The Bombay High Court, in a significant ruling, has held that tenants occupying premises covered under a Development Agreement cannot be evicted under Section 9 of the Arbitration and Conciliation Act, 1996. The court clarified that when tenants are not parties to the Development Agreement between the Developer and the Landlords, and they are not being offered upgraded premises in the redeveloped property, eviction under arbitration proceedings is not permissible.
Case Background
A petition was filed by Ambit Urbanspace ("Developer") under Section 9 of the Arbitration Act. The Developer had signed a Development Agreement on May 21, 2024, with Poddar Apartment Co-operative Housing Society Limited ("Society") to redevelop a building and sought protective measures pending arbitration.
The disputed premises involved in the case were five enclosed garages ("Subject Garages"). While commercial shops and tenanted basements in the society were being accommodated in the redeveloped building, the tenants of these garages—Respondents No. 5 to 8—were being treated differently. Instead of similar or upgraded premises, they were being offered open car parking spaces in the new building under an agreement they had not signed.
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Additionally, Respondent No. 9 was accused of being an illegal occupant of one of the garages by both the Developer and the Landlords.
The Developer’s Argument:
- The Developer sought eviction of the tenants based on the Development Agreement.
- The agreement included the tenants' names in the title clause but did not have a designated place for their signatures.
- A Supplemental Development Agreement dated October 21, 2024, also failed to recognize the tenants as parties to the contract.
The Landlords’ Stand:
- The Landlords contended that their silence on the matter did not mean they had acquiesced to the tenants' rights over the Subject Garages.
- They argued that the tenants' usage of these garages was illegal.
The Tenants’ Defense:
- The Tenants countered that the Landlords had always charged rent for the garages as commercial premises.
- They were also required to pay an additional assessment tax imposed by the Municipal Corporation of Greater Mumbai.
The Bombay High Court observed that the tenants' occupation of the garages was not unauthorized since the Landlords had allowed them to occupy these spaces for years.
“The Landlords cannot claim that the tenants are illegal users with no rights beyond car parking in the redeveloped property, particularly when they are not even parties to the Development Agreement.”
Further, the court noted that the tenants had not been informed about the redevelopment plan or shown the Development Agreement. Since they had not executed the agreement, it could not be used to evict them.
“Tenants who are not part of such a collective or constituents of a body corporate, and are in fact, protectees of the Rent Act, stand on a different footing.”
The court emphasized that eviction of tenants governed under the Rent Act requires compliance with specific legal provisions.
“Tenants protected under the Rent Act cannot be evicted through arbitration proceedings. The Tenancy Agreements themselves recognize them as statutory tenants.”
In the case of Rajesh Mishra & Mrs. Beena R. Mishra vs. Shree Ahuja Properties Pvt. Ltd., the occupants of garages were assured upgraded premises in the redeveloped building. The court highlighted that in the present case, the tenants were being downgraded to open parking spaces, which was unfair.
Based on these considerations, the Bombay High Court dismissed the petition filed by the Developer. The court ruled that granting eviction under the Arbitration Act would undermine the tenants' statutory protection under the Rent Act and would indirectly benefit the Landlords in fulfilling their obligations without due legal process.
Quote: “A measure taken under Section 9 of the Arbitration Act ought not to conflict with special protective provisions in ameliorative legislation such as the Rent Act.”
Key Takeaways from the Judgment
- Tenants governed by the Rent Control Act cannot be evicted under arbitration proceedings.
- A Development Agreement that does not include the tenants as signing parties cannot be used against them.
- The rights of tenants, especially statutory tenants, are protected under the Rent Act and can only be adjudicated by jurisdictional forums under the Rent Control Act.
- The court ruled in favor of the tenants, rejecting the Developer’s petition for eviction.
Case Title: Ambit Urbanspace Versus Poddar Apartment Co-operative Housing Society Limited & Ors.
Case Number: COMMERCIAL ARBITRATION PETITION (L) NO.38696 OF 2024
Order Date: 01/04/2025
