The Karnataka High Court has observed that the landlord-tenant disputes are Arbitrable as the Transfer of Property Act does not forbid or foreclose arbitration. The Single Bench of Justice E.S. Indiresh Observed that SC in the case of Vidya Drolia vs Durga Trading Corporation (2020) had overruled its decision in the Himangi Enterprise vs Amaljit Singh Ahulvalia (2017), wherein the Hon'ble Supreme Court has held that the issue relating to the lease is not arbitral in nature. Thus Karnataka has held that the landlord-tenant dispute under the Transfer of Property Act could be referred to Arbitration.
Facts
The relevant facts of the present petition are; that the respondent (Argo-Vet Associates) has entered into a lease deed with petitioner (Gokaldas Images). In 2017, Respondent filed suit before the trial Court seeking relief of ejectment, arrears of rent, damages and consequential injunction to restrain the petitioner from subletting the suit schedule property. The suit then, transferred to the commercial court. Subsequently, the petitioner, entered filed application under Section 8 of Arbitration and Conciliation Act, 1996 seeking referring the parties to the arbitration in terms of the clause mentioned under the lease deed. The trial Court, after considering the material on record, rejected the application for referring the parties to Arbitration proceedings. Feeling aggrieved by the same, the petitioner has presented this petition.
The present writ petition is filed under Article 227 of constitution of India for setting aside the impugned order passed by the trial court.
Contention Made
Petitioner: That the trial Court dismissed the application following the law laid down by the Hon'ble Apex Court in the case of Himangi Enterprise vs Amaljit Singh Ahulvalia (2017), wherein the Hon'ble Supreme Court has held that the issue relating to the lease is not arbitral in nature. However, in the case of Vidya Drolia vs Durga Trading Corporation (2019) and contended that the Hon'ble Supreme Court, held that judgment in Himagi Enterprise (supra) requires re-look by a Bench of three Hon’ble Judges of Hon'ble Supreme Court and therefore contended that the impugned order passed following the judgment in HIMANGI (supra) is incorrect and requires interference in this Writ Petition.
Respondent: That the Writ Petition is devoid of merits on the ground that there is delay of three years which disentitles the petitioner to claim relief.
Observation of the Court
The HC noted that the trial court, relying on the Supreme Court's decision in Himangi Enterprise (2017), had determined that the dispute between the parties was non-arbitrable because it involved eviction and rent arrears. The court further observed that the Supreme Court had ruled in Vidya Drolia vs Durga Trading Corporation (2020) that landlord-tenant disputes governed by the Transfer of Property Act are arbitrable because they are not actions in rem but rather subordinate rights in personam arising from rights in rem. Such actions would normally have no impact on third-party rights, have no erga omnes effect, and do not necessitate centralized adjudication.
Judgment
The Bench held that, Since the SC has overruled the judgment of Himangi Enterprise (2017) and has held that the landlord-tenant disputes are arbitrable as the Transfer of Property Act does not forbid or foreclose arbitration. However, landlord-tenant disputes covered and government by rent control legislation would not be arbitrable when specific court or forum has been given exclusive jurisdiction. Considering that the dispute between the parties under the lease deed was governed by the Transfer of Property Act, the court thus held that the order passed by trial court could not be sustained.
The court, therefore, allowed the writ petition and set aside the order of trial court.
Case: Gokaldas Images Private Limited versus Aries Agro-Vet Associates (Pvt) Limited & Anr.
Citation: W.P. No. 1305 of 2022.
Bench: Justice E.S. Indiresh
Decided on: 13th April, 2022.
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