Vidya Drolia v Durga Trading Corporation

(2021) 2 Supreme Court Cases 1Supreme Court of India2021Alternate Dispute Resolution

Rule established

Four-fold test for non-arbitrability; at S.8/S.11 stage, court applies prima facie test; detailed validity examination left to tribunal

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

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

How to use it in an exam

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."

Source

Source: Supreme Court judgment

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

Cited in study notes

ADRDefinitions - Arbitration, Arbitrator, Arbitration AgreementValidity examination at referral stage: prima facie test for S.8/S.11