Disputes arising from bilateral lease deeds under the Transfer of Property Act are arbitrable, and the section 11 court must only verify the existence of an arbitration agreement.

CORAM : SOMASEKHAR SUNDARESAN, J.

Reserved on : March 27, 2025 Pronounced on : August 12, 2025 Judgement:

Context and Factual Background:

1. This Petition has been filed under Section 11 of the Arbitration and Conciliation Act, 1996 (“the Act”), seeking appointment of an arbitrator in connection with disputes and differences that are said to have arisen between the parties under a lease deed dated August 8, 1988 (“Lease Deed”), whereby the Petitioner, Satishchandra Soman (“Soman”) has granted a 999-year lease for a monthly rental of Rs. 450 to Caltherm Thermostats India Pvt. Ltd. (“Caltherm”) in relation to land admeasuring 60 acres in Pune District.

2. The arbitration agreement is contained in Clause 7 of the Lease Deed (found at Page 44 of the Petition). In the interest of brevity, the arbitration agreement is not being extracted here. Suffice it to say that this matter falls within the jurisdiction of this Court.

3. It is apparent from the record that the arbitration agreement was invoked by Soman on August 11, 2023 through an advocate. Soman claimed that there has been no payment of the lease rentals at all since 1988 and called upon Caltherm to pay a sum of Rs. ~17.08 lakh along with interest at the rate of 10% per annum compounded; damages of Rs. 75 lakh; legal expenses of Rs. 5 lakh; and return of peaceful possession of the leased land. Violation of Section 108 of the Transfer of Property Act, 1882 (“Transfer of Property Act”) was alleged.

4. In response, by letter through an advocate, Caltherm issued a bland denial of all contentions in the invocation notice but also enclosed demand drafts towards the lease rentals from August 1988 to March 2024. What is relevant for purposes of this Petition is that Caltherm took a position that disputes between lessors and lessees are not arbitrable.

5. I have heard Mr. Aniesh Jadhav, Learned Advocate for Soman and Mr. Ashish Kamat, Learned Senior Advocate for Caltherm. That there is an arbitration agreement contained in the validly executed Lease Deed is not in dispute. The core objections by Mr. Kamat is that the disputes are not arbitrable and that the jurisdiction for such disputes is vested exclusively in the Small Causes Court established under the Provincial Small Cause Courts Act, 1887 (“Small Cause Courts Act”). Contentions on the premise of limitation are also raised. He would submit that Soman has refused to encash the demand drafts and therefore seeks to recover possession of the leased land, which is not arbitrable.

6. Mr. Jadhav would counter such objections by contending that the Section 11 Court must confine its examination to the existence of an arbitration agreement and cannot delve into the facet of whether the dispute is arbitrable. That apart, he would submit, the Lease Deed is a bilateral lease under the Transfer of Property Act, 1882 and Caltherm is not a protected tenant under the Maharashtra Rent Control Act, 1999 (“Rent Act”).

7. Mr. Jadhav would also point to the land in question being open land without any structure on it for it to be regarded as “premises” to attract the provisions of the Rent Act. He would go further to point out that there is no Small Causes Court in Pune with jurisdiction in the matter and the parties have consciously chosen arbitration as a means of dispute resolution.

8. Moreover, referring to Vidya Drolia¹, he would submit that the issue is no longer res integra considering that the Lease Deed is a lease under the Transfer of Property Act, and