The court upheld the referral of disputes to arbitration, affirming that the existence and validity of arbitration agreements are matters for the Arbitral Tribunal to determine.

JUDGMENT :

SOMASEKHAR SUNDARESAN, J.

1. This is a Petition under Section 11 of the Arbitration and Conciliation Act, 1996 (“the Act”) seeking to refer disputes and differences that have arisen between the parties in connection with an agreement dated February 19, 2007, and another deed dated August 14, 2015 (which cancelled the agreement dated February 19, 2007).

2. The arbitration agreement contained in each of the aforesaid instruments is identical in terms, and reads thus :

15 In case any dispute or difference arise between the parties hereto in regard to the said project or in regard to the construction and/ or interpretation of any of the clauses herein contained then the same shall be referred to the sole arbitrator as per the provisions of the Arbitration and Conciliation Act, 1996. The Venue of the arbitration shall be Navi Mumbai and language English. [Emphasis Supplied]

3. Each of these clauses relates to disputes and differences in connection with the construction or interpretation of any of the clauses of the respective instrument. The venue of the arbitration is within the territorial jurisdiction of this Court.

Respondents’ Objections:
4. The primary opposition by the Respondents, to the reference by this Court to an arbitrator under Section 11 of the Act, is two-fold. First, that Respondent No. 2, the individual partner who executed the agreement on behalf of Respondent No. 1, which is a partnership firm, did not have any implied authority to bind the firm to the arbitration clause contained in these two instruments. The submission of Learned Counsel for the Respondent Nos. 1 and 3 to 10 is that executing any contract which has an arbitration clause in it, constitutes “submission of a dispute to arbitration”. According to him, executing such a contract would require an explicit authorisation, since Section 19(2)(a) of the Indian Partnership Act, 1933 (“Partnership Act”) provides that there can be no implied authority for a partner to submit a dispute relating to the business of the firm to arbitration.

5. Second, that the very existence of the agreements is in doubt, in view of the foregoing proposition. In other words, a partner not having any implied authority to “submit disputes to arbitration” would have no implied authority to sign any agreement containing an arbitration clause. If such an agreement is indeed signed, it would mean that the agreement in question was not validly executed, and therefore, that agreement does not exist. The corollary is that for a partnership firm to sign any contract containing an arbitration clause, there ought to be an express authorization to the partner executing the said contract, in the absence of which, in view of Section 19(2) (a) of the Partnership Act, the Arbitration Agreement would not be in existence.

6. Learned Counsel for Respondent No. 2 (the individual partner who has executed the agreements containing the arbitration clause), supplements the aforesaid contentions with his own objection. He would submit that the dispute on existence of an agreement cannot even be referred to an Arbitral Tribunal, unless the arbitration clause expressly places the determination of existence of an agreement as a matter of dispute that can be referred to arbitration. If the arbitration agreement does not expressly empower the Arbitral Tribunal to determine validity and existence of the agreement, according to him, such question is outside the jurisdiction of the Arbitral Tribunal.

Analysis and Findings:
7. Having heard the Learned Counsel for the parties and having perused the record with their assistance, it is writ large on the face of the record that there exists a formal agreement at both instances, namely, the agreement dated February 19, 2007, and the cancellation deed dated August 14, 2015. As stated above, each of these instruments has an arbitration agreement inherent in it, which essentially requires disputes between the parties in connection with construction or interpretation of