VIDYA DROLIA & ORS. versus DURGA TRADING CORPORATION

VIDYA DROLIA & ORS.

DURGA TRADING CORPORATION

(Civil Appeal No. 2402 of 2019)

FEBRUARY 28, 2019

[R. F. NARIMAN AND VINEET SARAN, JJ.]

Arbitration and Conciliation Act, 1996 – s.11(6) – Disputebetween landlord and tenant regarding determination of lease –Arbitrator appointed on petition filed by respondent-landlord –Appellant-tenant objected on arbitrability of the dispute by relyingon Himangni Enterprises case wherein it was held that where theTransfer of Property Act applied between the landlord and tenant,disputes between them would not be arbitrable – Held: None of theprovisions of the Transfer of Property Act were noticed by HimangniEnterprises case – In Himangni Enterprises case, it was held that thequestion involved was answered by decision in Natraj Studios caseand Booz Allen case – However, perusal of decision in Natraj Studiosand Booz Allen showed that no such question was answered by thesetwo decisions – Therefore, Himangni Enterprises case requires arelook – In view of this, matter is referred to larger bench –Transfer of Property Act, 1882 – ss.111, 114 and 114A –Reference to larger bench – Landlord-tenant dispute.

Words and Phrases: Expression ‘arbitrability’ – Meaning of,Discussed.

Referring the matter to larger bench, the Court

HELD: 1. close reading of Section 114 of Transfer ofProperty Act, 1882 would show that the rights of landlord andtenant are balanced by the said provision. This is because wherea lease of immoveable property has determined by forfeiture fornon-payment of rent, and at the hearing of the suit, the lesseepays or tenders to the lessor the rent in arrears, together withinterest thereon and his full costs within 15 days, the Court in itsdiscretion may relieve the lessee against the forfeiture. Thisshows two things – one that the landlord’s interest is securednot only by the deposit of rent in arrears but also interest thereon

Aand full costs of the suit. The option given, of course, is thatsecurity may also be given but what is important is that the Courtis given discretion in making decree for ejectment if this isdone. The discretion may be exercised in favour of the tenant orit may not. This itself shows that Section 114 cannot be said to bea provision conceived for relief of tenants as class as matterBof public policy. The same goes for Section 114A. Here again, alessee is given one opportunity to remedy breach of an expresscondition, provided such condition is capable of remedy. However,the exception contained in this section shows that it is verylimited right that is given to tenant, as this would not apply toCassigning, sub-letting, parting with the possession, or disposingof the property leased, or even to an express condition relatingto forfeiture in case of non-payment of rent. Thus, it is clear thatevery one of the grounds stated in Section 111, whether readwith Section 114 and/or 114A, are grounds which can be raised

before an arbitrator to decide as to whether lease has or hasDnot determined. [Para 14] [476-B-F]

2. The decision in Himangni Enterprises, concerned itselfwith landlord-tenant dispute in which the Delhi Rent Act, 1995was admittedly inapplicable. However, in paragraph 18 of thesaid judgment, this Court said that the question involved in theEappeal was no longer res integra and stood answered by twodecisions of this Court in Natraj Studios and Booz Allen againstthe appellant and in favour of the respondent. The judgment inNatraj Studios is judgment in which Section 28 of the BombayRent Act, in the context of arbitrability, arose for consideration.FThis section made it clear that disputes between landlords andstatutory tenants would be referable only to the small causes courtin Bombay and “no other court has jurisdiction to entertain anysuch suit, proceeding or application or to deal with such claim orquestion”. In Booz Allen, it was heldthat only those tenancymatters that are (i) governed by special statutes (ii) where theGtenant enjoys statutory protection against eviction and (iii) whereonly specified courts are conferred jurisdiction to grant evictionor decide disputes, are cases where the dispute between landlordand tenant can be said to be non-arbitrable. perusal of NatrajStudios and Booz Allen judgments shows that Transfer of

Property Act situation between landlord and tenant is very farremoved from the situation in either Natraj Studios or in BoozAllen. Therefore, the question involved in Transfer of PropertyAct situation cannot possibly be said to have been answered bythe two decisions of this Court. [Paras 15-19] [478-A-D;479-B-D]

3. None of the provisions of the Transfer of Property Actwere noticed by Himangni Enterprises case. In fact, none of thesaid provisions would indicate that disputes under the said Actare triable only by the civil court and not by arbitration, as hasbeen held in this paragraph. It is clear that the Transfer of PropertyAct is silent on arbitrability, and does not negate arbitrability.Equally, merely because discretion had to be exercised by thecourt on whether or not to grant specific performance, would notmilitate against specific performance being granted, in particular,of Booz Allen. It is clear, therefore, that the judgment in HimangniEnterprises will require relook by Bench of three Hon’bleJudges of this Court. One more thing held in Himangni Enterprisesis that the mere fact that an exemption from the Rent Act isavailable does not mean that the matter becomes non-arbitrable.The Court held that as soon as the exemption is withdrawn, theRent Act will apply, and therefore, it cannot be contended thatthe Arbitration & Conciliation Act would apply. This reasoning isalso not correct. [Paras 21, 23, 24] [480-B-F]

Himangni Enterprises v. Kamaljeet Singh Ahluwalia(2017) 10 SCC 706: [2017] 10 SCR 139;DuroFelguera, S.A. v. Gangavaram Port Ltd. (2017) 9 SCC729 : [2017] 10 SCR 285 ;Praduman Kumar v. VirendraGoyal (Dead) by LRs.(1969) 3 SCR 950;NamdeoLokman Lodhi v. Narmadabai & Ors. [1953] SCR1109 ;Booz Allen and Hamilton Inc. v. SBI HomeFinance Limited and Others(2011) 5 SCC 532 : [2011]7 SCR 310 ; Olympus Superstructures Pvt. Ltd. v. MeenaVijay Khetan and Others(1999) 5 SCC 651 : [1999] 3SCR 490;Vimal Kishor Shah and Others v. JayeshDinesh Shah and Others(2016) 8 SCC 788 : [2016] 7SCR 102;Dhulabhai v. State of M.P. [1968] 3 SCR662;Emaar MGF Land Limited v. Aftab Singh2018SCC OnLine SC 2771 – referred to.

AWolverhampton New Waterworks Co. v. Hawkesford141 ER 486 – referred to.

Case Law Reference

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2402Dof 2019.

From the Judgment and Order dated 07.09.2016 of the High Courtat Calcutta in A.P. No. 286 of 2016.

Debajyoti Basu, Hiren Dasan, Harish Dasan, Chand Qureshi,M. K. Tripathi, Advs. for the Appellants.E

Saurav Agarwal, P.C. Sharma, Anirudha Agarwalla, T. R. B.Sivakumar, Anshuman Chowdhury, Ms. Akanksha Sisodia, Advs. forthe Respondent.

The Judgment of the Court was delivered by

FR. F. NARIMAN, J. 1. Leave granted.

2. The facts, in this appeal, are as follows:

(i) Tenancy Agreement was entered into between the landlord’spredecessor-in-title (Shree Bajrang Land & Trading Company) and theappellants/tenant on 02.02.2006 in respect of certain godowns and otherGstructures.

(ii) The maximum period of tenancy was for 10 years. The initialperiod was 5 years, with an option for renewal for another 5 years witha 10% enhancement in the rent.

(iii) It was agreed that the tenant should pay the agreed rent ofRs.12,985/- per month. It was also agreed that upon expiry or earlierdetermination of the lease, the tenant shall deliver vacant and peacefulpossession of the premises. Clause 23 of the aforesaid Agreement statedas follows:

“23. That in case of any disputes, differences and/or claims arisingby and between the parties out of this agreement and/or in respectto the subject matter of this agreement, the same shall be referredto the Arbitral Tribunal consisting of three arbitrators, out of whichone arbitrator shall be appointed by the party of the first part, oneby the party of the other part collectively and the PresidingArbitrator shall be appointed mutually by the two arbitrators soappointed by the parties. The decision of the Arbitral Tribunalshall be final and binding on the parties. The Arbitration proceedingsshall be governed by the provisions of Arbitration & ConciliationAct, 1996 with all statutory modifications for the time being inforce. The venue of arbitration shall always be within the OrdinaryOriginal Civil Jurisdiction of the High Court at Kolkata.”

(iv) On 16.10.2012, the tenancy was attorned in the name of therespondent, and the appellants paid rent to the respondent as the earlierlandlord had surrendered his leasehold rights in favour of the respondentwith effect from 01.11.2012.

(v) On 24.08.2015, letter was sent by the respondent callingupon the appellants to deliver vacant and peaceful possession on theexpiry of the 10 year period, i.e., on 01.02.2016. reminder to this effectwas also sent on 30.12.2015. As the tenant did not vacate the premises,arbitration was invoked by the respondent on 29.02.2016 by noticesent to the appellants.

(vi) On 28.04.2016, the respondent filed the present Section 11petition before the Calcutta High Court for appointment of an arbitrator.

(vii) On 07.09.2016, the High Court passed the impugned orderappointing an arbitrator, after rejecting the appellants’ objections onarbitrability of the dispute between the parties. After this, the arbitralproceedings began and we are informed that as many as 18 sittingshave taken place.

A(viii) Meanwhile, however, on 12.10.2017, judgment wasdelivered by this Court in Himangni Enterprises v. Kamaljeet SinghAhluwalia, (2017) 10 SCC 706 [“Himangni Enterprises”], in which itwas held that where the Transfer of Property Act, 1882 applied betweenlandlord and tenant, disputes between the said parties would not bearbitrable.B

(ix) Even though four arbitration sittings took place after thisjudgment, review/recall application was filed by the appellants beforethe Calcutta High Court on 04.06.2018 in the light of this judgment. Thisreview was dismissed by the Calcutta High Court on 08.06.2018.

C3. Mr. Debajyoti Basu, learned counsel appearing for the appellantshas argued that the Transfer of Property Act is an Act which createdrights in rem insofar as the landlord and tenant are concerned. He hasfurther argued that the public policy contained in the statute in Sections111(g), 114, and 114A, in particular, make it clear that by necessaryimplication the Arbitration & Conciliation Act, 1996 stands excluded.DFor this purpose, he also relied upon Section 2(3) of the Arbitration &Conciliation Act read with Section 5 thereof. He referred us to thestatement of claim made before the learned Arbitrator and said that, inany event, grant of mesne profits would be outside the arbitrationagreement inasmuch as mesne profits are to be decided by way ofEdamages only after the agreement has come to an end. He also referredto and relied upon Order XX Rule 12 of the Code of Civil Procedure[“CPC”] to state that mesne profits could only be given in the mannerprovided in Order XX Rule 12, i.e., by Civil Court and not by an arbitrator.He further went on to argue that even if it be held that certain sub-clauses of Section 111 would be arbitrable, yet it being clear that so farFas at least arrears of rent and forfeiture are concerned, such disputesbeing non-arbitrable, it would be difficult to bifurcate the aforesaid groundsas often, one petition for eviction may contain several grounds, some ofwhich are relatable to arrears of rent and forfeiture and some of whichmay relate to other grounds. Therefore, according to him, the entirety ofGthe subject-matter of landlord and tenant disputes arising under theTransfer of Property Act is excluded by necessary implication. He alsostated that it is well settled that this case is one of inherent lack ofjurisdiction and that therefore, participation in the arbitral proceedingswould make no difference as consent cannot confer jurisdiction, nor can

waiver be inferred so as to confer jurisdiction. He relied strongly upon anumber of judgments to buttress these submissions. In any event,according to him, this Court’s judgment in Himangni Enterprises (supra)would apply on all fours in the facts of his case and would therefore,govern this case, which would necessarily lead to an arbitrator in thepresent proceedings having no jurisdiction to decide disputes betweenlandlord and tenant. He also argued that Section 11(6A) of the Arbitration& Conciliation Act should be read in purposive manner, and that“existence” of an arbitration agreement that is spoken of would alsorefer to disputes which are non-arbitrable as such.

4. Mr. Saurav Agarwal, learned counsel appearing on behalf ofthe respondent countered these submissions. According to him, this is acase in which the appellants have participated in the arbitral proceedings.Arbitral proceedings are well on their way, and we ought, therefore, toexercise our discretionary jurisdiction under Article 136 of the Constitutionof India against the appellants. He has further argued relying upon variousjudgments, including certain High Court judgments that were passedafter Himangni Enterprises (supra) to state that, on facts, HimangniEnterprises (supra) was wholly distinguishable as it did not apply to asituation of lease expiring by efflux of time. He also pointed out thatcertain High Court judgments had, after Himangni Enterprises (supra),distinguished the said judgment on this and other grounds. As an alternativesubmission, he said that, in any case, Himangni Enterprises (supra)would require reconsideration as it did not state the law correctly.

5. Having heard the learned counsel on both sides, we may firstset out Section 11(6A) of the Arbitration & Conciliation Act, which readsas follows:

“—11. Appointment of arbitrators.

xxx xxx xxx

(6A) The Supreme Court or, as the case may be, the High Court,while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment,decree or order of any court, confine to the examination of theexistence of an arbitration agreement.

xxx xxx xxx”

The 246[th] Law Commission Report, which led to the enactmentof Section 11(6A), stated as follows:-

“Section 11(6A) of the amendment contemplates two-stepprocess to be adopted by judicial authority when considering anapplication seeking the reference of pending action to arbitration. TheBamendment envisages that the judicial authority shall not refer theparties to arbitration only if it finds that there does not exist anarbitration agreement or that it is null and void. If the judicial authorityis of the opinion that prima facie the arbitration agreement exists, then itshall refer the dispute to arbitration, and leave the existence of thearbitration agreement to be finally determined by the arbitral tribunal.CHowever, if the judicial authority concludes that the agreement does notexist, then the conclusion will be final and not prima facie. The amendmentalso envisages that there shall be conclusive determination as to whetherthe arbitration agreement is null and void.”

(emphasis supplied)

6. It will be seen that though the Law Commission Report speaksnot only of “existence” but also of an arbitration clause being null andvoid, this has not translated itself into the language of Section 11(6A).On the contrary, Section 11(6A) is to be contrasted with Section 16(1)of the Act which reads as follows:

“16. Competence of arbitral tribunal to rule on itsjurisdiction.—(1) The arbitral tribunal may rule on its ownjurisdiction, including ruling on any objections with respect to theexistence or validity of the arbitration agreement, and for thatpurpose,—

(a) an arbitration clause which forms part of contract shallbe treated as an agreement independent of the other terms ofthe contract; and

(b) decision by the arbitral tribunal that the contract is nulland void shall not entail ipso jure the invalidity of the arbitrationclause.”

7. It will be noticed that “validity” of an arbitration agreement is,therefore, apart from its “existence”. One moot question that therefore,arises, and which needs to be authoritatively decided by Bench ofthree learned Judges, is whether the word “existence” would include

weeding-out arbitration clauses in agreements which indicate that thesubject-matter is incapable of arbitration. Division Bench of this Court,through one of the learned Judges, Kurian Joseph, J., has stated, in DuroFelguera, S.A. v. Gangavaram Port Ltd.,(2017) 9 SCC 729, that thescope of Section 11(6A) is limited to the following:

“59. The scope of the power under Section 11(6) of the 1996 Actwas considerably wide in view of the decisions in SBP and Co.[SBP and Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] andBoghara Polyfab [National Insurance Co. Ltd. v. BogharaPolyfab (P) Ltd., (2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117].This position continued till the amendment brought about in 2015.After the amendment, all that the courts need to see is whetheran arbitration agreement exists—nothing more, nothing less. Thelegislative policy and purpose is essentially to minimise the Court’sintervention at the stage of appointing the arbitrator and this intentionas incorporated in Section 11(6-A) ought to be respected.”

8. We now come to the meat of the matter.

9. It is important first to set out certain provisions of the Transferof Property Act, 1882 and the Arbitration & Conciliation Act, 1996 inorder to appreciate the controversy before us. Section 111 of the Transferof Property Act, relating to determination of lease, reads as follows:

“111. Determination of lease.— lease of immovable property,determines—

(a) by efflux of the time limited thereby;

(b) where such time is limited conditionally on the happeningof some event—by the happening of such event;

(c) where the interest of the lessor in the property terminateson, or his power to dispose of the same extends only to, thehappening of any event—by the happening of such event;

(d) in case the interests of the lessee and the lessor in thewhole of the property become vested at the same time in oneperson in the same right;

(e) by express surrender; that is to say, in case the lesseeyields up his interest under the lease to the lessor, by mutualagreement between them;

(f) by implied surrender;

(g) by forfeiture, that is to say, (1) in case the lessee breaks anexpress condition which provides that on breach thereof thelessor may re-enter; or (2) in case the lessee renounces hischaracter as such by setting up title in third person or byclaiming title in himself; or (3) the lessee is adjudicated aninsolvent and the lease provides that the lessor may re-enteron the happening of such event; and in any of these cases thelessor or his transferee gives notice in writing to the lessee ofhis intention to determine the lease;

(h) on the expiration of notice to determine the lease, or toquit, or of intention to quit, the property leased, duly given byone party to the other.”

10. Section 114, which deals with relief against forfeiture for non-payment of rent, reads as follows:-

“114. Relief against forfeiture for non-payment of rent.—Where lease of immovable property has been determined byforfeiture for non-payment of rent, and the lessor sues to ejectthe lessee, if, at the hearing of the suit, the lessee pays or tendersto the lessor the rent in arrear, together with interest thereon andEhis full costs of the suit, or gives such security as the Court thinkssufficient for making such payment within fifteen days, the Courtmay, in lieu of making decree for ejectment, pass an orderrelieving the lessee against the forfeiture; and thereupon the lesseeshall hold the property leased as if the forfeiture had not occurred.”

F11. Section 114A, which deals with relief against forfeiture in certainother cases, reads as follows:

“114A. Relief against forfeiture in certain other cases.—Where lease of immovable property has been determined byforfeiture for breach of an express condition which providesthat on breach thereof the lessor may re-enter, no suit for ejectmentshall lie unless and until the lessor has served on the lessee anotice in writing—

(a) specifying the particular breach complained of; and

(b) if the breach is capable of remedy, requiring the lessee toremedy the breach;

and the lessee fails, within reasonable time from the date ofthe service of the notice, to remedy the breach, if it is capableof remedy.

Nothing in this section shall apply to an express condition againstassigning, under-letting, parting with the possession, or disposing,of the property leased, or to an express condition relating toforfeiture in case of non-payment of rent.”

12. While appreciating that lease is transfer of an interest inproperty, and therefore, conveyance, in law, there is nothing in theTransfer of Property Act to show that dispute as to determination of alease arising under Section 111 cannot be decided by arbitration. However,what was argued was that Sections 114 and 114A, which provide forstatutory reliefs against forfeiture for non-payment of rent and for breachof an express condition, would indicate that the statute itself is based ona public policy in favour of tenants as class, which can be decided bythe courts only.

13. In Praduman Kumar v. Virendra Goyal (Dead) by LRs.,(1969) 3 SCR 950, this Court explained the raison d’etre for Section114 as follows:

“The covenant of forfeiture of tenancy for non-payment of rent isregarded by the courts as merely clause for securing paymentof rent, and unless the tenant has by his conduct disentitled himselfto equitable relief the courts grant relief against forfeiture oftenancy on the tenant paying the rent due, interest thereon andcosts of the suit. Jurisdiction to relieve against forfeiture for non-payment of rent may be exercised by the Court if the tenant in asuit in ejectment at the hearing of the suit pays the arrears of renttogether with interest thereon and full costs of the suit. ……”

(at page 953)

The Court went on to quote from Namdeo Lokman Lodhi v.Narmadabai & Ors.,[1953] SCR 1109 as follows:

“… in exercising the discretion (under Section 114 of the Transferof Property Act), each case must be judged by itself, the delay,the conduct of the parties and the difficulties to which the landlordhas been put should be weighed against the tenant. … It is amaxim of equity that person who comes in equity must do equity

476SUPREME COURT REPORTS

Aand must come with clean hands and if the conduct of the tenantis such that it disentitles him to relief in equity, then the court’shands are not tied to exercise it in his favour.”

(at page 1025)

14. In fact, close reading of Section 114 would show that theBrights of landlord and tenant are balanced by the aforesaid provision.This is because where lease of immoveable property has determinedby forfeiture for non-payment of rent, and at the hearing of the suit, thelessee pays or tenders to the lessor the rent in arrears, together withinterest thereon and his full costs within 15 days, the Court in its discretionCmay relieve the lessee against the forfeiture. This shows two things –one that the landlord’s interest is secured not only by the deposit of rentin arrears but also interest thereon and full costs of the suit. The optiongiven, of course, is that security may also be given but what is importantis that the Court is given discretion in making decree for ejectment ifthis is done. The discretion may be exercised in favour of the tenant orDit may not. This itself shows that Section 114 cannot be said to be aprovision conceived for relief of tenants as class as matter of publicpolicy. The same goes for Section 114A. Here again, lessee is givenone opportunity to remedy breach of an express condition, provided suchcondition is capable of remedy. However, the exception contained in thisEsection shows that it is very limited right that is given to tenant, asthis would not apply to assigning, sub-letting, parting with the possession,or disposing of the property leased, or even to an express condition relatingto forfeiture in case of non-payment of rent. Thus, it is clear that everyone of the grounds stated in Section 111, whether read with Section 114and/or 114A, are grounds which can be raised before an arbitrator toFdecide as to whether lease has or has not determined.

15. So far so good on principle. However, we have now to referto certain decisions of this Court. The basic decision in cases of this kindis the judgment contained in Booz Allen and Hamilton Inc. v. SBIHome Finance Limited and Others, (2011) 5 SCC 532. This judgmentGhas laid down in great detail what is the meaning of the expression“arbitrability” [see paragraph 34]. Paragraph 35 is important and readsas follows:

“35. The Arbitral Tribunals are private fora chosen voluntarily bythe parties to the dispute, to adjudicate their disputes in place of

courts and tribunals which are public fora constituted under thelaws of the country. Every civil or commercial dispute, eithercontractual or non-contractual, which can be decided by court,is in principle capable of being adjudicated and resolved byarbitration unless the jurisdiction of the Arbitral Tribunals isexcluded either expressly or by necessary implication. Adjudicationof certain categories of proceedings are reserved by the legislatureexclusively for public fora as matter of public policy. Certainother categories of cases, though not expressly reserved foradjudication by public fora (courts and tribunals), may by necessaryimplication stand excluded from the purview of private fora.Consequently, where the cause/dispute is inarbitrable, the courtwhere suit is pending, will refuse to refer the parties to arbitration,under Section 8 of the Act, even if the parties might have agreedupon arbitration as the forum for settlement of such disputes.”

Paragraph 36 then goes on to give certain well recognizedexamples of non-arbitrable disputes as follows:

“36. The well-recognised examples of non-arbitrable disputes are:(i) disputes relating to rights and liabilities which give rise to orarise out of criminal offences; (ii) matrimonial disputes relating todivorce, judicial separation, restitution of conjugal rights, childcustody; (iii) guardianship matters; (iv) insolvency and winding-up matters; (v) testamentary matters (grant of probate, letters ofadministration and succession certificate); and (vi) eviction ortenancy matters governed by special statutes where the tenantenjoys statutory protection against eviction and only the specifiedcourts are conferred jurisdiction to grant eviction or decide thedisputes.”

Paragraphs 37 and 38 then go on to state that right in rem is aright exercisable against the world at large, and is not amenable toarbitration, whereas right in personam, in which an interest is protectedagainst specific individuals, is. It was also stated that disputes relating tosubordinate rights in personam arising from rights in rem have alwaysbeen considered to be arbitrable.

16. We now come to the sheet anchor of the appellants’ casebefore us, namely, the decision in Himangni Enterprises (supra). Thisjudgment concerned itself with landlord-tenant dispute in which the

ADelhi Rent Act, 1995 was admittedly inapplicable. However, in paragraph18 of the said judgment, this Court said:

“18. In our considered opinion, the question involved in the appealremains no longer res integra and stands answered by twodecisions of this Court in Natraj Studios (P) Ltd. vs. NavrangBStudios, (1981) 1 SCC 523 and Booz Allen & Hamilton Inc. vs.SBI Home Finance Ltd. against the appellant and in favour ofthe respondent.”

17. We may point out that the judgment in Natraj Studios (supra)is judgment in which Section 28 of the Bombay Rent Act, in the contextCof arbitrability, arose for consideration. This section made it clear thatdisputes between landlords and statutory tenants would be referableonly to the small causes court in Bombay and “no other court hasjurisdiction to entertain any such suit, proceeding or application or todeal with such claim or question”. Given this provision, and the fact thatthe Bombay Rent Act is welfare legislation, this Court held:D

“17. The Bombay Rent Act is welfare legislation aimed at thedefinite social objective of protection of tenants against harassmentby landlords in various ways. It is matter of public policy. Thescheme of the Act shows that the conferment of exclusivejurisdiction on certain Courts is pursuant to the social objective atEwhich the legislation aims. Public policy requires that contractsto the contrary which nullify the rights conferred on tenants bythe Act cannot be permitted. Therefore, public policy requiresthat parties cannot also be permitted to contract out of thelegislative mandate which requires certain kind of disputes to beFsettled by special Courts constituted by the Act. It follows thatarbitration agreements between parties whose rights are regulatedby the Bombay Rent Act cannot be recognized by Courtof law.”

It then concluded in paragraph 24 as follows:

G“24. In the light of the foregoing discussion and the authority ofthe precedents, we hold that both by reason of S. 28 of the BombayRents, Hotel and Lodging House Rates Control Act, 1947 and byreason of the broader considerations of public policy mentionedby us earlier and also in Deccan Merchants Co-operative BankLtd. v. M/s Dalichand Jugraj Jain (AIR 1969 SC 1320), the CourtH

of Small Causes has and the Arbitrator has not the jurisdiction todecide the question whether the respondent-licensor-landlord isentitled to seek possession of the two studios and other premisestogether with machinery and equipment from the appellant-licensee-tenant.”

18. So far as Booz Allen (supra) is concerned, we have alreadyextracted paragraph 36. Sub-paragraph (vi) of this paragraph makes itclear that only those tenancy matters that are (i) governed by specialstatutes (ii) where the tenant enjoys statutory protection against evictionand (iii) where only specified courts are conferred jurisdiction to granteviction or decide disputes, are cases where the dispute between landlordand tenant can be said to be non-arbitrable.

19. perusal of both the aforesaid judgments, therefore, showsthat Transfer of Property Act situation between landlord and tenantis very far removed from the situation in either Natraj Studios (supra)or in sub-paragraph (vi) of paragraph 36 of Booz Allen (supra). We are,therefore, of the respectful view that the question involved in Transferof Property Act situation cannot possibly be said to have been answeredby the two decisions of this Court, as has been stated in paragraph 18 ofthe said judgment.

20. The said judgment then goes on to state:

“23. The learned counsel for the appellant, however, argued thatthe provisions of the Delhi Rent Act, 1995 are not applicable tothe premises by virtue of Section 3(1)(c) of the Act and hence,the law laid down in the aforementioned two cases would notapply. We do not agree.

24. The Delhi Rent Act, which deals with the cases relating torent and eviction of the premises, is special Act. Though itcontains provision (Section 3) by virtue of it, the provisions ofthe Act do not apply to certain premises but that does not meanthat the Arbitration Act, ipso facto, would be applicable to suchpremises conferring jurisdiction on the arbitrator to decide theeviction/rent disputes. In such situation, the rights of the partiesand the demised premises would be governed by the Transfer ofProperty Act and the civil suit would be triable by the civil courtand not by the arbitration. In other words, though by virtue ofSection 3 of the Act, the provisions of the Act are not applicable

to certain premises but no sooner the exemption is withdrawn orceased to have its application to particular premises, the Actbecomes applicable to such premises. In this view of the matter,it cannot be contended that the provisions of the Arbitration Actwould, therefore, apply to such premises.”

B21. It may be noticed that none of the provisions of the Transferof Property Act have been noticed by this judgment. In fact, none of theaforesaid provisions would indicate that disputes under the said Act aretriable only by the civil court and not by arbitration, as has been held inthis paragraph. It is clear that the Transfer of Property Act is silent onarbitrability, and does not negate arbitrability.C

22. In similar situation, this Court, in Olympus SuperstructuresPvt. Ltd. v. Meena Vijay Khetan and Others, (1999) 5 SCC 651,held that when it came to the grant of specific performance, there is noprohibition in the Specific Relief Act that issues relating to specificperformance cannot be referred to arbitration, unlike the English statuteD[see paragraph 34].

23. Equally, merely because discretion had to be exercised bythe court on whether or not to grant specific performance, would notmilitate against specific performance being granted [see paragraph 44,in particular, of Booz Allen (supra)]. It is clear, therefore, that theEjudgment in Himangni Enterprises (supra) will require relook by aBench of three Hon’ble Judges of this Court.

24. One more thing held in Himangni Enterprises (supra) is thatthe mere fact that an exemption from the Rent Act is available does notmean that the matter becomes non-arbitrable. The Court held that asFsoon as the exemption is withdrawn, the Rent Act will apply, and therefore,it cannot be contended that the Arbitration & Conciliation Act wouldapply. This reasoning is also, in our respectful view, not correct. Personsmay be exempt from Rent Act not merely for certain period but alsobecause the rent contained in the agreement between the landlord andtenant is above certain amount. When the rent is fixed above theGamount stated by statute, in the normal course of human conduct, suchrent can only be increased and not decreased so as to fall back withinthe provisions of the Rent Act. Further, the exemption based on certainrent payable need not be withdrawn or cease to have application to aparticular premises for many years to come. For all these reasons, weHare of the view that this reason also does not hold good.

25. In Vimal Kishor Shah and Others v. Jayesh Dinesh Shahand Others, (2016) 8 SCC 788, this Court, after referring to Dhulabhaiv. State of M.P., (1968) 3 SCR 662, came to the conclusion that disputeswhich arose under the Indian Trusts Act, 1882, which applies only toprivate trusts, were also not arbitrable as this was excluded by necessaryimplication. This was so stated as follows:

“49. So far as the question involved in the case at hand isconcerned, it is governed by Condition 2 of Dhulabhai case[Dhulabhai v. State of M.P., AIR 1969 SC 78] which reads asunder: (AIR p. 89, para 32)

“32. (2) Where there is an express bar of the jurisdiction of thecourt, an examination of the scheme of the particular Act to findthe adequacy or the sufficiency of the remedies provided may berelevant but is not decisive to sustain the jurisdiction of the civilcourt.

Where there is no express exclusion the examination of theremedies and the scheme of the particular Act to find out theintendment becomes necessary and the result of the inquiry maybe decisive. In the latter case it is necessary to see if the statutecreates special right or liability and provides for thedetermination of the right or liability and further lays down that allquestions about the said right and liability shall be determined bythe tribunals so constituted, and whether remedies normallyassociated with actions in civil courts are prescribed by the saidstatute or not.”

50. When we examine the scheme of the Trusts Act, 1882 in thelight of the principle laid down in Condition 2, we find no difficultyin concluding that though the Trusts Act, 1882 does not provideany express bar in relation to applicability of other Acts fordeciding the disputes arising under the Trusts Act, 1882 yet, in ourconsidered view, there exists an implied exclusion of applicabilityof the Arbitration Act for deciding the disputes relating to trust,trustees and beneficiaries through private arbitration. In otherwords, when the Trusts Act, 1882 exhaustively deals with thetrust, trustees and beneficiaries and provides for adequate andsufficient remedies to all aggrieved persons by giving them rightto approach the Principal Civil Court of Original Jurisdiction for

redressal of their disputes arising out of trust deed and the TrustsAct, 1882 then, in our opinion, any such dispute pertaining toaffairs of the trust including the dispute inter se trustee andbeneficiary in relation to their right, duties, obligations, removal,etc. cannot be decided by the arbitrator by taking recourse to theprovisions of the Act. Such disputes have to be decided by thecivil court as specified under the Trusts Act, 1882.

51. The principle of interpretation that where specific remedyis given, it thereby deprives the person who insists upon remedyof any other form of remedy than that given by the statute, is onewhich is very familiar, and which runs through the law, was adoptedby this Court in Premier Automobiles Ltd. v. KamlekarShantaram Wadke [Premier Automobiles Ltd. v. KamlekarShantaram Wadke, (1976) 1 SCC 496 : 1976 SCC (L&S) 70 :AIR 1975 SC 2238] while examining the question of bar in filingcivil suit in the context of remedies provided under the IndustrialDisputes Act (see G.P. Singh, Principles of StatutoryInterpretation, 12th Edn., pp. 763-64). We apply this principlehere because, as held above, the Trusts Act, 1882 creates anobligation and further specifies the rights and duties of the settlor,trustees and the beneficiaries apart from several conditionsspecified in the trust deed and further provides specific remedyfor its enforcement by filing applications in civil court. It is for thisreason, we are of the view that since sufficient and adequateremedy is provided under the Trusts Act, 1882 for deciding thedisputes in relation to trust deed, trustees and beneficiaries, theremedy provided under the Arbitration Act for deciding suchdisputes is barred by implication.”

Dhulabhai (supra) refers to and relies upon the three famouscategories that are contained in Wolverhampton New WaterworksCo. v. Hawkesford, 141 ER 486. Willes, J. had set out these threecategories as follows:

“There are three classes of cases in which liability may beestablished founded upon statute. One is, where there was aliability existing at common law, and that liability is affirmed by astatute which gives special and peculiar form of remedy differentfrom the remedy which existed at common law: there, unless thestatute contains words which expressly or by necessary implication

exclude the common law remedy, and the party suing has hiselection to pursue either that or the statutory remedy. The secondclass of cases is, where the statute gives the right to sue merely,but provides no particular form of remedy: there, the party canonly proceed by action at common law. But there is third class,viz. where liability not existing at common law is created by astatute which at the same time gives special and particular remedyfor enforcing it.”

(at page 495)

26. The Indian Trusts Act, 1882, in fact, provides an excellentinstance of how arbitration is excluded by necessary implication. It isimportant to bear in mind the fact that the statute, considered as whole,must lead necessarily to conclusion that the disputes which arise underit cannot be the subject matter of arbitration.

27. few sections of the Indian Trusts Act will suffice todemonstrate how disputes under this Act cannot possibly be the subjectmatter of arbitration. Under Section 34 of the Indian Trusts Act, trusteemay, without instituting suit, apply by petition to principal Civil Courtof original jurisdiction for its opinion, advice, or direction on any presentquestions respecting management or administration of trust property,subject to other conditions laid down in the Section. Obviously, anarbitrator cannot possibly give such opinion, advice, or direction. UnderSection 46, trustee who has accepted the trust, cannot afterwardsrenounce it, except, inter alia, with the permission of principal CivilCourt of original jurisdiction. This again cannot be the subject matter ofarbitration. Equally, under Section 49 of the Indian Trusts Act, where adiscretionary power conferred on trustee is not exercised reasonablyand in good faith, only principal Civil Court of original jurisdiction cancontrol such power, again making it clear that private consensualadjudicator has no part in the scheme of this Act. Under Section 53, notrustee may, without the permission of principal Civil Court of originaljurisdiction, buy or become mortgagee or lessee of the trust property orany part thereof. Here again, such permission can only be given by anarm of the State, namely, the principal Civil Court of original jurisdiction.Under Section 74 of the Indian Trusts Act, under certain circumstances,a beneficiary may apply by petition to principal Civil Court of originaljurisdiction for the appointment of trustee or new trustee, and theCourt may appoint such trustee accordingly. Here again, such appointment

DEFGH

Acannot possibly be by consensual adjudicator. It can only be done by apetition to principal Civil Court of original jurisdiction. Also, it is importantto note that it is not any civil court that has jurisdiction, but only onedesignated court, namely, principal Civil Court of original jurisdiction.All this goes to show that by necessary implication, disputes arising underthe Indian Trusts Act cannot possibly be referred to arbitration.

28. Insofar as the Transfer of Property Act or the Specific ReliefAct, no such thing exists, as has been held by Olympus Superstructures(supra) and by Booz Allen (supra).

29. We may only indicate that Vimal Kishor Shah (supra) has, inCa Consumer Protection Act situation, been recently followed by DivisionBench of this Court in Emaar MGF Land Limited v. Aftab Singh,2018 SCC OnLine SC 2771.

30. In this view of the matter, this case is referred to Bench ofthree Hon’ble Judges.

31. Given the facts of this case and the fact that 18 hearings havebeen held, the stay that has been granted to the arbitral proceedings byour order dated 13.08.2018 is lifted, and the proceedings may go on andculminate in an award. The award cannot be executed without applyingto this Court. The appeal is disposed of accordingly.

Devika Gujral

Matter referred to larger Bench.