IMPORTANT POINT
Himangni Enterprises v. Kamaljeet Singh Ahluwalia, (2017) 10 SCC 706 referred to a three Judge Bench.

Headnote:(a) Arbitration & Conciliation Act, 1996 – Section 11(6A) r/w section 16(1) – existence and validity of arbitration clause – Meaning of ‘existence’ – Whether would include weeding-out arbitration clauses in agreements which indicate that the subject-matter is incapable of arbitration – Question needs to be authoritatively decided by a larger Bench. (Para 7)
       (2017) 9 SCC 729 – Referred
       (b) Transfer of Property Act, 1882 – Section 111, 114 and 114A – Act not barring arbitration in a dispute – Forfeiture of tenancy on payment of arrears of rent, interest and costs – Court having discretion to decree in favour of tenant or not – Held, grounds u/s these provisions are such which can be raised before an arbitrator to decide as to whether a lease has or has not determined. (Para 12, 14, 21)
       (1969) 3 SCR 950; (1953) SCR 1109; (2016) 8 SCC 788; (1968) 3 SCR 662; 2018 SCC Online SC 2771 – Relied upon
       (2011) 5 SCC 532; (1981) 1 SCC 523; AIR 1969 SC 1320 – Distinguished
       (2017) 10 SCC 706 – Referred to larger Bench
       Facts of the case:
       A Tenancy Agreement was entered into between the landlord’s predecessor-in-title (Shree Bajrang Land & Trading Company) and the appellants/tenant on 02.02.2006 in respect of certain godowns and other structures for a maximum period of tenancy was for 10 years at the agreed rent of Rs. 12,985/- per month. It was also agreed that upon expiry or earlier determination of the lease, the tenant shall deliver vacant and peaceful possession of the premises.
       On 16.10.2012, the tenancy was attorned in the name of the respondent, and the appellants paid rent to the respondent as the earlier landlord had surrendered his leasehold rights in favour of the respondent with effect from 01.11.2012.
       On 24.08.2015, a letter was sent by the respondent calling upon the appellants to deliver vacant and peaceful possession on the expiry of the 10 year period, i.e. on 01.02.2016. A reminder to this effect was also sent on 30.12.2015. As the tenant did not vacate the premises, arbitration was invoked by the respondent on 29.02.2016 by a notice sent to the appellants.
       On 07.09.2016, the High Court passed the impugned order appointing an arbitrator, and as many as 18 sittings have taken place.
       Meanwhile on 12.10.2017 in Himangni Enterprises vs. Kamaljeet Singh Ahluwalia, (2017) 10 SCC 706, in which it was held that where the Transfer of Property Act, 1882 applied between landlord and tenant, disputes between the said parties would not be arbitrable.
       Even though four arbitration sittings took place after this judgment, a review/recall application was filed by the appellants before the Calcutta High Court on 04.06.2018 in the light of the said judgment. This review was dismissed by the Calcutta High Court on 08.06.2018.
       Finding of the Court;
       Himangni Enterprises v. Kamaljeet Singh Ahluwalia, (2017) 10 SCC 706 needs to be referred to a larger Bench.
       Result: Himangni Enterprises v. Kamaljeet Singh Ahluwalia, (2017) 10 SCC 706 referred to a thtree Judge Bench.

JUDGMENT :

R.F. NARIMAN, J.

1. Leave granted.

2. The facts, in this appeal, are as follows:

(i) A Tenancy Agreement was entered into between the landlord’s predecessor-in-title (Shree Bajrang Land & Trading Company) and the appellants/tenant on 02.02.2006 in respect of certain godowns and other structures.

(ii) The maximum period of tenancy was for 10 years. The initial period was 5 years, with an option for renewal for another 5 years with a 10% enhancement in the rent.

(iii) It was agreed that the tenant should pay the agreed rent of Rs. 12,985/- per month. It was also agreed that upon expiry or earlier determination of the lease, the tenant shall deliver vacant and peaceful possession of the premises. Clause 23 of the aforesaid Agreement stated as follows:

“23. That in case of any disputes, differences and/or claims arising by and between the parties out of this agreement and/or in respect to the subject matter of this agreement, the same shall be referred to the Arbitral Tribunal consisting of three arbitrators, out of which one arbitrator shall be appointed by the party of the first part, one by the party of the other part collectively and the Presiding Arbitrator shall be appointed mutually by the two arbitrators so appointed by the parties. The decision of the Arbitral Tribunal shall be final and binding on the parties. The Arbitration proceedings shall be governed by the provisions of Arbitration & Conciliation Act, 1996 with all statutory modifications for the time being in force. The venue of arbitration shall always be within the Ordinary Original Civil Jurisdiction of the High Court at Kolkata.”

(iv) On 16.10.2012, the tenancy was attorned in the name of the respondent, and the appellants paid rent to the respondent as the earlier landlord had surrendered his leasehold rights in favour of the respondent with effect from 01.11.2012.

(v) On 24.08.2015, a letter was sent by the respondent calling upon the appellants to deliver vacant and peaceful possession on the expiry of the 10 year period, i.e. on 01.02.2016. A reminder to this effect was also sent on 30.12.2015. As the tenant did not vacate the premises, arbitration was invoked by the respondent on 29.02.2016 by a notice sent to the appellants.

(vi) On 28.04.2016, the respondent filed the present Section 11 petition before the Calcutta High Court for appointment of an arbitrator.

(vii) On 07.09.2016, the High Court passed the impugned order appointing an arbitrator, after rejecting the appellants’ objections on arbitrability of the dispute between the parties. After this, the arbitral proceedings began and we are informed that as many as 18 sittings have taken place.

(viii) Meanwhile, however, on 12.10.2017, a judgment was delivered by this Court in Himangni Enterprises vs. Kamaljeet Singh Ahluwalia, (2017) 10 SCC 706, in which it was held that where the Transfer of Property Act, 1882 applied between landlord and tenant, disputes between the said parties would not be arbitrable.

(ix) Even though four arbitration sittings took place after this judgment, a review/recall application was filed by the appellants before the Calcutta High Court on 04.06.2018 in the light of this judgment. This review was dismissed by the Calcutta High Court on 08.06.2018.

3. Mr. Debajyoti Basu, learned counsel appearing for the appellants has argued that the Transfer of Property Act is an Act which created rights in rem insofar as the landlord and tenant are concerned. He has further argued that the public policy contained in the statute in Sections 111(g), 114, and 114A, in particular, make it clear that by necessary implication the Arbitration & Conciliation Act, 1996 stands excluded. For this purpose, he also relied upon Section 2(3) of the Arbitration & Conciliation Act read with Section 5 thereof. He referred us to the statement of claim made before the learned Arbitrator and said that, in any event, grant of mesne profits would be outside the arbitration agreement inasmuch as mesne profits are

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2019 Supreme(SC) 351

SUPREME COURT OF INDIAR.F. NARIMAN, VINEET SARAN, JJ.Vidya Drolia and Others – AppellantsVersusDurga Trading Corporation – RespondentCivil Appeal No. 2402 of 2019, Special Leave Petition (C) No. 22211 of 2018Decided On : 28-02-2019

IMPORTANT POINTHimangni Enterprises v. Kamaljeet Singh Ahluwalia, (2017) 10 SCC 706 referred to a three Judge Bench.

Cases Referred (8)

SUPREME COURT OF INDIA
R.F. NARIMAN, VINEET SARAN, JJ.
Vidya Drolia and Others – Appellants
Versus
Durga Trading Corporation – Respondent
Civil Appeal No. 2402 of 2019, Special Leave Petition (C) No. 22211 of 2018
Decided On : 28-02-2019

IMPORTANT POINT
Himangni Enterprises v. Kamaljeet Singh Ahluwalia, (2017) 10 SCC 706 referred to a three Judge Bench.