Latest News
ARBITRABILITY OF TENANCY DISPUTES
ARBITRABILITY OF TENANCY DISPUTES
OVERVIEW
In the case Vidya Drolia & Others v Durga Trading Corporation [Civil Appeal No. 2402 of 2019] the Supreme Court of India reconsidered the arbitrability of tenancy disputes arising under the Transfer of Property Act.
FACTUAL BACKGROUND
The appellant (Tenant) and the respondent (Landlord) entered into a tenancy agreement on 02.02.2006 in respect of certain godowns and other structures. The maximum period of tenancy was 10 years after which the appellant was required to deliver vacant and peaceful possession of the premises. The tenancy agreement also stated that any dispute arising out of the agreement shall be resolved through a three- member arbitration tribunal. After the expiry of the 10 years period, the appellant did not vacate the land. Thus, the respondent invoked the arbitration clause in the tenancy agreement. An application requesting the Calcutta High Court to appoint an arbitrator was filed under section 11 of the Arbitration and Conciliation Act, 1996. The appellant objected the said application stating that the dispute is not arbitrable. However, the Calcutta High Court appointed an arbitrator.
While the arbitration proceedings were ongoing the Supreme Court in the case of Himangni Enterprises v Kamaljeet Ahluwalia stated that if the application of special rent Acts is exempted on certain premises, then the Transfer of Property Act shall be applicable for the same. Under Transfer of Property Act, the dispute has to be tried in a civil court. Hence, the Arbitration and Conciliation Act shall not be applicable.
In the light of the said judgement, a review application was filed by the appellant before the Calcutta High Court, but this review was dismissed. Hence, an appeal was filed in the Supreme Court.
RULES
- Booz Allen Hamilton Inc. v SBI Home Finance Limited and Others [(2011) 5 SCC 532]- In this case, the Supreme Court held that if a special statute is applicable on a tenancy matter, then the dispute is non- arbitrable. Under a special legislation, the tenant enjoys special protection and specified courts have jurisdiction of these matters.
- Natraj Studios (P) Ltd v Navrang Studios [(1981) 1 SCC 523]- In this case, the Bombay Rent Act, 1947 was applicable on the landlord tenant dispute. The Bombay Rent Act is a special legislation which confers exclusive jurisdiction on the Small Causes Court. Hence, the dispute was held non- arbitrable.
JUDGEMENT
In the present case, the Supreme Court relied upon the rules laid down in the Booz Allen case and the Natraj Studios case and stated that the Transfer of Property Act is not a special legislation. Hence, it cannot be concluded that disputes arising under this Act is non- arbitrable. Further it has also been pointed out that there is no such provision in the Transfer of Property Act that negates the arbitrability of disputes governed by this Act. Hence, the Court is of the view that the principle laid down in Himangni Enterprises v Kamaljeet Ahluwalia must be reviewed by a three- Judge bench.
Although in the present case, since the arbitration proceedings were ongoing the Court ordered for the continuation of arbitration proceedings until an award is passed by the arbitration tribunal.
Thus, it can be concluded that the question of arbitrability of tenancy disputes is yet to be answered by the Supreme Court. But if the dispute is governed by a special welfare legislation then the matter is non- arbitrable as a specific court confers jurisdiction upon such matters.
OVERVIEW
In the case Vidya Drolia & Others v Durga Trading Corporation [Civil Appeal No. 2402 of 2019] the Supreme Court of India reconsidered the arbitrability of tenancy disputes arising under the Transfer of Property Act.
FACTUAL BACKGROUND
The appellant (Tenant) and the respondent (Landlord) entered into a tenancy agreement on 02.02.2006 in respect of certain godowns and other structures. The maximum period of tenancy was 10 years after which the appellant was required to deliver vacant and peaceful possession of the premises. The tenancy agreement also stated that any dispute arising out of the agreement shall be resolved through a three- member arbitration tribunal. After the expiry of the 10 years period, the appellant did not vacate the land. Thus, the respondent invoked the arbitration clause in the tenancy agreement. An application requesting the Calcutta High Court to appoint an arbitrator was filed under section 11 of the Arbitration and Conciliation Act, 1996. The appellant objected the said application stating that the dispute is not arbitrable. However, the Calcutta High Court appointed an arbitrator.
While the arbitration proceedings were ongoing the Supreme Court in the case of Himangni Enterprises v Kamaljeet Ahluwalia stated that if the application of special rent Acts is exempted on certain premises, then the Transfer of Property Act shall be applicable for the same. Under Transfer of Property Act, the dispute has to be tried in a civil court. Hence, the Arbitration and Conciliation Act shall not be applicable.
In the light of the said judgement, a review application was filed by the appellant before the Calcutta High Court, but this review was dismissed. Hence, an appeal was filed in the Supreme Court.
RULES
- Booz Allen Hamilton Inc. v SBI Home Finance Limited and Others [(2011) 5 SCC 532]- In this case, the Supreme Court held that if a special statute is applicable on a tenancy matter, then the dispute is non- arbitrable. Under a special legislation, the tenant enjoys special protection and specified courts have jurisdiction of these matters.
- Natraj Studios (P) Ltd v Navrang Studios [(1981) 1 SCC 523]- In this case, the Bombay Rent Act, 1947 was applicable on the landlord tenant dispute. The Bombay Rent Act is a special legislation which confers exclusive jurisdiction on the Small Causes Court. Hence, the dispute was held non- arbitrable.
JUDGEMENT
In the present case, the Supreme Court relied upon the rules laid down in the Booz Allen case and the Natraj Studios case and stated that the Transfer of Property Act is not a special legislation. Hence, it cannot be concluded that disputes arising under this Act is non- arbitrable. Further it has also been pointed out that there is no such provision in the Transfer of Property Act that negates the arbitrability of disputes governed by this Act. Hence, the Court is of the view that the principle laid down in Himangni Enterprises v Kamaljeet Ahluwalia must be reviewed by a three- Judge bench.
Although in the present case, since the arbitration proceedings were ongoing the Court ordered for the continuation of arbitration proceedings until an award is passed by the arbitration tribunal.
Thus, it can be concluded that the question of arbitrability of tenancy disputes is yet to be answered by the Supreme Court. But if the dispute is governed by a special welfare legislation then the matter is non- arbitrable as a specific court confers jurisdiction upon such matters.
- Vidya Drolia & Others v Durga Trading Corporation.
- Facts and Judgement.
- Booz Allen and Nataraj Studios case.
