REPORTABLE
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
[Link] 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.
