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Suresh Shah vs. Hipad Technology India Private Limited - (Supreme Court) (18 Dec 2020)

Dispute arising under the lease being governed under Transfer of Property Act are arbitrable



The Petitioner has instituted present petition under Section 11(5) of the Arbitration and Conciliation Act, 1996 seeking appointment of a Sole Arbitrator for resolving the disputes that have arisen between the parties in relation to the Sub¬-Lease deed dated 14th November, 2018.

The parties to the petition have entered into a Sub¬ Lease Deed dated 14th November, 2018 whereunder the terms of lease have been agreed to between the parties. In respect of the terms and conditions agreed under the Sub¬-Lease Deed, certain disputes have arisen between the parties. In the Deed, the parties have agreed that, the disputes arising out of the same shall be resolved through Arbitration.

The Petitioner, therefore, got issued a Notice detailing the default committed by the Respondent which gave rise to the dispute between the parties and also invoked the Arbitration Clause. The Petitioner proposed the name of Justice (Retired) Mukul Mudgal as the Sole Arbitrator and indicated that, if the Respondent does not agree to the same the Petitioner would seek appointment of Sole Arbitrator through Court. It is in that view the Petitioner is before present Court. The only issue for consideration is as to whether in the instant case, the dispute arising under the lease being governed under the Transfer of Property Act, 1882 (TP Act) is arbitrable.

As per the Clause of agreement, the disputes between the parties are to be resolved through Arbitration. A further perusal of the Clause indicates that, the parties have agreed to secure appointment of the Arbitrator through the High Court of Delhi. It is in that view an indication to the same effect is made in the notice dated 11th December, 2019. The Petitioner is a citizen of Kenya and habitually is a resident of Nairobi, Kenya. Thus, the Petitioner being an individual who is a national of Kenya and is habitually a resident of that country; having entered into a contract and since disputes have arisen under the said document, the same qualifies as an ‘International Commercial Arbitration’ as defined in Section 2(f) of Act, 1996. In such circumstance, Supreme Court is to appoint an Arbitrator as provided under Section 11(6) of the Act, 1996 and not by the High Court as stated in the contract entered into between the parties.

In view of provisions contained in Sections 111, 114 and 114A of the TP Act which indicates the manner in which the determination of lease would occur, which also includes determination by forfeiture due to the acts of the lessee/tenant in breaking the express condition agreed between the parties or provided in law. The breach and the consequent forfeiture could also be with respect to non¬ payment of rent. Under Section 114A of the TP Act, a condition for issue of notice prior to filing suit of ejectment is provided so as to enable the lessee to remedy the breach. No doubt the said provisions provide certain protection to the lessee/tenant before being ejected from the leased property. The same cannot be construed as a statutory protection nor as a hard and fast rule in all cases to waive the forfeiture. It is a provision enabling exercise of equitable jurisdiction in appropriate cases as a matter of discretion.

When the disputes arise between the landlord and tenant with regard to determination of lease under the TP Act, the landlord to secure possession of the leased property in a normal circumstance is required to institute a suit in the Court which has jurisdiction. However, if the parties in the contract of lease or in such other manner have agreed upon the alternate mode of dispute resolution through arbitration the landlord would be entitled to invoke the arbitration clause and make a claim before the learned Arbitrator. Even in such proceedings, if the circumstances as contained in Section 114 and 114A of TP Act arise, it could be brought up before the learned Arbitrator who would take note of the same and act in accordance with the law qua passing the award.

Insofar as eviction or tenancy relating to matters governed by special statutes where the tenant enjoys statutory protection against eviction whereunder the Court/Forum is specified and conferred jurisdiction under the statute alone can adjudicate such matters. Hence, in such cases, the dispute is non¬-arbitrable. If the special statutes do not apply to the premises/property and the lease/tenancy created thereunder as on the date, when the cause of action arises to seek for eviction or such other relief and in such transaction, if the parties are governed by an Arbitration Clause; the dispute between the parties is arbitrable and there shall be no impediment whatsoever to invoke the Arbitration Clause.

The Petitioner in the instant case while invoking the Arbitration Clause has proposed the name of Justice (Retired) Mukul Mudgal as the Sole Arbitrator. The Respondent neither replied to the said notice nor objected to the Arbitrator proposed by the Petitioner. In that backdrop, since a dispute between the parties is to be resolved through Arbitration, the prayer made in this petition is liable to be accepted. Shri Justice (Retired) Mukul Mudgal, former Chief Justice of Punjab and Haryana High Court is appointed as the Sole Arbitrator to resolve the dispute between the parties. Petition allowed.


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