Reema Singal And Ors vs. M/S Nova Realty

Facts

The Petitioners filed a petition under Sections 11(5) & 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an Arbitrator. A Lease Deed dated March 19, 2024, was executed between the Petitioners and the Respondent for a five-year term, commencing February 1, 2024, with a monthly rent of Rs. 3,12,000/- (including 18% GST) and a two-year lock-in period. The Petitioners alleged non-payment of rent, necessitating the termination of the Lease Deed and eviction of the Respondent, along with recovery of balance rent. The Respondent contended that disputes had not yet arisen as the procedure prescribed in Clause 16.1.1A of the Lease Deed had not been followed.

Held

The Court held that landlord-tenant disputes are arbitrable, provided they do not fall under specific rent control legislation that grants exclusive jurisdiction to a designated court or forum. The Court relied on the Supreme Court's observation in Vidya Drolia v. Durga Trading Corporation, which clarified that such disputes are generally arbitrable as they pertain to rights in personam and do not affect third-party rights or have erga omnes effect. The Court noted that the Transfer of Property Act does not forbid arbitration. Regarding the Respondent's contention that disputes had not arisen due to non-compliance with a specific clause in the Lease Deed, the Court stated that this was a point for the Arbitral Tribunal to decide and made no observation on it. Consequently, the Court found that disputes had arisen and appointed Ms. Vansha Sethi Suneja as the Sole Arbitrator to adjudicate all claims and counter-claims between the parties. The Court directed the Respondent to move an appropriate application under Section 16 of the Arbitration and Conciliation Act, 1996, before the Arbitrator concerning arbitrability. All rights and contentions of the parties were kept open for the Arbitrator to decide on merits.

Key Issues

1. Whether landlord-tenant disputes are arbitrable under Section 11 of the Arbitration and Conciliation Act, 1996, in light of the Transfer of Property Act, 1882? The Petitioners argued that landlord-tenant disputes are generally arbitrable, citing the Supreme Court's decision in Vidya Drolia v. Durga Trading Corporation, which held that such disputes are not actions in rem and do not affect third-party rights or require centralized adjudication, and that the Transfer of Property Act does not expressly or by necessary implication bar arbitration. The Respondent, while not directly arguing against arbitrability in general, raised a procedural point regarding the non-arising of disputes due to non-compliance with Clause 16.1.1A of the Lease Deed, implying that the threshold for arbitration had not been met.