Property Law

Vidya Drolia v. Durga Trading Corporation

(2021) 2 SCC 1; 2020 SCC OnLine SC 1018

Facts

The underlying disputes concerned eviction, possession and rent under landlord–tenant arrangements.
The leases contained arbitration clauses.
The tenancies were not protected by special rent-control legislation and were governed by the Transfer of Property Act.
Earlier, Himangni Enterprises had held that landlord–tenant disputes were generally non-arbitrable.
The matter was referred to a larger Bench to determine:
whether ordinary lease disputes could be decided by arbitration; and
who should decide objections concerning arbitrability.

Whether disputes concerning possession, eviction and rent under a TPA lease are capable of arbitration.
Whether all disputes concerning immovable property necessarily involve rights in rem.

A dispute is generally non-arbitrable where it:
concerns sovereign or public functions;
determines rights in rem against the world;
affects third parties or requires centralised adjudication;
is expressly or impliedly reserved by statute for a special public forum.
Ordinary contractual rights between a landlord and tenant are rights in personam.
Special rent-control statutes may create:
non-waivable tenant protections;
exclusive statutory remedies; and
special forums.
Such disputes may be non-arbitrable where the statute excludes ordinary civil jurisdiction.
Courts at the referral stage should ordinarily refer parties unless non-arbitrability is manifest.

A lease transfers a right to enjoy immovable property, but every dispute arising from that lease does not determine title against the whole world.
A decision directing one tenant to vacate in favour of a particular landlord ordinarily binds only the parties and persons claiming through them.
Arbitrators can apply:
Sections 106 and 111 TPA;
contractual rent provisions;
rules concerning termination;
claims for arrears and possession.
The mere fact that the award may result in delivery of immovable property does not make the dispute in rem.
The position changes where a special rent statute gives exclusive jurisdiction to a rent controller or other statutory forum.
In that situation, arbitration cannot be used to remove the tenant’s statutory protection.
Since ordinary TPA tenancies do not involve such exclusive statutory adjudication, they may be arbitrated where a valid arbitration agreement exists.
The earlier broad view in Himangni Enterprises was therefore overruled.

Landlord–tenant disputes governed by the Transfer of Property Act are arbitrable.
Disputes exclusively governed by special rent-control statutes and forums may remain non-arbitrable.
Eviction and possession claims are not automatically rights in rem.
Referral courts should reject arbitration only where non-arbitrability is clearly established.