JUDGMENT : Arun Bhansali, J. This writ petition is directed against order dated 28.07.2006 passed by Additional District Judge No. 3, Udaipur, whereby, the application filed by the petitioners under Section 8 of the Arbitration and Conciliation Act, 1996 ('the Act') has been rejected by the trial court. 2. The respondent Nos.
JUDGMENT : Arun Bhansali, J. This writ petition is directed against order dated 28.07.2006 passed by Additional District Judge No. 3, Udaipur, whereby, the application filed by the petitioners under Section 8 of the Arbitration and Conciliation Act, 1996 ('the Act') has been rejected by the trial court. 2. The respondent Nos. 1 to 4 filed a suit for rendition of accounts, declaration and permanent injunction against petitioners and respondent No. 5 (partners) and respondent No. 6 - Andhra Bank seeking the following reliefs based on the averments made in the plaint:- ^32- vr% izkFkZuk gS fd%& ¼v½ oknhx.k ds i{k esa rFkk izfroknhx.k ds fo:) QeZ gksVy fouk;d dk fnukad 1-2-1989 ¼,d Qjojh fuoklh½ ls yxkdj 2004 ¼nks gtkj pkj½ o vkxs tc okn fu.khZr ugha gks rc rd fglkc le>us ds fy, lHkh fcy] okmplZ ds vk/kkj ij fglkc le>us ckcr nkok fMdzh Qjek;k tkos rFkk fglkc r; djkus ds fy, fdlh fu"i{k pkVZMZ ,dkm.VsUV dks dfe'uj fu;qDr fd;k tkdj fglkc cuok;k tkos vkSj mlds vk/kkj ij izR;sd ikVZuj dk QkeZ dh Hkkxhnkjh foys[k ds vk/kkj ij ykHk r; djk;k tkosA ¼vk½ fd oknhx.k ds i{k esa rFkk izfroknhx.k ds fo:) bl vk'k; dh LFkkbZ fu"ks/kkKk dh fMdzh ikfjr QjekbZ tkos fd os oknhx.k dks QeZ gksVy ij vkus tkus esa fdlh izdkj dh jksd ugha djs] fglkc&fdrkc le>us] ns[kus vkSj j[kus rFkk mldh udy ysus esa Hkh fdlh izdkj dh jksd] izfroknhx.k] muds ukSdj] ,tsUV vkfn ugha djs vkSj u ;g dk;Z fdlh vU; ls gh djkosA blds vykok Hkkxhnkjksa ds cSBus ds fy, tks dejk fuf'pr dj fn;k x;k Fkk mlesa cSBus ls ugha jksdk tkos vkSj u ml ij rkys yxkdj cUn fd;k tkosA ¼b½ fd oknhx.k ds i{k esa rFkk izfroknhx.k ds fo:) ;g ?kks"k.kkRed fMdzh iznku djkbZ tkos fd vkt fnu rd xyr fglkc fn[kk dj vkWfMVsM djk;k gS mls uy ,oa oksbZM ?kksf"kr djk;k tkos rFkk u;s fljs ls okil fglkc dk vkWfMV djk;k tkos rFkk Hkkxhnkjh foys[k ds vk/kkj ij cSad dks funsZ'k iznku djk;k tkos fd os nks ikVZulZ dks lfEefyr djrs gq, u;k ,dkm.V vkWijsfVax esa mudk uke tksM+sa rFkk ysunsu Hkh nks Hkkxhnkjksa ds la;qDr gLrk{kj ls fd;k tkosA bl rjg dh ?kks"k.kk djkbZ tkosA ¼bZ½ fd izfroknh la[;k 8 ¼vkB½ cSad dks ikcfUnr djk;k tkos fd Hkkxhnkjh foys[k ds vk/kkj ij ,dkm.V vksifuax esa tks 'krsZa ns j[kh gS mlds vk/kkj ij ,d ls vf/kd Hkkxhnkj [kkrk [kksysa vkSj ,d ls vf/kd Hkkxhnkjksa }kjk pSd is'k djs vkSj ,dkm.V eSaUVsu fd;k tkos bl vk/kkj ij mUgsa ikcfUnr djk;k tkos vkSj mUgsa vko';d vkKk izfroknh dks iznku djkbZ tkosA ¼m½ [kpkZ eqdnek oknh dks izfroknhx.k ls fnyk;k tkosA ¼,½ vU; dksbZ izfrdj ftls U;k;ky; oknh i{k esa mfpr le>s fnyk;k tkosA* 3.
It appears that the petitioners filed applications under Order 7, Rule 11 CPC read with Section 69 of the Partnership Act, 1932, Order 7, Rule 11 CPC read with Section 3 of the Limitation Act, 1961 and Order 7, Rule 11 CPC read with Sections 10, 11 and 33 of the Rajasthan Court Fees and Suit Valuation Act, 1961 which applications were rejected by the trial court on 17.11.2004 leaving it open for the petitioners to raise the objections in the written statement; where after, the petitioners filed application under Section 8 of the Act, inter alia, with the averments that the plaintiffs have referred to partnership deed dated 09.03.1990 and the same has been made the basis for the suit; in the partnership deed at page 9, the Clause pertaining to 'dispute' has been indicated, which provides for settlement of disputes mutually and that decision of majority of partners shall be binding on the parties, which agreement was arbitration agreement and, therefore, the parties deserve to be referred to arbitration in terms of Section 8 of the Act. 4. The application was opposed by the plaintiffs; it was, inter alia, indicated that no arbitration clause exists and the application has been filed for delaying the proceedings; it was prayed that the application be rejected and as the petitioners have failed to file the written statement within the stipulated period, the same may be closed. 5. It also appears that the petitioners have filed their written statement to the plaint on 07.12.2004 and 02.02.2006 after the application under Section 8 of the Act has been filed. 6.
5. It also appears that the petitioners have filed their written statement to the plaint on 07.12.2004 and 02.02.2006 after the application under Section 8 of the Act has been filed. 6. The trial court after hearing the parties, inter alia, came to the following conclusion and dismissed the application:- ^bl izdkj oknhx.k }kjk vius okn&i= esa vafdr fd;s x, rF;kuqlkj o Hkkxhnkjh foys[k esa of.kZr mijksDr 'krkZuqlkj i{kdkjku ds e/; Hkkxhnkjh ls lEcfU/kr fdlh Hkh izdkj dk fookn gksus dh fLFkfr esa Hkkxhnkjksa }kjk fey cSBdj vkilh lgefr ls mudk fuiVkjk fd;s tkus dh 'krZ Hkkxhnkjh foys[k esa r; gksuk izdV gksrh gSA bu ifjfLFkfr;ksa esa Hkkxhnkjh foys[k ds vuqlkj ,slk dksbZ rF; izdV ugha gksrk gS fd Hkkxhnkjksa ds e/; Hkkxhnkjh foys[k fu"ikfnr djrs le; ;g r; gqvk gks fd Hkkxhnkjksa ds e/; QeZ ls lacaf/kr fdlh izdkj dk fookn mRiUu gksus dh fLFkfr esa ml fookn dks ek/;LFke dks jsQj fd;k tkosxkA bl izdkj Hkkxhnkjh foys[k ds vuqlkj i{kdkjku ds e/; vkchZVªs'ku Dykst dk gksuk izdV ugha gksrk gSA* 7. It is submitted by learned counsel for the petitioners that the trial court was not justified in dismissing the application filed by the petitioners in view of the fact that arbitration clause does exist between the parties and in terms of mandatory provisions of Section 8 of the Act, the trial court was bound to refer the matter for arbitration; it is further submitted that the finding by the trial court that no arbitration agreement exists between the parties is ex facie contrary to the clause and, therefore, the order impugned deserves to be set aside. 8. With reference to definition of arbitration agreement as contained in Section 7 of the Act, it was submitted that the very fact that the clause in question provides for decision of majority being binding on the parties, makes the agreement an arbitration agreement and the plaintiffs cannot contend otherwise; it was submitted that absence of words arbitrator or arbitration in the clause does not make any difference and it is the substance, which has to be taken into consideration by the Court while dealing with the application. 9.
9. Reliance was placed on the judgments in the case of The Managing Director, Orissa State Cashewnut Development Corporation Ltd. v. Ramesh Chandra Swain & Ors., AIR 1992 Orissa 35, Uttam Wires & Machine (P) Ltd. v. State of Rajasthan & Anr., 1989 (2) Arbitration Law Reporter 314, Erach F. D. Mehta v. Minoo F. D. Mehta, 1970 (2) SCC 724 , Pravinchandra Murarji Salva v. Meghji Murji Shah & Anr., 1998 (2) Raj. 273 (Guj.), Girdhari Lal Bansal v. The Chairman, Bhakra Beas Management Board, Chandigarh & Ors., AIR 1985 P&H 219 and Smt. Rukmanibai Gupta v. Collector, Jabalpur & Ors., (1980) 4 SCC 556 . 10. Learned counsel for the respondents vehemently opposed the submissions made by learned counsel for the petitioners; it was submitted that the clause sought to be relied on by the petitioners cannot be termed as an arbitration clause and the jurisdiction of Civil Court to deal with the subject matter of the suit cannot be ousted based on such a clause; it was submitted that the necessary ingredients regarding arbitration clause are wholly missing from the said clause and, therefore, the matter cannot be referred for arbitration; it was further contended that the entire attempt on the part of the petitioners has been to deprive the plaintiffs from their rightful claim; the suit was filed way back in the year 2004 and the same is hanging fire without any progress and the petitioners are enjoying the fruits of the partnership property without any disclosures and responsibility towards the plaintiffs, who are partners in the firm and, therefore, the writ petition filed by the petitioners deserves to be dismissed. 11. I have considered the rival submissions made by learned counsel for the parties and have perused the material placed on record. 12.
11. I have considered the rival submissions made by learned counsel for the parties and have perused the material placed on record. 12. The clause as contained in the deed of partnership dated 09.03.1990, around which the present controversy revolves, reads as under:- "Dispute : All dispute and question whatsoever which either during the partnership or afterwards, arise between the parties or the respective representatives or between any touching this deed or the construction of application thereof or any clause or thing herein contained or any business affairs, account, valuation or division of assets, debts or liabilities to be made hereunder or as to any act, deed commission or omission of any partner or as to any act, deed or any other matter in any way relating to the partnership/partnership business or the affairs thereof or the rights duties or liabilities of any person under this Deed shall be mutually decided/settled and decision of majority of partners shall be binding on the parties to the indenture." 13. Section 7 of the Act defines arbitration agreement and reads as under:- "S. 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. (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 denied by the other. (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract." 14.
(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract." 14. The essential elements of an arbitration agreement are that there must be present or future difference in connection with some contemplated affair; there must be an intention of the parties to settle the difference by a Private Arbitration Tribunal as defined under Section 2(d) and contemplated by Section 10 of the Act; the parties shall be bound by decision of such tribunal; an arbitration agreement can be inferred on the exchange of letters, telex, telegrams and no particular form of agreement has been prescribed in the Act; however, it is also essential requirement that the identity of the arbitrator/arbitration tribunal must be certain and the agreement should not be vague. 15. The deed of partnership has been entered into among 11 partners desirous of carrying on the Hotel business in the partnership under the name and style of Hotel Vinayak; while parties 1 to 5, which includes four plaintiffs, appears to have contributed the site/land for construction of the Hotel and rest of the partners - defendants have agreed to contribute capital by way of cash; while nine partners getting 10% share each, Govind Narayan Nagda and Smt. Geeta Sharma have been granted 8% and 2% share respectively in the profit and loss with Govind Narayan Nagda being Managing Partner of the firm. 16. A bare look at the clause pertaining to disputes between the parties, as quoted hereinbefore, indicates that the parties have agreed to mutually decide/settle all dispute and question whatsoever and further provides that decision of majority of partners shall be binding on the parties to the indenture. 17. The trial court on plain reading of the said provisions came to the conclusion that the clause does not disclose that in case of dispute the same shall be referred to arbitrator though it provides for deciding/settling the dispute mutually. 18. As noticed hereinbefore, the primary requirement for construing an agreement as an arbitration agreement is certainty about the arbitrator/arbitration tribunal and further that the clause should not be vague; in the present case, a bare reading of the agreement, does not disclose as to who would arbitrate between the parties. 19.
18. As noticed hereinbefore, the primary requirement for construing an agreement as an arbitration agreement is certainty about the arbitrator/arbitration tribunal and further that the clause should not be vague; in the present case, a bare reading of the agreement, does not disclose as to who would arbitrate between the parties. 19. Learned counsel for the petitioners emphasised that the very fact that a clause provides that the disputes shall be mutually decided/settled and goes on to provide that decision of majority of partners shall be binding on the parties necessarily means that the arbitral tribunal shall consist of all the partners and the majority decision would prevail. 20. As noticed hereinbefore, while the present suit has been filed by four partners as plaintiffs; rest seven partners have been impleaded as defendants and several allegations have been made against each other. The submission of learned counsel for the petitioners that all the partners would constitute the arbitral tribunal, appears to be an exercise in total futility, inasmuch as, the fundamental requirement about the arbitral tribunal being a unbiased body would be the first casualty, as the claimants and the non-claimants in the claim before the arbitral tribunal would themselves be the arbitrators, which cannot and does not fulfil the fundamental requirement of an arbitration clause and, even if, as per the submissions of learned counsel for the petitioners, the same is construed as arbitration agreement, the same being wholly vague, cannot form basis for exercise of powers under Section 8 of the Act so as to refer the matter to a so called tribunal, which according to the petitioners, comprise of the claimants and non-claimants themselves. 21. In view thereof, on account of abject vagueness, uncertainty and lack of unbiased composition of the so called tribunal, it cannot be said that the clause as relied on by the petitioners is an arbitration agreement so as to invoke provisions of Section 8 of the Act. 22.
21. In view thereof, on account of abject vagueness, uncertainty and lack of unbiased composition of the so called tribunal, it cannot be said that the clause as relied on by the petitioners is an arbitration agreement so as to invoke provisions of Section 8 of the Act. 22. For invoking provisions of Section 8 of the Act, besides the fact that the action brought is the subject of an arbitration agreement, it is also necessary that the action is brought among parties to the arbitration agreement; admittedly, the suit has been filed against Andhra Bank also and, as quoted hereinbefore, the reliefs ^b bZ* have been sought against the Andhra Bank, who is not a party to the so called arbitration agreement, which aspect also puts applicability of Section 8 of the Act in doubt. 23. Hon'ble Supreme Court in Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya & Anr., (2003) 5 SCC 531 observed and held as under:- "15. The relevant language used in Section 8 is: "in a matter which is the subject of an arbitration agreement". The court is required to refer the parties to arbitration. Therefore, the suit should be in respect of "a matter" which the parties have agreed to refer and which comes within the ambit of arbitration agreement. Where, however, a suit is commenced - "as to a matter" which lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement, there is no question of application of Section 8. The words "a matter" indicate that the entire subject matter of the suit should be subject to arbitration agreement." (emphasis supplied) 24. So far as the judgments cited by learned counsel for the petitioners are concerned, there is no dispute about the principles laid down in the judgments that absence of words 'arbitrator' or 'arbitration' in the clause as not decisive; the clause providing for decision by the Government and its decision being final having been held as arbitration clause; reference of dispute to Superintending Engineer also being an arbitration clause and that arbitration agreement is not required to be in any particular form, however, the said judgments have no application to the facts of the present case in view of the nature of clause in the agreement, which is sought to be relied on by petitioners for seeking reference to arbitration.
25. In view of the above discussion, the order passed by the trial court, rejecting the application filed by the petitioners under Section 8 of the Act cannot be faulted. 26. Consequently, there is no substance in the writ petition and the same is, therefore, dismissed. The trial court is directed to proceed with the suit as expeditiously as possible. Petition dismissed.