On 28 February 2019, a Division Bench of the Supreme Court in Vidya Drolia v. Durga Trading Corporation reviewed the rather perplexing jurisprudence surrounding the issue as to whether disputes governed by the provisions of the Transfer of Property Act, 1882 (‘TP Act’) are arbitrable or not. Reviewing the stance taken by the Supreme Court in the Himangni Enterprises v. Kamaljeet Singh Ahluwalia that disputes governed by the provisions of the Transfer of Property Act, 1882 (‘TP Act’) are in fact inarbitrable, the Vidya Drolia decision has cast an air of uncertainty with respect to the subject-matter in hand and the correctness of the Himangni Enterprises dictum is being questioned and therefore is referred it to a larger bench for reconsideration.
In the current case, the appellant who is the tenant entered into a tenancy agreement with the respondent who is the landlord of the premises in question. The Tenancy Agreement entailed that the maximum tenancy period shall be of 10 years after which the tenant shall vacate the said premises and deliver the peaceful possession of the property to the landlord. Clause 23 of the Tenancy Agreement laid down a provision for Arbitration in any case of dispute with regards to the subject-matter of the agreement whereby the dispute shall be resolved by a three-member arbitral tribunal.
Thereafter, on the completion of the 10 years period, the tenant failed to deliver peaceful possession of the premises to the landlord even after the respondent sent a notice to the appellant notifying him about the same. Consequently, the respondent moved to the Calcutta High Court in order to appoint an arbitrator with accordance to Section 11 of the Arbitration and Conciliation Act, 1996 (Arbitration Act). In lieu of this, the Tenant opposed the application based on the reasoning that the current dispute is not arbitrable. This claim was however rejected by the Court.
While the arbitration process was still pending, the Supreme Court on October 12, 2017 in the Himangni Enterprises case adjudged that where the Transfer of Property Act, 1882 is applicable between landlord and tenant, disputes between the said parties would not be arbitrable.
Bearing in mind the Supreme Court’s decision in Himangni Enterprises, even though the arbitration was ongoing and several sittings had already been held, the Tenant sought a review/ recall of the High Court’s order appointing an arbitrator. The High Court dismissed this application, which dismissal was assailed before the Supreme Court.
On analyzing the scope and ambit of section 11 of the Arbitration Act, the Supreme Court proceeded to scrutinize the primary issue in the dissension. The tenant plead that sections 111, 114, and 114A of the TP Act dealt with matters of public policy and thereby did not come under the ambit of the Arbitration Act by necessary implication. The Court in response looked into the individual provisions and the respective rules that entailed. With respect to this, the Supreme Court declared that “there is nothing in the TP Act to show that a dispute as to the determination of a lease arising under Section 111 cannot be decided by Arbitration”.
The primary issue has been referred to be dealt with by a larger bench, Vidya Drolia is a rather vital addition to the Indian arbitration jurisprudence for two primary reasons. First, it lays down a much needed test to determine whether a particular statute is amenable to arbitration or not. Secondly, it clearly specifies when it can be said that a statute excludes arbitration by necessary implication. Furthermore, the Supreme Court in this case has quite judiciously dismantled the very basis of the judgement given in Himangni Enterprises, thereby rendering it likely that a larger bench will affirm the Vidya Drolia dictum in the future.
Tags : #TransferofPropertyAct #Arbitration&Conciliation #VidyaDrolia