Important Point
The existence of an agreement to refer the dispute to arbitration can be ascertained in the facts and circumstances of the case as it depends on the intention of the parties which is to be gathered from the relevant documents and surrounding circumstances.

Headnote:(i) Dispute Resolution-Arbitration agreement-Construction of-Expert determination for dispute resolution - Distinction-There are no conclusive tests-Nomenclature used by the parties may not be conclusive-Intent and purport of the agreement-Statutory requirements - (Arbitration Act, 1940-Section 2).
       Held, our courts have laid emphasis on (1) existence of disputes as against intention to avoid future disputes; (2) the tribunal or forum so chosen is intended to act judicially after taking into account relevant evidence before it and the submissions made by the parties before it; and (3) the decision is intended to bind the parties. Nomenclature used by the parties may not be conclusive. One must examine the true intent and purport of the agreement. There are, of course, the statutory requirements of a written agreement, existing or future disputes and an intention to refer them to arbitration. (Vide Section 2 Arbitration Act, 1940 and Section 7 Arbitration and Conciliation Act, 1996). (Para 21)
       (ii) Constitution of India-Art. 136-Disputes between members of a family-The family owns or has a controlling interest in a number of public limited companies - They also own various assets-Negotiations with the help of financial institutions - Memorandum of understanding arrived at between Group A and Group B-Implementation of -Decisions of the Chairman and Managing Director of the Industrial Finance Corporation were made final in view of Clause 9 of the Memorandum-The Chairman formed a Committee of Experts to assist him in deciding the questions-Report of the Chairman not filed in Court as an award-Appellants, Group B filed an arbitration petition u/s 33 of the Arbitration Act challenging the legality and validity of the decision of the Chairman, IFCI-On the same day appellants also filed a civil suit to challenge same decision of the Chairman suit dismissed as the Single Judge of the High Court struck down the plaint under Order VI Rule XVI CPC holding that the allegations in the arbitration petition and in the plaint in the suit were identical-Appeal against-Whether the decision of the Chairman, IFCI constitutes an award ? - (No)-Whether civil suit filed was an abuse of the process of court?-Held, the plaint in the suit, to the limited extent that it challenges the decision as a decision, would not amount to abuse of the process of court.
       Further held : Looking to the scheme of the Memorandum of Understanding and the purpose behind Clause 9, the learned Single Judge, in our view, has rightly come to the conclusion that this was not an agreement to refer disputes to arbitration. It was meant to be an expert’s decision. The Chairman, IFCI has designated his decision as a decision. He has consulted experts in connection with valuation and division of assets. He did not file his decision in court nor did any of the parties request him to do so. (Para 23)
       The intention of the parties was not to have any judicial determination on the basis of evidence led before the Chairman, IFCI. Nor was the Chairman, IFCI required to base his decision only on the material placed before him by the parties and their submissions. He was free to make his own inquiries. He had to apply his own mind and use his own expertise for the purpose. He was free to take the help of other experts. He was required to decide the question of valuation and the division of assets as an expert and not as an arbitrator. He has been authorised to nominate another in his place. But the contract indicates that he has to nominate an expert. The fact that submissions were made before the Chairman, IFCI, would not turn the decision-making process into an arbitration. (Para 24)
       The Chairman, IFCI has framed issues before answering them in his decision. These issues have been framed by himself for the purpose of enabling him to pin-point those issues which require his decision. There is no agreed reference in respect of any specified disputes by the parties to him. (Para 25)
       Consequently held, perception of the Learned Judge may be substantially correct though not entirely so. Undoubtedly, if the plaint in the suit is viewed as challenging only the arbitration award, a suit to challenge the award would be re-litigating the issues already raised in the arbitration petition. The suit would also be barred under Section 32 of the Arbitration Act, 1940. (Para 37)
       According to the appellants, in the suit there is an alternative plea that if the impugned decision of the Chairman and Managing Director, IFCI is not considered as an award, then that decision as a decision should be set aside. (Para 38)
       The plaint in the suit, to the limited extent that it challenges the decision as a decision, would not amount to abuse of the process of Court. (Para 39)

Judgement Key Points

Certainly. Based on the provided legal document, the key points are as follows:

The existence of an arbitration agreement depends on the true intent of the parties, which should be inferred from the relevant documents and surrounding circumstances. The nomenclature used by the parties is not decisive (!) (!) .
An arbitration agreement typically involves the parties' intention that the tribunal's decision will be binding, that the tribunal will act judicially, and that the decision will be enforceable by law. The tribunal should decide disputes impartially and fairly, and the agreement should contemplate that the dispute is already formulated at the time of reference (!) (!) (!) (!) (!) (!) .
The distinction between expert determination and arbitration hinges on the nature of the tribunal's decision-making process. Expert decisions are characterized by the expert's own inquiries and application of expertise, whereas arbitral tribunals arrive at decisions based on evidence and submissions, applying law or agreed considerations (!) (!) .
The true intent of the parties is paramount in determining whether a dispute resolution clause constitutes an arbitration agreement. This intent is to be ascertained objectively, considering the language of the agreement and the context (!) (!) .
Certain clauses, especially those stating decisions are final and binding on all questions relating to the contract, do not automatically constitute arbitration clauses unless they explicitly provide for dispute resolution through arbitration. The purpose and context of such clauses are critical in this determination (!) (!) (!) .
The use of terms like "final," "conclusive," and "binding" in decision clauses can suggest arbitration, but the overall scheme and the nature of the decision-making process must be examined. A decision made in the capacity of an expert, without an intention for judicial determination, does not qualify as an arbitral award (!) (!) .
Filing parallel proceedings—such as a suit and an arbitration petition—challenging the same decision may be considered an abuse of the process of the court, especially if the issues are identical and the proceedings are initiated to re-litigate the same matter (!) (!) .
However, if a suit challenges a decision as a mere decision and not as an arbitration award, and if it raises an alternative plea that the decision should be set aside if not considered an award, such a suit may not constitute an abuse of process. The court must assess the nature of the claim and the intent behind the pleadings (!) (!) .
The court emphasizes that family settlements and internal agreements within a family or family-controlled entities are to be given particular weight, especially when they have been substantially acted upon. Such agreements are to be viewed with a degree of deference, and their internal mechanisms should not be disturbed lightly (!) .
The court has the discretion to strike out pleadings or proceedings that amount to an abuse of process, such as relitigating the same issues or using the litigation machinery for collateral or spurious purposes. This power should be exercised sparingly and only in clear cases of abuse (!) (!) .
In the context of disputes over family settlements and internal agreements, the courts recognize the importance of upholding the settlement's integrity, provided the dispute resolution mechanism was not intended to be judicial or legal in nature but was meant for expert or internal resolution (!) .
When assessing whether an agreement or clause constitutes an arbitration agreement, courts look for evidence of the parties' intention that the decision will be binding, that it will be judicial in nature, and that disputes are meant to be resolved in a manner that ensures fairness and enforceability (!) (!) .

These points encapsulate the principles regarding arbitration agreements, the distinction between expert decisions and arbitration, and the considerations for avoiding abuse of process through parallel proceedings.

Judgment

Mrs. Sujata V. Manohar, J.-Leave granted in Special Leave Petition Nos. 14905 and 18711 of 1997.

2. The present litigation has arisen on account of disputes between Seth Gujjar Mal Modi’s five sons-K.K. Modi, V.K. Modi, S.K. Modi, B.K. Modi and U.K. Modi on the one hand (hereinafter referred to as ‘Group B’) and Kedar Nath Modi, the younger brother of Seth Gujjar Mal Modi and his three sons-M.K. Modi, Y.K. Modi and D.K. Modi (hereinafter referred to as ‘Group A’) on the other hand. The Modi family owns or has a controlling interest in a number of public limited companies. They also own various assets. Differences and disputes have arisen between Kedar Nath Modi and his sons constituting Group A and the sons of late Gujjar Mal Modi constituting Group B on the other hand. To resolve these differences, negotiations took place with the help of the financial institutions which had lent money to these companies, and through whom substantial public funds had been invested in the companies owned and/or controlled by these two groups. Representative of several banks, Reserve Bank of India and financial institutions were also invited to participate. Ultimately, on 24th of January, 1989, a Memorandum of Understanding was arrived at between Group A and Group B. Under the Memorandum of Understanding so arrived at, it is agreed between the parties that Group A will manage and/or control the various companies enumerated in Clause 1. One of the companies so included in Modipon Ltd. minus Indofil (chemical division) and selling agency. Under Clause 2, Group B is entitled to manage, own and/or control the companies enumerated in that clause. One of the companies so included is Modipon Ltd. minus Modipon Fibre Division. The agreement also provides for division of assets which are to be valued and divided in the ratio of 40:60-Group A getting 40 of the assets and Group B getting 60 of the assets. The shares of the companies are required to be transferred to the respective groups after their valuation. Under Clause 3, valuation has to be done by M/s. S.B. Billimoria & Company, Bombay. Clause 5 provides for companies which are to be split between the two groups as per the Memorandum of Understanding. The division has to be done under Clause 5 by a scheme of arrangement to be formulated by M/s. Bansi S. Mehta & Company, Bombay after taking into consideration the valuation done by M/s. S.B. Billimoria & Company, Bombay. Units of a company to be given to each group are to be given along with assets and liabilities. Clause 6 provides for interim arrangements which are to be made in respect of the three companies which are being split-these being Modi Industries Ltd., Modipon Ltd. and Modi Spinning and Weaving Mills Company Ltd. We are not concerned with the other clauses, except to note that the date for carrying out valuation, the date of transfer, the appointment of independent Chairman of these companies which are to be split and certain other matters specified in the Memorandum of Understanding shall be done in consultation with the Chairman, Industrial Finance Corporation of India (IFCI).

3. Clause 9 provides as follows :-

“Implementation will be done in consultation with the financial institutions. For all disputes, clarifications etc. in respect of implementation of this agreement, the same shall be referred to the Chairman, IFCI or his nominees whose decisions will be final and binding on both the groups.”

Pursuant to the Memorandum of Understanding, M/s. S.B. Billimoria and Company gave reports between January and March 1991. M/s. Bansi S. Mehta and Company who were required to provide a scheme for splitting of the three companies by taking into account the valuation fixed by M/s. S.B. Billimoria and Company, also sent various reports between November 1989 and December 1994. The members of both the Groups were dissatisfied with these reports. They sent various representations to the Chairman and Managing Director of the Industrial

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1998 Supreme(SC) 160

Important PointThe existence of an agreement to refer the dispute to arbitration can be ascertained in the facts and circumstances of the case as it de­pends on the intention of the parties which is to be gathered from the relevant documents and surrounding circumstances.

Cases Referred (5)

Important Point
The existence of an agreement to refer the dispute to arbitration can be ascertained in the facts and circumstances of the case as it depends on the intention of the parties which is to be gathered from the relevant documents and surrounding circumstances.