http://JUDIS.NIC.IN

SUPREME COURT OF INDIA

Page 1 of 4

CASE NO.:

Appeal (civil) 4467 of 2002

PETITIONER:

Jagdish Chander

RESPONDENT:

Ramesh Chander & Ors

DATE OF JUDGMENT: 26/04/2007

BENCH:

H K Sema & R V Raveendran

JUDGMENT:

J U D G M E N T

R.V. RAVEENDRAN, J.

This appeal by special leave is against the order dated 10.7.2001

passed by the Designate of Chief Justice of the High Court of Delhi,

allowing Arbitration Application No.284 of 1997 filed under section 11 (5)

and (6) of the Arbitration and Conciliation Act, 1996 (’the Act’ for short).

2. The appellant and first respondent entered into a Partnership as per

deed dated 9.1.1964 to carry on the business under the name and style of

’Empire Art Industries’. Clause 16 of the said Deed relates to settlement of

disputes. The said clause is extracted below :

"16) If during the continuance of the partnership or at any time

afterwards any dispute touching the partnership arises between the

partners, the same shall be mutually decided by the partners or shall be

referred for arbitration if the parties so determine."

(Emphasis supplied)

3. The first respondent filed the application for appointment of an

Arbitrator to decide the disputes in regard to dissolution of the said

partnership firm and for rendition of accounts. In the said application, the

first Respondent arrayed the appellant herein as the first respondent.

Respondents 2 to 6 herein were also impleaded as respondents alleging that

the two partners entered into an arrangement/agreement with Respondents 2

to 6 in the year 1974 under which Respondents 2 to 6 were to supervise the

business of the firm and pay to each of the two partners, a fixed sum, which

was increased periodically. According to first Respondent, the arrangement

worked satisfactorily for several years, but for some years, the entire amount

was being received by the appellant and he was not paying the first

Respondent’s half share. The appellant resisted the petition, inter alia, on the

ground that the partnership had come to an end in the year 1979 and the

accounts were all settled. He also contended that the partnership deed did not

contain any agreement to refer disputes to arbitration. It was specifically

contended that clause 16 of the Deed of Partnership was not an arbitration

agreement.

4. The learned Judge who heard the application under section 11,

allowed it by order dated 10.7.2001. He held that if the intention of the

parties was not to refer their disputes to arbitration, there was no need to

incorporate clause 16 making a specific mention of arbitration, and that such

a provision should be liberally interpreted so as to encourage arbitration. The

learned Judge held that clause 16 of the partnership deed was an arbitration

agreement. In regard to the objection of respondents 2 to 6 that they were not

parties to either the partnership deed or agreement, the learned Judge

observed that the scope of the proceedings was limited to the extent of

http://JUDIS.NIC.IN

SUPREME COURT OF INDIA

Page 2 of 4

examining whether it was a case for appointment of Arbitrator or not, and it

was for the Arbitrator to decide whether Respondents 2 to 6 were liable or

not. Justice Santosh Duggal, a retired Judge, was appointed as the sole

Arbitrator.

5. The appellant has challenged the said order appointing the Arbitrator.

It is submitted that the power under section 11 of the Act, to appoint an

Arbitrator, can be exercised only if there is a valid arbitration agreement

between the parties, and that as there is no arbitration agreement between the

parties, the Arbitrator could not have been appointed. Strong reliance was

placed by the Appellant on the decision in Wellington v. Kirit Mehta [2000

(4) SCC 272], where a Designate of the Chief Justice of India held that the

following clause was not an ’arbitration agreement’:

"It is also agreed by and between the parties that any dispute o