In the eventuality of any disputes arising between the parties to a particular agreement - such disputes can be settled by an arbitrator or courts as the parties to an agreement wish. So, you can provide for either arbitration clause or litigation clause in an agreement as the parties thereto are at liberty to set the terms such as jurisdiction of courts, arbitrators etc to govern their future disputes so long as such T& C are not illegal,immoral or opposed to public policy.
25 September 2013
BOMBAY HIGH COURT OUSTS ARBITRATION IN DISPUTES BETWEEN LANDLORD AND TENANT IN MUMBAI In a landmark judgment passed by a Full Bench of the Bombay High Court (“Court”), the Court has laid down the law regarding operation of an arbitration clause in agreements giving a license to use property executed in Greater Mumbai. The Court has thereby confirmed its earlier judgments which held that arbitration clauses in Leave and License Agreements pertaining to properties situated in Greater Mumbai are void and the jurisdiction to try all disputes in such arrangements vests with the Small Causes Court in Mumbai as per the provisions of the Presidency Small Causes Court Act, 1882 (“Presidency Act”). The Court observed that Section 41 (2) of the Presidency Act is a special law which in turn has constituted special courts for adjudication of disputes specified therein between the licensor and licensee or a landlord and tenant. Thus the Court held that Section 5 of the Arbitration Act in a sense was not an absolute non-obstante clause and cannot affect the laws that have been in force and thus Section 41 of the Presidency Act falls within the ambit of Section 2 (3) of the Arbitration Act. As a result, even if the License Agreement contains an Arbitration clause, the exclusive jurisdiction of the Courts of Small Causes under Section 41 of the Presidency Act, is not affected in any manner.
There is no absolute bar of excluding arbitration clause in Lease & License Agreement according to the Supreme Court in Dolphins Drillings Limited vs. ONGC unless the arbitration results in imposing undue burden on the Licensee etc. and the Supreme court held that such agreements should be carefully drafted invoking dispute resolution through arbitration clauses. Please read on: In the present case the issue before the SC was whether an arbitration clause in a contract is a one-time recourse available to the parties to the contract or whether the parties can invoke the arbitration clause repeatedly for different disputes. The respondent raised an objection with regard to the repeated invocation of the arbitration clause on the ground that the financial burden cast by the arbitration proceedings was quite onerous. The SC while considering the said question in the facts of the case answered the question in negative and held that unless the arbitration clause or arbitration agreement expressly provides so, it cannot be held that once the arbitration clause is invoked the remedy of arbitration is no longer available in regard to other disputes that might arise in future. The SC expressed its opinion that the process of arbitration had become a time-consuming and expensive mode of resolution of disputes and suggested that the problem of financial burden cast upon the parties resorting to arbitration should be remedied at the earliest by proper drafting of arbitration clauses. The SC expressed that the arbitration clauses should be drafted in such manner that the remedy could be used only at the conclusion of the work or on termination of the agreement.
Dolphins Drillings Judgement was rendered by the Hon'ble Supreme Court in 2010 and The Bombay High court's Judgment was earlier, i.e., in 2008.The Supreme court Judgment is binding on all other Courts of India and the Supreme Court didn't exclude arbitration clauses in Leave & License Agreements.
26 September 2013
in dolphin case the SC did not have to consider whether in leave and license agreement executed in Mumbai whether arbitration clause was valid or not . the Sc did not consider whether bar imposed under Small cause act ousting arbitration was valid or not . whereas Bombay high court judgment was on the specific issue relating to leave and license and after consideration of various SC judgments on said issue . hence i disagree with learned expert