Disputes under the Transfer of Property Act are Arbitrable: Supreme Court of India

The petitioner has instituted this petition under ‘Act 1996’ for short) seeking appointment of a Sole Arbitrator for resolving the disputes that have arisen The property bearing No.154­B Block ‘A’ Sector 63 Phase­III NOIDA Gautam Budh Nagar U.P. having been initially allotted and leased by New Okhla Industrial Development Authority under a Lease dated 26.03.2003 had changed hands and the lease was ultimately transferred in favour of the petitioner under a Sub­Leased the same to the respondent under the Sub­ Deed provides for resolution of the disputes through Sole Arbitrator and sought concurrence from the The petitioner is therefore before this Court seeking on 02.03.2020. Despite service the respondent has not have heard Mr. Vikas Dhawan learned counsel for the The parties to the petition have entered into a Sub­ terms and conditions agreed under the Sub­Lease Deed certain disputes have arisen between the parties. In the disputes differences or “12.1 All disagreements arising out of in connection with or in relation to this Sub­Lease Deed including w.r.t performance termination in the first instance shall be endeavored to be settled through good faith mutual discussions between the officials of the Sub­Lessor and the Sub­ period of 21 Mukul Mudgal as the Sole Arbitrator and indicated that if the indicates that the disputes between the parties is to be resolved through Arbitration. A further perusal of the Clause indicates that the parties have agreed to secure appointment of the Arbitrator through the High Court of and also the averments in the petition indicate that the of Nairobi Kenya. Thus the petitioner being an individual that country having entered into a contract and since disputes have arisen under the said document the same qualifies as an ‘International Commercial Arbitration’ as defined in Section 2(f) of Act 1996. In such circumstance Supreme Court is to appoint an Arbitrator as provided Court as stated in the contract entered into between the However before considering the appointment of Arbitrator the first part of Clause 12 providing for the dispute relating to lease tenancy agreements deeds when such lease is governed by Transfer of Property Act 1882 and iron out the creases on the such there is no impediment for resolving the dispute by the Supreme Court in the case of Booz Allen and 2011) 5 SCC 532 leaves no doubt. In order to put the “35. The Arbitral Tribunals are private fora chosen voluntarily by the parties to the constituted under the laws of the country Every civil or commercial dispute either unless the jurisdiction of the Arbitral necessary implication. Adjudication of as a matter of public policy. Certain other categories of cases though not expressly reserved for adjudication by public fora courts and tribunals) may by necessary of private fora. Consequently where the cause dispute is inarbitrable the court 36. The well­recognised examples of non­ arbitrable disputes are: disputes relating disputes relating to divorce judicial separation restitution of conjugal rights child custody guardianship matters and eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection Notwithstanding the same there is a deflection from Enterprises vs. Kamaljeet Singh Ahluwalia 10 suit against the tenant for eviction. In the said suit the tenant filed an application under Section 8 of Act 1996 seeking reference to arbitration since the parties were High Court. The Supreme Court while deciding the same issue arose in respect of premises governed under the Bombay Rents Hotel and Lodging Houses Rates Control Act 1947 and the case of Booz Allen supra) wherein it was clearly indicated that non arbitrability is in respect of tenancy governed by special statutes still upheld the order rejecting the application under Section 8 of Act 1996 seeking reference to 10. The observations contained in para 23 and 24 of the non­arbitrability of disputes relating to the lease tenancy governed under TP Act. The said “23. The learned counsel for the appellant however argued that the provisions of the Delhi Rent Act 1995 are not applicable to the premises by virtue of Section 3(1)(c) of Ltd. v. Navrang Studios 1 SCC 523] 5 SCC 532 cases relating to rent and eviction of the a provision by virtue of it the premises but that does not mean that the Arbitration Act ipso facto would be applicable to such premises conferring jurisdiction on the arbitrator to decide the eviction rent disputes. In such a situation the rights of the parties and the demised of Property Act and the civil suit would be triable by the civil court and not by the Act are not applicable to certain premises premises. In this view of the matter it cannot be contended that the provisions of the Arbitration Act would therefore apply to 11. The said observations are made by a Bench of two Hon’ble Judges without detailed reference to the scope of the provisions or the manner of right and protection arbitration. In that light another Bench of two Hon’ble Judges speaking through R.F. Nariman J. in the case of Vidya Drolia & Ors. vs. Durga Trading Corporation 2019) SCC online SC 358 noticed that Natraj Studios supra) had dealt with tenancy under Rent Act and Booz Allen had made reference to special statutes and had not stated with respect to non­arbitrability of cases arising under TP Act. In that regard having noted the “16. In fact a close reading of Section 114 would show that the rights of landlord and tenant are balanced by the aforesaid provision. This is because where a lease of immoveable property has determined by hearing of the suit the lessee pays or tenders to the lessor the rent in arrears together with interest thereon and the deposit of rent in arrears but also interest thereon and full costs of the suit The option given of course is that security that the Court is given a discretion in the tenant or it may not. This itself shows that Section 114 cannot be said to be a capable of remedy. However the exception this would not apply to assigning sub­ letting parting with the possession or that every one of the grounds stated in and or 114A are grounds which can be raised before an arbitrator to decide as to 12. Further with specific reference to the consideration in “24. A perusal of both the aforesaid judgments therefore shows that a Transfer and tenant is very far removed from the situation in either Natraj Studiosor in sub­paragraph of paragraph 36 of Booz Allenwhere such time is limited conditionally on the happening of some event—by the c) where the interest of the lessor in the property terminates on or his power to dispose of the same extends only to the lessor in the whole of the property become e) by express surrender that is to say in g) by forfeiture that is to say in case the lessee breaks an express condition which provides that on breach thereof the lessor may re­enter or in case the lessee renounces his character as such by setting up a title in a third person or by claiming title in himself or the lessee is adjudicated an insolvent and the lease in writing to the lessee of his intention to the lease or to quit or of intention to quit “114. Relief against forfeiture for non­ payment of rent.— Where a lease of forfeiture for non­payment of rent and the lessor sues to eject the lessee if at the hearing of the suit the lessee pays or tenders to the lessor the rent in arrear together with interest thereon and his full costs of the suit or gives such security as payment within fifteen days the Court may an order relieving the lessee against the forfeiture and thereupon the lessee shall hold the property leased as if the forfeiture 114A. Relief against forfeiture in certain other cases.—Where a lease of immovable property has been determined by forfeiture for a breach of an express condition which provides that on breach thereof the lessor specifying the particular breach b) if the breach is capable of remedy Nothing in this section shall apply to an express condition against assigning under­ letting parting with the possession or disposing of the property leased or to an express condition relating to forfeiture in A perusal of the provisions indicate the manner in which the determination of lease would occur which also lessee tenant in breaking the express condition agreed consequent forfeiture could also be with respect to non­ determined by forfeiture and the lessor sues to eject the lessee and if at the hearing of the suit the lessee pays or the lessee to remedy the breach. No doubt the said provisions provide certain protection to the lessee tenant before being ejected from the leased property. In our considered view the same cannot be construed as a equitable jurisdiction in appropriate cases as a matter of discretion. This position has been adverted to by the Namdeo Lokman Lodhi vs. Narmadabai & Others (AIR could not be refused except in cases where third party interests intervene is completely negatived by the decision of the House of “…..With great respect we think that the observations cited above contain sound principles of law. We are therefore unable to Act confers a discretion on the court that discretion except in cases where third party in favour of the tenant irrespective of the 16. Such equitable protection does not mean that the the tenant is not arbitrable and that only a Court is empowered to waive the forfeiture or not in the secure possession of the leased property in a normal circumstance is required to institute a suit in the Court which has jurisdiction. However if the parties in the the landlord would be entitled to invoke the arbitration landlord has sought for an award of ejectment on the ground that the lease has been forfeited since the tenant has failed to pay the rent and breached the express On the other hand the disputes arising under the Rent Acts will have to be looked at from a different view the reason that notwithstanding the terms and conditions statute namely the Rent Act the premises being amenable to the provisions of the Act would also provide statutory protection against eviction and the courts specified in the resolve such other disputes. In such proceedings under special statutes the issue to be considered by the aspects such as the bonafide requirement comparative therefore such cases are not arbitrable. As indicated above the same is not the position in matters relating to the lease tenancy which are not governed under the special to matters governed by special statutes where the tenant the statute alone can adjudicate such matters. Hence in such cases the dispute is non­arbitrable. If the special statutes do not apply to the premises property and the Arbitration Clause the dispute between the parties is opinion expressed by the Co­ordinate Bench while answering the reference made in the case of Vidya Drolia wherein the view taken in Himangni Enterprises is 19. As noted above the petitioner in the instant case while In the result the petition is allowed. Shri Justice resolve the dispute between the parties. The arbitral fee Act 1996. There shall be no order as to costs in this

Summary: Disputes that arise between landlord and tenant under Transfer of Property Act, 1882, are Arbitrable and the ones that arise under the Rent Act are not. This ratio was laid down by the Supreme Court of India presided over J. A.S. Bopanna in the case of Suresh Shah Vs. Hipad Technology India Private Limited, [Arbitration Petition (Civil) No(s). 08/2020].   The brief facts of this case are that there was a dispute between the Petitioner and the Respondent regarding sub-lease of a premise. The Deed between the parties consist a clause that any dispute between the parties should be resolved by Arbitration. Therefore, the Petitioner approached the court under Section 11(5) of the Arbitration and Conciliation Act, 1996, for appointing a Sole Arbitrator. The Court observed that the Arbitration qualifies as an International Commercial Arbitration as the Petitioner is a citizen of Kenya. Further, the Petitioner submitted that the dispute is Arbitrable as the rights of the tenant are not protected by any special statute. Further, there would be no impediment for resolving dispute through Arbitration. The Court analyzed Section 114 A and 114 of the Transfer of Property Act and further relied on the landmark judgments of Namdeo Lokman Lodhi Vs. Narmadabai &amp; Ors., and stated that in case of disputes between lease and sub-lease in the Transfer of Property Act, normally the court has the jurisdiction to adjudicate upon the same but if the parties have conferred jurisdiction to an Arbitral Tribunal in their agreement then the dispute can be solved through Arbitration. But if the lease/sub-lease is governed by a Special statute like the Rent Act, then the only the court that has been conferred jurisdiction by the Act can adjudicate over the dispute. As the court does not only look over the validity of the agreement but the bona-fide requirement and comparative hardships.