This case is a part of our Annual Arbitration Review 2019.
Judgment Name: Vidya Drolia & Ors. v. Durga Trading Corporation
Citation: Civil Appeal No. 2402 / 2019
Coram: R. F. Nariman, Vineet Saran, JJ.
Court: Supreme Court of India
Date: 28th February 2019
Keywords: Transfer of Property, Arbitration.
This judgement looks at the arbitrability of disputes which are governed by the provisions of the Transfer of Property Act and, 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 analyzed 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 that 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 whether a dispute arising out of the application 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 Enterprises and the two cases discussed in that case – the Booz Allen case and the Natraj Studios v. Narang Studios case, which discussed the arbitrability of landlord-tenant disputes. The Supreme Court distinguished the present case from Booz Allen and 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 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.