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

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 & 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.

The Supreme Court in this case appointed J. (Retired) Mukul Mudgal as a Sole Arbitrator and observed that, “We are of the considered view that insofar as eviction or tenancy relating to matters governed by special statutes where the tenant enjoys statutory protection against eviction where under the Court/Forum is specified and conferred jurisdiction under the statute alone can adjudicate such matters. Hence in such cases the dispute is non-­arbitrable.   If the special statutes   do   not   apply   to   the   premises/property   and   the lease/tenancy created thereunder as on the date when the cause of action arises to seek for eviction or such other relief and in such transaction if the parties are governed by an Arbitration   Clause;  the   dispute   between   the   parties   is arbitrable and there shall be no impediment whatsoever to invoke the Arbitration Clause.  This view is fortified by the 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 overruled.” 

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