2020 (12) TMI 1227 - SC - Indian Laws

Court's Limited Jurisdiction in Referral Stage; Arbitrability Decided by Tribunal; Landlord-Tenant Disputes

VIDYA DROLIA AND OTHERS Versus DURGA TRADING CORPORATION 

VIDYA DROLIA AND OTHERS Versus DURGA TRADING CORPORATION  - 2021 (2) SCC 1, 2021 (6) JT 460, 2020 (14) SCALE 55 Issues Involved:1. Meaning of non-arbitrability and when the subject matter of the dispute is not capable of being resolved through arbitration.2. Who decides non-arbitrability: whether the court at the reference stage or the arbitral tribunal in the arbitration proceedings.3. Scope and ambit of jurisdiction of the court at the referral stage when an objection of non-arbitrability is raised to an application under Section 8 or 11 of the Arbitration and Conciliation Act, 1996.4. Whether landlord-tenant disputes governed by the Transfer of Property Act, 1882, are arbitrable.Detailed Analysis:Non-Arbitrability:Non-arbitrability is fundamental to arbitration as it pertains to the jurisdiction of the arbitral tribunal. Booz Allen & Hamilton Inc. outlines three facets of non-arbitrability:1. Whether the disputes are capable of adjudication and settlement by arbitration.2. Whether the disputes are covered by the arbitration agreement.3. Whether the parties have referred the disputes to arbitration.The court in Booz Allen & Hamilton Inc. held that civil or commercial disputes, either contractual or non-contractual, which can be decided by a court, are in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of the arbitral tribunal is excluded either expressly or by necessary implication.Who Decides Non-Arbitrability:The court's jurisdiction at the referral stage is limited to a prima facie examination of the existence of a valid arbitration agreement. The arbitral tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. The court has a 'second look' on aspects of non-arbitrability post the award in terms of Section 34 of the Arbitration Act.The court can interfere at the Section 8 or 11 stage only when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid, or the disputes are non-arbitrable. This limited review is to protect parties from being forced to arbitrate when the matter is demonstrably non-arbitrable and to cut off the deadwood.Scope and Ambit of Jurisdiction of the Court:The court's role at the referral stage is to perform a prima facie examination to weed out manifestly non-existent and invalid arbitration agreements and non-arbitrable disputes. The prima facie review is not a full review but a preliminary check to ensure that the arbitration agreement is valid and the disputes are arbitrable. The court should not conduct a detailed review or a mini-trial at this stage.Landlord-Tenant Disputes:Landlord-tenant disputes governed by the Transfer of Property Act are arbitrable as they pertain to subordinate rights in personam arising from rights in rem. Such disputes do not affect third-party rights or require centralized adjudication. The provisions of the Transfer of Property Act do not expressly or by necessary implication bar arbitration. However, landlord-tenant disputes covered and governed by rent control legislation are not arbitrable when a specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligations.Conclusion:The court's jurisdiction at the referral stage is limited to a prima facie examination of the existence and validity of the arbitration agreement. The arbitral tribunal is the preferred authority to decide on non-arbitrability, with the court having a secondary role to review such decisions post-award. Landlord-tenant disputes under the Transfer of Property Act are arbitrable, but those under rent control legislation are not.