilappy Ilomc
Coop~ralii·c /lousing Socit'l)' [19641 3 S.C.R. 964 and Deccan Merchants Co-
operatil•c Bank Ltd. v. Af js Dalichand Jugraj Jai11 & Ors. {19691 1 S.C.R. 887
referred to . ••
.1G l'lu1dha Motor Tran.\porr Co. (P) Ltd., Deihl v. R. J\1. Chopra A.l.R. 1968
l)clhi 75, and Basanti Cotton Mills v. Dliingra Brothers, A.I.R. 1949 Cal. 684
apprcved. •
The Court of SrnalJ Causes jg 11ot exercising jurisdiction over any arbitra-
tion prc.x:·:edings merely because the agreement beh\•een the parties contains &n
arbitration clause and the Court is asked to stay a proceeding before itscl.f. The
jurisdiction under section 34 of the Arbitration: Act may be exercised by the
judicial authority before which tho procttdings are pending and not by the court
which has jurisdiction over the arbitration proceedings. This is clear from the
NATRAJ STUDIOS v. NAVRANG STUDIOS (Chinnappa Reddy, !.) 469

language of section 34 of the Arbitration Act. An application under section 34 A
is not an arbitration proceeding; nor is it aa 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 sta-y proceed-
ing pending before it. [483 F-0]

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1906-1907 B
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. c
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 D
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.
E
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 Janpary 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 Honse Rates
F
Control Act, 1947, by an amendment (Maharashtra Act 17 of 1973).
r-The effect of S. 15A was that any person who was in occupation of any
premises o'n February 1, 1973 as a licencee was w...emed 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 G
'leave and licence' agreement and called upon the appellrnt to hand
\
over JXMISession of the Studios to the first respondent. Immediately,
on May 8, 1979, the appellant filed Declaratory Suit Nd. 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 n
fixation of standard rent and other reliefs. A. written statement was
filed by the first respondent contesting the suit. Pending disposal of
14-57 SCI/81 '
'·

A
470 SUPREME COURT REPORTS [1981) 2 S.C.R.

the suit an interim order was made provisionally fixing the rent as
•
Rs. 11500 per month. On August 4, 1979, the appellant filed 11n •
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
dismissed by the High Court on November 12, 1979, by a learned
B
single Judge on the ground that, he had no jurisdiction to detennine
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 Arbi-
tration Act praying !hat the second respondent might be appointed as
the sole arbitrator to decide the disputes and differences between the
c 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 daled Novem~
, r· ~

ber 12, 1979 of the learned single Judge was dismissed by a Division
D Bench of the High Court on the ground that it was not maintainable
under S.39 of the Arbitration Ac!. The present two Civil Appeals II
have been filed by the appellant against the orders of the High Conrt .i:;,
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
:E 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 !he scheme of the Bombay Rent,
Hotel & Lodging Honse Rates Control Act, 1947, the dispute between
F 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
'\I
was not 'premises' within the meaning of that expression as defined
in the Bombay Act but the business as such and, therefore, the pro- •
G visions of the Bombay Rents, Hotel and Lodging House Rates Con-
trol Act were not attracted at all.
I
For a clear appreciation of the rival submissions, the relevant
provisions of the Bombay Rent, Hotel & Lodging House Rates Con-
trol Act, 1947, may first be set out.
Section 5 ( 4A) defines a licensee as follows:
H
"(4A) 'licensee', in respect of any premises or any part
thereof, means the person who is in occupation of the pre-
•
,; NATRAJ STUDIOS v. NAVRANG STUDIOS (Chinnappa Reddy,!.) 471

mises or such part, as the case may be, under a subsisting A
• 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 co-
operative housing society registered or deemed to be regis-
tered under the Maharashtra Co-operative Societies Act,
1960; but does not include a paying guest, a member of a B
family residing together, a person in the service er employ-
ment of the licensor, or a person conducting a running
business belonging to the licensor, or a person having any
aceo=odation in a hotel, lodging house, hostel, guest
house, club, nursing home, hospital sanatorium, qharma-
shala, home for widows, orphans or like premises, marriage c
or public hall or like premises, or in a place of amusement
or entertainment or like institution, or in any premise$
belonging to or held by any employee or his spouse who on
account of the exigencies of service or provision of a resi-
dence attached to his or her post or office is tempo-
D
rarily not occupying the premises, provided that he or she
charges licence fee or charge for such premises of the
employee or spouse not exceeding the standard rent and per-
mitted 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 con- E
ducting a canteen, creche, dispensary or other services as
amenities by any undertaking or institution; and the expres-
sions 'licence', 'licensor' and 'premises given on licence' shall
be construed accordingly";
Section 5(8) defines premises as follows:
F
~"-(8) 'premises' means-
'Jl'
(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, G
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 build-
ing for the more beneficial enjoyment thereof, H
but dees not include a room or other accommodation in a
hotel or lodging house."
•
I
SUPREME COURT REPORTS (19Sl] 2 S.C.R. ~ j
A Section 5 (SA) is as follows:
"(SA) 'premises Jet or given on licence for business' includes, and
•
shall be deemed always to have included, premises Jet 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 _,
c (aa)· xxx xxx xxx
(b) xxx xxx xxx
(bb) such licensees as are deemed to be tenants for the pur- (
poses of this Act by Section 15A.
( c) xxx xxx x:xx
D
. 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, edu-
cation, business, trade or storage."
F Sec. 15A which deems certain licensees in occupation of premises
on 1.2.1973 as tenants says: ~

"15A. (1) Notwithstanding anything contained else-
where in this Act or anything contrary in any other law for
the time being in force, or in any contract, where any person •
G is on the 1st day of February, 1973 in occupation of any pre-
mises, or aoy 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.

Il (2) The provisions of sub-section (1) shall not affecf
in any manner the operation of sub-section ( 1) of cection
15 after the date aforesaid."

.. _,_,,.,,.~ ..• - __,___.
~ NATRA.J STUDIOS v. NAVRANG STUDIOS (Chinnappa Reddy, J.) 473

Sec. 28 (1) which prescribes and prohibits the jurisdic- A
• tion 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, B
(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 c
(b) elsewhere, the Court of the Civil Judge (Junior
Division) having jurisdiction in the area in which the pre-
mises are situate or, if there is no such Civil Judge, the
Court of the Civil Judge (Senior Division) having ordinary
jurisdiction, •
D
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 E
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
::~fPart II applicable to "premises let or given on licence for business"
also. Sec. 5 (SA) 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 car-
rying on any occupation therein. Sec. 5 ( 8) defines "premises" G
• among other things, as any building or part of a building let or given
on licence separately', including, among other things, 'any fitting/I
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 B
running business belonging to the licensor. If the definitions of
"premises let or given on licence for business", "premises" and
•
474 SUPREME COURT REPORTS (1981] 2 S.C.R. -\

A "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 neces-
sarily go alongwith the building if it is to be used for the business.
H "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 changeg;,-
by the inclusion of auy building given ou licence in the definition of~
c "premises", and by the deeming of a licensee as a tenant up.der S. 15A
of the Act. A 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 r
of S. 5 (8) and 5 (SA), to which Part II of the Act is made applicable
by S. 6(1) notwithstanding the fact that the building is not let as
I)
such.
Shri Mridul relied upon Uttamchand v. S. M. Laiwani(I) and
Dwarka Prasad v. Dwarka Das Saraf(') in support of his contention that
having regard to the definition of "premise!" the licensee of a business or
industry which is carried on in a building cannot be considered to be
E 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
F as a Dal Mill. The question arose whether the subject matter of the
lease was 'accommodation' within the meaning of S. 3 (A) of t~
Madhya Pradesh Accommodation Control Act which defined 'accom- ,
modation' as meaning, among other things, any building or part of
a building and including any fittings affixed to ~uch building or part
of a building for the more beneficial enjoyment thereof. This Court
•
G held that in construing the lease it was necessary to determine the
dominant intention of the parties. It was found that the dominant inten-
tion 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
H matter of the lease and it was because the Mill was intended to be let
(1) AIR 1965 SC 716.
(2) [1976] 1 SCR 277.
•
> No\TRAJ STUDIOS v. NAVRANG STUDIOS (Chinnappa Reddy, !.) 475

out that the building had inevitably to be let out alongwith the mill. A
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 com-
posite 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. Tue
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 build-
ing or part of a Building including any fi\tings, affixed to such building
' or part of the building for the more beneficial enjoyment thereof. This
c
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 ~ubject of the lease was
the cinema apparatus and fittings including, 'subsidiarily and i11ciden-
tally', the building. It will be seen that in both the eases there was D
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 bmincss, the Act would not
apply. If what was intended to be demised was a building the Act
would apply. The test of dominant intentiou was applied and it was E
found in each of the cases that the lease was of a business and not
of 'accommodation'.

The question in the present case is entirely different and is one of
construction of the provisions of the Bombay Rent, Hotel & Lodging
Honse Rates (Control) Act, 1947, which deem a licensee to be a F
~ __ 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, r.pplies to a licence to
use a building even if the building is to be used necessarily and simul· G
• taneously along with machinery and fixtures separately lieenced 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 n
films by using the machinery and equipments listed in the agreement
and that the licence to use the building was only subsidiary incident
476 SUPREME COURT REPORTS (1981] 2 S.C.R.

A 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 busi:J.ess
within the meaning of the Act so as to attract its protective provisions.
B
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
;
c Rs. 25Q 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
D 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 tempo-
rarily, by others, whomsoever they liked during the subsistence of the
licences for the purpose of producing motion pictures only. Property
E 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,
F machineries and. equipments were to be used by the licensees in a pru-
dent 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 lice11Bees
only. The licensees were to carry on their business of motion picture
films' production in the licensed premises under the name and style of
G Natraj Studios (P) Ltd. The agreement is thus seen to be a compo-
site 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 posses-
sion of the Studios and the machinery in favour of the licensees. Not-
withstanding the fact that the agreement was a composite one and the
H 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
i NATRAJ STUDIOS v. NAVRANG STUDIOS (Chinnappa Reddy, 1.) 477

parties themselves were conscious that the licence granted by the A
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 B
the provisions of the Bombay Rents, Hotel and Lodging House Rates
Control Act, 194.7. 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 a'Ud 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 c
introducing S. 15A 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 D
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 licerlsee 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 pro- E
visions, 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 F
!ly 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 con-
trary which nullify the rights conferred on tenants by the Act cannot
be permitted. Therefore, public policy requires that parties cannot G
also be permitted to contract out of the legislative mandate which
•
requires certain kind of disputes to be settled by special courts consti-
tuted by the Act. It follows that arbitration agreements between
parties whose rights are regulated by the Bombay Rent Act cannot
.1 be recognised by a Court of law.
H
Thus exclusive jurisdiction is given to the Court of Small Causes
and jurisdiction is denied to other Courts (I) to entertain and try
478 SUPREME COURT REPORTS [1981] 2 S.C.R.

A 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 witb any claim .or question arising
out of the Act or any of its provisions. Exclusive jurisdiction to
B entertain and try certain suits, to decide certain appliC'ations or to
deal with certain claims or questions does not necessarily mean exclu-
sive jurisdiction to decide jurisdictional facts also. Jurisdictional
facts have necessarily to be decided by the Court where the jurisdic-
tional question falls to be decided, and the question may fall for ~
c 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
D tenancy but the denial by the defendant will not oust the jurisdiction
of Court of Small Causes. If ultimately the Court finds that the
defeudant 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
E 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 straight-
away oust the jurisdiction of the ordinary Civil Court but if ultimately
the plea of the defendant is accepted the suit must fail on that
F ground. So the question whether there is relationship of landlord !!.Ild
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
G
must cease to the extent its jurisdiction is ousted.
•
In Babula/ Bhaurama/ & Anr. v. Nandram Shivram & Ors.,(I) 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
H Court from entertaining a suit for a declaration that one of the plain- .
tiffs was the tenant of the defendant-landlord and the other plaintiffs
(I) [1959] SCR 367
NATRAJ STUDIOS v. NAVRANG STUDIOS (Chinnappa Reddy, J.)479

were his sub-tenants and that they were entitled to be protected from
• eviction, under the provisions of the Bombay Rents, Hotel and Lodg-
ing House Rates Control Act, 1947. The argument that S.28 applied
only to suits where the relationship of landlord and tenant was admit-
ted 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
(
relatioushJt> of a landlord and a tenant within the meaning c
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 D
the defendant for a declaration that the plainiff was in lawful posses-
sion of a shop and for an injunction restraining the defendants from
entering the shop. The plaintiff alleged that the defendant Vl'as licen-
see 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 1973 amendment). The E
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
F
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 G
.. 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.

.J In Vasudev Gopa/krishna Tamwekar v. The Board of Liquidators,
Happy Home Cooperative Housing Society, ( 2 ) there was a dispute O
(1) £1964]3 SCR 214.
(2) [1964] 3 SCR 964 .

•
480 SUPREME COURT REPORTS [1981J 2 S.C.R.

A 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 dis-
pute 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 jurisdio-
B tion 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,
c the proceedings before the Arbitrators must be between landlord and
tenant and must relate to the recovery of rent or possession of a pre-
mises. 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
D 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
E there was no relationship of landlord and tenant between the parties.
In Deccan Merchants Cooperative Bank Ltd. v. Mls. Dalichand
Jugraj Jain & Ors.(I), the conflict was between the jurisdiction of
the Registrar of Cooperative Societies under the Maharashtra Coope-
rative Societies Act and the jurisdiction of the Court of Small Causes
under the Bombay Rents, Hotel and Lodging House Rates Control
F 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
G achievement of that objective it was necessary that the Court set up
under the Rent Act alone should deal with a dispute between a land-
lord and a tenant and that in accordance with the provision~ of the
Rent Act. Necessarily, the jurisdiction of the Registrar was ousted.
The Court said (at pp. 901, 902);
B "The scheme of the various Rent Acts and the public
policy underlying them are clear; the policy is to give pro-
(!) [1969] 1 SCR 887
1

•
•
NATRAJ STUDIOS v. NAVRANG STUDIOS (Chinnappa Reddy, l.) 481

tection to the tenants. Various powers have been conferred A
• 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 B
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 determi-
nation of the disputes relating to the internal managemont
of the societies. But under the Rent Act a different social c
objective is intended to be achieved and for achieving that
social objective it is necessary that a dispu_te between the
landlord and the tenant should be dealt with by the Courts
I set up under the Rent Act and in accordance with the spe-
cial provisions of the Rent Act. This social objective does
not impinge on the objective underlying the Act. It seems D
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
E
Choagla 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 lon6 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 F
tenant or a licensee or a trespasser was a question which was not
I "" - let: 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) : G
-'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.
B
Once it was a suit which could be entertained by the High
- --
(!) (Lil) 1951 Bomb1y Law Reporter p, 386 @391-392.
•
482 SUPREME COURT REPORTS [1981] 2 s.c.R.

A 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
Comt whether the relationship between the plaintiff and
the defendant in the particular case before it was that as
B
between landlord and tenant. If it came to the conclusion
that it was not so, it would continue to have the jurisdic-
tion to try the suit and would be able to try the suit on
the merits to jts logical conclusion. If, on the other hand,
the High Court came to the conclusion that the relation-
ship between the plaintiff and the defendant was as between
c 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
D and tenants falling within the purview of s. 28".
In Sabavva Kam Hanmappa Simpiger v. Basappa Andaneppa
Chiniwar, ( 1) the question directly arose, as in the present case,
whether s. :\8 of the Bombay Rents, Hotel & Lodging House Rates
Cemtrol Act, 1947, excluded reference to arbitration of a dispute
relating to recovery of rent or possession of premises. It was held
E
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 .
.F 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

G
reason of the broader considerations of public policy mentioned by
us earlier and also in Deccan Merchants Cooperative Bank Ltd. v.
M/s. Dalichand Jugraf Jain & Ors. (supra), 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. That
this is the real dispute between the parties is abundantly clear from
H the petition filed by the respondents in the High Court of Bombay,
under S. 8 of the Arbitration Act seeking a reference to Arbitration.
(1) (1955) LVII Bombay Law Reporter P. 261
•

• NATRAJ STUDIOS v. NAVRANG STUDIOS (Chinnappa Reddy, J.)4s3

A
.. 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--de-
mised premises, there is no help from the conclusion that the Court B
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 res-
{ t pondent had filed a written statement in the suit instituted by the c
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 respondmt that S. 40 of the Arbitration Act prevented the Sma~
Cause Court from exercising any jurisdiction over arbitration proceed-
ings. It wa~ also urged that the questions at issue in the Court of D
Small Giuses 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. E
That was not 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 arbitra-
tion proceedings under s.40. There is no substance in this argu·
ment. S. 40 of the Arbitration Act declares that a Small Cause F
Court shall have no jurisdiction over any arbitration proceeding or
,,,,-UVer any application arising thereout. We do not see how it can b(l
... said that the Court of Small Causes is exercising jurisdiction ove~

• ,, 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 G
. 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 arbitra-
tian. proceeding; nor is it an application arising thereout. The bar
under s. 40 does not come in the way of the Court of Small Causeil H
exercising jurisdiction under s. 34 of the Arbitration Act to stay a
proceeding pending before it. If authority is necessary for this
•

484 SUPREME COURT REPORTS [1981] 2 S.C.R.

A proposition it may be found in Chadha Motor Transport Co. (P)
Ltd. Delhi v. R. N. Chopra(I) 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
B the dispute is clear from a perusal of the pleadings in the suit in the
Coil.rt 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 arbi-
tration clM!se in the agreement dated March 28, 1970 is declared to ..
C be inoperative. The application for reference to Arbitration is dis-
missed.

P.B.R. Appeals allowed. '

... ....

(I) AIR 1968 Delhi 75
(2) AIR 1949 Cal. 684