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IN THE HIGH COURT OF DELHI
C. Hari Shankar, J.
Manju Gupta - Appellant
Versus
Vilas Gupta - Respondent
Arb.P. 331 of 2020
Decided On : 22-01-2021
Important Points
Subject
Arbitration - Family Settlement Disputes
Act Referred
Headnote
(B) Arbitrability of Disputes - The court stated that disputes allegedly arising from violations of covenants of the memorandum of family settlement are arbitrable, reaffirming the principle of kompetenz-kompetenz that allows arbitral tribunals to rule on their own jurisdiction. (Paras 14, 22, 31)
(C) Enforcement of Arbitration Agreement - The order of the Company Law Board seeking unconditional withdrawal of a petition does not affect the parties' rights to refer disputes to arbitration under the memorandum of family settlement. (Paras 25-27)
Facts of the case:
The parties had executed a memorandum of family settlement to resolve disputes regarding corporate entities, agreeing to the appointment of arbitrators for any arising disputes. Disputes were then alleged on the implementation of the terms of the settlement.
Findings of Court:
The court found that the arbitration agreement existed, and therefore, appointed an arbitrator to resolve the disputes, despite disagreements on its enforceability.
Issues: Whether the disputes regarding the family settlement were arbitrable and whether the court had jurisdiction to appoint an arbitrator.
Ratio Decidendi: The court held that given the existence of an arbitration agreement, disputes are subject to arbitration despite the challenge to arbitrability and various procedural complexities.
Result: Petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 allowed; arbitrator appointed.
| Table of Content |
|---|
| 1. disputes to be referred to arbitration (Para 1 , 2 , 3) |
| 2. previous orders and their implications (Para 4 , 5 , 6) |
| 3. existence of arbitrable disputes acknowledged (Para 7 , 8) |
| 4. arbitration clause became unenforceable (Para 9 , 10) |
| 5. legal standards for arbitration agreement (Para 11 , 12) |
| 6. opposition to the petition based on previous orders (Para 13 , 14 , 15) |
| 7. reviewing arbitrability of disputes (Para 17 , 18 , 19) |
| 8. principles of separability and competency (Para 20 , 21 , 22) |
| 9. court's discretion in arbitration (Para 23 , 24) |
| 10. appointment of arbitrator due to vacancy (Para 28 , 29 , 30) |
| 11. appointment order issued for arbitration (Para 32 , 33 , 34) |
JUDGMENT (Oral)
(Video-Conferencing)
1. By this petition under Section 11 (6) of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as "the 1996 Act"), the petitioners seek reference of disputes that had arisen vis-a-vis the respondents, to arbitration, in accordance with Clause 3.15 of a Memorandum of Family Settlement (hereinafter referred to as "MFS"), dated 28th April, 2007, executed among the petitioners and the respondents, being the members of one family.
2. A reading of the MSF reveals that disputes among the petitioners and the respondents, vis-a-vis certain corporate entities being managed by them, had arisen, resulting in CP 31/2007 being filed before the Company Law Board, Principal Bench. In order to settle their disputes and differences amicably, the petitioners and respondents executed the MFS, agreeing to be bound by the terms thereof. The purpose to the MFS was specifically stated, in Clause 1(i) thereof, as being "to reduce in writing the terms and conditions of settlement of disputes and differences as agreed by and between the parties to this MFS and further terms and conditions to avoid any future controversy, disagreement, confusion and misunderstanding". The MFS also manifested the decision, of the petitioners and respondents to seek disposal of CP 31/2007, in terms thereof. It was further recited, in the MFS that the parties thereto would make a joint application, recording the terms of the MFS, for withdrawal of Co. Pet. 31/2007 and vacation of all interim orders passed in the said petition by the Company Law Board (hereinafter referred to as "CLB"). Insofar as the shareholdings of the parties to the MFS, in the companies, relating to which it was executed, were concerned, clause 2(iii), in the MFS, merits reproduction:
"iii) That notwithstanding the shareholding of the Parties and their Constituents in the Companies/businesses, properties and other assets, the parties hereto have agreed to carry out the division of the joint businesses, undertakings and properties in two parts in such a manner that one part shall be owned, controlled and managed by 'Group-I' and the other part shall be owned, controlled and managed by 'Group-II'. The businesses and properties shall be shared by two Groups in the ratio of 1:1 and the difference in values shall be settled by way of transfer of funds from one Group to the other as hereinafter determined."
3. The MFS, nevertheless, did envisage the possibility of disputes arising among the parties thereto and, in that regard, provided thus, in clauses 3.15 and 3.16:
"3.15 That in the event of any differences between the parties on the implementation and execution of the present MFS or with regard to any terms thereto, the parties agree to refer the said matter and issue to joint arbitration of Shri Ramanand Gupta and S. Devender Singh Kohli. In case of difference of opinion between the said two arbitrators, the matter shall be referred to Shri R.K. Gupta Son of Late Shri Munshi Ram Gupta, Resident of D-13, Naraina Vihar, New Delhi-110028, whose decision shall be final and binding upon the parties.
3.16 That the right to refer to arbitration any question in the event of difference or dispute amongst the parties shall be in addition to and not in derogation of the right of the parties
