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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
ARBITRATION PETITION (CIVIL) NO(S). 08/2020
Suresh Shah .… Petitioner(s)
Versus
Hipad Technology India Private Limited …. Respondent(s)
J U D G M E N T
A.S. Bopanna, J.
1. The petitioner has instituted this petition under
Section 11(5) of the Arbitration and Conciliation Act, 1996
(‘Act, 1996’ for short) seeking appointment of a Sole
Arbitrator for resolving the disputes that have arisen
between the parties in relation to the SubLease deed dated
14.11.2018.
2. The property bearing No.154B, Block ‘A’ Sector 63,
PhaseIII, NOIDA, Gautam Budh Nagar, U.P. having been
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initially allotted and leased by New Okhla Industrial
Development Authority (‘NOIDA’ for short) under a Lease
dated 26.03.2003 had changed hands and the lease was
ultimately transferred in favour of the petitioner under a
Transfer Memorandum dated 13.04.2011.
3. The petitioner thus having acquired absolute longterm
leasehold right of the land and building referred supra has
SubLeased the same to the respondent under the SubLease Deed dated 14.11.2018. In respect of the SubLease
entered into between the parties, certain disputes are stated
to have arisen which is to be resolved. Since the SubLease
Deed provides for resolution of the disputes through
arbitration vide Clause 12 thereof the petitioner invoked the
same by issuing a notice dated 11.12.2019, nominated the
Sole Arbitrator and sought concurrence from the
respondent. The respondent did not respond to the same.
The petitioner is, therefore, before this Court seeking
appointment of the Arbitrator.
4. Notice of this petition was ordered to the respondent
on 02.03.2020. Despite service, the respondent has not
chosen to appear and oppose this petition. In that light we
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have heard Mr. Vikas Dhawan, learned counsel for the
petitioner and perused the petition papers.
5. The parties to the petition have entered into a SubLease Deed dated 14.11.2018 whereunder the terms of lease
have been agreed to between the parties. In respect of the
terms and conditions agreed under the SubLease Deed
certain disputes have arisen between the parties. In the
Deed the parties have agreed that the disputes arising out of
the same shall be resolved through Arbitration. The clause
thereto reads as hereunder:
“12.1 All disputes, differences or
disagreements arising out of, in connection
with or in relation to this SubLease Deed,
including w.r.t. its interpretation,
performance, termination, in the first instance
shall be endeavored to be settled through
good faith mutual discussions between the
officials of the SubLessor and the SubLessee.
12.2 If no settlement can be reached through
such discussions between the Parties within a
period of 21 (twenty one)days, then all such
unresolved disputes, differences or
disagreements shall be finally decided
through arbitration, to be held in accordance
with the provisions of the Arbitration &
Conciliation Act, 1996. The venue of
arbitration shall be New Delhi and the
language of such arbitration shall be English.
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12.3 The Arbitral Tribunal shall consist of a
sole arbitrator to be mutually agreed by the
Parties. In the event of any disagreement
regarding the appointment of the sole
arbitrator, the same shall only and exclusively
be appointed by the Hon’ble High Court of
Delhi at New Delhi. The arbitral award shall
be final and binding.”
6. The petitioner, therefore, got issued a Notice dated
11.12.2019 detailing the default committed by the
respondent which gave rise to the dispute between the
parties and also invoked the Arbitration Clause. The
petitioner proposed the name of Justice (Retired) Mukul
Mudgal as the Sole Arbitrator and indicated that if the
respondent does not agree to the same the petitioner would
seek appointment of Sole Arbitrator through Court. It is in
that view the petitioner is before this Court.
7. At the outset, a perusal of the above extracted Clause
indicates that the disputes between the parties is to be
resolved through Arbitration. A further perusal of the
Clause indicates that the parties have agreed to secure
appointment of the Arbitrator through the High Court of
Delhi at New Delhi. It is in that view an indication to the
same effect is made in the notice dated 11.12.2019. Though
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that be the position the description of the petitioner in the
SubLease Deed as well as in the cause title to this petition
and also the averments in the petition indicate that the
petitioner is a citizen of Kenya and habitually is a resident
of Nairobi, Kenya. Thus, the petitioner being an individual
who is a national of Kenya and is habitually a resident of
that country; having entered into a contract and since
disputes have arisen under the said document, the same
qualifies as an ‘International Commercial Arbitration’ as
defined in Section 2(f) of 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.
8. However, 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 (‘TP Act’ for short) and iron out the creases on the
legal aspect. The learned counsel for the petitioner asserts
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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. On that aspect the position explained
by the Supreme Court in the case of Booz Allen and
Hamilton Inc vs. SBI Home Finance Limited and Others
(2011) 5 SCC 532 leaves no doubt. In order to put the
matter in perspective it would be profitable to extract para
35 and 36 which reads as hereunder:
“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 noncontractual, 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
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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 wellrecognised examples of nonarbitrable 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 windingup 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.”
9. Notwithstanding the same, there is a deflection from
the settled position due to certain observations contained in
the decision of the Supreme Court in the case of Himangni
Enterprises vs. Kamaljeet Singh Ahluwalia (2017) 10
SCC 706. In the facts therein the landlord had filed a civil
suit against the tenant for eviction. In the said suit the
tenant filed an application under Section 8 of Act, 1996
seeking reference to arbitration since the parties were
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governed by an arbitration agreement. The Civil Court had
dismissed the application and that order was upheld by the
High Court. The Supreme Court while deciding the same,
though relied on the decision in the case of Natraj Studios
(P) Ltd. vs. Navrang Studios (1981) 1 SCC 523 wherein the
issue arose in respect of premises governed under the
Bombay Rents, Hotel and Lodging Houses Rates Control
Act, 1947 (Special Statute) and the case of Booz Allen
(supra) wherein it was clearly indicated that non
arbitrability is in respect of tenancy governed by special
statutes, still upheld the order rejecting the application
under Section 8 of Act, 1996 seeking reference to
arbitration.
10. The observations contained in para 23 and 24 of
Himangni Enterprises (supra) has brought within its sweep
the nonarbitrability of disputes relating to the
lease/tenancy governed under TP Act. The said
observations read as hereunder:
“23. The learned counsel for the appellant,
however, argued that the provisions of the
Delhi Rent Act, 1995 are not applicable to
the premises by virtue of Section 3(1)(c) of
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the Act and hence, the law laid down in the
aforementioned two cases [Natraj Studios (P)
Ltd. v. Navrang Studios, (1981) 1 SCC
523] ,
[Booz Allen & Hamilton Inc. v. SBI
Home Finance Ltd., (2011) 5 SCC 532 :
(2011) 2 SCC (Civ) 781] would not apply. We
do not agree.
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.”
11. The said observations are made by a Bench of two
Hon’ble Judges without detailed reference to the scope of
the provisions or the manner of right and protection
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available to lessees/tenants under TP Act so as to exclude
arbitration. In that light, another Bench of two Hon’ble
Judges speaking through R.F. Nariman J., in the case of
Vidya Drolia & Ors. vs. Durga Trading Corporation
(2019) SCC online SC 358 noticed that Natraj Studios
(supra) had dealt with tenancy under Rent Act and Booz
Allen (supra) had made reference to special statutes and
had not stated with respect to nonarbitrability of cases
arising under TP Act. In that regard having noted the
provision contained in Section 111, 114 and 114A of TP Act
had in para 16 concluded as follows:
“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
immoveable property has determined by
forfeiture for nonpayment 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.
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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 nonpayment 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.”
12. Further, with specific reference to the consideration in
the case of Natraj Studios (supra) and Booz Allen (supra) it
was observed in para 24 of Vidya Drolia (supra) as follows:
“24. A perusal of both the aforesaid
judgments, therefore, shows that a Transfer
of Property Act situation between a landlord
and tenant is very far removed from the
situation in either Natraj Studios (supra) or
in subparagraph (vi) of paragraph 36
of Booz Allen (supra). We are, therefore, of
the respectful view that the question involved
in a Transfer of Property Act situation cannot
possibly be said to have been answered by
the two decisions of this Court, as has been
stated in paragraph 18 of the said
judgment.”
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13. In the reference made to a larger bench in the case of
Vidya Drolia (supra) several aspects arose for consideration
which has been adverted to therein. However, the only
issue for our consideration is as to whether in the instant
case the dispute arising under the lease being governed
under the TP Act is arbitrable.
14. To arrive at our conclusion, we have taken note of the
provisions contained in Section 111, 114 and 114A of the TP
Act which read as hereunder:
“111. Determination of lease.— A lease of
immovable property, determines—
(a) by efflux of the time limited thereby;
(b) where such time is limited conditionally
on the happening of some event—by the
happening of such event;
(c) where the interest of the lessor in the
property terminates on, or his power to
dispose of the same extends only to, the
happening of any event—by the happening of
such event;
(d) in case the interests of the lessee and the
lessor in the whole of the property become
vested at the same time in one person in the
same right;
(e) by express surrender; that is to say, in
case the lessee yields up his interest under
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the lease to the lessor, by mutual agreement
between them;
(f) by implied surrender;
(g) by forfeiture, that is to say, (1) in case the
lessee breaks an express condition which
provides that on breach thereof the lessor
may reenter; or (2) in case the lessee
renounces his character as such by setting
up a title in a third person or by claiming
title in himself; or (3) the lessee is
adjudicated an insolvent and the lease
provides that the lessor may reenter on the
happening of such event; and in any of these
cases the lessor or his transferee gives notice
in writing to the lessee of his intention to
determine the lease;
(h) on the expiration of a notice to determine
the lease, or to quit, or of intention to quit,
the property leased, duly given by one party
to the other.”
“114. Relief against forfeiture for nonpayment of rent.— Where a lease of
immovable property has been determined by
forfeiture for nonpayment of rent, and the
lessor sues to eject the lessee, if, at the
hearing of the suit, the lessee pays or
tenders to the lessor the rent in arrear,
together with interest thereon and his full
costs of the suit, or gives such security as
the Court thinks sufficient for making such
payment within fifteen days, the Court may,
in lieu of making a decree for ejectment, pass
an order relieving the lessee against the
forfeiture; and thereupon the lessee shall
hold the property leased as if the forfeiture
had not occurred.
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114A. Relief against forfeiture in certain
other cases.—Where a lease of immovable
property has been determined by forfeiture
for a breach of an express condition which
provides that on breach thereof the lessor
may reenter, no suit for ejectment shall lie
unless and until the lessor has served on the
lessee a notice in writing—
(a) specifying the particular breach
complained of; and
(b) if the breach is capable of remedy,
requiring the lessee to remedy the breach;
and the lessee fails, within a reasonable time
from the date of the service of the notice, to
remedy the breach, if it is capable of remedy.
Nothing in this section shall apply to an
express condition against assigning, underletting, parting with the possession, or
disposing, of the property leased, or to an
express condition relating to forfeiture in
case of nonpayment of rent.”
15. A perusal of the provisions indicate the manner in
which the determination of lease would occur, which also
includes determination by forfeiture due to the acts of the
lessee/tenant in breaking the express condition agreed
between the parties or provided in law. The breach and the
consequent forfeiture could also be with respect to nonpayment of rent. In such circumstance where the lease is
determined by forfeiture and the lessor sues to eject the
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lessee and, if, at the hearing of the suit, the lessee pays or
tenders to the lessor the rent in arrear, Section 114 of TP
Act provides that the Court instead of passing a decree for
ejectment may pass an order relieving the lessee against the
forfeiture due to which the lessee will be entitled to hold the
property leased as if the forfeiture had not occurred. Under
Section 114A of the TP Act a condition for issue of notice
prior to filing suit of ejectment is provided so as to enable
the lessee to remedy the breach. No doubt the said
provisions provide certain protection to the lessee/tenant
before being ejected from the leased property. In our
considered view, the same cannot be construed as a
statutory protection nor as a hard and fast rule in all cases
to waive the forfeiture. It is a provision enabling exercise of
equitable jurisdiction in appropriate cases as a matter of
discretion. This position has been adverted to by the
Supreme Court in one of its earliest decision in the case of
Namdeo Lokman Lodhi vs. Narmadabai & Others (AIR
1953 SC 228) as under:
“….. The argument of Mr. Daphtary that there
was no real discretion in the court and relief
could not be refused except in cases where
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third party interests intervene is completely
negatived by the decision of the House of
Lords in Hyman v. Rose.”
“…..With great respect we think that the
observations cited above contain sound
principles of law. We are, therefore, unable to
accede to the contention of Mr. Daphtary that
though section 114 of the Transfer of Property
Act confers a discretion on the court, that
discretion except in cases where third party
interests intervene must always be exercised
in favour of the tenant irrespective of the
conduct of the tenant.”
16. Such equitable protection does not mean that the
disputes relating to those aspects between the landlord and
the tenant is not arbitrable and that only a Court is
empowered to waive the forfeiture or not in the
circumstance stated in the provision. In our view, when the
disputes arise between the landlord and tenant with regard
to determination of lease under the TP Act, the landlord to
secure possession of the leased property in a normal
circumstance is required to institute a suit in the Court
which has jurisdiction. However, if the parties in the
contract of lease or in such other manner have agreed upon
the alternate mode of dispute resolution through arbitration
the landlord would be entitled to invoke the arbitration
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clause and make a claim before the learned Arbitrator. Even
in such proceedings, if the circumstances as contained in
Section 114 and 114A of TP Act arise, it could be brought
up before the learned Arbitrator who would take note of the
same and act in accordance with the law qua passing the
award. In other words, if in the arbitration proceedings the
landlord has sought for an award of ejectment on the
ground that the lease has been forfeited since the tenant
has failed to pay the rent and breached the express
condition for payment of rent or such other breach and in
such proceedings the tenant pays or tenders the rent to the
lessor or remedies such other breach, it would be open for
the Arbitrator to take note of Section 114, 114A of TP Act
and pass appropriate award in the nature as a Court would
have considered that aspect while exercising the discretion.
17. On the other hand, the disputes arising under the
Rent Acts will have to be looked at from a different view
point and therefore not arbitrable in those cases. This is for
the reason that notwithstanding the terms and conditions
entered into between the landlord and tenant to regulate the
tenancy, if the eviction or tenancy is governed by a special
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statute, namely, the Rent Act the premises being amenable
to the provisions of the Act would also provide statutory
protection against eviction and the courts specified in the
Act alone will be conferred jurisdiction to order eviction or to
resolve such other disputes. In such proceedings under
special statutes the issue to be considered by the
jurisdictional court is not merely the terms and conditions
entered into between the landlord and tenant but also other
aspects such as the bonafide requirement, comparative
hardship etc. even if the case for eviction is made out. In
such circumstance, the Court having jurisdiction alone can
advert into all these aspects as a statutory requirement and,
therefore, such cases are not arbitrable. As indicated above,
the same is not the position in matters relating to the
lease/tenancy which are not governed under the special
statutes but under the TP Act.
18. In the backdrop of the above discussion, we are of the
considered view that insofar as eviction or tenancy relating
to matters governed by special statutes where the tenant
enjoys statutory protection against eviction whereunder the
Court/Forum is specified and conferred jurisdiction under
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the statute alone can adjudicate such matters. Hence in
such cases the dispute is nonarbitrable. If the special
statutes do not apply to the premises/property and the
lease/tenancy created thereunder as on the date when the
cause of action arises to seek for eviction or such other relief
and in such transaction if the parties are governed by an
Arbitration Clause; the dispute between the parties is
arbitrable and there shall be no impediment whatsoever to
invoke the Arbitration Clause. This view is fortified by the
opinion expressed by the Coordinate Bench while
answering the reference made in the case of Vidya Drolia
wherein the view taken in Himangni Enterprises is
overruled.
19. As noted above, the petitioner in the instant case while
invoking the Arbitration Clause has proposed the name of
Justice (Retired) Mukul Mudgal as the Sole Arbitrator. The
respondent neither replied to the said notice nor objected to
the Arbitrator proposed by the petitioner. In that backdrop
since a dispute between the parties is to be resolved through
Arbitration, the prayer made in this petition is liable to be
accepted.
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20. In the result, the petition is allowed. Shri Justice
(Retired) Mukul Mudgal, former Chief Justice of Punjab and
Haryana High Court is appointed as the Sole Arbitrator to
resolve the dispute between the parties. The arbitral fee
shall be payable as provided under the Fourth Schedule to
Act, 1996. There shall be no order as to costs in this
petition.
..…………....................CJI.
(S. A. Bobde)
…..…………....................J.
(A. S. Bopanna)
..…..………......................J
(V. Ramasubramanian)
December 18, 2020
New Delhi
