VIDYA DROLIA & ORS. versus DURGA TRADING CORPORATION

Citation: [2019] 3 S.C.R. 465 · Decided: 28-02-2019 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Matter referred to larger bench

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Judgment (excerpt)

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                               VIDYA DROLIA & ORS.
 v.
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) – Dispute
between landlord and tenant regarding determination of lease –
Arbitrator appointed on petition filed  by respondent-landlord –
Appellant-tenant objected on arbitrability of the dispute by relying
on Himangni Enterprises case wherein it was held that where the
Transfer of Property Act applied between the landlord and tenant,
disputes between them would not be arbitrable – Held: None of the
provisions of the Transfer of Property Act were noticed by Himangni
Enterprises case – In Himangni Enterprises case, it was held that the
question involved was answered by decision in Natraj Studios case
and Booz Allen case – However, perusal of decision in Natraj Studios
and Booz Allen showed that no such question was answered by these
two decisions – Therefore, Himangni Enterprises case requires a
relook – 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. A close reading of Section 114 of Transfer of
Property Act, 1882 would show that the rights of landlord and
tenant are balanced by the said provision. This is because where
a lease of immoveable property has determined by forfeiture for
non-payment of rent, and at the hearing of the suit, the lessee
pays or tenders to the lessor the rent in arrears, together with
interest thereon and his full costs within 15 days, the Court in its
discretion may relieve the lessee against the forfeiture. This
shows two things – one that the landlord’s interest is secured
not only by the deposit of rent in arrears but also interest thereon
[2019] 3 S.C.R. 465
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SUPREME COURT REPORTS
[2019] 3 S.C.R.
and full costs of the suit. The option given, of course, is that
security may also be given but what is important is that the Court
is given a discretion in making a decree for ejectment if this is
done.  The discretion may be exercised in favour of the tenant or
it may not. This itself shows that Section 114 cannot be said to be
a provision conceived for relief of tenants as a class as a matter
of public policy. The same goes for Section 114A. Here again, a
lessee is given one opportunity to remedy breach of an express
condition, provided such condition is capable of remedy. However,
the exception contained in this section shows that it is a very
limited right that is given to a tenant, as this would not apply to
assigning, sub-letting, parting with the possession, or disposing
of the property leased, or even to an express condition relating
to forfeiture in case of non-payment of rent. Thus, it is clear that
every one of the grounds stated in Section 111, whether read
with Section 114 and/or 114A, are grounds which can be raised
before an arbitrator to decide as to whether a lease has or has
not determined. [Para 14] [476-B-F]
2. The decision in Himangni Enterprises, concerned itself
with a landlord-tenant dispute in which the Delhi Rent Act, 1995
was admittedly inapplicable.  However, in paragraph 18 of the
said judgment, this Court said that the question involved in the
appeal was no longer res integra and stood answered by two
decisions of this Court in Natraj Studios  and Booz Allen against
the appellant and in favour of the respondent.  The judgment in
Natraj Studios is a judgment in which Section 28 of the Bombay
Rent Act, in the context of arbitrability, arose for consideration.
This section made it clear that disputes between landlords and
statutory tenants would be referable only to the small causes court
in Bombay and “no other court has jurisdiction to entertain any
such suit, proceeding or application or to deal with such claim or
question”.   In Booz Allen, it was held that only those tenancy
matters that are (i) governed by special statutes (ii) where the
tenant enjoys statutory protection against eviction and (iii) where
only specified courts are conferred jurisdiction to grant eviction
or decide disputes, are cases where the dispute between landlord
and tenant can be said to be non-arbitrable. A perusal of Natraj
Studios and Booz Allen judgments shows that a Transfer of
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