Statutory Bar Precludes the Applicability of Arbitration and Conciliation Act, 1996

Under section 8 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), the concerned judicial authority is obliged to refer the parties to arbitration, if the action brought before it is also the subject matter of an arbitration agreement.  Recently, Supreme Court of India (“Supreme Court”), while delivering the judgment in Ranjit Kumar Bose & Anr v. Anannya Chowdhury & Anr, has held that a statutory bar (in other legislation) would preclude the applicability of Arbitration Act. That is, if a legislation prohibits reference of a matter to arbitration, the Arbitration Act will not be applicable [see: sec. 2(3), Arbitration Act]. 

Facts: Through an unregistered tenancy agreement [“Tenancy Agreement”], the Appellants (Rajnit Kumar Bose & Anr.) had inducted the Respondents (Anannya Chowdhury & Anr) as tenants with respect to a shop room. Later, the Appellants terminated the Tenancy Agreement and sought the vacation of the shop premises. The Respondents did not vacate the premises; as a consequence, the Appellants filed a Title Suit against the Respondents (in a Civil Court) for eviction, arrears of rent etc. As there existed an arbitration clause in the tenancy agreement, the Respondents filed an application under section 8 of the Arbitration Act for referring the matter to arbitration. The Civil Judge dismissed the Respondent’s application; however, on filing an application against Civil Judge’s order, the High Court held in favour of the Respondents. The High Court further held that issue of arbitrability, if any, will be decided by the arbitral tribunal.

In reaching its conclusion, the High Court had relied on the decision(s) of the Supreme Court in, (i) Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleums [(2003) 6 SCC 503]; (ii) Agri Gold Exims Ltd. v. Sri Lakshmi Knits & Wovens & Ors.[(2007) 3 SCC 686];  and (iii) Branch Manager, Magma Leasing & Finance Limited & Anr. v. Potluri Madhavilata & Anr. [(2009) 10 SCC 103]

Relevant Legislations: the West Bengal Premises Tenancy Act, 1997; Arbitration and Conciliation Act, 1996

Contentions: On behalf of the Appellants, it was contended that in the cases, as relied upon by the High Court, the Supreme Court had not decided as to whether a dispute between landlord and tenant can be a subject-matter of arbitration. It was further contended that such a dispute should be decided by the concerned court and not by the arbitrator. Reliance was placed on the decisions of the Supreme Court in – (i) Natraj Studios (P) Ltd. v. Navrang Studios & Anr. [(1981) 1 SCC 523]; and (ii) Booz Allen and Hamilton Inc. v. SBI Home Finance Limited & Ors. [(2011) 5 SCC 532].

On behalf the Respondents, it was contended that when there exist an arbitration agreement, the dispute should be decided by the arbitrator and not by the court.

Reasoning of the Court:

Section 6 of the West Bengal Premises Tenancy Act, 1997 (“Tenancy Act”) provides that a Civil Judge should not decree in landlord’s favour for recovering the possession, except on a suit filed by the latter. This requirement is notwithstanding anything contained in any contract. Having referred to this legal position under the Tenancy Act, the Supreme Court opined that section 6 will override a contract between a landlord and a tenant. In the present case, since the arbitration clause (clause 15) of the Tenancy Agreement would be overridden by section 6 of the Tenancy Act, the matter could not be referred to arbitration under section 8 of the Arbitration Act. In reaching this conclusion, the court relied on the decision in Natraj Studios (supra). In this case, the welfare objective of the legislations, such as those which govern the relationship between landlord(s) and tenant(s), was emphasised by the court. The court also referred to section 2(3) of the Arbitration wherein it is provided that:

“....This Part shall not affect any other law for the time being in force by virtue of which certain disputes may not be submitted to arbitration.”

As regards the applicability of the decisions relied upon by the High Court, the Supreme Court stated that in factual situations of all these cases, there was no statutory prohibition similar to that of section 6, Tenancy Act. Hence, they cannot be equated with the present case.

Conclusion: The relief claimed by the Appellants, being mainly for eviction, could only be granted by the “Civil Judge having jurisdiction” in a suit filed by the landlord as provided in Section 6 of the Tenancy Act.