• Leave and License clause

I am intending to give my property located in Mumbai on Leave and License.
The Lessee is insisting on putting a clause under the Arbitration Act of 1996.

Now my understanding is that the arbitration act is not valid for Leave and License and even incorporating the same in my L&L agreement will render it useless.
My questions are:
1) Is my understanding right? or will the arbitration act being incorporated in the L&L agreement have any bearing on the lease agreement whatsoever.

2) In case of any dispute in the future, will there be any time lost in filing a case in court cause of the arbitration clause?
Asked 1 year ago in Property Law from Mumbai, Maharashtra
Religion: Hindu
There is no necessity to incorporate arbitration  clause in the Leave and Licence agreement.   The lessee cannot demand to add such clauses.  Moreover the arbitration clause cannot invoke any benefit neither it is applicable to such agreements.  You are right in your observation that incorporating the same in L&L agreement will render it useless.All the disputes in this regard to be referred to Rent controller court only, the arbitration clause if found will unnecessarily delay the process to approach court in the event of any dispute though it has no validity. 
You can refuse to abide by their demand, if they do not agree to it, you may look for a different lessee by ignoring this one.
T Kalaiselvan
Advocate, Vellore
14161 Answers
128 Consultations
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1. Who told you arbitration act is not valid for a leave and licence agreement? You are at liberty to insert an arbitration clause  in the agreement and it will be legally valid and enforceable. 

2. You must remember though that arbitration is an expensive affair as compared to court proceedings in as much as in arbitration you have to pay not only your lawyer but also bear the fees of the arbitrator. 

3. Arbitration clause will make it difficult for you to go to court.


  
Ashish Davessar
Advocate, Jaipur
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450 Consultations
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Hi, there is no bar under law that arbitration clause that arbitration clause will not include in leave and license agreement.
2. It is my personal opinion don't incorporate Arbitration agreement in the agreement. It is too expensive for individual and both the parties have to pay arbitrator sitting fee and also both of you has to pay rent where the arbitration proceeding going on.
Pradeep Bharathipura
Advocate, Bangalore
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133 Consultations
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1) your interpretation is absolutely correct   Arbitration clause incorporated in leave and licence agreement cannot oust jurisdiction of competent authority 

2) don't give your property on leave and licence to such lessee who insist on incorporation of incorporating such clauses in contract 
Ajay Sethi
Advocate, Mumbai
23386 Answers
1229 Consultations
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1) you can go ahead with agreement if you want to . 

2) it is advisable to draw attention of lessee to judgement of SC and HC in this regard wherein it has been held that arbitration clause does not oust jurisdiction of courts 

Ajay Sethi
Advocate, Mumbai
23386 Answers
1229 Consultations
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,  The bombay high Court i   Writ Petition No. 4614 of 2009 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 full  Bench rof bombay high court relied on the decision of the Supreme Court in Natraj Studio Pvt. Ltd.
vs. Navrang Studio5 (1981) 1 SCC 523
, wherein in context of the section 28 of the Bombay Rent Act, 1947, it was
held that the provision was a law by virtue of which disputes contemplated therein could not be
submitted to arbitration. The Larger Bench also relied on the decision of the Supreme Court in
Mansukhlal Dhanraj Jain v. Eknath Vithal Ogale case6 (1995) 2 SCC 665 wherein it was held that the provisions ofSection 28 of the Bombay Rent Act are pari materia (relating to the same subject matter) to
section 41 (1) of the 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.
Accordingly, the Larger Bench held that an arbitration agreement in such cases would be invalid
and inoperative on th
Ajay Sethi
Advocate, Mumbai
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1. The Bombay High Court could not have said this. It seems that you are misinterpreting the judgment. Every judgment is peculiar to the facts and circumstances of the case in which it is delivered.  

2. It is your call as to whether you are going to incorporate the clause in the agreement. If you do it then you will have to comply with it.

3. The arbitration clause cannot be incorporated unilaterally by the lessee. It can be done only if there is a consensus.

4. If you make the clause a part of the agreement then you will not be able to go to court. 
Ashish Davessar
Advocate, Jaipur
18259 Answers
450 Consultations
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Any agreed condition in the contract will be subject to legal disputes as per law.  If the arbitration clause is incorporated even for the satisfaction of lessee, on a legal dispute at a later stage, the opposite party can very well seek to enforce the clause/condition incorporated  in the L&L agreement.
Though this may not be valid, but who will decide the validity, only court can decide that.  Therefore this will be a head ache until the said litigation is not disposed.  Instead if there is no such clause, all the disputes relating to L&L may be decided by small causes court itself.
Think about the pros and cons, today it may appear to be a party satisfaction issue, but in real it will be a thorn in the crown. 
T Kalaiselvan
Advocate, Vellore
14161 Answers
128 Consultations
5.0 on 5.0

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