Suresh Shah v. Hipad Technology India Private Limited
A.S. BOPANNA, J.
1. The petitioner has instituted this petition under Section 11(5) of
the Arbitration and Conciliation Act, 1996 (‘Act, 1996’ for short) seeking
appointment of a Sole Arbitrator for resolving the dis putes that have
arisen between the parties in relation to the Sub-Le ase deed dated
14.11.2018.
2. The property bearing No.154-B, Block ‘A’ Sector 63, Phase-III,
NOIDA, Gautam Budh Nagar, U.P. having been initially allotted a nd
leased by New Okhla Industrial Development Authority (‘NOIDA’ for
short) under a Lease dated 26.03.2003 had changed hands and the lease
was ultimately transferred in favour of the petitioner under a Transfer
Memorandum dated 13.04.2011.
3. The petitioner thus having acquired absolute long-term leasehold
right of the land and building referred supra has Sub-Leased the same to
the respondent under the Sub- Lease Deed dated 14.11.2018. In respect
of the Sub-Lease entered into between the parties, certain disputes are
stated to have arisen which is to be resolved. Since the Sub-Lease Deed
provides for resolution of the disputes through arbitration vide Clause 12
thereof the petitioner invoked the same by issuing a n otice dated
11.12.2019, nominated the Sole Arbitrator and sought concurrence from
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the respondent. The respondent did not respond to the same. The petitioner
is, therefore, before this Court seeking appointment of the Arbitrator.
4. Notice of this petition was ordered to the respon dent on
02.03.2020. Despite service, the respondent has not chosen to appear
and oppose this petition. In that light we have heard Mr. Vikas Dhawan,
learned counsel for the petitioner and perused the petition papers.
5. The parties to the petition have entered into a Sub- Lease Deed
dated 14.11.2018 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 betwee n the parties.
In the Deed the parties have agreed that the disputes arising out of the
same shall be resolved through Arbitration. The clause thereto reads as
hereunder:
“12.1 All disputes, differences or disagreements arising out of, in
connection with or in relation to this Sub-Lease Deed, including
w.r.t. its interpretation, performance, termination, in the first
instance shall be endeavored to be settled through good faith mutual
discussions between the officials of the Sub-Lessor and the Sub-
Lessee.
12.2 If no settlement can be reached through such discussions
between the Parties within a period of 21 (twenty one) days, then
all such unresolved disputes, differences or disagreements shall
be finally decided through arbitration, to be held in accordanc e
with the provisions of the Arbitration & Conciliation Act, 1996.
The venue of arbitration shall be New Delhi and the language of
such arbitration shall be English.
12.3 The Arbitral Tribunal shall consist of a sole arbitrator to be
mutually agreed by the Parties. In the event of any disagreement
regarding the appointment of the sole arbitrator, the same shal l
only and exclusively be appointed by the Hon’ble High Court of
Delhi at New Delhi. The arbitral award shall be final and binding.”
6. The petitioner, therefore, got issued a Notice dated 11.12.2019
detailing the default committed by the respondent which gave rise to the
dispute between the parties and also invoked the Arbitratio n 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 this Court.
SURESH SHAH V. HIPAD TECHNOLOGY INDIA PRIVATE LIMITED
[A.S. BOPANNA, J.]
7. At the outset, a perusal of the above extracted Clause indicates
that the disputes between the parties is 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 at
New Delhi. It is in that view an indication to the same effect is made in
the notice dated 11.12.2019. Though that be the position the description
of the petitioner in the Sub-Lease Deed as well as in th e cause title to
this petition and also the averments in the petition indicat e that the
petitioner is a citizen of Kenya and habitually is a resident of Na irobi,
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 appoin t 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.
8. However, before considering the appointment of Arbitrator the
first part of Clause 12 providing for arbitration needs elabor ation to
consider the arbitrability of the dispute relating to lease/tenancy
agreements/deeds when such lease is governed by Transfer of Property
Act, 1882 (‘TP Act’ for short) and iron out the creases on the lega l
aspect. The learned counsel for the petitioner asserts that the tenancy in
the instant case is not created under; nor is the leased/tenanted property
governed by a special statute where the tenant enjoys statutory protection
and as such there is no impediment for resolving the dispu te through
arbitration. On that aspect the position explained by the Supreme Court
in the case of Booz Allen and Hamilton Inc vs. SBI Home Finance
Limited and Others (2011) 5 SCC 532 leaves no doubt. In order to put
the matter in perspective it would be profitable to extract para 35 and 36
which reads as hereunder:
“35. The Arbitral Tribunals are private fora chosen voluntarily by
the parties to the dispute, to adjudicate their disputes in place of
courts and tribunals which are public fora constituted under t he
laws of the country. Every civil or commercial dispute, ei ther
contractual or non-contractual, which can be decided by a court,
is in principle capable of being adjudicated and resol ved by
arbitration unless the jurisdiction of the Arbitral Tri bunals is
excluded either expressly or by necessary implication. Adjudication
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of certain categories of proceedings are reserved by the legislature
exclusively for public fora as a matter of public poli cy. Certain
other categories of cases, though not expressly reserve d for
adjudication by public fora (courts and tribunals), may by necessary
implication stand excluded from the purview of private for a.
Consequently, where the cause/dispute is inarbitrable, the cou rt
where a suit is pending, will refuse to refer the parties to arbitration,
under Section 8 of the Act, even if the parties might have agreed
upon arbitration as the forum for settlement of such disputes.
36. The well-recognised examples of non- arbitrable disputes are:
(i) disputes relating to rights and liabilities which give rise to or
arise out of criminal offences; (ii) matrimonial disputes relating to
divorce, judicial separation, restitution of conjugal rig hts, child
custody; (iii) guardianship matters; (iv) insolvency and winding-up
matters; (v) testamentary matters (grant of probate, le tters of
administration and succession certificate); and (vi) ev iction or
tenancy matters governed by special statutes where the tena nt
enjoys statutory protection against eviction and only the specified
courts are conferred jurisdiction to grant eviction or decide the
disputes.”
9. Notwithstanding the same, there is a deflection from the settled
position due to certain observations contained in the decis ion of the
Supreme Court in the case of Himangni Enterprises vs. Kamaljeet
Singh Ahluwalia (2017) 10 SCC 706. In the facts therein the landlord
had filed a civil suit against the tenant for eviction. In the said s uit the
tenant filed an application under Section 8 of Act, 1996 seeking reference
to arbitration since the parties were governed by a n arbitration
agreement. The Civil Court had dismissed the application and that order
was upheld by the High Court. The Supreme Court while deciding the
same, though relied on the decision in the case of Natraj Studios (P) Ltd.
vs. Navrang Studios (1981) 1 SCC 523 wherein the issue arose in respect
of premises governed under the Bombay Rents, Hotel and Lodging
Houses Rates Control Act, 1947 (Special Statute) and the case of Booz
Allen (supra) wherein it was clearly indicated that non arbitrability is in
respect of tenancy governed by special statutes, still up held the order
rejecting the application under Section 8 of Act, 1996 seeking reference
to arbitration.
SURESH SHAH V. HIPAD TECHNOLOGY INDIA PRIVATE LIMITED
[A.S. BOPANNA, J.]
10. The observations contained in para 23 and 24 of Himangni
Enterprises (supra) has brought within its sweep the non-arbitrability
of disputes relating to the lease/tenancy governed under TP A ct. The
said observations read as hereunder:
“23. The learned counsel for the appellant, however, argued that
the provisions of the Delhi Rent Act, 1995 are not applicable t o
the premises by virtue of Section 3(1)(c) of the Act and he nce,
the law laid down in the aforementioned two cases [Natraj Studios
(P) Ltd. v. Navrang Studios, (1981) 1 SCC 523] , [Booz Allen &
Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532 :
(2011) 2 SCC (Civ) 781] would not apply. We do not agree.
24. The Delhi Rent Act, which deals with the cases relating to
rent and eviction of the premises, is a special Act. Th ough it
contains a provision (Section 3) by virtue of it, the provisions of
the Act do not apply to certain premises but that does not mean
that the Arbitration Act, ipso facto, would be applicable to such
premises conferring jurisdiction on the arbitrator to decide the
eviction/rent disputes. In such a situation, the rights of the parties
and the demised premises would be governed by the Transfer of
Property Act and the civil suit would be triable by the civil court
and not by the arbitrator. In other words, though by virtue of
Section 3 of the Act, the provisions of the Act are not applicable
to certain premises but no sooner the exemption is withdrawn or
ceased to have its application to a particular premise, th e Act
becomes applicable to such premises. In this view of the matter, it
cannot be contended that the provisions of the Arbitration Act
would, therefore, apply to such premises.”
11. The said observations are made by a Bench of two Hon’bl e
Judges without detailed reference to the scope of the provisions or the
manner of right and protection available to lessees/tenants under TP Act
so as to exclude arbitration. In that light, another Bench of two Hon’ble
Judges speaking through R.F. Nariman J., in the case of Vidya Drolia
& Ors. vs. Durga Trading Corporation (2019) SCC online SC 358
noticed that Natraj Studios (supra) had dealt with tenanc y under Rent
Act and Booz Allen (supra) had made reference to special statutes and
had not stated with respect to non-arbitrability of cases arising under TP
Act. In that regard having noted the provision contained in Section 111,
114 and 114A of TP Act had in para 16 concluded as follows:
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“16. In fact, a close reading of Section 114 would show that the
rights of landlord and tenant are balanced by the a foresaid
provision. This is because where a lease of immoveable property
has determined by forfeiture for non-payment of rent, and at the
hearing of the suit, the lessee pays or tenders to the lessor the
rent in arrears, together with interest thereon and his ful l costs
within 15 days, the Court in its discretion may relieve the lessee
against the forfeiture. This shows two things - one th at the
landlord's interest is secured not only by the deposit of rent in
arrears but also interest thereon and full costs of the suit. The
option given, of course, is that security may also be given but
what is important is that the Court is given a discretion in making
a decree for ejectment if this is done. The discretion may be
exercised in favour of the tenant or it may not. This itself shows
that Section 114 cannot be said to be a provision conceived for
relief of tenants as a class as a matter of public policy. The same
goes for Section 114A. Here again, a lessee is give n one
opportunity to remedy breach of an express condition, provided
such condition is capable of remedy. However, the exceptio n
contained in this section shows that it is a very limited right that is
given to a tenant, as this would not apply to assigning, sub- letting,
parting with the possession, or disposing of the property leased, or
even to an express condition relating to forfeiture in case of
non-payment of rent. Thus, it is clear that every one of the grounds
stated in Section 111, whether read with Section 114 and/or 114A,
are grounds which can be raised before an arbitrator to decide as
to whether a lease has or has not determined.”
12. Further, with specific reference to the consideration i n the
case of Natraj Studios (supra) and Booz Allen (supra) it was observed
in para 24 of Vidya Drolia (supra) as follows:
“24. A perusal of both the aforesaid judgments, therefore, shows
that a Transfer of Property Act situation between a landlord and
tenant is very far removed from the situation in either Natraj Studios
(supra) or in sub-paragraph (vi) of paragraph 36 of Booz Allen
(supra). We are, therefore, of the respectful view that the question
involved in a Transfer of Property Act situation cannot possibly
be said to have been answered by the two decisions of this Court,
as has been stated in paragraph 18 of the said judgment.”
SURESH SHAH V. HIPAD TECHNOLOGY INDIA PRIVATE LIMITED
[A.S. BOPANNA, J.]
13. In the reference made to a larger bench in the case of Vidya
Drolia (supra) several aspects arose for consideration whic h has been
adverted to therein. However, the only issue for our consideration is as
to whether in the instant case the dispute arising under the lease being
governed under the TP Act is arbitrable.
14. To arrive at our conclusion, we have taken note of the provisions
contained in Section 111, 114 and 114A of the TP Act which read a s
hereunder:
“111. Determination of lease.— A lease of immovable property,
determines—
(a) by efflux of the time limited thereby;
(b) where such time is limited conditionally on the happening of
some event—by the happening of such event;
(c) where the interest of the lessor in the property t erminates
on, or his power to dispose of the same extends only to, the
happening of any event—by the happening of such event;
(d) in case the interests of the lessee and the lessor in the whole
of the property become vested at the same time in one person
in the same right;
(e) by express surrender; that is to say, in case the le ssee yields
up his interest under the lease to the lessor, by mut ual
agreement between them;
(f) by implied surrender;
(g) by forfeiture, that is to say, (1) in case the lessee breaks a n
express condition which provides that on breach thereof the
lessor may re-enter; or (2) in case the lessee renounces hi s
character as such by setting up a title in a third person or by
claiming title in himself; or (3) the lessee is adjudicated an
insolvent and the lease provides that the lessor may re-enter
on the happening of such event; and in any of these cases
the lessor or his transferee gives notice in writing to the lessee
of his intention to determine the lease;
(h) on the expiration of a notice to determine the lease, or to
quit, or of intention to quit, the property leased, duly given by
one party to the other.”
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“114. Relief against forfeiture for non- payment of rent.—
Where a lease of immovable property has been determined by
forfeiture for non-payment of rent, and the lessor sues to eject
the lessee, if, at the hearing of the suit, the lessee pays or tenders
to the lessor the rent in arrear, together with interest thereon and
his full costs of the suit, or gives such security as the Court thinks
sufficient for making such payment within fifteen days, the Court
may, in lieu of making a decree for ejectment, pass an order
relieving the lessee against the forfeiture; and thereupon the lessee
shall hold the property leased as if the forfeiture had not occurred.
114A. Relief against forfeiture in certain other ca ses.—
Where a lease of immovable property has been determined by
forfeiture for a breach of an express condition which provide s
that on breach thereof the lessor may re-enter, no suit for ejectment
shall lie unless and until the lessor has served on the le ssee a
notice in writing—
(a) specifying the particular breach complained of; and
(b) if the breach is capable of remedy, requiring the les see to
remedy the breach;
and the lessee fails, within a reasonable time from the date of the
service of the notice, to remedy the breach, if it is cap able of
remedy.
Nothing in this section shall apply to an express condition against
assigning, under- letting, parting with the possession, or disposing,
of the property leased, or to an express condition relat ing to
forfeiture in case of non-payment of rent.”
15. A perusal of the provisions indicate 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. In such circumstance where the lease is determined by forfeiture
and the lessor sues to eject the lessee and, if, at the hearing of the suit,
the lessee pays or tenders to the lessor the rent in arrear, Section 114 of
TP Act provides that the Court instead of passing a decree for ejectment
may pass an order relieving the lessee against the forfeiture due to which
the lessee will be entitled to hold the property leased as if the forfeiture
SURESH SHAH V. HIPAD TECHNOLOGY INDIA PRIVATE LIMITED
[A.S. BOPANNA, J.]
had not occurred. Under Section 114A of the TP Act a condition f or
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 p rovide
certain protection to the lessee/tenant before being ejecte d from the
leased property. In our considered view, 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. This posi tion has been
adverted to by the Supreme Court in one of its earliest decision in the
case of Namdeo Lokman Lodhi vs. Narmadabai & Others (AIR
1953 SC 228) as under:
“….. The argument of Mr. Daphtary that there was no r eal
discretion in the court and relief could not be refused exce pt in
cases where third party interests intervene is completely negatived
by the decision of the House of Lords in Hyman v. Rose.”
“…..With great respect we think that the observations cited above
contain sound principles of law. We are, therefore, unable to accede
to the contention of Mr. Daphtary that though section 114 of the
Transfer of Property Act confers a discretion on the c ourt, that
discretion except in cases where third party interests intervene
must always be exercised in favour of the tenant irrespecti ve of
the conduct of the tenant.”
16. Such equitable protection does not mean that the disputes
relating to those aspects between the landlord and the tenant is not
arbitrable and that only a Court is empowered to waive the forfeiture or
not in the circumstance stated in the provision. In our view , 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 p arties in the
contract of lease or in such other manner have agreed upon the alternate
mode of dispute resolution through arbitration the landlord w ould be
entitled to invoke the arbitration clause and make a claim be fore the
learned Arbitrator. Even in such proceedings, if the circ umstances 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. In other words, if
in the arbitration proceedings the landlord has sought for an award of
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ejectment on the ground that the lease has been forfeited since the tenant
has failed to pay the rent and breached the express condition for payment
of rent or such other breach and in such proceedings the tenant pays or
tenders the rent to the lessor or remedies such other breach, it would be
open for the Arbitrator to take note of Section 114, 114A of TP Act and
pass appropriate award in the nature as a Court would have considered
that aspect while exercising the discretion.
17. On the other hand, the disputes arising under the Rent Acts
will have to be looked at from a different view point and therefore not
arbitrable in those cases. This is for the reason that notwithstanding the
terms and conditions entered into between the landlord and tenant to
regulate the tenancy, if the eviction or tenancy is governed by a special
statute, namely, the Rent Act the premises being ame nable to the
provisions of the Act would also provide statutory protecti on against
eviction and the courts specified in the Act alone will be c onferred
jurisdiction to order eviction or to resolve such other disputes. In such
proceedings under special statutes the issue to be conside red by the
jurisdictional court is not merely the terms and conditions entered into
between the landlord and tenant but also other aspects such as the
bonafide requirement, comparative hardship etc. even if the c ase for
eviction is made out. In such circumstance, the Court having jurisdiction
alone can advert into all these aspects as a statutory requi rement and,
therefore, such cases are not arbitrable. As indicated above, the same is
not the position in matters relating to the lease/tenancy which are not
governed under the special statutes but under the TP Act.
18. In the backdrop of the above discussion, we are of the
considered view that insofar as eviction or tenancy relati ng 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.
This view is fortified by the opinion expressed by the Co-ordinate Bench
while answering the reference made in the case of Vidya Drolia wherein
the view taken in Himangni Enterprises is overruled.
SURESH SHAH V. HIPAD TECHNOLOGY INDIA PRIVATE LIMITED
[A.S. BOPANNA, J.]
19. As noted above, 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.
20. In the result, the petition is allowed. 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. The arbitral fee shall be payable as provided unde r the Fourth
Schedule to Act, 1996. There shall be no order as to costs in this petition.
Devika Gujral Arbitration Petition allowed