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
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.
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
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.”
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.