Landlord-tenant disputes under Transfer of Property Act are arbitrable: SC

The Supreme Court held that landlord-tenant disputes governed by the Transfer of Property Act (TP Act) are arbitrable (except when they are covered by a specific forum created by rent control laws) as they are not actions in rem but pertain to subordinate rights in personam that arise from rights in rem.

 The Court, therefore, overruled its own 2017 judgment in Himangni Enterprises v. Kamaljeet Singh Ahluwalia [(2017) 10 SCC 706].

Alongwith this the Supreme court also laid down test for determining non-arbitrability of disputes

This judgment came in the case of Vidya Darolia and Ors. V. Durga Trading Corporation

Transfer of Property Act, like all other Acts, has a public purpose, that is, to regulate landlord-tenant relationships and the arbitrator would be bound by the provisions, including provisions which enure and protect the tenants.

A fourfold test for determining non-arbitrability of a dispute

(1) when cause of action and subject matter of the dispute relates to actions in rem, that do not pertain to subordinate rights in personam that arise from rights in rem.

(2) when cause of action and subject matter of the dispute affects third party rights; have erga omnes effect; require centralized adjudication, and mutual adjudication would not be appropriate and enforceable;

(3) when cause of action and subject matter of the dispute relates to inalienable sovereign and public interest functions of the State and hence mutual adjudication would be unenforceable; and

(4) when the subject-matter of the dispute is expressly or by necessary implication non-arbitrable as per mandatory statute(s).

However, these tests are not watertight compartments; they dovetail and overlap, albeit when applied holistically and pragmatically will help and assist in determining and ascertaining with great degree of certainty when as per law in India, a dispute or subject matter is non-arbitrable. Only when the answer is affirmative that the subject matter of the dispute would be non-arbitrable.