Tarun Dhameja vs Sunil Dhameja

IN THE SUPREME COURT OF INDIA 2024 INSC 973 CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.14005 OF 2024 (arising out of SLP(C) No. 16377/2024)

TARUN DHAMEJA ..... APPELLANT(S)

VERSUS

SUNIL DHAMEJA & ANR. ..... RESPONDENT(S)

O R D E R

Leave granted.

In the present case, the arbitration clause in the Deed of

Partnership dated 16.07.2016 reads as under: -

“23. Arbitration That if at any time either during the continuance of the partnership or after the retirement of any partner, any dispute or difference shall arise between the partners or their respective heirs or any one claiming through or under them, the same shall be referred to arbitration. Arbitration shall be optional & the arbitrator will be appointed by partners with their mutual consent. In any case of dispute arise then the Jurisdiction of Indore Civil Court shall be applicable & acceptable by the partners.”

In our opinion, it cannot be said that the arbitration clause

is optional in the sense that the arbitration clause is non-

existent or that the matter would be referred to arbitration only

if all the parties to the dispute agree to refer the dispute to

arbitration.

Signature Not Verified Digitally signed by In Vidya Drolia v. Durga Trading Corpn.1, this Court Deepak Guglani Date: 2024.12.12 20:56:07 IST delineated Reason:

the issue of interpretation and construction of an

1 (2021) 2 SCC 1.

1 arbitration clause and referred to the following observations in

Fili Shipping Co. Ltd. v. Premium Nafta Products Ltd.2:

“6. In approaching the question of construction, it is therefore necessary to inquire into the purpose of the arbitration clause. As to this, I think there can be no doubt. The parties have entered into a relationship, an agreement or what is alleged to be an agreement or what appears on its face to be an agreement, which may give rise to disputes. They want those disputes decided by a tribunal which they have chosen, commonly on the grounds of such matters as its neutrality, expertise and privacy, the availability of legal services at the seat of the arbitration and the unobtrusive efficiency of its supervisory law. Particularly in the case of international contracts, they want a quick and efficient adjudication and do not want to take the risks of delay and, in too many cases, partiality, in proceedings before a national jurisdiction.”

Vidya Drolia (supra) further referred to the judgment in

Oriental Insurance Co. Ltd. v. Narbheram Power & Steel (P) Ltd.3 to

hold:

“150. In Narbheram Power & Steel (P) Ltd. [Oriental Insurance Co. Ltd. v. Narbheram Power & Steel (P) Ltd., (2018) 6 SCC 534], this Court while dealing with the arbitration clause in the insurance agreement, has held that the arbitration clause should be strictly construed, relying on the principles of strict interpretation that apply to insurance contracts. These observations have been repeated in other cases.

151. What is true and applicable for men of commerce and business may not be equally true and apply in case of laymen and to those who are not fully aware of the effect of an arbitration clause or had little option but to sign on the standard form contract.

Broad or narrow interpretations of an arbitration agreement can, to a great extent, effect coverage of a retroactive arbitration agreement. Pro-arbitration broad interpretation, normally applied to international instruments, and commercial transactions is based upon the approach that the arbitration clause should be considered as per the

2 2007 UKHL 40.

3 (2018) 6 SCC 534.

2 true contractual language and what it says, but in case of doubt as to whether related or close disputes in the course of parties' business relationship is covered by the clause, the assumption is that such disputes are encompassed by the agreement. The restrictive interpretation approach on the other hand states that in case of doubt the disputes shall not be treated as covered by the clause. Narrow approach is based on the reason that the arbitration should be viewed as an exception to the court or judicial system. The third approach is to avoid either broad or restrictive interpretation and instead the intention of the parties as to scope of the clause is understood by considering the strict language and circumstance of the case in hand. Terms like “all”, “any”, “in respect of”, “arising out of”, etc. can expand the scope and ambit of the arbitration clause. Connected and incidental matters, unless the arbitration clause suggests to the contrary, would normally be covered.

152. Which approach as to interpretation of an arbitration agreement should be adopted in a particular case would depend upon various factors including the language, the parties, nature of relationship, the factual background in which the arbitration agreement was entered, etc. In case of pure commercial disputes, more appropriate principle of interpretation would be the one of liberal construction as there is a presumption in favour of one-stop adjudication.”

The first portion of the arbitration clause is clear and

states that, at any time during the continuance of the partnership

or after the retirement of any partner, if any dispute or

difference arises between the partners or their respective heirs or

anyone claiming from them, the same shall be referred to

arbitration. Therefore, the legal representatives or anyone

claiming through a partner is entitled to invoke the arbitration

clause. In the present case, the legal representative of the

deceased partner, Yeshwant Boolani, invoked the arbitration clause.

Reliance placed on the second portion of the arbitration

3 clause, which states that if any dispute arises, the arbitration

shall be optional and the Arbitrator will be appointed by the

partners with their mutual consent, is not to be read in isolation

but in the context of the earlier portion of the arbitration

clause. This means that the arbitration clause can be invoked by an

aggrieved party who wants to take recourse to arbitration. To this

extent there is mutual agreement. Thereupon, the arbitrator can be

appointed by mutual consent of all parties. This does not

obliterate or write off the arbitration clause. In terms of the

Arbitration and Conciliation Act, 1996,4 where parties cannot agree

upon a common name as to who will act as an arbitrator, the court

can appoint the arbitral tribunal. The arbitration clauses have to

be read in a pragmatic manner. The intent of the parties while

executing the arbitration clause in the Partnership Deed is clear.

The learned counsel for the respondents relied upon two

judgments of this Court in Wellington Associates Ltd. v. Mr. Kirit

Mehta5 and Jagdish Chander v. Ramesh Chander & Ors.6 In our opinion,

the facts of these cases are entirely different and the arbitration

clauses relied upon were differently worded. In Wellington

Associates Ltd. (supra), the proceedings were under the Arbitration

Act, 1940.

In view of the above discussion, the impugned judgment is set

aside and the appeal is allowed. The petition under Section 11(6)

of the A&C Act, filed by the present appellant, Tarun Dhameja, the

legal representative of the deceased partner, Yeshwant Boolani,

4 For short, “the A&C Act.” 5 (2000) 4 SCC 272.

6 (2007) 5 SCC 719.

4 will be treated as allowed.

The Coordinator/Chairman of the Madhya Pradesh Arbitration

Centre or the Arbitration Centre attached to the High Court of

Madhya Pradesh at Indore, as the case may be, will appoint an

Arbitrator to adjudicate the disputes inter-se the parties. The

learned Arbitrator will file his/her declaration under Section 12

of the A&C Act within 15 days from the date of appointment. The

fees of the learned Arbitrator will be fixed by the said Centre or

will be paid as per the Fourth Schedule to the A&C Act, as may be

applicable.

We clarify that we have not made any comments on the merits

of the claims and contentions raised by the parties.

Pending application(s), if any, shall stand disposed of.

..................CJI.

(SANJIV KHANNA)

..................J. (SANJAY KUMAR) NEW DELHI;

DECEMBER 06, 2024.

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