Arbitrability of Tenancy Disputes: A Welcoming Remedy for the Wrongfully Evicted

-Aarushi Kapoor and Ssanjnna Gupta*

The coronavirus pandemic has complicated the functioning of the world for the worse. It has abrasively taken a toll on the health industry of every country especially the developing ones like India. Apart from the healthcare, there are innumerable and unaccounted spheres hit by the nuances of this virus. With the entire gamut of economic activities coming to a halt, there has been a disruption in the entire supply-demand chain of the Indian economy. As a consequence of which there have been multiple incidents of industries shutdowns, wage cuts or retrenchments.

There has been a spur in the tenancy disputes owing to the non-payment of rent to the landlords who are financially dependent on rent. The Delhi High Court in a recent order, dismissed a petition seeking the waiver of rent payable by the tenants during the lockdown while upholding the righteous claim of the landlord to be entitled to receive the rent in accordance with law. However, after this order, landlords have come down on tenants by forcefully evicting them for the non-payment of rent. There have been reported incidents wherein the students who live in rented flats or PGs have started facing a barrage of phone calls accompanied by threats, from renters over pending monthly dues. They are being threatened by their tenants during these difficult times of pandemic.

This move is in utter disregard of the notification by Ministry of Home Affairs which prohibited the landlords from forcefully evicting the tenants on their failure to pay rent and any contravention of this notification would be liable for action under the Disaster Management Act, 2005.

With all the attempts to reach an amicable solution between the landlords and tenants thwarted, these disputes are being filed in the Courts for settlement. However, this recent outbreak of coronavirus has disrupted the functioning of the Courts and consequently litigation. As a result, the tenants who are being forcefully evicted and the landlords who are being denied the payment of their dues, are awaiting justice because the Courts are working virtually on reduced capacity. In an attempt to follow directives of social distancing, courts across the country have resorted to several measures to ensure that only urgent matters are heard, whilst curtailing the hearing of non-urgent matters. In absentia of its cognizance being taken by the Courts, the landlords have themselves taken over the reins to render justice by evicting the tenants who defer or deny the payments. Therefore, with the litigation proving to be an ineffective tool for solving tenancy issues during COVID-19, arbitration can be an efficient tool.

The question which brims is that whether the subject matter of tenancy could be decided by a private forum i.e. arbitral tribunal that is whether this subject is arbitrable. The Arbitration and Conciliation Act, 1996 (“The Act”) though does not enunciate a list of the subject matters which are arbitrable, however, the Courts time and again have provided a list of disputes which are incompetent to be settled by arbitration. It was in the landmark case of Booz Allen and Hamilton Inc v. SBI Home Finance Ltd. that the Apex Court had reiterated a list of non-arbitrable subject matters which included matrimonial disputes, criminal matters, insolvency, winding-up matters, eviction and tenancy matters that are governed by special statutes and only limited Courtshave jurisdiction to adjudicate upon them. The grounds relied upon by the Apex Court in Booz Allen to decide the arbitrability of the dispute largely involve: 1) Involvement of right in rem, and 2) Jurisdiction conferred upon specified courts. Therefore, the Courts until now have denied the arbitrability of the tenancy matters because it falls under Transfer of Property Act, 1882 (“TPA”). In addition, tenancy matters have been held to involve rights in rem i.e. right exercisable against the world at large.

  • The Involvement of Rights in rem

While rights in rem, are the rights which could be exercised against the world at large, rights in personam are the ones which arise out of the interpersonal contractual relations. With the nature of dispute involving private rights and obligations, it could be easily be arbitrable i.e. settled by a private forum. The Courts after Booz Allen have repeatedly held that the tenancy matters are non-arbitrable owing to their involvement of right in rem. However, an analysis of relevant section under TPA unravels a different interpretation altogether. The rights of the lessor and lessee under Section 108 of TPA, such as the lessee’s right to recover certain expenses from the lessor, the lessor’s right to receive rent, etc. are those that are exercisable by the lessor and lessee strictly against each other. These are the contractual rights which both of the parties can enforce between themselves. Thus, that the rights which arise from landlord-tenant relationship are rights in personam and not rights in rem. Therefore, the arbitral tribunals are well equipped with  necessary jurisdiction to adjudicate the tenancy matters.

  • The Conundrum of Specific Courts

Certain legislations confer jurisdiction upon specific courts to adjudicate the disputes. The conundrum began with the judgment rendered by the Apex Court in Vimal Kishore Shah v. Dinesh Shah wherein a trust dispute was held to be non-arbitrable owing to the reason that the jurisdiction to hear such matters was specifically conferred upon a civil court by the Indian Trusts Act, 1882. Similarly, the tenancy disputes were held to be non-arbitrable by the Court in  Himangi Enterprises v. Kamaljeet Singh because of the same analogy that the jurisdiction with respect to such matters has been exclusively conferred upon the civil courts under the provisions of TPA. However, it is important to note that conferring the jurisdiction to adjudicate certain category of disputes upon certain specific courts does not ipso facto make the dispute non-arbitrable. When the dispute in question does not involve the question of rights in rem, the arbitral tribunal or the civil court is stuffed with the similar requisite powers which are otherwise exclusively conferred upon the specified courts under the legislation. The Hon’ble Delhi High Court in HDFC Bank Ltd v. Satpal Singh Baksh has relied upon the same reasoning to hold that the disputes falling under the jurisdiction of Debt Recovery Tribunal can be settled through arbitration as well as the creation of a special forum does not ipso facto makes the other forums less competent to handle that subject matter.

Conclusion

In the light of the analysis, it is imperative to conclude that the tenancy matters should be considered arbitrable i.e. competent to be settled by an arbitral tribunal. The Courts should agree to the reasoning that these matters neither involve rights in rem nor are they barred by any special legislation. This question of law has already been referred to the larger bench in the recent judgment of Vidya Drolia and Ors v. Durga Trading Corporation, wherein the Court lifted a stay on arbitration proceedings with respect to tenancy matters. Such a verdict by the Court is a welcoming move. An arbitration friendly outcome at the present hour is expected to mitigate the vows of the wrongfully evicted tenants who are struggling to get the justice served. The functioning of the Courts has been reduced to litigate only urgent matters. Therefore, litigation has become an ineffective choice at the present hour to settle such tenancy matters. Hence, if the tenancy disputes involving the wrongful eviction of the tenants by the landlords are allowed to be settled by arbitration, then it would expeditiously serve justice to the aggrieved. 


* Aarushi and Ssanjnna are third year students at  Hidayatullah National Law University, Raipur. They can be reached at aarushikapoor24@gmail.com and ssanjnna.hnlu@gmail.com respectively.


Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.