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Himachal Pradesh High Court · body

2004 DIGILAW 168 (HP)

RAJESH KUMAR BANSAL v. COUNTRYSIDE BUILDERS

2004-07-23

M.R.VERMA

body2004
JUDGMENT M. R. Verma, J.: - Since both these applications under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) arise on the basis of the same agreement, therefore are being disposed of by this common order. 2. Brief facts leading to the presentation of these applications are that the plaintiff has instituted the suit against the defendants for dissolution of partnership firm (defendant No. 1), for rendition of accounts etc. The suit is at the initial stage. Before filing the written statement, defendant No. 2 filed OMP No. 179 of 2004 averring therein that the deed of partnership between the parties contain an arbitration clause that any dispute that may arise amongst the partners pertaining to the affairs of the partnership shall be referred to the arbitration of an arbitrator whose decision shall be final and binding on the partners, therefore, in view of this arbitration clause, the dispute is required to be referred to the arbitrator. 3. On the basis of similar averments, OMP No. 195/2004 has been filed by defendants No. 3 and 4. 4. The applications have been resisted by the plaintiff on the grounds that Clause 12 of the partnership deed relied by the defendants for referring the dispute to an arbitrator is a matter of record and is not denied but it is disputed that this clause is not such which leaves no room for instituting the suit in the Court. On the contrary, the clause by its nature is not binding on the partners as it specifically provides that jurisdiction of the civil Court shall not be ousted. 5. I have heard the learned Counsel for the parties and have also perused the relevant records. 6. Section 7 of the Act reads as under:- "7. Arbitration agreement (1) In this part, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in - (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not defined by the other. (5) The reference in a contract to a document containing an arbitration clause constituted an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract." 7. In view of the above definition, it is clear that any clause in a deed or agreement providing for referring the disputes between the parties to the deed/agreement to arbitration will constitute an arbitration agreement. However, since arbitration clause in a contract ousts the jurisdiction of the Court, therefore, it has to be strictly construed and while so construing it has to be kept in view that to constitute an arbitration agreement, the parties should be ad idem in other words the agreement of the party should be established so that they can be held to be bound by it absolutely and mandatorily leaving no option to them to get their disputes settled by any forum other than the arbitrator. The intention of the parties has to be gathered from the language used in the agreement and it should be essentially born by the language used that the parties had clearly and unambiguously agreed that the disputes should be determined in a quasi judicial manner, that is, by arbitrator. If the agreement provides or keeps open any remedy other than the settlement by arbitrator for redressal of the dispute, it cannot be said to be mandatory and biding arbitration clause. In such a case the party seeking redressal of disputes will have the option either to get the dispute settled by arbitration or by other mode as may be provided in the agreement or may be legally available to it. 8. In such a case the party seeking redressal of disputes will have the option either to get the dispute settled by arbitration or by other mode as may be provided in the agreement or may be legally available to it. 8. Clause 12 of the Deed of Partnership between the parties which is relied by the defendants-applicants for referring the matter for arbitration reads as under:- "12. Any dispute that may arise amongst the partners pertaining to the affairs of partnership shall be referred to the arbitration of arbitrator whose decision shall be final and binding on the partners. Arbitrator shall be chosen mutually by both the partners. However, jurisdiction of the civil Court shall not be ousted." 9. A bare perusal of the aforesaid clause makes it clear that it consists of two parts. First part provides that any dispute between the partners pertaining to the affairs of the partnership shall be referred to the arbitration of Arbitrator whose decision shall be final and binding on the parties. Its later part provides that jurisdiction of the Civil Court shall not be ousted. On a combined reading of the clause irrespective of the expressions "shall be referred" or "whose decision shall be final and binding", the first part of the clause cannot be said to be mandatory and binding in view of the second part which saves the jurisdiction of the civil Court by providing that the jurisdiction of the civil Court shall not be ousted. It is thus evident that the parties never intended to oust the jurisdiction of the Court to decide any dispute which may arise between the partners pertaining to the affairs of the partnership. Thus, the intention of the parties by providing Clause 12 (supra) in the deed was to leave it to the discretion of the party either to seek arbitration or to institute appropriate suit before a Court of competent jurisdiction. 10. The view hereinabove is supportable by the ratio of Wellington Associates Ltd. v. Kirit Mehta, 2000(4) Supreme Court Cases 272. In this case, there were two clauses in the agreement between the parties. By one of the clause, it was agreed that if any dispute arises between the parties only the Courts at Bombay would have jurisdiction and the parties submitted themselves to the jurisdiction of the Courts in Bombay. In this case, there were two clauses in the agreement between the parties. By one of the clause, it was agreed that if any dispute arises between the parties only the Courts at Bombay would have jurisdiction and the parties submitted themselves to the jurisdiction of the Courts in Bombay. By the second clause the parties agreed that any dispute or difference between them, may be referred to the arbitration under the Arbitration Act. The question of reconciling these two clauses arose and the Honble Supreme Court held as under: "17......................................... The words in sub-section (1) of Section 7, "means an agreement by the parties to submit to arbitration", in my opinion, postulate an agreement which necessarily or rather mandatorily requires the appointment of an arbitrator/arbitrators. Section 7 does not cover a case where the parties agree that they "may" go to a suit or that they "may" also go to arbitration. 18. Thus, unless the document filed by the party before the Chief Justice of India or his designate is an "arbitration agreement" as defined in Section 7 as explained above, requiring a reference in a mandatory sense, no reference, in my view, can be made to the Arbitral Tribunal. It is, as already stated, indeed implcity - if an objection is raised by the respondent before the Chief Justice of India or his designate that the so-called arbitration clause is not an arbitration clause at all falling within Section 7 that such a question will have to be decided in the proceedings under Section 11 of the Act. Therefore, the contention raised by the learned Counsel for the petitioner that the question whether cluase 5 of the agreement amounts to an arbitration clause is to be decided only by the Arbitral Tribunal is liable to be rejected." 11. As already seen hereinabove, the intention of clause 12 of the partnership deed between the parties is not such which ousts the jurisdiction of the civil Court and makes it mandatory to refer the dispute between them only for arbitration by the arbitrator. 12. In view of the above, the jurisdiction of this Court to entertain the suit is not ousted and the matter is not required to be referred to the arbitrator. 13. As a result, both these applications merit dismissal and are accordingly dismissed.