Court case(2021) 2 SCC 1

A tenancy agreement for commercial premises contained an arbitration clause. When the landlord sought to recover possession the tenant resisted a reference to arbitration, relying on Himangni Enterprises (2017), which had held that disputes governed by the Transfer of Property Act are not arbitrable. A two-judge bench doubted that decision and referred the matter to three judges, who also took up the wider question of what the court decides at the referral stage.

The Court laid down a four-fold test. A dispute is not arbitrable when (1) its cause of action and subject matter relate to actions in rem that do not pertain to subordinate rights in personam arising from rights in rem; (2) it affects third-party rights, has erga omnes effect or requires centralised adjudication; (3) it relates to inalienable sovereign and public-interest functions of the State; or (4) a statute expressly or by necessary implication makes it non-arbitrable. On that test, landlord-tenant disputes under the Transfer of Property Act are arbitrable (Himangni Enterprises overruled), but those governed by rent-control statutes with special fora are not; allegations of fraud are arbitrable unless they vitiate the arbitration clause itself or have a public flavour. At the referral stage the court's examination is prima facie: it refuses a reference only where it is manifest that there is no valid arbitration agreement or the dispute is plainly non-arbitrable; otherwise 'when in doubt, do refer'.