Tenants Occupying Premises Which Fall Under Development Agreement Cannot Be Evicted U/S 9 Of Arbitration Act: Bombay High Court

The Bombay High Court bench of Justice Somasekhar Sundaresan has held that Eviction of tenants governed by the Rent Control Act cannot be sought under Section 9 of the Arbitration and Conciliation Act, 1996 (Arbitration Act), particularly when they are not parties to the Development Agreement executed between the Developer and the Landlords and are not being provided upgraded premises in the redeveloped building compared to what they currently occupy under the tenancy agreements. Brief Facts: This petition has been filed by Ambit Urbanspace (“Developer”) under section 9 of the Arbitration Act , which has executed a Development Agreement dated May 21, 2024 (“Development Agreement”) with Poddar Apartment Co-operative Housing Society Limited, a Housing Society (“Society”) to redevelop a building, seeking protective measures from this Court pending arbitration being invoked. The tenanted premises that are in dispute for purposes of this Petition are five enclosed garages (“Subject Garages”). The Landlords own all commercial shops in the society along with tenanted basements and these tenants are being accommodated in the redeveloped premises. However the subject garages also tenanted to Respondent No. 5 to 8 (Tenants) are being treated differently. In lieu of the Subject Garages, the Tenants are proposed to be simply given open car parking spaces in the redeveloped building, and that too under an agreement to which they are not even signatories. Respondent No. 9 has been termed an illegal occupant of one of the tenanted Subject Garages by the Developer and by the Landlords in their respective pleadings. The Developer is seeking “eviction” of the Tenants, and that too, claiming under an agreement not even executed by the Tenants. The Development Agreement purports to make the Tenants parties in the title clause of the agreement, but there is not even a placeholder for their signatures in the agreement. Worse, the Development Agreement was supplemented by a Supplemental Development Agreement, also dated October 21, 2024 (“Supplemental Agreement”), and that instrument does not even purport to depict the Tenants as a party even in the title clause. Contentions: The Landlords submitted that mere silence of the Landlords would not amount to acquiescence by them, or give rise to any estoppel to prevent their assertion that the usage of the Subject Garages is illegal. Per contra, the Tenants submitted that the Landlords have charged rent as if the Subject Garages were commercial premises, since they have demanded that the Tenants pay additional assessment tax demanded by the Municipal Corporation of Greater Mumbai. Observations: The court observed that the Tenant's usage of the subject garages was not without the consent and knowledge of the landlords. Therefore, the Landlords cannot claim that the Tenants are illegal users with no rights beyond car parking in the redeveloped property especially based on the agreements to which the Tenants are not even parties. It further said that the assertion by the Tenants that they have never been briefed about the redevelopment and that the Development Agreement was never even shown to them has a ring of truth to it, particularly when the pleadings of the parties does not purport to assert that the Tenants had executed it, and more so since the agreement annexed does not even show a placeholder for them to execute. It further added that 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 equity principles that would apply in the case of members of a society who do not fall in line would not be blindly and absolutely applicable when adjusting for the interests of tenants. The court further observed that the Tenants are statutorily protected under the Rent Act with eviction governed by special provisions. The Tenancy agreements themselves refer to them as statutory tenants. In the present case, an attempt is being made to evict the tenants through redevelopment on terms different from their existing rights. The court rejected the submission that the eviction was temporary on the ground that the Tenants were not being offered redeveloped premised equivalent to their current entitlements under the Rent Act The Court further added that only jurisdictional forums under the Rent Control Act have the authority to determine issues related to tenancy. It rejected the Landlords' assertions of violations by the Tenants and held that proceedings under section 9 of the Arbitration Act should not be used as a backdoor method for eviction especially when no eviction action was taken over two decades that too on facts within the knowledge of the Landlords The court also observed that a measure taken under Section 9 of the Arbitration Act ought not to conflict with...

Tenants Occupying Premises Which Fall Under Development Agreement Cannot Be Evicted U/S 9 Of Arbitration Act: Bombay High Court

Mohd Malik Chauhan

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