A matter, Vidya Drolia and Others v. Durga Trading Corporation was referred to a three-judge Bench, after it was noted that the 2017 judgment in Himangni Enterprises v. Kamaljeet Singh Ahluwalia will require a relook by a Bench of three Judges of the Supreme Court.
SC overrules the judgment in Himangni Enterprises, avers that the landlord - tenant disputes under Transfer of Property Act are arbitrable. A three-judge Bench headed by Justice NV Ramana held that such actions under TP Act normally would not affect third-party rights and such disputes do not relate to inalienable and sovereign functions of the State.
Moreover, the Court also noted that an award passed deciding landlord-tenant disputes can be executed and enforced like a decree of the civil court and the provisions of the Transfer of Property Act do not expressly or by necessary implication bar arbitration.
“In view of the aforesaid, we overrule the ratio laid down in Himangni Enterprises and hold that landlord-tenant disputes are arbitrable as the Transfer of Property Act does not forbid or foreclose arbitration,” the Court ruled.
Noting that another clarification has been made by the Hon’ble Bench in the matter,
Landlord-tenant disputes covered and governed by rent control legislation would not be arbitrable when a specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligations.
In addition to the aforesaid issue in the judgment, the aspect of non-arbitrability was also examined, as to who would be the competent authority to decide the question of arbitrability - the court at the reference stage or the arbitral tribunal in the arbitration proceedings.
Following many provisions and rulings, the Court concluded that, arbitral tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. The court has been conferred the power of “second look” post the award, the judgment held.
The Court Said,
“The general rule and principle, in view of the legislative mandate clear from Act 3 of 2016 and Act 33 of 2019, and the principle of severability and competence-competence, is that the arbitral tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. The court has been conferred power of “second look” on aspects of nonarbitrability post the award in terms of sub-clauses (i) (ii) or (iv) of Section 34(2)(a) or sub-clause (i) of Section 34(2)(b) of the Arbitration Act,”
The judgment said, “The restricted and limited review is to check and protect parties from being forced to arbitrate when the matter is demonstrably ‘non-arbitrable’ and to cut off the deadwood,”.