[BREAKING] Landlord-Tenant disputes under Transfer of Property Act are arbitrable, Supreme Court overrules Himangni enterprises

Landlord-tenant disputes governed by the Transfer of Property Act (TP Act) are arbitrable as they are not actions in rem but pertain to subordinate rights in personam that arise from rights in rem, the Supreme Court ruled on Monday overruling its own 2017 judgment in Himangni Enterprises v. Kamaljeet Singh Ahluwalia. .A three-judge Bench headed by Justice NV Ramana held that such actions under TP Act normally would not affect third-party rights and such disputes do not relate to inalienable and sovereign functions of the State (Vidya Drolia v. Durga Trading Corporation).Further, an award passed deciding landlord-tenant disputes can be executed and enforced like a decree of the civil court and the provisions of the Transfer of Property Act do not expressly or by necessary implication bar arbitration, the Court noted..“In view of the aforesaid, we overrule the ratio laid down in Himangni Enterprises and hold that landlord-tenant disputes are arbitrable as the Transfer of Property Act does not forbid or foreclose arbitration,” the Court ruled..However, the Bench which also comprised Justices Sanjiv Khanna and Krishna Murari clarified that 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,” the Court made it clear.The matter was referred to a three-judge Bench in March 2019 by a Division Bench of Justices Rohinton Nariman and Vineet Saran after it noted that the judgment in Himangni Enterprises will require a relook by a Bench of three Judges of the Supreme Court..Are Landlord-Tenant disputes under TP Act arbitrable? Correctness of Himangni Enterprises to be decided by larger Bench of SC.Besides the aspect of non-arbitrability, another issued which the three-judge Bench was called to look into was who would be the competent authority to decide the question of arbitrability - the court at the reference stage or the arbitral tribunal in the arbitration proceedings..The Court analysed various rulings and provisions in this regard to conclude that the arbitral tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. The court has been conferred the power of “second look” post the award, the judgment held. .“The general rule and principle, in view of the legislative mandate clear from Act 3 of 2016 and Act 33 of 2019, and the principle of severability and competence-competence, is that the arbitral tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. The court has been conferred power of “second look” on aspects of nonarbitrability post the award in terms of sub-clauses (i) (ii) or (iv) of Section 34(2)(a) or sub-clause (i) of Section 34(2)(b) of the Arbitration Act,” the Court said..Rarely as a demurrer the court may interfere at the Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid or the disputes are non-arbitrable, the top court said. However, the nature and facet of non-arbitrability would, to some extent, determine the level and nature of judicial scrutiny.“The restricted and limited review is to check and protect parties from being forced to arbitrate when the matter is demonstrably ‘non-arbitrable’ and to cut off the deadwood,” the judgment said..Advocate Sourav Agarwal and Senior Counsel Nakul Dewan, KV Viswanathan, Manoj Swarup and Gopal Sankaranarayanan represented various parties in the case. .[Read Judgment]