ADRNon arbitrabilitySupreme Court of India

Vidya Drolia v Durga Trading Corporation

(2021) 2 Supreme Court Cases 120211 min read
The case in brief30-second read
Facts
Vidya Drolia was a tenant under a lease agreement containing an arbitration clause. Durga Trading (landlord) invoked arbitration for eviction and arrears. Vidya Drolia objected that tenancy disputes under the Transfer of Property Act/Rent Control legislation are non-arbitrable.
Issue
What test should courts apply to determine non-arbitrability of disputes?
Held
Four-fold test for non-arbitrability: A dispute is non-arbitrable when:
Principle
Four-fold test for non-arbitrability; at S.8/S.11 stage, court applies prima facie test; detailed validity examination left to tribunal
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Facts

  • Vidya Drolia was a tenant under a lease agreement containing an arbitration clause
  • Durga Trading (landlord) invoked arbitration for eviction and arrears
  • Vidya Drolia objected that tenancy disputes under the Transfer of Property Act/Rent Control legislation are non-arbitrable
  • The question was whether the court at S.8 stage should conduct a full inquiry into arbitrability or leave it to the tribunal

Issues

  1. What test should courts apply to determine non-arbitrability of disputes?
  2. At S.8/S.11 (referral/appointment) stage, should the court make a prima facie or final determination of arbitrability?
  3. Are tenancy disputes arbitrable?

Held

  • Four-fold test for non-arbitrability: A dispute is non-arbitrable when:
  • (a) It relates to rights in rem (against the world at large);
  • (b) It affects third-party rights or requires centralised adjudication;
  • (c) It involves sovereign/public interest functions;
  • (d) It is non-adjudicatory/non-arbitrable by specific statute.

Ratio decidendi

At the referral stage, the court's role is limited to a prima facie examination. Unless it is "ex facie" evident that the dispute is non-arbitrable, void, or that no valid agreement exists, the court must refer. The four-fold test provides a structured framework for assessing arbitrability.

Exam use

How to use it in an answer

  • Part A: State the four-fold test. Mention prima facie standard at S.8/S.11.
  • Part B: Use with Booz Allen (2011) for comprehensive non-arbitrability answers. Vidya Drolia refined and structured the Booz Allen categories into a principled four-part test.
  • Key line: "The court at referral stage should apply a prima facie test. Only when the dispute is manifestly and ex facie non-arbitrable should reference be declined."

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Citation

Vidya Drolia v Durga Trading Corporation (2021) 2 Supreme Court Cases 1

Reported: Supreme Court judgment. This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.