A Silent Exception to the Rule

Introduction

In October 2017, a division bench of the Hon’ble Supreme Court of India (“SC”) in the case of Himangni Enterprises vs. Kamaljeet Ahluwalia[1] (“Himangni Enterprises”) held that where the Transfer of Property Act, 1882 (“TP Act”) applied between landlord and tenant, disputes between the said parties would not be arbitrable, despite the existence of an arbitration clause.  Thereafter, in February 2019, another division bench of the SC in the case of Vidya Drolia and Others vs. Durga Trading Corporation[2](“Vidya Drolia”) respectfully disagreed with the conclusion arrived at in Himangni Enterprises and consequently referred the matter to a larger bench to finally settle the issue on the arbitrability of tenancy disputes.

While the reference is pending adjudication by a larger bench of the SC, this article seeks to examine the prevailing law with regard to the abovementioned issue and whether the ruling in Himangni Enterprises is a binding precedent or whether it falls under anexception to the rule of precedents.

Issue and Conflicting Views of the SC

Briefly, the issue before the SC in the case of Himangni Enterprises related to a tenancy dispute to which admittedly the Delhi Rent Act, 1995 did not apply. The judgement primarily relied on two decisions of the SC viz., Natraj Studios (P) Ltd. vs. Navrang Studios[3] (“Natraj Studios”) and Booz Allen & Hamilton Inc. vs. SBI Home Finance Limited and Ors.[4] (“Booz Allen”) to conclude that the question involved before it stood answered and that it was no longer res integra. It also held that though the Delhi Rent Act, 1995 did not apply to certain premises, it did not mean that the Arbitration and Conciliation Act, 1996 ipso facto, would be applicable to such premises, thereby conferring jurisdiction on the arbitrator to decide tenancy disputes. The division bench went on to conclude that in such a situation, the rights of the parties and the premises would be governed by the TP Act and would be adjudicated by a civil court and not by arbitration.

While dealing with a similar issue, another division bench of the SC considered whether Himangni Enterprises would impact the proceedings before it in the case of Vidya Drolia. In doing so, the division bench revisited the two decisions that were primarily relied on in Himangni Enterprises. It found that Natraj Studios dealt with disputes covered by the Bombay Rent Act, 1947, a special act which expressly grants jurisdiction to the small causes court in Mumbai,granting it exclusive jurisdiction. Further, it found that Booz Allen held that only tenancy matters governed by special statutes granting jusrisdcition to special courts are non-arbitrable disputes. Respectfully disagreeing with Himangni Enterprises, Vidya Drolia held that the two decisions relied on by Himangni Enterprises did not deal with the issue of arbitrability of tenancy disputes when covered by the TP Act. Interestingly therefore, and contrary to Himangni Enterprises, it concluded that the said issue was neither answered by Natraj Studios nor Booz Allen.

Vidya Drolia proceeded to conclude that the TP Act is silent on arbitrability and that none of the provisions of the TP Act have been referred to in Himangni Enterprises. Accordingly, in order to resolve the issue, the coordinate bench in Vidya Drolia rightly referred the matter to a larger bench of the SC.

Analysis and Applicability of the Rule of Sub Silentio

While we await the judgement of the larger bench to finally settle this issue, in the interim, a pertinent question remains - whether or not Himangni Enterprises is a binding precedent. Technically, the decision in Himangni Enterprises still holds the field. It has neither been overruled nor stayed by a larger bench of the SC. Moreover, Vidya Drolia being a coordinate bench with a conflicting view, did not finally decide the issue and instead only referred the matter to a larger bench. Therefore, prima facie, Himangni Enterprises would be a binding precedent.

However, there are two exceptions to the rule of precedents, viz., per incuriam and sub silentio. While per incuriam refers to a judgment rendered in ignorance of a statute or a precedent, the rule of sub silentio applies when a particular point of law involved in the decision is not perceived by the court or present to its mind.

The courts have time and again taken recourse to the rule of sub silentio for relieving from injustice perpetrated by unjust precedents. In this regard, the SC, in the case of Municipal Corporation of Delhi vs. Gurnam Kaur,[5]held that precedents sub silentio and without argument are of no moment. Further, the SC in State of U.P. and Anr. vs. Synthetics and Chemicals Ltd. and Anr.[6] categorically held that:

“… A decision which is not express and is not founded on reasons nor it proceeds on consideration of issue cannot be deemed to be a law declared to have a binding effect as is contemplated by Article 141. Uniformity and consistency are core of judicial discipline. But that which escapes in the judgment without any occasion is not ratio decidendi.”

In the present case, recourse may be sought under the rule of sub silentio from the binding effect of Himangni Enterprises, if one can demonstrate that the decision has been arrived at without proper consideration of the relevant provisions or the issues involved. Typically, the difficulty in applying the rule of sub silentio lies in demonstrating this very aspect. However, in the present matter, one is aided by the observations of the bench in Vidya Drolia, which while analysing Himangni Enterprises, observed that: “

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.”

Further, it was also observed that the two decisions relied upon by Himangni Enterprises could not possibly have been said to have answered the dispute in question.

Conclusion

It is evident that Himangni Enterprises failed to consider the provisions of the TP Act while deciding on the arbitrability of tenancy disputes. Hence, it fulfills the criteria required for application of the rule of sub silentio. Applying the rule of sub silentio makes it clear that Himangni Enterprises falls within the exception to the rule of precedents.Therefore, one can safely conclude that it is not a binding precedent.

As expressly stated by the SC in Booz Allen, only tenancy disputes that are governed by special statutes, whereby only the special courts are conferred jurisdiction, are declared to be non-arbitrable disputes. Moreover, as stated in Vidya Drolia, since it is clear that the TP Act is silent on arbitrability and does not negate arbitrability, it can be safely assumed that tenancy disputes covered by the TP Act and  not covered by special statues, would in fact be amenable to arbitration, subject  to the final outcome of the decision of the larger bench on this issue.

The views and opinions expressed in this article belong solely to the author and do not reflect the position of Tatva Legal, Hyderabad.

[1] (2017) 10 SCC 706.

[2] AIR 2019 SC 3498.

[3] (1981) 1 SCC 523.

[4] (2011) 5 SCC 532.

[5]  AIR 1989 SC 38.

[6] (1991) 4 SCC 139.