Every civil dispute is capable of resolved by arbitration unless is expressly or impliedly excluded

Every civil or commercial dispute, either contractual or non-contractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of the Arbitral Tribunals is excluded either expressly or by necessary implication. (Para 8)

Suresh Shah vs. Hipad Technology India Pvt. Ltd.

Arbitration Petition (Civil) No. 8/2020

Decided on 18th December, 2020

Counsel for Petitioner: Mr. Vikas Dhawan

A three-judge bench of the Supreme Court consisting of Chief Justice S.A. Bobde, Justice A.S. Bopanna and Justice V. Ramasubramanian decided that the sole arbitrator proposed by the petitioner will act as the arbitrator as there was no objection from the respondent side.

The facts of the case include disputes that have arisen between the parties in relation to the Sub­-lease deed. The lease of the property which is in dispute was transferred to the petitioner by New Okhla Industrial Development Authority (NOIDA) under a transfer memorandum. The property was further sub-leased to the respondent and certain issues rose. The petitioner nominated a sole arbitrator and the respondent did not responded to the same. The petitioner is before this Court seeking appointment of the Arbitrator.

The counsel for petitioner contended that this arbitration petition is filed according to the agreed terms and condition mentioned in clause 12 of the Sub-lease deed. The parties have agreed to resolve any dispute arising in the deed through arbitration. The counsel also asserted that that the tenancy in the instant case is not created under; nor is the leased/tenanted property governed by a special statute where the tenant enjoys statutory protection and as such there is no impediment for resolving the dispute through arbitration.

The Supreme Court stated in its judgement:

Before considering the appointment of Arbitrator the first part of Clause 12 providing for arbitration needs elaboration to consider the arbitrability of the dispute relating to lease/tenancy agreements/deeds when such lease is governed by Transfer of Property Act, 1882. (Para 8)

Justice A.S Bopanna, at the petitioner being a national of Keneya stated that;

7. The arbitration in the present case qualifies as ‘International Commercial Arbitration’ under the Section 2(f) of Arbitration and Conciliation Act, 1996. In such circumstance, Supreme Court is to appoint an Arbitrator as provided Under Section 11(6) of the Act, 1996 and not by the High Court as stated in the contract entered into between the parties.

On the assertion raised by the petitioner that stated that there was no hindrance in opting for arbitration as the tenancy in the case is neither created under nor governed by any special statute, the Supreme Court took the reference of the case Booz Allen and Hamilton Inc v. SBI Home Finance Limited and Ors.(2011) 5 SCC 532:

35. The Arbitral Tribunals are private fora chosen voluntarily by the parties to the dispute, to adjudicate their disputes in place of courts and tribunals which are public fora constituted under the laws of the country. Every civil or commercial dispute, either contractual or non-contractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of the Arbitral Tribunals is excluded either expressly or by necessary implication. Adjudication of certain categories of proceedings are reserved by the legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not expressly reserved for adjudication by public fora (courts and tribunals), may by necessary implication stand excluded from the purview of private fora. Consequently, where the cause/dispute is inarbitrable, the court where a suit is pending, will refuse to refer the parties to arbitration, Under Section 8 of the Act, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes.

36. The well-recognised examples of non-arbitrable disputes are: (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding-up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes. (Para 8)

The Supreme Court also relied upon the judgement of Himangni Enterprises v. Kamaljeet Singh Ahluwalia(2017) 10 SCC 706 for the non-arbitrability of disputes relating to the lease/tenancy governed under TP Act:

24. The Delhi Rent Act, which deals with the cases relating to rent and eviction of the premises, is a special Act. Though it contains a provision (Section 3) by virtue of it, the provisions of the Act do not apply to certain premises but that does not mean that the Arbitration Act, ipso facto, would be applicable to such premises conferring jurisdiction on the arbitrator to decide the eviction/rent disputes. In such a situation, the rights of the parties and the demised premises would be governed by the Transfer of Property Act and the civil suit would be triable by the civil court and not by the arbitrator. In other words, though by virtue of Section 3 of the Act, the provisions of the Act are not applicable to certain premises but no sooner the exemption is withdrawn or ceased to have its application to a particular premise, the Act becomes applicable to such premises. In this view of the matter, it cannot be contended that the provisions of the Arbitration Act would, therefore, apply to such premises. (Para 9)

The Supreme Court also made reference from the case of Vidya Drolia and Ors. vs. Durga Trading Corporation for Section 111, 114 and 114A of TP Act:

16. In fact, a close reading of Section 114 would show that the rights of landlord and tenant are balanced by the aforesaid provision. This is because where a lease of immovable 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 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, subletting, 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 11)

The Supreme Court allowed the petition stating that the Respondent neither replied to the said notice nor objected to the Arbitrator proposed by the Petitioner and appointed Shri Justice (retired) Mukul Mudgal as the sole arbitrator.

View/download judgement: Suresh Shah vs. Hipad Technology India Pvt. Ltd.

Nishant Aryaman