Existence of an arbitration clause does not preclude civil court jurisdiction; arbitration must be explicitly requested per Section 8 before civil court engagement occurs.

ORDER:

This revision petition is filed under Article 227 of the Constitution of India against the order dated 03.02.2025 dismissing the petition in I.A.No.706 of 2024 in O.S.No.86 of 2024 on the file of the Court of Additional Civil Judge (Senior Division), Kurnool filed by the defendants under Order VII, Rule 11 CPC to reject the plaint.

2. The respondent / plaintiff filed suit not to evict the plaintiff from the plaint schedule property. The defendants filed I.A.No.706 of 2024 stating that there is an arbitration clause in the lease deed i.e., clause No.17, which states that any dispute in respect of the plaint schedule property shall be referred to arbitrator under the Arbitration and Conciliation Act, 1996 (in short “the Act”), however the plaintiff filed the suit suppressing the said clause, despite being fully aware of it and therefore, the suit is not maintainable and liable to be rejected.

3. The respondent filed counter opposing the petition and contending that the subject matter of the case being a right in rem, is not arbitrable; that an arbitration clause in a contract does not automatically exclude the jurisdiction of a civil Court and but usually indicates that the parties have agreed to resolve disputes through arbitration; that as the petitioners were disturbing the petition schedule property and trying to evict the respondent from the property, the suit had been filed and an interim order of injunction was obtained against the petitioners, because the present case is not within the scope of the arbitration clause in the lease deed; and that, at the most, such a clause enables the parties to seek the civil Court’s jurisdiction to refer the dispute to arbitrator under Section 8 of the Act.

4. After hearing both parties, the trial Court dismissed the petition holding that when the terms No.17 and 18 of the lease deed are read together in a pragmatic way keeping in view the decision of the Supreme Court in Vidya Drolia and others Vs. Durga Trading Corporation , [1 (2021) 2 SCC 1 ] , it can be safely concluded that the civil Court’s jurisdiction is not ousted and that when no arbitrator had been so far appointed with the consent of the parties, the civil Court certainly has jurisdiction.

5. Aggrieved by the order, this revision was filed.

6a. The learned counsel for the petitioners submitted that the dispute regarding lease is no more a lis in rem, but a lis in personam and the dispute is arbitrable as held by the Supreme Court in the case of Vidya Drolia (supra). He further referred to the decision of the High Court of Punjab and Haryana in Vinay Chhatwal Vs. Sukhdev Singh and Anr, [C.R.No.5395 of 2016 (O & M), dated: 24.01.2023] wherein it was held that a matter of rendition of accounts is arbitrable. In the case of Vidya Drolia (supra), at paragraph No.80, it was held as follows:

“80. In view of the aforesaid, we overrule the ratio laid down in Himangni Enterprises v. Kamaljeet Singh Ahluwalia, (2017) 10 SCC 706 : (2018) 1 SCC (Civ) 82, and hold that landlord-tenant disputes are arbitrable as the Transfer of Property Act does not forbid or foreclose arbitration. However, landlord-tenant disputes covered and governed by rent control legislation would not be arbitrable when specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligations. Such rights and obligations can only be adjudicated and enforced by the specified court / forum, and not through arbitration.”

6b(i). He further contended that, as it is mandatory to refer the matter for arbitration when there is an arbitration agreement, the trial Court ought to have at least referred the matter to an arbitrator in view of Section 8 of the Act, treating the petition as one filed under such provis