Published on: May 07, 2024 12:26 IST
Court: Supreme Court of India
Case: Vidya Drolia v. Durga Trading Corpn. 2021
Honourable Supreme Court of India has held that that landlord-tenant disputes are arbitrable as the Transfer of Property Act does not forbid or foreclose arbitration. However, landlord-tenant disputes covered and governed by Rent control legislation would not be arbitrable when specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligations.
Such rights and obligations can only be adjudicated and enforced by the specified court/forum, and not through arbitration.
79. Landlord-tenant disputes governed by the Transfer of Property Act are arbitrable as they are not actions in rem but pertain to subordinate rights in personam that arise from rights in rem. Such actions normally [Ed. : Certainly in those cases where the dispute only affects the parties to the arbitration clause, third-party rights would not be affected, as in the facts of the present case. It is in such cases that “such actions under the TPA normally would not affect third-party rights or have erga omnes effect”. However, one may consider cases for instance, where a sub-tenancy exists or where the head lessee has taken a mortgage on the lease, and the landlord invokes the arbitration clause against the head lessee seeking to terminate the head lease, can the sub-tenant or mortgagee of the head lessee seek to be impleaded in the arbitration proceedings? For termination of the head lease would also extinguish the rights of the sub-tenant and the mortgagee of the head lessee. The situations posited are relatively simple ones. Often there are numerous prior and subsequent transferees who might be affected by the result of a dispute between a landlord and tenant, or even between other transferees. In such complex situations involving prior and subsequent transfers, it would appear that the matter would be non-arbitrable as it would appear to satisfy the first two tests of non-arbitrability laid down herein—see Shortnotes B and C. In a case where the mortgagee is covered by the RDB Act and the Sarfaesi Act, it might be rendered non-arbitrable by virtue of the fourth test as well—see Shortnotes E and G.] would not affect third-party rights or have erga omnes effect or require centralised adjudication. …………………
Drafted By Abhijit Mishra