Applicability of Arbitration and Conciliation Act on the dispute between the landlord and the tenant in the Transfer of Property Act
The Hon’ble Supreme Court of India, in Vidya Drola & Ors. versus Durga Trading Corporation being Civil Appeal No. 2402 of 2019 on 28.02.2019 allowed the arbitration proceeding to resolve dispute between the landlord and tenant and also referred the judgment of the Hon’ble Supreme Court in Himangni Enterprises versus Kamaljeet Singh Ahluwalia (2017) 10 SCC 706 to a Bench of three Judges Bench of the Hon’ble Apex Court to relook into the Himangni Enterprises case.
THE CHALLENGE:
The facts related to this case are that a tenancy agreement was executed between the landlord’s predecessor-in-title (Shree Bajrang Land & Trading Company) and the appellant/ tenant on 02.02.2006 in respect of certain godown. As per the agreement, the maximum period of the tenancy was 10 years i.e. initial 5 years with an option to renew the agreement for another 5 years with a 10% enhancement. The agreement provided for arbitration clause and it was decided that in case of any dispute/ differences, the same will be referred to Arbitral Tribunal consisting of three arbitrators and the venue of the agreement was decided to be within the Ordinary Original Civil Jurisdiction of the Hon’ble High Court of Kolkata.
Thereafter, as the earlier landlord transferred his leasehold rights to the respondent, w.e.f. 01.11.2012. On 24.08.2015, a letter was sent by the respondent calling upon the appellant to vacate the premises on the expiry of 10 years i.e. on 01.02.2016. A reminder to this effect was also sent to the appellant on 30.12.2015 and as the appellate/tenant did not vacate the premises, the respondent invoked the arbitration proceedings on 29.02.2016 by a notice to the appellants. On 28.04.2016, the respondent filed the present Section 11 petition before the Hon’ble Kolkata High Court for appointment of the arbitrator and on 07.09.2016, the Hon’ble High Court passed the impugned order, appointing the arbitrator, after rejecting the objection of the appellant on arbitrability of the disputes between the parties. After this, the arbitration proceedings began and as on the date of the present judgment, 18 sitting had taken place.
Meanwhile, on 12.10.2017, the Hon’ble Apex Court, vide it’s judgment in Himangni Enterprises versus Kamaljeet Singh Ahluwalia (2017) 10 SCC 706 held that where the Transfer of Property Act, 1882 applied between the landlord and the tenant, disputes between the said parties would not be arbitrable.
After this Judgment, a review application was filed by the appellant herein in light of Himangini Enterprises Judgment which was dismissed by the Hon’ble Kolkata High Court on 08.06.2018.
The Appellant argued that as the Transfer of Property Act creates right in rem in so far as landlord and tenant is concerned and public policy contained in the statute in Section 111 (g), 114 and 114A of the Transfer of Property Act makes it clear by necessary implication that the Arbitration Act stands excluded. Section 2(3) read with Section 5 of the Arbitration and Conciliation Act was also relied by the appellant to put this argument. It was further argued, referring to the statement of claim made before the Arbitrator in the present case that the Respondent has claimed mesne profit which can be decided only by the court and not the arbitrator and that too it comes into effect only after the agreement has come to an end. Therefore, even if the parties have consented for the arbitration, arbitration cannot be initiated as jurisdiction cannot be conferred with the consent of the parties.
The Respondent, on the other hand argued that as the arbitration proceeding is going on, the Hon’ble Supreme Court should, therefore, apply its discretionary jurisdiction under Article 136 of the Constitution of India. He, emphasizing the facts of the case, further argued that the Himangni Judgment does not apply in a situation where a lease expires by efflux of time. It was further argued that many High Courts have decided different from the Himangni Enterprises (Supra) differentiating the facts of the case.
HELD:
The Hon’ble Supreme Court first looked into Section 11(6A) of the Arbitration Act which says that the Supreme Court as well as High Court, while deciding any application under sub-section (4), (5) or (6) should confine itself to the existence of the existence of an arbitration agreement.
The Hon’ble Court further looked into the 246th report of Law Commission of India which lead to the enactment of Section 11(6A) and also relied upon the decision of the Hon’ble Supreme Court in Duro Felguera, S.A. versus Gangavaram Port Ltd., (2017) 9 SCC 729 wherein the Hon’ble Supreme Court, through Justice Mr. Kurian Joseph held that the purpose of Section 11(6A) is limited to the determination of the fact as to whether an arbitration agreement exists, nothing more, nothing less.
The Hon’ble Supreme Court, while deciding this case, observed that a lease is a transfer of an interest in property and there is nothing in law to show that dispute as to determination of a lease arising out of Section 111 cannot be decided by arbitration.
The Hon’ble Supreme Court, referred to the Himangni Enterprises (Supra) wherein the Hon’ble Supreme Court held that Delhi Rent Act does not apply to certain premises and those premises enjoys exemption from the Delhi Rent Act but that means they will be governed by the Transfer of Property Act and Arbitration Tribunal would not have jurisdiction. The Hon’ble Supreme Court, in the present case, referring to Trust Act, 1882, wherein specific remedies are given and specific forum is fixed so there is implied bar on the applicability of the arbitration act, decided that as nothing is given in the Transfer of Properties Act which impliedly bar the application of Arbitration Act, it would be wrong to hold that arbitration is not possible in disputes related to landlord and tenants. The Hon’ble Supreme Court, therefore, differing on the reasoning of the Himangni Enterprises Judgment observed that the Himangni judgment requires relook by a Bench off three Judges Bench of the Supreme Court.
The Hon’ble Supreme Court, finally decided that in the present matter, 18 hearing have taken place and arbitration proceeding is going on, the arbitration proceeding may go on and the arbitration may be culminated in an award but the execution of the same cannot be done without applying to the Hon’ble Supreme Court.