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Vidya Drolia vs Durga Trading Corporation on 28 February, 2019

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.2402 OF 2019
(Arising out of Special Leave Petition (C) No. 22211/2018)

VIDYA DROLIA ORS. … APPELLANT(S)

VERSUS

DURGA TRADING CORPORATION … RESPONDENT(S)

JUDGMENT

R.F. Nariman, J.

1. Leave granted.

2. The facts, in this appeal, are as follows:

(i) A Tenancy Agreement was entered into between the

landlord’s predecessor-in-title (Shree Bajrang Land Trading

Company) and the appellants/tenant on 02.02.2006 in respect of

certain godowns and other structures.

(ii) The maximum period of tenancy was for 10 years. The initial
Signature Not Verified

Digitally signed by R
NATARAJAN
Date: 2019.03.07
period was 5 years, with an option for renewal for another 5 years
17:26:52 IST
Reason:

with a 10% enhancement in the rent.

1

(iii) It was agreed that the tenant should pay the agreed rent of

Rs.12,985/- per month. It was also agreed that upon expiry or

earlier determination of the lease, the tenant shall deliver vacant and

peaceful possession of the premises. Clause 23 of the aforesaid

Agreement stated as follows:

“23. That in case of any disputes, differences and/or
claims arising by and between the parties out of this
agreement and/or in respect to the subject matter of
this agreement, the same shall be referred to the
Arbitral Tribunal consisting of three arbitrators, out of
which one arbitrator shall be appointed by the party of
the first part, one by the party of the other part
collectively and the Presiding Arbitrator shall be
appointed mutually by the two arbitrators so appointed
by the parties. The decision of the Arbitral Tribunal
shall be final and binding on the parties. The
Arbitration proceedings shall be governed by the
provisions of Arbitration Conciliation Act, 1996 with
all statutory modifications for the time being in force.

The venue of arbitration shall always be within the
Ordinary Original Civil Jurisdiction of the High Court at
Kolkata.”

(iv) On 16.10.2012, the tenancy was attorned in the name of the

respondent, and the appellants paid rent to the respondent as the

earlier landlord had surrendered his leasehold rights in favour of the

respondent with effect from 01.11.2012.

(v) On 24.08.2015, a letter was sent by the respondent calling

upon the appellants to deliver vacant and peaceful possession on

the expiry of the 10 year period, i.e., on 01.02.2016. A reminder to

2
this effect was also sent on 30.12.2015. As the tenant did not vacate

the premises, arbitration was invoked by the respondent on

29.02.2016 by a notice sent to the appellants.

(vi) On 28.04.2016, the respondent filed the present Section 11

petition before the Calcutta High Court for appointment of an

arbitrator.

(vii) On 07.09.2016, the High Court passed the impugned order

appointing an arbitrator, after rejecting the appellants’ objections on

arbitrability of the dispute between the parties. After this, the arbitral

proceedings began and we are informed that as many as 18 sittings

have taken place.

(viii) Meanwhile, however, on 12.10.2017, a judgment was

delivered by this Court in Himangni Enterprises v. Kamaljeet

Singh Ahluwalia, (2017) 10 SCC 706 [“Himangni Enterprises”], in

which it was held that where the Transfer of Property Act, 1882

applied between landlord and tenant, disputes between the said

parties would not be arbitrable.

(ix) Even though four arbitration sittings took place after this

judgment, a review/recall application was filed by the appellants

before the Calcutta High Court on 04.06.2018 in the light of this

judgment. This review was dismissed by the Calcutta High Court on

08.06.2018.

3

3. Mr. Debajyoti Basu, learned counsel appearing for the

appellants has argued that the Transfer of Property Act is an Act

which created rights in rem insofar as the landlord and tenant are

concerned. He has further argued that the public policy contained in

the statute in Sections 111(g), 114, and 114A, in particular, make it

clear that by necessary implication the Arbitration Conciliation Act,

1996 stands excluded. For this purpose, he also relied upon Section

2(3) of the Arbitration Conciliation Act read with Section 5 thereof.

He referred us to the statement of claim made before the learned

Arbitrator and said that, in any event, grant of mesne profits would

be outside the arbitration agreement inasmuch as mesne profits are

to be decided by way of damages only after the agreement has

come to an end. He also referred to and relied upon Order XX Rule

12 of the Code of Civil Procedure [“CPC”] to state that mesne profits

could only be given in the manner provided in Order XX Rule 12,

i.e., by a Civil Court and not by an arbitrator. He further went on to

argue that even if it be held that certain sub-clauses of Section 111

would be arbitrable, yet it being clear that so far as at least arrears

of rent and forfeiture are concerned, such disputes being non-

arbitrable, it would be difficult to bifurcate the aforesaid grounds as

often, one petition for eviction may contain several grounds, some of

which are relatable to arrears of rent and forfeiture and some of

4
which may relate to other grounds. Therefore, according to him, the

entirety of the subject-matter of landlord and tenant disputes arising

under the Transfer of Property Act is excluded by necessary

implication. He also stated that it is well settled that this case is one

of inherent lack of jurisdiction and that therefore, participation in the

arbitral proceedings would make no difference as consent cannot

confer jurisdiction, nor can waiver be inferred so as to confer

jurisdiction. He relied strongly upon a number of judgments to

buttress these submissions. In any event, according to him, this

Court’s judgment in Himangni Enterprises (supra) would apply on all

fours in the facts of his case and would therefore, govern this case,

which would necessarily lead to an arbitrator in the present

proceedings having no jurisdiction to decide disputes between

landlord and tenant. He also argued that Section 11(6A) of the

Arbitration Conciliation Act should be read in a purposive manner,

and that “existence” of an arbitration agreement that is spoken of

would also refer to disputes which are non-arbitrable as such.

4. Mr. Saurav Agarwal, learned counsel appearing on behalf of

the respondent countered these submissions. According to him, this

is a case in which the appellants have participated in the arbitral

proceedings. Arbitral proceedings are well on their way, and we

5
ought, therefore, to exercise our discretionary jurisdiction under

Article 136 of the Constitution of India against the appellants. He has

further argued relying upon various judgments, including certain

High Court judgments that were passed after Himangni Enterprises

(supra) to state that, on facts, Himangni Enterprises (supra) was

wholly distinguishable as it did not apply to a situation of a lease

expiring by efflux of time. He also pointed out that certain High Court

judgments had, after Himangni Enterprises (supra), distinguished

the said judgment on this and other grounds. As an alternative

submission, he said that, in any case, Himangni Enterprises (supra)

would require reconsideration as it did not state the law correctly.

5. Having heard the learned counsel on both sides, we may first

set out Section 11(6A) of the Arbitration Conciliation Act, which

reads as follows:

“11. Appointment of arbitrators.—
xxx xxx xxx
(6A) The Supreme Court or, as the case may be, the
High Court, while considering any application under
sub-section (4) or sub-section (5) or sub-section (6),
shall, notwithstanding any judgment, decree or order
of any court, confine to the examination of the
existence of an arbitration agreement.

xxx xxx xxx”

The 246th Law Commission Report, which led to the enactment of

Section 11(6A), stated as follows:-

6
Section 11(6A) of the amendment contemplates a
two-step process to be adopted by a judicial authority
when considering an application seeking the reference
of a pending action to arbitration. The amendment
envisages that the judicial authority shall not refer the
parties to arbitration only if it finds that there does not
exist an arbitration agreement or that it is null and
void. If the judicial authority is of the opinion that
prima facie the arbitration agreement exists, then it
shall refer the dispute to arbitration, and leave the
existence of the arbitration agreement to be finally
determined by the arbitral tribunal. However, if the
judicial authority concludes that the agreement does
not exist, then the conclusion will be final and not
prima facie. The amendment also envisages that there
shall be a conclusive determination as to whether the
arbitration agreement is null and void.”
(emphasis supplied)

6. It will be seen that though the Law Commission Report

speaks not only of “existence” but also of an arbitration clause being

null and void, this has not translated itself into the language of

Section 11(6A). On the contrary, Section 11(6A) is to be contrasted

with Section 16(1) of the Act which reads as follows:

“16. Competence of arbitral tribunal to rule on its
jurisdiction.—(1) The arbitral tribunal may rule on its
own jurisdiction, including ruling on any objections with
respect to the existence or validity of the arbitration
agreement, and for that purpose,—

(a) an arbitration clause which forms part of a
contract shall be treated as an agreement
independent of the other terms of the
contract; and

(b) a decision by the arbitral tribunal that the
contract is null and void shall not entail ipso
jure the invalidity of the arbitration clause.”

7

7. It will be noticed that “validity” of an arbitration agreement is,

therefore, apart from its “existence”. One moot question that

therefore, arises, and which needs to be authoritatively decided by

a Bench of three learned Judges, is whether the word “existence”

would include weeding-out arbitration clauses in agreements which

indicate that the subject-matter is incapable of arbitration. A Division

Bench of this Court, through one of the learned Judges, Kurian

Joseph, J., has stated, in Duro Felguera, S.A. v. Gangavaram Port

Ltd., (2017) 9 SCC 729, that the scope of Section 11(6A) is limited

to the following:

“59. The scope of the power under Section 11(6) of the
1996 Act was considerably wide in view of the
decisions in
SBP and Co. [SBP and Co. v. Patel Engg.
Ltd., (2005) 8 SCC 618] and Boghara Polyfab
[National Insurance Co. Ltd. v. Boghara Polyfab (P)
Ltd., (2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117]. This
position continued till the amendment brought about in
2015. After the amendment, all that the courts need to
see is whether an arbitration agreement exists—
nothing more, nothing less. The legislative policy and
purpose is essentially to minimise the Court’s
intervention at the stage of appointing the arbitrator
and this intention as incorporated in
Section 11(6-A)
ought to be respected.”

8. We now come to the meat of the matter.

9. It is important first to set out certain provisions of the Transfer

of Property Act, 1882 and the Arbitration Conciliation Act, 1996 in

8
order to appreciate the controversy before us.
Section 111 of the

Transfer of Property Act, relating to determination of lease, reads as

follows:

“111. Determination of lease.— A lease of immovable
property, determines—

(a) by efflux of the time limited thereby;

(b) where such time is limited conditionally on
the happening of some event—by the
happening of such event;

(c) where the interest of the lessor in the
property terminates on, or his power to
dispose of the same extends only to, the
happening of any event—by the happening of
such event;

(d) in case the interests of the lessee and the
lessor in the whole of the property become
vested at the same time in one person in the
same right;

(e) by express surrender; that is to say, in
case the lessee yields up his interest under
the lease to the lessor, by mutual agreement
between them;

(f) by implied surrender;

(g) by forfeiture, that is to say, (1) in case the
lessee breaks an express condition which
provides that on breach thereof the lessor
may re-enter; or (2) in case the lessee
renounces his character as such by setting
up a title in a third person or by claiming title
in himself; or (3) the lessee is adjudicated an
insolvent and the lease provides that the
lessor may re-enter on the happening of such
event; and in any of these cases the lessor or
his transferee gives notice in writing to the
lessee of his intention to determine the lease;

9

(h) on the expiration of a notice to determine
the lease, or to quit, or of intention to quit, the
property leased, duly given by one party to
the other.”

10. Section 114, which deals with relief against forfeiture for non-

payment of rent, reads as follows:-

“114. Relief against forfeiture for non-payment of
rent.— Where a lease of immovable property has
been determined by forfeiture for non-payment of rent,
and the lessor sues to eject the lessee, if, at the
hearing of the suit, the lessee pays or tenders to the
lessor the rent in arrear, together with interest thereon
and his full costs of the suit, or gives such security as
the Court thinks sufficient for making such payment
within fifteen days, the Court may, in lieu of making a
decree for ejectment, pass an order relieving the
lessee against the forfeiture; and thereupon the lessee
shall hold the property leased as if the forfeiture had
not occurred.”

11. Section 114A, which deals with relief against forfeiture in

certain other cases, reads as follows:

“114A. Relief against forfeiture in certain other
cases.—Where a lease of immovable property has
been determined by forfeiture for a breach of an
express condition which provides that on breach
thereof the lessor may re-enter, no suit for ejectment
shall lie unless and until the lessor has served on the
lessee a notice in writing—

(a) specifying the particular breach
complained of; and

(b) if the breach is capable of remedy,
requiring the lessee to remedy the breach;

10

and the lessee fails, within a reasonable time
from the date of the service of the notice, to
remedy the breach, if it is capable of remedy.
Nothing in this section shall apply to an express
condition against assigning, under-letting, parting with
the possession, or disposing, of the property leased, or
to an express condition relating to forfeiture in case of
non-payment of rent.”

12. While appreciating that a lease is a transfer of an interest in

property, and therefore, a conveyance, in law, there is nothing in the

Transfer of Property Act to show that a dispute as to determination

of a lease arising under Section 111 cannot be decided by

arbitration. However, what was argued was that Sections 114 and

114A, which provide for statutory reliefs against forfeiture for non-

payment of rent and for breach of an express condition, would

indicate that the statute itself is based on a public policy in favour of

tenants as a class, which can be decided by the courts only.

13. In Praduman Kumar v. Virendra Goyal (Dead) by LRs.,

(1969) 3 SCR 950, this Court explained the raison d’etre for Section

114 as follows:

“The covenant of forfeiture of tenancy for non-payment
of rent is regarded by the courts as merely a clause for
securing payment of rent, and unless the tenant has
by his conduct disentitled himself to equitable relief the
courts grant relief against forfeiture of tenancy on the
tenant paying the rent due, interest thereon and costs
of the suit. Jurisdiction to relieve against forfeiture for
non-payment of rent may be exercised by the Court if

11
the tenant in a suit in ejectment at the hearing of the
suit pays the arrears of rent together with interest
thereon and full costs of the suit. ……”
(at page 953)

The Court went on to quote from Namdeo Lokman Lodhi v.

Narmadabai Ors., [1953] SCR 1109 as follows:

“… in exercising the discretion (under Section 114 of
the Transfer of Property Act), each case must be
judged by itself, the delay, the conduct of the parties
and the difficulties to which the landlord has been put
should be weighed against the tenant. … It is a maxim
of equity that a person who comes in equity must do
equity and must come with clean hands and if the
conduct of the tenant is such that it disentitles him to
relief in equity, then the court’s hands are not tied to
exercise it in his favour.”
(at page 1025)

14. In fact, a close reading of Section 114 would show that the

rights of landlord and tenant are balanced by the aforesaid

provision. This is because where a lease of immoveable property

has determined by forfeiture for non-payment of rent, and at the

hearing of the suit, the lessee pays or tenders to the lessor the rent

in arrears, together with interest thereon and his full costs within 15

days, the Court in its discretion may relieve the lessee against the

forfeiture. This shows two things – one that the landlord’s interest is

secured not only by the deposit of rent in arrears but also interest

thereon and full costs of the suit. The option given, of course, is that

12
security may also be given but what is important is that the Court is

given a discretion in making a decree for ejectment if this is done.

The discretion may be exercised in favour of the tenant or it may

not. This itself shows that Section 114 cannot be said to be a

provision conceived for relief of tenants as a class as a matter of

public policy. The same goes for Section 114A. Here again, a lessee

is given one opportunity to remedy breach of an express condition,

provided such condition is capable of remedy. However, the

exception contained in this section shows that it is a very limited

right that is given to a tenant, as this would not apply to assigning,

sub-letting, parting with the possession, or disposing of the property

leased, or even to an express condition relating to forfeiture in case

of non-payment of rent. Thus, it is clear that every one of the

grounds stated in Section 111, whether read with Section 114 and/or

114A, are grounds which can be raised before an arbitrator to

decide as to whether a lease has or has not determined.

15. So far so good on principle. However, we have now to refer

to certain decisions of this Court. The basic decision in cases of this

kind is the judgment contained in Booz Allen and Hamilton Inc. v.

SBI Home Finance Limited and Others, (2011) 5 SCC 532. This

judgment has laid down in great detail what is the meaning of the

13
expression “arbitrability” [see paragraph 34]. Paragraph 35 is

important and reads as follows:

“35. The Arbitral Tribunals are private fora chosen
voluntarily by the parties to the dispute, to adjudicate
their disputes in place of courts and tribunals which
are public fora constituted under the laws of the
country. Every civil or commercial dispute, either
contractual or non-contractual, which can be decided
by a court, is in principle capable of being adjudicated
and resolved by arbitration unless the jurisdiction of
the Arbitral Tribunals is excluded either expressly or by
necessary implication. Adjudication of certain
categories of proceedings are reserved by the
legislature exclusively for public fora as a matter of
public policy. Certain other categories of cases, though
not expressly reserved for adjudication by public fora
(courts and tribunals), may by necessary implication
stand excluded from the purview of private fora.

Consequently, where the cause/dispute is inarbitrable,
the court where a suit is pending, will refuse to refer
the parties to arbitration, under
Section 8 of the Act,
even if the parties might have agreed upon arbitration
as the forum for settlement of such disputes.”

Paragraph 36 then goes on to give certain well recognized examples

of non-arbitrable disputes as follows:

“36. The well-recognised examples of non-arbitrable
disputes are: (i) disputes relating to rights and liabilities
which give rise to or arise out of criminal offences; (ii)
matrimonial disputes relating to divorce, judicial sepa-
ration, restitution of conjugal rights, child custody; (iii)
guardianship matters; (iv) insolvency and winding-up
matters; (v) testamentary matters (grant of probate,
letters of administration and succession certificate);
and (vi) eviction or tenancy matters governed by spe-
cial statutes where the tenant enjoys statutory protec-

tion against eviction and only the specified courts are
conferred jurisdiction to grant eviction or decide the
disputes.”

14
Paragraphs 37 and 38 then go on to state that a right in rem is a

right exercisable against the world at large, and is not amenable to

arbitration, whereas a right in personam, in which an interest is pro-

tected against specific individuals, is. It was also stated that disputes

relating to subordinate rights in personam arising from rights in rem

have always been considered to be arbitrable.

16. We now come to the sheet anchor of the appellants’ case be-

fore us, namely, the decision in Himangni Enterprises (supra). This

judgment concerned itself with a landlord-tenant dispute in which the

Delhi Rent Act, 1995 was admittedly inapplicable. However, in para-

graph 18 of the said judgment, this Court said:

“18. In our considered opinion, the question involved
in the appeal remains no longer res integra and stands
answered by two decisions of this Court in
Natraj Stu-
dios (P) Ltd. vs. Navrang Studios, (1981) 1 SCC 523
and
Booz Allen Hamilton Inc. vs. SBI Home Finance
Ltd. against the appellant and in favour of the respon-
dent.”

17. We may point out that the judgment in Natraj Studios (supra)

is a judgment in which Section 28 of the Bombay Rent Act, in the

context of arbitrability, arose for consideration. This section made it

clear that disputes between landlords and statutory tenants would

be referable only to the small causes court in Bombay and “no other

court has jurisdiction to entertain any such suit, proceeding or

15
application or to deal with such claim or question”. Given this

provision, and the fact that the Bombay Rent Act is a welfare

legislation, this Court held:

“17. The Bombay Rent Act is a welfare legislation
aimed at the definite social objective of protection of
tenants against harassment by landlords in various
ways. It is a matter of public policy. The scheme of
the Act shows that the conferment of exclusive
jurisdiction on certain Courts is pursuant to the social
objective at which the legislation aims. Public policy
requires that contracts to the contrary which nullify the
rights conferred on tenants by the Act cannot be
permitted. Therefore, public policy requires that
parties cannot also be permitted to contract out of the
legislative mandate which requires certain kind of
disputes to be settled by special Courts constituted by
the Act. It follows that arbitration agreements between
parties whose rights are regulated by the Bombay
Rent Act cannot be recognized by a Court of law.”

It then concluded in paragraph 24 as follows:

“24. In the light of the foregoing discussion and the
authority of the precedents, we hold that both by
reason of S. 28 of the Bombay Rents, Hotel and
Lodging House Rates Control Act, 1947 and by reason
of the broader considerations of public policy
mentioned by us earlier and also in
Deccan Merchants
Co-operative Bank Ltd. v. M/s Dalichand Jugraj Jain
(AIR 1969 SC 1320), the Court of Small Causes has
and the Arbitrator has not the jurisdiction to decide the
question whether the respondent-licensor-landlord is
entitled to seek possession of the two studios and
other premises together with machinery and
equipment from the appellant-licensee-tenant.”

18. So far as Booz Allen (supra) is concerned, we have already

extracted paragraph 36. Sub-paragraph (vi) of this paragraph makes

16
it clear that only those tenancy matters that are (i) governed by

special statutes (ii) where the tenant enjoys statutory protection

against eviction and (iii) where only specified courts are conferred

jurisdiction to grant eviction or decide disputes, are cases where the

dispute between landlord and tenant can be said to be non-

arbitrable.

19. A perusal of both the aforesaid judgments, therefore, shows

that a Transfer of Property Act situation between a landlord and

tenant is very far removed from the situation in either Natraj Studios

(supra) or in sub-paragraph (vi) of paragraph 36 of Booz Allen

(supra). We are, therefore, of the respectful view that the question

involved in a Transfer of Property Act situation cannot possibly be

said to have been answered by the two decisions of this Court, as

has been stated in paragraph 18 of the said judgment.

20. The said judgment then goes on to state:

“23. The learned counsel for the appellant, however,
argued that the provisions of the
Delhi Rent Act, 1995
are not applicable to the premises by virtue of
Section
3(1)(c) of the Act and hence, the law laid down in the
aforementioned two cases would not apply. We do not
agree.

24. 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
17
Arbitration Act, ipso facto, would be applicable to such
premises conferring jurisdiction on the arbitrator to
decide the eviction/rent disputes. In such a situation,
the rights of the parties and the demised premises
would be governed by the
Transfer of Property Act and
the civil suit would be triable by the civil court and not
by the arbitration. In other words, though by virtue of
Section 3 of the Act, the provisions of the Act are not
applicable to certain premises but no sooner the
exemption is withdrawn or ceased to have its
application to a particular premises, the Act becomes
applicable to such premises. In this view of the matter,
it cannot be contended that the provisions of the
Arbitration Act would, therefore, apply to such
premises.”

21. It may be noticed that none of the provisions of the Transfer

of Property Act have been noticed by this judgment. In fact, none of

the aforesaid provisions would indicate that disputes under the said

Act are triable only by the civil court and not by arbitration, as has

been held in this paragraph. It is clear that the Transfer of Property

Act is silent on arbitrability, and does not negate arbitrability.

22. In a similar situation, this Court, in Olympus

Superstructures Pvt. Ltd. v. Meena Vijay Khetan and Others,

(1999) 5 SCC 651, held that when it came to the grant of specific

performance, there is no prohibition in the Specific Relief Act that

issues relating to specific performance cannot be referred to

arbitration, unlike the English statute [see paragraph 34].

18

23. Equally, merely because a discretion had to be exercised by

the court on whether or not to grant specific performance, would not

militate against specific performance being granted [see paragraph

44, in particular, of Booz Allen (supra)]. It is clear, therefore, that the

judgment in Himangni Enterprises (supra) will require a relook by a

Bench of three Hon’ble Judges of this Court.

24. One more thing held in Himangni Enterprises (supra) is that

the mere fact that an exemption from the Rent Act is available does

not mean that the matter becomes non-arbitrable. The Court held

that as soon as the exemption is withdrawn, the Rent Act will apply,

and therefore, it cannot be contended that the Arbitration

Conciliation Act would apply. This reasoning is also, in our respectful

view, not correct. Persons may be exempt from a Rent Act not

merely for a certain period but also because the rent contained in

the agreement between the landlord and tenant is above a certain

amount. When the rent is fixed above the amount stated by a

statute, in the normal course of human conduct, such rent can only

be increased and not decreased so as to fall back within the

provisions of the Rent Act. Further, the exemption based on a

certain rent payable need not be withdrawn or cease to have

application to a particular premises for many years to come. For all

19
these reasons, we are of the view that this reason also does not

hold good.

25. In Vimal Kishor Shah and Others v. Jayesh Dinesh Shah

and Others, (2016) 8 SCC 788, this Court, after referring to

Dhulabhai v. State of M.P., (1968) 3 SCR 662, came to the

conclusion that disputes which arose under the Indian Trusts Act,

1882, which applies only to private trusts, were also not arbitrable as

this was excluded by necessary implication. This was so stated as

follows:

“49. So far as the question involved in the case at
hand is concerned, it is governed by Condition 2
of Dhulabhai case [
Dhulabhai v. State of M.P., AIR
1969 SC 78] which reads as under: (AIR p. 89, para

32)
“32. (2) Where there is an express bar of the
jurisdiction of the court, an examination of the
scheme of the particular Act to find the
adequacy or the sufficiency of the remedies
provided may be relevant but is not decisive
to sustain the jurisdiction of the civil court.

Where there is no express exclusion the
examination of the remedies and the scheme
of the particular Act to find out the intendment
becomes necessary and the result of the
inquiry may be decisive. In the latter case it is
necessary to see if the statute creates a
special right or a liability and provides for the
determination of the right or liability and
further lays down that all questions about the
said right and liability shall be determined by
the tribunals so constituted, and whether
remedies normally associated with actions in

20
civil courts are prescribed by the said statute
or not.”

50. When we examine the scheme of the Trusts Act,
1882 in the light of the principle laid down in Condition
2, we find no difficulty in concluding that though the
Trusts Act, 1882 does not provide any express bar in
relation to applicability of other Acts for deciding the
disputes arising under the
Trusts Act, 1882 yet, in our
considered view, there exists an implied exclusion of
applicability of the
Arbitration Act for deciding the
disputes relating to trust, trustees and beneficiaries
through private arbitration. In other words, when the
Trusts Act, 1882 exhaustively deals with the trust,
trustees and beneficiaries and provides for adequate
and sufficient remedies to all aggrieved persons by
giving them a right to approach the Principal Civil
Court of Original Jurisdiction for redressal of their
disputes arising out of trust deed and the
Trusts Act,
1882 then, in our opinion, any such dispute pertaining
to affairs of the trust including the dispute inter se
trustee and beneficiary in relation to their right, duties,
obligations, removal, etc. cannot be decided by the
arbitrator by taking recourse to the provisions of the
Act. Such disputes have to be decided by the civil
court as specified under the
Trusts Act, 1882.

51. The principle of interpretation that where a specific
remedy is given, it thereby deprives the person who
insists upon a remedy of any other form of remedy
than that given by the statute, is one which is very
familiar, and which runs through the law, was adopted
by this Court in
Premier Automobiles Ltd. v. Kamlekar
Shantaram Wadke [Premier Automobiles Ltd. v.
Kamlekar Shantaram Wadke, (1976) 1 SCC 496 :

1976 SCC (LS) 70 : AIR 1975 SC 2238] while
examining the question of bar in filing civil suit in the
context of remedies provided under the
Industrial
Disputes Act (see G.P. Singh, Principles of Statutory
Interpretation, 12th Edn., pp. 763-64). We apply this
principle here because, as held above, the
Trusts Act,
1882 creates an obligation and further specifies the
rights and duties of the settlor, trustees and the
beneficiaries apart from several conditions specified in

21
the trust deed and further provides a specific remedy
for its enforcement by filing applications in civil court. It
is for this reason, we are of the view that since
sufficient and adequate remedy is provided under the
Trusts Act, 1882 for deciding the disputes in relation to
trust deed, trustees and beneficiaries, the remedy
provided under the
Arbitration Act for deciding such
disputes is barred by implication.”

Dhulabhai (supra) refers to and relies upon the three famous cate-

gories that are contained in Wolverhampton New Waterworks Co.

v. Hawkesford, 141 ER 486. Willes, J. had set out these three cate-

gories as follows:

“There are three classes of cases in which a liability
may be established founded upon a statute. One is,
where there was a liability existing at common law, and
that liability is affirmed by a statute which gives a spe-
cial and peculiar form of remedy different from the
remedy which existed at common law: there, unless
the statute contains words which expressly or by nec-
essary implication exclude the common law remedy,
and the party suing has his election to pursue either
that or the statutory remedy. The second class of
cases is, where the statute gives the right to sue
merely, but provides no particular form of remedy:
there, the party can only proceed by action at common
law. But there is a third class, viz. where a liability not
existing at common law is created by a statute which
at the same time gives a special and particular remedy
for enforcing it.”
(at page 495)

26. The Indian Trusts Act, 1882, in fact, provides an excellent

instance of how arbitration is excluded by necessary implication. It

is important to bear in mind the fact that the statute, considered as a

22
whole, must lead necessarily to a conclusion that the disputes which

arise under it cannot be the subject matter of arbitration.

27. A few sections of the Indian Trusts Act will suffice to

demonstrate how disputes under this Act cannot possibly be the

subject matter of arbitration. Under Section 34 of the Indian Trusts

Act, a trustee may, without instituting a suit, apply by petition to a

principal Civil Court of original jurisdiction for its opinion, advice, or

direction on any present questions respecting management or

administration of trust property, subject to other conditions laid down

in the Section. Obviously, an arbitrator cannot possibly give such

opinion, advice, or direction. Under Section 46, a trustee who has

accepted the trust, cannot afterwards renounce it, except, inter alia,

with the permission of a principal Civil Court of original jurisdiction.

This again cannot be the subject matter of arbitration. Equally,

under Section 49 of the Indian Trusts Act, where a discretionary

power conferred on a trustee is not exercised reasonably and in

good faith, only a principal Civil Court of original jurisdiction can

control such power, again making it clear that a private consensual

adjudicator has no part in the scheme of this Act. Under Section 53,

no trustee may, without the permission of a principal Civil Court of

original jurisdiction, buy or become mortgagee or lessee of the trust

23
property or any part thereof. Here again, such permission can only

be given by an arm of the State, namely, the principal Civil Court of

original jurisdiction. Under Section 74 of the Indian Trusts Act, under

certain circumstances, a beneficiary may apply by petition to a

principal Civil Court of original jurisdiction for the appointment of a

trustee or a new trustee, and the Court may appoint such trustee

accordingly. Here again, such appointment cannot possibly be by a

consensual adjudicator. It can only be done by a petition to a

principal Civil Court of original jurisdiction. Also, it is important to

note that it is not any civil court that has jurisdiction, but only one

designated court, namely, a principal Civil Court of original

jurisdiction. All this goes to show that by necessary implication,

disputes arising under the Indian Trusts Act cannot possibly be

referred to arbitration.

28. Insofar as the Transfer of Property Act or the Specific Relief

Act, no such thing exists, as has been held by Olympus

Superstructures (supra) and by Booz Allen (supra).

29. We may only indicate that Vimal Kishor Shah (supra) has, in

a Consumer Protection Act situation, been recently followed by a

Division Bench of this Court in Emaar MGF Land Limited v. Aftab

24
Singh, 2018 SCC OnLine SC 2771.

30. In this view of the matter, this case is referred to a Bench of

three Hon’ble Judges.

31. Given the facts of this case and the fact that 18 hearings

have been held, the stay that has been granted to the arbitral

proceedings by our order dated 13.08.2018 is lifted, and the

proceedings may go on and culminate in an award. The award

cannot be executed without applying to this Court. The appeal is

disposed of accordingly.

……………………………… J.

(R.F. NARIMAN)

……………………………… J.

(VINEET SARAN)
New Delhi;

February 28, 2019.

25

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