Karnataka HC Sends Landlord-Tenant Dispute Over Tenant’s Post-Lease Stay To Arbitration, Excluding Claims Tied To Unsigned Extension

The petitioner, owner of an apartment in Bengaluru, leased it to the respondent under a Lease Deed dated 16 March 2023 for 11 months.

A signed MOU dated 24 January 2024 extended the lease until 30 June 2024 and provided for damages if vacant possession was not delivered; it also stated that the lease deed’s other terms would continue to apply.

The petitioner alleged that the respondent failed to vacate and pay amounts due, and invoked arbitration by notice under Section 21 of the Arbitration and Conciliation Act, 1996.

The respondent objected that the MOU had no arbitration clause and that claims relating to a further, unsigned MOU could not be arbitrated under the lease deed. The petitioner applied under Section 11(5) for appointment of an arbitrator

Section 11(5) of the Arbitration and Conciliation Act, 1996 empowers the Court to appoint an arbitrator where the parties fail to agree on the appointment; Section 21 concerns commencement of arbitral proceedings upon receipt of a request to refer a dispute to arbitration.

Under Section 7(5), an arbitration clause in another document may be incorporated by reference when the contractual terms and reference support that result.

In M.R. Engineers and Contractors Pvt. Ltd. v. Som Datt Builders Ltd., (2009) 7 SCC 696, the Supreme Court held that a general reference to another contract ordinarily does not incorporate its arbitration clause, subject to recognised exceptions.

Inox Wind Ltd. v. Thermocables Ltd., (2018) 2 SCC 519, explains that in a single-contract context a general reference to another document may be sufficient to incorporate its arbitration clause.

The judgment also treated the lease’s provisions contemplating arbitration after expiry or earlier termination as supporting the continued operation of the arbitration clause

The Court found that the signed MOU extended the parties’ existing lease, expressly provided for damages for failure to deliver vacant possession, and stated that the lease deed’s other terms continued to govern.

Applying the incorporation principles in M.R. Engineers and Inox Wind, the Court held that there was a prima facie basis for applying the Lease Deed’s arbitration clause to disputes under the MOU.

Expiry of the extended lease did not, by itself, bar arbitration, particularly given the lease provisions addressing disputes after expiry or termination.

The Court separately stated that the arbitration clause could not be invoked for claims relating to an unsigned agreement

The Court left all claims and contentions open, directed the parties to appear before the Centre on 23 November 2026, and directed the Registry to communicate the order and return original documents after retaining copies