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Disputes Governed by Special Statutes Are Non-Arbitral: Supreme Court

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This case concerned the appointment of Sole Arbitrator for the resolution of disputes concerning the lease or tenancy agreement under the Property Act. 

Brief Facts of the Case:

This petition had been filed under Sec. 11(5) of the Arbitration and Conciliation Act, 1996(‘Act, 1996), seeking appointment of a sole arbitrator for resolution of disputes relating to sub-lease deed. 

The property bearing No. 154-B, Block ‘A’ Sector 63, Phase III, NOIDA, Gautam Budh Nagar, U.P., was leased by New Okhla Industrial Development Authority (NOIDA) to the petitioner. The petitioner had sub-leased the same to the respondent under the Sub-Lease Deed dated 14.11.2018. In respect of Sub-Lease, certain disputes arose between the parties. 

As per Clause 12 of the Sub-Lease Deed, the dispute had to be resolved through arbitration, the petitioner invoked the same by issuing notice dated 11.12,2019, nominated the sole arbitrator, and sought concurrence from the respondent. The Respondent didn’t respond. The petitioner came before this Court seeking the appointment of the Arbitrator. 

Notice of this petition was ordered to the Respondent. Despite service, the respondent had not appeared and opposed the petition. 

Appellant’s Argument- 

The petitioner proposed the name of Justice (Retired) Mukul Mudgal as the Sole Arbitrator and pointed out that if the respondent did not agree, the petitioner would seek an appointment through Court. 

A perusal of Clause 12 points out that the parties have agreed to secure the appointment of arbitrator through the High Court of Delhi at New Delhi. The description in various documents indicated that the petitioner is a citizen of Kenya and was habitually resident of Nairobi, Kenya. Thus, the petitioner being a national and habitual resident of Kenya, having entered into a contract and since the disputes arose under the said document, the same qualified as an ‘International Commercial Arbitration’ defined under Sec. 2(f) of the Act, 1996. In such a situation, the Supreme Court is supposed to appoint an Arbitrator under Sec.11(6) of the Act,1996. 

The tenancy in the instant case was not created nor was the leased property governed by special statute where the tenant enjoys statutory protection and as such, there is no impediment for resolving the dispute through Arbitration. Further explained in the case of Booz Allen and Hamilton Inc. v. SBI Home Finance Limited and Others (2011), were examples of non-arbitral disputes. 

Observation by the Court- 

The Supreme Court in the case of Himangni Enterprises v. Kamaljeet Singh Ahluwalia (2017), dismissed the civil suit against the tenant for eviction, filed under Sec.8 of Act, 1996, seeking reference to arbitration. In deciding this case, the Supreme Court relied on the decision in the case of Natraj Studios (P) Ltd. v. Navrang Studios (1981) and Booz Allen, in which it has been indicated that tenancy governed by special statutes is non-arbitral. Despite this, the Supreme Court upheld the order of rejecting the application under Sec.8 of Act, 1996. 

In the case of Vijay Drolia & Ors. v. Durga Trading Corporation (2019), it has been noticed that in Natraj Studios and Booz Allen references had been made to special statutes and had not stated concerning non-arbitrability of cases arising under The Property Act. 

The provisions under Sec. 114 and 114A of the TP Act, provide certain protections to the lessee or tenant before being ejected from the property. However, the same cannot be interpreted as statutory protection or a strict rule in all cases to waive the forfeiture. It is a provision enabling the exercise of equitable jurisdiction in appropriate cases as a matter of discretion. 

This position has been adverted to in the case of Namdeo Lokman Lodhi v. Narmadabai & Others (1953), where it had been observed that Sec. 114 of TP Act confers discretion on the Court, that discretion except in cases where the third party intervenes must always be exercised in favor of the tenant irrespective of its conduct. 

The disputes arising under special statutes such as the Rents Act provide for statutory protection against eviction and the Court specified in the Act alone will be conferred jurisdiction to order eviction or resolve such disputes. In proceedings under special statutes issue to be considered is not merely terms and conditions of the agreement between landlord and tenant but also other aspects such as bonafide requirement, comparative hardship, etc. The jurisdictional Court alone can advert into these aspects as a statutory requirement, thus, non-arbitral. 

However, this was not the position in matters relating to the lease or tenancy which are not governed under special statutes but the TP Act. 

The Decision of the Court- 

The petition was allowed. Justice (Retired) Mukul Mudgal, former Chief Justice Punjab, and Haryana High Court was appointed as Sole Arbitrator to resolve disputes between the parties. The arbitral fee shall be payable as provided under the Fourth Schedule to Act, 1996, with no order as to costs. 

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