Supreme Court Says No To Arbitration In Landlord-

Tenancy Disputes
A Supreme Court (Court) bench consisting of the Hon'ble Justices R K Agarwal and Abhay
Manohar Sapre recently reaffirmed the non-arbitrability of disputes relating to tenancy and
eviction in Himangni Enterprises v Kamaljeet Singh Ahulwalia [(2017) 10 SCC 706].

Arbitration in landlord and tenant disputes

Under the Arbitration and Conciliation Act 1996 (Arbitration Act), an arbitral award will be set
aside if “the subject-matter of the dispute is not capable of settlement by arbitration under the
law for the time being in force”.

The Supreme Court for long maintained that the Supreme Court where the tenant enjoys
statutory protection against eviction and only the specified courts are conferred jurisdiction to
grant eviction or decide the dispute, are non-arbitral

It has held that when under a special statute (for instance Rent or Tenancy statutes), exclusive
jurisdiction is given to special court by denying jurisdiction to other courts, the parties by
agreeing for arbitration could not opt out of the rights conferred under such special statutes or
oust the jurisdiction of special courts.

In cases where the scheme of a statute show that pursuant to a social objective exclusive
jurisdiction is conferred on special courts, the public policy has been construed to require that
contracts to the contrary that nullify the rights conferred on beneficiaries of such statute
including contract for arbitration by ousting jurisdiction of Special Courts, to be impermissible

Decisions of Supreme Court show that a dispute is considered incapable of arbitration only if
following three conditions are fulfilled:

i) The matter is governed by a special statute;

ii) Under such special statute the tenant enjoys statutory protection against ejectment; and

iii) Such special statute confers exclusive jurisdiction on specified Courts.

The view of Supreme Court as aforesaid did not make every dispute between a landlord and
tenant, incapable of adjudication through arbitration.
DICTUM OF SUPREME COURT IN HIMANGNI ENTERPRISES V. KAMALJEET SINGH AHLUWALIA

Recently however in Himangni Enterprises v. Kamaljeet Singh Ahluwalia, (2017) 10 SCC 706 the
Supreme Court has ruled that even in respect of premises to which the application of special
Rent Act is exempted, the parties could not enforce arbitration, even though they had agreed
to get their disputes concerning such premises adjudicated through arbitration. Consequently,
it is held that the civil suit filed by one of the parties, by giving a goby to an arbitration
agreement is maintainable. It is held:

The Delhi Rent Act, which deals with the cases relating to rent and eviction of the premises, is a
special Act. Though 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.

Decision that even if tenanted premises/landlord-tenant relationship is governed by the

Transfer of Property Act, the civil suit would be triable by the civil court and not by the
arbitrator, appears to be inconsistent with the previously held view.

The Delhi Rent Control Act: Historical Background

The first rent control measure in Delhi came after the outbreak of the Second World War in
1939, under the Defense of India Rules. This was restricted to New Delhi and the Notified Area,
Civil Station. In 1942, the provisions of the Punjab Urban Rent Restriction Act, 1941 were made
applicable to the remaining areas of Delhi. It was soon realized that the provision of the Punjab
Act were insufficient for a city like Delhi and thus, it was supplemented by another Order under
the Defense of India Rules in 1944. After the war, another comprehensive legislation was
passed for all parts of Delhi by the name of The Delhi and Ajmer Marwara Rent Control Act,
1947. In 1952, it was repealed by The Delhi and Ajmer Rent Control Act, which substituted it
and ceased the application of rent Acts of other states to certain parts of Delhi. Another
attempt was made in 1958 to plug certain loopholes of the 1952 act. In the same year, the Slum
Areas (Improvement and Clearance) Act was passed which sought to protect the interest of the
slum dwellers. The next comprehensive enactment on rent control in Delhi was passed in 1958
and came into force on February 9, 1959.

This is the current legislation of rent control in Delhi and it extends to the areas included within
the New Delhi Municipal Committee and the Delhi Cantonment Board, together with the urban
areas of the Municipal Corporation of the Urban Areas in Delhi.
Legal Arguments
1. The Flawed Nature of Rent Control Acts: The structure of various rent control acts renders
them contradictory to other laws of the land in some situations:

a) The law relating to the landlord’s rights to evict the tenant can be found in the Transfer of
Property Act, 1882. While a landlord can immediately start an action for eviction of a tenant on
expiry of the notice of eviction under Section 106 of the Transfer of Property Act, 1882, he
cannot start such an action where the rent control act applies, unless he can prove the
existence of one of the grounds of eviction under the Rent Act.

2. Ineffectiveness of the Provisions: The provisions have not been very effective due to the
following reasons:

a) Significantly large urban groups have been excluded from the purview of RCAs. E.g.

The Delhi Rent Control Act (including all amendments) grants exemption to the following
tenancies (for full list, refer to Annexure 3, row 4):

• Properties belonging to the government

• Any tenancy created by a grant from the Government in respect of the premises taken on
lease or requisitioned, by the Government

• Newly constructed properties for a period of ten years from the date of construction.

• Any premises, residential or other, whose monthly rent exceeds three thousand and five
hundred rupees.

3. Poorly written Acts: The following observations from the Annexures clearly highlight the fact
that most of the states’ Rent Control Acts are poorly written and thus their implementation is
bound to be problematic.

Landlord tenant relationship in India

In India, public construction agendas produced significant numbers of houses in some cities but
most of the rental units have now been sold. Income-tax concessions were made available to
companies willing to build rental housing although they have been removed. In India, tenants
are generally younger than owners, less than 1 per cent of tenants are less than 25 years old.
The reason is that youth in India do not set up their own home but share housing with parents
until they are older. Indeed, sharing is very common in Indian cities. Certain more affluent
Indians rent accommodation, preferring to invest their capital in expanding their business.
Many people prefer to stay in the rented house for reasons of location, even though they own
houses elsewhere in the same city. In India, too, sharing is confined mainly to extended family
groups. Grownup children stay with their parents as they are quite old. The most common
category of sharer is newly arrived relatives from outside the city.

In India, the conventions work a little more effectively although most landlords still fail to
comply with the Rent Control Act. In fact, this has been a longstanding problem. “A large part of
Delhi’s rental housing market lies outside the purview of the Rent Control Act. Another
significant part of this market does not conform to all the provisions of the Act.”337 This is
demonstrated by Wadhva338 who notes that “most of the landlords and tenants are unaware
of the rent control act and even if they are aware are not fully conversant” with its provisions.
In Delhi, for example, Wadhva’s339 survey reveals that few landlords use the rent−fixing
machinery laid down by the Rent Control Act and 85 per cent of rents had been raised after a
couple of years despite the Act.

Duties of tenant
The tenant must:

1. Pay the rent on time. If the rent is not paid in time then thelandlord may start legal
proceedings to evict the tenant.

2. Keep the apartment and the surrounding areas clean and in good condition. For example,
garbage should not be piled up or left around, but should be disposed of promptly.

3. Keep noise to a level that will not disturb your neighbors. Tenant should not create any
disturbance and nuisance to the neighbors.

4. Repair any damage to the house that was the fault of the tenant, or the tenant’s family
members or guests. If there is major damage, the tenant should let the landlord know at once.

5. Let the landlord know immediately if the house needs repairsthat were not the tenant’s
fault.

6. Give the landlord permission to enter the house at reasonable agreed on times to inspect the
place or to make any necessary repairs.

7. Let the landlord know if the tenant will not be in the house for long periods of time so the
landlord can keep an eye on things.

8. When the tenant is moving out, give the landlord proper advance notice, be sure that the
house is in the same condition as when the tenant moved in and return the key to the landlord.
A tenant and a landlord should have an amicable and friendly relationship, if not; even small
problems culminate up into complex litigation which consumes lot of time and energy. It is
unreasonable for the tenant to harass the landlord by committing default or refusing to
increase the rent to a reasonable level. Another area that requires urgent consideration is to
provide a balanced set of rules and principles to maintain amiable relationship between the
tenant and landlord. Such rental law will consolidate the association between the two and will
be a refined and reformed code bridging the gap between landlord-tenant relations.

Dispute Settlement in WTO

Resolving trade disputes is one of the core activities of the WTO. A dispute arises when a
member government believes another member government is violating an agreement or a
commitment that it has made in the WTO. The WTO has one of the most active international
dispute settlement mechanisms in the world. Since 1995, over 500 disputes have been brought
to the WTO and over 350 rulings have been issued.

Dispute settlement or Dispute Settlement System (DSS) is regarded by the World Trade
Organization (WTO) as the central pillar of the multilateral trading system, and as the
organization's "unique contribution to the stability of the global economy".[1] A dispute arises
when one member country adopts a trade policy measure or takes some action that one or
more fellow members considers to a breach of WTO agreements or to be a failure to live up to
obligations. By joining the WTO, member countries have agreed that if they believe fellow
members are in violation of trade rules, they will use the multilateral system of settling disputes
instead of taking action unilaterally — this entails abiding by agreed procedures—Dispute
Settlement Understanding—and respecting judgments, primarily of the Dispute Settlement
Board (DSB), the WTO organ responsible for adjudication of disputes.[2] A former WTO
Director-General characterized the WTO dispute settlement system as "the most active
international adjudicative mechanism in the world today."[3] Chad P. Bown of the Peterson
Institute for International Economics and Petros Mavroidis of Columbia Law School remarked
on the 20th year anniversary of the dispute settlement system that the system is "going strong"
and that "there is no sign of weakening"

CONCLUSION

Conclusion

Rent control in India was introduced to prevent pseudo-scarcity of rental housing. They were
heavily biased in favour of tenants to prevent exploitation at the hands of landlords. But the
pace of amendments has not kept up with the change in socio-economic demographics. The
provisions of these Acts are frequently misused and the landlords face undue hardship. The
rent laws show scant regard to the intention of the parties. If given a choice, the parties
prefer to be governed by law relating to lease as contained in the Transfer of Property Act,
1882. The rental laws in India need to be revised to protect the owner and his property from
the tenant. Special areas of focus should be on terminating old tenancies, removing constraints
on increase of rentals and empowering owners in the sense of being able to reclaim their
properties without any court proceedings

The market forces should be allowed to determine the rental amounts and the owner must
have full protection for his/her property. This will go a long way in providing security to the
landlord and also reduce the deposit amount required with the lease agreements.

If these laws are enacted and strictly enforced, there is every chance that more investors will
want to enter the real estate market to utilize the rental fees as income. This is especially true
for the commercial sector. The tax laws also need to be revised so that renting of properties
becomes a financially viable option. Amendments in the Rent Acts of several states are a
progressive move.
DISPUTE SETTLEMENT MECHANISMS
(LAND AND REAL ESTATE LAWS)

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