This case is a part of our Annual Arbitration Review 2018.
Judgment Name: Vidya Drolia & Ors. v. Durga Trading Corporation
Citation: Civil Appeal No. 2402 / 2019
Coram: R. F Nariman, Vineet Saran
Date: 28th February 2019
This judgement looks at the arbitrability of disputes which are governed by the provisions of the Transfer of Property Act and in order to do this, analyses the precedents pertaining to this issue.
The following case arose due to tenancy related issues and whether disputes which were governed by the provisions of the Transfer of Property Act could be arbitrable. In this case, the applications under Section 11 of the Arbitration Act as well as the review and recall applications made by the tenant were rejected by the High Court which is why it was appealed to in the Supreme Court. The Supreme Court essentially analysed the relevant sections of the Transfer of Property Act as well as the precedent established discussing the arbitrability of landlord-tenant disputes. The Court concluded that if there was an arbitration clause present in an agreement which is governed by the Transfer of Property Act, then the dispute could be referred to for arbitration.
What is the scope of a Section 11 application and can the dispute be referred to for arbitration?
The Supreme Court held, that the contentions which stated that the issue was governed by Sections 111, 114 and 114A Transfer of Property Act which dealt with matters concerning public policy and thereby excluded the Arbitration Act, could not be used in this instance. This was because the Court examined the relevant provisions and stated that the relevant provisions dealt with the mode of determination of lease and relief in case of forfeiture and did not concern public policy. Based on this fact, the Court held that the Arbitration Act could not be held to be excluded.
The Court also looked at the precedent established in the case of Himangni Enterprisesand the two cases discussed in that case – the Booz Allen case and the Natraj Studios v. Narang Studioscase which discussed the arbitrability of landlord-tenant disputes. The Supreme Court distinguished the present case from Booz Allenand Natraj Studios on the basis that Booz Allen only stated that tenancy matters are non-arbitrable when they are governed by special statutes and the same was applicable in Natraj Studios as the legislation in contention was the Bombay Rent Act, 1947 which was a special welfare legislation.
This judgment therefore provides an explanation and solution on how to perceive landlord-tenant disputes and the jurisdiction of the Arbitration Act. Through this judgment, the Court has elucidated that since the Transfer of Property Act does not oust the jurisdiction of the Arbitration Act and therefore, if there is an arbitration clause present in the agreement which is governed by the Transfer of Property Act, the dispute can be referred to for arbitration.
Himangni Enterprises vs Kamaljeet Singh Ahluwalia (2017) 10 SCC
Natraj Studios (P) Ltd vs Navrang Studios & Anr 1981 AIR 537
Booz-Allen & Hamilton Inc vs Sbi Home Finance Ltd. & Ors Civil Appeal NO.5440 OF 2002