Is Transfer of Property Act Disputes between Landlord-Tenant Arbitrable? SC Refers to Larger Bench

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Transfer of Property Act 1882, is a central legislation which contains the general laws governing lease of immovable property. It focuses on the rights and liabilities of landlord and tenant, in absence of contract to the contrary. It also says that how the tenancy will come to an end. After tenancy comes to end, in case the tenant fails to vacate the tenanted premises, the landlord is required to file civil suit for ejectment to obtain possession.

The bench comprising Justice Rohinton Fali Nariman and Justice Vineet Saran was considering the appeal against Calcutta High Court order appointing an arbitrator in a dispute between landlord and tenant, after objections on arbitrability of the dispute.

The Supreme Court for long maintained that the Supreme Court where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the dispute, are non-arbitrable.

In cases where the scheme of a statute show that pursuant to a social objective exclusive jurisdiction is conferred on special courts, the public policy has been construed to require that contracts to the contrary that nullify the rights conferred on beneficiaries of such statute including contract for arbitration by ousting jurisdiction of Special Courts, to be impermissible

It has held that when under a special statute (for instance Rent or Tenancy statutes), exclusive jurisdiction is given to special court by denying jurisdiction to other courts, the parties by agreeing for arbitration could not opt out of the rights conferred under such special statutes or oust the jurisdiction of special courts.

In The Case Of Himangni Enterprises v/s Kamaljeet Singh Ahluwalia, 2017

A civil suit was filed, under the Civil Procedure Code, essentially to seek appellant’s eviction from Shop situated in a Commercial Complex at New Delhi. The suit also sought recovery of dues and a permanent injunction against the appellants.

According to the facts of the case, a premise was leased out to the appellant through lease deed executed between the parties for a period of three years starting from 07.10.2010. With the passage of time, the suit period expired and no fresh lease was executed between them.

The appellant was served with the notice to vacate the premises. On being served with such notice of the civil suit, he filed an application under the Arbitration and Conciliation Act, 1996 for resolving the dispute through arbitration. According to him, the lease deed contained a clause which provided that the dispute between the parties will be resolved through arbitration.

The respondent refuted this contention on two major grounds. Firstly, it was contended that the lease deed had come to an end by efflux of time and thus the appellant cannot take recourse to such deed. Secondly, it was contended that the matters which fall under the jurisdiction of the civil law cannot be resolved by the arbitrator. Both the trial court and High Court upheld the objections raised by the respondent. Being aggrieved by this the appellant filed a writ petition before the Supreme Court of India through a special leave.

Thus the court held that the actions taken by lower courts were correct and there is no merit observed in the appeal. It was next contended by the appellants that the provision of the Delhi Rent Act will not be applicable in the present dispute by virtue of section 3 of the 1996 act. The bench rejected this argument and said that though section 3 of the 1996 Act has a restrictive clause enumerated in it, it does not mean that the act of 1996 will be applicable, ipso facto. If such circumstances arise then the Transfer of Property Act would be applicable. Thus dismissing the appeal, the civil court was instructed to proceed under the law.

Conclusion

Generally speaking, the categories of tenant-installed fixtures that remain the tenant’s property are broader than most people think. There is a presumption that if the tenant installed the fixtures for use in its business, that the fixtures will remain the tenant’s property at the end of the lease term. Thus, a tenant can take – and can be forced to take – such fixtures that remain the tenant’s property. This can include things that are connected to the HVAC system, bolted to the floor, etc.

Things to consider when signing the lease include (1) the language used to describe what fixtures will belong to the landlord or tenant, and (2) whether the tenant, in the lease, will grant UCC liens on its property. After default, remedies such as the landlord’s lien, attachment, and the threat of personal liability, can be used to negotiate with the tenant to leave its property. Of course, a landlord and tenant can also agree to waive some or all claims for unpaid rent in exchange for the tenant leaving the property. This is common when the tenant is otherwise judgment proof.

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