SYMBIOSIS LAW SCHOOL, PUNE
Constituent of Symbiosis International (Deemed) University, Pune
(Accredited by NAAC (UGC) with `A’ Grade)
LEGAL INTERNSHIP
IRAC
Himangini Enterprises vs Kamaljeet Singh Ahluwalia
Submitted by:-
Pranjal Singh
PRN – 18010126137
DIVISION - B
IRAC
Facts:
The dispute culminated out of a tenancy agreement which contained an arbitration clause.
The Landlord called upon the Tenant to deliver vacant and peaceful possession of
tenanted property on the expiry of the term of tenancy agreement. As the Tenant did not
vacate the premises, arbitration was invoked by the Landlord who filed an application
under Section 11 of the Act before the Calcutta High Court for appointment of an
arbitrator which was contested by the Tenant who argued that the subject matter of the
dispute is non-arbitrable.
The High Court rejected Tenant’s contention and appointed an arbitrator. Meanwhile,
however, the judgement of Himangni was passed by the Supreme Court of India in which
it was held that where the Transfer of Property Act of India applied between landlord and
tenant, disputes between the said parties would not be arbitrable. In view of this
judgement, the Tenant filed a review petition before the High Court assailing its decision
of appointment of an arbitrator earlier. This review was dismissed by the High Court
aggrieved by which the Tenant knocked the doors of the Supreme Court in the present
proceedings.
Issues:
The Court referred to the 246th Law Commission Report to show the scope of
section 11(6-A) of the Arbitration Act. Section 11(6-A) only talks about the
examination of the “existence” of the arbitration agreement and not of it being
“null and void”. Reliance was placed on Duro Felguera, S.A. v. Gangavaram Port
Ltd., which stated that- “…all that the courts need to see is whether an arbitration
agreement exists— nothing more, nothing less. The legislative policy and purpose
is essentially to minimize the Court’s intervention at the stage of appointing the
arbitrator and this intention as incorporated in Section 11(6-A) ought to be
respected.”
In response to the tenant’s plea, the court held that the there is nothing in the
Transfer of Property Act to show that a dispute as to the determination of a lease
arising under Section 111 cannot be decided by arbitration. Moreover, a close
reading of sections 114 and 114A show that the rights of landlord and tenant are
balanced and there is no protection afforded to only one side by the aforesaid
provisions and that each of the issues can be raised before an arbitrator.
The Supreme Court then proceeded to scrutinize the ratio laid down in Himangni
Enterprises, which placed reliance upon Natraj Studios Navrang
Studios and Booz Allen and Hamilton Inc v. SBI Home Finance Ltd. to conclude
that disputes governed by the TP Act are inarbitrable. It opined that Natraj
Studies concerned a dispute relating to a lease deed governed by the provisions of
the Bombay Rents Act, 1947, which was a special statute that specifically
provided for a separate adjudicating forum, and therefore, it was not of relevance
to the issues raised in Himangni Enterprises. Similarly, after examining the
relevant paragraph of the Booz Allen judgment, the Supreme Court clarified that
only those tenancy matters: (i) that are governed by a special statute, (ii) that
provided statutory protection against eviction, and (iii) where jurisdiction is solely
conferred upon a special forum, are cases where the dispute between landlord and
tenant can be said to be non-arbitrable.
Rules:
Section 11(6A) under the Act
“11. Appointment of arbitrators.—
(6A) The Supreme Court or, as the case may be, the High Court, while considering any
application under sub-section (4) or sub-section (5) or sub-section (6), shall,
notwithstanding any judgment, decree or order of any court, confine to the examination of
the existence of an arbitration agreement.”
Section 16(1) of the Act
“16. Competence of arbitral tribunal to rule on its jurisdiction.—
(1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any
objections with respect to the existence or validity of the arbitration agreement, and for
that purpose,—
(a) An arbitration clause which forms part of a contract shall be treated as an agreement
independent of the other terms of the contract; and
(b) A decision by the arbitral tribunal that the contract is null and void shall not entail
ipso jure the invalidity of the arbitration clause.”
Section 111 of the Indian Transfer of Property Act, relating to determination of lease,
reads as follows:
“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 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 re-enter; 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 re-
enter 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.”
Section 114 of the Indian Transfer of Property Act deals with relief against forfeiture for
non-payment of rent, reads as follows:-
“114. Relief against forfeiture for non-payment of rent.— Where a lease of immovable
property has been determined by forfeiture for non-payment 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.”
Section 114A of the Indian Transfer of Property Act deals with relief against forfeiture in
certain other cases reads as follows:
“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 re-enter, 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, under-
letting, parting with the possession, or disposing, of the property leased, or to an express
condition relating to forfeiture in case of non-payment of rent.”
Analysis:
The filter of standard of proof to substantiate the application for appointment of an
arbitrator as adopted by the English Courts is absent under Indian Arbitration regime.
Therefore, the mechanical approach of just looking into the existence of an arbitration
agreement while considering an application for appointment of an arbitrator by Court
needs a further addition of a standard of proof, like ‘good arguable case’, to make sure
that the parties are not driven in to prolong arbitration proceedings and end up wasting
time on a non-arbitrable disputes.
In this regard, the Report of the High Level Committee to Review the Institutionalisation
of Arbitration Mechanism in India published in 2017 has recommended the adoption of
the practice followed in Singapore and Hong Kong in the Indian scenario — apart from
avoiding delays at court level, it may also give impetus to institutional arbitration.
However, devoid of any corresponding legal arrangements to cater such mechanism, it
would be best to adopt the English approach to deal with this issue.
Further, in my view, the question of arbitrability in respect of Section 8 of the Act (which
is also pre-conditioned upon checking the “existence” of a valid arbitration agreement to
refer the parties for arbitration by Court) was very aptly answered by the High Court
in U.P. Industrial Co-operative Association Ltd. vs. Rajendra Kumar Dhingra,. In that
case, the Allahabad High Court relied on Himangni and rejected the contention of the
Revisionist in that case who urged that the issue relating to arbitrability of the dispute
should have been referred for decision by the Arbitrator under Section 16 of the Act.
The Court inter alia held that though under Section 8, the Court is only expected to check
the existence of an arbitration agreement to refer the parties to arbitration, this cannot
mean that the Court will mechanically refer even the non-arbitrable matters for arbitration
just because there exists an arbitration agreement. Since the Court will not refer a non-
arbitrable dispute to arbitration, therefore as a natural corollary, it will not be required by
the Arbitral Tribunal to decide the arbitrability of the dispute even though it is
empowered to do so under Section 16 of the Act. The observations of the Court are
reproduced below:-
In my view, a similar explanation would be applicable for Section 11 of the Act as well,
where although the Court is obliged to take a prima facie view regarding the existence of
an arbitration agreement, yet it is implicit that such view should be taken while taking
into account the arbitrability of a dispute. For appointing an arbitrator for a non-arbitrable
dispute would be a toothless task. The above view is further fortified by the 246 Indian
Law Commission Report which led to the enactment of Section 11(6A), and states as
under:-
Although the above Report recommended both conditions (i.e. existence of arbitration
agreement and same should not be null and void), the expression “null and void” was
absent in the enacted version of Section 11(6A) of the Act (as also noted by Hon’ble Mr
Justice Nariman in the present case) which would have otherwise choked the non-
arbitrable disputes from being proceeded with being null and void.
Conclusion:
The Supreme Court, in this case, has given a lot of conceptual clarity with regard to the
scenario when Statutes exclude arbitration by necessary implication and when they do
not. A comparison was made between the Indian Trusts Act, 1882 and Specific Reliefs
Act, 1963 to show that it is imperative to examine the statute as a whole before
determining whether the statute excludes arbitration. For instance, according to section 74
of the Indian Trusts Act, a beneficiary may petition a civil court to appoint a new trustee
under certain circumstances. Similarly, section 34 of the Trusts Act allows trustees to
petition a civil court for its opinion regarding the management of trust property. On the
other hand, the Court noted how there was no provision in the Specific Relief Act that
suggested that arbitration be excluded. Similarly, it reasoned that the Transfer of Property
Act was analogous to the Specific Relief Act in this regard and it thus, could not be said
that disputes governed by the Transfer of Property Act cannot be arbitrated.
The decision, in this case, might not be binding as the case has been referred to a larger
bench but it nonetheless echoes a pro-arbitration stance of the Supreme Court by
effectively deconstructing the reasoning given in the Himangni Enterprises. It is very
likely that the larger bench will concur with the ratio of this case, making lease and tenant
disputes that are governed by the Transfer of Property Act arbitrable.
