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Disputes between landlords and tenants governed by the Transfer of Property Act are arbitrable by character: Karnataka high court

The parties to the lease agreement, which was controlled by the Transfer of Property Act, might submit their landlord-tenant problems to arbitration, is upheld by the High Court of Karnataka through the learned Judge JUSTICE E.S. INDIRESH, in the case of Gokaldas Images Private Limited v. Aries Agro-Vet Associates (Pvt) Limited & Anr, (WRIT PETITION NO.1305 OF 2022).

Brief facts of the case:

The respondent/lessor Aries Agro – Vet Associates (Pvt) Limited and the petitioner Gokaldas Images Private Limited entered into a leasing agreement. The respondent filed a lawsuit with the trial court demanding eviction of the petitioner from the rented property, as well as rent arrears, damages, and an order prohibiting the petitioner from subletting the leased property. The case was then moved to the Commercial Court. The petitioner submitted an application under Section 8 of the Arbitration and Conciliation Act of 1996 (A&C At) to send the parties’ disagreement to arbitration in accordance with the lease’s Arbitration Clause. The respondent objected to the aforementioned application. The trial court issued an order rejecting the petitioner’s application. The petitioner then filed a writ case with the Karnataka High Court.

The petitioner, Gokaldas Images, told the High Court that the trial court denied the petitioner’s application because it was based on the Supreme Court’s decision in the case of Himangi Enterprises vs. Amaljit Singh Ahulvalia (2017), in which the Supreme Court said that the issue with the lease is not one that can be decided by arbitration. The petitioner said that in the case of Vidya Drolia versus Durga Trading Corporation (2019), the Supreme Court said that the judgement in the case of Himangi Enterprises (2017) needed to be looked at again by a Bench of three Supreme Court judges. So, the petitioner said that the order made by the trial court was wrong because it was based on the ruling in Himangi Enterprises (2017).

JUDGEMNET:

The High Court pointed out that the trial court, relying on the Supreme Court’s decision in Himangi Enterprises (2017), had ruled that the dispute between the two parties could not be settled by arbitration because it was about eviction and rent that was not paid on time.

The Court said that in the case of Vidya Drolia (2019), the Supreme Court had ruled that the judgement in Himangi Enterprises (2017) needed to be looked at again by a bigger group of Supreme Court judges.

Following that, the Supreme Court declared in Vidya Drolia against Durga Trading Corporation (2020) that landlord-tenant conflicts governed by the Transfer of Property Act are arbitrable since they are not actions in rem, but rather subordinate rights in personam arising from rights in rem. The Supreme Court overturned the Himangi Enterprises (2017) ruling and declared that landlord-tenant conflicts are arbitrable in nature since the Transfer of Property Act does not prohibit arbitration, the court said. The Court did observe, however, that the Supreme Court had concluded that if a single court or forum was given exclusive jurisdiction under the Statute to adjudicate unique rights and responsibilities, landlord-tenant issues covered by rent control laws would not be arbitrable.

JUDGEMENT REVIEWED BY – HARILAKSHMI

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